IRS To Provide Greater Scrutiny of Nonprofit Exec's Pay

The IRS is about to begin using greater scrutiny of nonprofit organizations with respect to their executive pay practices. The IRS will begin looking at executive pay to determine whether nonprofits are providing excessive compensation to their senior executives. The IRS will look at the execs pay and compared it to available salary data on other nonprofits. There are numerous examples of senior executives making pay that is excessive given the operating budget of their organization. For example, a few years ago there was an executive of a nonprofit organization with a $1.5 million operating budget that hired an exec to be its CEO. It started out paying him $150,000 a year, giving him a $1,000 a month car allowance, and loaning him $200,000 to buy a home. In addition, each year the board voted to given him a 10% increase while the staff received only 3%. In addition, he urged the board to cut the organization's share of health care benefit to the staff which they did. Then he urged the board to pay him the value of the heallth care insurance benefit he normally would have received if it were not for his wife getting full health care at the organization that she works at. All this happened while the organization's revenue was decreasing on an annual basis. The board eventually let this individual go after he had let several key staff go. Well, what is the executive salary story at your organization? How should executive salaries be determined? Should the CEOs salary be determined by a certain percentage of the operating budget? Should it be determined on the CEO reaching certain goals?