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This publication was produced upon request of the United States Agency for International Development. It was prepared independently by the Consulting and Advisory Services Program for Colombia executed by Olgoonik Technical Services LLC and completed in January 2019.

Anti-Corruption & Transparency Consultancy Final Report

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Research Team

Presented by: Olgoonik Technical Services LLC Lead consultant: Maria Zuleta Assistant consultant: Diana Galvis

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Content List of Acronyms ................................................................................................................. 5

1. Executive Summary .................................................................................................... 6

2. Background .................................................................................................................. 9

3. Methodology ............................................................................................................. 14

4. Key Findings ............................................................................................................... 15

(a) Policy aspects .......................................................................................................... 15

(b) Investigation and punishment of corruption ..................................................... 19

(c) Social control .......................................................................................................... 19

(d) Cultural aspects ...................................................................................................... 20

(e) Public procurement issues .................................................................................... 21

(f) Electoral matters ..................................................................................................... 25

(g) Capture and cooptation of the State ................................................................... 27

(h) Other matters ......................................................................................................... 28

5. Strategy ....................................................................................................................... 29

6. Recommendations .................................................................................................... 32

(a) Prosecuting and disrupting people engaged in corruption ............................. 32

(i) Support to FGN .................................................................................................... 32

(ii) Support to PGN for disciplinary investigations .............................................. 33

(iii) Support to Consejo Nacional Electoral (CNE) ................................................ 34

(iv) Support to CGR with overseeing the expenditure of the SGR ..................... 35

(b) Prevention and protection .................................................................................... 35

(i) Support the PGN to follow up implementation and compliance with transparency and access to information law ........................................................... 36

(ii) Governance support to the subnational level ................................................ 36

(iii) Support for DNP to continue with the strategy to improve regulatory quality ........................................................................................................................... 39

(iv) Public procurement system for Large Infrastructure Projects ...................... 40

(v) Support to the Ministry of Justice in the implementation of the electoral crime policy .................................................................................................................. 41

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(vi) Support the strengthening of the Anti-corruption Observatory at the Secretary of Transparency (ST) .................................................................................. 42

(vii) Support to the OVP and ST in the implementation of the international commitments ............................................................................................................... 43

(viii) Support to Congress to continue with the commitments on Open Congress Initiative ...................................................................................................... 43

(c) Social control .......................................................................................................... 43

(d) Academic research ................................................................................................. 45

7. Bibliography .............................................................................................................. 46

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LIST OF ACRONYMS ANDI Asociación Nacional de Empresarios CE Consejo de Estado CCE Colombia Compra Eficiente CGR Contraloría General de la República DAF Dirección de Apoyo Fiscal DAFP Departamento Administrativo de la Función Pública DNP Departamento Nacional de Planeación FGN Fiscal General de la Nación GOC Government of Colombia IGA Índice de Gobierno Abierto INVIAS Instituto Nacional de Vías MHyCP Ministerio de Hacienda y Crédito Público MEN Ministerio de Educación Nacional MI Ministerio del Interior MJ Ministerio de Justicia MOE Misión de Observación Electoral OECD Organization for Economic Cooperation and

Development OVP Office of the Vice President PDET Programas de Desarrollo con Enfoque Territorial PGN Procuraduría General de la Nación SGP Sistema General de Participaciones SGR Sistema General de Regalías ST Secretary of Transparency TxC Transparencia por Colombia UIAF Unidad de Información y Análisis Financiero USAID United States Agency for International Development WB World Bank

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1. EXECUTIVE SUMMARY Corruption undermines Colombia’s democratic governance and stifles development. In the year 2017, the country ranked 96th among 180 countries in the perceptions of corruption index of Transparency International with a score of 37 on a scale from 0 (highly corrupt) to 100 (highly clean). The World Bank’s 2016 Governance Indicators show improvements vis a vis the 2014 Voice and Accountability, Political Stability, Absence of Violence/Terrorism and Government Effectiveness indicators. The country maintained the same levels of indicators as in 2014 for Regulatory Quality and Control of Corruption but has backtracked in Rule of Law. Colombia ranks particularly low compared with its peers (in terms of income) in the indicator of Control of Corruption (Engel et al Pag. 8). A 2018 Gallup polls show that corruption is perceived as one of the main challenges the country face in front of security and a slowing economy. In fact, 85% of those surveyed stated that corruption is getting worse. Companies surveyed in the 2015 World Economic Forum Global Competitiveness Report stated that corruption is the second biggest challenge to business activity, only preceded by a high tax burden and followed by inadequate infrastructure. Colombia has undertaken a number of steps to implement anti-corruption systems and initiatives to foster integrity and transparency. However, various assessments1

have identified issues that remain to be addressed. These include public institution’s capacity to investigate and prosecute corruption, clarity in the application of the conflict management system and special attention to the implementation of the Peace Accord at local level. The recently presented National Development Plan 2019-2024 situates Legality, along with Equity, and Growth as one of the three main pillars for a strategy for moving the country forward. Specifically, the section on Legality recognizes the fight against corruption not only as a matter of rule of law, but as a critical factor for economic and social wellbeing. Low institutional capacity is singled out as an enabler for corruption that needs to be improved. Having said that, corruption doesn’t only thrive in environments where institutions are weak or where there is a lack transparency, but where they are vulnerable to cooption by electoral barons and conflicts of interest.

1 OECD (2017), OECD Integrity Review of Colombia: Investing in Integrity for Peace and Prosperity, OECD Public

Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264278325-en.

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This document puts forward a number of key findings from the desk review; field visits to Córdoba, Valle and Cauca; and interviews with relevant actors. Key findings are grouped into the following categories: (a) policy aspects; (b) investigations and punishment of corruption; (c) social control; (d) cultural aspects; (e) public procurement issues; (f) electoral matters; (g) capture and cooptation of the State; and (h) other matters. Based on such findings the study puts forward a strategy and a set of recommendations for USAID to design an anti-corruption program to support the government, academia, business associations and civil society in PDET areas. USAID counterparts for a future program include the Departamento Nacional de Planeación (DNP) and the three main anti-corruption institutions: FGN, PGN and CGR. These recommendations are aimed at supporting Colombia in: (i) reducing opportunities and incentives for corruption, (ii) identify cultural influences (e.g. peer and societal pressures) influencing corrupt behaviors; (iii) increase access to public information and its use for purposes of investigation and prosecution, following the money, understanding how corruption works, building capacity to focus investigation and prosecution; (iv) improve the communication system among government agencies at different levels; (v) means to transform behavior towards public affairs; (vi) make progress in international anti-corruption commitments; and (vii) link the action lines with the USAID/Colombia Country Development Cooperation Strategy particularly with the purpose of improving governance and reduce corruption. The starting point of the proposed strategy is the analysis of public data: collection, organization, access to the data, data quality and understanding the link between data bases and its relevance for interventions in four dimensions: (i) prosecuting and disrupting people engaged in corruption; (ii) prevent corruption and protect the society from corruption; (iii) improve quality and technical capabilities of social control; and (iv) academic research linked with the social control exercise at the territories and the process to improve local governance. The analysis of the four dimensions and the interventions consider a cultural approach and its impact on transforming the behaviors of citizens, entrepreneurs and public officers. The recommendations covered include support to FGN, PGN, CNE and CGR to carry out their investigation duties, capacity to analyze data, and build on case theory to be able to prosecute and disrupt people engage in corruption. The second set of recommendations includes support for the implementation of the transparency and access to information law for PGN. Recommendations also include governance

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support for municipal level administrations, support for DNP’s strategy to improve regulatory quality, support for the implementation of the electoral crime policy, support to Congress for transparency in legislative matters, and support for the implementation of international Anti-corruption agenda level commitments. Finally, recommendations also include two initiatives on social control in PDET areas in collaboration with stakeholders from academia.

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2. BACKGROUND The fight against corruption is a central theme in political campaigns and national government plans since 1998. In the last twenty years the country’s anti-corruption agenda has prompted legal reforms, pushed for transparency and access to public data, fostered the adoption of international best practices, and the creation of new government institutions. In this sense the country has adopted various measures aimed at strengthening the legal framework to enhance integrity and combat corruption. The 2014 Transparency and Access to Information Statute and the 2011 the Anti-corruption Statute (Estatuto Anticorrupción), provided additional legal mechanisms to prevent, investigate, and punish corruption and enhanced the effectiveness of public control measures. However, recurrent corruption scandals and the lack of trust in public institutions indicate that legal measures alone are insufficient to curb corruption and that there is an urgent need to strengthen good governance and government capacity. Since 1996, the World Bank (WB) defines governance as “the traditions and institutions by which authority is exercised has measured six indicators to assess the context of government action” which includes combatting corruption2. The following graph shows Colombia’s performance for the period from 1996 to 2017.

