Nonprofits Must Reveal Salaries
Last week the IRS introduced new regulations that increased the salary information that must be disclosed on the Form 990. Are we sure this is the focus that will drive visibility and improved management of nonprofits?
Historically, nonprofits have been required to disclose limited compensation information for "key employees" such as the executive director. That requirement has been greatly expanded to include up to 20 key employees earning more that $150,000 as well as the five highest paid other employees earning over $100,000.
New 990 instructions can be at http://www.irs.gov/pub/irs-tege/part_vii_instructions.pdf.
I guess the real question is what it the goal here. Is it increased visibility and accountability? If the answer is "yes" then I would ask -why are salaries considered the key driver of visibility? If I am going to make a charitable donation to an organization I am more concerned that they have the infrastructure and resources available to deploy my donation. I do not want to support an organization that is operating on the brink of fiscal health. I want to know that my donation will quickly be put to use and that programs can expand as a result.
Of course, fiscal responsibility is critical to any organization. But keeping only the cheapest talent available is not my view of fiscal responsibility. I would rather know that infrastructure is sturdy, that partnering relationships are driving efficiency and that immediate social impact as well as systemic change is being addressed.
I predict that this continued focus on reducing overhead will be the demise of many worthy charitable organizations. I look forward to a societal and regulatory shift toward focus on impact, scalability, and ability to execute strategy. To have the IRS moving in the opposite direction is a disappointment. Perhaps the other sector watchers and regulators will step up to the challenge.
June 2021
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