Wikimedia Foundation Audit Committee/2017-03-22

Audit Committee Meeting

March 22, 2017

9:00 - 10:30 PDT (16:00 - 17:30 UTC)

WMF San Francisco Headquarters

Attending in person:  Katherine Maher, Jaime Villagomez, Tony Le, Amy Vossbrinck    

Attending in person from KPMG:  Vince Passanisi, Valerie Ball

Attending remotely:  Maria Sefidari, Kelly Battles, Julian Singh, Michael Snow, Nataliia Tymkiv

Agenda

• Introductions
• Review 990 and 990 T
• Review progress of the 2017-18 Annual Plan
• Finance Department’s Plan for next year

Review Forms 990 and 990T

Vince Passanisi and Valerie Ball from KPMG presented the Form 990 to the Audit Committee.  The KPMG presentation began with an overview of the Form 990 and 990T with a note that these forms need to be available for public inspection.  The Form 990 consists of 12 parts and 15 schedules.  KPMG highlighted the relevant  parts of the 990 as described below and the associated reportable information. KPMG also noted that only 9 of the 15 schedules apply to WMF.

• Part I – Summary – an overview of the organization
• Part III – Mission Statement and Program Service Activities
• Part IV – Checklist of additional schedules
• Part V – Statements regarding other tax compliance requirements
• Part VI – Governance and Policies
• Part VII – Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent Contractors
• Parts VIII – XI – Financial Information
• Schedule A -  Public Charity Status and Public Support

WMF is in complete compliance with all Federal Tax Laws.

The heart of Form 990 covers governance, policies, and required disclosures.  WMF has all the policies in place except for the Document Retention Policy. This is in process and will be done by June 30, 2017.

KPMG described the process of determining reasonable compensation, including benefits and severance payments, for WMF’s Executive Director, other officers, and key employees.  It should include:

• Review and approval by independent persons
• Comparable compensation data for similarly qualified persons in functionally comparable positions at similarly situated organizations
• Deliberations and decisions need to be contemporaneously documented

Expenditures and other financial information are also reported in the 990.  Charity/non-profit watch agencies are very interested in these numbers.  They want to see at least 65% of the total expenditures  spent on program services as opposed to management and fundraising.  WMF spends 72% of its total expenditures on program services.

Additionally, KPMG provided updates on the IRS work plan for FY16 and FY17 and none will have any significant impact to the WMF.

The two representatives from KPMG left the meeting. 

Tony Le, Controller, requested an approval of the 990 by the Audit Committee so that it can be filed in April (deadline to file is May 15). Vote to approve was unanimous with the stipulation that the Board of Trustees will have an opportunity to review it before it is filed.

Discussion of the Foundation’s 2017-18 Annual Plan

The draft of the 2017- 2018 Annual Plan was presented by Jaime Villagomez to the Audit Committee.   The focus of the draft 2017 - 2018 Annual Plan remains the 2016 strategic priorities: Reach, Community and Knowledge.  We are working on our budgeting process to make it more agile.  

The programmatic priorities for the Annual Plan are focusing on cross departmental programs and operational improvements.

Cross Departmental Programs

• Community health - how we treat each other online
• New Readers - grow communities
• Privacy and Security
• Structure data - Wikimedia Commons integrated with Wikidata
• Movement Strategy
• Foundation Brand

Operational Improvements and Departmental Tuning

• Product and Technology with a focus on being very effective
• Process and  systems refinements in Finance & Administration and Talent & Culture

Funding the Endowment 

For the 2017- 2018 Annual Plan, a revised budget framework was created to expand and more completely describe the use of our overall resources - including operating expenses and the net assets (surplus).  The Foundation staff discussed the purpose, benefits and compliance requirements for the budget framework.  The budget framework for financial resources (including surplus) has been organized into three classification:

• Board Designated Funds:  Specific funds that are set aside from surpluses. It is a common practice for nonprofit Boards to designate funds for a special purposes (such as defining a  strategic organization shift, responding to unanticipated opportunities or funding a major, one-time event such as a organizational relocation).   This is considered a good and commonly utilized business practice.  There needs to be a clear designation for the surplus allocation and only transactions associated with the clear purpose can be funded by the designated funds.  There are no legal or tax implications to establishing this designation and the Board can amend any specific designation or designated funding amount.
• Operating Reserve:  General funds that are set aside to cover extraordinary risks which are unforecastable (possible unexpected shortfalls). Twelve months of operating spending is considered a good benchmark
• Operating Activities:  Funds that are required to run the Foundation’s programs; these are recurring expenses.

The Audit Committee engaged in a detailed discussion of the budget framework with a focus on the board designated funds classification.  The Audit Committee approved the Staff’s recommendation and reaffirmed future compliance with the principles of specific funding for a special board designation.

The Audit Committee was presented with a few different budgetary scenarios for revenue, operating spending, board designated funds, and the reserve.  This plan increases our focus and programmatic spending for 2017- 18 and looks to keep that spending above 70% of total spending.  The Annual Plan Budgets are in the process of being finalized with the Foundation’s department leaders.

On April 7th the draft Annual Plan will be posted for community consultation and Funds Dissemination Committee feedback - this step will be completed by May 19th.  Once community feedback has been received and evaluated, the Annual Plan will be revised, as appropriate.  The revised Annual Plan will be presented to the Audit Committee by the beginning of June for their recommendation to the full Board of Trustees.

Question: How might the new US Administration impact our programs and priorities; can we answer this definitively? Do we need to step in to  fill gaps, e.g. net neutrality, freedom issues, travel issues.  This will be addressed during the risks conversation at the upcoming Board meeting.

The Agenda for Wikimedia Conference Board Meeting in Berlin on March 30, 2017

Movement Strategy

Risk Assessment

2017-18 Annual Plan  - Programmatic priorities and preliminary budgetary information

Finance Department’s Plan for next year

The Finance staff presented an overview of their organizational priorities for fiscal 2017-2018.  The discussion was organized to focus on finance and administrative operational improvements, and community support and investment portfolio compliance.

Finance and administrative operational improvements:

• Enhance the clarity, quality and timeliness of financial reporting to all departments
• Reduce the monthly close period
• Improve predictability of projections so that unspent resources are used effectively

Community Finances Program:

This program is in process. We are supporting the Community Resources Team and movement affiliates with additional financial expertise.  This program will enhance the community’s ability to effectively use their resources.

Portfolio management:

We continue to invest the Foundation’s surplus in compliance with the Board approved Investment Policy Statement.

Respectfully submitted:  Amy Vossbrinck