2 Worldwide Governance Indicators (WGI) available from 1996-2016. See

http://info.worldbank.org/governance/wgi/#reports

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Figure 1 - Worldwide Governance Indicators - Colombia

Source: World Bank, Worldwide Governance Indicators

The Control of Corruption indicator shows the percentile rank of the country on each governance indicator. “Percentile rank indicates the percentage of countries worldwide that rate below the selected country. Higher values indicate better governance ratings. Percentile ranks have been adjusted to account for changes over time in the set of countries covered by the governance indicators. The statistically likely range of the governance indicator is shown as a thin black line. For instance, a bar of length 75% with the thin black lines extending from 60% to 85% has the following interpretation: an estimated 75% of the countries rate worse and an estimated 25% of the countries rate better than the country of choice.” The Report of the Expert Advisory Group on Anti-Corruption, Transparency, and Integrity in Latin America and the Caribbean indicates the evolution of the Control of Corruption indicator for select countries in the region3. The chart below shows the evolution of the indicator for a number of South American countries between 1996

3 IDB (2018) Report of the Expert Advisory Group on Anti-corruption, Transparency, and Integrity in Latin America and

the Caribbean / Eduardo Engel, Delia Ferreira Rubio, Daniel Kaufmann, Armando Lara Yaffar, Jorge Londoño Saldarriaga, Beth Simone Noveck, Mark Pieth, and Susan Rose-Ackerman (Page 8).

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and 2017. The only countries where indicators improved are Bolivia (25 to 28), Colombia (37 to 44), Paraguay (10 to 25), and Uruguay (82 to 88).

Figure 2 - Control of Corruption: Trends South American Countries

Source: World Bank, Worldwide Governance Indicators

Colombia ranks 72nd out of 114 in the 2017 Rule of Law Index of World Justice Project. In other indicators the country ranks: Open Government 31/113, Absence of Corruption 83/113 and Regulatory Enforcement 54/1134. Latin America’s governance quality followed the trend of other predominantly middle-income regions and also lags behind its income peers in control of corruption (Engel et al, 2018). Gallup polls indicate that corruption is perceived by society as one of the main problems. In fact, a Gallup poll conducted in Colombia every two months between August 2004 and December 2016, indicated that respondents to the question “Nowadays what is Colombia’s principal problem?” highlighted corruption as the country’s first or second biggest problem. The 2018 poll confirmed that corruption is the country’s biggest problem.

4 http://data.worldjusticeproject.org/pdf/rule-of-law-index-COL.pdf

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Figure 3 - Gallup bimonthly poll 2018

Source: Own design based on Gallup Poll SAS data

Colombia is emerging from a 50-year internal conflict that seriously undermined the rule of law and created an environment rife for corruption and illegal activity. During the 1980s, illegal economies succeeded in capturing the state and coopting public institutions. The Constitution of 1991 created a new legal framework that empowered subnational level government new and expanded with budgetary autonomy. However, the influx of additional funds to municipalities with low levels of institutional capacity exacerbated the problem of corruption. Additionally, the 2011 reform to the royalty’s system allowed municipalities to receive additional funds without having the requisite financial management capacity. An illegal economy needs certain conditions to operate. This means that illegal seek to manipulate elections, civil service appointments, formulation of regulation, and other government decisions. Illegal economies like narcotrafficking, illegal mining and logging, thrive when illegal actors coop national and local level administrations. The typologies of corruption identified in this study include:

1. Bribery and the exchange of favors to obtain an authorization, a construction license, or to avoid paying a fine. These types of corrupt practices can be classified as petit corruption.

2. Corruption in public procurement includes the design of terms of reference

in favor of a given bidder, collusion, disclosing of information to a given competitor, non-biased offer evaluation, demanding payments or favors to

0

5

10

15

20

25

30

35

2018 February 2018 April 2018 June 2018 August 2018 October 2018 December

Nowadays what is Colombia's principal problem?

Public Order Economy Corruption Others

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process payments, and not monitoring the performance of the contract, among others.

3. Corruption in the regulatory process includes undue pressures on authorities

to have regulation be favorable to a particular business, company or individual; conducting an investigation against/favor of someone in particular; or not updating the cadastral value of land to avoid taxation at the mandated level.

4. Clientelism linked to the electoral system and the exercise of the economic

power.

5. Cooptation of institutions or administrations through coercion or economic pressure.

There is a widespread bias towards adopting a punitive approach to combatting corruption and very little interest in analyzing it as phenomena. In fact, there is little in terms of domestic literature on corruption, let alone research into the causes of corruption and its corrosive effects. The analysis of corruption has been limited to dismissing it as an inherently sub regional problem. In some cases, talk of corruption only echoes calls for recentralizing budgets from subnational administrations or for issuing new laws and regulations. Similarly, demagogues and pundits propose little in terms of practical solutions to combat corruption. In light of the above, possible future USAID technical assistance to anti-corruption institutions could include: (i) improving their ability to understand how corruption works in different contexts, in different municipalities, and in different government agencies, and (ii) enhancing their ability to be able to design strategies to prevent corruption, focus on prosecution, and protect organizations. Until now, anti-corruption institutions are not taking advantage of data analytics and new technology tools, particularly machine learning, to effectively prevent, prosecute, and disrupt corrupt activity. The government needs to strength administrative processes and procedures to prevent corruption. In turn, academic institutions and organizations engaged in social control need to contribute to improve the research on corruption as a widespread phenomenon. The 2015 WB World Development Report acknowledges the need to include in the analysis and design of public policies non-rational elements of human action (e.g.

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emotions), as well as the need to consider the weight of informal norms (in particular social ones) in the understanding the limits of state intervention. Until now, the government’s traditional approach to fighting corruption has been implementing expensive public awareness campaigns with little or no effect. There is considerable public pressure demanding immediate solutions to societal woes. The popular belief is that as a society, Colombians are slow and don’t react to problems. For example, Colombians highlight delays in national road construction with the ability of Japan to reconstruct a highway after the 2011 earthquake in only six days. What Colombians fail to understand is that Japan previously invested time and resources on how to respond to natural disasters, designed detailed processes and procedures to repair damages, and emergency response mechanisms. A quick reaction without studies and procedures increase the risk of corruption, it is common to hear Colombians saying that public issues are overly diagnosed when in fact there has never been an adequate understanding. President Ivan Duque decided to avoid the practice of having budget allocations assigned to a region and to a particular Congress member (who would participate in the expenditure process of such funds at the subnational level5). In the last eight years, this practice has been denounced by various sectors as one that enables corruption where funds have been squandered or outright stolen. This political decision by the current presidential administration may have an enormous impact on combatting corruption. For this reason it requires further analysis along with the monitoring of transfers from the central government to local administrations. The recently presented National Development Plan situates Legality, along with Equity, and Growth as one of the three main pillars for driving the country forward. Specifically, the section on Legality recognizes the fight against corruption not only as a matter of legality but critical and necessary for economic and social wellbeing. Low institutional capacity is singled out as an enabler for corruption that needs to be rectified/improved. 3. METHODOLOGY The present study combines a desk review of academic and government documents and 33 interviews carried out in seven municipalities and in Bogota between June and December 2018. Interviewees selected for this study were in a position to say something meaningful about corruption in their municipalities and regarding the National strategies to control corruption. 5 The mechanism used in the formulation of the Budget is known as cupos indicativos.

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Data collection mainly comes from secondary sources. The review team conducted a desk review of documents at both global and country levels. In addition, the review team conducted a series of in-depth interviews with key stakeholders at the municipal and department level and a group discussion with the MSI/USAID consultants for the Regional Governance Activity on electoral crime. Municipalities were selected with USAID. Each interview was carried out by two interviewers and lasted 1.5 hours on average. Based on the key findings, this document puts forward a number of recommendations to provide technical assistance to the Government of Colombia (GOC). Recommendations are based on their degree of successful implementation, of political will, and where international cooperation agencies and development banks have expressed interest to work in. 4. KEY FINDINGS There is no universally accepted definition of corruption. Transparency International defines corruption as the abuse of entrusted power for private gain6. The WB considers a corrupt practice the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party7. The UN Guide for Anti-Corruption Policies (2003) highlights the need of a different understanding of corruption from country to country in accordance with its legal and cultural context and the nature of the problem8. In this document we refer to corruption from the perspective of public sector, so it is defined as the abuse of entrusted power for private gain in detriment of public funds and public interest. Key findings from this study are grouped into: (a) policy aspects; (b) investigation and punishment of corruption; (c) social control; (d) cultural aspects; (e) public procurement issues; (f) electoral matters; (g) capture and cooptation of the State; and (h) another matters.

