Silent Partners: Are you working with a local NGO that doesn’t exist?

In this guest post, experienced global development finance professional Najwa Whistler describes her experience investigating ghost NGOs in a conflict zone. Names and details have been changed.

roadSome years ago, I found myself investigating events in a program in a war-torn country. The program had been set up to build the capacity of small local NGOs to implement community development projects. The concept was great, the donor funding had been secured, local partner NGOs had submitted proposals and agreements had been signed, transfers had been made and reports had been received. The only problem was that most of these NGOs didn’t exist.

In development sector investigations, one of the first actions upon arriving in-country is to meet with the local program director and understand how the concerns began. But within moments of sitting down with Nancy, I could already start to see how the fraud had arisen.

afghanistan-60668_1920Ex-pat Nancy used to be a teacher in Canada, and this was her first job in an international NGO. She was young, and idealistic, but it was clear that she did not have the relevant skills and experience. A conflict zone is a dangerous and stressful place, often with high staff-turnover, and the international NGO had compromised on her qualifications to find someone willing to endure the hardship.

As I talked through Nancy’s concerns that their local partners might not exist, two things became very clear. The first was that Nancy did not have field trip and progress reports and had not visited their offices.

“Why?” I asked.

“Oh, I can’t visit, it’s too dangerous,” she said.

The second was that, instead, Nancy had relied heavily on a single individual to manage this project.

“Can I see the checklist for the review of the partners’ proposals, and who was involved in the decision making?” I asked.

Nancy nodded. “Raj, the national program manager, reviewed the proposals and approved them – then he prepared the contracts.”

Raj had worked for the international NGO for many years.  In his late forties and a man of few words, he was a hard worker – the first in the office, the last to leave, and rarely took a day off. Nancy delegated most of her tasks to him.

volkswagen-569315_1920When my team drove out to the field to visit the partners and the communities, I went with Malik, a driver, who turned out to be Raj’s brother. The driver tipped off the ‘NGOs’ that we were coming for a visit.

Malik took us to a building consisting of five rooms and a hall way. On the door of each room was a crisp, freshly printed A4 paper with the name of each ’NGO’. In each room sat one man, the ‘managing director’ of each ‘NGO’. Solidarity, cooperation and co-ordination between NGOs at its best perhaps, and rarely seen to such an extent!

Malik was not the only person I met that day close to Raj. All five men came from the same village, and the same kinship group, as the brothers. This was surprising too – as the community development projects were in an area where the majority of locals were from a different kinship group – one with a long history of conflict with that of the brothers.

Over the day, I sat with each ‘managing director’ and asked about the progress of the work, the challenges, their records and their reports. Not one could locate any team members, volunteers or records with whom I could engage.

“I keep the documentation at my house because it is not safe to keep them in this building,” said one. Perhaps unsurprisingly, he would not allow us to follow him to his house or wait while he retrieved the documents as the house was ‘too far’.

Unfortunately, this picture is not unusual. But the red flags were visible in this case – and there are things we can do to better spot them and manage these risks.

office-594132_1920Firstly, ensure a realistic and validated assessment of potential partners takes place. More than one person or function needs to be involved in this assessment, and it should compare project proposals. Involve logistics and procurement teams to verify market rates.

Secondly, constantly review your project management approach during its lifecycle. Perform regular visits to the projects when the security situation allows. Ask the team members of the local partner organisation to meet you at your office from time to time.

Thirdly, even in environments where we trust our colleagues, ensure that you take a robust approach to verification. If security doesn’t allow you to physically visit the project, perhaps you can ask for GPS located photos of activities – and do not be afraid to ask for them again if the first ones look odd! Interview beneficiaries over the phone. Talk to donors and other international organisations working in the same area about their experiences.

passport photoNajwa Whistler is a finance director with 18 years of experience working for several international NGOs around the world. Growing up in a small village in Lebanon in poverty during the civil war built her resilience and determination to work in international development. She enjoys cooking and dancing. You can reach her via naj.whistler@gmail.com

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In Rehab: Restoring a team after an insider fraud

When I arrived at my last employer’s headquarters on my first day as their new head of counter-fraud, I did not know that the vacancy had arisen because my predecessor had committed… fraud.

The last person to hold that office had stolen nearly £65,000 using false invoices from fake companies. He had been arrested, would plead guilty at court and receive a custodial sentence. Despite the lurid headlines, the organisation was open about what had happened.

