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GuideStar Nonprofit Compensation Report Webinar Follow-up

GuideStar Nonprofit Compensation Report Webinar Follow-upI would like to thank everyone who attended our webinar about the 15th GuideStar Nonprofit Compensation Report on September 29th. In case you missed it, you can view the full recording and slide deck here. There were a few questions that we did not have time to answer during the webinar, so I will take them on here. Forgive me first for providing the standard disclaimer: The information provided below is not to be considered legal advice applicable to any particular situation and organizations needing specific advice and counsel on these matters should always consult with knowledgeable counsel.

Are you seeing an increase in the number of nonprofits who are paying directors to serve on the Board? Do you think Guidestar will start including director compensation in its report?

There does not appear to be any sign of an increase in the number of nonprofits that pay board members. Generally fewer than 4 percent of 990 filers provide compensation to board members, and most of those that do are reimbursing those board members for travel expenses involved in attending board meetings. From a purely practical perspective, then, GuideStar is unlikely to start including such compensation in our report, because there isn’t much data to crunch!

If you Google “compensation of nonprofit board members”, you will find many takes on whether and how much you should compensate board members. The consensus is that compensation of board members is not encouraged as a best practice. Also consider that if you do compensate board members, the IRS expects you to follow the same sort of rigorous procedure that you would in setting fair compensation for key executives at the organization.

What are your thoughts on per diem for Board members for attending Board meetings? Count towards compensation?

Lots of interest in the topic, apparently! Generally (see above), this is frowned upon, but if done correctly, it can be a reasonable thing to do. The best practice dictates that an organization would have a formal travel reimbursement policy that sets out per diem limits (the IRS would be unlikely to argue with limits that mirror what is allowed for federal employees), what the organization will not reimburse (e.g., alcoholic beverages), and requires documentation for all expenses in the form of receipts, etc. Failure to follow this kind of policy could lead to requiring an organization to file a W-2 for the board members who are compensated.

If someone is made to pay back the overcompensation they received, who are they paying back, the IRS or the nonprofit?

Under Section 4958 of the Internal Revenue Code, penalties are paid to the IRS, and the excess benefit is paid to the organization. So, for example, if an individual is paid $150,000 and the IRS determines that the compensation should have been $100,000, there is an excess benefit of $50,000, which must be repaid to the nonprofit. The individual then must pay 25% of the excess benefit ($12,500 in this case) to the IRS.

How would you recommend benchmarking compensation for organizations that are not required to file 990s (like an archdiocesan school)?

Just because an organization doesn’t file a Form 990 does not mean that it cannot use Form 990 data for benchmarking. The organization can compare itself to private nonprofit schools of similar size and type that do file a 990. Also, remember that the IRS does not limit organizations to nonprofit comparables – if you can find a source of compensation data for for-profits of similar size and type, you can also consider them in the process of setting reasonable compensation.

Chuck is responsible for conducting research for GuideStar and customers interested in nonprofit sector data. He also works to identify new data sources and ways to present data effectively to GuideStar users. Chuck produces the annual GuideStar Compensation Report, which analyzes the salary and benefits of thousands of nonprofits throughout the country. He has 15 years of experience as a teacher and researcher in various institutions of higher education. Chuck serves on the advisory committee of the National Center for Charitable Statistics and is a member of the Panel of Nonprofit Sector Representatives for the Commission on Accountability and Policy for Religious Organizations. A graduate of Christopher Newport University, Chuck also received an M.S. degree in mathematics from the College of William and Mary. Vice President, Research, Chuck McLean

Chuck is responsible for conducting research for GuideStar and customers interested in nonprofit sector data. He also works to identify new data sources and ways to present data effectively to GuideStar users. Chuck produces the annual GuideStar Compensation Report, which analyzes the salary and benefits of thousands of nonprofits throughout the country. He has 15 years of experience as a teacher and researcher in various institutions of higher education. Chuck serves on the advisory committee of the National Center for Charitable Statistics and is a member of the Panel of Nonprofit Sector Representatives for the Commission on Accountability and Policy for Religious Organizations. A graduate of Christopher Newport University, Chuck also received an M.S. degree in mathematics from the College of William and Mary.

Topics: Nonprofit Leadership and Practice