GUID 5270

Guideline for the

Audit of Corruption
Prevention

INTOSAI Guidances are issued

by the International
Organisation of Supreme Audit
Institutions, INTOSAI, as part of
the INTOSAI Framework of
Professional Pronouncements.
For more information visit
INTOSAI www.issai.org

Pre-IFPP document - this document was developed

before the creation of the INTOSAI Framework of
Professional Pronouncements (IFPP) in 2016. It
may therefore differ in formal purpose from more
recent INTOSAI Auditing Guidelines.
 INTOSAI

INTOSAI, 2019
1) Endorsed in 2016 as ISSAI 5700 - Guideline for the Audit of Corruption
Prevention in Government Agencies
2) With the establishment of the Intosai Framework of Professional
Pronouncements (IFPP), it was relabeled and renamed as GUID 5270
Guideline for the Audit of Corruption Prevention with editorial changes in
2019
TABLE OF CONTENTS

INTRODUCTION 5

1. THE NECESSITY OF COMBATING CORRUPTION 7

1.1 The concept of corruption 7
1.2. Causes of corruption 12
1.3 Cost of corruption 13
1.4 The role of the SAI in the fight against corruption 15
1.5 Laws and regulations 17

2. COMPONENTS OF CORRUPTION PREVENTION SYSTEMS 19

2.1 Anti-corruption organizational culture 20
2.2 Objectives / strategy 21
2.3 Organizational responsibility for corruption prevention 22
2.4 Risk assessment and risk analysis (risk management) 24
2.5 Anti-corruption program (modules of corruption prevention) 29
2.5.1 Prevention of corruption 30
2.5.1.1 Appropriate framework of standards and regulations 30
2.5.1.2 Code of ethics 32
2.5.1.3 Appropriate human resources (HR) - management 34
Merit-based human resources management 34
Training 35
Job rotation 35
2.5.1.4 Internal control 39
2.5.1.5 Use of e-government 43
2.5.2 Detection of corruption 43
2.5.2.1 Whistleblowing mechanism 44
2.5.2.2 Internal audit 45
2.5.3 Reaction to corruption 46
2.6 Communication – reporting 49
2.6.1 Reporting to institutions outside the auditee’s body (SAI,
parliament, ig, prosecutors) 49
2.6.2 Gathering and disseminating information from internal
and external sources 50
2.6.3 Communications 51
2.6.4 Written plan on institutional communication 52
2.6.5 Effective internal communication 53
2.6.6 Effective external communication 55
2.6.7 Report issuing 56
2.7 Monitoring and modification 57
2.7.1 Permanent monitoring process 57
2.7.2 Analysis of lessons learned 59

3. ADDITIONAL ASPECTS 61
3.1 Cooperation with other institutions involved in fighting
against corruption 61
3.2 Cooperation between supreme audit institutions (SAIs) 61
3.3 Appointment of government agency 62
 INTRODUCTION

This guideline is designed to help SAI auditors in preparing and conducting the audit
of anti-corruption policies and procedures in government organizations within
the scope of their mandate. It highlights anti-corruption policies, structures and
processes in these organizations and can be used as an audit tool by the auditors.
It may, however, also be used by the auditees (such as government departments,
government institutions etc.) as guidance for implementing and carrying out their
own anti-corruption-activities. Those SAIs that do not have a mandate to conduct
performance audits can use this guideline for internal purposes.

The guideline assumes the reader is aware of general and specific audit
methodology and procedures applicable to this area of audit as set out in the
International Standards of Supreme Audit Institutions ISSAIs, ISAs, audit manuals,
and other relevant auditing standards and guidance. Given the enormous amount
of information widely available on the subject, this guidance is not intended to be
final or exhaustive but rather to explain and illustrate the relevant features and to
present practical solutions for SAI auditors.

The guideline covers key areas of anti-corruption structures and procedures that
may be found in government organizations. It also describes the setting up of anti-
corruption-structures, the approaches for risk assessment and risk analysis and
monitoring processes. The main emphasis is placed on the modules of an effective
anti-corruption organization such as the delimitation of duties, job rotation, role
of internal review, human capital including raising awareness and training of
employees.

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GUID 5270 - GUIDELINE FOR THE AUDIT OF CORRUPTION PREVENTION

This guideline does not cover fraud investigations, although some SAIs have
investigative units. In most cases the SAI does not lead an investigation since it does
not possess adequate knowledge or resources to do so. The investigative authorities
may even ask the SAI to stop carrying out audit work in the area concerned so as not
to jeopardize the findings of the investigation team. The SAI, however, may also be
asked to cooperate and even work alongside the investigative team. The fraud and
corruption investigation actively seeks out cases of deception and hidden figures
and is not concluded before it has gathered sufficient evidence on the extent and
financial impact of the problem.

One of the key issues, which has been known for years among scientists and
practitioners of public management, is the need to ensure institutional balance
(transaction cost theory). There is no possibility of effective implementation of
formal institutions, such as anti-corruption law, without concurrent changes of
informal institutions, as well as convincing citizens of the need to make changes in
order to effectively fight corruption.

The authors of the guideline have covered this concept in the first part of the
guideline that provides general information about the phenomenon of corruption.
This guideline is not only a kind of anti-corruption methodology, where risk-based
principles and procedures are discussed, but is also intended to help readers
understand the importance of the fight against corruption. Therefore, in the first
part of the guideline that is directed towards representatives of public institutions
around the world, the authors have decided to gather general information about the
phenomenon of corruption, its causes and consequences.

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1 THE NECESSITY OF
COMBATING CORRUPTION

1.1 THE CONCEPT OF CORRUPTION

Before discussing how to reduce corruption, it is worth mentioning why the issue
of corruption is essential to public management, and how corruption is related
to public governance. The term governance is generally used to encompass all
aspects of the way a country, corporation, or other entity is governed. Good
governance is a precondition for the sustainable development of societies and
regions. This means competent public management of a country’s resources
and public tasks in a manner that is right, transparent, accountable, equitable
and responsive to people’s needs. Corruption is a narrower concept than
governance as it is often defined as the abuse of public authority or trust for
private benefits. These two concepts are closely linked, where there is poor
governance, there are greater incentives and more scope for corruption.
Thus, the promotion of good governance helps to combat corruption. It also
complements efforts that target corruption more directly, such as raising public
awareness and strengthening the enforcement of anti-corruption legislation.
There is also a reverse link: corruption undermines governance to the extent
that it distorts policy decisions and their implementation.1

The International Monetary Fund’s operations and its relations with member
states have always been concerned with good governance. But in 1996, the policy-
making committee of its Board of Governors added an explicit mandate. In its
Declaration on Partnership for Sustainable Global Growth, the Interim Committee
stressed, among other things, the importance of “promoting good governance in
1 The IMF’s Approach to Promoting Good Governance and Combating Corruption — A Guide, International
Monetary Fund, Washington D.C. 2005 Retrieved November 2, 2009.

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GUID 5270 - GUIDELINE FOR THE AUDIT OF CORRUPTION PREVENTION

all its aspects, including by ensuring the rule of law, improving the efficiency and
accountability of the public sector, and tackling corruption, as essential elements
of a framework within which economies can prosper”2.

The World Bank also prepared the Worldwide Governance Indicators, and listed
six key dimensions of governance as follows: Accountability, Political Stability and
Lack of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and
Control of Corruption3. In addition, the Financial Action Task Force, recognizing
that corruption and money laundering are intrinsically linked, has developed a
reference guide to raise awareness of how its recommendations for combating
money laundering can also be used in the fight against corruption.4

There is no doubt that corruption can have a major negative impact on economic
performance. Corruption can reduce investment and economic growth. It also
diverts public resources to private gains and away from needed public spending on
education and health. It tends to compress operation and maintenance expenditures
while boosting for public investment and defense spending, which are both highly
amenable to corruption. By reducing tax revenue, corruption can complicate
macroeconomic management, and since it tends to do so in a regressive way, it can
accentuate income inequality.5

The United Nations Convention against Corruption does not contain a single definition
of corruption, but lists several specific types6. There are, however, several “working
definitions”. For example, Transparency International defines corruption as “the
abuse of entrusted power for private gain”7. The working definition of corruption
adopted by the World Bank Group is more oriented to the public sector and reads as
follows: “The abuse of public funds and/or office for private or political gain”8.

2 Communiqué of the Interim Committee of the Board of Governors of the International Monetary Fund, Press
Release Number 96/49, September 29, 1996, International Monetary Fund, Washington, D.C.
3 See: http://info.worldbank.org/governance/wgi/index.asp.
4 Financial Action Task Force, Corruption: A Reference Guide and Information Note on the use of FATF
recommendations to support the fight against corruption, 2010.
5 The IMF’s Approach to Promoting Good Governance and Combating Corruption — A Guide, International
Monetary Fund, Washington D.C. 2005 Retrieved November 2, 2009
6 UNODC, 2004. The United Nations Anti-Corruption Tooklit, 3rd Edition. Available at https://www.un.org/
ruleoflaw/files/UN_Anti%20Corruption_Toolkit.pdf , p. 10.
7 Transparency International, Frequently asked questions about corruption. Available at www.transparency.org/
news_room/faq/corruption_faq.
8 Available at https://openknowledge.worldbank.org/handle/10986/6848

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GUID 5270 - GUIDELINE FOR THE AUDIT OF CORRUPTION PREVENTION

The Civil Law Convention on Corruption by the Council of Europe, defines corruption
as requesting, offering, giving or accepting, directly or indirectly, a bribe or any other
undue advantage or prospect thereof, which distorts the proper performance of any
duty or behavior required of the recipient of the bribe, the undue advantage or the
prospect thereof.9

In terms of how widespread it is, corruption can be divided into individualized

corruption – involving a definite number of people, and collective corruption –
extending to entire interest groups, leading to dependencies in which the donor
becomes the recipient and vice versa. A distinction can also be drawn according to
the spheres of state and society in which corruption occurs: in the private sector, at
the interface of the private and public sectors, and in the public sector. By adopting
an ‘actor-centric’ approach towards giving and accepting corruptive advantages,
passive and active corruption can be distinguished. Passive corruption involves the
deliberate action by an official, who, directly or through an intermediary, requests
or receives advantages of any kind whatsoever, for himself or for a third party, or
accepts a promise of such an advantage, to act or refrain from acting in accordance
with his duty or in the exercise of his functions in breach of his official duties. Active
corruption involves the deliberate action of whoever promises or gives, directly or
through an intermediary, an advantage of any kind whatsoever to an official for
himself or for a third party in order for him to act or refrain from acting in accordance
with his duty or in the exercise of his functions in breach of his official duties.10

According to the Criminal Law Convention on Corruption by the Council of Europe,

active bribery of domestic public officials is defined as an act committed intentionally
by the promising, offering or giving by any person, directly or indirectly, of any undue
advantage to any of its public officials, for himself or herself or for anyone else, for
him or her to act or refrain from acting in the exercise of his or her functions. Passive
bribery of domestic public officials is defined as an act committed intentionally by
the request or receipt by any of its public officials, directly or indirectly, of any undue
advantage, for himself or herself or for anyone else, or the acceptance of an offer or
a promise of such an advantage, to act or refrain from acting in the exercise of his or
her functions.11

9 See Article 2, Civil Law Convention on Corruption, done at Strasbourg on 4 November 1999,
https://www.coe.int/en/web/conventions/full-list/-/conventions/rms/090000168007f3f6
10 Z. Dobrowolski, Trust, Corruption and Fraud [in:] B. Kozuch, Z. Dobrowolski, Creating Public Trust: An
Organisational Perspective, Peter Lang GmbH, Frankfurt am Main 2014, pp. 132-136.
11 Criminal Law Convention on Corruption, see: http://conventions.coe.int/treaty/en/Treaties/Html/173.htm

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GUID 5270 - GUIDELINE FOR THE AUDIT OF CORRUPTION PREVENTION

The concept of corruption could also be referenced to two types, grand and petty
corruption. Grand corruption involves substantial amount of money and usually
high-level officials. Petty corruption is the corruption that involves smaller sums and
typically more junior officials.

