Stuck On Sarbanes? Let Me Summarize It For The Non-Profit Or Small Business

by Robert Martinez for, November 28th, 2010.

Sarbanes-Oxley requires documentation of all expenses including where the transactions occurred, how many times, and how much the activities cost. It also requires businesses to implement internal systems for keeping track of this detailed information and for monitoring whether the activities actually occurred.

For example, say your company participates in co-op advertising, and you give a retailer $10,000 for marketing ($5,000 for the cost of the co-op ad, plus $5,000 designated for “marketing expenses”). The unspecified “marketing expenses” are where the problem lies. Before Sarbanes-Oxley, you could deduct the entire $10,000 as a business expense, regardless of how the retailer actually spends the unspecified $5,000.

Now, to prevent companies from using funds for other operations, everything has to be documented in detail to be eligible for subtraction from your revenue.

“In detail” means Sarbanes-Oxley requires your company’s information storehouse has to include the following information:

1. Processes capable of identifying the value of any pending activities.

2. Plans that specifically identifies what activities for which money is allocated.

3. Processes that identifies whether the money was actually used for those planned activities.

4. A method to determine whether the activity occurred at the specified time and place.

5. A designated representative who is responsible for identifying any deviation or variance from the plan

6. And a course of action in case the activity did not take place or occur as planned.

Once all the proper reports have been filed your CEO, and CFO must sign-off on the accuracy of the information. If the numbers are not accurate, you face a $10-20 million fine, and 10-20 years in prison for noncompliance. (continue reading… )



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