Tue, 5 Mar 1996 09:25:42 EST
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IN RE: Salaries as a portion of income.
First of all, your terms are screwy: Not-for-profits, by definition,
don't have a "gross profit." Later in your post, you seem to re-cast
the question to: is there a standard for what portion of gross revenue
is used for salaries?
The short answer is: no. In service agencies, almost all of the
revenue is used for salaries, besides rent, non-capital equipment,
supplies, insurance, etc. In a museum, more might be used on
non-salary items having to do with caring for a structure or
collection and mounting exhibitions.
The longer answer is that funders will certainly look at how your
income is being spent. If you raise $200,000 each year, and 50% of
that is spent on the director's salary, then funders will definitely
question the value of giving you money toward your mission. This
kind of arrangement suggests a possibly shady not-for-profit, like the
"drum and bugle corps" run by a district superintendant in New York
City. The Times reported a situation like the one you describe, where
it appears that this not-for-profit exists principally to contribute
to the income of its director.
Eric Siegel
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