Talk:Wikimedia Foundation reports/Financial/Audits/2021-2022 - frequently asked questions

Negative investment income

Thanks for the timely publication. The page numbered 4 (page 6 in the pdf), "Consolidated Statements of Activities", shows a negative investment income:

• Investment income (loss), net (11,665,241)

This is somewhat counterintuitive. Could you explain a little further? Thanks, Andreas JN466 12:00, 1 November 2022 (UTC)

@JBrungs (WMF): Would you be so kind as to have a look at this? Best, Andreas JN466 16:30, 5 November 2022 (UTC)

This question is already answered in our FAQ section. In light of misrepresentations being spread here and elsewhere about this statement, I will clarify here again.

In short, the $11,665,241 number represents the value of the assets we held as of June 30, 2022 vs June 20, 2021. The overall value did indeed go down, as this was a period of global economic downturn. Most of this number is an unrealized loss, meaning that we held onto most assets and will continue doing so until markets improve, rather than selling at a loss. SLangan (WMF) (talk) 20:49, 29 November 2022 (UTC)

@SLangan (WMF) Thanks. I was hoping that you might be able to share a few more details. The explanation you link to merely says,

"Investment income (loss), net" is primarily interest, dividends, realized gains/losses, and unrealized gains/losses earned on the Wikimedia Foundation's cash and investment portfolio. During this audit period, some of the Foundation's cash was invested in mortgage backed securities, U.S. Treasury securities, corporate bonds, and stocks (Note 3). It is the Foundation’s investment intention to preserve capital, income and liquidity over‎ capital appreciation, which has higher volatility.

Those are just generalities, and it doesn't really tell us anything about which of your assets specifically went down so much as to cause this quite large loss. The pandemic started in early 2020, causing a similar economic downturn in the first half of 2020, yet WMF investment income in 2019–2020 remained $5.5 million in the black by the end of June 2020.

Moreover, Finance & Administration's 2021–2022 third-quarter tuning session deck still projected a $25.9 million increase in net assets for the Foundation at the end of the year, which was reduced to just an $8 million increase in the end-of-year financial statements. What is the explanation for this large change?

Also, while I have your attention, could you also please resolve the query in the following section? I.e., how many of the people identified as "contractors" on the Staff and contractors page (there are 237 at the time of writing) are included in the Line 15 salary total on the Form 990? And what does "contractor" mean on the Staff and contractors page – does this category include non-US employees (i.e. non-US workers having full employee status for Form 990 purposes by being employed by an employer of record) or not? Any help would be much appreciated. Best, Andreas JN466 13:41, 30 November 2022 (UTC)

The $25.9 million and $8 million can’t be directly compared, since they are different calculations on different reports covering different time periods. Gains and losses on unsold assets are typically excluded from our regular management reporting, such as the March 2022 tuning session slides you link to, as well as our annual Form 990 reporting to the Internal Revenue Service in the United States. This is because over the short term these assets tend to go up and down with the market. However, unrealized gains and losses are included in our annual audit report per US accounting requirements. SLangan (WMF) (talk) 20:16, 30 November 2022 (UTC)

Thanks, that is useful to know. I note you're choosing not to answer the question about what caused the difference in how the 2020 and 2022 downturns affected WMF investment income. This would have been interesting.

What also remains unclear is to what extent the meaning of "contractor" on the WMF's Staff and contractors page is the same as it is in the FAQ answer On page 1, Part I, Summary, line 15, what is included within the category “Salaries, other compensation, employee benefits” (which says that no "contractors" are included in this total). It's a pity; this would have been an easy point to clarify ... Andreas JN466 14:12, 2 December 2022 (UTC)

Contractor pay

Section Wikimedia_Foundation_reports/Financial/Audits/2021-2022_-_frequently_asked_questions#What_is_“salaries_and_wages”? states (my emphasis), "Salaries and wages" includes salary, benefits, retirement, wellness, and payroll taxes for full-time and part-time staff members in the US and outside of the US employed by Wikimedia Foundation or its Employer of Record. These costs as well as salaries vary significantly by geography. This number does not include fees paid to contractors, vendors, or consultants.

The WMF Staff and contractors page includes around 250 people marked as "contractors". Under which rubric are the equivalent costs incurred in paying these contractors included, if they are not included in "Salaries and wages"? Are they all in "Professional service expenses" or are some of the related costs (like related tax or administrative overheads) included in "Other operating expenses"? Regards, Andreas JN466 16:46, 5 November 2022 (UTC)

Some concerns I would like to share with you

Thank you for directing me (on Twitter) to this page. I'm afraid I have some concerns about the rise of the salaries (plus "professional service expenses" which I understand to mean people working for WMF without WMF being their employer) and the rise of the "net assets without donor restrictions". As to the salaries and professional service expenses: over 4 years, from 2017-2018 to 2021-2022, this has risen by 130%. The amount of "net assets without donor restrictions" has risen, over these 4 years, by 79%.

