Survey Finds Little Effect From SOX on Not-for-Profits
"It is now more than a year since Sarbanes-Oxley was enacted and still most not-for-profit organizations, including larger ones, have not made any changes to their board governance policies," says Bob Leavy, Grant Thornton’s national managing partner for the Not-for-Profit Industry Practice.
"While Sarbanes-Oxley is not a mandate for not-for-profit organizations, many believe that the requirements and guidelines stated in the Sarbanes-Oxley Act set a standard or benchmark that not-for-profit organizations should consider emulating. Those organizations that adopt these governance standards may be seen more favorably by donors and funders."
Overall, 57 percent of the respondents indicated that they are "somewhat familiar" or "very familiar" with the Sarbanes-Oxley Act. And surprisingly, only 20 percent said that they have made some changes to their board governance policies as a result of the Sarbanes-Oxley Act.
Additional highlights from the survey include:
- Only 38 percent of respondents have had discussions with their board members about the implications of the Sarbanes-Oxley Act.
Leavy says, "This is a clear indication that communication between boards and executive staff is insufficient. The issues that Sarbanes-Oxley addresses are the critical issues that boards and management must be discussing in light of their own governance policies."
- 90 percent of the respondents have not made any changes to the composition of their audit committee as a result of Sarbanes-Oxley.
"This is not that surprising, since three-quarters of respondents believe they do have a "financial expert" on their audit committee," explains Leavy. "Probably far fewer than that actually do," he added.
- Just 17 percent of respondents indicated that they have a "whistle-blowers" policy and, of those who don’t, only 21 percent said that they are considering adopting such a policy.
"It is surprising that so few not-for-profit organizations have or are considering a whistle-blowers policy," Leavy says. "Recent corporate scandals indicate that the lack of an effective whistle-blowers policy is a contributing factor to unlawful activity."
The complete report of the Grant Thornton Board Governance Survey for Not-for-Profit Organizations will be available in early December. To place an advance order, contact Grant Thornton by e-mail .