VARC paid CEO $1.5 million in bonuses, deferred compensation

In the three years before his retirement in 2019, the nonprofit Vernon Area Rehabilitation Center (VARC, Inc.) paid its CEO over $1.5 million in bonuses and deferred compensation in addition to his regular pay, according to public records.

Anthony Ugo was paid $1.03 million in 2016, which included a deferred compensation payout of $619,000 and a $217,000 bonus. He received a $300,000 bonus in 2017 to bring his total pay for that year to $498,000. And in 2018, he was paid $604,000, including a $390,000 bonus. Ugo retired to be replaced as CEO by Elizabeth Filter on Jan. 1 of 2019. All the numbers come from public records.

VARC is a charity headquartered in Viroqua that also has facilities in other parts of Wisconsin, including La Crosse, Richland Center, and Reedsburg. Founded in 1975, the nonprofit specializes in contract assembly and packaging and had revenue of $11 million in 2018. As of Jan. 1 of this year, VARC legally paid 233 workers with disabilities subminimum wages, according to the U.S. Department of Labor. VARC also provides residential, transportation and other services to people with disabilities.

The La Crosse Independent asked Laurie Styron, the executive director of CharityWatch in Chicago, to review VARC’s public financial records, including Ugo’s compensation package, in the years leading up to his retirement. She noted that VARC had provided little explanation in its public disclosures for Ugo’s pay.

“Charities have both a moral and a reporting obligation to not only disclose executive pay, but to justify it,” Styron said. “This charity has not done a good job of justifying the high base compensation and multiple six-figure bonuses of its president and CEO.”

Nonprofits are subsidized by taxpayers because they pay no tax on the majority of the revenue or donations they raise. This is one reason why executive pay at nonprofits like VARC should receive public scrutiny. While VARC receives relatively few charitable donations, it reported revenue of nearly $5.9 million from government contracts in 2018.

CharityWatch publishes an annual Top 25 list of the highest compensation packages for nonprofit executives, based on a survey of around 650 charities around the country. The list is usually filled by executives who work at nationally renowned nonprofits like the Worldwide Wildlife Fund or the National Rifle Association (NRA). VARC, a comparatively small charity based in rural Wisconsin, has typically not been included in the survey.

“In 2016 the charity (VARC) reports paying its president over $1 million in base compensation, bonuses, and other reportable compensation without justifying why this level of compensation was necessary, what it consisted of, or how it was computed,” Styron said. “If we had rated this charity in 2016, the president’s compensation would have made our Top 25 list.”

“a LIFETIME OF DEDICATION”

Asked about Ugo’s 2016 pay packet, VARC’s current CEO Elizabeth Filter released a statement signed by the nonprofit’s board of directors, which noted Ugo’s instrumental role in the early years of the charity in the 1970s through its steady growth to a position where VARC now employs 460 people.

“Through this time Anthony Ugo has been the driving force, contributing a lifetime of dedication toward the mission of serving and enhancing the community,” the statement from the board noted (you can read the board’s full statement to The La Crosse Independent here.).

Ugo’s $619,000 payment from VARC was listed as “other reportable compensation” on the nonprofit’s form 990 for 2016, a year in which the charity had total revenue of $9.4 million. The board said the payment, which pushed Ugo’s compensation for that year over $1 million, was part of a deferred compensation plan. Ugo also received a $217,000 bonus in 2016, on top of his base pay of $183,000.

“Some years prior to 2016, the board determined that it was necessary for a deferred compensation ‘plan’ (to) be implemented to compensate Anthony for the many years in which a retirement benefit had not been provided,” the board’s statement said. “So, the Board established a 457(F) account for Anthony. Thus, a majority of Anthony’s 2016 compensation was the deferred compensation and retirement distribution, of which Anthony paid approximately $400,000 in taxes.”

However, after receiving the $619,000 deferred compensation payout in 2016, Ugo went on to receive a bonus of $300,000 in 2017 and a bonus of $390,000 in 2018, both of which were in addition to his base compensation for those years, public records revealed.

VARC’s board noted that it uses “state association comprehensive wage and salary surveys, and comparable information” from other local nonprofits in determining executive pay, in addition to performance metrics.

High levels of compensation for executives at charities should not automatically be viewed as a negative by the public, Styron said, but those organizations have a duty to justify what they pay their leaders.

She added, “The bottom line is this: Could the charity recruit and retain a leader with the necessary skills, education, expertise, and experience for substantially less, or is what they are paying this executive representative of market rate?”  

Filter did not respond to a request to review the specific salary surveys VARC uses to determine CEO compensation. A report published in 2016 by Charity Navigator found that the median nonprofit CEO compensation was $123,000, including bonuses, based on a nationwide analysis of over 4,500 charities.

Subminimum wages

Among local nonprofits of a similar size to VARC reviewed by The La Crosse Independent, the only executive with compensation close to Ugo’s in recent years was Barb Barnard at ORC Industries, who made $804,000 in 2018, compared to Ugo’s $604,000. In addition to the high compensation packages paid to their leaders, ORC and VARC also both employ workers with disabilities on subminimum wages, a practice that has attracted increasing criticism in recent years.

Since 2015, state governments in New Hampshire, Maryland, Oregon, Nevada and Alaska have either eliminated or moved to phase out subminimum wages for workers with disabilities, as have the cities of Seattle and Chicago.

The law allowing the practice comes from the Fair Labor Standards Act of 1938 but many now say the provision is outmoded. In 2011 a report by the National Disability Rights Network called for an end to subminimum wages for workers with disabilities.

“Unfortunately, sheltered workshops and the subminimum wage still exist today because of self-interested employers and systematic neglect by federal agencies, buttressed by outdated stereotypes of people with disabilities and the low expectations held by the general public, lawmakers, and, sadly, even some families and the disability rights community,” Curtis Decker, the executive director of the National Disability Rights Network wrote in the report.

VARC’s board of directors sees things differently.

“Special wage licenses allow for individuals with the most significant and persistent disabilities to enjoy the value of contribution; to be a part of a workforce like every other citizen and experience real, meaningful work,” the statement from the board said. “Many individuals gain skillsets that allow them to transition to new employment opportunities outside of VARC’s walls.”

Last year, when a bill pushed by Democrats that included a provision to end subminimum wages nationally was introduced in Congress, VARC posted a call to action on its Facebook page, asking supporters to call lawmakers and voice opposition to the proposed legislation, which passed the U.S. House but has not been given a vote in the Senate.

VARC’s board of directors in 2018, the most recent year for which public records are available, included Westby attorney David Abt, who is the legal representative for the city of Westby and is also the Vernon County Corporation Counsel. Abt did not respond to an emailed request for comment. Other members of VARC’s board in 2018 included Ugo, Palmer Hoffland, Marvin McNeal, Art Zgronning, David Jenkins, Bill Hoffland and Larry Mosher.

By Eric Timmons. Email questions to lacrosseindependent@gmail.com.

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