Greater media and scholarly coverage of corruption and fraud in local-level NGOs in developing countries has brought attention to the complex and often contradictory underbelly of global civil society. The vast majority of social science research on corruption and fraud focuses on governments, corporations, and large-scale organizations. While some scholarship has examined the conditions that allow the proliferation of corruption and fraudulent activities in local-level NGOs, most of this work emerges from the global North and frequently fails to consider the unique conditions of the global South. The first section of this article summarizes foundational theories on corruption and fraud, highlighting their Western standpoint, which can be limiting in the context of developing nations. The second section turns to the contemporary development literature on local-level NGOs in the global South to illustrate why any exploration of corruption and fraud in these organizations must first address their unique circumstances, including globalization and neoliberalism, environments of uncertainty, organizational frames, and national structures of inequality, and how each can create opportunities for corruption and fraud. The review concludes with a case study of alleged corruption and fraud at a local-level NGO in Kathmandu, Nepal, to illustrate the vulnerability of such NGOs and how an integrated approach can provide a better model for understanding the complexities of corruption and fraud in the developing world.
In 2014, the American magazine Newsweek published a shocking exposé on the Cambodian activist Somaly Mam, suggesting that the cofounder and president of Agir pour les femmes en situation précaire (Acting for Women in Distressing Situations, AFESIP), an NGO that operates rehabilitation centers for survivors of human trafficking, fabricated her own claims of being trafficked and coached girls to misrepresent themselves as survivors. In the West, public reaction to the story was intense. Tweets responding to the article ranged from rage to disbelief. A debate emerged that questioned whether the public good of AFESIP was negated by the exaggerations and untruths that had enabled the organization to grow.
Of course, corruption, fraud, and similar unethical activities occur in all nations. Yet since the 1990s the issue has become central in the field of development as an anticorruption consensus stressed the negative impact of these activities on economic development and growth (Bukovansky 2006; Uberti 2014). In his “Washington Consensus,” John Williamson (1990) even argued that excessive government regulation can promote corruption, which illustrates why governments need to deregulate the economy (Naím 2000). In 2004, the World Bank identified corruption as the greatest obstacle to social and economic development (quoted in Bukovansky 2006:191). In a 2007 household survey of a number of African Countries by the UN, over 30 percent of respondents in Uganda and over 25 percent in Tanzania said they had paid a bribe in the prior 12 months (United Nations 2009). While considered controversial by many, Transparency International’s 2022 Corruption Perceptions Index highlighted “corrupt” and “highly corrupt” countries on all continents except Australia and Antarctica (2023). The Council of the European Union (2023) estimates the negative economic impact of corruption at nine times global official development assistance. And the World Bank’s global report on the fight against corruption continued to stress the critical importance of the issue, highlighting incoming reports of inflated food prices and favored medical contracts in response to the COVID-19 pandemic (Bajpai and Myers 2020).
There is a solid literature within sociology and other related fields, such as international relations and political science, on corruption and other unethical activities, such as fraud. Much of this work explores the conditions that allow corruption and fraud to emerge and persist. Jancsics (2014) suggests that four conditions are necessary for corruption: an informal or illegal and secret exchange of formally allocated resources; the involvement of two parties; one party’s having formal membership in or affiliation (or at least a contractual relation) with an organization; and deviation or violation of social rules or expectations. Prasad et al. (2019) contend that corruption persists due to resource challenges, definitional challenges, and challenges from alternative moralities. However, the vast majority of the defining literature is tied to political and governing structures. There is little scholarship that unpacks corruption (and other unethical activities) in nonpolitical arenas such as nongovernmental and nonprofit organizations.
This is somewhat surprising. Despite the commonly held position that NGOs are progressive, egalitarian, and altruistic (Boli and Thomas 1999; Clark 2001; Keck and Sikkink 1998), accusations like those brought against AFESIP are not unique or new. Throughout the 1990s, a plethora of articles about wrongdoing in NGOs appeared in the U.S. press (Gibelman and Gelman 2004). As more NGOs were investigated, it became clear that NGOs and nonprofits were as susceptible to “white-collar crime” as state institutions or private companies (May 2016). This prompted a push from scholars, activists, policymakers, and donors for accountability and transparency in the NGO sector, even in spaces that were not reporting widespread abuse (Fassin 2009; Greenlee et al. 2007; McGann and Johnstone 2006). Thus, by the turn of the millennium NGOs in the developing world faced the pressure of external evaluations and audits (Ebrahim 2003; Hirth 2012). Yet, these new checks and balances were rooted in Western knowledge and understandings of unethical organizational practices and frequently failed to consider the varied realities of the global South (Petras 1999). Clearly, there is a growing concern among social scientists about the effects of corruption on development, but this literature is primarily coming from the West and frequently fails to address the complex structural conditions and social relations that sustain corruptive practices in the global South.
