2011-12 Fundraising and Funds Dissemination process/Recommendations 2

At the Wikimedia Foundation Board of Trustees request, Sue is working on a set of recommendation regarding fundraising and fund dissemination. As part of the process, she published her work on meta to get input and discussion from the community. Right after publishing, a lot of discussion started on the talk page. Now, we can see that there's possibility at hands :

Wikimedia Foundation becoming the only Wikimedia organisation able to fund raise on Wikimedia projects websites
All Wikimedia organisations able to fund raise on Wikimedia projects websites as long as they reach the accountability and transparency criterias to do so

The first recommendation is materialized by Sue's, but the second one is only to be seen in the discussion page or in emails. In order to ease the board work, these page goal is to materialze the second set of recommendations and arguments.

Purpose of this document

The purpose of this document is to collaboratively develop recommendations. Those recommendations are to be finalized in late January, so the Board can discuss it at the same time it's discussing Sue's.

When this document is completed, it will contain recommendations for the Board of Trustees crafted by the community.

The bigger context: future of Wikimedia movement entities & tie-in with Movement Roles

To be rewritten.

Recommendations: Fundraising

Recommendation #1: All donations received from visitors to sites operated by the Wikimedia Foundation should be received and processed by accountable and transparent Wikimedia organization

This recommendation is stating the actual situation. In 2011, Wikimedia Foundation Board of Trustees issued a letter saying that accountability and transparency were of the utmost importance. Even though the timing was bad, in the following weeks, most of the chapters representatives approved that fundrasing chapters had to be accountable and transparent. It ended in having, in 2012, 5 Wikimedia Organization able to fundraise:

Wikimedia Foundation
Wikimedia France
Wikimedia Germany
Wikimedia United Kingdom
Wikimedia Switzerland

Those five organizations have been fundraising for years and have improved efficiency, accountability and transparency thorough the years. As the 5 organization have gathered experience and invested money in order to improve their fundraising capabilities, it is important to keep on building those investment and experience to develop Wikimedia fundraising capacities. The fundraiser agreement with Wikimedia Nederland was not continued for 2011-2012, but it had been a payment processor successfully for the three previous years. Early numbers of the 2011 fundraising campaign indicate that results in Euro in The Netherlands are lower than the previous year, making it the only geography that has a lower yield in the top 10 countries with the most donations.

Rationale: On balance, the benefits of centralized payment processing by the Wikimedia Foundation are mainly short term benefits. A mix models allows the Wikimedia Movement to develop its fundraising capacities in many countries, and allows to create and develop a long term relationship with donors.

As Sue said on her blog last June : "Conventional fundraising is inherently oppositional and makes the donor feel bad not good. A situation is dire, your help is urgently required, we will hassle and shame you until you give. That kind of fundraising works, but it doesn’t create a very enjoyable experience for the donor. Nobody opens a fundraising appeal in a spirit of joy and curiosity."

We can't handwrite, or have kids doing it, to every single of our donors. but we can inform them of events and actions done localy. And this is what chapters are awesome at: local. If Wikimedia Foundation is fundraising for the whole world, the relationship with donors could not be localized. Chapters can. Even so we're not there yet (any Wikimedia Organization) we're getting there.

Having chapters fundraise allows us to create a true and sustainable relationship with our donors.

Arguments for and against centralized payment processing by the Wikimedia Foundation

1) TRANSPARENCY. All Wikimedia fundraising activities need to be truthful with prospective donors. We need to tell people what we intend to use their money for, and we need to report in a timely fashion on how it was actually spent. The Wikimedia movement's experience thus far tells us that in a decentralized payment processing model, it is more difficult to be transparent with donors. Transparency is easier and simpler using a centralized payment processing model.

During the annual fundraiser, Wikimedia Foundation create banners and appeals that are reused by the Wikimedia chapters. Though Wikimedia Foundation international banners has been used by the chapters, the 4 fundraising chapters have dedicated time to localize and create new banners. Those banners allowed to fundraise on both an international and local platforms.

The 2011 annual fundraising campaign, showed us that fundraising chapters were develop banners and appeals that were as effective as Wikimedia Foundation ones.

The mix model seems to be the solution that best develop on the long run our fundraising capabilities without jeopardizing our needs for transparency and accountability.

