I recently spoke at the National Grant Management Association (NGMA) conference about internal control mistakes that sabotage grants.
And while most organizations have anti-fraud controls in place, like a code of conduct or an external audit of the financial statements, many are missing one of the most effective controls for detecting fraud.
- Do you have a whistle-blower hotline?
It may surprise you to know that the number one way fraud is detected is tips from employees and others. (Source: Association of Certified Fraud Examiners, ACFE, Report to the Nations, 2016.)
So why do only about half of organizations have a hotline in place?
Perhaps they think it can’t happen in their organization, or maybe there don’t want to hear what employees and others are thinking!
However, if we are serious about stopping waste, fraud, and abuse in Federal grants, we need to recognize that a robust whistle-blower process and hotline should be part of every grant recipients anti-fraud controls.
Why? Because they work!
Effective Anti-Fraud Control: Hotlines
Research shows that not only are most frauds detected by tips, it also shows that tips can come from a wide range of employees and others.
- When organizations have a hotline, 47% of the frauds are detected via tips. Even for organizations who haven’t taken the formal step of having a hotline, 28% of their frauds are also detected by a tip.
- More than 40% of the tips came from non-employees. So you can see that if the hotline is only available to active employees, the risk of missing fraud increases for the organization.
- About 58% of tips were received via email or online form, while 40% of tips came in via phone. The more methods you have in place to report fraud, the more likely you are to connect with tipsters.
Don’t have a whistleblower hotline in place at your organization?
You may miss one of the most effective ways to detect waste, fraud, and abuse of grant funds.
Whistleblowers: Reality Shows vs. Reality
But there is a dark side when it comes to whistleblowers!
We’ve seen the movies, watched the news, read the articles – and they don’t paint a pretty picture when it comes to what happens to those with the gumption to blow the whistle when we see wrongdoing in the workplace.
Now, there is little question that the media is sensationalizing the actual facts in the most famous whistle-blower stories. After all, a good story, when embellished, can turn into a more profitable block-buster tale.
So want does the research really show?
Whistleblowers: What does the research say?
A more rational approach is to review research conducted utilizing scientific method rather than anecdotal and/or isolated stories of what happened to specific individuals.
The intention is not to discredit or minimize the hardships reported by individuals such as Sherron Watkins who blew the whistle at Enron or Dr. Jeffrey Wigand whose life was destroyed after blowing the whistle on the tobacco industry.
(But what I wanted to know is whether or not stories such as theirs are unique or if whistleblowers can expect to experience negative consequences as a result of reporting irregularities.)
Here’s the unfortunate truth…
Every study I examined indicated whistle blowers as a group are not rewarded for coming forward.
So what does this say about our real commitment to stopping waste, fraud and abuse particularly in the world of Federal grants?
We have more work to do!
Learn More About Grant Management
Want to learn more about how to be a better grant manager?
We offer two-day grant management training online, on-site and at our live training seminars called “Grant Management Boot Camp.”
Lucy Morgan CPA, MBA
CEO, Compliance Warrior