In light of the recent accusations from Shad Khan that the KYN accelerator was charging too much in overhead and not giving enough money to startups, I decided it was time to peel back the onion even further to see if the same had occurred with One Spark. One Spark as a 501c3 non-profit is required by the IRS to share their 990 financial forms. Yesterday I made a 990 request and One Spark provided me the documentation promptly. Full disclosure, I am not an accountant and make no promises about the financial accuracy of my analysis. Some of the numbers aren't easy to match up with a quick analysis.
The 990 Form I received is from the 2012 calendar year, which runs from 7-01-2012 to 6-30-2013. One Spark 2013 took place in the middle of this reporting period. The 990 Form does not detail where the money flows to, so a more detailed forensic accounting analysis is really needed to give a comprehensive view of One Spark financials.
One Spark's two key staffers in this period, Joe Sampson (Executive Director) and Vince Cavin (Director of Operations and Finance) were both paid reasonable salaries in my estimation. Sampson received $62k and Cavin received $60k, both for 40 hours of work a week. However, President Elton Rivas and Vice President Dennis Eusebio received compensation of $50,000 and $40,000 respectively. On the surface that does not seem like much, but they noted on the 990 form that they only worked 15 hours a week for One Spark (and 40 hours at a related organization). These equate to $133,333 for Rivas and $106,666 for Eusebio when factored at 40 hours a week. Those salaries may be reasonable for an established and highly successful festival, but not a start up in its first year. Certainly not one that only brought in $96,511 in actual revenue (not counting donations).
Now let's look at the donations and expenses. One Spark received $1,198,105 in total revenue, but spent $1,399,817. It incurred a loss of $201,712, which appears to be covered by a $220,000 unsecured loan (presumably from Peter Rummell). In terms of revenue, $96,511 appears to be generated from the festival itself, while the remaining $1,101,594 appears to be from donations. One Spark 2013 only paid out $243,676 in cash prizes to creators at the festival. So where did the remaining money go? A portion appears to have gone to the festival itself. This includes $30,474 in "entertainment", $7,812 in "food and beverage" and $8,812 in "rent/facility costs". There is also $284,592 in "other direct expenses". No clue what that is.
A grand total of $1,399,817 went to functional expenses. Of that $538,417 went to "Office Expenses", $250,607 to "advertising", $256,977 to staff compensation, $119,715 to "IT", $51,041 to "other", $53,176 to "occupancy", $20,670 to "insurance", $3,000 to "accounting" and $106,214 to "all other expenses". The numbers do not exactly add up, but I believe the "other direct expenses" and "cash prizes" may be included in the "office expenses" figures. If not, then the $538,417 for office expenses is a huge red flag.
There are a couple follow up questions that I already asked One Spark.
1. What did the $538,417 in Part IX. 13 "office expenses" go to?
2. What did the $284,592 in "other direct expenses" on Part 2 go to?
3. What did the $106,214 in "all other expenses" in Part IX 24.e go to?
4. What did the $51,041 in "other" in Part IX 11.g go to?
5. Who was paid for the $119,715 in IT and the $250,607 in advertising?
I will email a copy of the PDF report to Stephen to upload for all to see.
A short summary for those that couldn't follow along, OneSpark 2013 appears to have paid $243,676 in cash prizes to creators, but had a significantly larger go towards staff salaries, advertising, and various other expenses.
I'm very interested in digging a little deeper.
Quote from: CityLife on October 09, 2014, 01:00:30 PM
Of that $538,417 went to "Office Expenses."
(http://bookwormjaz.files.wordpress.com/2014/08/1389891555909.gif)
Citylife, this is great! thanks!
Would you mind sharing the document?
TheCat, can you send me a PM with your email and I'll send it to you to upload.
For those curious, their 2013 990 is apparently not ready yet.
Thanks, Citylife for sending.
This is link to the 2012 990:
https://drive.google.com/file/d/0BwM3vpztR4J7N1Y4aGYwT3poOHc/view?usp=sharing (https://drive.google.com/file/d/0BwM3vpztR4J7N1Y4aGYwT3poOHc/view?usp=sharing)
To help read the form, you can find IRS instructions here:
http://www.irs.gov/instructions/i990/ch02.html#d0e9335
For part ix line 13, office expenses, the doc lists the following:
Quote
Enter amounts for supplies (office,
classroom, or other supplies); telephone (cell phones and
landlines) and facsimile; postage (overnight delivery, parcel
delivery, trucking, and other delivery expenses) and mailing
expenses; shipping materials; equipment rental; bank fees and
other similar costs. Also include printing costs of a general
nature. Printing costs that relate to conferences or conventions
must be reported on line 19.
My guess from reading the IRS instructions is that rent should go in line 16
Quote
Line 16. Occupancy. Enter amounts for the use of office space
or other facilities, including rent; heat, light, power, and other
utilities expenses; property insurance; real estate taxes;
mortgage interest; and similar occupancy-related expenses. Do
not include on line 16 expenses reported as office expenses
(such as telephone expenses) on line 13.
