THE SARBANES OXLEY ACT

1
THE SARBANES - OXLEY ACT AND HOW IT AFFECTS NON
PROFITS

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GOALS OF THE SARBANES -OXLEY ACT

• INCREASES EXECUTIVE ACCOUNTABILITY
• TOWARDS THEIR EMPLOYEES AND INVESTORS.
• 2. INCREASES GOVERNANCE OVER BUSINESS
• TRANSACTIONS.
• 3. ENSURES THAT ACCURATE INFORMATION
• IS PRESENTED TO THE PUBLIC.

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THE SARBANES - OXLEY ACT

• NON PROFITS SHOULD CONSIDER THE ACT AS
• THE INDUSTRYS BEST PRACTICES ON HOW TO
• EFFECTIVELY MANAGE A BUSINESS.

4
HOW DOES THE SARBANES OXLEY ACT APPLY TO NON
PROFITS?

• DESTRUCTION OF DOCUMENTS
• RETALIATION AGAINST WHISTLE
• BLOWERS

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VOLUNTARY IMPLEMENTATION OF SOX DEMONSTRATES

• THE BOARD AND EXECUTIVE LEADERSHIP ARE
• COMMITTED TO ITS INVESTORS, THE COMMUNITY,
• AND OTHER STAKE HOLDERS.
• 2. THE BOARD HAS ESTABLISHED AN EFFECTIVE PLAN
• TO RECEIVE AND DISTRIBUTE FUNDS/INVESTMENTS.
• 3. THE NON PROFIT IS A SAFE AND REPUTABLE
• ORGANIZATION FOR INVESTORS.

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SECTION 102 103 AUDITING, QUALITY CONTROL,
AND INDEPENDENCE STANDARDS AND RULES

• REQUIRES ALL INDEPENDENT ACCOUNTING
• FIRMS BE REGISTERED IN ORDER TO PERFORM
• ACCOUNTING SERVICES.
• ESTABLISHES DUTIES FOR THE INDEPENDENT
• ACCOUNTING FIRM (GAAP).

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RECOMMENDATION FOR IMPLEMENTATION

• SELECT INDEPENDENT AUDITING FIRMS THAT
• MEET THE REQUIRMENTS OF THIS SECTION.

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SECTION 201SERVICES OUTSIDE THE SCOPE
OFPRACTICE OF AUDITORS

• PROHIBITS THE AUDITING FIRM FROM
• SIMULTANEOUSLY PROVIDING
• ANY ADDITIONAL SERVICES TO THE NON
• PROFIT DURING THE TIME OF THEIR AUDIT
• SUCH AS

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SECTION 201SERVICES OUTSIDE THE SCOPE
OFPRACTICE OF AUDITORS

• BOOKEEPING
• BROKER OR DEALER SERVICES
• INVESTMENT ADVISER
• INTERNAL AUDIT OUTSOURCING
• LEGAL SERVICES

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RECOMMENDATIONS FORIMPLEMENTATION

• ADHERE TO ALL REQUIRMENTS OF THIS SECTION
• TO AVOID THE
• POSSIBILITY OF RELEASING INCORRECT INFORMATION
• TO INVESTORS AND THE PUBLIC.
• APPEARANCE OF A CONFLICT OF INTERESTS BETWEEN
• THE NON PROFIT AND THE SERVICES THAT THE
• AUDITORS PROVIDE.

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SECTION 203 AUDIT PARTNER ROTATION

• REQUIRES THAT THE
• ORGANIZATION CHANGE THEIR
• AUDITING FIRM EVERY...

5 YEARS
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RECOMMENDATIONS FORIMPLEMENTATION

• THIS ROTATION WILL
• MAINTAIN THE EFFECTIVENESS OF THE
• AUDITING FIRM.
• ENSURE THAT THE AUDITING FIRM REMAINS
• INDEPENDENT IN ITS ACTIONS TOWARDS THE AUDIT.
  
• ENSURE THAT ALL FINANCIAL INFORMATION
• IS DISCLOSED ABOUT THE NON PROFIT.

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SECTION 204 AUDITOR REPORTS TO AUDIT COMMITTEES

• REQUIRES THE INDEPENDENT AUDITING FIRM TO
• REPORT ITS FINDINGS TO THE BOARDS AUDIT
• COMMITTEE.
• REQUIRES COMMUNICATION BETWEEN THE AUDITING
• FIRM AND THE MANAGEMENT TEAM ABOUT HOW THE
• FINANCIAL INFORMATION WILL BE DISCLOSED.

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RECOMMENDATIONS FORIMPLEMENTATION

• ENCOURAGE OPEN COMMUNICATION BETWEEN THE
• NON PROFITS BOARD AND THE AUDITING FIRM.
• ENCOURAGE ENTREPRENEURIAL SPIRIT WHILE
• MAINTAINING PROPER FINANCIAL OVERSIGHT.
• TIMELY REACTION TO THE AUDITS FINDINGS TO
• MAINTAIN THE BOARDS FUDICIARY
  RESPONSIBILITIES.

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SECTION 206 CONFLICTS OF INTERESTS

• PROHIBITS AN AUDIT FIRM FROM PERFORMING
• ANY AUDITING SERVICES FOR ANY CORPORATION
• IF AN EXECUTIVE OFFICER WAS EMPLOYED BY
• THE ACCOUNTING FIRM DURING THE PAST YEAR.

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RECOMMENDATION FORIMPLEMENTATION

• ENSURE THAT THE NON PROFIT REDUCES THE
• POSSIBILITY THAT A CONFLICT OF INTEREST
• COULD RESULT FROM THEIR BUSINESS
• PRACTICES.

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SECTION 302 CORPORATE RESPONSIBILITY
FOR FINANCIAL REPORTS

• REQUIRES THAT THE CEO AND CFO CONFIRM,
• BY SIGNING, THE ACCURATENESS OF THE
• ORGANIZATIONS FINANCIAL STATEMENTS.

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SECTION 302 CORPORATE RESPONSIBILITY
FOR FINANCIAL REPORTS

• BY SIGNING THE REPORT, THE CEO AND CFO ARE
• CONFIRMING THAT
• THE REPORT IS AN ACCURATE AND FACTUAL
• REPRESENTATION OF THE ORGANIZATIONS
• FINANCIAL CONDITION.
• PROPER INTERNAL CONTROLS ARE PRESENT AND
• THAT THERE ARE NO DEFECENCIES WITHIN THE
• REPORT.

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RECOMMENDATION FOR IMPLEMENTATION
EXECUTIVE LEADERSHIP MUST ENSURE TO INVESTORS,
GRANTORS, AND OTHER STAKEHOLDERS THAT THE
FINANCAIL RESULTS ARE ACCURATE AND NOT MEANT TO
MISLEAD THEM IN ANY WAY.
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SECTION 401 ENHANCED FINANCIAL DISCLOSURES

• REQUIRES THAT THE PUBLISHED AUDIT
• REFLECT ALL MATERIAL CORRECTIONS THAT
• WERE IDENTIFIED BY THE REGISTERED
• PUBLIC ACCOUNTING FIRM.
• REQUIRES THAT ANY OFF BALANCE SHEET
• TRANSACTION THAT MAY FINANCIALLY AFFECT
• THE ORGANIZATION BE DISCLOSED.

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RECOMMENDATIONS FOR IMPLEMENTATION

• ESTABLISH A STANDARD THAT ALL NON PROFITS
• MUST ADHERE TO WHEN RELEASING INFORMATION TO
• THE PUBLIC.
• PRESENT THE ORGANIZATION AS ONE THAT HAS
• PROPER OVERSIGHT OF ITS FINANCIAL CONDITION.
• CREATE AN ATMOSPHERE OF OPENESS AND
• CONFIDENCE IN THE NON PROFITS FINANCIAL
• STABILITY.

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SECTION 402 CONFLICTS OF INTEREST PROVISIONS

• PROHIBITS THE ISSUANCE OF LOANS AND OR
• CREDIT TO EXECUTIVE OFFICERS TO AVOID
• ANY CONFLICTS OF INTEREST.

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RECOMMENDATION FOR IMPLEMENTATION

• PREVENT THE NON PROFIT ORGANIZATION FROM
• CONDUCTING IMPROPER TRANSACTIONS THAT COULD
• RESULT IN QUESTIONS ABOUT THEIR INTEGRITY AND
• FINANCIAL INTENTIONS.

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SECTION 802 DESTRUCTION, ALTERATION,
OR FALSIFICATION OF RECORDS

CHAPTER 73 OF TITLE 18, SECTION 1519
WHOSOEVER KNOWINGLY ALTERS, DESTORYS,
MUTILATES, CONCEALS, COVERS UP, OR MAKES A FALSE
ENTRY IN ANY RECORD, DOCUMENT, OR TANGIBLE
OBJECT WITH THE INTENT TO IMPEDE, OBSTRUCT, OR
INFLUENCE THE INVESTIGATION OR PROPER
ADMINISTRATION OF ANY MATTER..SHALL BE FINED
UNDER THIS TITLE, IMPRISONED NOT MORE THAN 20
YEARS, OR BOTH.
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SECTION 802 DESTRUCTION, ALTERATION,
OR FALSIFICATION OF RECORDS

CHAPTER 73 OF TITLE 18, UNITED STATES CODE,
SECTION 1520 REQUIRES AN ORGANIZATION TO
MAINTAIN ALL AUDIT PAPERWORK FOR A MINIMUM OF 5
YEARS FROM THE END OF THE FISCAL YEAR.
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RECOMMENDATIONS FOR IMPLEMENTATION

• MAINTAIN ADEQUATE DOCUMENTATION OF ALL
• FINANCIAL RECORDS FOR THE REQUIRED TIME
  PERIOD.
• MAINTAIN PROPER FILING SYSTEMS TO ENSURE
• ACCESSIBILITY TO CURRENT AND PAST INFORMATION.
• EMPHASIZE THE PRESENCE OF FINANCIAL STABILITY
• TO ITS INVESTORS.
• ENCOURAGE STRONGER FINANCIAL GOVERNANCE
• THROUGH ACCOUNTABILITY.

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SECTION 806 PROTECTION OF EMPLOYEES WHO PROVIDE
EVIDENCE OF FRAUD

• CRIMINALIZES RETALIATION AGAINST INDIVIDUALS
• THAT
• PROVIDE INFORMATION ABOUT OR
• ASSISTS IN AN INVESTIGATION RELATING TO POSSIBLE
• FRAUD WITHIN THE ORGANIZATION.

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RECOMMENDATIONS FOR IMPLEMENTATION

• CONTINUE YOUR OPEN DOOR POLICY
• FOR ALL EMPLOYEES.
• MAINTAIN AN ATMOSPHERE OF STRONG
• ETHICAL STANDARDS.

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THIS HAS BEEN AN OVERVIEW OF HOW THE SARBANES
OXLEY ACT CURRENTLY AFFECTS NON PROFITS AND HOW
IT COULD AFFECT NON PROFITS IN THE FUTURE.
THIS PRESENTATION IS MEANT TO ENCOURAGE NON
PROFITS TO GROW THEIR ORGANIZATIONS THROUGH
INCREASED GOVERNANCE, ACCOUNTABILITY, AND
FINANCIAL OVERSIGHT.