The Importance of the Whistleblower Policy
So far in our Policies and Procedures series, we have looked at two of the three written policies mentioned in part VI section B of the IRS Form 990 (read more about Document Retention and Destruction Policies and Conflict of Interest Policies). In this article, we are going to look at the final included policy, the whistleblower policy.
While the whistleblower policy is not required by law or the IRS it is highly recommended. The intent of the policy is to prevent violations of the Sarbanes-Oxley Act Section 1107 which prohibits retaliation against informants.
Having a written whistleblower policy is a best practice as it demonstrates transparency and accountability both internally and externally. Transparency and accountability are critical for building trust and demonstrating the integrity of a nonprofit. The whistleblower policy is a proactive measure for your organization, promoting a culture that supports problem-solving and safeguarding your nonprofit’s reputation.
As mentioned previously, the whistleblower policy is specifically mentioned in question 13 of part VI section B of the IRS Form 990, “Did the organization have whistleblower policy.”
Checking ‘no’ to this question can negatively impact the rating of charity evaluators or watch dogs. It also raises concerns about governance policies and practices.
Developing a Whistleblower Policy
An effective policy should apply to anyone who may observe and report on violations. This includes the board, committees, management, staff, and volunteers. The other essential element of the policy identifies the individual or individuals designated to receive whistleblower reports. This person has a significant responsibility and needs to demonstrate integrity. The whistleblower needs to feel confident the person hearing the report will not impede the process and can be counted on to follow through with an investigation. The designated recipient may be a board member, top level management, or an outside party.
The policy scope is generally broad and not limited to just financial actions. If the organization has a code of ethics this can serve to communicate expectations and help identify actions or conduct that are inappropriate. It is also recommended the policy specify that the reporting individual is acting in good faith on credible information.
The whistleblower and individuals who cooperate in the investigation should not be punished if they are acting in good faith and without malice toward the organization. Thus, the policy should include the consequences for any retaliation actions. This may include disciplinary action, suspension or potential termination.
Offer Direct Guidance
While having a written whistleblower policy for your nonprofit provides consistent and clear information, training is essential. Ideally the training would be interactive and provide an opportunity for participants to practice active listening and creating a safe environment using a case study. By supplementing your policy with effective, intentional guidance, you further reinforce the culture of transparency and accountability you have created within your nonprofit.
Our Nonprofit Specialists highly recommend that our clients adopt a whistleblower policy as part of their comprehensive, custom-tailored policies and procedures manual. Please contact your accountant with specific questions or get in touch with Wegner CPAs’ Nonprofit Advisors to learn more about developing a customized policies and procedures manual that echoes the goals, culture, and mission of your organization. For more information on Form 990 and the policies included, download our Form 990 FAQs.
