Working for a charity or NGO? Getting enough sleep at night? If you’ve answered ‘yes’ to both these questions, then you should be asking yourself how much you really know about corruption risks within the non-profit sector.
See no evil, hear no evil, and speak no evil!
Despite the growing level of funds channelled through NGOs (or maybe because of it), fraud and corruption continue to be a highly sensitive topic, with most NGOs reluctant to openly discuss it. This was highlighted a few years ago, when Médecins du Monde initiated a study in an attempt to open up discussion on corruption within the humanitarian aid sector (one of the most corruption prone areas of development). Of the 17 largest French NGOs contacted for a confidential interview, accounting for more than 80% of all French humanitarian aid, 11 refused to participate. Attitudes such as this, a general lack of transparency within the sector, and a scarcity of empirical evidence available on fraud and corruption, has resulted in the topic avoiding appropriate scrutiny.
‘Lies, damn lies, … and NGO accountability’.
In the simplest of terms, the stability of the non-profit sector is based on a collective public trust, built on the innate belief that nongovernmental organisations (NGOs) are intrinsically trustworthy. Just how warranted is this faith? Are NGO’s doing enough to merit the belief placed in them? At the heart of these questions is the issue of accountability.
Fraud has increased 20% since the GFC.
While global research has consistently shown that the typical organisation losses 5% of its revenues to fraud each year, rates within the non-profit and international development sectors are considered to be significantly higher. Putting this into perspective in 2013, fraud cost the OECD $7.56 billion in Overseas Development Assistance (ODA), while in the case of Australia, the non-profit sector loses around $1.53 billion a year. And the issue isn’t expected to improve, with a recent study showing that fraud increased 20% in the first two years of the global financial crises (GFC). Despite fraud being a significant issue for many NGOs and other non-profits, few (if any) view it as a cost to be managed and controlled. More