Among other types of wrongdoing, corruption is associated with nepotism or

favoritism, clientelism, cronyism, patronage, graft, bribery, extortion, embezzlement,
theft and fraud. Nepotism is defined as providing favors based on consanguinity.
It is also defined as favoritism granted to relatives regardless of merit. Favoritism
means giving favors based on informal relations or the practice of giving special
treatment to a person or group12. The term clientelism refers to a complex chain
of personal bonds between political patrons or bosses and their individual clients
or followers. These bonds are founded on mutual material advantage: the patron
furnishes excludable resources (money, jobs) to dependents and accomplices in
return for their support and cooperation (votes, attendance at rallies). The patron
has disproportionate power and thus enjoys wide latitude about how to distribute
the assets under his control13.

By definition, favoritism, nepotism and clientelism all involve abuses of discretion,

although a number of countries do not criminalize the conduct (for example,
Article 7 of the UN Convention Against Corruption covers merit selection without
even mentioning nepotism). Such abuses usually involve not only a direct personal
benefit to an official but also promotes the interests of those linked to the official,
be it through family ties, a political party, a tribe, or religious group. A corrupt
official who hires a relative (nepotism) acts in exchange, not of a bribe but of the
less tangible benefit of advancing the interests of others connected to the official.
The unlawful favoring of – or discrimination against - individuals can be based on
a wide range of group characteristics: race, religion, geographical factors, political
or other affiliation, as well as personal or organizational relationships, such as
friendship or shared membership of clubs or associations.14

Cronyism is showing partiality to long-standing friends, especially by appointing them

to positions of authority, regardless of their qualifications. Patronage is the support,
12 The American Heritage New Dictionary of Cultural Literacy, Third Edition. Houghton Mifflin Company, 2005. 10
Aug. 2009, http://www.thefreedictionary.com/favouritism.
13 D.W. Brinkerhoff, A.A. Goldsmith, Clientelism, Patrimonialism and Democratic Governance: An Overview and
Framework for Assessment and Programming. Prepared for U.S. Agency for International Development Office of
Democracy and Governance, under Strategic Policy and Institutional Reform, Abt Associates Inc., Bethesda 2002,
p. 2.
14 United Nations Handbook on Practical Anti-Corruption Measures for Prosecutors and Investigators, op.cit., p. 28.

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GUID 5270 - GUIDELINE FOR THE AUDIT OF CORRUPTION PREVENTION

encouragement, privilege, or financial aid that an organization or individual bestows

upon another. In some countries the term is used to describe political patronage,
which is the use of state resources to reward individuals for their electoral support.
Although in some countries patronage systems are legal, the term may refer to a
type of corruption or favoritism in which a party in power rewards groups, families,
ethnicities for their electoral support using illegal gifts or fraudulently-awarded
appointments or government contracts.

Graft is a form of political corruption that can be defined as an unscrupulous use of

a politician’s authority for personal gain. Most governmental systems have laws in
place to prevent graft although this does not always halt political corruption. Bribery
is the act of conferring a benefit in order to improperly influence an action or decision.
It can be initiated by an official who asks for a bribe or by a person who offers to
pay one. Bribery is probably the most common form of corruption. Definitions or
descriptions appear in several international instruments, in the domestic laws of
most countries as well as in academic publications. Typically, it is used to describe a
payment extracted by a public official from an unwilling member of the public before
the citizen can receive the service to which he or she is entitled. Strictly speaking,
such a transaction is not one of a “bribe” being given by an accomplice in corruption,
but a “payment being extorted” from an unwilling victim.15

The “benefit” conferred by a “bribe” can take a variety of forms: cash, company
shares, inside information, sexual or other favors, entertainment, employment or,
indeed, the mere promise of a benefit in the future (such as a job on retirement).

The Criminal Law Convention on Corruption by the Council of Europe defines bribery
associated with the phenomenon of corruption, namely: active or passive bribery.16

In the context of corruption, embezzlement, theft and fraud all involve stealing by an
individual exploiting his or her position of employment. In the case of embezzlement,
property is taken by someone to whom it has been entrusted (e.g. a pay clerk).
Fraud involves the use of false or misleading information to induce the owner of
the property to part with it voluntarily. “Theft”, per se, goes well beyond the scope
of any definition of corruption. However, “embezzlement” - essentially the theft of
property by someone to whom it was entrusted - is universally regarded as falling
15 United Nations Handbook on Practical Anti- Corruption Measures for Prosecutors and Investigators, op.cit.,
p. 24.
16 The Criminal Law Convention on Corruption, Strasbourg, 27 January 1999, Articles: 2, 3, 7, 8 of the Convention.

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GUID 5270 - GUIDELINE FOR THE AUDIT OF CORRUPTION PREVENTION

within corruption definitions wherever it occurs, carrying with it, as it does, a breach
of a fiduciary duty.17

1.2. CAUSES OF CORRUPTION

Flaws of human nature are mentioned among the causes of corruption. The urge to
enrich one quickly by dishonest means makes this phenomenon persistent in any
society, regardless of a political system. The tolerance for corrupt behavior may not
only have a cultural, but also a historical background. For instance, the absence of
one’s own national state may generate a disregard for legal norms, perceived as
rules imposed by the occupying power. This, in turn, can translate into a generalized
disregard for legal norms, and – more broadly – for ethical standards. In addition,
some mistakes of state economic policies may catalyze corruption. For instance, in
the circumstances of a shortage economy, with mismatched supply and demand, a
desire to get some consumer goods may generate corrupt behavior.18

Several studies have identified three common characteristics (Fraud Triangle model)
that may have an impact on the conduct of a corrupt or fraudulent person19:
• Incentive/pressures: The need a corrupt person is trying to satisfy by
committing a dishonest act.
• Opportunity: The ability of the corrupt person to act dishonestly due to
his/her position.
• Rationalization: The corrupt person’s ability to justify the act in his/her
mind.

In a market economy, corruption may be encouraged by the existing legal and

organizational regime which may restrict the freedom of business, by imposing
restrictions on business transactions. These restrictions may give rise to secret
agreements, various informal groups, which can affect the existing society system20.
Such agreements can occur in various societies with different cultures. It is worth
noting at this point that an act considered to be a corrupt practice in one community
17 United Nations Handbook on Practical Anti- Corruption Measures for Prosecutors and Investigators, op.cit.,
p. 26.
18 Z. Dobrowolski, Trust, Corruption and Fraud [in:] B. Kozuch, Z. Dobrowolski, Creating Public Trust. An
Organisational Perspective, Peter Lang GmbH, Frankfurt am Main 2014, pp. 129-130.
19 Dr. Donald Cressay; Criminal Organization: Its Elementary Forms, 1972
20 Z. Dobrowolski, Trust, Corruption and Fraud [in:] B. Kozuch, Z. Dobrowolski, Creating Public Trust. An

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may not necessarily fit into such classification adopted in another community. A
gratuity offered to an official after he or she has completed a task may – for some –
be a sign of corruption (establishing a “climate” for successful completion of other
affairs in future), and for others – only an expression of gratitude acceptable in the
culture.21

In considering the reasons why the corrupting party pays bribes, the following factors
can be distinguished:
• access to restricted goods, for instance contracts, licenses, permits, real
property in attractive city districts,
• access to information, for instance on the contractual terms and conditions,
on a bill of quantities with prices, on the activities planned by decision-
makers,
• favorable treatment of some matter, which allows avoiding or cutting
some costs, depriving other entities of some benefits.22

In light of what has been discussed so far, corruption develops when the freedom to
do business is restricted, there is excessive discretion in decision-making, little or no
accountability of decision-makers, inefficient control system, lack of transparency in
the activities of institutions using public funds or property.23

1.3 COST OF CORRUPTION

Corruption generates costs. However, the problem with corruption is that unlike other
crimes, those that are victims of corruption are often not directly linked, either in place
or in time, with the corrupt activities. There are, however, some estimates of overall
bribes paid worldwide. Corruption alone is estimated to cost the EU economy EUR
120 billion per year, just a little less than the annual budget of the European Union24.
Furthermore corruption has more far-reaching and damaging serious corruption
problems and two in three worldwide suffer from corrupting 25 consequences
Organisational Perspective, Peter Lang GmbH, Frankfurt am Main 2014, pp. 129-130
21 Ibidem
22 Ibidem
23 Anticorruption in Transition: A Contribution to the Policy Debate, World Bank, Washington D.C. 2000 (reproduced
typescript), pp. XV-XVII.
24 Report from the Commission to the Council and the European Parliament, EU Anti-Corruption Report, COM
(2014) 38 Final
25 Corruption Perceptions index 2015; Transparancy international.

