One of the most costly and time-consuming provisions of the Sarbanes-Oxley Act is the requirement for publicly-traded companies to test and report on the adequacy of their internal accounting controls -- the "404 Report".

The Sarbanes-Oxley Act was enacted in 2002. For publicly-traded companies registered with the Securities and Exchange Commission, it requires greater accountability for financial management and reporting practices.

Not-for-profit organizations and privately-held companies aren't required by law to comply with Sarbanes-Oxley or issue a 404 Report, but some are doing it anyway. Why? Because they realize some of the benefits of the law and a "clean" report, including:

  • Favorable publicity that can attract resources from foundations, government agencies, individual donors, members, and other not-for-profit organizations.
  • A sense of comfort for management and the board.
  • A more favorable insurance premium for their fidelity bond.

The trick is deciding whether the benefits outweigh the costs. There are lots of variables involved in the answer, including the size of your organization, staff, and budget. Some organizations are adopting parts of Sarbanes-Oxley, such as revising their ethics codes and setting up whistleblower programs.

Contact our office to discuss whether complying with Sarbanes-Oxley is beneficial for your not-for-profit organization

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