The most frequently asked question CPA Colette Kamps hears from her nonprofit clients is "how is Sarbanes-Oxley affecting nonprofit organizations?"

The legal answer is it doesn't, but the practical answer is that Sarbanes-Oxley has helped change the way people think about accountability not only in the corporate world but the nonprofit one. Thus, successful nonprofits are at least thinking more about accountability.

"Public perception and public awareness have a lot to do with how nonprofit organizations are affected by more stringent oversight in the for-profit world," says Kamps, manager of not-for-profit services at Henry & Horne LLP, a Leading Edge Alliance firm.

"Largely publicized accounting scandals caused a loss of public trust and government responded with more stringent regulations in an effort to regain that trust," she says.

Pamela Plott, accounting and audit director at Leading Edge Alliance firm SS&G Financial Services, Inc., says the public often views money donated to nonprofit organizations as subject to public oversight, just one step below investing in public companies.

Kamps agrees. "The nonprofit sector also requires a lot of public trust. The public donates money to nonprofit organizations with the expectation that the money will be used appropriately and in line with the tax-exempt mission of the organization," she says. "So the federal government is looking more closely at how public trust can be protected within the nonprofit sector."

But whether or not the government steps up regulations to ensure nonprofit organizations are accountable, nonprofit organizations throughout the United States are taking their own steps to promote accountability internally.

The Governance Institute, which focuses on hospital and health care organizations, recently issued a paper that says "maximum philanthropy yields better stakeholder relations, and better stakeholder relations yield more funds."

Dan Wander, director of accounting and audit at SS&G, says the fiduciary responsibility of directors or board members of nonprofit organizations—through oversight or closer scrutiny of contributions and other money given the organization—is the biggest, most immediate response to the increased interest in accountability.

"The most direct reaction is the consideration of the formation of an audit committee," he says.

Audit committees have become the norm at public companies in the Sarbanes-Oxley world, but nonprofits have only recently begun to consider them.

Boards of directors create audit committees to implement checks-and-balances and oversee internal accounting controls, including oversight of independent audits of the organization.

Wander explains that nonprofit organizations' boards typically have a finance committee but many do not have a separate audit committee. The decision to create one depends on the organization and the role of its finance committee.

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