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Government Turns Critical Eye on Nonprofits

By Susan Carey Dempsey on April 23, 2010No Comment

Nonprofits who’ve spent long days coping with the deep cuts resulting from the recession in the face of increased need from impoverished families might as well plan on some sleepless nights as well. Recent reports show the government, currently searching under couch cushions for every spare bit of change, in little mood to allow tax exemptions to hundreds of thousands of nonprofits who’ve failed to notice or live up to new regulations requiring them to  file tax forms.  As Stephanie Strom reports in The NY Times, legislation passed in 2006 required all nonprofits to file the following year, whereas previously only organizations with revenues of $25,000 or more had to file.

While this will affect mainly the smaller charities who traditionally keep a low profile, some major nonprofits are attracting unwelcome attention with their exceptionally large executive compensation package. Paul Light writes in the Washington Post that lawmakers  – who are keenly aware of the backlash against massive executive pay in the private sector – are demanding to know why the CEO of Boys and Girls Clubs of America should be earning two and a half times the salary of the US President, and five times as much as the Chief Justice:

Outraged by CEO Roxanne Spillett’s nearly $1 million package, four Republican senators have placed a hold on a $425 million Boys and Girls Clubs funding bill until the organization provides more information. Spillett’s 2008 mega-package included $361,000 in base salary, a $150,000 performance bonus, and $363,000 in deferred compensation, which the organization claimed was essential “to be fully competitive with similar national large non-profit organizations.” Noting that the Boys and Girls Clubs lost more than $13 million that year, the four senators called the organization top heavy, poorly managed, and largely unresponsive to the needs of its 4,300 local clubs.

If the pervasive sense of distrust of government and Wall Street spreads next to the nonprofit sector, the pressure for greater transparency and accountability will be increased exponentially. Individual nonprofits will do well to monitor their own performance, and should expect that they will face a growing demand to justify their existence.

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