Evidence on how funding for corruption risk management is allocated

Query

Please provide an overview of the available evidence on how corruption risks in aid programmes are costed and whether any practical guidelines exist for typical or appropriate levels of allocation, or even earmarking, for anti-corruption activities in aid programmes.

Summary

The effectiveness and intended impact of aid can be hampered by corruption. Scandals involving misappropriation of donor funds show the need for better control and oversight mechanisms in aid investments. It is common to include activities to prevent and mitigate corruption in aid programme budgets, including in sector specific investments (e.g. health, education, climate change). These activities have an input cost and can be assumed to make up a proportion of an overall aid programme budget and depend on risk assessments and contextual realities in a programme.

This paper explores whether these costs can be identified, and whether any practical guidelines can be derived for typical or appropriate levels of allocation, or even earmarking, for anti-corruption activities within aid programmes.

There is limited information in the public domain on allocation and earmarking in aid investments for understanding and tackling corruption risks – both in terms of how much is set aside for corruption risk mitigation within programmes, as well as how donor agencies make these budget decisions. The focus of this answer is on the need for agencies to plan activities and set aside funds for corruption risks and presents a few cases of how agencies deal with budget allocation or earmarking for anti-corruption in their aid modalities.

Main points

• Aid being lost to corruption not only undermines the intended project impact, but political scandals surrounding aid embezzlement go on to undermine trust for donors in their national context.
• There are several corrupt ways is which aid money can be misappropriated, i.e., elite capture, embezzlement, bribery, procurement fraud, etc.
• Corruption risk assessments for projects operating in a particular context could be supported by calculating for anti-corruption earmarking in aid investments.
• Donors have varying approaches across the spectrum on how to address anti-corruption as a cross-cutting issue within their programmes.

Contents

1. Background
2. Select cases on how earmarking/budgeting for anti-corruption in aid takes place
3. References

Authors

Kaunain Rahman ([email protected])

Reviewer

David Jackson (U4)

Date

15/12/2022

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