Thursday, April 12, 2012

What Can Nonprofit Board Members Be Paid?

The recent case of Greg Mortenson and the Central Asia Institute has led some to wonder whether being a nonprofit board member and a salaried employee are mutually exclusive.

According to Maryam K. Ansari, Esq. of the answer is no -- with some qualifications.

In an article featured in Reuters, Ansari wrote that it is perfectly within the law of tax exempt organizations for board members to have salaries, as long as the pay is "reasonable." What defines reasonable? This is defined by law. The Internal Revenue Service (IRS) has intermediate sanctions rules that require checking salaries at like organizations to ensure there isn't private gain.

Ansari also wrote about another factor in the pay of board members: A conflict of interest and compensation policy. These are put into place to prevent the individual from deriving any extra benefits from the nonprofit. Standard conflict of interest policies usually state that when the board votes on the pay for a member, that individual must leave the room during the process.

A compensation policy will lay out how the salary for that employee is to be determined. Things that will be considered are the duties of the position and the average salary paid for the job. All of these procedures must be documented to ensure that the decision was impartial.

Nonprofit board pay can be a very sticky subject, so it's important to follow the best practices that Ansari laid out. To read her full article, head on over to the Reuters website.

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