1 disclaimer: all images have been taken from google clipart

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Anti-Fraud Hotline

Case Scenarios

Disclaimer: All images have been taken from Google Clipart.

List of possible corrupt activities during the lifetime of a project

PROCUREMENT

• Manipulated tender specifications/bidding

documents

• Bid-rigging and insider information

• Biased supplier prequalification

• Manipulated bid evaluation, contract award and

execution

• Surplus procurement

• Supply of sub-standard goods or services

TRANSPORT

• Payment for access to aid resources or

beneficiaries

• Diversion during transport

• Falsification of inventory documents

• Diversion during storage

ASSET MANAGEMENT

• Unauthorized private use of vehicles

• Corruption in vehicle repairs and

maintenance

• Diversion of fuel

HUMAN RESOURCES

• Bias in recruitment, deployment, promotion or

supervision

• Short-circuiting of HR controls in an emergency

• Conflict of interest

• Extortion, intimidation and coercion of staff

• Behavior conducive to corruption


FINANCE

• Operating in a cash environment

• Issues in cash-based programming

• Financial fraud and embezzlement

• Improper accounting

• False or inflated invoices or receipts

• Manipulated audits

• Payroll and claims fraud

• Payment for local permits or access to public

services

NEEDS ASSESSMENT/RESOURCE ALLOCATION

• Biased project location or resource allocation

• Inflated or distorted needs, costs or beneficiary

numbers

PARTNERS AND LOCAL INTERMEDIARIES

• Manipulated selection of local partner agencies

• Ineffectual partner monitoring

• Biased local relief committees

• Blocking or diversion of aid by ‘gatekeepers


TARGETING AND REGISTERING BENEFICIARIES

• Bias in targeting criteria

• Corrupt exclusion or inclusion of

beneficiaries

• Multiple or ‘ghost’ registrations

DISTRIBUTION AND POST-DISTRIBUTION

• Modification of entitlement size or

composition

• Diversion of resources during distribution

• Post-distribution taxing or expropriation


PROGRAMME MONITORING AND EVALUATION

• False, exaggerated or incomplete reports

• Non-reporting of corruption

COMMODITIES

• Diverting Food aid

• Gifts in Kind

1. SUPPLY OF SUBSTANDARD GOODS OR SERVICES

Under a health project, medical equipment had to be provided to a hospital. The head

of the project awarded the contract to a company that provided surgical instruments.

After certain medical equipment was received by the hospital, the project head asked

the company to provide used equipment to the hospital at the cost of new ones. After

the company refused, their contract was cancelled and handed over to another party

that agreed to supply used equipment like x-ray machines, delivery tables etc. The

project head cancelled the contract only because the surgical company refused to

collude with him; however, unfortunately, he found another supplier that agreed to the

corrupt terms.

• Set up an independent monitoring system

Make frequent, unannounced control checks (including site visits) to

monitor contract implementation. Consult aid recipients regularly to help

establish benchmark quality standards for items, as well as to check whether

these are adhered to. Carry out regular, independent internal audits to deter collusion or cover-up,

and ensure external auditors compare final costs and results with estimates and expectations.

Investigate discrepancies and hold those responsible to account. Inform beneficiaries of quality

standards, so they can tell you if these are not met.

Prevention measures


• Prices inflated substantially above market levels

• The amount of goods or services delivered being less than requested

• Goods that don’t match the sample provided with the bid

• Goods with imminent or past expiry dates

• Excessive or frequent change orders, requests for contract variations or efforts to

renegotiate contract terms during implementation

Watch out for


2. MODIFICATION OF ENTITLEMENT SIZE OR COMPOSITION

Relief goods consisting of biscuits, chocolates and cooking oil were being provided to the

poor victims and patients of a rural and basic health center. The DCO handed over the

responsibility of distribution of the goods to one of the doctors. The doctor appointed a

distributor at his discretion. Allegedly, very few people received the allocated aid while

some goods were being sold in the local markets.

Allegedly the doctor appointed a distributor he could collude with; relief goods were

reported to have been misused and/or hidden so that they could be sold.

