Early anti-fraud control measures could minimise corruption in Govt
FOLLOWING the GIPF multi-million dollar financial scandal, Avid, Offshore Development and the Fishrot scandals, government ought to invest in fraud management control systems to prevent large scale fraudulent schemes that absorb much needed funds for critical capital projects and other national developmental initiatives.
The cost benefit analysis of investing in fraud risk management systems compels government to be much more cost effective to proactively address fraud risks than to suffer preventable fraud and spend valuable resources to detect, investigate, prosecute and clean up.
With the economy set to decline a record 7.
8 percent owing to Covid-19, preventing potential fraud before it occurs is a key imperative if government is going to bounce back from the economic trauma caused by Covid-19, increase profitability in public enterprises and increase the ability to improve the development budget in the Appropriation Bill.
On the contrary, the absence of effective anti-fraud control measures in many public enterprises has created an avenue for dishonest public officials to prey on the public purse and enrich themselves at the expense of the taxpayer.
It remains worrisome that most boards of directors and executive management officials in the public space have continued to resist adopting and implementing anti-fraud controls despite suffering millions of losses every year due to fraudulent schemes and organised crime.
Despite many public enterprises having gatekeeping functions such as audit committees, legal/company secretarial functions, risk compliance functions, external and internal auditors, the anti-fraud controls in many public enterprises remain inadequate and ineffective especially where there is collusion or where management overrides internal controls.
Principle 15 of King IV on Corporate Governance emphasises the importance of a ‘Combined Assurance Model’ to ensure that gatekeeping functions enable an effective control environment.
Fraud in the form of asset misappropriation, financial misstatement and corruption poses a significant risk to the programme integrity of many Public Enterprises (PEs) in Namibia and it has eroded public trust in the management of Public Enterprises.
The Ministry of Public Enterprises as the line ministry of commercial PEs has a duty to enhance programme integrity.
Legislation such as the Public Enterprises Governance Act No 1 of 2019, State Finance Act No 31 of 1991 and the Corporate Governance Code of Namibia (NamCode) have increasingly focused on the need for PEs to take a strategic approach to managing fraud and other irregularities.
Moreover, there are opportunities for the Ministry to take a more strategic, risk-based approach to managing fraud risks and assist PEs develop effective anti-fraud controls. Proactive fraud risk management is meant to facilitate PEs mission and strategic goals by ensuring that resources entrusted to them serve their intended purposes.
In the absence of human resources within, the Public Enterprise Ministry needs to enlist the services of experts to mitigate the fraudulent schemes.
Minister Leon Jooste needs to develop common policy frameworks for the operation of Public Enterprises to ensure an effective control environment against fraud and other irregularities.
Apart from this, the ministry needs to develop a fraud risk management framework model that can proactively address public enterprise fraud risks – by decreasing the likelihood of fraud occurring; increase the likelihood of detection and offer mechanisms to monitor as well as recover losses from fraud perpetrators.