In this review, I document the scope of the literature in the social sciences (and especially sociology) on corruption and fraud, to illustrate the overwhelmingly Western nature of this literature. Next, building on earlier studies that overwhelmingly focused on corruption and fraud within political and governing structures, I explore whether contemporary theories of corruption and fraud are adequate in addressing the corruption and fraud that occurs in local-level NGOs in the global South. To answer this question, I turn to development scholarship, finding four unique factors that augment the likelihood of corruption and fraud in developing countries and suggesting that future research must address these factors within the context of local-level NGOs. And to further depict this phenomenon and provide a partial analysis of the problem, I conclude with a case study of a local-level NGO in Kathmandu, Nepal, currently under investigation for fraud and corruption.
Corruption and Fraud: A Sociological Puzzle in the Global North
Sociologists have a disciplinary history of questioning the relationship between the state, unethical practices, and civil society, including the emergence and proliferation of corruption and fraud.1 Corruption and fraud are related but different. While corruption is broadly recognized as an abuse of power, in which an actor or actors engage in deviant behavior for personal gain (be it financial or nonfinancial), fraud does not necessarily involve power structures. Fraud is simply an act of misrepresentation (made with full knowledge of its falsity) for personal gain. While corruption can and frequently does involve fraud, the two are not always linked, as fraud does not involve the exploitation of power and trust in the same way as corruption. Both corruption and fraud occur on a continuum from minor acts, such as exaggerating one’s skills on a resume, to more extreme ones, such as falsifying reports and misappropriating assets.2 A 2014 report by the ONE Campaign, an anti-poverty organization, said that while many cases of corruption and fraud may seem benign, if the lost revenues were invested in health systems as many as 3.6 million deaths could be prevented each year.
In the social sciences, numerous studies across various disciplines have explored various aspects of corruption and fraud.3 This literature highlights the long-standing debate across and within disciplines regarding the relationship between social structures and individual action (agency), but also reflects the dominance of Western thought and ideologies on these topics.4 Historically, sociologists have focused more on corruption than on fraud and analyzed it at the organizational level (Pinto, Leana, and Pil 2008). A subfield of sociology focusing on corruption first emerged in the 1950s and 1960s as sociologists, many with work rooted in structural functionalism and/or modernization theory, began to consider new postcolonial states and their social structures (Osrecki 2017). Across the social sciences, prominent scholars, including Samuel Huntington, viewed corruption not as an indicator of underdevelopment but as a latent function of modernization as countries advanced.5 From this perspective, corruption was deeply tied to the political sphere, as political structures were viewed as the agents of modernization. The expansion of modernization theory coincided with the establishment of a large number of development agencies shaped by its theoretical rhetoric (Woolcock, Szreter, and Rao 2011). Ultimately, many scholars agreed that a model of progress and development that mirrored the West, while not flawless, was the best path to modernity.
By the 1970s, the influence of modernization theory began to diminish and with it the subfield of sociology of corruption. Those who did continue to examine the issue viewed universal definitions and hypotheses as passé, and micro-level analyses became the arena à la mode as scholars focused on the meaning and variation of corruption (Osrecki 2017). As the conversation gained traction in the fields of psychology and economics, more emphasis was placed on individual-level perspectives (Pinto, Leana, and Pil 2008). The micro-level approaches that emerged suggested that corruption and unethical activities could be explained by individual attributes (Ashforth et al. 2008). Here the primary focus and locus of corruption was an individual actor.
During this period the “principal–agent dilemma” emerged as a popular framework for understanding corruption. From this perspective, an agent acts on behalf of a principal, which can be an organization, a government, or the general public. But if their respective goals do not align, the agent may sacrifice the principal’s objectives in favor of their own interests (Rose-Ackerman 1975). Corruption was seen as the result of cost/benefit analysis: an individual rational evaluation of the risk involved and the potential payoff (Jurkiewicz 2020). In this sense all agents have the potential to be corrupt unless structures are put in place to deter it (Jancsics 2014). Given the focus on individual choice, the principal–agent theory can appear on the surface to frame corruption as exceptional, and corrupt individuals as “bad apples” (Ashforth et al. 2008).
