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Transparency and Legitimacy in Covid-19 emergency responses

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By Gray Kalindekafe, Governance, Human Rights And Civic Education Expert:

GUARD AGAINST CORRUPTION—Procurement of testing materials like used above need to be transparent

The scientific community has time and time again recommended that Covid-19 is lethal to people who have pre-existing conditions. It appears to be true also that Covid-19 has manifested that countries with pre-existing governance deficits just like Malawi and prone to corruption are turning out to be looters’ paradises.

While there is no consensus on the causes of corruption in Malawi, research indicates that important drivers of corruption include – high levels of poverty and inequality, insufficiently funded and inefficient public sector, and extensive patronage networks.

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On 9 July, United Nations (UN) experts warned of the distressing human cost of corruption, including human rights abuses if governments fail to guard against fraud and bribery in healthcare supply chains as they secure essential medicines and personal protective equipment (PPE) in the fight against Covid-19.

The biggest area targeted by the “covidpreneurs” (a term that has been given to those who unlawfully and unethically manipulate tenders linked to Covid-19) is PPE. Contracts to distribute items such as masks, gloves, and medical visors have been abused by companies allegedly connected with people in power or positions in health departments.

For Example, in April, CSOs in Malawi, operating under the banner Anti-Corruption Alliance, came out with guns blazing following the allocation of K1-billion ($1.3-million) Covid-19 funds to the then-first lady, Getrude Mutharika’s organisation, Beautify Malawi. The CSOs expressed concern over the lack of transparency and accountability on how the pandemic funds were being handled.

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According to media reports there were concerns on the allegation that members of the Cabinet committee on coronavirus were each receiving K300,000 ($407) for each news media briefing they held to update the public on the pandemic, and the total had blown up to K1-billion ($1.3-million) in allowances by 7 April.

In a separate incident, the Human Rights Defenders Coalition (HRDC) called for the immediate resignation of Minister of Information Mark Botomani and Minister of Health Jappie Mhango for the alleged abuse of Covid-19 funds, drawing of hefty allowances (K450,000 [$610] for Cabinet ministers and K350,000 [$475] for members of Parliament) and trying to cover up the same. HRDC accused the ministers of being heartless, considering that health workers did not have adequate PPE to effectively execute their duties.

  1. Fiscal Transparency, Public Accountability and Legitimacy

In the context of the Covid-19 pandemic, governments including Malawian government are “doing what it takes” to extend massive economic support packages to people and firms in record time.

The exceptional response in terms of scale and speed has challenged traditional approaches to ensuring fiscal transparency, safeguarding public accountability, and maintaining institutional legitimacy. Yet, all three are key for the success of the Covid-19 fiscal policy response, including by (i) enabling citizens and economic actors to understand the objective, size and cost of the policy package and how it will affect them; (ii) helping to sustain widespread support for the overall policy package and confidence that it is not misused; (iii) getting a clear picture of the medium- to long-term risks associated with the policy response; and (iv) bolstering market confidence, notably by highlighting the strength of the short-term response and its consistency with long-term fiscal prudence. To achieve these objectives, attention will have to focus on three aspects of the support package:

Design

The key challenge is to balance urgency and timeliness of the response in a volatile economic environment with achieving transparency in the identification and presentation of the response measures.

Implementation

The key challenge is to have adequate control and tracking/ traceability of budget and off-budget interventions, to ensure that the agreed emergency measures are deployed effectively and in line with their intended purpose and – if needed – give the opportunity to revise and adapt the set of measures to changing circumstances.

Oversight to ensure that objectives are met

The key challenge is to put in place comprehensive and transparent reporting and public accountability procedures that oversight institution (e.g. Parliament, the Auditor General’s Office, Anti-Corruption Bureau, civil society organizations, and the public at large are able to enforce while the support measures are being designed and implemented.

Ii. Designing the Support Package

Notwithstanding the need for speed and flexibility, the design of the support package should follow standards of transparency. This is needed to maintain public support and build institutional legitimacy, ensure the effectiveness of the package, and avoid any misappropriation of funds disbursed in an emergency situation. Important points to take into account include:

Ensuring parliamentary scrutiny and securing legal authorization of policy measures. All budgetary spending should have a clear authorization under the legal framework, with ex ante authorization or ex post approval by the legislature, as needed. Some countries will use a supplementary budget to secure legal authorization of the emergency response measures and associated funding needs, which provides greater transparency. This should not lead to excessive delays, as many countries manage to produce and vote a supplementary budget in less than a week. If convening parliament for approving a supplementary budget is not an option, other forms of parliamentary scrutiny could be considered, such as a dedicated hearing in the parliamentary Finance or Budget Committee. Some countries may be able to use emergency provisions as authorized in their PFM legislation, which allow for a certain discretion in reallocation of appropriations.

In an emergency, the Executive may use décrets d’avances, which are decrees to reallocate appropriations between programs or line-items, or even create new appropriations, subject to ratification of the décrets (decrees) by Parliament in the next budget law (loi de finances)., This may create opportunity for abuse of COVID 19 funds through executive arrogance .

