Sarbanes-Oxley Impacts Nonprofits
Many nonprofit organizations, while not required to meet the provisions of the Sarbanes-Oxley Act of 2002, are beginning to adapt some of the Act’s standards to their own governance practices. One of these is New York's Juilliard School, where President Joseph Polisi has long stressed transparency and board involvement, according to the Wall Street Journal.
Another nonprofit organization that plans to adapt Sabanes-Oxley practices to his organization is Bruce Wigo, the newly hired president and CEO of the International Swimming Hall of Fame in Fort Lauderdale, Florida, according to the Wall Street Journal. Mr. Wigo has persuaded all of the directors to resign in order to recruit board members who can review audits and help with fund raising.
“There’s no question that the Sarbanes-Oxley Act has led to a heightened sensitivity to corporate governance issues for nonprofits as well as for for-profit public companies,” said Eric Rieder, a partner at Bryan Cave LLP in New York told the Phoenix [Arizona]Business Journal. “Some of the standards for corporate governance set forth in the Sarbanes-Oxley Law [sic] are being looked at as the appropriate standard for corporate governance even in nonprofits. One example would be having an audit committee composed of independent directors.”
Tom Morgan, a partner at Lewis & Roca in Phoenix told the Business Journal that the record shredding provision of Sarbanes may be applicable to all corporations, including nonprofits.
Another provision of Sarbanes that could impact nonprofits is implementation of the whistleblower policy, according to Melanie Herman, executive director of the Nonprofit Risk Management Center in Washington, D.C. Ms. Herman told the Phoenix Business Journal that whistleblower policies are not new, but the Sarbanes-Oxley Act brings it to the attention of nonprofits.
“These provisions are embraced as best practices or suggested guidelines,” Herman said.
Arizona nonprofit organizations are paying attention to the issues raised by Sarbanes-Oxley according to the Business Journal report. Angela Melczer of the Girl Scouts Arizona Cactus-Pine, told the Business Journal that their auditors and accountants brought the legislation to their attention early on. But she said that the additional work had strained limited resources.
Hospitals face special requirements having to do with patient records. Dave Lamparter, senior vice president and chief financial officer of the John C. Lincoln Health Network in Phoenix, told the Business Journal that they had a records retention policy and they had opened a compliance hotline for anonymous reporting of questionable activities in response to the whistleblower provision.