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Charity work has lucrative side

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By MARK DOUGLAS

mdouglas@wfla.com

Published: December 13, 2009

CLEARWATER - Will Carey spends some of his time collecting deli sandwiches by the hundreds from stores willing to hand them over for charity.

As the man who runs the nonprofit Tampa Bay Harvest, Carey helps leverage 600 volunteers to deliver about $3 million worth of surplus food to groups feeding the poor.

He makes $36,000 a year with no benefits. He doesn't expect to get rich.

"To me, everybody's got their own self-worth," Carey said. "And to me it's more important getting done what I'm getting done."

Ron Hytoff runs Tampa General Hospital and is credited by hospital spokesman John Dunn with turning the former public health care center from a failing venture to an economic dynamo.

Hytoff is paid more than $2 million a year in compensation, though he didn't want to talk about it for this story.

Carey and Hytoff might seem to have little in common. But under federal tax law, they are much the same - operators of charitable organizations granted tax-exempt status in return for providing some benefit to the public.

They can buy material and supplies from vendors without paying sales tax, and they can lure donors by noting that any largesse can be deducted from income taxes.

Charitable status doesn't mean no one is making any money.

The New Jersey-based watchdog group Charity Navigator said in a report issued last summer that the average wage of a nonprofit CEO among more than 5,000 publicly supported U.S. charities amounted to $158,000 a year. That's about 6 percent higher than the previous year's report.

For nonprofit organizations with at least $100 million in annual revenue, CEO compensation averages $462,000 a year, Charity Navigator said.

Nonprofit agencies seldom submit reports required by the IRS on time, and lags of up to 18 months are common. But the most recent figures available show that hundreds of nonprofit executives in the Bay area continue making well above the national average even as recession sends unemployment soaring to nearly 12 percent in the region.

Organizations paying top dollar said they are forced to do so or they risk losing executives who ride herd over big-money operations, more than $1 billion a year in the case of Tampa General.

But that doesn't sit well with Don Newman, who once managed hundreds of billions of dollars helping the poor and was paid less than $150,000 each year. Newman, undersecretary for Health and Human Services under President Ronald Reagan, retired to Belleair with his wife. Now he volunteers at a free clinic, and at holiday time, he rings a Salvation Army bell.

"Just because you're doing business with big numbers," Newman said, "it still doesn't merit, in my opinion, exorbitant salaries."

Charities under pressure

Charitable giving in the United States plummeted more in 2008 than at any time in the 53 years it has been measured, according to Charity Navigator, which rates thousands of charities nationwide based on their efficiency and performance.

Charities are taking a hard look at payrolls and executive compensation to stay afloat, said Ken Berger, president of Charity Navigator.

"There is a flattening, and in at least 30 percent of the cases, cuts in salaries since the recession began," Berger said.

It comes at a time when the number of nonprofit agencies is increasing. In 1940, there were 13,000 agencies. Today, Berger said, there are 1.9 million.

The nonprofit sector is now a trillion-dollar industry responsible for 1 in 10 jobs, he said. Even so, most charitable giving lands in the hands of a few. Six percent of the nation's nonprofits end up with 94 percent of all donated money.

It takes professionals and professional salaries to run the nation's mid-size to large charities, Berger said, but he finds it hard to justify million-dollar compensation paid by some local, tax-exempt charitable organizations.

"This defies common sense," he said.

"All of us who are paying taxes are, in essence, subsidizing this organization. It's supposed to provide a public benefit and the leadership of a charity is becoming a millionaire or is a millionaire - that's absurd."

That sentiment is echoed by some donors in the Bay area, including people dropping dollars into a Salvation Army kettle in Clearwater last week.

"It doesn't make sense to me," retiree Steven Marcinek said. "To me, it's too much."

Pat Cullen-Davis said she thinks hospital CEOs, in particular, are overpaid.

"I'd love to get $2 million a year," Davis said. "No person is worth that."

Some are cutting pay

One local nonprofit agency that cut executive salaries is the Florida Orchestra, which set the salary of its president and CEO, Michael Pastreich, at $175,000 in October 2008.

Pastreich took a 10 percent pay cut, other executives took smaller cuts, and there was a pay freeze for those making $50,000 or less. The moves helped the orchestra cut $2 million in the past two years, said Stephanie Gonthier, chief financial officer.

The orchestra also laid off a third of its 29-member administrative staff and is bracing for $800,000 more in cuts next year.

The woman who runs the David A. Straz Jr. Center for the Performing Arts, formerly the Tampa Bay Performing Arts Center, said her pay was frozen this year, like all other employees of the center.

President and CEO Judith Lisi, whose team recently landed a donation from a retired banker for whom the center is now named, is paid a salary of $391,000 a year.