Specifying crisis-related measures in the budget with clear eligibility criteria and ensuring granularity of information. Emphasis should be put on a very detailed and granular presentation of measures including costing and transparent eligibility criteria.

Emergency situations can offer a fertile ground for vested interests to use public funds for private gain, making it critical that vulnerabilities to corruption and misuse be recognized and mitigated. Misuse of funds during humanitarian crises including Hurricane Katrina and the Ebola outbreak attest to such vulnerabilities. For example, in 2015, the Sierra Leone Auditor General released an audit of domestic donations made to the government for the Ebola relief effort providing evidence of mismanagement by public officials in the distribution of these funds.

Payments for supplies and sensitisation efforts were duplicated and undocumented, money was paid out to private individuals rather than to organizations and procurement procedures were widely disregarded. Audits of international development organization spending showed there was also failure to provide rightful healthcare workers’ salaries and bonuses which were paid out to private individuals by those charged with distribution. In the United States, corruption and misuse of funds in the wake of Hurricane Katrina in 2005 and Hurricane Maria in 2017 have led to more than a thousand prosecutions, the ousting of government officials, and the adoption of new practices by U.S government agencies to reduce such vulnerabilities.

Transparency and public accountability play a crucial role in this respect, with the following areas most vulnerable to risks of corruption and misuse:

Cash transfers or provision of basic goods to households: Allocation criteria for cash transfers and procurement of goods should be transparent. This is particularly important for aid-in-kind, given the logistics and procurement implications. One option to enable transparency is the use of digital payments or mobile banking to pay cash transfers.

Procurement of goods and services in the health sector: This can be highly vulnerable to mismanagement by public officials. A main concern (apart from outright corruption) relates to the acquisition of defective material or theft in the distribution or procurement of goods and services. To mitigate risks (e.g. hidden contracts, overpricing, and collusion), governments should: (i) publish all public contracts; (ii) use open and competitive bidding, and use emergency non-competitive processes only when followed by adequate forms of control, auditing and reporting scrutinizing such processes; (iii) publish beneficial ownership information of companies that are awarded contracts; (iv) empower existing anti-monopoly agencies to monitor market conditions in critical sectors, and (v) foster cooperation among various authorities and with the civil society on matters related to transparency of public finances and the delivery of goods and services. It is important that the government publicise ex ante measures (e.g., publication of the plans on the use of emergency funding) and define ex post measures, publication of all information on attribution of procurement contracts or selective audit of procurement contracts once the crisis abates).

Loan and Guarantees Programs: Existing liquidity programs of national development banks may be expanded to provide easy access to loans for affected companies. Emergency loans and guarantee programs may be directed towards the wider economy, or towards a subset of economic actors (small and medium sized enterprises; specific sectors; state-owned enterprises; local government, and the use of public trust funds). These instruments often involve complex financial schemes that are prone to corruption. In all cases, transparent criteria for selecting beneficiaries are necessary, and transparent approval and reporting processes should be followed. For example, the existing liquidity programs of Germany’s Kreditanstalt für Wiederaufbau (KfW) will be expanded to provide access to loans for affected companies and guarantee bond issues, with the precise nature and legal form of the guarantee, guarantee fees and all further details relative to eligibility and process clearly specified in an administrative text. Records of guarantees and loans should be complete, accurate, updated and reconciled monthly, and published along with the names of beneficial owners.

Health workforce recruitment and management: Transparency in payroll management needs to be ensured. For example, bonuses to healthcare workers for exceptional strain and risks incurred may be diverted to officials less involved in “frontline” tasks. For the Red Cross alone, reports suggest that 5 percent of total disbursements for health workers were lost to fraud. Ex-post audits by SAIs would need to check the correct utilization of the amounts earmarked for this purpose.

Wage subsidy schemes: Wage subsidy schemes can also be abused, requiring a proactive approach ensure to safeguard the amounts at stake. Hong Kong has promised high transparency when employers apply to the government’s HK$80 billion wage subsidy scheme to keep paying some 1.5 million workers through the coronavirus crisis. Employers will have to fill out application forms and be criminally liable for false declarations regarding the number and salaries of employees.

Service delivery level: Forms of corruption such as informal payments, over-prescribing, and nepotism are likely to be exacerbated during a pandemic as the system experiences a greater patient load. To reduce bribery in service delivery, information on how emergency relief funds are spent should be available to internal and/or independent auditors. Priority auditing should be given to critical areas such as health, public procurement, infrastructure and social security expenditures. For example, the International Federation for Red Cross and the Red Crescent Societies (IFRC) have already put in place a full-time auditor for its Covid-19 response following the fraud it uncovered during the Ebola outbreak.

Research and development: There is a global call to advance research and development of diagnostics, therapeutics and vaccination to address the Covid-19 outbreak and considerable amounts of public money is being spent in this area. This may give rise to opportunity of misuse by vested interests. Transparency in allocation of these resources and monitoring their use can mitigate this risk. An adequate protection for whistleblowers is in this respect of major importance.

Finally, to complement the transparency and accountability efforts described here, countries should continue implementing and strengthening their existing anti-corruption and anti-money laundering frameworks.

DISCLAIMER: The author is writing in his own capacity as a governance, Elections, Human rights and Civic Education specialist

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