Sarbanes-Oxley for Nonprofits SarbanesOxley for Nonprofits A Guide to Gaining Competitive Advantage Peggy M Jackson, dpa, cpcu Toni E Fogarty, ph.d.,mph John Wiley & Sons, Inc This book is printed on acid-free paper Copyright © 2005 by John Wiley & Sons, Inc., Hoboken, NJ All rights reserved Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008 Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our Web site at www.wiley.com Library of Congress Cataloging-in-Publication Data: Jackson, Peggy M Sarbanes-Oxley for nonprofits : a guide to gaining competitive advantage / Peggy M Jackson and Toni E Fogarty p cm Includes index ISBN 0-471-69788-5 (cloth) Nonprofit organizations—United States—Finance—Management United States Sarbanes-Oxley Act of 2002 Nonprofit organizations— Accounting Law and legislation Nonprofit organizations—Auditing— Law and legislation Nonprofit organizations—United States— Management I Title: Sarbanes-Oxley for non-profits II Fogarty, Toni E III Title HG4027.65.J33 2005 657'.98—dc22 2004029119 Printed in the United States of America 10 In loving memory Bernice Stinemates Barnhardt Carlisle Stinemates The Rev Chandler C Jackson PMJ In loving memory Molly Davenport Nokal Kitchens Hoss and Weasel TEF Contents acknowledgments about the authors preface chapter chapter chapter xiii xv xvii Overview of the Legislation and Its Implications for Nonprofits What Is the Sarbanes-Oxley Legislation About? Relevance of SOX to Nonprofits Current Legislative Environment for Nonprofits Conclusion Endnotes Safeguarding Your Nonprofit’s Financial Resources and Assets: Establishing Auditor Independence and Audit Committee Competence SOX Titles II and III The Value of Accurate Financial Statements The Importance of a Good Audit The Board’s Responsibility Regarding the Financial Statements Conclusion Reading and Interpreting Financial Statements Balance Sheet Statement of Operations Statement of Changes in Net Assets Statement of Cash Flows Financial Statement Analysis Conclusion 1 12 13 26 26 27 28 29 30 32 38 39 42 46 49 50 52 65 vii viii contents chapter chapter chapter chapter chapter Form 990: Unnecessary Paperwork or a Useful Tool? What Are Form 990 and Form 990-EZ? Why Is Form 990 Important? Management’s Role in Improving Form 990: Creating a Good Internal Control System The Board’s Role in Form 990 Conclusion SOX Sections VIII and XI: Document Retention and Whistleblower Protection Obligations Whistleblower Protection Creating a Confidential Reporting System Document Retention, Archiving, and Retrieval First Steps: Beginning the Process Conclusion Raising the Bar of Accountability: SOX Best Practices and the Board Legislative Environment: Best Practices and Governance New Expectations for Board Oversight and Governance Higher Expectations for Board Membership and Deliberations SOX and the Board: Higher Performance and Greater Accountability Championing SOX Best Practices: The Board’s Governance Role Conclusion SOX Best Practices and Organizational Culture: Changing the Environment The Nonprofit’s Organizational Culture and the Adaptation of SOX Best Practices Introducing Change Nonprofit Board Culture Strategies for Introducing Change in the Board Culture Conclusion Endnote A Platinum Operating Standard Starts with Good Bones SOX Best Practices: Moving to a Platinum Operating Standard What Are Platinum Operating Standards? Review of Internal Controls 67 67 68 69 72 74 75 76 77 79 79 84 85 86 89 90 96 98 102 103 103 110 112 120 121 121 123 123 125 126 220 appendix k business continuity plan Contact Information for Board Members and Staff Important! The data contained in this worksheet is confidential material and should have very limited distribution You can paste the contact information for all board, staff members, and key volunteers in this section of the plan The following categories of information should be provided for everyone