Royal Audit Authority

Rising Irregularities due to deficit of ethics & morality: RAA

In a stinging report titled the ‘AG’s Occasional Paper on Agencies Rationalizing Irregularities,’ the Royal Audit Authority (RAA) goes beyond its usual numbers and points to declining ethics and morality of public officials as one of the main causes of rising irregularities.

The report says that over the recent years, the RAA has reported increasing trend of unresolved irregularities in its Annual Audit Reports from 588 mn in 2016 to 2.051 bn in 2020.

The RAA said that despite attempts to seek attention of the authorities and agencies to act upon its reports and recommendations on a continued basis in terms of trend of reported irregularities, there is no sign of improvements.

It says irregularities occur basically due to failing of control systems put in place to ensure that processes designed produce desired results.

The RAA says the conditions or factors that allow perpetration of fraud is explained by Donalt Cressey’s Fraud Triangle of Pressure which gives a motivation on incentive to commit fraud, Rationalization which is justification of dishonest actions and Opportunity which is the ability to carry out misappropriation of cash or other assets.

Opportunity

Expanding on this triangle the RAA says that in case of opportunity irregularities occur when basic controls are lax. 

RAA found cases of fraud committed by officials operating accounts involving colossal amount of funds in the absence of even the basic and minimum controls in operating the accounts.

An amount of Nu. 10.878 million was embezzled in 2019 by an accountant looking after the accounts of four Gewogs. The RAA noted that the operations of accounts were managed single handedly by the accountant and there were no check and balance put in place. Similarly, a fraudulent case involving Nu. 8.398 million was also detected in one of the Dungkhags which was also perpetrated by an accountant. It reportedly happened due to lack of knowledge of supervisor in financial rules.

Civil servants like accountants, revenue officials, auditors, customs and tax officials, engineers and procurement personnel are considered vulnerable groups as per the Bhutan Civil Service Rules and Regulations (BCSR) 2018 due to their nature of work and susceptibility to corruption and corrupt activities.

RAA says such category of civil servants need to be regularly shuffled and transferred to ensure that there is no familiarity threat and risk of animosity with clients. 

One of the examples of weak controls put in place is the absence of verification process in making payments for goods and services. RAA found many instances where agencies had made extra payments for works not executed or for goods not delivered. Unless done with justifiable reasons, such acts could be construed as favoring the contractors, suppliers or consultants and would fall under fraudulent activities.

It says the actions to be taken as pointed out in the audit reports solely rests with the implementing agencies. However, it has been observed that the agencies tend to be protective of officials and often, resort to either refraining from taking actions or initiate mild action.

 The RAA has also come across cases where officials continued with similar corrupt practices even in the new place of posting. The particular case in point was pertaining to the embezzlement of Nu. 0.732 million in 2018 by an accountant who was transferred in another agency where he embezzled another Nu.0.503 million in 2019.

Pressure

RAA says pressure relates to incentives or circumstances or compulsions under which the individuals are compelled to resort to undesirable acts.

One instance is construction projects for which the duration specified is unreasonably short, it puts pressure on the officials overseeing the project to complete the project in time. When it is practically not possible, officials resort to collude with contractors to request for time extension on the basis of hindrances unjustifiably certified by the official. It also leads to multiple irregularities.

It says such faulty practices in estimation of construction duration invariably lead to inducing irregular behaviors of officials in a bid to deliver results. Besides impacting the quality of work either due to short construction time or due to prolonged construction duration, it also deprives timely services to the nation.

On various occasions, the RAA noted that people who had unsettled issues with RAA had not applied for audit clearance and the requirement was not enforced by some agencies.

Rationalization

RAA says Rationalization is making actions acceptable although it deviates from what is required to be observed.

RAA has observed several instances where officials who were supposedly on tour have signed the attendance register on the days they were supposed to be out of station.

Sanctioning of advances to employees beyond rules is rationalized across agencies in that requesting officials feel it is a matter of right and sanctioning officials feel it is morally correct to sympathize and extend assistance in times of need. The sanctioning of advance beyond what is permissible becomes irregular, individuals’ inability to liquidate within the timeframe also result in violation of rules.

Mileage claims in many agencies are paid based on the eligibility criteria. The fact that a vehicle may not be used in the actual travel is not considered. If three officials travel to same place for any official purpose, all three officials are paid mileage claims. However, more often than not, the officials will travel in a single car.

Strategies

RAA said to stop the above there must be some strategies.

It says all institutions need to create control consciousness, influence ethical behaviors, have zero tolerance to irregularities and tone must be set at the top.

Responsibility should be taken by individuals either in the position of leadership or as an individual to create ethical culture, drive desirable behaviors, and embrace highest level of professionalism.

In addition to prevention and detection, there should be a system for strict enforcement of accountability and sanctions.

RAA said that on its part it will discontinue the practice of issuing audit clearance on the basis of undertaking letter from the agencies, RAA will review the accountability fixed by the agencies, engage and collaborate with RCSC to review cases against civil servants and prescribe sanctions against erring civil servants and collaborate and coordinate with ACC in sharing of information on corrupt practices.

It will also report in the Annual Audit Report if action taken by the agencies are not uniform or adequate and do not address the issues reported by RAA, recommend issues and observation from the Annual Audit Report to the Public Accounts Committee for Public Hearing and RAA will issue AG’s Advisory Series from time to time highlighting issues in the areas of governance in the public sector and seek appropriate interventions of authorities for improvement.

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