Non-Profit SOX Is An Unnecessary Evil
Unless you've been living under a rock for the past year, you know that Congress is well on its way to enacting a kind of Sarbanes-Oxley law for the non-profit sector. Recent scandals involving several high-profile charities have triggered a reform movement that will not be satisfied until Congress passes...
November 30, 2005 at 07:00 PM
8 minute read
Unless you've been living under a rock for the past year, you know that Congress is well on its way to enacting a kind of Sarbanes-Oxley law for the non-profit sector. Recent scandals involving several high-profile charities have triggered a reform movement that will not be satisfied until Congress passes new laws. The charity establishment (in the form of the Independent Sector, a coalition of the country's leading non-profits) saw the writing on the wall and quickly responded to the Senate Finance Committee's invitation to make recommendations. The result is a hefty report from our side containing many specific suggestions for new rules, guidelines, statutes, safe harbors and the like. The Independent Sector used a lot of paper, legal fees and staff time to achieve this.
Yet, there are a few voices amid the clamor that claim none of this is necessary. They make the simple point that all we need to get the non-profit sector back on track is better enforcement of existing laws. They have a point.
These voices point out that the IRS, the lead agency charged with keeping charities and foundations in line, hasn't been enforcing existing law. By its commissioner's own admission the agency hasn't had the resources in recent years to properly oversee the sector. And others cite a years-long reorganization of the agency's Tax Exempt and Government Entities Division (TE/GE Division) as a huge distraction from enforcement. Less than scrupulous accountants, consultants and lawyers took note of the resulting enforcement vacuum and then proceeded to fill it with shady practices that eventually caught the public's and Congress' attention.
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