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Public Sector Management [i]

A fifth building block of an anti-corruption strategy consists of reforms in the internal management of public resources and administration to reduce opportunities and incentives for corruption. Reforming public sector management and public finance requires: 

In most cases, greater public oversight can play a key role in the reform process.

The practice of political patronage in public administration continues to be an important source of corruption in many developing countries. Political patronage can be a source of accountability to the patron, but it can also undermine continuity and the development of standards, institutional values, and memory in the public sector. This opens the way to conflict of interest, misprocurement, and theft of public funds. The short-term and uncertain nature of many political appointments also decreases the time horizons of public sector workers, creating incentives for predatory behavior.

A meritoric civil service with monetized, adequate pay

A first step in reforming public sector management is to eliminate patronage by instituting meritocratic systems for appointment, promotion, and performance evaluation and, where feasible, establishing an independent civil service oversight body. In parallel it will be important to increase salaries, relate them to skill and responsibility, and regularize the extensive nonsalary benefits that provide broad scope for discretion and corruption.

Review of governance and functional structures in ministries and agencies should also be a high priority. Some administrations have moved central government functions into quasi-private-sector structures. These structures blur the lines of policy direction and accountability and also create an unnecessarily large number of highly paid supervisory jobs which can serve to multiply political contacts and opportunities for pay-offs. Off-budget agency funding contributes to budget fragmentation and lack of transparency. There is also a small but important category of agencies, such as the committee on statistics, that should not be subject to political direction and whose independent functioning needs to be safeguarded. Such agencies need statutory protection, elimination of party political appointments, professional management, and freedom from political interference.

…more on  administrative and civil service reform

Enhancing transparency and accountability in budget management

To improve transparency and accountability in fiscal management it is crucial to ensure full budget coverage and control. This can be achieved by reducing the diversion of resources into off-budget accounts that typically lack oversight and transparency. These off-budget transactions take different forms, from extra-budgetary funds to lack of integration of investment planning and external financing into the budget. A further challenge is the significant magnitude of contingent liabilities stemming from nontransparent off-budget commitments.

Another challenge is to institute the key elements of a functioning budget system that ensures accountability. Budget formulation is often flawed by ambiguity between executive and legislative roles, poor parliamentary processes, lack of strategic policy coordination and consultation, and inability to impose trade-offs at the executive level. Expenditure projections lack a medium term perspective and revenue forecasts are unrealistic, leading to ad hoc and nontransparent adjustments during budget execution. Expenditures on defense and internal security tend to be even less transparent and accountable than other expenditures. Unclear appropriations and unreliable disbursements often leave public managers unable to deliver reliable services. They also undermine the accountability of budget managers and undermine monitoring and evaluation.

Reforms to promote greater accountability and control over budgetary expenditures require robust accounting and auditing and a strong budget execution process. Treasury systems are crucial here. Investment in information technology needs to be well grounded in broader institutional reforms. Transparent and competitive procurement is essential to prevent corruption from inflating public expenditure. In this context, web-based procurement can be a valuable aid to transparency.

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The effectiveness of external and internal audit entities varies greatly. To be effective in reducing corruption, external audit must be independent and equipped with strong auditing and diagnostic skills, moving beyond individual fault to target systemic weaknesses. Internal audit also needs to be developed further. Parliamentary and public oversight needs to be strengthened, with public dissemination of audit findings and scrutiny by Parliamentary Audit committees—which too often do not exist.

Enhancing transparency and accountability in tax and customs

Corruption in customs and tax administration lowers state revenues, creates a distorted private sector environment, and is often linked with smuggling and organized crime. Reforms to simplify tax policy and eliminate discretionary exemptions help, as do professional staff, standardization of forms and procedures, and transparent systems such as the use of computerized risk analysis at the borders. It is important to eliminate one-on-one contact between taxpayers and officials and ensure that operating and management systems are efficient and easily monitored, including through periodic taxpayer surveys.

…more on  tax policy and administration

Policy reforms in sectoral service delivery

Finally, administrative corruption can be profoundly damaging to the level and quality of service delivery across key sectors. It is often deeply rooted in distorted policies, as illustrated in the energy and health sectors. Corruption, for instance, plagues the interface with customers and lies behind the low collection rates reported by many electricity, gas, and district heating companies. In Azerbaijan, the state-owned Baku Electricity Company reports a household collection rate of 12 percent despite employing 1,000 payment collectors. Sale of the distribution company or privatization/management contracts can help, as long as tendering and contracting processes are transparent and contract execution can be monitored. Reducing noncash transactions including barter and arrears offsets can also reduce private rent-seeking, as noncash exchange at artificially inflated rates is a standard method of extracting private gains.

Health services are characterized by interdependence of supply and demand, asymmetric information, gatekeeper power, divergence between public and private interests and incentives, and other characteristics that provide fertile ground for corruption. Patients, especially the poor, are in a uniquely weak position to counter these difficulties. Remedies include a set of reforms in health care financing, together with complementary measures to reallocate resources to priority areas, reduce waste in the health system due to malpractice in the procurement of equipment and pharmaceuticals and a variety of other abuses, and strengthen the professionalism and pay of health care personnel. Most importantly, health care systems require basic oversight and accountability. (See  reform proposals for the health sector in Central and Eastern European and the Commonwealth of Independent States).

Decentralization with Accountability   

Decentralization of service delivery can in principle make the state more responsive to the needs of the people and improve service delivery. However, in countries where the accountability and capacity of subnational governments is weak and where there are few safeguards against the manipulation of municipal assets and enterprises for the private gain of local officials, decentralization can actually increase corruption, bias resource allocation, and adversely affect access and quality in basic social services. Improving accountability at the local level for local expenditures and to the central government in cases where expenditures are only administered by the local level (deconcentration) is a necessary first step. Reform efforts should strongly focus on creating regional/local capacity in financial management and auditing, before (or while) the decentralization process gets underway.

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In parallel with reforms in sector policy and institutions, strengthening public oversight over the quality of service delivery can promote improvements in certain contexts. In Armenia, Latvia, and Albania for instance, civil society groups have initiated periodic user surveys of service delivery, published findings, and ranked public entities according to their efficiency, integrity, and adherence to service standards. This has provided a powerful impetus for internal reorganization to realize efficiency gains, develop performance standards, and sow the seeds of transformation from a command and control orientation to one of service delivery and accountability.

…more on  surveys

[i] This section is largely based on World Bank. 2000. Anticorruption in Transition. A Contribution to the Policy Debate. Washington, D.C., pp. 52-57.