North Carolina

Triangle nonprofit leaders earn million-dollar salaries. Here’s who they are.

Half of the top 10 nonprofit pay packages in the Triangle belong to Duke University officials, with their famous men’s basketball coach leading the way, according to a review of tax return data by The Charlotte Observer and The News & Observer.

Easily topping the list is Coach Mike Krzyzewski, who in 2016 earned $5.8 million in salary, benefits and deferred compensation into a supplemental retirement plan.

That also makes him the top-paid nonprofit official in North Carolina, according to an analysis of information gathered by Guidestar, which tracks nonprofits. But unlike other top Duke officials, the coach’s total compensation has trended downward from a high of nearly $9 million in 2011, Duke’s tax returns show.

Krzyzewski still received nearly twice that of the next highest paid Duke official, Neal Triplett, who leads the university subsidiary that manages its investments. Triplett received nearly $3.4 million.

Michael Krzyzewski, Duke University men’s basketball coach

Much of Krzyzewski’s growth in compensation occurred after the Los Angeles Lakers unsuccessfully dangled a reported $8 million a year contract in front of him in 2004. Back then, Krzyzewski made $1.3 million, federal tax records show.

A Duke spokesman said neither the officials nor the board chairs who decide compensation would discuss specifics. Some of Krzyzewski’s compensation in 2016, the most recent year available, includes Duke paying for charter travel and covering income tax obligations. Krzyzewski also received $1.2 million in deferred compensation provided in a previous year.

“Duke University is a large, complex global institution that is committed to recruiting and retaining the most talented individuals in all our endeavors,” said Michael Schoenfeld, Duke’s vice president for public affairs and governmental relations. “The university leadership and board go through a rigorous annual process using independent consultants to set and review compensation based on responsibilities, performance and the competitive environment.”

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Experts in the nonprofit world say big pay for top officials at major institutions isn’t a surprise, even though they do not exist to make money. Federal law requires executive compensation be set by an independent board that conducts a peer review.

“For larger entities, whether it’s a hospital system or a private university, there is a need to offer competitive compensation, and that may mean that it grows a lot faster for these positions than for typical staff at a typical nonprofit,” said David Heinen, vice president for policy and advocacy at the North Carolina Center for Nonprofits.

While many people think of nonprofits as charities such as the United Way, they also encompass major institutions such as hospitals, private universities, national membership organizations and trade associations.

Federal law prohibits charities from awarding excessive compensation to their leaders. But federal government does little to monitor nonprofit pay, leaving charities free to pay almost any compensation they see fit, experts say.

Most nonprofits in North Carolina pay their top executives less than $100,000 annually, data suggest. But among the largest nonprofits — those with budgets of more than $50 million — the average compensation for nonprofit CEOs in North Carolina was about $497,000, according to a study by Guidestar, a group that publishes financial data from nearly 2.7 million nonprofits in the United States.

Three Duke officials in the Triangle top 10 have largely seen their compensation grow. Football coach David Cutcliffe at $2.5 million is making roughly $600,000 more than five years earlier, and Athletic Director Kevin White’s compensation has climbed from $936,000 to $1.5 million. Triplett made $1.2 million more than he did in 2011.

The compensation for Krzyzewski, Cutcliffe and White reflects the largesse in college sports, which is mostly driven by lucrative TV broadcast contracts, and the importance universities place on athletics to promote themselves. Krzyzewski, Cutcliffe and Atlantic Coast Conference Commissioner John Swofford are among the ten best-paid nonprofit officials in North Carolina, tax records show.

Eugene Washington, hired by Duke in 2015 to serve as its health affairs chancellor and president and CEO of its health system, is the fifth Duke official in the Triangle top ten, receiving $2.2 million in compensation.

Two of the other five top spots belong to executives with the American Institute of Certified Public Accountants, which lists Durham as its home but has much of its management in New York City and Washington, D.C. The institute is different from Duke and other nonprofits in that it is a membership organization known in the federal tax code as a 501(c)(6). It exists to serve its members, instead of the general public, and as a result receives fewer tax breaks than charitable organizations known as 501(c)(3)s.

CEO Barry Melancon and Cynthia Fornelli, executive director of the affiliated Center for Audit Quality, received $2.1 million and $1.8 million respectively in total compensation, according to the institute’s most recently available tax return. Melancon is based in New York, while Fornelli works out of Washington.

An institute spokesman had no comment on the executive pay.

Three Rex Hospital doctors make up the rest of the top ten. They are Eric Janis, Ravish Sachar and Matthew Hook, who each made nearly $1.6 million in compensation.

Guidestar reported that only one out of 10 executives at in-state nonprofits with expenses exceeding $50 million made at least $946,965 in compensation.

The IRS can take action in cases of exorbitant compensation, but it rarely does.

Jeff Tenenbaum, head of the nonprofit practice at the DC-based law firm of Lewis Baach Kaufmann Middlemiss PLLC, said for 501(c)(3)s, the IRS can levy penalty taxes on those receiving excessive compensation as well as those who approved it.

He said for 501(c)(6)s such as the CPA institute, “revocation of tax-exempt status is the IRS’ only remedy — and one rarely utilized.”

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How we reported the story

To compile its lists of the highest paid nonprofit leaders in the Triangle and in North Carolina, The Charlotte Observer and The News & Observer used data from Guidestar, a group that collects information on thousands of nonprofits. The newspapers also checked that data with the latest available tax returns that nonprofits filed with the Internal Revenue Service.

Although the word “nonprofit” conjures up an image of a charity, the word has a much broader meaning for tax purposes.

The lists includes nonprofits designated as 501(c)(3) organizations, groups that the public typically refers to as charities. Charities are exempt from paying most taxes, and most of them rely heavily on tax-deductible donations for support. They also include 501(c)(6) groups, nonprofits that include business leagues and industry trade associations. These nonprofits are also exempt from paying federal corporate income taxes, but charitable donations to them are not tax deductible.

The IRS prohibits nonprofits of all kinds from paying their leaders excessive compensation. But the agency does not provide specific guidelines or formulas to define what constitutes excessive pay.

Dan Kane: 919-829-4861, @dankanenando