(a) Policy aspects

Absence of a conceptual framework of corruption, its meaning and its characteristics at FGN, PGN, and CGR. 6 Transparency International https://www.transparency.org/what-is-corruption#define 7 World Bank, Helping Countries Combat Corruption: The Role of the World Bank

http://www1.worldbank.org/publicsector/anticorrupt/corruptn/cor02.htm 8 https://www.unodc.org/pdf/crime/corruption/UN_Guide.pdf

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The three main anti-corruption agencies do not have sufficient conceptual tools to translate corruption (the sociological concept) into concrete behaviors. This results in a lack of inter-agency coordination, in the difficulties of translating cooperation agreements between agencies into coordinated interventions, and undermines ability to prosecute and conduct investigations9. The FGN understands corruption as a crime solely affecting public administration and disregards the link it may have with a larger criminal purpose (ie. buying of votes to coopt public officials in charge of public budgets). Regardless of the number of punitive measures that PGN produces each year and the creation of anti-corruption task force, there is no a strategy within the PGN to investigate corruption and to link disciplinary findings with corruption. The public perception is that PGN decisions at national level and subnational levels are influenced by the political interests of the Inspector General and of the Regional Inspectors (Procuradores Provinciales y Regionales) which are focused in procedural aspects and not corrupt practices. In the case of the CGR, the common perception is that there are many announcements and little results. The perception from technical experts is that there is no clarity in the CGR of when corruption is the cause behind the failure of a project or when it was the lack of adequate planning. Poor implementation of Transparency and Access to Information Law and lack of data analysis to tackle corruption. Well-documented processes and procedures are key to preventing corruption. Despite progress in record keeping as mandated by the Transparency and Access to Information Law, the law needs to be fully implemented, particularly with regards to the electoral system and in subnational level financial information systems. There are many cases in which errors due to lack of knowledge and training create the space for corruption. Public officials need to understand the reason behind the obligation of keeping records and need to learn how to use tools to organize and communicate data. Also, there is room to work with the municipal and departmental levels to strengthen administrative processes, particularly those related to the financial information system: income (SGP, SGR and local taxes and levies) and expenditure (procurement, civil service, pension funds, subsidies, judgments and judicial conciliation). Other 9 Ángel Arango María Paula, Dávila Contreras María Ximena, Newman Pont Vivan (2018) Corrupción e Instituciones de

Control y Justicia in Lucha Integral contra la Corrupción en Colombia: Reflexiones y Propuestas. Fedesarrollo.

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processes that need to be strengthened include establishing rules for reporting to Congress and national government officials. Machine learning instruments may help to prevent and anticipate corruption. Anti-corruption institutions should avail themselves of these tools in particular PGN since it is tasked with taking preventive measures. Others units that could benefit include Internal Control offices that need to gain a better understanding of the context and risks of corruption. For example, these units need to use corruption risk for auditing purposes in contracting. Lack of capacity to structure projects at the subnational level Municipal administrations often lack the necessary technical capacity to formulate projects. This situation is taken advantage by consultants that offer their services to municipal administrations for projects in which they have vested interests. Unscrupulous consultants will structure and present projects to authorities to secure funding and then reap benefits from their implementation. In the worst cases, projects often go unfinished. Anti-corruption policies without differentiation in the areas with presence of GAO and GDO Measures to prevent corruption cannot be the same in a context of state capture and cooptation by illegal armed groups or criminal organizations10. In fact, anti-corruption themselves may also be captured or coopted. For this reason, national level authorities need to make distinctions and the necessary adjustments to implement anti-corruption efforts at the local level. Conflicts of interest Colombia has a prescriptive system to identify conflicts of interest. This means that the law defines specific situations where conflict of interest may arise. In light of this, the general interpretation has been that conflict of interest is not an abstract situation, but a concrete situation clearly identified by law. Such an interpretation ignores contextual factors and ignores a broader general interest lens. The system of impedimentos y recusaciones, is simply insufficient to prevent conflicts of interest.

10 Grupos Armados organizados -GAO- and Grupos Delictivos Organizados -GDO- as known by Colombian authorities.

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The movement of high-level employees from public sector jobs to private sector jobs and vice versa, and from the executive branch to the judicial branch increases the possibility of conflict of interest. The current interpretation of the law covering impedimentos y recusaciones is insufficient to deal with the conflict of interest. In a county where the majority of public servants are legal professionals, the problem of conflict of interest is particularly common, especially in the absence of a system establishing rules and no independent bodies to uphold them. For example, in France a former judge cannot switch careers to a ministry where he/she deals with related legal issues he/she may have dealt in the past. Other countries have taken steps to avoid such situations in part by relying on the work of independent bodies that oversees the actions of members of the legal profession. Judicial activism emerges when Congress fails to address the anti-corruption agenda Congress demonstrated a lack of political will to pass legislation to address the issues raised during the anti-corruption August 2018 public consultation. Additionally, the conflict of interest of the General Prosecutor in the Odebrecht case has negatively affected the image of GOC and its willingness to combat corruption along with the legitimacy of anti-corruption institutions. Grupo Aval’s partnership with Odebrecht and its power over the media and advertising through El Tiempo11 have generated widespread general distrust in the legal system, financial organizations, and in the State’s capacity to react to grand scale corruption. Situation like these open up a window for judicial activism. Given that Congress has failed to legislate, citizen will seek to impact the political agenda on fighting against corruption12. For example, there is a civil action suit before the Consejo de Estado (CE) to challenge the election of the General Prosecutor due to his lack of disclosing his conflict of interest as a former legal counsel to Grupo Aval. Irrelevance of the observatory of transparency and anti-corruption in the Secretary of Transparency (ST) The ST has an observatory of transparency and anti-corruption that is irrelevant in the public opinion, media, government agencies and anti-corruption agencies. The

11 Colombia’s highest circulation newspaper 12 Through legal actions before the CE, the NGO Dejusticia obtained a decision forcing the former Inspector General to

leave the PGN for using improper methods for his election.

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ST web site merely reproduces data from other sources. Likewise, there is little analysis, studies or research made by the observatory and that are available on the ST’s web site.

(b) Investigation and punishment of corruption

Colombia has an extensive track record investigating narcotrafficking and other crimes perpetrated by illegal armed actors. However, there is a limited understanding about how to effectively tackle corruption or its underlying causes in other areas, not necessarily in criminal ones. For example, anti-corruption institutions do not distinguish between petit, grand or large-scale corruption, or the cooptation of public institutions. Knowledge of case theory is required for prosecuting and disrupting people engaged in corruption. Therefore, anti-corruption authorities need to better understand how corruption works and how it manifests in different sectors, regions, and types of corruption. If anti-corruption entities improve their capabilities in investigating the systemic nature of corruption they will be able to carry out investigations that reveal a multi-faceted phenomena not isolated actions. For example, the investigation carried out to determine the illegal issue of a construction license thru a bribe differs from the elaborate bribing scheme involved in illegally securing a contract for a major infrastructure project or from the cooptation of a municipality’s financial system. Anti-corruption institutions do not have enough capacity to understand the factors (resources, appointment of corrupt officials, and the elaborate financial and legal schemes) involved in corrupt activities. Using machine learning, and IT and understanding the impact of cultural aspects is important tool to tackle this phenomenon. To this day, the institutional level response to corruption remains unable to disrupt people engaged in corruption and generates public distrust in anti-corruption institutions.

(c) Social control

Weakness in the social control capacity NGO’s at the subnational have a strong commitment to carry out social control but few have the necessary technical capacity or funding. In more extreme cases, NGO leaders have been threatened by criminals in order to intimidate them from pursuing their anti-corruption activities. In some cases, it has been reported that corrupt government officials and political organizations take advantage of these situations to coopt NGO’s and/or undermine their work.

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Lack of communication between academic research and social control There is interest from local level organizations to follow policy implementation and engage in social control. A number of academics are working with the Misión de Observación Electoral (MOE) before the late 2019 elections take place in order to point out the vulnerabilities of the electoral process. The work of MOE can be enriched if linked to the work of local leaders as this would provide valuable insights, will reinforce capacity and knowledge of the social control work and may help protect the community leaders. Private sector organizations play a key role in preventing corruption Initiatives led by ANDI (Asociación Nacional de Empresarios) supported by Transparencia por Colombia (TxC)13 seem to be in reaction to a given situation rather than part of a holistic approach to combating corruption.

(d) Cultural aspects

Legalistic and moral approaches The legalistic approach may generate a situation in which corruption flourishes and undermines government. This is what happens with applying punitive measures to contractors per the Anti-Corruption Statute of 2011. The process established to discipline contractors (the contractor receiving three fines in a year is restricted to participate in the procurement system during the following year, the formal hearings to impose fines) have left without effect the fines clause in public contracts. This creates an incentive to the contractor to delay the non-compliance hearings and to play with the late compliance of the contracts but avoiding fines or giving an extortion opportunity to the public officer who is not acting in good faith. The legalistic approach generates problems as the ones that Colombia is facing in Odebrecht case. On one hand anti-corruption institutions the approach has been to limit Odebrecht’s ability to participate in public procurement as per public statements from the General Inspector, the General Prosecutor and even the Superintendent of Industry and Trade. On the other hand, little or no attention has been given to demanding that Odebrecht complete the work that was contracted and paid for, obtaining information to indict, and prosecute those involved. The legalistic and moral approach of the anti-corruption institutions hamper a practical 13 Colombian chapter of Transparency International

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approach that considers the issue of the public value which has symbolic value for citizens. Such legal and moral approach is the base of several reforms that are a political reaction to corruption scandals and are not based in evidence and studies of the impact of the existing regulations and its restrictions. Lack of research related with the importance of cultural aspects in corruption There is little domestic research to understand how corruption works. Yet, the theory of social norms used to convey the concept of “citizenship culture” by Antanas Mockus and Henry Murrain, may be used to understand how beliefs, values, attitudes, and symbols affect behavior and how peer pressure and family expectations can trigger a decision to engage in or prevent corruption It is common to hear in Bogota that corruption is mostly a regional phenomena closely linked to the lack of capacity. Even academics make this statement without clear evidence to support it whilst ignoring that the risk of corruption is higher when the amount of money involved is higher even when dealt by agencies with sufficient technical capacity. Scandals like the contracts to build Bogota’s Calle 26 and the Ruta del Sol show that the problem is not just one of capacity, but of a much more complex nature. Violence and homicide rates in the Pacific coast illustrate the importance of understanding cultural aspects. If we isolate Tumaco and Buenaventura from the rest of the Pacific coast region, it exhibits one of the lowest homicide rates of the country. Therefore, homicide rates are not necessarily related to poverty, which often is described as the cause behind the high homicide rate in the shantytowns of Medellin.

