Transparency and tech together can safeguard taxpayers’ money

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum. Author: Silvina Moschini, Co-founder, TransparentBusiness, Inc.

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Fraud, waste and abuse of taxpayers’ money in government procurement is unfortunately far too common across the globe. In the US alone, the government spent $4.11 trillion in 2018, with $400 billion of that going directly to contracts for goods and services. It is impossible to know how much taxpayer money is wasted, but in one case the City of New York was overbilled $500 million for a municipal project.

Corruption is seen throughout the world. In a 2018 OECD survey, 42% of state owned enterprises (SOE) respondents reported that over the past three years, corrupt acts or other irregular practices occurred in their company. Given that SOEs comprise approximately 22% of the world’s largest companies, the significance of this fact cannot be understated.

With the advent of the Fourth Industrial Revolution, governments now have new and innovative tools that can make significant inroads into protecting taxpayers’ money and save millions of dollars at all levels – federal, state, city and municipalities.

Foremost consideration in this battle is transparency. By leveraging innovative technology platforms, the ability of governments to protect taxpayers’ money through transparency can become one of its greatest assets.

Transparency makes it possible for governments to hold contractors accountable, as well as provide its citizens with assurances that their money is being spent responsibly and not lost to fraud, waste and abuse.

When a company accepts a government contract to provide services for its citizens – whether that is to build a bridge, create an emergency system or provide legal counsel – it is their responsibility to undertake that work in a responsible and lawful manner. And taxpayers depend on their governments to make sure they do this rather than steal their money.

In the vast majority of the cases, that is exactly what happens. But history shows us time and again that government contractors will take advantage of this situation because they know, at the end of the day, it is more likely than not that the government who awarded the contract will in fact not hold them accountable. Often because they know the technology better than the government agencies and apply it more effectively.

The good news is, with advanced solutions now possible, those days are over. Through simple software programmes and other technologies, government agencies can now independently verify computer-based work done by its contractors and ensure public funds are not being wasted or lost through fraud or abuse.

In reality, the transparency achieved through technology can be applied to all aspects of government procurement, providing accountability across the entire process. This type of digital transformation in government procurement will instill good government policies that will protect taxpayers’ money simply through the independent verification of services delivered.

The fact is, there are a wide range of opportunities for fraud to be committed through the entire procurement process. At the same time, with today’s advancements, there are many ways technology can be applied to prevent this crime.

For instance, predictive models can be used to identify potentially fraudulent behaviour before it happens, and AI and machine learning can be leveraged for statistical analysis to reduce fraud. According to a March 2018 Forrester Report, several governments are already considering using blockchain networks as part of their efforts to strengthen their systems and prevention efforts.

Even as the people who commit fraud evolve and become more sophisticated, so too can government agencies by leveraging deep analytics, AI, blockchain and other technologies that can keep them ahead and prevent the loss of taxpayers’ money.

These programmes not only protect taxpayers, they increase efficiency for both the government and contractors, saving money that easily offsets their cost. They can also provide a host of other services and resources that can increase collaboration and identify potential problems much sooner than they can today.

What may be the greatest benefit of governments having their contractors use these types of programmes is that it will demonstrate to their citizens that they are holding contractors accountable; which, in turn, will only help gain their trust.

The IMF’s April 2019 Fiscal Monitor: Curbing Corruption calls for greater transparency as one of the most effective ways to fight fraud. “Invest in high levels of transparency and independent external scrutiny. This allows audit agencies and the public at large to provide effective oversight. For example, Colombia, Costa Rica and Paraguay are using an online platform that allows citizens to monitor the physical and financial progress of investment projects. Norway has developed a high standard of transparency to manage its natural resources.”

Taxpayers should expect nothing less. Through transparency and advanced technology, governments can make significant strides in ensuring that the electorate do get the work they paid for, and in turn, start to regain the public’s trust.