In Sarbanes-Oxley Era, Running A Nonprofit Is Only Getting Harder

As president of New York’s prestigious Juilliard School, Joseph Polisi gets to hang out with actor Robin Williams, opera singer Renée Fleming and other famous alumni in the performing arts. But he also has to know how to analyze a balance sheet, negotiate faculty contracts, oversee big fund-raising drives and achieve consensus among the school’s 26 trustees on issues ranging from curriculum to the current $150 million capital campaign and campus expansion.

Business executives who worry about meeting growth targets every quarter may think they would have fewer headaches running a nonprofit. In fact, the job is more stressful than ever as more nonprofit groups compete for limited funding. And while juggling myriad personnel and other duties, heads of nonprofits also feel pressured to strengthen governance practices and codes of ethics. In this post-Enron era, many nonprofits, including Juilliard, have adopted the governance practices laid out in Sarbanes-Oxley, the 2002 corporate reform law.

"Sarbanes-Oxley doesn’t apply to nonprofits, but like ink in water it’s changing the way they operate," says Charles Elson, director of the University of Delaware’s Weinberg Center for Corporate Governance. "Suddenly you’ve got accounting firms that audit nonprofits clamoring for the same financial controls now in place at for-profits." And nonprofit trustees want more transparency. Although they’re exempt from financial liability in most states except in cases of fraud, they worry that in this climate their reputations could be hurt if money is misused or the organization falters.

By Carol Hymowitz

From The Wall Street Journal Online

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