WORCESTER – The Boys & Girls Clubs of MetroWest has been buffeted in recent years by state funding cuts that forced the small nonprofit agency to close one of its Marlboro locations, freeze salaries and lay off employees after it was hit with an $800,000 deficit.
At the same time, the Marlboro-based group’s national parent organization reported a $13 million loss on its most recent tax return and came under fire in Congress last month for doling out nearly $1 million in salary and expensive perks to its president.
As its own finances were plummeting, the MetroWest group’s top official, Francis X. Hurley, saw his total pay and benefits rise 17 percent over three years — from $118,000 in 2006 to $142,150 in 2008. The Boys & Girls Clubs has since rolled back Mr. Hurley’s compensation to $121,000, the amount he earned in 2007.
The same financial pattern has held for many of Central Massachusetts’ largest nonprofit organizations that provide direct human services, with chief executives’ pay and benefits rising as the economy sank into a recession and agencies cut programs, eliminated services, and increased employee workloads.
Even as the groups faced tough economic challenges, however, most experienced steady expansion in their overall revenues and scope of services — success their leaders attribute to their efficiency and quality of programs and which critics say has largely been spurred by state government’s privatization of social services.
In 2008, Community Healthlink Inc., the subsidiary of UMass Memorial Health Care Inc. which administers several mental health, substance abuse and homeless programs, sustained a $2 million budget cut and closed a Worcester day program for the mentally ill. That same year, its president and chief executive, Deborah J. Ekstrom, was coming off a 6.6 percent raise, over 2007, in her compensation package. She and other top managers took a pay freeze last year.
As of 2008, the most recent year for which financial information is publicly available, Ms. Ekstrom made $237,776, with an additional $72,477 in benefits.
At YOU Inc., a counseling agency for troubled youths in Worcester, revenues stayed flat at about $28 million in 2008 and 2009, while longtime president and CEO Maurice J. Boisvert got a $219,000 boost to his base salary during that time period.
That increase was a bonus that will continue for five years to fund “a modest retirement benefit” for Mr. Boisvert, according to Gloria Griffith, chairwoman of the agency’s board of directors. YOU Inc. officials declined to make Mr. Boisvert available for an interview.
As is already the case in the for-profit corporate sector, scenarios such as these are triggering closer scrutiny of executive pay and benefits within charities and nonprofit agencies by sources ranging from local public employee unions to members of Congress and advocates of greater public oversight of nonprofit groups.
“This basically is, in my opinion, the same corporate greed we’ve seen on Wall Street and in the banking industry,” said Andrew Stacy, a direct services worker at the Templeton Developmental Center, who earns $40,000 after a 27-year career in the social services field.
“And the taxpayers are on the hook for this,” added Mr. Stacy, who is president of the union that represents direct care workers at the Templeton center. “They call themselves nonprofits, but that’s because when they’re done paying their CEOs, vice presidents, executive team and layers of management under them, they’re consuming all the profits.”
State Sen. Stephen M. Brewer, D-Barre, who spoke at a Statehouse rally last month to protest the proposed closing of the Templeton center and other state group homes, said the issue of nonprofit executive compensation is “largely uncharted territory,”
While Mr. Brewer stopped short of saying he would call for hearings on the matter, he noted that “there’s a lot of room here to have a thorough review.”
“I think it is something that is worth looking at,” he added. “Maybe if you’re doing the work of Mother Teresa, you should be making the pay of Mother Teresa.”
For their part, defenders of paying corporate-like salaries to nonprofit executives say that good leaders are worth the money if they can navigate their agencies effectively and expand services during challenging economic times and as competition increases among agencies for state and federal contracts.
Meanwhile, some nonprofit leaders such Mr. Hurley at the MetroWest Boys & Girls Clubs say they have taken steps to curb expenses as budget problems mount.
The primary source for financial information about most nonprofit companies registered as charities is the Internal Revenue Service’s Form 990, which is usually filed on a fiscal-year basis. Many groups file for extensions, and the 990s — which contain the salaries of the top five highest-paid employees and basic revenue and expense data — often lag a year or two behind, as is the case with about half of the dozen Central Massachusetts nonprofits surveyed for this story.
So while public information is not available for Mr. Hurley’s group for the past year and a half, Mr. Hurley said that in addition to rolling back his salary to 2007 levels, he and other top managers took a pay freeze for both 2009 and 2010.
“What we started to do in September of 2008 is look at all of our expenses and cut back on things like conferences and travel,” Mr. Hurley said.
“We’ve been forced, like all organizations, to look very carefully at our expenses.”
As for recent congressional scrutiny of the $900,000-plus compensation package given to the national Boys & Girls Club President Roxanne Spillett in 2008, Mr. Hurley said: “We have no control over that.”
The most lucrative executive compensation package of the groups surveyed by the T&G is that of David A. Jordan, head of the Seven Hills Foundation, one of the largest private social service agencies in the state. With about 3,000 employees and a budget of more than $115 million, the foundation provides rehabilitation, housing, counseling and other services to adults and children with mental illness, retardation and substance abuse problems.
Mr. Jordan’s annual benefits package of more than $200,000, which supplemented his $263,272 salary in fiscal 2008, was set up in 2006 to provide him with a retirement fund that he did not have before, according to William Stock, a Seven Hills spokesman.
Mr. Stock maintained it is unfair to compare Mr. Jordan’s compensation with that of other local nonprofit leaders because Seven Hills is so much bigger than other regional agencies. Mr. Jordan also was not available for an interview.
“Seven Hills is entirely different than them,” Mr. Stock said. He said Mr. Jordan’s compensation package is in line with those of executives of comparably sized health services agencies in the Northeast.
