April 24, 2005
By MIKE SWIFT, Courant Staff Writer
When a federal audit highlighted
the $300,000-plus compensation package for the head of a Hartford
anti-poverty agency, the state's nonprofit community took note
- not only because of the size of the package, but also because
of the national spotlight on executive pay.
Since the scandal over the pay and perks of United Way head
William Aramony more than a decade ago, compensation of nonprofit
executives has been under continual scrutiny. At least a half-dozen
state attorneys general have taken action over allegedly excessive
compensation since 2000.
In Washington, a U.S. Senate committee is holding hearings on
the finances of organizations in the nonprofit sector, while
the Internal Revenue Service has launched a major initiative
to search out agencies whose charity is focused as much on their
executives as on the people they are supposed to serve.
Paul C. Puzzo, president and CEO of the Community Renewal Team,
is hardly alone among nonprofit chief executives in Hartford
in having a compensation package that tops $300,000. But a review
by The Courant of 54 nonprofit arts, health care, educational,
cultural and social service organizations in Greater Hartford
suggests Puzzo's salary and benefits package is far larger than
that of the typical nonprofit CEO.
Locally, pay for nonprofit chief executives covers a broad spectrum
- ranging from more than $500,000 for the chief executives of
the city's two major hospitals, to $30,000 to $50,000 for the
heads of community groups such as Hartford Areas Rally Together,
the Northside Institutions Neighborhood Alliance and the Immaculate
Conception Housing and Shelter Corp.
The review of nonprofit agencies in and around Hartford found
that the median total compensation for a chief executive was
about $132,500, $119,000 of which was salary. Among the 54 organizations,
seven paid their chief executives a compensation package, including
salary, benefits and deferred compensation, worth $300,000 or
Puzzo, however, had a richer salary, benefits and expense account
package than the presidents of Trinity College and the University
of Hartford and the top executives of the Wadsworth Atheneum
Museum of Art and the Bushnell Memorial. Only the CEOs of Hartford
Hospital and St. Francis Hospital and Medical Center had richer
compensation packages than Puzzo's at CRT. The figures were disclosed
on the latest tax returns that the organizations filed with the
IRS, for either the fiscal or calendar years of 2003 and 2004.
A pay study done by the Connecticut Association of Nonprofits,
based on voluntary questionnaires answered by about 100 agencies
across the state, set average CEO pay in Connecticut in 2000
at about $90,000.
A third survey, by the NonProfit Times, a trade publication,
found that the average pay for a nonprofit chief executive in
New England in 2003 was $82,745, well below the average for the
mid-Atlantic states, where the average nonprofit chief executive
"There's no trend to give excessive salaries" to executives
in Connecticut's nonprofit sector, said Nancy Roberts, president
of the Connecticut Council for Philanthropy. "[Puzzo's salary]
is not an indication of a trend. I'm not calling this an excessive
salary, but there is no trend to have any kind of large increase
in the salaries of nonprofit organizations in this state. If
anything, the trend is to being more careful" with executive
The scrutiny of the nonprofit sector in Washington is due to
the actions of an unprincipled few, rather than a general increase
in executive pay, Roberts said.
Others who follow the nonprofit sector say that sector's CEOs
still make far less money than executives in the for-profit sector.
Nonprofit executives, they say, also are not eligible for many
of the perks of power many executives in private business enjoy,
such as stock options.
"The real salary scandal is not that some nonprofit CEOs
make big bucks. It is that most nonprofit employees are paid
too little," said Ron Cretaro, executive director of the
Connecticut Association of Nonprofits.
Cretaro said one way to measure the fairness of executive salaries
is by looking at them as a percentage of an organization's total
budget. But there are many other factors in setting CEO salaries,
he said, including the makeup of an organization's board of directors.
"A board that includes many business people may have fewer
issues about paying a larger salary," Cretaro said. "They
tend to accept higher salaries - whereas if you have a community,
grass-roots group, they're going to say, `What are we doing paying
somebody this much?'"
Tax returns filed by nonprofit
organizations on IRS Form 990 have been public for decades.
But the Internet, and websites that offer nearly instantaneous
and free public access to the salary information on "990" forms,
have exposed the finances of nonprofit organizations to far
"With the Internet, we have real disclosure which is 24/7,
365. You don't have to wait in line; you don't have to pay a
fee" to view a 990 form, said Joseph Urban, an expert in
the IRS' exempt organization department.
Urban said the Internet's exposure of nonprofit tax returns
has led to a string of media stories about misconduct by some
nonprofits, attention that encouraged authorities to increase
scrutiny of the sector.
In August, the IRS announced a plan to go after nonprofit organizations
that pay excessive salaries and benefits to their top executives
or other insiders. As part of the Tax Exempt Compensation Enforcement
Project, the IRS is contacting nearly 2,000 nonprofit organizations
and foundations to investigate how much they pay their chief
executives. IRS officials said federal law bars them from discussing
the initiative's effect on CRT, or any other specific case.
In Congress, the Senate Finance Committee is also holding hearings
on the nonprofit sector, including the issue of excessive CEO
"We must recognize that we now are at an important juncture," IRS
Commissioner Mark W. Everson told the committee this month. "We
can see that abuse is increasingly apparent in our [tax-exempt]
sector, and we must work to address it."
Under federal tax law, executives and even board members could
face tax sanctions, and a nonprofit agency could risk losing
its tax-exempt status, if the IRS found the organization was
paying excessive salaries to top managers or other insiders.
The executive could be liable for a 25 percent tax on the excessive
benefit, and could be compelled to return the excess benefit
to the organization or face a 200 percent tax sanction. The IRS
would make that determination of excessive benefit based on an
analysis of compensation paid to executives doing similar nonprofit
and for-profit work.
Several local nonprofit experts agreed it was unfair to compare
CRT to other Head Start agencies, because CRT is so large and
provides multiple services at multiple sites.
It might be fairer to compare CRT to a large hospital, said
Michael Bangser, the president of the Hartford Foundation for
Public Giving, an organization that frequently analyzes the financials
of nonprofit organizations as part of grant applications. Cretaro,
of the Connecticut Association of Nonprofits, suggested a comparison
with the Connecticut Institute for the Blind, which offers multiple
programs at multiple sites.
Those comparisons, however, offer little insight into whether
Puzzo's compensation at CRT is in line with the market.
Hospital executives occupy the summit of Hartford's nonprofit
salary pyramid. In St. Francis Hospital's 990 filing for 2003,
the most recent available, then-president David D'Eramo is listed
as receiving $665,934, the highest of the nonprofits surveyed.
The hospital did not provide information requested last week
on compensation of D'Eramo's successor, Christopher M. Dadlez.
The head of the Connecticut Institute for the Blind in 2003,
Lars Guldager, received a significantly more modest $125,861.
His successor, Patrick Johnson, receives $188,297.
Reprinted with permission of the Hartford Courant.
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