They stole food from the mouths of babes
Examining humanitarian aid fraud in developing countries
Two employees of a U.S. government-funded relief project in Liberia, Africa, were convicted of diverting US$1.9 million in food and tools from thousands of hungry and needy families. The author describes her fraud examination work on the case and provides tips on working in Africa.
Liberia in the early 2000s: This West African nation — recovering from the rule of Charles Taylor and a brutal 14-year civil war — was under a transitional government. Displaced people were returning to their battered communities. Clinics, schools, wells, latrines, bridges and roads needed repair. Good jobs were scarce. At the end of 2003, unemployment and illiteracy stood at more than 75 percent. This fragile context bred a "grab what you can" mentality to survive and support extended family members.
In 2005, the U.S. Agency for International Development (USAID) funded more than $2 million in food commodities to a large international humanitarian organization — for a Community Resettlement and Rehabilitation Program in Liberia. The grant provided vital nutrition — legumes, vegetable oil, grains — in return for beneficiary labor on desperately needed post-war infrastructure projects.
At the end of the two-year grant, the national director and head of programs received an anonymous text message reporting that employees had diverted food and tools from hungry and needy families. Eventually, two Liberian defendants —salaried managers of the program — were accused and convicted of a US$1.9 million fraud in a country that had a real per capita GDP in 2009 of $128.
The fraudsters stole food from the most vulnerable of the vulnerable — many of whom were young, frightened mothers with babies in impoverished, rural areas.
At the time I was director of financial and strategic planning for the humanitarian organization. The organization sent me to Liberia — primarily because of my West African audit background — in February and August of 2008 to review a previous internal audit and gather additional information. My division's responsibility was to respond to U.S. authorities, calculate and report final losses and ultimately repay USAID.
In this article, I describe my fraud examination and tips on investigating amidst the challenging conditions in African countries.
Humanitarian aid is a multibillion-dollar industry providing basic economic, health, infrastructure and food security to those in need. Many of the countries that receive this aid have contextually challenging business environments. For example, Transparency International's 2005 Corruption Perceptions Index ranked Liberia, West Africa, 137 out of 158 countries for levels of corruption. Conducting a successful fraud examination requires a basic understanding of the unique environmental and cultural issues on the ground.
FRAUDSTERS FALSIFIED DOCUMENTATION WELL
We knew from the internal audit that in the midst of an incredibly tough operating environment, management-level employees had committed occupational fraud by diverting food intended for hungry Liberians and covering it up by directing subordinates to falsify corresponding documents. The fraudsters then sold this food on local markets for personal gain.
The "distributions" appeared legitimate to those monitoring the project because of fraudulently signed waybills and falsified beneficiary receipt documentation. The audit process could only verify that 9 percent of the commodities had been distributed to the intended beneficiaries. Many of the corresponding infrastructure projects remained incomplete.
With the possibility that up to 91 percent of the food intended for hungry people was diverted (though the audit couldn't confirm this), we conducted additional probes, including a contractually required review from a supervising organization on the ground in Liberia. By the time we discovered the magnitude of the fraud, the grant was completed; most employees had fulfilled their terms of service, and we weren't able to reach them.
It was difficult for us to uncover additional details and determine final losses. Because the fraudsters falsified documentation so well, we had to reconstruct events from staff's and beneficiaries' oral reports. Closing "feedback loops" (that is, discovering who received what food and tools and how it was distributed) with staff and beneficiaries in Liberia required extremely complicated travel. Many intended beneficiaries lived in remote areas, and it took days of traveling washed-out roads to reach just a few. (See photo at left.) Unlike organizations in Western society, these people didn't have a ready way to connect to let us know their customer experiences.
|Gathering evidence in the African bush can be harrowing.
We had to carefully consider the motivations of both beneficiaries and former staff. Beneficiaries may have been motivated to inflate losses so they could receive more food. Staff may have been under other pressures or threats that outsiders couldn't easily detect or understand.
Conducting fraud examinations in Africa poses cultural challenges. Africans' notion of time often is different from Westerners. (For example, one former Burkinabe colleague was unsure of his birth date, so he was never able to report his accurate age.) All the intended Liberian beneficiaries lived in remote villages without standard working hours, calendars or electricity. Seasons are limited to "dry" and "rainy." To complicate matters further, we were interviewing beneficiaries about events that took place years earlier.
Tribal alliances are another potential complication. In Western society, nepotism is addressed through human resources' departments, general hiring practices and policy. Alliances might be more pervasive, yet subtle, in many African societies. In Liberia, employees alleged both the head of the local operation and the fraudsters were members of the Vai tribe.
As news of the potential fraud spread, we had difficulties securing all original documentation. Remaining documentation had been moved and placed in an unsecured, temporary, unlit storage unit in front of the main office building. We had to dig for days through red-dust-covered commodity documentation in hot, uncomfortable conditions.
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