How to Minimize Corruption in Pandemic-Related Programs

By Caleb Taylor

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 Ready for Business Grant Program need greater scrutiny, according to ACRE Policy Analyst Dr. Mavuto Kalulu in “Be vigilant,” 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, “Little Rock Woman Charged with Covid Relief Fraud” from July 16 and “Arkansas Project Manager Charged in Oklahoma with Covid-Relief Fraud” 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 ‘Report to the Nations’ 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 here.

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 UCA 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.