Maintaining integrity standards for Covid-19 response funding

Since the start of the pandemic, billions of dollars have been sent to developing countries by multilateral development banks (MDBs) and financial institutions to provide the resources necessary to manage immediate health needs, but also to address the longer term economic and social impacts of the pandemic.

The World Bank Group has pledged $160 million in grants and financial support, making this the largest and fastest response in the group’s history. The European Bank for Reconstruction and Development (EBRD) also responded rapidly and expects to dedicate the entirety of its activities to help the emerging economies it supports  combat the impact of the crisis. And the African Development Bank has created a Covid-19 Response facility with up to $10 billion available to assist member countries in fighting the pandemic.

With such large sums being deployed at speed, it is becoming increasingly difficult to follow the funds from donor to beneficiary and beyond. As such, red flags have been raised around transparency and the risk of fraud. Financial institutions are being urged to take all necessary steps to ensure the sums disbursed are subject to the usual high level of integrity compliance, placing particular emphasis on transparency and accountability.

Over the last 20 years, multilateral development banks have invested considerably in systems and controls that will protect their financing projects from risks such as fraud, theft, collusion, obstructive practices and other forms of funding misappropriation. Ensuring that these controls are rigorously applied to all the fast-tracked Covid-19 funding will be vital, not just to mitigate any abuse, but to ensure that communities for whom the funding is intended receive the full benefit.

This will involve clear communications on the importance of good governance, integrity and human rights to be agreed with partner governments. In addition, a programme should be established to ensure organisations in receipt of funding have the capacity to implement effective compliance policies and procedures. Communications should outline expectations for such a programme and clarify the monitoring procedures that will be applied to ensure appropriate accountability for the sums disbursed.

Two factors will be critical to this success; devising a strong system for remote integrity compliance and building capacity locally.

Remote integrity compliance – key steps:

• Make sure everyone is aware that the usual integrity standards still apply and that the use of funds will be monitored. Make it known that support is available to help meet these standards, outlining what form this will take to encourage recipients of fast-track lending to raise concerns or ask for help promptly.
• Check policies and procedures remotely. Network capacity and technological preferences will vary across different geographies and there may be logistical challenges in some of the countries with poorly developed communications infrastructure .
• Identify what can and cannot be checked remotely and devise a system for recording what is being done. Where there are loopholes or gaps, make practical recommendations as to how the organisation should address these. Inform the recipient that further checks will be carried out both during the lending period and at the end to ensure accountability, but also provide support to help organisations develop their compliance infrastructure. Prioritise retrospective checks or spot checks that may be needed as soon as circumstances allow.
• Out of necessity, fast-track lending risk assessments may not have followed the usual rigorous procedure prior to disbursement. Any outstanding risk assessments should now be carried out, paying particular attention to governance, procurement, corruption and human rights.

Capacity building

• Local associates in the recipient country can and should be used to help monitor compliance and/or support policy implementation. This should be done with structured and active expert support delivered remotely to locally based compliance officers, associate consultants or assessors. Collaborate with reliable contacts on the ground to identify and recruit the right people, providing training on the required policies and procedures via webinars and interactive workshops.
• Where needed training should also be provided on the use of technology to assist with programme implementation and monitoring. This can be applied to the following: –
  • interviews with staff in exposed roles or those in leadership positions;
  • training-the-trainers;
  • familiarisation with template policies and procedures so they can be tailored relevantly;
  • document checks;
  • obtaining evidence of health and safety and human rights standards.

Fast-tracking such vast sums into emerging economies is unprecedented and while entirely necessary it is clearly not without risk. Those in receipt of funds must be made aware that they will be held accountable for how the sums are used and that this information will be made public.

Applying the usual standards of integrity compliance remotely and in particular building capacity locally can have significant benefits for the long term. The more stakeholders in recipient communities recognise that identifying and mitigating corruption, environmental safeguards or human rights abuses brings greater social and economic benefit from the funds received, the greater the adherence to integrity standards in the future.