Here is a first of a number of opinion pieces published today in New Age, relating to the two previously published reports on financial irregularities in the World Bank and donor supported health sector programmes. The two articles are: 'Audit finds $70m irregularities' and '$428m or irregularities in 8 years'.
The article below contains links to relevant documents:
The article below contains links to relevant documents:
Donors and audit transparency
by David Bergman
THE financial irregularities identified in the donor-supported ministry of health programmes, implemented between 2003 and 2012, involve mind-bogglingly large numbers.
In the recently completed eight-year programme, irregularities involving $470 million were identified (‘428m irregularities in 8 years’, New Age, June 30) and in 2012–3, the most recent audit of the current health programme identified $70 million, which is nearly a third of the total audited expenditure. (‘Audit finds $70m spending irregularities’, New Age, June 29).
This does not mean that all the money was gobbled up by greedy ministry officials — some of it was also wasted, or spent on contracts given through illegal procedures.
The audits themselves raise a number of important questions about the integrity of development programmes in Bangladesh and how donors should respond to information about financial irregularities. However, this first article considers the transparency of donors towards the audit reports which they receive from government.
In the recently completed eight-year programme, irregularities involving $470 million were identified (‘428m irregularities in 8 years’, New Age, June 30) and in 2012–3, the most recent audit of the current health programme identified $70 million, which is nearly a third of the total audited expenditure. (‘Audit finds $70m spending irregularities’, New Age, June 29).
This does not mean that all the money was gobbled up by greedy ministry officials — some of it was also wasted, or spent on contracts given through illegal procedures.
The audits themselves raise a number of important questions about the integrity of development programmes in Bangladesh and how donors should respond to information about financial irregularities. However, this first article considers the transparency of donors towards the audit reports which they receive from government.
World Bank
THE stories in New Age would never have seen the light of day if the World Bank had not provided it with the copies of the audit reports on the health programme.
As part of the agreement between the World Bank and the government of Bangladesh, the comptroller and auditor general’s office had to undertake an annual audit of the programme and send it to the World Bank within six months after the end of each financial year.
The government does not release these audit reports, but the World Bank is able to do so because of its Access to Information Policy which allows government documents to be made publicly available if their disclosure was part of its ‘condition for doing business with the bank’.
The policy says, ‘The country/borrower provides such documents to the bank with the understanding that the bank will make them available to the public.’ In a footnote, it specifically refers to ‘audited annual financial statements’ for which the ‘invitation to negotiate’ was issued on or after July 1, 2010.
So, on this account at least, the World Bank needs to be congratulated for its openness. The audit report provides important information about financial irregularities which should be made public.
THE stories in New Age would never have seen the light of day if the World Bank had not provided it with the copies of the audit reports on the health programme.
As part of the agreement between the World Bank and the government of Bangladesh, the comptroller and auditor general’s office had to undertake an annual audit of the programme and send it to the World Bank within six months after the end of each financial year.
The government does not release these audit reports, but the World Bank is able to do so because of its Access to Information Policy which allows government documents to be made publicly available if their disclosure was part of its ‘condition for doing business with the bank’.
The policy says, ‘The country/borrower provides such documents to the bank with the understanding that the bank will make them available to the public.’ In a footnote, it specifically refers to ‘audited annual financial statements’ for which the ‘invitation to negotiate’ was issued on or after July 1, 2010.
So, on this account at least, the World Bank needs to be congratulated for its openness. The audit report provides important information about financial irregularities which should be made public.
Asian Development Bank
THE World Bank’s policy on this matter can, however, be contrasted with that of the Asian Development Bank.
At first sight, it appears that the Asian Development Bank policy is similar to that of the World Bank. Its Public Communications Policy 2011 states that the ‘ADB shall post on its web site annual audited project accounts for sovereign projects for which the invitation to negotiate is issued on or after the policy effective date.’ The policy became active on April 2, 2012.
This suggests that the ADB, which also relies on the CAG for audit of the programmes it funds, will also make public the reports. That is, however, not what the ADB does.
So far, the ADB has posted on its web site two such ‘audited accounts’ — one relating to the urban primary health care services delivery programme and the other to power system expansion and efficiency improvement investment programme.
But the audit information posted is very limited and excludes all the information on audit ‘observations’, details of the irregularities, and the ‘management letter’ which provides key information on the scope of the audit as well as other information on identified problems in financial management. It is not the ‘annual audited project accounts’ which the ADP received from the comptroller and auditor general and which its policy promises it will publish.
In fact, the information published on the ADB web site is pretty much useless if one is interested in assessing whether there were any financial irregularities in the audited programme which, of course, one assumes was one of the key functions of the audit in the first place.
In an e-mail to New Age, the ADB’s spokesperson justified this withholding of information by saying that the ADB had not agreed to provide a copy of the audit. ‘As per the policy, we are required to disclose only the “audited project financial statements”,’ he said.
