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Archive:2009-2010 Annual Plan Questions and Answers

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Financial Reports

What's an annual plan?
An annual plan is an organization's financial plan for the year. The annual plan for the Wikimedia Foundation was developed by the senior leadership of the organization with consultation throughout the organization. The Annual Plan for 2009-10 was approved by the Wikimedia Foundation Board in June, 2009.
The Annual Plan of the Wikimedia Foundation is an operating budget. This means that the plan reflects only the work that the Foundation does which is not part of restricted funding projects. So for example, in 2009-10, the Foundation will continue working on the Usability Project funded by the Stanton Foundation but none of those amounts are reflected in the 2009-10 Annual Plan.
In addition to reflecting only unrestricted spending, the operating budget is primarily a cash-basis budget so it doesn't include in-kind revenue and expenses nor does it include non-cash expenses such as depreciation. This is fairly common practice for budgeting purposes. Of course our annual audited financial statements do reflect restricted funding as well as non-cash revenue and expenses in order to conform to generally accepted accounting principles.
What's the upshot here; how has the organization and the annual plan changed from last year?
Last year's plan, the 2008-09 plan was the first one to reflect a full year's presence in San Francisco. It also was the first plan to include revenue targets and to call for investment in revenue generating staff. The revenue-generating team exceeded 2008-09 targets despite a difficult economy and spending was successfully reduced from plan in response to the economic downturn.
The 2009-10 plan reflects another full year in San Francisco; increased revenue targets and cautious expansion in technology and programmatic capacity. It also reflects the funding of our key initiative for 2009-10, the collaborative strategy development project.
What's the total budget in this year's annual plan and how does it compare with previous years?
The total operating budget for 2009-10 annual plan is $9.4 million. By contrast, the 2008-09 projected spending will be $5.3 million (against a plan of $5.9 million). In 2007-08, the Foundation spent (cash expenses excluding depreciation and in-kind expenses) $3.0 million; in 06-07, it spent $1.4 million; in 05-06 it spent $0.5 million; in 04-05 it spent $0.1 million. In general, spending has increased every year, as the projects and the organization have grown.
This is a considerable increase over the prior year. In these uncertain economic times, is this a good idea?
Our approach is one of cautious growth. Approximately $1.3 million of the increase over prior year plan relates to priority projects which are not ongoing increases to the organization's annual budget. The remaining $2.8 million of growth represents a 53% increase over the 2008-09 projected spending of $5.3 million.
What are the main increases in expenses?
There are three priority projects in the Program area which are the Strategy Plan, the Public Outreach Bookshelf and the Communications Campaign. The planned spending for these three projects combined is $1.3 million. The growth in the ongoing expenses of WMF include: nine permanent staff including six in program/tech; two in fundraising and one project manager; necessities such as more bandwidth and technical equipment to accommodate growing audiences on the site and to allow for new functionality; increases in staff and volunteer development; new allocations for awards and grants aimed at supporting volunteer initiatives and costs related to the office move.
The projected budget for the 2008-09 annual plan was $5.9 million: what were the actuals?
Fiscal year 2008-09 doesn't end until June 30, but we are projecting to spend $5.3 million in the operating budget (this does not include things like depreciation and spending on restricted grants). When the audited financial statements are available in Fall of 2009, the total expenses reflected there will be higher because they will reflect items such as depreciation which we don't include in plan or projections.
Why is projected spending so much lower than plan?
Spending was consciously curtailed from October 2008 to January 2009 in response to the unknown impact of the global economic crisis on the WMF annual fundraiser.
What's the total expected revenue in 2009-10, and how does it compare to previous years?
The 2009-10 plan posits revenue of $10.6 million, a 43% increase over projected revenue of $7.4 million for 2008-09. The 2009-10 plan assumes $7.5 million in individual donations, $1.75 million in foundation grants and $1.3 million from mission-friendly business partnerships and licensing agreements. In 2007-08, revenue was $5.1 million (excluding $2 million of Sloan funding which is ear-marked for 2008-09 and 2009-10); in 2006-07 it was $2.7 million; in 2005-06 it was $1.5 million; in 2004-05 it was $0.4 million and in 2003-04 it was $0.1 million.
Are those targets realistic?
We think so. We plan to achieve growth in individual donations with a better fundraising process which includes a redesign of the donation site, a marketing and communications campaign, and exploring alternative ways to give such as mobile giving and increasing corporate matching gifts. We expect modest growth in Major Gifts and Partnerships as those areas continue to mature and we expect business development revenues to grow fairly significantly due to the Orange deal which was signed on May 15, 2009 and one to two other anticipated licensing deals.
What's the target for the 2009-10 annual campaign?
We are planning to raise $6.5 million from community giving during the 2009-10 year, but have not set a specific target yet.
What will you do if you fall short overall?
