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Home > Storage Technology News > Users feel Sarbanes pains |
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As the deadline for compliance with the Sarbanes-Oxley Act creeps closer, companies large and small are battling with the cost and workload of complying with this ruling. In simple terms, the Act requires managers with a financial responsibility to prove that they have established and are maintaining internal controls over their company's financial reporting. The compliance deadline for companies with a market capitalization of over $75 million is November 15, 2004. For companies under this market cap, it's April 15, 2005. General Electric Company easily falls into the first bracket with revenues of $134.2 billion in 2003. It has said publicly that the cost of complying with just part of the Sarbanes-Oxley Act will cost it upward of $30 million this year alone. The company declined to provide any more information. Another company feeling the financial burden of compliance is McData Corp. which recently switched its auditing company because it felt it was being squeezed too much on the cost of its Sarbanes-Oxley auditing services. "PriceWaterhouse increased its auditing fees almost 100% to perform the additional internal controls audit, which we thought was way too much," said Ernie Sampias, Chief Financial Officer of McData. "We decided to test that from a market perspective to see if it was reasonable." McData quickly discovered it wasn't and found another auditing company with more favorable terms. Deloitte & Touche LLP was the chosen replacement. McData has also purchased Compliance Manager software from Documentum, a division of EMC Corp, to help manage the process of updating its files and records management. McData declined to say how much it is spending to achieve compliance. Waste of money? Smaller companies are also struggling to get the budget for Sarbanes-Oxley compliance. One user at a mortgage brokerage, who agreed to be quoted on condition of anonymity, said that creating a compliant record retention system for an event he perceives is unlikely to ever happen is frustrating. "Theoretically, it could be a waste of money and is an excessive price to pay when we'll probably never be called upon," he said. The company has spent several thousand dollars purchasing record rentention software from ArchivesOne Inc. Plus it said the man-hours to organize this effort is enormous. "We are adding one full-time staff member just for this task," the source said. Not all small companies see it this way. Guilford Savings Bank, based in Guilford, Conn., has spent the last 18 months building a record retention policy to meet Sarbanes-Oxley requirements. It has five branches in and around Connecticut and has spent months in its vault going through boxes of microfiche and labeling which records are in each box. Administration supplies and classes to learn how to create its record rentention policy cost the company about $2,500, but it says the larger cost is in employee time and pay. It didn't put a figure on this. "Keeping on track with what we have and what we need to keep is the most difficult part," said Erika LaBanca, facilities coordinator in charge of compliance at the bank. The upside is that the bank is much more organized now. "I can go down to the basement and not trip over everything now," she said. To add on to the cost issues, many companies are experiencing organizational challenges when they try to implement compliance procedures. A spokeswoman for one of the largest cable companies in the U.S. said her company is in the early stages of creating a compliance program to meet regulations. "Most of our divisions have something in place, but we need to write a company-wide plan; We need all the divisions on the same page," she said. Aside from the organizational requirements, the company is also "ignoring some of the records components" of the law, which need to be looked at more closely, she said. Internally she said "meeting with all the right people at the right time" to get the compliance program underway is also difficult. The company declined to give more details on what records managment systems it is looking at, or how much it is spending on compliance. For more information: Fast Guide to Regulatory Compliance Managing corporate records for Sarbanes Oxley Part two: Managing corporate records for Sarbanes Oxley
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