For whom the Chimes toll

October 23, 2003

THE CHIMES, a Baltimore-based nonprofit, has grown into a big business -- a $125-million-a-year business -- providing jobs and care for the disabled, largely via government contracts. It serves more than 5,000 people across the mid-Atlantic region and is one of the nation's largest providers of disabled janitors.

And in the process, its top executives have been rewarded handsomely, including payments to its chief executive over the last three years totaling more than $1.5 million.

Chimes CEO Terry A. Perl's compensation appears high in comparison with the leaders of similar organizations. But as shown by an investigation by Sun reporter Jay Hancock, a more fundamental problem is that most of the salaries paid to Mr. Perl and to two other top Chimes executives were not disclosed on the group's federal tax filings -- as independent experts say they should have been.

The Chimes was able to sidestep that Internal Revenue Service requirement because most of the executives' salaries came from an affiliated entity, and those payments were never reflected on the Chimes' tax form.

Moreover, the Chimes also failed to report on its tax filings, as required, that some of its board members do business with it.

As a social-service provider, the Chimes has a good reputation. Less than $2 million of its annual revenues come from charitable donations. Mr. Perl says, "We've done nothing wrong. We're not playing games."

But even if that's the case, the Chimes' failures -- to disclose much of its senior executives' pay and its board members' transactions -- appear to fall short of what's required and are certainly not up to the standards of transparency desired for well-operated nonprofits, particularly one taking on such responsibility for the disabled.

While hardly on the scale of the major scandals afflicting corporate America the last few years, the revelations about the Chimes involve the appearance of some of the same potential corporate governance problems: excessive management pay, alleged self-dealings, and a lack of openness.

As Mr. Hancock notes, with no stockholders, and the Internal Revenue Service not closely monitoring nonprofits, their workings are too often not well scrutinized -- particularly if their board members are doing business with them.

The Chimes can and should be more publicly accountable.

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