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4 SECTOR ASSESSMENT This section introduces ways of assessing the risk of corruption across the water sector of a country. Since corruption involves specific individuals and organizations, a “sector level” assessment is an attempt to sum or average the level of corruption across organizations in a sector. As such, sector level indicators can be misleading since the differences between the organizations involved are too great to make averages useful. For example, in a sector where, say, the regulator and one provider are very corrupt while the Ministry and another provider are not at all corrupt, a statement that the sector as a whole is moderately corrupt would not be useful. Therefore the objective of this section is simply to help the sector practitioner understand risks of corruption across the whole sector, identifying risk levels in specific key agencies, as well as general patterns. Using this information, this section outlines a “mapping” approach sector practitioners can use to understand where corruption is occurring in the water sector. 4.1 Sector Performance and Efficiency Indicators Four key sector performance indicators can provide first order signals on the possible level of corruption in the sector: • Coverage • Non-revenue water • Collections ratio • Cost recovery. Table 4.1 describes these indicators and their possible relationship to poor governance and corruption. Data on each of these indicators may be found in the sources shown in Source List 4.1 on page 34. 4.2 Asset Observation Evidence that individuals working in the sector are enjoying living standards beyond what their wages could support is another indicator of corruption. If wages from an individual’s job are insufficient to pay for apparent extravagancies, then where is the money coming from? “Red flags” could include observations of: • Obvious displays of wealth (such as gold watches) • Frequent overseas trips by counterparts or sector officials • Asset declarations from senior officials and politicians that reveal assets well beyond what those individuals’ official salaries would support. Sector practitioners won’t be able to definitively determine if such observations are indeed a sign of corruption. However, such observations can serve as useful indicators that corruption may be occurring within the water sector. Further dialogue with sector staff and stakeholders can help to determine whether observed assets are indeed a sign that corruption is occurring, or whether there is a legitimate explanation. Box 4.1 describes an example where observations of individuals living beyond their means helped to detect corruption, and the steps a community took to put a stop to it. Source List 4.1 on page 34 provides useful sources for further information on detecting corruption through asset observation. 24
Table 4.1 Corruption and Sector Performance Indicators Indicator Description Possible relationship to poor governance or corruption (or both) Water and sanitation coverage Nonrevenue water Collection ratio Cost recovery Water coverage refers to the percentage of the population with access to an improved water source. Sanitation coverage refers to the percentage of the population with access to private or shared (but not public) excreta disposal facilities. Water that has been produced and is “lost” before it reaches the customer. Losses can be “physical” losses (for instance, through leaks) or “commercial” losses (for instance, through theft or metering inaccuracies). Percentage of bills collected. The capture—through fees, subsidies, or other explicit transfers of funds—of the cost of providing water and sanitation services. Good coverage indicates that the sector is putting resources to good use. However, water coverage must be understood in the country context. For instance, developed countries will tend to have better coverage than less-developed countries, and countries that are low cost to serve will tend to have higher coverage than countries that are high cost to serve. In this sense, as an indicator or “red flag” of corruption, water coverage should be assessed in terms of how far coverage is from where it might be expected to be, given income and geography. High physical losses may indicate a corruption risk. For instance, under-investment in pipes may be the result of: • A tendency to misuse resources generally • Poor quality of construction and repair work • A bias toward large capital projects. High commercial losses show a chaotic commercial system, which often allows corruption to thrive. A low collection ratio indicates lack of discipline in commercial and financial systems in the sector. This lack of discipline will allow corruption to thrive. Sectors which recover some margin above operating and maintenance (O&M) costs tend to be less corrupt than ones where tariff revenue is less than or equal to O&M costs. This may be because sectors or providers which are recovering their costs are more likely to have effective processes for financial management and accountability in place. Alternatively, if a utility isn’t recovering costs, employees are less likely to feel pressure for any kind of commercial discipline—that will allow corruption to thrive. Finally, research suggests that utilities that recover a majority of costs from their customers are more likely to be accountable to their customers. a a Schwartz, K.(2006). “An assessment of bureaucratic and New Public Management models in the water supply and sanitation sectors in low- and middle-income countries”. UNESCO-IHE Institute for Water Education Box 4.1 Displays of Wealth in a South Asian Community In South Asia, a donor-funded poverty reduction project included the construction of septic tanks in locations selected by communities. Following a competitive tender, the municipality noted that the bids received were all three times the standard unit rate. To get around what was perceived as collusion amongst the tenderers, and high prices, the chief municipal engineer proposed to the community that they take on the construction of the project—it would also provide work for community members. This was agreed and two community leaders, the most educated, were given the task of managing the finances. Initially, there were some concerns that the accounts were not open to the rest of the community, but when one leader started smoking imported cigarettes rather than the local ones, the community lost faith and in a public meeting involving donor representatives, demanded that the accounts be made public. The costs of materials and payment for labor were posted at the entry to the slum at the end of each week for the remainder of the work. Source: Plummer, J. (2007). “Making Anti-Corruption Approaches Work for the Poor: Issues for Consideration in the Development of Pro-Poor Anti-corruption Strategies in Water Services and Irrigation”. Swedish Water House Policy Brief No 4, page 6 25
Page 1 and 2: Public Disclosure Authorized 46829
Page 3 and 4: PREFACE In 1996, then World Bank Pr
Page 5 and 6: TABLE OF CONTENTS 1 INTRODUCTION ..