on the list: Name Address Home phone Office Phone Cell phone Family member’s cell phone number Pager Fax Business e-mail address Personal e-mail address Business Resumption Strategies for Each Department within Your Nonprofit Complete a strategy sheet for every department within your nonprofit • For each department or function within your nonprofit, list the most important activities or tasks that have to be done to remain in operation • What are the ways in which the nonprofit can ensure that these functions can continue or resume—perhaps at another location? • What are the materials and/or supplies that would be needed to resume these functions if the nonprofit’s offices are destroyed? • Provide an inventory of furnishings, equipment, and specialized software/hardware and other technology needs • Cross training of the staff is essential Ensure that more than one individual knows how to each important task or function vendors 221 Communication • Internal communication Identify the strategy for communicating with the board, staff, volunteers, and clients about the nature of the business interruption and how to contact the nonprofit • External communication Prepare a general statement that can be retrieved in the event of a business interruption The statement should identify the name of the nonprofit, the name of the spokesperson, contact information for the spokesperson, provide a general description of what happened (the fewer the details, the better), and information about the location of the nonprofit and how to make an emergency donation (if applicable) • This section should contain the contact information for the local media Financial Services [Confidential—only include this section in the copies of the plan distributed to the executive committee of the board, the executive director, and the CFO.] In this section of the plan, include the account information for all financial accounts—banks, investments, and other financial instruments The purpose of this section is to have the information available on a “need to know” basis for those senior board and staff members who are authorized to make transactions with your nonprofit’s bank and other financial service providers For each bank and/or financial service provider, provide the following information: • Signature authority for your nonprofit—list the names and contact information for all signatories • Bank codes and other security access information Vendors Vendors are very important people to your nonprofit in the event of a serious business interruption As you determine which vendors to include, consider commercial realtors, plumbers, electricians, locksmiths, windowrepair, and the like IT vendors are always important, particularly if your nonprofit has to relocate 222 appendix k business continuity plan Have at least the following information available for each vendor: Vendor name Contact person for your nonprofit’s account with the vendor Customer service manager (if the contact person is not available) Phone number Cell phone or pager Fax number Your nonprofit’s account number Person at your nonprofit who is authorized to place an order Alternate person Address of vendor Service Providers—Utilities, Water, Governmental Agencies Have at least the following information available for each service provider: Contact person at the agency Phone number Cell phone or pager Fax number Your nonprofit’s identifying information (account number or ID number) Person at your nonprofit who is authorized to interact with the agency Alternate person Address of agency If Your Nonprofit Needs to Relocate In this section, outline the materials and data that would be needed to resume operations in an alternative location As you determine what you will need, also consider the sources of these materials and the account numbers and/or security codes that will be necessary to access the materials and data if