Shedding light on TI

An investigation by CORRECT!V and German business daily Handelsblatt has unearthed gaping holes in the financial reporting of Transparency International. TI has been organising its International Anti-Corruption Conference (IACC) without proper accounting. Sponsors' fees paid by corrupt companies have been kept off-the-books. In one case, Transparency presents a Thai-language document with little relevance to the IACC as a conference audit. In this article we document both our research and also the crucial questions that remain unanswered.

von David Schraven , Frederik Richter

By documenting our investigation step by step, we also would like to show the kind of results that can be achieved using information solely in the public domain. And we wish to highlight the questions that still remain unanswered. We will continue to ask these on Twitter under the Hashtag #anticorruption.

The tip-off

It’s June. We’re already doing research on a different project by Transparency International (TI). In a general conversation on the organization, we pick up on the following sentence: „They’re also running this conference that has become so expensive that Western governments don’t host it anymore. It’s only hosted by countries with poor reputations.“

This is all we have when we decide to dig deeper.

The website

We start by scrutinizing the website of the IACC. We notice that there is no legal notice. No website credits. This means that the IACC has no legal entity. From this point on, we know there is a story in the conference. The event has a turnover of several million euros each time it is held. Several partners play a role. But without its own legal form, there is no clear responsibility. This fits with our early picture of the organization. While investigating the Water Integrity Network, a former program of TI, we had also noticed a surprising lack of basic corporate governance and internal accountability.

The politicians

We also notice that several politicians with poor reputations have spoken at the IACC. For example Brazilian President Dilma Rousseff at the IACC in 2012, which was held in Brazil. She chaired the supervisory board of state-own oil firm Petrobras at a time when a multi-billion bribery scheme existed at the company. Illicit payments reached Rousseff’s party. In September, a senior party official was was sentenced to 15 years in prison for his part in the scheme.

The numbers

We’re are studying the financial reports published by TI, reading every single line and footnote. We’re scrutinizing the IACC audits that are published on the Internet. The documents are in local language such as Portuguese or Thai. We’re reading the MoUs that were signed between the host government, Transparency and a local partner organizing the logistics on the ground. We struggle to make the numbers add up. The MoUs say the host government will pay several millions to finance the conference. But only a few hundred thousand euros can be found in TI’s financial reports. How has the remainder been accounted for? What has that money been spent on? There is no information on that.

We notice on the IACC website that Petrobras, arguably one of the most corrupt firms in the world, sponsored the IACC held in Brazil. There are also a number of Brazilian banks that have sponsored the IACC. But nowhere in the books can we find any reference to this sponsoring.

We spend several weeks trying to understand the publicly available information, reading every footnote, before we approach TI with questions. We think this is important during investigations so that the organization in question is forced to take us seriously. This also allows us to evaluate the response and detect misleading information.

The questions

We submit a first set of questions. The response confirms our suspicions. Transparency does disclose certain information, such as how much Petrobras supposedly paid for its sponsorship. But TI does not provide us with any comprehensive conference accounts. The information provided by TI cannot be verified. Instead, new questions arise.

In 2010, the conference was held in Thailand. TI presents a Thai-language document as conference audit. One CORRECTIV editor happens to read Thai. The document contains no reference to the IACC. There is only one budget line referring to the holding of an international conference (see the picture above). When CORRECTIV points this out, Transparency tells us it has requested additional information from their local partner in Thailand.

The longer this goes on, the more we gain the impression that Transparency does not in fact have comprehensive IACC accounts in its possession. The money flows are so opaque that we decide to focus our efforts on just one event. This is an important decision during most investigations: focus on one case study to illustrate structural issues. We chose the even that was held in Brazil.

We exchange emails with Transparency over several weeks. It is an arduous process. We think a meeting would be more efficient and we ask for it several times. The office of the international secretariat is just a few miles from CORRECTIV offices in Berlin. But remarkably, TI turns down our requests for a face-to-face meeting. We’re beginning to wonder if the organization has something to hide.

We realize that the Portuguese-language document presented as the conference audit for the event held in Brazil is only one out of a series of documents. We find the remaining documents in Brazil and have them translated. Meanwhile, TI says it has received additional information from Thailand. But it only re-sends the Thai-language audit document that was publicly available from the very beginning. We’re puzzled.

The mistake

In one of our emails to TI, we get a number wrong. Transparency says in its financial reports that it has received 700.000 Euro from its Brazilian conference partner to cover the costs of designing the conference program at its Berlin headquarters. In one of our questions, we by mistake count the money twice and write 1.4 million euros. TI says this number is wrong, saying that the organisation has received 950.000 euros from its local partner.

We’re very puzzled now. So far, Transparency has disclosed only 700,000 euros. Sometimes it helps to cite a wrong number to get the right information.

But where are the additional 250,000 euros accounted for? What exactly is this income? Why has it not been published?

The deleted donor entries

In between, something curious happens. The 2.5 million euros conference funding by the Brazilian government was paid by the Brazilian comptroller general to the local partner of Transparency who then passed on 700,000 euros to Berlin. We’re asking Transparency to confirm it has not received any money directly from the comptroller general. TI confirms.

