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Tab 15: Whistleblower Policy

The community foundation submits evidence that there is a system to receive and respond to internal and external good faith complaints about violations of the law or of the ethics or organizational policy or other misconduct by trustees, directors, or staff members.

Related Standards

II. Mission, Structure and Governance
II.F.3 A community foundation's governing body approves and monitors policies regulating the ethical operations of the community foundation.

View all National Standards

Key Element

Evidence that the community foundation has a system to receive and respond to internal and external good faith complaints about violations of the law, ethics, or organizational policy or other misconduct by trustees, directors, or staff. At minimum, the written policy should include:

a system for reporting information

a procedure for investigating information

a prohibition against retaliatory action against those who make good faith complaints

Core Materials
FAQs
Glossary

Required Document

Whistleblower policy

How did a whistleblower policy come to be important for community foundations?

When accounting scandals rocked Enron, Arthur Andersen, and other businesses, Congress enacted the American Competitiveness and Corporate Accountability Act of 2002, commonly known as the Sarbanes-Oxley Act after its co-writers, Senator Paul Sarbanes (D-MD) and Representative Michael G. Oxley (R-OH). While the law, designed to rebuild public trust in America's corporate sector, largely affects only publicly traded for-profit corporations, the nonprofit sector was urged to voluntarily adopt many of its provisions to help ensure effective governance and avoid potential government regulations. These provisions include defining the role of the board of directors in overseeing financial transactions; auditing procedures that ensure independence; and protecting whistleblowers who report financial and other improprieties.

Why should a community foundation have a whistleblower policy?

As the success of a community foundation depends upon public confidence, credibility, and broad public support, a goal for a foundation should be to maintain the highest standards of personal and professional integrity, conduct, and ethics. A financial impropriety reporting and whistleblower protection policy reflects practices and principles that are crucial to maintaining a foundation's success and standing within the community.

What elements should be included in a whistleblower policy?

The Sarbanes-Oxley Act provides new protections for whistleblowers and criminal penalties for actions taken in retaliation against whistleblowers. The act protects whistleblowers who risk their careers by reporting suspected illegal activities in the organization. It is illegal for a corporate entity - either for-profit or nonprofit - to punish a whistleblower in any manner. A policy should also address a chain of command for making complaints; a system for investigating and resolving such complaints; and punishment for a whistleblower who makes intentionally false, fraudulent, malicious, or frivolous claims.

Who is a whistleblower?

A whistleblower is someone who makes a good-faith communication that discloses information that may indicate an improper activity or condition. Whistleblowers are only reporting parties and not investigators or finders of fact; they do not determine appropriate remedial or corrective actions. The policy should be made applicable to all employees, board members, committee members, and volunteers.

How can a whistleblower policy be structured?

An organization must develop procedures for handling employee complaints, including a confidential and anonymous mechanism to encourage employees to report any improprieties within the entity's financial management. No punishment - including firing, demotion, suspension, harassment, failure to be considered for promotion, or any other kind of discrimination - is permitted. Even if the claims are unfounded, the nonprofit may not reprimand the employee. The law does not force the employee to demonstrate misconduct; a reasonable belief or suspicion that a fraud exists is enough to create a protected status for the employee.

Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation that was designed to rebuild public trust in the corporate community in the wake of the Enron scandal and other corporate and accounting scandals. Sarbanes-Oxley requires publicly traded companies to adhere to governance standards that expand board member roles in overseeing financial transactions and auditing procedures. Nonprofit organizations are required to comply with two Sarbanes-Oxley provisions: whistle-blower protection and document destruction. However, incorporating other internal controls and policies included in the act may lead to greater accountability and transparency by nonprofits to their boards of directors, their donors, and the general public.

Whistleblower policy
A policy that outlines a mechanism that allows individuals to communicate their good faith concerns about possible legal or ethical violations and prohibits retaliation against whistleblowers. Policies and procedures will vary depending on the size, staffing, and activities of the organization.

Reconfirming?

Review all key elements and consider if your organization has made changes to your policies, powers or practices.

Pay special attention to key elements and core materials marked with and a . These represent minimum requirements for reconfirmation as well as Pension Protection Act requirements. Items marked with a are particularly critical for those who submitted record books prior to January 2007.