There has been a lot of chatter lately in the news about the potential impact on charitable giving of the current economic crisis. I notice that the 08/09 budget calls for Q2 revenues of $3.5M., a total annual donation revenue of $6M and an annual revenue of $7.3M.
Since the bulk of the annual revenue is to be acquired in this quarter, and the world is currently engaged in a serious financial crisis, what adjustments or contingencies has the Foundation planned to mitigate a downturn in gift revenue? The actual spending budget has a built in cushion of $1.3M, but the budget indicates that the cash reserve as of the end of September was anticipated to be in the hole $752. With a negative reserve, a threat to revenue and a very poor borrowing environment are the finances of the organization still secure?
Thanks,
Nathan
[1]"Economy Expected To Take a Tole on Charitable Giving" http://www.nytimes.com/2008/09/30/business/30foundations.html [2]"In Tight Times, Many Nonprofits Feel the Pinch As Contributions Dwindle" http://www.nytimes.com/2008/10/07/nyregion/07charities.html [3]"Charities Are Bracing For Long, Hard Winter" http://www.time.com/time/business/article/0,8599,1848864,00.html?imw=Y
2008/10/11 Nathan nawrich@gmail.com:
There has been a lot of chatter lately in the news about the potential impact on charitable giving of the current economic crisis. I notice that the 08/09 budget calls for Q2 revenues of $3.5M., a total annual donation revenue of $6M and an annual revenue of $7.3M.
Since the bulk of the annual revenue is to be acquired in this quarter, and the world is currently engaged in a serious financial crisis, what adjustments or contingencies has the Foundation planned to mitigate a downturn in gift revenue? The actual spending budget has a built in cushion of $1.3M, but the budget indicates that the cash reserve as of the end of September was anticipated to be in the hole $752. With a negative reserve, a threat to revenue and a very poor borrowing environment are the finances of the organization still secure?
I'll let someone in the know give a full answer, but in the past Sue has said that the easiest way (or, at least, one of the easy ways) to deal with a short term lack of funds is to defer planned hires. There are certainly hires planned that could be deferred, so I guess that's what they'll do if they need to.
On Sat, Oct 11, 2008 at 10:20 AM, Thomas Dalton thomas.dalton@gmail.com wrote:
I'll let someone in the know give a full answer, but in the past Sue has said that the easiest way (or, at least, one of the easy ways) to deal with a short term lack of funds is to defer planned hires. There are certainly hires planned that could be deferred, so I guess that's what they'll do if they need to.
Probably a good idea too, but not adding new spending is maybe not going to be enough if our level of donations decreases significantly. They would have to cut their current spending if they don't get enough donations to cover their costs.
Admittedly it doesn't make a lot of sense to speculate about this until we see what the donations situation looks like. For all we know we could end up with plenty of donations and not have any problems.
--Andrew Whitworth
2008/10/11 Andrew Whitworth wknight8111@gmail.com:
On Sat, Oct 11, 2008 at 10:20 AM, Thomas Dalton thomas.dalton@gmail.com wrote:
I'll let someone in the know give a full answer, but in the past Sue has said that the easiest way (or, at least, one of the easy ways) to deal with a short term lack of funds is to defer planned hires. There are certainly hires planned that could be deferred, so I guess that's what they'll do if they need to.
Probably a good idea too, but not adding new spending is maybe not going to be enough if our level of donations decreases significantly. They would have to cut their current spending if they don't get enough donations to cover their costs.
Admittedly it doesn't make a lot of sense to speculate about this until we see what the donations situation looks like. For all we know we could end up with plenty of donations and not have any problems.
Of course, cutting new costs isn't going to be enough if the income actually reduces, but I think that's unlikely. We have new staff working full time on finding new sources of donations and grants, I doubt the economic crisis will be enough to cancel that out entirely. Donations from individuals may well reduce enormously if we go into a global recession, but I'd think charitable foundations will continue handing out grants regardless (in fact, if memory serves, US law requires such foundations to spend a certain amount of their funds each year, so they can't just stop handing out money until the economy picks up again). But, as you say, this is just speculation, the only way to know for sure what will happen is to wait and see.
On Sat, Oct 11, 2008 at 9:54 AM, Nathan nawrich@gmail.com wrote:
There has been a lot of chatter lately in the news about the potential impact on charitable giving of the current economic crisis. I notice that the 08/09 budget calls for Q2 revenues of $3.5M., a total annual donation revenue of $6M and an annual revenue of $7.3M.
