Yesterday I discussed a Q&A from the Taproot Foundation founder about the difference between a nonprofit and for-profit. I found particular fault with the reflections about the selection and purposefulness of the respective boards.
In today's Nonprofit Quarterly, the wise maven of those things questionable within the nonprofit sector highlighted the efforts by the IRS to take away the tax exempt status of the Prairie Meadows Raceway and Casino in Iowa. The Casino is a gambling enterprise that provides significant social benefit in terms of jobs, entertainment, and, most importantly, huge sums of support for the County and area nonprofits. The IRS' interest in the Enterprise came as a result of what many of us lay people would interject as fairly substantive salaries for the CEO and top managers.
I would concur that the salaries are indeed substantive but like many of the media and others who state that nonprofit managers should be paid on a sub-par basis compared to for-profit competitors, the issue of salaries is, in my opinion, misguided and not really the "issue". The "issue" really must be focused on mission and social benefit and whether the nonprofit is in accordance with these two goals. I would offer additionally, that "ownership" matters and in this case, after a review of the governing body (the surrogate owners who are not personally benefiting from the casino (in accord with the Casino's code of ethics), I would offer that all looks "right".
Still, as we know, enforcement is as much policy and politics and I for one am unclear what is driving the IRS' actions but would challenge that a political solution may be necessary. For sure, in my opinion the "C" suite salaries, while huge, appear to be consistent with peers - the standard used to test IRS excess benefits rule. So, what is up? This case should be a story that many nonprofit boards should be concerned about, especially hospitals, colleges and museums. And perhaps it's also time for the Independent Sector and the Nonprofit Council to lift up everyone's voices on this topic and come to an agreement about what should be the matters that grab the IRS' attention.
Here's the Nonprofit Quarterly story.