Documenting Your Executive Director’s Salary

Does your organization document your executive director's salary?  

Documenting the salary and compensation for your organization’s executive director is crucial for transparency, compliance, and accountability. it is also required by the IRS.  Below are the key aspects needed to be documented.

• Employment Agreement or Contract – Detailed contract outlining terms of employment, responsibilities, benefits, and compensation structure.
• Job Description – Clear and comprehensive job description outlining the roles, responsibilities, expectations, and performance metrics for the position. 
• Salary Structure – Document describing the salary structure, including base salary, bonuses, incentives, benefits, retirement plans, and any other components of the compensation package. 
• Board Approval and Resolution –  A board resolution formally approving your executive director's compensation package, including details of the approval process, discussions, and the final decision. 
• Compensation Committee Documentation – Documentation from any compensation committee (or the committee responsible) meetings or discussions related to the executive director's compensation, including meeting minutes and decisions made.
• Comparative Salary Data – Data showing the salary ranges and compensation packages for executive directors in similar nonprofit organizations, within the same sector, and within the same geographic region. 
• Financial Statements – Financial records, including your organization’s annual financial statements, demonstrating the organization's ability to sustain the executive director's compensation. 
• Annual Performance Evaluation –Documentation of the annual performance evaluation of the executive director, including feedback, goals, and performance metrics used for evaluating performance and determining compensation adjustments.
• Procedures – Document outlining the organization's procedures for reviewing the executive director's compensation and ensuring compliance with legal and regulatory requirements.
• Conflicts of Interest Policy – Policy ensuring that individuals involved in the compensation decision-making process disclose any conflicts of interest and do not participate in decisions where a conflict may exist.
• Employee Handbook – The relevant sections of the employee handbook outlining compensation, benefits, and related policies that affect the executive director's compensation. 

Ensuring comprehensive and accurate documentation of your executive director's compensation is essential for maintaining transparency, adhering to legal and regulatory requirements, and demonstrating fiscal responsibility within your nonprofit organization.

Contributed by: Carrie Minnich, MAcct, CPA | Partner | DWD CPAs & Advisors