2) EFFECTIVENESS (MAXIMIZING REVENUES). Chapters are effective fundraisers. If we compare what can be, countries where funds at been raised two years in row by the same organisation, here is what we get for the 12 countries that we got the most money from (excluding countries where chapters fundraised in 2010 and WMF did in 2011) :

Country	Fundraising organisation	Growth
Germany	WM DE	59%
United Kingdom	WM UK	?%
France	WM FR	84%
Switzerland	WM CH	46%
United States	WMF	42%
Canada	WMF	46%
Japan	WMF	44%
Spain	WMF	32%
India	WMF	88%
Brazil	WMF	67%
Norway	WMF	62%
Belgium	WMF	18%
Denmark	WMF	48%

So, chapters performed, at least, as well as Wikimedia Foundation and often better. Two chapters, Wikimedia France and Wikimedia Germany, outperformed the 30-40% growth in the 215 countries in which the Wikimedia Foundation payment-processed both years.

This suggests that Wikimedia Chapters will, in general, be a much more effective payment processor than Wikimedia Foundation once they get the experience, process and structure to handle the fundraising. We also know for fact that tax deductibility is a strong asset in fundraising. In France 58% of the donors explicitly asked for tax deductibility. Without the tax deductibility we can expect that those donors would have either not donated or less. It also is a fact that chapters have a higher average donation amount than Wikimedia Foundation.

3) EFFICIENCY. The Wikimedia movement aims to raise the maximum possible amount of money from donors while minimizing administrative costs as much as possible, in order to reserve the largest amount of money possible for programmatic activities. Experience tells us that for chapters to payment process during the annual campaign is needlessly expensive, because it duplicates work already being done by the Wikimedia Foundation and services used by the Wikimedia Foundation such as Global Collect.

Originally, some people felt that chapters acting as payment processors for the annual campaign might be cost-effective, particularly to the extent the work could be done by volunteers. We know now that isn’t true. Volunteers simply don’t have time to create and maintain appropriate financial, technical, administrative, legal and communications systems and processes supporting the annual campaign. Chapters that tried to do that work in past years using volunteers found themselves unable to do the necessary work [1] on time, which exposed the movement to unacceptable risk and resulted in many payment processing chapters deciding to incur expenses such as the hiring of staff and engagement of third-party payment processor companies. These are unnecessary additional costs, given that the Wikimedia Foundation is already creating and maintaining appropriate financial, technical, administrative, legal and communications systems and processes supporting the annual campaign. Further, centralized payment processing enables economies of scale in the relationship with third party companies such as Global Collect and PayPal, reducing costs for collection of payments and enabling better bulk processing rates, more-favourable contractual terms, and overall better relationship management and support.

[1] These systems and processes include: developing a solid understanding of the laws regulating fundraising activities and ensuring compliance with those laws; creation of, and adherence to, policies such as gift policies and donor privacy policies; creation of a website for donors as well as implementation of an online payment system and a donor database; maintenance of site uptime during the campaign so donations are not lost; creation of systems for privacy safeguards, fraud protections and security measures preventing data theft and phishing; creation of systems for answering donors inquiries and processing refunds; creation of systems for thanking and sending receipts; creation of systems for managing payment subscriptions; creation of annual plans and annual reports; creation of marketing materials explaining what the donations will be used for and reporting back on how they were used; creation of financial accounting procedures, controls and auditing practices sufficient to ensure adherence to appropriate standards and all relevant laws and regulations, and purchase of insurance portfolios to manage potential risks.

4) EASY TRANSFER OF FUNDS INTERNATIONALLY. This issue has only been looked through one solution "A transferring $X to B". But they're many other ways to have finance to flow within our movement. Wikimedia Chapters have, for years, always participated in the expense of the smaller chapters to go to international events. In 2011, Wikimedia France and Wikimedia Germany have financially supported foreign local projects. If that money did not go to Wikimedia Foundation, it went to international projects and therefore lowered the money spent by Wikimedia Foundation in grants.

The mix system also helps developing the "movement" as all the organizations are helping each other instead of Wikimedia Foundation providing for everyone.

5) ROBUST CONTROLS. Mix fundraising structures increase fraud risks but lessen the outcomes it anything happen. If Wikimedia Foundation is one and only organization raising money for the movement. If anything happen (fraud, legal issue, etc.) all our eggs are in the same basket.

Having a mixed structure ensures that a single failure will not jeopardize the whole movement.

On the other hand, as said before, only the Wikimedia organizations meeting the accountability criterias are allowed to fundraise thus allowing us to manage the risks.

