Corruption: are you an expert? [quiz]

Headlines regularly focus on political scandals and corruption. From public officials embezzling government monies, selling public offices, and trading bribes for favors to private companies generate public indignation and calls for reform—corruption, it seems, is inevitable. But what really is corruption, and who is responsible for its continuation?

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The First Global Organizations Anti-Corruption Certification Program

For more information, click here. You will find FAQs when you click here.

Election Fraud and Corruption: Issues and Solution

In cooperation with TAMU. You may watch the complete one-hour-long interview at tamu.theaaci.com

Transparency and Corruption[1]Prevention in the Healthcare Industry

June 13, 2017

Technical Staff

The AACI currently prepares an initiative for the Arab countries healthcare sector.  It is an ambitious and innovative anti-corruption project. Transparency, integrity, and accountability are fundamental pillars of the project. The Arab countries healthcare decision makers and executive management will always play a pivotal role in preventing and deterring fraud and corruption. They set the proper tone at the top!

The following constitutes an integral part of The AACI's anti-corruption initiative in the Arab countries healthcare sector.

INTRODUCTION

Ban Ki-moon’s, the United Nations Secretary-General, message on the International Anti-Corruption Day on December 9, 2016 was forceful and alarming: “Corruption strangles people, communities and nations. It weakens education and health…..No country is immune, and every country bears a responsibility to end it.”[2] Fighting corruption is not an option; it becomes a global objective of the international community. Goal 16[3] of the 17 Sustainable Development Goals (SDGs)[4] of the 2030 Agenda for Sustainable Development — adopted by world leaders in September 2015 at an historic UN Summit — urges substantial reductions in corruption and bribery and the development of effective, accountable and transparent institutions at all levels.

CORRUPTION IN THE GLOBAL HEALTHCARE

Since 2008 global average fraud, error, and corruption losses in healthcare have risen 25% from 5.59% of expenditure to 6.99%. Reduction in fraud and error losses of up to 40% is possible within one year - freeing up to $195 billion globally. The world is losing some $487 billion to fraud and error annually according to a report "The Financial Cost of Healthcare Fraud 2014" from BDO LLP, the accountancy and business advisory firm in partnership with The Centre for Counter Fraud Studies at the University of Portsmouth.[5]

The global healthcare expenditure for 2013 was $7.35 trillion while the estimated global average loss rate of 6.19% [6] was due to fraud, error, and corruption. Such a loss amounted to $ $455 billion. Other studies estimated the annual loss in the global healthcare market to be worth 10% of the global gross national product. [7][8][9][10]

It is evident that developed and developing countries are struggling with this disease in the healthcare sector. According to the National Health Care Anti-Fraud Association, as much as 10% of what the US spends on healthcare is lost to outright fraud and corruption. The most common examples of fraudulent abuse include misrepresenting services, overcharging for services delivered, providing more costly services than required, altering diagnoses, waiving copayments, or submitting claims for free services.[11] Healthcare fraud, error, and corruption rates in developing countries are much higher than those of developed countries. Developing countries’ healthcare corruption rate exceeds 15% of the annual healthcare expenditures. Healthcare corruption levels in the Arab countries are worse and more complex than too many other developing countries.

CORRUPTION IN THE ARAB COUNTRIES HEALTHCARE

“The Middle East and North Africa’s total healthcare spending is estimated to be $125 bn this year, according to Al Masah Capital, a Dubai-based alternative-investment management firm. Government spending is estimated to account for 64 per cent – or $80 bn – of the total market, with private-sector healthcare spending making up the rest.

The role of the private sector is expected to increase in the Mena market, according to Al Masah Capital. It forecasts that the private-sector healthcare market will be worth $61bn in 2020, more than double its size in 2011.” [12]

Waste due to widespread inefficiencies, over-prescription of drugs, and needless medical tests amounts to $40 billion in the MENA public healthcare sector, according to Haidar Al Yousuf, the head of funding at the Dubai Health Authority.[13] "In our region … 50 per cent of the money we spend on health, due to inefficiency, is not properly utilized," he said. Medical insurance fraud and abuse — ranging from over prescribing medication or keeping patients in hospital longer — is hitting operators’ margins. GCC countries try to tackle a growing healthcare corruption multibillion US dollar problem.[14]

The corruption prevailing in the Arab countries casts its shadows on the healthcare services. In a survey published by Transparency International (TI) on May 3, 2016, it states that fifty million people in the Middle East and North Africa had to pay bribes to access the basic services that they needed.[15] That is nearly 1 in 3 public service users like medicine, education, or water. The survey uncovers the public pessimism and skepticism of the governments efforts in fighting corruption. An analysis by Transparency International in 2010 showed that increasing transparency, accountability and integrity in 48 countries has a robust correlation to better outcomes in health, education and water.[16] This holds true irrespective of a country’s wealth or how much it spends in a specific sector.

