Debunking email hoaxes and exposing Internet scams since 2003!

Hoax-Slayer Logo Hoax-Slayer Logo

DividerDivider
Home    About    New Articles    RSS Feed    Subscriptions    Contact
DividerDivider


Site Navigation










Circulating Post Claims US Charity CEO’s Overpaid

Outline
In a newly pictorial format, the post presents what it claims are the salaries of the CEO’s of some well-known US based charitable organizations.


CEO at Desk

© Depositphotos.com/Alexander Limbach



Brief Analysis
Aside from being outdated, the data wasn’t even correct when it was originally compiled. First appearing in 2005, the list at that time was presumably based (roughly) on IRS form 990's filed by those charities - but failed to note that (unless the organization publishes the most recent form themselves) the forms most easily obtainable are frequently at least one tax year behind. It also fails to differentiate between base salaries and 'other compensation', and in some cases appeared to make up data out of whole cloth. In its most recent incarnation, a few new items are added but the data is still hopelessly skewed. And in this case skewed = wrong.

By David M. White

Example
Charity CEO Chart

Detailed Analysis
Before launching into the data, let’s take a moment to divine the intent of the creator of this bit of misinformation. Any given day, we are all inundated with requests for donations/assistance/support from a plethora of charitable causes. And whether your putting your pocket change in a kettle, writing a check or ticking off a box to make a payroll deduction, we’d like to have some assurance that our hard earned money is going to actually provide the services, feed the destitute, clothe the poor, or save some animal from euthanasia. What many people don’t know, however, is the financial workings of your average not-for-profit organization. Many people also don’t understand the relationship between their local affiliate organization and the national organization which they represent. So when we see something indicating astronomical salaries being drawn by the CEO’s of the beneficiary of our tax deductible donations, it can be a little disconcerting.




While we could give the benefit of the doubt to the original creator of that salary screed that they were simply promoting the support of more fiscally responsible organizations, the fact that the information provided was simply wrong mitigates that benign intent. Latter versions that simply repeat earlier errors, and then compound it by adding additional incorrect data as well as comparing organizations with wholly different missions makes the whole mess wholly worthless.

Considering that most of our readers aren’t Certified Public Accountants, we won’t try and delve too deep into the fiscal operations and definitions in this venue. And while you’re humble author is also not a CPA, he does have 20+ years of experience in the not-for-profit sector as the director of a regional organization that is affiliated with a well-known international organization. (And no, he doesn’t earn a 6 figure salary). This is not intended to be a graduate level course in understanding non-profit management and accounting… but we will try and hit the highlights before getting to the figures you’re probably most interest in….

Contrary to what many people seem to believe, a not-for-profit organization is a business as much as is your local manufacturers, supermarkets, or hardware stores. The mission of the organization is the primary difference, but the real definition comes in with where any ‘profit’ goes. A for profit business turns excess revenue into dividends for shareholders or increased wealth for owners (depending on the corporate structure) or it is reinvested in the business. A not-for-profit turns excess revenues into additional funding for programs, additional funding for operations costs, or it is held in reserve. Most not-for-profit organizations in the US are required to file a very long, very detailed financial statement to the IRS that is called a 990. The completed 990 is accessible to the public through a variety of methods. There are two exceptions to this rule: Small organizations with gross receipts less than $50,000 a year can file a very simple 990-N (aka Postcard 990) that does not require disclosure of any specific financial information; and religious organizations are not required to disclose that information publically. The 990 includes information on remuneration of the management and leadership of the organization, along with statements of revenues and functional expenses. From the 990, it is rather simple to calculate ratios of salaries to program expenses, fundraising expenses as a ratio of total expenses, and percentage of revenue that goes to fund programs. And certainly executive salaries have been a hot-button issue. There have been some excesses and abuses, but tarring the whole lot with the same brush is rather narrow-minded.

What it doesn’t tell you, however, is anything at all about your local affiliate. In some cases, your local affiliate will have filed their own 990. In other cases, the local affiliate’s information is filed as part of a consolidated report with other affiliates in their state or region. In some cases, the ‘parent’ organization will include in their 990 funding that was distributed to the local organizations as part of nationally targeted fundraising efforts. But typically the local affiliate is responsible for their own fundraising; e.g., that donation you make to the United Way supports local beneficiaries of your local United Way affiliate – not the United Way Worldwide. What the local organization gets out of the affiliation depends on what organization they are affiliated with. In some cases, it’s as simple as brand identity; would you be more likely to donate to Joe’s Project to Build Houses or to Habitat for Humanity? With others it’s about what we call ‘technical support’; things like assistance with grant writing, identifying potential grant funding, and assistance in preparing for accreditation surveys. And in some cases its direct fundraising assistance; a local Easter Seals affiliate organizing a ‘Walk With Me’ event doesn’t have to set up a website for teams and donors, print a banner or design t-shirts – all of that is provided by the national organization.

