USA Team Handball (USATH) has formally released its Internal Revenue Service (IRS) Form 990 for 2008. This form, which is an annual requiremetn for all U.S. non-profit organization, details income and expenses from July 1st 2008 to June 30th 2009, and is the first window to the fiscal status of USATH. The following is an analysis of some key data points contained on the form.

Income (Donations): USATH President Dieter Esch has backed up his promise to support the organization with a donation of $305,000. This contribution accounted for over half of USATH’s income and the organization simply would not have functioned without it. Business partner and fellow board member Brad Krassner contributed $50,000 while a 3rd board member, John West contributed $10,000. Lacking, however, is a clear indication as to whether any of the other board members have contributed any or part of the $50,000 that is stated in Section 7.26 of the by-laws as a requirement for Board Members. The end date for the form 990 is June 30th of this year, so perhaps those contributions were made after that date.

Income (Dues): USATH collected $41,117 in membership dues. This is similar to the total amount collected by the previous administration according to its last available Form 990 in 2004. As there was a significant increase in the price for annual dues, one can infer that there are now actually fewer members. It’s not surprising, however, that the new Federation would start with a low ground floor. It should be interesting to see how this metric tracks in the years to come, though, as it is a fairly reliable metric of the sports growth.

Membership dues revenue from previous IRS Form 990s
2004 $37k
2003 $42k
2002 $59K
2001 $26K
2000 $42K
(Note: I would speculate that the lower revenue in 2001 and the higher revenue in 2002 are due to some anomaly related to when the dues were collected. On average, the yearly revenue tracks closely to $40,000)

Expenses (Salaries): The USATH spent $285,279 on employee salaries and this is easily the largest expenditure of the Federation. The IRS also requires that all employees receiving compensation over $100,000 be listed by name and the General Manager of USATH, Steve Pastorino tops that mark with an overall compensation listed as $108,000. (Mr Pastorino has informed me that the yearly compensation is actually $100,000 and the extra $8,000 is due to 13 months of income). Extrapolating salaries for the other administrative personnel is difficult as several staff members were employed for only part of the year.

There are very few items of information more personal than how much money one earns in a year and in many businesses such information is held very close to the vest. U.S. non-profits, however, have stringent transparency requirements and with ready access to the internet this information is now available for all to see.

There’s a number of different ways to assess the appropriateness of the General Manager’s salary and everyone’s viewpoint is going to be influenced to some extent by their own professional experiences. Perhaps one of the more relevant comparisons is the compensation that Mike Cavanaugh received ($65,000/year) as the Executive Director back in 2004. Using a 4% inflation rate this would equate to a $73,000 salary for 2008; $100,000 equates to about a 37% pay increase. Using just those 2 data points one could come to the conclusion that either Mike Cavanaugh was undercompensated, Steve Pastorino is being overcompensated, or perhaps a mixture of both. (As a side note Mike Cavanaugh is listed as earning $24,917 in CY2008 as the new CEO of USA Table Tennis. This is, however, only for an indeterminate portion of that year. You’ll have to wait until next year to see what he makes now on an annual basis)

Out of curiosity I checked a few other sports federations to see what the top earner made. All federations are not created equal, but these numbers, inflation adjusted to 2008, do provide some insight.

USA Team Handball
Total income: $541,701
Top Salary: $100,000

Ultimate (Frisbee)
Total income: $1,236,000
Top Salary: $76,752

USA Water Polo
Total income: $4,703,000
Top Salary: $238,160

USA Field Hockey
Total income: $5,900,000
Top Salary: $263,120

USA Rugby
Total Income: $7,128,000
Top Salary: $271,000

USA Lacrosse
Total Income: $10,369,000
Top Salary: $173,000

If you compare handball to these sports, you’ll note that Mr Pastorino’s salary is substantially less with the exception of Ultimate. There are several ways to look at this.
– Salary as a ratio to total income: It can be argued that someone managing more money has greater responsibility and therefore should earn more. Using this argument Mr Pastorino’s salary is actually tops at 17% of total revenue.
– Salary requirement as an Olympic sport: The case can be made that Handball needs a base salary that is in line with the inherent prestige of other Olympic sports. In other words, if you’re going to take the sport seriously you need to have a salary comparable to other sports. Using this measure, Handball falls short of the mark.
– Salary requirement as it relates to the difficulty of the task. Anybody familiar with the challenges a minor sport like Handball faces knows full well the level of difficulty involved. A good case can be made that you don’t need just any manager, you need a super star with a proven track record of successful turnarounds. Handball probably falls short of the mark here as well and you could also bet that some top managers wouldn’t take the position at any salary, because they know that it will be tough to be successful. I’d love to put the head of USA basketball in charge of USA Handball and see how well that individual does in a more challenging situation.

In the end, there’s no automatic calculator that can decide what the appropriate compensation should be. It’s maybe a little more than I would have thought, but it’s in the ballpark. The bottom line is that the salary decision was Dieter Esch’s and since he contributed $305,000 to the organization one can only assume it was a decision that he was comfortable with.

Other Expenses: The Federal Statement at the end of the package identifies $168,975 in other expenses. This section is a hodgepodge of different expenses, but 3 items are worth noting:
Travel: $65,754
National Team Expenses: $7,071
USA Club Competition Expenses: $36,058

It’s hard to imagine Travel and National Team Expenses remaining so low in the future. For the time frame indicated there was only limited activity in those areas and these are sure to increase substantially in future statements. USA club competition expenses are probably in line with the costs of conducting a National Championship tournament. It will be interesting to track this in the years to come. Also as more training camps and other development activities are conducted I hope that future documentation highlights the spending in these areas more clearly.

The overall numbers: $540,000 to run a national federation is going to result in a shoestring operation. It’s hardly enough revenue to do a few things well, let alone enough to do everything that needs to be done. This number has got to get larger and USA Team Handball is working diligently to make that happen through engagement with international entities and the USOC. We can and should expect this bottom line number to increase from year to year so that it approaches the funding of some of the other sports organization listed above.

Closing thoughts: These numbers don’t tell the full story, but do set some initial benchmarks. I have had some limited dialogue with Steve Pastorino on these topics as well as opportunity to review a rough draft of planning documents that look towards the future. Hopefully, this information will be posted soon to the USA Team Handball website and will provide better insight as to the fiscal health and planning envisioned.

Full disclosure: I sent Dieter Esch an unsolicited letter expressing interest in the USA Team Handball General Manager position shortly after USA Team Handball was certified by the USOC in 2008. I was never interviewed and it’s probably unlikely that I would have accepted employment due to a number of personal and professional considerations. I’m also not surprised that Mr Esch hired someone he knew with a sports management background and very importantly no ties to the fractious politics that have afflicted the sport in the U.S. I think that my commentaries on USA Team Handball are fair and backed with reasoned arguments, but readers will have to judge for themselves as to whether my previous interest in employment clouds my critiques.

USA Team Handball Form 990 (1998): http://usateamhandball.org/assets/documents/attached_file/filename/20855/2008_USA_Team_Handball_Form_990.pdf
Guidestar: www.guidestar.org (Free service which provides access to IRS Form 990s for all U.S. Non-Profits)