The budget is fudged to make it look like the Foundation is going to spend more than it actually is going to spend. Sue has even admitted this, though she used some euphamism like "conservative" instead of "fudged".
Since the bulk of the annual revenue is to be acquired in this quarter, and the world is currently engaged in a serious financial crisis, what adjustments or contingencies has the Foundation planned to mitigate a downturn in gift revenue? The actual spending budget has a built in cushion of $1.3M, but the budget indicates that the cash reserve as of the end of September was anticipated to be in the hole $752. With a negative reserve, a threat to revenue and a very poor borrowing environment are the finances of the organization still secure?
Every year someone comes up with this "sky is falling" analysis, and every year the Foundation comes out with a bigger surplus. See http://blog.p2pedia.org/2008/06/foundation-who-cried-wolf.html
Anthony
2008/10/11 Anthony wikimail@inbox.org:
On Sat, Oct 11, 2008 at 9:54 AM, Nathan nawrich@gmail.com wrote:
There has been a lot of chatter lately in the news about the potential impact on charitable giving of the current economic crisis. I notice that the 08/09 budget calls for Q2 revenues of $3.5M., a total annual donation revenue of $6M and an annual revenue of $7.3M.
The budget is fudged to make it look like the Foundation is going to spend more than it actually is going to spend. Sue has even admitted this, though she used some euphamism like "conservative" instead of "fudged".
Since the bulk of the annual revenue is to be acquired in this quarter, and the world is currently engaged in a serious financial crisis, what adjustments or contingencies has the Foundation planned to mitigate a downturn in gift revenue? The actual spending budget has a built in cushion of $1.3M, but the budget indicates that the cash reserve as of the end of September was anticipated to be in the hole $752. With a negative reserve, a threat to revenue and a very poor borrowing environment are the finances of the organization still secure?
Every year someone comes up with this "sky is falling" analysis, and every year the Foundation comes out with a bigger surplus. See http://blog.p2pedia.org/2008/06/foundation-who-cried-wolf.html
Yes, every year the foundation plans their spending so that they can survive even if things go horribly wrong and then, when things don't go horribly wrong, they end up with a large surplus. It's called good business sense.
On Sat, Oct 11, 2008 at 12:18 PM, Thomas Dalton thomas.dalton@gmail.comwrote:
Yes, every year the foundation plans their spending so that they can survive even if things go horribly wrong and then, when things don't go horribly wrong, they end up with a large surplus. It's called good business sense.
That can be done without lying, though, if you plan on the surplus instead of lying about the expected expenditures.
On Sat, Oct 11, 2008 at 12:21 PM, Anthony wikimail@inbox.org wrote:
lying about the expected expenditures.
"by which I mean you posit that you're gonna need more than you think you actually will need"
2008/10/11 Anthony wikimail@inbox.org:
On Sat, Oct 11, 2008 at 12:21 PM, Anthony wikimail@inbox.org wrote:
lying about the expected expenditures.
"by which I mean you posit that you're gonna need more than you think you actually will need"
Well, you usually do a bit of both. Each department will work out how much it will need next year and then add a bit on for emergencies, then all those numbers will be added together and a bit more will be added on for emergencies. The department heads don't want to go over budget any more than the company as a whole does.
On Sat, Oct 11, 2008 at 12:30 PM, Thomas Dalton thomas.dalton@gmail.comwrote:
2008/10/11 Anthony wikimail@inbox.org:
On Sat, Oct 11, 2008 at 12:21 PM, Anthony wikimail@inbox.org wrote:
lying about the expected expenditures.
"by which I mean you posit that you're gonna need more than you think you actually will need"
Well, you usually do a bit of both.
No I don't. I'm an honest person.
2008/10/11 Anthony wikimail@inbox.org:
On Sat, Oct 11, 2008 at 12:30 PM, Thomas Dalton thomas.dalton@gmail.comwrote:
2008/10/11 Anthony wikimail@inbox.org:
On Sat, Oct 11, 2008 at 12:21 PM, Anthony wikimail@inbox.org wrote:
lying about the expected expenditures.
"by which I mean you posit that you're gonna need more than you think you actually will need"
Well, you usually do a bit of both.
No I don't. I'm an honest person.
I apologise, *one* usually does a bit of both.