(e) Public procurement issues

Manipulation of the public procurement to pay for political campaign expenses The following practices are common to pay for political campaigns expenses: (i) drafting of terms and reference to give unfair advantages to a specific company; (ii) use direct contracting method when a competitive method of procurement may take place; (iii) use the personal services contract to satisfy a particular clientele; (iv) delay publication of terms and conditions to limit the participation in the process; (v) low offers to win the selection process and amendment of the contract after signing it;

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(vi) contract acquisition of goods, services or works with NGOs belonging to politicians or people who financed the campaigns against the norm. Use of public works in favor of particular groups Perception of corruption in public works is higher than in any other sector of public procurement. Collusion, terms and conditions to select contractors, amendments to contracts, delays in delivery, and cost overruns in public works may all be linked with corruption. Furthermore, the process to decide where to build public infrastructure (jurisdiction and specific location) are subject to be suspicious as they might be benefiting someone in particular. The Colombian Chamber of Infrastructure (Cámara Colombiana de Infraestructura) and the Colombian Society of Engineers (Sociedad Colombiana de Ingenieros) often publish studies showing the elevated number of selection processes in which there is only one contractor complying with a given solicitation’s requirements (which in many cases is done to give unfair advantages to a particular bidder). Academics and anti-corruption institutions do not trust these reports because the lack of information about the methodology employed. Likewise, the fact that companies are members of these two organizations raises questions about the impartiality of these reports. Law 1882 of 2018 established the obligation of having standard terms and conditions for the selection of public work bidders. As a result the GOC is overburdened with having to establish guidelines for all government agencies using the General Public Procurement Statute. These include conditions to participate in tenders for public works and the technical and economic conditions to be taken into account in the evaluation of the offers. The GOC shall also take into account the characteristics of the regions to promote local employment. Standard contracts are in fact a good practice. However, the public officials need to have a degree of discretion to adjust the standard forms to the particular technical needs and local market conditions. The regulation of the Law 1882, the drafting process of the standard terms and conditions and the implementation thereof have an enormous risk of corruption. The director of the Departamento Nacional de Planeacion (DNP) has supported the initiative of standard terms and conditions, and announced a decree to regulate its application by early 2019. The decree and the process to issue and update standard terms and conditions are key for implementing the measure. Additionally, it is important to follow up on its application and monitor the number of bidders after the usage of the standard forms.

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In the last eight years, journalist, editorials, and civil society representatives have linked public works at local level with cupos indicativos and the elevated number of works not finished or not operating14. Furthermore, there is collusion between politicians and contractors (for example Gerlein, Name and Char-Nule political clans). Similarly, former officials involved in procurement often chose to run for public office (the secretary of public works of infrastructure is a candidate for Governor Cauca). The existence of such groups and practices may not imply corruption per se, however, it creates a bad perception and unfortunately there are many cases under scrutiny in which such groups are involved. Use public funds and public infrastructure for political campaigns The PGN is investigating governors and mayors that allegedly are supporting political campaigns for the upcoming gubernatorial and city and municipal elections. During the visit to Popayan, the research team was informed that during the 2015 campaign for governor of Cauca funds from the public treasury were used to for pay t-shirts, transportation, and logistics for political events. There are similar cases in other parts of the country were mayors and governors used public funds to support campaigns for Congress and even the Presidency. Loosing the real public interest perspective when punishing corruption in public procurement Recent corruption scandals involving Nule and Odebrecht in infrastructure projects are evidence the weakness of Colombia’s anti-corruption’s agencies. The focus of these entities has been on publicly scolding these companies and in a few cases indicting the individuals involved. In other Latin American countries where Odebrecht was involved in corrupt activities, the approach to dealing with the situation was: (i) demanding that work under the contract be completed in the term and manner agreed upon; (ii) demanding that the company release information to investigate and prosecute acts of corruption and their support webs; and (iii) demand the payment of fines for damages. The prospects of letting these companies participate in future bids system should be the end result of and not the starting point of a dealing with corruption. Lessons from Odebrecht scandal regarding conflict of interest in the procurement system

14 Mentioned by Rahomir Benitez (Director of El Meridiano, Monteria newspaper) in the visit to Córdoba

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The main lesson that Colombians may have learned from the Odebrecht scandal is that there is no conflict management system in place. Odebrecht is a Brazilian construction firm that has bribed officials in a dozen Latin American countries, and Grupo Aval, Colombia’s biggest financial group is its local partner for the $1.6bn concession contract to build and operate Ruta del Sol, a highway linking Bogotá and the Caribbean coast. Grupo Aval is owned by Luis Carlos Sarmiento, Colombia’s richest man. Mr. Sarmiento’s legal adviser for many years was Néstor Humberto Martínez who is currently the General Prosecutor, a member of the Council of Ministers during the Santos Administration from August 2014 until 2015, and the head of one of the most prestigious law firms in the country. During Martínez’s campaign to be General Prosecutor, the possible conflicts of interest were flagged by some members of Congress but for the most part were largely ignored. In a plea bargain with the United States’ Department of Justice, Odebrecht admitted to paying $11m in bribes to Colombian politicians in order to obtain the Ruta del Sol contract. Grupo Aval and Mr. Martínez have denied prior knowledge of these payments and of any subsequent ones. Jorge Enrique Pizano, an auditor for Grupo Aval, who was a close friend to Mr. Martínez, detected more than $30m in bribes by the consortium Odebrecht – Aval for non-existent consultancies. A portion of these bribes may have gone to politicians. Mr. Pizano informed Mr. Martínez of these bribes during his campaign for General Prosecutor. Mr. Pizano later died in November 2018. Despite the strange circumstance surrounding his death and public concerns, to date there is no official evidence of a murder. Adding to the series of murky events, Pizano´s son died from cyanide poisoning when he took a sip from a water bottle on Mr. Pizano’s desk three days after his father death.

In 2017, Mr. Martinez’s office ordered the house arrest of Luis Fernando Andrade, who was the director of the government’s infrastructure agency for a case involving the consortium Grupo Aval – Odebrecht, arguing that he illegally awarded an addendum to the contract to extend Ruta del Sol. As Grupo Aval’s lawyer, Mr. Martínez reviewed that addendum and approved it. Mr. Martínez belongs to the same political party than Mr. Robledo former Superintendent of Industry and Trade along with former Vice-president German Vargas Lleras. The decision of Mr. Robledo to force the termination of Ruta del Sol contract left Andrade without authority to impose any sanctions on the contractor.

Individuals involved in the scandal include executives from Aval, members of Congress, current ministers and former ministers. After more than two years of discussions, GOC hasn’t been capable to compel Odebrecht to tell the truth, to pay

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fines arising from a non-performing contract, much less complete the work under the contract. On the contrary, Odebrecht recently filed a lawsuit against the GOC. Jose Elias Melo, former president of holding company Corficolombiana, member of Grupo Aval was implicated in the bribery to obtain the Ruta del Sol concession. He is now in prison and Grupo Aval hired Maria Lorena Gutiérrez, former advisor to President Santos, to replace him. The above shows the limited ability of anti-corruption institutions to handle a scandal of monumental proportions and how the notion of conflict of interest requires thoughtful revision. Government agencies processes to pay invoices There is widespread corruption surrounding the payments of invoices submitted to government agencies. While recent efforts to implement information systems SECOP15 are in the right direction, other systems need to be open to the public to prevent corrupt officials from asking bribes to process contractor’s invoices. Technical specifications for specific goods to be procured The use of specifications outside normally required by the market for goods and services creates favorable market conditions for a select few. This is the case of the chocolate chip cookie scandal in the school meals program. Despite the red flags raised in 2016 in connection with contract specifications that left out suppliers of standard products in the local market, there was no revision of the technical specification requirements. The precedent of the school meals program calls the attention of the need to review the specifications for the procurement of food for the Army, Navy, Air Force, Police, Hospitals and Prisons. The procurement specifications of textiles for uniforms for the Army, Navy, Air Force and Police have been under scrutiny for the same reasons.

