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Nonprofit organization fraud and theft investigations

On Behalf of | Jun 8, 2021 | White Collar Crimes

A nonprofit organization’s employees could come under investigation for fraud or theft. As noted by, allegations of fraud may include inflating expenses or paying fictitious contractors. Theft may involve embezzling money or using the organization’s funds for bribes or kickbacks. 

Many nonprofit organizations receive public funding from the federal government. Employees often serve as stewards of those funds. They may also have responsibility for monitoring and reporting abuse, waste or fraud. If an organization’s financial records appear to not match, staff members may need to defend against lost or missing money. 

Strong record-keeping systems could help back up spending

To prevent abuse, fraud or waste, organizations may establish internal controls, such as matching each purchase order to a proof of delivery. Unusual spending patterns may otherwise result in an internal investigation or a whistleblower reporting inaccuracies to officials. 

Detailed records could help employees hold each other accountable for any financial discrepancies. A reliable internal control system may also provide evidence to counter allegations of wrongdoing. Officials may review an organization’s records and determine if employees spent taxpayer funds wisely. 

An internal investigation may lead to allegations of mismanagement

As reported by the Voice of San Diego, a financial clerk working for a San Diego charity discovered new payments made to an unknown vendor. The employee began investigating and found that the vendor invoiced the charity for items priced at greater than twice their normal cost. County auditors later also found charges billed by the charity that lacked supporting records. 

Suspicions of misconduct often begin with an internal accounting investigation. When financial records fail to reconcile or lack documentation, an external investigation may follow. This could lead to allegations of mismanagement and result in prosecution. Strong enough evidence, however, may counteract criminal charges.