The psychology of giving and the corruption double whammy

An excellent post by William Savedoff and Nancy Birdsall over at GCD on Cash on Delivery aid got me thinking. Talking about proposed preconditions to successful COD aid they say:

“Similarly, conditioning a contract on adequate financial controls assumes that it is better to control the use of funds by tracking where they go than to control the use of funds by verifying what they yield. … Any further eligibility conditions are likely to undermine the restructuring of the accountability relationships or to simply delay implementation.”

They are absolutely right. Proposing such pre-conditions struck me as the classic aid mistake of focusing far too much on process, which able bureaucrats can spin out ad infinitum, as opposed to outcome, which is what we all want to see. Essentially donors are suggesting that they’d prefer to see none of their money stolen through local corruption than any particular outcome achieved, although given that money leaks even from the best aid projects, really all they are doing is prioritising the enforcement of controls – so that they cannot be accused of lax oversight – over effective implementation.

A good example of this which filters down even to small NGOs is procurement policies. A friend of mine experienced actual cost increases (never mind all the wasted staff time) when the NGO where he works was forced to implement a comprehensive procurement policy, and we have recently come under pressure to put one in place. Yet we all know the simple truth: trusting – and being able to trust! – your staff is easily the best, most cost-effective solution to dodgy procurement. I also have heard of big NGOs with dedicated procurement officers nonetheless paying suspiciously high prices for certain items.

What this highlights to me is one of the most pernicious effects of corruption: the layers of red tape that are imposed in an attempt to stamp it out; what I call the corruption double whammy. Unfortunately they rarely stop the leaks.

Donors ought to be capable of realising this and rising above it, but for their paranoia about best practices and being caught with their pants down. For most donors, I assume, this is basically a fear of the political process: tolerating a certain amount of corruption tends not to go down to well, and it is likely that the cacophony of condemnation will drown out more level-headed arguments. Indeed it is something we can all relate to: if you give some money to a good cause you’d prefer they suffered a glorious failure than that they’d achieved something with some of your cash, and then stolen the rest.

Is there a way forward? Perhaps some donors could set aside at least some of their funds for perceived riskier projects in which outcomes were prioritised over process? At least if the potential problems, but also potential gains, are acknowledged up front that might help draw some of the sting from the almost inevitable damning exposé when it comes.


2 responses to this post.

  1. Perhaps we could devise cash on delivery outcomes on clean hands? It would not be easy, but I might work.

    I regret to say that in my experience, well trained staff can do good procurement faster than the negotiation-like process of bad procurement. Moreover, when government buys anywhere, it seems that every short-cut leads to friends and family instead of to more effectiveness.


    • As in you only get the cash if 95% of the costs can be properly accounted for on a thorough audit? Makes sense, I suppose!

      Re procurement, I think we’re basically making the same point: it’s the staff as what matters not the endless form filling and multiple sign-offs. If my friend’s experience is anything to go by, tendering firms just put up their prices when they get asked to submit an official quote like this, which therefore comes back to poor calibre procurement staff who are not negotiating prices downwards when they see something that is too high. And the gravy train rolleth onwards …


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