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GuideStar Blog

From the President's Office, October 2004

Dear Friend:

Compensation is one of the key issues confronting nonprofit organizations today. Congress, donors, the media, and the IRS are all scrutinizing nonprofit salaries. Lists of "highest-paid nonprofit CEOs" abound.

Salary figures by themselves are meaningless, however. To gain true understanding of nonprofit compensation, we must add something else: context. We need to compare compensation practices among nonprofits of similar location, budget size, and mission.

That's why we're proud to announce the release of the 2004 GuideStar Nonprofit Compensation Report, a valuable tool for determining appropriate compensation. GuideStar's report remains the only nonprofit-compensation analysis derived entirely from IRS Form 990 and 990-EZ data. The 2004 edition is based on the 990s of more than 83,000 charities.

The GuideStar Nonprofit Compensation Report gives nonprofit leaders reliable, authoritative data on which to make salary decisions. The extra attention being paid to nonprofit compensation today makes this information more critical than ever.

Something else is necessary for understanding nonprofit compensation: transparency. Yes, 990 filers must report salaries and benefits to the IRS, but just reporting the figures is no longer enough for many organizations.

There's no doubt that most nonprofits are run by dedicated individuals who receive little or no compensation for their efforts. A few, however, require large budgets and complex operations to achieve their missions.

The leaders of these nonprofits must be prepared to disclose not only what their top employees earn but also why they earn it. Our colleagues have an obligation to define the challenges they face and the skills that are required to meet them. Only then can people inside and outside the sector determine if the salaries paid are appropriate for what employees do.

Nonprofit compensation is a critical issue for the nonprofit sector. Let's make sure the debate about it is well informed and based in fact.


Bob Ottenhoff
President and CEO, GuideStar

Nonprofit Branding: Unveiling the Essentials

An organization's greatest asset is its brand. Branding is the process of creating a clear, consistent message about your organization, so that when people see your logo or hear your name, they'll think of your mission and programs in terms you have defined. I.e., the way you want them to.

In graduate school recently, I drew on 18 years' practical experience in marketing to look at nonprofits and branding. I found that nonprofits devote little time, energy, and care to branding, and that they generally relegate this process to a lower-level functionary.

The reason why is readily apparent: daily responsibilities and thin resources give nonprofit executives little time for the reflection that effective brand management requires. The purpose of this article is to help busy nonprofit managers by distilling the essentials of branding in a simple and concise fashion.

IRS Updates: New Car Donation Regulations; Form 1023 Revisions

If you're thinking of donating a car to charity or applying for 501(c)(3) status for your nonprofit organization, you'll want to take heed of recent IRS actions.

New Car Donation Regulations

As of January 1, 2005, donors who give cars (or trucks or boats or airplanes) to charity will no longer be able to claim the "fair market value" of those items on their federal income taxes. Instead, if the claimed value of the donated vehicle exceeds $500 and the organization sells it, the deduction will be limited to the amount the nonprofit receives for it. For more information, see the consumer alert the IRS issued November 30.

New, Improved Form 1023

In October, the IRS released revisions of Form 1023, "Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code," and its instructions. The new 1023 is intended to reflect tax law changes, expedite processing of requests for 501(c)(3) status, make the application and instructions easier to understand, and capture information about potentially abusive transactions. For more information, see the IRS FAQs about the revised application.

Introducing, a new e-philanthropy portal, is taking GuideStar data to the Empire State. Dedicated to increasing the flow of philanthropic dollars to charities located in New York State, is already on-line but will be launched formally at an event in New York City on October 28. (Go to for details about the launch and accompanying nonprofit workshop, both co-sponsored by GuideStar).

Are Nonprofit Executives Paid Fairly? IRS Actions and September Question of the Month Results

Long a lightning rod for public and media attention, nonprofit compensation is back in the news. On the heels of June's Senate Finance Committee hearing, the IRS has kicked off its Tax Exempt Compensation Enforcement Project.

The IRS began contacting individual exempt organizations in July. During the course of this effort, which is projected to continue into 2005, the service expects to communicate with nearly 2,000 nonprofits about their compensation practices.

Although individual compensation is on the agenda, the IRS is interested in more than just what an organization's CEO makes. Agents will also examine insider transactions, such as loans to officers; gather information on how exempt organizations set compensation levels; assess how nonprofits report compensation on their 990s; and educate organizations about tax issues related to compensation.

For more information, see the IRS news release.

Gender, Geography, and Nonprofit Compensation

Gender, organization type, and location all affected nonprofit pay in FY 2002, the newly released 2004 GuideStar Nonprofit Compensation Report shows.

GuideStar's fourth annual analysis of nonprofit compensation draws exclusively on fiscal year 2002 Form 990 data from more than 83,000 public charities. Here are some highlights of the 2004 report: