John Butterworth IRC International Water and Sanitation Centre

1. Transparency International Executive Education Series 2008: An introduction to the Water Integrity Network John Butterworth IRC International Water and Sanitation Centre

2. Contents • Key definitions and the importance of this topic: what do statistics tell us? • Frameworks for understanding corruption • Case studies • Designing pro-poor strategies to prevent corruption • Links and further information

3. 1.1 Some key definitions Transparency = sharing information and acting in an open manner • Honesty/ Integrity = working and acting in ways that reflect known best practices, and following ethical principles • Accountability = objectively holding people and agencies responsible for their performance • Corruption = the abuse of entrusted power for private gain

4. 1.2 Governance, poverty and WASH indicators in 10 selected countries Sources: www.transparency.org; http://mdgs.un.org/; http://www.wssinfo.org/

5. 1.3 Correlation or cause? Source: Stalgren, 2006

6. 1.4 Key questions • Are there causal linkages, as well as correlations, between corruption, WASH sector performance and poverty? • Will increased WASH sector investment (to meet MDGS) have the desired impact without better governance? • What are the most important forms of corruption and levels at which it occurs? • Why might the WASH sector be prone to corruption? • How much leakage should we expect to find? • What could be achieved with existing investments if we tackled leakage? • Should corruption ever be tolerated?

7. Corruption occurs between public officials and 3 different sets of actors Public Actors Private Public Officials Consumers 2.1 Interaction framework • Public to public • Diversion of resources • Appointments and transfers • Embezzlement and fraud in planning and budgeting • Public to private • Procurement collusion, fraud, bribery • Construction fraud and bribery • Public to Citizen / consumer • Illegal connections • Falsifying bills and meters Source: Janelle Plummer

8. 2.2 Interaction framework PUBLIC PUBLIC interactions PUBLIC PRIVATE interactions PUBLIC CONSUMER interactions Policy-making and regulating Planning/budgeting / transfers Management Tendering and Procurement Construction/Operations Payment Systems

9. PUBLIC PUBLIC interactions PUBLIC PRIVATE interactions PUBLIC CONSUMER interactions • Distortions and diversion of national budgets • State Capture of policy and regulatory frameworks • Administrative fraud • Document falsification • Bribery, fraud, collusion in tenders • Fraud/bribes in construction • Illegal connections • Speed bribes • Billing/payment bribes • Bribery/fraud in community procurement • Elite capture

10. PUBLIC to PUBLIC interactions • Early warning indicators • Monopolies/tariff abnormalities • Lack of clarity of regulator/provider roles • Embezzlement in budgeting, planning, fiscal transfers • Speed/complexity of budget processes • No. of signatures • % spending on capital intensive spending • Unqualified senior staff • Low salaries, high perks, cf. HH assets • Increase in price of informal water • Anti-corruption Measures • Policy and tariff reform • Separation • Transparent minimum standards • Independent auditing • Citizen oversight and monitoring • Technical auditing • Participatory planning and budgeting • Performance based staff reforms • Transparent, competitive appointments • Policy-making/Regulating • Diversion of funds • Distortions in decision-making, policy-making • Planning and budgeting • Corruption in planning and management • Bribery and kickbacks in fiscal transfers • Management and Program Design • Appointments, transfers • Preferred candidates • Selection of projects

11. PUBLIC to PRIVATE interactions • Early warning indicators • Same tender lists • Bidders drop out • Higher unit costs • Variation orders • Low worker payments • Single source supply • Change in quality and coverage • Anti-corruption Measures • Simplify tender documents • Bidding transparency • Independent tender evaluation • Integrity pacts • Citizen oversight and monitoring • Technical auditing • Citizen auditing, public hearings • Benchmarking • SSIP support mechanisms • Procurement • Bribery, fraud, collusion in tenders • Construction • Fraud/bribes in construction • Operations • Fraud/bribes in construction

12. PUBLIC to CONSUMER interactions • Anti-corruption Measures • Corruption assessments • Citizen monitoring and oversight • Report cards • Transparency in reporting • Citizen oversight and monitoring • Complaints redressed • Reform to customer interface (e.g. women cashiers) • Early warning indicators • Loss of materials • Infrastructure • failure • Low rate of faults • Lack of interest in connection campaigns • Night time tanking • Unexplained variations in revenues • Construction • Community based WSS – theft of materials • Fraudulent documents • Operations • Admin corruption • (access, service, speed) Payment systems • meter, billing and collection – fraud and bribery

13. 2.3 Chain of impacts

14. 2.4 Local governance • Specific governance challenges at local level require different approaches • Decentralisation brings new challenges and opportunities • Corruption has more immediate and corrosive impact • Improvements may also be more rapid and wide reaching • In WASH, community management as a key paradigm • Tackling poverty is a key issue