your nonprofit needs to Relocate 223 • Vendors • Essential equipment and material to support the critical functions of this department • Contacts, account numbers, and security codes—identify the individuals who are in possession of this data • Other materials needed Appendix L Bibliography AICPA Sarbanes-Oxley Act/PCAOB implementation central Retrieved on June 25, 2004 from www.aicpa.org/sarbanes/index.asp Abernathy, K Q (2002) “Special alert: What WorldCom bankruptcy means to consumers.” Focus on Consumer Concerns 2, no Retrieved on August 15, 2004 from www.fcc.gov/commissioners/abernathy/news/worldcom.html About the Great Depression Retrieved September 24, 2004 from www.english uiuc.edu/maps/depression/about.htm Anderson, Christopher B “Form 990: More Than Just a Tax Return.” The Tax Advisor 35, no 4, (April 2004), p 200 (2) Beattie, A (2003) Why it’s all our fault: How investors often cause the market’s problems Retrieved on June 17, 2004 from www.investopedia.com/articles/ basics/03/062003.asp Bonello, F J (2004) Stock exchange Microsoft Encarta Online Encyclopedia Retrieved May 23, 2004 from http://encarta.msn.com/encyclopedia_761560145_2/ Stock_Exchange.html#p67 Borenstein, E R (1998) Legal need relative to non-profit and/or tax-exempt status of new organizations Retrieved June 27, 2004 from www.muridae.com/ nporegulation/ Bumgardner, L J (2003) How does the Sarbanes-Oxley Act impact American business? Journal of Contemporary Business Practice 6, no Retrieved on July 19, 2004 from http://gbr.pepperdine.edu/031/sarbanesoxley.html CNN.com (1998) The market “circuit breakers”: How they work Retrieved on July 17, 2004 from www.cnn.com/US/9809/01/market.circuit.breakers/ Davis, R R (April 2004) Using disclaimers in audit reports: Discerning between shades of opinion The CPA Journal, Online Retrieved on August 3, 2004 from www.nysscpa.org/cpajournal/2004/404/essentials/p26.htm 225 226 appendix l bibliography Editors of Career Press Business Finance for the Numerically Challenged Career Press: New Jersey, 1998 Eichenwald, Kurt “Arthur Andersen convicted of obstruction of justice.” The New York Times (June 15, 2002) Emert, Carol “Financial Irregularities Prompt Shakeups at Beard Foundation.” San Francisco Chronicle (September 15, 2004) Estrada, Heron Marquez “Theft at Paper Exposes Vulnerability of Nonprofits.” Minneapolis Star Tribune (October 4, 2004) Everson, Mark W., Commissioner of the Internal Revenue Service Testimony before the U.S Senate Finance Committee hearings on “Charity Oversight and Reform: Keeping Bad Things from Happening to Good Charities,” Washington, DC, June 2004 Evergreen State Society (2003) What is Form 990?: How is it used? Retrieved on June 16, 2004 from www.nonprofits.org/npofaq/19/06.html Fabrizius, Michael P., and Richard M Sarafini “Learning to Love the Scrutiny: Initiating a Quality Assessment Can Help an Internal Audit Group Come Out on Top.” Internal Auditor 61, no (February 2004), p 38(7) Farrell, G “Anderson staffer says phrase was a hint to shred.” USA Today (May 21, 2002) Francis-Smithy, Janice “Sarbanes-Oxley Holds Big Implications for Nonprofits.” Journal Record (January 8, 2004): Hopkins, Bruce “Sarbanes-Oxley Act of 2002: What It Means For Nonprofit Organizations.” Nonprofit Counsel XIX, no 10 (October 2002) Internal Revenue Service “Corporate Responsibility.” Ann 2002–87,37 Jacobs, Jerald “Conflict of Interest Policies—Address Them Now.” Association Management 55, no Washington, DC (May 2003), p 17 (2) Lambert, Joyce “Reduce Your Losses From Errors and Fraud.” Nonprofit World 16, no (Sept/Oct 1998): pp 46–49 Lange, Michele, C S “Keeping Your Head: New Sarbanes-Oxley Rules Make Document Retention Dizzying.” Corporate Counsel Magazine (April 2003) Light, Paul C “Fact Sheet on the Continued Crisis in Charitable Confidence.” Brookings Institution, Washington, DC, September 13, 2004 Markon, Jerry “Ex-Chief of Local United Way Sentenced.” Washington Post (May 15, 2004) Maryland Association of Nonprofit Organizations “Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector.” Baltimore, MD, 2004 bibliography 227 McDonough, Siobhan “Survey: Charity CEO Raises Nearly Double Inflation Rate.” Advocate (September 27, 2004): 12.A Mondaq Business Briefing Governance and Nonprofit Corporations: Requirements and Expectations in a Post-Sarbanes-Oxley World May 20, 2004 ——— Nonprofit Governance Reforms: Five Steps Toward Improved Accountability, May 25, 2004 Moskin, Julia “Thousands Missing in Revenue Records of Culinary Charity.” The New York Times (September 6, 2004): A.1 Nonprofit Integrity Act (2004), State of California State Senate Bill 1262, September 2004 Office of the Attorney General, State of California “Attorney General Lockyer Unveils Reforms to Toughen Nonprofit Accountability, Fundraiser Controls.” February 12, 2004 O’Reilly-Allen, Margaret “How to Have an Audit Without Breaking the Bank.” Nonprofit World 20, no (July/August 2002): 26(3) Peregrine, Michael W and James R Schwartz “Taking the Prudent Path: Best Practices for Not-for-Profit Boards.” Trustee 56, no 10 (November/December 2003): 24 PricewaterhouseCoopers LLP United Way of the National Capital Area Forensic Accounting Investigation, Washington, DC August 7, 2003 Revised Model Nonprofit Corporation Act (1987) defines “duty of care” in section 8:30: Schein, Edgar Organizational Culture and Leadership, 2nd ed San Francisco: JosseyBass Publishers, 1992 Schroeder, Mike “Is It Time to Rethink Your Board’s Structure?” Nonprofit World 21, no (November/December 2003): Schweitzer, Carole “The Board Balancing Act: Achieving Board Accountability Without Micromanaging.” Association Management 56, no (January 2004): 34(7) Schwinn, Elizabeth, and Grant Williams “IRS Outlines Audit Plans for Nonprofit Organizations.” Chronicle of Philanthropy 16, no (October 16, 2003): 33 Silk, Thomas “Ten Emerging Principles of Governance of Nonprofit Corporations.” The Exempt Organization Tax Review 43, no (January 2004): 35 (4) Silverman, Rachel Emma “Charities to Start to Grade Themselves.” The Wall Street Journal (August 18, 2004) 228 appendix l bibliography Snyder, Gary “Boards Must Change the Way They Do Business.” Nonprofit World 21, no (July/August 2003): 14 Strom, Stephanie “Questions About Some Charities’ Activities Lead to a Push for Tighter Regulation.” The New York Times (March 21, 2004): 1.23 ——— “Public Confidence in Charities Stays Flat.” The New York Times (September 13, 2004): A.17 Tyler, J., Larry Biggs, and L Errol “Conflict of Interest: Strategies for Remaining ‘Purer Than Caesar’s Wife’.” Trustee 57, no (March 2004): 22(5) United States Senate Finance Committee Staff Discussion Paper released in conjunction with June 2004 hearings on “Charity Oversight and Reform: Keeping Bad Things from Happening to Good Charities.” Washington, DC, June 2004 Van Derbeken, Jaxon “Free Clinics’ Ex-Exec Accused Of Fraud.” San Francisco Chronicle (June 25, 2004) Vishneski III, John S “New Liabilities Created by Sarbanes-Oxley: Are Your Directors, Officers Covered?” National Underwriter 107, no 48 (December 1, 2003): 36 Wallack, Todd “Nonprofit Advisory Group in Crisis, Management Center Helped Local Agencies.” San Francisco Chronicle (January 22, 2004) ——— “Charity Settles in Pipevine Fiasco.” San Francisco Chronicle (February 19, 2004) ——— “SF Nonprofit to Shut Down.” San Francisco Chronicle (May 19, 2004) ——— “Nonprofits Fight Tougher Disclosure Rules.” San Francisco Chronicle (June 24, 2004) Walters, Brent R “Nonprofits Are Corporations Too: Now It’s time for Iowa to Treat Them That Way.” Journal of Corporation Law 28, no (Fall 2002): 79, (25) Weidenfeld, Edward L “Sarbanes-Oxley and Fiduciary Best Practices for Officers and Directors of Nonprofit Organizations.” Tax Management Estates, Gifts and