While there are no widely accepted standards for nonprofit executive pay, a 2009 CEO salary survey by Charity Navigator, an organization that tracks nonprofits, found that the average pay for CEOs in the Northeast — the country’s highest-paying region — was $196,133. The average CEO salary in New York was $220,735; in Boston, $195,535. Health group CEOs made above-average pay and human services executives in nonprofits made below average pay, the survey found.
The Charity Navigator survey of 5,448 mid-size to large charities found that organizations with budgets between $50 million and $100 million, such as some of those in Central Massachusetts, paid their CEOs an average of $378,026. Those with budgets above $100 million, such as Seven Hills, paid their top executives $462,037 on average.
The Charity Navigator salary formula includes straight salary, deferred compensation paid during the year in question, bonuses and expense accounts.
Brian R. Forts, chairman of the Seven Hills board, said Mr. Jordan, who started with the agency in 1995 and holds a doctorate in health administration from the Medical University of South Carolina, is well worth his salary and fringe benefits.
“Some nonprofits are bankrupt and what a lot of people don’t realize is that nonprofits need to run like a business to succeed,” said Mr. Forts, a Holden lawyer. “But for the foresight and compassion of Dr. Jordan, Seven Hills would not be the agency that it is. You have to pay the going rate to have the talent to do the job.”
But Thomas J. Frain, a Bolton lawyer and leader of an advocacy group for relatives of people in state group homes, noted that Mr. Jordan’s total compensation package is more than triple what the governor and the state’s human services commissioner make, while Mr. Jordan has considerably fewer responsibilities.
Mr. Frain also pointed out that most similar nonprofit human service agencies derive the bulk of their revenues from public sources such as Medicaid and Medicare, with only a relatively small percentage of most large human service agencies’ funding and earnings coming from foundations, individual donors, or private insurance payments.
“It’s outrageous,” said Mr. Frain, whose mentally retarded brother resides in a group home in Clinton. “The taxpayers and the government never anticipated that we’d be paying the head of Seven Hills nearly $500,000.”
Some critics say many nonprofits don’t use standardized benchmarks and comparative data when setting executive pay rates. They also say that the agencies’ boards often tend to be weak and retain compensation consultants who are reluctant to recommend lower salaries for fear of not being invited back.
By contrast, in the corporate world, shareholders and activist boards can sometimes regulate compensation more readily, said Gary Snyder, a member of the National Committee for Responsible Philanthropy and founder of the Detroit-based Nonprofit Imperative website.
“The nonprofits have a history of not regulating themselves. There’s very little incentive for them to do that,” Mr. Snyder said.
Advocates for nonprofits, however, maintain that there are ample means for the government and the public to oversee nonprofit companies. They also say that advanced expertise is needed to run big nonprofit agencies — skills and experience that are difficult to value.
David P. Magnani, executive director of the Massachusetts Nonprofit Network in Boston, argued that the Internal Revenue Service’s newly expanded reporting requirements for nonprofits provide as much as, and possibly more, information about agencies than private, for-profit corporations do about themselves.
Also, Mr. Magnani said, nonprofit boards for the most part do exert strenuous oversight to see if nonprofit agencies and their boards are doing their jobs effectively. Other sources of accountability, such as foundations that provide funding to nonprofits, can decrease that funding if they determine too much money is spent on overhead, Mr. Magnani said.
“And the state can do the same thing,” he added. “If you want to get state contracts, the state can tell them they need to get their compensation back into line.”
It often comes down to ability, Mr. Magnani said.
“You can certainly find another executive director, but it may be hard to find another executive director with the same level of expertise,” he said.
Not all nonprofits pay their leaders handsome salaries, especially smaller agencies. Dismas House, a small Worcester-based group that runs a halfway house and farm for ex-convicts, pays its co-executive directors, husband-and-wife team David McMahon and Colleen Hilferty, $42,500 each in base salary.
“CEO pay for charities is an important yardstick for someone considering making a donation to help the disadvantaged with their hard-earned dollars,” Mr. McMahon said. “What percentage of their dollar actually goes directly to help people in need?”
“Our overhead is extraordinarily low, and all staff members, including both co-executive directors, are involved at some level with direct services and housing provision,” Mr. McMahon said.
Each nonprofit has its own way of determining pay and benefits for its top executives.
The Boys & Girls Clubs of MetroWest uses surveys and consultants provided by its national parent group every few years, according to Mr. Hurley.
The Framingham-based South Middlesex Opportunity Council, which runs the People in Peril homeless shelter in Worcester and group homes across the region, uses Kalandavis, a Boston consulting group.
SMOC Executive Director James Cuddy, whose compensation was $318,899 in 2008, including use of an agency car, said his package is mainly a reflection of his nearly three decades at the helm of large, complex organization and his expertise in finding locations for often-controversial group homes and other programs.
“I agree it’s a sensitive issue,” Mr. Cuddy said.
In the case of Ms. Ekstrom, the Community Healthlink CEO, her pay and benefits are set based on criteria comparing her job to hospital executives, not nonprofit social service agency executives, according to UMass Memorial Health Care officials who spoke on her behalf.
The hospital’s compensation committee, which reviews her salary and benefits annually, has placed Ms. Ekstrom in an upper tier with other high-level managers, said Cheryl M. Lapriore, the hospital system’s marketing vice president. Ms. Lapriore noted that Ms. Ekstrom’s pay was frozen last year along with other members of upper management.
John A. Shea, chairman of the Community Healthlink board, noted that while the nonprofit hospital subsidiary has had to close two programs because of state budget cuts in the last few years, it has steadily expanded otherwise and he credited Ms. Ekstrom for shepherding the organization through tough economic times.
“She’s worth every penny,” Mr. Shea said. “She’s a tireless worker and a tireless advocate for people with mental health and substance abuse issues.”
Contact Shaun Sutner by e-mail at ssutner@telegram.com.
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