What is Sarbanes-Oxley?

Sarbanes-Oxley Act is legislation passed in 2002 in response the corporate accountability scandals in which corporate boards failed to protect the interest of investors, top management practiced unimaginable deceit in preparation of financial statements, and “independent” auditors appeared to be more interested in protecting lucrative consulting relationships with clients than in providing truly independent judgment about the degree to which readers should rely on management’s financial info.

Sarbanes-Oxley addresses corporate governance, financial disclosure and the practice of public accounting in the for-profit world. With two limited exceptions, it does not apply to nonprofits. And while proposals have been introduced in other states to extend its provisions to nonprofits, Independent Sector and other well respected nonprofit leadership groups have made it clear that little will be gained by wholesale adoption of provisions that do not speak directly to the big issues of the nonprofit sector.

Gary McGee, CPA focuses his CPA practice entirely on nonprofit organizations. At the 2004 Oregon Society of CPA's Not-For-Profit Conference, Gary shared his insights about Sarbanes-Oxley and his suggestions for how nonprofits can adapt the concepts behind the federal legislation to increase their own accountability. Read excerpts from his article here.