Nonprofit Organizations
Accounting Office Management & Administrative Report (AOMAR) says that nonprofits, while exempt from Sarbanes-Oxley are nevertheless feeling pressure to conform. Not many nonprofits have made changes. Here is some advice from a presentation at the AICPA Practitioners Symposium as reported by AOMAR. Sarbanes-Oxley may someday apply to nonprofits.
- Advise nonprofits to create an audit committee of three people not necessarily all from the board.
- Audit committee responsibilities: Select a competent outside auditor, review the engagement letter, and review the auditor’s report.
- Adopt a conflict-of-interest policy including prohibition of loans to directors. Publicity of conflicts in the media can be extremely harmful.
- Set up a procedure to encourage and protect “whistle-blowers.”
- Create a document retention and destruction policy.
- Beware of excessive compensation of executives. IRS is closely watching.
- Help nonprofits with governance. Concentrate on the board and how it executes its responsibilities.
- Encourage the board to:
o Determine which are the most important matters to deal with.
o Delegate specific responsibilities to board members.
o Evaluate the structure of the board and its committees.
o Evaluate the composition of the board.
o Create relevant agendas.
o Determine how staff members should support the board.
o Develop education programs for board.
The Senate Finance Committee has considered a proposal that would require outside audits of all nonprofits with revenues over $250,000. This would be extremely difficult for these small nonprofits.
For more, see Accounting Office & Administrative Report, January 2005, p. 3.