Although it is not required by law for nonprofits to have written whistleblower policies, it is highly recommended to practice sound governance and diligent risk management. The Sarbanes-Oxley Act of 2002 (SOX) was instituted to mandate protection for employees that reveal concerns within publicly traded companies. Using many of the guidelines from the Act, The Panel on the Nonprofit Sector was formed and developed a set of recommendations for nonprofits to follow in order to promote transparency and accountability within their organizations.
In a research study conducted, 82 percent of nonprofit employees felt their organizations were above-board and honest in their dealings, compared to 60 percent at for-profit entities and only 30 percent in the public sector. However, 69 percent of all people who have reported illegal or corrupt activities in all sectors have been forced into retirement or have lost their jobs.
Developing a risk management strategy that includes a whistleblower policy will help strengthen your organization and minimize the chances of a serious issue going public before management and board members have the opportunity to handle the situation. It will also encourage employees to come forward if they do notice a problem and mitigate losses or litigation costs due to corrupt or illegal activities if they know there will not be any retribution.
A sound whistleblower policy should include a statement letting employees know there will be no retribution for reporting an issue, who they should report the issue to and the steps that will be taken once an issue is reported. With a clear set of procedures and practices in place, employees will know how to address their concerns and understand your organization’s integrity is tantamount.
For possible sponsors and government programs, a whistleblower policy outlines your nonprofit’s moral compass and provides a measure of security due to accountability and transparency.
Does your nonprofit currently have a whistleblower policy as part of your nonprofit risk management services? Please share with us in the comments section below.