15. 3.1 Decentralization versus centralization in India • Davies (2004) identified high levels of corruption • Petty corruption (falsify meter reading, speed repairs etc) • Kickbacks from contractors • Transfers within administration • Decentralisation linked to higher levels of corruption. Why? • Opportunity to plan activities linked to decentralisation programmes

16. 3.2 Report cards in India • Public Affairs Centre (PAC) in Bangalore developed report cards for citizens to rank performance of public service agencies (including water) • Monitored public satisfaction with staff behaviour, quality of service, information, and corruption (speed money) • Initially showed lows levels of public satisfaction, agencies not citizen friendly, lacked customer orientation, corruption a serious problem • Second survey 5 years later revealed limited improvements • Third survey 4 years later showed noticeable progress by all agencies

17. 3.2 Report cards in India • Report cards influenced key officials in understanding perceptions of ordinary citizens • Public agencies launched reforms to improve the infrastructure and services • Government agencies showed greater transparency and more responsiveness • CRCs acted as a catalyst in the transformation of services in Bangalore

18. 3.3 Using freedom of information laws India adopted a Right to Information Act in 2001 • The citizens group Parivartan in Delhi has been active in supporting its use • There have been examples where an application under the act has brought immediate results on a water issue Source: Earle & Turton

19. 3.4 Lesotho Highlands Water Project • Largest international water transfer was from Lesotho-South Africa • Construction contracts awarded fraudulently • Foreign companies paid bribes • Successful prosecutions set precedents Source: Earle & Turton

20. 3.4 Lesotho Highlands Water Project Precedents from prosecution • Bribes are still illegal even if not acted on after corrupt agreement • Jurisdiction can be takenwhere the impact is felt • Crucially, courts can gain access to Swiss bank accounts Source: Earle & Turton

21. 3.5 Pipe manufacturers in Colombia • Procurement is vulnerable to price fixing and collusion • Private sector pipe manufacturers in Colombia introduced self-regulation • Adopted an integrity pact not to pay or accept bribes • Support given by professional association, Transparency International and government • Half of 167 manufacturers have signed up • Prices have reduced by 30%

22. 3.6 Phnom Penh, Cambodia Transformation of a public utility under difficult post- conflict (civil war) conditions • High levels of illegal connections and unaccounted for water, including bribery of utility officials

23. 3.6 Phnom Penh, Cambodia • Corruption was tackled effectively, due to • Leadership • Culture of change • External support • Led to reform and new investment

24. 3.6 Phnom Penh, Cambodia • Human resources management improved • Revenue collection improved • Rehabilitation of services achieved harnessing local resources • Illegal connections were tackled, reducing unaccounted for water • Tariffs were increased

25. 3.7 Sanitation in Kerala • The NGO SEUF targeted diversion of funds to reduce costs (by ½ to ⅔) in latrine construction • Mix of strategies to tackle corruption: • more information • extra checks & spot checks • public postings • double signatures • action on complaints at lowest level • referral of problems

26. 3.8 Money diverted from education in Uganda • Public expenditure tracking (PET) survey in Uganda • Tracked central funds allocated for school construction • Only 13% of funds arrived at schools • Transparency campaign published, information about the grants • Led to capture being reduced from 87% to 18% • Schools near newspaper and communication points did better in receiving their funds Source: Reinikka, R. and Smith, N. Undated

27. 3.9 Kecamatan Development Project (KDP) • Tackling grassroots corruption in a large rural development project • KDP – a central government project focused on poor villages and highly dispersed • Very high risk environment • Weak institutions for control • Mapping is a key step in tackling this Source: Guggenheim (2007)

28. 3.9 Kecamatan Development Project (KDP) Mapping identified sources of corruption • Bribing officials to get projects • Cuts taken at high levels • Illicit fees • Under-delivery of materials/ work • Embezzlement by staff

29. Effect of Audits on Percent Missing 35% 30% 25% 20% Materials Percent Missing 15% Materials 10% 5% Wages Wages 0% Control Audits 3.9 Kecamatan Development Project (KDP) • Solutions identified • Reducing discretion • Reducing transactions • Promoting competition • Lowering costs of acquiring information • Promoting social controls • Strengthening formal oversight • Applying sanctions

30. 4.1 Pro-poor anti-corruption strategies • Are all information, transparency and accountability initiatives likely to benefit the poor? • Could they even be harmful? • Evidence shows that anti-corruption actions can harden and shift its forms Source: Janelle Plummer (2007)

31. 4.2 Diagnose • A key starting point is to understand what types and level of corruption exist • Frameworks can be used to map different types of corruption and help to identify appropriate solutions • Severe lack of diagnosis of corruption and its impacts on the poor in the WASH sector • Poorly informed anti-corruption activities risk merely hardening or shifting it to other forms • Look before you leap Diagnose Monitor Target Connect solutions Mitigate

