Federal Form 990 Open to Public Disclosure…and they are reading them!

The Washington Post is reporting on compensation of the President of GWU as he “cracks the $1 million” level in a sensational sounding article.   The Federal Form 990 is open to public inspection, and as every compensated officer, key employee or “highest compensated” employee knows, that means their compensation and benefits are reported in Part VII of the form on open display for the general public.  Arguably more important, in Part VI Section B of the 990, the policies of how an organization approves and documents the decision process for compensating their CEO and other top positions is also disclosed.  The IRS is encouraging all organizations to use the three prong approach of:  having an independent review and approval system, the use of comparability data, and the written substantiation of the deliberation and decision process.  It is important to note that lately the IRS has had representatives attending conferences and using other outlets to publicize their opinion that there is a flaw to using “comparability data” referred to as upward creep.  Basically, upward creep means using comparative data over several years for compensation rates, and consistently choosing the upper strata to set compensation levels, the comparability data itself inherently become inflated.