Trusts Journal 29, no (March 11, 2004): 104 (4) Wolverton, Brad “What Went Wrong? Board Actions at Issue At Troubled D.C United Way.” Chronicle of Philanthropy 15, no 22 (September 4, 2003): 27(4) Index Accounting system, 70 Accounts payable, 44 Accounts receivable, 43–44 Accrual basis of accounting, 41–42 Activity ratios, 55 Adelphia Communications, Age of facility ratio, 62–63 American Red Cross, 12 Analyst conflicts of interest (Title V), 9, 11 Anti-discrimination legislation, 131 Arthur Andersen LLP, 6, 28, 33, 125 Assets, 43–45 Audit, 129 defined, 30 Audit committee, 33, 93, 129 creation of, 35–36 procedures and protocols, 195–196 role of, 36–38 and small nonprofits, 159–160 SOX requirements for, 34–35 Auditor, 141 restriction of services, 33–34 Auditor independence (Title II), 8, 11, 28–29 Auditor’s opinion, 30–32 adverse, 31 disclaimer of opinion, 31–32 qualified, 31 unqualified, 30 unqualified with explanatory language, 30–31 Average collection period ratio, 57 Average payment period, 59 Balance sheet, 40, 42–46 assets, 43–44 liabilities, 44 net assets, 45–46 sample, 167–174 Behavioral norms, 106 Behavior and its consequences, 104–105 Beliefs, 106–107 Below the line items, 48–49 Best practices (SOX), 127 checklists, worksheets and sample documents, 165–223 and the board, 85–102 governance, 86–89, 98–102 and creating competitive advantage, 137–154 and organizational culture, 103–121 for small nonprofits, 155–163 Black Tuesday, Board, nonprofit, 22 composition of, 23 culture, 112–121 strategies for change, 120–121 transforming, 119–120 duties, 22–23 dysfunctional, 112, 114–119 governance profile and performance expectations, 203–205 229 230 index Board, nonprofit (cont.) guided by ethical and operational principles, 100 incorporating SOX best practices in activities and administration, 96–97 leadership and role clarity, 99 members, potential, 142–143 membership and deliberations, 90–95 traditional standards of behavior, 91–93 upgraded standards based on SOX best practices, 93 orientation, 97–98, 207–209 overall management responsibility, 100–101 oversight and governance, 89, 98–102 policies and procedures, in small nonprofit, 161 recruitment and retention, 93 relationship with auditor, 32–33 responsibility regarding financial statements, 32–38 and staff interaction, 100 Board binder, 207–209 contents, 208–209 Bonds payable, 44 Bush, George W., Business continuity plan (BCP), 149–154, 219–223 defined, 150–151 designing, 151–154 sources of business interruptions, 149–150 California “Nonprofit Integrity Act” (SB1262), 24–25, 87–88, 108 and fundraising activities of board, 101–102 Capital structure ratios, 55 Cash basis of accounting, 41–42 Cash equivalents, 43 Ceremonies, 106 Chief Executive Officer (CEO), and interaction with board, 100 Circuit breakers, Client files, 132 Code of ethics for board and senior management, 94, 201–202 sample, 202 for small nonprofit, 161 Commission resources and authority (Title VI), 9, 11 Common-size analysis, 54 Competitive environment, 124 Confidential reporting system, 77–78 ombudsman, 77–78 third-party reporting systems, 78 Conflict of interest policy, 94–95, 197–199 for small nonprofit, 160–161 Control activities, 71 Coolidge, Calvin, Corporate and criminal fraud accountability (Title VIII), 9, 12 Corporate fraud and accountability (Title XI), 10, 12 Corporate responsibility (Title III), 8, 11, 28–29 Corporate tax returns (Title X), 10, 12 Current assets, 43 Current investment, 44 Current liabilities, 44 Current ratio, 56 Days cash on hand, 58 Debt service coverage ratio, 65 Decision-making models, 98–99 Depreciation, 48 Development, 129–130 Document preservation (Title VIII), 9, 12, 79–84, 86, 95 Document retention, archiving, and retrieval, 79–84, 129–130, 131, 158–159, 191–194 and small nonprofits, 158–159 index Donors, 130, 141–142 Dysfunctional boards, 112 factors that contribute to dysfunction, 