32. 4.3 Target Diagnose • Focus on water and sanitation services that reach the poor • May include small-scale providers and community managed systems • Local government a key level in WASH - an opportunity to prevent corruption before it takes root • Decentralisation to service providers and agencies that are closer to communities can encourage more accountability • Weak local agencies may be more susceptible to being corrupted than stronger State agencies Monitor Target Connect solutions Mitigate

33. 4.4 Example: Indonesia • 15% get water directly from utility networks • 20% get water indirectly or illegally • 65% rely on community-managed systems, self-supply and small-scale providers

34. 4.5 Connect solutions • Effective anti-corruption programmes combine a mix of strategies. • Supply side measures include high level institutional reforms to tackle corruption • Demand side measures strengthen the ability of poor people to seek improvements Diagnose Monitor Target Connect solutions Mitigate

35. 4.6 Mitigate • In some places petty corruption may be a necessary evil to get access to services • Anti-corruption measures take away this coping strategy • Programmes should do no harm • put back what is lost • identify alternatives so that the poor do not need to engage in petty corruption Diagnose Monitor Target Connect solutions Mitigate

36. 4.7 Monitor • WASH sector has little experience in reducing levels of corruption • Vital to observe which strategies are effective and which aren’t • Implementation programmes should be flexible and build on what works best Diagnose Monitor Target Connect solutions Mitigate

37. 4.8 Key messages • Be informed and anticipate • Be inspired by examples and success stories • Use multiple strategies to improve access to information, transparency and accountability…and prevent corruption • Act in partnerships • Learn what works

38. 5.1 Links and further information • www.waterintegritynetwork.net is the website of the Water Integrity Network based at Transparency International in Berlin • www.irc.nl/transparency includes materials from the IRC International Water and Sanitation Centre and links to other useful sources • www.transparency.org is the website of Transparency International, a global civil society organisation in anti-corruption

39. 5.2 Links and further information Astana, A.N. (2004). ´Corruption and decentralization: evidence from India’s water sector´. In proceedings of the 30th WEDC International Conference, held at Laos, 2004.Loughborough, London, WEDC. Balcazar, A.R. 2006. The establishment of an anti-corruption agreement with pipe manufacturing companies: a Colombian experience [online] Available at www.waterintegritynetwork.net/page/238 (A 5 minute video about the Colombian integrity pact between pipe manufactures can be viewed at www.waterintegritynetwork.net/page/254) Davis, J. (2004). ´Corruption in Public Service Delivery: Experience from South Asia’s Water and Sanitation Sector´. In: World Development, vol. 32, no. 1, pp. 53–71, UK, Elsevier Ltd. www.elsevier.com/locate/worlddev González de Asís, M., O’Leary, D., Butterworth, J. & Ljung, P. (forthcoming) Training modules for the Programa para mejorar la transparencia, la rendición de cuentas y el acceso a la información en el sector del agua en Honduras y Nicaragua. World Bank Institute.Available in English and Spanish (forthcoming) Gonzalez de Asis, M. (forthcoming) Reducing Corruption at the Local Level. World Bank. Plummer, J., & Cross, P., 2006 A framework for tackling corruption in the water and sanitation sector in Africa. In proceedings of the 32nd WEDC International Conference held in Sri Lanka, 2006. Loughborough, London, WEDC. Plummer, J. 2007. Making Anti-Corruption Approaches Work for the Poor: Issues for consideration in the development of pro-poor anti-corruption strategies in water services and irrigation. Swedish Water House, SIWI and WIN. [online] Available at www.swedishwaterhouse.se Satyanand, P.M. and Malick, B. 2007. Engaging with citizens to improve services: overview and key findings. Water and Sanitation Program-South Asia, New Delhi, India [online] Available at www.wsp.org Shordt, K., Stravato, L., & Dietvorst, C. 2007. About Corruption and Transparency in the Water and Sanitation Sector. Thematic Overview Paper 16. IRC International Water and Sanitation Centre, the Netherlands [online] Available at www.irc.nl Sijbesma, C., Mathew, S., and Balachandra Kurup, K. (forthcoming) Preventing corruption in sanitation: A case from Kerala, India. World Bank Institute, Washington. Sohail, M & Cavill, S. 2007. Accountability arrangements to combat corruption – case study synthesis report and case study survey reports. Partnering to combat corruption series. [online] Available at www.lboro.ac.uk/wedc/publications/ Stålgren, P. 2006. Corruption in the Water Sector: Causes, Consequences and Potential Reform. Swedish Water House Policy Brief No. 4, SIWI, Stockholm, Sweden [online] Available at www.swedishwaterhouse.se TI & UN-Habitat. 2004. Tools to support transparency in local governance. Urban governance toolkit series [online] Available at www.transparency.org/tools/e_toolkit/ TI. The 2008 Global Corruption Report is focused on the water sector. Forthcoming at www.transparency.org Woodhouse, A. 2002. Village corruption in Indonesia: Fighting corruption in the World Bank’s Kecamatan Development Program. World Bank, Washington.