December 05, 2007
Boards Change Governance Policies in Response to Congress
By Debra E. Blum
Nearly nine out of 10 nonprofit groups have changed their governance policies in the five years since Congress passed stricter rules on corporate responsibility, according to a new survey.
While the 2002 law, known as Sarbanes-Oxley after the lawmakers who sponsored the measure, applies mostly to publicly traded companies, many nonprofit groups have adopted policies and procedures consistent with the law, even when they are not required to do so, said a report on the survey, which was conducted by Grant Thornton, a Chicago accounting and consulting company that advises charities and businesses.
The company’s survey, its fifth annual one, was based on data provided by officials at 603 nonprofit organizations around the country. Nearly half of the respondents have total annual budgets of at least $20-million.
New 990
The report says that charities are making changes in response not only to Sarbanes-Oxley, but to new and proposed changes in the Form 990, the informational tax returns nonprofit groups must file each year, and to increased interest among lawmakers in tightening the oversight of charities.
Overall, 87 percent of the nonprofit groups reported that they had created new governance policies in the last few years. In Grant Thornton’s first survey in 2003, only 20 percent of the respondents said they had made such changes.
Many charities have instituted whistleblower policies, for example, since that is one part of Sarbanes Oxley that applied to nonprofit groups.
Sixty-eight percent of this year’s survey respondents said they had a whistleblower policy — providing a channel through which employees can anonymously report concerns regarding internal controls and financial reporting — and most of them were put into place within the last three years.
Along with governance, the report found that many changes are coming fast in another area, too: accounting. Ninety-two percent of the survey respondents said they had put new accounting policies and procedures into effect in recent years, compared with only 59 percent in last year’s survey.
The survey also showed a big jump in the number of charities that had adopted written investment policies: 87 percent this year, versus 63 percent in 2006.
The report identified an emerging trend: putting a policy in place requiring the full governing board or one of its committees to review the organization’s Form 990 before it is filed. Thirty percent of this year’s respondents said they already have such a policy, but the report predicts that that percentage will grow quickly because of an expected addition to the Form 990 that will ask whether such a review had taken place.
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