2015-2016 Audit Questions and Answers

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Wikimedia Foundation Audit Report - FY15-16.pdf

Overview

What’s the purpose of this FAQ?

This FAQ provides a general overview of the Foundation’s FY 2015-16 audited financial statements and additional details about areas that have generated many inquiries in the past. Detailed information available in the footnotes to the financial statements is generally not repeated in the FAQ. The financial statement footnotes are an integral part of the financial statements and should be read in their entirety; particularly the first footnote, which contains descriptive information such as an explanation of what is contained in particular lines of the Balance Sheets and Statements of Activities.

What are financial statements for?

Financial statements provide an overview of basic information about an organization's financial position,  its overall financial health. Normally, financial statements are read by a number of different audiences, including the management of the organization, board members, donors, and others.

What do these statements represent?

The audited financial statements of the Wikimedia Foundation, covering the time period from July 1, 2015 to June 30, 2016. They were prepared by the accounting staff of the Wikimedia Foundation, and our audit firm, KPMG, certified that they meet the requirements of the U.S. GAAP (Generally Accepted Accounting Principles). These audited statements were given to the Wikimedia Foundation Audit Committee -- a board subcommittee -- which has approved them, and to the Wikimedia Foundation Board of Trustees for their review.

When will next year's audited financial statements be published?

Next year's audited financial statements will be released in October 2017.

Will the Wikimedia Foundation release interim financial statements?

We release interim statements for the mid-year period between the annual audits. Our next statements will be basic, unaudited, mid-year financial statements covering the period from July 1, 2016 – December, 31, 2016. These will be released by the end of February 2017.

When will the 2015-16 Form 990 be published?

We will soon begin working on the Form 990 for 2015-16. It should be completed, approved by the Audit Committee, and published in May 2017.

Who audits the Wikimedia Foundation's financial statements?

KPMG is the Wikimedia Foundation's audit firm.

Key highlights

What’s the overall takeaway?

Our auditors, KPMG, noted there were no issues with the accounting of our financial records across donation revenue, payroll, payables, processed payments, grants and fixed assets. There are also no deficiencies or weaknesses of significant importance in the Foundation’s processes, which support our financial transactions.

The Wikimedia Foundation’s financial position is healthy as of June 30, 2016. Our cash and investment balances increased from the prior year due to better fundraising activity than planned.

Refer to the Fundraising Report for more details on our FY 15-16 fundraising activity.

Our overall increase in operating expenses from FY 14-15 is consistent with the resources requirement outlined in the FY 15-16 Annual Plan. The increase is primarily in Salaries and Wages and Awards and Grants. The total Awards and Grants is significantly higher than Plan due to the $5M irrevocable gift provided to the Tides Foundation to fund the Wikimedia Endowment.

Refer to the following link for more details on the Wikimedia Endowment - https://15.wikipedia.org/endowment.html

Wikipedia and the many other Wikimedia projects are created by volunteers. How do they fit into the report?

Under U.S. GAAP, general volunteer activity is not reflected in a non-profit's financial statements. As a result, we do not attempt to quantify the value of volunteer contributions or include it as an in-kind donation of services.

This is in no way intended to diminish the significance of the volunteers' contributions. The Wikimedia Foundation projects wouldn't exist without the volunteers around the globe and we value their contribution enormously.

What are the Wikimedia Foundation’s other sources of revenue?

The vast majority of the Foundation’s revenue comes from individual donations. Every year, more than one million people from around the world support the Wikimedia projects, mostly in the form of small, individual contributions. We also receive gifts from corporations and foundations, interest and dividends on investments, and “other income,” including revenue from merchandise sales and sublease of unused office space. The sublease income only applies to FY 14-15 financials as the lease expired in December 2014 and the Foundation offices now occupy the space.

Why is the Wikimedia Foundation increasing its cash and investment balance?

The Wikimedia Foundation’s goal is to ensure we have an appropriate amount of available operating cash. As a non-profit it is prudent to ensure that we have sufficient cash funds in the event that unforeseen opportunities arise, or an external or internal event limits our ability to raise funds. This is important for stability and the overall financial health of the organization.

There is no general guideline on what amount of cash availability is appropriate for a non-profit; different non-profits maintain different levels of available operating cash depending on their age, maturity, and mission. The cash and investment balance of the Wikimedia Foundation on June 30, 2016 represents a little more than one year of operating funds, based on our Fiscal Year 2016-17 Annual Plan; we believe the amount is appropriate for a growing non-profit of our size and age. Our goal is to maintain at least one year of operating funds so that we’re able to sufficiently support our operations if we are unable to raise our budget through our usual fundraising activity.

What is the Wikimedia Foundation’s approach to investment?

Our investment philosophy favors preservation of capital and liquidity over higher yields, which come with more risk.

Terms and Definitions

What is "in-kind service revenue”?

“In-kind service revenue” includes goods and services that the Wikimedia Foundation would normally pay for, but have been donated to us at no charge, such as bandwidth and hosting services and pro-bono legal services. Further detail is available in the Footnotes to the Financial Statements under Non-cash Contributions (Note 1.(j)).

What is “other income, net”?

"Other income, net" for the Foundation consists primarily of revenue from merchandise sales, and rental income from the sublease of office space not currently used by the Foundation (the sublease income only applies to FY 14-15).

What is "investment income, net"?

“Investment income, net” is primarily interest and dividends earned on the Wikimedia Foundation's cash and investment portfolio. During this audit period, some of the Foundation's cash was invested in certificates of deposit, mortgage backed securities, U.S. government and agency securities, municipal bonds, corporate bonds, stocks and mutual funds.

What are "other operating expenses"?

“Other operating expenses” include expenses for facilities such as rent and office and non-office supplies, insurance, annual All Hands gathering, recruiting, staff development, and personal property taxes.

What is the “functional allocation of expenses”?

The functional expense statement is created to break out the purpose of spending -- how much an organization spends on program activities that further the mission, versus administrative support and fundraising activities. Expenses are reviewed and allocated among three categories: Programs, General and Administrative Support, and Fundraising.

What are “Programs” expenses?

The "Programs" category includes all the work done by the Wikimedia Foundation that directly supports the Wikimedia mission.  For example, it includes all technology spending with the exception of spending supporting the office (e.g., office equipment). It includes, for example, servers, bandwidth and the salaries of the technical staff.

What are “General and Administrative” expenses?

The "General and Administrative" category includes all costs for business insurance, staff recruitment expenses, and the salaries and expenses of the Human Resources, partially Legal, Administrative, and Finance staff, as well as an allocation for general office expenses such as rent.

What are “Fundraising” expenses?

The "Fundraising" category includes all spending associated with fundraising activities. For example, it includes the salaries of the Fundraising staff, expenses related to the online fundraiser (e.g., PayPal and Global Collect fees), and all fundraising-related travel and conference costs.