Charities careful on how much to pay directors

Boards of the 122 public charities in Jefferson, Lewis and St. Lawrence counties with paid executive directors must answer one important question every year: How much is too much?

If a public charity doesn't pay its executive enough, it might not hold onto a skilled person. If it pays the executive too much, it could lose donors.

Kenneth A. Berger, president and executive director of the nonprofit watchdog group Charity Navigator, Mahwah, N.J., said executive salaries are a touchstone for donors.

"The most common feedback we see is something like, 'I've been giving to this charity for years. I can't believe this is what the CEO is getting. I'm never giving to this charity again.'"

But he warned that donors can't expect executives to make only the most meager salaries.

"There are some donors who assume that charity means the leadership needs to take a vow of poverty," he said. "It takes all the skills, if not more, of a for-profit executive."

For a multimillion-dollar nonprofit, it isn't unreasonable for the executive to earn six figures, he said.

While Charity Navigator and other watchdog organizations do not recommend limits on executive salary, they do suggest certain controls.

Watchdog groups advise that charities compare salaries from charities of a similar size and mission and with similar responsibilities. Charities also need to weigh cost of living, location and qualifications.

"Each charity is different in terms of what type of people it needs to hire with certain qualifications, education and other skills," said Bennett M. Weiner, chief operating officer of the Better Business Bureau's Wise Giving Alliance, Arlington, Va. "They may need medical degrees or legal degrees. They may need expertise in science."

In its annual survey of executive salaries, Charity Navigator found that the Mid-Atlantic region, including New York, had the second-highest average pay compared with other regions, based on a nationwide survey of 5,324 charities. The nationwide average salary was $148,972, while the Mid-Atlantic average was $156,479, which could reflect cost-of-living considerations.

The average public charityexecutive salary in the north country, according to the most recent Form 990 filings with the Internal Revenue Service, was far below that at $64,449. The median executive salary is even lower, at $45,632. The median is the number in the center of a series of numbers, so it minimizes the effects that very high and very low numbers have on averages.

Douglas Sauer, executive director of the Council of Community Services of New York State, said low salaries are far more typical.

"The vast majority are underpaid, not overpaid," he said.

Certain sectors tend to make less, such as youth services, while others pay more, such as health.

In setting a salary, "the board needs to document that it went through a reasonable process," Mr. Sauer said.

Charity Navigator advises that charities create a compensation committee to determine the appropriate salary and benefits. That committee should compare salaries and should hire an expert to analyze salary comparisons.

The Wise Giving Alliance counsels charities to follow initial hiring with formal performance reviews every two years.

The Council of Community Services of New York State advises an annual performance review in writing.

"Lots of boards don't do it, don't do it in writing or don't do it consistently," Mr. Sauer said.

Peter W. Schmitt, chief executive officer of Watertown Family YMCA Inc., said his organization uses an executive committee to formulate and recommend a compensation package for him. The nonprofit follows the watchdog recommendations in hiring a regional consultant to collect data on executive compensation in nonprofits of similar size in cities of similar size.

"Locally, we also look at nonprofits that are roughly the same size as ours in dollars," Mr. Schmitt said.

He said they don't attach the names of the organizations or their executives, but list revenues and salaries. The committee also has a list of goals to keep it from becoming based on personality, he said.

"It's a tough thing for people to do," Mr. Schmitt said. "It's better to give them too much information than too little."

The goal for the committee is to create a fair compensation package.

"They know generally what for-profit positions pay," he said. "This way, they know what it would cost to replace a director."

"We want to make sure we're being responsible with donor or investor dollars," he said.

According to their most recent filings with the IRS, the 122 charities with executives represent 17 percent of the 717 public charities in the north country. They are 34 percent of the 360 public charities in the region that bring in more than $25,000, thus requiring them to file with the IRS.

Readers can investigate nonprofits on their own.

GuideStar USA Inc., through its Web site, publishes all public charity and private foundation Form 990s filed with the Internal Revenue Service. Free registration allows the public to search nonprofits and see the three most recent filings.

Nonprofits have five and a half months after the end of their fiscal year to file a Form 990 with the IRS. They also may receive two 90-day extensions. After the IRS receives the form, GuideStar says, it takes about two months to post it.

The GuideStar Web site is: www.guidestar.org