Home > Best Practices > Board Governance
Board Governance
"Non-Profits are Urged to Prepare for Sarbanes Oxley Legislation"
By Suzanne C. Pine, Executive Vice President
As a direct result of the well publicized improprieties of several publicly held companies in the late 1990's and early 2000's, Congress passed what is known as the Sarbanes-Oxley Act of 2002 or SOX. This piece of legislation was designed to quash the fears of investors by improving public disclosures about business practices and preventing fraud.
Although SOX currently only applies to publicly traded companies, some of its requirements have caught the attention of non-profit organizations who are proactively adopting safety measures outlined in the Act.
As a dual charter accredited Association Management Company (AMC), Fernley & Fernley is extremely concerned about providing accurate financial oversight and reporting of client funds.
We have taken action to educate clients about the advantages of SOX and have recommended that the Board of Directors consider implementing some or all of the guidelines provided in the Act.
Principles of the Act flow from these issues:
- Transparency of all financial transactions - Non-Profits should consider adding Board Code of Ethics for the Board to sign-off on.
- Independence of auditing function - Non-Profits should consider forming an Audit Committee that includes at least one professional that understands financial reporting. This team should meet with the auditor independent of staff that manages the finances to discuss and confirm the integrity of the internal financial processes.
- Accountability from Officers and Directors for financials of the organizations - Education of the Board and comprehensive Board Orientation sessions would be steps to assist the Board in recognizing their fiduciary responsibility.
This legislation includes a number of policies/clauses that make good business sense for all organizations, not just publicly held companies.