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Champagne Wishes and Caviar Dreams?

By Kate Golden on March 1, 2007No Comment

In Thursday’s New York Times, Stephanie Strom reports that out of 1,800 nonprofits studied by the I.R.S., nearly 600 reported payments to executives incorrectly on their tax forms.  This finding comes in the same week that American University announced that it is facing an I.R.S. investigation stemming from the exorbitant spending of ousted president Benjamin Ladner, a story following on the heels of Senator Grassley’s assertion, made Monday, that a top Smithsonian official squandered institutional resources on jet travel and entertainment expenses.  Is it any wonder that donors want to restrict their gifts

The study, the largest ever undertaken by the tax exempt division of the I.R.S., began in 2004 amid heightened scrutiny of the sector by both Congress and the media. 

Steven T. Miller at the I.R.S. said of their findings, “We found some problems.  Whether they were due to confusion, poor design of the tax forms used by these organizations or something more nefarious, I can’t tell you.”   Unfortunately, of course, it is the nefarious that makes the news.  And perhaps it is the nefarious that leads to inquiry and, ultimately, change. 

The compensation issue is a tricky one.  An organization must be able to attract, and retain, talented executives or it will likely flounder in the competitive landscape of today’s nonprofit sector.  Many nonprofits are offering attractive compensation packages, honestly and openly.  Miller explained, “…that in some cases where we found high compensation — and we did find it — the organization has done a good job of using comparables and establishing a procedure to determine it.”   

These recent reports of organizations with questionable spending practices should be counterbalanced with a report detailing those organizations who do pay their executives well, and who have a detailed rationale for doing so.  Learning from the good, instead of the nefarious, may lead to even greater change.

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