Source: The Conversation
Summary
Nonprofit fraud is a growing concern, with high-profile cases like the Southern Poverty Law Center’s indictment and the shutdown of the Donald J. Trump Foundation. The Department of Justice reported a record $6.8 billion in settlements and judgments in 2025 tied to the False Claims Act. Nonprofit fraud can be internal, such as embezzlement, or external, like fake charities. The IRS and state attorneys general are responsible for policing nonprofits, but limited resources and lack of training can hinder their efforts. Donors can take precautions by researching charities and looking for transparency, but may inadvertently pressure nonprofits to prioritize low overhead costs over fraud prevention.
Our Reading
The numbers tell one story. Nonprofit fraud is a growing concern, with the Department of Justice reporting a record $6.8 billion in settlements and judgments in 2025. The Southern Poverty Law Center’s indictment and the shutdown of the Donald J. Trump Foundation are just two high-profile examples. The IRS and state attorneys general are responsible for policing nonprofits, but limited resources and lack of training can hinder their efforts. Donors may inadvertently pressure nonprofits to prioritize low overhead costs over fraud prevention. The announcement sounds familiar: nonprofits are less likely to be trained to identify evidence of fraud risks, making their staff and leaders less prepared to spot and deal with fraud.
Internal vs. external fraud: nonprofits are typically created when their founders file paperwork with state authorities, making state attorneys general responsible for policing them. The federal government plays a role, too, with the IRS overseeing nonprofits through 990 forms and audits. Donor precautions can be counterproductive: pressure to keep overhead spending low can lead nonprofits to not make fraud prevention and detection a high priority. Transparency and corrective action are key after fraud occurs.
Author: Evan Null
