IFMIS, PEM, and Anti- corruption IFMIS, PEM, and Anti- corruption Bill Dorotinsky PREM Public Sector Governance Group April 21, 2005 Building ICT to Reduce Administrative Corruption

Rationale for Reform IFMIS generally adopted to IFMIS generally adopted to –Improve management of public finances  Improve information availability for decision-makers, managers  Increase control over public spending  Support year-end account closing, preparation of the final accounts  Enable better analysis of costs, identify emerging risks –Rarely intended as anti-corruption tool from the beginning Though automation of tax and customs directly may have anti-corruption as an objective Though automation of tax and customs directly may have anti-corruption as an objective

Assumptions underlying the nexus with corruption Quality information Quality information –comprehensive public finance system –accuracy of records –integrity of database Other ‘soft’ systems functional Other ‘soft’ systems functional –internal controls –reconciliation of bank, fiscal records –Internal and External Audits Corruption within FMS domain Corruption within FMS domain

Public corruption Source of Funds Source of Funds Public Assets Non-public Assets Political Officials Theft of public goods, funds Theft of public goods, funds Contract steering Contract steering Nepotism Nepotism Bribery/influence peddling Bribery/influence peddling Career Officials Theft of goods, funds Theft of goods, funds Contract steering Contract steering Nepotism Nepotism Abuse of office Abuse of office Procurement Procurement Kick-backs, bribery Kick-backs, bribery Citizens, Companies VAT invoice fraud VAT invoice fraud Tax fraud Tax fraud Fraudulent Claims (programs) Fraudulent Claims (programs) Substandard goods, services Substandard goods, services

Cases Canada Canada –Advertising scandal Ukraine Ukraine –Tax reform Turkey Turkey –Customs

…and counter-pressures Public Assets Non-public Assets Political Officials Free and active media Free and active media Civil society monitoring Civil society monitoring Active opposition parties Active opposition parties Free & fair elections Free & fair elections Independent Judiciary Independent Judiciary Whistleblower protection Whistleblower protection Automated personnel records Automated personnel records Free and active media Free and active media Civil society monitoring Civil society monitoring Active opposition parties Active opposition parties Free & fair elections Free & fair elections Independent Judiciary Independent Judiciary Asset declarations Asset declarations Career Officials Professional civil service Professional civil service Transparent, timely, accurate, complete finance, management information Transparent, timely, accurate, complete finance, management information Internal controls Internal controls Active audit (internal/external) Active audit (internal/external) Legislative hearings Legislative hearings Transparent management information Transparent management information Effective tax compliance Effective tax compliance Asset declarations Asset declarations Citizen reporting/education Citizen reporting/education Citizens, Companies MIS to monitor trends against profiles MIS to monitor trends against profiles Data matching Data matching Audit Audit

Summary IFMIS/technology enabling tool for transparency and anticorruption IFMIS/technology enabling tool for transparency and anticorruption But not substitute for But not substitute for –attention to institutional environment (‘soft systems’) –underlying factors (e.g. comprehensiveness) May not target prime areas of corruption May not target prime areas of corruption