Employee Hotline, Part V
Third Step: After the Call
Once you have set up your dissemination rules that determine which individuals, departments or groups receive each type of complaint, you should then periodically review that structure to ensure any changes within the financial institution are reflected in the report dissemination rules.
Ongoing Communication With Anonymous Callers
When dealing with an anonymous caller, the goal should be to get complete and accurate information during the interview. This is based on the assumption that there may never be an opportunity to add additional information - you only get this one chance. An anonymous hotline should therefore enable the caller to call back to offer additional information while maintaining anonymity. This is generally done by giving the caller a process to follow for calling back to answer more questions. The caller can be given an unique code correlating to his/her report and asked to call back after a pre-determined interval. This gives investigators a chance to review the information and formulate questions to ask the caller if he or she calls back as agreed. While the call back process can enhance an investigation, roughly two-thirds of anonymous callers historically never call back, so the quality of every initial interview is of critical importance.
The Role of Audit and Compliance
To ensure that allegations related to Sarbanes-Oxley reach the board of directors, hotline incident reports regarding financial irregularities should be automatically reported to the auditor or compliance officer responsible for this communication. This enables the auditor to receive any reports of financial irregularities in a timely manner. Many financial institutions elect to simultaneously send such reports to their legal counsel or ethics officer, who work with the auditor to manage the investigation.
Having received an allegation, the next step is to determine how the allegation should be investigated. Personnel who receive reports generally have procedures in place to investigate incidents pertaining to them. These processes should be periodically reviewed with legal counsel to ensure they are appropriate and effective.
Allegations of financial irregularities present a somewhat more complicated situation, as Sarbanes-Oxley requires the Audit Committee of the Board of Directors to develop a mechanism for the "...receipt, retention and treatment..." of complaints. One possibility is developing relationships with external parties, such as forensic accounts or independent Certified Fraud Examiners. This gives them an independent resource to manage an investigation, should an allegation arise. Given new independence requirements for external auditors, many accounting firms have formed alliances that enable them to recommend a second firm for special projects such as these.
When investigating an incident based on a confidential hotline tip, it is important for the financial institution not to reveal that it is reacting to a tip. Disclosing this information is a breach of confidentiality and may put the whistle blower at risk.
Tracking the "Treatment" of Complaints
This requirement of SOX is best met with a database. A system like this enables the financial institution to document every complaint and then add information regarding the actions they have taken to investigate each allegation. The database should record the final disposition of the investigation and the nature of any discipline or other corrective action taken as a result of the complaint. Should the financial institution be sued, or should a regulator or government agency require it, this documentation can be very helpful, even in a court of law. This is another area in which a qualified third-party hotline provider can assist the financial institution by providing an established system for documenting investigative activities.
Data regarding hotline calls should be summarized to assist management in discovering trends within the organization. For example, if reporting reveals one type of issue is always the top concern, it points to a need for training or communication to address the situation.
Financial institutions should look for "hot spots" within the organization. Is there a division that seems to have more issues than others? If so, there are probably opportunities for employee training or increased management training to improve the situation. Conversely, there may be an issue with a location that is exceptionally quiet. Perhaps the hotline communication has not reached this group.
For many years, companies have been using hotlines to detect theft and fraud with great success. But until recently, some companies still considered them a luxury, rather than a necessity. Since the passage of the Federal Sentencing Guidelines over ten years ago and the more recent corporate scandals, hotline usage has dramatically expanded. A variety of business sectors have found hotlines to be critical tools in their efforts to uncover and manage a variety of unethical, illegal, or fraudulent activities.
With the introduction of the Sarbanes-Oxley Act, lawmakers have further validated the need for this reporting mechanism.
Creating a successful hotline program involves thoughtful planning of the reporting process, the communications strategy and the back-end issues of investigation and data management.
Establishing an anonymous hotline gives financial institutions access to a powerful tool for detecting fraud and other harmful activities. It also assures investors, customers and members that the financial institution has made a long-term commitment to maintaining the highest standards of business conduct.
About the Authors: Tony Malone is CEO of The Network, Inc., a company that helps companies collect and respond to feedback from employees, suppliers, customers and members on vital issues, such as ethics, safety and service quality.Ralph Childs is Chairman of The Network, Inc. He founded The Network in 1983 as the nation's first anonymous third-party ethics hotline provider.The Network, Inc. provides centralized reporting of sensitive workplace incidents. In addition to operating hotlines and helplines, The Network also offers comprehensive communications services to support employee communication initiatives. For more information about The Network and ReportLine, call 800-357-5137 or visit www.reportline.net Our thanks to THE NETWORK for providing us with Best Practices in Ethics Hotlines and for their permission to use it.
Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 10, 10/05
First published on 10/01/2005