Committee:Audit Committee/2014-03-14

Audit Committee Meeting

Friday, March 14, 2014

Wikimedia Foundation Office/San Francisco

12:30 - 14:00 PDT - 19:30 - 21:00 UTC

Meeting was convened at 12:35 pm PDT by: Stu West

Attendees: Garfield Byrd, Stu West, (both in person) and Matt Bisanz, Sam Klein, and Michael Snow (all via conference call)

Also present: Sue Gardner, Tony Le, Amy Vossbrinck

Present from KPMG: Valerie Ball - Senior Manager, Development & Tax Exempt Organizations; Regina Prince - Senior Partner, Tax Exempt Organizations; Ana Akhtar - Senior Manager, Development and Exempt Organizations (DEO)

Approval of Minutes

The minutes from the September 19, 2013 meeting were previously reviewed and approved via email and were posted at Audit Committee Meeting Minutes September 19, 2013.

KPMG Review of Forms 990 and 990T

Valerie Ball and Regina Prince led a review of 12 pages of the 60 page document. The first page is a snapshot of the organization and the third page is a summation of the Foundation's program service accomplishments which provides information regarding how funds donated to the Foundation are utilized.

Additional relevant questions covered by the pages reviewed in the meeting included:

Do any trustees, employees or the family members of any trustees or employees associated with the organization engage in any excess benefit transactions? There is a five-year look back on this question. This is not an issue for the Wikimedia Foundation.
Are the voting members of the organization independent? Wikimedia Foundation members are 100% independent.
Are the board members for the organization compensated? Wikimedia Foundation Board Members volunteer their time.
Does the organization's board review the 990 before it is filed? The Wikimedia Foundation has the Audit Committee review the 990. Stu West chairs the Audit Committee and is a member of the Board of Trustees. Stu asked that the 990 be sent to the entire board this year.
Does the organization have a conflict of interest policy and how do they monitor the policy? The Wikimedia Foundation does have a written conflict of interest policy and Board Members sign a questionnaire regarding this each year.
How does the organization determine C-Level compensation and does it use comparable data to determine salaries? The Wikimedia Foundation does use comparable data and a review is done every 2 years.
Does the organization have a document and data retention policy? The Wikimedia Foundation is currently working on this policy, the Legal Department is reviewing it. One of the primary questions is what to do about the extensive amount of information on the wikis.
Does the organization make all of its tax exempt documents public? The Wikimedia Foundation does this.
Does the organization have any unrelated business income? The Wikimedia Foundation has a minimal amount because of the [Wikimedia Shop]. The Foundation notes this income on the 990T.
How does the organization qualify for tax exempt status? 96% of the support for the Wikimedia Foundation comes from the public which makes the Foundation a "public charity". The Foundation provides information but it does not lobby or advocate over the permitted threshold.

It was noted that Schedule G does not list all 50 states as locations where the Wikimedia Foundation may receive donations. We are registered in all of the states where we need to be registered. Tony Le will check with the Fundraising Department regarding the states that are not listed. (This item was checked and the Wikimedia Foundation does not need to be registered in all 50 states).

KPMG confirmed that there are no material changes in either rules or filing procedures for the upcoming 990 or 990T filings.

The Wikimedia Community tends to rely more on the Foundation website for information about our finances and programs rather than looking at our 990. Members of the general public looking for information about nonprofits frequently use both Charity Navigator (which gives the Wikimedia Foundation 4 stars out of 4 possible) and Guidestar.

Report on KPMG's review of existing Wikimedia Foundation Grant programs

Ana Akhtar led the review of KPMG's report "Review of Wikimedia Foundation's ("WMF") Grant-Making Process". The report was based on a one-day series of interviews with Wikimedia Foundation staff, followed by a review of documents and further discussion. Ana will check with the legal department at KPMG to see if this report can be made available to the general public.

Focus areas for the report were: Receipt and Management of Proposals and Funding Requests; Grantee Evaluation (Pre-funding); Grant Approval Process; Grant Agreements; Conflict of Interest Policies; Grantee Monitoring and Grantee Reporting.

Highlights from the report included:

The transparency of the Wikimedia Foundation grantmaking process is unique in that anyone can provide input regarding the grantmaking process, grantee selection, grantee activities, and reporting.
There is an oversight structure in place that is followed and is in compliance with tax laws.
Grants are impact driven and that impact is measured.
The financial reporting required is specific and detailed.
Grant agreements are clear and well written.
KPMG was surprised to find that an organization as young as the Wikimedia Foundation has such a strong and well organized grantmaking program in place.
KPMG suggested the Wikimedia Foundation could simplify its reporting requirements for grantees.

Suggestions from the KPMG report which were discussed by the Audit Committee:

The possibility of less intense and less frequent financial reporting requirements.
How can the Wikimedia Foundation structure the reporting to put a stronger emphasis on program results rather than financial data?
The possibility of a more proportional approach to grantee reporting: smaller grants can require less in-depth reporting than larger grants. The Wikimedia Foundation Board also encourages this approach.
The extension of this idea of proportional reporting to encompass the expected risk of a grant, based on its location or the historical work of its implementer: groups that have demonstrated their effectiveness could similarly require less in-depth reporting.
Site visits to the grantees by Finance and Grantmaking are important, particularly for building a baseline of trust. The current timing of those visits is appropriate. In the future more of an emphasis on evaluating program effectiveness during the visits could be valuable.
As grantees become trusted they could reduce the frequency of their financial reports.
Less experienced grantees could use help with the reporting requirements.
How can the Wikimedia Foundation support smaller grantees through larger, trusted grantees?
How do we measure success? Defining impact of a project is a universal challenge.

At 1:50 pm, KPMG representatives and Sue Gardner departed the meeting.

Review of Site Visits Report

The Audit Committee reviewed the site visit reports for Wikimedia Germany, Wikimedia India and the Center for Internet Society.

Review of Proposed Investment Policy

The Wikimedia Foundation "Proposed Investment Policy" has been reviewed by the Wikimedia Foundation Legal Department and by investment advisers Rockefeller and Co. Long-term reserves are defined as monies to be invested for a period of not less than 10 years. Garfield was thanked for moving forward with this. The next step will be a review of the entire policy and a vote by the Wikimedia Foundation Board of Trustees.

Stu West adjourned the meeting at 2:15 pm PDT.

There was a brief executive session.

Action Items

Garfield Byrd

to send the 990 and 990T out to the entire Wikimedia Foundation board per Stu West's request. (Completed)
to work with the Grantmaking Team to set up an independent internal (Wikimedia Foundation) quality review of the grantmaking process every 2 - 3 years.
to talk with Anasuya Sengupta regarding raising the possibility of a more proportional approach to grantee reporting at the FDC meeting in May and possibly at the Wikimedia Conference in April. Less structured reporting may also be considered for more stable grantees.
to follow up with Ana Akhtar from KPMG regarding the release of the KPMG report on the Wikimedia Foundation grantmaking process. (Completed)

Tony Le

to check with Fundraising to see if the Wikimedia Foundation is registered to receive donations in all 50 states. (Completed).

Amy Vossbrinck

to circulate minutes from this meeting to the Audit Committee for review. Once approved they are to be posted on the Wikimedia Foundation Audit Committee page. (Completed)

Audit Committee members

to present the Investment Policy to the Board for approval.