An Internal Revenue Service inquiry into not-for-profits executive compensation found
widespread disclosure errors and raised considerable concern about loans to
directors, officers and key employees, according to a summary of the findings.
Of the roughly 1,200 tax-exempt organizations initially surveyed by IRS, including
hospitals and health systems, more than 30% were required to amend annual IRS filings,
the Form 990. The initiative, under way since 2004, included a second wave of closer
examinations for 782 tax-exempt organizations, which resulted in proposed penalties
totaling more than $21 million against 40 individuals or not-for-profit subsidiaries
for excessive executive compensation or failure to properly report pay, largely among private
foundations. Of the second raft of examinations, 10% remain open.
A third wave of IRS examinations was prompted by concerns about loans of more than
$100,000 by tax-exempt organizations to key employees or board members; results have
not yet been released, the report said.
The report cautioned the agencys findings could not be considered a definitive
statement of compensation problems plaguing the entire tax-exempt sector, but went on
to call for continued inquiries and revisions on the Form 990 to curb errors and
heighten loan disclosure.
Regulators continued interest in executive pay should heighten tax-exempt
healthcares focus on executive pay, said Gerald Griffith, a Chicago healthcare
attorney with Jones Day. The agencys ongoing efforts have raised awareness of proper
pay practices and likely lessened regulators tolerance for errors. Everybodys
getting more educated, Griffith said. Theyre going to be less forgiving. -- by Melanie Evans