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How grants can deliver impact in complex and changing environments
In this third episode of the Granting the Future podcast, the UN’s Pradeep Kurukulasuriya discusses how to manage nearly US$5 billion worth of complex grant programs to achieve maximum impact.
Grant and relief fund programs operate in complex, dynamic ecosystems, with an ever-present risk of fraud, misallocation and waste. And nowhere is this truer than for the United Nations Development Programme (UNDP), which annually oversees nearly US$5 billion worth of grant funding, across 140 countries, tackling urgent challenges in nature, climate, energy, chemicals and resources, with hundreds of active projects at any one time.
In this, our third episode of the series, host Tim Smith discusses how to address such complexity with Dr. Pradeep Kurukulasuriya, Director and Executive Coordinator of Environmental Finance at the United Nations Development Programme, Maryam Hussain, EY International Fraud and Corruption Investigator, and Simon Inglis, Leader of the EY Grants and Relief Funding Management Team.
The UNDP manages the risks of fraud and corruption and tracks the impact of grant funding via a multilayered system, with several lines of defense and a clear escalation process. Agility of people and processes is vital to keep up with bad actors and monitor local and global trends. Each part of the process must be integrated, with shared data that gives grant administrators a single view of the truth — in close to real time.
Remember that this is not about one person, but about systems and processes that are standardized and repeatable.
You need a very strong culture in place to ensure that risk management practices are robust and applied consistently.
Individuals across the system should be accountable for results in terms of fraud, waste and impact.
Transparency is essential, with a view of every transaction, across all stages and down to a granular level.
For your convenience, full text transcript of this podcast is also available.
Jingle
Granting the Future from EY.
Tim Smith
Hello and welcome to Granting the Future, a new podcast series from EY for grant and public fund managers around the world.
I'm your host, Tim Smith, and each episode we'll be sharing expert insight about transforming the grants process to overcome challenges and meet citizens’ needs.
This time our theme is how to build systems to manage projects that deliver impact in complex and changing environments. To discuss this, I am joined by Dr Pradeep Kurukulasuriya, Director and Executive Coordinator of Environmental Finance at the United Nations Development Programme . Pradeep, hello, welcome to the podcast.
Dr. Pradeep Kurukulasuriya
Hi, Tim, good to be here.
Smith
Well, good to have you with us. Also joining us is Maryam Hussain, EY International Fraud and Corruption Investigator . Maryam, hello to you.
Maryam Hussain
Hello, Tim. Delighted to be part of this conversation.
Smith
And last, but by no means least, Simon Inglis, Leader of the EY Grants & Relief Funding Management team. Simon, hello, thanks for joining us as well on this podcast today.
Simon Inglis
Hi, Tim. Great to be here as well.
Smith
Well, Simon, let me start with you. First of all, give us some hard truths about the kind of challenges affecting the management and distribution of grants funding.
Inglis
Well, it's a great place to start, Tim. I think the context around grants is really important here. Grants operate in complex, dynamic systems. These systems will change around the grant as it progresses. With each actor moving, so does that environment and that system that the grant is working in change. So we have the impact actors. These are people who are getting funding and we're relying on to deliver the impact, whether that be economic or social or environmental. And then we have the threat actors, who are looking to defraud schemes or just simply disrupt them because it's in their political interest to do so.
But what's really important in this space is the agility of the teams who are in the space to change and refocus and adapt to that threat, which we see as a real struggle in this area. And we have to bear in mind that those threat actors are often more nimble, and are happy to fail. “Fail first, move fast” is one of the ways of trying to defraud a scheme. You try one way, you try another one. So the challenge, for us I think, is can the overall system be agile enough to counter the threat and maximize impact?
Smith
And given that dynamic, changing environment, what would you say are the most common system failures that can compromise the distribution of grants funding?
Inglis
From our perspective, the common failures are around designing for a static world. It should be like this, therefore it shall be like this. I think we see a lot of siloed approaches of worlds where we need to join up this process from end to end. Everyone needs to have the end in mind. I think they do, particularly in Pradeep’s organization, but in some of the other organizations we work with, we see efficiency being more important than impact in some of the stages of that. And following on from that, we're seeing people with incomplete, duplicate or inaccurate data, which makes reporting, identifying trends or threats very very hard, and certainly almost impossible to do in real time which, within this dynamic environment, you need to be able to do.