(f) Electoral matters

It is common to hear that the origin of corruption is linked with the electoral system and political practices. However, the knowledge of cultural aspects of electoral crimes, the understanding of the social value of voting is limited, and the

15 Sistema Electrónico de Contratación Pública

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identification of how the electoral crimes actually occur are linked to other criminal actions. In addition to the lack of capacity to investigate electoral crimes that is aligned with the findings of section (b) above, the lack of implementation of the transparency and access to the information law at the National Electoral System (including the political parties and CNE) contributes to diminish trust in the electoral system. An example of the lack of understanding of electoral corruption are vote buying estimates for the 2018 elections in Cartagena. One estimate shows that 75% of Cartagena’s population would sell their votes while other estimates are as low as 38 %. One of those estimates shows that the intention to sell the vote is linked with the price offered to the voter (Semana magazine and ELCA polls from Universidad de los Andes). The Regional Governance Activity (RGA) team of consultants has identified lack of knowledge of electoral crime works as a main factor affecting the ability of the State to tackle this type of criminal activity. The draft of the policy document prepared by RGA for the Ministry of Justice contained a description of the problems that arise from the lack of understanding of how corruption is present in the electoral. The RGA team of consultants have identified the following issues at CNE: (i) lack of capacity to carry out the relevant studies necessary to determine annually campaign expenditure thresholds; (ii) noncompliance with the transparency and access to information law; (iii) lack of an information dissemination protocol to guarantee equal treatment to the individuals under investigation; (iv) outdated processes and procedure to avoid bias in the distribution of cases; (v) lack of capacity to oversee the electoral system and fulfill its mandate as advisor to GOC in electoral matters including draft bills and decrees; and (vi) the lack of capacity to convey the value of elections and its importance in democracy to the general public. CNE needs to comply with its mandate including the ability to review financial reports from political parties and candidates following the elections using Cuentas Claras which is a web-based application developed and donated by TxC. TxC developed the application with the support of USAID and the National Democratic Institute (NDI). For the 2010 elections, CNE gave political parties access to Cuentas Claras in order to on Congress and the Andean Parliament campaign financing. Subsequently, the application was revised and adjusted for 2011 elections for mayors, governors, municipal councils and department assemblies. Even though Cuentas Claras is a

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useful tool for CNE, none of the information gathered through the application has served to conduct analysis that would serve CNE to comply with its mandate.

(g) Capture and cooptation of the State

Capture and cooptation is a practice by criminal organizations to control the functioning and operation of the State. The control of the State may be used to protect illegal economies or to extract resources from the public budget. Illegal actors coopt local administrations by manipulating the electoral process. Once in office, client administrations design municipal development plans that render control over procurement and subsidies to their illegal patrons. Sometimes capture or cooptation of local administrations can go as far as the appointment of public official including prosecutors and judges. State capture more likely in areas with the presence of GAOs, GDOs, and illegal economies. These areas include North of Cauca, South of Córdoba and the area of the Bajo Cauca Antioqueño. Other areas that exhibit varying degrees of state capture by illegal actors include the border between Chocó and Antioquia. Undue influence over regulators DNP has developed a system to improve regulatory quality with the support of the OECD. This system includes the publicly disclosing proposed regulation, public debates, and a system to track changes and to the proposed regulation. Despite the benefits of such a system, there is an active lobby and undue influence that undermines impartiality of several regulations. For example, regulations on Public Private Partnerships are a clear example of the power that economic groups and business associations can exercise. When the GOC was formulating the decree regulating the 4th generation of roads infrastructure project, the Ministerio de Hacienda y Crédito Público (MHyCP) and Colombia Compra Eficiente (CCE) insisted on (i) including the required term for a prequalification (days of each stage), (ii) the condition of being prequalified to be able to participate in a tender, and (iii) no limitation of the number of companies prequalified for the program. The government’s intention was to have as many participants as possible and be able to receive interested companies at any time before the date of opening the tender, bearing in mind that the program included more than ten tenders and that Colombia was not the only country with this kind of projects.

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However, high-ranking officials within the government argued for having a deadline for the prequalification’s and a maximum number of prequalified companies. Ultimately, the decree reflected the interests of lobbyist echoed by sectors within the government. Limiting competition to a reduced number of companies closes off free competition. Amendments introduced to Law 1508 of 2011 (Public Private Partnership law) are another example of pressure from special interest groups seeking to solve particular problems in dealing with controversies in concession agreements. While this amendment raised the concern of some Congress members there was no opposition from the anti-corruption agencies. Years later, PGN announced litigation against such this regulation, but if successful it will still have no effect on agreements already entered into unless the unlikely scenario where is evidence of corruption in the formation of the law arises. Another example is the regulation for acquiring public cloud services by GOC agencies issued by the Superintendence of Industry and Trade limiting the purchase of cloud services from providers whose data servers where located in a specific list of countries. This restriction undermined the concept of a public cloud since its reliability depends on an adequate backup system and not the country in which the servers are located. The situation was eventually corrected after CCE and embassies from several countries intervened. It is clear that this regulation obeyed the special interests of a particular company.

(h) Other matters

Endemic corruption in specific cities Cartagena and Buenaventura are two cities that despite repeated central government intervention and initiatives from the private sector, continue to be immersed in political instability and corruption scandals. Mayors of the two cities weren’t able to finish their terms because anti-corruption institutions suspended them. The widespread practice of handing out personal services contracts to political barons and their client contractors is endemic. Officials admitted over the course of interviews that often contractors must pass on a percentage of their wages to their political chief. The importance of the two cities for the economy of Colombia cannot be understated. The former is a major seaport and the latter is both a port and tourist destination. However, the context of the two cities is different. The presence of illegal

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economies in Buenaventura is out in the open while in Cartagena remains in the shadows. Litigation cartels Groups of lawyers, judges, and former public officials have acted to defraud municipalities with false debts and spurious claims like the alleged violation a fundamental right (all of which makes the municipality liable to pay damages). Some municipalities do not have the expertise to be able to handle such claims. In some instances, officials within municipal administration are in collusion with these groups. Terms for business approvals and licenses The private sector often complains that corruption is present in the issuing of approvals and licenses for business purposes. Business plans include the timeframes stated in the law for obtaining authorizations or permits. Exceeding such periods generates additional expenses and the potential of lost market opportunities. When companies file an application for a permit, they either expect to receive comments to further clarify their application or receive the permit. However, in many cases government agencies request additional requirements that are not conducive to the permit or simply do not undertake any action. This situation creates incentives for private companies to cut corners in obtaining a permit. 5. STRATEGY The objective of proposed activities is to support the GOC and civil society to improve prevention and prosecution of corruption at the national and subnational levels. This involves improving public expenditure effectiveness, processes and procedures to obtain permits and licenses, capacity building for social control, and a better understanding of how corruption works and its context for petit, grand or large scale corruption, and the cooptation of public institutions. The starting point of the proposed strategy is the analysis of public data: collection, organization, access to data, data quality, understanding the link between data bases and its use in four different areas or dimensions: (i) prosecuting and disrupting people engaged in corruption; (ii) prevent corruption and protect the society from corruption; (iii) improve quality and technical capabilities of social control; and (iv) academic research linked with the social control exercise at the territories and the process to improve local governance. The analysis of the four dimensions and the

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interventions proposed bear in mind the cultural approach and its ability to transform behaviors of citizens, entrepreneurs and public officers. Traditionally the behavioral change theory in public policy is the rational choice model. It means that people act to maximize their welfare, assessing their decision in terms of costs and benefits. Then a punishment system would be the clue to fight against corruption. Anti-corruption institutions will punish corruption acts and the rational choice model indicates that such punishment will disrupt people to engage in corruption. The rational choice model is in the center of public policy worldwide but has limitations from the behavioral change perspective because it tends to ignore the influences on human behavior as religion, groups, family expectations, peers’ pressure, among others. This is why we propose to bear in mind the cultural aspects and its particularities in each line of action and build a frame of cultural conditions in which corruption flourishes and acts.

Figure 4 - Dimensions of the proposed intervention to support the Anti-corruption Agenda

Source: own design.

These recommendations are aimed to: (i) reduce opportunities and incentives for corruption, (ii) identify environmental influences (peer pressure, family expectations) influencing corrupted behaviors; (iii) increase access to public information and its use for purposes of investigation and prosecution, following the money, understanding how corruption works, building capacity to focus investigation and prosecution; (iv) improve the communication system among government agencies at different levels; (v) have a catalytic effect to transform behavior towards public affairs; (vi) make

C

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progress in the GOC international anti-corruption commitments; (vii) link the action lines with the USAID/Colombia’s Country Development Cooperation Strategy (CDCS) particularly with the purpose of improving governance and reduce corruption bearing in mind that this report will serve for the design of future anticorruption program design A number of municipalities located in PDET (Programas de Desarrollo con Enfoque Territorial)16 areas could be selected for the implementation of a future anticorruption program. Areas for intervention should include those where there is: (i) strong political will from mayors and governors to be elected in 2019; (ii) exhibit conditions identified by DNP under the Plan (Chapter XV Pact for the decentralization: connecting territories, governments and population); and (iii) logistical (adequate transport) and security conditions. Colombia requires support to strengthen the institutional capabilities in PDET areas that are transitioning out of the conflict and are particularly vulnerable to corruption and cooptation. In PDET areas the presence of illegal economies and illegal armed groups renders the design and implementation of interventions to promote a culture of legality much more complex. RGA has presence in some PDETs areas and provides support to municipal administrations and some civil society organizations. It is important to bear in mind that all of Caquetá’s 16 municipalities are covered by one PDET, all four municipalities of Guaviare together with 8 municipalities of Meta department are part of another PDET, and 9 of the 13 municipalities of Putumayo are covered by another PDET. Therefore, if the decision is to work in Caquetá, Putumayo or Guaviare it makes sense to work at department and municipal level.