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for society and the economy as a whole as is evident based on such estimates.
For instance, the money looted usually leaves the country and is thus not
accessible there anymore for other productive or redistributive purposes. Also,
the possibility to extort bribes biases the incentives for government officials and
has detrimental effects on overall governance, and thus on the quality and the
availability of public services. Bribes and embezzlement are just two aspects of
this corruption. Non-monetary and monetary effects of favoritism and nepotism
as well as fraud (e.g. the manipulation or falsification of information) have to be
added to the picture.26

Corruption negatively affects productivity and deters investments. One of the reasons
for this is because the effects of corruption are comparable to a tax on investments.
A firm wishing to make an investment has to take into account the unpredictable
costs of bribery for setting up and operating a business.27

Environmental quality also suffers from corruption, and corruption undermines

effectiveness of environmental policies. Indeed, pollution may increase due to a less
effective environmental regulation which can be circumvented through bribes.28

Corruption can undermine the system of democracy. First of all, in most countries a
social and political consensus has been established that private wealth is subject to
a redistributive system to guarantee the provision of public goods and services, and
to prevent excessive social inequality, therefore income is taxed. Through bribing tax
officials or through tax evasion, corrupt practices undermine the ability of the state
to tax private wealth and revenues. Secondly, public expenditures are agreed on in
the budget, which is usually approved and determined by parliament, central audit
authorities and by civil society and media. But, as already mentioned, corruption
distorts the budget towards expenditures offering the highest corrupt opportunities,
undermining the democratically desired use of resources and favoring narrow
interests over public interest. Finally, corruption may also seek to directly influence
the policy making and the rules and regulations of a society, thereby undermining
democratic processes as well as the legitimacy of the state.29
26 Quote from the publication: F. Boehm, J. Joerges, Cost of Corruption: Everyone Pays – And the Poor More than
Others, Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH, Division State and Democracy
Supporting the Implementation of the UN Convention against Corruption, Federal Ministry for Economic
Cooperation and Development, Eschborn 2008, p. 2.
27 F. Boehm, J. Joerges, Cost of Corruption, op.cit., pp. 5-6.
28 H. Welsch, Corruption, Growth, and the Environment: A Cross-Coutry Analysis. Environment and Development
Economics, 2004, Vol.9: 663-93 cited by F. Boehm, J. Joerges, Cost of Corruption, op.cit., p. 7.
29 Quote from the publication: F. Boehm, J. Joerges, Cost of Corruption.., op.cit., pp. 9-10.

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1.4 THE ROLE OF THE SAI IN THE FIGHT AGAINST CORRUPTION

One of the most important aspects of the SAI’s role in combating corruption is the
work it does in strengthening public institutions, which are the elements of the
national integrity system. The public institution, within its statutory powers, supports
this national integrity system like pillars that support the roof of the building. Sound
governance in such a system is based on integrity, transparency and accountability.
Taking into consideration that it is much better to prevent than detect corruption,
the SAI’s fight against corruption should be multifaceted. It includes, but is not
limited to: (1) incorporating corruption and wrongdoing issues in SAI’s routine audit
work; (2) heightening public awareness of corruption and other wrongdoing through
timely and public disclosure of SAI’s audit findings; (3) improving methods and tools
of combating corruption and other types of wrongdoing; (4) providing a means for
whistleblowers to report instances of wrongdoing; and (5) cooperating with other
institutions in the fight against corruption.30

The SAI should analyze corruption phenomena (its occurrence, causes, areas and
mechanisms) as appropriate during each audit, and through its audits the SAI
should attempt to identify ways to reduce arbitrariness in the application of rules
and regulations, simplify administrative procedures, and eliminate unequal access
to information. Through SAI’s daily analysis of irregularities identified during audits
and analysis of legislation the SAI should attempt to identify the mechanisms that
can contribute to corruption. Through its work, the SAI should try to influence the
laws and regulations so that they themselves do not encourage corruption. If the
SAI makes a decision that a law or a regulation creates a situation that permits
or encourages corruption, it makes proposals for change. It is worth noting that
when irregularities are identified in an audit, the SAI should recommend corrective
measures, although most of SAIs have no executive powers and do not issue legal
verdicts.

By carrying out this comprehensive strategy aimed at combating corruption and

other types of wrongdoing, the SAI helps to strengthen the financial management
systems of public institutions, knowing that ongoing accountability within the
government will create a preventive environment that does not favor corruption and
30 Z. Dobrowolski, Corruption and Fraud Prevention [in:] B. Kozuch, Z. Dobrowolski, Creating Public Trust. An
Organisational Perspective, Peter Lang GmbH, Frankfurt am Main 2014, pp 181-185.

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other types of wrongdoing. A strong financial management system incorporates the

following: accurate, complete, and timely financial reporting, to include financial
statements audited by the SAI or independent auditors and reports on internal
controls and compliance with laws and regulations; a reliable system of internal
controls; and cost accounting capabilities. A strong financial management system
also contributes to and provides a basis for effective performance measurement.
Simultaneously the SAI should evaluate internal controls (an important line of
defense in preventing wrongdoing) and makes recommendations to strengthen
any weaknesses identified.31

The SAI should attach great importance to its informational role and heighten
public awareness of corruption and other wrongdoing through the timely and
public disclosure of its audit findings. Increased public awareness of corruption
helps to foster accountability. It is worth noting, however, that in many countries
the SAIs have certain information gathering tools for combating wrong doings and
can report on corruption in the public sector. In some countries, SAIs do not have
the competences of a police agency or prosecutor office. In the case of a well-
founded suspicion of a crime or any offence, the SAI should notify the body called
upon to investigate crimes and offences (in instances required by Criminal Law). In
some cases auditors may play an important role during criminal prosecutions by
being witnesses for the prosecution.32

The SAI’s effectiveness and efficiency in the area of wrongdoing detection is the
result of its strategy. Therefore the SAI should constantly work in a systematic
manner to improve its methodology to identify and combat wrongdoing. The SAI
should also increasingly turn its focus on training of its staff, knowing that the
success of the fight against wrongdoing depends not only on its audit procedures
and tools, but also on having staff with appropriate skills, knowledge, and abilities
to identify and assess potential irregularities.33

The SAI should create a commitment to individual integrity not only through its own
staff. Additionally it should be an institution to which whistleblowers can provide
information about suspected or actual wrongdoing in the workplace. Many SAIs
have a complaint gathering system. Telephone hotlines and Internet technology
are examples of commonly used whistleblowing mechanisms. The efficiency of
31 Ibidem.
32 Ibidem.
33 Ibidem.

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any whistleblowing system, however, depends not only on the availability of

such a solution for citizens, but also on how the system ensures the anonymity
of whistleblowers, and the belief of citizens that the information on irregularities
in public life, provided by individuals to the authorities of the state are properly
used by the authorities. All information gathered from such individuals by an SAI’s
complaint system should be transmitted over a secure connection, and the SAI
should safeguard all information provided by whistleblowers or others against
unauthorized disclosure.34

In their efforts to combat corruption SAIs should encourage public organizations

to put effective pre-employment screening procedures in place. Such procedures
should verify the qualifications, suitability and experience of potential candidates
for employment. Specific techniques that should be used include confirmation of
educational and professional qualifications, verification of employment background,
criminal history searches and credit checks. Such pre-employment screening
techniques must, however, be carried out in accordance with appropriate laws and
regulations. Screening applicants can reduce the likelihood of individuals with a
history of dishonest or fraudulent behavior being given a role within the organization,
and is therefore an important corruption prevention procedure.35

1.5 LAWS AND REGULATIONS

Laws and regulations concerning the prevention and fight against corruption, fraud
and money laundering should be a part of the legal system of each country. Given
the number of countries and SAIs, relevant laws and regulations have not been
included or referenced in this guideline.

Some countries have individually developed initiatives to combat international

corruption. However, only since the latter half of the 1990s, has the international
community established a legal framework to strengthen enforcement through
cooperation. The main instruments are the following:
• The Convention of the United Nations against the Corruption.
• The Inter-American Convention against corruption, the ICAC, of the
Organization of American States, OAS.
34 Ibidem.
35 Fraud risk management. A guide to good practice, Chartered Institute of Management Accountants,2008, p.35.

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• Civil and Criminal Law Conventions on Corruption by the Council of Europe.

• The Convention International Anti bribery, of the Organization for
Cooperation and Economic Development, OECD.
• African Union Convention on Preventing and Combating Corruption.

It should be pointed out that the mentioned conventions contain the majority of the
recommendations made in the various national and international forums to combat
transnational corruption such as mutual legal assistance, joint investigations, the
prevention and detection of transfers of assets illicitly acquired, measures for the
direct recovery of assets and the exchange of information, among others.36

36 Statement of Cartagena de Indias “Transparency Against Corruption”.

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2 COMPONENTS OF
CORRUPTION PREVENTION
SYSTEMS

According to World Bank anti-corruption approach as well as Robert Klitgaard

corruption model efficient fight against corruption requires eliminating monopoly,
reducing discretion and promoting transparency and the rule of law.

Seven key components have been identified for an effective fight against (and
prevention of) corruption:

Anti-Corruption Organizational Culture, Objectives/Strategy, Organizational

Responsibility, Risk Management, Modules of Corruption Prevention (anti-
corruption programme), Communication and Information and Monitoring and
Modification. This chapter has been prepared to provide a comprehensive
explanation on its relevance and impact to reduce and prevent corruption in
government organizations, but it also covers the SAIs’ role establishing guidance
on how supreme auditing contributes to corruption prevention.

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Anti-Corruption
Organizational
Culture

Monitoring and Objectives /

modification Strategy

Communication - Organizational
Reporting Responsability

Anti-Corruption Risk
Programme Management

Fig. 1: Components of Corruption Prevention Systems, SAI of Austria

2.1 ANTI-CORRUPTION ORGANIZATIONAL CULTURE

It should be pointed out that the design and implementation of an effective anti-
corruption preventıon system is a challenge for every institution and it requires
the active participation and professional judgment of all public officials so that
it constitutes more than an inertial set of steps destined to comply with specific
policies and procedures.

In this context the role model function of the management of all hierarchical levels is
essential for an efficient corruption prevention system. Without the “tone from the

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top” and the full commitment of the management to a comprehensive approach for
the fight against corruption preventive measures are inefficient.

The governing bodies and senior management use their expertise and professional
judgment to assess the necessary degree of control over integrity. Mid-level
management and administrative staff, among other public officials, use their
expertise and their professional judgment on a day-to-day basis to select, develop
and implement the anticorruption controls within their responsibility areas.

Likewise, auditors and other bodies in charge of institutional control apply their
professional judgment to supervise and evaluate the effectiveness and efficiency
of the anticorruption system. Possible indicators for a desirable anti-corruption
organizational climate can be:

1) The organization demonstrates a commitment to integrity and ethical values.

2) The oversight body should oversee the entity’s internal control system.

3) Management establishes, with board oversight, structures, reporting lines

and appropriate authorities and responsibilities in the pursuit of objectives.

4) The organization demonstrates a commitment to attract, develop and retain

competent individuals in alignment with objectives.

5) The organization holds individuals accountable for their internal control

responsibilities in the pursuit of objectives.

2.2 OBJECTIVES / STRATEGY

The first key element for a successful fight against corruption is the establishment
of related strategic objectives or priorities. To create a corruption free environment
within an organization is a desirable goal but may not always be a realistic objective
as in some cases corruption can only be curbed to an acceptable level but not
completely extinguished.