1If a humanitarian or global development organisation gets serious about tackling fraud and corruption, then it will detect cases – possibly in significant numbers. As my organisation invested in counter-fraud efforts, for example, we saw recorded suspicions in its global operations nearly treble in three years (this, of course, reflected a rise in vigilance and engagement rather than incidents).

But what happens after an incident of insider fraud or corruption, when the dust settles?

rippleThe job does not finish with the dismissal or conviction of the suspect(s). These incidents have long tails – there is work still to be done to rehabilitate the project or business unit in which the incident took place. An incident represents a severe breach of trust; workers may feel abused and betrayed. The ripples can spread wide.

How we go about rebuilding a team and restoring a business function depends hugely on the circumstances of the case, and there is no ‘one-size-fits-all approach. Although we only have space here for a few pointers, I have learned some lessons from helping teams like mine to overcome setbacks like this – these considerations may be helpful for you too.

First things first

The aftermath of an incident is the time to ask some basic questions: Could this happen again, and are there any other vulnerabilities we can spot?

Startup Stock PhotosHopefully, the organisational response included a lessons-learned exercise, generating changes to implement. This should look beyond the internal controls, also into enabling factors such as culture, communication and awareness.

That said, a fresh and full fraud and corruption risk assessment of the department can be helpful. Are there other vulnerabilities beyond the affected processes? An unexpected further case – just as things settle  – can create more uncertainty for the team if more changes to processes are necessary. Instead, let’s make all the adjustments we need to now (and capture the benefit of a sense of ‘moving on’) rather than risk constant change for the team.

planningNow is also a good time to do some contingency planning. Is the incident serious enough that it could result in regulatory interest, onerous remedial controls applied by institutional donors, or put future funding at risk, for example? We can prepare for these.

Startup Stock Photos

Remember to seek advice. Overcoming an incident of fraud or corruption is a risk-rich activity. Consider engaging with HR, internal communications, legal, any dedicated counter-fraud or ethics or integrity office, staff health and/or other relevant specialists.

Treat people as individuals…

colored-pencils-179167_1920Team members will respond to the matter differently. While some may be relatively unaffected, others may not. It is important to note that where staff have made a commitment to an organisation on the basis of their values – perhaps more common for charities, nonprofits and NGOs than for private sector organisations – a breach of trust could be more impactive. Perhaps there could even be a grief reaction for some team members.

sadLook out for, and respond to, the traditional symptoms of stress, low morale and anxiety. These might include absenteeism, disciplinary issues, a rise in complaints, and disillusionment. An incident can impact upon personal and professional confidence, and colleagues may feel fear, shame or embarrassment. Will the incident create a funding crisis, putting their jobs at risk? Will staff have to justify themselves to an angry public? Consider access to staff support systems, and formal interventions such as counselling and facilitated debriefing.

16404-a-woman-in-a-business-meeting-pvBe a compassionate and responsive manager. Avoid assuming you understand how people feel or why they behave the way they do. Instead, in your one-to-one meetings with team members, explore how they are experiencing the crisis and responding to it. Remember, of course, to make it clear that this is pastoral and not investigative. Similarly, it is important to restore individuals’ sense of control. In a way, employees in whose midst an act of fraud or corruption occurred are victims of abuse. Solicit and listen to their concerns and visibly respond to them.

Accept that restoration may take time. Do not assume that the passage of time, themes in office chatter or improved productivity are signals that everybody has moved on. While these might be positive indicators, look out for those left behind.

…But re-build the team

Teams can be fragile creatures, and discovering that someone was out for themselves can undermine the workplace trust that allows them to function.

gambia-239849_1920Clear communication. Rebuilding trust requires the open communication of reliable content. Low information creates anxiety, more information helps manage our ‘fight or flight’ crisis response. Concealing the matter from the team is, therefore, more likely to sow suspicion and fear than peace and confidence. Be as open as you can about what has happened, and what will now happen, within the boundaries of policy, employment law and data protection legislation. As you describe the future, avoid over-promising – employees need clear and consistent messaging from management. If you cannot make promises, don’t; recognise uncertainty and explain what is being done to reduce it.

Similarly, set the right key messages for staff and stakeholders. Absolutes (‘this will never happen again,’ ‘rogue employee,’ ‘isolated incident…’) and over-reassuring can be risky for expectation management.  More sustainable messaging might include that fraud and corruption are normal business risks which we can reduce but not eliminate, and that the best way to respond to incidents is to use them to make us stronger.

