When doing executive recruiting for non-profits, it is amazing to me the number of clients and candidates that have not heard of Guidestar – the first place anyone should go when seeking information about a non-profit.
Guidestar (www.guidestar.org) is a national database providing basic information on approximately one million non-profits throughout the United States, including over 80,000 in New York. The most important aspect of the database is that it includes the 990s for the vast majority of these organizations. (The 990 is the tax form submitted annually by non-profits to the IRS. It includes information on revenue, expenses, senior management salaries, and board membership.)
Before a job interview it is important to download the prospective employer’s 990 as part of any research that you do. While it is important to note revenue and expenses, in reality what any candidate wants to check are the salaries paid to senior management. Anyone earning more than $50,000 should be listed. This is not just important for salary negotiations, it can also be very informative.
I once went for an interview where the proposed salary was $80,000. I downloaded the agency’s 990 and discovered that no one was listed as earning $50,000 or more. Since I was interviewing for director of Development, it was logical to assume that at least the CEO and COO would be making more. I asked the COO for an explanation. He told me that the agency was in fact made up of a network of non-profits. Salaries were distributed among the different constituent agencies. As no single agency paid $50,000 or more to any employee, none was listed. As I found out later, their accounting practices were questionable at best. That said, their books were audited, and distributing the salaries was legal – but it certainly wasn’t kosher!
Then there is a Connecticut educational non-profit. It has annual revenue of $5,766,523. Of this, $1,194,884 comes from contributions, $4,571,639 from program revenue.
The president earns $254,700. The co-president makes $127,169. One program director grosses $57,308 and another employee makes $60,303. Together the four earn $499,480.
Additionally, the agency pays a lease of $461,358. Specifically, $266,601 is lease rent; $103,697 is for lawn maintenance and rubbish removal; $50,477 is utilities payments; and $40,583 is taxes.
The four employees earn 41.80% of donations. Or, they earn 10.92% of program revenue. Or, 8.66% of all revenue. The lease represents 38.61% of contributions; 10.09% of program revenue; or 8% of all revenue.
All of this is perfectly legal. It is also apparently totally reasonable. Just one problem: The president and co-president are husband and wife. The two employees are their children. And they own the land that the non-profit leases. So, in total, the family receives $960,838 from the non-profit. Put differently, they get 80.41% of contributed funds, or 21.01% of program revenue, or 16.66% of all revenue. Again, it may be legal, but it’s not kosher.
The appearance of impropriety is something non-profits have to avoid at all costs. While the two examples cited are clearly exceptions to the rule, they reflect poorly on the industry as a whole. And it is all a matter of public record.
The number one rule of management is this, If you don’t want it on the front page of the local paper, don’t do it.