Accountability Act Has Strong Impact on Nonprofits as Well as Public Corporations

By Francis-Smith, Janice | THE JOURNAL RECORD, January 8, 2004 | Go to article overview

Accountability Act Has Strong Impact on Nonprofits as Well as Public Corporations


Francis-Smith, Janice, THE JOURNAL RECORD


Sarbanes-Oxley is having a trickle-down effect on nonprofit organizations, according to Rick McCune. McCune is an Oklahoma City-based assurance partner with Grant Thornton, a national accounting, tax and business advisory organization. McCune focuses on helping clients understand and comply with the Sarbanes-Oxley Act.

Most of the provisions of the American Competitiveness and Corporate Accountability Act of 2002 (commonly known by the names of the act's authors, U.S. Sen. Paul Sarbanes, D-Md., and U.S. Rep. Michael Oxley, R-Ohio) legally apply only to publicly traded companies. But as expectations are raised for public companies, private organizations - particularly those looking for outside funding sources - are likewise being held to a higher standard.

This is not all gloom and doom, said McCune. There might be some positive impact if leaders start to get a better understanding of the economics of their organization, or direct their attention more to efficiencies and assurances (for donators).

Unlike many for-profit businesses, nonprofit organizations are more apt to be managed by individuals who are less skilled in financial management than they are in promoting the organization's mission. Since nonprofits often operate on a little money and a lot of volunteerism, in past years managers may have taken a more relaxed approach to establishing and implementing internal controls. This has left some nonprofit organizations financially vulnerable and therefore unattractive to donors.

More private companies and nonprofits are beginning to focus on efficiency and internal controls, said McCune. Boards of directors are also taking a closer look at corporate governance and internal controls. This is high in the public eye - (management) is feeling some pressure to make sure their internal controls are up to standard.

Though difficult to implement at first, the stricter standards will prove to be a good thing both for the economy and for society as a whole, said McCune. I hope to see companies take the opportunity to not only comply with the requirements of Sarbanes- Oxley, but to really extend that a little bit and add value to their organizations, look at efficiency and financial controls and operations.

When businesses operate more efficiently, profits increase, and the more efficient nonprofits become, the farther donations can go toward remedying social ills.

The Sarbanes-Oxley Act was signed into law on July 30, 2002, inspired by the corporate and accounting scandals of Enron, Arthur Andersen and others. After just a year and a half of implementation, the legislation has already had a profound effect on how business is done. Many publicly traded companies have restructured their boards, revised their accounting practices and updated their ethical guidelines.

Sarbanes-Oxley is most likely creating the desired effect in making businesses realize that very strong responsibilities come with being a public company, and that at the end of the day, accountability stops at the desk of the CEO, who can now be found criminally liable for firm actions, said Grant Thornton CEO Edward Nusbaum.

While nearly all the provisions of the bill apply only to publicly traded corporations, the passage of this bill should serve as a wake-up call to the entire nonprofit community, reads a joint report issued by BoardSource (formerly the National Center for Nonprofit Boards) and Independent Sector, a coalition of nonprofits and corporations.

During these months of intense corporate scrutiny, the Act has also forced the nonprofit sector to analyze its board practices and methods of operation. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Accountability Act Has Strong Impact on Nonprofits as Well as Public Corporations
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.