Following the New Ethic
When the whistleblower is viewed first as a hero and an
ethical champion, the consequences of his action take second stage to the
morality he portrays. But when morality
is stripped from whistleblowing, the ineffectiveness of his action can sting.
HomeFirst Services of
Santa Clara County, which employed me for seven years and fired me after
learning I disclosed several suspected wrongdoings by the company, is a
nonprofit company. Like whistleblowers,
nonprofits are often viewed as social heroes, but they too should be seen more
simply. HomeFirst contracts with
government agencies and takes contributions from individuals and organizations
to provide social services. With the
money it raises, it pays the salaries of its employees and other expenses. It is a business with tax advantages that
stem from its presumed social benefit.
Nonprofits generally do a poor
job of reporting the results of their activities, which are the source of
their social benefits. Nearly all
nonprofits, including HomeFirst, tell stories about their activities and some
success stories, but they avoid systematic accounting for their results or how
money is spent on services. Those who
criticize nonprofit deficiencies in reporting operational results[1]
are not quite whistleblowers because the deficiencies, which count as marketing
techniques more than ethical violations, are evident to all who choose to look.
On the other hand, financial misreporting is less easily detected. Nonprofits have been found guilty of widespread
misreporting of expenses – chiefly by understating their fundraising costs and
overstating the program costs – to improve the appearance of their performance[2]. These misstatements occur despite the internal
and external
controls intended to stop them and the watchdog agencies who hope to catch them[3].
In justifying my termination, HomeFirst’s
CEO warned the Board that I might include unpleasant information in the
company’s audit report if I were not fired.
After my successors failed to disclose some of that unwelcome
information, I complained
to the AICPA in June 2015 that the company’s
auditors had failed to ensure that HomeFirst’s 2014 financial report was
complete and accurate. The AICPA
replied promptly, assuring me that I would be informed if no investigation
was warranted or, if one was warranted, when the investigation was
complete. I did not hear back from them
again.
HomeFirst’s 2015 audit report showed a 54% reduction in
administrative expenses (without any change in staffing) and an 18% reduction
in fundraising expenses. I asked the
company’s new CEO and its auditor whether a mistake had been made, but received
no reply. I
wrote again to the AICPA that the auditors had failed in their duties; this
time they did not reply.
My complaints about misleading reports might not meet most
people’s definition of whistleblowing: they were not about illegal actions; they
posed a threat only to the small portion of the public who consider donating to
HomeFirst; and I presented them as violations by the auditors, not by my former
employer HomeFirst. They also had no
perceptible effect. In contrast to most whistleblowing,
they were undertaken without any likely cost to me unless you give credence to HomeFirst’s
threatening letter from a year earlier.
Why anyone should blow the whistle on perceived wrongdoing
is a question whose answer can seem obvious at the start of the project and
more dubious after the penalties have been received. At each end, moral concerns appear to be
obvious justifications. But if absolute morality
is dismissed as mostly a rationalization after the fact, as
I suggest, what can be the point of whistleblowing that is likely to be ineffective
and, if it accomplishes anything, is likely to cause harm to the whistleblower?
That is the problem with most things, isn’t it? They are likely to come up short of what you
had initially hoped. Early dreams you
had of sports success, career superstardom, great wealth, idyllic families,
long and healthy lives. In the end you manage
with what you have, and so we must with our whistleblowing.
Whistleblowing is a banal activity, in itself no more
significant than any other act intended to make the world a somewhat better
place – like holding a door open for someone whose arms are loaded with
packages or helping someone who has tripped to stand up. Luck may present the unusual opportunity of
becoming a big-time whistleblower, but the rest of us simply disclose small
wrongs.
While I worked at HomeFirst, I felt that my revelations might
change the company’s direction. Perhaps
I would benefit from that change somehow; perhaps not. After I was fired, it came to seem that my
continued complaints would not benefit me or anyone else. But the persistent wrongs were irritating
reminders that organizations too often do what they want without meaningful
checks.
That HomeFirst could continue not to repay the $1.2
million it had tricked out of HUD more than ten years earlier was stupid
beyond belief. That it could continue to
avoid repaying the $140,000
it grabbed from the County years ago was another insult. Evading its responsibility
to fairly pay its client-employees for years was a continuing reminder of
the cuts companies take out of all employees.
Likewise the questionable reporting reminds that companies say what they
want, true or not.
It can be painful when whistleblowing fails to achieve its
objectives. Reality forces the admission
that many of our objectives are not achieved.
But the whistleblower’s failure may be less than that of the observer
who ignores his opportunity and remains silent.
[1]
For example, Stern,
Ken. With Charity for All. New
York: Doubleday. 2013 and Singer, Peter. The
Most Good You Can Do: How Effective Altruism Is Changing Ideas about Living
Ethically. New Haven: Yale
University Press. 2015
[2] Krishnan, R., M. Yetman and R.
Yetman. “Expense misreporting in
nonprofit organizations.” The Accounting Review 81.2 (2006): 399-420. Also see Yetman , Michelle H. and Robert J. Yetman. “Do
Donors Discount Low Quality Accounting Information?” Accounting Review. 88.3 (May 2013): 1041-1068 and Ling, Qianhua
and Daniel G. Neely. “Charitable
Ratings and Financial Reporting Quality: Evidence from the Human Service Sector.” Journal of Public Budgeting, Accounting & Financial
Management. 25.1 (Spring 2013): 69-90
[3] Cnaan, Ram A., Kathleen
Jones, Allison Dickin and Michele Solomon. “Nonprofit Watchdogs: Do
They Serve the Average Donor?” Nonprofit Management and Leadership (21 June 2010): 381–397
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