63905 No. 131 / June 2010 GOOD-PRACTICE NOTE: Governance and Anti-Corruption Innovations in the Malawi Social Action Fund Project The World Bank supported three phase Malawi Social Action Fund (MASAF) Project was first approved in 1996. MASAF 3 APL II, which operates in a challenging governance environment has introduced a number of innovative Governance and Anti-Corruption (GAC) interventions in the realm of governance and political economy, fraud and corruption risks in procurement and financial management, and demand side governance (transparency, participation and third party monitoring). These challenges and innovations are the focus of this learning note. The Governance Context in Malawi – A Background: Box 1: Corruption, a Major Impediment to Malawi, with a population of 13 million, is a low- Development income country with one of the lowest per capita incomes in Sub-Saharan Africa. Malawi continues In 2005, the Government of Malawi conducted a to face a variety of social, economic, political and Governance and Corruption Baseline Survey to administrative challenges including high inflation, identify the locus and extent of corruption in the low salaries/pensions of public officials, chronic country. The survey indicated that: resource shortages, dearth of public goods and x Nine out of 10 Malawians perceived corruption to be a serious problem. services, unethical individual behavior, and x Seventy percent of ordinary citizens believe kinship and nepotism. As a result of these factors, that corruption has worsened over the years. corruption remains a major problem in Malawi. x Sixty percent believed that it is common to Malawi has consistently performed poorly on pay gratification to public officials. Transparency International’s Corruption x Public officials acknowledged that Perception Index. It ranked 68 out of 102 surveyed gratification represents nearly a quarter of countries in 2002, 90 out of 146 surveyed countries their salaries. Gratification received is shared in 2004 and 115 out of 180 surveyed countries in between superiors (26.9%), colleagues in the 2008. Indeed, most Malawians view corruption as organization (21%), politicians or political being a major constraint to development (Box 1). parties (24.6%) and the receiver. x Malawi society perceived public institutions as delivering inferior services and identified In response to these challenges, Malawi has “troubled departments� such as the introduced a number of initiatives aimed at Directorate of Road Traffic, Office of the promoting good governance and fighting endemic Director of Public Procurement, corruption. In May 2004, President Bingu Wa Administrator General, Malawi Revenue Mutharika, immediately after taking office adopted Authority, Malawi Housing Corporation and a zero tolerance stance on corruption. This was the Department of Immigration as high subsequently formalized into a Declaration on Zero corruption prone departments. Tolerance on Corruption in February 2007. The Source: Governance and Corruption Baseline Survey. strong political will to improve governance and Government of Malawi combat corruption translated itself into the 2006 Malawi Growth and Development Strategy Box 2: The Malawi National Anti-Corruption (MGDS), which included “Good Governance� as Strategy: A Holistic Approach to Curbing one of the five themes instrumental in Malawi’s Corruption economic growth and development, and several laws such as the Public Procurement Act, the Public “The National Anti-Corruption Strategy is designed to Audit Act, the Public Finance Management Act, promote good governance in Malawi. Its purpose is to and the Money Laundering, Serious Crimes and eradicate corruption in all its forms and in all sectors of Financing of Terrorism Act, 2006. Malawi has a the Malawi society through anti-corruption reforms and promotion of a culture intolerant to corrupt practices�. draft Freedom of Information Act, awaiting Parliament’s approval. The President’s anti- - Hon. Dr. Bingu Wa Mutharika, President of the Republic of Malawi corruption efforts have also led to several high-level arrests and convictions. The 2008 National Anti-Corruption Strategy (NACS) emanates from theme five of the Malawi Fighting corruption, until recently, was seen as Growth and Development Strategy (MGDS) which primarily the responsibility of the Anti- recognizes that “corruption retards economic Corruption Bureau (ACB) since it was the growth and development by diverting resources for agency responsible to implement the Corrupt socio-economic development activities into the Practices Act. 1995. The recently launched coffers of a few�. The Strategy, which is currently National Anti-Corruption Strategy, 2008 being rolled out, expects – i) to promote integrity, transparency and improve service delivery in all however, has identified areas and activities by sectors; ii) to promote public involvement in the which the executive, legislature, judiciary, fight against corruption; and iii) to