NIC's Reporting Hotline Policy:

Ensuring NIC's Integrity

Table of Contents:

• Overview
• To Whom The Policy Applies
• Reporting Procedure
• Receipt of Reports
• Scope of Matters Covered by This Policy
• Treatment of Reports
• Reporting and Retention of Reports
• Frequently Asked Questions

Overview:

NIC Inc. and its subsidiaries ("NIC" or the "Company") are committed to upholding stockholders’ trust, employees’ trust, and our government partners’ trust. Stockholders trust us when they purchase our stock, to operate NIC with integrity on their behalf. Employees trust NIC to provide a working environment with integrity. Government partners trust us to build and operate some of their most important functions for citizens and businesses, and choose NIC in part because of its integrity.

One way in which NIC upholds trust is by achieving compliance with all applicable laws and regulations. Employees are directed to report any complaints or concerns regarding accounting and auditing matters, internal accounting controls, fraud, corruption, policy violations, violations of NIC's Code of Business Conduct and Ethics, or illegal activities, whether involving the Company’s employees, its contractors, its suppliers, or the Company’s officers or directors. The Audit Committee of the NIC Board of Directors (the "Audit Committee") will oversee the handling and disposition of employee or external complaints or reports of concerns in these areas. The Audit Committee is made up of independent directors who are not affiliates or officers of the Company.

In order to facilitate reporting, the Audit Committee has established procedures for (1) the receipt, retention and handling of reports and (2) the confidential, anonymous submission by employees or others of reports regarding the items listed above.

If a Reporting Hotline report is made, it will remain anonymous unless the individual making the report voluntarily provides his or her name. With or without a name, reports are confidential to the extent reasonably possible.

To Whom this Policy Applies:

This policy applies to all employees, officers and directors. It also applies to any other person wishing to report a concern regarding NIC’s employees, officers and directors, or those of any of its subsidiaries.

Reporting Procedure

An employee, officer or director of the Company, or any other person, may submit a report through the procedures described in this policy. These procedures permit those making a report to submit the report anonymously.

Follow the steps below when submitting any report of a concern or complaint:

1. Consider reporting to your supervisor
2. If your supervisor is involved, does not respond appropriately or you are not comfortable bringing this issue to your supervisor, then you are authorized to bypass the supervisor and go to the supervisor’s supervisor or to NIC’s Human Resources Department.
3. If steps 1 and 2 are not responded to appropriately, or you legitimately fear that reporting to your supervisor’s supervisor or Human Resources Department would endanger your position, or you are not comfortable making your report to that person, then you are authorized to use the NIC Reporting Hotline and report outside the chain of command, through one of the ways detailed below.
4. Please note: As of January 1, 2012, NIC will offer both anonymous email and anonymous voicemail reporting options through an outside company independent of NIC, and there will be the ability to receive a response to a complaint through the independent company’s anonymous database system. Prior to January 1, 2012, please use the system described below.

Any person who is not an employee, officer or director may also submit a report of a concern by telephone, or e-mail as described below.

Receipt of Reports:

• Employees or others may forward their reports through any of the following:
• Before January 1, 2012: The report hotline at 866.325.5329. This goes to a voicemail box accessed only by the chair of the NIC Board of Directors’ Audit Committee, or his non-NIC staff or designee. The calling number is not recorded on caller ID (any employee who wishes to disclose his/her identity will need to include contact information in the voicemail).
• Before January 1, 2012: E-mail to confidential@egov.com. This email account automatically removes the sender's contact information from the document header to ensure anonymity (any employee who wishes to disclose his/her identity will need to include contact information in the body of the email). This email box is accessed only by the chair of the NIC Board of Directors’ Audit Committee, or his non-NIC staff or designee.
• After January 1, 2012: Employees, officers and directors will receive an email notice prior to January 1, 2012 that informs them of the independent company’s dedicated NIC email address and telephone number for reporting complaints or concerns on or after January 1, 2012. This number and address will also be published on the NIC website. The telephone will be answered 24 hours a day, 7 days a week by a trained person not affiliated with NIC. Persons reporting concerns or complaints either by telephone or email will be furnished with a “control number” for the report by which communications back and forth can be conducted without compromising anonymity.

Scope of Matters Covered by These Procedures:

Honest errors or mistakes should be reported through the chain of command. The types of things that are important to report, whether through the chain of command or through using the NIC Reporting Hotline, are such things as:

• Fraud or deliberate error in the preparation, evaluation, review or audit of any financial statement of NIC;
• Fraud or deliberate error in the recording and maintaining of financial records of NIC;
• Deficiencies in or noncompliance with NIC’s internal control over financial reporting;
• Misrepresentation or false statement to or by a senior officer or accountant regarding a matter contained in the financial records, financial reports or audit reports;
• Deviation from full and fair reporting of NIC’s financial condition; or
• Deliberate violations of NIC’s Code of Business Conduct and Ethics, insider trading policy, travel and expense guidelines, or any other NIC policy.