Derived from a mission statement or vision, the management of an organization has

to define long-term organizational objectives or priorities. These objectives have

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to be consistent with the overall strategy of the organization and must fit the legal
and budgetary framework. Typically, such objectives deal with the enhancement of
organizational integrity, the strengthening of corruption prevention systems
or improvement of the effectiveness and efficiency of such systems. Definite
and comprehensive anti-corruption objectives underline the commitment of
management in the effort to curb corruption within an organization.

Based on this objective or priorities, operational goals have to be defined that

underline which impact should be achieved by implementing a comprehensive anti-
corruption program.

These goals have to be targeted toward the prevention of corruption, realistic,

appropriate, time framed and measurable.

2.3 ORGANIZATIONAL RESPONSIBILITY FOR CORRUPTION

PREVENTION

In some countries, internal control standards require managers to establish an

organizational structure, among other actions, to achieve the program’s objectives.
In this context, a leading practice is to designate an entity within the structure to
design and oversee these activities . Further if the results of risk analyses or other
circumstances warrant, organizational responsibility for corruption prevention
within the institution should be clearly assigned. This could be organized within the
institution, as a specific anti-corruption unit, as a senior anti-corruption officer or
externally by other institutions. They shall understand the program and its operations,
as well as the anti-corruption risks and controls throughout the program; have
defined responsibilities; and be independent and have the right to report directly to
the head of the organization.

The unit/person for corruption prevention shall be established based on the tasks
and size of the organization and it may be responsible for more than one organization.

This unit/person may be charged with the following tasks covering the whole
organizational activities:
• serving as a contact for organization staff and management, if needed
without having to rely on official channels, along with private persons (the

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unit/person shall have direct access and may report to top management
level (e.g. Head of Organization);
• being the repository of knowledge on anti-corruption-risks and advising
organization management;
• keeping staff members informed (e.g. by means of seminars, e-learning
tools and presentations on a regular basis);
• assisting with training and having access to all anti-corruption related
training sessions;
• managing the risk assessment process
• monitoring and assessing any indications of corruption;
• helping keep the public informed about penalties under public service law
and criminal law (preventive effect) while respecting the privacy rights of
those concerned.

If the unit/person becomes aware of facts leading to reasonable suspicion that a

corruption offense has been committed, the organization management shall be
informed immediately and recommendations shall be made on:
• conducting an internal examination,
• taking measures to improve transparency
• informing the law enforcement authorities (the organization management
shall take the necessary steps to deal with this matter) and
• reporting deficiencies in the existing corruption prevention systems.

The unit/person shall not be delegated any authority to carry out disciplinary
measures and shall not lead investigations in disciplinary proceedings for
corruption cases.

Organizations shall provide this unit/person promptly and comprehensively with any
information needed to perform their duties, particularly with regard to incidents of
suspected corruption. The organization has the task to support the unit/person for
corruption prevention in carrying out their duties (e.g. by setting up special e-mail
addresses or providing appropriate resources).

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Even after completing their term of office, they shall not disclose any information
they have gained about staff members’ personal circumstances. They may, however,
provide such information to organization management or personnel management
if they have a reasonable suspicion that a corruption offence has been committed.
Personal data shall be treated in accordance with the principles of personnel records
management.

The unit/person for corruption prevention is to be formally appointed. This

appointment is to be announced in the person’s area of responsibility. If the unit/
person for corruption prevention is to be responsible also for implementing the anti-
corruption directive of the organization, in particular for heading the independent
organizational unit, the relevant organization may formally appoint the unit/person
to be its official.

Staff members responsible for carrying out security clearance of personnel may not
serve as unit/person for corruption prevention.

While continuing to perform their duties, the unit/person should work with staff
in the internal audit unit and with those responsible for implementing corruption
prevention policies.

2.4 RISK ASSESSMENT AND RISK ANALYSIS (RISK MANAGEMENT)

In all government organizations, at regular intervals measures shall be carried out

to identify areas of activity especially vulnerable to corruption and as warranted by
circumstances. This task may either be performed by external or internal organization.
The use of risk analyses shall be considered for this purpose.

Risk analyses are to be performed by government organizations on a regular basis and

on an ad hoc basis if actual threats materialize to identify and analyze organizational
elements or processes that are vulnerable to corruption. Organizations that
effectively assess risks try to take into consideration specific risks that the organization
or program faces; analyze the potential likelihood and impact of corruption; and
ultimately prioritize risks and document these decisions. In addition, the risk
assessment process can be used to determine the extent to which controls may no
longer be relevant or cost-effective. There is no universally accepted approach

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for risk assessment; however, they generally involve the following five actions: (1)
identifying risks affecting the program, (2) assessing the likelihood and impact of
inherent risks38, (3) determining the organization’s risk tolerance (e.g. willingness
to accept a certain level of risk of corruption based on the circumstances of the
individual programs and other objectives); (4) examining the suitability of existing
controls and prioritizing risks; and (5) documenting the program’s risk profile (e.g.
summarizing and documenting key findings and conclusions from the prior steps).

Specific steps that risk assessments may comprise include

• evaluation of individual organizational structure, processes and procedures
with regard to the risk of corruption;
• evaluation of audit records;
• based on this, identification of potential risks (especially for financial
fraud, e.g. in financial statements);
• valuation of potential financial losses and damage to reputation;
• checking the probability of risks and their consequences;
• evaluation of internal control systems (e.g. security systems).

The results of the risk assessment shall be used to determine any changes in
structures, procedures or personnel assignments in order to eliminate the
deficiencies identified.

The identification and analysis of areas of activity that are especially vulnerable to
corruption is a major task to be performed by government organizations.

An area of activity vulnerable to corruption is one where the following occurs (by
staff, custom or decision):
• third parties (individuals, businesses, associations, companies, other
institutions) receive material or non-material advantages or are preserved
from disadvantages, and
• third parties are able to provide staff members with advantages to which
they are not entitled by law or collective bargaining agreements.

38 This could also include the consideration of the nature of the risks themselves in the analysis. Even though a risk
may have a small impact or likelihood of occurrence, by its very nature it may be significant to the organization
and should be considered and a response determined.

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Furthermore, an area of activity associated with any of the following is especially

vulnerable to corruption:
• frequent outside contacts – also in the course of checking and supervisory
activities;
• management of large budgets;
• awarding of public contracts or subsidies, including the awarding of grants
or other funding;
• imposing of conditions, granting of concessions, approvals, permits, and
the like, setting and levying of fees;
• processing of transactions and operations using internal information not
intended for third parties.

This applies only if:

• the potential advantage has a significant material or non-material value
for third parties or
• the potential disadvantage to third parties would result in punishment, a
threat to their business or to the existence of the affected institution.

The need for risk analysis in areas of activity considered especially vulnerable to
corruption should in principle be evaluated on a frequent and regular basis, required
by significant circumstances (e.g. every one to five years or following organizational
or procedural changes or changes in the nature of assigned tasks). In order to
identify individual areas vulnerable to corruption, the following two-step procedure
is expected to be performed by the government organization:
• a brief examination of vulnerability to corruption and of the effectiveness of
existing safeguards and internal controls (e.g. by examining organizational
charts).
• if a risk analysis is needed: Identify operations which are especially
vulnerable to corruption as well as existing safeguards and internal
controls (e.g. by means of questionnaires and supplementary interviews).

If a need for action is determined, the risk analysis should conclude by recommending
and/or ordering additional preventive measures and detective and corrective
measures as well.

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In addition to the items noted above, the following questions may be asked by
the organization’s management, anti-corruption unit/person and individual staff
members through self-assessment, as well as SAI auditors when auditing whether
an activity is vulnerable to corruption:
• Are there or have there been instances of corruption in the area of activity?
• Have third parties tried to influence the decisions of a staff member in this
area?
• Does the area manage budget funds or resources?
• Is the area responsible for contracts, subsidies, funding?
• Does the area impose conditions, grant concessions or authorizations?
• Does the area charge fees?
• Have there been known cases of corruption in comparable areas of activity
at other organizations?
• Does the area of activity follow specifically defined work processes?
• Is the position associated with special scope for action and discretionary
powers?
• Does the extent of decision-making authority vary depending on the size
of contracts or other criteria?
• Does the area of activity have a final say regarding processing and decision-
making?
• Is there adequate administrative and task-related supervision?
• Is personal integrity the only barrier to corruption in the area of activity?
• What in-house control mechanisms are in place?
• Does the decision-making process provide for the double control by
involving more than one official responsible?
• Do other organizational units also have to approve decisions?
• Does decision-making ensure transparency, e.g. by means of checking
operations, reporting, explicitly designating responsibilities, or supplying
accurate and full documentation (minutes, notes, reports, proper record-
keeping)?

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• Is the decision-making process required to be transparent even if no

consent is needed from a superior or another organizational unit entitled
to participate?
• Is there a requirement that a transparent, written record be kept of the
decision-making process, which can be followed by an auditing authority?
• Are there any known violations of regulations (e.g. budget law, law on
public procurement)?
• Are there any complaints by the SAI or another supervisory authority, e.g.
the independent organizational unit for overseeing corruption prevention?

Government organizations as well as SAIs should be aware of factors related to

increased vulnerability, such as complexity, organizational change / dynamics,
management style, working environment and prior integrity incidents.39

Also a system of harmonized performance indicators could be established to

measure the level of corruption in a country based on transparency, disclosure
and effective reporting.

Public institutions could perform self-assessments periodically to identify

vulnerabilities.

IntoSAINT, for example, is a tool used by SAIs but can also be used by other public
organizations to self-assess their vulnerability concerning potential integrity
breaches.

IntoSAINT is targeted at corruption prevention and leads to management

recommendations to support the integrity of the organization. It is a ‘qualitative
tool’ that enables the user to design a tailor made integrity policy and at the same
time increases the integrity awareness of employees.

The basic principles of IntoSAINT are self-assessment, targeted at prevention, raising

general integrity awareness, learning to think in terms of vulnerability and risk, and
concrete management reports/action plans.

39 Handbook for Self - assesment Integrity IntoSAINT, 2011. SAI of the Netherlands.

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2.5 ANTI-CORRUPTION PROGRAM (MODULES OF CORRUPTION

PREVENTION)

Based on the results of an entity’s risk assessment, including its risk profile (if this
step was taken), the organization should develop and document a strategy for
fighting corruption; including identifying specific control objectives and developing
and implementing appropriate measures and specific control activities to prevent
corruption.

A comprehensive and reasonable anti-corruption programme has to be integrated

into the overall organizational structure. This programme must focus on three
elements: Prevention – Detection – Reaction.

