The Africa Aid Circus
Tuesday, June 12, 2012 at 2:28AM
Michael Ndichu Kuria in Africa, Foreign Aid

I am one of those Africans who strongly believe that aid achieves very little of its intended objectives and fuels, among others, dependency and corruption. Dependency, of course, is a bad thing as it demotivates governments from developing local capacity.

Aid agencies are considered cash cows on the average African street. And not surprisingly, everyone is a PFP (Potential Fraud Perpetrator) What is surprising is that donors and aid agencies accept this or at the very least turn a blind eye to it. This puzzles me because all frauds in this sector are the most basic type -- fraudulent disbursement schemes that are easy to catch by following the money from a bank account to the ultimate beneficiary.

My hypothesis is that aid agencies turn a blind eye to the endemic corruption that diverts money from the end goals because it is in the interests of the senior officials in those agencies to do so. Upward mobility for staff depends on their performance on various "deliverables," to borrow a superfluous buzzword. In most of the aid agencies I know, these deliverables are basically (a) the number of programs an officer manages in a given period and (b) his or her ability to remain within budget.

If fraud is detected within a program, acting on it might mean closing down the program. Naturally this means the officer will not meet his deliverable goals for that year. Better to pretend that nothing is amiss. To turn a blind eye because a closed program means a cut budget and nobody wants that. Because a cut budget means firing staff across the board. People have children to raise and salaries to earn. This is obviously a horrible model.

Donors must demand that the organizations to which they give money first of all demonstrate the existence of a fraud risk management framework that is backed by thorough and independent reviews every so often, preferably once a year. The current model of appointing Local Fund Agents to manage the funds and review disbursements does not work because LFAs are typically accountants who don't understand fraud or even a fraudster's mentality and who devote the cheapest and therefore lowest trained resources to this task in order to make a profit. Aid Agencies should design internal fraud risk frameworks with internal "process owners", to borrow another buzzword, who are backed by external independent review.

It must however not be lost on everyone that while aid is noble, altruistic and gives donors a warm, fuzzy feeling, it will not end poverty. Ultimately, what will end poverty is fair trade and local productivity.

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Michael Kuria is a contributing editor of the FCPA Blog. He's a counter-fraud and counter-corruption consultant currently active in the East, Central and Horn of Africa regions.

Article originally appeared on The FCPA Blog (https://www.fcpablog.com/).
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