Sarbanes-Oxley for nonprofits is expected to create business for CPA firms big and small.  Gov. Schwarzenegger signed into law the "Nonprofit Integrity Act of 2004" which takes effect Jan. 1.  The law is fashioned after the federal Sarbanes-Oxley Act of 2002 which applies to publicly traded corporations.  SB 1262 is designed to create higher financial accountability and disclosure standards for nonprofits operating in California.

The law will apply to almost 300,000 tax-exempt organizations and commercial fund raisers incorporated in the state of California.  Those with over $2 million in revenue will feel the most scrutiny.  Before the legislation there was no mandatory requirement that such nonprofits conduct audits, therefore most such organizations have never before had an audit.

California is Home to more than 5,600 philanthropic foundations with a combined grant of $3.5 billion.  Many of these nonprofit organizations are responding initially by appointing a CPA or attorney to address the law.

The new law requires charitable corporations, charitable trusts and unincorporated associations to register with and annually report to the state Attorney General's Registry of Charitable Trusts.  Nonprofits with more than $2 million in revenue are required to file annual audited financial statements with the state, hire an independent auditor and publicly disclose audited financial statements.  These nonprofits must also set up an independent audit committee and have their boards review and approve officers' compensation.