Prevention Detection Reaction

(i.a.) (i.a.) (i.a.)
Framework of
standards and
Whistle blower Investigations /
Code of Ethics mechanism Examination

HR -
Management

Internal
Controls Internal Sanctions /
Audits Penalties
Use of
e-government

Fig. 2: Modules of Corruption Prevention, SAI of Austria

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2.5.1 PREVENTION OF CORRUPTION

A primary objective for the government is to prevent errors or irregularities from

occurring in an organization due to corruption or other misconduct.

For the prevention of corruption the following program elements should be

considered:
• Appropriate framework of standards and regulations
• Code of ethics
• Appropriate Human Resources management
• Appropriate internal control system
• Use of E-government

2.5.1.1 APPROPRIATE FRAMEWORK OF STANDARDS AND

REGULATIONS

In the past two decades, there have been radical changes in public sector
management. Although the issues between developed and developing countries are
different, one common theme is how to bolster public management accountability.
Key stakeholders such as the public and the legislature have become increasingly
interested in how public funds are allocated and spent, as well as how to reduce
public spending by limiting costs associated with moral hazard (the risk that the
presence of action will affect other parties) and adverse selection (a situation where
asymmetric information results in harming other parties).

Results-based management attempts to address these issues. Governments around

the world should take additional steps to ensure that public service is being performed
in an effective manner which will also help further anti-corruption efforts. Results
based management has been acknowledged as a successful reform in the developed
countries such as United States, New Zealand, Sweden and United Kingdom.

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In the 2003 United Nation Guide for Anti-Corruption Policies, the United Nation
also mentioned the importance of result-based management.40 In order to provide
a coherent accountability framework, many governments and organizations have
adopted results-based management, also known as facts-based management and
performance management.

Managers who effectively manage corruption and other risks develop and
document strategies that describe the organization’s approach for addressing the
risks identified in its risk assessment. A compendium of documents, guidelines,
regulations and other tools is an essential element of corruption prevention systems.
The scope of these documents has to cover all vulnerable areas to corruption in an
organization that are ideally identified as the result of a risk analysis. Additionally,
the values of an organization have to be emphasized in such documents.

Topics for such regulations might be:

• Secondary employment
• Conflict of interests
• Acceptance of gifts or invitations
• Handling of whistleblowers
• Handling of restricted information
• Post-public employment

In addition, the issue of open government, where citizens have the right to access
the documents and proceedings of the government, allows for further effective
public oversight and thus deters corruption. Requests for information by citizens
have been embedded in legislation in a number of countries through the enactment
and coming into force of the Freedom of Information Act.

40 United Nations Guide for Anti-corruption Policies. www.unodc.org/pdf/crime/corruption/UN_Guide.pdf

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2.5.1.2 CODE OF ETHICS

Every public institution should be equipped with a code of ethics.

A code of ethics is a set of conventional principles binding any person, from managerial
to official level, to properly behave in accordance with stakeholders’ expectation.41

Code of ethics is a moral guidance to be obeyed by all management and staff in an

organization to maintain individual and organization credibility. At the minimum, a
code of ethics should set out:
• Core values of an institution, covering integrity, independence, objectivity,
impartiality, confidentiality, and competence.
• Obligation of the institution’s management and employees to meet the
core values.

Every public institution should disseminate the code of ethics as an integrated

part of corruption prevention.

Effective corruption prevention could be achieved if all management and staff

understand the institution’s code of conduct properly. A good understanding
of an institution’s code of ethics can be achieved through a regular and effective
dissemination of the code to every level of the organization.

Usually, a new employee is equipped with a complete set of company guidelines

including the code of ethics. However, without any proper explanation on the
substance of the code of ethics, the new employee would not get a comprehensive
understanding and he/she may not practice it properly in daily business.

Every public institution should establish an appropriate way to monitor the

implementation of its code of ethics.

A specific unit or committee is established to ensure that the code of ethics is utilized
properly and to impose punishment to the violation of the code of ethics, e.g. Ethics
Committee.

41 ISSAI 130 Code of Ethics

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If a public institution and/or SAI establishes a committee, its members should consist
of representatives of top management, legal division, internal auditor division and
independent party.

Every public institution should review its code of ethics periodically.

A code of ethics is strict in nature but should be dynamic and follows any changes
in business practice and related regulations. The code of ethics should be reviewed
on a frequent and regular basis (e.g. every five years) or as required by significant
circumstances, depending on the serving term of top management.

There are few questions in relation to the code of ethics that should be asked by the
auditor including:
• Does the organization have a code of ethics?
• What is stipulated in the code of ethics?
• Does the code of ethics set out core values of an organization, such as
integrity, independence, objectivity, impartiality, confidentiality and
competence?
• Does the code of ethics set out obligations of the organization’s
management and staff to meet the core values?

Examples of core values in an organization are objectivity, integrity and

professionalism. Thus, the code of ethics reflects the following:
• observation of professional oath and pledge
• acting neutrally and impartially
• avoiding any conflict of interests
• acting firmly in implementing principles, norms and decisions
• acting firmly in expressing and/or conducting anything required based on
their consideration and conviction
• acting in good faith by maintaining confidentiality
• avoiding receiving undue advantages
• avoiding the use of state confidential information which becomes

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disclosed due to their positions or function for personal, group, or other party
interests
• avoiding to perform actions beyond their scope of duties and authorities

2.5.1.3 APPROPRIATE HUMAN RESOURCES (HR) - MANAGEMENT

Besides an appropriate framework of standards and regulations, human resource

management is an important aspect in the prevention of corruption.

In this context the following elements have to be considered:

• Merit-based human resources management
• Training
• Job rotation

»» MERIT-BASED HUMAN RESOURCES MANAGEMENT

Merit-based human resources management is a key element in fighting against

corruption. To prevent the undue influence of public sector human resources
management processes, selection and promotion criteria and procedures need to
be fair, predefined and clearly documented, so that the margin of discretion and
arbitration is limited. Appeal structures and mechanisms also need to be in place to
ensure effective remediation. Effective human resource management can reduce
potential risks and control weaknesses through the appointment of competent
staff to implement procedures and controls. This includes also the payment of
adequate and fair remuneration to all civil servants so that they may not become
involved in corruption.

Personnel for areas that are especially vulnerable to corruption must be recruited with
special diligence. For executive or management positions the need for completing
anti-corruption trainings should be a prerequisite for appointment, promotion and
succession.

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»» TRAINING

Every public institution should organize a training program to enhance employee’s

awareness on the danger of corruption. The training program is required to accelerate
the understanding of the danger of corruption, thus enhancing the corruption
prevention efforts. The training should be repeated periodically and should cover the
need and rank of the specific position. Newly hired staff shall undergo a specific anti-
corruption training to be documented in the personal file. Efforts should be made by
the organization to ensure a clear understanding of the code and its principles has
been achieved by staff after training.

»» JOB ROTATION

Job rotation is a job design technique that systematically assigns employees to

various jobs and departments over a period of a few years. The objective is to
expose employees to different experiences and wider variety of skills to enhance job
satisfaction and to cross-train them. In addition to being a learning mechanism, job
rotation can also be used as a tool to prevent corruption. However, there are both
positive and negative effects involved in job rotation that need to be taken into due
consideration when the decision to utilize this technique is made.

Positive effect of job rotation

Job rotation is an aspect of successful work environment that is often ignored by

employers. Job rotation can provide tremendous benefits to both employees and
employers alike, including in the following area:

Increase employee knowledge: Rotating jobs enable employees to learn different

aspects of the job, to gain a wider spectrum of their studies and to experience how to
perform their jobs at their best. Hence, they have the opportunity to learn necessary
skills which can help them to advance within the organization. This may also boost
their morale and self-efficacy. Apart from that, having several employees who are
knowledgeable about different tasks can be of merit as if one employee decides to
leave, the other can take his/her place without too much effort needed.

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Key staff: Employers often have difficulty trying to hire for key positions or hard-to-
find skills. Job rotation solves this by offering internal set of employee skills that can
often be helpful in other positions in addition to an employee’s current ones. Hence,
the organization can run more efficiently, and as a result, become more productive
and profitable.

Cost savings: Job rotation seems to be costly, yet in reality hiring someone who is
completely new to a position will require additional training.

Develop career: Job rotation can be seen as a means to develop an employee’s career
and move him laterally. Whatever the move is, it can be advised as a promotion
or advancement along the career path to a new position which requires further
knowledge in different departments or organization activities.

Minimize corruption: Instead of having a few employees undertaking activities that

have a high risk of corruption, more employees can be trained to also undertake those
activities thus the risk of corruption may be reduced, especially when combined
with job rotation allocation of tasks.

Negative effects of job rotation:

There are some negative attributes associated with job rotation. Some positions
within an organization may not be eligible for rotation due to the need for special
expertise. These positions may not fit the profile for rotation opportunities because
of rules and regulations on competency and also costs involved to train the workers.
Another problem faced by organizations is the possibility of having to compensate
staff for cooperation with job rotation implementation, since this can lead to wage
inequality. Utilization of job rotation may have the effect of reducing a workforce
because of the cross-training involved; an organization may not need to hire
additional staff to cover positions and may possibly lay-off current employees no
longer considered necessary. Finally, job rotation could lead to improper behaviors
including corruption especially if an employee wants to avoid such rotation.

Job rotation as a tool for fighting corruption:

The decision to utilize job rotation needs to be thoroughly evaluated based not
only on the positive but also negative aspects an organization may face. More
importantly, the organization should also evaluate the risk of corruption associated

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with the task. Although top management may have a conception of what corruption
is, the image may differ from executive to executive and may, indeed, differ widely
in respect of the true nature of corruption. In order to adopt a job rotation policy
to fight corruption within the organization, a full corruption risk assessment is
required to identify the specific opportunities a given set of operations. Only then
can a system of internal controls related to job rotation be designed to address
those specific risks. Even then, corruption can never be truly eliminated but they
can provide reasonable assurance that not only instances of corruption but also
waste and general misuse of resources can be reduced.

Red flags are early warning indicators that the risk of corruption in a particular area
is either higher than is normally tolerable or has increased over a period of time.
Identifying activities and jobs that are especially at risk in relation to corruption is
important. The need for job rotation should be considered when certain employee
behavior is observed, including the following:
• Employee maintains a very close relationship with vendors or customers
• Employee accessibly dominates and controls a particular process
• Employee refuses a promotion
• Employee refuses to take vacation time
• Employee works unnecessary overtime
• Productivity decreases and signs of dissatisfaction at work increases
• Mood changes and irritability increases
• Borrowing money from co-workers
• Rewriting records for neatness
• Sudden increase in the visibility of material possessions without a
reasonable cause
• Apparent increase in absenteeism
• Dislike of oversight
• Destroying work-related information

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Implementation of job rotation:

The policy of job rotation varies between entities. For example, in one INTOSAI
member country, the heads of the regional departments of federal bodies and their
deputies responsible for control and supervisory functions will be subject to job
rotation. In April 2010, the government adopted measures aimed at implementing
a job rotation mechanism for public servants. The need for job rotation as an anti-
corruption measure is also required by law in regards to the federal public service
within this country. The term of service for the heads of regional departments
and their deputies will last three to five years. All the decisions on their job
rotation will be made by the president or the government. The job rotation
for public servants is also mentioned in the United Nations Convention against
Corruption (UNCAC) adopted in 2003. This member country had previously
ratified this legally binding international anti-corruption instrument that obliges
the signatories to implement a range of anti-corruption measures affecting their
state’s legislation, institutions and practices.

