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Whistleblower Policies: What Are the Recommendations and How Does Your Not-for-Profit Organization Measure Up?


Fourth Quarter - 2014

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As part of CohnReznick’s ongoing commitment to provide value to our clients and contacts, earlier this year we announced our first Not-for-Profit and Governance Survey. The survey, which covered topics such as audit committees and conflicts of interest policies, also included the topic of whistleblower policies. Why? Because, as highlighted in the American Society of Certified Fraud Examiners (ACFE) 2014 Global Fraud Study, whistleblower tips remain the most common way that acts of fraud are initially detected. Based on the 2014 study, whistleblower tips accounted for 42.2% of initial detection of occupational frauds1 – a significant percentage and one that has remained consistently high for more than a decade.

Whistleblower Policy

CohnReznick strongly encourages all not-for-profit leaders to develop a whistleblower policy and system to support the anonymous reporting of complaints and minimize the risk of frauds going undetected. In an effort to gauge our clients and contacts understanding of whistleblower policies, we asked respondents if their organization has a written whistleblower policy in place. We were pleased to find that 82% of responding organizations do have a policy in place. For the other 18% without a policy, we want to reiterate that it is important to look into individual state regulations as some states may require a whistleblower policy.

Whistleblower Complaint Resolution Process

Coupled with the written whistleblower policy, it is imperative that not-for-profit organizations implement an effective complaint resolution system. A policy that lacks a complaint resolution system is equivalent to having no policy. An effective complaint resolution system ensures that the objectives of the written whistleblower policy can be accomplished. When asked if their organization has a whistleblower complaint resolution process, we were encouraged to find that 65% of the survey respondents stated that they do have a process in place. It was also interesting that only 11% said they used an outside service to record and monitor complaints.

In an effort to analyze this further, CohnReznick also requested information on whether whistleblower hotlines were part of a whistleblower complaint resolution process. We were surprised to find that only 22% of respondents have a hotline in place, with only another 7% planning to implement one in the next 12 months. We would like to note the implementation of a whistleblower hotline has been recommended by the IRS for adoption by all not-for-profit organizations. This hotline protects the board and demonstrates commitment to best practices.

What Does CohnReznick Think?

We recommend that clients annually evaluate their fraud prevention and detection systems. Arguably, the most important tool in these systems is a well-functioning whistleblower policy. Furthermore, we also encourage clients to annually evaluate the top risks their entities are facing and whether there are controls in place to mitigate those risks. This evaluation could be done in the broader context of an Enterprise Risk Management process.

For more information on fraud prevention and detection for not-for-profit organizations or any of the other topics covered in our inaugural Not-for-Profit Governance Survey, please visit our website.

Contact

For more information, please contact John Alfonso, CohnReznick partner, at john.alfonso@cohnreznick.com or 646-254-7415.


1http://www.acfe.com/rttn-detection.aspx


This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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