Humanitarian Causes W/ Fraud Prevention Models

Non-Government Organizations (NGOs) are a categorical area covering a multitude of humanitarian causes across the globe.

NGO as a category industry is an overarching umbrella term. Many components, ideas, Causes, organizational structure and hierarchy, motivations, foundations funding them etc., dictate the unique signature of a specific NGO in question.

For the purpose of my today’s conversation on this topic, my objective is to think aloud on the various elements and functional constructs of it, from a common sense perspective and from observations and all other relevant read.

A few points to note:

1. No two humanitarian Causes are comparable for a quantifiable metric, in terms of their relevance more/less to humanity. (That’s not the part of the exercise nor should it be a wise approach, in any other case too)
2. A wide range of factors are associated with any given NGO mapped to it’s specific Cause or Focus area.
3. One or more foundations maybe funding a single NGO entity. (not branch but the entire entity of it, for example, in the US, blood donation or organ donation based NGOs nationwide maybe one single entity)
4. One single foundation donor maybe funding multiple NGOs for various Causes also. (HNIs and other philanthropists with size-able and significant donations)
5. To give a sense of range of Causes spanning these NGOs - Blood donation Orgs, Organ donation Orgs, Animal rescue Orgs, Specific animal species focused ones (like Elephant preserves, endangered Wildlife Species and more), Climate control related, Rehabilitation centers for incarcerated / underprivileged / abused children based ones, Orphaned children education sponsorship, Natural calamity hit areas or economic poverty areas for education and general welfare funds and more..
6. We must not apply an ALL or NONE thinking when we talk about these Industry vertical as a Category and must seek the foundational elements of why they exist and separate the other potential fraudulent areas due to finances involved anywhere in the process.
7. We can additionally identify possible motives of such bad actors contributing to the fraudulent financing models.

With the axioms, facts and some basic ideas to anchor in mind, as stated above, let’s look at a high level construct of an NGO or an anatomy of it.

Premise:

Some NGOs or some specific type of NGOs or some NGOs funded by specific single big donors or some mysterious Causes or Some shady focus areas (children abuse for trans surgeries) or the NGOs where it’s a complete blackbox type of structure but has serious detrimental effects on the Society due to lapse of it, need a full investigative analysis into their process.

And, if the fraudulent activities are confirmed during the investigation process and outcomes, they need to be considered broadly for two possible actions:

1. Shutdown the entire NGO Cause and entity altogether.
2. Keep the humanitarian Cause operational but decommission the NGO model w/ Government funding but make it a 100% private individuals’ owned Organization with better financial controls, tax terms and payments etc.,

Objective:

1. To review the overarching anatomy of an NGO.

2. Identify the potential fraudulent financing / funding structures with a methodical distillation process.

   1. Separate the humanitarian Cause with end beneficiaries from the operational dysfunction leading to financial fraud and more.

3. Discuss alternative funding models to eliminate the fraud due to Governments funding the NGOs model which suffers from gross lack of transparency to Account Ledgers, lack of Financial accountability, abuse of funds and more..

Anatomy of an NGO:

1. The Humanitarian Cause itself, the background story, the mission statement, the goals to meet and/or improve for better humanity, a motivation, a long history of why this Cause is felt to be relevant and important, as it was conceived by one or more minds and such.
2. End beneficiaries: (Totally removed from the operational or financial management)
3. Enrollment Staffing team: Who scouts, recruits / employs the needy end beneficiaries into their Scheme or Program.
4. Site Staffing team or Marketing team: Who identifies the qualified leads and maintains a record of the CRM(?)
5. Mid-level Executive and Admin Staff: Website content, Program management and execution, a liaison between end beneficiaries and the upper executive management, accepting donations via website or scheme based selection and such.
6. Accounts manager / Financial executive: Who must be aware of what’s going on with the funds flow, cash flow all the way from receiving into the System to the end usage point of the funds, down to the dollar as balance sheets, accounts ledger, tax payments and all need to be visible to this team.
7. Top level executive team: Who funds the entire Org, reviews the external funding received by numerous donors / analytics, separate big donors, their frequency of funding, or if self-funded Org then view the analytics in comparatives to internal vs. external sums received, how the funds are disbursed, analyze the surplus funds or shortage and more…

That’s a typical construct, it could be more or less nuanced for a specific NGO but we can live with the skeletal anatomy for the purpose of our objective and conversation without losing significant signal.

