Friday, December 21, 2007

The Ubiquity of Corruption

Dear Colleagues

Sadly ... corruption is everywhere. Human nature has a greed dimension, and this easily translates into corruption.

Corruption has two forms: (1) is where there is simple bribery and money is exchanged for favors that are of benefit to the briber ... something that is rather widespread where for profit enterprise seeks contracts from the public sector ... and something that is almost universal, and certainly not limited just to the developing countries of the global south; and (2) where an organization defrauds the public by using public funds to pay for (good) works that are not going to deliver benefit to anyone but the organization, its staff and its friends.

Some people talk about corruption as being (1) grand corruption; and (2) petty corruption. Grand corruption is where $millions are involved and petty corruption is little more than systemic "tipping". In West Africa the latter was referred to as "dash" ... and was very, very widespread in the years when I was commuting into Africa.

And how does one deal with corruption?

It is not easy, but the best tool in the fight against corruption is accountancy, and open-book accounting and reporting. For a good part of my career I was in corporate accounting and was the CFO of a fairly large international company. Our corporate accounting was uncompromising in its rigor about payments and cost analysis, and we had rather little problem with "grand corruption". We did, however, make it very clear that we delivered not only profits to our stockholders from our investments, but also social value to the communities where we operated and value to the country on a national level. We aimed to be a good citizen and a good partner, and we were not unaware that competition was interested in pushing us away, and might well have tried to influence those in authority. We tried to have friends ... but we did not "own" our friends, and our friends did not "own" us.

In my subsequent work with the international relief and development sector organizations, I have been surprised and disgusted at the low esteem of the accountancy community. The World Bank, the IMF, the UN, the bilateral agencies ... all have ignored the potential of good accounting, accountancy and accountability to help address the problem of corruption.

And as any junior audit clerk knows ... when there is resistance to the use of good accounting, you know that good accounting would show up something that needs to be addressed because it is wrong. Corruption is wrong. Accounting can help to stop it.


Peter Burgess
The Tr-Ac-Net Organization

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