September 2006

We are proud to announce the release of the 2006 GuideStar Nonprofit Compensation Report. This year's report, the sixth in our annual series, is derived from information on more than 108,600 individual positions at more than 63,000 tax-exempt organizations that filed Form 990 with the IRS for fiscal year 2004 and had incomes of $1 million or greater.

The GuideStar Nonprofit Compensation Report remains the only analysis of its kind based entirely on data reported to the IRS. It also continues to be the most comprehensive nonprofit compensation study available. The 2006 report includes three new features:

• Data on non-charitable organizations as well as public charities
• An executive summary based not only on this report but also on data for previous years
• Information on incumbent compensation

Accurate, complete, and authoritative information on the nonprofit sector is more important than ever. Two years ago, Congress began looking closely at the nation's tax-exempt organizations, leading to the inclusion of charity-reform provisions in the Pension Protection Act of 2006. Although President Bush signed the bill into law on August 17, 2006, Congressional scrutiny of exempt organizations continues, and more changes are probably forthcoming.

At the Internal Revenue Service, Commissioner Mark Everson has made strengthening oversight of exempt organizations one of the IRS's top four priorities. This focus has already led to examinations of nonprofits' political activities, nonprofit credit counseling organizations—and nonprofit compensation. Last December, Commissioner Everson told the Greater Washington Society of CPAs that the IRS compensation inquiry had "uncovered a variety of troubling practices." The IRS plans to issue a report on its findings and to continue conducting compliance checks based on those results.

The general public is also paying more attention to nonprofits. Last year's natural disasters led to unprecedented support for relief activities and focused donors' attention on the organizations that provide them. Like government, donors have begun asking more of the nonprofits they support. They want to know that their gifts are going to legitimate organizations, and they want to know that that their contributions are being used wisely.

Nonprofits must demonstrate to oversight agencies, grantmakers of all types (government, corporations, and private foundations), and individual donors that the salaries and benefits they offer are justified. They must document their compensation practices and be prepared to help their supporters understand why these practices are appropriate. The 2006 GuideStar Nonprofit Compensation Report is a valuable tool for navigating through compensation and benchmarking complexities.