118–119 sources of dysfunction, 114–116 symptoms of dysfunction, 116–118 Economic history, U.S., 3–7 Great Depression, 3–4 Securities Act of 1933, Securities Exchange Act of 1934, twenty-first century corporate and accounting scandals, 5–7 Adelphia Communications, Arthur Andersen LLP, Enron Corporation, Global Crossing, Tyco, WorldCom, Inc., Xerox, EDGAR See Electronic Data Gathering, Analysis, and Retrieval system Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, Enron Corporation, 1, 2, 6, 28, 125 Environment, 107 Ernst & Young, 33 Everson, Mark W., 13, 109 Executive director (ED) compensation package, 23 and interaction with board, 100 relationship with auditor, 27–28, 33 and responsibility for internal control system, 69 Exempt Organization Hotline, 2, 24, 87 Expenses, 48 Fairness, of financial statements, 32–33 Family and Medical Leave Act, 131 Financial Accounting Standards Board (FASB), 29 FASB standard 116, 30 FASB standard 117, 29–30 lobbying activities, 73, 74 231 salaries for managers and staff, 73 certification by upper management, 73 Financial disclosures (Title IV), 8–9, 11 Financial literacy, 94 training, for small nonprofits, 160 Financial operations, 128–129 Financial ratios, 55–65 asset management ratios, 55, 61–63 age of facility ratio, 62 fixed assets ratio, 62 total asset turnover ratio, 61–62 debt management ratios, 55, 63–65 debt service coverage ratio, 65 long-term debt to net assets, 63–64 times interest earned, 64 liquidity ratios, 55, 56–59 average collection period ratio, 57 average payment period, 59 current ratio, 56 days cash on hand, 58 quick ratio, 57 profitability ratios, 55, 59–61 operating margin, 60 return on total assets, 60–61 Financial statements, 29–30 analyzing, 52–65 common-size analysis, 54 financial ratios, 55–65 trend analysis, 53–54 basic statements, 40 board’s responsibility regarding, 32–38 reading and interpreting, 39–65 Financing activities, 51, 52 Fixed assets ratio, 62 Form 990, Return of Organization Exempt From Income Tax, 19–21, 40, 41, 67–74, 127, 140–141 advantages of good internal control systems, 69–72 board’s role in improving, 72–74 fundraising, 72–73 lobbying activities, 73–74 salaries for managers and staff, 73 232 index board’s role in improving (cont.) certification by upper management, 71–72 importance of, 68–69 Form 990-EZ, 40, 41, 67–68 Fund balance, 45 Funding sources, 141–142 Fundraising, 72–73, 129–130 California Nonprofit Integrity Act and, 101–102 Gains, 47 Generally accepted accounting principles (GAAP), 29 Global Crossing, Goals, 107 Grassroots organizations, 124, 125 Great Depression, 3–4 GuideStar, 40, 68, 127, 140 Haight-Ashbury Free Clinic, 88, 91 Harding, Warren, Hoover, Herbert, Human resources, 131–132 Income statement, 46 Insurance, 95 Insurance professional, 141 Internal control system, 69–72 accounting system, 70 code of ethics, 69 control activities, 71 monitoring activities, 71 review of, 126–135, 211–212 Internal Revenue Code section 501(c)(3), 29, 40, 67, 68 Internal Revenue Service (IRS), 140 Intervention strategies, 107–108 Investing activities, 51, 52 Labor payable, 44 Language, 106 Legislative environment for nonprofits, 13–25, 86–89 California’s “Nonprofit Integrity Act,” 24–25 U.S Senate Finance Committee hearings on nonprofit accountability, June 2004, 13–24 Liabilities, 44 Loan policies, 125 Lobbying activities, 74 Long-term debt to net assets, 63–64 Mission-driven organizations, 124 Monitoring activities, 71 Mortgages payable, 44 NASDAQ, 35 National Center for Charitable Statistics, 40, 68 Net assets, 45–46 permanently restricted, 45 temporarily restricted, 45 unrestricted, 45 Newcomers, 104 New York Stock Exchange (NYSE), Non-current assets, 44 Non-current liabilities, 44 Nonprofit organizations legislative environment and, 13–25 and relevance of Sarbanes-Oxley Act, 12–13 Notes payable, 44 Ombudsman, 77–78 Operating activities, 51, 