Tax-exempt status is a deal that a nonprofit strikes with a government, state or federal. In exchange for receiving a public good from the nonprofit’s service, the government gives up tax revenue.

However, a measure of transparency has always been part of that deal, because the value of the service can be compromised if the nonprofit is diverting too much of its resources to the private enrichment of its top officers.

This week, Star-Advertiser writer Rob Perez approached Hawaii’s top 10 federal credit unions for the compensation and benefits package of their five highest paid executives and was either refused or received no response. The law doesn’t require it and they were unwilling to offer up the information voluntarily.

There’s good reason for concern about the lack of transparency from Hawaii’s federally chartered credit unions. Although the 42 nonprofit federal credit unions receive a significant public subsidy — paying no state or federal income taxes and deeply discounted, even nominal, county property taxes — they don’t have to report what their executives are paid.

The City Council is considering overhauling its entire exemption system, and its budget chairwoman, Ann Kobayashi, said the credit union exemptions could be at risk if the credit union compensation data is not disclosed. That’s a good idea, considering that FCUs now pay only $300 for each Oahu parcel they own, in lieu of regular property taxes, and so far there’s been insufficient pushback from other government agencies on this matter.

What is the City and County of Honolulu getting in return for its revenue sacrifice? It’s impossible to answer that completely. The Internal Revenue Service requires state-chartered credit unions and other nonprofits to report compensation and other financial information on its Form 990 tax returns.

Hawaii has no state-chartered credit unions and, for reasons that aren’t clear, federal credit unions are exempt from that requirement. The Hawaii Credit Union League, the local industry trade group, issued survey results from 2010 showing the average salary of chief executive officers at 12 credit unions with assets exceeding $200 million was $187,510.

But such aggregate data is insufficient. Momentum has been building around a call for change, but it hasn’t reached critical mass at the federal level.

It became an issue during a 2005 hearing before the U.S. House Ways and Means Committee on the credit union tax exemption, said Keith Leggett, vice president and senior economist at the American Bankers Association. Leggett writes a blog, Credit Union Watch, which has been critical of the lack of compensation transparency.

As a result of the hearing, the U.S. Government Accountability Office published a report the following year. In it, the GAO recommended that the disclosure be required by the National Credit Union Administration, the independent federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions.

NCUA formed a task force, which issued its own report in 2008.

"While the report recommends that compensation for senior management be disclosed, NCUA has not acted on the recommendation, except it is now requiring corporate credit unions — credit unions that serve credit unions — to disclose this information annually to its members," Leggett said in an email exchange with the Star-Advertiser.

Even the requirement of annual disclosure to members would be a welcome concession, enhancing trust among credit union members and among the taxpaying public. Such an enhancement may be sorely needed now. It’s only been a little more than a year since the NCUA raised questions about the actions of the volunteer board overseeing the Hawaii State Federal Credit Union. The board was flagged for what some of the members believed were excessive benefits.

The time for disclosure is long overdue. A spokesperson for the NCUA told the Star-Advertiser that transparency was an "important topic" but that there was no consensus yet for agency action. If the City Council at least added its weight to the pressure for disclosure by rescinding its own tax benefits for FCUs that aren’t transparent, that would be a step in the right direction.