There is finally some recognition of the incredible abuse of non-profit, tax-exempt status to pay executives millions in annual compensation. These people are paid like they are in a for-profit and typically deliver far worse results. This happens frequently in non-profit health care organization and also in other non-profits. It is a tactic used by Dems to funnel money through the organizations to managers who will then donate back to the Dems. Congress and the IRS have attempted to address the abuse on a federal level; states like Minnesota will never do so because it is part of the Dem strategy to stay in power. Now the IRS is proposing an even stricter regulation of this compensation, but it won’t come close to ending it.
The new rule would continue and extend the current practice of imposing a higher tax on “excess” executive compensation. Excess compensation should be completely banned, not taxed. The current law and rule apply to the five highest compensated persons, the change would apply to any person earning more than a million dollars in compensation a year. That is crazy. There is no excuse for any executive in any non-profit or tax-exempt organization earning more than around $200,000 a year. If you want more compensation, go work in the for-profit sector. (IRS Proposed Rule)
In my tax and accounting practice, I have 7 or 8 non profit organizations as clients, all of which are providing program services (mostly religious based schools). As such I am very familiar with expenditures for program services, administration costs and compensation. I am also quite familiar with costs across
Very prominent is the level of expenditures which are for compensation and other admin costs while not for actual program services. The diversion away from actual program services is especially true in the large non profits and the NGO’s, USAID, etc.
A good indication of the abuse/corruption/excess compensation is the where the complaints are coming from those who object to the cutting of USAID. Lancet published a study projecting 10 million to 14million excess deaths due to cuts in USAID. A level of deaths comparable to Stalins 5 year plan or Mao’s great leap forward which is simply not credible. The study is strictly an advocacy piece designed to get renewed funding.
I agree with Kevin – If the organization is truly a non profit with the goal of providing ‘services ” for a true charitable purpose, then compensation would reflect that actual charitable purpose.
Conflict alert – Over a span of twenty years, My wife worked for two national level charitable organizations, one of which provided very little actual programs services, yet the executives of that organization took great pride in what they were accomplishing.