2012 – Whistleblowers and Ethics Hotlines

In the October 2012 Institute of Internal Auditors (IIA) Pulse of the Profession survey, 545 Chief Audit Officers provided input on their expectations in the next year.

For Ethical Advocate clients, a key finding is that the Chief Audit Officers are not seeing a dramatic change in internal whistleblower activity.  There was initial concern that the Dodd-Frank Act and corresponding financial payout would encourage whistleblowers to report malfeasance outside of their organizations instead of addressing concerns internally first.

The SEC whistleblower program allows informants to receive between 10 and 30 percent of the monetary penalties exceeding $1 million that are collected from a report with original information.  There were over 3000 reports to the SEC in the first year, according to the SEC 2012 Whistleblower Program annual report.

Internal auditors often identify and evaluate unethical employee behavior and the group has insight into the organizational whistleblower and ethics hotline activity.  Most participants said they had little or no concern about employees going directly to the SEC instead of using already established internal procedures.  The majority also said that the risk of employees going to the SEC directly had not changed since the SEC whistleblower program began.  Survey respondents said the number of ethics hotline reports stayed the same relative to the previous year.

Most respondents indicated they received between 1 and 10 reports, but 20 percent of those surveyed get more than 50 reports per year.  The nature of the hotline whistleblower reports ranked in order were in personnel, company code violations, misuse of company assets, financial fraud, and employment law violations.