How $900,000 in direct cash giving was stolen from the poorest of the poor
Why openness about fraud — and a plan to fix it — is key to more effective philanthropy.By Kelsey Piper Jun 8, 2023, 7:00am EDT
Kelsey Piper is a senior writer at Future Perfect, Vox’s effective altruism-inspired section on the world’s biggest challenges. She explores wide-ranging topics like climate change, artificial intelligence, vaccine development, and factory farms, and also writes the Future Perfect newsletter.
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Finding the best ways to do good.GiveDirectly is a charity that we’ve written about a lot here at Future Perfect. Their project is, on the surface, incredibly simple: send cash straight to the poorest people in the world, so they can spend it on whatever they need. The big idea is that cash has far less overhead than other forms of philanthropy, can be used for almost anything, and respects the recipients, who know better than anyone else what they need.
GiveDirectly started only a decade ago, but it’s grown into a major force in international aid. Not only has it moved hundreds of millions of dollars in cash transfers to the global poor every year, but it has also funded large-scale randomized controlled trials (RCTs) of cash transfers, growing the evidence about where they help and how they can (and can’t) change people’s lives.
This week, GiveDirectly is coming forward about another, less-discussed piece of the global aid picture: fraud and theft. In a detailed report released earlier this week, they explain how nearly a million dollars was stolen in 2022 from GiveDirectly aid recipients in the Democratic Republic of the Congo (DRC).
That’s less than 1 percent of the money GiveDirectly moved last year, but it has had an enormous impact on the intended recipients in the DRC, where more than half the population lives on less than $2.15 a day, and has prompted some major organizational policy changes to make sure it doesn’t happen again.
The report sheds some light on an issue that almost every aid organization faces — but that no one wants to talk about. The worry is that if you tell your donors about theft and fraud that occurs on your watch, your donors will give to other organizations that don’t talk openly about these issues. But they’re issues that every organization trying to transfer money or any other kind of aid at scale faces — and only by talking openly about theft can organizations design better procedures to prevent it.
“You end up in a situation where no one shares” the details of theft and fraud cases, Tyler Hall, the communications director for GiveDirectly, told me. “It’s bad for the recipient because if we’re not able to actively talk about this, how to safely deliver money in really difficult contexts, we’re not going to get better at doing this.”
So let’s dig into fraud: how it happens, how it gets caught, and whether it undermines the case for helping the world’s poorest and most vulnerable people.
One-off versus systematic aid theft
An “ordinary” case of attempted aid fraud, Hall told me, is a one-off, small-scale incident: “Usually we’re finding somebody got manipulated by a family member or a local money agent lied about what percentage they take off the top.”That’s a problem GiveDirectly attempts to tackle, because if recipients are exploited, then they’re not benefiting from the aid. GiveDirectly does information campaigns about how much money agents are allowed to charge in fees, warning everyone not to pay more than what is permitted. They tell recipients they do not have to share their money with community leaders or aid workers or anyone else who might claim they are owed some. They estimate some money is still lost to theft and fraud, but it’s a very small percentage of the overall money successfully moved. (GiveDirectly estimates its annual loss from fraud — even including this event — at 1 percent or less.) In some ways, this is the cost of doing philanthropy.
What the GiveDirectly team discovered in January of this year, though, was something very different from that. To understand it, you have to know a little about how GiveDirectly verifies that the money it donates makes it to where it was meant to go.
The process, GiveDirectly wrote in a blog post released this Monday, involves “separate census, registration, pre-pay audit, post-pay audit, and follow-up call” steps. Different groups of people are responsible for getting a census of the village, registering recipients for payments, auditing those registrations, checking that those recipients got money, and following up with the recipients later. That way, if there’s a thief involved at any step, it’ll be quickly caught at the next step.
In most countries, the staff members who conduct registration of recipients help those recipients get an account with an independent money agent, but due to the ongoing war in the DRC, GiveDirectly waived that step, and allowed registration of recipients directly with GiveDirectly’s enrollment team.
“We now know,” GiveDirectly’s new blog post reveals, “that while enrolling villages in South Kivu, some staff conspired to register payment SIMs to the recipients’ names (per the special exception granted), pocket those registered SIMs, and put different SIMs in recipients’ phones. ... Fraud checks are not just done by the enrollment team, but are further validated during visits from a completely separate internal audit team and follow-ups from our call-center, all of which are supported by our back office team. In this case, conspirators recruited local staff in every layer of this system in order to suppress evidence of the fraud, including complaints from families who had not received their promised funds. Further still, they conspired with third-party mobile money agents to transfer funds from these stolen SIMs.”
GiveDirectly’s system of separated teams was meant to serve as a check against theft: if anyone did attempt theft, it’d be caught immediately by the audit team. But because the conspirators had arranged to work in all of those offices, they were able to get away with the fraud for about five months, before it was caught in January 2023. About $900,000 was lost, and 1,700 families in need were stolen from. GiveDirectly has paused operations in the DRC while they adjust their procedures.
A path to fixing fraud
Obviously, an incident like this is a tragedy on multiple levels. First, thousands of families in desperate poverty are going hungry because the money that was promised to them was stolen. (GiveDirectly is trying to ensure they eventually receive the promised funds.) Second, theft, as rare as it might be, undermines donors’ confidence. And it’s simply an extraordinary betrayal to learn that your own aid staff was signing recipients up for aid and then pocketing the money. I’m sad and angry that this happened.I’m also deeply grateful that GiveDirectly is being so open about it. (They actually reached out to ask if I’d be willing to write about this for a larger audience.) People sometimes shoplift from stores, but no one thinks that undermines the case for having stores.
Addressing theft is a crucial priority for doing cash transfers — without good procedures, theft would certainly be more widespread — but a single instance of theft doesn’t, to my mind, change the importance of getting aid to the people who need it most. And by describing exactly how the aid was stolen, GiveDirectly has risked its own reputation to help every other nonprofit out there that might have similar vulnerabilities, and make it easier for everyone to design procedures that even organized thieves can’t beat.
Part of getting charity right is admitting when you got it wrong. It’s only with accountability and transparency that we can build systems that truly work to help the people who need it most. And so, while I’m appalled that this happened, I’m happy that we’re able to report on it. I think that’s the first step toward a world where it doesn’t keep happening, and where it’s possible to move huge sums of money in a transparent way.
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