Smith
Okay. Well, Pradeep, let me bring you in now. Give us an overall sense of the scale of grant funding your team at the United Nations Development Programme oversees, in terms of value, the number of donors and things like the number of countries?
Kurukulasuriya
We operate, at present, nearly US$5 billion worth of grant funding, that is essentially going through UNDP books, in nearly 140, 141 countries around the world. These funds that we manage leverage a further US$20 billion worth of additional finance that's flowing to countries for urgent actions on nature, climate, energy, chemicals and waste.
Smith
And what are the main challenges today then, that your team face, when ensuring that grant funding reaches the correct beneficiaries and also achieves its intended impact?
Kurukulasuriya
I think, first and foremost, it's really important to bear in mind the context in which these funds go to work. That is a very heterogeneous context. We operate across different parts of the world, from the Pacific to West Africa to the Caribbean to Latin America. We operate in middle-income countries, to low-income countries. We operate in cities, rural areas, and that brings such a diversity of issues to the forefront when it comes to risk management, that the context, first and foremost, I think, is the most important factor for us.
And of course, as an organization, what that means is we then have to have a very robust risk management system in place in order to manage what is a very dynamic risk environment in which we operate.
Smith
Okay. Well, talk us through the risk management in slightly more detail, if possible. How does the UNDP manage the risks of fraud and corruption in the funding process, especially in those high-risk environments that you mentioned?
Kurukulasuriya
First and foremost, it's to recognize that managing risks isn't necessarily just the job of one person, it is actually a system. And in our case, we have what we refer to as a multilayered system of risk management. So we have our first line of defense, which is essentially country officers who are intentionally and very deliberately made to account for project risk management. So there's an entire process and system in place for country officers to follow through as they identify risks and figure out ways to manage risks as they emerge.
There's also an escalation process in place whereby, for some risks that they themselves can't manage, they can escalate to our second line of defense, which is essentially what we refer to as our regional bureaus, our central organizational management framework that is based in New York, who have the ability to respond to risks escalated from country officers or themselves escalate risks as they see it. There are regular structured discussions that take place with country officers on a regular basis to understand what the ever-changing risk environment looks like and what needs to be dealt with.
Then there's also another central unit, which I lead, the Vertical Fund Oversight Compliance and Programme Support Unit , that plays a third line of defense along with the headquarter machinery, to make sure that nothing essentially slips through the system, or at least minimizes the chances of it doing so. And on top of that, we have our independent officers of Audit and Investigation, Ethics Office that operate independently and do their own checks on how the UNDP system essentially is functioning in its risk identification, risk management process.
In addition to that, of course, we operate with a number of donors who have their own processes and systems in place for risk management. So it's really through this multilayered system that we are able to minimize the issues of negligence or misidentification or non-identification of risks that obviously we all want to minimize.
Smith
Well, Maryam, let me turn to you now. You've been listening to what Pradeep was saying. It's clearly a complex issue, and you've been investigating fraud in the public and private sectors for 20 years. When there are cases of large-scale grant funding corruption and fraud, are lessons learned and processes changed? Presumably, in a perfect world, they are, but are some mistakes repeated?
Hussain
Yeah, in my experience, I think lessons are often learned about the importance of the adequacy of financial safeguards, but the repeated failures are often in adapting that knowledge to a new local context. So, ultimately, large-scale fraud and corruption is about power in a system. Who has the power and incentive to divert funds at a large scale, and, conversely, who are often the coalitions with the power and motivations which are aligned with the program objectives?
And this analysis is actually very complex, especially if you overlay that with a fragile state or in a conflict environment. But, in my experience, this understanding is really critical in how we implement the technical solutions to make sure that the funds do get to the right place at the right time to deliver the intended impacts.
Smith
You talk about technology; how are developments in technology then helping to prevent and detect fraud and corruption?
Hussain
The common criticism whenever there's a major scandal or fraud or corruption case is that the response was too slow. Individuals were too slow to detect the early warning signs and then were too slow to respond to them. Addressing this, of course, requires decision-makers to get timely information about a developing situation to enable them to intervene. I think where technology can help is in monitoring of project spend and delivery that is more active and less after the event, and is more real time and with shorter reporting lines of findings to those decision-makers who can intervene at an early stage.
Smith
Pradeep, how do you think the early warning signs that compromise the ability to achieve strategic objectives can be better detected in the grants process?
