Last year, UN investigations into several small, local partner NGOs in Somalia resulted in estimates that up to 79% of disbursed funds (in the region of US$3m) could have been stolen, with suggestions that some of it could have fallen into terrorist hands.
The local partners of international agencies vary widely; the term encapsulates an enormous number of diverse organisations, from grassroots collectives to municipal authorities, educational institutions, and local (or ‘national’) NGOs. The relationships themselves are also diverse.
Working with partners is crucial, offering international organisations deep insights into the localised causes, enablers and solutions of the issues that their missions tackle, as well as (often) heightened access to beneficiaries. Helping to establish, grow and support local civil societies is also vital to the future of global development.
But there is a tension. Case studies such the UN’s experience in Somalia support a perception amongst many in the sector that, generally speaking, working with local partners represents an elevated fraud and corruption risk. A range of reasons are commonly cited for this, but the most common perhaps is where partners carry lower capacity and capability in finance and wider management by comparison to that of the international agencies, or donor expectations.
Another way to look at it
In the current global development paradigm, the perception of this risk may be accurate. But not only shouldn’t it surprise us – research suggests that across all sectors, smaller organisations are the most vulnerable to fraud – it also isn’t the whole picture, and rather belies the role played by international actors, including NGOs, institutional donors and development agencies, in perpetuating this vulnerability.
Ways in which these agencies leave the relationships open to fraud and corruption, and can inadvertently help to maintain the vulnerability of local organisations, can include:
- Failing to assess or adequately build capacity, or issuing funds in excess of that assessed capacity;
- Failing to operate in a true partnership – instead treating the partner as a sub-contractor, irrespective of its fundamentally different nature;
- Unbridled and unmanaged risk transfer – sometimes down a long funding chain;
- Failure to follow a proper engagement cycle (including strategic planning, assessment and selection, effective engagement and monitoring, and objective evaluation and review) which includes the consideration of fraud and corruption risk at each stage;
- Cultural insensitivity, failing to factor in cultural differences around the perception of things like contracts and transactions.
But things could be different. In fact, there are some ways that local organisations could be better at deterring and preventing fraud and corruption than their international agency partners.
1. They have local, contextual knowledge
The first is the very reason international agencies often work with them in the first place – they understand their local environment. They know where the risks are, and are in a strong position to evaluate how to reduce them. This can mean more informed planning (how long does it take to get that permit without paying a bribe?) and risk management, if the space is given to it.
2. They are closer to the action
Whether in remote programme management or not, local partners are often physically closer to project delivery or able to more efficiently move around and interact. This is a substantial advantage for monitoring, and the detection of red flags.
3. They might be part of local accountability systems
Development expert Jennifer Lentfer tells a great story of an encounter with a Liberian village elder in which he described ‘hot money’ and ‘cold money.’ It was an illustration of how local accountability systems exist, but development money might not connect with them – denying it the investment of local communities necessary for greater oversight. Carefully-selected local partners may be part of such systems in a way that international agencies might not, presenting opportunities for greater deterrence of fraud and corruption.
4. They’re increasingly assisted by technology
The global coverage of telecommunications is expanding as fast as its costs are declining, meaning that much humanitarian and development work is happens underneath its umbrella. This means that innovative software and hardware solutions to manage and monitor programming are increasingly available and affordable.
So how can international actors respond to this – reducing the role that they play in perpetuating the cycle, and instead helping local civil societies to unlock this counter-fraud potential?
1. Actually build capacity
However many project proposals mention capacity-building, it often does not happen, or if it does, it does so without the clear assessment of need, a plan, and an evaluation phase that are so important for it to actually have effect. Where the capacity and capability of a potential partner is assessed pre-engagement, this should provide the basis for a capacity-building plan. What can we live with, and how do we need to help the partner to grow?
As international NGOs challenge themselves to look for ways they can devolve responsibility, funding and power to local civil societies, helping them to improve their resilience to fraud and corruption would be a great start.
2. Consider the risk of fraud and corruption at each stage of the partner engagement cycle
Fraud and corruption risks vary as a project progresses. At the outset, kickbacks and nepotism can cluster around selection processes. Towards the end, as short-term employment contracts expire, theft of funds and stock can begin to climb in likelihood. At each stage, both partners should give space to identifying the risks and how best to protect the partnership.
3. Seek their advice, and that of national staff
It should be uncontroversial to point out that expat workers are not local experts. And local experts are available – in the partner, and in international agencies’ national staff. Agencies need to take the time to actually ask these reservoirs of knowledge about how best to squeeze fraud and corruption out of this work, and do so in sufficient time that the information can be applied. When I conduct counter-fraud awareness workshops, it is always exciting to hear local participants’ innovative and contextually-relevant ideas.
There are corrupt local organisations out there, of course, who have the sole or corollary aim of gaining access for their principals to international agencies’ funds. But the vast majority of local organisations whom I have encountered have been full of passionate people doing amazing work in difficult circumstances. Robust selection processes are needed to ensure that these are the partners who are taken on.
There are other necessary changes of course – Mango currently champion universal financial management standards for NGOs, which would significantly improve transparency and accountability. But for now, there is much that international agencies can do to truly contribute to local civil societies – not just write about it in their annual reports.