• Inform the community of distribution details and their entitlements

Tell beneficiaries transparently and directly (not via leaders) what each is entitled to receive, how

much, when and how. Communicate distribution timing, process, ration size and composition in the

local language through community meetings, signboards, leaflets, speaker vans, posters,

drama and radio announcements, to ensure that people are aware of their

entitlements. Encourage beneficiaries to use your confidential complaints mechanism

if entitlements aren’t received as announced.

• Have written agreements with distribution site teams

Specify contractual obligations and penalties, including repayment of the value of losses for corrupt

diversion of goods. If distribution site personnel are caught diverting goods, impose sanctions, which

will also act as a deterrent and show that your agency is serious about its responsibilities to

beneficiaries.

Prevention measures


• Make regular visits to distribution sites

Monitor and evaluate distributions regularly. Make random, surprise

site visits to verify that rations handed out match original entitlements.

Visit local markets and stores to see whether relief goods are being sold

privately. Carry out ‘food basket verification’, i.e. random checking of rations received by one in

every five or 10 beneficiaries, and examine food sacks and oil cartons thoroughly to ensure they’re

completely empty post-distribution. Rotate M&E teams to reduce the potential for collusion with

field staff.

Prevention measures


• Large quantities of relief goods on sale in local markets or stores

• The rounding-up of ration allocation numbers

• Puncture holes in bags or cans; packages that look tampered with

• Cartons missing from standard pallets

• Distribution records that have been altered or could have been rewritten

• Substantial discrepancies between cash transfer entitlements as calculated in the needs

assessment, and disbursements

Watch out for


3. MULTIPLE OR GHOST REGISTRATION

The government had approved the immediate payment of a fixed cash benefit per

disaster-affected family. However, a lot of villagers who were allocated cash under this

scheme, did not receive any relief from the local staff. Instead, villagers from

neighboring areas were registered by replacing the names of legitimate beneficiaries. It

was also seen that the staff, some of whom did not even own a motorcycle, now had

their own cars worth millions.

The local staff was allegedly extorting bribes from the legitimate beneficiaries before

providing the funds. Since the beneficiaries were unable to pay, funds were given to

different villagers that were ready to pay the bribes.

• Verify registration documents at distribution

During registration, ensure staff can speak the language and check registration

documents. Verification should be regular and frequent, including

house-to-house visits, random cross-checks of other records (e.g.

medical records), interviews with people suspected of multiple registration, and roll-calls or card

validation before distributions. Update your information as the population changes with births,

deaths and movement. Try to include some visual record such as photographs, biometric indicators,

etc., to supplement written registration cards.

Prevention measures


• Corrected or apparently falsified registration lists

• Altered or fake registration or ration cards

• Fake identity documents

• Beneficiaries with identical characteristics (age, family size,

origin, etc.)

• Too many absent beneficiaries who can’t physically register themselves

• The multiple appearance of similar names (check with local leaders if these are different

people: many names can be repeated in a community), or similar signatures

• Registration lists that are all thumbprints and no signatures

Watch out for


4. BID RIGGING AND INSIDER INFORMATION

A contractor was working with an educational foundation and was involved with

constructing classrooms along with providing furniture to the government school. Then,

he was told that his contract had been rejected based on the bid he submitted. The

contractor had not submitted any bids at that time.

Allegedly, one of the employees of the educational foundation along with an employee

of a printing company had prepared and submitted sham quotations with inflated rates

under the contractor’s company letterhead. Then the two made another quotation – this

time under the printing company’s letterhead – and stated comparatively lower prices

than the contractor’s (sham) quote. Thus, because of this collusion, the tender was

awarded to the printing company and both the culprits shared the commission received.

• Have clear sanctions and disciplinary measures

Use debarment or legal action to sanction corrupt suppliers. Be sure to

take disciplinary measures should findings indicate corrupt practices.• Winning bids consistently being the last submitted or

being altered at the last minute (indicating they were waiting for information about other bids)

• Winning bids being consistently just less than the next lowest bid, indicating that the bidder could have received details of other bids

• An employee consistently pushing for contracts to be awarded to one or a few suppliers, even though they may not have made the best bid

