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Execs' pay at LI nonprofits under scrutiny

State Sen. Carl Marcellino (R-Syosset), in an undated

State Sen. Carl Marcellino (R-Syosset), in an undated photo, has introduced legislation to set guidelines for executive pay at all New York nonprofits -- not just those receiving state funds. Photo Credit: Newsday/Dick Yarwood

More than 120 not-for-profit organizations on Long Island -- from large hospital systems to museums -- pay their top executives more than $200,000 a year in salary, bonuses and other taxable benefits.

At least 47 pay more than $400,000 a year, and six pay more than $1 million.

Pay to these top executives -- and the roughly 64,000 public charity administrators statewide -- is under scrutiny in Albany where:

Gov. Andrew M. Cuomo in January ordered that, "to the extent practicable," no more than $199,000 in state funds should go to reimburse nonprofit and for-profit service providers for any executive's compensation. He said administrative costs at such providers should be capped at 15 percent by 2015. The governor has asked state agencies under his control, largely health and social service agencies, to draft rules on executive compensation and administrative costs by May 16.

State Sen. Carl Marcellino (R-Syosset) has introduced legislation to set guidelines for executive pay at all New York nonprofits -- not just those receiving state funds. Instead of a hard cap or a formula pegged to an organization's budget, Marcellino wants to establish across-the-board procedures, such as requiring nonprofits to look at comparable organizations, before approving a pay package.

Attorney General Eric Schneiderman is working on legislation to create a more uniform process for the setting of compensation at nonprofits. Such legislation comes months after a committee he formed issued a set of recommendations on reforming the sector.

"It's about time we had some discussion on these things," said Michael Cooney, a partner at Nixon Peabody, a major law firm with offices around the world and Long Island that represents nonprofit organizations.

"These are our institutions. We give money to them, we volunteer for them, some people work for them. Making bad guys out of hospitals or health care providers or museums, I think, accomplishes very little. At the same time we need to make sure there's public trust."

 

Analyzing compensation

Newsday reviewed about 1,700 tax filings for nonprofits on Long Island to determine how much charitable organizations are paying in compensation -- salary and benefits -- to their executives. Of the organizations that paid more than $199,000 in compensation to a top executive, more than 100 received or are affiliated with an organization that received taxpayer money.

The 10 highest-paid executives on the most-recent tax filings were all from hospitals or health care systems. They had reportable compensation -- base pay, bonuses, incentives and other compensation -- ranging from nearly $900,000 for No. 10, to nearly $3.6 million for the No. 1 on the list, according to the filings. That list included a few former executives whose pay for the year was boosted by large severance checks.

 

The filings reviewed by Newsday were for organizations with more than $100,000 in annual revenue and included both nonprofits that receive state funds as well as those that rely solely on private donors. The review provided both a view of the region's nonprofits and their levels of compensation, as well as a window into the organizations that might be affected as state officials look to create new rules to monitor the sector.

It's important to remember that nonprofits are businesses often with large, complex operations and budgets, said Gwen O'Shea, president and chief executive of the Health and Welfare Council of Long Island, an umbrella organization for a number of health and human service nonprofits in the area. "The health and human services sector as a whole is extremely efficient and transparent. Are there outliers? Of course," O'Shea said.

But, executives "need to be compensated appropriately," she added.

It is unclear what, if any, impact the Cuomo's new rules will have on Long Island nonprofits and executive compensation, once they go into effect. Nonprofit sector officials have feared draconian measures, but now say Cuomo's office will likely provide some leeway as opposed to a firm cap.

"We suggested they needed to be flexible and the governor's office expressed the same willingness to do that," said Susan Hager, president of the United Way of New York State. "Running a food bank is very different from managing a hospital or an arts museum. It's different and it should be treated differently and I think there's recognition of that."

The governor's office did not respond to interview requests.

Nonprofit officials and advocates acknowledge the need for accountability at organizations that receive taxpayer or donor funds. However, they are urging state regulators and lawmakers not to push through one-size-fits-all regulations.

"Passing new laws and creating new burdens that affect all nonprofits when nobody has demonstrated this is anything more than a problem of outliers is not the right approach," said Sean Delany, executive director of the Lawyers Alliance for New York.

Much of the recent focus on nonprofits stems from a New York Times article last August that reported that the two brothers who ran the Medicaid-financed Young Adult Institute Network, a service provider for disabled adults in New York City, each earned nearly $1 million a year.

 

Health systems top list

Newsday's review of Long Island nonprofits' tax filings found executives at major health systems topped the list.

Michael Dowling, the president and chief executive of North Shore-Long Island Jewish Health System, received the most in direct compensation, with about $1.2 million in base salary and about $1.1 million in bonus and incentive pay in 2010.

"Michael Dowling is the CEO for 14 hospitals within the North Shore-LIJ Health System, with $6.5 billion in annual revenues and more than 43,000 employees. Most other hospital CEOs, especially on Long Island, oversee a single hospital. Clearly, his level of responsibility is far greater than any other New York area health care CEO," according to a statement from the system in response.

Alan Guerci, president of St. Francis Hospital in Roslyn, received $3.6 million in reportable compensation in 2010, according to that year's tax filing.

