About the Author
Mr. Dinesh Bhargav
Director General, Government Accounting Standard Advisory Board (GASAB), SAI India
After qualifying the elite Indian Civil Service Examination (ICS), he joined in September 1991, the Indian Audit & Accounts Service (IA&AS) in the Office of CAG of India after undergoing 2 years rigorous professional training course in the areas of auditing and accounting at the National Academy of Audit and Accounts (NAAA), Shimla. Ever since joining this service, he has held several executive level posts within the organization and holds more than 15 years experience in the areas of auditing & accounting, finance and administration. Audit experience pertains to 3 areas of audit viz. compliance audit, financial attest audit and performance audit of the government departments and public sector undertakings. At the international level, the author has supervised the audit team conducting the audit of Indian mission in countries viz. Algeria, Libya, Nigeria (Abuja & Lagos) and Saudi Arabia where significant audit observations were raised and reported to the concerned ministry for further improvement and corrective action. In the year 2021, he conducted Compliance Audit of FAO’s (UN Food and Agriculture Organisation, Rome) Sub-regional office, Zimbabwe and Country offices of Cameroon, Malawi and Zimbabwe. The audit was successfully conducted remotely due to travel restriction of Coronavirus pandemic.
The officer, in order to enhance his professional qualification, has done MBA (Finance) from the Amity University through distance learning during the Academic Year 2013-15.
1. About Pandemic
A message to mankind to end Pandemic:
“ Helping one another is the only wayforward”
- A quote from the President of European Commission.
Covid-19 is the curse to mankind by nature and is the second biggest global crisis after Second World War. It has affected all major economies in the world including US which is the worst affected country in the world. Currently, the virus has affected 223 countries and territories and have infected 239 million people globally with death toll of nearly 5 million people worldwide. Following the fast spread of disease like wildfire, countries after countries have announced national emergency, curfew measures, lockdow, strict enforcement of covid protocol etc. to contain the virus spread as initially no vaccine was in sight. According to WHO, only cure for this disease is testing, frequent handwashing and social distancing. The leading manufacturing drug firms and research institutes like Moderna and NovavaxInc (US), Astra Zeneca (UK) and Serum Institute of India among a lot others have developed vaccines to contain the disease as drugs like HCQ, Plasma Therapy and antibodies do not show any promising impact on virus.
Now almost two dozen vaccines have been authorized by various countries and approved by WHO for emergency uses for treating covid-19 patients around the world. Moderna, Vaxzebria also known Covishield, Sputnik V, Janssen and Sinovac are some of the major vaccines which are being used to vaccinate the global population against this deadly virus. A few more are under various stages of development/trials.
2.1 Global economic scenario: The coronavirus recession also known as the Great Lockdown or the Great shutdown is a severe global recession since Great Depression 1929-30. It has resulted in shutdown of many businesses like aviation, automobile, hospitality, rail transport etc. causing massive job losses worldover. The Government response to the pandemic in many countries are focused primarily on the health emergency and its economic effects, thus seeking to safeguard the provision of healthcare and support for individuals, households and businesses. The economic impact in India has been largely disruptive. This prompted immediate Government response to economic crisis caused by the pandemic.
2.2 Government’s Stimulus Packages: To help recovery of badly battered economy, various Governments across the world announced stimulus packages constituting a sizeable chunk of the country‘s Gross Domestic Product (GDP). Both governments and central bank worldwide enacted sweeping and sizable stimulus measures to counteract the disruption caused by the coronavirus and provide relief to those suffering from the pandemic.
2.3 State sponsored Vaccination Programme: “COVID-19 must be beaten everywhere, or it comes back to haunt us again. COVID-19 knows no borders. The more people we vaccinate—everywhere—the sooner the pandemic will end.” -US President, Mr. Joe Biden.
The massive and effective deployment of vaccination programme for the entire population in fair and equitable manner needs proactive intervention by the Governments across the globe. With COVID-19 vaccines being approved for use in different parts of the globe, the scale and complexity of their manufacture, allocation and distribution globally will be unprecedented. The successful implementation of COVID-19 vaccination programmes will require robust supply systems. Such systems will need to ensure effective vaccine storage, handling and stock management; rigorous temperature controls in the supply chain; and the maintenance of adequate logistics management information systems. This is vital to safeguard the COVID-19 vaccine supply and prevent any interruptions from the point of manufacturing to service delivery. We believe, these five basic tenets should be followed in any global vaccination approach:
1. Vaccinate the most vulnerable people first. Frontline health workers, elderly people, other essential workers, and those with underlying health conditions should be first to receive vaccines in every country. Across these categories, countries must closely examine age structure and other factors to determine actual vulnerability to COVID-19. We know through our close partnerships with frontline health workers that they play an essential role in ensuring health, saving lives, and curbing the pandemic. More than 70 percent are women, often serving as the primary caregivers in their families and communities. They need to be protected so that they can continue to play these essential roles and limit transmission to those for whom they care.
