Category: Case Study

NGOs and Compliance Risk – A Road Paved with Good Intentions

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Picture - Road paved with good intentions - Compliance riskA road paved with good intentions! …. When it comes to compliance, are good intentions enough?  The following blog was written for the Compliance Channel, a web TV channel and best practice showroom for ethics and compliance issues.  If you have any comments or opinions on the topic I’d love to hear them.

Are good intentions enough?

Despite their good intentions, when it comes to compliance and the NGO sector, scratch the surface too much and what you see may not necessarily be what you get.  Although ranked as the most trusted sector in the world, NGOs and charities (as with any other organisation) are not immune from compliance risks.  If anything the complexity of the environment they operate in make it even more challenging, as at the heart are a number of unique internal and external compliance risks. More

Why NFPs aren’t comfortable using the ‘F’ Word!

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Photo of Man with covered mouth showing an F

Every year for the past decade, the Not-for-profit (NFP) sector has been voted the most trusted in the world – but just how valid is the ranking when it comes to the ‘F’ word:  fraud and corruption?  Despite the sector’s ongoing reliance on maintaining a high level of public and donor trust, there continues to be a unexplained complacency when it comes to the topic of fraud.

Although acknowledged by most NFPs as a problem for the sector as a whole, when assessing its own organisation, corruption is rarely seen as an issue. Unless NFPs and charities recognise – and start to properly manage – fraud and corruption risk, their reputation and public confidence – built up over many years – could be wiped out overnight. So where does this apparent reluctance to deal with the issue come from?

This article was originally written for the ACFE’s publication The Fraud Examiner.

The Unravelling of an NFP fraud scheme

A recent fraud investigation I carried out for a large international NFP is a textbook example of how fraud can occur in the sector. Despite one of its humanitarian projects being externally audited four times (two external financial audits, a capacity audit and a specific project audit), vague mutterings continued to circulate about improprieties. None of the four audits had highlighted any irregularities.  On the contrary, the capacity audit stated that the project had been “appropriately designed, well planned, and effectively managed,” while the project audit confirmed that all relief items had been physically delivered to all beneficiaries. More

Corruption is perverting NGO missions – but are its leaders up to the challenge?

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Photo of Hands-up to stop corruptionAccording to the UNDP, funds lost to corruption in the Global South are 10 times the amount of official development assistance (ODA), while the World Bank estimates that each year between 20% and 40% of ODA itself is “stolen” by public officials.  It does not end here though, as its pervasiveness and magnitude –  when combined with the risks inherent to the non-profit sector – has now reached the point where corruption is perverting NGO’s missions.  At stake here is the accountability and credibility of the sector as a whole.  But are its leaders up to the challenge?

Acknowledging the elephant in the room

A simple litmus test for this is to ask an NGO’s leadership the following question: ‘Is corruption a problem within your organisation?’  In a 2014 survey of Australian and New Zealand NGOs, while 90% felt that corruption was a problem for the sector, 72% (or three out of four) stated that it was not an issue for their organisations.  In other words, while it was a problem, it wasn’t theirs, but someone else’s! So if most non-profit leaders don’t see corruption as an issue, why should their staff? More