Yet, the principal–agent theory was not the first time the individual was put front and center. In the 1950s, criminologist Donald Cressey (1953) proposed the “fraud triangle” theory. In this individual-level theory, fraud requires three elements: pressure, opportunity, and rationalization. Following the turn of the millennium, scholars in the field of accounting suggested that a fourth dimension, capability (the skills and ability to commit an unethical act), was also necessary, making the fraud triangle into a fraud diamond (Wolfe and Hermanson 2004).
While it is not as clearly evident as in the literature rooted in modernization theory, the individual-level perspective also reflects a Western framing of corruption and fraud, which in part represents a return to universal assumptions about social structures and human behavior. First, there is an emphasis on hierarchical structures, with a baseline assumption that individuals feel an initial obligation to act on behalf of a larger and more powerful organization, government, or public. This fails to explain how unethical activities related to corruption and fraud can and do emerge in the more horizontal organizational structures seen less frequently in the West.6 Next, there is an understanding that the principal acts in its own best interest or on behalf of the public good; as Klitgaard (1988:22) puts it, the principal is a “highly principled principal.” In addition to failing to address the reality of “unprincipled” principals, the understanding that the problem lies with the agent and that corruption should be controlled by the principal fails to address how structural issues such as weak organizations or governance, which in postcolonial countries are often traced back to colonialism (Mlambo et al. 2019), may lack the ability to address the issue. Finally, framing corruption as exceptional minimizes its epidemic nature. In some parts of the developing world corruption is the rule rather than the exception (Persson, Rothstein, and Teorell 2010).
In response to these individual-level perspectives, many scholars returned to a structural approach, although divorced from the problematic elements of structural functionalism and modernization theory, bringing sociologists back into the conversation. This “revised” set of structural perspectives provided a useful tool when exploring unethical activities within organizations, arguing that surface-level “bad apples” frequently turn out to be representative of “bad barrels” (Felps, Mitchell, and Byington 2006). In other words, when corruption extends beyond the individual and becomes institutionalized, the driving forces are external to a single person and become embedded in the collective (Ashforth and Anand 2003).7
From the “revised” structural perspective, corruption often reflects the norms and values that members of an organization internalize, rationalize, and spread via socialization (Ashforth and Anand 2003); material constraints, limited resources, and fierce competition can create corrupt organizations (Vaughan 1983; Zahra et al. 2005). But whether the impetus is material or normative, misconduct is a systematic product of complex structures and processes within an organization (Vaughan 1999). Thus, corruption manifests from the core of the organization.
The return to more structural perspectives created space for addressing the diversity of ways unique social forces have shaped practices of corruption and fraud. However, even with a focus on how norms and values can impact the behavior of small groups there is an assumption that organizational or workplace subcultural forces, which are not part of all cultural contexts, carry as much if not more weight as other small group structures, such as family, community, or subcultural groups. There is also little exploration of the intersection of social forces and how these intersections create different circumstances for the most marginalized members of a society. Taking these things together, it is clear that the foundational academic literature on corruption and fraud in the discipline of sociology, and the social sciences more broadly, comes from a pointedly Western standpoint. This should lead one to ask whether the knowledge in this literature, which is being used to create policy (Mlambo et al. 2019; Petras 1999), is culturally situated and holistic enough to be useful in the global South. Or is today’s understanding of corruption and fraud still tied to what Patricia Hill Collins (1989:751) once referred to as the “Eurocentric masculinist knowledge validation process”? These are critical questions because the knowledge that makes up our global understanding of corruption and fraud not only tells us how these phenomena operate and how we might address them but also provides clues as to where they will emerge.
Corruption, Fraud, and the Global South: Understanding Unethical Activities from the Perspective of the Developing World
Scholarship on development has stressed that corruption and fraud are especially problematic and have especially grim consequences in developing countries (Otusanya 2011; Szeftel 2007). Yet, the literature also highlights how the practice and language of corruption and fraud are frequently a routine part of the bureaucratic processes, and society more broadly, in the global South (Adeniran 2008; de Sardan 1999). In Nigeria, legislators and other political elites commonly use ambiguous language and actions to execute and defend corrupt practices (Dumbill and Sofadekan 2016). In China, it is common practice, among those with the financial means, to pay to ensure admission to a prestigious school if a child did not score high enough on the entrance exam (Werve and Global Integrity 2008). De Waal (2016) argues that the culture of corruption is so dominant in Ukraine that people simply accept that everyday bribery is the way to get various tasks accomplished. In these ways, corrupt and fraudulent practices become intertwined with the ideological, moral, cultural, and political perspectives in a society (Otusanya 2011).
