I recently read a comment in a draft document by a respected audit firm, and wasn’t sure whether to laugh or cry. Imagine the biggest risk associated with not having a comprehensive fraud policy? They said: ‘You might get whistleblowers’!
Presumably this refers to the risk that is surely every board chair’s nightmare – that someone somewhere might go public with a headline-grabbing fraud scandal – I wouldn’t wish that on anyone. But surely we are not so cynical to believe that the primary purpose of our fraud policies is to contain fall out, spin the messaging and manage the impact?
This reveals a great dilemma in the fight against fraud which I like to call the detection paradox. We want to fight fraud, and that includes having good detection measures in place. But at the same time we don’t really want to find any, as that would reflect badly on us – so perhaps we shouldn’t look too hard.
In 2015 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. If we reflect on the #metoo movement it is intuitive that the amount of harassment reported is a small fraction of the actual misconduct happening undetected. The same is true of fraud. There are also parallels to be drawn between the ‘felt shame’ that prevented many women from sharing their ordeals, and the embarrassment that organizations have about sharing their fraud realities.
We don’t yet have good publicly available data to see whether the sea change created by the #metoo movement since 2017 has actually resulted in fewer instances of harassment. But I expect that in acknowledging the problem, changing the public discourse and creating a culture where victims are empowered to speak up, we will see a sharp increase in reported cases, hopefully followed by a decrease in actual total incidence. We are already hearing from many of our members that they are seeing an increased number of reports of sexual harassment–which is what we would expect. This is what Humentum tries to provide in offering free member convenings and sessions around fraud where you can learn from your peers at OpEx DC 2019, our annual conference.
If you are coming to OpEx DC 2019, Humentum’s annual conference, you may find some of the sessions around fraud topics informative. There are sessions on Detecting Fraud Through Vendor Audits, Contract And Procurement Fraud, After Fraud: How Do You Bring About Institutional Change, Mobile Money As An Alternative To Cash: Opportunity Or Threat? and how to Think Like A Forensic Auditor. We look forward to seeing you at this year’s conference. We will also be sharing about fraud at the Uganda INGO Finance network later this month.
In the same way, organizations that take positive steps to create safe channels for people to speak up, and create a culture where fraud is talked about are likely to see an increase in reported fraud cases. And that’s a difficult PR message! But it’s one that leaders in this fight have embraced, such as Plan International, who disclose every allegation on their website.
After a fraud has happened, we rightly focus on investigating, then taking corrective actions, and ideally also preventative measures so that a particular fraud can’t happen again. It’s a bit like getting a virus – we learn, and rarely get exactly the same fraud twice. But is there anything we can do before it happens? To improve our readiness to detect and respond to future frauds, and develop a mature organizational culture where fraud cannot thrive? All without getting staff tied in bureaucratic or administrative knots?
Many NGOs are realizing the wide-scale risks of waiting until fraud happens before tackling it. They are also aware that sending a couple of staff on a training course isn’t the answer. We need both a pro-active and holistic approach to fraud across all levels of an organization. A holistic approach builds robust organizational strength in a comprehensive way, so fraud is not only combated when it occurs, but is actively prevented and not tolerated, by any individual within an organization.
In 2019, Humentum is joining forces with the international NGO sector to help fight fraud. We want to provide NGOs with tools and guidance to feel empowered to take an integrated approach, with clear policies, effective deterrents, and nuanced understanding of human behavior to design effective controls.
Humentum offers a wide range of advice in the ‘Mango Guide’. Take a look at our pages on fraud and risk assessment, which include an explanation of why people commit fraud, and how to carry out an effective risk assessment so that you can prioritize where the most serious dangers of fraud lie. We provide guidance on internal controls so that simple but efficient measures like passwords, stock counts, segregation of duties and many others can be put in place to prevent and detect fraud. There is also some helpful advice on how to conduct an internal audit, to ensure that internal control systems are continually improving.
Free Templates, Tools, Checklists, and Top Tips
We recognize that many NGOs benefit from ready-made checklists and templates. On the Humentum website you can access an editable 32 page anti-fraud and anti-bribery policy template, as well as a checklist for anti-bribery principles, developed by us with Transparency International. There are also some examples of fraud policies, including those shared by the Red Cross and others. And our Top Tips series covers topics like the Warning Signs of Fraud, Dealing with Fraud and Fighting Bribery.
Much as training is not a magic bullet, it is often part of the solution, as our trainees testify. We offer a leading workshop called Fighting Fraud in NGOs, which builds the skills and confidence of NGO managers and staff to prevent, detect and respond to fraud. The two-day face to face course is open to any individual from an NGO and is also offered as a client workshop within an organization. There is also a 3-day course on Fraud and Bribery that Humentum offer as a client workshop. The online Fighting Fraud eworkshop runs for 5-weeks and offers the opportunity to learn the content through interactive lessons, readings, videos, individual and team tasks, and a practical course assignment. There are no ‘real time’ sessions so you can study at a time that suits you, within the set module weeks.
Many NGOs are thinking of the advantages of procuring a more bespoke package of advice and guidance, and Humentum can help out here too, with our consultancy offering. Our 4-day Fraud and Bribery client workshop includes practical fraud policy development, so participants leave with a draft policy ready to present to their boards. Find out more about how 16 Rwandan NPOs took advantage of this programme in this blog. Humentum can also conduct fraud Investigations, and we will support organizations to develop your anti-fraud strategy, policies, processes and culture. You can find out much more about our consultancy services on our website.
Fraud risk does not appear to be going away. We are very excited about the global move towards localization and getting more money to front line organizations, which is absolutely as it should be. But sector wide, the chronic under investment in the organizational capacity and systems of these NGOs and CBOs does now bring an increased risk of fraud.
Humentum wants to take a pro-active holistic approach. We want to help NGOs combat all the risks collectively, achieve organizational maturity and enable the sector to come together around this important issue. Something more meaningful than a tick-box policy to just keep whistleblowers away from the media for the sake of a good night’s sleep.
Please, let us know how we can help further, and how we can help you fight fraud in your organization.