Whistleblowing hotlines for municipalities

The King IV Code on Corporate Governance strongly recommends that all organisations have a whistleblowing mechanism in place to establish an ethical corporate culture. Whistleblowing hotlines are particularly important for municipalities given their crucial socio-economic role, says Philippus Fouché, CEO, Advance Call.

According to a 2018 Association of Certified Fraud Examiners (ACFE) global study on occupational fraud and abuse, tip-offs are the primary method of fraud and corruption detection. Fraud losses are 50% lower at organisations with whistleblowing hotlines.

The Protected Disclosures Act (No. 26 of 2000) protects employees from retaliation should they report any suspected wrongdoing or misconduct within their organisation. To encourage employees to report such misconduct, they need to be convinced that all disclosures will be dealt with appropriately.

Accordingly, using an independent whistleblowing hotline, or safe report line, creates trust and affords employees and other stakeholders the opportunity to report ethical transgressions without fear of being victimised. On the other hand, such a safe report line protects the organisation by offering the opportunity to deal internally with ethical issues. This can pre-empt public exposure of organisational scandals and prevent potentially harmful reputational damage.

The importance of blowing the whistle

Blowing the whistle on suspected unlawful and unethical behaviour may seem very daunting and overwhelming. Whistleblowers fear possible retaliation or isolation. However, employees and other stakeholders play an important role in rooting out fraud and corruption in municipalities. Blowing the whistle is vital for the following reasons:

1Reporting fraudulent and corrupt

behaviour can put an end to it

Transparency International compiles an annual Corruption Perception Index, which measures the perceived level of corruption in each country. In 2019, South Africa received a score of 44/100, indicating a high level of perceived corruption, and ranked 70 out of 180 countries. Furthermore, according to the PwC Global Economic Crime and Fraud Survey 2018, 77% of South African companies reported experiencing a form of fraud or economic crime within the last 24 months. This is in comparison to the global average of 49% of companies.

What is the Advance Call process?

Although fraud and corruption are a global problem, South Africa seems to be even more prone thereto. Reporting this kind of behaviour can help bring the crimes to light and put an end to it.

2Fraud and corruption can cause a

municipality serious damage

Municipalities that are victims of fraud and corruption can suffer serious harm, including the cost of the actual crime, investigative costs, legal costs, and reputational damage. Over and above the cost of the actual crime – in 30% of cases – the cost of investigating the crime may be more than the cost of the actual crime.

Should a municipality decide to take legal action after an investigation, it will also incur further legal costs. Apart from the financial loss, a municipality can also suffer extensive reputational damage, which is incredibly difficult to recover from.

The longer fraud and corruption crimes go unnoticed, the higher the cost of these crimes. One of the biggest problems with fraud and corruption is that it is impossible to recover the losses in most cases. Therefore, it is essential to report any suspected wrongdoing to minimise the potential loss.

3Whistleblowing is crucial for detection It is imperative for municipalities to have proper corporate controls specifically designed to detect fraudulent and corrupt behaviour.

One of the most valuable sources of information to a municipality is its employees and they play a crucial role in identifying and alleviating fraud and corruption. Employees should be encouraged to report suspected wrongdoing and should keep in mind that they are protected from any form of retaliation by the Protected Disclosures Act.

WHY ADVANCE CALL?

To assist municipalities in combatting fraud and corruption, Advance Call provides independent, professionally run ethics and fraud hotlines, which ensure: - A solution certified by The Ethics

Institute - Technology-driven communication channels for reporting disclosures - Continuous service (24/7) - Multilingual capability - Three options regarding anonymity - Guaranteed confidentiality of information - Bespoke solution software, complete with latest technology - Educated and trained staff with extensive interviewing experience - Additional security of information with two-factor authentication login - Awareness material and training Disclosures can be reported on any incidents or behaviours that can possibly be considered unlawful, unethical, or irregular.

Disclosures are categorised as follows: - Fraud (forgery, falsification of documents/claims, identity theft, misrepresentation) - Corruption (any form of bribery, third-party collusion, contract and procurement irregularities) - Theft (unlawful and intentional removal of company property, with the aim of permanently depriving the company of the benefit thereof) - Misconduct (harassment, any form of discrimination, intimidation, abuse/misuse of company property, time and attendance abuse, abuse of authority) - Unethical behaviour (favouritism, nepotism, conflicts of interest)

The key factors for a successful whistleblowing hotline

Implementing a whistleblowing hotline for a municipality is a positive step towards creating a more ethical culture. To ensure that a whistleblowing hotline is effective, the following factors need to be kept in mind:

1Creating an ethical culture It is crucial that leadership sets a positive ‘tone from the top’, placing emphasis on good governance and ethical business dealings. By creating a culture in which the reporting of unethical behaviour is valued, stakeholders will be encouraged to report any wrongdoing they are aware of within a municipality.

2Awareness and training The success of a whistleblowing hotline for a municipality depends largely on the awareness and training surrounding it. It is essential that all stakeholders are continuously made aware of the existence of the whistleblowing hotline through various platforms, such as staff meetings, written communications, posters, and supervisory interactions. Furthermore, it is important to provide proper training and education to stakeholders to clarify the scope of the whistleblowing hotline and clearly define the types of wrongdoing that can be reported.

3Acting on disclosures For stakeholders to continue making use of a whistleblowing hotline, there needs to be a perception that action is being taken. Accordingly, it is critical that disclosures are properly investigated and resolved, and there needs to be ongoing and meaningful communication with the whistleblower to provide updates on the progress of the matter.

Municipalities also need to provide regular updates to all stakeholders regarding action taken against unethical behaviour. In the interest of fostering a speak-up culture and demonstrating that a municipality is serious about doing ethical business, it is critical that stakeholders know the executive is taking action when required.

In summary

A whistleblowing hotline is an integral and necessary part of a municipality’s compliance programme, but simply having one is not sufficient to guarantee its success. The onus is on the leadership to create an ethical work environment and foster a speak-up culture. There is also the responsibility to create awareness, provide training, and act decisively when confronting potential wrongdoing. If done correctly, a whistleblowing hotline can be an excellent tool in combatting unwanted behaviour within a municipality.