Laws of probability: Sue's argument : "Let’s say for the sake of argument that each organization processing payments in the annual campaign has a 1% chance of experiencing fraud. This means that centralized payment processing, with one payment processor, has a 1% chance of experiencing fraud. The probability of fraud rises with each additional payment processor: with two it is 1.99%, with three it is 2.97%, with ten it is 9.56%, with thirty it is 26.03% and with fifty it is 39.5%. This is important because the reputations of payment processors are linked, because they are all processing payments for the same campaign. If one entity experiences fraud or malfeasance, everybody's reputation will be damaged." Which is true but, having only Wikimedia Foundation fundraising means having 1% chance of experiencing fraud, it also means 1% chance of jeopardizing the whole movement. Where as with ten chapters fundraising it means 9.56% of damaging the movement. (On a side note, and I think this is also true for Sue's argument, the percentage are given as examples and are not real figures).

6) MINIMIZING LEGAL EXPOSURE. Per the previous argument. Better not to have all the eggs in the same basket.

7) CAPACITY BUILDING. Fundraising has, and is, making the chapters to develop their capacities. Having to raise their own money forces chapters to dive in and get better and better. It makes them grow in experience and capacity. All chapters are not meant to fundraise, but having said that it does not mean that no chapter should fundraise.

Also, preventing chapters to fundraise online would "force" them to use classic fundraising techniques (phone calls/emailing/street fundraising) that would, in my opinion, lower the capacity of online fundraising.

8) MAJOR DONOR RELATIONS. This is a long term goal. Even though this is not significant enough right now, it is becoming more and more significant. A mix structure allows us to rely much more on local major donations than a centralized structure would. As we plan to be there for decades, it might be worth to keep in mind our long term goals too.

9) RELATIONSHIPS. Whether or not a chapter is approved to payment-process during the annual campaign has been a source on ongoing stress and tension in the relationship between the Wikimedia organizations. The main source of those tensions are that nothing, regarding fundraising, has been set black on white. It has changed every single year for 4 years. Tensions comes from frustration. Setting for good a mix structure and the expectation Wikimedia organization have to meet in order to fundraise will erase most of the frustration.

As most chapters board members have said in the last weeks, the accountability is a real need that every chapter is ok to goes by, as long as the criteria are clearly stated and supported by strong arguments.

Recommendation #2: All movement entities should be free to fundraise outside of the wikis operated by the Wikimedia Foundation, in ways that are consistent with our mission and values.

Currently, some Wikimedia chapters raise money from a variety of sources including membership dues, other small donor fundraising activities, restricted and unrestricted grants from foundations, in-kind donations, major gifts, and conference fees.

Rationale: This is a good path for financial sustainability for the organization, supporting chapter independence from the Wikimedia Foundation, and supporting growth in revenue for the Wikimedia movement overall.

Recommendations: Funds Dissemination

Recommendation #3: The Wikimedia organizations should commit to significantly expanding grant-making activities to support decentralized work by movement members (including chapters, other groups, and individuals).

For 2 years now, Wikimedia Foundation has been giving grants to support other Wikimedia organizations projects. Last year, some chapters started to give to chapters grants for specific projects. The global amount of grant made to other organization is increasing every year. However, we're lacking a central place where applications can be submitted and funded by one, or many, Wikimedia organizations.

The purpose of this global grant-making program would be to support decentralized mission-advancing programmatic activities throughout the Wikimedia movement, building capacities of newer organization and developping the idea of all the organizations being part of a global movement. Entities eligible to receive grants would include Wikimedia chapters, and also Wikimedia-affiliated groups such as wiki-project members, student clubs, organizations such as Wikimedians in Kansai, Mutirões pelo Conhecimento Livre and Associació Amical Viquipèdia, Arbitration or other project governance committees or OTRS workers, and non-Wikimedia-affiliated but like-minded organizations such as Creative Commons, the Free Software Foundation, or OpenStreetMap. Entities would not need to be non-profit in order to receive a grant, nor would they need to be incorporated.

The grants programs would be clearly and widely promoted and would be designed to support applications by individuals and entities that are highly familiar with Wikimedia work and decision-making processes, as well as those who are less familiar. Each grant program would use standard assessment criteria that would be publicly available to applicants, so they can assess their qualifications before applying. Each process would strive to have clear, detailed application guidelines and simple and non-burdensome application and reporting processes, and to make timely decisions.

The Wikimedia movement grant program would expand and support decentralized, movement-wide program initiatives, which may come from individuals, Wikimedia chapters, affiliates, or aligned organizations.