As I have said, the understanding of corruption and fraud emerging from the scholarship of the global North can be problematic when applied to developing countries, where micro-level individual attributes often intersect with structural factors, and relational dimensions compound risk factors. The individual-level perspective presents a challenge in the context of the global South because it fails to recognize how organizations in developing countries beyond political and governing structures and corporations can influence the behavior of members, especially when an organization is central to a community. It also provides little insight into how organizations become more corrupt over time, which is a phenomenon seen in the global South (Smith 2010). As most structural studies focus on the relationship between an actor and a collective (e.g., the organization), there is little attention to how organizations are tied to multiple networks, which is a central feature of institutions and organizations in developing nations. These ties are often essential in smaller community/neighborhood contexts that depend just as much on informal as formal exchange (Kraemer-Mbula and Wunsch-Vincent 2016).
Local-level NGOs in the global south
Just as in politics and government, local-level NGOs in developing countries occupy a space where corruption and fraud exist in shades of gray. And yet, given that much of the sociological literature on NGOs and social change finds a positive relationship between NGOs and the advancement of progressive issues, such as education, human rights, and women’s rights (Cole 2005; Paxton, Hughes, and Green 2006; Rademacher 2020; True and Mintrom 2001; Wotipka and Ramirez 2008), it is not surprising that these organizations are often heroized or idealized. Scholars across disciplines stress the role of nongovernmental actors in development and humanitarian issues, interactions, and relations (Afsharipour 1999; Berkovitch 1999; Bob 2001; Boli and Thomas 1999; Chandler 2001; Clark 2001; Fisher 1997; Keck and Sikkink 1998; Smith and Wiest 2005; Willetts 1996). This is compounded by the theoretical persuasion that NGOs have the capacity to advance positive change given their independence from the reins of both government and the market (Fisher 1997). In fact, NGOs are frequently tasked with advocacy, arbitration, and acting as “watchdogs” of civil society (Agam 2002).
While on the surface NGOs in developing countries are viewed optimistically as key engines of progress and positive social change, they are also characterized by overlapping and intersecting structural and environmental vulnerabilities that create opportunities for corruption and fraud. Scholars and practitioners suggest two factors that influence the risk of unethical activities in these organizations: what the organization does, and where it operates (Coburn 2020; Helmer and Deming 2011).
Development scholars have suggested that other factors unique to developing nations put more pressure on organizations, deepening the cracks that contribute to corruption and fraud among local-level NGOs in developing countries. These factors include globalization and neoliberalism; the uncertainty embedded in the framework of global civil society; organizational frames; and stratification and inequality. Let us consider each of these in turn.
Globalization and Neoliberalism
Globalization and the neoliberal policies that emerged in the 1980s and expanded in the 1990s created new opportunities for corruption and fraud as movements for social change in developing countries morphed into a preferred structure: the local-level nongovernmental organization. These NGOs transformed grass-roots social movements into institutionalized, professionalized, depoliticized, and demobilized organizations dependent on foreign funding, removing much of their autonomy and critical voice (Buxton 2019; Jacobsson and Saxonberg 2016; Jalali 2013).
In many instances, this new structure led to an increase in dependency on “aid chains,” which require multiple actors to participate in the transfer of funds from donors to a population in need (Bebbington 2005; Koch 2009; Wallace, Bornstein, and Chapman 2006). This undertaking increased uncertainty for all parties involved and expanded the potential points of corruption and fraud as funds traveled through ever-changing delivery mechanisms and modalities. NGOs were (and continue to be) surprisingly reluctant to share funding information, and opportunities for corruption and fraud broadened as this reluctance was paired with a broader cultural context devoid of openness and transparency, making detection more difficult (Burger and Owens 2010).
Another effect of globalization and neoliberalism was the rise of structural adjustment policies, which translated into cuts in state expenditures and social programs. To fill the void, governments paired with capable and politically trusted NGOs. Given that these partnerships often involved subcontracts to advise on or carry out government programs, organizations had less space to critically monitor governing practices and faced more pressure to accomplish their tasks regardless of the means (Cooley and Ron 2002). While the proliferation of local-level NGOs during this period was meant to address the shortcomings of state-centric development models and be more accountable to citizens in pressing for social change and delivering social services (Chahim and Prakash 2014), stronger neoliberal agendas resulted in the promotion of those organizational forms and practices that aligned with structural adjustment policies, taking away some of the voice and power of nongovernmental actors (Alvarez 2009; Sahoo 2013; Zaidi 1999).
