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  • August 2005 This publication was produced for review by the United States Agency for International Development. It was prepared by the IRIS Center, at the University of Maryland.

    TOOLS FOR ASSESSINGCORRUPTION & INTEGRITYIN INSTITUTIONSA HANDBOOK

  • TOOLS FOR ASSESSINGCORRUPTION & INTEGRITYIN INSTITUTIONSA HANDBOOK

    DisclaimerThis document was prepared by the IRIS Center for the United States Agency for International Development.The authors viewsexpressed in this publication do not necessarily reflect the views of the United States Agency for International Development or theUnited States Government.

  • SUBMITTED BYThe IRIS Center, University Research Corporation International

    SUBMITTED TODavid Meyer, Cognizant Technical Officer

    CONTRACT NUMBERPCE-I-00-97-00042-00,Task Order 8

    ABOUT THE AUTHORSThis handbook was written by Dr. Anthony Lanyi and Dr. Omar Azfar, both economists at the IRIS Center.

    Dr. Lanyi is an expert in macroeconomic policy in developing countries and international finance. He currently specializes inthe analysis and measurement of corruption, the economic impact of poor governance, and training. Prior to joining IRIS in1996, Dr. Lanyi served for 26 years at the International Monetary Fund.

    Dr. Azfar is an expert on the causes, consequences, and remedies for corruption, as well as on the determinants of effective localgovernment. He has examined the effect of womens empowerment on corruption, as well as the effect of corruption on health,education, and trade reform. Dr. Azfar is currently working with the World Bank to develop objective governance indicators.

    ACKNOWLEDGMENTSA number of people made important contributions to the handbook. Dr. Peter Murrell co-wrote the first draft and signifi-cantly contributed to the development of the methodology. Ann Mestrovich, Dr. Peter Murrell, Malcolm Russell-Einhorn, andDr. Melissa Thomas wrote annexes. Patrick Meagher permitted the authors to use portions of his Analytical Tools for USAIDAnticorruption Programming in the Europe and Eurasia Region paper. Christine Prefontaine edited the handbook and managedits design and production.

    Finally, it is gratefully acknowledged that this work was supported under USAIDs Enhancing Anticorruption Programming in theEurope and Eurasia Bureau (EECOR) project.The advice and ideas of David Meyer, the Cognitive Technical Officer, played amajor role in determining the final shape and thrust of this document.

    ABSTRACTDeveloped for practical field use, this handbook outlines a methodology that provides reliable quantitative, qualitative, andcomparative information that can be used to design, implement, and evaluate sector- or government agency-specific anti-corruption programs. Steps in the methodology include reviewing available information, conducting an expert assessment,conducting quantitative surveys of both users and government officials, and using the assessment findings to inform programdesign. A series of annexes provide technical depth, as well as a model scope of work to implement the assessment.

    KEY WORDSCorruption, anticorruption, institutions, principal-agent theory, Europe, Eurasia, USAID, government integrity, governance, survey,assessment, institutional reform, transition economies.

    DOWNLOADwww.irisprojects.umd.edu/anticorruption

    CONTACT INFORMATIONIRIS CenterUniversity of MarylandDepartment of Economics2105 Morrill HallCollege Park, MD 20742, USAE-mail: info@iris.econ.umd.eduPhone: +1.301.405.3110Fax: +1.301.405.3020Web: www.iris.econ.edu

  • TOOLS FOR ASSESSING CORRUPTION & INTEGRITY IN INSTITUTIONS

    CONTENTS

    INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1How to Use this Handbook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Testing the Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Complementary Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

    CHAPTER 1UNDERSTANDING CORRUPTION & INTEGRITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

    Understanding Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Understanding Integrity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

    CHAPTER 2REVIEW OF EXISTING MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

    Sources of Background Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Data & Information on Corruption & Integrity . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Institutional Integrity of Specific Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Existing Documentation on Sector-Specific Institutional Integrity . . . . . . . . . . . . . 24

    CHAPTER 3EXPERT EVALUATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

    Initial Inquiry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Structured Interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29The Substance of Structured Interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Other Methods of Obtaining Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32The Next Step: Quantitative Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Second-Stage Expert Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

    CHAPTER 4SURVEYS OF CORRUPTION & INSTITUTIONAL INTEGRITY . . . . . . . . . . . . . . . . . 37

    Organizing a Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Measuring Corruption with Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Measuring Integrity with Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Lessons Learned from Pilot Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

    CHAPTER 5DESIGNING A PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

    Determine Corruption Vulnerabilities & Integrity Strengths & Weaknesses . . . . . . 45Make a Judgment as to the Degree of Systemic Corruption . . . . . . . . . . . . . . . . . 46Use Prior Experience to Create a Menu of Reform Measure Options . . . . . . . . . 46Choose Appropriate & Feasible Reform Measures . . . . . . . . . . . . . . . . . . . . . . . . . 46Take into Account Strategic Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Establish Benchmarks for Monitoring & Evaluation . . . . . . . . . . . . . . . . . . . . . . . . 50

  • TOOLS FOR ASSESSING CORRUPTION & INTEGRITY IN INSTITUTIONS

    ANNEX 1 DEFINING CORRUPTION: INTER-COUNTRY DIFFERENCES . . . . . . . . . . . . . . . . . . . .

