should I report an ethics violation?

A reader writes:

I work at a field office of a national nonprofit intermediary that provides financial and technical assistance to local community organizations. A week ago a coworker of mine told me that a representative from a community organization that we are funding had recently approached him with some disturbing news. Apparently, this organization had hired a consultant to help them work through some financial management issues. Unfortunately for the community organization, the consultant quit in the middle of the project. Unfortunately for my organization, the consultant in question is another coworker in my office, who was apparently out freelancing on this project. Our organization does allow staff to provide consulting services to other nonprofits, but naturally any revenue comes back to the organization, not directly to the employee (since our organization's whole point is to provide these services).

Also making things more complicated is the fact that the coworker providing the consulting sits on a committee that makes decisions re: public funding to nonprofit organizations, including the organization involved here.

This seems like a pretty cut and dry violation of our organizational conflict of interest policy. I told the coworker who spoke with the representative of the community organization that he should report the incident through our our anonymous and confidential system. However, he has said he does not want to do so. The downside for our organization could be pretty severe if this boils over, and I am inclined to report this incident myself. I am reluctant to do this, however, since the information was shared with me secondhand. Also, our office is very small (less than a dozen people) and morale is at a low point now (for other reasons). Any subsequent investigation by our legal department would only accentuate the tension that's already there. Should I just mind my own business? I'm very interested in a manager's perspective on this.

If you think there could be serious consequences for your organization, and it sounds like you do, you should report it. You shouldn't be deterred by the fact that you learned it secondhand; you can make that clear when you report it, and then it will be up to the organization to investigate and get to the bottom of it.

Sometimes I advise people not to report something, when it's small. But we're not talking about noticing that someone is 10 minutes late every day, or someone saying they were sick when they really just wanted a day off, or other things that don't really matter in the scheme of things. When something is serious or potentially serious, when it could affect the organization's reputation or integrity or finances or effectiveness, then I think you have to speak up.

You can give plenty of caveats -- "I want to stress that I don't know if there's any truth to this," "I don't know this to be true firsthand," etc. -- but you should speak up. Do it discreetly, but say something.