Blowing the whistle on Fraud.

We recently collaborated with the wonderful team at Our Community and developed an article for their November newsletter. We have included an excerpt below and encourage you to read the full newsletter and subscribe here!

Our Community is Australia’s Centre for Excellence for the nation’s 600,000 not-for-profits & schools, providing advice, tools, resources and training.

It seems like every week that we hear media reports of inappropriate or illegal behaviour, misconduct or fraud at an organisation.

In the weeks, months or even years that follow, we watch as the consequences of these allegations play out in the public eye. Allegations of credit card misuse at the Shire of York in Western Australia’s wheatbelt, fraud among Queensland sporting groups and by a school principal – they’re just a few examples.

Mitigating commercial and reputational risk is essential to any organisation’s health – essential when it comes to attracting funding, employees and customers, and protecting the board. One way in which not-for-profits can take a proactive approach is by implementing a whistleblowing program. Typically, a whistleblowing program aims to cultivate a “speak up” culture within an organisation, and removes barriers that might otherwise deter employees from reporting inappropriate conduct, which can occur at any level, from the longest-serving board member to the newest staff volunteer.

The power of allowing employees multiple ways to “speak up” – including anonymously – has been reviewed by various local and international studies. A 2014 study by the accounting network BDO Australia found that 35% of frauds in the not for-profit sector were uncovered as a result of tip-offs, which makes tip offs among the most effective means of fraud detection. It’s important, then, for an organisation to have a formal mechanism in place to channel tip-offs – in other words, a whistleblowing program.

A whistleblowing program is a serious commitment. Its planning, development and maintenance requires a sensitive approach to policy development and internal promotion. It requires support from all levels of the organisation, particularly the upper echelons. This is important: the BDO study found that 30% of the largest fraud incidents involved collusion, and of these, 31% involved a board member.

An effective whistleblowing program:

  • provides multiple avenues for reporting wrongdoing
  • offers whistleblowers support and protection
  • guarantees anonymity
  • guarantees confidentiality of reported information.

Internal and external reporting pathways are not mutually exclusive.

Organisations should always encourage employees to use internal means as their first option to report wrongdoing. But when employees feel unsafe, do not feel confident, or fear reprisals, it is crucial that they can report externally. This accords with best governance practice and Australian Standard AS 8004_2003.

Making multiple reporting pathways available:

  • increases the likelihood that wrongdoing will be reported
  • reduces delays in reporting wrongdoing
  • allows timely assessment, investigation and action
  • facilitates anonymous reporting, communication and protection
  • allows individuals to report alleged wrongdoing at any level of the organisation.

The corollary, of course, is that organisations must take appropriate and timely action in response to reports to build integrity and trust.

How committed is your organisation to encouraging the reporting of wrongdoing? Do you provide both internal and external reporting mechanisms that offer whistleblowers anonymity, protection, confidentiality and the promise of follow-up action?