Compliance & Risk Management > About > Sarbanes-Oxley Act
The Sarbanes-Oxley Act became law in July 2002 in response to the corporate scandals at Enron, WorldCom, Arthur Andersen and others. The act establishes new standards for corporate accountability and seeks to improve the accuracy of financial reporting for publicly traded companies.
Since DePaul is a non-profit university, and not governed by the same rules as a corporation, the Sarbanes-Oxley Act has minimal impact. However, there are several examples of how DePaul is taking the initiative to adopt many of the same principles outlined in Sarbanes-Oxley, and applying them to its own stewardship practices.
The National Association of College and University Business Officers (NACUBO) released an advisory report with recommendations for higher education based on the Sarbanes-Oxley Act. In the report, NACUBO says colleges and universities should consider the act "as a framework to help evaluate overall financial risks, and not simply comply with accountability concepts that stem from structures, and circumstances that differ fundamentally from the stewardship responsibilities and public obligations they face."
At the request of the audit committee of the board of trustees, DePaul formed the Office of Institutional Compliance to lead such efforts. A university compliance officer was named and, in the spirit of the Sarbanes-Oxley Act, the compliance department created supporting programs such as management standards training, general compliance training, risk assessments, monitoring plans and quality assurance reviews.
Other non-profits and higher education institutions are also following suit, with the expectation that the Sarbanes-Oxley Act may eventually apply to them as well.
Many colleges and universities may face closer scrutiny for institutional transactions and relationships by board members; greater enforcement by state agencies, the IRS and other regulatory groups; increased reviews of transactions and financial statements by institutional auditors; and greater oversight of the auditors themselves.
Fitch Ratings, a credit rating agency, says it views the increasing voluntary adoption of the Sarbanes-Oxley Act in higher education as a best practice for improving accountability, transparency and disclosure within the sector.
Fitch goes on to say that internal controls within higher education are viewed as critical in reducing the risk of fraud and other activities that could jeopardize an institution's assets and financial position.
Failure to comply with the Sarbanes-Oxley Act can result in steep penalties for those in corporations who commit fraud, fail to report fraud or destroy records. Such behavior can now result in criminal felony charges. The act also provides protection for corporate whistleblowers.
While these penalties don't necessarily apply to DePaul now, they're proof of how seriously the federal government is taking fraudulent behavior at the corporate level.