By admin May 15, 2014 No Comments
By Heather Menchine, OneOC Volunteer

Questions about pay, and what is or is not reasonable pay is something nonprofits have been struggling with for years.  And for good reason.  Nonprofit salaries have recently been under increased scrutiny from the IRS, not to mention the media, donors and stakeholders.

To be clear, the IRS requires that nonprofits be open and honest about what top executives are earning. Having a written policy to review compensation helps protect nonprofits and ensures that they are meeting the expectations of good governance by regulators and stakeholders.   It is essential that a nonprofit board have compensation guidance to help set the ceiling (and floor) of salaries. But what exactly is reasonable compensation?  Sounds a bit vague.

“Compensation” is easier to define typically by the calculation of salary plus other benefits, such as insurance, phone, car, housing allowance or anything else of value.

Defining “reasonable” is more difficult and requires a comparison.    The IRS encourages a nonprofit’s board to collect data on the compensation practices of similar organizations.  As described by the IRS in Form 990 (Part VI, Section B, Line 15), the review process must have at least three elements:

  • Review by an independent body such as a compensation committee

  • Use of “comparability” data  such as a salary survey by similar nonprofits

  • Documentation of the board’s consideration and approval of the compensation

So where do you find this  “comparability” data?  One way is to seek out compensation surveys conducted by independent compensation consultants.

An even easier way to get Orange County-specific nonprofit salary information is to purchase the newly released OneOC Nonprofit Salary survey for 2014.  Over 100 Orange County nonprofits participated this year and provided a wealth of information on compensation and benefits – ranging from vacation and retirement to salary increases and bonus practices.

Click here to purchase your copy of the 2014 Orange County Nonprofit Salary Survey study report. 

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