PRIMO FORUM|KIEV, UKRAINE| MAY 2017 GALINA MIKHLIN-OLIVER|Director - - PowerPoint PPT Presentation

INTEGRITY FOR BETTER SERVICE DELIVERY PRIMO FORUM|KIEV, UKRAINE| MAY 2017

GALINA MIKHLIN-OLIVER|Director Strategy|Integrity Vice Presidency

Foster the highest standards of integrity for the WBG through the detection, investigation, resolution, and prevention of fraud and corruption affecting WBG operations INT’s mandate extends to allegations of fraud and corruption involving:

• Participants in WBG-financed activities (e.g., bidders, contractors, financial intermediaries, beneficiaries, service

providers)

• WBG staff
• Corporate Vendors

INT’s MANDATE

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INT’S STRATEGIC PILLARS

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Investigation & Sanction Prevention Detection

WBG’s LEGAL ENFORCEMENT FRAMEWORK

WBG BG San Sanctio ionable Of Offenses/Actionable Mis isconduct

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Fraud

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Corruption

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Collusion

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Coercion

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Obstructive practices

WBG BG San Sanctio ions vi vis s a a vi vis 3rd

rd part

parties

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Letter of reprimand

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Conditional non-debarment

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Debarment with conditional release

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Debarment

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Restitution

WBG BG In Integrity Co Compliance Co Conditio ions

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Sanctioned parties must meet rehabilitation conditions before they can apply for reinstatement to participate in WBG-financed activities 4

Web and Media Coverage List of Debarred Entities

SANCTIONS ARE PUBLIC: www.worldbank.org/debar

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ENGAGING WITH NATIONAL AUTHORITIES

Working with the Norwegian National Authorities Working with Canadian authorities on the Padma Bridge investigation Working with the Fiscalia in Colombia Working with the British and Dutch governments to investigate corruption implicating a Dutch company

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• Substantiation of misconduct relating to:
• US$633 million under 43 Bank-financed projects
• 11 WBG staff – and cleared 11 other staff of alleged misconduct
• 0 corporate vendors
• WBG sanctions of:
• 59 entities that engaged in misconduct under WBG-financed projects
• 10 corporate vendors
• Disciplinary remedies relating to:
• 2 WBG staff who engaged in misconduct were permanently barred from rehire
• Release from WBG sanctions of:
• 20 entities (12 multinationals and 8 SMEs) assessed to have improved their integrity compliance
• Preventive support to WBG Operational teams and country clients relating to:
• 100 new and ongoing WBG-financed projects
• Integrity training and awareness raising delivered to 1700 development professionals and contractors active

in development work

INT RESULTS (FY16 SNAPSHOT)

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INT COMPLAINTS AND INVESTIGATIONS (FY16 SNAPSHOT)

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1,290 Communications to INT 279 PRELIMINARY INQUIRIES OPENED 64 INVESTIGATIONS OPENED

35 FIRs issued

48 Cases 8 Cases 9 Cases

Corruption Collusion Fraud

SOURCES OF OUR INSIGHTS AND INFORMATION

9 Public Information

• Internet
• Media
• Specialized databases
• Public Records

Documents

• Bank
• PIU
• Company
• NRAs and disclosures
• Complainants & Witnesses
• National Authorities

Forensic Audits

• Exercise of audit clause
• New audit guidance note
• Joint fiduciary reviews of

high-risk projects

• Early identification of

integrity issues

Human Intelligence

• Bidders
• Project & Govt. officials
• Beneficiaries
• Confidential witnesses
• WBG Staff

Reporting Out

• FIRs
• Referrals
• Integrity Risk Reports
• Training Materials
• Reports & Publications
• Volcker List
• Integrity Concern Flags
• Forensic Audit Reports
• CRPD

• Use of agents as a vehicle to perpetrate misconduct
• Undisclosed agents
• Agents posing as resellers, distributors, freight companies, sub-contractors
• Use of advance payments to compensate agents
• High overall commission rates
• No proof of services rendered
• Fraudulent invoices used to support payments
• Undisclosed sub-contractors that result in increased prices and /or sub-standard work
• Misuse of advance payments to finance bribes and support unrelated contractor activities

through fraudulent disclosure of advance payment usage

• Delivery of sub-standard goods and works that deviate from bid/contract specs
• Fraudulent sign-off by engineering consultants on sub-standard goods and work
• Company records show payments to PIU officials or purchase of gifts / travel
• Facilitation payments for customs
• Misrepresentations of qualifications in bids -- past experience in bids inconsistent with internal

financial records or financial disclosures to regulators

• Falsified documentation provided during audits & other forms of obstruction
• Poor record keeping as a means to perpetrate/enable fraud and corruption
• Lack of effective/functioning complaint handling systems trusted by the beneficiaries which

dilutes accountability

RECURRENT ISSUES IDENTIFIED THROUGH INT INVESTIGATIONS

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• Interference with access to essential services (health, education, utilities, roads):

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“Grease” or “speed” payments to agency staff to assure access at different levels – from priority lists, to actual connection, to service/repairs, etc.

