Academic journal article
By Norris, Daniel M.
The Government Accountants Journal , Vol. 46, No. 3
Kickbacks, corruption, lack of internal controls-these are just a few of the author's experiences with a multi-million dollar foreign aid project involving the U.S. government and affiliated organizations in the United States.1 The absence of proper internal project controls resulted in the misappropriation and misuse of millions of dollars.
This article will share insights with the hope that wider dissemination of this information will reduce this type of fraud and corruption in other projects. Issues are raised concerning not only the improper use of U.S. taxpayers' funds but also the negligent project oversight responsibilities of the U.S. government and participating organizations.
Corruption at the national level in some countries is considered a cultural phenomenon. Just as the ethical tone at the top of a company influences the behavior its employees, the presence of national-level corruption increases the acceptability of corruption in lower-level participating organizations. However, national-level corruption is not the concern here, but rather fraud within entities receiving grants.
Statement on Auditing Standards No. 82 classifies fraud into two categories. One type is employee fraud that results in a misappropriation of assets from the organization, directly harming the organization. The other category is the intentional misstatement of financial statements that directly harms the organization's creditors and investors because they have made financing decisions based on misleading information. Misstated financial statements may also harm the organization because inappropriate performance bonuses may be given to management, and the organization may suffer from creditor and investor lawsuits.2 The former category of fraud will be the focus here.
The project discussed in this paper is part of the agricultural market reforms undertaken by the government of a developing country in the early 1990s. Market reforms are creating a high demand for managers, technicians and other business professionals who can function effectively in a market-based economy Additional training, education and research programs are required to supply the professionals necessary to guide and carry out reforms while improving efficiency To meet these training needs, and to contribute to the success of the agri-food sector in this country, a project was developed and $15 million was secured over a five-year period. The co-recipients of the project grant funds were an agricultural institute in the developing country and a university in the United States, involved to provide leadership, supervision and program development for the project.
Objectives of the Project
The project objectives were to identify and introduce agricultural business education, training, research programs and activities in the developing country. These programs and activities would support the agri-business sector in its adaptation to changing economic and market conditions and would improve the capacity of the agri-business sector to function in an emerging market-based economy.
The specific objectives were to carry out the following:
1. Education at the undergraduate and graduate levels, emphasizing courses in the agri-business, technical and managerial skills necessary for effective functioning in a market economy;
2. Training programs serving middle- and top-level managers and technicians in the agricultural cooperatives and other private sector individuals by preparing them for efficient privatization and accelerated economic reforms; and
3. Research contributing to changes in institutions and policies, and the restructuring of the agri-food system, including the organization and operation of private sector firms and cooperatives and development of the infrastructure to support the efficient functioning of markets. The research program would also support the education and training programs with timely information and analysis of the current status of the agri-business sector. …