So… what follows is simply a direct rebuttal to the information being circulated. It does not address the level of compensation of the director of your local charity that might be affiliated with the national organizations listed. It does not address that fact that most reputable organizations have an executive compensation policy that strictly defines the basis for direct and indirect compensation. And we should note here that the salaries listed below are the base salaries listed for the organizations the information is available for – it does not include (as has been done by some others who have reported on this) what is referred to as ‘other reportable compensation’ simply because there can be a great deal of variability with that. E.g., it might include a vehicle allowance or de minimis use of a company vehicle (which amount is reported on a 1099 tax form and the executive has to pay taxes on), contributions to retirement plans, or any number of other items. Also listed will be the score assigned to that charity by Charity Navigator when that score is available – bear in mind the score is on a 0 to 70 scale. When appropriate, a link to the Charity Navigator page for the organization is linked. By way of definition, since I use the term repeatedly below, ‘Program Expenses’ are the expenses incurred in providing whatever services are provided. That does include salary and benefit costs for employees providing those services. It does not include the payroll costs of management and other support staff – that goes under ‘administrative expenses’.

American Red Cross – CEO Gail McGovern: $501,122 / CN Score 59.64.

March of Dimes – CEO Jennifer Howse: $545,982 / 41.05 As you can easily see by the data from their 990, considerably more than ‘one dime’ from revenues goes to program services – in fact it’s nearly 66% of revenues going to services. Claiming otherwise is what we call ‘lying’.

United Way Worldwide – CEO Brian Gallagher: $559,257 / 65.79 Gallagher’s salary is actually greater than what is claimed in the screed – however it might also be noted that over 90% of revenues go to program expenses, and all of that has very little to do with what you donate at the local level. At the local level, you can actually designate your contribution to go to a specific program or organization supported by your local United Way.

UNICEF – CEO Caryl Stern: $454,855 / 59.6 The claims made in the screed against UNICEF are just outright outrageous fabrications. Over 90% of revenues go to program expenses.

Goodwill Industries International – CEO Jim Gibbons: $413,278 / (this equates to .1% of revenues) GII is not rated by Charity Navigator as 98% of their revenues come from their business lines, not through donations. The author of the screed clearly has not one jot of a clue as to what Goodwill does, how it operates, who it helps or pretty much anything else remotely associated. Rather than ask you for monetary donations, they accept your donations of clothing, furniture, books, etc. They pay individuals with disabilities to prepare those items for re-sell, they pay individuals with disabilities to work in the stores, and they pay those individuals through the profits they make reselling those donated items, along with all the other overhead costs of operating the store. Along the way they also provide a very cost effective way for other lower-income persons to acquire clothing, furniture and other goods at a greatly reduced cost. And no – the employees do not get first grab at all the donated goods. There are very strict policies regarding that, and you can get fired for violating those policies. Items that are not suitable for resale are recycled.

Salvation Army – National Commander William Roberts: Actual salary is not known, but is estimated to be between $79,389 and $243,248. Not rated by Charity Navigator as it is a religious organization and is not required to file a 990. The Commander is also provided a housing allowance and allowances for other expenses. Local officers are also paid a salary and provided housing.

Information on the American Legion, VFW, Disabled American Veterans, Order of the Purple Heart, and Vietnam Veterans Association (see also NVVF) is not as simple to address in the same terms. As you can see from some of the links provided, some of these organizations have had rather serious issues in the past few years – some approaching the level of outright fraud. None of these organizations has provided information to the Better Business Bureau to obtain a rating from them. There is also the issue that the individual who may be listed as ‘national commander’ of these organizations actually is not the paid CEO of the organization. In some cases, there are two people listed, and for all of those organizations the actual compensation to the top one or two executives generally exceeded $300,000 per year.

Make a Wish – CEO David Williams: $365,587 / 58.36. Let’s also be honest here and note that only about 73% of expenses are program expenses – so clearly far less than 100% of donations are used for the ‘wishes’.

St. Jude – CEO Richard Shadyac Jr: $477,920 (and lets also add CFO David McKee: $522,334) / 56.91 70.3% Program expenses. Over 20% goes to fundraising expenses.

Ronald McDonald House Charities – the national organization CEO is Martin Coyne, Jr., who is not compensated for this position as he is also a VP of McDonalds corporate. CN score of the national unit is 64.99, with Program Expenses coming in at 89.5% - quite admirable, but not quite 100%. At the local level, however, the local CEO’s are compensated, with the level being a factor of size of territory, size of home, etc. Salaries reported range from the $80k range up to well over $200k.

Lions Club International Foundation – CEO Peter Lynch receives no direct salary, but does receive almost $200k in compensation from affiliates. CN Score 65.77, with Program Expenses at 83.9%.

As a final note to this, and as a personal note to our readers, I do wholly advocate that you support the local charity of your choice as you see fit and as you are able. I would not presume to ask you to support one sort of charity over another; but whether your interest lies in animal welfare, feeding the poor, sheltering the homeless or providing services for persons with disabilities, almost every community has an organization that is struggling to make ends meet and continue providing valuable services to the community. There are certainly great tools out there that provide some good, and sometimes rather enlightening, details on how certain organizations are run – but that doesn’t always translate well to the local level. Ask questions, visit the organization(s) that interest you, and make an informed decision.

Links Relating to Organizations Listed:
American Red Cross
March of Dimes
United Way Worldwide
UNICEF
VFW
Disabled American Veterans
Order of the Purple Heart
Vietnam Veterans Association
National Vietnam Veteran’s Foundation
Make a Wish
St. Jude
Ronald McDonald House Charities
Lions Club International Foundation



Bookmark and Share

Last updated: February 25, 2013
First published: February 25, 2013
Written by David M. White
About Hoax-Slayer

References

CHARITY NAVIGATOR 2012 CEO Compensation Study
Charity Navigator - Articles
Charity Navigato - Top Ten Lists



Go to Mobile Version