January 26, 2005
Sarbanes Oxley and Non-profits
As those of you who serve on non-profit boards may already be well aware, many such boards have been considering adopting various portions of the Sarbanes-Oxley Act. Enacted in 2002, the Sarbanes-Oxley Act, the corporate governance reform law passed in the wake of the Enron Corp. and WorldCom Inc. scandals is aimed primarily at pubic companies. However, recent scandals in the non-profit world have shaken that community and caused a general review of their corporate practices. According to a recent study by the accounting firm Grant Thornton LLP reported that 48 percent of the nation's nonprofits have made voluntary changes to their governance practices since the passage of Sarbanes-Oxley. This includes rewriting corporate charters, redrafting conflict-of-interest policies, and, in some instances, performing costly examinations of their internal controls.
All indications are that more regulation of non-profits will occur soon. Federal and state regulators have indicated a greater willingness to regulate non-profits. In November, California enacted the first governance law for nonprofits, which, among other things, requires charities doing business in the state with revenues above $2 million, to form audit and compensation committees. And last summer, the IRS announced that it was launching an investigation into nearly 2,000 nonprofits. In addition, Charles Grassley ( R-Iowa), chairman of the Senate Finance Committee, announced that his committee is working on a bill that would impose several governance reforms on nonprofits; the legislation is expected to come up for a full committee vote early this year.
For further information, please see this article. [bm]
January 26, 2005 | Permalink