From the New York Times
“Most of these things are not caught by routine audits,” said Gary Snyder, who tracks nonprofit fraud in his newsletter, Nonprofit Imperative. “They’re usually done by someone in the financial area — the treasurer, the bookkeeper, the signer of checks — who knows how to avoid getting caught.” 
Almost 95 percent of the reported frauds entailed loss of cash, and a majority of those involved false or inflated invoices, billing for expenses that were never incurred and check tampering.
“I gave a talk to a group of nonprofit executives a few weeks ago, and every single one of them had a fraud story to tell,” said one of the report’s authors, Janet S. Greenlee, an associate professor of accounting at the University of Dayton. “This has been going on for years, but there’s a feeling that it shouldn’t be discussed,” because of the effect it might have on donations.
But it will now be harder for charities to hide fraud, because beginning with tax forms they must file for 2008, the Internal Revenue Service has added a question requiring them to disclose whether they have experienced theft, embezzlement or other fraud during the year.
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