That figure, however, included $2.5 million in contributions to his supplemental retirement plan. The bulk accrued in previous years but became taxable in 2010 when Guerci turned 60, said Christine Hendriks, a spokeswoman for Catholic Health Services of Long Island.

Guerci should get about $1.3 million of that when he retires; the rest went to the government for taxes. Guerci's base and bonus compensation for the year was $1.1 million, according to records.

Hendriks said an executive compensation committee reviews pay to ensure it is in line with the market and reflects an executive's experience. She added that St. Francis is a nationally renowned hospital with some of the best programs in the country. In addition to running that hospital, Guerci is the head of Mercy Medical Center and St. Joseph Hospital, and serves as an executive vice president for the entire system. The highest-paid nonmedical, nonprofit professional was Hofstra University president Stuart Rabinowitz. He received $802,842 in reportable compensation in fiscal year 2010, including $574,934 in base pay, according to tax filings. The school's total revenue in fiscal year 2010 was $433.2 million.

 

Pay at other institutions

The expected average reportable compensation for an executive at a university with that level of revenue was $543,139, according to an analysis by the Redmond, Wash., based Economic Research Institute. ERI compiles compensation data for organizations, including the Internal Revenue Service.

In a statement, Hofstra officials said executive compensation is based "on an annual review by the Board of Trustees" and periodic consultant reviews of comparable salaries. The pay "reflects the President's extraordinary accomplishments in moving Hofstra University forward during the past decade," the statement said.

The school said it receives less than 2 percent of its revenue from the state and would likely not be affected by regulations on service providers.

Among organizations that spend at least six figures on an executive's annual compensation, Newsday found 35 that paid more than 15 percent of their annual revenue to a top executive. Of these, 28 had less than $1 million in revenue.

Elizabeth Zimmer received $203,846 in compensation when she was executive director of the Hauppauge-based Maurer Foundation for Breast Health Education in fiscal year 2010. Her pay was nearly half of the nonprofit's $432,529 in revenue for the year, according to records. The organization has received one-time grants from the state but does not have a regular state contract for program services, according to the foundation.

"As Executive Director of the Maurer Foundation, an organization dedicated to finding paths to the amelioration of breast cancer, Libby Zimmer's compensation was modest, well within the standards for not-for-profit organizations, and commensurate with her notable prior experience with the March of Dimes, the St. Charles Foundation for Children and with St. Mary's Hospital for Children, as well her tremendous ability, energy and impressive education," Maurer said in a statement.

The foundation had about $1.8 million in revenue in 2008, the year Zimmer became executive director, and she agreed to a pay cut during the recession, the organization said. Since the 2010 filing, Zimmer has left and the foundation hired a new, part-time executive director who makes $72,000 a year.

 

Some are optimistic

Some nonprofit sector professionals are optimistic the state will unveil flexible rules without a hard salary cap, but they questioned the need for new regulations that try to set pay levels and said there was no evidence of widespread abuses in the nonprofit sector.

There are already laws to regulate nonprofit executive compensation, and the state attorney general's office has broad powers to keep nonprofits from inappropriately spending money, said Delany, a former head of the state attorney general's charities bureau.

State law requires nonprofit executive compensation to be "reasonable" and "commensurate with services performed." The law does not spell out what that means.

Even without explicit guidelines, the attorney general's office has been able to take action against nonprofits and boards that overpay executives -- such as blocking compensation or suing to recover funds, Delany said. If there's a problem with compensation, it's not due to a lack of regulation but a lack of resources to enforce the existing laws, he added.

Hager, from the United Way, said she understands the outcry over compensation at nonprofits. But it's unfortunate that such cases shift the public conversation from the work that nonprofits are doing to a discussion on salaries, she added.

"If they're meeting the needs of Long Islanders -- if they're doing what's expected of them and people are satisfied with that outcome -- that should count for something," Hager said.

 

 

 

Calls for reform

 

THE GOVERNOR: Gov. Andrew M. Cuomo issued an executive order in January calling on state agencies to limit the amount of taxpayer funds that could go to reimburse any executive's compensation to $199,000. The order also sought to limit the amount of state funds that could go to administrative costs at an organization to 15 percent of its budget by 2015. These regulations, which are due by mid-May, would impact nonprofits that contract with the state. The proposal would not impact nonprofits that primarily rely on donors and other sources of revenue.

THE ATTORNEY GENERAL: Attorney General Eric Schneiderman formed a committee to study the entire nonprofit sector in the state and make reform recommendations. The committee issued a report in February. While many of the suggestions are aimed at making it easier for nonprofits to do business with the state, the report also looked at increasing oversight of organizations. The committee recommended independent oversight of executive compensation, setting criteria for board review, requiring record-keeping on the process, and providing oversight of compensation consultants. Schneiderman's office is working on legislation based on the recommendations.

THE SENATOR: Sen. Carl Marcellino (R-Syosset) chaired a Senate Standing Committee on Investigations and Government Operations hearing in February on executive compensation at nonprofits. He introduced a bill this month targeting the issue. The bill so far does not have a sponsor in the Democratic-led Assembly.

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