The Latest Trend In Hiding Compensation Within The Nonprofit Sector

There’s a thought-provoking article by Sarah Pulliam Bailey in the 1/17/2020 edition of the Washington Post that examines a growing trend among evangelical organizations to shift from a traditional nonprofit status to what the IRS defines as a “Church” status. The impetus for this is a desire to obfuscate executive leadership compensation.

While both status allow donors to deduct charitable gifts, the Church option provides the ability to hide compensation while only losing the ability to engage in political lobbying efforts.

Critics of this trend point out that the restrictions are easily sidestepped but donors and transparency advocates have no recourse when it comes to discovering top tier compensation packages.

All of this overlaps a great deal with issues surrounding executive and music director compensation within the nonprofit performing arts field.

While the lion’s share of nonprofit performing arts orgs include CEO and music director compensation in their public tax filing, there are still a few holdouts each year that share a perspective akin to the religious institutions highlighted in the Post article.

Things get even murkier when you weave in the numerous methods for reporting compensation after the fact when and therefore no longer within the realm of influence or accountability. The field has seen more than its share of instances where cuts to executive compensation implemented during austerity measures returned once a long-term concessionary labor agreement is signed.

Transparency and accountability are bonds of trust nonprofits form with donors. They are cornerstones of legitimizing mission driven activity. The regular erosion of these donor protections across adjacent nonprofit sectors should come as a sober reminder that what we take for granted now, can be turned on its head in short order.