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Identifying all types of nonprofit fraud

On Behalf of | Jun 29, 2022 | White Collar Crimes

Some nonprofit organizations are more affected by increased fraudulent activities than for-profit businesses. There are fewer legal and government regulations that control how they create, collect and use their funds. Anti-fraud state agencies in California and federal agencies regularly conduct investigations into nonprofit activities.

Types of nonprofit fraud

Fraud that involves nonprofit organizations often includes theft, embezzling, forgery and kickbacks. Internet fraud occurs when volunteers send spam or create scams on their websites. Debit and credit card fraud is when they make unauthorized charges on donors’ accounts.

The extent of white-collar crimes may be more widespread in nonprofit organizations than in companies. Nonprofit organizations often receive large-sum donations and have fewer legal restrictions to follow. They are exempt from having to pay federal and state taxes and have different rules for payroll taxes.

Reporting fraud

Fraud is reported to the Federal Trade Commission or the Office of Inspector General. The federal agencies are responsible for investigating accusations of fraud, excessive spending and misappropriation of funds. The organizations can lose their nonprofit status, individuals can be charged with civil and criminal penalties and the organization can lose its reputation and supporters. Through a court judgment or settlement, the owners are often forced to repay their donors plus fines.

Embezzling funds, scamming donors and withholding taxes are a few white-collar crimes that are committed in nonprofit organizations. There are many types of fraud that are distinctive in the nonprofit field. Anti-fraud efforts include identifying, reporting and preventing fraud. In addition, anti-fraud task forces exist within the local police departments, offices of inspector generals and federal agencies to investigate the crimes.