On Sat, Oct 11, 2008 at 12:38 PM, Thomas Dalton thomas.dalton@gmail.comwrote:
2008/10/11 Anthony wikimail@inbox.org:
On Sat, Oct 11, 2008 at 12:30 PM, Thomas Dalton <thomas.dalton@gmail.com wrote:
2008/10/11 Anthony wikimail@inbox.org:
On Sat, Oct 11, 2008 at 12:21 PM, Anthony wikimail@inbox.org wrote:
lying about the expected expenditures.
"by which I mean you posit that you're gonna need more than you think
you
actually will need"
Well, you usually do a bit of both.
No I don't. I'm an honest person.
I apologise, *one* usually does a bit of both.
The Foundation usually does a lot of both (they were 37% under budget last year, with technology spending coming in 65% under budget), which is the point I was trying to relay to Nathan. The further question of whether or not this is ethical is probably something for another mailing list.
The Foundation usually does a lot of both (they were 37% under budget last year, with technology spending coming in 65% under budget), which is the point I was trying to relay to Nathan. The further question of whether or not this is ethical is probably something for another mailing list.
Yes, but to be fair that was due to deferred spending rather than the money not being spent at all. The tech team just decided to wait until next year to spend the money, it wasn't because they'd been dishonest about how much they needed to spend.
On Sat, Oct 11, 2008 at 9:38 AM, Thomas Dalton thomas.dalton@gmail.com wrote:
2008/10/11 Anthony wikimail@inbox.org:
On Sat, Oct 11, 2008 at 12:30 PM, Thomas Dalton thomas.dalton@gmail.comwrote:
2008/10/11 Anthony wikimail@inbox.org:
On Sat, Oct 11, 2008 at 12:21 PM, Anthony wikimail@inbox.org wrote:
lying about the expected expenditures.
"by which I mean you posit that you're gonna need more than you think you actually will need"
Well, you usually do a bit of both.
No I don't. I'm an honest person.
I apologise, *one* usually does a bit of both.
Having reserves and contingency margins are a good and necessary thing, but I agree with Anthony that it is generally more honest for non-profits to declare what there reserves and margins are rather than rolling them into the larger budget in black box fashion. In the large public sector projects I've worked with contingency funds were always an explicit part of the budget, and it certainly helped to know where things really stood as funding and expense realities evolved.
-Robert Rohde
Having reserves and contingency margins are a good and necessary thing, but I agree with Anthony that it is generally more honest for non-profits to declare what there reserves and margins are rather than rolling them into the larger budget in black box fashion. In the large public sector projects I've worked with contingency funds were always an explicit part of the budget, and it certainly helped to know where things really stood as funding and expense realities evolved.
I've only seen an extremely summarised budget that, for example, says technology has budgeted $2,705,000 for the year. I don't know how that's broken down, but I expect the tech team (and Sue) have a more detailed budget (they haven't just plucked that number out of thin air) that may well include an explicit contingency fund.
Now that we're in the business week, can someone from the Foundation staff or Board comment on this? If you can't provide specifics, a "we should be fine" or "we aren't able to comment at this time" would be great.
While the other opinions above were interesting, they weren't what I was actually looking for (although thank you to Thomas for pointing out the correct interpretation of the Q1 reserve).
Thanks,
Nathan
The actual spending budget has a built in cushion of $1.3M, but the budget indicates that the cash reserve as of the end of September was anticipated to be in the hole $752. With a negative reserve, a threat to revenue and a very poor borrowing environment are the finances of the organization still secure?
I think you may be misinterpreting the plan (it's worded rather strangely, IMO) - the -$752,000 is the change in cash levels, the footnote says there should have been more than $1,000,000 in the bank at the beginning of the year, so there should still be a reserve of more than $248,000. That means we should still be in the black as long as Q1 revenue wasn't more than 34% worse than expected. Q1 finished 11 days ago, so I expect the powers that be either have, or will soon have, preliminary data on how things went (and will at least have a rough idea) and will tell us if we're in serious trouble. Assuming we're not already in the red, we can stay above water with just 39% of the expected Q2 revenue and 69% of expected Q3 revenue (and that is, again, with no spending cuts), we would then be in trouble for Q4, but there is plenty of time to implement spending cuts before then if necessary.
Nathan wrote:
There has been a lot of chatter lately in the news about the potential impact on charitable giving of the current economic crisis. I notice that the 08/09 budget calls for Q2 revenues of $3.5M., a total annual donation revenue of $6M and an annual revenue of $7.3M.
