2019 Northeast Indiana Salary Survey
Posted on Wednesday, June 12, 2019 Share
The IRS pays close attention to compensation paid to top executives by nonprofits.
There are certain things a nonprofit organization is restricted from doing in order to keep its exempt status. One of which is private inurement. The most common example of private inurement is excessive compensation paid to insiders (CEO, Executive Director, board members, etc.). Private inurement occurs when an insider receives benefits from the nonprofit in excess of what he or she provides in return. The key to determining whether private inurement has occurred is whether the transaction is fair and reasonable under the circumstances. For example, a $100,000 salary to the Executive Director of Organization A may not be reasonable while the same salary to the Executive Director of Organization B may be reasonable given the specific circumstances.
Although the IRS does not state what reasonable compensation is, it does provide some guidance by asking the following on Form 990.
Did the process for determining compensation of the organization’s CEO, Executive Director or top management official and other officers or key employees …
- include a review and approval by independent persons (i.e. board of directors or executive committee),
- comparability data,
- contemporaneous substantiation of the deliberation and decision (i.e documentation)?
Comparability includes looking at the compensation paid by similar organizations for similar positions. These may include organizations similar in size, within the same geographic region, or providing a similar service. Often times organizations will use Form 990 of other organizations on Guidestar.org to find comparable salaries. One resource that organizations in Northeast Indiana have is the Northeast Indiana Salary Report. The Community Foundation of Greater Fort Wayne and United Way of Allen County partnered with Charitable Advisors to create the 2019 survey - 2019 Northeast Indiana Nonprofit Salary Survey. It includes information from 125 area nonprofits on the salaries of various positions, job descriptions and benefits. Utilize tools like this to document comparability data of your organization’s executives.
Posted by: Carrie Minnich, CPA
Posted in Mission Minded Nonprofits
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