intensify private sector, civil society, faith based prevention of corruption and promotion of organizations, traditional leaders and the media integrity in all sectors. The Strategy spells out the can strengthen the anti-corruption drive (Box 2). role of the public in the fight against corruption. It encourages the public, through awareness Other anti-corruption initiatives undertaken by the campaigns, to report corrupt practices and to government include the establishment of an demand accountability from service providers. The Alternate Dispute Resolution mechanism (ADR) major focus of the Strategy is the development of a National Integrity System (NIS) which spans all within the Judiciary; the creation of the Business sectors of Malawi society into action. Action Against Corruption (BAAC) by the private sector and the Civil Society Action Against The implementation, monitoring and evaluation of Corruption (CSAAC) by civil society the Strategy is expected to be done by a National organizations. BAAC has developed a code of Integrity Committee (NIC) comprising members conduct guiding business enterprises to conduct drawn from all sectors of Malawi while the ACB, honest and corrupt free business transactions. The since it has the legal mandate to prevent corrupt Legislature is in the process of establishing the practices in Malawi, acts as the secretariat of the Malawi Chapter of the African Parliamentarians NIC. Institutional Integrity Committees (IICs) are proposed to be established in all organizations with Network Against Corruption to fight corruption a view to promoting transparency and within the Legislature. A few para-statal and accountability. government organizations such as the regional water boards, the telecommunication and Source: Malawi National Anti-Corruption Strategy, electricity utilities, MASAF, etc. with the guidance 2008. of the ACB have developed corruption prevention policies to fight corruption from within. Other MASAF 3 APL II - Key GAC Features in institutions are also in the process of developing Project Design: their anti-corruption policies. The World Bank supported three phase Malawi Social Action Fund (MASAF)1 has been 1 MASAF 1 was approved in May 1996 and closed in December 2001. MASAF 2 was approved in October 1998 and closed in November 2003. MASAF 3, APL I was approved in May 2002 and closed in December 2007. MASAF 3, APL II which is the focus of this learning note was approved in June 2008. 2 operating in such a challenging governance environment. The creation of a culture of good governance behavior is critical to the success of a decentralized community driven project such as MASAF. Recognizing this early on, MASAF project management focused on creating, nurturing and building a culture of good governance and ethical behavior within the project and adopted an overarching zero tolerance policy to fraud and corruption. MASAF 1 and 2 built strong financial and public accountability systems at the project and community levels and MASAF 3 continues to To begin with, MASAF’s governance structure has deepen accountability in project management provided the project with independence and processes and project financed activities. The freedom from direct control by any branch of key design features of MASAF 3, APL II which Government. Overall policy and fiduciary is currently under implementation, assessed responsibility was assigned to a Board of Directors along three GAC dimensions2, namely - comprised of representatives of public and private governance and political economy; fraud and sector institutions and a national umbrella NGO. corruption risks in procurement and financial This governance structure has sheltered MASAF management; and demand side governance against ‘political capture’, thereby minimizing (transparency, participation and third party opportunities for corruption. Another major monitoring) are enumerated below. project design feature was the shift in responsibility for implementation from the Dimension 1: Governance and Political Economy national government to local governments. Local Development Funds (LDF) were established to be The design of MASAF 3 APL II benefited managed by District Councils and to serve as the immensely from prior analysis of governance Districts’ resource mobilization mechanism from and political economy issues3 in the 2006 MGDS central budgets and external assistance. Similarly, and the 2007 CAS4, and the Government’s the MASAF PIU also shifted responsibilities to pursuit of the good governance and anti- local governments, with the current MASAF/LDF corruption agenda. It identified the various technical support team (TST) playing a capacity stakeholders (beneficiaries, village councils, building/change agent role in this transitional Village and Area Development Committees, phase. Traditional Leaders, District Councils, community based organizations, private sector, Though the establishment of the LDF in the and sectoral ministries) at both national