In ensuring that job rotation is sufficient and effective, an auditor should take
necessary steps to ascertain the existence of control mechanisms.

There are few questions in relating to job rotation planning and implementation that
should be asked by an auditor including:
• Does the entity have any policy regarding job rotation?
• Is its design based on risk analysis?
• Is the policy being implemented? If not, why?
• Who makes decisions regarding job rotation?
• Does he/she have the authority?
• Who is eligible for job rotation? Why?
• What action has been taken to ensure that the policy is adhered to in the
future?
• Is the policy being reviewed?
• How, when and why is rotation to take place?

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• How much time does it take to choose the right candidate?

• Are the right people being notified?

2.5.1.4 INTERNAL CONTROL

Internal control is broadly defined as a process, affected by an organization’s board

of directors, management and other personnel, designed to provide reasonable
assurance regarding the achievement of objectives in the following categories:
effectiveness and efficiency of operations, reliability of financial and non-financial
reporting and compliance with applicable laws and regulations.

Internal control is also the process designed to ensure reliable financial reporting,
effective and efficient operations, and compliance with applicable laws in order
to safeguard organization assets against theft and unauthorized use, acquisition
or disposal.42

In addition, internal controls include a training program of analyzing and preparing

reports for different administrative levels which enable the executives to conduct
internal control in various activities particularly in large organizations.

Examples of internal controls are:

• Segregation of duties
• Multiple eye principle
• Supervision
• Transparent decision-making processes
• Need to know principle
• Informatıon Technology Control Activities

“There are several keys to effective corruption prevention, but some of the most
important tools in the institution or organization toolbox are strong internal
controls”43. The focus of this part is on strengthening the role of internal control in
corruption prevention.

42 Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013.

43 Fraud prevention: Improving internal controls, By Daniel Draz, M.S., CFE, March 2011. http://www.csoonline.
com/article/678375/fraud-prevention-improving-internal-controls-

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The following case studies illustrate some weaknesses in internal controls:

»» CASE STUDY 1

In 2010, a contractor was bidding for a highway construction tender by a

Ministry of the Federal Government. On the day before the tender result was to
be announced, the contractor received an email sent from an unknown webmail
account soliciting a bribe amounting to a percentage of the project value to
guarantee the contractor would win the project. The contractor did not respond
and the tender was awarded to another party.

The initial complaint of the contractor was investigated for what evidence could
be obtained and the results forwarded to the Ministry. The resulting investigation
revealed a number of contributing factors, in what proved to be tender rigging
by an employee of the Ministry who was ultimately convicted of the offence by
the courts, which would have thrown up red flags of potential corruption. The
perpetrator was in charge of a number of functions in the ministry and this was
due to a lack of delimitation of duties.

»» CASE STUDY 2

Information was provided to the Chief Executive Officer by a whistleblower that

two employees in charge of its workshop were receiving kickbacks from a transport
contractor. The investigation uncovered information that indicated payments were
made by the contractor to workshop employees. In addition, it was determined that
the Contractor was overcharging the organization and numerous other suspected
frauds perpetrated on the organization by the two employees were discovered.
It was revealed that one of the two individuals involved was responsible for
commissioning work from the contractor, preparing material orders to be signed
by the project managers in charge of budget and often signed invoices as well. This
shows that there was no delimitation of duties in this organization.

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»» CASE STUDY 3

An organization often received complaints about overcharging of prices by a supplier.

An investigation was carried out on suspected overcharging by a supplier providing
services under contract. The investigation began as a data review for duplicate
payments, and when a number of events were detected, the investigation was
widened. Further anomalies were detected including progress payments processed
without adequate justification or a milestone associated with the payment not having
been reached. Payments or invoices that could not be linked to any particular work
were also found. A review of the relationship with the vendor indicated a sudden
increase in volume of work three years before. It was found that tender documents
were written to favor the vendor by the individuals that recommended the vendor.
This occurred in this organization due to no delimitation of duties.

Knowing where to look for areas vulnerable to corruption and what specific signs
or red flags to look for is an important starting point for managing the risks of
corruption. After these are identified, policies can be developed and implemented
to prevent corruption. Such policies should accommodate an accurate risk profile for
an organization, as well as provide for training and awareness programs that target
the risk points, encourage the effective delimitation of duties and involve targeted
surprise audits to detect acts of corruption.

The following case studies illustrate some of the signs of weaknesses in supervisory
controls:

»» CASE STUDY 1

In a government organization it was reported that an executive officer of a regional

development board had engaged in corrupt conduct. He had illegally obtained
public funds and used them for the benefit of himself and his family.

The man was a middle-ranking public official of long standing on a modest salary,
working in a location away from the head office of his organization. Reporting lines
were ambiguous or not properly understood or applied by the relevant managers.
He reported to a regional office but on an ad hoc basis and mostly via telephone,
which was not adequately recorded on files. This lack of supervision meant that he
was able to exercise a high level of discretion.

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Another risk factor identified in the investigation was the apparent lack of direction
by senior management and the lack of performance management. Remote officials
were expected to define, create and manage their own work program with minimal
reference to the head office and little or no supervision.

It was recommended that:

• appropriate management, performance management, accountability and
reporting controls be placed on small, remote offices and that internal
audit programs pay particular attention to their program management
and expenditures and
• adequate access be provided to employees in regional and remote offices
to incorporate training, including training in ethical standards and codes
of conduct.

»» CASE STUDY 2

In a training institute under the Ministry of Youth and Sports, a procurement contract
was signed with a contractor to supply certain tools for the specific programs
conducted at the training institute. However, the auditor found that there were
significant differences in price quoted in the supplier’s contracts when compared
with the prices of the same tools that were being supplied by different suppliers to
the same institution. In this case, exorbitant prices were charged for tools, digital
cameras and other items.

The underlying cause was attributed to the absence of supervision by the head of
the training institute. Adequate supervision is essential in operations such as those
related to contracts. It was found that monitoring the operation of the contract is
the key to ensuring that suppliers meet the terms and conditions of the contract for
price, standards, and delivery.

»» CASE STUDY 3

The Anti-Corruption Agency has arrested an engineer with a Municipal Council and a
contractor for alleged graft involving $47,100. The contractor was arrested for

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allegedly providing false information when making his claim for the construction of
a retaining wall. The engineer was arrested as he was alleged to have abetted the
contractor. It was found that the contractor had submitted a claim for $88,100 as the
cost of construction for the retaining wall when in fact the cost was only $41,000.
Both were being investigated and charged in the court.

Auditors found during their review that the contractor allowed unsupervised
modification without any documentary support and verification by superiors.
Auditors also identified supervision, as well as lack of training as an internal control
weakness.

2.5.1.5 USE OF E-GOVERNMENT

E-government may also be used as a specific corruption measure as the use of IT

depersonalizes and standardizes the provision of services, requires that rules and
procedures be standardized and made explicit for IT systems to function effectively
and makes it possible to track decisions and actions. All these serve as a deterrent
to corruption.

2.5.2 DETECTION OF CORRUPTION

Managers have the task to continually monitor their operations and take prompt,
responsive action on all findings of irregular, uneconomical, inefficient, and
ineffective operations. Monitoring operations is very important to ensure that
controls are achieving the desired results. Often it was found that without the
necessary understanding and monitoring, it is more convenient for people not
to follow established control practices. In some cases, instances of weak internal
controls are identified and reported, management responds to the points raised and
early corrective action is normally taken.

The followıng examples of ınstruments for the detectıon of corruptıon can be

considered:

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2.5.2.1 WHISTLEBLOWING MECHANISM

A whistleblowing mechanism is a formal means of communication established by

the institution so that public officials and any interested third party may provide
information about possible corrupt actions or transgressions that have happened in
the past or are currently happening.

This mechanism may be comprised of letter-boxes, telephone lines, emails or

websites designed to receive the above mentioned denunciations.

Whistleblowing mechanisms are a fundamental means of preventing, detecting and

deterring corrupt actions, integrity breaches and inappropriate behavior.

Specialized studies have pointed out that whistleblowing mechanisms have

traditionally been the most effective way to discover corrupt actions, frauds and
other irregular behaviors, surpassing by far other corruption controls such as external
and internal audits and management verifications.

These mechanisms are also important dissuasive elements as they convey the
message that actions opposed to the integrity policy may be easily reported and
taken care of.

Likewise, when such a mechanism is adequately tailored to the institution’s needs

and implemented, it significantly reduces the amount of actual corruption that takes
place and the amount of losses the institution faces due to earlier detection.

The correct implementation of a whistleblowing mechanism requires, among other

things, that the policy is properly communicated within the institution at every level
and with interested third parties. The policy should also ensure that whistleblowers
can inform about irregularities in an anonymous, confidential and consequence-free
fashion.

The mechanism must include a tracking system that records the reports and that
ensures that reports are followed up on appropriately. The institution’s anti-
corruption unit, or an equivalent, should supervise the effectiveness of compliance
with the mechanism.

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Senior management must periodically promote that any suspicious activity is

reported in a timely manner and emphasize the anonymity of the whistleblowers
and the lack of reprisals for them.

The Institute of Internal Auditors provides a framework of worldwide professional

practices which may also be taken into account by the auditors evaluating the
corruption prevention system.44

2.5.2.2 INTERNAL AUDIT

Internal audit is an important tool to detect corrupt practices and can be usually
divided into:

a) Administrative (operational) audit that includes:

• assessing and testing administrative activities and management results;

• evaluating and examining processes of the entity and
• evaluating the efficiency of utilizing human and material resources, and
developing recommendations for improvement.

b) Financial audit focuses on determining whether an entity’s financial

information is presented in accordance with the applicable financial
reporting and regulatory framework45, including:

• tracking accounting entries by performing documentary and arithmetic

tests;
• ascertaining the integrity and compatibility of systems, regulations, and
generally accepted accounting principles;
• ensuring the presence of safeguards for the assets against embezzlement,
fraud, and abuse and
• testing and assessing the strength, reliability, and efficiency of internal
controls.

44 https://na.theiia.org/Pages/IIAHome.aspx
45 ISSAI 200 Financial Audit Principles.

