Article: 47 People Charged for $250M Fraud

Source: The NonProfit Times Wednesday | September 21st, 2022 
"Federal charges have been filed against 47 people in what might be one of the largest frauds involving nonprofit organizations — $250 million in government COVID relief money that was supposed to feed children. 

Among those indicted is Aimee Bock, founder and executive director of Feeding Our Future in Minneapolis, Minn., a nonprofit that was a sponsor participating in the federal Child Nutrition Program. The indictments charge Bock with overseeing a fraud scheme involving organizations, some of which were held out as foundations, operating sites under Feeding Our Future’s sponsorship."  (Read Full Article)

A Violation of Trust: Fraud Risk in Nonprofit Organizations

Source: Nonprofit Risk Management Center, By Jonathan T. Marks, CPA, CFF, CITP, CFE, and Pete A. Ugo, CPA, 

"The risk of fraud is a serious concern for all types of enterprises, but fraud can be particularly damaging to a nonprofit organization, for which a damaged reputation can have devastating consequences.

The Costs of Fraud in Nonprofit Organizations

According to the most recent global fraud study by the Association of Certified Fraud Examiners (ACFE), the typical organization loses an estimated 5 percent of its annual revenue to fraud. While fraud in nonprofit organizations resulted, on average, in a smaller net loss than fraud in commercial enterprises, the nonprofits in the study reported a median loss of $100,000—an 11 percent increase from the previous study and a significant loss to any charitable organization.

Beyond the immediate financial loss, however, an even greater potential cost of fraud to nonprofit organizations is the reputational damage that can occur. Because most nonprofits depend on support from donors, grantors, or other public sources, their reputations are among their most valued assets. In addition, fraud in nonprofit settings often garners unrelenting negative media attention.

Warning Signs

Common warning signals or red flags of potential billing fraud include but are not limited to:

• Invoices for unspecified or poorly defined services
• Unfamiliar vendors
• Vendors that have only a post-office-box address
• Vendors with company names consisting only of initials (many such companies are legitimate, of course, but fraudsters commonly use this naming convention)
• Sudden increases in purchases from one vendor
• Vendor billings issued more often than once a month
• Vendor addresses that match employee addresses
• Large billings that are broken into multiple smaller invoices that will not attract attention
• Internal control deficiencies such as allowing a person who processes payments to approve new vendors

These warnings or red flags can be organized into four general categories (Read Full Article)