and Districts created the potential for elite capture, local levels and assigned their roles and the project has adopted several reforms and responsibilities with appropriate checks and safeguards to mitigate these risks. At the local balances necessary to curb corruption. level, the establishment of the Local Authority Management and Information System (LAMIS) and the mandated financial and technical audit requirements are expected to enhance budget 2 These three dimensions were part of “Governance and and expenditure transparency. In view of Anti-Corruption (GAC) Assessment Framework: which was designed by the Bank’s Quality Assurance Group MASAF’s reduced implementation role, the collaboratively with other departments as part of the GAC in project plans to build the capacity of District Lending Operations: A Benchmarking and Learning Review, Governments, Area and Village Development 2009. Committees, and community organizations to 3 During MASAF I, the Ministry of Planning and Economic Development sponsored a “Stakeholder Analysis� to monitor project implementation and speak out understand power relations among participating against corruption. institutions. 4 The CAS called for “…analysis of political economy and institutional dynamics in all project cycle.� 3 The MASAF TST will also play a key role in Procurement Committee members has been overall supervision and ensuring that the agreed planned. Districts will also maintain a roster of systems and procedures are applied. Indeed, in pre-qualified contractors and a ‘priced data bank’ view of the varying levels of capacity among the to ensure that project staff adheres to a transparent Districts, the need for interim technical support from MASAF is enormous. During earlier stages Box 3: Potential Sources of Fraud and Corruption of the project, MASAF had taken measures to Corruption in MASAF sub-projects can manifest consolidate its field presence by closing the three in various forms – Zonal Offices responsible for groups of Districts x Conniving with suppliers to inflate prices of (MASAF currently only has one central office) and project materials with an aim of sharing the assigning Justification Assistants to each office of benefits; the District Commissioner to assist in the review x Demanding or accepting gifts or money in of sub-project expenditures and overall portfolio order to favor certain suppliers or management at the district level. contractors; x Failing to disclose a conflict of interest in Dimension 2: Combating Fraud and Corruption in bidding fora contract to perform work or Procurement and Financial Management supply project materials in order to assist a friend or relative to win a contract; Over the years, MASAF, has developed as a x Using one’s position to award contracts for credible ‘brand name’ in Malawi associated with works or supply of project materials to community empowerment, participatory friends or relatives or your own company; development, transparency, accountability and x Imposing projects on communities to serve integrity. MASAF’s procurement and financial vested interests or interfering with project management systems and procedures are implementation for selfish ends and theft of nationally regarded as more transparent than project materials. those adopted in other public sector managed Source: MASAF Forum, Vol. 2 Issue 2, June 2006. development programs. MASAF 3, APL II includes several innovative competitive selection process that prevents measures to tackle fraud and corruption (Box 3). potential corrupt practices. Critically, the First, MASAF’s anti-fraud and corruption institutional strengthening measures discussed strategy is equally focused on building local above are not “ring fenced� approaches to meet capacity—including at the community level— the specific requirements of the Project, but are and instituting other prevention measures. For part of the GOM’s commitment to the example, the Project has made a provision for decentralization of development responsibility to capacity building at the District level and District Governments. trained accountants are being assigned to each District to manage the newly introduced Dimension 3: Demand Side Governance Integrated Financial Management Information (Transparency, Participation and Third Party System (IFMIS). While progress in this area Monitoring) remains slow, the TST is trying to promote the MASAF 3 APL II exhibits several good practice system. MASAF’s strict adherence to and design features on demand side governance. application of procurement and financial Most notably, the project incorporates a management rules, has resulted in prosecution Transparency and Accountability Program for of MASAF staff for fraud and corrupt practices. ensuring that public servants are accountable to communities. The program includes a Second, procurement units are being established Transparency and Accountability Framework for each council. Intensive procurement training that has 9 key elements (Figure 1). The key for all appointed procurement officers and holistic features of the framework are discussed below: procurement training to all Community 4 Figure 1 - Key Elements of MASAF 3’s Transparency and Accountability Framework Transparency Community Administrative participation appeal mechanisms MIS to facilitate Capacity transparency Transparency enhancement and ultimately and accountability Accountability Framework (MASAF 3) Knowledge Incentives and generation, sanctions for pooling and monitoring of sharing performance benchmarks Fiscal Answerability prudence and for actions ethical behavior x Transparency: Disclosure of project related accountability has also been developed for information (financial, procurement and Districts. results of monitoring and evaluation) and x Participation: At the District level the various sharing emerging lessons from stakeholders - district officials, traditional implementation experience are common leaders, area and village development practices in MASAF operations. MASAF has committees, elected project management established a transparent value chain process committees, communities and NGOs – actively from allocation of resources to participate in the identification, formulation, implementation of district and community implementation, supervision and operation projects. One of the key steps taken by and maintenance of approved projects. MASAF MASAF is to publicly announce and display has also established several channels to deepen the annual resources allocated to each District beneficiary and user participation and allow the based on the formula established by the general public to file complaints and National Local Government Finance grievances. MASAF’s own internal Ethics Code Committee (NLGFC), a subsidiary of the (Box 4) encourages the public to lodge Ministry of Local Government and Rural complaints anonymously either with MASAF, Development. The upfront disclosure of the ACB, the Police or using the judicial system. resources earmarked to each District is based The ACB has also established a grievance hot- on publicly announced allocation criteria line to or submit complaints in writing. Village- including population size and poverty Based Anti-Corruption Clubs are also being incidence. A Service Charter, which will serve established to facilitate collective community as an instrument for transparency and action against corruption. 5 Box 4: The Role of Ethics in MASAF 3 MASAF, in collaboration with agencies such as the police department and the Anti-Corruption Bureau (ACB) have launched a number of initiatives to prevent and combat unethical practices within the project: x MASAF’s code of ethics defines “unethical conduct� to include behaviors or actions associated with fraud, corruption, misuse of resources, deliberate misinformation, circumvention of procedures, or any other similar behavior likely to bring disrepute to MASAF, its board, management or its employees. x In September 2004, the ACB and MASAF agreed upon three broad ethics management strategies for MASAF sub- projects, namely – i) disseminating information through civic education; ii) sensitization and training of key personnel that execute MASAF 3 projects in identification and investigation of unethical practice cases; and iii) sharing information on complaints pertaining to MASAF projects. MASAF has the unique distinction of being the first institution in Malawi to be awarded a certificate of recognition by ACB for its transparency efforts. x The MASAF ethics database is expected to act as a memory center to facilitate - analyses of unethical practices; follow-up of cases involving fraud, corruption and unethical practices; and reviews of ethics promotion policies instituted under MASAF. The number of registered complaints in the MASAF ethics database has gradually increased from 2 in 1996 to 38 in 2006 indicating management’s commitment and success of the initiative. A number of MASAF personnel have been prosecuted and dismissed after investigations. Source: Ethics in the Implementation of MASAF Project, Reports to the World Bank by MASAF MU, 2002 and 2006. x Third Party Monitoring: At the District level, the project faces several challenges while rolling the project design has instituted several layers out the above discussed governance interventions. of monitoring including District technical staff, Both the Government of Malawi and the traditional leaders in collaboration with area MASAF/LDF TST are cognizant of these development committees and community representatives. In order to promote third party monitoring, the project plans to contract Box 5: Demand Side Governance through Community Scorecards in MASAF 3 with NGOs to help communities report on a sample of projects under implementation. The Comprehensive Community Scorecard With respect to independent verification of (CCSC) was the most widely applied mechanism under access to and quality of services, the project the social accountability framework