[Foundation-l] Board letter about fundraising and chapters

[phoebe ayers]

All,
At the recent Wikimedia Foundation Board of Trustees meeting at Wikimania,
the Board approved sending the following letter regarding concerns with our
shared fundraising practice, and outlining principles for future fundraising
practices.

This  will also be posted at
http://meta.wikimedia.org/wiki/Fundraising_accountability for discussion.
Note: for those currently at Wikimania, please feel free to ask us questions
in person as well as on the list or on meta.

best,
Phoebe Ayers
(2011-12 Board Secretary)

-------------------------------------------------------

The Board of Trustees has recently reviewed our fundraising model and issues
related to the way donor funds are received. This review followed detailed
discussions among the Board's Audit Committee and with our outside auditors,
which highlighted issues about the level of financial controls over donor
funds that go directly to the chapters who act as payment processors. This
review focused on the model established last year, under which donors in
certain countries are exclusively directed to the local chapter during the
annual fundraiser. In our 2010-2011 year, about $4M net went directly to 12
chapters, representing roughly 15% of the total funds donated to the
movement.

There are several problems with this model, and with the current fundraising
situation. Some chapters have received large sums of money early in their
organizational lives, before they have built the capacity and financial
controls to safeguard and best use those resources in pursuit of the
mission. Some chapters have received many times their planned budget in a
single fundraiser. Additionally, in some countries, transferring funds
internationally has been limited by regulatory constraints.

There are also currently no movement-wide controls applied consistently to
all entities that receive donor funds. Some chapters, despite being
well-funded, have not reported in a timely way on their activities, their
financial status, and their use of donor funds, or have had difficulties
following the regulatory requirements of their countries.

This fundraising model has also contributed to significant resource
disparity among chapters. Some of the largest fundraising chapters have
revenue far greater than their stated need and capacity to spend, while
other chapters receive revenue only from Foundation grants or have almost no
revenue at all. The model also suggests that chapters are entitled to funds
proportional to the wealth of their regions, which amplifies the gap between
the Global North and South.

We need to improve our model to address these concerns and to improve the
distribution of donor funds across the Wikimedia movement.
*
==Design principles==*

Our design principles for improving the fundraising model are:

* We are deeply committed to decentralized pursuit of our mission and to
supporting the long-term sustainability of chapters and other movement
partners.

* Because of its role as operator of the websites, the Foundation has to be
satisfied that any organization directly receiving donor funds will treat
them with an appropriately high level of care and transparency.

* An organization can directly receive donor funds as a payment processor if
the following criteria are met:
** There is sufficient money raised in the geography to merit the logistical
effort.
** The organization offers tax deductibility or other incentives to local
donors.
** Regulatory issues about any international funds flows are fully resolved.
** The organization's current financial resources are not enough to fund
proposed program work.
** The Foundation can confidently assure donors to the chapter that their
donations will be safeguarded, that our movement's transparency principles
will be met, and that spending will be in line with our mission and with the
messages used to attract donors.
* The donation process should clearly disclose basic facts about the
organization receiving the donation.
* The Foundation is committed to a grants program to continue to provide
funds to those who can most effectively pursue our mission.

*==Next steps==*

These concerns need to be substantially addressed prior to the start of the
2011 fundraiser. In particular, we expect all parties to live up to current
fundraising agreements including full compliance with all reporting
deadlines.

We appreciate that some chapters have already started working on their
budgets assuming that they would participate as payment processors in the
2011 fundraiser, but may not be able to meet the new criteria outlined
above. The Foundation will work with these chapters to follow through on the
principles of the current Fundraising Agreement to provide the necessary
funds to continue their programmatic work and to meet their operational
needs.

The Foundation will significantly expand its grants program, and should work
closely with the Audit Committee to continue improving the controls and
disclosures around grants.