16 As part of the Peace Accords, the Programas de Desarrollo con Enfoque Territorial (PDET) were created to implement a

sweeping rural reform. Sixteen sub-regions and 170 municipalities are beneficiaries of the GOC’s plan to strengthen capabilities required for public administration.

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Figure 5 - Localization of PDETs

Source: Agencia de Renovación del Territorio

In light of the above, the proposed strategy consists of helping anticorruption agencies to strengthen their ability to implement the transparency law, support governance at subnational level, and foster social control based through enhanced use of data analysis of anticorruption entities. 6. RECOMMENDATIONS The following recommendations are organized in the four dimensions mentioned in Strategy section above. Each includes a description of deliverables and indicators as well as entry points (i.e. stakeholders or contacts to engage within the GOC).

(a) Prosecuting and disrupting people engaged in corruption

Supporting the GOC to build capacity in anticorruption institutions through data analytics in particular regions of the country under a framework of case theory.

(i) Support to FGN

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Support for FGN to: enhance their understanding and knowledge of public databases; identify knowledge loops that can be established through data base analysis, and the development of corruption matrixes. This will allow FGN to use these tools in developing case theory for different types of corruption and collect evidence to support investigations that actually lead to the prosecution of individuals engaged in corruption. This enhanced level of understanding will allow the FGN to use machine learning instruments to identify different types of corrupt practices like bribes involved in obtaining a license, electoral crimes, cooptation, corruption in procurement, corruption in distribution of subsidies, prosecutor’s and judge’s corruption; and to link individual crimes with criminal systems. USAID already has experience in data analytics for purposes of building case theory and understanding where to collect evidence at FGN. We recommend continuing with the existing activities training but focusing them more on corruption and its different typologies. The entry point is the offices of organized crime and prosecutors in the departments and municipalities prioritized by USAID. The deliverables include the case theory constructions and the formulation indicators.

(ii) Support to PGN for disciplinary investigations USAID could support PGN to structure a coherent anti-corruption strategy, develop the action plan, and to build capacity to use data analytics. This strategy needs to take into account the judicial decision from the CE in connection with the revision of the PGN decision against Mr. Gustavo Petro when acting as Mayor of Bogotá17 and that the definition of corruption provided by the Inter-American Convention against Corruption. USAID could support the PGN in: (i) developing different categories of corrupt practices (for example, corruption in procurement, disclosure of data, human resources and financial and accounting matters) and create features to organize the typology of the disciplinary actions; (ii) create specific protocols to prevent corrupt practices within each specific category; (iii) create specific protocols to undertake 17 Sala Plena de lo Contencioso Administrativo, Magistrado Ponente César Palomino Cortés, 15 de noviembre de 201,

Radicado 110010325000201400360 00, Demandante: Gustavo Francisco Petro Urrego, Demandado: Nación - Procuraduría General de la Nación

https://www.procuraduria.gov.co/relatoria/media/file/flas_juridico/1892_CE-Rad-2014-00360-00%20GUSTAVO%20PETRO.pdf

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disciplinary investigations within each specific category; (iv) organization of public data bases to develop data analytics system to find alerts in the above mentioned categories; (v) organization of data by public administration sectors to generate alerts and findings stemming from the data analytics exercise; and (vi) using data with regional approach to understand the differences within the territories and the real need of intervention thereof. The entry points are the offices of the Inspector for Public Procurement (Camilo José Orrego Morales), for administration and judicial surveillance (Germán Calderon España) and for the preventive function of public administration (Liliana Caballero). The PGN anti-corruption strategy and its implementation plan are the deliverables under this recommendation. The strategy shall include its indicators.

(iii) Support to Consejo Nacional Electoral (CNE) The President of the CNE has expressed his intention of supporting the implementation of the electoral crime policy that is currently being drafted with USAID support. The following interventions do not require regulatory changes. In fact, the political will demonstrated by CNE during the process of drafting the criminal electoral policy is enough to implement them. USAID may support CNE in the following activities.

o Support for the design of processes and procedures to publish data thru the online portal in compliance with Law 1712 of 2014. The deliverable will be the procedure of making information accessible in accordance with the regulation which shall include the indicators.

o Build the requisite technical capacity in order to produce studies to determine

campaign expenditure thresholds. These studies will have to be completed on an annual basis based on the data to be collected in the 2019 elections. The deliverables include the methodology and the results of its application in the jurisdictions to be selected by USAID. The indicators would be the number of studies used to fix a threshold (threshold by jurisdiction). MHyCP and Departamento Nacional de Estadística with whom CNE have to agree the thresholds taking into account the Index of Electoral Campaigns Costs (ICCE), are two important players for this recommendation.

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o Support the development of a communications protocol that ensures impartiality when disseminating information to the public of a given case. The deliverable includes a document outlining the communications protocol.

o Support the creation of a procedure to distribute cases within the magistrates of CNE to avoid political interference and bias in the distribution process. The deliverable is the procedure and the indicators have to be set therein.

o Strengthen the capacity to oversee the electoral system by providing technical assistance in drafting the strategy of CNE and its action plan for four years. This includes budget and human resources and covering the Constitutional duties prioritized by the magistrates. Such strategy has to include the narrative of CNE, which shall highlight the public value of elections and its importance in democracy. The deliverable is the strategy document and the action plan which shall be published and communicated for open discussion.

(iv) Support to CGR with overseeing the expenditure of the SGR

Per the Constitution, companies extracting oil, gas and minerals have to pay royalties. Until 2011, the GOC only distributed royalties to departments and municipalities where the extractive activity took place or where a port facility was located. This reform intended to correct inequalities in the royalty’s distribution (given that sub-soil belongs to the Nation and not only to the department/municipality where the well or the mine is located), and corruption in the expenditure of royalties at the subnational level. A number of academic analyses indicate that the IGA (Spanish acronym for Open Government Index) of the municipalities that previously did not receive royalties have scored lower than before, probably because these municipalities did not have the infrastructure and capability to comply with the additional reporting requirements from the central government USAID could provide support to CGR and DNP to evaluate the performance of SGR expenditures in PDET beneficiary municipalities to determine if the reform actually decreased corruption in royalty expenditure. Also, support could be provided for documenting good practices and lessons for improvement. Deliverables under this action line are reports on the quality of the SGR expenditure by regions and recommendations for improvement.

(b) Prevention and protection

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(i) Support the PGN to follow up implementation and compliance with transparency and access to information law

The Transparency and Access to Information Law is not by itself an anti-corruption initiative. Transparency as means to disclose public information is a channel to make governments accountable and to allow social control. PGN is the guarantor of Law 1712 of 2014 and yet t has not taken the necessary steps to comply with such an important responsibility. Developing the IGA index is not enough to fulfill its role of guarantor. It should be noted that RGA electoral crimes consultants identified poor compliance of Law 1712 by CNE, political parties and even by PGN and FGN. USAID may support the PGN to enhance its capability to enforce the transparency and access law at the FGN, PGN CNE, Political Parties, as well as in prioritized departments and municipalities. Deliverables under this action line are the action plan to follow up and enforce the transparency and access to information law. The indicators shall be established in the action plan and may follow the IGA methodology.

(ii) Governance support to the subnational level

Organizing the municipalities and some departments back offices will improve governance at subnational level. By back offices we refer to duties related with planning, budgetary, treasury, accounting, procurement, human resources, technology and information, filing archives, and the issuing of permits and authorizations. DNP shall coordinate the work with participation from Dirección General de Apoyo Fiscal (DAF), Departamento Administrativo de la Función Pública (DAFP) and CCE. For purposes of answering questions and reviewing documentation the Contaduría General de la Nación (General Accounting Office) and the Archivo General de la Nación (National General Archives) have to be taken into account. Currently DAFP is designing a prototype for municipal back offices that considers factors like population, income and expenditure and set clear guidelines for their operation. USAID may provide technical support to the municipality to carry out the necessary adjustments to the back office prototypes to fit the needs of a given

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municipality (factors to be considered include among others income and expenses, the number of employees, the size of its procurement). New municipal administrations will take office on January 2020. This is a window of opportunity to support the incoming administrations. The back office shall manage income, expenditure, asset management (if applicable) and permits and authorizations issued by the municipality. DNP has worked on a project to develop an Enterprise Resource Planning (ERP system) for a number of municipalities and has acquired loans with the WB and the Inter American Development Bank for its implementation. USAID may support municipalities to use this system to organize the flow of information and review processes and procedures.

Figure 6 – Income of the municipality

Source: Own design.

Organization of data for SGP, ability to elaborate and submit projects to OCADS18 to be financed with royalties, and the organization of cadastral and property registry and the business registry are required to organize the tax collection of the municipality. Setting up this type organization will help reduce incentives for corruption and understand the culture and practices of the municipality to design integrity measures.