Equally important is to address the ways that advances in technologies associated with globalization and neoliberalism have impacted development and local-level NGO work in developing countries. While it was not entirely supported by theory or evidence, “for much of the past half-century, there was a presumption that advances in technology [in the West] would benefit all” (Korinek and Stiglitz 2021). Of course, technology has not always been so beneficial. Yet, both larger NGOs (those with name recognition in with West) and newer local-level NGOs have been transformed by Western advances in technology in both progressive and problematic ways. One of the top challenges has been how to use technology to track and measure meaningful outcomes showing greater effectiveness (Schmitz et al. 2020). In some instances, this has resulted in a desire for more quantitative evaluation metrics, which might only tell part of the “development story” but are appealing to administrations and funders (Springer 2020). These findings then become the new story of what makes an organization successful, or not.
Globalization and neoliberal policies opened the door for local organizations to become increasingly involved in addressing both local and global social problems. However, globalization and neoliberal policies also altered global society’s actors, transforming grass-roots social movements into professional organizations. Fraud and corruption became easier as organizational goals were less aligned with change and more aligned with the agendas and structures of states, for-profit businesses, and large intergovernmental organizations. In other words, as organizations became “professional” they also became more competitive, bureaucratic, and stratified, essentially creating the same environment and opportunity structures some scholars have associated with misconduct, fraud, and corruption (Vaughn 1999; Zahra et al. 2005).
The impact of uncertainty
Sociological scholarship has illustrated that uncertainty is deeply embedded in civil society as a whole and shapes the structure, goals, and strategies of NGOs. Watkins, Swidler, and Hannan (2012:286–87) note that “NGOs and their donors are organizations, and much of what is distinctive about them as organizations derives from the special uncertainties they face…due to the environments in which they operate, the goals they pursue, and the social and material technologies they employ.”
Uncertainty also results in real pressures on NGOs and creates opportunities for corruption and misrepresentation (Holloway 1997). For instance, NGOs can only operate when they have sufficient funding. A basic feature of NGOs in developing countries is that they serve a population that is not in a position to pay for the services received (Fowler 2007). Thus, they are often struggling for survival (Cooley and Ron 2002; Heiss and Kelley 2017; Reith 2010; Witesman and Heiss 2016). Competition for funding is fierce, which gives donors the power to make extensive demands on the organizations they fund (Batti 2014; Cooley and Ron 2002; Hilhorst 2003; Parks 2008; Thayer 2010). Organizations are constantly under pressure to produce results that suggest success (or highlight the achievement of more limited goals), even when a program fails to achieve its objectives (Watkins, Swidler, and Hannan 2012). In some cases, falsifying information in reports and evaluations is a strategy of survival.
To survive and to minimize uncertainty, local-level NGOs in developing countries are increasingly partnering with large and powerful actors, creating dependency rather than assurance. This prevents them from being accountable to the very communities they were created to assist, as they are now obligated to answer to the requests of their partners above all else (Olawoore and Kamruzzaman 2019). Partnerships take multiple forms. In some cases, NGOs are turning to partnerships with corporations, which opens the door not only for co-optation but also for the weakening of the nonprofit sector (Baur and Schmitz 2012). Even when such partnerships are set up with the best intentions on all sides, their embedded power dynamics can result in less satisfaction among the partners, loss of resources, and a decline in trust from the local community (Ashman 2001), making them vulnerable to fraud and corruption.
Government–NGO partnerships can also be problematic. Researchers have highlighted cases where after development aid to governments was suspended for political reasons, local-level NGOs and quasi-governmental programs partnered with government actors as a way for local elites to continue business as usual, ultimately making the NGOs and the governments partners in corruption (Holloway 1997; Smith 2010). Some organizations are created specifically for deceptive purposes, but even in legitimate organizations the leaders and staff may receive external compensation from powerful partners for “good works” (Smith 2012). In each instance, the external environment in which local-level NGOs must function leads to further uncertainty that makes individuals and organizations vulnerable to practices of fraud, misrepresentation, and corruption.
