Audit Committee/2014-07-28

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Audit Committee Meeting
Monday, July 28, 2014
Wikimedia Foundation Office/San Francisco
11:00 - 12:30 PDT - 18:00 - 19:30 GMT
Participating by  phone
Stu West, Sam Klein, Michael Snow, Matt Bisanz.
Participating in person
Garfield Byrd, Lila Tretikov, Tony Le, Amy Vossbrinck
Participating from KPMG
Nancy Rose and Karen Cordeiro
Potential new members all participating by phone
Abhijith Jayanthi, Ben Creasy, Florian Gerl

Introductions

The Audit Committee is looking for members who are active in the community, know how WMF and the community work and who may be interested in joining the committee. Stu welcomed Abhijith Jayanthi, Ben Creasy, Florian Gerl, each of whom have expressed an interest in possibly serving on the Audit Committee. Current members of the committee, support staff, the two representatives from KPMG and the three potential new members offered brief professional introductions.

Annual Wikimedia Foundation Audit

KPMG will provide audit services for the 2013­14 audit. A pre ­audit will be done during the second week of August and two weeks of sampling will begin on August 25 to be followed by offsite work at KPMG the week of September 8.

Nancy Rose and Karen Cordeiro from KPMG walked the committee through the “Wikimedia Foundation Audit Plan” prepared by KPMG, highlighting both KPMG and WMF responsibilities.

Nancy asked if the Audit Committee would like KPMG to focus on particular areas during the audit. The complexities regarding how fundraising is managed globally and the grant making process were both mentioned as being important due to the fact that both are very dynamic and constantly changing.

WMF audits performed by KPMG in the past have been “clean” ­ nothing material was found. The question was raised regarding the threshold amount that may raise a question regarding materiality. Should there be an adjustment of $60K or above, this issue would be raised with WMF management and brought to the Audit Committee. If WMF management decides that the adjustment made is not material, they write a letter
explaining the adjustment and that letter is included in the audit. An example was offered: If management makes the decision not to capitalize all of its smaller assets and that decision results in an amount that adds up to the threshold amount above $60K it is not considered an error, but rather a decision made by management. Management has the option to expense the items all in one year or spread them out. It is common for organizations and businesses to set a threshold for what they will capitalize.

The question was raised regarding whether or not there is a statistical analysis done of the audit. The answer was no; the audit opinion is the deliverable from KPMG but the Audit Committee can ask for more detail.

KPMG offered a 3 page document entitled “ Today's Top To­Do's for Not­For­Profit Audit Committees.”

Nancy Rose, Karen Cordeiro and Lila Tretikov left the meeting

OFAC (Office of Foreign Assessment Control) Positive Grants Protocol

The US Treasury maintains a list of organizations and individuals to which US grantee organizations cannot send money. This list also includes a short list of countries. The OFAC software makes it possible to enter the name of the potential grantee to determine if they are blocked from receiving funds. WMF banks also monitor this, but WMF has the responsibility for checking the OFAC list.

There are criminal and civil penalties for not complying with this requirement.

While the Chapters are legally separate entities from WMF, we encourage them comply with the OFAC rules. If they choose not to follow this request and WMF sees a risk factor, it is highlighted in the site visit report and may limit the Chapters’ ability to receive funds from WMF in the future.

There is a procedure in place to request permission from OFAC to do a specific transaction even if a particular country is flagged during an OFAC check. WMF is considering the possibility of offering a very small, restricted grant to a program in Iran. WMF continues to work with KPMG and a law firm to make sure we have a high degree of compliance when considering such a grant. To date, these requirements have been manageable by both WMF and the Chapters and have not put undue restrictions on the ability to offer grants to individuals or Chapters.

Update regarding RFP for Investment Advisor Services

WMF has an Audit Committee but we do not have a Finance and Investment Committee. So Garfield has informed the Audit Committee that a Request for Proposal (RFP) for investment advisors has been issued. These RFPs are due by the end of July, we are expecting approximately 6 proposals.

Once WMF has identified the appropriate investment advisors we will consider building a long-term reserve fund. The Foundation has always invested conservatively and that will not change. An endowment has been discussed but no final decisions have been made.

Review Chapter Site Visit Report Wikimedia Israel

KPMG assisted in the development of the protocol for chapter site visits. The visits provide an opportunity to evaluate both programmatic and financial progress or problems. Garfield Byrd, Chief of Finance and Administration, and Anasuya Sengupta, Senior Director of Grantmaking, along with staff as needed, conduct the visits. The visits began approximately 18 months ago and will typically be done every two to three years going forward. Ten chapter visits have been done to date. The most recent chapter visit to Israel indicated that the chapter had good internal controls, good accounting controls, employed external accountants and there were no concerns regarding fiscal management of the grant funding.

Discussion

Information was offered for those considering joining the Audit Committee: WMF does not have a separate finance committee so the Audit Committee also serves that function. Stu West, who is on the Board of Trustees, serves as the Audit Committee's connection with the Board.

The Audit Committee has three meetings a year: the pre­ audit meeting (typically in July), the post­ audit meeting (typically in September or October), and the review of the US Tax filing (typically in March).

Possible issues coming up for consideration by the Audit Committee: Does WMF want to establish an endowment? Does WMF need to look at a high level fundraising strategy? Does WMF want to consider a policy of raising just the amount of funds required for a given fiscal year and no more? There are merits to maintaining a reserve fund for unexpected emergencies or years when funds raised are lower than expected. In the past WMF has always been able to raise more than it needs to cover immediate expenses so there is now a reserve.

WMF over the last three years has had “clean” audits. Many systems have been put in place by Garfield and Tony Le, Controller, to make the audit process more streamlined. Expectations are high that WMF will have another clean audit this year.

Action Items

Stu West: Check in with Abhijith Jayanthi, Ben Creasy, Florian Gerl in a week or two to see if they want to join the Audit Committee.

Executive Session

The Committee held a brief executive session.

Respectfully submitted by Amy Vossbrinck

See also