adopted under plans to extend “Participatory Community MASAF 3. The first round of the CCSC was Monitoring and Accountability� approaches implemented in over 500 communities countrywide. The and systems using Citizen Report Cards and assessment focused on 5 key issues – i) accountability; ii) Community Score Cards. MASAF has satisfaction with project management processes; iii) successfully piloted the use of Community performance of project outputs such as water points, classroom blocks, etc.; iv) local authority and MASAF Scorecard under MASAF 3 (Box 5). The management performance; and v) perceptions on MASAF TST is currently working with local sustainability of MASAF funded projects. authorities to institutionalize the Some of the key areas identified for Comprehensive Community Scorecard at the improvement were – increase frequency of supervision local authority and community levels. by local authorities; improve transparency in beneficiary recruitment for programs executed by local authorities; Implementing GAC Measures in MASAF 3 need to improve reporting of financial progress to APL II – Challenges Ahead: communities; and improvement in behavior of local authority staff towards community members. Overall MASAF 3 APL II has benefited enormously from there was widespread appreciation of the CCSC process prior studies, stakeholder and situation analyses, and communities wanted CCSCs to be conducted adopted Acts, systems and procedures. Moreover, regularly to strengthen citizen oversight and improve the evolving democratic environment and the public scrutiny. Anecdotal evidence indicated that country’s pronounced commitment to promote communities have become more critically aware of their good governance and combat fraud and role in sub-project management and the responsiveness of local authority officials has improved considerably as corruption practices has facilitated the integration a result of the CCSC exercise. of GAC measures in project design with minimum additional analysis. Notwithstanding the above, 6 challenges, which are discussed below, and are prosecution is time-consuming. Despite these attempting to address them. bottlenecks, both MASAF management and the ACB are committed to promoting a corruption- x Decline in political will: The government has free culture of good governance. an overwhelming majority in the newly elected x Low institutional capacity of Local parliament. Thus, there is a concern that the Authorities: The challenge associated with government may back-track in the realm of building financial management, procurement, good governance and anti-corruption. If that supervision and safeguards capacities is were to happen, the existing enabling enormous. The capacity of councils to environment for GAC would be threatened. undertake procurement is weak to average x Delays in the LDF: As of February 2010, the and the overall risk is high. For example, the LDF’s institutional set up had still not been severe shortage of technical staff at times finalized, and it is uncertain when the Cabinet brings MASAF sub-projects to a halt due to will approve the LDF mechanism. In the absence of timely technical support. While accordance with the LDF’s decentralized the project has made a provision for capacity approach to local development, MASAF no building at the District level, these efforts longer has regional offices and, instead, appear to be inadequate relative to the need fiduciary and procurement responsibilities of Local Authorities. have been transferred to local governments. x Poor post-construction asset utilization and However, there is a continuing lack of staff at maintenance follow-up: There appears to be the local level for fiduciary and procurement no record of the follow-up on asset utilization issues. Furthermore, despite the fact that the and maintenance after the assets have been financial management system used for the constructed. Some assets appear to have been LDF is supposed to be extended to all local abandoned and there appears to be no plan to governments, it has so far only been piloted in rejuvenate abandoned assets or prevent such five districts. This also continues to adversely recurrences from happening in the future. affect MASAF’s implementation. x Numerous bells and whistles difficult to x Structural factors continue to thrive: Several translate into action: MASAF manuals factors such as low salaries/pensions of public appear to articulate lofty intentions to improve officials, lack of incentives and sanctions, governance, transparency and accountability cumbersome and time consuming procedures, which are difficult and expensive to poor supervision and performance implement in the field in a sustainable benchmarking, etc. continue to persist in manner. To illustrate, the Transparency and Malawi. These factors will work against the Accountability Framework in MASAF 3 has 9 GAC risk mitigation measures in MASAF 3. key elements (Figure 1), most of which do not x Increase in