An allegation of misconduct or illegality can have very harmful effects for an organization: it can hurt staff morale, violate an organization’s mission, and, in extreme circumstances, can threaten a nonprofit’s exempt status. During a recent luncheon program, Venable partners George Constantine, Eric Berman, and Doreen Martin, along with Jesse Raben, general counsel and COO of The Trust, discussed how nonprofits should navigate internal investigations that can arise from whistleblower complaints, government inquiries, or any other violation of the organization’s policies. Drawing on their experience guiding numerous nonprofit organizations through complex investigations, the panelists also discussed the nuts and bolts of conducting such investigations and the practices and policies organizations should have in place to minimize risk.

Draft Written Standards of Conduct and Policies and Procedures

In the event an allegation arises, it’s essential to take appropriate and prompt action. But to do so effectively, an organization will have to have laid the groundwork by implementing written standards of conduct, policies and procedures, or a code of ethics, applicable to all employees, volunteers, board members, and even consultants, that can be enforced in the event of a violation. Such policies and standards must be unambiguous, with key terms clearly defined, and enforced uniformly and fairly across the organization. This will help staff understand the organization’s compliance expectations and enable the organization to defend its policies against a challenge. Human resources departments should ensure that new hires acknowledge that they have read and understood the codes of conduct that apply to them and ideally should refresh that understanding through periodic training.

Know When to Conduct an Investigation

Upon receipt of a complaint, the organization must assess whether the allegations contained in the complaint rise to such a level that an investigation is required. The organization should assess whether the behaviors alleged in the complaint pose a risk (whether legal or otherwise) to the organization or its employees. In making this assessment, the organization should also consider how it has chosen to address similar complaints and should strive to treat similar complaints consistently. An investigation should be conducted upon receiving credible information regarding potential wrongdoing. It is not necessary to have direct evidence of wrongdoing to begin an investigation; circumstantial evidence will suffice.

Assign an Investigator

Once a determination is made that an investigation is appropriate, the organization needs to decide who will conduct the investigation. When determining who will investigate, the organization should consider the nature and size of the investigation, the potential involvement of senior management, the need for special expertise, potential conflicts of interest, the involvement of any government agencies or departments, the ability to defend the investigation to the government and auditors, and privilege considerations, including the attorney-client privilege. An organization should consider bringing in outside counsel to conduct the investigation in order to avoid potential conflicts of interest.

Plan the Investigation

When planning an investigation, the first thing to establish is its scope. If that parameter is defined too narrowly, something might be missed; if defined too broadly, the investigation could lose focus. Once the scope has been determined, the organization should:

• Identify the key stakeholders in the investigation
• Identify what evidence might exist
• Identify what communications and documents are relevant, and where they can be found
• Examine the organization’s policies and codes of conduct to assess what needs to be established in the investigation
• Create a witness list that will lead the investigator to the facts they need to reach a determination
• Examine personnel files of the stakeholders and witnesses to gather as much information as possible before questioning them

Identify and Preserve Evidence

When it comes to identifying and preserving relevant documents, the organization should cast as wide a net as possible: this would include any documents on the company’s server and communications made over company devices. In general, any communications on any platform that may be relevant evidence should be preserved. An outside vendor may be enlisted to collect this electronic evidence using targeted search terms to uncover only relevant material and otherwise maintain the stakeholder’s privacy. If the organization has received a subpoena, demand letter, complaint, or any other trigger that would make it reasonable to anticipate litigation, the investigator should draft a litigation hold that the organization distributes to custodians with instructions to preserve relevant documents.

Consider Interim Measures

If applicable, the organization should also initiate the steps necessary to stop or limit the potentially problematic behavior during the course of the investigation and notify the wrongdoer of the complaint or allegations. For example, the organization may consider whether to take steps to place an employee on administrative leave pending the outcome of the investigation, or to temporarily reassign an employee to another shift or department. The organization should consult with legal counsel to ensure that the interim measures are not perceived as retaliation.

Prepare Internal and External Communications

When it comes to internal communications about an investigation, a general rule of thumb is “less is more” – inform only those employees who need to know and tell them only what they need to know. For instance, rather than sharing that someone was fired for sexual harassment, it’s enough to communicate that someone is simply no longer with the company. The same principle applies to external communications – share what needs to be known only with whoever needs to know it.

Organizations should ideally consult legal counsel when drafting codes of conduct and other policies, considering an investigation, and navigating its stages.