Kurukulasuriya
Well, indeed, this is something we are currently exploring in UNDP, particularly with the advent of AI technology. What we are finding is that, certainly looking at some of the cases we've had to deal with in the past, the signals, if you like, have actually been in a number of reports, whether they be annual monitoring reports or midterm evaluations or terminal evaluations that have taken place. We're talking about literally hundreds and pages of documentation that to date has been very difficult to process, certainly for an organization like ours where we're dealing with multiple hundreds of projects at any given time.
What we are now toying with, and we've actually demoed the capability of using AI at the recent GEF Assembly in Vancouver, is a fascinating ability to be able to identify patterns in these reports that previously it was very difficult to extract that information. It’s becoming another tool in our effort to minimize certainly resources being misused in any shape or form. Having said that, at the end of the day, nothing works better than eyes on the ground.
Our capability, certainly our presence in many of the countries that we operate, certainly gives us an added advantage through physical verification of results and impacts, and certainly managing vendors and so on, that becomes hugely beneficial and advantageous for an organization like ours to manage the kind of volume and scale of resources that's entrusted in us.
Smith
Finally, can I get all of your thoughts on how preventative and flexible measures can be applied to improve the response to the threats that we've been talking about generally? Simon, let me put that to you first.
Inglis
Well, I think as we've all talked about, we know that the threats are out there, and we know that the complexities are there. What we don't really know is exactly how they'll manifest themselves in any given day or in any given grant program. I think it's also important to bear in mind that a grant program, in itself, it changes over time. Those complexities arise, we find the impacts have been undermined or we've got a particular threat. We often don't see those until after the fact and, as Maryam was saying, it's important that we get better at getting a real-time view of what's going on.
To do that, we need to build agility into the people, the processes and the technology. Primed for that agility, people must expect to change. Resistance to change is a problem in every part of the corporate world, the business world. But actually, this is where change is coming. We know it's coming, and we need to be able to respond in a calm, measured, proportionate way to mitigate the threat or that complexity. That means we need to be looking at newer technologies, always on the forefront of the technology, trialing things, but with that we also have to have processes that allow that information to be collected from different sources in real time into a single place.
And that way we create a single source of truth for people to run reporting at. Pradeep talked about running AIs to look for patterns. But if the information is in different places, you can't do that. You have to have the information coming together in a single place so that you can apply AI or simple data analytics to start to see if there are patterns there. That then allows us to change the team on the ground so that we deploy more people at quite short notice, or we add additional steps or require additional reporting or data in the process. So all the way, moving throughout, but also the complexities that reduce impact for the dollars that are being spent, how can we get more of that focus on being better, and happy to change what we do for better, rather than wanting to continue down the same path?
Smith
And Maryam, your thoughts on that, how to improve the response to the threats?
Hussain
I would reiterate the importance of sufficient monitoring and evaluation to understand the development impact of efforts, because that in itself is a significant lead indicator of major fraud and corruption. There is an excellent “lessons learned” report that was issued by the Special Inspector General for Afghanistan Reconstruction, SIGAR, which is in the public domain. One of the chapters talks about the fact that the absence of what they call “periodic reality checks” creates the risk of doing the wrong thing perfectly, and I think that spans across all of the different risks.
Smith
And Pradeep, anything you'd like to add?
Kurukulasuriya
Yeah, I think a few points. One, I think, and Simon alluded to this: culture. Ultimately, you need a very strong culture in place to ensure that the risk management practices are what they're meant to be. Number two: I think associated with that is to ensure that accountability, individuals across the system are held to account; and the absence of measures that enforce that accountability certainly is a problem. Transparency, I think, is really important in this process to ensure, together with, I believe, due process, we are able to act swiftly on what is found. And finally, I think I would say, the big issue that we're finding certainly is not the absence of tools and gadgets and policies and so on and so forth. It ultimately boils down to a very simple thing: application of what already exists. I think if we do that, we'll be almost there in terms of the kind of systems that we want to see.
Smith
Okay. Thank you very much. On that point, that is it for this episode. Thanks to all of you for such an interesting and enlightening conversation on what is clearly a complex, dynamic and extremely important subject. Pradeep, thank you very much indeed for joining us.
Kurukulasuriya
Thank you. Thank you, Tim, thank you for having me.
Smith
Maryam, thank you to you also.
Hussain
Thank you very much.
Smith
And Simon, thanks very much.
Inglis
Thanks, Tim.
Smith
Do join us again soon, when we'll continue to look at transforming the grants process. And please subscribe to this series so you won't miss an episode. From me, Tim Smith, thanks for listening and goodbye.
