URCS: Ethical

Dilemma
Baloyi. M; Mavetera. T; Manungo. W; Dembure. M &
Nyarupanga. S
 Introduction
• URCS is a member of the International Federation of the Red Cross and Red
Crescent Committee established by an Act of Parliament, the Red Cross Act
• Provision of humanitarian aid during times of war and to alleviate all forms of
human suffering in Uganda
• Governed by policies and regulations for human resources, finance and
accounting and Code of Ethics for the board and members
 Theoretical background – Game Theory
• An ethical dilemma is a situation when an individual, facing different courses of action must
make a decision about which course of action is best and that no matter what course of action
is taken, some ethical principle is compromised
• Game Theory first introduced in the 1950s by Morgenstern and Neumann assumes:
1. There is finite number of players
2. The players are rational or act reasonably
3. Every player strives to maximize gains and minimize losses
4. Each player has a limited number of possible outcomes or payoffs
• The end result is an equilibrium position when both players have made their decisions and an
outcome is reached
 Ethical Issues
• Forging board resolutions
• Securitization of personal loans using organisation assets
• Misrepresentation (reporting 4 billion sale instead of 5 billion)
• Abuse of office (importing personal items using company resources)
• Fraud (donor funds)
• Non-disclosure of agreement of sale
• Connivance of CEO and other board members to defraud the society
 Corporate Governance Issues
• Independence (board free influence of others) – Agency Theory (information
asymmetry), CEO deviant behavior (Cultural Transmission Theory)
• Fairness (equality & effective redress) – Extra Ordinary Meeting resolutions
• Transparency (timely and accurate disclosure on all material matters) – +ve: Forensic
audit, inviting foreign delegates. –ve: non-disclosure of the broker commission;
reporting UGX.4 billion instead of 5 billion
• Accountability – No board sub-committees & internal control systems. Tax liabilities
and servicing of loan
 Sustainability Issues
• Economic – Reduced liabilities from 26.7 bn to 2.5 bn. Restored donor
confidence, with close to 75% of donors that had left in 2013 resuming funding
• Social – Revamped board structure (board composition (board interlock), skills
and experiences) improved stakeholder relations
• Environmental – By implication, URCS being an affiliate IFRC, the global plan
for action in climate change is targeting 2 billion trees
 What could have gone wrong?
• Loopholes in the board structure, roles and duties – no board sub-committees
• Absence of effective internal controls (maker-checker, checks and balances and
the escalation matrix)
• Information asymmetry (CEO possessed more knowledge and had unfair
advantage than other internal stakeholders and he used it for his self-interest)
• Non-implementation and non-enforcement of existing policies and codes
 Recommendations
• Sets up appropriate board sub-committees for monitoring and oversight role
• Activate internal control systems, such as, regular audits, snap checks and ad-hoc
returns
• Comes up with a whistle blowing policy, set in conjunction with an independent firm
• Board complies with existing policies and procedures (Comply or Explain)
• Amends the accounting policies.
• Enacts an organisation’s Code of Ethics.
• Set up an Integrity committee
Asante Sana! Thank
You! Siyabonga!
Tatenda!
THE END