Depending on the level of the grant, the grantees would have to meet different criterias and provide different document during and at the end of the project. This in order to be able to be accountable for every cent given through a grant and to accustom grantees with accountability. This would also allow newer chapter to build capacity to handle more and more money.

Three types of grants are, each with its own application process, timeline and deliverable.

Expanded grant-making to individual volunteers, to provide support for work that requires it, e.g. reimbursement of travel expenditures, lending or purchasing of equipment and literature, provision of t-shirts and event materials. The current participation grant program would be the model for this type of grant, although the program would need to be significantly scaled up to accommodate many more grants.
Restricted grants for specific program initiatives. These would typically be larger grants given to entities that are able to administer both the funds and the program. These entities might or might not be Wikimedia chapters.
Unrestricted operating funds. These grants would be typically given to fund all or part of a full year's operating budget of a registered entity. They would require close alignment of the entity's objectives with those of the Wikimedia Foundation, and will probably most frequently be given to Wikimedia chapter organizations and other recognized affiliates. A draft sketch of this program is currently open for discussion.

Recommendation #4: The Wikimedia Foundation Board of Trustees should commit to delegating movement-wide allocation of funds to a newly-formed movement body that would make decisions on the best use of funds within the movement.

Brainstorming area: Fundraising and Funds Dissemination/Funds allocation brainstorming

The Wikimedia movement needs a mechanism for making high-quality decisions about what activities, within the scope of the Wikimedia mission and strategy, should be funded. This is not work that should be done by people in a single country, or by people representing any narrow set of experiences or views: it should be done by a group that as much as possible mirrors the full diversity of the Wikimedia movement itself.

The only exclusion from this process should be the core operations of the Wikimedia Foundation including, but not limited to, the operation of the websites and related services, continued development and maintenance of the software and required core services of the Foundation (e.g., Fundraising, Finance, Legal, Communications). All other elements of the Wikimedia Foundation’s activities should be subject to the same process as other movement entities. (See the Q and A page for a definition of "core.")

Funding decisions would be made by a body (let’s call it the Funding Allocations Committee, for now) composed primarily of experienced Wikimedia community members. The Funds Allocation Committee (FAC) would be designed to be as diverse as possible, including representation from multiple languages, and representing multiple roles within the Wikimedia movement. It would have decision-making authority and would do its work in public. It would aim to have committee members who are responsive, approachable and consistent in their communications, and who are generally considered fair and competent. Their work would be supported by advisors with professional grant-making experience, and by payment processing organizations finance and administration staff. The purpose of the staff support would be to conduct due diligence ensuring money is used for the purpose given, but not to assess the overall quality or value of proposals.

The FAC would be a standing committee with a substantial workload. It would work in both annual and rolling planning cycles, depending on the nature of the funding decisions (overall allocations vs. specific grants/program approvals within those allocations). Being part of such a committee would be labour-intensive, with a workload comparable to or higher than being a member of a Wikimedia organization board. Accordingly, it would be important to develop processes like elections and/or systematic rolling searches, as well as aggressive pruning of membership for inactivity. It would not necessarily be entirely comprised of community members -- like the Board itself, it may benefit from additional perspectives, as well.

Therefore, we recommend the FAC to be compozed of :

1 Wikimedia Foundation Staff
1 Wikimedia Foundation Audit committee
4 Wikimedia organizations board member
3 Wikimedia community representatives

The members of this committee are nominated by the Wikimedia organizations board members for 2 years and renewed by half.

The committee is supported in his actions by a facilitator/secretary.

Transition from here to there

Setting in the stone the mix structure is the first step toward a sustainable fundraising and funds dissemination structure. What has been lacking for the past few years is criterias and rules. The lack of explicit and fixed criterias and rules led to have them changed every year, and some time twice a year. From this instability came a lot of frustration and tension creating a conflictual relationship between the Wikimedia organizations and mainly between Wikimedia Foundation and the Wikimedia Chapters.

