When people and organisations make donations to support those affected by an emergency or disaster, they trust that this aid not only reaches those in need, but that the government distributes funds in line with the principles of integrity and transparency. If fraud and corruption affect this process, donors’ confidence may be undermined. At worst, this lack of trust may prevent people from making donations in the future.
- Governments need to maintain public trust during emergency situations, particularly when disbursing donations made by the public. Auditing the mechanisms in place to disburse aid and donations helps maintain accountability and integrity in the use of these funds
- By auditing integrity measures and controls during an emergency or disaster, auditors can make recommendations that help prevent integrity risks from materialising in future situations
Diverting aid and donations away from those in need, duplication of support or favouring oneself, family members, friends or political partners, are examples of integrity risks that can occur in an emergency involving humanitarian aid. These risks are characterised by unethical, fraudulent and corrupt behaviour. The weakening of controls, which usually occurs in emergencies, enhances these risks.
The Portuguese Court of Auditors’ role in auditing funds and donations during the 2017/2018 forest fires
In 2019, upon request of parliament, the Portuguese Court of Auditors completed an audit of a special fund set up by the government to manage donations for victims and to revitalise areas affected by devastating forest fires. The damages caused by the June 2017 forest fires amounted to EUR 500 million, of which EUR 27.7 million pertained to destroyed houses. Donations amounting to EUR 16.5 million were raised by several organisations and were mostly disbursed for reconstruction of houses. The request for the audit followed allegations of fraud involving funding for the reconstruction. It was alleged that the fires did not actually affect the houses of some recipients, while others received funds for houses not listed as their permanent residence. These allegations resulted in fewer donations being made in the subsequent disasters.
When designing the audit, the Court did not adopt a solely compliance-based approach, choosing to leave criminal authorities to investigate possible irregularities. Instead, the Court wanted to assess whether the fund was functioning as an adequate instrument to disburse humanitarian aid, and whether the controls in place were effective in safeguarding integrity and ensuring compliance in the use of funds. In particular, the audit evaluated the strengths and weaknesses of the ethics component within the control environment, examining if it was conducive to mitigating integrity risks.
To assess the ethics component, the audit team followed the EUROSAI Guidelines on ‘Audit of Ethics in Public Sector Organisations’. The audit addressed questions such as:
- How well were integrity risks anticipated and controlled?
- To what extent were managers and staff aware of those risks?
- Were ethical guidelines provided to staff?
- Were integrity safeguards applied in the definition of criteria and procedures, segregation of functions, and verifications undertaken and in identifying and preventing conflicts of interests?
- Were transparency and participation arrangements sufficient?
- Were whistleblowing mechanisms in place?
The audit team used standard audit techniques, such as document and case review, observations, inquiries and interviews, and an anonymous survey to gather insights on perceptions regarding the ethical behaviour of those involved in disbursing the funds.
Results and impact of the audit
Some of the observations, conclusions and recommendations made during of the audit are included in the table below.
|Lack of a dedicated policy, specific legal framework and planning system for donations and aid||Introduce a specific policy and legal provisions, defining how to objectively assess needs, assign responsibilities taking into consideration the sectors involved, engage beneficiaries, and ensure reporting and oversight|
|The perception survey indicated that staff felt free to speak up about irregularities and that reports were investigated and prosecuted, but the Court observed a lack of specific ethical guidelines for the management of donations||Issue specific guidelines on ethical conduct during emergency situations in anticipation of future emergencies/disasters|
|Management and control systems for the disbursement of funds were not wholly effective in preventing risks of fraud, corruption or integrity violations. Criteria to disburse aid were unclear, and integrity risks were not assessed. Potential conflicts of interest were not analysed, no physical verifications were conducted and decision making procedures were too concentrated in the offices of local politicians||Review these measures to ensure that the management and control systems in place during future emergency situations are effective in identifying and managing integrity risks|
|Transparency and participation mechanisms were not wholly effective||People affected by disasters should be engaged throughout the process of disbursing donations. Information regarding the amounts given to beneficiaries should be publicly available|
Auditing responses to an emergency is challenging. Authorities face complex and unexpected circumstances and are under pressure to meet urgent needs. Auditors have to find the right balance in reporting what could have been done better, compared to what was actually possible. Public sector managers may be disheartened by these reports, feeling that the audit judgements are unfair. Auditors should keep in mind a ‘lessons learned’ approach and ensure that reporting is balanced.
Adopting the right approach to auditing integrity in an emergency context is key. Auditors should develop a positive and interactive approach, relying on commonly accepted criteria. With our audit, it was vital that we provided a rationale as to why and how we selected the audit criteria, and how they reflected international standards.
The audit report had a significant impact on the public after being widely reported in the media. Many were calling for greater transparency around how their donations are spent, demonstrating a need for stronger accountability mechanisms.
Lessons for COVID-19 funds
During the COVID-19 crisis, large amounts of donations are being raised to support people in need. The Court recently reported that some of the recommendations from 2019 have not yet been implemented, such as the establishment of a co-ordinated policy and legal framework for managing donations and humanitarian aid. Implementing these recommendations is vital for avoiding pitfalls that we unfortunately fell into during the 2017/2018 forest fires.
|Helena Abreu Lopes is a member of Tribunal de Contas, the Portuguese Court of Auditors|
 See a recent report on “Risks in the use of public resources for emergency management (COVID-19)”, in https://www.tcontas.pt/pt-pt/ProdutosTC/outras-acoes-controlo/relatorios-oac/Documents/2020/relatorio-2020-01.pdf
 The damages caused to houses by the October 2017 and August 2018 forest fires were even higher, amounting to EUR 85.7 million, and were entirely addressed by the state budget public funding. In these cases, donations were mainly collected by municipalities and amounted to EUR 1.26 million. These funds were not used for the reconstruction of houses.
 See ISSAI 5530, Preventing Corruption in Humanitarian Operations, Transparency International, 2010, and Towards Better Humanitarian Donorship, OECD, 2012.
The views in this article are the author’s only, and do not necessarily represent the views of the OECD or its member countries.
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