Her total annual compensation, according to the most recent report to the IRS, was $679,000, but she said it included a one-time payment to her retirement fund, which she called an "adjustment."

LifeLink Foundation Inc., the charitable organization that procures life-saving human organs for half of Florida, all of Georgia and Puerto Rico, is run by Dana Shires, a co-inventor of Gatorade.

Shires receives $557,000 a year from LifeLink, with headquarters on Bayshore Boulevard in Tampa; his son, Dan, receives $294,000 as executive director of the organization's tissue bank.

The University of Tampa is a charitable organization as well, and President Ronald Vaughn - who has overseen the expansion of the campus and its enrollment - received $693,627 in total compensation for 2007, according to the most recent report filed.

With no new report, it's not clear whether the recession affected Vaughn's pay or the $92,000 expense account he received in 2007. That's the largest expense account among the roughly 2,000 executives and board members reviewed for this story by News Channel 8.

"As a matter of policy, the university does not disclose personnel information," said UT spokesman Eric Cardenas. That includes "details on individuals' salaries, benefits, contracts or salary negotiations," Cardenas said.

Hospital salaries are tops

The best paid nonprofit executives in the Tampa Bay area work in hospital administration.

Berger said high wages are not necessarily a bad thing as long as they are in line with the size and complexity of the organization. He suggests gauging the effectiveness and efficiency of the organization before scrutinizing executive pay.

"If you see a higher-than-average CEO salary and they're going gangbusters in helping people in a meaningful way, then I would cut them some slack," Berger said of those who lead nonprofits.

"If, on the other hand, you see absolutely no evidence that they're helping anyone in a meaningful way, then I would have a second thought."

At the top of the salary list is Hytoff at Tampa General, who received more than $1.7 million in salary and benefits in 2007, according to the hospital's IRS filing. The 2008 numbers haven't been submitted, but they're higher, according to a statement from Jim Warren, chairman of Florida Health Sciences Center, which oversees TGH.

Hytoff received a raise in his base salary of $64,400. That raise, along with benefit increases, brings his total compensation to $2 million. His hourly wage works out to about $800 based on the 50-hour work week reported to the IRS.

Warren said in the statement the TGH board bases executive compensation on research by an independent consultant, "with the goal of retaining and fairly compensating key leaders" in an operation worth almost $1 billion with more than 6,000 employees.

Warren said meeting or exceeding business goals, as well as experience, also figures into an executive's compensation.

Not far behind Hytoff is BayCare President Steve Mason, who received more than $1.67 million in 2007 and $1.73 million in 2008. As a whole, BayCare's top seven executives received $4.6 million in 2007 and $5.4 million in 2008.

That's an average of $771,000 each for overseeing 10 BayCare hospitals.

"The salaries we pay our executives, including our president and CEO, are competitive," said John Borreca, who chairs BayCare's board and compensation committee. The committee, like TGH, uses an independent consultant to establish salaries.

Setting reasonable pay

Using independent consultants is the right course, Berger said. But nothing can justify the million-dollar rewards lavished on nonprofit agencies' executives across the nation, he said.

"Once you start getting into the millions and millions of dollars, it's getting ridiculous," Berger said.

All Children's Hospital paid CEO Gary Carnes $1.12 million in 2007, and taken as a group, the top seven executives at the nonprofit St. Petersburg hospital received $4.1 million. That's about $300,000 more than the total raised by the 2009 All Children's Telethon on WFLA-TV.

The H. Lee Moffitt Cancer Center and University Community Hospital in Tampa paid their top executives nearly $900,000 each, according to figures filed with the IRS.

An IRS survey of 500 nonprofit hospitals released this year said average compensation for top executives was just less than a half-million dollars and just more than $1 million for nonprofit hospitals with revenue exceeding $500 million.

That means top executives at the Bay area's biggest nonprofit hospitals are beating the national average.

"When it comes to nonprofit hospitals, in particular, the IRS has spoken about this, that this needs to be looked at," Berger said.

He questions whether the tax exemptions they enjoy give them an unfair advantage over for-profit hospitals, which compete for patients, insurance payments and Medicare reimbursements.

"If it walks like a for-profit and talks like a for-profit, and yet we call it a nonprofit, then maybe we need to redefine what we call a nonprofit hospital."

Carey of Tampa Bay Harvest gave some thought to the million-dollar salaries as he stocked the pantry of a Tampa shelter for pregnant women.

"I don't want to condemn somebody that's making good money," Carey said. "Maybe they're worth it."

But he also questioned whether that much money makes you lose sight of the charitable mission.

"If I'm preoccupied with raising money," he said, "and getting me more money, something falls through the cracks."

News Channel 8 reporter Mark Douglas can be reached at (727) 451-2333.

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