Imagine you have recently joined a nonprofit board. The organization’s bookkeeper, a long-time employee, approaches you and shares her concern that lately she has entered several checks signed by the Treasurer and made out to “Cash.” The Treasurer has provided no explanation except to tell her to assign the expenses to “Office Supplies” and not to worry. What do you do next?
Assess the Whistleblower Problem
First, identify the problem. The bookkeeper has made a “whistleblower” complaint of official misconduct: she has reported apparently unethical and possibly illegal activity by one of the nonprofit’s leaders. The bookkeeper is looking to you for help, as a director entrusted with fiduciary responsibilities to carefully guard the nonprofit’s charitable resources, legal obligations, and reputation. The IRS, the state Attorney General, and donors likewise all hold you and the other directors accountable for the nonprofit’s well-being.
Next, check to make sure the organization has a whistleblower policy. Better yet – do so now, to be fully prepared! It is now standard “best practice” for responsible nonprofits to have a board-approved whistleblower policy in place. Indeed, the IRS Form 990 information return specifically asks whether such policy exists, as a measure of overall good governance. The whistleblower policy should set forth a high standard for ethical conduct among the organization’s leaders and workers, along with a strong prohibition against any retaliation for whistleblowers. The federal Sarbanes-Oxley Act also contains certain whistleblower protections, as do some state laws.