“Then why is the comptroller general listed in your 2013 financial report?“ The line contains no amount.

“This is an unfortunate mistake, which we are going to correct.“ Later, the entry as well as several other donor entries without amounts are in fact deleted from the financial report.

This points to the financial reports being done in sloppy fashion. In particular as the 2013 report must have been written about 18 months after the conference. By then, TI should have been clear about who funded the conference. Have there been other indirect money flows as was the case in Brazil, we wonder?

The conference call

We increase the pressure on TI. We really would like to meet to have time to go through all the numbers. It could very well be that we are simply not grasping the money flows. Finally, TI agrees to let us speak to its accounting department. But only over the phone, not face-to-face.

It’s a short call wrought with tension. What about the additional 250,000 euros from Brazil? These are participants’ fees, TI says. So where are they accounted for? The response is remarkable. This income has not been accounted for in the IACC project account, but in the other income line of the overall budget, TI says. Even in the footnotes there is no reference to the IACC. We ask for an explanation but none is forthcoming. We end the call.

The first meeting

TI agrees to let us speak with Roberto Perez Rocha, the head of its IACC program. But once more only over the phone. But we insist. We would like to speak face-to-face. Hours before the meeting, TI almost begs us: „Please do not come to our offices.“ We reply: „We will pass by. Feel free to send us away.“ In that case we can have the call from our mobiles standing in the building lobby.

We are let in. It’s a fruitful conversation, Transparency discloses a lot of additional information. TI says it has also realized that the IACC accounts lack clarity and that the organization plans to publish all data. But new questions emerge. We ask why Transparency allows corrupt companies such as Petrobras to sponsor its events. One answer: the corruption scandal engulfing the company today had not been known at the time. We continue to press. Even in TI’s own rankings, Petrobras had poor marks at the time. Another answer: Neither TI nor the local partner ever received money from Petrobras.

We’re stunned. Who received the money then? The answer: it was spent directly on social events during the conference.

So there have been funds, 155,000 euros according to TI, that have been not accounted for at all. Were any other funds dealt with this way? Who benefitted? Who was responsible? Was this a slush fund?

The FOI request

The German aid agency GIZ funded the event in Brazil to the tune of 300,000 euros. According to Germany’s general funding rules, the government is not supposed to fund events that turn a profit. Did TI account for the participant fees from Brazil under its general income statement to hide profits?

We would like to know the exact legal clauses of the German government funding. It is common for participant fees to considered as part of any conference income. Through a freedom of information request (FOI) we obtain the funding contract between TI and the GIZ as well as the report on how the money was spent. In fact, TI has not reported the additional income from sponsoring and participants’ fees to GIZ. But what does that mean in light of the legal clauses set out in the contract? We consult two experts. Both say the contract has been designed in a way that the additional funds do not need to be taken into consideration. That is because the money paid by GIZ was specifically meant to fund only a number of workshops at the conference, not the conference altogether.

We have sent many questions to GIZ, which went unanswered. The agency largely kept repeating its legal position on why it will not request any funding to be returned.

The second meeting

We’re already in in late-September. By now, colleagues at Handelsblatt have joined our research. Transparency offers another meeting. We insist on finally meeting with top management. The meeting is attended by Miklos Marshall, TI’s deputy secretary general.

There is still no explanation for the way the participant fees from the Brazil event were accounted for. But yet TI insists it has not made a profit from the event. How does that square, when the participants’ fees are not included in the project account? TI suddenly says it occurred additional „indirect costs“ related to the conference, which it did not disclose in the IACC account.

This sounds like it was made up on the spot. We take it seriously nevertheless and ask for a break-down of the costs that occurred at the Berlin headquarters. TI promises to send us the data. We have not received it until today.

The remaining questions

Transparency has applied the tactics used by large companies covering up internal issues. It has provided information very slowly at times or information that was misleading. But by providing information bit by bit it can later claim internally that is has cooperated. TI also admits a small issue in order to hide a larger one. It says its IACC accounts lack transparency. It also says its financial reports comply with international accounting standards. But external accountants can only verify information presented to them. They cannot scrutinize money that has been kept off the books. And do they read Portuguese and Thai?

Finally, we also would like to document the questions that our investigation has not been able to answer. We will continue to press TI, using the hashtag #anticorruption.

  • why was sponsoring income in Brazil not accounted for?
    • was this a slush fund?
    • was there a similar flow of money at the other IACC conferences?
    • who controlled this money?
    • who benefitted from this money?
    • what did this money pay for?
  • why were the participant fees from Brazil accounted for in such an opaque way?
    • were there any clauses in the funding received, such as from the Brazilian government or the UNDP, that tied the funding to the conference not turning a profit?
    • does any money need to be returned to donors if it became known that the event in Brazil yielded a surplus?
  • how do the accounts look like for the IACC conferences held in other countries?
    • what was money spent on?
    • who benefitted from the money?
    • who controlled the money?
    • has any other IACC conference turned a profit?
  • TI deleted the Brazilian comptroller general as a donor from its 2013 financial report because the money was paid through another party. Other donor entries with nil amount have also been deleted. Did these donors also pay money to TI through third-parties? Where is this accounted for?