Thursday, January 28, 2010

Whistle Blower Policy

We had some big business scandals in the early part of the new millennium. Accounting fraud at companies like Enron and Worldcom, and theft from companies like Tyco were in the headlines almost daily. Business executives were treated to the “perp walk” on a regular basis, partly to prove that the government was doing something about them. The end result was a lot of people lost a lot of money because of a few arrogant #$%^&*.

Non-profits were directly affected by these scandals. There is now more scrutiny of how non-profits do their work, and concern when any individual at the non-profit gets a salary over $150,000. (Maybe the big banks should get some of this scrutiny. But that’s off topic.) There has always been a concern when a non-profit spends more than 20% of its revenue on administration and fund raising.

The law passed to deal with business ethics, Sarbanes-Oxley, now requires that non-profits have a Whistle Blower Policy. A Whistle Blower Policy details the organization’s response to someone who reports alleged inappropriate activity within the organization. It protects the Whistle Blower from retaliation and gives a process for reporting the questionable activity. Many organizations do not know that this requirement exists, but the new IRS Form 990 now has a question about this.

What’s a non-profit to do? They can spend thousands of dollars with an attorney to create a customized policy. This is appropriate for large organizations like colleges and the United Way. There even are companies that enable an organization to outsource their response to people who report inappropriate activity.

Smaller organizations have an alternative. They can use a template to establish a policy. Here is a good site where you can get such a template.

Take a look and try it out.

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