The Sarbanes-Oxley Act of 2002

VI. Solutions and Protections
for Nonprofits
Sarbanes-Oxley and Nonprofits:
Bogeyman in the Boardroom?
by Blue Avocado on December 24, 2008
Somehow, all the publicity about Sarbanes Oxley made it seem as if this legislation
applied to nonprofits, too. But contrary to what is frequently thought (and said in nonprofit
boardrooms!), Sarbanes-Oxley is not applicable to nonprofits, albeit with just a couple of
exceptions. In other words, there are a couple of small points to note (templates later in
this article), a lot to relax about, and a lesson to be learned in nonprofit leadership.
You may remember that this multi-component legislation (nicknamed SOX) was passed
by the U.S. Congress in 2002 in response to a large number of for-profit scandals
involving Enron, Tyco, WorldCom, Arthur Anderson, and others. Extreme fraud, conflicts
of interest on boards, unethical executive compensation practices, and improper
auditing led to the failure of these mega-companies and deep, negative impacts on
consumers, shareholders, employees, and many other individuals and institutions.
In response, Sarbanes-Oxley set in place a number of required processes for publicly
held corporations (corporations that issue stock to the public), of which the best known
may be the requirement that the CEO personally vouch for the accuracy of financial
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