ABSTRACT
Today, hotlines are recommended, but are not required, in nonprofit entities. It is important to understand which nonprofits are using hotlines. Organizations with hotlines are more likely to catch fraud. This chapter suggests that fraud in these organizations is less costly due to early detection. Fraud hotlines have been advanced by legislation as a method of fraud prevention and detection since the passage of the Sarbanes–Oxley Act of 2002 (SOX). The use of fraud hotlines in the private sector was later reinforced by Dodd–Frank in 2010. In the meantime, increased transparency of hotline data in this sector would be helpful to consumers from an antifraud perspective. Ideally, organizations operating hotlines will report their hotline data to the public to provide confidence their tips are heard and handled appropriately. Both internal and external hotlines may also require additional personnel and training, as discussed, both resulting in potential increased costs. The chapter considers the use of money rewards to incentivize tipsters.
