TOOLS FOR ASSESSING CORRUPTION & INTEGRITY IN …

1 August 2005 This publication was produced for review by the United States Agency for International Development. It was prepared by the IRIS Center, at the University of Maryland. TOOLS FOR ASSESSINGCORRUPTION & INTEGRITYIN INSTITUTIONSA HANDBOOKTOOLS FOR ASSESSINGCORRUPTION & INTEGRITYIN INSTITUTIONSA HANDBOOKD isclaimerThis document was prepared by the IRIS Center for the United States Agency for International Development. The author s viewsexpressed in this publication do not necessarily reflect the views of the United States Agency for International Development or theUnited States BYThe IRIS Center, University Research Corporation InternationalSUBMITTED TODavid Meyer, Cognizant Technical OfficerCONTRACT NUMBERPCE-I-00-97-00042-00, Task Order 8 ABOUT THE AUTHORSThis handbook was written by Dr.

2 Anthony Lanyi and Dr. Omar Azfar, both economists at the IRIS Lanyi is an expert in macroeconomic policy in developing countries and international finance. He currently specializes inthe analysis and measurement of CORRUPTION , the economic impact of poor governance, and training. Prior to joining IRIS in1996, Dr. Lanyi served for 26 years at the International Monetary Azfar is an expert on the causes, consequences, and remedies for CORRUPTION , as well as on the determinants of effective localgovernment. He has examined the effect of women s empowerment on CORRUPTION , as well as the effect of CORRUPTION on health,education, and trade reform.

3 Dr. Azfar is currently working with the World Bank to develop objective governance number of people made important contributions to the handbook. Dr. Peter Murrell co-wrote the first draft and signifi-cantly contributed to the development of the methodology. Ann Mestrovich, Dr. Peter Murrell, Malcolm Russell-Einhorn, andDr. Melissa Thomas wrote annexes. Patrick Meagher permitted the authors to use portions of his Analytical TOOLS for USAIDA nticorruption Programming in the Europe and Eurasia Regionpaper. Christine Prefontaine edited the handbook and managedits design and , it is gratefully acknowledged that this work was supported under USAID s Enhancing Anticorruption Programming in theEurope and Eurasia Bureau(EECOR) project.

4 The advice and ideas of David Meyer, the Cognitive Technical Officer, played amajor role in determining the final shape and thrust of this for practical field use, this handbook outlines a methodology that provides reliable quantitative, qualitative, andcomparative information that can be used to design, implement, and evaluate sector- or government agency-specific anti- CORRUPTION programs. Steps in the methodology include reviewing available information, conducting an expert assessment,conducting quantitative surveys of both users and government officials, and using the assessment findings to inform programdesign.

5 A series of annexes provide technical depth, as well as a model scope of work to implement the WORDSC orruption, anticorruption, institutions, principal-agent theory, Europe, Eurasia, USAID, government INTEGRITY , governance, survey,assessment, institutional reform, transition INFORMATIONIRIS CenterUniversity of MarylandDepartment of Economics2105 Morrill HallCollege Park, MD 20742, USAE-mail: + :+ FOR ASSESSING CORRUPTION & INTEGRITY IN INSTITUTIONSCONTENTSINTRODUCTION .. 1 Background .. 1 How to Use this Handbook.

6 1 Testing the Methodology .. 3 Complementary Resources .. 3 CHAPTER 1 UNDERSTANDING CORRUPTION & INTEGRITY .. 5 Understanding CORRUPTION .. 5 Understanding INTEGRITY .. 13 CHAPTER 2 REVIEW OF EXISTING MATERIALS .. 17 Sources of Background Information .. 17 Data & Information on CORRUPTION & INTEGRITY .. 18 Institutional INTEGRITY of Specific Sectors .. 23 Existing Documentation on Sector-Specific Institutional INTEGRITY .. 24 CHAPTER 3 EXPERT EVALUATIONS .. 27 Initial Inquiry .. 28 Structured Interviews .. 29 The Substance of Structured Interviews.

7 32 Other Methods of Obtaining Information .. 32 The Next Step: Quantitative Assessment .. 34 Second-Stage Expert Evaluation .. 35 CHAPTER 4 SURVEYS OF CORRUPTION & INSTITUTIONAL INTEGRITY .. 37 Organizing a Survey .. 38 Measuring CORRUPTION with Surveys .. 39 Measuring INTEGRITY with Surveys .. 42 Lessons Learned from Pilot Studies .. 44 CHAPTER 5 DESIGNING A PROGRAM .. 45 Determine CORRUPTION Vulnerabilities & INTEGRITY Strengths & Weaknesses .. 45 Make a Judgment as to the Degree of Systemic CORRUPTION .. 46 Use Prior Experience to Create a Menu of Reform Measure Options.

8 46 Choose Appropriate & Feasible Reform Measures .. 46 Take into Account Strategic Considerations .. 47 Establish Benchmarks for Monitoring & Evaluation .. 50 TOOLS FOR ASSESSING CORRUPTION & INTEGRITY IN INSTITUTIONSANNEX 1 DEFINING CORRUPTION : INTER-COUNTRY DIFFERENCES ..Linguistic Issues ..Survey of Business Registration & Licensing ..ANNEX 2 CORRUPT PRACTICES & CORRUPTION VULNERABILITIES CHECKLISTS .. CORRUPTION in the Health Sector .. CORRUPTION in the Judicial System ..ANNEX 3 INTEGRITY CHECKLIST ..Purpose & Underpinnings.

9 Structure & Use ..Illustrative Checklist for ASSESSING INTEGRITY & Accountability ..ANNEX 4 SOURCES OF DATA & INFORMATION ON CORRUPTION & INTEGRITY ..ANNEX 5 ASSESSING CORRUPTION & INTEGRITY IN SELECTED SECTORS ..Business Licensing & RegulationThe Health Sector ..The Judicial Sector ..Tax Administration ..The Energy Sector ..ANNEX 6 USING INTERVIEWS TO ASSESS INTEGRITY ..Human Resource Management ..Financial Management ..Assets Management ..External Oversight ..Services & Authority ..ANNEX 7 RETICENT RESPONDENTS.

10 ANNEX 8 CONSTRUCTING & INTERPRETING INDICES ..Interpreting Measures of CORRUPTION & INTEGRITY ..Aggregating Measures & Creating CORRUPTION Indices ..Constructing a Cross-Country Index for CORRUPTION in Business Regulation ..Comparing One-Stop Shops & Health Inspectorates in Romania ..ANNEX 9 MODEL SCOPE OF WORK ..BIBLIOGRAPHY .. 147 INTRODUCTIONTOOLS FOR ASSESSING CORRUPTION & INTEGRITY IN INSTITUTIONS 1 BACKGROUNDHOW TO USE THIS HANDBOOKThis handbook is designed to help USAID Mission staff to assess institutionalintegrity at the micro-level.