Relationships between NGOs are also a source of uncertainty for local-level NGOs. Increasingly, large international NGOs (INGOs) are collaborating with local NGO partners, which has resulted in INGOs assuming the role of donors, with power and influence due to their control of funds (Olawoore and Kamruzzaman 2019). These power dynamics can be exacerbated because some INGOs based in the West perpetuate a system of beliefs that local NGOs in developing countries have less skills and experience and weaker or more vulnerable structures (May 2016). For their part, local organizations may see the INGO’s involvement as rooted in self-interest and control, with few (if any) pathways to true collaboration (Baaz 2005; May 2016). This can result in asymmetrical agendas, with some of the dynamics outlined in traditional principal–agent scenarios. Partnerships and collaboration between multiple local-level NGOs are rare, given the competition for funds among organizations (Batti 2014; Thayer 2010). Thus, divisions and distrust among partners prevent the kind of information sharing that could limit the spread of corruption and fraud among regions and organizations. For example, a corrupt individual might be removed from one organization only to join another without detection. Given the competition for funding, the demands of donors, inequality in partnerships, and the need to demonstrate success, local-level NGOs function in an unsettled and ever-changing environment. This context creates gaps within organizations that enable fraud and corruption to flourish and even to appear necessary if an organization is to survive.
Organizational frames
Scholars suggest that as collaboration between partners increases, the organizational frame of local NGOs also shifts (Jalali 2013). Local NGOs have begun to look more like corporations than social movements or humanitarian projects. Of course, not all local-level organizations are part of this process (known as the NGO-ization of development), but as mentioned above, those involved with state agendas have become more hierarchically organized, increasingly governed by business-management principles, and less focused on critically monitoring policy and advocating for reform (Alvarez 2009). Chahim and Prakash (2014) report that this shift has affected the accountability of organizations and those who run them. Rosenblatt (2012) says that the power inequalities, favoritism, and discrimination embedded in hierarchical structures lower awareness of the misuse of power, leading to the initiation and perpetuation of corruption. Some scholars are increasingly noting that fraud is a concern in these restructured organizations (Fassin 2009). As Taylor (2016:2) suggests, “The realities of hierarchy mean that thriving in an organization involves suppressing bad news, which means that taking responsibility is hazardous.”
Attempts to create a more corporate (as opposed to activist) environment have also impacted the staffing of many local-level NGOs. For example, the pressure for NGOs to demonstrate managerial and technical capabilities has led to the hiring of paid employees (as opposed to volunteers), who are more likely to view their work as a means of employment rather than a service or passion project (Ghosh 2009). In fact, NGO employees in developing countries, generally an elite group of workers including professionals such as academics, lawyers, and engineers. are known to take secondary positions with internationally funded projects for additional income (Casey 2016). Studying AIDS organizations in Malawi, Swidler and Watkins (2017) observed that NGOs not only hired professionals but paid them a desirable wage. This illustrates not only the overlap between uncertainties and organizational frames but also how neoliberalism and globalization tie into uncertainty and organizational framing.
These changes in organizational structures are especially problematic when they are not paired with new mechanisms for public transparency and accountability—beyond the constant concerns of funders that lower-level implementing organizations are not completing the expected work or presenting the foundation in the best light (Best 2017). Clearly, there is no altruistic guard against corruption and fraud in any organization, but the preferred organizational framing and the shifts in personnel working at local-level NGOs in developing countries, along with limited if any public transparency and accountability, essentially provide all three sides of the fraud triangle: pressure, opportunity, and rationalization.
Structures of inequality
Uncertainty intersects with other social forces to expand opportunities for fraud and corruption in local-level NGOs in developing countries. Studying the impact of corruption on local AIDS NGOs in Nigeria, Smith (2012:475) notes that “one cannot separate an examination of corruption…from the broader context of inequality.” In developing countries, local understandings and practices of fraud and corruption are impacted by the perceptions of power structures in both local and global contexts. Scholars suggest there are strong correlations between inequality, corruption, and social distrust (Andres and Ramlogan-Dobson 2011; Dimant and Tosato 2018; Uslaner 2008; You and Khagram 2005). A common trope in the literature is that inequality provides the wealthy with opportunities and motivation for corruption, ultimately undermining social and economic development (You and Khagram 2005). For example, Smith (2010) outlines a 1986 case where a powerful Nigerian general’s wife established a program described as an exemplar in improving the lives of rural women, which in reality was a mechanism for individuals in power to channel resources to themselves under the guise of development. Given that development programs in this community were known to be a common cover for graft, there was a sense of ambivalence when the program was credited for ongoing social transformations in the community (249–50). Uslaner (2002, 2008) frames relationships such as the one described by Smith (2010) as cyclical, suggesting that wide inequality leads to low social trust, which leads to high levels of corruption, which ultimately reinforce inequality.