Since the bulk of the annual revenue is to be acquired in this quarter, and the world is currently engaged in a serious financial crisis, what adjustments or contingencies has the Foundation planned to mitigate a downturn in gift revenue? The actual spending budget has a built in cushion of $1.3M, but the budget indicates that the cash reserve as of the end of September was anticipated to be in the hole $752. With a negative reserve, a threat to revenue and a very poor borrowing environment are the finances of the organization still secure?
Thanks,
Nathan
Hi Nathan,
I've just seen the preliminary figures for Q1 and at the moment we are on track - overachieving slightly on revenues, and underspending. At this point, donations are coming in at a normal pace. Having said that, I am sure that -like all non-profits- we will be affected by the economic turmoil: the question is really how much.
The conventional wisdom is that the subset of donations that's softest in a troubled economy is first-time major gifts. That's because if, year after year, I have given an organization 1m annually, it is tough for me to suddenly scale that back. But if I am poised to give for the first time, and would normally have been considering a gift of 1m, it is fairly easy for me to give less, because I haven't yet set any expectations.
That softness is bad news for us, since we have a very small pool of major donors, which we have recently hired Rebecca Handler to expand. It is not an easy time to be trying to do that.
FWIW, it is also conventional wisdom that "small gifts" (the bulk of what comes in through our online fundraiser) remain fairly insensitive to economic turmoil until and unless the turmoil looks very bad, and looks like it will last a very long time. (I expect that individuals start cutting back their charitable donations at about the same time they make other personal cutbacks, like cancelling vacations, skipping evenings out, etc.) Foundation grants are considered fairly impervious to economic downturn; corporate grantmaking programs semi-susceptible because the budgets of some are tied to the organization's own financial performance. It is also the case that in economic hard times, philanthropy shifts somewhat away from charities like museums and schools, towards those providing basic necessities such as food and housing.
So what will our response be, in the event donations soften? Basically, there's only two things to be done: cut spending, and find new ways to increase revenues.
Cutting spending is straightforward: if we need to, I would institute a non-essential spending freeze. Freezes can range from "soft" - e.g., putting a hold on consultants and other discretionary spending, scaling back on travel, and deferring new hires such as the Chief Program Officer, to "strict" - e.g., deferring tech purchases, cancelling planned spending for outreach events, etc. We would see what's necessary. (In general IMO, it's important to control spending, but it's also important to not overreact. Whipsawing from a feast to famine approach can be incredibly wasteful: the most effective way to get things done is obviously steady planned spending.)
Our other piece of work would be to find new ways to increase revenues, for example by increasing our focus on grant-making institutions which, as I said above, are generally considered less susceptible to downturns. More information will help us here: For example, if big donations turn out to be impervious to the downturn, while small donations suffer, we would refocus towards major gifts.
At this point, I am reprioritizing "making money" upwards. If I am weighing whether to put our energy behind Initiative A or Initiative B, and Initiative A will bring in money while B will not, A is a little higher on my priority list than it would have been two months ago. And as you can imagine, I'm also paying extremely close attention to our financial statements.
There are probably things that people on this list can do to help, if you're so inclined. (I'm sure many of you do these things already :-)
* Tell your family and friends that we're a charity. Last week I spoke to an international group of academics focused on public service media: the very first question expressed surprise that we're a non-profit. Because Wikimedia is unique, I find that people make a lot of incorrect assumptions about us, basically in an attempt to fit us into a box they already understand. They assume that we employ thousands of staff, that we have a huge "campus" in Silicon Valley, that Wikipedia has made us very, very wealthy. We need to keep telling people that we're a non-profit. It's a simple message but if they don't know we depend on their donations, they can't help us.
* One area we haven't historically explored is employee matching gifts. More than 15,000 U.S.-based corporations/subsidiaries (including IBM, Google, Sun, Cisco, Yahoo, HP, Intuit, Microsoft) match charitable donations made by their employees - but the onus is on the employee to fill out the paperwork to make it happen, and many don't. If you donate to the Wikimedia Foundation, and you can get your gift matched by your organization, please do :-)
* When the online fundraiser starts, please help promote it. I expect Erik will start posting here soon about the fundraiser: one thing I can tell you is that, like last year, we will be offering badges/buttons that people can put on their own sites and/or point other people towards. Please put the buttons on your site, if you have one :-)
What a long e-mail. Thanks for asking the question Nathan, and I hope you find this useful. As we move into the fundraiser, we will keep you (all, collectively) posted on how we're doing.
