How to combat fraud in public offices

Kenya is never short of shocking stories emanating from all corners. But undoubtedly the number of corruption and fraud scandals hitting institutions entrusted with tax payers’ funds are on upward trajectory.

Recent revelations about corruption and fraud cases in the Ministry of Education and the National Social Security Fund (NSSF) are as shocking as they are disappointing. They reminded me of the immortal words from one philosopher: “If a country is to be corruption free and become a nation of beautiful minds, I strongly feel there are three key societal members who can make a difference. They are the father, the mother and the teacher.”

This is why we must be bothered when teachers or educational officers are accused of stealing funds from donors and taxes from Kenyans.

An audit report by the Finance ministry reveals the massive fraud cases rocking the free primary school programme. The British Government, through DfID, a major financier of the ambitious programme, has rightly been exasperated by the scandal even contemplating withdrawing its support.

Do these people ever think that donor funds are indeed taxes paid by citizens of the countries? In this scandal, funds were siphoned through fabricated training workshops, hiring of non-existent training halls, inflating “fictitious” payments, fake receipts, double allocation and disbursement of funds to schools.

Simply put, it was a well orchestrated racket that involved various employees including accounting officers. Progressive organisations have no choice — they must adopt change in every major facet of corporate strategy and tactics if they are to mitigate these risks.

Government institutions and agencies are no exception. Private companies, particularly whose stock-in-trade is liquid cash, invest heavily in anti- fraud risk assessment models and programmes that can effectively identify the gaps that can be used by fraudsters to swindle the business of its hard-earn cash. In Kenya, virtually all commercial banks have set up fraud and security departments that work closely with risk management functions to ensure fraud risk is sufficiently mitigated.

But this cannot be said of government institutions and agencies. To achieve it we must start with the larger picture; the management of the country and then cascade these ideals down to these institutions.

Ever imagined Kenya being run as a private company? One that responds to market forces, as business is presumed to do, and whose major drive is to achieve the highest levels of efficiency. A company led by a charismatic CEO and where cabinet sessions look a lot like the business roundtable meetings where every member earns a place due to meritocracy and ability to deliver —and not patronage.

Where lower level officials, too, look and sound like business folk. Does it sound like one of those far-fetched dreams by armchair theorists?

The ever mounting corruption and fraud cases in our public institutions can be aptly referred to as “White collar crime”. With impunity they continue fleecing innocent tax payers’ colossal amounts of cash and must force us to re-think our processes and procedures.

Fraudsters are getting smarter by the day and institutions must develop concrete internal controls that will stand the test of time. There are three phases to developing an effective anti-fraud programme: assess, improve, and monitor. A fraud risk assessment is a proactive step that can be taken to identify areas that pose high risk of fraud. It highlights leadership or management’s commitment to preventing, deterring, and detecting fraud.

Once the risks are identified, a gap analysis can be completed and improvements recommended to mitigate the fraud risks. Subsequent monitoring should ensue. Employees who work for these institutions studied in same schools, colleges and universities. Why then do some of those in the public sector change? I believe it must be the organisation’s culture. Integrity is a psychological trait like intelligence, personality or aptitude. No university teaches corruption as a virtue to be cherished. Probably as a people and a society we desperately need a thorough ideological self-analysis.
These challenges know no boundaries, although the art has been perfected in Africa. The World Bank estimates that globally bribes amount to about $1 trillion a year, with $150 billion of the money changing hands in Africa. This is why there are no enough role models on this front. I will not pick on one of those overrated western nations. Rwanda, a small landlocked country in Africa is a perfect example. President Kagame set to reform the rot that had plagued the country for decades.

He styles himself as the CEO of the company — Rwanda. He acknowledges that he must lead from the front; he must energetically communicate the company’s vision to all who care to listen. On September 21 he contributed a well thought article titled, Why US needs Africa in the respected Washington Post. Indeed a long shot coming from a continent whose leaders dreadfully steer clear of the media. The Doing Business 2009 report, by the World Bank, released towards the end of last year singled out Rwanda as a leading reformer

Service delivery
Mr Kagame has improved service delivery alongside the fight against corruption. No wonder Time magazine listed him among 100 most influential people of 2009 while Financial Times listed him among the World’s 50 most influential people who shaped the past decade.