Sarbanes-Oxley and the New Form 990

Abstract

Eighty-five arts and culture nonprofits were surveyed to determine the extent to which their financial and managerial practices conform to Sarbanes-Oxley and the New Form 990. Approximately half of the sample had audit committees that included unpaid financial experts. Almost all of the nonprofits engaged external accountants or CPA firms to conduct annual audits, but only 40% required their ED or CFO to sign the financial statements. Approximately half of the nonprofits had conflict of interest forms, written ethics policies, and whistle-blower policies. According to the results, the most important reason for voluntarily complying with Sarbanes-Oxley (SOX) was because it promotes sound financial management and “contributes to an internal culture of transparency.” Compliance was less motivated by donor retention, board directives, or fear of governmental regulation. This survey found that the size of a nonprofit’s annual operating budget and its age are directly related to its level of compliance with SOX.