Fifty billion dollars. It’s a staggering sum of money that most people can only fantasize about, and when asked, what you would do with such an outrageous amount of money, there is  a struggle to translate into everyday terms.

To provide some perspective, here’s a fun shopping list of things you could buy if you had $50 billion:  33 Yankee Stadiums, 25 percent of the Microsoft Corporation, 520 Neverland Ranches, or 120 Airbus 380s (these are the cool double-deckers that Saudi princes buy.)

What is even more unfathomable than owning just one Yankee Stadium, is the fact that $50 billion is  the estimated amount that is lost each year to fraud in nonprofit organizations (according to the New York Times). One might assume that most fraud takes place in  large global charities with deep pockets similar to the Red Cross or UNICEF.  In reality, most embezzlement takes place in smaller organizations with fewer than 100 employees due to the fact that these organizations are less likely to have adequate internal controls in place.

When it comes to embezzlement, it is a sad irony that nonprofits are founded on the noble intention of improving the state of mankind, and unfortunately can become the easiest targets for  fraud.  Small nonprofits are even more vulnerable because their environments are very personal, more intimate, and nurture a false sense of security that “it could never happen here.” But it isn’t too hard to imagine how an employee, facing their own financial pressures and temptations, might begin to skim a little cash here or there. If you are watching the news headlines,  there have been multiple reports on   how  cash skimming  soon evolves into falsified time sheets, expense reports, and more, until the nonprofit is losing huge amounts of money – one Airbus seat cushion at a time.

What to do:  to protect the mission and the reputation of a nonprofit? Leaders can implement best practices that will go a long way toward preventing “fraud,” “embezzlement,” “larceny,” “and other charges” that are often described in the news. Conducting surprise audits, requiring regular job rotations, enforcing cross-checking and review processes for all financial transactions, and providing hotlines for anonymous whistleblowers are just a few of the precautions that can be taken. These policies are not meant to be a burden to your operations, but a way to preserve both your financial resources and the public’s trust in your good name.

If you are not sure whether or not you have enough checks and balances in place to protect against fraud, external auditors, industry experienced consultants can offer some important insight into where you may be at risk. With so much at stake, you want to ensure that the  donations that are generously made to your organization are used for their intended purpose and not for an employee’s personal gain.

Last month I gave a seminar on revenue diversification to a group of people who serve on the boards of a wide variety of nonprofit organizations. In my work, I have the pleasure of meeting dynamic leaders who are dedicated to serving others and to providing their organizations with the oversight that will help them achieve the missions for which they were created.

What I found surprising and potentially problematic was that the vast majority of my audience, though passionate about their missions, could not tell me anything about the real mission statements on which their charities were founded. The one that appears on their Form 1023 and that is submitted to the IRS to gain the service approval for a tax-exempt status. Most of my audience had never heard of, nor seen, nor read their Form 1023.

In order to gain tax exempt status under the IRS Section 501(c), nonprofits are required to complete a Form 1023, stating the intended mission of the organization such as charitable, religious, educational, or scientific purposes. They are also required to provide a detailed narrative of all past, present and planned activities that support this purpose. Gaining tax exempt status saves the organization from paying a host of taxes such as federal income tax, federal unemployment tax, state tax, and more. The danger arises when a nonprofit begins to engage in activities that fall outside the parameters of what they originally listed on their Form 1023. Then, they could be at risk of losing their tax exempt status and all of the financial benefits that come with it.

For example, if a nonprofit earns income through activities that are not related to those on the Form 1023, they could be required to pay taxes on that income. More importantly, if a nonprofit participated in political campaigns, lobbying, or engaged in activities that benefited an individual’s private interest, they could be stripped of their tax exempt status altogether. No matter how well intentioned these actives might seem, the IRS may take a completely different view.

Whenever I to talk with people who are thinking of assuming a position of leadership within a nonprofit, I strongly recommend that they first gain a clear understanding of the organization’s mission, and that includes the important information of the mission detailed in their Form 1023. One of the most important things that you can do to protect the interests of your nonprofit is to know and embrace the real mission statement and all of the rules that apply to it. And this mission, should you choose to accept it, will ensure that you, your donors, and your volunteers can continue to serve the causes that are nearest and dearest to your hearts.

This blog will self-destruct in sixty seconds.