Archive:Financial reports/July 2008 to December 2008 Mid-Year FAQ

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FAQs for Financial Statements (July 2008 to December 2008)

What is the purpose of these statements?

These financial statements provide an overview of basic information about the Wikimedia Foundation's financial status during the first six months of the 2008-09 fiscal year. They cover the period of July 1, 2008 until December 31, 2008.

Who created these statements?

They were created by the accounting and financial staff of the Wikimedia Foundation for the Executive Director. The Executive Director, in turn, shared them with the Board in February 2009.

How often does the Wikimedia Foundation publish financial statements?

The Wikimedia Foundation publishes its audited financial statements annually. Beginning last year, the Wikimedia Foundation began the process of also publishing mid-year unaudited financial statements. Previous statements can be found on the Wikimedia Foundation's wiki under Financial reports.

So what is the main message of the statements? What is the big picture?

The Wikimedia Foundation's financial situation is strong. Spending is very slightly below plan, and revenues are slightly exceeding plan. Our projections say we will finish the year on target. This is primarily due to the terrific performance of the online fundraiser campaign, which exceeded its targets and enabled us to close the fundraiser early, as our core operating budget was met ahead of schedule. We think this is great news, particularly in a very difficult global economy.

You note on the financial statements that you have surpassed the annual fundraising goal of $6MM but the actuals show only $5.2MM. Why?

As of December 31, 2008, we collected $5.2MM. That number does not include our pledged commitment of $1MM from the Sloan Foundation, which is part of Sloan's three-year support to the Wikimedia Foundation. Because Sloan had committed to making the grant, we included it in our fundraising totals. And, as expected, we received the funds on February 4, 2009.

Your annual plan shows $7.3MM in revenue. If you've raised $6MM through your annual campaign, how are you going to close the $1.3MM gap in your annual plan? Where are the funds expected to come from?

In our annual campaign, we've targeted a goal of $6MM to fully cover our operating expenses. The remaining $1.3MM in our annual plan is targeted to go to the organization's reserve fund: it is contingency money. We plan to raise it through our normal revenue-generating activities during the remainder of this fiscal year: primarily through community fundraising activities (including gifts made through the permanent donations links on all our projects), through business development arrangements such as licensing our trademark for mission-friendly commercial uses, and through major gifts and grants. This is not a change: it was always our expectation that the contingency money would be raised through normal revenue-generating activities in the remaining six months of the year.

Why do you need a reserve or savings?

It is normal for organizations to plan to have reserve or contingency funds. Reserve funds are critical to prepare the organization in the event of unplanned expenses, emergencies and/or revenue shortfalls. They are especially critical in today's global economic context: The global recession has already caused millions of people to lose their jobs, and corporate profits and foundation endowments have shrunk. In that context, we do not know if the fundraising success of 2008-09 will be replicable in the global economic environment in which we will launch our next annual campaign, so it will be important for us to have funds available in reserve, in the event we need them.

What will happen if you don’t meet your revenue targets?

We expect to meet our targets. If we don't, we would plan to cut certain expenses, or end the year with a smaller reserve than planned.

How much fundraising revenue is from community donors (i.e. donations of less than $10,000)?

In 2008-09, community fundraising has already exceeded its targets, even though the year is not yet over. In the time period covered by these financial statements, we received donations from 130,110 donors at an average donation of $33.01. This accounts for the majority of our fundraising revenue for this statement. We are very grateful to all our supporters.

How did you increase so significantly the number of donors this year versus last year?

We attribute the increase to a combination of factors. We hired a full-time fundraising team including a Head of Community Giving and a Development Associate. We also engaged existing staff and external contractors to improve our database and public reporting infrastructure, to re-design our donation web pages, to support translations, and to raise awareness of our campaign in the media. These combined efforts have allowed us to run a more professionally executed and successful campaign than any in our organization's history. We are thrilled that so many people responded in support of our work.

How has the Wikimedia Foundation’s strategy regarding grants awarded by private foundations changed?

The success of our community giving campaign has meant that the Wikimedia Foundation's base operating budget is now covered. That means we are now able to focus on developing grant proposals for specific projects, rather than requesting that foundations fund our general operations. This is good for the Wikimedia Foundation, because it means we will be able to launch projects that will help us speed up progress towards fulfilling the overall mission - for example, the Wikipedia Usability Initiative, for which we received $890,000 from the Stanton Foundation. And it is good news for foundations too, which generally prefer to fund specific project work rather than recurring operating expenses.

How has the Wikimedia Foundation’s strategy regarding gifts from Major Donors changed?

In 2008-09, the Wikimedia Foundation is developing its first ever major donor program, and is cultivating both existing and new prospects to become sustaining supporters. However, thus far in 2008-09, we are not reaching our revenue targets for major donors. We attribute this to a number of factors. Because it is the first year of major donor cultivation for Wikimedia, we didn't have a lot of data to help us set targets, so they were by necessity just approximations. Also though, economic downturns typically have a significant effect on major donations, and that effect is felt particularly in the area of first-time gifts. We do expect to continue to grow our pool of major supporters, despite the economic situation. It will probably just take longer than we originally projected.

What is program income?

Program income is income from business development activities and includes agreements to license the Wikipedia trademark for commercial use when consistent with our values and mission, as well as technical services such as real-time access to content feeds.

What do operating expenses consist of?

Operating expenses consist of anything that doesn’t fall into the other financial statement categories. Operating expenses includes expenses such as rent, utilities, supplies, Paypal fees, outside contract services, legal fees, accounting fees, etc.

How many more people do you expect to hire in the near-future?

Our budget for the fiscal year ending June 30, 2009 includes a Chief Program Officer position and a System Administrator position. We're currently in the process of evaluating candidates for both roles.

What will the budget next year look like?

We will begin the budget process for the 09-10 fiscal year in March 2009. The budget will be submitted to the Board for its approval in late June. We expect the budget to reflect a certain amount of deliberate, careful growth, especially to address key capacity gaps.