Scholars find similar patterns when examining fraud. As it is closely linked to corruption, fraud risk factors are often present in contexts where corruption exists (Bishop and Hydoski 2009). Institutional discrimination and structural inequality embedded in societies can also put marginalized people at risk of predatory practices (Nguyen and Pontell 2011). However, paradoxically, much of the scholarship on fraud in NGOs focuses on how “bad actors” in an organization use organizational resources for personal purchases or activities outside the organization’s scope (Gibelman and Gelman 2004), or on the impact of fraudulent practices on donor–organization relationships (Best 2017; Lauck and Brozovsky 2018). Although it is clear that fraud and corruption siphon off some of the resources intended for populations in need, both academic and popular discourse frequently explore the issue as a concern for donors, especially when the donors are powerful Western actors and the projects are collaborations with local-level NGOs in developing countries (May 2016; Olawoore and Kamruzzaman 2019). This discourse further reinforces structures of inequality and the notion that issues embedded in a local-level NGO are either “case specific” or only problematic when they hurt outside actors.
To further illustrate the benefits of applying the expanded sociological frame outlined in this paper in examining the vulnerability of local-level NGOs to corruption and fraud, I conclude with an ethnographic vignette of such an NGO currently facing charges of corruption and fraud.
The Women’s Network
Globalization and neoliberalism, the uncertainty embedded in the framework of global civil society, organizational frames, and stratification and inequality create cracks in local-level NGOs that allow corruption and fraud to emerge. In some cases, corruption and fraud can exist side by side with real progress and advancement, creating ambiguity and even tensions in determining best practices and the steps necessary to advance real social change, especially when those in the global North view the practices through a different lens than those in the global South. This tension can be seen in the daily operations of many local-level NGOs in the developing world, including the Women’s Network,8 an NGO in the capital of Nepal designed to give female survivors of human trafficking a set of transferable skills in the legal and hospitality industries as well as to conduct outreach work in rural villages to educate the public about human trafficking.
In 2014, I traveled to Kathmandu to volunteer and to study Western volunteers at this local NGO. From my first days, I observed numerous ways the Women’s Network was an impressive grass-roots initiative. In this setting, female survivors were empowering themselves, and while they worked in collaboration with both domestic and international power brokers, this was an organization created by women in the community for the women of the community. Furthermore, the organization was successful by both local and Western standards: it employed women, won multiple large grants, sent representatives to speak at national and international meetings, and was internationally recognized for promoting women in leadership. Its website and its volunteer packets highlighted the hundreds of women they had trained, the thousands of children they reached in their educational awareness programs, and the numerous career opportunities they created for high-risk girls. In 2016, members of the organization established a for-profit sister business, designed to create more opportunities for women who were survivors of human trafficking. In many ways, the Women’s Network was an exemplar of how local-level organizing could play a part in social change.
However, in 2019 rumors spread among the volunteers about questionable practices in the organization after three foreign volunteers submitted a formal complaint of corruption and fraud. The key complaints centered on a former managing director and legal advisor who was now the CEO of the for-profit sister business. The volunteers charged that despite the shift in leadership he was still making most of the decisions for the nonprofit. In fact, his daughter had been hired as his replacement. Therefore, many of the voluteers felt the decisions regarding the nonprofit and the for-profit organizations were ultimately his. He was also seen accessing the resources of both organizations for his personal use; the complainants said that he used the company vehicle to travel to work, though it had been purchased (with grant funds) to transport volunteers for the nonprofit organization and clients of the for-profit business. They also charged that many of the women associated with the nonprofit were not survivors of trafficking but essentially employees tasked with the growth of the for-profit business, above the nonprofit’s goals of public awareness, survivor outreach, policymaking, training, and activism.
Just as in the Cambodian case of Somaly Mam and AFESIP, former foreign volunteers of the organization were shocked by the corruption and fraud that existed side by side with the opportunities created by the organization; locals were not. The sociological approach outlined in this article is useful in unpacking this contradiction. However, in this case, the elements of uncertainty, inequality, and globalization/neoliberalism are so tightly fused that it is challenging to consider one without bringing in the next. Of course, uncertainty played a pivotal role in how events played out at the Women’s Network. As the need for funding was a constant concern, members frequently relied on the most educated and articulate members to apply for grants, manage funds, and represent the organization. Those with these skills were given more power in the organization—including the former managing director and his daughter.
Thus, uncertainty was deeply tied to the structural inequality and the organizational framing of the Women’s Network. According to the formal complaint, not only did the former managing director take a salary six times as high as any of the other members (with the exception of his daughter, who earned half the amount), but he also decided who was nominated to the board. Thus he was able to influence the NGO’s objectives and decision-making processes even though he should not have had any power in the organization. This dynamic also made it easy for funds to be misappropriated, but hard for team members (and even the board) to challenge these actions.