• Staff living above their means• Staff having social relations or accepting private appointments with bidders• Staff who are vague or evasive about their purchasing or contract awarding role and authority,

or who resist publicizing information on the procurement process

Prevention measures


• Repeated awards to the same bidder or group of bidders• Contracts awarded to known friends or family of agency staff, or to companies

where staff have a financial interest• Contracts awarded under financing terms not the most favorable on offer• Common patterns in bids, particularly where the same calculations,

components or mistakes appear in multiple bids• Conditions conducive to the formation of a price-rigging cartel

(e.g. a small number of vendors who have close relationships with one another)• Bids received in advance of the due date not stored in a secure location• Bids opened in advance of the bid opening date

Watch out for


5. CONFLICT OF INTEREST

A local organization was supporting an education department to improve children’s

reading skills. The organization hired a director of operations (DO), who was a friend of

the organization’s chairperson and had been fired from his previous employment due to

alleged corruption. Allegedly, the DO displayed strong biases towards employees; he

would favor the HR manager and whenever she would request to visit a city, that trip

was turned into an official one. The director also showed personal grudges to employees.

He wouldn’t extend employee contracts for personal reasons and would not provide any

justification. Also, the alleged director awarded contracts only to his favorite vendors.

• Have a clear conflict of interest policy as part of your code of conduct

A written policy enables staff to identify and avoid conflicts of interest,

and tells staff what to do if they occur. Its existence makes a clear

statement, that decision taken on any basis other than what’s best for

your organization constitute corruption and undermine program quality.

Such a policy helps staff resist improper approaches, protecting them

(and your organization) from any appearance of harboring corruption.

• Oblige staff to avoid conflict of interest situations

Be clear that employees may not engage in conduct where potential for personal or professional gain

might affect their activities on behalf of your organization. Staff should avoid actual/apparent conflict

between work and private interests by disposing of the private interest or withdrawing from all related

decisions at work. Implement a policy on staff acceptance of gifts and hospitality. Establish an ethics office

to give staff guidance.

Prevention measures


• Employees or their families with a lifestyle or assets well above their salary

and official income level

• Reports of staff indulging in gambling, excessive entertaining or

international travel, or boasting about their status

• Decisions that are not objectively justifiable and may reflect cronyism

or nepotism• An employee consistently pushing for contracts to be awarded to one or a few suppliers, even

though they may not have made the best bid• Staff living above their means• Staff having social relations or accepting private appointments with bidders

Watch out for


6. BIASED LOCAL RELIEF COMMITTEE

For the implementation of a project supporting rural areas, toilets had to be

constructed. An NGO formed a committee from one group of people and nominated a

president who was tasked with preparing a list of deserving beneficiaries. Calls were

received from alleged beneficiaries complaining about favoritism. Allegedly, the

president of the committee prepared a list of preferred beneficiaries, even if they already

had a toilet facility. The committee also registered 5-10 persons from the same family.

• Understand local power structuresAs part of your risk analysis prior to or in the initial phase of a crisis, learn about the political, economic, social, religious, ethnic and clan structures in target communities, so that committees and volunteers can be as free from conflict of interest as possible. Require that all committee decisions are publicised transparently and that people know their entitlements, so they can speak out or complain privately if they feel a committee isn’t representing them fairly.• Don’t give committees or volunteers total discretionary powerEnsure that committee or volunteer work is adequately monitored and evaluated. Make random, surprise visits to observe committees or volunteers in action. Explain their roles and responsibilities to the community and set up an independent complaints mechanism (i.e. not through the committee or volunteer structure).• Be explicit about payments or rewards for committee membersDepending on context, either establish and publicise a nominal payment for committee members or publicly state that committee members should not be paid – including by beneficiaries. Make sure everyone understands and agrees to this, so that committee members don’t feel entitled to skim off unofficial ‘payment’ in relief goods which they feel they’ve earned. Publicly acknowledge members’ contribution, to inspire loyalty to your agency and make them feel valued.

Prevention measures


• Committees composed only of established local leaders or public authorities

• Committees with members of only one particular group

• Members who attend committee meetings intermittently

• Unexplained substantial improvements in volunteer or

committee member lifestyles

• Committees resistant to monitoring and evaluation

• Reports of SEA or extortion of staff or beneficiaries

Watch out for


1 disclaimer: all images have been taken from google clipart

Documents

beneficiaries diversion

diversion of aid

local intermediaries

local permits

biased local relief

aid resources

services transport payment

services procurement