Whistleblower reporting systems are also widely considered a best practice for nonprofit organizations. Form 990 now includes disclosure whether the nonprofit has adopted a whistleblower collection mechanism.  Many private companies as well are setting up Whistleblower hotlines in order to obtain both financial and non-financial related complaints (i.e. human resources, ethics violations, and other employee complaints).

The following are pitfalls to avoid when setting up a hotline:

• Most internal whistleblower solutions (when either collecting or investigating complaints) provide an unacceptably high risk of encouraging retaliation claims.  Any money saved by using internal resources is immediately lost when the first retaliation claim occurs.
• By relying on a single collection vehicle (phones), “hotline” services provide an incomplete and mechanical solution that unnecessarily constrains communications.
• By using inflexible and overly simplistic scripts/forms, most outside vendors fail to collect important information.
• By using unskilled personnel to collect the complaints, uninformed or prank calls waste investigation resources, rather than being quickly identified for what they are.

For more information, see www.fulcrum.com

Articles:

IRS Whistleblower Program Provides Opportunities For Some, Pitfall for Others

Nonprofit Organizations Now Need a Whistleblower Reporting Mechanism

Fraud Study Says Whistleblowers Are The Most Common Means Of Identifying Fraud, But This Comes At A High Personal Cost When Whistleblower Anonymity Is Not Maintained

DOL’s ARB Limits SOX & Dodd-Frank Whistleblower Protections To U.S. Employees