Corruption in the health sector

Financial resources management

CONTENT ON THIS PAGE:

The problems

•  The budget process
•  Lack of financial accountability
•  Budget leakages
•  Multiple funding mechanisms and large influxes of funds

What can be done

•  Improved resource control and accounting systems
•  Budget transparency and participation
•  Decentralisation
•  Privatisation of health services
•  Tracking resource flows
•  Information campaigns

The Problems

The budget process
The budget process constitutes an important tool for governments to mobilise adequate resources for health, translate policies into pro-poor investments and provide equitable and efficient quality health services. It also sets the targets for which governments can be held accountable. In many countries institutions are weak, budget processes opaque and undemocratic and public participation opportunities limited.  Resources therefore risk being diverted from the country’s key social priorities at the very early stage of the budget formulation and resource allocation towards more politically or financially “profitable” sectors. 

Lack of financial accountability
Allocated resources for health flow through various layers of national and local government’s institutions on their way to the health facilities. Financial accountability using monitoring, auditing and accounting mechanisms defined by the country legal and institutional framework is a prerequisite to ensure that allocated funds are used for the intended purposes. In many developing countries, governments do not have the financial and technical capacity to effectively exercise such oversight and control functions, track and report on allocation, disbursement and use of financial resources. Political and bureaucratic leakage, fraud, abuse and corrupt practices are likely to occur at every stage of the process as a result of poorly managed expenditure systems, lack of effective auditing and supervision, organisational deficiencies and lax fiscal controls over the flow of public funds. Falsification of financial statements is more of a problem in proprietary (private) hospitals. Executives will sometimes exaggerate revenue and misstate expenses in order to meet expectations of industry analysts and shareholders.

Budget leakages
Recent surveys carried out by the World Bank in a series of developing countries to compare budget allocations to actual spending at the facility level have confirmed that resources are not allocated according to underlying budget decision [1]. In Uganda and Tanzania, local or district councils have diverted large parts of the funds disbursed by central government to other uses as well as for private gains, with leakages affecting up to 41 % of the allocated resources. In Ghana, only 20 % of non-wage public health expenditures actually reached the service delivery points, with a large proportion of the leakage occurring between line ministries and district levels.

Multiple funding mechanisms and large influxes of funds
Donor funds are the single most important external resource in many developing countries, particularly in Africa. The trend over the past ten years has been towards pooling resources with governments and other donors in budget funding or basket funding arrangements, moving away from single project funding. This is particularly true for health and education. A considerable share of donor funds continues, however, to be channelled off-budget through international and non-governmental organisations. To give one example:  The Global Fund has committed 50% of their resources directly to governments and an almost equally large share to other organisations and the private sector. There is an inherent risk of corruption when large amounts of funding become available and need to be spent quickly, as has been the case with some HIV-AIDS related funding in developing countries under the Global Fund and PEPFAR initiatives [2].

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What can be done?

Improved resource control and accounting systems
Health systems require a legal and institutional framework that provides clear and simple accounting and procurement standards based on transparency, comprehensiveness and timeliness. They should also have effective supervision and auditing systems to improve fiscal oversight and ensure effective enforcement of rules and sanctions for financial misconduct. Because in corrupt systems people may be benefiting from the lack of transparency, there could be resistance to putting in place better control systems. For example, when reformers sought to control diversion of user fee revenues by putting in place cash registers in one Kenyan hospital, the initiative was resisted by collection agents. The original fee collectors had to be fired and new personnel assigned before the reform could be implemented. Within 3 months, user fee revenue jumped 50% with no effect on utilization; within three years annual user fee revenue were 400% higher [3].

Budget transparency and participation
Accountability supposes that public policies, practices and expenditures are open to public and legislative scrutiny and that civil society is involved at all stages of budget formulation, execution and reporting [4] . Budget transparency requires an information system that produces timely, reliable and accurate information in order to hold public officials accountable for the use of allocated resources. Civil society must also be enabled to use the information and take action when irregularities are detected. Participatory budgeting initiatives encourage a wide range of stakeholders to have a voice in allocating budgets according to their community's priorities, monitoring budgets to assure that spending is in accordance with those priorities, and monitoring the quality of goods and services purchased with budgets. Successful initiatives to expand participatory budgeting have been documented in Ireland; Porto Alegre, Brazil; and South Africa [5].

For an interesting case study on Mexico see [6]

Decentralisation
Decentralisation is a favoured strategy to improve technical as well as allocation efficiency, with the view to enabling broader public participation, improving local oversight of fiscal resources, enhancing public ability to hold decision makers accountable and enhancing the responsiveness of the health system. Research indicates that in poorer countries, higher fiscal decentralisation is consistently associated with lower mortality rates and appears to improve health outcomes in environments with high levels of corruption [6a]. However, decentralisation can also lead to corruption and elite capture due to loosened central control, lack of appropriate institutional capacity and inadequate checks and balances at local level. It can also increase regional disparities between richer and poorer districts. Decentralisation is a risky strategy that needs to be cautiously implemented [7] .  

Privatisation of health services
When the institutions are weak and accountability for the use of public funds is low, privatisation of health services can be seen as an alternative method of improving the quality and effectiveness of health services. Privatisation reduces the power monopoly of public providers and limits their opportunity to charge bribes. Many developing countries, particularly in Latin America and some Asian countries, have also witnessed rapid and unregulated private sector development [8]. Preventive functions have mostly remained the government’s responsibility. The supposed benefits have been elusive. The main problem has been the lack of a regulatory framework to control and monitor the quality, reliability and cost-effectiveness of private care and treatments, ensures equitable and universal access to quality health services and prevents market abuses and illicit practices [9] . The existence of alternative providers was associated with lower rates of informal payments in one study of municipal hospitals in Bolivia [10]. The authors found that competition between the public and private providers was more likely to reduce informal payments when public providers were dependent on user fee income to finance their operating costs.

Tracking resource flows
Measuring resource leakages and efficacy of public spending is important to detect problems. Public Expenditure Tracking Surveys (PETS), Quantitative Service Delivery Surveys, and Price Comparisons can identify places where funds are not reaching beneficiaries or are being used for purposes other than what was intended.

Information Campaigns
The government capacity as auditor and supervisor in weak institutional environments is very limited. Traditional audit and oversight mechanisms may be an insufficient one-sided approach to reduce abuse and corruption in the health system. Publication of survey findings and information dissemination can increase the visibility of corrupt practices, as well as the ability of the public to monitor and challenge abuses and help combat the general culture of impunity. For example, following a PETS, Uganda started to publish monthly intergovernmental fund transfers in the local media, dramatically reducing the capture and leakage of funds by 78 %. [11]

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References