Corruption in the management of organisational resources

Corruption in service delivery also occurs in the management of organisational resources, such as personnel, goods, supplies and budgets. In the context of complex bureaucracies with weak oversight and overlapping responsibilities and jurisdictions, bribery, leakages and embezzlement of funds is widespread in many developing countries as funds trickle down from central governments to their intended destinations. This risk is especially acute in sectors such as health, water and education, characterised by large flows of money, specialised equipment and complex organisational structures: administrative funds and supplies can be diverted before reaching the point of service delivery.  

Procurement processes are typically confronted with major integrity challenges, with risks of bribery, diversion of resources, leakages, partiality in the drawing up of selection criteria or biased decision making in the contracts’ award. Private service providers can use bribery to secure long-term profitable contracts from procurement officials. Public officials can also favour their friends, relatives or their own companies in awarding lucrative government contracts. At the contract implementation stage, agencies or companies may procure fraudulent or lower quality equipment, materials or supplies to cut costs and increase profits, with a direct impact on the quality of public goods and services. At this level, individual projects might not be completed or completed with substandard materials because contractors did not follow specifications, faked their technical and financial capacities to win the contract or because the supervision was weak or oversight officials colluded with the contractors.  

The nature of corruption challenges may greatly vary depending on the scale of the project and the profile of the companies involved. Large infrastructure projects are likely to involve big multi-national companies and complex collusion schemes that may require settlement resolution or somebody to come forward to uncover corruption. While bribing to obtain contracts and increase their profits, such companies will complete the project in most cases. In addition, politicians have greater incentives to rescue the project (through, for example, amendments and finance cost overruns) due to potential reputational damage if the project fails.  

Smaller-scale projects are likely to involve a large number of bidders, family or individually owned businesses and smaller bribes. In some cases, these bribes are used to hide the company’s lack of capacity to implement the project, which could undermine the project’s completion. In addition, in smaller-scale projects, where smaller companies are involved, beneficiaries may lack awareness of the the projec and its complexities, limiting their ability to monitor the works, while local governments involved may have mixed capabilities to implement the project. On the other hand, collusion schemes involving smaller companies are more likely to be detected by a well-trained evaluation committee analysing offers submitted by small companies and doing due diligence to detect simple red flags, such as similarities in information provided.[1]

Corruption, particularly favouritism, nepotism and abuse of authority, can affect all personnel management processes, including the management of recruitments and promotions, compensation, conditions of service and personnel records. This can result in oversized and underqualified civil services, with distorted incentive structures and poor work ethics that ultimately undermine the goal of providing strong, efficient and accountable public services to all.[2]

Footnotes

  • [1]

    Based on input provided by an expert consulted within the framework of this research

  • [2]

    Chêne, M. 2015. Corruption and Anti-Corruption Practices in HR Management in the Public Sector. https://www.transparency.org/w...

Author

Iñaki Albisu Ardigó; Marie Chêne

Reviewer:

Matthew Jenkins

Contributing experts:

Umrbek Allakulov (Water Integrity Network)

Shaazka Beyerle (US Institute of Peace)

Simone Bloem (Center for Applied Policy)

Claire Grandadam (Water Integrity Network)

Jacques Hallak (Jules Verne University – Amiens)

Mihaylo Milovanovitch (Centre For Applied Policy)

Muriel Poisson (International Institute for Educational Planning (IIEP-UNESCO)

Juanita Riano (Inter-American Development Bank)

Marc Y. Tassé (Canadian Centre of Excellence for Anti-Corruption)

Vítězslav Titl (University of Siegen)

Davide Torsello (Central European University Business School)

Patty Zakaria (Royal Roads University)

Date

01/09/2017

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