G1: What is the purpose of PACS Standard 6
The purpose of PACS Standard 6 is to provide for measures which reduce the risk of corruption in the management of Project finances. Such corruption may include, for example:
- the Project Owner’s finance managers making corrupt payments:
- of more than is due, to Suppliers who have paid a bribe to the finance manager(s)
- of more than is due, to Suppliers who are secretly owned, wholly or partly, by the finance managers
- to phantom Suppliers, and instead receiving the payment into their own account
- the Project Owner’s finance managers extorting payments from Suppliers in return for making payments which are properly due.
G2: General management controls (paragraph 1 of PACS Standard 6)
Paragraph 1 of this PACS Standard provides that the general anti-corruption measures in paragraphs 10 (conflict of interest), 11 (decisions), 12 (communication) and 13 (records) of PACS Standard 1 should apply to all Project financial management. This means that all financial management processes, including, for example, approvals of payment, making of payment and receiving of payment, should comply with the requirements that:
- no manager should act where s/he has a conflict of interest
- there should be appropriate separation of functions
- decisions should be made by an appropriate number of skilled, senior persons
- all decisions, approvals, recommendations, and outcomes should be properly communicated and recorded.
G3: Appointment and employment of finance managers (paragraph 2 of PACS Standard 6)
Paragraph 2 of this PACS Standard provides that the Project Owner’s finance managers should be employed in accordance with paragraph 9 (employment procedures) of PACS Standard 1. This means, for example, that:
- they should be obliged by their conditions of employment to comply with applicable anti-corruption laws and regulations, the Project Code of Conduct and relevant Project Procedures, and can be disciplined if they do not comply
- if they are in a position which is exposed to more than a low corruption risk, then they should be vetted before they are employed, should be competent to undertake their role, and should declare any conflict of interest, and their performance bonuses and targets should be reviewed periodically to verify that there are reasonable safeguards to prevent them from encouraging corruption.
G4: Payments to be made through the banking system (paragraph 3 of PACS Standard 6)
The risk of corrupt payment is further limited by the requirement in paragraph 3 of this PACS Standard that payments over a minor value threshold (US$ 100 is suggested) should only be made through the banking system. This allows investigators to trace a payment to its ultimate recipient, and therefore uncover any potential corrupt payment.
G5: Could the controls in this PACS Standard be abused?
There is a risk that, even though the controls in this PACS Standard are designed to limit corruption, a corrupt public official or finance manager may ensure that these controls are by-passed. This risk is limited in PACS by:
- the obligation on the Project Owner’s top management and compliance manager (who should be independent from the financial management process) to ensure that the PACS Standards are properly implemented (PACS Standard 1)
- the raising of awareness among Project personnel of the importance of preventing and dealing with corruption through the Project Code of Conduct (PACS Standard 8) and training (PACS Standard 9)
- the monitoring of the financial management process by the independent monitor (PACS Standard 11)
- the independent financial audits (PACS Standard 12)
- the ability of Project personnel and the public to report suspected corruption or breach of procedures (PACS Standard 13)
- the obligation on the Project Owner to publish to the public all relevant information in relation to the financial management process (PACS Standard 15).