Whistleblower Protections for Nonprofits

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Federal law1 prohibits all corporations, including nonprofits, from retaliating against employees who “blow the whistle” on their employer’s financial management and accounting practices. Additionally, over 45 different states have enacted laws to protect whistleblowers from retaliation at the workplace. Consequently, committing to an internal process for addressing complaints about financial practices that protects whistleblowers from retaliation will help a nonprofit comply with state and federal laws.

Does our nonprofit need a whistleblower protection policy?

When Congress enacted the Sarbanes-Oxley Act, following the scandalous behavior of corporate America, it included two provisions that also apply to nonprofits. Federal law prohibits all corporations, including nonprofits, from retaliating against employees who “blow the whistle” on their employer’s accounting practices. Additionally, over 45 different states have enacted laws to protect whistleblowers from retaliation at the workplace. Consequently, having a good internal process for addressing complaints including a whistleblower protection/anti-retaliation policy can help your organization protect itself from the risk of violating state and federal laws that afford protections to whistleblowers, and can help ensure that if there is a problem it will be investigated and fixed.

Even organizations that do not have paid staff should also put a whistleblower protection policy in place to encourage people to bring their concerns forward without fear of retaliation. Organizations that encourage complaints by having an “open door” policy and have a standard of “no retaliation” for raising concerns are considered more transparent. These organizations will be in a better position to address all concerns, whether they are about fraudulent accounting practices, unsafe conditions, or alleged discrimination.

Do We Need a Whistleblower or Anti-retaliation Policy?

Yes. Your nonprofit is practicing sound governance and exercising prudent risk management if you have a written policy. Your organization will only be in a position to correct a situation if it becomes aware of the problem. That is why having a policy that encourages people to report their concerns without fear of retaliation is so critical to good governance. Plus, federal and state laws prohibit employers from retaliating against employees who file complaints. Claims for retaliation are one of the most prevalent causes of actions against employers (including nonprofits) today.

The IRS views whistleblower policies as helpful because:

A whistleblower policy encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the organization, specifies that the organization will protect the individual from retaliation, and identifies those staff or board members or outside parties to whom such information can be reported.

Source: Instructions to the Form 990

Resources

Here are some starting points to help your nonprofit design an appropriate whistleblower policy. But be sure to research your state’s law on protections for whistleblowers, as the details of an appropriate policy will differ state-to-state.

[1] The Sarbanes-Oxley Act includes two provisions that apply to nonprofit corporations: the whistleblower protection and document retention provisions

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