Responding to a Whistleblower Complaint & Handling the Investigation

Introduction

Whistleblower complaints present not-for-profits and charities with complex challenges that can impact their reputation, operations, and legal standing. Addressing these complaints effectively is essential, as organisations must ensure that every whistleblower complaint is taken seriously and investigated in line with legal obligations under the Corporations Act 2001 (Cth) and other relevant legislation.

Responding to whistleblower complaints requires more than just having a policy in place—it demands a thoughtful, well-managed investigation process and a clear understanding of how to protect whistleblowers. Engaging a not-for-profit lawyer early is crucial to help navigate the investigation, maintain confidentiality, and manage potential legal risks associated with whistleblowing allegations.

Immediate Steps After a Whistleblower Complaint

Moving Beyond Policy to Action

Having a whistleblower policy is an important first step, but an organisation’s true test comes in how it responds when a complaint is made. The failure to recognise a report as a whistleblower complaint can lead to significant problems, as the organisation’s legal duties are triggered the moment a disclosure is received.

Once a complaint is identified, specific legal obligations come into effect. These include requirements to:

• Maintain the whistleblower’s anonymity if requested
• Keep their identity strictly confidential
• Ensure they are not subjected to any form of detriment or victimisation because of their report

Moving from a passive policy to an active and compliant response is critical for managing legal risks.

The Importance of Seeking Early Legal Advice

The whistleblower protection regime is complex, making it essential to obtain legal advice at the very beginning of the process. Engaging a lawyer experienced with not-for-profits can help guide the management and investigation of any whistleblower reports from the outset.

Legal counsel should be included in early discussions, particularly those involving:

• The potential for self-reporting to regulatory bodies
• Other required notifications

An expert can provide crucial advice on navigating the legal framework, ensuring the investigation is handled correctly and protecting the organisation from potential liabilities.

Triaging the Complaint & Keeping Communications Confidential

Upon receiving a whistleblower complaint, the first step is to conduct an initial assessment or triage. This process helps to understand the nature and severity of the allegations. Key considerations during this stage include:

• Reviewing the details of the complaint to determine its seriousness
• Identifying the location and availability of information that could support or refute the claims
• Assessing any immediate risks to safety or the organisation’s operations
• Determining which laws, rules, or regulations may be at issue

It is crucial to keep the details of the whistleblower complaint confidential and limit its disclosure to a very small group of people. Broadly sharing information about the complaint can lead to retaliation claims and may compromise the investigation by allowing for the destruction of evidence.

Under the Corporations Act 2001 (Cth), it is illegal to disclose a whistleblower’s identity without their consent, except in specific circumstances, such as reporting to the Australian Securities and Investments Commission (ASIC), Australian Prudential Regulation Authority (APRA), the Australian Federal Police, or a lawyer for legal advice.

Understanding Your Legal Framework & Common Allegations

NFP Duties Under the Corporations Act

Not-for-profits structured as companies registered with ASIC, as well as those considered foreign, trading, or financial corporations, must comply with the whistleblower protections in the Corporations Act 2001 (Cth). An incorporated association may also fall under this legislation if its trading or financial activities—such as buying and selling goods or commercial dealings—form a significant part of its overall operations.

A primary obligation under this Act is to protect a whistleblower from any “detriment” because of their complaint. It is illegal for anyone to cause or threaten to cause detriment to a person because they believe or suspect that person has made, or could make, a whistleblower disclosure.

Detriment is broadly defined and can include actions such as:

• Dismissing an employee
• Injuring an employee in their employment
• Altering an employee’s position or duties to their disadvantage
• Discriminating between an employee and other employees
• Harassment or intimidation
• Harm or injury, including psychological harm
• Damage to a person’s property, reputation, business, or financial position

Duties Under the NSW Associations Incorporation Act

For not-for-profits registered under the Associations Incorporation Act 2009 (NSW), the regulatory framework is managed by NSW Fair Trading. However, its role is specifically limited to ensuring that associations comply with the requirements of the Associations Incorporation Act 2009 (NSW) itself.

The legislation is designed to allow associations to manage their own affairs autonomously. Consequently, NSW Fair Trading cannot get involved in internal matters. Its limitations include:

• Internal disputes: Fair Trading cannot intervene in internal NFP disputes, as these must be addressed using the dispute resolution procedures outlined in the association’s constitution.
• Constitutional breaches: Matters governed by an association’s constitution are not the same as breaches of the Associations Incorporation Act 2009 (NSW), and Fair Trading does not have the authority to intervene.
• Criminal matters: Allegations of theft or other criminal activities are matters for the NSW Police, not Fair Trading.
• Employment issues: Fair Trading does not handle complaints related to NFP employment law matters like employment contracts, unfair dismissal, or workplace bullying and harassment.

Common Allegations: Fraud, Bullying & Mismanagement

For a whistleblower complaint to receive legal protection, it must be a “qualifying disclosure”. This means the whistleblower must have reasonable grounds to suspect that the information they are reporting concerns misconduct or an improper state of affairs or circumstances.

Common allegations that may trigger whistleblower protections often relate to conduct that:

• Breaches the Corporations Act 2001 (Cth) or other financial sector laws enforced by ASIC
• Constitutes an offence against another Commonwealth law that is punishable by imprisonment for 12 months or more
• Represents a danger to the public or the financial system

While protections may not apply to isolated complaints of sexual harassment, they might extend to reports alleging a sexually charged or hostile working environment, which points to systemic issues. Similarly, allegations of serious mismanagement or fraud within the organisation can also constitute a qualifying disclosure.

