[Foundation-l] Building up the reserves

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Gregory Kohs

2 Mar 2010 2 Mar '10

4:37 a.m.

The recent 6-month financial report indicates at the end of 2008, there was $6.67 million sitting in a savings account. At the end of 2009, it's $12.56 million. Do individual contributors and organizations who are donating to the Wikimedia Foundation realize that nearly $6 million of last year's funds were simply put into the bank? Do you think donors think this is an important mission, to build up the savings account? -- Gregory Kohs

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David Gerard

2 Mar 2 Mar

5:37 p.m.

On 2 March 2010 04:37, Gregory Kohs <thekohser(a)gmail.com> wrote:

...

Do you think donors think this is an important mission, to build up the savings account?

Yes. Getting out of living hand-to-mouth and building an actual ongoing reserve has been an express goal over the past few years. - d.

Anthony

6 p.m.

On Tue, Mar 2, 2010 at 12:37 PM, David Gerard <dgerard(a)gmail.com> wrote:

...

On 2 March 2010 04:37, Gregory Kohs <thekohser(a)gmail.com> wrote:

Do you think donors think this is an important mission, to build up the savings account?

Yes. Getting out of living hand-to-mouth and building an actual ongoing reserve has been an express goal over the past few years.

Yeah, IIRC it was one of the suggestions of the auditors a few years ago. How much would you say needs to be saved up before WMF is no longer "living hand-to-mouth"?

Bod Notbod

6:18 p.m.

On Tue, Mar 2, 2010 at 6:00 PM, Anthony <wikimail(a)inbox.org> wrote:

...

Yeah, IIRC it was one of the suggestions of the auditors a few years ago. How much would you say needs to be saved up before WMF is no longer "living hand-to-mouth"?

Very interesting question. Presumably it can be expressed as a percentage of yearly running costs? I would be curious to know of an answer to this. Anybody familiar with other non-profits in this regard?

effe iets anders

3 Mar 3 Mar

1:35 p.m.

I assume you do realize that this 12.5M is /after/ the fundraiser, hence including the huge amount of donations that has been raised? -- eia 2010/3/2 Gregory Kohs <thekohser(a)gmail.com>

...

Andrew Gray

8:53 p.m.

On 3 March 2010 13:35, effe iets anders <effeietsanders(a)gmail.com> wrote:

...

I assume you do realize that this 12.5M is /after/ the fundraiser, hence including the huge amount of donations that has been raised?

...as, indeed, was last December's glut. Looking at both mid-year and end-year reports, the cashflow status becomes clearer: Assets (cash) versus monthly running costs (estimated) mid-2007 - - - - - $1m end-2007 - - - - - $2.3m - - - - - $0.21m - - - - - 11 mos. mid-2008 - - - - - $3m - - - - - ($0.32m) - - - - - 9 mos. end-2008 - - - - - $6.7m - - - - - $0.43m - - - - - 15 mos. mid-2009 - - - - - $6.2m - - - - - ($0.54m) - - - - - 11 mos. end-2009 - - - - - $12.5m - - - - - $0.65m - - - - - 19 mos. Reserves jump dramatically each year-end report, but then idle until the next fundraiser - as running costs increase roughly linearly, though, the average number of months funding in reserve seesaws. I don't know what's considered a normal margin to have - I'd presume around a year or so is considered quite good - but hopefully someone more au fait with standard practice in the field could enlighten us. -- - Andrew Gray andrew.gray(a)dunelm.org.uk

Veronique Kessler

4 Mar 4 Mar

2:41 a.m.

Hi, The question of what is the right reserve amount is a common one. I've hear of ranges from 0 to 3 months to 3 years. I agree that one year is a good measure and that could be increased or decreased depending on a variety of circumstances both internal and external. Many non-profits may have a smaller than optimal reserve because they simply don't have more funds to keep in a reserve. We are quite fortunate to have the amount of reserves that we do. As we have operated over the last few years with a single main fundraiser, our revenue tends to peak over a 4 month period while we have expenses all year. Right after a fundraiser, we have more reserves than we do right before the fundraiser begins because we have months of the year where there is little revenue but expenses are about the same. Veronique Andrew Gray wrote:

...

On 3 March 2010 13:35, effe iets anders <effeietsanders(a)gmail.com> wrote:

I assume you do realize that this 12.5M is /after/ the fundraiser, hence including the huge amount of donations that has been raised?

Geoffrey Plourde

3:46 a.m.

