Assessing Board Members In The Nonprofit Organizational Arena: Increased Board Responsibilities Dictated By Sarbanes Oxley

Abstract

Numerous corporate scandals of the 1990’s and 2000’s, coupled with public accounting firms generating high non-audit fees, eroded the publics’ confidence in the concept public accounting independence.  These scandals and the erosion of confidence in the auditor’s independence resulted in Congress passing the Sarbanes-Oxley Act in 2002.  While Sarbanes-Oxley applies mainly to publicly traded companies, proactive, progressive nonprofit organizations will also reap the benefits of Sarbanes-Oxley.  In fact, Board Source (2003) indicates, “Indeed, some state attorney generals are already proposing that elements of the Sarbanes-Oxley Act be applied to nonprofit organizations.”  According to this author, whether this law eventually extends to the nonprofit arena or not, an increase in responsibility of board members of nonprofit organizations is inevitable. Due to the increased responsibilities board members assume, Boards would be well advised to increase their self assessment process.  This paper will look at assessing the Board of Directors in light of the new responsibilities Board Members assume in conjunction with the increased responsibilities resulting from the Sarbanes-Oxley Act.