I am sure that the rise in salaries and service expenses is in line with your annual plans. But what you have written here is not really helpful. How many more staff, how much rise in wages? How does this compare to this Mercer salary survey? I would expect that this information is available within the WMF, if only when negotiating with a potential new employee. I do think that more information would be helpful for donors, especially existing, long-time donors.

As to the net assets without donor restrictions: I think you will agree with me that USD 238 million is a lot of money. Wikipedia and all the other projects have shown a healthy growth over the years, but even so, this is a large amount of money.

I think there might be a cultural aspect to this. Over here (the Netherlands) charities are expected to practice frugality. (I think it was the major Dutch charity in cancer research that hired, a number of years ago, a medical specialist as their executive director, at the salary he had as chef de clinique in a hospital, about € 300,000. When this was found out, it cost them many times this amount in missed donations.)

I donate to Wikipedia because it is a nice hobby for me and because it serves a very useful purpose. But my wife and I donate to a number of charities. While we are not badly off, our finances are not unlimited. So we have to make choices. In view of these USD 238 million, you will appreciate that I fear that I may find it difficult to convince both my wife and myself that the Wikimedia Foundation should be a recipient in 2023.

Of course this will not stop me from continuing as an editor. But I felt that I had to share my concerns with you. With kind regards, MartinD (talk) 08:50, 24 November 2022 (UTC)

Hi @MartinD, thank you for reaching out to share your concerns. The audit report you see here and the Form 990 also available online are documents which use very specific definitions of terms like "Net assets without donor restrictions" related to US accounting practices. I would offer Charity Navigator as an independent source on the finances and how they compare to other charities. On your specific question about the Mercer Salary survey, I can confirm the salaries are in line with the survey and other comparable organisations. There's more information here about the context of how salaries are set here.

You can also read more about why we need reserves here and how they are set. I understand though this information may not be enough to reassure you, but want to thank you for your continued contributions to the projects as an editor - it is deeply appreciated. SLangan (WMF) (talk) 18:16, 28 November 2022 (UTC)

Dear SLangan, thank you for your response. Obviously, every organisation, be it a commercial enterprise, a foundation or a family household, should strive to have a sufficient reserve to draw upon in hard times. But it should also have a plan on how to minimize expenses should the hard times occur. I would expect that your Board has also asked itself (in my words): "If we are suddenly facing a severe drop in income, how can we scale back our activities in order to make ends meet, and what expenses will we be incurring during this process?" I would expect you would have to terminate a number of employment contracts and lease contracts, and reduce grants. These make up about two-thirds of your total expenses, so cutting back would have to happen here. I'm not conversant with US labor laws, but I would think that in such an unfortunate situation if would be possible to reduce your staff considerably in a few months. (Obviously, I really do not look forward to such an event!) In the Netherlands, I think that the "rule of thumb" of a severance payment of one month' wages for each year of employment would apply, and I would expect US labor law to be less generous. Eighteen months of working capital reserve would seem to imply that the average WMF employee has been on your payroll for about 18 months: this seems unlikely to me.

I've read the article "Building a secure financial future for Wikipedia". I think the cultural aspect I mentioned in my first post applies here as well. Ms. Gruwell says "Be Bold". Of course, she is entitled to do so. But I feel it is fair to warn you (and her, perhaps) that (I think) many Dutch people will feel this shows an undue amount of self-importance. (On the part of WMF, not with regard to herself, please note.)

"In perpetuity": I'm sorry, but if WMF really means they want to have such a large amount of money that the existence of Wikipedia and its sister projects is assured forever, I think WMF is asking too much. I am neither able nor willing to assure Wikipedia's future in perpetuity.

And now I'll stop being grumpy and go back to my nice litte project "updating population numbers of French municipalities".;) With kind regards, MartinD (talk) 14:34, 30 November 2022 (UTC)

For reference, the compensation of WMF executives can be viewed in this 2020 Form 990 tax return (the latest one available at the time of writing). Total compensation for the CEO, including all benefits, was $423,318 in the 2020 calendar year. There were seven further executives whose total compensation figures exceeded $300,000 in that year. Present compensation levels can be assumed to be significantly higher, based on observed trends showing consistent pay rises well in excess of inflation. Andreas JN466 13:11, 4 December 2022 (UTC)