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

INT’s MANDATE 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 2

INT’S STRATEGIC PILLARS Investigation Detection & Sanction Prevention 3

WBG’s LEGAL ENFORCEMENT FRAMEWORK WBG BG San Sanctio ionable Of Offenses/Actionable Mis isconduct Fraud  Corruption  Collusion  Coercion  Obstructive practices  rd part WBG BG San Sanctio ions vi vis s a a vi vis 3 rd parties Letter of reprimand  Conditional non-debarment  Debarment with conditional release  Debarment  Restitution  WBG BG In Integrity Co Compliance Co Conditio ions Sanctioned parties must meet rehabilitation conditions before they can apply for  reinstatement to participate in WBG-financed activities 4

SANCTIONS ARE PUBLIC: www.worldbank.org/debar List of Debarred Entities Web and Media Coverage 5

ENGAGING WITH NATIONAL AUTHORITIES Working with the British and Working with Canadian Dutch governments to authorities on the investigate corruption Padma implicating a Dutch company Bridge investigation Working with the Fiscalia in Working with the Colombia Norwegian National Authorities 6

INT RESULTS (FY16 SNAPSHOT)  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 7

INT COMPLAINTS AND INVESTIGATIONS (FY16 SNAPSHOT) Corruption 48 Cases Collusion 8 Cases Fraud 9 Cases 1,290 Communications to INT 279 PRELIMINARY INQUIRIES OPENED 64 INVESTIGATIONS OPENED 35 FIRs issued 8

SOURCES OF OUR INSIGHTS AND INFORMATION Public Information Documents Forensic Audits Human Intelligence Reporting Out • Internet • Bank • Exercise of audit clause • Bidders • FIRs • Media • PIU • New audit guidance note • Project & Govt. officials • Referrals • Specialized databases • Company • Joint fiduciary reviews of • Beneficiaries • Integrity Risk Reports high-risk projects • Public Records • NRAs and disclosures • Confidential witnesses • Training Materials • Early identification of • Complainants & Witnesses • WBG Staff • Reports & Publications integrity issues • National Authorities • Volcker List • Integrity Concern Flags • Forensic Audit Reports • CRPD 9

RECURRENT ISSUES IDENTIFIED THROUGH INT INVESTIGATIONS • 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 10

RECURRENT ISSUES IDENTIFIED THROUGH INT INVESTIGATIONS  Interference with access to essential services (health, education, utilities, roads): “ Grease” or “speed” payments to agency staff to assure access at different levels – from priority lists, to actual  connection, to service/repairs, etc. “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: Contractor illegitimate profit-maximizing efforts through substandard goods and/or overbilling through  inflated invoices Funding of kickback schemes  Corruption schemes that steer contracts to unqualified bidders  Fraud during bid process ( misrepresentations of technical and/or financial qualifications and relevant financial  and implementation arrangements) Fraud and/or corruption during implementation involving contractors/suppliers, consulting engineers and  other monitors, government officials, intermediaries, etc. (inflated invoices, fraudulent completion certificates/acceptances, etc.) 11

RECURRENT ISSUES IDENTIFIED THROUGH INT INVESTIGATIONS Conflict of Interest 6% Embezzelment 18% Corruption 35% Misrepresentation 13% Collusion 10% Implementation Fraud 9% 12

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY 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 13

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY The construction site was abandoned by the contractor prior to completion 14

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY Drugs against a deadly disease do not contain the active ingredient and are ineffective 15

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY “Finished” classroom used to store stolen aid 16

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY Because of the appalling The supervisor and construction condition of the road, cars company agent had paid more than are using the smaller road $500,000 in bribes to get the which is reserved for contract pedestrians and bikes 17

WHAT WE SEE: THE IMPACT OF FRAUD AND CORRUPTION ON SERVICE DELIVERY A half-completed bridge awaits additional funding after the supervision engineer signed off on full payments against allegedly “completed” works. 18

WHAT WE SEE: DOUBLE DIPPING TO BENEFIT A FEW TO THE DETRIMENT OF MANY Government Other Donor World Bank Project A1 Project C1: Project B1: 10 micro projects 3 Schools 10 Schools Project C2: Project A2: Project B2: 10 micro projects 10 Schools 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

IMROVING DELIVERY OF PUBLIC SERVICES: THE NEED FOR AN INTEGRATED APPROACH 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 * See: “ Prevention: An Effective Tool to Reduce Corruption ”, 3. Focus on results https://www.unodc.org/pdf/crime/gpacpublications/cicp2, Vienna, 1999 20

IMPROVING DELIVERY OF PUBLIC SERVICES: “TRIED -AND- TRUE” MEASURES OF EFFECTIVE OVERSIGHT  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 of 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 21