Trust issues: Does a ‘culture of trust’ make your NGO effective, or vulnerable to fraud and corruption?

Years ago, as a teenager, I walked past a bakery in my home town which had a ‘part-time Saturday work – inquire within’ sign on the window. In I went, and asked the lady at the till whether I could apply. She summoned a flour-dusted gentlemen from the back, and asked him: ‘What do you think – a young man?’

He gave me a cursory glance up and down, shook his head, and said: ‘No.’

The baker vanished again, and the lady shrugged. I left, dejected and wondering whether they thought a female candidate might be more trustworthy.

Trust is very important in the workplace. We know that ’empowerment’ is probably a key factor in employee satisfaction, and that there might be a link between the quality of staff performance and their sense of that. We also know that there is a level of trust inherent in all controls, and that humanitarian and global development organisations need to devolve substantial responsibility in (for example) emergency operations, distant field offices, and when working with volunteers. Trust is an important lubricant for our operations. Untrusting workplaces feel austere: morale-deserts that suck the moisture of life out of us.

There is, however, a tension between the need to trust, and the risk of abuse – such as fraud and corruption. Some have argued that the scale of trust in charities, NGOs and non-profits elevates their vulnerability to fraud, a perception with which a 2009 survey of UK charities seemed to agree.

When you unpack it, it is hard to find justifications for the idea that charity, NGO and non-profit workers are more trustworthy than those in other sectors. Such an idea would seem to imply that people are either honest or dishonest, and one can determine which is which from their career choices. This is patently untrue – people are complicated, and are the products of factors acting upon and through them.

Instead, there are good reasons to look again at the extent of our cultures of trust.

Firstly, fraud and corruption are designed to hide and masquerade, like chameleons, stonefish or those alarming wobbegong sharks. Instances can look (for example) like the product of poor training or non-compliance through operational stretch – there’s always an excuse for anomalies. Arguably, if we are too trusting, we never dig deep enough to find out when something dishonest is afoot.

Secondly, the Association of Certified Fraud Examiners (ACFE) found in 2012 that 87% of the occupational fraudsters they studied had never been charged or convicted of a fraud-related offence, while 84% hadn’t been punished or dismissed by a previous employer for fraud-related conduct. They were ‘clean (and trusted) skins.’ Noting that this is the second Pesh Framjee reference on this blog (sorry, Pesh), no wonder he said at a recent conference in the UK: ‘In God we trust, everybody else we audit.’

Thirdly, when NGO managers cite a ‘culture of trust’ in their organisation, they need to ask themselves – is this really a conscious, intentional, planned and managed organisational culture – or a phrase being used to cover mismanagement such as conflict-aversion or complacency?

So, how do we reconcile this tension? For many NGOs, non-profits and charities, the first step is the recognition than an alternative is needed – a culture of trust that isn’t at the expense of vigilance. While trust is important, fraud and corruption can be enabled when:

• The organisational culture is not intentional, monitored and reviewed;
• Trust is used an excuse for failing to maintain proportionate visibility of work, ask questions, and challenge managers and staff – or for failing to build the capacity of staff, volunteers or local partners to manage resources effectively;
• Trust is allowed to extend into complacency, such as permitting the absence of, or non-compliance with, meaningful internal controls and risk management.

Here are six suggested ways we can foster trust, at the same time as reducing the risk of fraud and corruption.

1. Ensure that sufficient checks are conducted before a person is let into a culture or position of trust

Don’t just seek two employment references – after all, what self-respecting fraudster volunteers damaging referees? Consider:

• Conducting dip-sample checks on the contents of CVs (some research suggests a significant proportion of applicants lie about qualifications);
• Joining an information-exchange service such as CIFAS;
• Ensuring that criminal record checks are conducted in a timely fashion (and consider using a commercial checking agency);
• Obtaining local legal advice on checking the internet footprint of applicants – contrary to popular belief, it is often not unlawful to Google applicants as part of the background check process.

2. Develop a good understanding of the signs that your trust is being abused

Know what ‘red flags’ – signs that something might be wrong – look like. Organisations like the ACFE and the World Bank publish lists of them online. Being trusting does not mean failing to ask questions or probe anomalies – prompt action is needed where red flags are identified.

3. Have proportionate internal controls…

Having a culture of trust does not mean having no, or inadequate, controls. Neither, of course, does it mean an onerous filing cabinet’s worth of policies, procedures and systems (in fact evidence suggests that too many, or too demanding, controls reduces compliance). It means having just enough to manage the risks – an ongoing cycle of design, implementation and review of proportionate internal controls. It also, of course, means having an effective organisational counter-fraud and corruption framework.

4. …and actually follow them

Counter-intuitively, it is the failure to follow policies, procedures and systems that can often be so corrosive to trust in the workplace. Following some but not others makes staff feel untrusted, wondering ‘why am I being checked on this but he isn’t on that,’ and allows suspicions to develop when others are routinely non-compliant without challenge (‘is she committing fraud or taking kickbacks? Did she bribe the manager to turn a blind eye to it?’). Not only does routine non-compliance make it much harder to identify dishonest non-compliance, but it also leaves staff uneasy and confused – the norms of their workplaces unclear.

Instead, to feel safe, secure and successful, we all need to know where the boundaries are, and we all need feedback on our performance. After all, if we are mission-oriented, then ‘oversight’ is about colleagues working together to maximise our effectiveness and efficiency in delivering that mission, right?

5. Articulate the value of policies, procedures and systems

One of the things we can do to reduce the perception that having and following rules represents a failure to trust, is to re-frame activities like due diligence and monitoring. We need to be clear with managers and staff about our expectations, and explain that following policies, procedures and systems is about:

• Transparency. It means we are all accountable to each other, and it’s easier to spot what is wrong when right is the norm;
• Teamwork. NGOs can be big organisations, and when we follow procedures, it enables colleagues and teams in other departments to do their job – knowing what to expect from us and when;
• Totality. Nobody likes going through airport security and being zapped, prodded and rummaged. But we all accept it, because we know it’s needed to deter and prevent a very small number of people who could create a catastrophic event. In the same way, we all need to adhere to policies, procedures and systems, because of the small number of people we need to catch misbehaving.

6. Develop internal culture with intentionality

A defence against the use of a ‘culture of trust’ as an excuse for poor management might be to define the organisational culture we do want, and what the indicators of it might be. That way, poor management behaviours are easily compared against this standard.

Internal culture is something that happens whether it is intended or not – and it only needs a few people in an organisation for one to develop. Taking hold of it and shaping it to be an effective force-multiplier for our missions can be very powerful.

Trust can be a great asset – as long as it is sited within a culture that also actively reduces the risk of fraud and corruption.

 

Find out more about the risk that fraud and corruption pose to humanitarian and global development organisations, and how they can better deter, prevent, detect and respond to it, in my book! Click here to get your copy of Fighting Fraud and Corruption in the Humanitarian and Global Development Sector from the Routledge website or Amazon!