Corporate Government & Accountability in the Non-profit sector.
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TABLE OF CONTENT 1.0 Question 1 Page 1.1 Oversight Functions in Non-Profit Sector 2 1.2 Main Provisions of Sarbanes-Oxley Act 3 1.2.1 Independent and Competent Audit Committee 4 1.2.2 Responsibilities of Auditors 4 1.2.3 Certified Financial Statement 5 1.2.4 Insider Transactions and Conflicts of Interest 5 1.2.5 Disclosure 5-6 1.2.6 Whistle-Blower Protection and Document Destruction 6 1.3 Conclusion 6 2.0 Question 2 2.1 Public Trust in Non-Profit Sector 7 2.2 Restoring Public Confidence in Non-Profit Sector 7-8 2.3 Performance Evaluation System for Non-Profit Sector 8-9 2.4 Panel Recommendations to Non-Profit Sector 9 2.4.1 Filling of Form 9 2.4.2 Disclosure of Compensations 10 2.4.3 Code of Ethics 10 2.4.4 Independent Rules 10 2.5 Conclusions 11 3.0 Question 3 3.1 Accountability in Non-Profit Sector 12-13 3.2 Ethic Climates 13-14 3.3 Code of Ethics 14-15 3.4 Conclusion 15 4.0 References 16-18 QUESTION 1 Discuss the importance of the provisions of the Sarbanes-Oxley Act in relation to how the provisions may help increase accountability within the non-profit sector? (10 Marks) Oversight Functions in Non-Profit Sector Non-for-profit organizations are usually established to achieve philanthropic purposes rather than maximize the wealth of their stakeholders. The primary purpose of nonprofit sector is to serve the public rather than earn profit. As general, their values are to meet client needs (Alexander & Weiner, 1998; Green & Griesinger, 1996). Organizations includes voluntary and community sectors, such as education authorities, hospital trust, sports organizations, and other nonprofit entities and non-governmental. The Harvard Business Review in May 2003 that $100 billion could save to give scholarship in high school student across the country. Public have concerned that nonprofit organizations do not use charitable dollars as efficiently as possible to advance their charitable mission (Bradley, Jansen, & Silverman, 2003). Publics and donators are interested to find out how well their donations are being spent; and asking the charity agencies that what kind of comprehensive evaluation to assess their performance.
Emerging corporate reforms, rules, and regulations are having significant implications for the governance and accountability of nonprofit sector such as higher education institutions, charities, and churches. The provisions of Sarbanes-Oxley Act are applicable to nonprofit, although these provision were intended for public companies; many nonprofit sector have benefits from the act. To see the growth of corporate accountability, recent survey from Grant Thornton LLP, reported that over 300 nonprofit officers determine their interests and knowledge's in SOX. The survey have pointed out that 20% of nonprofit sector have adopted their policies (Grant Thornton 2003). Many positive feedbacks that the aspects of Sarbanes-Oxley Act will give a new standard of best corporate governance practices to nonprofit (McDowell, 2004, 8) Performance in non-profit sector is often difficult to measure. They have multiple bottom lines rather than a single financial profitability measure. However, in order to make financial information more reliable in non-profit sector, some states such as California now require report in charities organizations of between $250,000 and $1 million profit need to have audit committees and maintain an audit committee with gross revenue of &2 million. (Panel on noonprofit sector, 2005). Organizations like charitable have under extensive scrutiny regarding their governance and financial integrity. California's Non-profit Integrity Act was effective as 1st January 2005, requires that they must register and file their Articles of Incorporation with the Attorney General's Register of Charitable Trust within 30 days. Performance Evaluation System for Non-profit sector An award program, Donner Canadian Foundation Awards is established in 1998 to select and reward the excellence non-profit organizations likes child care canters, education institutions, hospitals and many others. Non-profit sectors are participating to fill in detailed applications which include areas of all financial reports and statements, structure of the board, board members, outcome monitoring of funds, and etc. The data provided from the organizations are then ranked between other agencies and measures on the quality of social programs (Sylvia, 2003).
Secondly, another code of ethic emphasis of core values or the vision on organizations, most called mission statement. These statements usually include affirmations of the commitments of a company to key stakeholders. Lastly the code of corporate philosophies where describe the beliefs guiding the organizations. Lioyod (2005) indicated the results and benefits of adopting the code of ethics in the nonprofit sector especially nonprofit sector need for maintaining public confident and code of ethics set good practices to all employees (Antonio 2009). A code of ethics may enable employees to do what they believe to be right. Even well-written codes of ethics have limitations; a bad one may have some unintended consequences. Some codes focus primarily on employee misconduct that can harm the organizations. Hence, studies showed these might occurs advantages and disadvantages which organizations adopt code of ethics. A first recognized code was Code of conduct for the International Red Cross and Red Crescent Movement and Nonprofit organization in disaster relief (www.icrc,org). Many codes are basically statement of principle. The one trait of all successful codes of ethics has clear support to top-level management. A success code is imposed from the top down. Ideally, everyone in the organizations have ownership of the code. Conclusions Where if corporate accountability and ethical in nonprofit sector was properly increase, then fraud and other kinds of financial wrongdoing would be difficult to commit, and detection would be easy. The task of corporate ethics must be practices by all members include auditors and directors in the nonprofit organizations. There is a danger in giving so much independence power to managers; but, respect and enjoy their specialized knowledge. Hence, the sector must hold accountable in result that members do not engage in fraud or other wrongdoings. Adopt of code of ethics in response to serious scandals, or to prevent scandals before they occur. The standards of ethics presented in a code of professional for the self-regulation. Most scandals cause of the unethical behaviors of people within the organization, a code of ethics is not an option but something that is required by the nature of professionalism itself.
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