In 2006, the Rev. Dr. Daun E. McKee, CEO and president of Diakon Lutheran Social Ministries, collected $385,947 in salary, $582,925 in benefits and a $63,591 expense account for a total $1.03 million, according to tax records.Posted on 06/12/2008 1:09:52 PM PDT by SmithL
A local congress of Lutherans wants to know why the top executive of a large, church-affiliated social services agency has a compensation package topping $1 million.
In 2006, the Rev. Dr. Daun E. McKee, CEO and president of Diakon Lutheran Social Ministries, collected $385,947 in salary, $582,925 in benefits and a $63,591 expense account for a total $1.03 million, according to tax records.
McKee's compensation topped all other nonprofit executives in the region, according to the Central Penn Business Journal.
Diakon officials defend McKee and other executives' pay, saying compensation at Diakon is appropriate and competitive and helps attract and retain leaders who are critical to meeting the organization's goals.
The local Lutherans also expressed concern about compensation for two other Diakon executives who ranked Nos. 4 and 5 on the Journal's list of nonprofit compensation in the midstate:
· Mark T. Pile, chief operating officer, $418,499 in compensation
· Richard M. Barger, chief financial officer, $385,546 in compensation
On Saturday, the York Conference of clergy and lay representatives of the Evangelical Lutheran Church in America will take the data to a nine-county church assembly. They want the body to approve a resolution asking Diakon directors to explain their philosophy on executive pay.
In the resolution, the York Conference cites the Lutheran confessions, Scripture and church social policy, which calls for lessening the disparities between pay for top executives and those under them.
We "saw this as inappropriate behavior for a church agency," said the Rev. Dr. Amy Schifrin, interim pastor at St. Peter Lutheran Church in North York, who helped draft the resolution.
"This is not the way the church wants to be represented in the world - to be giving these compensation packages. Especially when one (executive) is an ordained clergyperson. That's not what the church is about."
Several of the conference clergy have church members who donate privately to Diakon. The church's regional governing body, the Lower Susquehanna Synod, gave Diakon $21,530 in grant money last year, according to Diakon.
In recent years, the IRS, Congress and the media have shown heightened interest in nonprofit compensation. In 2004, the IRS began an initiative to identify and curb excessive compensation to nonprofit executives and to help nonprofits better understand laws governing reporting and payments to executives.
Diakon: Amount merited
Diakon officials said last week they would discuss the matter with the church should the assembly approve Saturday's resolution.
A charity of the ELCA, Diakon is a 2,300-employee nonprofit organization that operates 50 sites, including 12 senior-living communities, in eastern Pennsylvania, Maryland and Delaware.
Diakon provides social service programs such as health care, nursing and rehabilitative care, adoption services and programs for at-risk youths to 70,000 clients a year. Its administrative offices are in Mechanicsburg and Allentown.
During McKee's tenure, Diakon's budget has grown from $35 million at the organization's founding in 2000 to nearly $200 million. Its assets total $500 million.
Leadership of such a complex organization "requires a level of expertise, a level of commitment and certainly a sense of mission in order for the organization to carry out its mission," said Susan Schellenberg, chairwoman of the board of directors.
Because of its size and good management, the charity can afford to provide about $1 million per month in free or discounted services to clients who can't pay full price, Schellenberg said.
"My feeling is if you believe in the organization, what you need to do is tout its mission and not get hung up on executive compensation," she said, referring to the York Conference.
"I think the focus is wrong. There is nothing untoward here. There is nothing that flies in the face of any social statement of the ELCA."
Federal law places no specific caps on compensation for nonprofit executives but says employees must not receive more than what is "reasonable" under like circumstances, according to IRS regulations.
In a written statement, Diakon officials said the board maintains a philosophy of paying staff at midway on a salary range and using comparable figures from similar nonprofit and for-profit organizations to set compensation at market rate.
An external consulting firm, Watson Wyatt in New York City, recommends compensation levels for about 65 Diakon managers. Diakon's attorneys also consult with the board to ensure compensation is fair and aligns with the market and similar organizations.
"Diakon operates in such fields as health care and rehabilitation, which are highly competitive in terms of staff recruitment and retention," the statement says.
Compared with 50 years ago, nonprofit management is more challenging and complex in an environment of increased competition and regulation, especially in the health care industry, said Jill Schumann, president and CEO of Lutheran Services in America.
The Baltimore-based network of 300 Lutheran health and human service agencies recommends its members use an external consultant and compare salary data with organizations similar in size, services and complexity when setting executive pay, Schumann said.
At least 11 of the network's larger agencies - those with budgets of more than $50 million - reported in a survey last year they have executive salaries of more than $250,000.
"It's really interesting to see that nonprofit compensation is evolving to look like for-profit organizations over time," Schumann said.
Diakon CEO McKee is responsible for the operations and direction of the nonprofit. His duties include meeting service-growth and financial goals set by the board, which in turn sets his compensation.
Before Diakon, he served as CEO/president of Lutheran Services Northeast and, before that, Allegheny Lutheran Social Ministries Inc. He graduated from the Lutheran Theological Seminary at Gettysburg and earned a doctorate in speech communication from Penn State.
Diakon officials said compensation to the three executives was higher in recent years because it included pension payments to the executives' employee retirement plans that were deferred from 1996 through the early 2000s.
During that time, the organizations that later formed Diakon were involved in a series of affiliations, mergers and acquisitions, requiring the board's attention and extensive discussions, officials said.
Once the new organization became more financially stable, the board focused on funding McKee's pension plan - a promise made when McKee was hired in 1995 by Lutheran Services Northeast, one of the two agencies that created Diakon in 2000 - officials said.
