Local Paper Challenges Severance Package for Former CEO of Iowa Nonprofit – but Why?

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April 11, 2012; Source: Des Moines Register

This article from the Des Moines Register reports that the former CEO of an Iowa-based nonprofit received a severance package worth $289,000 after he was abruptly fired in 2010. The reporter was forced, however, to wait for the organization’s 2010 form 990 to be filed before he could access the information—perhaps not a wise PR move on the part of the nonprofit, which had received the request from local press when the termination occurred. NPQ has repeatedly warned nonprofits about “the disappearing CEO”—or the lack of a communications plan in the wake of an executive transition.

When put into organizational context, the size of the severance package is not enormously surprising. Donald Lovacz, who headed the former Iowa Foundation for Medical Care (IFMC), now known as Telligen, was making somewhere in the area of a half million between base salary and bonuses. This means that the severance package given to Lovacz was between 50 percent and 75 percent of his annual salary, which is not an unusual severance amount to award to a senior executive. Further, Telligen specializes in health care finance and operates in multiple states, with a $90 million budget and 800 employees. These factors help to explain the level of executive salaries and Telligen’s Form 990 states that its board employs an independent compensation review process for all senior leadership annually. The IRS explicitly allows nonprofits to use comparable salary data from both for-profits and nonprofits when determining executive pay.

When put into a communications, political and economic context, however, the picture looks different. Iowa is home to Sen. Chuck Grassley, who is already questioning the $2.1 million compensation package for the former CEO of Iowa’s Care Initiatives, a tax-exempt Iowa organization that operates a chain of nursing homes. And IFMC, which operates on taxpayer funded no-bid contracts, paid two other former executives a total of $848,659 in severance in 2005-2006. These types of taxpayer funded six-figure severance packages irk the public, but are perhaps less of a concern than the fact that this organization has been questioned by the inspector general of the U.S. Department of Health and Human Services for the purchase of laptop computers, cellphones and personal digital assistants which it then gave to employees of the Centers for Medicare and Medicaid Services—an agency with which the contractor does business. The whole scene, then, begins to look like it well deserves the investigative reporting it is getting. –Michael Wyland

  • Ann from IA

    I applaud the journalists who investigate such abuses of financial power. As an Iowan I am horrified that these pampered executives get severance packages of such value, especially via tax dollars, whether the IRS says it’s ok or not. Of all the fine people in Iowa who need severance pay, it’s least likely to be those pulling in over a quarter million in salary and bonuses per year. If the terminated executives are/were prudent people at all, they’d have savings to draw upon as they find other employment. I’ll bet the severance offered to mainstream employees of the same nonprofits is a pittance or nonexistent, despite the fact that it is the work of the many that funds the excesses of the few, who seem to be compensated only for their willingness to take risk and to make unpopular choices.
    We need to support hard-hitting investigative reporting, and watchdog editorial writing. Better to get the story in a form that is longer than a tweet. . .and better as a citizen to know what’s being done with tax dollars than to remain ignorant. Better to have questions asked and answered publicly than to let multi-million dollar organizations squander public funds and behave deceitfully with no accountability.

  • Susan

    I hope these journalists continue to investigate these “nonprofits” that pay their “executives” enormous salaries at our expense. If they can prove they are saving us enough to offset the tax exemption, then ok, but I doubt it will turn out that way. I say, tax them all, until they openly prove they are “non-profit”.