Allow the opportunity to debrief. Ask staff what the incident has meant for them, and for the team. Consider soliciting suggestions on how to move forward, which can demonstrate management’s ongoing belief in the wider team (despite the actions of one). It also helps to empower the team to claim their status back, and move forward.

Team_Building_LanzaroteFoster trusting relationships. Ensure that teams meet as regularly as possible, in person or via teleconferencing. Consider holding team-building events, reflective away days and/or ‘how are we doing’ agenda items in meetings. These measures can improve understanding, interaction and trust between team members.

Arrange a good-quality fraud and corruption awareness workshop. This will not only help reduce the risk of incidents, but will also help staff to feel empowered; the best workshops help to generate a sense of solidarity and support amongst the honest majority. Be cautious not to let it feel remedial.

beautiful-day-1374424_1920Lead by example. We know that employees look to the behaviour of their managers to determine their own. So be present; you cannot role-model behaviours and attitudes if you cannot be seen by anyone. Be positive and show how you treat what has happened constructively, managing risk, avoiding blame, taking care of your colleagues (and yourself), and using the incident to make the business unit stronger in the future. As one casualty of a fraud or corruption incident is honesty, ensure that you are (and are seen to be) authentic. So, for example, if you feel hurt, vulnerable or confused, consider sharing those feelings with the team. This helps to normalise these emotions.

Avoid blame. This includes the narrative that we create around the perpetrator. It is tempting to turn them into the catch-all receptacle for all that has gone wrong, but this risks helping to foster a blame culture that can trip us up later. Furthermore, it can help us to move on from a crisis if we are able to see that there are things we could have done differently.

Get back to business-as-usual as quickly as possible

roadReaching project milestones or completing tasks puts clear blue water between the incident and the present, assisting both staff and stakeholders to move on. It also, of course, ensures the progress of the project or business unit. Embed, as rapidly and effectively as possible, any changes to processes to reduce the risk of a recurrence.

Remember the big picture – the goals and values of your organisation. Trust may have been betrayed on this occasion, but a refocus on why we all come to work in the first place can assist everyone to work hard towards recovery.

Thanks to Liz Crowe, Wellbeing at Work Specialist, for her contributions to the content. Liz tweets @lizcrowe2, or visit her website at LizCrowe.org.

FFCHGDSTo 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!

Aid diversion to terrorists: 3 things NGOs need to know

This week I’ve been in Nairobi, Kenya, delivering workshops for local NGOs on minimising the risk of money-laundering and terrorist financing. Preparing the material led me to reflect on some of the conversations I’ve had with NGO managers about reducing the risk that physical assets, funds and stock might fall into the hands of those designated as terrorists, or subject to financial sanctions.

Diversion_11This presents a very challenging issue for NGOs that work in high-risk areas, and one with significant tensions at its heart. These include the tension between minimising the risk of diversion versus disrupting the delivery of aid, competing obligations on the ground, and the wider balancing act between regulation and enforcement versus guidance and capacity building.

It does not help that the international regulatory picture and sectoral response are far from coherent, and subsequently it is understandable that there are widespread misunderstandings. This is not an exhaustive article, of course,  but we’ll explore (in no particular order) some of the most common areas that have popped up in my conversations around the sector.

Audit may be unlikely to pick up incidents.

16811751576_856ea1d5f2_oAudit is a helpful process that assists managers to meet their organisational goals and minimise risks. It is not its purpose to detect financial crime (less than 20% of detected fraud cases are identified this way). That’s assuming, of course, that systematic and independent audit even happens – in remote programmes, conflict zones or humanitarian emergencies, whole projects in some organisations may see little or no independent review at all.

NGO managers need to avoid the errors of assuming that a detection-free audit is an all-clear, or that it is solely the duty of auditors to prevent and detect financial crime, rather than everybody’s responsibility. ‘Protection money’ or ‘taxes’ paid to terrorist groups can be masked as vague costs, such as ‘transport’ or ‘security.’ If identity and sanctions list checks of partners, contractors, consultants, staff and volunteers were not conducted, auditors won’t necessarily pick up positive hits either. Audit may help identify vulnerabilities, but it cannot be relied upon to spot incidents.

