Author: Jeremy Sandbrook

Trouble in Paradise: NGO Accountability & Corruption

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‘Lies, damn lies, …  and NGO accountability’.

Street Sign showing accountabilityIn the simplest of terms, the stability of the non-profit sector is based on a collective public trust, built on the innate belief that nongovernmental organisations (NGOs) are intrinsically trustworthy.  Just how warranted is this faith? Are NGO’s doing enough to merit the belief placed in them?  At the heart of these questions is the issue of accountability.

In the first of a series of three articles on corruption and the NGO/non-profit sector, I will explore the issue of NGO accountability, a concept that goes to the very heart of the sector’s legitimacy.

NGOs are now the size of small countries!

The past quarter of a century has seen a reduction in the size and role of governments around the world, leading to a growing gap in the provision of much needed primary welfare services. This gap is increasingly being filled by NGOs, whose numbers continue to grow exponentially, as has the scale of resources entrusted to them.  Mirroring the rise of multi-national corporations half a century ago, a number of them now control annual budgets the size of small economies! An example of this is World Vision International, who, in 2013, reported a total worldwide income of US$2.67 billion, a figure equal to Burundi’s economy, and higher then the GDP of twenty-nine other nation states! Other international NGOs (INGOs), such as Save the Children International (with a total 2013 income of US$1.9 billion), are key recipients of taxpayer funded overseas development aid, with 53% of their income sourced from governments. ActionAid, another INGO, have positioned themselves to take a key role in helping shape a number of nation’s policy formulation and service delivery. Given this size and influence, just how accountable are INGOs (and other) operating in the non-profit sector? More

Fraud and Corruption – The Last Great Uncontrolled Cost

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Fraud has increased 20% since the GFC.

Chart of fraud great uncontrolled costWhile global research has consistently shown that the typical organisation losses 5% of its revenues to fraud each year, rates within the non-profit and international development sectors are considered to be significantly higher.  Putting this into perspective in 2013, fraud cost the OECD $7.56 billion in Overseas Development Assistance (ODA), while in the case of Australia, the non-profit sector loses around $1.53 billion a year.  And the issue isn’t expected to improve, with a recent study showing that fraud increased 20% in the first two years of the global financial crises (GFC).  Despite fraud being a significant issue for many NGOs and other non-profits, few (if any) view it as a cost to be managed and controlled.

We manage what we measure

Fraud, like any other type of cost, can be measured, managed and minimised, with the figures quoted above highlighting the current costs incurred by non-profits.  Despite this, how many of us view fraud as simply being just that, one of a number of types of costs incurred by an organisation?

By challenging our view of fraud, and shifting the focus even slightly, fraud costs all of a sudden become an opportunity, which – if managed properly – has the potential to drive significant cost savings through an organisation.  By re-classifying it as a separate ‘cost’ category, and setting up the metrics to measure it, it can start to be proactively managed.  Given where the non-profit sector is currently positioned in the fight against fraud, the potential upside is even higher, with immediate savings possible with relatively little effort. More