18 Órganos Colegiados de Administración y Decisión regarding the National Royalties System

SGP

Education

SGR

Projects

Statutory

Own income

Tax on property

Industry and trade taxesStamps

Dividends and participations

Health

General purpose drinkablewaterand basic sanitation)

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Figure 7 – Municipal expenditure

Source: own design.

There is a general assumption that most all municipalities have clarity about their financial and pension liabilities. However, it is important to work with DAF to support each municipality to carry out and update actuarial studies regarding financial liabilities and to fully assess the breath and scope of pension-related liabilities. There is an abuse of the mechanism referred to in Figure 7 as “other agreements”. These are agreements that a government agency can enter to with an NGO for a given project. In such agreements there is no acquisition of goods, works or services, they are agreements for joint efforts to implement a public policy. However, there is evidence of abuse of this mechanism, to enter into agreements with NGOs belonging to politicians for public works and for the school meals program. Municipalities should organize their litigation capabilities and legal defense in line with the guidelines of the Agency of Government Legal Defense. There are cases of corruption schemes to extract rents from the municipalities trying to collect through spurious labor claims or false reimbursement of local taxes. The analysis of procurement data is required, while a calculation of the risk of corruption is recommended. This analysis will allow to understand the main category of expenditure (goods, services and public works and subcategories therein), the amount of money received from the National government and from the department through inter institutional agreements (convenios inter administrativos) and how it has been spent, the methods of procurement used, how competitive is the system in the municipality, the number of personal services contracts (a method to overcome the rigidity of the system, and as the source of corruption as indicated above in the Endemic corruption in specific cities section) and the concentration of contractors.

Transactions

Debt Payroll and pensions Other agreements(no conmutative)

Subsidies Judgements and settlements

Public procurement

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INVIAS is an important actor to review specifications of public works, as well as Ministerio de Educación Nacional (MEN) to review procurement in the education sector. Budget, accounting and expenditure reconciliation are important to identify the any possible delays in payments. Delays in payments is inadequate practice that may lead to corruption and generate cost overruns for the municipality. The deliverables include a revision of procedures and documentation for each of the lines of income and expenditure, with recommendations and an action plan the indicators.

(iii) Support for DNP to continue with the strategy to improve

regulatory quality Colombia should continue the strategy to improve regulatory quality. The overflow of regulation or the tendency to solve any inconvenience issuing a law, a decree, a resolution, a directive have created an enormous number of non-enforceable regulations that generates uncertainty and creates an environment rife for corruption. The GOC has taken steps to address these issues by thru list of non-applicable regulations, elimination of permits and authorization, and in 2015 and effort to organize the National decrees by government sectors. In 2014, the GOC issued a CONPES Document and a year later the OECD published a review on Colombian regulatory practices19. DNP has issued methodological guides and created a web-based portal called SUCOP (at the time of this writing only has one project published in the Information Technology Sector). In 2017, with the support from the United Kingdom, DNP published the results of a pilot to create an inventory of regulations using web-scrapping tools. There is room for improving the quality of regulation. This includes the creation of a clear inventory of what is in place, what is the benefit new regulation can produce, asses a new regulation’s level of enforceability and the necessary preparations required for implementation/enforcement. Additionally, the effort of creating SUCOP should be supported by using the tool when a sector of the public administration undertakes a public consultations.

19 OECD (2013), Regulatory Policy in Colombia: Going beyond Administrative Simplification, OECD Reviews of

Regulatory Reform, OECD Publishing, Paris, https://doi.org/10.1787/9789264201941-en.

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USAID may support DNP with technical assistance in order to provide a review of sectors and assessing the impact of such regulation in prioritized areas. For example, this could include regulation related with public work permits. The deliverables are the inventory with its classification, impact, benefit and requirements and a recommendation bearing in mind the enforceability at the local level. The methodology to produce the deliverable may be applicable to other sectors. In addition, USAID may support DNP in establishing indicators to measure the use of SUCOP and the guidelines, the impact of the tools in simplification (regulations issued/existing regulation) as well as the actual participation of the public in the process of drafting regulation.

(iv) Public procurement system for Large Infrastructure Projects

It is advisable to review the recommendations of Engel (Engel et al 2018)20 on large infrastructure projects and find out if there is political will for their implementation. Some of these recommendations match with the ones included in the proposed bill submitted in 2016 by CCE which was rejected by the infrastructure sector21. Open tender and competitive auctions are not the best solution for large infrastructure projects. For instance, the private sector and the World Bank use limited competition with further negotiation22 to overcome the asymmetries of information and better understand the needs and the possible solutions. Renegotiation of contracts can play a major role in facilitating corrupt deals. Therefore, special attention should be given to contract amendments. Likewise, the impact of “financial equilibrium clauses”23 in contracts creates a perverse incentive to contractors to not undertake all the possible actions to manage risks and comply with its duties because there is a kind of insurance arising from those clauses24. Recommendations include: (i) separate infrastructure planning bodies from the units in charge of contract compliance, (ii) break conflicts of interest between promoting new investment and enforcing existing contracts, (iii) use independent technical

20 IDB (2018) Report of the Expert Advisory Group on Anti-corruption, Transparency, and Integrity in Latin America and

the Caribbean / Eduardo Engel, Delia Ferreira Rubio, Daniel Kaufmann, Armando Lara Yaffar, Jorge Londoño Saldarriaga, Beth Simone Noveck, Mark Pieth, and Susan Rose-Ackerman

21 https://www.colombiacompra.gov.co/sites/cce_public/files/cce_documentos/20160620motivos.pdf https://www.colombiacompra.gov.co/sites/cce_public/files/cce_documentos/20160620articulado.pdf

22 As proposed in article 51.3 of the reform. 23 Engel et al 2018 page 14. 24 Colombia Compra Eficiente (2016) Propuesta de reforma de la normativa del Sistema de compra pública. Motivos pg

11, 12, 13 and 14.

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review panels to mediate conflicts and review any contract renegotiations, (iv) treat investments in infrastructure via public provision and public-private partnerships in the same way for fiscal accounting purposes, since their dynamic impact on the budget is the same and (v) public-private partnerships should be subject to the same scrutiny in the budgetary process as public infrastructure projects (Engel et al page 14). USAID may support a technical analysis of the data regarding large infrastructure projects, reviewing competition process, rules and specific terms and conditions, award and signing, amendments and conflicts in the performance of the infrastructure contracts in Colombia, to give factual analysis to the above-mentioned recommendations and suggest guidelines for such large infrastructure projects. There is for example an Observatory of Infrastructure at Universidad de los Andes and an Observatory of Public Contracts25 who can work in such analysis and recommendations. OVP, DNP, ANI, INVIAS, CCE and ST would be interested in this analysis and in its conclusions, as well as the local infrastructure agencies.

(v) Support to the Ministry of Justice in the implementation of the electoral crime policy

USAID supported the Ministry of Justice (MJ) in formulating a policy to fight against electoral crimes per Law 1864 of 2017. The MJ aims to have the policy ready for the 2019 elections. The starting point of the policy is the acceptance of the low levels of institutional understanding of the electoral crime phenomena, the little public value that the elections have in the narrative of Colombian authorities and citizens, communication problems among the agents of the electoral system and the lack of public trust in the system to prevent, investigate and punish electoral crimes (buying of votes, illegal financing of campaigns, etc.) USAID could provide technical support to the MJ in the form of technical assistance for the design of the action plan and the interagency work set forth in the policy. The agencies that are part of the proposed policy are FGN, PGN, CNE, CE, MI, MJ and UIAF. The Vice Minister of Criminal Policy and Restorative Justice is the contact person in the national government who is in charge of coordinating the agents of the National Electoral System. 25 Given that Ms. Zuleta works at Universidad de los Andes School of Government a disclosure of this condition is

required to assess this recommendation. .

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MOE and its partners at the regions play an important role in this action line as well as ANDI who has expressed its interest in working in improving the electoral process to gain governability at the subnational level.

(vi) Support the strengthening of the Anti-corruption Observatory at the Secretary of Transparency (ST)

The work of an observatory of corruption should have the potential to add value through data analytics, policy formulation, the context and cultural aspects and the evaluation of policy implementation. An observatory requires data analytics expertise, communication and coordination with FGN, PGN, CGR, VOP, MI, MJ, UIAF, ST, and the Superintendencies to process data. A committed and disciplined team with clear leadership is necessary as well as a financed and detail action plan to produce and communicate reports every six months. The observatory should have the ability to understand symbols, codes and narratives that may impact particular behaviors associated to corruption by using surveys, interviews, focus groups, observation, media analysis (and networks), and speeches analysis. The integral analysis of the context (violence, poverty, public expenditure, taxes paid in the area related with a municipality) and the symbols, beliefs, codes and narratives, measuring the intensity of their reciprocal relationship will contribute to the understanding of the phenomenon contributing to focus criminal and discipline investigation. The work of an observatory may show that the phenomenon has regional variations and it changes quickly because it reacts to the electoral cycle, the actions of the anti-corruption agencies, trends and economic conditions, among others, so what we see in one region at some point is not a general rule in the country. MJ has a criminal observatory and the ST has a corruption observatory that may work together to increase the scope of their observations, linking the prosecution and punishment related with corrupted actions, from the criminal and disciplinary perspective views, with historic, economic, violence and cultural context of each region. An option is to merge the two observatories or create a new one outside GOC. A policy discussion is required as well as an agreement between the agencies producing data to be observed and by the agencies to be users of the observatory reports. The discussion and an agreement of all parties involved is necessary for the success of the initiative. It is important to bear in mind that one of the problems of the observatory at ST is the lack of support from FGN, PGN, MI and MJ.