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“Capture” of essential goods (drugs, food, livestock, etc.) and services (e.g., water and sanitation, roads, power) for the benefit of “connected” few beneficiary groups

• Sub-standard/non/delayed delivery – reduced value for money as a result of:

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Contractor illegitimate profit-maximizing efforts through substandard goods and/or overbilling through inflated invoices

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Funding of kickback schemes

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Corruption schemes that steer contracts to unqualified bidders

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Fraud during bid process (misrepresentations of technical and/or financial qualifications and relevant financial and implementation arrangements)

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Fraud and/or corruption during implementation involving contractors/suppliers, consulting engineers and

• ther monitors, government officials, intermediaries, etc. (inflated invoices, fraudulent completion

certificates/acceptances, etc.)

RECURRENT ISSUES IDENTIFIED THROUGH INT INVESTIGATIONS

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RECURRENT ISSUES IDENTIFIED THROUGH INT INVESTIGATIONS

12 Corruption 35% Embezzelment 18% Conflict of Interest 6% Misrepresentation 13% Collusion 10% Implementation Fraud 9%

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY

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A community bakery was built on the land of the chairman of the Beneficiary village He and his family were the sole users of the bakery

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY

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The construction site was abandoned by the contractor prior to completion

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY

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Drugs against a deadly disease do not contain the active ingredient and are ineffective

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY

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“Finished” classroom used to store stolen aid

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY

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Because of the appalling condition of the road, cars are using the smaller road which is reserved for pedestrians and bikes The supervisor and construction company agent had paid more than $500,000 in bribes to get the contract

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY

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A half-completed bridge awaits additional funding after the supervision engineer signed

• ff on full payments against allegedly

“completed” works.

Government

Project A1 10 Schools Project A2: 10 micro projects

Other Donor

Project B1: 10 micro projects Project B2: 10 Schools

World Bank

Project C1: 3 Schools Project C2: 5 schools, 2 clinics

28 sch chools - 20 mic icro proje jects – 2 clin clinic ics

Project delivers: 10 sch

chools - 10 mic icro proje jects – 2 clin clinics BUT charges for: 28 schools - 20 micro projects – 2 clinics

WHAT WE SEE: DOUBLE DIPPING TO BENEFIT A FEW TO THE DETRIMENT OF MANY

It has been long understood that fraud and corruption cannot be addressed in isolation As noted as early as 1999*, sustainable improvements in delivery of public services require an integrated and coordinated approach that focuses on 3 primary areas: 1. Building systemic integrity in all elements of society (all parts of government, citizens, the private sector) 2. Strengthening the institutional capacity of public sector and civil society organizations to support enhanced integrity and better public sector performance 3. Focus on results

IMROVING DELIVERY OF PUBLIC SERVICES: THE NEED FOR AN INTEGRATED APPROACH

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* See: “Prevention: An Effective Tool to Reduce Corruption”,

https://www.unodc.org/pdf/crime/gpacpublications/cicp2, Vienna, 1999

IMPROVING DELIVERY OF PUBLIC SERVICES: “TRIED-AND-TRUE” MEASURES OF EFFECTIVE OVERSIGHT

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 Reduce opportunities for side payments through:  enhanced oversight by beneficiaries in partnership and support from watchdog NGOs and media  effective audit and verification (including spot/rolling audits and cross verification as needed)  tighter contracting arrangements that focus on payments against outputs and results, rather than inputs  Implement Grievance Redress Mechanisms  Elevate the moral and fiscal cost of misconduct to the service providers  Establish strong financial management systems with clear lines of responsibilities for allocation and transfer

• f funds and pre and post transfer verifications

 Minimize the number of approving authorities to reduced rent-seeking opportunities  Eliminate or closely monitor the use of agents

Impact of audits on reducing theft of funds in roads projects in East and Central Java

IMPROVING DELIVERY OF PUBLIC SERVICES: USING AUDITS TO DETER THEFT

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What are they?

