How can corruption be minimized in pandemic-related government programs?

Incentivize whistleblowers and improve online transparency. Programs such as the Paycheck Protection Program (PPP) or the need greater scrutiny, according to ACRE Policy Analyst Dr. Mavuto Kalulu in “,” an op-ed published in the Arkansas Democrat-Gazette on August 27.

Dr. Kalulu begins by citing two recent Department of Justice Office of Public Affairs (DOJ OPA) news releases, “” from July 16 and “” from June 4 as examples of corruption in the PPP program.

Kalulu writes:

Fortunately, these cases have been caught quickly. The secretive nature of fraud makes it difficult to detect with much speed. More often than not, it is caught long after the damage has already been done. A 2020 ‘’ by the Association of Certified Fraud Examiners (ACFE) estimates that the typical time between when a fraud begins and when it is detected is 14 months. In general, abuse of public resources negatively affects the delivery of services by diverting resources from important services such as public education and public health. In the case of PPP, there are other struggling businesses that could use these dollars to pay their workers.”

While audits can help catch some of the corruption in these programs, the 2020 ACFE Report finds that audits only catch 19 percent of fraud. Therefore, Kalulu recommends improving the online transparency of these government programs and incentivizing whistleblowers to report abuse.

Kalulu writes:

According to the ACFE report, tips from whistle-blowers account for 43 percent of the initial detection of occupational fraud. Thus, in addition to audits, it is important to incentivize people to report fraud. According to the National Whistleblower Center, between 2007 and 2019 the IRS has been able to recover $5.7 billion while awarding nearly $932 million through the IRS Whistleblower Reward Program. The program rewards whistle-blowers 15 percent to 30 percent of proceeds from tax fraud or tax underpayments. Another way is to be very transparent by publishing online recipients’ details including their names, addresses, number of employees and the amount that they receive. The idea is to empower residents to be a part of the process of detecting abuses. If unscrupulous applicants are using fake addresses, residents can assist to detect such abuses. It is encouraging on this front that the U.S. Treasury reversed its earlier stand not to disclose details of the PPP recipients.”

You can read the entire op-ed .

Dr. Kalulu is the co-author of the second edition of Access Arkansas: County Web Transparency, with ACRE Policy Analyst Joyce Ajayi.

The index ranks counties on a score from 0 to 1 by combining three types of transparency: fiscal, administrative, and political. Fiscal transparency is the disclosure of financial information. Administrative transparency relates to the openness of government activities and processes, while political transparency relates to the transparency of elected officials and quorum courts.

“State Government Internal Auditing, Education Attainment, and Occupational Fraud Control” by Kalulu and BT����Assistant Professor of Accounting Ashley Phillips, published in the Volume 41, Number 2 edition of the Southern Business and Economic Journal of Auburn University in April examines the effectiveness of public sector internal auditing in reducing public sector corruption. 

To see more of our work related to this topic, you can go here.

By Caleb Taylor

A recent arrest of a Craighead County Clerk for theft of public funds shows the importance of improving the online transparency of county governments in Arkansas.

Craighead County Clerk Kade Holliday resigned last week and was charged with 13 felonies related to theft of public funds — estimated at $1.6 million —after auditors alerted officials to suspicious activity, according to .

Holliday was charged with 12 counts of felony theft of property and one count of abuse of public trust.

Holliday was elected as county clerk in 2012.

Online transparency helps the public guard against cases of alleged fraud like this one.

New Research On Educational Attainment and Fraud

According to a , internal and external audits are responsible for the detection of  only 19% of occupational fraud.

“State Government Internal Auditing, Education Attainment, and Occupational Fraud Control” by ACRE Economic Policy Analyst Dr. Mavuto Kalulu and BT����Assistant Professor of Accounting Ashley Phillips, published in the Volume 41, Number 2 edition of the Southern Business and Economic Journal of Auburn University in April examines the effectiveness of public sector internal auditing in reducing public sector corruption. 

Kalulu and Phillips find that state internal auditing laws and practices have been ineffective in reducing public sector corruption. They recommend states emphasizing other ways of controlling corruption such as “improving education standards” since states with a higher percentage of the population holding a bachelor’s degree have fewer corruption conviction cases.

Kalulu and Phillips write:

We argue that more educated states are more capable of scrutinizing how public officials are managing public resources and are able to hold them accountable. Public officials become afraid that the chances of being caught are higher when people are watching them, and this deters them from engaging in corrupt activities. On the basis of our findings, we recommend that states focus on policies to improve education quality, since this is the only variable that is consistently negatively related to public sector corruption.”

The paper was published before Holliday’s arrest.

Craighead County’s Online Transparency Score

Craighead County ranked ninth in overall online transparency in the second edition of Access Arkansas: County Web Transparency, produced by ACRE Policy Analysts Mavuto Kalulu and Joyce Ajayi, in December 2019.

