Whistleblowing for non-profits

Not-for-profit organisations often rely heavily on public trust and must maintain high ethical standards to fulfil their missions effectively. One key aspect of fostering an ethical environment is having robust policies in place that support whistleblowing for non-profits.

Australia’s legislative framework aims to encourage the reporting of misconduct, improper conduct, or breaches of the law by providing legal safeguards for whistleblowers.

As non-profit organisations navigate this framework, it’s essential to understand the requirements and implications of the law. 

Regulatory scrutiny on whistleblower policies for Australian organisations

In a review of over 100 whistleblower policies across various organisations, including charitable companies, the Australian Securities and Investments Commission (ASIC) uncovered a worrying trend. The review revealed that the majority of these policies failed to include all the necessary information required under the Corporations Act.

Whistleblowing for non-profits: Definitions

• Certain non-profit organisations in Australia must comply with the corporate sector whistleblower protection regime under the Corporations Act 2001. This includes incorporated associations, bodies corporate, and organisations registered as Australian bodies or charities with ASIC or the ACNC, if they meet the definition of a trading or financial corporation.
• Determining if a non-profit falls under this definition can be unclear, especially when trading or financial activities are part of their operations. The key factor is whether these activities make up a significant proportion of the organisation’s overall activities.
• Examples where non-profits have been considered trading or financial corporations include sporting clubs paying players or selling media rights, charities earning substantial trading income, and finance organisations lending money or engaging in major investments.
• Ultimately, each organisation’s status is decided case-by-case based on their specific activities. Those deemed trading or financial corporations must adhere to the whistleblower protection requirements outlined in the legislation.

Obligations

If your incorporated association or body corporate significantly engages in trading or financial activities, you must comply with whistleblower protections under the Corporations Act. This involves:

• Keeping whistleblowers’ identities and information confidential unless they consent to disclosure.
• Preventing harm or detriment to whistleblowers, such as termination, harassment or discrimination for reporting misconduct.

Adhering to whistleblower protection laws for Australian non-profits

For not-for-profit organisations in Australia to comply with whistleblower protection laws, there are three key obligations they must fulfill:

1. Maintaining whistleblower confidentiality
   
   Except in specific permitted situations, it is illegal to disclose the identity of a whistleblower or any information that could potentially reveal their identity (including details about their spouse or relatives). This confidentiality extends to not disclosing the whistleblower’s identifying details to other eligible recipients.
   
   Investigations into the reported misconduct should be conducted in a manner that preserves the whistleblower’s anonymity as the information source. Breaching confidentiality can result in criminal offences and civil penalties under the Corporations Act and Tax Administration Act.
   Disclosure of a whistleblower’s identity is permitted in certain circumstances, such as reporting to ASIC, APRA, or the AFP, seeking legal advice, or with the explicit consent of the whistleblower.
   
2. Protecting whistleblowers from detriment and victimisation
   Organisations must protect whistleblowers from detrimental conduct and victimisation, as it is illegal under the Corporations Act and Tax Administration Act to cause detriment or harm to a person due to their whistleblowing activities or potential whistleblowing.
   
   Detrimental conduct can include dismissal, demotion, discrimination, harassment, intimidation, psychological harm, damage to reputation or property, or any other form of harm. Victimisation refers to causing or threatening detriment due to a belief or suspicion that the person has made, plans to make, or could make a whistleblower report.
   
   ASIC and the Commissioner of Taxation have the power to investigate allegations of detrimental conduct or victimisation, which may result in penalties for the offender, the organisation, or its officers and employees involved. Organisations may also be ordered to pay compensation to whistleblowers who suffer loss, damage, or injury due to such actions.
   
3. Implementing a whistleblower policy
   
   Public companies, large proprietary companies, and proprietary companies that are trustees of registrable superannuation entities are legally required to have a whistleblower policy in place. However, there is an exemption for not-for-profit public companies limited by guarantee with annual consolidated revenue below $1 million.
   
   While not mandatory for all not-for-profit organisations, implementing a whistleblower policy or strategy can be beneficial. It demonstrates reasonable precautions to prevent detrimental conduct or victimisation and helps foster a culture of integrity and accountability.

Not-for-profit organisations are advised to seek legal counsel before implementing any changes to meet the requirements of whistleblower protection laws. By adhering to these obligations, organisations can promote an ethical environment, protect whistleblowers, and effectively address any reported misconduct or improper conduct.

Next steps

Organisations like Report It Now® offer reporting hotlines and services to help businesses create a culture of honesty and integrity while encouraging employees to report misconduct anonymously and confidentially.

By understanding whistleblowing for non-profits and implementing appropriate strategies, not-for-profit organisations in Australia can foster an ethical environment while protecting whistleblowers and addressing misconduct effectively.