Veronique, what would be the maximum we'd want to go with a reserve fund. I know that with Army Emergency Relief for example, they get dinged by Charity Navigator for having massive reserves of money. What do you think the maximum would be for Wikimedia? ________________________________ From: Veronique Kessler <vkessler(a)wikimedia.org> To: Wikimedia Foundation Mailing List <foundation-l(a)lists.wikimedia.org> Cc: effeietsanders(a)gmail.com Sent: Wed, March 3, 2010 6:41:36 PM Subject: Re: [Foundation-l] Building up the reserves Hi, The question of what is the right reserve amount is a common one. I've hear of ranges from 0 to 3 months to 3 years. I agree that one year is a good measure and that could be increased or decreased depending on a variety of circumstances both internal and external. Many non-profits may have a smaller than optimal reserve because they simply don't have more funds to keep in a reserve. We are quite fortunate to have the amount of reserves that we do. As we have operated over the last few years with a single main fundraiser, our revenue tends to peak over a 4 month period while we have expenses all year. Right after a fundraiser, we have more reserves than we do right before the fundraiser begins because we have months of the year where there is little revenue but expenses are about the same. Veronique Andrew Gray wrote:

...

On 3 March 2010 13:35, effe iets anders <effeietsanders(a)gmail.com> wrote:

I assume you do realize that this 12.5M is /after/ the fundraiser, hence including the huge amount of donations that has been raised?

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effe iets anders

3:41 p.m.

hm, wouldn't that be more a question that would suit more the board? It seems a rather strategic one. Lodewijk 2010/3/4 Geoffrey Plourde <geo.plrd(a)yahoo.com>

...

On 3 March 2010 13:35, effe iets anders <effeietsanders(a)gmail.com>

wrote:

I assume you do realize that this 12.5M is /after/ the fundraiser, hence including the huge amount of donations that has been raised?

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William Pietri

5:48 p.m.

On 03/03/2010 06:41 PM, Veronique Kessler wrote:

...

Thanks for the reply, Veronique. Do you have an opinion on building up an endowment to cover core operating costs? I know zero about non-profit finance, but it would be comforting to me to know that, even in worst-case scenarios, the servers would stay up and bits would continue to flow. Don't get me wrong: a full year of reserve seems great to me. But in my head Wikipedia is for the ages, and a financial model that matches that -- at least for the very basics -- would be reassuring. William

Andrew Gray

9:15 p.m.

On 3 March 2010 20:53, Andrew Gray <andrew.gray(a)dunelm.org.uk> wrote:

...

mid-2007 - - - - - $1m end-2007 - - - - - $2.3m - - - - - $0.21m - - - - - 11 mos. mid-2008 - - - - - $3m - - - - - ($0.32m) - - - - - 9 mos. end-2008 - - - - - $6.7m - - - - - $0.43m - - - - - 15 mos. mid-2009 - - - - - $6.2m - - - - - ($0.54m) - - - - - 11 mos. end-2009 - - - - - $12.5m - - - - - $0.65m - - - - - 19 mos.

It occurs to me this morning that there's a major problem with that last column - it's x months reserves *at the previous six month's averaged operating costs*. Costs are increasing all the time. (Fun fact: the WMF's operating costs seem to have increased linearly, at a steady $18ish-k/month, over the past few years) Adjusting for that, we end up with... hmm, something like end-2007 - - - - - 7 mos. mid-2008 - - - - - 6 mos. end-2008 - - - - - 11 mos. mid-2009 - - - - - 9 mos. end-2009 - - - - - 15 mos. Still pretty good (after the last two fundraisers), but not quite as comfortable as it originally looked - and, presumably, it gets a little tighter right before the fundraisers. That said, it suggests that purely from a "safe margin" perspective, we could safely lower the target amount for the late-2010 fundraiser - we did very well last year, after all. On the other hand, William's suggestion about treating this as the nucleus of an endowment rather than as an operating margin is an interesting one. Hrm. Further research, as they say... -- - Andrew Gray andrew.gray(a)dunelm.org.uk

Anthony

5 Mar 5 Mar

1:57 a.m.

On Thu, Mar 4, 2010 at 4:15 PM, Andrew Gray <andrew.gray(a)dunelm.org.uk>wrote;wrote:

...

presumably, it gets a little tighter right before the fundraisers.

In 2009 it was "tightest" end of september/beginning of october. In October and November, revenues exceeded expenses. That's a great chart (*) by the way. I'd be interested in seeing that for the entire life of the foundation. Combined with Andrew Gray's numbers it looks like WMF have for the most part been spending less than they've been taking in even when there isn't a fundraiser going on. (*) Revenue and Expense Actuals/Projections Against Plan, on the last page of the report.

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participants (9)

Andrew Gray
Anthony
Bod Notbod
David Gerard
effe iets anders
Geoffrey Plourde
Gregory Kohs
Veronique Kessler
William Pietri