TMCnet News
SARBANES-OXLEY COMPLIANCE(Controller's Report)An industry-based look at Sarbanes-Oxley costs is available to controllers in a recent survey by the Risk Management Association (RMA), a professional group for bank lenders. Key finding: The survey determined that most SOX-based cost increases are attributable to hiring additional staff, not investments in compliance technology. Indeed, 66% of respondents attributed less than 10% of their increases in SOX-based spending to technology that supports implementation. Observes RMA: "The majority of costs have involved bank staff, with institutions either diverting current staff from other matters or adding new staff." CR emphasizes that this RMA survey attempted to capture direct costs associated with SOX compliance. In particular, its strategy was to ask participants to provide ranges for incremental costs surrounding SOX implementation. Key points: Excluded from this survey were the routine costs incurred in preparation of the general ledger, monthly/quarterly/annual closings, auditors, or 10K and 10Q statements. Further, RMA broke respondents into two asset pools: Pool A reflects smaller lenders with assets below $15 billion while Pool B contains those with assets at $15 billion or more. Findings: * At smaller lenders, respondents expected costs to rise this year in the categories of testing, external auditors, internal staff, total and other preparation, and total costs. Note that among these survey participants, total SOX-based costs averaged $422,600. (See table.) * SOX costs will increase this year at larger lenders in two categories: total control structure and other preparation. Among this group, average total SOX costs are $4,553,800. Controllers may find one bright spot in this survey: The SOX workload is stabilizing or decreasing. Details: Thirty-two percent of respondents expect manager involvement with compliance to decrease in the 12 months ending May 2006, while 50% expect no increase in demands. Note that 29% of controllers will spend less time on SOX in this period. (Source: Risk Management Association) Sarbanes-Oxley Compliance Costs at Banks: May 2005 Directional Directional change in change in Pool A costs for Pool B ($ costs for Activity ($000) 2005 ($000) 2005 Documentation $93.4 Decrease $822.2 Decrease Deficiencies 48.8 Decrease 472.2 Decrease Total control structure 116.8 Decrease 937.5 Increase Testing 104.9 Increase 800.0 Decrease External auditors 135.1 Increase 791.7 Decrease Internal staff 102.9 Increase 1,227.3 Decrease Total preparation 119.7 Increase 1,448.7 Decrease Other preparation 35.8 Increase 187.5 Increase Total costs 422.6 Increase 4,553.8 Decrease (Source: RMA) |