Special Report: US Congress and NY Governor Focus on Nonprofit Sector

In the halls of government, last week was a very interesting time for the nonprofit sector.

The U.S. House of Representatives Ways and Means Subcommittee on Oversight began a series of hearings about the nonprofit sector with an eye toward regulatory reform. There’s an excellent summary in the Venable Nonprofit Alert 

In New York, Governor Cuomo has proposed new regulations capping nonprofit executive compensation, limiting the use of state funds for administrative expenses, and imposing new reporting requirements. If adopted in New York, these regulations could serve as a model for consideration by other states. The New York Nonprofit Press has prepared a terrific summary of the Governor’s proposals, visit.

I’m very tempted to editorialize, but I’m restraining myself, at least for the moment. That doesn’t mean you have to. I invite you to freely share your views of these two news items.

That’s what Michael Rosen says… What do you say?

 

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2 Comments to “Special Report: US Congress and NY Governor Focus on Nonprofit Sector”

  1. I have been following these events, the New York issue more than the Federal. I am concerned with high salaries and administrative costs, as they take money away from the services for those who need them. When dealing with state and Federal tax money (or funding from any donor, for that matter), it needs to go to services of the clients, and should not be lining the pockets of those in charge of the organizations. Compensation should be fair and reasonable, but when dealing with service organizations, executives should not plan on getting rich. Recently, I have read too many reports of nonprofit executives who have misused the trust of the donors and lived lifestyles one would expect of a major corporate executive or overpaid movie star. I see this as the result of abandoning the ethical behaviors we all should be living by.

    • Richard, thank you for commenting and sharing your passion on this subject. While I agree with you that nonprofit executive compensation should be “fair and reasonable,” I suspect we will disagree about what those terms mean. And, I certainly do not believe that high salaries always “take money away from the services for those who need them.” While undeserved high salaries and bloated administrative budgets do take resources away from those served by the organization, high-salaries paid to exceptional executives that produce results can actually help more people.

      I believe in paying people what they are worth. I do not believe that talented people should have to endure a lower salary just because they work for a nonprofit rather than for-profit organization. If we want efficiently run nonprofits that maximize the number of people they serve, we better be prepared to pay for the talent that will make that happen. Paying mediocre salaries will tend to attract (not always, but often) mediocre staff who will achieve mediocre results.

      I could go on but, instead, I’ll direct you to the far more articulate essays on the subject by Harvard’s Dan Pallotta.

      Finally, I also want to point out that a portion of any donor’s money, whether private or government, is required for reasonable overhead. Donors should not expect that all of their money will go directly to services. Someone needs to pay the electric bill, buy office furniture, etc. Setting an arbitrary cap on how much of each dollar can go to administrative expenses is problematic. Depending on where an organization is in its lifecycle will greatly impact the ratio of administrative to service expenses. Other factors will also impact the ratio. This is one reason that the US Supreme Court found such government mandated caps to be unconstitutional back in the 1980s. While the proposed regulations skirt around the Supreme Court decision, they are nevertheless wrong-headed. The proposed regulations offer an overly simplistic solution to a complex challenge. While we want our nonprofits to run efficiently and effectively, we should find a better way.

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