The Internal Investigation as Your NFP’s Best Defence

Planning the Investigation & Defining Roles

A consistent approach is essential when responding to whistleblower complaints, and it can be achieved by creating a formal investigation plan. Thinking ahead and formalising key procedures ensures your practices remain consistent rather than relying on the experience of one or two individuals.

The plan should outline the specific allegations to be investigated and clearly define the scope of the investigation.

Clearly defining roles and responsibilities is the next critical step:

• Appoint an investigator with the authority and knowledge to conduct the inquiry.
• Make sure the investigator has unrestricted access to all relevant information.
• Remove anyone with an actual, potential, or perceived conflict of interest to maintain objectivity.

Ensuring Procedural Fairness & Gathering Evidence

The investigation must provide procedural fairness to any person who is the subject of the allegations. This means they receive a formal opportunity to respond before any final decision is made.

There are three key elements to ensuring procedural fairness:

• Opportunity to respond – the person facing the allegations must be heard before a decision is reached.
• Impartial decision-maker – the decision-maker must be free of bias and should not be the same person as the investigator.
• Evidence-based decision – the final outcome must rest on the available evidence and facts.

The investigator is responsible for gathering sufficient and reliable information to address the allegations. This involves documenting all lines of inquiry and recording written, photographic, oral, or electronic evidence.

Documenting Findings & Deciding on Appropriate Actions

At the conclusion of the investigation, each allegation should be assessed and a formal finding made.

Typical findings fall into three categories:

• Substantiated: the weight of evidence suggests the allegation was more likely than not to have occurred.
• Not substantiated: the evidence suggests the allegation more than likely did not occur.
• Inconclusive: the evidence does not clearly lead to a finding of either substantiated or not substantiated.

A final report should document the investigation’s background, scope, findings, and recommendations. This report is then provided to a senior officer or committee to decide on proportionate actions, signalling that misconduct is not tolerated within the organisation.

Managing Communications & External Reporting After an Investigation

Best Practices for Communicating with the Whistleblower

Engaging with a whistleblower requires sensitivity and a structured approach to encourage their continued cooperation. Every whistleblower complaint must be taken seriously, regardless of the person’s role or whether they provide documented evidence. Expressing appreciation for their courage in coming forward is crucial, as this builds trust and signals that the organisation is accountable enough to value their input.

Setting clear expectations from the outset can prevent feelings of futility. You should explain how the investigation will proceed and provide an estimated timeframe for its completion.

To maintain open communication and demonstrate accountability, consider the following practices:

• Provide feedback: Keep the whistleblower informed about the investigation’s outcome and the actions being taken, sharing as much detail as confidentiality allows. This helps them see their report was fully investigated.
• Be sensitive to their concerns: Whistleblowers often fear retaliation or wonder if their identity will be protected. Be prepared to answer their questions about the process or direct them to the appropriate person in human resources or compliance.
• Check in after the investigation: If the whistleblower’s identity is known, follow up with them after the process concludes. This allows you to monitor for any potential retaliation and reinforce that the organisation is committed to a safe reporting environment.

Responding to External Bodies: ACNC & NSW Fair Trading

If a regulatory body becomes involved in a whistleblower complaint, it is important to understand their specific jurisdiction and processes.

The Australian Charities and Not-for-profits Commission (ACNC) is not an eligible recipient for disclosures under the whistleblower protection laws, meaning reporting to them does not automatically grant legal protection. However, the ACNC can investigate registered charities, and ASIC may refer a complaint to them, typically with the whistleblower’s consent.

For not-for-profits registered under the Associations Incorporation Act 2009 (NSW), NSW Fair Trading is the relevant regulator. Its role is limited to ensuring compliance with the Associations Incorporation Act 2009 (NSW) and it cannot intervene in internal disputes, which must be handled through the association’s own constitutional procedures.

When a complaint is lodged, NSW Fair Trading will:

• Assess whether a breach of the Associations Incorporation Act 2009 (NSW) has occurred
• Determine if any action is needed to ensure compliance

Handling Potential Media & Funder Inquiries

After an internal investigation, your organisation should be prepared for potential inquiries from external stakeholders, such as the media or funders. Allegations of misconduct can attract public attention, and managing these communications effectively is essential for protecting the organisation’s reputation.

To prepare, you should establish clear communication protocols that outline who is authorised to speak on behalf of the organisation and what information can be shared.

For serious allegations that may become public, consider retaining a public relations or crisis management firm: These experts can assist with developing messaging and managing media inquiries to ensure communications are consistent and strategic.

Conclusion

Effectively responding to a whistleblower complaint requires a structured approach, from the initial triage and investigation to managing communications and meeting legal duties under legislation like the Corporations Act 2001 (Cth). A prepared, fair, and lawful process is crucial for addressing allegations properly and protecting your not-for-profit from significant legal and reputational risks.

If your organisation needs guidance on handling a whistleblower investigation or strengthening its internal processes, contact the experienced not-for-profit lawyers at LawBridge. Our team provides specialised legal advice to help you manage these complex situations effectively and ensure your NFP remains compliant and protected.

Frequently Asked Questions