52 Operating margin, 60 Organizational culture, 103–121 as barrier to SOX best practices, 108–110 defined, 104 interpretation of, 105–108 introducing change, 110–112 modeling new behavior: SOX best practices, 111–112 index modifying current culture, 110–111 time required for change, 112 Orientation, 97–98, 207–209 Oxley, Michael, Philanthropic Research, Inc., 140 Pipevine, 88 Platinum operating standards, 123–135 characteristics of, 125–126 conducting review of internal controls, 126–135 incorporating SOX best practices, 126–128 Policies and protocols, 107 Price Waterhouse, 33 Privacy issues, 130, 132 Problem solving, 107 Pro bono assistance, 162–163 Profit and loss (P & L) statement, 46 Programs and operations, 132 Public Company Accounting Oversight Board (PCAOB) (Title I), 7, 8, 10–11 Public Company Accounting Reform and Investor Protection Act, 1, See also Sarbanes-Oxley Act Public trust and scrutiny, 89 Quick ratio, 57 Regulatory practices knowledge, 95 Return on total assets, 60–61 Revenues, 47 Risk management plan, 213–218 sample, 217–218 worksheets, 213–217 Risk management program, 144–149 designing program, 148 developing plan, 148–149 risk administration and monitoring, 147–148 risk assessment, 145–146 risk management implementation, 146–147 233 Roosevelt, Franklin D., Rules of the game, 106 Salaries for key managers and staff members, 73 Sarbanes, Paul, Sarbanes-Oxley Act (SOX), 1–26 best practices resulting from compliance, 3, 138–154 current legislative environment for nonprofits, 13–25 economic history and, 3–6 importance of, list of titles and sections of Act, 7–12 provisions of, relevance to nonprofits, 12–13 Schein, Edgar, 104 SEC See Securities and Exchange Commission Securities Act of 1933, 4, 29 Securities and Exchange Commission (SEC), EDGAR, Securities Exchange Act of 1934, 5, 29 Small nonprofits, 155–163 adopting SOX best practices, 157 customizing SOX best practices successfully, 162–163 myths that impede, 155–157 scaling SOX best practices to suit needs, 157–161 Smith, Adam, 124 Social marketing, 111 SOX See Sarbanes-Oxley Act Staff members, 143 Statement of cash flows, 40, 50–52 financing activities, 51, 52 investing activities, 51, 52 operating activities, 51, 52 sample, 184–187 Statement of changes in net assets, 40, 49–50 sample, 181–184 234 index Statement of operations, 40, 46–49 below the line items, 48–49 expenses, 48 revenues, gains, and other support, 47 sample, 175–180 Stock market crash of 1929, Strategic planning, 107 Studies and reports (Title VII), 9, 11 Suer, Oral, 113 Support, 47 Term limits, 203–204 Third-party reporting systems, 78 Time line, establishing, 135 Times interest earned, 64 Total asset turnover ratio, 61–62 Traditions, 106 Transparency, 21 Trend analysis, 53–54 Truth in securities act, Tyco, U.S Senate Finance Committee hearings on nonprofit accountability, 2, 13–24, 108 proposals, staff paper, 86–87 United Way, 12 United Way of the National Capital Area, 112–113, 125, 138 lessons learned from scandal, 113–114 United Way of the San Francisco/Bay Area, 88, 91 Values, 106–107 Vendor contracts, 130 Volunteers, 143 Web site, 143 Whistleblower protection (Title VII), 9, 12, 76–77, 86, 95, 132 sample policy, 189 and small nonprofits, 157–158 White collar crime penalty (Title IX), 10, 12 Workers Compensation claims and legislation, 131 WorldCom, Inc., 6, 125 Xerox, ...Sarbanes -Oxley for Nonprofits SarbanesOxley for Nonprofits A Guide to Gaining Competitive Advantage Peggy M Jackson, dpa, cpcu... Legislation and Its Implications for Nonprofits What Is the Sarbanes -Oxley Legislation About? Relevance of SOX to Nonprofits Current Legislative Environment for Nonprofits Conclusion Endnotes Safeguarding... Practices for nonprofits come from this section III Corporate Responsibility Best Practices for nonprofits come from this section IV Enhanced Financial Disclosures Best Practices for nonprofits