Will non-profits be next focus of Sarbanes-Oxley?Corporate scandals A corporate scandal is a scandal involving allegations of unethical behavior by people acting within or on behalf of a corporation. A corporate scandal sometimes involves accounting fraud of some sort. that have affected companies such as Enron Corp. and WorldCom Inc. have vividly brought the issues of transparency and accountability to the forefront of the business world for public companies. But like their for-profit counterparts, non-profit organizations A non-profit organization (abbreviated "NPO", also "non-profit" or "not-for-profit") is a legally constituted organization whose primary objective is to support or to actively engage in activities of public or private interest without any commercial or monetary profit purposes. in the U.S. are also increasingly being pressured to answer to the general public. Recent instances of fraud have affected such high-profile charitable organizations This article is about charitable organizations. For other uses of the word charity, see Charity. A charitable organization (also known as a charity) is an organization with charitable purposes only. as the United Way, the American Red Cross American Red Cross: see Red Cross. and the Nature Conservancy Nature Conservancy, nonprofit organization established in 1951 to preserve or aid in the preservation of natural environments. It protects wilderness areas in the United States and Canada and is affiliated with similar groups in Latin America and the Caribbean. . Although Sarbanes-Oxley rules currently apply only to publicly held companies, the character of the law applies to all organizations--and could, realistically, be mandated for the non-profit sector The nonprofit sector, also called the third sector, civic sector or voluntary sector, is a third area of an economy, distinct from the public sector and the private sector. It is made up of all of the non-profit organizations in the economy. in the near future. In fact, many industry insiders believe that this type of regulation will come sooner, rather than later. Taxpayers, regulators and legislators are calling for some type of formal regulation within the non-profit sector. And donors also increasingly want to know how much of their contributions go to aiding the actual cause. As a result, many private companies have adopted Sarbanes-Oxley practices at the advice of financial institutions (lenders) and others. Anne Marchetti, practice director of Sarbanes-Oxley services at financial consultancy Parson PARSON, eccl. law. One who has full possession of all the rights of a parochial church. 2. He is so called because by his person the church, which is an invisible body, is represented: in England he is himself a body corporate it order to protect and defend the Consulting, believes that non-profits that are not prepared for compliance could be severely challenged once these regulations take effect--much like the recent Section 404 compliance scramble by public companies. Marchetti suggests that organizations take the following steps to help ease the transition into inevitable compliance requirements Compliance requirements are a series of directives established by United States Federal government agencies that summarize hundreds of Federal laws and regulations applicable to Federal assistance (also known as Federal aid or Federal funds). : * Educate the organization: Most non-profits have little knowledge of Sarbanes-Oxley requirements because these regulations have not been formally imposed. Before putting a compliance plan in place, the organizations' CFOs should have a solid understanding of general compliance requirements and educate their team on these regulations. This will lead to setting realistic goals and expectations, as well as helping to prioritize activities. * Discuss options with external auditors The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. : Obtaining auditor input and viewpoint can help put specific compliance priorities into perspective and, therefore, organizations can better address compliance requirements. * Discuss and develop a high-level strategy: CFOs should heighten the communication with board members and senior-level executives and develop a high-level strategy focused on oversight, accountability and transparency for financial information. In addition, they should outline a specific plan and timeline to easily execute on the proposed strategy. Because of the likelihood that non-profits will be required to comply with Sarbanes-Oxley in the not too distant future, organizations need to be adequately prepared to address the cost of compliance--both in time and money. By voluntarily moving toward compliance now, organizations can lessen the burdens when regulation actually comes to pass. |
|
||||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion