Nonprofit Whistleblower Policy
All organizations, including nonprofits,should consider implementing whistleblower provisions. Consider these important facts from the Association of Certified Fraud Examiners’ 2006 “Report to the Nation on Occupational Fraud and Abuse”:
- More than $600 billion in annual losses is attributed to fraud.
- Anonymous reporting mechanisms are the anti-fraud measure with the greatest impact on reducing losses: Companies with anonymous reporting mechanisms reported median losses of $100,000, while those without reported median losses of $200,000.
- Tips from employees, customers, and vendors and anonymous tips account for 34% of the detection of fraudulent activity for not-for-profit organizations.
A whistleblower policy and effective enforcement has the potential not only to significantly reduce fraudulent activity but also to send a signal to both internal and external constituencies that the organization exercises good corporate governance. Just as corporations must answer to shareholders, nonprofit organizations must answer to the public regarding the stewardship of resources.
So, what should a whistleblower policy look like?
The whistleblower policy should be designed to: 1) encourage directors, officers, employees, and volunteers to come forward with credible information on suspected illegal practices or serious violations of policies; 2) facilitate cooperation in any official inquiry or investigation by any court, agency, or other law enforcement or governmental body; 3) specify that the nonprofit will protect any person who has in good faith raised a concern or reported any such violation from retaliation or threats of retaliation; and 4) identify where such information regarding suspected violations can be reported. The purpose of the policy is to support the organization’s goal of legal compliance.
- Encouragement of reporting unlawful activity. The organization encourages is directors, officers, employees and volunteers to raise good faith concerns, complaints, reports or inquiries about illegal practices or serious violations of the organization’s policies, including illegal or improper conduct by the organization itself, by its leadership, or by others on its behalf. If any director, officer, employee or volunteer reasonably believes that some policy or practice of the organization is in violation of law, a report should be filed with the appropriate person as described below. Appropriate subjects to raise under this policy would include financial improprieties, accounting or audit matters, ethical violations, or other similar illegal or improper practices or policies.
- Protection from retaliation. The organization should prohibit retaliation by or on behalf of the organization against directors, officers, employees, or volunteers for making good faith complaints, reports or inquiries under this policy or for providing information, participating in any official inquiry, review or investigation under this policy. This protection extends to those individuals whose allegations are made in good faith but prove to be mistaken. The organization reserves the right to discipline persons who make bad faith, knowingly false, or vexatious complaints, reports or inquiries or who otherwise abuse this policy.
Suggestions on where and how to report. Complaints, reports or inquiries may be made under this policy on a confidential and/or anonymous basis to the extent possible. Complaints, reports, and inquiries should describe in detail the specific facts demonstrating the basis for the complaints, reports or inquiries or belief that illegal or improper conduct has occurred. Complaints, reports and inquiries should be directed to the President or Senior Officer of the Board of Directors. If President or Senior Officer is implicated in the complaint, report or inquiry, these persons shall excuse themselves from the proceedings, and the Board of Directors shall select an appropriate officer of the organization to continue the proceedings. The appropriate officer will conduct a prompt, discreet, and objective review or investigation and provide a report to the Board of Directors. The Board of Directors shall determine an appropriate response to a complaint, report or inquiry. Any officer, director, employee, or volunteer who may be implicated in the complaint, report, or inquiry shall not participate in any deliberation of the Board of Directors regarding the complaint, report or inquiry, except to present information on his or her own behalf. Directors, officers, employees, and volunteers must recognize that the Corporation may be unable to fully evaluate a vague or general complaint, report or inquiry that is made anonymously.
Last Modified: February 21st, 2010