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Strategic Partnership: The Canadian Centre of Excellence for Anti-Corruption (CCEAC) of the University of Ottawa

PRESS RELEASE

Tempe, June 9, 2017

On April 25, 2017, The AACI and the Canadian Centre of Excellence for Anti-Corruption (CCEAC) of the University of Ottawa signed a general agreement to cooperate and innovate in pursuing their respective missions globally. It is a long-term strategic professional and business relationship that will focus on both developed and developing countries. 

Click here to read the press release. 

Al Jazeera expose on Maldives wins One World award

A documentary exposing wrongdoings of the Maldives' government wins a prestigious award at the One World Media ceremony.

For more details, click here.

Corruption Prevention, Deterrence, and Detection — Nonprofit Organizations — Part 2

Tempe, May 31, 2017

Technical Staff

Significant Fraud Schemes in Nonprofits

1. Skimming
2. Check tampering
3. Expense reimbursements
4. Payroll schemes

As we will discuss what nonprofits can do to assess and evaluate fraud risks, we will list efficient and affordable anti-corruption practices nonprofits may use to prevent, deter, and detect fraud and corruption.

1. Skimming

When an entity receives cash, it must record (recognize) it in its accounting system. Skimming occurs when an employee steals cash or checks BEFORE recording it in the entity’s accounting system. Skimming schemes are usually called “off-books” schemes. Because cash theft happens before cash is recorded in the accounting records, it is tough to detect such a scheme: there is no audit trail. (Read more)

2. Check Tampering

A check tampering scheme occurs when a fraudster (usually an employee) takes a physical control of one or more than one check of an entity where the employee-fraudster benefits from controlling who the payee would be by forging the signature of the check maker and/or make certain alteration on the face of the check (financial instrument).

A check tampering scheme requires a physical control of the entity’s check. If the employee-fraudster cannot access a check or a check book, he just cannot complete any check tampering scheme.

Most forgery schemes are committed by accounts payable clerks (Read more)

3. Expense Reimbursements

Nonprofit organizations like for profits reimburses its officers and directors for “legitimate” business expenses. Qualified expenses for reimbursement varies from one entity to another. However, such expenses should be known to the nonprofit employees, management, and directors. As long as these expenditures are for agreed on business purposes and incurred in compliance with the nonprofit policies and procedures, they are reimbursed to the employee or manager who incurred them. Airline tickets, transportation, and lodging are examples of reimbursable expenses.

Under normal reimbursement procedures, …..

Expense reimbursement fraudulent scheme occurs through one of the following classifications:

1. Mischaracterization expense reimbursement — listing expenses that are not for legitimate business purposes where they are correctly classified to look authentic. (Read more)

4. Payroll Schemes

In a payroll scheme, the perpetrator usually falsifies a timecard or alters information in the payroll records. The most common payroll frauds are ghost employee(s), falsified hours and salary schemes, and commission schemes. We will briefly discuss the ghost employee scheme.

In a typical ghost employee scheme, the fraudster should do all the following: (Read more)

A ghost employee is not necessarily a fictitious person. It could be a real person who is conspiring with the fraudster to defraud the company. For example, (Read more)

Fraud and Corruption Risk Assessment

Those charged with governance and executive management of nonprofits should be aware of the nature and type of fraud and corruption risks their organizations face. It would be impossible to address such risks unless they are identified and quantified. (Read more)

The Minimum a Nonprofit Can Do to Prevent and Deter Fraud and Corruption

Recognizing that small charities and nonprofits do not have sufficient resource to segregate duties, too many identified fraud and corruption cases suggest that they could have been avoided with low cost and efficient controls and without a need for sophisticated financial expertise. It is common sense and a questioning mind.(Read more)

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Note: Members will find the complete text of this paper at the membership portal