2. Distribute safe, effective vaccines that are backed by science. Several vaccines are proven safe and effective, and multiple other vaccine candidates are currently going through clinical trials. All countries need access to vaccines that are proven by science, irrespective of their cost.
3. Exercise global cooperation and generosity. Fair and equitable access to vaccines and a smart pandemic-control strategy also means ensuring wealthy countries are not first in line, but that vaccines are distributed globally based on need. More than 170 nations participated in COVAX, a partnership led by Gavi, the Coalition for Epidemic Preparedness Innovations, and WHO, which aims to accelerate the development and manufacture of COVID-19 vaccines, and to guarantee fair and equitable access for every country in the world.
4. Cooperate with ministries of health, civil society partners, community and religious leaders to encourage voluntary vaccinations and behaviors that mitigate the transmission of COVID-19. Ending the pandemic depends on people willingly being vaccinated. Myths and misconceptions around vaccination must be combated through comprehensive public health campaigns reaching people with evidence and messages that resonate in their societies and communities. At the same time, people must be encouraged to continue wearing masks, distance physically, and wash their hands—interventions proven to mitigate transmission.
5. Strengthen health systems and ensure the continuation of essential services, including sexual and reproductive health care. As vaccines are rolled out, health systems strengthening must continue to address the COVID-19 pandemic, and to anticipate and respond to future crises. Health systems must be able to support efficient systems for vaccine distribution while maintaining essential health care.
3. High corruption risks
These twin state sponsored programmes on large scale–Fiscal stimulus packages and Vaccination Programme pose big challenges before the public authorities and oversight functions in myriad ways. Evidence indicates that some forms of corruption and serious misconduct become more prevalent during periods of significant disruption and economic downturn as depicted in the pyramid below :
A combination of opportunity, financial pressure and rationalization is extremely conducive to fraud. The covid19 pandemic and related economic downturn have intensified all the three elements. Employees, suppliers and customers may be facing financial pressure/hardship due job loss, work dries for suppliers and investments not yielding expected returns. Poor/non-existent control systems and lack of supervision may provide golden opportunity to indulge in financial misappropriation as normal segregation of duties may not be in place or IT systems may not be accessible, multiagency teams may be formed, social distancing practices and WFH may be in vogue. Further, perpetrators may find it easier to rationalize dishonest behavior. For example, individuals may find it morally justifiable to engage in fraud in case of acute circumstances or if they perceive others getting away with it. This fact is confirmed by the outcome of a survey conducted by ACFE. During the COVID-19 pandemic, the Association of Certified Fraud Examiners (ACFE) conducted survey to assess the potential fraud which may take place across the globe in view of massive stimulus package announced by various governments to fight corona virus pandemic as indicated below :
3.1 Corruption in procurement and deployment of Vaccination Programme
These risks include the entry of substandard and falsified vaccines into markets, theft of vaccines within the distribution systems, leakages in emergency funding designated for the development and distribution of vaccines, nepotism, favouritism, and corrupt procurement systems. These corruption risks must be identified and mitigated by public institutions to help advance access to safe and effective COVID-19 vaccines by the population, including the most vulnerable and marginalized groups.
3.1.1 Corruption risks in vaccine procurement
Under normal circumstances, the public procurement process poses one of the greatest risks for corruption among all government functions. The large volumes that are involved in public procurement make it highly vulnerable to corruption risks. In many countries, public procurement is estimated to comprise as much as 15 – 30 per cent of the gross domestic product. Corruption scandals in procurement are widespread, but in the health-care sector, the procurement of pharmaceuticals and medical devices are particularly prone to corruption.
Corruption risks can be found throughout the procurement cycle. During the pre-bidding phase, corruption risks include inaccurately estimating the demand for a particular product or service, circumventing tender procedures, and deliberately tailoring tender documents to favour a particular bidder. During the bidding phase, there is the risk of government officials receiving bribes or kickbacks from suppliers, as well as the risk of collusion and market division between bidders themselves. Such closed networks thrive by virtue of their exclusion and even more so when oversight is traded for speed and rapid impact. Lastly, in the post-bidding phase, corruption risks include false invoicing, changing contract agreements, and the failure to deliver procured vaccines.