Instead, according to FATF, factors that might elevate an NGO’s risk include programmes in close proximity to terrorist groups, and/or those that are ‘service’-oriented; these could include construction and distributions (i.e. operations more likely to involve the movement of physical assets, funds or stock). An NGO in this position needs to ensure that it implements a meaningful risk management cycle, creating space to look for vulnerabilities and taking reasonable precautions. Risk assessment is only a bureaucratic ‘tick-box exercise’ if we let it be – it can be a powerful method to spot what could go wrong and do our best to prepare for it.

Transferring all the risk to local partners isn’t fair.

afghanistan-90761_1920In my book, I suggest that a chain of unbridled risk transfer from back-donors to INGOs to local partners has the opposite effect of protecting funds – it increases the risk of fraud and corruption. In the end, too much risk derived from decisions taken in coffee-laced, air-conditioned meetings in Brussels, London and Kabul sits on the shoulders of one Afghan worker standing in the sun at a checkpoint in Badakhshan. This is poor risk management, poor partnership-working, and poor diversion prevention.

The flow needs to be inverted. Rather than just responsibility flowing from back-donor to local organisation, communication about the nature of the risks needs to flow the other way, and provoke increased investment in capacity-building and shared responsibility. There are difficulties with reconciling programmatic objectives and terrorism risk (‘what if we really can’t access that population without a payment?’), but we will not start to address these if agencies hide behind risk transfer to avoid the conversation.

Relying on assurances of non-prosecution is dangerous.

getoutofjailIn 2015, the UK government issued guidance describing the risk of a prosecution for a terrorism offence as a result of involvement in humanitarian efforts or conflict resolution as ‘low.’ This was encouraging in terms of the British government’s recognition of the vital need for humanitarian work in conflict zones and the difficult circumstances in which it occurs. However, we need to be cautious about how we respond to this in terms of our investment in minimising the risk – we might have been here before.

In 2010, the Bribery Act led to a flurry of compliance activity amongst NGOs keen to avoid prosecution for failing to prevent bribery. According to some, however, unnamed British officials apparently indicated to nervous NGOs that their organisations were not the focus of this legislation and appeared to imply that they would not be paid much attention. Some perceive that, sadly, this well-intentioned move contributed to a dwindling of effort amongst some NGOs in developing meaningful compliance frameworks. (Ironically, in this regulation with strong ‘prevention’ requirements, it is the dwindling of effort and its consequences that could potentially elevate the chances of prosecution!)

Save_the_Children,_Westport,_CT,_USA_2012Implied assurance of non-prosecution is always caveated, is not always made by those with the correct authority, and might not relate to that which is perceived. The British guidance note, for example, does not indicate whether it is referring to placing resources in the hands of terrorists (potentially s15-18 Terrorism Act offences), failing to have sufficient systems to prevent sanctions breaches (potentially a s34 Terrorist Asset Freezing Act offence of neglect), failing to report a suspected funding offence (s19 Terrorism Act), or some of those, or none – and so on. In any event, any decisions would be made on the basis of the prevailing circumstances of the case and it is worth noting that Save the Children International were investigated by the Metropolitan Police for allegedly failing to report a suspected incident of theft by a terrorist group in Somalia.

This situation also comes with an ethical choice – if we are not to be prosecuted, is it okay to commit the offence? Our donors and supporters may have something to say about that.

Assurances of the low probability of prosecution are not literal Get Out Of Jail Free cards. Instead, a pragmatic response for NGOs might be to continue to do all that is reasonable to comply with regulations, invest in proper systems to reduce the risk of both incidents and non-compliance, and maintain dialogue with authorities on the implications for humanitarian operations generated by the intricacies of their regulatory regimes. And there is no substitute, of course, for professional legal advice.

Conclusion

As with many of the corruption risks facing NGOs, the issues are complex and difficult. NGOs require the understanding – and patience – of the public, their donors and host governments. However, there is much that NGOs can do to reduce these risks.

Many of the systems and approaches that minimise the risk of diversion represent good governance and management – creating space for proper planning and monitoring of operations, ensuring that open internal communication channels exist, investing in the coherent verification of outputs, the diligent management of third parties, and so on. Getting these things right in areas where we are more able to do so reduces overall exposure, allowing us to focus our problem-solving on the areas where things are more challenging.

Improving transparency – or, in old money, having the conversation – will start the ball rolling.