Dan Prives, author of the Where Most Needed blog on charities reports in yesterday's post that (according to the New York Times) the IRS has collected excise tax penalties for excessive compensation from forty individuals to the tune of $20 million. (See earlier post on Intermediate Sanctions regulations for more on this law and the reason for these penalties, and see IRS Report on Exempt Organization Executive Compensation for more details on the enforcement effort that resulted in these penalties.)
Prives also takes the IRS to task - rightly so, I believe - for the structure of Form 990 (where charities publicly disclose financial information including compensation to top officers) which makes it difficult to track and compare what nonprofits are doing in terms of executive compensation. He suggests another model, more along the lines of the proxy statements issued by public companies, which provide not only a summary of compensation for top executives (versus the incoherent bits and pieces scattered throughout the current Form 990) but also describes the process by which compensation was determined.
I applaud this proposal and hope that it gains traction. Unless it does, donors and the rest of the general public will continue to base their appraisals of this aspect of a charity's financial stewardship using partial and inconclusive information.
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