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Methodology/Disclaimer Nonprofit Comparables Assessor & Tax-Exempt Survey Software and Databases

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Methodology/Disclaimer Nonprofit Comparables Assessor & Tax-Exempt Survey Software and Databases ERI Economic Research Institute s data is used by expert witnesses, attorneys, CPA firms, consultants, researchers,
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Methodology/Disclaimer Nonprofit Comparables Assessor & Tax-Exempt Survey Software and Databases ERI Economic Research Institute s data is used by expert witnesses, attorneys, CPA firms, consultants, researchers, Internal Revenue Service, state regulators, businesses, and corporations. ERI s team of PhD s provides data analysis once performed by corporate statisticians, operations researchers, industrial engineers, compensation and job analysts, and similar mid-level management support jobs which have largely disappeared from corporate America. Today, ERI is the world s largest survey firm in terms of collection, compiling, and analysis of compensation, jobs, and cost-of-living data. ERI provides analysis of competitive pay for 9,600 areas in North America and Europe, 1,200 industries, and all organizational sizes. Most of the Fortune 500 companies are users of ERI s data. ERI collects survey data for jobs and cost of living and evaluates each source for validity and reliability. Compensation data is compiled in terms of mean and median salaries for jobs of similar duties, responsibilities, skills, and functions. Cost-of-living data is provided by geographic location. ERI produces surveys and software analyses which managers, advisors, and Boards of Directors may use to make recommendations and/or decisions. ERI does not provide fee-for-service consulting; our sole focus is providing valid and reliable information to our subscribers. ERI's senior researchers have served as expert witnesses in Federal Tax and other courts since 1977 regarding matters of reasonable compensation, and the Nonprofit Comparables Assessor & Tax-Exempt Survey is a derivative of that work. Versions The Nonprofit Comparables Assessor software and databases are available either via an installable DVD or through access to a cloud-based application. The underlying data, the statistical models, and the general user experience of the two versions of the product are the same, although aesthetic differences do exist. Installed Version The Installed Version of the Nonprofit Comparables Assessor application is an executable software that is installed on a computer. This software allows users to access competitive salary information without having to be connected to the Internet. The Nonprofit Comparables Assessor is intended to both assist nonprofits in their salary planning and to satisfy the IRS requirements of determining reasonable compensation. In addition to a free Demo for nonprofits needing only limited data, the Installed Version comes in two editions: Professional and Consultant. The free Demo shows only those organizations that pay within +/- 1 Standard Deviation of the mean (so that averages can be ascertained); the Professional Edition shows all 200,000 charities and foundations that report compensation plus for-profit comparable organizations; and the Consultant Edition includes special State Analysis filters for highest paid contractors and other common audit reviews to assist with compliance and litigation. Both editions include data leased under license from both GuideStar, Inc. (www.guidestar.org) and the National Center for Charitable Statistics at the Urban Institute (www.nccs.org). Cloud-Based Version The Cloud-Based Version of the Nonprofit Comparables Assessor can be accessed over the Internet via any computer and does not require any software installation. The Cloud-Based Version contains the same data and functionality as the Installed Version, but currently does not have access to the supplementary historical data and non-compensated employee data. The Cloud-Based Version also comes in several editions similar in scope to the Professional and Consultant editions of the installed product. 1 Overview ERI has been a provider of competitive executive compensation data since 1986, and its databases have grown to include all publicly-traded or reporting companies (currently over 14,000), hundreds of executive compensation surveys, all reporting UK and Euro publicly-traded companies ( currently about 1,200) and nearly 8,000,000 Forms 990/PF/EZ returns from 1998 to the present. ERI products offer subscribers the largest available database of executive salary and benefit data for both profit and tax-exempt organizations The Nonprofit Comparables Assessor has a focus on nonprofits' comparables and reasonable compensation as contrasted to the Executive Compensation Assessor's for-profit salary and total compensation planning focus. The Nonprofit Comparables Assessor applications are designed to mirror the IRS requirements for selecting