political interference: With the appear to have been translated into effective channeling of MASAF 3 resources through steps on the ground during the early stages of Local Authorities and the impending arrival of MASAF 3. Similarly while third party elected Local Authority members, political monitoring has been envisaged in MASAF 3, it interference in community decision making does not appear to have been conducted and implementation processes to influence widely. MASAF 3 needs to strengthen project selection and procurement may demand-side governance measures such as increase. The quick and effective third party process monitoring, citizen operationalization of MASAF 3’s feedback gathering and complaints handling Transparency and Accountability Program to ensure their integration into project will help limit excessive political interference. processes sustainably. x Over-stretched and under-funded GAC monitoring institutions: Nurturing and Conclusion: promoting ethical practices requires capacity, time and finances. Both MASAF and ACB staff Malawi’s growing conducive and open political are over-stretched (in terms of both personnel climate, empowers development stakeholders and funding) and gathering evidence for including external development partners to flag 7 accountability framework into project management processes. The implementation of the social accountability framework comprising of numerous mechanisms, which place communities at the center of assessing performance of public sector service delivery and facilitate citizen feedback to service providers, require money, time and technical expertise to implement and are often cumbersome and unsustainable. Consequently the most relevant social accountability mechanisms need to be chosen wisely and sequenced appropriately. In conclusion, MASAF 3 APL II has continued the governance and corruption issues with ease. The previous MASAF projects’ commendable work in awareness that weak governance and corruption identifying governance and accountability risks hamper effective delivery of services by public and and integrating mitigation measures into proposed private sectors has resulted in the formulation and project activities. What remains to be seen is how implementation of several legal frameworks, codes effectively MASAF will be able to translate these of conduct, institutional safeguards, systems and proposed mitigation measures into reality and procedures to improve governance and combat take advantage of the supportive good governance corruption. environment that exists in Malawi today. In MASAF, more than a decade of experience has References: helped establish and apply transparent financial x Mustafa, Hussein (2005). Combating management and procurement systems and Corruption in Malawi: An Assessment of the procedures. MASAF is also combating fraud and Enforcing Mechanisms, University of Malawi, corruption with active prevention measures and Chancellor College. successfully prosecuting corrupt staff. Its x Kajumi, Murphy (2006). Citizen Oversight commitment to a fraud and corruption-free through Social Accountability: The Malawi community based development program is widely Social Action Fund and the Comprehensive recognized. However, the onset of decentralization, Community Scorecard Process. Findings 265, and the primary implementation responsibility World Bank. shifting from the center to the districts, with weak x Casals and Associates Inc., 2007. Public institutional capacity, poses a serious challenge to Opinion on Corruption in Selected Regions of MASAF’s operations and reputation. Adequate Malawi - A Survey Implemented under the safeguards have been integrated in the design of the Strengthening Government Integrity Project, project including technical audits, supervision by Lilongwe, Malawi. MASAF and output based disbursement. x National Anti-Corruption Strategy (2008). Republic of Malawi. MASAF 1 and 2 have laid a strong foundation for x Transparency and Accountability Program public accountability systems at the community Handbook (2004). Malawi Social Action Fund level. MASAF 3 continues this trend of deepening Project. accountability and integrating a social This note was prepared by Petros Aklilu and Sanjay Agarwal as part of the Quality Assurance Group led GAC in Lending Operations: A Benchmarking and Learning Review, 2009. The authors are grateful to Anis Dani who task led the Review for his invaluable insights and comments, and would like to express their deep gratitude to the Malawi Country Office, MASAF Project and Management Unit Teams for providing timely information. They would also like to specially thank Shilpa Banerji, Sabine Cornelius, Timothy Gilbo, Chrissie Kamwendo, Nginya Mungai Lenneiye, Esther Lozo, Charles Mandala and David Post for their invaluable support without which this note would not have been made possible. The findings, interpretations, and conclusions expressed in this note are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. 8