Oddly though, the office expenses seem quite excessive (unless they did a lot of 900 number calls) if they does not include the rent, power....
What I also found interesting is the following in part XII Financial Statements and Reporting:
2a Were the organization's financial statements compiled or reviewed by an independent accountant?
NO
2b
Were the organization's financial statements audited by an independent accountant?
NO
Personally, I would expect to have the statement audited or reviewed independently for such an organization.
Quote from: CityLife on October 09, 2014, 01:00:30 PM
3. What did the $106,214 in "all other expenses" in Part IX 24.e go to?
Checking the IRS documentation - if I understand it correctly - it appears they did not fill in line 24 correctly - do you understand the IRS instructions the same way I do or do I perhaps misinterpret the instructions?
Quote
Line 24. Other expenses. Enter the types and amounts of expenses which were not reported on lines 1 through 23. Include expenses for medical supplies incurred by health care/medical organizations. Include payments by the organization to professional fundraisers of fundraising expenses such as printing, paper, envelopes, postage, mailing list rental, and equipment rental, if the organization is able to distinguish these expense amounts from fees for professional fundraising services reportable on line 11e. Enter the four largest dollar amounts on lines 24a through 24d and the total of all remaining, miscellaneous expenses on line 24e. Do not include a separate entry for "miscellaneous expenses," "program expenses," "other expenses," or a similar general category in lines 24a-d. If the amount on line 24e exceeds 10% of the amount on line 25, column (A), the organization must list the type and amount of each line 24e expense on Schedule O (Form 990 or 990-EZ).
It's a shame the amount in line 24e only amounts for 7,58% of the amount in line 25, or else we would have been able to see the details on Schedule O
Quote from: stephendare on October 09, 2014, 02:41:15 PM
from a onespark insider:
"One more note: The thread is saying One Spark paid those salaries to Elton & Dennis - they are incorrect. He is reading the form wrong. Those salaries were not paid by One Spark."
In Column F it says "other compensation from the organization or related organizations". That appears to be either deferred income (not yet paid) or compensation that is non taxabe (at all or during the current year).
Would it be this then ?
Quote
Other compensation paid to the person by a related organization at any time during the calendar year ending with or within the filing organization's tax year should be reported in column (F). If the related organization was related to the filing organization for only a portion of the tax year, then the filing organization may choose to report only other compensation paid or accrued by the related organization during the time it was actually related. If the filing organization reports compensation on this basis, it must explain in Schedule O (Form 990 or 990-EZ) and state the period during which the related organization was related.
I think KYN should have not raised such a big deal after Khan stopped funding. Khan was good at just letting it go, but KYN wanted to bash Khan and get sympathy I suppose. Khan wasn't speaking until he was criticized for 2 days from others.
Quote from: stephendare on October 09, 2014, 02:50:43 PM
So the organization got more than a million dollars?
Thats slightly more than the under 300k figure that has been publicized isn't it?
that's never really been a secret. It cost over $600,000 to put the first festival on...and that's with the City providing a significant amount of in-kind services (police, traffic, etc.)
Has CoWork Jax shut down also?
Quote from: Gunnar on October 09, 2014, 02:51:50 PM
Quote from: stephendare on October 09, 2014, 02:41:15 PM
from a onespark insider:
"One more note: The thread is saying One Spark paid those salaries to Elton & Dennis - they are incorrect. He is reading the form wrong. Those salaries were not paid by One Spark."
In Column F it says "other compensation from the organization or related organizations". That appears to be either deferred income (not yet paid) or compensation that is non taxabe (at all or during the current year).
Would it be this then ?
Quote
Other compensation paid to the person by a related organization at any time during the calendar year ending with or within the filing organization's tax year should be reported in column (F). If the related organization was related to the filing organization for only a portion of the tax year, then the filing organization may choose to report only other compensation paid or accrued by the related organization during the time it was actually related. If the filing organization reports compensation on this basis, it must explain in Schedule O (Form 990 or 990-EZ) and state the period during which the related organization was related.
It appears this should have been disclosed on Schedule O.
Whether it was salary, bonuses, or whatever, the total amount of compensation paid to officers, directors, trustees, and key employees was $256,977.
Wow, interesting thread!
People leaving town until the dust settles?!?
IMO $256K is not an outrageous sum for salary/staff overhead (there are many non-profits where that is not even one person's base salary, if one can believe that!)
Likewise, the $500K for office expenses might have a lot of stuff buried in there that we don't know about, that should not have been classified as Office Expenses, or should have been footnoted. How much of that actually went to winners' office expenses? Perhaps OneSpark organization got enough office space/furniture etc to facilitate these start ups/winners?
