The Impact of Fraud on the Nonprofit and Social Services Sector

The Impact of Fraud on the Nonprofit and Social Services Sector

Authored by

Ron Matan, CPA

And

Darryl Neier, CFE, MS

2009

ABSTRACT

This white paper sets forth a discussion on the breadth of fraud occurring in the nonprofit community and its over-all impact on the nonprofit sector and the community at large. The paper begins with a brief overview of the size and scope of the nonprofit sector. It then delves into the types of fraud common to nonprofits, provides a profile of a typical perpetrator and traces the cost of fraud in the nonprofit community. Examples of nonprofit fraud are cited in order to share lessons learned in the real world. Suggestions and guidelines are offered for improving internal controls in order to more effectively detect and deter fraud in the future.

Table of Contents

Introduction – Nonprofit Organizations are Big Business

The Cost of Fraud

Defining Fraud and its Impact on the Nonprofit Sector

Tracking Trends

Preventing Fraud

Examples of Nonprofit Fraud

Conclusion

Research Cited

About the Authors

Introduction – Nonprofit Organizations are Big Business

As we began the research for this white paper, we confronted some key facts about the breadth of the nonprofit community, its impact, its influence, as well as recognizing the importance of having a strong and vital nonprofit sector. For more than three centuries, charitable organizations have been making a difference every day for anyone living in the United States. It might be the upkeep of a local city park in Chicago, a relief agency supporting victims of natural disasters, or a children’s theater and dance group – no matter what the cause or issue, nonprofit organizations provide critical services, making a contribution to every community in America. This long tradition has created a powerful legacy with more than 1.3 million public...