The Sarbanes-Oxley Act of 2002

statements and that the external audit firm be different from the firm providing financial
consulting.
There are only two aspects of Sarbanes-Oxley that are applicable to nonprofits:
Strengthened whistleblower protection and
Retention of documents related to lawsuits
The new Form 990 also asks whether you have policies related to these two areas,
making it more important to get them adopted. To make it easy, nationally recognized
attorney Tom Silk of Silk Nonprofit Law has created model policies in each of these
areas, and made them available at no charge to the nonprofit community through
CompassPoint Nonprofit Services. Blue Avocado is pleased as well to be able to
present these for use by nonprofits. See the end of this article for links to these
templates.
Perhaps the most intriguing aspect of Sarbanes-Oxley is that many of the provisions it
mandated for for-profit businesses were already common, nearly universal practices in
nonprofits, including:
Requirement that the audit committee be comprised of board members
Requirement that audit committee members not be on staff, and
Prohibition of loans from the organization to board members.
Although Sarbanes-Oxley was not aimed at nonprofits and its key provisions are
already widely practiced in nonprofits, some voices in the nonprofit sector saw the law’s
passage as a wake-up call for nonprofits to adopt a variety of governance and financial
practices. For example, Independent Sector, the national coalition that proposes
standards for nonprofit governance, now suggests that nonprofit boards include at least
one “financial expert,” and provide “financial literacy training” to all board members.
While such practices may be good ideas for some organizations, turning them into
requirements would be, for most organizations, defensive, unnecessary moves. (Two
whitepapers that explore possible implications are The Sarbanes-Oxley Act and
Implications for Nonprofit Organizations from BoardSource and Ten Emerging
Principles of Governance of Nonprofit Corporations and Guides to a Safe Harbor by
Tom Silk.)
The bottom line for nonprofits and Sarbanes-Oxley?
A. Adopt and implement a whistleblower policy.
B. Adopt and implement a document retention policy
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