NAVEX continues to produce high-quality compliance reports, many of which are a must-read in the compliance industry.  Its annual Whistleblower Report is of particular note — NAVEX is the leading provider of hotline services in the world and its data is invaluable as a source of trends in this industry.

This year –2024 — is no exception.  NAVEX combed through the data from 3784 organizations for 2023.  Its headline conclusion — 2023 was a busy year, a record level of use and the substantiation rate reached an eleven-year high. More reports came in and more were found true. Such an increase is a good sign, not a bad sign.  It means that employees trusted their respective hotline reporting system to produce results.

The increase in internal reporting comes at a critical time when government-sponsored whistleblower programs are maturing and expanding into new agencies.  The SEC’s program continues to increase and received a record number of tips in fiscal year 2023.  FinCEN’s whistleblower program has begun, and new whistleblower programs are being launched at the Department of Justice.  Internal programs have to compete against these government alternatives that offer significant financial rewards.

As NAVEX reported, organizations received a median 1.57 reports per 100 employees, exceeding the previous record of 1.47 set in 2022. More organizations (23%) received five or more Reports per 100 Employees, making this population the largest in NAVEX’s data set. And while year-over-year values fluctuated, every size of organization – from the smallest companies to enterprises with over 100,000 employees – has seen report volumes rise comparing 2021 and 2023.

Given the increasing number of reports lodged, the accuracy of those reports increased to an overall media value of 45 percent, an 11-year high.  Anonymous reports accounted for a median of 56 percent of all reports received in 2023 and the substantiation rate remained relatively flat at 33 percent since 2020.  However, the substantiation rate for reports made by persons who identified themselves increased to 50 percent in 2023 after remaining around 47 percent for several years.  This is a critical development demonstrating the trust the reporting system and the accuracy of reports where a  reporter identified himself/herself. 

As NAVEX consistently points out, higher rates of internal reporting produce better business outcomes.  Programs that successfully encourage reporters to speak up have direct visibility into how these pressures are impacting their organizations.

The NAVEX Report focused on accounting-related reporting.  While such reports are lower in overall percentage to the number of overall reports, totaling only around 4.3 percent in 2023, these reports often require a robust response because of danger of report directly to SEC or DOJ.

Interestingly, these reports were often combined with the following trends:  

• Showed the longest time between when an incident was observed and when it was reported to the organization.
• By a large margin, were least likely to be reported anonymously.
• Experienced the longest time to investigate and close the case.
• Had among the highest median Substantiation Rates, at 50%
• Were most likely to cause an employment separation event as a result of a substantiated case.
• Accounted for twice as many of the reports submitted by third parties than the reports submitted by employees.

NAVEX analyzed its reporting database for the first times to distinguish between employee reports and third-party reports. NAVeX’s analysis revealed that third parties were more likely to report business integrity and financial misconduct issues. As a group, third parties made a far greater median share of reports related to business integrity, 50 percent of reports, versus employees who reported such issues around 17 percent of the time. These issues included confloicts of interest, vendor issues, fraud, global trade and human rights. Third-party reports, however, had a lower substantiation rate than that of employees.

NAVEX also analyzed the types of risk categories organizations received based on their overall report volume. As reporting volumes increase, specific risk categories saw significant increases, such as in the category of HR, Diversity and Workplace issues.

Some other interesting trends were the fact that reports of imminent threat was most likely to be substantiated, with nearly 9 out of 10 reports of imminent threat toa person, animals or person proven to be substantiated in 2023.  In addition, workplace discord continued to dominate reporting categories.  Workplace civility, an important trend, increased to 18 percent of reported cases, while discrimination constituted 12 percent, harassment totaled 7.1 and 2 percent retaliation.  Overall, HR issues totaled 55 percent of all reports, an increase from prior years 2021 50 percent and 2022 54 percent.