HOW TO MITIGATE CORRUPTION RISKS IN AID FLOWS?

Corruption is a major threat to public funds – and not just in the developing world. According to a recent report commissioned by the EU anti-fraud agency OLAF, € 901 million should be recovered after proven fraud or corruption in EU funds. One of the greatest concerns of any donor is how to minimise the risk that their funds are mismanaged or stolen.

The governments of Norway, Iceland and Liechtenstein asked Transparency International to assess and help mitigate the risk of corruption in their EEA and Norway Grants, a €1.8 billion programme that aims at reducing economic and social inequalities in 16 EU countries. This report did not investigate actual cases of corruption but looked at the anti-corruption systems in place.

Of the 150 programmes assessed by Transparency International, 2 out of 3 faced a medium risk, and 1 in 10 was exposed to high risk of corruption. Our assessment shows that two things are especially important to ensure public funds are not mismanaged: Effective channels for reporting corruption and clear ethical rules for public officials managing these funds.

The need for trusted and independent channels to report corruption

Active citizens who take part in reporting corruption can be a very effective way to find out about corruption or the risk of it. But TI’s assessment found that in many countries there were no channels in place to report or receive such complaints. In other cases, it was difficult to know where to report. By now, all management authorities have established and publicised a complaint mechanism, and work is going on to ensure that they effectively work in practice and that complaints are properly followed-up.

Managing funds requires high integrity of public officials

Some countries require staff responsible for implementing programmes to adhere to particularly high integrity mechanisms. They must provide written statements on compliance with ethical rules, declare any conflicts of interest or disclose their assets. Others provide specific training programmes to their staff, thus increasing the awareness and skills to manage corruption risks in the grants.

It is now up to the managers of the EEA and Norway Grants to ensure that dedicated measures are implemented and regularly reviewed in all countries. The risk assessment provides a solid basis for this. It means a significant step forward in implementing the commitment to zero tolerance to corruption in the beneficiary countries.