U4 Theme:
Corruption in Public Financial Management and Procurement
Public financial management (PFM) and procurement are key areas for the functioning of a state. Every public entity needs financial means in order to provide its services and to ensuring performance according to its role and mandate in the institutional landscape of a state – ideally for the good of the people. In this regard, PFM encompasses
- collection of revenues,
- allocation of funds through the budgetary process, and
- utilisation of public revenues, for instance through procurement of goods and services, but also
- internal and external auditing of public spending and performance of state institutions.
Corruption can occur within all these processes with devastating consequences for service provision economic growth.
However, corruption is not only a problem isolated to the PFM system itself. As the recent World Bank report The Many Faces of Corruption underlines, the “nature and quality of a country’s PFM system to a large extent determine the ease with which public corruption can occur” in other sectors as well. Unclear or weak regulation and lack of scrutiny allow corruption to flourish wherever public spending is involved. This is why sound PFM institutions and procedures and a functioning system of checks and balances are essential in order to reduce corruption and enhance integrity and accountability in any given state.
Related pages:
Public Expenditure Tracking Surveys
- PETS have emerged as a popular tool for identification of problems with the flow of resources between different levels of public administration and frontline service providers (read more).
Procurement
- How does corruption affect public contracting and what can be done about it? A general overview of the problem, exploring the examples of two sectors - health and education (read more).
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This U4 Issue Paper explores challenges faced by SAIs, and suggests how they can be overcome by forming and strengthening alliances with parliaments and civil society. It proposes that in circumstances where the legislature is weak, the SAI may need to stretch the letter of their mandate for the benefit of more effective application of public resources to development challenges.
Expenditure tracking has become a popular activity among civil society organisations engaged in accountability issues at the local level. This U4 Issue Paper takes a critical look at the experience of expenditure tracking, argues that its successes may have been overstated, and proposes some principles of engagement on how to track expenditures more effectively.
This U4 Issue reviews the information that theory and empirical studies provide on the prevalence of corruption in relation to various aid modalities, the degrees to which corruption distorts the developmental impact of different aid modalities, and how aid modalities affect the governance environment and corruption.
This U4 Brief gives some examples of corrupt activities and outlines practical steps to minimise the problem in the tax and customs sectors through appropriate staff management, training, operational procedures, and internal investigations.
This U4 Brief summarizes the VAT refund experiences from Bolivia, highlighting how improved inspection control contributed to reducing corruption in the National Tax Service and stemmed the loss of public funds.
Not much has been written about the less successful PETS experiences. This brief presents the Tanzanian experience, which clearly shows that PETS is not a silver bullet as vested interests can easily derail the process.
This U4 Issue summarises available evidence on fiscal decentralisation and corruption. It starts off with a discussion of issues and proceeds to look at policy implications.
This U4 Issue discusses what budgetary corruption is, how may it be detected and what should the policy responses be.
The aim of this U4 Issue paper is to identify and discuss major challenges, appropriate responses, and relevant tools for addressing corruption in revenue administrations.
The aim of this issue paper is to compare the effectiveness of budget support versus that of other aid modalities - in particular project support - in partner countries characterized by corruption. |
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Public Financial
Management and Procurement |
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Budget process |
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Revenue administration |
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Fiscal decentralisation |
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Direct budget support |
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Public Expenditure Tracking |
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Procurement |
Query the U4 helpdesk about PFM |
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U4 welcomes any | CONTACT |
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Hannes Hechler
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| RECOMMENDED READING |
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“It is our money. Where is it gone?” is a short documentary, released by the International Budget Partnership, on an initiative, in Mombasa (Kenya) to involve communities directly in monitoring the Constituency Development Fund, a fund managed by Kenyan parliamentarians. Through social audits, communities monitored budgets and held their government accountable for managing the public’s money and meeting the needs of the poor.
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| RELATED U4 PUBLICATIONS |
This U4 Brief assesses how banks facilitate illicit capital flows from developing countries. The shortcomings of the existing regulatory frameworks are discussed, and recommendations are made for donor governments on what can be done to curb the flow of corrupt money out of the developing world. |
