Compensation for senior managers in non-profit organizations for many years was not monitored, which contributed to excessive compensation and other abuses in some organizations. In 1996, The Taxpayer Bill of Rights (commonly known as "Intermediate Sanctions") was enacted which empowered the Internal Revenue Service to impose significant cash penalties on Boards of Directors and senior managers if compensation is deemed to be excessive.

Subsequent to the passage of Sarbanes-Oxley, non-profit compensation arrangements have come under increasing scrutiny at both the federal and state level.

Effective Pay Practices works with Boards of Directors and Compensation Committees of non-profit organizations to assess executive compensation and develop appropriate recommendations. Such an assessment is important for all non-profits, as the organization's use of comparability data is one of the criteria the IRS uses when reviewing the reasonableness of compensation.

Summary of Regulations