    Linguistic Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Survey of Business Registration & Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    ANNEX 2 CORRUPT PRACTICES & CORRUPTION VULNERABILITIES CHECKLISTS . . . . . . . . .

    Corruption in the Health Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Corruption in the Judicial System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    ANNEX 3INTEGRITY CHECKLIST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    Purpose & Underpinnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Structure & Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Illustrative Checklist for Assessing Integrity & Accountability . . . . . . . . . . . . . . . . . . .

    ANNEX 4 SOURCES OF DATA & INFORMATION ON CORRUPTION & INTEGRITY . . . . . . . . .

    ANNEX 5ASSESSING CORRUPTION & INTEGRITY IN SELECTED SECTORS . . . . . . . . . . . . . . .

    Business Licensing & RegulationThe Health Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Judicial Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tax Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Energy Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    ANNEX 6 USING INTERVIEWS TO ASSESS INTEGRITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    Human Resource Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Financial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assets Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .External Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Services & Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    ANNEX 7RETICENT RESPONDENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    ANNEX 8 CONSTRUCTING & INTERPRETING INDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    Interpreting Measures of Corruption & Integrity . . . . . . . . . . . . . . . . . . . . . . . . . . . .Aggregating Measures & Creating Corruption Indices . . . . . . . . . . . . . . . . . . . . . . . .Constructing a Cross-Country Index for Corruption in Business Regulation . . . . . . .Comparing One-Stop Shops & Health Inspectorates in Romania . . . . . . . . . . . . . . . .

    ANNEX 9MODEL SCOPE OF WORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

  • INTRODUCTION

    TOOLS FOR ASSESSING CORRUPTION & INTEGRITY IN INSTITUTIONS 1

    BACKGROUND

    HOW TO USE THIS HANDBOOK

    This handbook is designed to help USAID Mission staff to assess institutionalintegrity at the micro-level. It guides the user through five steps to identifyand select integrity failures and vulnerabilities for which donor interventionsshould be considered. Each step corresponds to a handbook chapter. Inorder to make the handbook user-friendly and concise, while still providingtechnical depth, detailed discussions and additional resources have beenplaced in a series of annexes.

    1. Understanding Corruption & Integrity. Before conducting theassessment, the programmer must define the integrity standards and,conversely, the corrupt practices in the institutional context of thehost country and government function(s) or agency(ies). At this stage,one should consider questions like:

    To better address the development challenges posed by corruption,USAIDs Anticorruption Strategy (2005a) calls for a more strategic use ofexisting resources. More specifically, it calls for

    Mainstreaming anticorruption efforts, encouraging Missions and Bureaus toincorporate anticorruption components into sectoral programs includinghealth, energy, agriculture, and education, in addition to broader economicgrowth, democracy and governance, and social transition programs

    Focusing economic growth and democracy and governance resourcesmore explicitly on anticorruption, as well as increasing the share of fundsdedicated to specific anticorruption initiatives

    Updating USAIDs assessment framework so that Missions can betteridentify institutional areas where anticorruption programs may be mostneeded or most likely to succeed

    These are ambitious goals.To accomplish them, USAID Missions needtools to help them collect good-quality information about corruptionand integrity particular to targeted sectors, analyze it, and translate it intoeffective programs. Improving USAIDs assessment framework, and devel-oping and refining these tools, was the objective of the Enhancing USAIDAnticorruption Programming in the Europe and Eurasia Region (EECOR)project, implemented by the IRIS Center from October 2002 to August2005. More specifically, EECOR aimed to improve the effectiveness ofUSAID anticorruption programming and support the development ofwell-designed anticorruption components within sectoral programs.

  • 2 TOOLS FOR ASSESSING CORRUPTION & INTEGRITY IN INSTITUTIONS

    What do we mean by integrity and corruption? How can weoperationalize these terms in the context of the specific governmentfunctions or agencies in our host country?

    How might the meanings of these words differ between the contextof our host country versus that of the United States?

    Based on what we already know, which government agency(ies)is (are) in particular need of assistance?

    To what extent does corruption, if it exists, arise solely from incentivesfor individual government officials and private sector players? Alterna-tively, to what extent does corruption seem to be systemic?

    2. Review of Existing Materials. Chapter 2 explains how to conductthe first phase of the assessment: compiling information from existingmaterials, including data in the public domain, such as the general assess-ment of country integrity or corruption levels prepared by TransparencyInternational, the World Bank Institute, and Freedom House. Informationon specific sectors may also be available, for instance, in the World BanksBusiness Environment and Enterprise Performance Survey (BEEPS) and inthe Doing Business surveys on the governance problems faced by enter-prises. Previous experience in sectoral programs is also highly relevant.To help define the research parameters, Annex 5 summarizes potentialgovernance problems and remedial measures in several key sectors.

    3. Expert Evaluations. Chapter 3 details how to carry out expertevaluations, the second phase of the assessment. Expert evaluationsshould provide detailed information about the specific governmentagencies or sectors of interest to the Mission. Such evaluations arebased on sources that include

    Domestic studies, reports, laws, and other documentation

    Interviews (informal and structured)

    Focus groups

    Direct observation

    Forensic accounting and statistical analysis

    4. Quantitative Surveys. The final stage of the assessment involves imple-menting quantitative surveys. Surveys of a government agencys services(and, if feasible, agency officials) can establish the frequency, magnitude, andtherefor...

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