New York and California are considering asking private companies to comply with SarbOx-type regulations, according to businessweek.com. California has began requiring nonprofits with more than $2 million a year in receipts to undergo audits. Colleen Cunningham, CEO of Financial Executives International, says compliance is not a matter of if, but when. “Private companies have the advantage of doing it right now at their own pace,” says Cunningham. However painful that may be.
“Sarbanes-Oxley doesn’t apply to nonprofits, but like ink in water it’s changing the way they operate,” says Charles Elson, director of the University of Delaware’s Weinberg Center for Corporate Governance, according to WSJ.com. “Suddenly you’ve got accounting firms that audit nonprofits clamoring for the same financial controls now in place at for-profits.” And nonprofit trustees want more transparency. Although they’re exempt from financial liability in most states except in cases of fraud, they worry that in this climate their reputations could be hurt if money is misused or the organization falters.