Forensic Accounting for Nonprofits
Fraud can significantly damage a nonprofit organization’s mission, reputation, and relationship with its community. When financial misconduct occurs, forensic accounting helps uncover wrongdoing, support legal action, and restore accountability.
Why Nonprofits Are Vulnerable
Many nonprofits receive federal funding, which often makes up a large portion of their revenue. If a nonprofit expends $750,000 or more in federal awards, it must undergo a Single Audit. In April 2024, the Office of Management and Budget (OMB) raised the audit threshold to $1,000,000, effective for audit periods beginning on or after October 1, 2024.
The Role of the Single Audit
A Single Audit offers more than regulatory compliance—it provides a comprehensive look at how well a nonprofit manages its financial and operational responsibilities. It evaluates whether financial statements are fairly presented, tests internal controls, and highlights any noncompliance. A schedule of findings and questioned costs is included, giving leadership a useful tool for identifying risks and strengthening oversight.
A Real-World Example: PSCHS and Head Start Fraud
The U.S. Department of Health and Human Services (HHS), through its Administration for Children and Families (ACF), administers Head Start grants across the country. Many of these grants go to nonprofit organizations.
In March 2025, the U.S. Attorney’s Office for the Southern District of New York announced that Arie Rangott, executive director of Project Social Care Head Start Inc. (PSCHS), was sentenced to 27 months in prison for defrauding the federal Head Start program. He and several co-conspirators funneled grant money to for-profit entities they secretly controlled—violating compliance rules through undisclosed self-dealing.
Despite warnings from HHS, Rangott denied wrongdoing. A federal investigation began in September 2022, eventually resulting in multiple guilty pleas and prison sentences. The investigation also revealed that PSCHS lacked an independent board and adequate internal controls—key safeguards against this type of fraud.
When to Consider Forensic Accounting Services
If your nonprofit suspects financial misconduct, is navigating legal or regulatory scrutiny, or wants to strengthen internal controls, forensic accounting can be a vital resource. A forensic accountant investigates irregularities, identifies vulnerabilities, and helps your organization build back trust and compliance.
Protecting Your Mission and Integrity
Fraud doesn’t just impact your finances; it affects your ability to serve, earn community trust, and secure future funding. Forensic accounting offers a way to address past issues while reinforcing your financial systems for the future.
In a world where transparency matters more than ever, being proactive about financial integrity isn’t just smart—it’s essential.
