Wikimedia Foundation Audit Committee/2017-09-27

Participating remote: Kelly Battles (WMF), James Heilman (WMF), Christophe Henner (WMF), Eileen Hershenov (WMF), Katherine Maher (WMF), Maria Sefidari (WFM), Julian Singh (WMF), Michael Snow (WMF), Nataliia Tymkiv(WMF), and Stephen Franco (US Trust) who joined at 9:00 am PDT.

The meeting began with thank yous to Maria Sefidari and Nataliia Tymkiv for their service on the Audit Committee and a welcome to Christophe Henner and James Heilman who are joining the Audit Committee.

Approval of Minutes from July 21, 2017 meeting

A motion to approve the minutes from the July 21, 2017 Audit Committee was made by Kelly, seconded by Maria, and unanimously approved.

Audit Review - KPMG

Presented by Sizhe Liu, Jeremy Peters, and James Womboldt

KPMG acts as an external public accounting firm. They are hired by the Audit Committee and offer an independent perspective of the WMF’s financial statements. They audit WMF’s financial statements to determine a fair presentation made in accordance with GAAP. They don’t examine all records, they look at what is material. They consider WMF’s internal controls but they don’t perform an audit of those controls. There are no matters related to internal controls that require the attention of the Audit Committee.

An Audit Plan was presented to the Audit Committee on July 21; there were no changes to that plan. KPMG did 3 weeks of field work in the WMF offices in San Francisco to create the review being presented today. The audit ran smoothly with strong collaboration by the WMF staff.

The areas of focus were: Accounting for contributions; Payroll and Procurement; Cash, cash equivalents, and restricted cash; Investments; Fixed assets; Net assets; Expenses; Commitments and contingencies; Financial statement disclosure; Management override of control (fraud risk or significant risk); Lease accounting; and Endowment contribution.

100% of the Foundation’s investments were confirmed and priced through independent pricing sources.

There were no instances of fraud or illegal acts; all information was properly disclosed

Examination of the endowment verified WMF’s contribution to the endowment but does not verify the endowment’s accounting which is independent of the Foundation.

There were no material weaknesses and no significant deficiencies. Kelly mentioned that significant deficiencies are common in audits (material weaknesses less so) but the Foundation’s audit had none.

Kelly congratulated the WMF Finance Team on a clean audit and moved to approve the audit as presented. Christophe seconded. The support to approve was unanimous. The Audit Committee also agreed that the opinion and no material weaknesses letter could be issued.

Sustainable Investment Portfolio - US Trust

Presented by Avi Cohen and Stephen Franco

The WMF Board of Trustees recently passed a resolution on environmental impact and sustainability saying, in part, “We believe that a long-term commitment to sustainability is an essential component of our work towards the Wikimedia mission and vision.” WMF recently sent a letter to the data centers that house the Foundation’s servers regarding sustainability and is looking to further address this issue by considering the building of an investment portfolio based on ESG (environmental, social, and governance) considerations.

The Audit Committee’s thoughts and comments are needed before we move forward with an investment in this type of portfolio.

Overview

Over the last 18 - 24 months investments in sustainable portfolios have increased 40% of those companies who have money to invest, are now interested in sustainable investments - up from 20% just 2 years ago. 80% of millennials believe that sustainable investments are important. 20 - 25% or all investments are in sustainable portfolios. It has been proven that these investments are of value and do not cause losses; diversity is the key to success. Companies who invest in sustainable portfolios have an advantage over those who don’t - doing good because it is good business. 85% of companies now report on sustainability issues as they relate to their business so it is possible to determine which companies are truly implementing sustainability practices.

Building the Portfolio

US Trust has spent a significant amount of time building their “S2I Environmental Stewardship & Sustainability Portfolio” and their “S2I Carbon Reserve Free Portfolio”.

They look for companies that show leadership in (ESG) issues. Financial performance is also important. They examine policies and performance; companies must be strong in both areas. They also look for companies that are developing solutions to environmental challenges. The worst performers are avoided as well as those companies who have ignored sustainability issues.

US Trust has a team of analysts as well as assistance from Merrill Lynch. They look for good stocks and avoid landmines - those stocks with extraordinary issues or risks. A computer program also assists in choosing the stocks; looking for ones that are within 1 - 2% of the market benchmark. There is no need to give up performance when investing in an ESG portfolio.

It is possible to exclude investments in certain areas if client wants that (e.g. investments in the fossil fuel sector) and then rebalance the portfolio.

Further considerations

The yield numbers are gross not net. Avi will confirm fees and provide current details. We have been in a bull market for last nine years. We haven’t experienced a down market yet, so we need to take that into consideration.

The minimum investment is $10 million. There is no plan to liquidate any of the Foundation’s current investments, this would be an additional investment. We do have funds that we can invest.

There was a discussion regarding the importance of maintaining sufficient cash in the Foundation’s operating account. It is possible to do this and still make the investment in an ESG portfolio.

All agreed that it made sense to proceed with further consideration of an ESG portfolio. Avi will put together a fuller recommendation to present to the Audit Committee.

WMF Financial Statement - Year ending June 30, 2017

WMF Audit 2016-17 Question and Answers

9:50 am the meeting adjourned

Note: Stephen Franco joined the meeting at 9:00 am

Eileen Hershenov left the meeting 9:22 am

Respectfully submitted, Amy Vossbrinck