He said that the ADB considered the two terms — annual audited project accounts and audited project financial statements — to be ‘synonymous in practice.’
It seems difficult to see how the ADB can justify this new interpretation, which seems only designed to avoid making public potentially embarrassing material about financial irregularities in a programme which it funds.
If the purpose of the provision in the ADB’s communication policy about the publication of ‘annual audited project accounts’ was to create greater transparency about any financial irregularities in the programme, then it might as well just remove it as the way the ADB interprets the provision simply does not serve that objective.
Interestingly, the ADB has now added a new term to its loan contracts with the Bangladesh government which state that the ADB will publish on its web site the ‘annual audited financial statements’ rather than what its communication policy states, the ‘annual audited project accounts.’
This new contractual term seems to be in defiance of the ADB’s own communication’s policy, suggesting an organisational intention to remain entirely non-transparent about financial irregularities in its programmes.
Perhaps the ADB will justify this change by pointing to a footnote in its communication policy which states, ‘The procedures for the disclosure of annual audited project accounts will be discussed and agreed with each borrower and made part of the loan agreement for each project.’ However, this footnote only allows discussion over ‘procedures’ for disclosure, and does not justify changing the content of what can be published.
THE World Bank’s policy on this matter can, however, be contrasted with that of the Asian Development Bank.
At first sight, it appears that the Asian Development Bank policy is similar to that of the World Bank. Its Public Communications Policy 2011 states that the ‘ADB shall post on its web site annual audited project accounts for sovereign projects for which the invitation to negotiate is issued on or after the policy effective date.’ The policy became active on April 2, 2012.
This suggests that the ADB, which also relies on the CAG for audit of the programmes it funds, will also make public the reports. That is, however, not what the ADB does.
So far, the ADB has posted on its web site two such ‘audited accounts’ — one relating to the urban primary health care services delivery programme and the other to power system expansion and efficiency improvement investment programme.
But the audit information posted is very limited and excludes all the information on audit ‘observations’, details of the irregularities, and the ‘management letter’ which provides key information on the scope of the audit as well as other information on identified problems in financial management. It is not the ‘annual audited project accounts’ which the ADP received from the comptroller and auditor general and which its policy promises it will publish.
In fact, the information published on the ADB web site is pretty much useless if one is interested in assessing whether there were any financial irregularities in the audited programme which, of course, one assumes was one of the key functions of the audit in the first place.
In an e-mail to New Age, the ADB’s spokesperson justified this withholding of information by saying that the ADB had not agreed to provide a copy of the audit. ‘As per the policy, we are required to disclose only the “audited project financial statements”,’ he said.
He said that the ADB considered the two terms — annual audited project accounts and audited project financial statements — to be ‘synonymous in practice.’
It seems difficult to see how the ADB can justify this new interpretation, which seems only designed to avoid making public potentially embarrassing material about financial irregularities in a programme which it funds.
If the purpose of the provision in the ADB’s communication policy about the publication of ‘annual audited project accounts’ was to create greater transparency about any financial irregularities in the programme, then it might as well just remove it as the way the ADB interprets the provision simply does not serve that objective.
Interestingly, the ADB has now added a new term to its loan contracts with the Bangladesh government which state that the ADB will publish on its web site the ‘annual audited financial statements’ rather than what its communication policy states, the ‘annual audited project accounts.’
This new contractual term seems to be in defiance of the ADB’s own communication’s policy, suggesting an organisational intention to remain entirely non-transparent about financial irregularities in its programmes.
Perhaps the ADB will justify this change by pointing to a footnote in its communication policy which states, ‘The procedures for the disclosure of annual audited project accounts will be discussed and agreed with each borrower and made part of the loan agreement for each project.’ However, this footnote only allows discussion over ‘procedures’ for disclosure, and does not justify changing the content of what can be published.
Danish and British governments
WHAT about the bilateral donors? Again practice differs considerably between them.
DANIDA, the Danish government donor agency, is willing to make public copies of the audit reports it receives from the comptroller and auditor general as long as the CAG permits it. Sometime ago, when DANIDA was contacted for copies of the audit reports, the CAG gave its consent and the full FAPAD reports of the donor’s projects were handed over.
The UK’s position is, however, even more restrictive than the ADB’s. Although the Department for International Development seeks to be the most transparent of the donor agencies, it has refused point-blank to make public any of the CAG audit reports it has received relating to projects that it has funded through the government.
When an initial request was made to DfID for FAPAD reports, it was turned down. When this was appealed through the British government’s Freedom of Information Act procedures, it was again rejected. The DfID official wrote that ‘while recognising the significant public interest in ensuring DfID funds are spent appropriately, including in the projects in which you are interested, I find that the public interest in withholding the information in this particular case outweighs that in disclosure.’