comparable organizations and creating the rebuttable presumption described/found in US IRC 4958's Intermediate Sanctions. The program creates an easy method of establishing defensible compensation levels for the executives (and the organization managers who are knowing and who have joint and personal liability). The Nonprofit Comparables Assessor also allows the use of compensation for for-profit companies when relevant, as permitted by IRS rules. ERI is reading the publicly available Form 990s/PFs/EZs and extracting the reported compensation paid by hundreds of thousands of organizations to create evergreen executive compensation surveys. ERI focuses on extracting data on contractors, and for nonprofits with less than $1 million in revenue, as the data on larger organizations are purchased from GuideStar The Assessor Series have been used since 1989 in Federal Tax Courts to research publicly traded and privately-held executive compensation (electronically reading US SEC proxies, 10-Ks and UK/EU annual reports). This is important because Intermediate Sanctions allow for the creation of a rebuttable presumption using data from both taxable and tax-exempt organizations, easily and quickly accomplished via ERI's Nonprofit Comparables Assessor. As required by the Intermediate Sanctions Code (IRC 4958), it reports compensation levels paid by similarly situated organizations for functionally comparable positions and reveals where there are similar services in the geographic area of the applicable tax-exempt organization. The analysis also qualifies as a current compensation survey compiled by an independent firm. Organization data is available by year, location, industry, organization size and thirty-three executive job functions as well as combined via: US taxable + tax-exempt or tax-exempt entities by themselves. These patented applications (Nos. 6,862,596 and 7,647,322) also allow for the retrieval of the original source material. Click on a graph dot and retrieve any one of millions of filed reports, 1998 to the present. Retrieval of proxies, Form 990s, etc. requires access to ERI's servers via the Internet. Similar Area - similar services in the geographic area The Nonprofit Comparables Assessor utilizes ERI's Geographic Assessor & Pay Survey filters to identify specific city, OES employment areas, county, state, or national areas. Most tax-exempt organizations use a local or state geographic market, as they tend to be small in size. The largest ones may be national in scope, similar to most publicly-traded for profit corporations and utilize a national market. Similar Industry - similarly situated organizations The Nonprofit Comparables Assessor utilizes the National Taxonomy of Exempt Entities (NTEE), a classification coding system designed specifically for the nonprofit sector. The IRS, which classifies the applications of nonprofit organization for their tax-exempt status based on descriptive data, uses the NTEE because a more detailed nonprofit-oriented coding system that was provided by the North American Industry Classification System (NAICS) or its predecessor, the Standard Industrial Classification (SIC) codes of Likewise, publicly traded organizations are identified by an SIC code utilized by the Securities & Exchange Commission. ERI provides a crosswalk between these coding systems. Three potential NTEE classifications may be shown: 1) the code determined by the IRS and included on the IRS Business Master File, 2) the code determined by GuideStar, and 3) the code determined by NCCS at the Urban Institute. ERI provides all three so the user has the most complete information on the organizations. Similar Functions - functionally comparable positions Many executive positions are a combination of functions rather than a single function. 2 These functional areas include: Administration Facilities Prop & Equip Operations All, Total Finance Product Manufg Artistic Fund Raising Programs Athletics Government Relations Psychiatric Board Human Resources Public Relations Business Information Technology Purchasing Customer Member Service Legal Religion Development & Planning Marketing & Sales Risk Management Education Materials Services Engineering Medical Sub Matter/Research Environmental Animal & Agr Nursing Transportation Crosswalk between Executive Compensation Databases Thirty-three executive functions have been identified with each function found, except for rare cases, in all these ERI executive databases: US for-profit ( E ) and the US tax-exempt ( N ) databases. These functional areas and titles are shown below: E Chief Executive Officer N Top Position or Executive Director E Chief Operating Officer N Chief Operations Position E Executive Vice President N Top Business Position E Top Marketing & Sales Officer N Top Marketing & Sales Position E Top Human Resources Officer N Top Human Resources Position N Top Financial Position E Top Financial Officer E Top IT Officer N Top Technology Position E Top Legal Officer N Top Legal Position E Top Risk Management Executive N Top Risk