For Area's Top Officials, $300,000 Is High End

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 more.

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 received $101,663.

"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 salaries.

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 more scrutiny.

"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 pay.

"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.