If you look at the top 1 to 5 teams / departments / functions of an NGO, they are generally removed from the financial operations. By design, they are abstracted, by role they are abstracted and they don’t know and they don’t need to know. Simple.

So, let’s split the anatomy segments of 1 to 7 above into two segments.

• 1 to 5 teams — NO visibility to finances.

  • Don’t touch them in your fraud investigation process.

  • Waste of your time and resources.

• 6 and 7 teams — Everything to do with financial operations and how they are run. They are responsible, accountable, consulted, informed (in a classic RACI matrix representation, some of them are checked off on all the RACI elements).

  • Distill the financial operations by rounding up the individuals in these 2 broad team (use it as a functional subdomain and find everyone who has access to end-end finances)

Let’s invoke our inner Sherlock Holmes a bit and see if we can chalk out some investigative analytical approach:

Investigative Process elements to dissect:

1. Who’s the single big donor? Founder and Funder? or only a funder?

2. What’s the frequency of donation?

3. What’s the max(donation) received and the last date?

4. What’s the Average time between any two donations?

   Repeat the above steps for all the significant donors (exceeding some $x threshold value that you deem it as a potential red flag, define the parameters and take the process)

5. Who reviews the financial analytics, charts, trends and accounting?

6. Who reports to who on the financials and how periodically? Example meeting minutes, charts/data from the last 3-6-9-12 month rolling period

7. What’s deemed as financial anomaly? And, who or how or what’s the SOP (Standard Operating Procedures) for resolving the anomaly? Any notes collected from such past anomalies?

8. How do they report them transparently internally?

9. Who or where is the accountability to meeting the financial metrics?

   Draw the potential inferences to see if there’s money laundering element, any glaringly skeptical areas where funds are abused (example: funds received into the System but never disbursed or used for the end-beneficiaries in any form or shape)

10. Look for financial leaks in the process.

Depending on what your findings are in the high-level process laid out above, you need to have an idea of what’s ideal / normal/ passable for some thresholds barring the balance sheets that need to match and such..

For example, if a donor frequently donates millions of dollars every month. Does the Cause in question require that many funds or is it an element of the guy washing off the sins and resorting to tax exemptions to route many of his/her fortune to keep the other personal/company funds clean?

Some things to keep in mind and worth noting:

• There’s a need to have a benchmark standard to use or at least a common sense idea on what to look for and then look for it.
• Much of it is an art of approaching it using the science of doing the methodical process.
• I hope someone with a good, objective, clear and sane mind can do these investigative processes, and not a political opponent who’s hungry to get some personal vendetta and settling their scores.
• I’m generally skeptical of the investigators too, given the political drama that plays out in public in a generality so my caveat has it right placement, and sharing it for what’s it’s worth.
• Do it sincerely, honestly and with some integrity and moral code to find the right fraudulent activities only and not to bring any person/people down with your showdown political drama and raise another issue of ‘abuse of authority’ element from the investigation itself…
• Take good care in all the steps, intentions, objectives, goals to meet.
• Set the right expectations on the investigation purpose.

Next….

If deterministically fraudulent activities are found, depending on the class of fraud and the abuse of finances, the reason code of abuse (example: money laundering and identified the bad actors), initiate one of the two broad outcomes based on case by case basis.

Either shutdown the entire Cause if the cause itself is shady to begin with and no promise of doing any good to the people. OR

Shutdown the NGO model, stop the government funding (not abruptly to disrupt the operations of a good humanitarian cause putting innocent end beneficiaries through pain, risk and trauma) but a method to transition over to any PE owned person or set of private investors who may want to take it over.

All the financial controls with transparency, integrity to the data/process/person, accountability, tax reporting and structures and other related controls need to be in place as part of the full transitioning process.

We are not moving the rogue process to another rogue process in a different place. Make sure the process is self-accountable enough to prove and close the gaps identified above, show how it will be fool-proof and immune for money laundering or other mafia / rogue / social evil models.

Hope the above perspective is helpful.

I write from my own observations, ideas, common sense based, logical reasoning based ideas. There’s no other input source in specificity to quote as they are all common, relatable ones that should be in common public knowledge. I’m not writing a theorem on Quantum Entanglement to cite any other sources for this topic.

Thanks for reading.

Stay tuned for more…..