We plan to spend $9.4 million, but our revenue targets total $10.6 million. That means we can absorb a revenue shortfall of $1.2 million without needing to cut planned spending. We have also earmarked an additional $500K of expenses as "stage-gate" spending which means they will only be spent after January 2010 and only if revenues-to-date are on target. In total, we'll be able to absorb a $1.7 million shortfall before tightening expenses.
What's the upshot here: how much bigger is this year's budget compared with last year's? Where are you spending more, and why?
Planned spending totals $9.4 million, which is an increase of $4.1 million over the 08-09 projected actuals.
The single biggest increase is $800K in technology spending for equipment purchases, connectivity and bandwidth usage to serve more readers and support new functionality, for three new technical positions and a project manager position enabling faster implementation of strategic software projects and volunteer-driven MediaWiki extensions, as well as faster problem fixes and improved operations monitoring and backup procedures. Specifically, we are planning to hire a Quality Assurance Software Engineer early in 2009-10, and an Operations Engineer and a Software Developer later in the fiscal year.
The second largest increase is a non-recurring spend of $700K for the collaborative strategy development project which is aimed at bringing together Wikimedians and external experts with facilitation support to create a five-year-strategic plan.
Other program spending increases of $700K include a pilot mission activity grants program for our chapter organizations and three program staff positions.
Another $400K of spending is related to the annualization of staff salaries and benefits for those existing staff who did not work a full year in 2008-09.
The Public Outreach Bookshelf project will increase spending by $350K (non-recurring) to provide a library of outreach materials.
Another $300K of spending represents additional investment in revenue generating activities such as costs to make the annual fundraiser more effective, additional fundraising fees which will result from raising more funds, increases in travel to reach out to potential donors and the addition of two fundraising positions.
$250K will be spent on communications campaign support aimed at driving the visibility and recognition of the Wikimedia Foundation as a charitable non-profit organization, bringing increased awareness and visibility to the mission of the Wikimedia movement, highlighting the quality achievements of the Wikimedia projects, and making a strong case for supporting the organization.
What is the collaborative strategy development project?
The collaborative strategy development project will start in July 2009, and run for roughly one year. Its purpose is to develop a strategic plan laying out a course of action for the Wikimedia movement, covering the next three to five years. The project will be designed to include input from a wide range of sources, including Wikimedia volunteers and supporters representing a diversity of geographies and projects, and also --in an effort to broaden our knowledge base and benefit from new ideas and information-- from parties who are currently not part of the Wikimedia community. Its core values will include transparency, participation and collaboration. The process will be led by the Executive Director on behalf of the Board of Trustees, and will require significant time and energy from everybody on the staff. The project team will include a Project Manager, Facilitator, and Research Analyst, and will include support from non-profit strategy development firm Bridgespan. It's our top priority for 2009-10.
What is the Public Outreach Bookshelf project?
The Public Outreach Bookshelf will be a repository of reference materials designed to 1) create awareness of the Wikimedia projects and provide basic information about them, 2) invite people to become contributors, and 3) provide information and training about how to participate. When complete, the bookshelf is intended to serve as a core set of instructional materials, to be translated, adapted and used for multiple purposes by Wikimedia chapters, individual volunteers, and partner organizations such as schools. The Head of Public Outreach will be the primary builder of the bookshelf. It will be built in 2009-10. The bookshelf project itself doesn't include translation or dissemination activities; it only includes the creation of the base set of materials. A project manager will be hired to run the Public Outreach Bookshelf project; that position will be advertised in July. The project will involve consultation with members of the editing community, and others.
What is the Communications Campaign?
Wikipedia is extremely popular and famous, and also frequently misunderstood. Because it is the number four most-popular website in the world, people commonly assume the organization behind it is a massive for-profit corporation employing tens of thousands of people, like Google or Yahoo. The Communications Campaign is a two-part public relations and marketing campaign designed to help people better understand the Wikimedia Foundation and its goals. Part one is a “credibility campaign” aimed at increasing general awareness and understanding of the Wikimedia Foundation as a unique global non-profit promoting free knowledge. Part two is a set of communications activities designed to support the annual giving campaign with specific messaging. Wikimedia's Head of Communications issued a public Request for Proposals for the Communications Campaign in spring 2009, and will select a firm to execute the work in summer 2009.
What is the new awards and grants program?
Last winter, the Wikimedia chapters were invited to submit proposals for funding, for work they wanted to get done in the furtherance of Wikimedia's overall mission and goals during the fiscal year 2009-10, but couldn't do without financial help. In July, that funding will be released. For now, this program is intended to support the chapters,and we hope to later be able to expand it to encompass individual volunteers as well.
How many people are you hiring and when?
We plan to hire nine permanent positions and four temporary positions. The permanent positions include three tech positions plus a project manager, three program positions and two development positions. The temporary positions include three for the strategy plan and one for the Public Outreach Bookshelf project.
Will all the jobs be advertised publicly?
Yes. Our general practice, with a few rare exceptions, is to advertise all jobs on the Wikimedia Foundation website. Normally we also advertise on Craigslist, and other job sites. We expect to advertise for all the positions we have opening up in the coming year.
