Fighting corruption at the subnational level Risks and opportunities www.pwc.com/publicsector in devolved states Introduction Over the past few decades, several sovereign governments have begun a > trend towards devolution – the system of decentralizing some power and authority from national levels in favor of subnational level governments. Some of the most significant examples of comparatively recent devolution include: the gradual empowerment of Colombian municipalities in the 1980’s; the creation of 47 new administrative counties in Kenya by the 2010 Constitution; and the movement to decentralize political authority in Indonesia following the election of President Susilo Bambang Yudhoyono in 1999. In these and other similar countries, issues with corruption may persist, despite the various anti-corruption regimes deployed by the national level governments. Regardless of national level capacity, countries undergoing devolution can work to combat widespread and systemic corruption by endowing the newly empowered local and regional governments with the governance tools required to effect meaningful change. In this article, we identify some reasons why devolved governments may be vulnerable to corruption issues, and through exploration of the Kenyan example, we highlight how corruption has taken shape under this devolved state. Finally, we offer a few recommendations that may help address corruption that occurs at the subnational level. The advantages of devolution As devolution has progressed, newly empowered subnational level governments have assumed responsibility for a range of activities including direct revenue collection, infrastructure improvement, and the provision of health, education, and security services. Devolved governments may be better positioned to provide such services for several reasons. In countries with heterogeneous populations, for example, locally controlled governments can more accurately target the needs of their particular populations and provide for their welfare. Additionally, where local governments exercise significant power and authority, those in power can be more closely tied to the outcomes resulting from the policies they enact. This close association with outcomes enables local electorates to use their political franchises (voting, etc.) to hold their local government officials accountable for the outcomes. 1 PwC Fighting corruption at the subnational level - Risks and opportunities in devolved states The risks of corruption in a devolved state At the same time, while subnational governments operate at a level closer to the citizens they govern, some have begun to experience new and distinct challenges to their governance and integrity goals. Corruption issues at the subnational level may surface for a number of reasons including: Fighting corruption at the subnational level - Risks and opportunities in devolved states PwC 2 The Kenyan example Before the historic referendum of August 2010, Kenya’s Even though devolution may provide a greater political landscape was marked by a strong presidency opportunity for citizens to hold their local governments with unchecked power, blurred division between accountable, corruption has remained a challenge executive and judiciary branches, and violence stemming in Kenyan political life, at both the national and sub- from land ownership battles and ethnic tension.1 national level. According to a recent study, approximately However, in August 2010, 67% of the country’s eligible two-thirds of Kenyans believe corruption increased voters supported a constitutional referendum that sought between 2014 and 2015, and many believe the majority to address these issues through new political and legal of government officials are complicit.8 In their 2014- frameworks.2 Notably, the constitution established 47 2015 assessment, the Ethics and Anti-Corruption popularly elected county governments that derived Commission (EACC) identified and reviewed 5600 power from the presidency and would assume functional reports of corruption, which was a 41% increase from responsibilities devolved from the national government. the previous year. Of the cases reported, 50% dealt These functions included agriculture, disease control and with activity from middle officers such as inspector primary healthcare delivery. The new local governments generals or procurement officers. Finally, abuse of office, were structured to increase citizen access to leadership, maladministration and bribery were among the top three introduce checks to authority, and promote effective types of cases reported. service delivery to citizens. Governors were ultimately Local governments may be particularly vulnerable to 3 elected in 2013, which established devolution. corruption as business functions may occur under fewer There is evidence that devolution has revitalized controls relative to national standards, presenting the public hospital and health facilities, improved service opportunity for significant graft and self-enrichment. delivery, and increased citizen engagement in local Last year, allegations surfaced against Kisumu County administration/governance. In Nairobi County, citizen Governor, accusing the head of spending over $208,000 demand helped to drive a finance bill to reduce property on hotel accommodations while his official residence was taxes from 34 to 14%.4 In Siaya County, officials have under renovation.9 In Bungoma County, procurement tackled food security issues through mechanized farming officers within the Ministry of Agriculture purchased such that since 2014, the county has procured 15 tractors a set of 10 wheelbarrows at the highest cost totaling and about 59,000 pounds of seeds, resulting in a 30% $10,300, 10 times the normal cost. Sound source decrease in input costs and an increase in general selection and pricing controls may have helped to prevent production from 33 to 55%.5 For the first time in 50 such waste. Furthermore, according to some accounts, years, emergency vehicles in Mandera County can safely many county procurement officials were former national transport women to nearby hospitals that are equipped government employees who continued corrupt practices to deliver healthy babies via C-section.6 Further, in locally.10 Samburu County child and mortality rates have gone down by 76%.7 1 http://allafrica.com/stories/201412081032.html with-all-on-board?articleID=2000190604&story_title=devolution-works-best- 2 http://www.brookings.edu/research/opinions/2013/10/22-devolution- with-all-on-board&pageNo=1 resource-sharing-kenya-kimenyi 6 http://devolution.cog.go.ke/ 3 http://www.irinnews.org/report/97726/briefing-devolution-transform-kenya/ 7 http://allafrica.com/stories/201504240129.html http://citiscope.org/story/2015/nairobi-governor-evans-kidero-devolution- 8 http://www.afrobarometer.org/sites/default/files/press-release/kenya/ken_r6_ bringing-services-closer-people pr_corruption.pdf 4 http://www.thisisafricaonline.com/News/Devolution-in-Kenya-Panacea-or- 9 http://allafrica.com/stories/201604250854.html problematic?ct=true 10 http://www.the-star.co.ke/news/2015/09/08/uproar-over-sh109000-wheel- 5 http://www.standardmedia.co.ke/article/2000190604/devolution-works-best- barrow-in-bungoma_c1201118 3 PwC Fighting corruption at the subnational level - Risks and opportunities in devolved states Recommendations As governments have progressively shifted to subnational government entities, citizens have benefited from increased access to leadership authorities. In order to provide more effective leadership, the need for implementation of anti-corruption controls is becoming increasingly apparent. These tools and principles focus on building or strengthening the supporting institutions that will enable the country to optimize gains from devolution. In addition to addressing institutional architecture, several of these recommendations focus on creating an environment that engages citizens as true partners in governance, as they offer key opportunities to mitigate potential corruption in devolved states. Buy-in from local and regional leaders will invigorate anti-corruption policies enacted at the subnational level. Effective governments will consistently and continuously promote anti-corruption principles at the highest levels. Similarly, Establish a culture subnational governments that hold their own officials to high standards of integrity and take disciplinary action against those who do not meet them will more integrity from effectively contribute to a culture of public integrity. the top down and Local and regional integrity initiatives should also consider adopting mechanisms that harness the power of citizen engagement in fostering a culture of accountability. reinforce it from Such initiatives would provide for citizen input throughout the lifecycle of policy the bottom up making, collaborate with citizens to execute and deliver services, and provide direct and indirect channels through which citizens can share feedback. As a result, citizens can become stewards who actively scrutinize power and demand change where necessary. National governments should consider how to effectively coordinate with their local and regional counterparts on anti-corruption efforts. If national governments Reinforce local adopt laws that require regional and local governments to enact certain minimum control with anti-corruption practices, they can frustrate the efforts of bad actors hoping to “shop” around for permissive jurisdictions. Additionally, even as sources of funding national