What is the Sarbanes-Oxley Act — Why Should Nonprofits Be Concerned?
Recent scandals in the corporate world have undermined public faith in institutions and created a demand for financial accountability and sound ethical practices. To help prevent another Enron debacle, the Sarbanes-Oxley Act was signed into law in July 2002 to regulate what boards of publicly traded companies must do to oversee financial transactions and ensure auditors’ independence from their clients. Misdeeds by a tiny fraction of nonprofits, too, have shaken public trust in the sector as a whole. Attorneys general in New York and California have taken preliminary steps toward applying Sarbanes-Oxley to large nonprofit organizations. “Although nonprofits are technically not required to comply, it is important that they recognize the implications and understand how they will be affected,” says Richard Larkin of BDO Seidman. Clients, funders, employees and the public at large will be taking a close look at your nonprofit to see if all activities are aboveboard. Questions may soon be a
