Will Sarbanes-Oxley Compliance Leave a Hole in Your Budget?By Tom Steinert-Threlkeld | Posted 2004-09-22 Print
Is the practical effect of Sarbanes-Oxley compliance making companies less efficient, rather than more? For one real-estate investment trust company the unfortunate answer is, yes.
Identifying how all of your company's processes work is supposed to be a benefit of going through the rigor of complying with the Sarbanes-Oxley Act, which is designed to curb financial fraud among U.S. corporations.
But is the practical effect of Sarbanes-Oxley compliance to make a company less efficient, rather than more?
Most likely, yes. At least if you're CarrAmerica Realty, a $570 million-a-year real estate investment trust based in Washington, D.C.
The company's technology shop this year gave back $750,000 of its $12 million budget because it didn't have time to pursue initiatives aimed at improving its efficiency. The culprit: Sarbanes-Oxley compliance. The 40-person staff didn't have time to pursue both.
"We had to focus so many things on Sox,'' says Susan Gerock, the senior director of systems integration and support at CarrAmerica. "We had budgets for projects and had to give back the budgets."
For instance, the company had wanted to change over its collection of rental payments on the 300 properties it owns to electronic methods, including facsimile transmissions and e-mail, using Automated Clearing House codes.
Right now, at the turn of each month the company must manually process approximately $7 million to $8 million of rental payments that appear nightly, collected in lockboxes. The company also wanted to automate the process of renewing leases on its properties.
Instead, the company's technology staff spent its time this year on Sarbanes-Oxley compliance, and spent $1 million in the process.
The prospects are no better for next year.The company's corporate management has sliced its 2005 technology budget to $11 million, and Gerock expects another $700,000 of that to go toward Sarbanes-Oxley compliance. With the usable budget down almost 15 percent overall, some efficiency initiatives are again likely to be delayed.
Gerock is sanguine. But she wants the hamstringing impact of Sarbanes-Oxley to be recognized in the way her resources get managed. All compliance-related spending will be clearly identified.
"We're putting a Sox tax in the budget,'' she says.
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