A new report on fraud in the nonprofit sector estimates that charities lose roughly $40-billion annually to fraud and embezzlement.

That number is based on an estimate by the study’s authors that 13 percent of the nonprofit sector’s revenues are stolen by employees, volunteers, and board members.

And it is sparking debate on the popular blog Freakonomics about its accuracy.

The former auditor for a nonprofit organization, for instance, says the number is likely inflated.

“To the extent that fraud occurs, its fairly minor (compared to the stock options backdating schemes, and other frauds committed at for profits),” the commenter writes. “That said, many non-profits are smaller organizations without the internal controls to properly identify fraud risks and detect fraud in a timely manner.”

Others claim it is likely too low — though some observers say it might not be worth the cost for charities to try to curb fraud.

“There’s a cost to monitoring, policing & prevention. What costs could they expect to incur & what return could be expected? Obviously, spending 2% to cut the number down to 5% would be a good return,” another commenter wrote. “Total fraud cost would be 7% (2% prevention + 5% loss). But is something that good possible? I’d assume they’ll have to go to the private sector to recruit experts & figure out a game plan.”

What do you think? Is the $40-billion number an accurate estimate? Click on the comment link below this post to share your thoughts.