Is SOX applicable to public school districts? 2325

  • I just heard about Sarbanes-Oxley today from a vendor who also sells to for-profit companies. We are a public school district. Are we subject to the rules of SOX?

  • In short - No.
    a useful faq is here:

  • To add to what Denis said, while SOX is not applicable to non-public companies (though it might be if you have public debt registered with the SEC), it would be best practice to ensure that you perform annual risk assessments, understand your financial controls and have effective monitoring of those controls.

  • We are subject to annual auditing as a public school district/government entity so internal controls are looked at frequently. The particular situation is our wanting to pay for a product during this fiscal year (July 1-Juune 30) but not take delivery until the beginning of the next fiscal year. The vendor thought that Sarbanes Oxley would prohibit that. But from what I am reading, here and on other sites, SOX does not really apply to us. Just wanted to get a second/third/fourth opinion. Thanks.

  • There is nothing wrong with paying for a product prior to delivery as long as the accounting reflects the nature of the transaction (prepaid expense or deposit on your end and prepaid revenue on the vendor’s books).

  • Hi Beth - I recall in the past a thread here where some aspects of SOX might be optionally applicable to public governmental entities (although as other have shared, there are not subject to the entire scope of the law). I might try to search the forums later for the thread when I get a break at work.
    Below is another good resource (please copy link to browser)

  • :idea: Found some of the past discussion, related to Milan’s good sharing in the past:
    Please paste this external link in your browser

  • If you want to pay for a product in the current fiscal year, but to have it delivered in the next fiscal year, then you simply record it in your books as an advance payment in the balance sheet. Why should there be a problem if you want to make an advance payment? If the delivery is really in the next fiscal year and you clearly disclose it under advance payments in your balance sheet, then there is no fraudulent financial reporting under US GAAP.
    Most sections of the Sarbanes-Oxley Act only apply to public companies, i.e. companies that have securities listed on a national securities exchange in the U.S., whose equity securities are traded over-the-counter in the U.S. (if they have at least 10 mn. USD of total assets and at least 300 holders of the securities) or who have publicly offered their securities in the U.S. and have thus to register the securities with the SEC and to file periodic reports with the SEC. Some sections of the Sarbanes-Oxley Act amend the federal criminal code and also apply to non issuers and private companies because they ban certain criminal behavior that is not necessarily related to public companies.

  • All that’s said before is correct, however we may have missed the key point here.
    I imagine the driver for this advance payment is something like ‘we want this to count against this years budget which we haven’t fully spent yet instead of counting against next year’s’.
    However, even accounting for the advance payment properly you shouldn’t account for the expense itself until the following fiscal period.
    So in short you can pay in advance but it doesn’t help you.

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