Choose an article about a not-for-profit as it relates to the three elements tha
ID: 462605 • Letter: C
Question
Choose an article about a not-for-profit as it relates to the three elements that establish the presumption of reasonableness for a non-for profit organization.
Three Elements:
1. The compensation arrangement must be approved in advance by a governing board (or a committe comprised entirley of independent directors) wthout conflict of interest.
2. The board or committee must obtain appropriate data as to comparability (e.g. compensation paid by similarly situated organization for positions with a similar role and scope of reponsibility.)
3. The board or committee must adequately document the basis for its determination (e.g. the record includes a description of the decision made, the comparability data relied upon, and the basis for determining the compendsation to be reasonable.)
Address each of these three elements to include specific data, addressing conflict of interest, and documenting the basis for its determination. Incorporate a strategy and action plan for any other challenges the organization meets as it relates to intermediate sanctions.
Explanation / Answer
The compensation must be approved by governing body because it is the body that is responsible for the employment of an individual and hence is responsible for the benefit that an employee can earn. The compensation must be calibrated with similar position holding in different organization otherwise it may cause discomfort among the employee and they believe that they are underpaid. This may leads to deterioration in their performance. The board shoud document the basis for the determination of compensation which helps in maintains the record and also act as a reference document. It may happen that people responsible for bigger role are taking unexpected high compensation or any individual enjoying unnecessary benefit which may cause problem in Organization.