Endless cases of fraud and corruption in the public sector

The Auditor-General Tan Sri Ambrin Buang’s keynote address at the Combating Procurement Fraud in the Public and Private Sectors Forum 2017 in Kuala Lumpur on January 24,  was headlined as  “Public procurement most vulnerable to corruption, says Auditor-General” by The Malaymail Online and “Ambrin: Losses in publicly funded projects due graft” by The Star. Reading the two articles, I think a more appropriate headline could be “Endless cases of fraud and corruption in the public sector.”  Despite multiple measures taken to prevent this, the situation seemed to have become more alarming.

The AG lauded the efforts of the MACC to open investigation on a few cases over the last few months that involved millions of ringgits. He recommended the “strengthening the role of internal auditors, across- the-board auditing of procurement in government departments and agencies, and having more focused training on procurement management.”

The AG is the auditor of about 1400 government agencies and about 1700 government-linked companies. There are about 1.6 million civil servants. Given the size of the government machinery, the AG’s knows it is an uphill task for the National Audit Department and MACC to curtail fraud and corruption on their own. By the time the audit is carried out, and the MACC starts the investigations, too much time would have elapsed. By then, the damage is done and there will be a lost opportunity to undertake projects and initiatives beneficial to the citizens.

Roping in the internal auditors is a good move but in the past, this has not been effective. The JPA also implemented the Integrity unit in 2013 to increase their anti-corruption resources. Prior to this,  the government established the National Institute of Integrity in 2004. It is apparent this is also not getting the outcome expected.

Perhaps, it is time to get back to the drawing board. We should go back to the fundamentals of accountability and good governance in the public sector. These may be overused and ambiguous terms but we can define the actions and outcome required from the public sector based on these two concepts.

Accountability and Good Governance

Accountability is a chained relationship. The civil servant should be accountable and answerable to the supervisors. Likewise, the supervisor is accountable and answerable to the sections heads, section heads to departmental heads, departmental heads to secretaries, secretaries to ministers and  ministers to the Prime Minister. The Prime Minister and the ministers are in turn is accountable to the public. Unfortunately, this chain of accountability can be broken is those at the top resist from being accountable or do not demand their subordinates to account to them.

The situation is Malaysia is complicated by the fact that the leadership and the board of directors of some of the government agencies and GLCs are political appointees. These appointees are also accountable to their party and may owe personal loyalty to the party leaders. These entities should be considered vulnerable and special attention should be paid to them.

The dictionary defines accountable as “required or expected to justify actions or decisions.”   Accountability within the public sector is different from accountability to the public as the issue of transparency and confidentiality does not arise.

“Good governance is about the processes for making and implementing decisions. It’s not about making ‘correct’ decisions, but about the best possible process for making those decisions.”

With the above in mind, it is important that all the significant decisions made in the public sector must be properly documented. This includes all communications, reports and working papers, meeting notes and minutes, instructions, and so on. A journal of all related events must be maintained. The aim is to leave a paper trail for future investigations when required. This requirement may already be part of the SOP or ISO 9000. All officers involved should be jointly and severally held responsible. The absence of such a paper trail or any falsifications should be considered a serious offense. The role of the auditors, internal or external, is to ensure that such documentations and records exists and are securely archived. However, we cannot expect the auditors to evaluate the quality of the decisions as part of the routine audits.

This may have been practiced to some extent in the better-organized agencies but the endless cases of fraud and corruption in the public sector seem to show otherwise. Every effort should be made to simplify the documentation process by providing various standard formats for different purposes. In so doing, it is important not to miss out the pertinent information. Ultimately, the documentation should be sufficient for the investigators to identify negligence, omissions, and incompetencies that facilitate fraud and corruption.

A basic truism is that we cannot stop every crime as the cost of stopping every crime can be exorbitant and stifle the activities of the public sector. The emphasis should, therefore, be ensuring that criminals will be caught and this knowledge will deter them from committing crimes. There need to be an environment of trusts and common purpose for the public sector to function efficiently and effectively. As such, the idea of encouraging “spies” may have unintended detrimental consequences.

The other big issues highlighted by the Auditor General is procurement and project implementation. That is a story for another day.

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