• Continuous assessment of

project implementation performed

• Semi-annually, or
• Ad hoc/surprise
• Random sampling or

universal

• Bottom-up approach
• Compliment annual audits

IMPROVING DELIVERY OF PUBLIC SERVICES: USING ROLLING AND SPOT AUDITS TO DETECT AND DETER LOSSES

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Expected Benefits:

• Timely vs. ex post facto
• Regularly conducted
• Independent
• Enhance financial discipline,

management, and accountability

• Strengthen capacity building and

training

• Deterrent effect: Increase perception of

detection

IMPROVING DELIVERY OF PUBLIC SERVICES: “TRIED-AND-TRUE” DETERRENCE THROUGH INTEGRITY-FOCUSED PROCUREMENT FRAMEWORK

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1.Include clear definitions of fraud, corruption and other types of misconduct in the public procurement law (PPL) in a manner that is consistent with the appropriate penal code. 2.Reflect the PPL definitions of misconduct in tender and contract documents to clarify expectations and raise awareness of costs/consequences of misconduct 3.Deal with conflicts of interest through clear regulations and enforcement of compliance, supported through appropriate Codes of Conduct and Conflict of Interest Affidavits for public officials 4.Require appropriate integrity due diligence of bids by procurement officials and support it through relevant training, manuals, checklists and other tools (e.g., access to company registries, debarment lists) 5.Adopt an effective regime of administrative sanctions/debarments to address misconduct 6.Promote integrity of procurement officials through up front verifications, training, clear behavioral expectations, positive incentives, and appropriate disciplinary procedures to address alleged misconduct 7.Conduct periodic audits/compliance checks of the procurement system to detect any weaknesses and implement timely corrections

IMPROVING DELIVERY OF PUBLIC SERVICES: INCREASED TRANSPARENCY AND ACCOUNTABILITY SUPPORTED BY INFORMATION TECHNOLOGY

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IMPROVING DELIVERY OF PUBLIC SERVICES: ENHANCING ACCESS TO INFORMATION

Donors Central Government Decentralized Government Grassroots/Civil Society Publish what you fund Website Website/other (SMS, etc) SMS Publish what you receive Publish what you fund Publish what you receive Publish what you fund Publish what you fund Website

What How/W here Who

IMPROVING DELIVERY OF PUBLIC SERVICES: INCREASED TRANSPARENCY AND ACCOUNTABILITY

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Increase transparency and accountability at all junctions of the service delivery process -- from application, to eligibility verification, to connection/delivery/payment/monitoring/ repair Use information technology coupled with centralized/consistent reporting, oversight and publication of outputs to enable and empower oversight by beneficiaries

IMPROVING DELIVERY OF PUBLIC SERVICES: USING TECHNOLOGY TO REDUCE LOSSES

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Example: Mobile money transfer: M-PAISA, Afghanistan Offers safe and reliable financial services:  Person to person money transfer  Disbursement and repayment of microfinance loans  Merchant payments  Disbursement and receipt of salaries RESULTS: Afghan National Police force: salaries transferred via SMS  up to 1/3 higher salaries receipt

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IMPROVING DELIVERY OF PUBLIC SERVICES: USING TECHNOLOGY TO VERIFY IMPLEMENTATION STATUS

• Satellite

images allowed INT to prove fraud in conflict zone

• Area in red

should have had new school built

• n site

IMPROVING DELIVERY OF PUBLIC SERVICES: THE IMPORTANCE OF EFFECTIVE COMPLAINTS HANDLING MECHANISMS

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Access to information and complaint mechanisms

• Complaint handling at village, city and national

level.

• Media : box, texting/sms, email, face to face.
• Complaints are recorded, followed-up and

responded.

• Follow ups are recorded.
• Complaints and follow ups are disclosed.
• Time-bound responses.
• Web-based management system.
• Handled by facilitators, coordinators, city and

national management consultants Disclosure& web-based complaint handling system

IMPROVING DELIVERY OF PUBLIC SERVICES: THE IMPORTANCE OF EFFECTIVE COMPLAINTS HANDLING MECHANISMS

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Public information boards can be a strong indicator of transparency and good governance. Empty boards are a red flag of deeper issues.

IMPROVING DELIVERY OF PUBLIC SERVICES: THE BENEFITS OF DOING THINGS RIGHT

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