May our nonprofit cover the cost of our executive director’s membership fees at a local social club where he often meets with donors and other important supporters?
Yes. But it is a terrible idea.
Critics of charities are always looking for examples of waste and excessive spending. Paying the CEO’s club dues is often Example Number One when someone wants to be critical. It smacks of elitism, of living in the rarified world of the rich while the organization is begging for money to run its program. If you ever get called before a legislative committee, to lobby for an important bill, to seek an increased appropriation for your work, or to respond to some perceived impropriety, you can be pretty sure that someone will seek a headline by showing how out of touch your organization is with the people using its services.
You can accomplish essentially the same thing by paying the CEO a little more in base salary in order to cover some or all of the club dues, and then reimbursing the CEO for the costs directly associated with the organization. (You will probably have to report some or all of the dues you pay directly as an additional compensation benefit anyway.) A slight bump in the base salary will be imperceptible and whatever the CEO does about a club is a personal matter, not an official action of the organization. There is no reason to self-inflict a serious public relations injury on the organization by paying the club dues for the CEO.
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