Ironically, gender inequality (in both global and local contexts) was also mirrored in the organization. Because it was situated in an extremely patriarchal society, it is not surprising that its central authoritative voice was male. Many of the women involved in the organization were raised in homes where they were taught to be submissive to male authority. One of the foreign volunteers who filed the complaint against the organization commented that it was problematic that all the NGO’s awards and recognitions were displayed in the former managing director’s office. The complainants argued there was a clear gender (and class) hierarchy within the organizational frame. This was reinforced by the cultural norms and expectations of the community. The hierarchy not only reflected the structures of inequality in the community but furthered inequality within the organization.
In reviewing this case, it is clear that globalization and neoliberalism further extended the other conditions embedded in the Women’s Network. Foreign volunteers were recruited to help access funding (as most grant proposals were submitted to Western donors and needed to be written in English), but they only stayed with the organization for brief periods. The for-profit sister organization emerged in a world where capitalist ideologies are easily merged with nonprofit missions and are even applauded by global civil society. And even before the creation of the for-profit side of the Women’s Network, this NGO functioned like a business—a business susceptible to corruption and fraud.
Those associated with the Women’s Network will argue it is an important local player in addressing human trafficking and providing opportunities for women (despite the questions of who is a survivor). The Women’s Network has been successful in bringing public awareness to the issue of trafficking on both global and local stages. Both the original NGO and the for-profit sister organization provide employment opportunities (and income) to women in a place where women are still expected to be subservient to men, which presents a new question: Are corruption and fraud in local organizations in the developing world incongruent with real social change? We cannot unpack these questions without applying an integrated approach, examining corruption and fraud with attention to both the literature of the global North and the real conditions of the global South.
Conclusion
The current literature on corruption and fraud fails to address many of the complications of how these issues emerge in the context of local-level NGOs in the global South, leading to more questions than answers, as seen in the example of the Women’s Network. In this article, I reviewed the social science (and especially sociological) literature on corruption and fraud to illustrate its overwhelmingly Western nature and how it has primarily been applied to political and governing structures. I have argued that future research must expand beyond the context of the global North, especially when looking at how corruption and fraud operate in the developing world. This requires not only bringing in more culturally situated knowledge from the global South into the conversation, but also using that knowledge to better understand how certain social forces—including globalization and neoliberalism, uncertainty, organizational frames, and inequality—all impact and often intersect in unique ways to create venues for corruption and fraud in spaces that have been underexamined, such as local-level NGOs. Development scholars offer a rich set of resources for filling the gaps in the literature and seeking a more holistic understanding of why corruption and fraud might function differently, and therefore perhaps should be addressed differently, in the developing world.
Recognizing this paradoxical gap in the literature does not mean throwing out the baby with the bathwater. As sociologists have renewed the discourse on corruption and fraud and how it is linked to development, there is an opportunity to further explore the diversity of what corruption and fraud look like, where these practices occur, and how (or whether) they impact real social change and human advancement.
Notes
Readers interested in a more historical review of these relations within the social sciences should see Brooks (2016), Quinney (1977), and Osrecki (2017).
In this review, the focus is on severe forms of corruption and fraud, because these acts often have the greatest effect on an organization’s capacity for creating social change.
See Jancsics (2014) for an interdisciplinary organization of the literature by driving factors.
In addition to individual and structural-level perspectives, some scholarship is based on a network or relational perspective rooted in broad and extended social and personal relations, which might be a better perspective for examining the unique conditions of local-level NGOs in the global South while addressing the intersection of structure and agency (Cook and Emerson 1978; Li 2018; Torsello 2015.) However, the vast majority of studies that make up the relational literature on corruption are outdated or byproducts of other research objectives (Jancsics 2014).
Advancement being defined as the development of a market economy, democracy, free press, and a competitive job market that mimicked the “progress” of the West (Gilman 2003).
Jaskiewicz et al. (2013) explore how nepotism, which benefits kin/family structures rather than the individual, operates in horizontal networks.
There is a rich body of scholarship on whether “bad apples” create “bad barrels” or the reverse (Kish-Gephert et al. 2010; O’Boyle et al. 2011; Trevino and Youngblood 1990).
This is a pseudonym. All names and identifying information have been changed to protect the privacy of those associated with the organization, as no final verdict has been rendered in this case.