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| On the Board |
Sarbanes-Oxymoron
Matthew Schuerman
07/01/2004
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Critics say the bills in New York, California and Massachusetts would
force nonprofit CEOs to vouch for the accuracy of financial statements they do
not understand. “In for-profit organizations, the CEO is almost always a person
with significant financial expertise,” says Deborah Hechinger, the CEO and
president of BoardSource, a national organization for nonprofit board members.
“The heads of nonprofit organizations are selected because of their knowledge of
programs or policy, or their ability to fund raise.”
In the face of such
resistance, attorneys general quickly softened their proposals, but they have
already lost a lot of good will. Even after Spitzer revised the audit committee
trigger to apply only to organizations with at least $1 million in revenue or,
as in the case of foundations, $3 million in endowment assets, nonprofit leaders
still grumble. (In any case, New York’s Republican-controlled state senate may
block passage of the Democratic attorney general’s proposal.) Massachusetts
Attorney General Tom Reilly first outlined his plan this past winter, but, given
charities’ brusque feedback, he has yet to actually file a bill. In California,
a packed public hearing in April prompted a legislative committee to water down
its proposal and increase the trigger for an independent audit from $500,000 in
annual revenue to $2 million.
Reinventing the Wheedle
“They were trying to
kill a fly with a Mack truck,” says Florence Green, executive director of the
California Association of Nonprofits. “We desperately want more oversight, but
how many times do we have to prove that more laws do not lead to improved
management practice?”
Green seems to have a point. California, unlike
Massachusetts or New York, currently does not require charities of any size to
undergo an audit by a certified accounting firm, and the proposed $2 million
trigger would apply to a mere 5 percent of the state’s 90,000 nonprofits.
Meanwhile, all California charities and foundations must already file standard
IRS 990 tax forms, which are quite revealing. They require that an officer of
the organization sign the form, attesting that it is “true, correct and
complete.”
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