May 2019 – Rick Szilagyi, Principal

The Genesis of Whistleblower Policies

Remember the issues surrounding Enron and WorldCom in the early 2000s?  These two extremely large companies, “darlings of Wall Street,” were found guilty of scandalous financial behavior, brought to light by individuals within the companies. 

Corporate misbehavior, as seen in these two examples, helped lead to the Sarbanes-Oxley Act, which includes prohibitions against corporations AND nonprofits from retaliating against employees, board members, volunteers, etc., when someone “blows the whistle” about financial mismanagement.  Today, most of our fifty states have laws to protect whistleblowers, and Whistleblower Protection Policies often include more than issues related to financial mismanagement.  They can also cover issues pertaining to unsafe conditions, alleged discrimination, harassment, etc.

Should your nonprofit have one?  Yes, it should.  Want further evidence?  Read Part VI, Section B: Policies when preparing your 990.  The question is there: “Did the organization have a written Whistleblower Policy?”  While not required by the IRS, having a whistleblower policy is something it strongly supports.  Having a Whistleblower Policy in place can be helpful when applying for grants, as applicants are usually asked to submit their organization’s most recent 990.  Most institutions likely take the answer to the Whistleblower Policy question into consideration when awarding grants, particularly if it’s a substantial one.  If an organization is more buttoned-up in terms of its policies, it is a better candidate for a grant award.

Generally, and specifically, what does a Whistleblower Policy do?

In general, the policy shows commitment to being open to hearing about complaints, and shows that the organization values transparency and accountability.  Specifically, the policy should do three things:

  1. Encourage staff and volunteers to come forward with credible information on illegal practices, violations of the organization’s policies, etc.
  2. Specify that the organization will protect the individual from retaliation.
  3. Identify those staff, board members, or outside parties to whom such information can be reported.

For more information and sample policies, please visit the following:

The Lexian Management newsletter is for informational purposes only.

Always consult your attorney, accountant, and/or insurance provider to obtain advice with respect to any particular issue or concern.