Sarbanes Oxley Act Compliance: Where to Find a Helping Hand

The area of non profit compliance has gained more attention due to the Sarbanes-Oxley Act’s passage in 2002. As a response to the Enron and Tyco accounting scandals, among others, the law serves as a foundation for reestablishing the public’s faith in the corporation’s ability to govern itself and its finances. When non profit organizations are compliant with the key areas of the Sarbanes-Oxley Act, donors and stakeholders can find greater assurance that the non profit is focused on responsibly serving the organization’s mission and goals.

One of the biggest factors for non profit Sarbanes Oxley Act compliance has to do with the establishment of an independent audit committee, of which the members are also Board members. The committee should have the financial expertise to counsel the Board and the non profit organization, while managing the organization’s hiring, compensation plans, rules and processes for complaints and overall auditor’s functions. Non profit organizations that use more than $500,000 of federal monies are mandated to conduct an audit annually, and smaller non profits that may work with more limited annual budgets of $250,000 or less, should carefully consider conducting audits on a periodic basis.

A compliant non profit organization should also be mindful of the rotation of audit committee members and the qualifications of internal staff. For instance, the adherence of Board and committee members to limited terms assures that individuals gain experience in the financial maintenance of the non profit organization, and bring fresh perspectives and expectations about the organization’s performance. Likewise, the CFO should have prior experience with the auditing function, which would strengthen the individual’s understanding of the non profit organization’s financial standing. The CFO will be better able to certify the organization’s financial documents, which is an integral part of the compliance process.

Above all, the key characteristic of the non profit organization that maintains Sarbanes Oxley Act compliance is its transparency and commitment to properly disclosing its financial activities, especially where service to the public is concerned. Non profit organizations must strive to provide accurate and complete financial information, while limiting the conflicts of interest that can arise when large amounts of funds are taken in and disbursed for the public good. Making special dispensation for the protection of whistle-blowers, those internal and external watch-dogs, and creating a system for proper document retention and destruction are attributes of compliant non profit organizations.