Treatment of Reports

NIC will treat reports as follows

• Mr. Art Burtscher, NIC’s Board of Directors’ Audit Committee Chair, receives all reports. (Note: Prior to January 1, 2012, Mr. Burtscher will receive them through the procedure described above. After that date, he will receive them from the independent outside company that is not a part of NIC).
• Mr. Burtscher, possibly in conjunction with the Company’s General Counsel, will determine whether the report actually pertains to Company matters and, when requested by the sender (and when sender’s contact information is provided), will acknowledge receipt of the report to the sender.
• Reports will be reviewed under the Audit Committee’s direction and oversight.
  • The review conducted will be confidential to the extent possible consistent with the need to conduct an adequate review.
  • Members of management not involved in the report may be used to assist the Audit Committee.

• Appropriate corrective action will be taken when and as warranted in the judgment of the Audit Committee.

NIC will not discharge, demote, suspend, threaten, harass or in any manner discriminate against any employee in the terms and conditions of employment (or against any other individual) based upon any lawful actions of such employee for reporting concerns in good faith to the Audit Committee or to a government or law enforcement agency regarding Accounting or Auditing Matters or otherwise as specified in Section 806 of the Sarbanes-Oxley Act of 2002. As used here, “good faith” means a reasonable belief in the truth and accuracy of the information reported.

Reporting and Retention of Reports and Investigations:

The Audit Committee will maintain a log of all reports, tracking their receipt, investigation and resolution and will prepare a summary report for the NIC Board of Directors on a quarterly basis, or more frequently if warranted. If there have been no reports, the quarterly report will specifically state that fact. Copies of reports and the log may be maintained in accordance with a document retention policy.

Frequently Asked Questions:

1. Question: What concerns are not covered by this policy?

   Answer: The following items are not properly reportable under this Policy: frivolous or bogus complaints; business and financial decisions taken by the Company that do not involve wrongdoing or illegality, or which are not otherwise prohibited by a Company policy; matters already addressed pursuant to a disciplinary or other Company procedure; and personal grievances that do not implicate wrongdoing, illegality or violation of Company policy.

2. Question: I overheard a male employee repeatedly making inappropriate comments to a female employee. Should I report this through the hotline?

   Answer: If you feel uncomfortable reporting this to your supervisor (particularly if the supervisor was involved), your supervisor’s supervisor or to NIC’s Human Resources department, or you otherwise fear that the reporting would endanger your position, then you should report this conduct immediately through the hotline.

3. Question: I know that my supervisor is submitting expense reports that include items that were actually purchased for my supervisor’s spouse. I know that the items were for personal use and were not authorized, but the total of the items is minimal. What should I do?

   Answer: Use of Company funds for the benefit of non-employees, to the extent not authorized by Company policy or other action of the Company, is a violation of Company policy and is theft, regardless of the amount involved. You should report this behavior immediately, and given that the individual implication is your supervisor, going to HR, your supervisor’s supervisor or using the Company hotline are all acceptable methods to communicate your concern.

4. Question: I am an employee in the financial department, and I have knowledge of a financial matter that was not included in the Company’s financial reports. In my opinion, leaving this information out of the financial reports means that the financial reports do not fairly and accurately reflect the Company’s financial condition, results of operations or cash flows. I previously spoke with my supervisor about this issue, but my supervisor did not agree with my assessment. Since I already brought this up to my supervisor, have I fulfilled my obligations as an employee, or should I report this matter? In addition, if I need to report this information, do I have to go to my supervisor’s supervisor, or can I use the Company hotline?

   Answer: It is possible that your supervisor took your concern to his or her supervisor, the Chief Financial Officer and/or the NIC Disclosure Committee, and that they reached a conclusion that was different than yours. Regardless, if you have concerns that the result is inaccurate financial reporting, you should report the matter and at least receive confirmation that the decision to not include the information has been made by the individual(s) ultimately charged with making that decision. You may use the Company hotline to report the matter.

5. Question: I work with an independent contractor hired by the Company on a sensitive, non-public matter. I overheard the independent contractor making statements over the telephone regarding a sensitive, non-public matter to someone who was obviously a family member or close friend (i.e., someone not involved with the matter or the Company). Since this individual is not an employee, I don’t have a reporting obligation, right?

   Answer: Wrong. Company policies often implicate non-employees, including independent contractors and other third parties. The best rule of thumb is that if an employee doing what the independent contractor/third party is doing would be a violation of Company policy, then it is likely that the independent contractor/third party is likewise violating Company policy. In this particular instance, the independent contractor is violating the Company’s policy regarding confidential information, as well as the NIC Inc. Trading Policies and Disclosure of Non-Public Information document. This should be reported immediately, using the procedure set forth in this policy.

Disclaimer: The information posted is as of the date indicated. We are under no obligation to update or remove outdated information other than as required by applicable law or regulation.