The Anti-Corruption Guru Blog

Why Anti-Corruption Programmes Fail

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Photo of drowning person - Why Anti-Corruption Programmes FailCurrently estimated to cost five per cent of the world’s total GDP, or US$2.6 trillion per annum, corruption is now the third largest industry globally and is growing. In response, anti-corruption legislation around the world is being strengthened, with a growing emphasis now placed on enforcement and compliance. Organisations not only need to have an anti-corruption programme in place, but are increasingly required to prove its effectiveness.

The following article was originally published in Ethical Boardroom Magazine Winter 2016 Edition.

Eight mistakes that boards & management need to be aware of when establishing anti-corruption programmes

Unfortunately, a growing number of anti-corruption programmes are failing to meet this new challenge; the most recent being the French industrial group Alstom. Despite having an integrity and anti-corruption programme in place, Alstom was recently fined US$277.3 million to resolve criminal charges relating to a widespread corruption scheme. The scheme involved the payment of at least US$75 million in secret bribes to government officials around the world.

So what went wrong? Why was it that its anti-corruption programme failed and failed so miserably? While there is no silver bullet to guarantee success, there are a number of common pitfalls, which, if avoided, can dramatically decrease the chance of failure.

While not exhaustive, outlined below are the most common mistakes that boards and management need to be aware of when establishing anti-corruption programmes. More

10 corruption risks keeping charities / NGOs awake at night

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Photo of man sleepless over corruptionWorking for a charity or NGO? Getting enough sleep at night? If you’ve answered ‘yes’ to both these questions, then you should be asking yourself how much you really know about corruption risks within the non-profit sector.

The following article was subsequently published by Pro bono Australia.  Titled ’10 Corruption Risks Keeping NFPs awake at night’, it appeared in their Hot Topics section on 15 October 2015.

While Charities are the most trusted institutions in the world …

I’m always surprised when talking with people working in the charity/NGO sectors, at how little many of them know about the inherent corruption risks facing their industry.  While consistently ranked as the most trusted institutions’ globally (topping the Edelman Trust Barometer for the last seven years in a row), the sector faces a number of inherent vulnerabilities that significantly raises its overall corruption risk ranking.  Having a knowledge of these is essential if a charity/NGO is to put an appropriate risk mitigation strategy in place. More

Corruption: What NGOs don’t want you to know

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See no evil, hear no evil, and speak no evil!

The three monkeys of fraud and corruption: What charities don't want you to knowDespite the growing level of funds channelled through NGOs (or maybe because of it), fraud and corruption continue to be a highly sensitive topic, with most NGOs reluctant to openly discuss it.  This was highlighted a few years ago, when Médecins du Monde initiated a study in an attempt to open up discussion on corruption within the humanitarian aid sector (one of the most corruption prone areas of development).  Of the 17 largest French NGOs contacted for a confidential interview, accounting for more than 80% of all French humanitarian aid, 11 refused to participate. Attitudes such as this, a general lack of transparency within the sector, and a scarcity of empirical evidence available on fraud and corruption, has resulted in the topic avoiding appropriate scrutiny.

Following on from my article on NGO accountability, this is the second in a series of three articles examining NGO accountability and corruption.  Its focus will be on what we know about actual corruption within the NGOs.

‘Rose-tinted’ glasses’:  Corruption only happens in NGOs working in the developing world … or does it!

When the topic of corruption is raised, the natural inclination is to point the finger elsewhere.  In the case of Northern NGOs, this tends to be at their counter-parts operating in the developing environments of the South.  This was brought home to me in a discussion with a CEO & President of a North American based INGO last week, who stated with absolute conviction, that the ‘real’ need for anti-corruption measures was in Southern NGOs, as those in the North (like his) could safely “rely” on their external auditors and internal risk management systems to prevent it from happening.  When I pointed out that the latest ACFE fraud survey showed that he had twice the chance of uncovering a fraud within his INGO by accident (at 6%) then it being uncovered by his external auditors (at 3%), he was a little taken aback.  That aside, just how accurate was his assertion that the problem of fraud and corruption within the NGO / non-profit sector is limited to certain parts of the world? More

Trouble in Paradise: NGO Accountability & Corruption

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

Sign showing accountability - NGOs and Charity corruptionIn 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