Management Position E Corporate Director N Trustee/Board Member E Top Long Range Planning Director N Top Development Position N Top Engineering Position E Top Engineering Officer E Director Customer Services N Top Customer Member Service N Top Artistic Position E Editorial Writer N Top Athletic Position E Top Transportation Officer N Top Transportation Position E Top Manufacturing Officer N Top Product Manufacturing Position N Top Materials Position E Top Research Officer N Top Research Position E Top Purchasing Officer N Top Purchasing Position N Top Facilities Position E Top Real Estate Officer E Top Administrative Officer N Top Administrative Position E Employee Services Director N Top Services Position E Director Employee Training N Top Education Position N Top Public Relations Position E Top Public Relations Officer N Top Government Affairs Position E Top Government Affairs Officer N Top Programs Position E Program Manager E Director Nursing Services N Top Nursing Position N Top Psychiatric Position E Psychiatrist E Top Environmental Officer N Top Environmental Animal & Agricultural Position E Clergy Member N Top Religious Position E Board Chair N Tax-Exempt Board Chair E Medical Top Professional Service N Medical Top Professional Service E Fund Raising Director N Top Fund Raising Position N Highest Paid Position E Highest Paid Executive N Second Highest Paid Position E Second Highest Paid Executive N Third Highest Paid Position E Third Highest Paid Executive N Fourth Highest Paid Position E Fourth Highest Paid Executive N Fifth Highest Paid Position E Fifth Highest Paid Executive Selection of Positions and Matching of Comparable Positions ERI utilizes a proprietary and customized form of contextual text mapping (Semantic Analysis) in the 3 collection of data and the selection of comparable positions using the Search String in the Enter New Job function. ERI Assessor Series, the edot Project, ERI Internet applications and Distance Learning Center use Semantic Analysis* for advanced skill set matching. This new methodology allows a subscriber to specifically define job function, related skills and experience by typing in descriptive words (or job title). *The effectiveness of contextual text mapping (Semantic Analysis) requires a universe of prose in which to operate. ERI's library of copyrighted descriptions, its edot Project (patent pending), historical library of competitive compensation information (since 1986), Internet mining (with CareerJournal and other job boards), and study of work (PAQ data since 1974), create a unique, not duplicated, universe of data for creating competitive salary estimates, job availability assessments, and updating of the enhanced Dictionary of Occupational Titles job demands. Others may claim they use Semantic Analysis, but none can duplicate the breadth of data accessed by ERI. Semantic Analysis allows subscribers to benchmark their rates against the most current data available. Ranges, Minimums, Maximums and Percentiles ERI calculates the minimum and maximum ranges for each position based upon calculations using standard deviations. ERI constructs a cubic spline regression through 28 standard deviations at 28 revenues to create a curve that creates a standard deviation at any revenue. Starting at 100,000 and increasing by 50% from there, it will take 28 times to get to 8.5 billion (within 20% of 10 billion). Increasing by 50% also allows a +-20% spread for any revenue point without any overlap (1.5*0.8 = 1.2). Key to ERI's methodology is the smoothing effect created by polynomial regression equations for each job, drawn across an X-axis of the organization's size most commonly measured by revenue. This allows ERI to smooth the impact and vagaries of any one survey that may report data in error or be highly affected by an abnormal survey population and/or sample size that may occur from year to year. Sample Frame Size The Nonprofit Comparables Assessor & Tax-Exempt Survey is a census of compensation practices rather than a survey with a sample frame. Nearly 8,000,000 Forms 990/PF/EZ may be researched and downloaded with this software. With the exception of religious organizations (although some do report), all IRS tax-exempt 501(c)(3) organizations with more than $25,000 in annual revenue must file publicly viewable reports. The Nonprofit Comparables Assessor includes all these forms, including EZs (which are filed by the smaller nonprofits). By April 2013, the release contained compensation data from organization returns filed in calendar year 2011 included on DVDs supplied by the IRS to ERI, along with a sampling of the data filed in As a contrast, the Executive Compensation Assessor & Survey software databases are the combination of all employers that participate in surveys that ERI collects and analyzes along with information from public filings and purchased survey reports. Definition of Salaries ERI maintains a common definition of salaries in its analyses of salary surveys. As described, however, it adopts Form 990 definitions for the