Nonprofit leaders say public funds used appropriately

Reports of excessive salaries for nonprofit executives don't represent reality, say those in the trenches

By John David Iseman




	Gov. Andrew Cuomo and state Inspector General Ellen Biben are two key players in the governor’s task force to investigate state-funded nonprofit compensation and executive salaries. Biben will help lead the task force, which many nonprofit executives say is investigating a very small issue in the nonprofit sector. Photo by Gazette file.

August 15, 2011

Despite recent headlines, executive compensation at nonprofit organizations is not a controversial issue for the vast majority of the 70,000 nonprofits in New York state, according to Doug Sauer, CEO of the New York Council of Nonprofits.

Sauer's comments come in response to Gov. Andrew Cuomo's formation of a task force to investigate administrative and executive compensation levels at nonprofit organizations.

"We're concerned they are taking isolated instances and painting the entire nonprofit sector," Sauer said.

According to the state Division of the Budget's January 2010 preliminary report of nonprofits contracting with New York's mental hygiene agencies, there were 1,926 employees making at least $100,000. The average salary of these employees was $168,555.

The announcement of the task force followed a New York Times article about two brothers who became millionaires running a nonprofit in New York City and allegedly used state money to help pay for their children's education.

Sauer said he believes this is not the case, and, in fact, most executives take home low to moderate salaries with little compensation from the government.

The Levy brothers in the Times article began their nonprofit company, The Young Adult Institute Network, in the 1970s. Sauer points out the brothers had been making millions of dollars as the top executives of the company for years, without any government investigation, until they resigned this past June.

As a nonprofit, the organization had to submit an IRS 990 form every year. This form is public information and contains a financial statement and the salaries of executives. Sauer asks why nothing was done about the compensation levels at the company until Cuomo announced his task force. "There hasn't been any public outrage or any gubernatorial leadership on the issue," he said.

For larger nonprofits, there are other IRS and state regulations they must abide by. Nonprofits are required to send independent financial audits every year to the state government and are also audited every three years by the state government, according to Maria Dibble, executive director of the Southern Tier Independence Center, a nonprofit group in the Binghamton area that runs an independent living center.

These fiscal reviews are very comprehensive, according to Dibble. The organizations must show samples of their billing records and obtain the correct financial paperwork. The executive directors face questioning on what their salaries are, what kind of cars they drive and what perks or benefits, if any, come with the position.

Eleanor Moran, executive director of Women's Empowerment & Resource Center Inc., a nonprofit in Utica, says her organization is "highly monitored" and audited no less than three times a year. These audits include a review of expenditures and vouchers.

Although Dibble says she "doesn't have a problem with the task force itself," she is worried the task force will hurt nonprofits that use state money appropriately by adding even more regulations. "I am very concerned about what will come out of this task force," she said. "Those who are being compensated under $100,000 a year will pay the price."

This price will be in the form of more paperwork and regulations that are not needed according to Dibble. She agrees with Sauer that the example of the Levy brothers is an isolated incident, and the majority of nonprofits do not make nearly the amount of money the brothers did. In some cases there is "overregulation," according to Sauer.

Adam Kirkman, director of technical assistance for CARES Inc., a nonprofit that helps people locate affordable housing, says the formation of the task force is the wrong thing to do in this economy.

"It seemed like a slap in the face to agencies that are doing difficult and important work," said Kirkman, who is also asking why the governor is not looking into excessive compensation on Wall Street.

"It is inappropriate in a time of budget cuts to be launching a probe to make it appear that they are taking advantage of the government in some way when the vast majority of them are doing good work," Kirkman said.

The budget for Women's Empowerment & Resource Center has been cut the past three years, according to Moran. In 2010, the organization received $327,000 in state funding. This year it will receive $158,000, and in 2012 its state funding will be cut further to $24,600. These cuts make it likely that the center in Utica Moran oversees will have to close down.

Moran says she doesn't understand how the government can keep cutting nonprofit funding such as hers, when for every four dollars it receives from the state, her organization produces four dollars in return.

Judy Atchinson is executive director of a nonprofit who says she is paid a low salary but believes it comes with the job. Atchinson has run a small nonprofit in Schenectady called X-Quest Inc. for the last 17 years. It works to help youth get off the streets and stay away from gangs.

X-Quest has a budget of about $150,000, with Atchinson making $39,000 per year, $3,000 to $4,000 of which she donates back to the program. "I think that nonprofits are paying their executives far too much money," Atchinson says. "Too much money is being spent on administrative personnel."

The governor's task force "will affect a certain elite number of nonprofit organizations," according to Sauer. These elite nonprofits are those with huge operating budgets that are more likely to have excessive salaries for executives. Sauer describes the task force's efforts as "rooting out the bad apples."

One "well-standing vehicle" for training nonprofits is the State Board Training Consortium, according to Sauer. This consortium is a training effort led by the Council of Nonprofits and other state agencies that prepares nonprofit board members to run organizations funded by the state. The training includes topics such as fiscal responsibility and ethics.

Sauer said he believes these training sessions are important, but says "regulation needs to be enforced" on the boards to ensure state funds are not misused.

One other major question, according to Sauer, is who is going to be serving on the task force.

The task force will be led by state Inspector General Ellen Biben, Secretary of State Cesar A. Perales, Medicaid Inspector General Jim Cox and Department of Financial Services Superintendent Benjamin Lawsky. Commissioners from the Department of Health, the Office of Mental Health and Office for People with Developmental Disabilities will also serve on the board.

A member of a nonprofit organization should be on the task force, argues Sauer, saying such a representative "can provide a value to the task force by at least being at the table."

Atchinson says there needs to be real oversight on nonprofit compensation, but questions how effective this task force will be. She said nonprofits that do not use state money properly should lose funding.

This task force will focus solely on nonprofits and not-for-profit organizations, a fact that Sauer and Dibble take issue with. Dibble says some for-profits receive Medicaid money from the state, so they should be investigated as well. She also asks why the government is not investigating state employee salaries and compensation.

Sauer seconds Dibbles' opinion, saying, "Perhaps it is also time to order an extensive review of the executive compensation levels of taxpayer-supported for-profit businesses."

"New York is functioning because we have nonprofit agencies," Kirkman says. He adds now is not the time to cut funding for nonprofits, because the need for them is so high.

Nonprofits are a "privilege of the government," according to Sauer, and "do not exist for someone's private inurement." Sauer also sees a problem with certain nonprofit executives making more money than for-profit executives. Since nonprofits are charitable organizations partially funded through taxpayer money, the executives should not be making excessive salaries, says Sauer.

In a 2009 report investigating nonprofit hospital compensation done by the IRS, it was reported nationally the average compensation for top management officials was $490,000.

Sauer argues nonprofit leaders should be paid for the work they do, along with being paid a reasonable amount compared to similar nonprofits. Nonprofit executives having a higher salary than a for-profit executive is an "offense to the nation to what a charitable organization is," he says. "The decisions they are making; they should be making for public gain."

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