Executive Board Manual: Sarbanes Oxley Act

Observance of Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002 lays out federal regulations intended to ensure effective corporate governance. Two provisions apply to all corporations, including nonprofits. They relate to whistleblower protection and document destruction. All provisions are provided below.

Provisions		Potential Impact
1.Whistleblower protection		It is illegal for any organization to punish a whistleblower in any way.
2. Document Destruction		It is a crime to alter, falsify, or destroy any document to avoid its use in an official proceeding. Destruction of any documents must be intentional and carefully administered. Nonprofits should have a written document retention and periodic destruction policy including electronic documents.
3. Conflicts of Interest		A clear conflict-of-interest policy must be in place. Personal loans to directors or executives are prohibited. Loans and other benefits as a result of board service are subject to all IRS regulations.
4. Audit Committee		Audit committee members must be independent and financially competent and not receive payment for work done on the committee.
5. Independent Auditors		Organizations are encouraged to change auditors every five years. Auditors cannot provide non-auditing services, such as accounting advice. In order to foster informed judgment by the audit committee, auditors must disclose to the audit committee any critical accounting policies, practices, or assumptions encountered during the auditing process.
6. Certification of Financial Statements		The financial statements relevant to this provision are the audit and Form 990. The proposed certification confirms the truth and accuracy of the financial reports, based on the officers' having read and understood the statements. It is recognized that the full Board has ultimate legal responsibility for the accuracy of the financial records.
7. Financial Disclosure		IRS regulations require the Form 990 to be available to anyone who requests it. The audited financial statements also should be easily accessible. All administrative and financial reports must be filed with regulatory agencies in a timely fashion.
8. Executive Committee		An executive committee is required if the Board is larger than 25 members, as long as its creation is not prohibited by the organization's charter.

Sarbanes-Oxley Act Requirements

Retaliation Against Whistleblowers Prohibited

No officer, director, employee, or agent of IGFOA shall take any harmful action with the intent to retaliate against any person, including interference with employment or livelihood, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any offense.

Nor will any officer, director, employee, or agent take any harmful action with intent to retaliate against any employee or member of IGFOA for reporting to an appropriate senior management or elected official of IGFOA the suspected misuse, misallocation, or theft of any association resources.

Document Destruction Prohibited

No officer, director, employee, or agent of IGFOA shall knowingly destroy a document with the intent to obstruct or influence the investigation or proper administration of any matter within the jurisdiction of any government department or agency or in retaliation to or contemplation of any such matter or case.