June 21, 2018

Non-Profit Organizations Feeling the Pain of Sarbanes-Oxley Compliance

You’ve already seen me rail on SOX and I’m not the only one.

Skeptical CPA, Accounting Onion, Business Insider’s John Carney, Re: The Auditors (and Francine here on Going Concern). Need I point you to more?

I am not classically trained in recognizing Service threats but this certainly feels like one.

Accounting and Tax Tips:

The Internal Revenue Service today reminded tax-exempt organizations to make sure they file their annual information form on time. In 2010 the tax-exempt status of any non-profit that has not filed the required form in the last three years will be revoked.

The Pension Protection Act of 2006 requires that non-profit organizations that do not file a required information form for three consecutive years automatically lose their Federal tax-exempt status. This requirement has been in effect since the beginning of 2007.


The costs of compliance begin to add up and suddenly it starts to reek of 404(b); compliance for the sake of compliance does not equal nor even assist transparency.

I spoke to Chris Leach, a former not-for-profit auditor who has served on several NFP boards, who gave some insight into the problem with the 990. Let me tick off just a few “concerns”:

• Some of the smaller non-profits don’t have anyone on their board qualified to do the 990. It’s not a 1040 and problems are numerous.

• NFP board members are exposed to liability, being forced to “sign off” on 990s. That should sound familiar to any auditor who has been at the job for longer than ten years or so.

Increased regulatory pressure has been proven to distort true financial condition, not necessarily make it any more transparent.

Any of this sound eerily familiar?

Many boards do not have members equipped to adequately review and sign Form 990, so they are still exposing themselves to liability as a result of improperly filed forms. “Bad publicity is the largest implication in my view, especially for organizations facing financial stress, and even more so in this economic environment,” Chris told me. “Beyond that, from a board member’s perspective, the biggest problem would be misstatements on the Form 990, which could potentially lead to personal liability for the board.”

Chris is slightly more reasonable than yours truly, saying “Just the simple day-to-day administration of tax issues puts pressure on smaller not-for-profit organizations. [However], when a not-for-profit organization isn’t a worthy steward of its donors’ trust, donors feel betrayed, so they want more transparency.”

Fair enough. Bring on the transparency (and the headaches?)!

You’ve already seen me rail on SOX and I’m not the only one.

Skeptical CPA, Accounting Onion, Business Insider’s John Carney, Re: The Auditors (and Francine here on Going Concern). Need I point you to more?

I am not classically trained in recognizing Service threats but this certainly feels like one.

Accounting and Tax Tips:

The Internal Revenue Service today reminded tax-exempt organizations to make sure they file their annual information form on time. In 2010 the tax-exempt status of any non-profit that has not filed the required form in the last three years will be revoked.

The Pension Protection Act of 2006 requires that non-profit organizations that do not file a required information form for three consecutive years automatically lose their Federal tax-exempt status. This requirement has been in effect since the beginning of 2007.


The costs of compliance begin to add up and suddenly it starts to reek of 404(b); compliance for the sake of compliance does not equal nor even assist transparency.

I spoke to Chris Leach, a former not-for-profit auditor who has served on several NFP boards, who gave some insight into the problem with the 990. Let me tick off just a few “concerns”:

• Some of the smaller non-profits don’t have anyone on their board qualified to do the 990. It’s not a 1040 and problems are numerous.

• NFP board members are exposed to liability, being forced to “sign off” on 990s. That should sound familiar to any auditor who has been at the job for longer than ten years or so.

Increased regulatory pressure has been proven to distort true financial condition, not necessarily make it any more transparent.

Any of this sound eerily familiar?

Many boards do not have members equipped to adequately review and sign Form 990, so they are still exposing themselves to liability as a result of improperly filed forms. “Bad publicity is the largest implication in my view, especially for organizations facing financial stress, and even more so in this economic environment,” Chris told me. “Beyond that, from a board member’s perspective, the biggest problem would be misstatements on the Form 990, which could potentially lead to personal liability for the board.”

Chris is slightly more reasonable than yours truly, saying “Just the simple day-to-day administration of tax issues puts pressure on smaller not-for-profit organizations. [However], when a not-for-profit organization isn’t a worthy steward of its donors’ trust, donors feel betrayed, so they want more transparency.”

Fair enough. Bring on the transparency (and the headaches?)!

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BDO, Looking to Spread Out Some Liability, Admits New Partners

BDO_International.pngAs you probably know, BDO Seidman is having a rough year. Tax shelter prosecutions and trials for the International Global Coordination firm that now falls on the U.S. make for some big liability exposure.
The obvious solution to this conundrum? Spreading the love!

BDO Seidman, LLP, is pleased to announce that 10 new partners have been admitted to the partnership, effective July 1, 2009. Five of the new partners are in the tax practice, four are in the assurance business line and one is in BDO Consulting. BDO Seidman, LLP is a leading national professional services firm providing assurance, tax, financial advisory and consulting services to private and publicly traded businesses.”I am very proud to welcome each of these very deserving individuals to our partnership,” said Jack Weisbaum, CEO of BDO Seidman. “The key to maintaining momentum in our profession is a commitment to recruiting, training and retaining superior client service professionals. Each of these new partners is an example of our commitment to human capital development.”

What are the chances that these new partners are some of the most hated people in the firm? C’mon, $520 million judgment hanging out there, the bigwigs have to be thinking, “well, as long as we’re screwed, we may as well stick it to some people within the firm we don’t like.”
Congrats to the new partners!

BDO Seidman, LLP, Admits 10 New Partners
[BDO Seidman Press Release]

SEC Doesn’t Care Who it Has to Hurt to Get Respect Again

mary_schapiro_1218.jpgAfter everything the SEC has been through, you might expect some government bureaucracies to wither and die at the hands of some irate congressional committee (ahem, Financial Services).
Not the Commission. No, the SEC has HAD IT with everybody’s Monday morning quarterbacking and is going to start kicking ass and taking names.
And they’re going to start by aggressively interpreting the clawback provisions in Sarbanes Oxley. Sounds incredibly snoozerific, we realize, but in the past the Commission has only gone after the bonuses of the actual scofflaws.
The new SEC has decided that it’s going to try and clawback the bonuses and performance-based pay back from those who knew squat about the fraud and just cashed checks.

Last week, the regulator asked a court to order the return of $4m (€2.82m, £2.43m) paid to Maynard Jenkins, former chief executive of CSK Auto, whose profits were allegedly inflated by accounting fraud committed by others: Mr Jenkins was not involved.

We especially feel bad for the guy being made to be an example at the hands of the SEC. The House of Schape/Cox has been the joke of the establishment for months so the Commission figures that if it has to make a few people miserable while they crawl their way back to semi-respectability, it’s a small price to pay.
‘Clawback’ marks tougher SEC stance [FT.com]