Fraud Risks in Nonprofit Organizations: Learning from Real-Life Case Studies

Abstract

The Washington Post (2013) found that one-sixth of all embezzlement cases in the United States involve nonprofit and religious organizations, ranking just behind the financial sector. This statistic is jarring but not entirely surprising to those in the exempt industry who know nonprofit organizations can be especially vulnerable to fraud risks. Unlike for-profit businesses that usually operate under more rigid financial oversight, nonprofits are often laser-focused on their missions and that can lead to less attention on building internal controls. This can create an environment where financial irregularities may go unnoticed for extended periods, increasing the amount of potential losses.