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SAI auditors are expected to ask at least the following questions about internal
audits, including whether the internal auditors:
• perform their duties honestly, diligently and responsibly?
• observe the implementation of financial laws and expect to detect
wrongdoings by doing so?
• respect and promote the legal and ethical objectives of their institution?
• take part in any activities that may undermine their impartial judgements?
• accept any material benefits that may undermine their professional
judgement?
• disclose all material findings detected in the course of their work?
• safeguard information obtained in the course of their work according to
the principle of confidentiality?
• perform their duties with due care and diligence according to the standards
of the profession?
• consistently enhance and develop their efficiency and effectiveness in
performing their duties?

2.5.3 REACTION TO CORRUPTION

Every organization should ensure that corrupt or fraudulent misconduct is subject

to appropriate response or reaction by management. This includes measures
established by criminal law, disciplinary law, labor law or private law. Corruption
cases should be analyzed and, where necessary, should be a reason for the revision
of the corruption prevention measures.

Corruption response refers to a plan of action that is put in place when a suspected
corrupt behavior is discovered or reported. The purpose of this plan is to define the
responsibilities for actions, such as:
• Examining corruption cases and taking appropriate action,
• Securing evidence for disciplinary and/or criminal action,

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• Preventing further loss,

• Recovering losses,
• Establishing lines of communication with the relevant law enforcement
organizations,
• Reviewing internal controls following a corruption case, and
• Corruption reporting arrangements.

Once a suspected corruption case has been reported or identified, an assessment

of the situation should be made. Consideration should be given to the following
factors:
• The source of discovery of the suspected corruption,
• The authenticity of the information initially received; and
• Line management’s initial assessment of the circumstances involved.

The purpose of an assessment is to allow a decision to be made on the appropriate

action to be taken. This could include:
• Whether or not the matter should be reported to the relevant law
enforcement organizations,
• Whether or not the matter requires reporting to the State Audit Institution
or any other external organization,
• Whether or not a formal internal investigation is required,
• Who should conduct an internal investigation,
• Whether or not action needs to be taken to secure the organization’s
assets, resources or information.

Suspected corruption should be reported to the relevant law enforcement

organizations where there is the likelihood that criminal activity has taken place. If
the suspected corruptıve or fraudulent activity is considered to be of this nature and
the matter is reported to the relevant law enforcement organizations, no attempt
must be made by the organization’s personnel to question the employee(s) or
third parties involved as this could prejudice future investigations and subsequent
prosecutions of relevant law enforcement organizations.

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Investigations may involve people from the organization itself, such as internal
auditors or finance managers, or may involve external parties who have particular
skills and are engaged specifically to assist the investigation.

The decision will depend on the circumstances and the relevant expertise required.
In any event, the person chosen must have the appropriate qualifications and
experience to carry out an investigation. In some cases it may be necessary to take
action to secure assets and preserve information. Such actions could include:
• Directing the Head of Human Resources to stand down or suspend
from work the suspected employee(s), pending the outcome of any
investigation,
• Securing the suspect’s work station and documentation and making it
inaccessible to the suspect and any other unauthorized employees,
• Directing the Head of Information Technology to ensure that information
contained on PCs, laptops or on the organization’s network relating to
corruption cannot be accessed, destroyed or corrupted,
• If an external contractor/supplier/consultant is suspected, directing the
Head of Finance to immediately suspend any payments due, and
• Physically securing cash, assets or other material that may be at risk.

As part of the examination, the actual amount of any loss will be quantified to the
extent possible. Repayment of losses caused by any corrupt, fraudulent or unethical
activity should be sought in all cases. This includes an assessment of the costs versus
the benefits. Where the loss is substantial, legal advice should be obtained about the
possibility of freezing the suspect’s assets through the court, pending conclusion of
the investigation. Legal advice may also be obtained about prospects for recovering
losses through the civil court, if the person involved refuses to make repayment.

A critical outcome of a corruption investigation is the identification of the control

failures that allowed the corruption to occur. In each instance where a corrupt
activity is detected a review should be undertaken to assess the adequacy of the
organization’s internal controls and determine what action needs to be taken.

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Irrespective of whether the investigation is internal or external, proper records should

be maintained for all investigations. This includes for the investigation itself and any
consequent disciplinary proceedings and changes to internal control arrangements.

Once an investigation is concluded, the results should be reported to the Board or

Audit Committee, and the Head of Internal Audit. An annual report on corruption
may also be presented detailing:
• All instances of corruption reported against the organization,
• The outcome of internal corruption investigations,
• The status of cases of corruption referred to external organizations for
investigation,
• The results of any completed prosecutions or administrative actions, and
• Internal control modifications made subsequent to any corruption.

2.6 COMMUNICATION – REPORTING

2.6.1 REPORTING TO INSTITUTIONS OUTSIDE THE AUDITEE’S BODY

(SAI, PARLIAMENT, IG, PROSECUTORS)

Information is necessary for an institution to perform its corruption prevention

responsibilities and to carry out its activities in a way that contribute to the
accomplishment of goals and objectives and within an effective and transparent
environment.

Likewise, when communication flows internally and externally, it gives public

officers the necessary information to execute anticorruption activities on a daily
basis and it enables them to understand the individual shares of responsibility on
the achievement of institutional integrity goals and objectives, the fulfillment of
legal obligations and avoiding the misuse or waste of resources.

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Gathering and
spreading of
information form
external and
internal

Report Communication
on Integrity
Issuing Information and
Communication

Effective Internal Written Plan on

and External Institutional
Communication Communication

Fig. 3: Internal and External Communication Flows, SAI of Mexico

2.6.2 GATHERING AND DISSEMINATING INFORMATION FROM

INTERNAL AND EXTERNAL SOURCES

The information coming from internal and external units is gathered and analyzed
continuously while institutions carry out their duties and make decisions regarding
the general functioning of the institution and specific activities of each area.

It is essential that the institution implements adequate mechanisms throughout this

process to identify and communicate within the organizational structure information
relevant to integrity safeguarding.

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The anticorruption unit or its institutional equivalent must assure that the relevant
and pertinent information produced internally reaches the senior management and
the head of the institution in a timely manner.

As a supporting feature, this unit should also monitor for any external information
that may be relevant to the institution meeting its integrity goals and objectives and
share this information with senior management and the head of the institution. Such
information can include: audit findings, legal changes that affect the institution’s
operations or the issuing of new guidelines, operation rules or general programs
related to the entity.

The institution will have a better chance of being effective and efficient about its
integrity tasks and responsibilities if it is effective in identifying, gathering and
delivering relevant information to the adequate public officials, in the correct way
and at the right time.

As to mid-level management, they should receive analytical information to help

them identify specific actions to perform in order to promote integrity and avoid
corruption in their areas of responsibility. The degree of detail of this information
will depend on the directive level.

The information presented has to be clear, simple, synthesized and it has to be at

hand for an effective follow-up on vulnerable events, activities and operations that
enhances prompt responses.

Summing up, all public officials must receive, according to their authority level and
their degree of responsibility towards the institutional integrity, information that
helps them determine if anti-corruption strategic objectives are being met, if the
annual development plans on the topic are being followed and if the institutional
goals on transparency, legality and accountability are being achieved.

2.6.3 COMMUNICATIONS

Communication is the continuous process of providing, exchanging and obtaining

information that an institution performs to support the gathering and dissemination
of relevant information, which protects it against corruption and helps safeguard its

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integrity. Internal communication is the means to transmit and spread information

throughout the whole institution.

Such information enables public servants to receive from the head of the institution
and senior management a clear message stating that the anti-corruption, internal
control and integrity enhancing responsibilities should be taken seriously.

External communication goes both ways: on one hand it provides institutions with
external information related to its values and principles and, at the same time, it is
the channel whereby the entity delivers information to external parties in response
to its needs, expectations and institutional integrity criteria.

In this way, communication with other public institutions, providers, media, citizenry
and other stakeholders allows the institution to gather and deliver information to
develop and better address the mission, goals, objectives and integrity risks that the
institution faces.

Even though there are multiple ways and means available for institutions, each
organization should establish those that are most suitable according to its mandate
and duties.

2.6.4 WRITTEN PLAN ON INSTITUTIONAL COMMUNICATION

Communication methods within institutions include handbooks, guidelines,

directives, policies, procedures, reports, memos, statistical reports, notifications,
notice boards, websites, intranet, recorded messages and videos, email and
speeches, among others.

These methods should ensure the quality of the information in terms of integrity,
reliability, completeness, precision and pertinence; the release of unreliable or
mistaken information affects the institution’s image and increases the possibility of
corruption materialization.

Thus, institutions need to develop, administer and test their information systems and
trace a continuous improvement plan to guarantee the effectiveness and reliability
of the information it conveys.

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The operation of information and communication systems is to be based on a plan

whose goals and objectives are related to the institutional strategic plan, ensuring
the existence of mechanisms to identify the upcoming information needs.

Also, as part of the information management process, the institution should control,
analyze, evaluate and improve their technological infrastructure in order to increase
its response ability to its users.

The head of the institution and senior management have to supervise periodically
by proper mechanisms, the quality of the produced and transmitted information
according to the directives contained in the information systems continuous
improvement plan. These actions should take into consideration factors such as the
precision and exactness of the contents, as well as relevance and accessibility of
data.

It should be pointed out that the information that institutions convey to external
parties is usually governed by legal obligations relative to transparency, accountability
and information access. As so, the data gathered by the government institutions is
public; public officials do not hold exclusivity rights over it and it must be available
to petitioners.

Every institution is to analyze its information access obligations and set up the
communication mechanisms it will use to spread and deliver data according to the
applicable legal provisions.

2.6.5 EFFECTIVE INTERNAL COMMUNICATION

Effective internal communication is a central element for ensuring that integrity rules
and directives are applied in a timely manner and adequately because it is necessary
to spread the above mentioned message of the head of the institution about the
seriousness of the anticorruption responsibilities. Hence, government institutions
have to set up mechanisms that facilitate the vertical, horizontal and transversal
flow of information within the entity so as to promote a dynamic, simple and prompt
communication between the different authority lines.

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Public officials must be clearly informed about their specific tasks through
formal mechanisms so that they identify their responsibilities regarding integrity
safeguarding and the way in which their work is interconnected with the one of
other public servants and third parties. This helps prevent and deter possible corrupt
activities.

Further, communication on integrity issues should include letting the public officials
know that, if they discover the lack of enforcement of an existing control, not only
are they to analyze and register the incident, but also the underlying causes that
led to it in order to be able to correct the structural weaknesses of anticorruption
controls.

There are cases in which some areas of the institution are temporarily or periodically
located on distant geographic places. If so, the entity must carry out special efforts
to assure a constant communication between senior management and all operative
executives and regional programs is properly established.

Such interaction should create a synergy that contributes to ensuring that all public
officials, regardless of the place they are, are working towards the same goals and
objectives and that every area is aware of each other’s integrity indicators and
anticorruption directives.