Nonprofit Comparables Assessor. Direct Cash Compensation is from Form 990, Part VII, Section A, Columns (D) and (E) for form years 2008 and beyond. Column (D) includes reportable compensation from the reporting organization and Column (E) includes reportable compensation from related organizations. The IRS instructions for the Form 990 (found at define the reportable compensation as consisting of: For officers and other employees, amounts required to be reported on Form W-2, box 5; For directors and individual trustees, amounts required to be reported on Form 1099-MISC, box 7 (plus Form W-2, box 5 is also compensated as an officer or employee); and For institutional trustees, fees for services paid pursuant to a contractual agreement or statutory 4 entitlement. The above definition is for organizations that file the Form 990. Organizations that file Form 990EZ may choose to use the definition above or the definition used prior to 2008 (found at which was: Salaries, Fees, & Bonuses Paid: For each person listed, report salary, fees, bonuses, and severance payments paid. Include current-year payments of amounts reported or reportable as deferred compensation in any prior year. (Sometimes spikes in compensation are caused by reporting single large payments a deferred compensation amount and may cause distortions in a year-to-year analysis for the same organization.) Organizations that file Form 990PF (private foundations) use the same prior-to-2008 definition noted above (found at Source Data The Comparable Peer Analysis Table prepares reports and displays annual direct cash compensation estimates (salaries + fees + bonus) with data provided by both this Survey and the Executive Compensation Assessor & Survey software and database, used by both private industry and the IRS. Each was developed with the methodology designed to support those who provide expert witness work in Federal Tax and State Courts and have been used in this fashion since the late 1980s. (Standard errors are shown to satisfy Daubert Challenge parameters.) The Nonprofit Comparables Assessor tables are further enhanced by ERI's Platform Library (DVD encyclopedia of HR-related data); see Resources Form 990/Proxies/10-Ks/Summary Tables databases in the Installed Version. This query allows quick review of summary proxy data extracts for a direct comparison of the Executive Compensation Assessor & Survey software database calculations with industry matches of actual compensation, as well as downloads of the actual raw data sources (the proxies and 10-Ks themselves). One can view these Summary Comp Tables using the Comparables' Form 990/PF/EZ tab in the Installed Version or the Comparables window in the Cloud-Based Version. Total Compensation This Total Compensation amount is defined as the sum of annual direct cash compensation and other contributions (typically deferred compensation and certain nontaxable benefits). The compensation amounts shown represent the averages of executives within a specific esic/naics/ussec industry (or NTEE/NAICS/usSEC for this Survey) selection and comparables grouping. Select Comparables The Comparables window displays a listing of comparable organizations. In the Installed Version, organizations in blue are the closest to the defined size values; the organization in red is the highest paid. Nonprofit Comparables Assessor The purpose of this software is to be able to allow the creation of comparable organization groupings by US Tax-Exempt, US For-Profit, and the unique combinations of US Tax-Exempt and Exempt organizations and US For-Profit entities. To our knowledge, this is the only software and database package in existence that allows the blending of for-profit and nonprofit executive compensation packages. It certainly is the only application that allows the user to click on dots and retrieve source data by year, area, city, industry, and/or organization size (Patent protected). Retrieve Forms 990/PF/EZ ERI creates PDFs from monthly data purchased from the IRS. These purchased TIFFs are converted to PDF and posted in the ERI Form 990 Library so subscribers may quickly check source material. Retrieve Full Proxies Should a company name be highlighted while an Internet connection is active, the Assessor Series software databases will access ERI's library of proxies, 10-Ks, summary compensation tables, and appraisal norms to retrieve more extensive data on that company. 5 Retrieve Full 10-Ks Full 10-K datasets can be quickly downloaded and printed out as well. This data is extracted in Courier 10 as stored in the SEC files. Reliability Statistics - A Note for US Expert Witnesses In 1975, the US Congress passed Federal Rule of Evidence 702 so that a threshold standard for the admission of expert witness testimony might exist in Federal Courts. Based on the concept that experts should use methodologies that are generally accepted by a discipline's practitioners, the rule states: If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form o
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