Public Leaders Under Fire for Misusing Office for Personal Gain
A Call to Action: Curbing Fraudulent Activities in the Public Sector
In an effort to combat fraudulent activities in the public sector, the government has issued guidelines for developing and implementing fraud risk management frameworks in Public Sector Entities (PSEs). This move comes as a response to the increasing cases of public leaders misusing their office for personal gain.
The Problem: Misuse of Office for Personal Gain
According to sources, the guidelines aim to complement existing laws and regulations, including the Code of Ethics and Conduct for the Public Service issued under the Public Service Act, CAP 298. This code outlines ethical behavior expected of public servants in Tanzania. Additionally, the Anti-Money Laundering Act, CAP 423 requires individuals to report any suspicious financial transactions and conduct country risk assessments for money laundering and fraudulent activities.
What is Fraud?
Fraud is defined as an intentional act or omission designed to deceive others, resulting in a loss and/or the perpetrator achieving a gain. The term fraud involves various activities such as:
- Theft
- Corruption
- Conspiracy
- Embezzlement
- Money laundering
- Bribery
- Extortion
Types of Occupational Frauds
The guidelines emphasize that there are generally three key types of occupational frauds:
- Asset Misappropriation: the theft or misappropriation of assets, such as cash, inventory, or equipment.
- Fraudulent Financial Statements: the intentional misrepresentation of financial information to deceive stakeholders.
- Corruption: the abuse of power for personal gain or benefit.
The Fraud Triangle
Researchers have identified the “fraud triangle” as a key factor in committing fraud. The triangle consists of:
- Motivation: greed or need
- Opportunity: weak internal control systems and poor security
- Rationalization: the philosophy that “if others are doing it, why not me”
Removing Opportunity: A Key to Deterrence
Experts note that removal of opportunity is most directly affected by the system of internal controls and provides the most actionable route to deterrence of fraud.
Fraud Risk Management
The guidelines define fraud risk as the vulnerability of a PSE in relation to the three interrelated elements that enable someone to commit fraud (motive, opportunity, and rationalization). Fraud Risk Management is defined as a process that identifies, assesses, and mitigates fraud risks to protect public resources.
Implementation: A Collaborative Effort
The Permanent Secretary-Treasury has been mandated to issue directions and/or instructions from time to time to ensure the safe and efficient use of public resources. The Internal Auditor General (IAG) has also been tasked with issuing guidelines and ensuring the effectiveness of risk management in PSEs, including fraud risk management.
Conclusion
The development of these guidelines is a significant step towards promoting ethical conduct among public leaders and preventing fraudulent activities in the public sector. By understanding the risks and implementing effective fraud risk management frameworks, we can work together to ensure that public resources are used efficiently and effectively.