Thanks, Sue
[1]"Economy Expected To Take a Tole on Charitable Giving" http://www.nytimes.com/2008/09/30/business/30foundations.html [2]"In Tight Times, Many Nonprofits Feel the Pinch As Contributions Dwindle" http://www.nytimes.com/2008/10/07/nyregion/07charities.html [3]"Charities Are Bracing For Long, Hard Winter" http://www.time.com/time/business/article/0,8599,1848864,00.html?imw=Y _______________________________________________ foundation-l mailing list foundation-l@lists.wikimedia.org Unsubscribe: https://lists.wikimedia.org/mailman/listinfo/foundation-l
On Wed, Oct 15, 2008 at 2:41 PM, Sue Gardner sgardner@wikimedia.org wrote:
[snip]
FWIW, it is also conventional wisdom that "small gifts" (the bulk of what comes in through our online fundraiser) remain fairly insensitive to economic turmoil until and unless the turmoil looks very bad, and looks like it will last a very long time. (I expect that individuals start cutting back their charitable donations at about the same time they make other personal cutbacks, like cancelling vacations, skipping evenings out, etc.) Foundation grants are considered fairly impervious to economic downturn; corporate grantmaking programs semi-susceptible because the budgets of some are tied to the organization's own financial performance. It is also the case that in economic hard times, philanthropy shifts somewhat away from charities like museums and schools, towards those providing basic necessities such as food and housing.
[/snip]
Very good post Sue, great to know that all of this is being looked after and taken care of. One thing I might point out. You mention above(I quoted the relevant bit) that you believe people will start cutting charitable donations when they cut personal spending. I am afraid that time is already upon us. Most people (at least that I know) have hit a point financially where vacations and a night on the town are a luxury we just can't afford, at least not with the regularity a different economy could afford.
Sad, but true :(
-Chad
2008/10/15 Chad innocentkiller@gmail.com:
Very good post Sue, great to know that all of this is being looked after and taken care of. One thing I might point out. You mention above(I quoted the relevant bit) that you believe people will start cutting charitable donations when they cut personal spending. I am afraid that time is already upon us. Most people (at least that I know) have hit a point financially where vacations and a night on the town are a luxury we just can't afford, at least not with the regularity a different economy could afford. Sad, but true :(
When people ask "how can I help?" I tend to answer:
1. Take pictures. 2. Write stuff. 3. Send us money!
(I still rank 1 and 2 higher.)
- d.
David Gerard wrote:
When people ask "how can I help?" I tend to answer:
- Take pictures.
- Write stuff.
- Send us money!
(I still rank 1 and 2 higher.)
Actually David, when I think about Wikimedians hustling people for money, you are the poster child - at Wiki Wednesday last year in London, I thought you were admirably shameless :-)
2008/10/16 Sue Gardner sgardner@wikimedia.org:
David Gerard wrote:
When people ask "how can I help?" I tend to answer:
- Take pictures.
- Write stuff.
- Send us money!
(I still rank 1 and 2 higher.)
Actually David, when I think about Wikimedians hustling people for money, you are the poster child - at Wiki Wednesday last year in London, I thought you were admirably shameless :-)
That's 'cos they knew what Wikipedia was :-)
(I repeated every now and then "and so we're a tiny charity with no money. By the way, please give us money.")
- d.
...It is my considered, though non-expert, opinion that this email is a stunning example of the leadership that we have come to expect from Sue.
From day one, I have had no doubt that she knew what she was doing when managing an organization like this, and she has yet to disappoint.
I'm impressed with the research, with the fact that she bothers to respond to Foundation-l, and that there is a plan (even if ad hoc) in place.
Needless to say, I'm a fan of Sue.
__________________ Philippe|Wiki philippe.wiki@gmail.com
[[en:User:Philippe]]
On Oct 15, 2008, at 1:41 PM, Sue Gardner wrote:
Hi Nathan,
I've just seen the preliminary figures for Q1 and at the moment we are on track - overachieving slightly on revenues, and underspending. At this point, donations are coming in at a normal pace. Having said that, I am sure that -like all non-profits- we will be affected by the economic turmoil: the question is really how much.
2008/10/16 Philippe|Wiki philippe.wiki@gmail.com:
...It is my considered, though non-expert, opinion that this email is a stunning example of the leadership that we have come to expect from Sue.
From day one, I have had no doubt that she knew what she was doing when managing an organization like this, and she has yet to disappoint.
I'm impressed with the research, with the fact that she bothers to respond to Foundation-l, and that there is a plan (even if ad hoc) in place.
Needless to say, I'm a fan of Sue.
Hear, hear!
wikimedia-l@lists.wikimedia.org