Page 7 and 8: Tables Table 1.1: How to Use the So
Page 9: Box 11.1: Five Key Elements of an A
Page 12 and 13: In each section, corruption and gov
Page 14 and 15: 2 UNDERSTANDING CORRUPTION AND GOVE
Page 16 and 17: Box 2.2 Governance in the Literatur
Page 18 and 19: Corruption often involves a “mora
Page 20 and 21: When these conditions hold, a virtu
Page 22 and 23: This suggests that sector practitio
Page 24 and 25: spur increased local demand for acc
Page 26 and 27: Source List 2.1 Framework for Think
Page 28 and 29: • P rovider - Section 5 discusses
Page 30 and 31: That said, the interpretation of na
Page 32 and 33: Source List 3.1 Country Level Gover
Page 36 and 37: 4.3 Informal Service Provision In m
Page 38 and 39: Media coverage of corruption can se
Page 40 and 41: Opportunities for corruption arise
Page 42 and 43: Table 4.2 Some Corruption and Poor
Page 44 and 45: Source List 4.1 Sector Assessment S
Page 46 and 47: Source List 4.1 Sector Assessment (
Page 48 and 49: Source List 4.1 Sector Assessment (
Page 50 and 51: Figure 5.1 Corruption in Procuring
Page 52 and 53: 5.1.3 Problems with quality As disc
Page 54 and 55: • Utility unable to link billing
Page 56 and 57: 5.3.1 Detecting corruption in human
Page 58 and 59: • Travel by utility staff at the
Page 60 and 61: 6 PLANNING AND IMPLEMENTING CAPITAL
Page 62 and 63: transferred from the government or
Page 64 and 65: sector staff might schedule mainten
Page 66 and 67: Practitioners can detect corruption
Page 68 and 69: • Increase the price of the contr
Page 70 and 71: 7 IMPLICATIONS OF DIFFERENT SECTOR
Page 72 and 73: Table 7.1 Five Variants of Private
Page 74 and 75: Box 7.2 An Example of Related Party
Page 76 and 77: • A reputation for corruption in
Page 78 and 79: Indicators of corruption risk in co
Page 80 and 81: • Management processes, for examp
Page 82 and 83: PART II INCREASING PROBITY AND IMPR
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Box 8.1 Improving Probity in Capita
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Applying the rules effectively is c
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sors and auditors can be appointed
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Box 8.6 Procurement Outsourcing to
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fective deterrents include debarrin
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Source List 8.1 Improving Project P
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9 INCREASING PROBITY AT THE PROVIDE
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Linking management controls to corr
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Box 9.2 Performance Incentives for
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Box 9.5 Performance Evaluation in a
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Source List 9.1 Improving Provider
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10 STRENGTHENING WATER SECTOR GOVER
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Government responses to citizen dem
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Methods for increasing information
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can at any time direct that provide
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Box 10.3 Internally Delegated Manag
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To overcome some of these constrain
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vider from the political directorat
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Box 10.7 Cooperative Management of
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Source List 10.1 Reforming Water Se
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technology in selected areas”, bu
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mission (the CRA) sets out rules fo
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surrounding area, to small schemes
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works and planning in public agenci
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11.2 Second Best Options for Improv
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Table 11.1 Summary of “Second-Bes
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good strategy. One way to identify
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Example of a simple, narrow approac
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lustration, a practitioner with som
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Source List 11.1 Improving Probity
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Source List 11.1 Improving Probity
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12 REVIEWING PROGRESS Monitoring an
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• Indicators chosen should relate
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Box 12.2 Using Objective Cost Measu
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on the program’s success had been
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Source List 12.1 Reviewing Progress
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threats). Competitive bidding proce
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Other Water Working Notes Water Wor
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