Fawad Sayed– Project Manager Transparency International Pakistan Workshop on Prevention and detection of Fraud July 1, 2013 Avari Hotel, Lahore, Pakistan Anti-Fraud Hotline – Workshop on Prevention and Detection of Fraud in USAID funded projects across Pakistan.

The benefits of building an effective anti-corruption programme 2 “Having an anti-corruption programme in place and publicizing it is seen as valuable or very valuable to a enterprise’s brand by 86% of respondents.” PricewaterhouseCoopers, Confronting corruption – The business case for an effective anti-corruption programme, January 2008 “Companies with anti-corruption programmes and ethical guidelines are found to suffer up to 50 % fewer incidents of corruption, and to be less likely to lose business opportunities than companies without such programmes.” Transparency International, Global Corruption Report Corruption and the Private Sector

1.Problem: Bribery is being taken place at every step. Cause: There is no guiding principle for bribery policies. Weak implementation of anti-corruption policies. 2.Problem: Low level of integrity in processes, such as sales, procurement; Operations and facilitation of payments. Cause: Improper evaluation of existing risks and failure in foreseeing risks which can easily lead to disadvantage for beneficiaries. 3.Problem: Engagement and involvement of employees in corrupt activities like receiving or offering bribes to the suppliers and customers or overlooking processes and supply chain. Cause: There is no Code of conduct and rules of integrity specified and properly communicated to the employees. Inefficient Internal controls, monitoring and record keeping and no governance. Identified Weakness in Civil Society

4.Problem: No actions are being taken against corruption by the top management. Cause: Most of the organisations are not successful in translating their anti- corruption policies into action as there is lack of communication, training, weak internal supporting and operational functions. 5.Problem: Lack of continuous improvement due to weak scrutiny procedures. Cause: There is conflict of interest as self- accountability is very common in private sector. There is no credible body that ensures unbiased monitoring and evaluation. 6.Problem: No demonstration of the sincerity of organization’s commitment. Cause: The enterprises are not open to discuss their Programs with employees, business partners and other stakeholders with the aim of identifying valid concerns, areas where improvements can be made and building trust. Identified Weakness in Civil Society

Private Sector Integrity Toolkit – six steps for building an effective anti-corruption programme  Transparency International's Integrity Toolkit is a user-friendly six step process for building an effective corporate anti-corruption program Commit to an anti-corruption programme ‘from the top’ 4. Act on the plan 5. Monitor controls and progress 6. Report internally and externally on the programme 3. Plan the anti-corruption programme 2. Assess the current status and risk environment

COMMIT: What is expected from you?  The owners/shareholders, chairman or Chief Executive Officer publishes a statement of the organisation’s commitment to anti-corruption business principles, e.g.:  “The enterprise shall prohibit corruption in any form whether direct or indirect.”  “The enterprise shall commit to implementing a programme to counter corruption.” The commitment is communicated and adopted throughout the organisation in operational (e.g. procurement) and key support (e.g. Finance & Controlling) departments, as well as to external stakeholders worldwide. Sufficient resources are allocated to ensure implementation or review of the anti-corruption programme, which may include the setup of an independent, cross-functional project team.  Commitment from the NGO’s senior management should be renewed on a periodic and regular basis (e.g. yearly).  A “culture of integrity” is fostered from the top down. 6

NGOs operating in high risk countries likely to face higher corruption risks than other NGOs Self-regulatory mechanisms and internal rules, procedures, policies. Due diligence on potential of local partners as well as risks assessment inherent to specific program and activities. NGO’s laws and regulations, quality of management and accounting systems, past performances and financial trends would minimize the risk of corruption. There should be a comprehensive corruption risk management system that involves taking appropriate measures to detect, investigate and sanction corruption cases. ASSESS: Assess the current status and risk environment

PLAN: Scope and implementation requirements of the programme 8 Scope of the ProgrammeImplementation Requirements The programme should address the most prevalent forms of corruption relevant to the business, but at a minimum should cover the following areas: The following requirements should be met at a minimum when implementing the programme:  Corruption inside the organization  Examples: Fraud, Conflicts of Interest,  Corruption in the supply chain  Examples: Bribery, Extortion  Corruption in the market environment  Example: Collusion  Corruption in society  Example: Undue influence  Laundering the proceeds of corruption  Example: Money Laundering  Organisation, roles and responsibilities  Relationships with  Subsidiaries and other entities  Joint ventures and consortia  Agents and intermediaries  Contractors and suppliers  Human Resources  Training  Raising concerns and seeking guidance  Communication  Internal controls, monitoring and record keeping

 Who is responsible for ensuring compliance with and monitoring the programme (e.g. compliance officer, internal audit)?  Do existing policies need to be adapted (e.g. employee incentive structures) conflict of interest policy, code of conduct?  What monitoring controls are needed?  How will suggestions and complaints be handled?  How will the programme be communicated to internal and external stakeholders?  To what extent will external assurance and reporting be used?  What recordkeeping systems need to be put in place?  What types of Operational, financial statements and procurement guidelines? PLAN: What is expected from business?

The policies and procedures need to be integrated into the organisational structures:  Implement policies and procedures (e.g. internal checks and balances)  Develop supporting systems (IT, etc.)  Communicate the programme (e.g. CEO announcement, workshops, newsletter)  Identify ‘local champions’ to support the implementation  Deliver training (face-to-face, self-study etc.)  Provide supporting tools and guidance (e.g. self-assessment survey for high- risk departments)  Address concerns and issues (e.g. hotline, FAQ) ACT: Act on the plan

 Promote code of conduct.  Proper separation of Accounting Functions.  Merit based recruitment and promotion practices and processes.  Transparent salary and benefit structure and performance appraisal systems.  Regulations/prohibitions of employment of relatives, family members etc.  Complaints/feedback mechanism ACT: Act on the plan

Auditing financial reports on annual basis. Reviewing of CEO’s performance, financial performance, monitoring and reviewing recruitment and selection procedures should be compulsory. Accounting and auditing policies and practices should be monitor. Auditor should not be in relation to any of the board members. Oversight mechanisms should be in place. Proper monitoring of inflated, duplicate, or fictional invoices for goods and services procured for a project. No kickback arrangements in procurement of goods or services or in hiring of project staff. Accountability of fictitious NGOs. MONITOR: What is expected from business?

REPORT: Why reporting on anti- corruption? Reporting on anti-corruption is an important way for an organization to demonstrate that it is living up to its anti-corruption commitments Benefits: There are three major benefits from reporting on anti- corruption: Please note: The first two categories apply to individual organizations (independent of their size), whereas the third category outlines benefits also for the overall community. Reporting on anti-corruption raises awareness among employees and provides a means of control and discipline for the management. Reporting on anti-corruption establishes a common language to measure, compare, discuss and improve anti-corruption activities and practices. Reporting on anti-corruption positively influences a organization’s reputation in the marketplace and society. Increased internal integrity and transparency Common information basis Enhanced reputation 13