A response to Stu West


Much has been made of a recent blog post by the Wikimedia Foundation’s Stu West regarding the financial model of the Wikimedian movement, and the question of how the movement as a whole can ensure that money we collect from donors is properly accounted for and used.  That blog post has generated quite a bit of comment, including lengthy replies from Sebastian Moleski, Phoebe Ayers, Florence Devouard and Delphine Menard.  Having this discussion is a good thing, and I hope that this post can add some points onto all of the excellent commentary and analysis that has already taken place.

I’m going to concentrate on Stu’s first question, because it’s the one that I think has the most relevance to my own position as the Treasurer of Wikimedia Australia.  I must point out at this point that these views are my own, and not official positions of my chapter.

Stu West sez: “Is it right that 50% of rich country donations stay in those rich countries?”

As others have pointed out, this is a rather misleading statistic and does not reflect the current reality of how money is distributed around the movement.  Official statistics on exactly how much was raised and who raised it is not easy to come by on the Wikimedia Foundation’s website.  Indeed, there isn’t even any mention as far as I can see in the Annual Report that a lot of the legwork (receipting donations, managing enquiries, and the like) is done by chapters and not by the foundation itself.  The closest official, public statistic I can find is this one from the 2010/11 Financial Plan Q&A site:

“The 2010-11 plan assumes $16.5 million in individual donations (including $0.5 million share from chapters)”

While this is a plan figure, I don’t think it’s totally unrealistic, since a very large portion of the WMF small donor funding comes from the United States, where they get a 100% share of the net donations.  Assuming an exact 50/50 split between money remitted to the foundation and what the chapter gets to keep, we can therefore conclude that chapters end up with just over 3% of the total funding raised.  In reality it’s not a 50/50 split and indeed for the 2010/11 fundraiser, Wikimedia Australia ended up with 54.5% of the money raised after all fees and concessions had been taken into account.  I assume this is a rather typical figure, but for the sake of argument let us be very generous and assume that 5% of the total funds raised end up in the bank accounts of chapters rather than the WMF account.

As astute readers will have noticed, 5% is a lot less than 50%!  So what essentially happens is that 95% of the total money is held by the WMF, who can then go and spend the money anywhere they wish.  A lot of that money needs to be spent inside the US, on things like professional staff (lawyers, techs, accountants, etc), but the programme work component, according to Page 20 of the annual plan is 77%.  So, even making the assumption that none of the money going to “rich country” chapters is going to developing countries (a flawed assumption that I will get to later), over 81% of money raised is controlled by the WMF and available for investment into the so-called “global south”.

The practical effect of this split is that WMF could spend 50% of the total revenue by the movement on the whole in the developing world, and there would even then still be 31% free in WMF hands for projects and programmes in the developed world, and that’s even without dipping into the WMF’s operational funds or chapter revenues.  The following graph shows how the breakdown would work in the event that this was to happen:

Final Destination for Fundraising Revenue

There are a number of issues even with the above split.  For instance, the split between developed and developing countries (or, as the foundation likes to call them, ‘global north’ and ‘global south’ countries) is often not clear.   For instance, Wikimedia Hungary is one of the chapters who has been involved in fundraising.  While not amongst the poorest countries in the world, it’s HDI is not in the league of the USA, Australia or the Nordic countries, and it’s behind several other ex-communist Eastern European countries.  It is not listed as one of the “Global North” countries in our article on the topic.  Should the money raised and spent inside Hungary by its chapter be considered money spent in a “rich” country?  I would say “No”.

Another issue is that “rich” country chapters are often involved in projects and programmes in developing countries.  The most obvious manifestation of this is where chapters in rich countries provide financial and technical assistance to chapters in developing countries.  For instance, Wikimedia Australia paid for representatives of Wikimedia Indonesia to attend both the chapters’ meeting in Berlin earlier this year, as well as for representatives of the Indonesian chapter to attend events such as the Australian Metadata conference to help them build capacity in their own countries.  Other smaller chapters, including those in developing regions, have also benefitted from arrangements like this.

However, the great irony in this discussion is that events have already moved on from the situation that Stu has described.  For instance, that 50% figure is nowhere to be found in the current fundraising agreements between chapters and the foundation.  Chapters must now submit a budget to the WMF, and are allowed to fundraise up to that amount (of course, they are also allowed to seek additional revenue sources beyond what they fundraise through WMF).  So, only as much money will be staying in the chapter as they have a budget for.  This would seem to be a nice, neat solution to the “problem”.

This post is getting long, so I’ll round things out by saying that I’m disappointed that this came out of the blue from a member of the WMF Board of Trustees.  Many chapters are currently engaged in strategic planning activities, and it is difficult for chapters to have the confidence to develop long-term plans when we have trustees (or senior employees like Sue Gardner, who brought up much the same question a few months ago) openly musing on tinkering with chapter’s main sources of income.


3 Responses to “A response to Stu West”

  1. Hi Craig. Thanks for your take on this. I’d be interested in what solutions (and hence what answers to Stu’s questions) you’d actually envisage for the future coordination of fundraising within Wikimedia. Especially the stewarding of donations. Thanks.

    • 2 Craig

      Solutions? That’s the hard bit!

      To my mind, and sticking to Stu’s first question, a lot of the issues are blown out of proportion, simply because of the relatively miniscule proportion of money that is ending up in chapter coffers. If the foundation wants to spend 50% or more of its funding in developing countries, it can do so, and there is still plenty of money left over for everyone else.

      Secondly, chapters can do a lot better at actually explaining where the money that they’re raising is going to. As I said before, WMAU has spent a significant amount of money in developing countries over the past financial year.

      Thirdly, a lot of the solution already has been implemented via the new fundraising agreements. While they’re not perfect, I think they go a long way towards chapters actually have a plan for how they’re going to spend that money, and that that plan jives with the foundation’s strategic plan.

      Fourthly, I have to say that what I perceive as the foundation’s preferred way forward, that is, having chapters come supplicant-like to them and humbly request a grant for operating funds is very much the wrong way to go. I’d much prefer to see a model where WMF assistance to chapters is based around helping chapters build the capacity to raise revenue themselves (whether through the fundraiser or other methods), rather than funding day to day programme work. This way everyone can do their own thing and the WMF doesn’t have to worry so much about bailing chapters out due to financial mismanagement.

      Fifthly, as far as Stu’s other questions go, one possible solution I’ve mused on is a shared services model for overhead activities like bookkeeping and payroll. In this model a central organisation, probably with staff, would be formed to provide those sorts of core services to chapters, the WMF, and other allied bodies at cost. It is very important for political reasons that this organisation is an equal partnership between organisations, and not controlled by WMF or one of the larger chapters. This way we could get some consistency in how everyone manages their money and affairs, and it has a side benefit of freeing up chapter resources to concentrate on programme work. There is a whole other blog post to be made here, and I may be biased since I implemented shared service financial accounting systems for a living 😉

      Lastly, Sebastian said it a lot and I agree that a decentralised approach is the way to go. The WMF doesn’t have all the answers, their strategic plan has deficiencies, and there are some things that chapters can just do better. We’d be able to do them even better without WMF standing over our shoulders trying to take control. Chapters also need to realise though that the WMF is an important stakeholder and there is a lot of expertise that we can tap there to improve our own programme delivery.

  1. 1 » Questions about Wikimedia Fundraising Faccio Cose Vedo Gente

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