Ethics

5/30/07 Nonprofit Executive Compensation Under Scrutiny in Pittsburgh. According to the Pittsburgh Post-Gazette, University of Pittsburgh Medical Center (UPMC) President Jeffrey Romoff collected $3.3 million in compensation in 2006, representing a 17% increase from in compensation from 2005.  Because UPMC is a nonprofit organization, Romoff’s high salary has attracted much public attention.  The announcement was immediately followed by editorials in Pittsburgh papers, questioning the value of nonprofit tax exemptions.

According to UPMC, their board members believe that this level of compensation is appropriate for UPMC’s "size, complexity and accomplishments".  At least 5 other UPMC executives collected over $1 million in compensation for 2006.

This comes at a time when the City of Pittsburgh is wrestling with financially distressed city status, and the value of charities’ tax exempt status is being questioned by policy makers.  Acting city controller Pokora even went as far as to say that the University of Pittsburgh and its Medical Center (which owns $3 billion in real estate) was “bleeding” Pittsburgh of $23 million each year in property taxes.

On the other hand, UPMC operates 14 medical facilities (some in distressed areas- which tend to lose money), and 8 colleges and universities throughout Western Pennsylvania.  UPMC employs 43,000 workers, and generates $6 billion in revenue.  In 2007, it expects to provide $60 million in community services, including at least $200 million in charity (up 17% from last year), thus providing healthcare services to many people who could not otherwise afford these services.

For the Pittsburgh Post-Gazette Articles: May 10 article (Nonprofit shouldn't mean no profits, UPMC defenders say) at http://www.post-gazette.com/pg/07130/784790-28.stm, the May 18 editorial at http://www.post-gazette.com/pg/07138/787012-192.stm, and the May 22 news article at http://www.post-gazette.com/pg/pp/07142/788054.stm. 

Investment-owned Life Insurance (IOLI):

PANO strongly opposes IOLI. A proposed change to the current insurance regulatory guidelines will allow strangers to buy life insurance on other people using charitable organizations as a conduit.  Under the proposed change, investors with no connection to a person would be able to purchase life insurance on that person, as if that person were some kind of commodity to be bought or sold. Human life should never be treated as a mere commodity. PANO strongly opposes this legislation because IOLI endangers the viability and affordability of life insurance for people who really need it, and jeopardizes the federal tax preference given to this type of insurance without significantly benefiting the charitable organizations.

Penalties for fraudulent business practices

PA House Bill 1059 passes the Pennsylvania House of Representatives and moves to the Senate. (7/2005)

On July 2, Pennsylvania House of Representatives passed House Bill 1059 by a vote of 198-0. The bill was then sent to the Senate where it was referred to the Judiciary Committee. PA HB 1059 imposes tougher penalties for large-scale deceptive or fraudulent business practices. This bill increases fines and prison terms when funds of public charities are involved. This bill increases prison terms by as much as an additional 5 years when the offense involves a charitable organization (as defined in the Solicitations of Funds for Charitable Purposes Act) Under Current Pennsylvania law, a deceptive or fraudulent crime carries a maximum fine of $15,000. This new bill would increase this fine to as much as $25,000. We will continue to offer updates as this issue progresses