Whistleblower Policy Disclosure

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In the aftermath of Enron and Worldcomm, the federal government enacted measures in 2002 to protect individuals who come forward with information about financial mismanagement and corporate cover-ups through the Sarbanes-Oxley Act (SOX). While most of SOX applies only to publicly traded companies, a few provisions, including whistleblower protection, apply to nonprofit organizations filing an IRS Form 990. Whistleblower policies set out procedures for addressing complaints from employees regarding financial improprieties or misuse of organizational resources and help foster an ethical and more transparent workplace.

Legal Authority

SOX prohibits employment related retaliation against whistleblowers that provide information on specific financial crimes under federal law by all entities, including nonprofit organizations.

In Minnesota, state law also prohibits employment-related retaliation against whistleblowers that report violations of state or federal law to an employer or government body. The statute also prohibits retaliation against an employee that does not conform to an employer’s order when the employee has an objective basis to believe is illegal and e has so explained his refusal.

While the above legal requirements may be fulfilled without a written whistleblower policy, the IRS “encourages the board of directors to adopt an effective policy for handling employee complaints and to establish procedures for employees to report in confidence any suspected financial impropriety or misuse of the charity’s resources.”

Form 990 Disclosure

In Part VI, Section B, Question 13, the IRS Form 990 asks, “does the organization have a written whistleblower policy?”

Unlike the Conflict of Interest inquiry, Question 13 on the adoption of a whistleblower policy does not suggest content or procedures to follow for the policy. Nonetheless the intent of this question is to encourage compliance with the law and to protect employees who in good faith report a violation of state or federal law. It also provides some internal procedures to the organization to address concerns in an attempt to prevent fiscal impropriety or misuse of organizational resources.