What’s a Whistleblower Policy? Does My Nonprofit Need One?

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.

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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.

Establishing a Conflict of Interest Policy

Due to the very nature of nonprofit organizations, they can be particularly vulnerable to conflict of interest issues and risk losing their tax-exempt status if they do not have a clear policy established. Nonprofits rely on public perception for much of their success and the use of volunteers that wish to help the organization. If there is even a perceived conflict of interest, it can be very damaging to the nonprofit.

A conflict of interest occurs when any member of your nonprofit stands to potentially

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benefit from a transaction with your organization. This may be in the form of a service provided, or even renting space from a member. Although it is not illegal to do so, the means by which the transaction is carried out must be in the best interests of the nonprofit and not the member’s personal interests.

It is not required by law for a nonprofit to have a written conflict of interest  policy. However, the newly-revised IRS Form 990 does require disclosure of potential conflicts of interest, as well as your organization’s practices with handling conflicts and how they are identified.

A clearly-defined conflict of interest policy should include detailed information about any potential conflicts of interest, as well as a reporting procedure if a conflict is suspected. Statements made by board members should be included in the board roster to provide full disclosure, and voting practices should be outlined to preclude those with a potential conflict to reduce the appearance of impropriety. Your policy should be reviewed annually, and all board members should be encouraged to report potential conflicts as a regular practice with the details included in the minutes of your meetings. This will create a culture of integrity and transparency within your nonprofit.

Lamb Financial Group provides risk management services, as well as insurance solutions for nonprofits and social services organizations. If you have any questions or would like more information, please call us at 866-481-5262 or contact us.

Please share with us your experiences in creating a conflict of interest policy for your nonprofit organization in the comments below.

Liquor Liabilities – The Risks

Have you ever been to a company event and noticed a guest that has been served too many drinks? Have you ever wondered who would be responsible if this patron hurt him or herself, or caused harm to someone else due to intoxication? Most commercial liability insurance packages exclude liquor liability coverage, which can leave your company vulnerable to claims of over serving at a business event. Before hosting an event and choosing to serve alcohol, you should not only determine whether or not your organization has the proper liquor liability coverage, but also consider ways to reduce the risk of over serving.

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A business that does not serve alcohol as a part of their day-to-day operations, but decides to throw an event with alcohol, will need to review its policy for liquor liability coverage. Serving alcohol will most likely not be covered under your general commercial liability policy. Therefore, your business should consider adding the host liquor liability coverage endorsement onto your policy. This endorsement will protect your business if someone or something at your event is injured or damaged as a result of intoxication. This endorsement, however, will not provide coverage if your company violates the law, such as serving alcohol to a minor. A discussion with an insurance professional about the event will help provide your company with the necessary coverage needed and can further educate you on the policy exclusions.

In addition to the host liquor liability coverage, your business should consider taking proper precautions to reduce the risk of injury due to alcohol. The following precautions are ways to prevent injury as a result of overconsumption:

  • Serve food to prevent guests from drinking on an empty stomach
  •  Put up signs to drink responsibly
  • Do not serve to minors
  • Obtain the proper licenses and permits
  • Hire professional bartenders that can recognize intoxicated patrons
  • Hire security for the event
  • Provide volunteers to give rides for guests who have been drinking

The best way of preventing claims is to decrease the risk exposure from the start. If an accident does occur, your liquor liability coverage can protect your company against a claim.

Lamb Financial Group is a New York insurance broker specializing in serving nonprofits and other social services organizations. By speaking with an insurance professional from Lamb Financial Group, you can find the appropriate coverage needed for your organization’s event.