I’ve been getting ready for the board meeting and Wikimania and have been struggling with a particularly thorny issue and thought I would use a blog post to start a conversation I hope to continue in Haifa.
Many groups have discussed this issue over the past few years, including the Audit Committee (which I chair), our independent auditors KPMG, the Movement Roles group, the Chapters who have been working closely on the fundraising agreement with the Foundation and Barry Newstead’s development team, and the Board (e.g. see our resolution on the importance of transparency in use of donor funds). But progress has been difficult because this is a hard issue.
Here’s some background. Our historical model for fundraising, developed in 2006, is that chapters who meet some basic criteria have the opportunity to automatically receive 50% of the fundraiser donations on wikipedia.org from within their country. In the year ending June 30, 2011, about $4.3 million net went directly to chapters, roughly 15% of the $29.5 million donated to the movement. Other chapters, and the rest of the movement, instead apply for project-specific grants that the Foundation helps administer.
In the five years since this approach was put in place, a lot has changed. We’ve grown from a half-dozen chapters in Europe to 34 chapters across six continents. Our collective fundraising capabilities have soared from $1.5 million a year to $30 million. We’ve created a robust, transparent grantmaking process and formed a Grant Advisory Committee with 16 community members half of whom live in the Global South. And finally, the movement has collectively developed and put in place a strategic plan that clearly outlines priorities for spending over the next few years.
The issue is whether our approach to distributing funds to chapters should change along with all the other things that have changed over the past five years. Here are a few key questions I’m asking myself:
- Is it right that 50% of rich country donations stay in those rich countries? 95+% of dollars donated to the Wikimedia movement come from Global North countries, so this results in a major skewing of how dollars are invested in the mission. Our strategic plan lays out a priority that we increase investment in the Global South, both in programs and in technologies like mobile. At first glance, the precedent that 50% of all rich country donations automatically stay in those rich countries is a direct contradiction to the thoughtful, nuanced priorities laid out in the strategic plan.
- How do we establish solid movement-wide financial controls to protect donor funds? How do we ensure transparency of the use of those funds? The Foundation needed four or five painful years before it had the financial controls, program activities, and maturity to handle large sums of money. Some of our chapters are getting hundreds of thousands of dollars within the first year or two of their organizational lives. Many are young organizations, without much operating history or experience managing money, budgets, or programs. The recent track record of reporting on activities, financial status, and spending of donor funds, and even of following basic regulatory requirements, is not where we’d all like it to be. We have seen chapters struggle, trying to quickly evolve controls and comply with local regulations, and figure out how to spend cash effectively in pursuit of the mission. This problem will only get more severe as the number of chapters continues to grow, and stretches even further the support infrastructure provided by ChapCom and Barry’s team. There are real risks of something bad happening (most likely inadvertent) with so much money flowing around orgs that don’t have good uses established for their funds.
- Who is ultimately responsible for stewarding donors’ contributions? We now have a large base of donors who support us, contributing based on a core set of messages and commitments like the strategic plan. The Wikimedia Foundation does have some special legal responsibilities (called fiduciary duties) to protect assets like donor funds, the reputation of the movement, and even the Wikipedia name. How should it carry out those duties when it comes to financial risk and donor transparency? Right now the Audit Committee serves in that role for 85% of our donor funds, but has no oversight authority over how chapters handle the funds they receive automatically thru the fundraiser.
- How do we address the above questions while maintaining the decentralization that has made our movement so great? This is one of the hardest questions. We must continue supporting any team or entity that consistently drives the mission forward, even when larger sums of money drive the requirement for financial controls and monitoring.
What do you think? How do we build the right model for the flow of money around our movement, given all these competing realities? Please add your comments below.