This week, Candid released the 21st edition of our annual Nonprofit Compensation Report. The report reviews key employee compensation based on 160,726 observations from 101,489 Forms 990 and 990-EZ filed by 501(c) organizations with the IRS for fiscal year 2019. It is the only large-scale analysis of its kind based entirely on data reported to the IRS and continues to be the most comprehensive nonprofit compensation study available.   
We’re sharing key insights and top takeaways from the 2021 report to provide a snapshot of the rich findings included: 
1. Median executive compensation has grown steadily over the last five years. This year’s report found that most of the trends observed in 2018 continued in 2019, including steady growth in median executive compensation. This has risen gradually, year-over-year, from $106K in 2015 to $121K in 2019. 
2. Median compensation for CEOs decreased for all but the highest and lowest budget bands from 2018 to 2019. Median compensation for CEOs increased only at small organizations with budgets $250K and under and at large organizations with budgets of $50M and greater.  
3. There remains a pay gap in CEO compensation by gender. The pay gap is narrower for organizations with a smaller budget size. As past reports have found, there are still significant differences in CEO compensation between men and women. The median compensation of female CEOs was lower than that of male CEOs at organizations of all sizes. However, the gender gap is (slowly) declining, with all budget bands showing a decrease in pay gap since 2005. The report also notes that women represent the majority of CEOs at smaller organizations (budgets of $2.5M or less).
4. Science and health organizations have the highest overall median executive compensation,1 while religious institutions continue to have the lowest. As has been the case for some time, science and health organizations have the highest overall median executive compensation at $196K, while religious institutions ($65K), animal-related organizations ($86K), and the arts ($92K) continue to have some of the lowest overall executive compensation. 
5. 501(c)(3) organizations in the Northeast have higher median executive compensation compared to all other regions. Our report found that 501(c)(3) organizations in the Northeast have the highest median executive compensation at $137K, compared to other regions. The District of Columbia has the highest median executive compensation at $174K, followed by New York ($152K) and Massachusetts ($143K). It is important to keep in mind that location is only one of several factors that account for differences in compensation. The full report looks at compensation on the state and metropolitan statistical area (MSA) level broken out by budget size. 

Why it matters 

If the IRS finds that a nonprofit has overpaid its executives, it can impose fines on both the executive(s) who received the overpayment and the board members who approved it. A nonprofit’s board can prevent this outcome by taking three steps: 

  1. Approving compensation in advance. The board must also ensure that no one who participates in the decision has a conflict of interest concerning the transaction. 
  2. Basing its decision on comparability data obtained before the compensation is approved. 
  3. Documenting the decision-making process at the time it approves the compensation. 

Candid’s 2021 Nonprofit Compensation Report fulfills the requirement in step 2. 
Nonprofits, particularly charities that rely on contributions, must also be able to defend their compensation practices to the public. As the IRS observed in a 2009 study on nonprofit hospital compensation, “For some, there may be a disconnect between what, as members of the public, they might consider reasonable, and what is permitted under the tax law.” Having reliable comparative data on hand can be the difference between maintaining or losing the public’s trust in your organization.
View a sample report 

[1] Executive compensation refers to all 14 job categories tracked in the report.

 

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