Last year, the departmental breakdown included the Board, the Office of the Executive Director, Technology, Programs, Finance & Administration, Programs, Legal and Wikimania. This year, you show Governance, Technology, Other Programs, Fundraising and Management, Finance & Administration. Why the change?
The change reflects a departmental reporting that is more similar to the Form 990's Functional Expense Statement. The Functional Expense statement is a tool for measuring the relative effectiveness of an organization in fulfilling its mission; in other words, how much of its spending goes towards mission or program work versus fundraising costs and administrative costs. The 2008-09 Spending by Functional Area has been re-formatted to reflect the same assumptions as for 2009-10.
How are the numbers derived for purposes of the Functional Expense statement and what do they consist of?
The functional expense statement often reflects allocations of "shared" expenses such as office rent and may include allocations of staff salaries among the different areas if staff perform functions in more than one area. The categories required by the Form 990 are Program, Fundraising and General and Administrative. For purposes of the annual plan, we have further broken out the categories to reflect the spending in the area of Governance and to distinguish between Program spending which is Tech vs non-Tech (aka Other Program).
The process is very granular. We look at every staff person and allocate their salary and benefits based on how they spend their time. For example, certain staff may "work" only in one area (thus their salary and benefits are reflected 100% in that area) while others, such as the Executive Director and Deputy Director, perform program-related work, fundraising work and administrative work so their salaries are spread among those areas. Other positions which are allocated across areas (though not necessarily in the same ratios), include the CFOO, the CPO, the CTO, the Head of Business Development, the Office Manager and the Assistant to the Executive and Deputy Directors.
We then look at every expense category and determine which bucket(s) the expense belongs to. For example, we apply 100% of internet hosting to Tech and 100% of volunteer development costs to Other Program.
Overhead expenses (such as rent, utilities, office supplies) are allocated based on how salaries were allocated. For example, if the total of salaries allocated to Program represents 70% of all salary costs, then overhead costs are allocated 70% to Program as well.
So what are examples of differences in reporting from 2008-09 to 2009-10?
In the 2008-09 plan document, the departments we reported reflected the management structure and how things are organized for financial and accounting purposes. For example, last year, the Executive Director and Deputy Director where shown as a department but in 2009-10, they are allocated among several categories to reflect the way they actually spend their time. Also last year, the fundraising staff used to report to the CFOO, so they were counted as part of Administration; this year, they are a stand-alone category. Last year, we showed Wikimania as its own cost center whereas this year, it is reflected in Other Program.
What is included in Governance in the Annual Plan?
In 2008-09, Governance is projected to be $100K; in 2009-10, it is planned to be $200K. In 2009-10, Governance includes costs for the Board and the Advisory Board; including four Board meetings per year (travel and facilitation), other travel costs (e.g., conferences), and an allocation for board development.
What is included in Technology in the Annual Plan?
In 2008-09, Tech is projected to be $2.0 million; in 2009-10, it is planned to be $3.3 million. In 2009-10, Tech includes salaries for the tech staff, costs for technical contractors, bandwidth and hardware costs as well as an allocation of overhead costs such as rent, utilities, business insurance, etc.
What is included in the Other Programs budget in the Annual Plan?
In 2008-09, Other Programs is projected to be $1.9 million; in 2009-10, it is planned to be $3.9 million. In 2009-10, Other Program includes the salaries for the Chief Program Officer, the Head of Communications, the Head of Public Outreach, and the Volunteer Coordinator as well as new positions of Communications Officer, Partnerships Specialist and Volunteer Support Specialist as well as communication materials such as brochures and promotional products. Also included is an allocation of overhead costs such as rent, utilities, business insurance, etc. and allocations of the Executive and Deputy Directors salaries and an allocation of the salary of the General Counsel. Other Programs also includes the costs of the three non-recurring initiatives; the collaborative strategy development project, the Public Outreach Bookshelf and the Communications Campaign.
What is included in the Fundraising budget in the Annual Plan?
In 2008-09, Fundraising is projected to be $600K; in 2009-10, it is planned to be $1.1 million. In 2009-10, Fundraising includes the salaries for the fundraising staff (Community Gifts, Major Gifts and Partnerships/Foundations), design costs related to the annual fundraiser, Paypal fees related to donations, fundraising expenses as well as an allocation of the Executive and Deputy Directors salaries and allocations of overhead costs.
What is included in the Management, Finance & Administration budget in the Annual Plan?
In 2008-09, it is projected to be $700K; in 2009-10, it is planned to be $900K. In 2009-10, Management, Finance & Administration includes the majority of the salary for the Chief Financial and Operating Officer, the Accounting Manager, the Office Manager and IT Support and allocations of the salaries of the Executive Director, Deputy Director, the CPO, the CTO, the General Counsel and the Head of Business Development. It also includes allocations of general operating expenses such as rent and other facilities costs (including the office move), some staff development and staff meeting expenses and the fees for the annual audit.