McKee's pension pay in particular is higher because of his age - he'll be 65 this month - meaning Diakon has less time to make up the earlier unmade contributions.
In 2006, 98 percent of the $582,925 McKee received in benefits was for retirement/pension plans, and the remainder for medical and other insurance, officials said.
McKee's $65,591 expense account included housing and vehicle allowances because the ELCA recommends them for ordained clergy, Schellenberg said.
The Northeast Pennsylvania Synod, in which McKee works, sets minimum salary guidelines for its pastors - $36,000 for clergy with 20 years of ministry experience, for example - and recommends congregations provide pastors with additional housing and automobile allowances.
McKee's compensation in particular was what caught the eye of the Rev. Ralph A. Greiman Jr., 80, of Manchester Township.
The retired pastor brought it to the attention of the York Conference, which agreed with Greiman that the executives' pay was excessive.
"They do lots of good, but I can't imagine that kind of good warrants these huge salary packages," Greiman said. "I wanted to make the people in our church aware that these kind of salaries are being paid."
Bishop B. Penrose Hoover of the local synod said people have to understand that, while the church supports Diakon, it doesn't run Diakon.
"We do have two representatives of the synod who sit on the Diakon board of directors, and they have been made aware, and will be made aware, of our concerns concerning remuneration," Hoover said. "But this is not something over which the church has direct control."
The resolution on Saturday's agenda quotes Diakon's code of conduct, which states in part, "We will use Diakon's assets faithfully for mission."
Diakon officials said all funds received from church synods are used in direct support of program operations, particularly those involving benevolent care.
Schellenberg, who is unpaid for her work on Diakon's board, said the purpose of the conference's resolution is to start a conversation, and Diakon directors are willing to do that.
"It's a shame that all of this has overshadowed the good work of Diakon," she said.
"Some folks will never feel good about it. For the others, I hope we can show them that there's more than one side of the story."
Read a Q&A with Bishop B. Penrose Hoover of the Lower Susquehanna Synod, and listen to the full interview here.
The Rev. Daun E. McKee is president and CEO of Diakon Lutheran Social Ministries.
He is responsible for the overall operations and strategic direction of the nonprofit organization and required by the Diakon board to meet financial, strategic and service-growth goals, the organization said.
Diakon, which operates in Pennsylvania, Maryland and Delaware, employs 2,300 and has a budget of $200 million. Assets total roughly half a billion dollars.
Name: Diakon Lutheran Social Ministries
Description: A private, nonprofit charity of the Evangelical Lutheran Church in America
Coverage area: Eastern Pennsylvania, Maryland and Delaware
Administrative offices: Mechanicsburg and Allentown
Employees: 2,300 among 50 sites
Operating budget: $200 million
Assets: $500 million
Services: Programs include senior housing, health care, adoptions, foster care, family counseling, day care, wilderness programs for at-risk youth and more.
Name means: "One assigned by the church to minister to the needs of others"
Founded in: 2000 by the affiliation and later merger of Lutheran Services Northeast and Tressler Lutheran Services
Source: Diakon.org
Diakon Lutheran Social Ministries: www.diakon.org
Your tithes at work
It’s all right folks!! He’s not Catholic!
The love of mammon is the root of all evil.
Not really. From the article:
The church's regional governing body, the Lower Susquehanna Synod, gave Diakon $21,530 in grant money last year, according to Diakon.
The real funding source for Diakon and its counterparts nationwide is HHS - Health and Human Services = MEDICARE.
That has become a real dance with the devil because so much of the operation of the care facilities is governed by "Medicare rules".
They even have signs on the main doors warning Pastors NOT to give Communion to their parishioner/residents unless they first check with the nursing staff! (I haven't seen such signs at "secular" facilities, BTW)
There was a time that many rural congregations would gather a huge assortment of fresh homegrown produce plus "store-bought" food for an end-of-growing-season festival called Harvest Home. The food would be donated to the Lutheran homes to reduce the kitchen budget. Not any more "HHS regulations".
Frankly they should just remove "Lutheran" from the name.
Denominationalism!
A great paradox to me.
People call themselves “conservatives” and believe that the best government is at the local level where the people who pay the bills (tax payers) can monitor the government.
But then they will give their money at church to be sent up to denominational structures and operations where it can largely be spent out of sight from the people who give tithes and offerings.
The local autonomous, independent Bible-believing congregation is best. . . . because it is Scriptural.
Keep yourmoney in your local church and monitor how it is spent.
Keep in mind that most of the kitchen, housekeeping, and NA staff in Diakon’s facilities is barely above minimum wage.
The top end of the Lower Susquehanna Synod’s “Minimum Salary” scale (which most congregations interpret as M A X I M U M) for a Pastor with over 30 years experience is $67,700.00.
Lutheran group: Explain $1M pay for top exec
By MELISSA NANN BURKE
Daily Record/Sunday News
Article Last Updated: 06/13/2008 07:55:07 PM EDT
A church-affiliated social services agency should explain why their top executive makes more than $1 million, an assembly of Lutherans resolved Friday.
The resolution, approved at a nine-county church meeting, asks the nonprofit Diakon Lutheran Social Ministries to respond in writing by Sept. 30, a church spokeswoman said.
The measure expresses the church's concern that three Diakon executives ranked among the top five earners in a recent report of midstate nonprofit groups.
The resolution passed during the annual meeting at Messiah College of clergy and lay representatives of the Lower Susquehanna Synod.
The synod, which includes York and Adams counties, is the midstate governing body of the Evangelical Lutheran Church in America.
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