A recent Washington Post report detailing millions of nonprofit dollars lost to embezzlement and fraud has spurred scrutiny on Capitol Hill and in some state legislatures.

Federal and state officials last week said they would examine charitable organizations’ governance practices after a Washington Post investigation identified more than 1,000 nonprofits that have suffered significant losses of assets in recent years due to fraud or embezzlement.

According to a followup Post report, Sen. Charles Grassley (R-IA), ranking member of the Senate Judiciary Committee, sent a six-page letter to the American Legacy Foundation November 1 with a series of questions about the organization’s alleged loss of $3.4 million due to fraud by a member of its IT staff.

“The public should know when charitable dollars are diverted,” Grassley said. “Tax-exempt dollars are meant for tax-exempt purposes, not bankrolling someone’s personal champagne lifestyle.”

House Ways and Means Chairman Dave Camp (R-MI) said it is “vital that nonprofits account for, and accurately report, how their funds are used, even when the worst happens and funds are misused.”

Regulators in New York and Hawaii also said they are reviewing the database of charitable diversions created by the Post to see if charities in their states had failed to disclose the amounts and circumstances of their losses.

The Post analyzed Form 990 filings dating back to 2008, the year the Internal Revenue Service implemented a requirement that nonprofits report any “significant diversion of assets.” The finding of such diversions at more than 1,000 nonprofits indicates the need for tighter financial control procedures at many organizations, a nonprofit accounting expert told Associations Now last week.

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