Compliance Policies and Procedures,
Non-Profit Whistleblower Policy
Non-Profit Whistleblower Policy Preparation Form (Coming Soon) – We recommend that you gather the information in this form prior to accessing the online questionnaire. Doing so will help you efficiently create your custom Non-Profit Whistleblower Policy.
Non-profit organizations can use this whistleblower policy to set up procedures for whistleblowing. Specifically, non-profits will use this policy for its directors, officers, employees, and volunteers (referred to collectively as non-profit individuals) to report any suspected criminal behavior, violations of law or internal policies, or misuse of the non-profit’s resources. It is important for non-profits to create a process to investigate these reports and address any wrongdoing. By using this policy, non-profits protect their individuals from retaliation for reporting misconduct.
Regulators and watchdog agencies are increasingly recommending written governance policies for non-profits since the introduction of the Sarbanes-Oxley Act of 2002 (SOX), which sets out governance standards mainly applicable to public companies. Almost all states have passed whistleblower protection statutes and encourage non-profits to adopt whistleblower policies. Laws usually do not require governance policies. However, not having them can bring into question the non-profit’s compliance with laws, such as anti-retaliation statutes, and negatively affect the non-profit’s reputation and operations. For example, if the non-profit does not have a whistleblower policy:
- The IRS may be more likely to audit the non-profit.
- Watchdog organizations may assign a lower rating to the non-profit.
- The non-profit may face more difficulties in attracting new donors, who may view weak governance as a sign that an organization also poorly handles its operations and funds.
Benefits of a Whistleblower Policy
A well-drafted and effectively implemented whistleblower policy can:
- Encourage reporting, and therefore, reduce the risk that fraud and other malfeasance go undiscovered.
- Send a message to non-profit individuals, regulators, and other stakeholders that the non-profit does not tolerate misconduct.
- Be used as a marketing tool in order to help instill donor confidence in the non-profit.
- Enhance the non-profit’s reputation, as it demonstrates the non-profit’s commitment to identifying and remedying malfeasance.
- Encourage non-profit individuals to raise matters of concern internally, therefore, avoiding the potential damage that may result from external disclosure.
- Help directors fulfill their fiduciary duties to oversee the non-profit and ensure compliance with applicable laws and internal policies.
- Put the non-profit in the best possible position to defend against claims of improper handling of complaints brought by a whistleblower.
- Promote compliance with federal and state anti-retaliation laws. For example, SOX and many state laws prohibit non-profits, including charitable organizations, from retaliating against whistleblowers.
- Meet IRS expectations. The IRS asks on Form 990, the publicly available annual return for non-profits, whether the non-profit has a written whistleblower policy and considers having that policy a good governance practice.
Customizing the Policy
This whistleblower policy assumes that the non-profit is a 501(c)(3) public charity. Therefore, the non-profit should customize this policy as needed to:
- Meet the requirements of any applicable state laws governing whistleblowers. For example, a New York non-profit meeting certain size and annual revenue thresholds must adopt a whistleblower policy that meets the requirements described in Section 715-b of the Not-for-Profit Corporation Law.
- Comply with any industry-specific requirements (for example, hospitals must include additional language to comply with federal law).
- Include any specific disclosure or reporting requirements and mitigation procedures that the non-profit currently has in place or wishes to implement.
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Non-Profit Whistleblower Policy