The index ranks counties on a score from 0 to 1 by combining the three types of transparency listed above: fiscal, administrative, and political. Fiscal transparency is the disclosure of financial information. Administrative transparency relates to the openness of government activities and processes, while political transparency relates to the transparency of elected officials and quorum courts.

According to the index, Craighead County publishes online 47.5 percent of the important public information tracked in the index. According to the authors, 67 of the 75 Arkansas counties publish less than 50 percent of this information online.

To see more of our work relating to this topic, you can go here.

By Caleb Taylor

How can Arkansas reduce government corruption?

ACRE Policy Analyst Dr. Mavuto Kalulu discussed solutions to this question and four steps officials can take to improve transparency in an op-ed published in the Arkansas Democrat-Gazette on August 5th.

Kalulu begins by noting the size and scope of corruption at all levels of government in Arkansas. There have been 189 corruption-related convictions that concern about $13 million in taxpayer dollars from 2010 to 2017, according to Arkansas Legislative Audit. 

Kalulu recommends prosecutors ensure there’s “repercussion for failure to adhere to accounting standards and rules to minimize opportunities to misuse public resources.” Kalulu also advises officials to ensure the “segregation of duties” between public employees to limit “opportunities for one person to abuse public resources.”

Kalulu writes:

The last two areas for improvement in Arkansas are promoting transparency and access to information, and empowering citizens. A 2018 transparency report I co-authored with Terra Aquia and Joyce Ajayi assessing the state of transparency in Arkansas titled “Access Arkansas: County-Level Web Transparency” shows there is much room for improvement. Accessing fiscal, administrative, and political information on Arkansas counties is often difficult. For example, only eight counties out of 75 had their 2017 budget published online when we looked for them last year. The Legislature should be applauded for enacting Act 564, which requires counties to publish their budgets and financial statements online beginning January 2020. Easy access to financial information allows residents to be better informed, but also to be watchdogs as well. Elected officials will be more prudent when taxpayers are on the lookout. We need transparent processes in addition to knowing outcomes. Transparency helps with detection as well as deterrence of corruption. It’s important to catch and punish those who abuse public resources and trust, but it’s far better if it doesn’t even occur in the first place. Fighting corruption requires a concerted effort. Those who abuse their positions should be found and punished. Processes should be improved to minimize the opportunities for abuse. Ensuring public information is easily accessible by the public informs and empowers them.”

You can read the full op-ed .

An updated index of county level transparency from “Access Arkansas” is scheduled to be released later this year. 

Interested in more of our work on transparency? Check out ACRE’s new policy brief, “Let the Sun Shine In: Improving Access to Arkansas Counties’ Financial Information,” which shows what an average Arkansan would experience when attempting to collect county financial information.

More ACRE research on this issue can be found on our Transparency page.

Related Work

• A one page summary infographic of the current  state of Fiscal Transparency in Arkansas’s Counties
• Read a recent op-ed on by a former ACRE student worker, Alexandria Tatem, “.”
• See how your county’s web transparency compares to others in our study, Access Arkansas: County-Level Web Transparency

In an , ACRE Policy Analyst Dr. Mavuto Kalulu and ACRE Research Assistant Terra Aquia discuss the need for greater transparency of county government operations in Arkansas.

According to Kalulu and Aquia, county governments in general are far less transparent than state government in Arkansas.

Kalulu and Aquia write:

“Arkansas’ county governments are far less transparent than state government, yet they are just as important. Their closeness to the citizens allows them to be direct providers of most public services, including public health and public safety. When citizens are unaware of how elected officials allocate tax dollars, abuses can take place.”

Greater transparency is needed at the local level in order to help deter corruption, according to Kalulu and Aquia. They cite a recent story who spent nearly $10,000 on restaurant meals, clothing, shoes, online shopping and other items using state funds.

Kalulu and Aquia conclude by calling for local governments to make their financial information more accessible to the general public by publishing it online similar to the state’s transparency.arkansas.gov website.

Kalulu and Aquia write:

“Arkansans deserve to know how every one of their tax dollars is spent. To ensure that, financial transparency from the local and state government is imperative. All Arkansas local governments should make their up-to-date financial information easily accessible to the public by posting the information online in a fashion similar to the state’s transparency.”

Kalulu and Aquia are currently developing an index to rank all Arkansas counties by how much financial, political and administrative information their websites contain. It’s expected to be released sometime in 2018.

CORRECTION: In the published op-ed, the authors incorrectly stated that the  showed that the Arkansas state government earned a C+, and Arkansas counties earned an F. The Arkansas state government actually earned a B. The overall grade for Arkansas (average of city, state and county) was a C+, and Arkansas counties earned an F.