NGOs hire investigators as pressure mounts over fraud

NGOs hire investigators as pressure mounts over fraud

Rising mistrust of international charities and a public push for greater transparency on spending in corruption-prone crisis zones are compelling some non-government organizations (NGOs) to hire a new recruit – the criminal investigator.

In a bid to prevent as well as report fraudulent activity, Plan International, Oxfam GB, Americares and International Medical Corps are among those to have appointed trained counter-fraud directors at their head offices.

Others, such as Medicins Sans Frontieres, Handicap International and Action Against Hunger use auditors and finance officers to handle cases of fraud.

The growing trend to hire criminal investigators comes after the NGO sector has doubled in size in the past decade with a Thomson Reuters Foundation survey finding 50 of the world’s biggest humanitarian NGOs spent $18 billion in 2013-14.

This rapid growth has fueled concerns over a lack of accountability with the annual Edelman Trust Barometer finding NGOs were the most trusted of four institutions but trust slipped in the past year with a perception they had become too money focused.

One forensic expert said the lack of experienced investigators can be a barrier to financial probity as NGOs faced a unique set of issues such as ghost employees, fictitious invoices, kickback arrangements and “double-dipping” to get funds from more than one donor for a project.

“External auditors, unlike [counter-fraud] officers, are not necessarily looking for evidence of fictitious receipts or inappropriate spending in the field,” said Matthias Kiener, Zurich-based forensic officer with the consultancy, KPMG.

“Sometimes the due diligence is not done. That might be because many charities are founded on the principle of trust. An NGO might be reluctant to ask tough questions of some of those it employs,” said Kiener, whose clients include large humanitarian organizations.


In July a Thomson Reuters Foundation survey revealed a third of humanitarian NGOs with budgets greater than $150 million were not prepared to reveal their annual fraud figures.

Others, such as BRAC, Direct Relief, Americares, Oxfam US and Sightsavers all said they had not experienced any fraud greater than $10,000 in the last five years.

But critics question the rationale in not reporting fraud data, speculating that it could be an indication of under detection and less effective management.

Oliver May, Oxfam GB’s head of counter-fraud and a former UK organized crime investigator, said NGOs were reluctant to share fraud data, partly for fear of jeopardizing donations, but an increase in NGO fraud reporting would be a welcome change.

Oxfam GB said it lost 0.16 percent of its income to fraud and corruption in 2014-15, although some was recovered.

“Really fraud is a problem for all organizations. It is an environmental risk for us and it should be less reassuring when an NGO is not reporting fraud than when it is,” May told the Thomson Reuters Foundation.

“If there is no detection it is harder to know what the problem looks like … What we really want to see is the publication of annual fraud data across the whole NGO sector – that would really be an important step.”

It is important for charities to accept that corruption permeates every corner of the world, and every walk of life, including humanitarian organizations, said Gary Mitchell, Plan International’s director of global assurance.

The charity, employing nearly 10,000 staff globally, has allocated $300,000 (200,000 pounds) annually to staffing anti-corruption efforts.


“In [parts of] Africa, for example, we know extended families are a way of life and we would expect you to hire your uncle’s third cousin because that is the way it is,” said Mitchell.

“That’s a reality we have to face in combating fraud. Societies differ in what they perceive to be corrupt.”

Plan’s attitude to corruption – like that of Oxfam GB’s – contrasts with that of U.S.-based Direct Relief, which has not reported any incidence of fraud over $10,000.

The charity sends medical relief and equipment to partners in disaster zones who then use them in their programs.

“I’m not aware of any circumstance where we haven’t put boots on the ground [to] oversee the [aid] distributions. It would be hard for anyone to get hold of the shipments and misappropriate them,” said Ernie Getto, chair of Direct Relief’s audit committee since 2014.

“We have been audited externally – and everything we have been audited about has come out with a good result. I am not saying we are perfect but I think we are as close to it as an organization can get,” said Getto.

Getto believes the dearth of fraud reports is partly due to the NGO’s size. Despite having spent over $550 million in the period 2013-2014 he said the charity employs just 65 people at its head office and warehouse in Santa Barbara, California.

“Everybody is sitting there in that building … there is not a lot of cash flowing through the organization,” said Getto, adding that he is considering proposing a whistle-blowing fraud hotline in the interests of best practice.

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