This week, Deloitte published One Step Ahead, its 2017 bribery and corruption report. It provides insights from Deloitte’s survey of Australian and New Zealand risk leaders, asking about their perception and experiences of domestic and foreign bribery and corruption.
International NGOs operate in some of the most high-risk jurisdictions in the world, often in the bottom half of the Transparency International (TI) Corruption Perceptions Index. So what are the implications of the report’s insights for such organisations? This article suggests four key questions for your internationally-operating NGO.
Do you recognise the reputational risk – and how to manage it?
There is a disconnect between the perception of reputational risk and the action taken to manage it.
Deloitte’s report notes rising public scrutiny and political concern in Australia, with a number of recent initiatives including a review of Australia’s legislative and policy framework on corruption, the consideration of Deferred Prosecution Agreements, proposed changes to whistleblower protection and beneficial ownership legislation, and a proposed new corporate offence of failing to prevent foreign bribery. These measures arise as Australia slips down TI’s index, and survey respondents overwhelmingly saw reputational impact as the most serious consequence of incidents.
And yet despite this dizzying acceleration, Deloitte’s survey actually implies a slowdown in the progress of organisations. Detection rates and the perception of the risk were broadly consistent with 2015, and almost half of respondents did not even intend to upgrade their anti-corruption frameworks in the next five years.
International NGOs will recognise the reputational dimension, often perceived to impact upon fundraising. But they may also recognise the slowdown. There’s a paradox here and it begs the question – are you best managing the risk? Considering reputational risk after an incident has occurred is too late – it needs to be a driver for investing in meaningful prevention and detection systems.
What does ‘risk assessment’ mean to you?
One of the report’s most surprising findings was the under-use of risk assessment. This might not surprise NGOs, however; my counter-fraud colleagues and I have found the quality and extent of risk assessment in the sector to be patchy at best.
The problem is often in how it is seen. Is it a dry, bureaucratic, tick-box activity carried out for donor proposals and then forgotten about – or a powerful and creative tool for building resilience, evidencing stewardship, and quality-assuring your NGO’s anti-corruption approach?
The narrative we create around risk assessment, and the space we make for it, is critical. For example, I have delivered fraud and corruption training all over the world and people love risk assessment exercises – being invited to think about how they might defraud their organisation, and what could stop them! We can harness that intelligence. For example, consider proper risk workshops, horizon-scanning, ‘red-cell’ thinking, and reflect on how risk management is framed to your staff.
How effectively are you managing conflicts of interest?
The biggest proportion of incidents reported were conflicts of interest, with personal favours not far behind. This may resonate with NGO managers; anecdotally, conflicts of interest in procurement and recruitment can be a real issue.
There is often scope for improvement in how conflicts of interest are identified and managed. Because the process is often reliant on self-declaration by those who are not necessarily incentivised to declare, compliance is not automatic. Good conflicts of interest frameworks need to be simple, well-communicated, focused on heightening transparency, and subject to ongoing reinforcement.
What do you say, and what do you incentivise?
Respondents most frequently declared organisational culture and tone-at-the-top as the greatest preventative factors. I have written about the link between culture and corruption for NGOs before (here and here), but in my experience most NGO managers believe they do set the right tone and have the right culture. The problem here is that by culture and tone, we don’t just mean what you say and how you say it, we also mean what you incentivise and are perceived to permit. In my book, I describe how tone at the top is about not just words, but actions. For example:
- Did you take the right action over that manager who might have given a contract to his sister’s company?
- Did you ask the right questions about that mysteriously rapid movement of humanitarian equipment into that high-risk jurisdiction when other agencies were held up at customs?
- Do you include anti-corruption objectives into personnel appraisals and job descriptions?
- Are the objectives and timelines for projects and programmes set at such an ambitious level that you inadvertently incentivise corruption?
Your staff, volunteers, institutional donors, private supporters are watching. Crucially, so are your beneficiaries.
To read more about how to deter, prevent, detect and respond to fraud and corruption in humanitarian and global development work, make sure you pick up a copy of my book, Fighting Fraud and Corruption in the Humanitarian and Global Development Sector (Routledge, 2016). It’s out now and packed with relevant material!
Fraud and corruption has, historically, not been well understood in this sector. Your Board may have a low or rudimentary understanding of the risk and how to respond to it. This means starting at a basic level, making no assumptions, taking the time to address myths and misconceptions and playing a longer game. ‘Educate as you go,’ Willie Oelofse from Deloitte Kenya told NGOs at 
Civil society is under attack the world over, and the issue of their fraud and corruption exposure can be something that sends Board members running for their shields and helmets – especially if it is perceived to come from an 
People make decisions differently and on the basis of different values. For example, I am a big fan of the 
Fraud and corruption, especially at a strategic level, can be abstract concepts. Help the Board to connect by painting a picture of the risk with case studies. If you don’t have any in your own organisation, then perhaps partners, donors or other organisations have some they will let you use? If not, then find cases in the public space affecting comparable organisations. If you’re really struggling, consider using fictional examples – but remember to state that they’re fictional!
NGO Boards are often allergic to anything with a whiff of extra expense, especially if it is 
NGO Boards manage a lot of risks, only some of which materialize. Using evidence helps them to appreciate how fraud and corruption sits, whether that evidence is perception-based, representative sampled, or from other diverse sources. Cast the evidence net wide – consider staff surveys (especially anonymous surveys), risk assessments, project and programme evaluations, audit reports, security reports, academic research and open source. This may mean that you need to start by 
Just as is the case with private and public sector organisations, the counter-fraud agenda needs to directly support the organisation’s mission. This needs to be clearly elucidated so that Boards can see that counter-fraud is a mainstream activity, rather than a distraction.
In March’s 
A ten-minute agenda item at a Board meeting is not enough to ensure that a Board truly embraces counter-fraud and corruption. Obtain regular meetings with each member to explore their own position and build their buy-in – especially before key decisions are to be made. Similarly, the counter-fraud agenda needs to align not just to the organisation’s mission but to the agendas of those individual Board members. How does countering fraud help, not hinder, the aims of the person in front of you?
Anonymous donors are a normal feature of fundraising. We’ve all popped a few coins into a collection bucket. But where NGOs receive unusual or significant funds, with no information on their provenance, a red light should flicker into life. Anonymous giving could be the starting point for a number of laundering methodologies, perhaps even involving insiders. NGOs need to take reasonable steps to identify the sources of such contributions.
An example might arise from the UK. In 2013, the Charity Commission 
Let’s say you are running a social development enterprise. A company approaches you to purchase a quantity of your beautiful wooden products. You’re delighted – but then the company asks if a second company can settle the invoice on its behalf. They’ll settle up between themselves, later, it says. The red light should come on.
Let’s say that our rich, local businessman approaches you with a proposition. He wishes to store some money in a savings account, but he doesn’t like banks. Maybe he says they’re greedy and corrupt, and he wants to help those who live out his own commitment to social justice. He suggests giving you his US$100,000 – which he will retrieve in six months, while you get to keep the interest. Red light.
A range of complex issues face NGOs that move funds into and around locations of elevated risk, such as conflict zones, fragile states and areas of significant terrorist activity. One of these is that we don’t know who else’s money an MTO is moving in or out of these places. If our NGO engages an unscrupulous, unregulated or badly-run MTO, there are real risks of breaching the principle of ‘do no harm’ and of reputational impact.
Second Marshmallow 