TNRC Blog Can strengthening internal controls prevent corruption behind natural resource crimes?
Can strengthening internal controls prevent corruption behind natural resource crimes?
This blog post captures insights from a TNRC Learning Series webinar on the use of internal controls to prevent the corruption that often accompanies natural resource crimes. The webinar was conducted on December 1, 2022 by the Basel Institute on Governance. The speakers described the results of a three-country pilot study and addressed learning questions related to: a) how assessments of internal control systems can help practitioners achieve objectives; b) the current state of natural resource management (NRM) internal controls as observed in the study; and c) implications for future NRM programming and recommendations for the future. Practitioners from 52 countries attended the learning event. A TNRC publication on the topic and a how-to guide with practical guidance for internal control assessment in the NRM context are forthcoming. A recording of the webinar is above and a PDF of the slides can be downloaded here.
- Effective internal controls are a vital element of efforts to address corruption risks affecting NRM goals. Practitioners can start with an assessment of existing internal controls to identify challenges, implementation gaps, and potential actions.
- It is helpful for internal control assessments to build on corruption risk assessments and political economy analyses that illuminate how existing internal control systems are designed and implemented.
- In the three countries of our pilot study, most NRM internal controls were at an early stage of maturity, typically the informal or ad hoc level. Some policies were in place but most fell short of what was needed for effective control. Government-level internal control units rarely focused on NRM agencies. This is in part due to wildlife and other natural resources not being appropriately valued.
- As a result, NRM agencies and practitioners who work with them are missing opportunities to mitigate critical corruption risks and improve protections for wildlife and other natural resources. The same controls would also help mitigate financial, economic, and reputational risks.
- Imagination and a deep understanding of local realities can help practitioners to maximize the impact of activities like developing guidelines and conducting training.
Where should NRM practitioners start in order to assess internal controls?
A useful entry point for understanding internal controls is a corruption risk assessment. This is especially valuable in systems where the control structure is at an informal or ad hoc stage of development. By using the results of corruption risk assessments, practitioners can identify areas of focus that are more likely to produce specific and actionable next steps to reduce NRM-related corruption risks.
It is also important to understand how a country has designed and implemented its existing system of internal controls related to NRM and corruption. Different ministries and agencies operate within different contexts and under different constraints. Understanding the challenges and opportunities they face is key to helping NRM practitioners make well-informed decisions about how to best provide assistance and support and achieve mutual objectives. A political economy analysis is a good way to do this.
Another important element to consider is “tone at the top.” The actions of leaders can provide insight into an organization’s values, philosophies, and attitudes. A positive tone at the top, in which managers uphold ethics and demonstrate integrity, can drive effective internal control. In contrast, a negative tone at the top can be difficult to overcome.
To what extent are internal controls used in the NRM environment so far?
Internal controls for wildlife activities in the countries that we worked with were generally at an informal, ad hoc, or undocumented level. Various internal control units, such as supreme audit institutions or internal audit organizations, had been assigned some degree of responsibility for aspects of internal control.
These often seemed to be effective when addressing budgetary or accounting issues. However, in most cases, the internal control units did little to address topics related to illegal wildlife trade, natural resource crime, or environmental management generally.
In terms of policies and procedures, we found some written guidance intended to mitigate corruption. However, much of it lacked needed detail or had not been implemented effectively due to a lack of resources, the need for additional training, or the absence of established monitoring processes.
What opportunities stand out?
As a result of the weak application of internal controls, NRM agencies are missing a potent opportunity to mitigate identified corruption risks. This would improve their functioning and ability to achieve their objectives.
The same systems of internal control can also mitigate other important risks related to wildlife and natural resources. These include:
- financial risks, e.g. loss of revenue from export permits;
- risks to economic opportunities, e.g. loss of jobs in eco-tourism or impacts from sanctioning; and
- risks to national and regional reputation, e.g. as a safe and reliable place to do business or citizen faith in government.
However, it is important to realize that no system of internal control can ever completely eliminate the potential for corrupt behavior. Enhancing internal controls is only one of many ways to help close the implementation gap. Wider systemic challenges such as under-resourcing, unclear values and direction, or adverse socio-economic conditions may also need to be addressed as part of any plan to ensure integrity in public agencies.
Why is it important that wildlife and other natural resources are properly valued?
Historically, governments have often treated wildlife and other NRM-related crimes as relatively mild offenses. The thinking is: it’s “only” an animal or a tree.
To overcome this thinking, wildlife and other natural resources need to be valued appropriately – not only in terms of their “price” on the illicit market but also in terms of their value to biodiversity and the country’s reputation and sustainable development. Otherwise, internal controls focused on how the criminal justice system deals with the worst offenses can lead to NRM crimes and related corruption being overlooked.
For example, if internal control units are instructed to prioritize their work based on the amount of public funds at stake, wildlife crime may be viewed as a low priority since such offenses rarely cause the loss of public funds directly.
How can one address sensitivities in conducting internal control assessments?
Corruption is a sensitive topic. Some of the people interviewed as part of our pilot study were unsure about the views of their own leadership and were concerned about the way that their answers would be used.
In dealing with topics like bribery and undue influence, it can be helpful to speak in positive terms – discussing ways to achieve integrity instead of fighting corruption, for example. This can help to elicit full and accurate information to support internal control assessments.
Using neutral terms that are less challenging or critical can help achieve a more constructive tone. The emphasis should be on the value of an internal control approach in supporting NRM agencies to achieve their important objectives.
How can practitioners go beyond the usual activities of developing guidelines and conducting training?
Too often, we saw internal control policies or procedures developed according to “international best practice” that were gathering dust in a drawer. Internal control systems need to fit the reality of employees at all levels. Policies, procedures, and guidelines need to be clear and simple enough for everyone to understand. That might mean focusing on the basics, to begin with.
At the very least, all employees should know the specific actions to be taken to reduce corruption risks. They should also know how and where to report indications of potential misconduct. Focusing on achieving those two things will already be a good start, before adding additional layers.
Second, practitioners could seek to enhance transparency in its widest sense. Even relatively simple steps, such as making annual and audit reports publicly available and sharing the results of inter-agency initiatives to fight corruption, could also strengthen the ability of NRM agencies to achieve objectives.
Last, capacity building can be far more than simply attending training classes. One panelist described an innovative effort in which employees are encouraged to imagine where corruption could exist and to be alert to ways in which even the most positive interventions might result in increasing integrity risks. The resulting vigilant mindset is useful for identifying previously unexpected sources and types of corrupt behavior.
The value of such training is not limited to employees of NRM agencies. Conservation and anti-corruption practitioners – all of us, in fact – can benefit from exercising our imaginations as well!
Image attribution: © naturepl.com / Jen Guyton / WWF; © Brian J. Skerry / National Geographic Stock / WWF; © Georgina Goodwin / Shoot The Earth / WWF-UK; © Hkun Lat / WWF-Aus