[Foundation-l] Wikimedia finances and the economy

[Sue Gardner]

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
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-- 
Sue Gardner
Executive Director
Wikimedia Foundation

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