In a public health crisis, corruption risks in procurement are amplified by the urgency of needs, required flexibility and requested speed. This may create opportunities for individual discretion that can further increase the risk of corruption. Many countries have issued direct contracts without competitive processes and face challenges in ensuring that controls are in place to detect and prevent abuses and corrupt practices. Unscrupulous government officials may seek to enrich themselves, or those connected to them, through the procurement process by demanding kickbacks from suppliers. Suppliers, on the other hand, may exploit shortages to demand grossly inflated prices from government purchasers and collude with other suppliers to their advantage. If suppliers bribe government officials to circumvent regulatory controls, there is also a risk that governments may purchase substandard or falsified products, undermining the health of their populations and reducing their citizens’ trust and confidence in public institutions – as well as in the government’s response to the pandemic.
3.1.2 Vaccine deployment and weak or non-existent distribution systems
There are corruption risks throughout the entire vaccine deployment process. As an example, vaccines may be stolen from the public supply chain during the transportation process and diverted to the black market or kept for personal use. Vaccine supplies are also at risk once they reach the hospital or public health facility administering the vaccinations, if there are no reliable oversight measures in place. Public health facility staff may also steal vaccines for resale in the black market or in their own private practices. This risk is particularly pronounced when supplies are limited, and demand is high, as is the case during a pandemic.
Limited vaccine supplies may also incentivize those who have the financial resources to bribe health professionals to secure a vaccine for themselves or their family. Some health professionals may also demand payoffs from patients to access COVID-19 vaccines, a practice that will be particularly harmful to poor, marginalized and vulnerable groups.
4.Role of Audit
In this grave situation, Public sector auditing, as championed by the Supreme Audit Institutions (SAIs), can be an important factor in making a difference to the lives of citizens. The auditing of government and public sector entities by SAIs has a positive impact on trust in society because it focuses the minds of the custodians of public resources on how well they use those resources. Such awareness supports desirable values and underpins accountability mechanisms, which in turn leads to improved decisions. Once SAIs’ audit results have been made public, citizens are able to hold the custodians of public resources accountable. In this way, SAIs promote the efficiency, accountability, effectiveness and transparency of Governance. An independent, effective and credible SAI is therefore an essential component in a democratic system where accountability, transparency and integrity are indispensable parts of a stable democracy.
4.1 Accountability, control and oversight of the economic stimulus packages and deployment of state sponsored vaccination programme
High risks and low controls
To mitigate the economic recession caused by COVID-19 and keep population healthy, governments are developing significant economic stimulus packages along with large scale vaccination programme. Previous experiences with economic stimulus packages, most notably the one following the 2008 global financial crisis, show that the breadth and scope of such measures offer opportunities for high risks of corruption, fraud, waste and abuse. Paradoxically, governments are relaxing controls in order to urgently spend funds, further amplifying these as well as strategic and operational risks, which can undermine the effectiveness and efficiency of such programmes.
This context puts pressure on public financial management systems, and more specifically internal control systems within public organisations. For instance, the pace of implementation of the economic stimulus packages requires adapting or relaxing routine control measures and ex ante due diligence. Moreover, this situation is exacerbated by disruptions to the institutions that are typically responsible for accountability and oversight in government. These include internal audit functions, Supreme Audit Institutions and parliamentary oversight committees. For example, in some cases, parliamentary oversight committees have been suspended, due to public health concerns or concerns over expediency. Many Supreme Audit Institutions (SAIs) are also facing difficulties conducting audits and have postponed the publication of audit reports.
Despite the pressures facing internal control, internal audit and oversight functions within government, it is key to recall that these actors play a critical role in ensuring that public integrity is not compromised in the management of the economic stimulus packages and that these, in turn, produce the intended economic benefits. For example:
- Internal auditors can act as backstops to address any temporary control gaps and flag risks to management as controls and requirements change, and can provide real-time assurance on the validity of transactions as a result of emergency measures, using data matching and other analytical methods.
- SAIs can keep abreast of the modifications made to the public financial management systems and identify potential risk areas and, where necessary, adapt their routine end-of-year report audit activities, due to the volume of additional demands on the SAI’s audit capacity.
- Internal audit functions, SAIs and other oversight bodies can help promote transparency and high-quality open data to enlist the public in holding government officials accountable. The 2008 financial crisis and the subsequent recession offer useful examples for the current circumstances, demonstrating the mutual dependencies of transparency and accountability. In the United States, the Recovery Accountability and Transparency Board, which co-ordinated the work of the inspectors general monitoring the implementation of the American Recovery and Reinvestment Act of 2009, created an analytical platform that could identify recipient anomalies, and then tasked the inspector general for the particular programme to address issues. This had the dual benefit of preventing both fraud and corruption while also building the capacity of the inspector general functions within the line ministries. The public platform allowed journalists and citizens to track the taxpayer money and see how the government was spending it. Both internal and external auditors are also well placed to support governments in managing risks in the short term. For instance, they can provide useful insights to decision makers on the integrity risks associated with emergency measures, such as cash outflows to businesses and individuals.
