Anti-corruption work in 2009

By Anne Kristin Sydnes (Director of International Programmes) and Eivind Aalborg (Head of International Staff Division) in Norwegian Church Aid

Norwegian Church AID (NCA) works in 50 countries, has Representations in 20 countries, and works with long-term development aid, advocacy and political processes and emergency organised through 1,000 projects. NCA works with local, national and international partner organisations. 2009’s budget volume was NOK 750 million.

NCA’s standpoint is zero tolerance with respect to corruption and financial irregularity, and is proactive with anti-corruption initiatives and attitudes. Specific cases that are detected are included in a competence enhancement programme. The programme’s preventative goal is reached both through specific lessons learnt from individual cases, to detect signals as quickly as possible, and to leave no doubt that NCA takes corruption extremely seriously.

Norwegian Church Aid (NCA) is committed to transparency in its work against corruption. This is the second year that NCA publishes the cases the organisation has worked with during the year, although the article published in February 2009 was not translated from Norwegian.

The cases outlined below vary in complexity and size. Regardless of the differences, one common aspect is that NCA staff members at different levels in the organisation initiate immediate enquiries in all cases. This is consistent for all issues, whether discovered through our incident reporting (whistle-blowing) mechanisms or brought to light through normal reporting lines.

If the issue relates to a partner organisation which receives funds from several donors, NCA informs the other donors on the ground, and in many situations close cooperation with donors is sought in taking further steps.
NCA staff members in different parts of the global organisation worked on the following cases during 2009:

Brazil:

During autumn 2009 the Brazilian magazine “Veja” published an article containing allegations of misused funds in the organisation ”Movimento dos Trabalhadores Rurais Sem Terra” (MST), which is also a partner of NCA. MST was established in 1984 as a social movement to fight for the rights of the landless and has been a target of harassment from the right wing in Brazil. MST has had many successful campaigns through the years. NCA have always prioritised the need for responsible financial management in organisations connected to MST, such as CEPATEC. Our information, including audited financial statements, indicate no reasons to link the allegations to funds provided by NCA. Despite this, the Norwegian MFA decided in December 2009 to stop further support for MST, judging that there was too much insecurity with MSTs working practices and financial management. NCA will be working together with other organisations in investigating further the accuracy of the allegations in the Brazilian press.

Burundi:

 NCA received information in autumn 2009 indicating contradictory information from the United Baptist Church of Burundi (UEBB) in its reporting to different donors. Additionally, the Secretary General of UEBB started his own organisation, which he then introduced to donors as a new department of UEBB that would implement development and emergency projects for UEBB. Information received later revealed that the new organisation has no formal connection with UEBB, and is a separate organisation. Several rumours of internal struggles and financial irregularities have sprung out of the organisation. In response, NCA has initiated a process to conduct a special audit, in close coordination with other donors. The audit will commence shortly.

Democratic Republic of Congo (DRC) I:

In August 2009 the Head of Finance and Administration at NCA’s field office in Goma discovered falsified vouchers from one of NCA’s drivers. Further enquiries, some with the assistance of a local lawyer, uncovered fraud amounting to USD 955, comprising of USD 755 relating to travel and visit to Dar es Salaam to fetch a vehicle transferred from another NCA Representation, and USD 200 relating to falsified papers concerning the import of an electric cable from Rwanda to DRC. The driver was immediately dismissed and a repayment plan agreed on. After careful consideration, NCA decided not to report the incident to the police, mainly due to concerns relating to the country’s legal system. Management decided that strategic and operational risks associated with pressing charges were too high; it may even have led to unfortunate, unforeseeable consequences for NCA’s staff members and other projects in the country.

Democratic Republic of Congo (DRC) II:

During summer 2009 the Norwegian MFA enquired how NCA followed up and monitored the project work through the local partner CELPA. The cause of the enquiry was indications of possible irregularity at the partner. NCA stopped all transfers to the partner and decided to instead transfer funds to NCA’s field office in Bukavu, and take a more ‘hands on’ approach to managing the project. We have no reasons to suspect misuse of NCA funds, and are following up CELPA in accordance with NCA’s strict auditing and reporting requirements.

Guatemala:

In July 2009, the Director, Administrator and Accountant in the partner organisation ”Proyecto Vida” were dismissed for complicity in stealing money from bank accounts of the organization by falsifying cheques and vouchers. All three were reported to the police and put in jail, but released after paying bail. The case continues in Guatemala’s legal system. A preliminary audit sanctioned by NCA, and other internal and donor-financed investigations, indicate that no NCA funds have been defrauded.

