Fraud and Abuse in Nonprofit Organizations

Nonprofits fall prey to fraud just like any organization, says author Gerard Zack, CPA and founder of the Nonprofit Resource Center, which serves external auditors of nonprofits. The difference here, though, is that damage to a nonprofit's reputation may be even harder to salvage than with a for-profit organization: the public is less forgiving of nonprofit institutions that breach their trust. By looking at fraud in well-known institutions including the Fondest Wish Foundation (which raised over $1 million, but used only $7,000 of it towards its mission), and New York University (where a financial aid officer embezzled $4.1 million in false tuition checks), Zack shows where nonprofits are vulnerable, and presents best practices for avoiding these types of traps.