The institution must establish adequate mechanisms for officials to communicate

relevant and pertinent integrity information to higher hierarchical levels without
depending on his direct supervisor. In turn, the head of the institution and senior
management must show a true will to listen.

A common practice to achieving this goal is the implementation of websites or emails,

telephones or letter-boxes. All received cases have to be registered and properly and
promptly followed up under clearly defined authority lines.

As mentioned above, staff must be sure that no reprisals will be brought for informing
about possible corrupt acts or violations to the integrity policy. Otherwise, the
effectiveness of the whistleblowing mechanism will be seriously diminished.

As a supplementary activity to the channels for communicating irregularities,

institutions design mechanisms to let the public officials and third stakeholders to

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suggest improvements to the entity’s operations, such as letter-boxes, emails or

hotlines. Finally, codes of ethics and conduct perform an important role as internal
communication methods that disseminate knowledge about the conducts that are
acceptable and those that are not, as well as the consequences of an inadequate
conduct.

2.6.6 EFFECTIVE EXTERNAL COMMUNICATION

In order to mitigate possible corruption from external parties it is important that

entities establish effective communication with all entities that might have an
impact on the integrity of its activities, programs, projects, operations and other
institutional activities.

Therefore, institutions must implement formal communication channels with other

public entities, providers, contractors, consultants, citizenry and other interest
groups that could contribute on the quality and design of the functions, products
and services offered by the institution, according to its mandate and responsibilities.

The extended use of social networks and technological development contribute

to the implementation of these kinds of practices. Regardless of the means by
which information is obtained from external sources, it should be processed and
documented formally and it must be continuously monitored in a way that assures
its effectiveness and efficiency.

Likewise, it is important that the institution guarantees that every external party
with whom it communicates is informed of the ethical rules that govern the entity’s
actions and that it conveys the message that improper actions, such as the filing of
inaccurate bills or the attempt to bribe a public official, among other, will be detected
and sanctioned.

The infrastructure that handles communications varies among entities according

to their nature, size and mandate. However, every public institution should ensure
that its communications comply with the best practices through clear policies and
programs that are adequate in terms of cost-benefit evaluations.

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2.6.7 REPORT ISSUING

Communication activities involve issuing institutional reports (such as budgetary,

financial, operational and programmatic reports) of proper quality, content and
scope and that are compiled under the supervision of the head of the institution,
senior management and any personnel designated with this responsibility.

In order for reports to support the institution’s values, the head of the institution and
senior management must establish adequate mechanisms by which to incorporate
key principles, such as data reliability, in order to eliminate the possibility of
presenting inexact data and issuing reports of low quality (for example, having an
insufficient scope or overly complex presentation).

Similarly, reports shouldn’t overestimate or underestimate events and numbers that

affect the knowledge about the position of an entity. Hence, the institution must
formally establish and document a policy for issuing reports, which has to include
specific procedures for each of the different steps: the gathering of information,
the verification of the data, the testing of the pertinence and integrity of the
information, the final validation by the competent authorities, and the final release
of the document.

Since there must be logic and adequate mechanisms to generate the reports, the
head of the institution and the senior management, in their respective area of
responsibility, must disclose all data about the exercise of resources, budgets, and
financial statements that is required to properly understand the position of the
entity. Through those activities, the entity enhances transparency and accountability,
according to the pertinent legal norms.

Due to the importance of issuing reports that precisely reflect the status of the
institutional operations and the progress towards the achievement of objectives,
it is essential that the head of the institution and the senior management establish
internal responsibilities in a proper and clear way. In this way, the information and
the authorization procedures can be effectively allocated among public servants at
distinct levels of responsibility.

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Likewise, the policy to issue reports must establish that the information is available
to senior management; it must specify the information requirements to allow a
proper performance, and it must exactly define the degree of accomplishment of
responsibilities.

Staff involved in developing and issuing reports should clearly understand the report
process, including the delegation of responsibilities and levels of review, in order
to avoid any duplication of efforts, contradictory instructions and confusion among
members of the institution.

Within the process of creating reports, there are usually risks due to the disconnection
between operational and managerial activities. However, the policy for issuing reports
should establish a structure of relationships that promote effective communication
between senior, middle and operational management.

2.7 MONITORING AND MODIFICATION

2.7.1 PERMANENT MONITORING PROCESS

Even if the corruption preventıon system is adequate and there are not serious
corrupt or anti-integrity cases, the entities have to remain alert and establish
continuous monitoring activities.

The head of the organization and senior management must establish a strategy to
guarantee that a continuous monitoring process is present and effective, and that
it allows for independent evaluations when deficiencies are detected. Effective
monitoring and evaluation should focus on measuring outcomes and progress
toward the achievement of objectives, rather than simply reviewing outputs and
progress in implementing control activities.

There are different sorts of assessments that the entity can execute for specific
aspects, such as design, implementation and impact assessments.

The design evaluation contributes to determine the viability of the corruption

preventıon system, and to estimate the possibilities of success. It is done before

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the implementation of controls and it involves the analysis of the measurement

methods according to the specific problem that is to be solved and the resources
that the entity has.

The evaluation of implementation is relevant to determine whether the Program is

executed in the best possible way. This assessment is done when the anticorruption
controls are being established and it consists in verifying that the public servants are
doing the proper actions.

The impact evaluation has the purpose of measuring the effects of the system
related with its quality and scope. This assessment is done after the implementation
of the program, and it involves testing whether a specific situation improved when
the Program was applied in comparison to a situation in which the Program was not
applied.

An independent periodical review is related to specific sections of the internal

control system.

To determine the scope and frequency of the independent evaluations, the institution
must consider the results of the corruption risks assessment. This assessment is
usually done inside the entity and it helps to identify the vulnerable areas of the
institution.

The institution should also carry out independent evaluations after relevant
changes in its strategic plans, when there is an increase or decrease of personnel or
institutional abilities, or when the information systems related to the use of public
resources have changed dramatically.

Even in the absence of relevant changes in the activities related to public resources,
it is convenient to do independent evaluations frequently of these activities and any
other activities vulnerable to corruption.

Furthermore, the strategy of continuous monitoring and independent evaluations

must be clearly documented and communicated to the institutional staff. The
institution must guarantee that those activities of supervision are carried out by
personnel with the proper professional and ethical competencies.

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The conclusions and results of the evaluatıon must be available to the respective
public servants, so that they can improve their performance and contribute to the
protection of integrity.

2.7.2 ANALYSIS OF LESSONS LEARNED

The results of monitoring and evaluations should be used to improve the design and
implementation of corruption risk management activities. The implementation of a
corruption preventıon system does not eliminate the existence of corrupt cases and
instances. Because no system is perfect, controls can sometimes be avoided and
structural weaknesses may not be timely identified.

That is why it is required, as a part of the monitorıng activities of the program, to

analyses in detail the corruptive acts that have already occurred and to use the
results to permanently improve the system.

The head of the institution and senior management, in coordination with the
anticorruption department and internal auditors, must communicate in order to
address specific issues and lessons learned. Through the dynamic feedback of
those communications, the entity can detect the structural problems that make
corruption possible and, in consequence, it can improve the institutional integrity
program, adopt better measures and prevent the recurrence of those problems in
the future.

As an example, the next questions should be asked so that their responses can
contribute to anti-corruption efforts and help concentrate institutional resources in
a more efficient, effective and economical way:46
• How did the corrupt or anti-integrity act happen?
• What controls failed? Why?
• What controls were avoided? By whom?
• Why was not the irregular act detected before?
• Which indicators (red flags) were not seen by the governing bodies, the
head of the institution, the senior management and the control units?
Why?

46 The Institute of Internal Auditors, Practice Guide “Internal Auditing and Fraud”

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• How can future irregular acts be prevented or how can they be easily
detected?
• Which controls must be reformed?
• Which processes to safeguard the integrity must be improved?
• What kind of additional training is required?

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3 ADDITIONAL ASPECTS

3.1 COOPERATION WITH OTHER INSTITUTIONS INVOLVED IN

FIGHTING AGAINST CORRUPTION

Fighting against corruption requires the establishment of institutions with specific

capacities to perform actions for preventing and tackling corruption.47 Cooperation
between institutions involved in the fight against corruption, such as SAIs,
organizations or commissions with the mission of corruption prevention, among
other entities, is therefore fundamental.48 In this sense, it is important for such
organisms to strengthen cooperation between them in order to reach better
results.

3.2 COOPERATION BETWEEN SUPREME AUDIT INSTITUTIONS

(SAIS)

As corruption is a common phenomenon across different societies, regardless

their form of government, the fight against corruption requires the comprehensive
commitment of each country’s institutions in order to build a culture of public
ethics, with the active participation of citizens as a whole.

47 See United Nations Convention against Corruption and

48 Article 38 United Nations Convention against Corruption, states that State Parties shall take such measures as
may be necessary to encourage, cooperation between, its public authorities, as well as its public officials, and,
its authorities responsible for investigating and prosecuting criminal offences.

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In that sense, SAIs have an important role in the fight against corruption and the
fulfilment of these responsibilities may benefit from the exchange of knowledge
and experiences with one another, as stated in the INTOSAI P-1 Lima Declaration.49
Based on their experience in prevention, detection and sanctioning corrupt
activities, within their respective legislative framework, SAIs may develop common
approaches to fight corruptions, exchange good practices and conduct joint
interventions.50

For this, every SAI may, for example, adopt cooperation agreements to detect
acts of corruptions in international public procurement or information exchange.
In addition, whenever the legal framework allows it, SAIs may perform joint
interventions, such as cooperative audits on those matters.51

3.3 APPOINTMENT OF GOVERNMENT AGENCY

A Government Agency could also be established to promote good governance

and anti-corruption and handle alleged cases of corruption. It could also be
responsible to train the business sector and financial institutions in transparency,
integrity and other good governance principles. It could also liaise with
international institutions in case of international corruption.

49 Lima Declaration, article 15

50 Article 43 United Nations Convention against Corruption, states that States Parties shall consider assisting each
other in investigations of and proceedings in civil and administrative matters relating to corruption, where
appropriate and consistent with their domestic legal system.
51 In January 2011, the Supreme Audit Office of the Czech Republic (Czech SAI – NKÚ) and the Bundesrechnungshof
of Germany (German SAI – BRH) agreed to conduct parallel audits both of the EU-wide awarding of building
contracts and of corruption prevention. The audit focused on the application of EU procurement law as transposed
into national law and corruption prevention of contracts for building construction and road construction and/or
transport. The audit also covered contract awards below the EU thresholds with a view to corruption prevention.
For more references see http://www.nku.cz/assets/publikace/spolecna-zprava-nku-a-brh-2013_1.pdf

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