Japan's Official Development Assistance White Paper 2007
Next PageMain Text > Part II ODA ODA Record for FY2006 > Chapter 2 Details about Japan's Official Development Assistance > Section 6. Formulation and Implementation of Aid Policy > 3. Matters Essential to Effective Implementation > (3)Prevention of Fraud and Corruption
(3) Prevention of Fraud and Corruption
Japan's ODA has the goal of contributing to the socio-economic development and the welfare of the recipient countries and, given that taxpayers' money supports ODA projects, fraudulent use of the funds provided for assistance must be avoided. Accordingly, the Government and the implementing agencies are taking steps to enhance the transparency and simplicity of procurement procedures.
Concerning loan aid, efforts in the project selection stage include the compilation and release of a list of candidate loan aid projects (long list). Long lists have been prepared and released for six countries, including Viet Nam and Indonesia. Each list cites candidate projects over a period of several years. Inclusion in the list does not in any way mean a loan aid will be provided; in principle, after the compilation of the list, formal requests for loan aid are to be made each fiscal year for projects on the list, and loans will be extended to selected projects after appraisals. From a medium- to long-term perspective, the compilation and release of such lists enables the effective and efficient identification and formulation of loan aid projects and promotes collaboration with other donor countries and international organizations.
Measures have also been taken to ensure transparency during the procurement stage of grant aid and yen loans. Bidding, in principle, is conducted by developing countries in accordance with the procurement guidelines of JICA and JBIC. Then, JICA and JBIC verify the results, and both the names and amounts of the winning tenders are made public. For technical cooperation, JICA procures equipment, services, and so forth for implementing projects in accordance with provisions pertaining to procurement. In case improprieties are discovered relating to grant aid, loan aid, or technical cooperation, a mechanism has been set in place whereby firms that commit improprieties are disqualified from bidding or receiving contracts for projects for a certain period.
Efforts are also underway to increase the efficacy of auditing. External audits are being expanded and spot audits have been introduced, with the recommendations obtained from these audits being used to further measures aimed at improving the use of assistance.
With regard to improving external audits of loan aid, a review by an external expert on the procedures for procurement, which was previously done in a limited number of countries, is now applied in an increased number of countries. For grant aid, external audits for Grant Assistance for Grass-roots Human Security projects worth ¥3 million or more (formerly ¥20 million or more) are obligatory in principle and are steadily implemented. JICA is also using external audits for technical cooperation to serve as accounting audits.
With respect to the implementation of spot audits of loan aid, audits have been conducted on a sampling basis for projects agreed upon by the governments after FY2002 in principle. For grant aid, "spot check without prior notice" was introduced from FY2004 to determine whether or not contract verification, which is the process of checking that all the contacts related to the projects are in line with the agreements between the governments concerned, has been carried out pursuant to a set of standards. Meanwhile, for technical cooperation, the internal audits are conducted through sampling.
Systems for establishing improvement measures regarding the use of loan aid and technical cooperation are currently being set in place through the expansion of mechanisms for each corresponding department of the implementing agencies to follow up audit results.
Japan, for its part, will further strengthen efforts targeting fraud.