Charities boost pay to retain leaders

Skilled nonprofit officials command high salaries

HERO's package not `out of line'

April 12, 2004|By Kate Shatzkin | Kate Shatzkin,SUN STAFF

When it came to light that the executive director of a local AIDS organization paid for a personal trainer with the charity's money, on top of receiving a six-figure salary and thousands of dollars in bonuses, some donors, volunteers and partners of the group blanched.

Baltimore Health Commissioner Dr. Peter L. Beilenson commented that Leonardo R. Ortega's salary was "quite a high salary for a nonprofit in the city" as he asked the FBI two weeks ago to investigate Health Education Resource Organization's use of federal grant money.

But nonprofits increasingly look like businesses, with pay to match.

Although Ortega's salary of $122,000 - plus $16,000 in possible bonuses - might be on the high side, it is not as unusual for an organization like HERO as it might seem, experts say and surveys show.

In tight economic times, nonprofit executives are expected to combine fund-raising acumen with sharp managerial skills. The sector is becoming more professional, with more than 200 degree programs across the country in nonprofit management.

Their organizations are taking on more services that were once provided by government.

In Maryland, nonprofits are growing faster than the for-profit sector, meaning more organizations are competing for talented leaders.

The number of Maryland charities with budgets of more than $1 million rose from 1,259 to 1,608 over the past five years - an increase of 28 percent.

"My own reaction is that a $122,000 salary for a $4 million agency is not at all out of line in my experience," said David E. Edell, president of DRG Inc., an executive search firm for nonprofits in New York City.

"There may be questions about the kinds of benefits and the rest of the agreement, [but] we've placed people in smaller agencies who were hoping to grow for bigger salaries than that."

A 2003 survey sponsored by the Maryland Association of Nonprofit Organizations found that salaries for executives of health-related nonprofits in the Mid-Atlantic region ranged from $52,424 to $151,589, with a median salary of $75,356.

The region comprises Delaware, Maryland, Virginia and Washington.

Keeping employees

HERO, founded 21 years ago to address the emerging AIDS epidemic, operates a drop-in center at 1734 Maryland Ave. that has a clinic for HIV patients, and legal, housing and mental health services.

Since the reports last month, board members have issued statements saying they will cooperate with investigators.

John W. Nugent, chief executive of Planned Parenthood of Maryland, makes $130,000 - a bit less than Ortega when Ortega's bonuses are included.

Like HERO, the organization has a $4.5 million budget and provides counseling and medical services, but it serves far more people: 16,000 receive family planning services, compared with HERO's 3,500 clients.

Nugent said it is particularly hard for a health care organization like his to hold on to skilled employees in the Baltimore area.

More than once he has lost staffers to Johns Hopkins programs or the University of Maryland Medical System - much larger nonprofits.

"It always causes us to sharpen our pencils to see if we can do a little bit better," Nugent said.

Beilenson's pay lags behind Nugent's and Ortega's: He makes $128,500 to supervise a $200 million department.

Greater scrutiny

Although they often perform tasks comparable to those of their corporate counterparts, nonprofit executives face greater scrutiny because their organizations are exempt from taxes.

Their salaries must be listed on an annual 990 tax form filed with the Internal Revenue Service and available over the Internet.

The IRS forbids nonprofits from paying "excessive" compensation - a standard that boards often meet by using salary surveys for comparable jobs.

Paula McLellan, chief executive of Family Health Centers of Baltimore, disliked the fact that her $106,099 salary is available for public inspection, although she said she would make more in a similar for-profit job.

The organization, with four health centers, has a $6.6 million budget to give primary medical care and other services to low-income and uninsured clients. More than 18,000 patients were seen at the centers last year.

Benefits questions

At HERO, the questions go beyond Ortega's salary.

His deputy director, Indira Kotval, told HERO's board she had discovered questionable expenses for travel and other items, along with bonuses and perks at a time when other employees were getting only cost-of-living raises. She was fired shortly after that.

"I think you'll find that he is at or near the top [in earnings] by any scale," said Mark Jason McLaurin, a former HERO board member who is associate prevention policy director for Gay Men's Health Crisis in New York.

"There's also the question, for me at least, of an organization that's not in very good health fiscally."

Neither McLellan, Nugent nor any other executive interviewed has a personal trainer paid for by the nonprofit, as Ortega does.

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