4.2 Short-term measures to ensure accountability, control, and oversight in the management of economic stimulus packages and deployment of vaccination programme
To ensure that the internal control, internal audit and oversight functions can exercise effective accountability and oversight of the economic stimulus packages, a number of measures could be taken immediately. These include:
- Ensuring that SAIs and internal audit functions have the resources they need: For instance, the United States' stimulus package also allocates funding to the Government Accountability Office (GAO), the SAI, enabling it to assist Congress in conducting oversight of overspending in relation to the current crisis. As such, governments can allocate, where necessary, the appropriate funding to ensure the necessary resources for conducting real-time audits of the economic stimulus packages.
- Establishing or leveraging existing legislative committees: For example, in New Zealand, a bipartisan parliamentary oversight committee has been established and given the task of overseeing the government’s response to the current crisis, including the economic stimulus package. The committee meets remotely via video conferencing platform and publishes these meetings online to ensure transparency.
- Establishing specialised oversight bodies,while ensuring they have a clear and coherent mandate relative to existing accountability actors: For instance, the Pandemic Response Accountability Committee was established to ensure oversight of the economic stimulus package in the United States. To avoid duplication and draw on existing capacities, the Committee will be made up of independent Inspectors General with responsibilities for conducting and co-ordinating audits and investigations to provide accountability and identify waste, fraud, and abuse in crisis-related spending.
- Articulating clear responsibilities and lines of communication to ensure that all public officials are accountable for their actions: As noted, the COVID-19 crisis and economic downturn creates risks for the public financial management system, and the standard policies and processes for internal control and risk management. While some controls may be relaxed to meet immediate needs, and the work environment has temporarily changed due to social distancing measures, managers remain a critical “first line” of assurance. Programme management can reinforce this individual responsibility and at the same time communicate the expectations to all staff of the need for continued vigilance over public funds.
- Ensuring that the appropriate integrity risk assessments are carried out: Given the rapid pace at which these programmes are required to be rolled out, it may not be feasible to conduct a comprehensive integrity risk assessment. Public officials can, at the very minimum, be encouraged to document and report any obstacles as they arise. This can include documenting changes to control activities in order to accommodate short-term objectives.
- Ensuring that adequate procedures are in place to design, review and approve programmes urgently: For example, in order to ensure efficient yet accountable implementation of the 2008 Economic Action Plan, the Privy Council Office and Treasury Board Secretariat in Canada established an accelerated process for financial and policy approvals, reducing the timeframe from 6 months to 2 months. In the particular context of the COVID-19 crisis, with many public officials working from home, this could also include establishing protocols for using electronic signatures.
4.3 Long-term measures to leverage the role of external oversight to prepare for the economic recovery
External oversight bodies can be a key partner for governments as they transition from the immediate crisis and prepare for the long-term repercussions. In particular, auditors can highlight the potential for emerging integrity risks associated with longer-term recovery measures. For instance, auditors can report to decision makers on ex-post lessons learned to improve policy-making, especially on preparedness for future crises. Performance audits can give a wider perspective than just the financial and compliance aspects, and provide insights about the effectiveness, efficiency and economy of the programme, thus fulfilling their obligation to be “a credible source of independent and objective insight and guidance to support beneficial change in the public sector”.
SAIs can also adopt a risk-based and data-centred approach, while going beyond oversight to offer insights and foresight for better managing both the crisis and its aftermath. In particular, SAIs can support the centre of government and other public organisations, to identify and interpret evidence that can shape policies and improve the government’s capacity to act in real time in the face of evolving issues and risks.
- External/Internal Audit should engage more closely with major stakeholders/State actors to identify new priorities areas and risk assessment;
- Develop more flexible Audit planning to keep pace with the changing working ecosystem under the new normal;
- Leveraging Information technology viz. MS Team, Zoom and social media apps like whatsapp for holding Entry and Exit Conference and better outreach with auditee entity and stakeholders.;
- Conduct all three types of Audit-compliance, performance and certification audit remotely to the extent possible due to travel restrictions and Covid protocols;
- Rely heavily on electronic documentation in place of physical files.
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Association of Certified Fraud Examiners (2016), Report to the Nations on Occupational Fraud And Abuse: 2016 Global Fraud Study, https://www.acfe.com/rttn2016/docs/2016-report-to-thenations. pdf(accessed on 21 September 2017).
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