By Simon Eskow

Accounting for nonprofit organizations in the post-Enron era should include a clearer understanding among board members of how organizations work, a more thorough audit, and better communication with management, a New York State Society of CPAs member said at a recent symposium.

“Accounting in the post-Enron era should make us ask ‘why’ and ‘what does it mean,’” Julie Floch, a member of the Society’s Not-for-Profit Organizations Committee, said. “It should make us ask, ‘What is happening to our organization?’”

Floch contends that reform includes more active board management and improved audits.

Floch was one of a dozen speakers at a May 21 symposium on accounting and management issues for not-for-profit organizations, a conference that drew 500 nonprofit board members and executives, accountants and attorneys.

Organizers of the symposium, sponsored by the New York State Charities Bureau of the Attorney General’s Office, said they were surprised by the greater-than-expected attendance, even though New York State Attorney General Eliot Spitzer has from the beginning of the year pushed for accounting and management reform among nonprofits that relate to similar reform efforts for public companies.

Spitzer’s bill, parts of which the NYSSCPA Board of Directors criticized in April, applies strict financial reporting standards for nonprofits with gross revenues of $250,000 or more. That figure emerged as a rallying point for the Society’s objections; members decried the quarter-million-dollar cutoff point as too low a threshold for many smaller nonprofits, and pushed to raise the figure to $5 million.

Nonprofits with revenue below $5 million would not be able to afford the cost of implementing executive employees needed to comply with the bill’s internal control requirements, the Society stated in a letter to Spitzer.

(The Attorney General’s office did indicate in late May, however, that it would significantly raise the revenue and assets thresholds, bringing key requirements of the bill closer in line with the Society’s position.)

Internal control requirements in the bill include a stipulation that board members assume executive responsibilities, such as certifying reports on potential problems with internal controls.

This attitude coincided with a general feeling that governance issues affect nonprofits as much as they do public companies like Enron and WorldCom.

“In the philanthropy world, there seems to be as much abuse as in the business world,” William Josephson, assistant attorney general, said in his remarks at the beginning of the symposium.

Josephson said the key to the attorney general’s proposal, which became a bill in the state legislature in April, is an emphasis on a nonprofit’s board of directors and the need for the board to have an “excellent relationship with its accountants.”

Floch expanded on a similar idea when she said that new requirements would make audits very intrusive, requiring a close relationship with various parts of the organization to “ferret out problems and fraud.” But, because of limitations on the audit, reform expands beyond the audit to accounting and management, until management is asking the right questions and understanding how its own organization works.

Held at the Fashion Institute of Technology, the symposium featured presentations on raising money, building an accountable board of directors and new state and federal regulations and resources.

During a question-and-answer period, Charities Bureau representatives also discussed the bureau’s size in relation to its responsibilities, noting it has more than 40,000 registrants under its jurisdiction, and only six accountants.

Part of the Society’s criticism of Spitzer’s bill is a call to expand the bureau’s effectiveness with a larger staff and a bigger budget.