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USAID has experience supporting the creation and operation of criminal observatories in Latin America, what may benefit an initiative of a Colombian corruption observatory. The deliverable under this line should be the governance documents of the observatory, the commitments to grant access to anonymized data and initial reports from the observatory.

(vii) Support to the OVP and ST in the implementation of the international commitments

USAID may support the OVP and ST in the evaluation of the implementation of the III National Action Plan 2017-2019 and the preparation of the IV National Action Plan 2020-2022, as well as in the implementation of OECD recommendations included in the Integrity Review.

(viii) Support to Congress to continue with the commitments on Open Congress Initiative

Senator Lizcano who was President of Congress 2016-2017 had a program of open initiatives for Congressional work. However, the short term for presidency of Congress (one year) is a challenge to actually implement any initiatives. USAID may support Congress in having a long-term program to make data on Congressional activity available to the public following international best practices. Almost all political parties have one or two members supporting this idea but have found difficulty in finding an agreement. USAID may provide support to facilitate an agreement and the formulation of an action plan and its implementation.

(c) Social control

USAID may support the web of social control at the municipalities and departments that would be priority to USAID. There is presence of business associations, Chambers of Commerce, universities, religion associations, ethnic associations and grassroots interested in local governance in almost the whole Colombian territory. Sharing knowledge and coordinating activities is required to increase the effects and to keep the enthusiasm in this organizations. The recommendation is a program assuring the participation of different organizations, sharing knowledge, including training to the grassroots organizations from an overseeing program in the first four of the five typologies of corruption

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mentioned in the Background above, excluding for security reasons the one related with cooptation of institutions or governments, through violence or through economic power. The deliverables are the methodology to use in social control in the correspondent region to prevent each type of corruption in specific projects, which shall include how to communicate with the authorities performing the project and the anti-corruption agencies, how to prevent conflict of interest in the social control and bias from the political actors, and the governance scheme to undertake social control in a diverse group with participants of different associations. USAID may promote associations for social control purposes which shall include (i) universities; (ii) business association; and (iii) local organizations (religion associations, ethnic associations and grassroots). The association to be selected by USAID shall undertake a social control program covering:

o The preparation of the development plan and its execution; o Collection and organization of data for purposes of SGP distribution; o Public procurement of (i) public works; (ii) information systems; (iii) legal

services; (iv) personal services related with preparation of urban planning , development plan, anticorruption plan, formulation of projects; and (v) other personal services related with the operation and functioning of the department or the municipality.

o Public procurement of public works at National level affecting the PDETs areas.

o Permits and authorizations for entrepreneur activities in the municipality to be issued by national or subnational authorities.

o Compliance with the law of transparency and access to information. o Public education system in the municipality (public schools, agreements with

private schools for public education and universities). o Health system in the municipality (presence of health infrastructure, system

coverage, availability of medicines, emergencies and coordination of attention of level II, III and IV if not available at the municipality).

The social control program shall also include the capacity building program at the local level to make sure that the universities and business association transfer knowledge to local organizations. USAID may organize a tender promoting the creation of such organizations for purpose of the project with universities from the main cities and local universities,

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NGOs with national scope and local organizations, and business associations. We recommend having one project covering all the areas with one leader who shall involve expert parties for each one of the categories of work so there is one responsible party for compiling the lessons in each category in one PDET.

(d) Academic research

Academic research is critical to evidence the corrosive effects of corruption and carry out analysis free of political bias. There are two universities in Bogotá with research groups on corruption (Universidad de los Andes and Universidad Externado) while others include Fedesarrollo has undertaken studies and made policy recommendations. Universities can play an important role in the analysis of corruption at the local level and may contribute to the understanding of the context and cultural aspects that surround corruption. Universities can identify the differences of how corruption occurs within municipalities and even in smaller units like veredas and neighborhoods. USAID may support research of the five types of corruption mentioned in the Background section in prioritized areas. The deliverables are the research reports and its presentation to local government and local social control groups. The deliverable should include training for the social control groups of collecting data and review it using the methodologies of the research completed by the corresponding university.

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7. BIBLIOGRAPHY OECD (2013), Regulatory Policy in Colombia: Going beyond Administrative Simplification, OECD Reviews of Regulatory Reform, OECD Publishing, Paris.,https://doi.org/10.1787/9789264201941-en. OECD (2013), Colombia: Implementing Good Governance, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264202177-en. OECD (2016), Towards Efficient Public Procurement in Colombia: Making the Difference, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264252103-en. OECD (2017), OECD Integrity Review of Colombia: Investing in Integrity for Peace and Prosperity, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264278325-en. Worldwide Governance Indicators (WGI) available from 1996-2016. See http://info.worldbank.org/governance/wgi/#reports IDB (2018) Report of the Expert Advisory Group on Anti-corruption, Transparency, and Integrity in Latin America and the Caribbean / Eduardo Engel, Delia Ferreira Rubio, Daniel Kaufmann, Armando Lara Yaffar, Jorge Londoño Saldarriaga, Beth Simone Noveck, Mark Pieth, and Susan Rose-Ackerman. World Justice Program, Rule of Law Index (2017-2018), http://data.worldjusticeproject.org/pdf/rule-of-law-index-COL.pdf Transparency International https://www.transparency.org/what-is-corruption#define World Bank (1997) Helping Countries Combat Corruption: The Role of the World Bank, Poverty Reduction and Economic Management http://www1.worldbank.org/publicsector/anticorrupt/corruptn/cor02.htm UN (2003) UN Guide for Anti-Corruption Policies. https://www.unodc.org/pdf/crime/corruption/UN_Guide.pdf Colombia Compra Eficiente (2016) Propuesta de reforma de la normative del Sistema de compra pública. Motivos.

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Saavedra Victor and Conde Javier (2018) Descentralización y corrupción en Colombia in Colombia in Lucha integral contra la corrupción en Colombia: reflexiones y Propuestas. Fedesarollo. Newman Pont, Vivian and Ángel Arango, María Paula (2017) Sobre la corrupción en Colombia: Marco conceptual, diagnóstico y propuesta de política. Cuadernos Fedesarrollo. Ángel Arango María Paula, Dávila Contrears María Ximena, Newman Pont VIivan (2018) Corrupción e Instituciones de Control y Justicia in Lucha Integral contra la Corrupción en Colombia: Reflexiones y Propuestas. Fedesarrollo. Perry Rubio Guillermo and Saavedra Victor (2018). Corrupción, crecimiento y desarrollo: Elementos para una estrategia integral anticorrupción in Colombia in Lucha integral contra la corrupción en Colombia: reflexiones y Propuestas. Fedesarollo. Zuleta María Margarita, Saavedra Victor and Medellin Juan Camilo (2018) Contratación, compras públicas y riesgos de corrupción en el nivel central y descentralizado in Colombia in Lucha integral contra la corrupción en Colombia: reflexiones y Propuestas. Fedesarollo. Henao Juan Carlos and Isaza Carolina (2018) (edition) Corrupción en Colombia Tomo I: corrupción, política y sociedad; Tomo II: enfoques sectoriales sobre corrupción; Tomo III: corrupción privada; y Tomo IV: corrupción, estado e instrumentos jurídicos. Universidad Externado de Colombia Propuesta de una política de Estado para el control de la corrupción (2005) Presidencia de la República, Vicepresidencia de la República, Programa Presidencial de lucha contra la corrupción. Gaviria Alejandro (2018) Cinco ideas para reducir la corrupción in ¿Cómo mejorar a Colombia? Garcia Villegas Mauricio (edition) Universidad Nacional. Basu Kaushik (2000) Prelude to Political economy. Oxford University Press. Prentice Deborah A. and Miller Dale T. (1993) Pluralistic ignorance and Use on Campus: Some Consequences of Misperceiving the Social Norms in Journal of Personality and Social Psychology.

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Murrain Henry (2015) La légalité et la représentation de l´autre. L´influence es normes sociales dans le respect des lois. In Droit et société. Instituto de Ciencia Política and Colombian office of Konrad Adenauer Stiftung, March 15, 2018. Zuleta María Margarita, Ospina Santiago and Caro Carlos Andres (2019) Working paper, using a methodology developed by Instituto Mexicano para la Competitividad -IMCO- to calculate risk index of public procurement at procurement agency level, Fedesarrollo. Zuleta María Margarita, Beltran Isaac and Murrain Henry (2019) Working paper prepared under a MSI/USAID consultancy project for the Regional Governance Activity on electoral crime.