(Corrects paragraph 11 to "five-year period")
* World's biggest aid charities only admit to $3 mln losses a year
* Third of charities decline to make fraud data public
* NGOs under pressure to come clean on losses for credibility
By Tom Esslemont
LONDON, July 15 (Thomson Reuters Foundation) - With fraud rife in conflict and disaster zones, aid charities are under pressure to be open about corruption but one third of the world's 25 biggest aid charities declined to make their fraud data public in a Thomson Reuters Foundation investigation.
Data collected from 12 of the 25 humanitarian non-governmental organisations (NGOs) with the greatest expenditure shows annual losses of $2.7 million - or just 0.03 pct of annual turnover based on data supplied for the years 2009-2014.
Transparency experts said the real figure would likely be far higher if data was available with these major aid relief groups estimated to spend $18 billion a year globally.
Eight of the biggest NGOs questioned in a pioneering survey on accountability in charitable aid declined to elaborate, saying they reported their losses to regulators. Five of the biggest NGOs said they had not experienced any diversions of funds during this period.
"Most NGOs in many cases will not report fraud as fraud because they will have a long paper trail coming after them," said transparency and development researcher, Till Bruckner, author of the book "Aid Without Accountability".
"Accounting demands in the field are unrealistic and come on top of the pressures associated with helping people, meaning NGO staff will at times produce fictitious paperwork, providing an illusion of accountability."
Other experts believe that recent disaster responses and allegations of corruption have compelled aid groups reliant on public donations to own up to financial losses in the field.
The 2010 Haiti earthquake - which saw Haitians accuse local authorities of deliberately holding up aid distributions - forced a rethink in the NGO sector, says Craig Fagan, head of policy at global anti-corruption watchdog Transparency International.
"I would say in the last five years there has been a turning of the tide," Fagan told the Thomson Reuters Foundation.
"[There has been] a realisation, at least at a global level, that this is part of their licence to operate, that charities need to be accountable in a 360-degree way with people they are working with and those funding them."
The biggest loss over a five-year period was reported by World Vision International, the largest humanitarian NGO in the world in expenditure terms, which said $1 million of its resources went missing between 2009 and 2013.
A spokesman for the charity said this was largely down to two significant incidents, both in World Vision's Zambia office.
The first, amounting to $262,000, resulted from collusion between staff and outside vendors and bankers, while the second, amounting to $306,000, was related to internal staff fraud in procurement transactions.
The charity said the perpetrators were found guilty and were jailed, senior staff in Zambia have been replaced and 50 percent of the missing funds were recovered.
REPORTING FRAUD SEEN AS ONEROUS
"World Vision strengthened ... electronic banking controls, and approval mechanisms. We also established new internal audit procedures to improve the detection of fraud, theft, and collusion," said Rudo Kwaramba, World Vision's regional leader who oversees the organisation's work in several African nations.
Mercy Corps, Care International, Oxfam GB, Plan International, Norwegian Refugee Council, ActionAid, Handicap International, Concern Worldwide, Médecins sans Frontières (MSF), the American Jewish Joint Distribution Committee and the Danish Refugee Council all reported losses of between 0.003 and 0.1 percent of their own annual revenue.
Mercy Corps said its misappropriated funds had been reimbursed meaning there was no substantial loss.
The Norwegian Refugee Council (NRC) revealed 14 cases of financial irregularities in nine countries, including Liberia, Afghanistan and Pakistan. Its biggest financial loss was in Colombia, where $50,000 worth of building materials did not reach the intended beneficiaries.
"A staff member admitted to having misappropriated the funds and was dismissed," an NRC spokesman explained.
Those defrauded said the problem was not simply one of theft.
"Corruption includes cases where the organisation faces theft, bribery, embezzlement, nepotism, facilitation payments, deception, extortion, abuse of power," said a spokesman for the medical relief charity MSF.
The MSF spokesman said in a separate incident, $790,000 of material goods were looted or stolen from its premises in the Central African Republic in 2014.
Other organisations opted not to disclose detailed fraud information, which alarmed some analysts in an environment in which corruption is known to be widespread.
"There needs to be more pressure on NGOs to ensure they provide clear figures which are timely, reliable, useful and comparable," said Robert Bourgoing, founder of AidInfoPlus.org, an aid transparency website.
International Rescue Committee, Christian Aid and International Medical Corps said they do not share fraud data publicly, but they do report it to regulators and have internal mechanisms to tackle it.
Action Against Hunger (ACF) International, Catholic Relief Services, Feed The Children, Samaritan's Purse, and Global Communities failed to respond to the question on fraud that was included as part of a broader survey on NGO staffing, fundraising costs, and impact. (Reporting By Tom Esslemont, Editing by Belinda Goldsmith; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, corruption and climate change. Visit www.trust.org)
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