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Chief executives of associations and other nonprofits are not great fans of compensation lists. Besides showcasing their salaries for staff, friends, and family to see, the figures don't really reflect their annual pay, the leaders protest.

It's a hard complaint to swallow at first, particularly because the salary figures come directly from the Internal Revenue Service's Form 990, the tax document on which nonprofits report their annual budget, compensation payments, and financial underpinnings.

Accountants and tax lawyers agree, however, that the Form 990 numbers don't tell the entire story. When a group reports its CEO's salary, "what you're really seeing is a lot of different elements -- salary, deferred compensation, retirement -- and sometimes they're not broken out well," says Patricia McDermott, a partner in the employee benefits and executive compensation group of law firm Venable.

The first problem, lawyers say, is that the IRS hasn't always given associations explicit instructions on how to report salary and its varied components. The groups have been pretty much on their own in interpreting how to list CEO pay and benefits.

"I don't think there is uniformity in how it's reported by associations; sometimes they only report base compensation, and some organizations throw in everything," says Hugh Webster of law firm Webster, Chamberlain & Bean. "You look at the base number there and people think that's what their paycheck is, and it really isn't. It can give an inflated view of what someone's salary is."

In December, the IRS issued revisions to the Form 990 for the first time since 1979. Nonprofits will start using the revised form for the 2008 tax year; it includes schedules that will allow filers to record detailed explanations of compensation and all of its elements, says Hugh A. Mallon III, president of Executive Compensation Concepts.

"Now you will be able to see a breakdown of the actual payment made to people making $150,000-plus in W-2 wages," Mallon says. "It should elevate the level of transparency."

Using the current form, for example, the National Association of Securities Dealers (now called the Financial Industry Regulatory Authority) reported that retired CEO Robert Glauber received $6.8 million in compensation, benefits, and expenses in 2006. But it's helpful to know that Glauber's total award -- No. 1 among the 737 executive salaries surveyed by National Journal and CEO Update -- included $1.45 million in deferred compensation and contributions to his retirement benefit plan.

Unless an organization spells out those numbers, anyone can guess how much cash compensation a leader received in a given year. "Often you'll see a salary and it will seem huge -- and it turns out that was the year they retired and received a big severance payment; it really throws it off and it seems like they have a much higher salary than they do," Webster says.

"When large payouts occur," Mallon says, "it's virtually impossible for a third-party reviewer who does not have access to the actual contributions made" to understand. "You may think it's excessive when, in fact, it is part employer- and part employee-funded."

Moreover, the IRS currently requires associations to report deferred compensation twice -- first in the year it is accrued and second in the year it is paid out. Lawyers say that the requirement can inflate the appearance of a leader's salary over several years. The revised Form 990 should resolve that problem.

"From 2008 and on," Mallon explains, "when you pay out the deferred compensation, you will get credit for prior-year contributions and only have to report the incremental growth in that contribution and the earnings."

That fix should address the concern raised by America's Health Insurance Plans when AHIP was asked to comment on the $1,391,383 in compensation, benefits, and expenses to President Karen Ignagni that the group reported on its Form 990 for 2006. A spokesperson said that Ignagni's base salary that year was $700,000 and that she also received a bonus of $250,000. An additional $364,377 of the total was deferred compensation that would be paid out in the future; the remaining $77,006 was other benefits paid by the association.

In defending the seven-figure sums, lawyers for tax-exempt associations point out that their CEOs' compensation can't compare to that of their counterparts' in the for-profit sector. In any case, nonprofit boards that want leaders with market-oriented solutions seem willing to pay handsomely to get or keep a CEO with experience and muscle to lead their trade association.

"Tax-exempt is a tax status," Mallon says, "not a business model."

The author, an associate editor for CEO Update, can be reached at evans@ceoupdate.com.