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What do you think?

Our national nonprofit is in a very difficult financial situation. The elected treasurer could not provide reports to the board last year because staff could not get new financial software to work right. The treasurer recommended a new accountant who found that we were way in the red. When a few directors called for the treasurer to be removed, the treasurer resigned. He had made several recommendations to save money that were not well-received (combining the Executive Director’s position with another, etc.) and many perceived he was "thrown under the bus" because of these recommendations. One Board member mentioned that he might have recourse under a "whistle blower" law for nonprofits (Sarbanes/Oxley?). What do you think?

It is unlikely that he has any whistle blower protection.  Although most of Sarbanes/Oxley doesn’t apply at all to nonprofits, the whistle blower protections of Sarbanes/Oxley apply broadly to all organizations, including nonprofits, but only make it criminal to retaliate against a person who provides information to a federal investigator.  Sarbanes doesn’t protect against retaliation for disclosure to state or local governmental investigators, let alone for bringing bad news to a board of directors.  State whistle blower protection laws, where they exist at all, apply mostly to employees and sometimes only governmental employees. Assuming he is a typical volunteer treasurer, a state law would not normally apply to him.  His best protection might be from your organization’s own whistle blower protection policy -- if there is one -- that could create rights beyond those provided by the law.

From what your wrote, however, it doesn’t sound as though he has charged fraud, illegal activity, failure to follow corporate policies or other misfeasance of the type normally covered by a whistleblower protection policy.  It sounds more like he has raised a series of governance issues and some of the board want to make him a scapegoat for the bad financial situation.  If he is responsible for the bad financial situation, it may make sense to remove him from office.  If he is just the messenger, it is not one of the top ten practices of good governance to shoot him.

Tuesday, May 31, 2011

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