GuideStar Releases Free Report Defining Rules Governing Nonprofit Executive Compensation

New Report Details What the IRS Permits and Consequences of Failing to Follow the Rules
Release date: September 22, 2011

Washington, D.C.—GuideStar—the leading source of nonprofit information—has released a new report, " Compensation">What You Need to Know about Nonprofit Executive Compensation," detailing the regulations governing executive compensation. The report, which can be downloaded for free, reviews how nonprofit professionals and board members can maintain public trust and mitigate risk through their compensation practices.

"Nonprofit compensation has long been a topic of conversation and controversy on Capitol Hill, in the media, and of course among the philanthropic donors that keep these charities alive," said Bob Ottenhoff, president and CEO of GuideStar. "It's critical that nonprofits back up their executive compensation practices. We created this report to help professionals wade through the various legalities and governance issues facing nonprofits today."

The IRS is charged with enforcing the Federal Private Inurement Prohibition, which strictly forbids a tax-exempt organization's decision makers—board members, trustees, officers, or key employees—from receiving unreasonable benefits from the nonprofit's income or assets. The rules, however, are not always easy to follow. Prepared by GuideStar editorial director Suzanne Coffman and available for free download, "What You Need to Know about Nonprofit Executive Compensation" concisely breaks down the most important issues facing nonprofits, including:

  • what the IRS permits in setting nonprofit executive compensation;
  • the consequences of failing to comply with compensation regulations;
  • how nonprofit board members can protect themselves and the organizations they serve;
  • the kind of data compensation decisions should be based on; and
  • the importance of reporting compensation accurately in annual IRS filings.

March 2007 IRS report found that "25 examinations have resulted in proposed excise tax assessments ... aggregating in excess of $21 million, against 40 disqualified persons or organization managers." In 2011, already there have been scandals involving an investigation of six television evangelists by Senator Charles E. Grassley (R-Iowa), an investigation of the Fiesta Bowl by Arizona officials, and a proposal by Massachusetts officials to ban compensation for nonprofit trustees.

"Given the intense scrutiny of nonprofit compensation, accurate, up-to-date information from a reliable source on compensation at peer organizations is a nonprofit's best tool for protecting its decision makers from costly excise taxes and the organization itself from possible loss of tax-exempt status," writes Suzanne Coffman, GuideStar's editorial director.

"What You Need to Know about Nonprofit Executive Compensation" has been published on the heels of the 2011 GuideStar Nonprofit Compensation Report, the only large-scale analysis of its kind that relies exclusively on data reported to the IRS. Authored by GuideStar's vice president of research, Chuck McLean, the 2011 GuideStar Nonprofit Compensation Report is an extensive review of key employee compensation practices across the entire GuideStar database of digitized IRS Form 990 information of approximately 88,000 501(c) organizations for fiscal year 2009. It presents GuideStar's first look at how the "Great Recession" affected salaries and benefits across the nonprofit sector, and it shows that the economy undoubtedly played a role in lessening compensation in FY 2009. The report also shows that female nonprofit compensation continued to lag behind that of their male peers two years ago. To view sample pages or purchase the 2011 GuideStar Nonprofit Compensation Report, please visit

For more information or to download "What You Need to Know about Nonprofit Executive Compensation" for free, please visit

About GuideStar

GuideStar,, connects people and organizations with information on the programs and finances of more than 1.8 million IRS-recognized nonprofits. GuideStar serves a wide audience inside and outside the nonprofit sector, including individual donors, nonprofit leaders, grantmakers, government officials, academic researchers, and the media.

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