SPARC Quietly Divulges Information, Adds a Risky Fib

Without notification, SPARC at long last and quietly revealed detailed information about its fiscal sponsorship arrangement, governance, and grants — not via an active response to the numerous stories here and elsewhere, but weeks ago and without notice via their website.

They’ve also introduced a description of SPARC’s organizational status that is demonstrably false, and which could expose SPARC and its fiscal sponsor to liability via false advertising regulations, in one expert’s opinion:

An organization that claimed it was nonprofit and is not nonprofit under state law would open itself to claims of misrepresentation and fraud if a third party detrimentally relied on that representation.

Opening the Vault

A litany of stories from 2018 until just a few weeks ago seem to have had an effect. That is, SPARC has finally publicly divulged its ties to the New Venture Fund (NVF) on their “About SPARC” page via an update that occurred between March 31 and April 16, 2022 (per the WayBack Machine). The NVF relationship is also captured for the first time in various other documents SPARC posts, including its articles of governance.

As a reminder, NVF is a non-profit political fundraising entity, a registered lobbying firm, and has been described as a “dark money” organization by critics in the New York Times. It is affiliated with Arabella Advisors, a for-profit consultancy specializing in philanthropies. In 2020, Arabella Advisors took in more than $45 million in fees from its various fundraising non-profit satellite entities, with more than half of this total coming from NVF.

NVF and Arabella Advisors also share office space, offices also apparently shared by SPARC.

SPARC has made available a document called a “Project Charter” from NVF which outlines various aspects of SPARC. This document originated in 2021, and supersedes all other agreements, including a likely initial contract between NVF and Heather Joseph, which now is probably simply an employment agreement of some type.

Since SPARC moved from ARL in 2014, it seems fair to assume it was without a charter from NVF until very recently. Wording in the charter suggests this is the first time the arrangement has been outlined in a robust manner.

The document may change a number of perceptions about SPARC:

1. Governance. In this document, the governance of SPARC is NVF-heavy, consisting of a Board of Directors, which is the Board of NVF, then the President of NVF, and then the combination of the NVF Board and President (“NVF Leadership”), then what is termed the “Operations Staff,” which consists of NVF staff dealing with compliance, finance, governance, HR, and administrative roles, including an account manager for SPARC, and then finally the Project Director, in this case Joseph. The charter also points to an Advisory Board, which can provide “non-binding recommendations to NVF,” as well as donors. Overall, it is a governance structure driven by NVF, with an employee designated, a toothless advisory board, and donor influence.
2. The Advisory Board (Steering Committee). SPARC’s Steering Committee is an entity I addressed at one point during these investigations. Its role is more clearly delineated and more clearly secondary — to “support NVF in its oversight of the Project’s activities” by designating a Chair to serve as “the liaison between NVF and the Advisory Board.” The Account Manager also has a role, and NVF clearly states that it is not obligated to follow the recommendations of the Steering Committee or Project Director. The Steering Committee is required to participate in NVF’s annual review of the Project Director.
3. The Restricted Fund. Donations to SPARC and other revenues go into a restricted fund at NVF. The monies in this fund are used to pay the administrative fee NVF charges SPARC, as well as other SPARC expenses, grants (called “Subgrants” here), salaries, and so forth. It also outlines how Arabella Advisors is paid as a third-party provider of services, without explicitly identifying them as said provider. These facts have been established separately via other disclosures via 990s. If SPARC is terminated as a project at NVF, funds in the Restricted Fund will be donated to another 501(c)3 or charity. This means that if SPARC were to become a 501(c)3 itself, there is the potential for the restricted funds to roll over into the new entity, as I read it.
4. The Administrative Fee. For 2021, the administrative fee charged to SPARC by NVF was set at $248,491, or $62,122.75 per quarter. This can be increased or decreased by NVF of its own volition.
5. Termination Options. SPARC’s Advisory Board does have one power — to notify NVF that it is terminating the agreement, either by establishing SPARC as a separate non-profit legal entity, or finding a new fiscal sponsor that meets with NVF’s approval. The first option underscores that SPARC is not a non-profit organization currently. NVF can terminate the project of its own accord, as well.

Not Very Charitable

SPARC also published a full accounting of grants and donations received, along with grants SPARC has made.

Since 2013, SPARC has received $13.5 million in philanthropic grants, and $1.8 million in donations (mainly through membership fees for ORFG member philanthropies), for a total of $15.4 million. Of this, it has given out grants totaling $108,900, or about 0.7% of its total grants and donations. That means that 99.3% of the grants it receives, it keeps.

What we don’t have is any record of how large the Restricted Fund for SPARC at NVF has become. We could see something analogous to this if SPARC were a non-profit. Another new disclosure — a financial summary for 2021 — suggests that SPARC is carrying over substantial sums in the Restricted Fund each year, upwards of $2 million in 2021.

The New Misinformation

Sadly, SPARC also also injected a lie during these website updates at the top of their self-description:

SPARC is a non-profit advocacy organization . . .

Even NVF knows that SPARC is not a non-profit, as the Project Charter makes clear in numerous spots. In fact, SPARC is not an organization, having no tax ID, filing no separate organizational forms or certificates, and being a project within another organization.

At SPARC, this is just par for the course. OA.Works falsely claims it’s a non-profit organization, even though it’s a side-project related to SPARC, which itself is a project claiming to be a non-profit organization.

When it comes to reputation washing, it’s non-profit organizations all the way down, apparently.

There are potential liabilities associated with this — false advertising claims seem unlikely, but are on the table unless and until this is corrected. More importantly, if SPARC misled the NIH/NLM about its status in order to insinuate itself into positions to influence policy and practice discussions or to serve on the Steering Committee for the next Director of the NCBI, liability under the False Claim Act could become a possibility, as misrepresentations to government agencies are another matter entirely.

There are also perceptual liabilities. SPARC is supposed to be about openness and transparency as ways to ensure truth-telling via sunlight. However, they have been resistant to disclosures, having ushered these disclosures out surreptitiously, and they are now making false statements about SPARC’s non-profit status.

Why SPARC doesn’t transition to an independent non-profit — given its durability, revenues, influence, and potential initial reserves — remains a mystery.

Perhaps it is a mystery the Steering Committee can solve at an upcoming meeting.

Or maybe it’s in the works? Maybe the “lie” is just someone getting ahead of themselves . . . ?