He argued that as it was ‘unlikely that the government of Bangladesh will make the reports you have requested public’ their release ‘would likely to have a negative effect on the relationship between the UK and Bangladeshi governments and that such an outcome would not be in the public interest.’
He also argued that ‘making the information sought available in the public domain would be likely to have a detrimental effect on DfID’s ability to work with other organisations on which it depends for expertise and information and that this would constitute an adverse effect on DfID’s abilities to formulate and develop government policy.’
These are spurious arguments. First, DfID never made any attempt to see whether the CAG was actually willing to allow these reports to be made public. As noted above, when DANIDA asked, the comptroller and auditor general was willing.
Secondly in relation to DfID’s argument claiming that the relations between the Bangladesh and UK governments would be negatively affected were it to release the audits reports, one simply has to point to DANIDA and the World Bank that have not faced any difficulty in their relationships with the Bangladesh government that could in any way be linked to its release of the government audit reports.
And DfID’s third point also has no basis. What relationships with what partner organisations would be affected negatively by the release of these reports? Perhaps, the official is referring to its relationship with the CAG. If so, why then does the World Bank, whose policy since 2010 has been to release these audit reports, continue to have very positive and energetic relations with the CAG and, in fact, is part of managing a donor project involving it.
WHAT about the bilateral donors? Again practice differs considerably between them.
DANIDA, the Danish government donor agency, is willing to make public copies of the audit reports it receives from the comptroller and auditor general as long as the CAG permits it. Sometime ago, when DANIDA was contacted for copies of the audit reports, the CAG gave its consent and the full FAPAD reports of the donor’s projects were handed over.
The UK’s position is, however, even more restrictive than the ADB’s. Although the Department for International Development seeks to be the most transparent of the donor agencies, it has refused point-blank to make public any of the CAG audit reports it has received relating to projects that it has funded through the government.
When an initial request was made to DfID for FAPAD reports, it was turned down. When this was appealed through the British government’s Freedom of Information Act procedures, it was again rejected. The DfID official wrote that ‘while recognising the significant public interest in ensuring DfID funds are spent appropriately, including in the projects in which you are interested, I find that the public interest in withholding the information in this particular case outweighs that in disclosure.’
He argued that as it was ‘unlikely that the government of Bangladesh will make the reports you have requested public’ their release ‘would likely to have a negative effect on the relationship between the UK and Bangladeshi governments and that such an outcome would not be in the public interest.’
He also argued that ‘making the information sought available in the public domain would be likely to have a detrimental effect on DfID’s ability to work with other organisations on which it depends for expertise and information and that this would constitute an adverse effect on DfID’s abilities to formulate and develop government policy.’
These are spurious arguments. First, DfID never made any attempt to see whether the CAG was actually willing to allow these reports to be made public. As noted above, when DANIDA asked, the comptroller and auditor general was willing.
Secondly in relation to DfID’s argument claiming that the relations between the Bangladesh and UK governments would be negatively affected were it to release the audits reports, one simply has to point to DANIDA and the World Bank that have not faced any difficulty in their relationships with the Bangladesh government that could in any way be linked to its release of the government audit reports.
And DfID’s third point also has no basis. What relationships with what partner organisations would be affected negatively by the release of these reports? Perhaps, the official is referring to its relationship with the CAG. If so, why then does the World Bank, whose policy since 2010 has been to release these audit reports, continue to have very positive and energetic relations with the CAG and, in fact, is part of managing a donor project involving it.
Moving forward
THE point surely is this. The ADB, DfID and the UNDP (which also refuses to release the reports) claim they are concerned about corruption and have zero tolerance for it. They also state that they are transparent about the programmes that they fund.
It is also the case that when these organisations loan or give money to the government, they rely very significantly on the audits from the comptroller and auditor general to determine whether their money has been used appropriately. There is no other auditor.
That being so, ADB, DfID, the UNDP and other donor agencies should all be as open as the World Bank in making public the audits they receive from the government. It will only be by shining a bright light on these irregularities that public and other pressure will build for them to stop. Keeping the audits from the public gaze is exactly what corrupt government officials rely upon. Whose side are the donors on?
THE point surely is this. The ADB, DfID and the UNDP (which also refuses to release the reports) claim they are concerned about corruption and have zero tolerance for it. They also state that they are transparent about the programmes that they fund.
It is also the case that when these organisations loan or give money to the government, they rely very significantly on the audits from the comptroller and auditor general to determine whether their money has been used appropriately. There is no other auditor.
That being so, ADB, DfID, the UNDP and other donor agencies should all be as open as the World Bank in making public the audits they receive from the government. It will only be by shining a bright light on these irregularities that public and other pressure will build for them to stop. Keeping the audits from the public gaze is exactly what corrupt government officials rely upon. Whose side are the donors on?
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