Endowment:Spending Policy
Spending Policy
Purpose
The purpose of the Wikimedia Endowment (“Endowment”) is to act as a permanent safekeeping fund that can support in perpetuity the operations and activities of current and future Wikimedia projects.
The objectives of the Spending Policy for the Endowment are: to aid the Wikimedia Projects by sustainably distributing funding; to preserve the Endowment principal and sustain purchasing power into perpetuity; and to operationalize overall spending goals in conjunction with the Endowment’s Investment Policy.
The Spending Policy shall adhere to the principles of Uniform Prudent Management of Institutional Funds Act (“UPMIFA”). UPMIFA enables the Board, in the absence of specific donor instructions, to spend the Endowment funds in a flexible fashion given the uses, benefits, purposes, and duration for which the fund is established, even to the extent of spending from a fund that has fallen below its historic dollar value. Spending Rate The target spending rate for the Endowment is 4.0% of the ending market value [of the Endowment’s investment portfolio] in a given fiscal year. At no point will the spending rate exceed 4.0%. The Finance Committee has the ability to adjust the spending rate down to 2.5% and up to 4.0%.
Exceptions Process
In the case that market value and/or economic conditions materially change the performance of the Endowment’s investment portfolio, distributions may decrease to 2.5%. If management anticipates a material change in the spend rate above 4.0%, the Board directs management to consult the Finance Committee promptly. The recommendation to reduce or cease spending is at the discretion of the Finance Committee and requires approval of the Wikimedia Endowment Board.
Operations Budget
The Spending Policy is grounded in assumptions related to the operational needs of the Endowment. As such, the Policy spending rate is governed by budgetary needs of the organization as well as annual grantmaking goals. The Policy shall aim to avoid negative spend from the investment portfolio in market-down years by restricting grantmaking, as needed. For example, there may be years where budgetary needs are prioritized over grantmaking needs, and vice versa.
Restricted Gifts
In partnership with the Community and Grantmaking Committee, the Treasury and Finance teams shall monitor and report any gift restrictions which may impact the Spending Policy and the overall decision-making of the Finance Committee.
Policy Ownership
This policy has been approved by Wikimedia Endowment Board of Directors and is maintained by the Finance Committee in conjunction with the Treasury team at the Endowment.
Review Cycle
The Finance Committee shall review the Spending Policy on an annual basis, at a minimum. Modifications to the Spending Policy can be made following a recommendation by the Finance Committee, a review by the Governance Committee, and upon approval by the full Endowment Board. The Policy spending rate-range of 2.5%-4.0% as well as the general spending approach shall be reevaluated when the Endowment’s investment portfolio reaches $250M valuation.