This is the 7 step toward a sustainable fundraising and funds dissemination structure :

Wikimedia Foundation board resolution affirming the mix structure is the structure chosen for Wikimedia movement for the time to come
- 30 March
Creation of the Funds Allocation Committee
- 2nd April
Definition of the criterias making a Wikimedia organization accountable and transparent
- 7 May
Definition of the criterias for the different levels and types of grants
- 15 June
Audit of the fundraising Wikimedia Organizations regarding the accountability and transparency criterias
- 1st June
Audit of the fundraising Wikimedia Organizations regarding the accountability and transparency criterias and announcement of the 2012 fundraising organizations
- 3 September
Evaluation and adjustment of the 2013 fundraising organizations annual plan and budget
- 15 October

Questions from Phoebe Ayers

Scenario: All chapters aim to payment process, eventually

How can we minimize fighting and maximize trust?
- Having clear rules and cretarias, well known and stable will prevent fighting and maximize trust. What broke trust, generated tensions and ended in fighting is that the rules changed. A lot. And some times on really short notice.
How can we maximize efficiency and minimize administrative stuff, so we all can do program work?
- Communication is key. Today, we do communicate but we're not using the same definition for the same words, not the same indicators. We have to define a thesaurus that would have us all using the same words with the same meaning.
How do we take advantage of what we've got?
- This recommendation is capitalizing on the investment and experience of the past years. We do not start everything from scratch, we build above. In fact, this is very much like Wikipedia as we assess mistakes and correct them to have a better structure. Shifting the model would, basically, have us lose years of chapters experience and investment.
How do we do the right thing with donor money?
How do we steward the projects for the long-term future?
How do you pick which chapters payment process?
- Based on accountability and transparency criterias. Once the criterias are set, if they're smart, there's little room for discussion.
Who picks what chapters payment process?
- The FAC, so, in the end, peers. On that we move from a Wikimedia Foundation employee to a group. As there would be less room for personalization of the choices it would also minimize fighting and as it's a group of peers, trust should be maximize.
What are guidelines for payment processing?
- The same as the accountability criterias.
How much do they collect (e.g., to a budget, as much as possible, etc)?
- Based on budgets and annual plans.
1. If only to a budget, who reviews these budgets?
- The FAC
1. If as much as possible, how do you prevent extreme chapter & country disparity (i.e. rich vs poor)
- Every donation processing organization would have to give back a faire share to the movement.
How is funding distributed to chapter programs?
- Through the grant program.
How is funding distributed to Wikimedia core mission, i.e. funding the servers?
- Direct transfer from the chapters. As all the budget are reviewed by the FAC it would be easier to say how much should be distributed from the chapters to WMF.
how is funding distributed to non-core Wikimedia mission, i.e. editor decline? (all other questions about WMF, per above, also apply here)
- Either through grants or through donation processing organizations program
How is funding distributed to other groups, i.e. non chapter affiliated volunteers?
- Through grants
How are chapters that don't payment process funded?
- Through grants
Do chapters contribute to pooled grants?
- Yes.
How do you ensure:
1. donor privacy
  - In the accountability guidelines, part of it should be dedicated to donor privacy. ie: once a year, every donation processing chapter should have its database audited.
2. coordination with WMF fundraising team
  - Dedicated staff
3. timely reporting
  - Dedicated staff
4. Donors know who they are contributing to, why, and what that group does
  - Annual plans, after FAC approval, must be publicly available and easily accessible
5. accountability, i.e. no one is embezzling funds
  - Up to each chapter to set-up the appropriate fail-safe
6. accountability, i.e. money is being spent on what chapter says it is being spent on
  - Annual financial report
7. program effectiveness and alignment to mission -- i.e. why spend the money that way in the first place
  - All budget items are described in the annual plan.
How do you deal with transferring money internationally -- esp if laws preventing
- Up to every chapter to come out with the best solution regarding the transfer money
Who does localization? (i.e. who coordinates with translators etc)
- The chapters if they're fundraising or willing to fundraise in the coming month.
Does fundraising agreement equate to other exclusive agreements as well, or just fundraising?
Who reviews chapters?
1. How does this work for chapters that are very small or are in places with limited donation possibility
2. How does this work for chapters in places with extremely difficult or unfriendly laws
3. How are non-chapter groups/volunteers in those places funded?
  1. How is community input given to this?
4. At what point and who decides which chapters are ready to fundraise; what is the standard?
5. Who decides what new chapters there are (could be lucrative, under this model). Who reviews?

Appendix: Board Resolution

to come

Appendix: other appendix material

to come

A note on language

For many people in the Wikimedia movement, English is not their first language, and it can be exhausting to read long English-language texts. To those people: I am sorry this text will be so long. These are important issues, and I want to be as clear as possible. But I will try to also be as concise as possible, and to avoid colloquialisms. If there are aspects of this text that people want to propose be translated, or summarized-and-then-translated, please say that on the talk page.