In that case, you have to consider that there is "prize money" (i.e. non-discretionary or discretionary cash), but then there are also benefits. Also consider that there is no reason for the leaders and employees of OneSpark, who are working full time for the organization, to be paid anything less than market, and that includes benefits. 501(c)3 doesn't imply "work for free", though eyebrows deserve to get raised when salaries and benefits escalate into the 1%er range.
Finally, consider where we'd be without all these evil OneSpark people getting paid and leasing office space. The other option is traditional VC, which is not available really to the Jacksonville market and is MUCH MUCH more expensive!
As the original post stated, the salaries of the ED and Operations Director are reasonable. The "compensation" to the President and Vice President do raise eyebrows, not because of how high they are, but because they may be for 15 hours of work a week. Simply founding a non-profit doesn't entitle one to a share of the money it brings in.
Given the amount of time volunteers have donated to One Spark, the amount of money donated to One Spark, and the significant in-kind services COJ has provided for the festival, I think the folks at One Spark have a responsibility to be transparent about their spending. I have a few hunches that nobody has really touched on in the thread, but don't want to post without facts. An independent audit of their books would be a good start.
Any CPA's out there willing to offer up an in-kind donation for a review of their books?
Aren't a few of the founders and board members from One Spark also on paper as working with KYN? That is probably where the confusion is coming in if so. I may be wrong, but I think even Elton or Joe released the statement a while ago saying they were separate entities and the article went on to site said person as being a director and founder of KYN.
Soon or later, the truth will come out for everyone to form an opinion as to the good or bad of OneSpark. Too bad you cannot see how much some big-time church pastors are paid ... they hide behind the veil of religion and are not required to file 990 forms.
Some people appear to be a little too focused in on the salary/compensation aspect of the financials. Definitely not the biggest question mark....
I am fairly certain he sees all the feedback on the various media outlets. A majority of posters in the various comment sections are saying he should be replaced or step down. The real question is what will he or the rest of the board members at one spark do? This whole situation is pretty shady looking so hopefully it all gets cleared up soon.
Haven't read through the thread - but I work in advertising and the $250k for marketing seems reasonable - especially if that includes media placement. Those banners at bus stops and on streetlamps are quite expensive to produce and place. However, the salaries for Rivas and Eusebio seem a little over-the-top... especially for 15hrs of work a week, especially not including their KYN salaries. All those Berlin trips are pretty expensive though.
Now to be fair, they are working much more than 40 hours per week. They work 24/7 - the startup world isn't like the typical 9-5.
But I know a lot of people who work 80-90hrs per week and don't make over six figures or eat at nice restaurants all the time or globe trot. Oh and the income they *do* earn isn't from donations or big checks written by millionaires/billionaires. So there's that.
Quote from: BoldCityRealist on October 10, 2014, 04:29:53 PM
Haven't read through the thread - but I work in advertising and the $250k for marketing seems reasonable - especially if that includes media placement. Those banners at bus stops and on streetlamps are quite expensive to produce and place. However, the salaries for Rivas and Eusebio seem a little over-the-top... especially for 15hrs of work a week, especially not including their KYN salaries. All those Berlin trips are pretty expensive though.
Now to be fair, they are working much more than 40 hours per week. They work 24/7 - the startup world isn't like the typical 9-5.
But I know a lot of people who work 80-90hrs per week and don't make over six figures or eat at nice restaurants all the time or globe trot. Oh and the income they *do* earn isn't from donations or big checks written by millionaires/billionaires. So there's that.
JTA may have been an in-kind sponsor. So, it's very possible that the ads on the JTA system weren't a direct one spark expense.
^ true, but they may have had to show it on financials anyway. I know that we listed all in-kind sponsorships and expenses in the budget for the conference I recently chaired.
Quote from: BoldCityRealist on October 10, 2014, 04:29:53 PM
Haven't read through the thread - but I work in advertising and the $250k for marketing seems reasonable - especially if that includes media placement. Those banners at bus stops and on streetlamps are quite expensive to produce and place. However, the salaries for Rivas and Eusebio seem a little over-the-top... especially for 15hrs of work a week, especially not including their KYN salaries. All those Berlin trips are pretty expensive though.
Now to be fair, they are working much more than 40 hours per week. They work 24/7 - the startup world isn't like the typical 9-5.
But I know a lot of people who work 80-90hrs per week and don't make over six figures or eat at nice restaurants all the time or globe trot. Oh and the income they *do* earn isn't from donations or big checks written by millionaires/billionaires. So there's that.
The question isn't really how many hours they work (or what they are paid), but what the return for the money spent is.
So you have President & Vice President, a Director for Finances & Operations and an Executive Director and then you have a 990 form that is mostly "Misc" (i.e. neither detailed nor transparent) and if I understand the last page correctly they even needed to file for an extension.
It would be interesting to see what their books look like.
Paying market rate is perfectly fine if the performance is up to market standards.
Another thing that irks me: Most of the criticism seems to be focused on one person but it's really everyone's job in management to check numbers and processes. The top brass have the highest responsibility but looking at the 990 form I would say there are at least four.