Haiti:

The Norwegian MFA had received information indicating possible irregularities at NCA’s local partner ISPOS. The grant letter for 2008 to NCA included a requirement for an independent audit to be conducted in addition to the normal annual audit, and by another auditor than ISPOS’ normal auditor. In accordance with NCA’s normal routines, including the invitation to competing bids, it was necessary to seek proposals from international firms also outside Haiti. No firms based outside Haiti were willing to take on the assignment, citing primarily security risks. In the mean time, the MFA did not extend the grant, and ISPOS’ Director decided to close the institute as a consequence of lack of financing. The normal external audit report for 2008, concluded after the closure, did not include any issues to confirm the initial indications of irregularities.

Malawi:

Christian Health Association of Malawi (CHAM) has received NOK 12.5 million from NCA in the period 2006-2008 towards its critical work in Malawi’s health sector nationwide. Based on signals of unsatisfactory financial management in the organisation NCA decided in May 2009, in close cooperation with other donors, to initiate an extraordinary audit. The audit report revealed that NOK 3 million of funds from all donors in total had been used on administrative work at CHAM’s Head Office, not directly on health projects. The auditors also reported a loan authorised by the Executive Director to himself. Subsequently, the Executive Director resigned and has now repaid the borrowed funds.
NCA has put into use several initiatives to secure closer monitoring and control of CHAM’s financial management than previously, also in close cooperation with other donors. CHAM is now in the process of repaying donors, including NOK 280,000 to NCA.

Mali:

A previous employee at NCA’s Representation in Mali informed NCA Head Office about irregularities at the Representation. Head Office therefore decided to sanction an independent auditing firm to investigate the allegations. The audit did not uncover a fraud, but did recommend a number of improvements to strengthen the control environment. These recommendations have been and are being implemented.

Tanzania:

Observations from NCA’s holistic monitoring and control routines stimulated NCA to contract an international auditing firm to perform a special audit of NCA’s partners BAKWATA and WCRP. NCA drafted the Terms of Reference for the assignment and chose the auditing firm. The auditors reported several control weaknesses but did not discover any fraud specifically. The organizations have until end-March 2010 to submit a status report on implementing the recommendations from the auditors. Both partners have been granted a reduced budget in 2010.

Previous years:

The following two cases are not new in 2009, and are included here as they have demanded resources from NCA in 2009.

Chechnya:

In 2006 NCA’s local partner Chechnya, Centre for Peacemaking and Community development, CPCD, with headquarters in England was deemed insolvent. NCA had ceased the partnership a few months previously, due to the failure by CPCD to submit audited financial statements. A previous director in CPCD, based in England, had borrowed significant amounts from the organisation and funnelled them to private property projects. The trustee in bankruptcy has issued an indictment against the previous director, and the case continues in the British legal system.

Somalia:

In this case NOK 250,000 of funds for the Gedo and Puntland programme were defrauded by an earlier programme coordinator based in Nairobi. Charges were pressed in May 2006, and the case continues in Kenya’s legal system. There have been many court adjournments because of a variety of reasons, including Somali interpreters not being sufficiently competent and the defending attorney being held up at a seminar. In November 2009 the case was moved to Isiolo, abut 300 km north of Nairobi, in accordance with the judge being moved. The alternative to moving court was to start the case again. Fees paid to date to forensic auditors and lawyers are significantly in excess of the amount lost to the fraud.

Conclusion

NCA believes it necessary to be open and transparent about cases we are working on. This must be done in a responsible manner in order to stimulate the discovery of more cases, and to feed into learning throughout the global organisation in the fight against corruption.

We are working with other organisations in the ACT Alliance (Action by Churches Together) and with other Norwegian organisations.
In accordance with our fundamental belief in transparency at all levels, NCA committed itself in 2009 to the principles and standards of the ”Humanitarian Accountability Partnership” (HAP).

HAP is an international competence organisation that specialises in certifying NGO’s work in terms of accountability. NCA’s goal in the medium term is to be certified by HAP. Therefore, HAP’s auditors will examine our work and routines, with the objective of ascertaining whether NCA meets HAP’s requirements.

We acknowledge that combating corruption requires financial resources and competence, and NCA considers these to be important and necessary investments in the long term.

19 February 2010