INVESTIGATIONS

How NGO managers steal funds

As much as NGOs play an important role in changing people’s lives, an increase in fraud and corruption cases has left donors uneasy. It is important to state that fraud and corruption within NGOs are not a new phenomenon. It’s been happening for years! NGO Managers Steal Funds.

The Oxfam saga is a case in point. This fraud involves 22 staff members. It came to light that, twenty thousand pounds disappeared mysteriously. This all happened during a 2004 Tsunami, in Indonesia. An independent investigation revealed discrepancies in money paid to suppliers. The investigation went on to reveal that the lack of transparency was a root cause.

Another example would be the infamous Malay-Muslim which saw its manager and his co-accused charged with fraud. There are many similar cases. All of which involve internal staff committing either corruption or fraud. Seemingly, most NGOs do not press criminal charges against managers involved in fraud.

Donations go a long way in making a difference in people’s lives. In some African states, for instance, corporate philanthropy outdo government by many strides. BP is one such company that has pledged support. To date, since 2006, BP Foundation has donated over $218 million. Almost all multinational conglomerates are following on BP’s steps by donating funds for one cause or another.

Fraudsters like all criminals are normal people trying their luck. Corrupt NGO staff commit crimes where they see a tempting opportunity and fraudsters when they believe no one will catch them. As all fraud cases have come to prove, the more an authority is assigned to an individual, the greater chances for embezzlement of donated funds.

In an attempt to prevent fraud and corruption, NGOs drafted constitutions hoping all staff members will abide by them. This included over-emphasizing important values like honesty and integrity; highlighting vision and mission of the NGO and pinpointing whistle blowing procedures. Another way was by empowering NGO finance staff with apt financial management training. All the above attempts have since proven to be futile. Theft of donated funds continues unabated. Some of which happens as a result of suppliers taking advantage of NGOs.

This is how corrupt managers steal funds.

Inflated expenses
Just like any commercial business, NGOs purchase materials from time to time. In most cases for items like stationery, office furniture, and tools used by NGOs. The goods will be of substandard nature. An NGO manager can collude with a company owned by a friend, by inflating the quantity of delivered goods to maximise stealing. And how do you like this one? A manager that collides with a supplier to steal charity funds!

Ghost employees
Creating ghost employees is easy. An NGO committed to reforming teenagers through sport may need more than one employee for its varying duties. Most donors expect NGOs to employ staff full time. And information like names of employees; their qualifications; together with contracts, are all submitted to the donor’s head office. Does this mean donors really know who is being paid by an NGO? Unfortunately not.

An NGO manager with fellow managers can easily submit bogus contracts. All monies intended to pay NGO staff will now go straight, (again, as if inflating expenses was not enough) into their dirty pockets. What tends to happen in most cases though is; when a staff member resigns, the new development is not communicated to donors.

Another scenario for this fraud is when volunteering staff members are registered as paid workers. This form of fraud is favored in African countries. Again, this problem reveals why it is so important for donors and NGOs to be on the same board.

Fictitious deliveries/services
Delivery for fictitious art crafts, condoms or even stationery can be another area to investigate. I must point out that this is not very common, as it’s easy to prove that a delivery did not take place. But it doesn’t mean that this method is not used to steal donated funds.

Fictitious services such as a hard to prove workshop or training are other preferred ways of stealing funds. The rationale goes along these lines: It costs money to have a workshop and training so overcharging is justifiable. In most cases, donors do not even question this ridiculous charge. It goes without saying that, extra costs (like catering and the moderator) lend themselves well in workshops.

According to a survey conducted by BDO Australia, 54% of NGOs do not report fraud cases to police. In addition, UK-based National Fraud Authority (2012:9) found that fraud costs an estimated 1.7 percent of income equivalent to 1.1 billion.

NGOs are an integral part of society and like any organization, pretty prone to fraud. With the world’s trust in these charities, spending transparency is fundamental. Luckily technology has made it easy for all to achieve spend accountability and there are no more excuses. So this is a call to all NGOs in need of spend transparency

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