Behind the scenes, governments and accounting professionals often work together to fight corruption. Their combined efforts rarely make the headlines, but are nonetheless fundamental to protecting the public interest and creating more just and equitable societies.

A new report from the School of Administrative Studies at York University highlights the power of in-depth knowledge of accounting-based information systems (ABIS) to expose fraud and corruption. It also shows the potential for transparency tools to be manipulated for personal gain.

KEY TAKEAWAYS FROM THE WHITE PAPER

The facts of the case occurred in Argentina, a country with a corruption perception index higher than Canada. In one of the largest municipalities, a powerful union of municipal employees caused multiple strikes every year. After a mayor was re-elected in 2015 on the promise of curbing the union’s power, it set about tracing employment conditions and salaries for all employees. This was part of a broader plan to strengthen the ABIS and internal controls.

In May 2017, the mayor’s office published a list of municipal employees and their employment details – a move supported by anti-corruption agencies. This exposed a raft of corrupt practices, such as the same person getting two salaries, nepotism, or even being paid a salary while in prison. The irregularities had been going on for years.

The union responded by filing a lawsuit, claiming it was a violation of personal data privacy laws. The judges disagreed and the case was dismissed.

Transparency initiatives need robust ABIS

How had such blatant corruption been going on for so long?

The researchers’ answer is because the union leaders had hidden behind accounting systems. They found this group actively obstructed the improvement process of ABIS and internal controls. The municipality’s accounting records were contained in a centralized system of databases using a code that dated back to the 1970s. The reporting function was not user-friendly, and even high-ranking officers were unable to obtain activity or efficiency summaries. They claimed it would be too disruptive to update it.

Who saved the day?

Accountants with technical knowledge of accounting, ABIS and internal controls, used reconciliation techniques “to match the expenses reported in salaries, wages and employees benefits to the separated payroll system,” states the reports’ authors. “After every record in payroll was linked to the budget execution system, a report was generated where all employees were listed with their salary and area of service.”

To prevent ongoing corruption, the expenses classification needed to be automated in ABIS.

However, the authors note that the transparency initiatives in the Argentinian municipality were short-lived. The ABIS software and hardware was not updated, and there has been no further scrutiny on employment details since a new mayor took office in 2019.

Nonetheless the case shows how high-technology skillsets can protect organizational resources.

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