Building up the reserves

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Building up the reserves

thekohser
The recent 6-month financial report indicates at the end of 2008,
there was $6.67 million sitting in a savings account. At the end of
2009, it's $12.56 million. Do individual contributors and
organizations who are donating to the Wikimedia Foundation realize
that nearly $6 million of last year's funds were simply put into the
bank?  Do you think donors think this is an important mission, to
build up the savings account?

--
Gregory Kohs

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Re: Building up the reserves

David Gerard-2
On 2 March 2010 04:37, Gregory Kohs <[hidden email]> wrote:

>  Do you think donors think this is an important mission, to
> build up the savings account?


Yes. Getting out of living hand-to-mouth and building an actual
ongoing reserve has been an express goal over the past few years.


- d.

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Re: Building up the reserves

Anthony-73
On Tue, Mar 2, 2010 at 12:37 PM, David Gerard <[hidden email]> wrote:

> On 2 March 2010 04:37, Gregory Kohs <[hidden email]> wrote:
>
> >  Do you think donors think this is an important mission, to
> > build up the savings account?
>
>
> Yes. Getting out of living hand-to-mouth and building an actual
> ongoing reserve has been an express goal over the past few years.
>

Yeah, IIRC it was one of the suggestions of the auditors a few years ago.
How much would you say needs to be saved up before WMF is no longer "living
hand-to-mouth"?
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Re: Building up the reserves

Bod Notbod
On Tue, Mar 2, 2010 at 6:00 PM, Anthony <[hidden email]> wrote:

> Yeah, IIRC it was one of the suggestions of the auditors a few years ago.
> How much would you say needs to be saved up before WMF is no longer "living
> hand-to-mouth"?

Very interesting question. Presumably it can be expressed as a
percentage of yearly running costs? I would be curious to know of an
answer to this.

Anybody familiar with other non-profits in this regard?

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Re: Building up the reserves

Effe iets anders
In reply to this post by thekohser
I assume you do realize that this 12.5M is /after/ the fundraiser, hence
including the huge amount of donations that has been raised?

-- eia

2010/3/2 Gregory Kohs <[hidden email]>

> The recent 6-month financial report indicates at the end of 2008,
> there was $6.67 million sitting in a savings account. At the end of
> 2009, it's $12.56 million. Do individual contributors and
> organizations who are donating to the Wikimedia Foundation realize
> that nearly $6 million of last year's funds were simply put into the
> bank?  Do you think donors think this is an important mission, to
> build up the savings account?
>
> --
> Gregory Kohs
>
> _______________________________________________
> foundation-l mailing list
> [hidden email]
> Unsubscribe: https://lists.wikimedia.org/mailman/listinfo/foundation-l
>
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Re: Building up the reserves

Andrew Gray-3
On 3 March 2010 13:35, effe iets anders <[hidden email]> wrote:
> I assume you do realize that this 12.5M is /after/ the fundraiser, hence
> including the huge amount of donations that has been raised?

...as, indeed, was last December's glut.

Looking at both mid-year and end-year reports, the cashflow status
becomes clearer:

Assets (cash) versus monthly running costs (estimated)

mid-2007 - - - - - $1m
end-2007 - - - - - $2.3m - - - - - $0.21m - - - - - 11 mos.
mid-2008 - - - - - $3m - - - - - ($0.32m) - - - - - 9 mos.
end-2008 - - - - - $6.7m - - - - - $0.43m - - - - - 15 mos.
mid-2009 - - - - - $6.2m - - - - - ($0.54m) - - - - - 11 mos.
end-2009 - - - - - $12.5m - - - - - $0.65m - - - - - 19 mos.

Reserves jump dramatically each year-end report, but then idle until
the next fundraiser - as running costs increase roughly linearly,
though, the average number of months funding in reserve seesaws.

I don't know what's considered a normal margin to have - I'd presume
around a year or so is considered quite good - but hopefully someone
more au fait with standard practice in the field could enlighten us.

--
- Andrew Gray
  [hidden email]

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Re: Building up the reserves

Veronique Kessler
Hi,

The question of what is the right reserve amount is a common one.  I've
hear of ranges from 0 to 3 months to 3 years.  I agree that one year is
a good measure and that could be increased or decreased depending on a
variety of circumstances both internal and external.   Many non-profits
may have a smaller than optimal reserve because they simply don't have
more funds to keep in a reserve. We are quite fortunate to have the
amount of reserves that we do.    As we have operated over the last few
years with a single main fundraiser, our revenue tends to peak over a 4
month period while we have expenses all year.  Right after a fundraiser,
we have more reserves than we do right before the fundraiser begins
because we have months of the year where there is little revenue but
expenses are about the same.

Veronique



Andrew Gray wrote:

> On 3 March 2010 13:35, effe iets anders <[hidden email]> wrote:
>  
>> I assume you do realize that this 12.5M is /after/ the fundraiser, hence
>> including the huge amount of donations that has been raised?
>>    
>
> ...as, indeed, was last December's glut.
>
> Looking at both mid-year and end-year reports, the cashflow status
> becomes clearer:
>
> Assets (cash) versus monthly running costs (estimated)
>
> mid-2007 - - - - - $1m
> end-2007 - - - - - $2.3m - - - - - $0.21m - - - - - 11 mos.
> mid-2008 - - - - - $3m - - - - - ($0.32m) - - - - - 9 mos.
> end-2008 - - - - - $6.7m - - - - - $0.43m - - - - - 15 mos.
> mid-2009 - - - - - $6.2m - - - - - ($0.54m) - - - - - 11 mos.
> end-2009 - - - - - $12.5m - - - - - $0.65m - - - - - 19 mos.
>
> Reserves jump dramatically each year-end report, but then idle until
> the next fundraiser - as running costs increase roughly linearly,
> though, the average number of months funding in reserve seesaws.
>
> I don't know what's considered a normal margin to have - I'd presume
> around a year or so is considered quite good - but hopefully someone
> more au fait with standard practice in the field could enlighten us.
>
>  

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Re: Building up the reserves

Geoffrey Plourde
Veronique, what would be the maximum we'd want to go with a reserve fund. I know that with Army Emergency Relief for example, they get dinged by Charity Navigator for having massive reserves of money. What do you think the maximum would be for Wikimedia?




________________________________
From: Veronique Kessler <[hidden email]>
To: Wikimedia Foundation Mailing List <[hidden email]>
Cc: [hidden email]
Sent: Wed, March 3, 2010 6:41:36 PM
Subject: Re: [Foundation-l] Building up the reserves

Hi,

The question of what is the right reserve amount is a common one.  I've
hear of ranges from 0 to 3 months to 3 years.  I agree that one year is
a good measure and that could be increased or decreased depending on a
variety of circumstances both internal and external.   Many non-profits
may have a smaller than optimal reserve because they simply don't have
more funds to keep in a reserve. We are quite fortunate to have the
amount of reserves that we do.    As we have operated over the last few
years with a single main fundraiser, our revenue tends to peak over a 4
month period while we have expenses all year.  Right after a fundraiser,
we have more reserves than we do right before the fundraiser begins
because we have months of the year where there is little revenue but
expenses are about the same.

Veronique



Andrew Gray wrote:

> On 3 March 2010 13:35, effe iets anders <[hidden email]> wrote:
>  
>> I assume you do realize that this 12.5M is /after/ the fundraiser, hence
>> including the huge amount of donations that has been raised?
>>    
>
> ...as, indeed, was last December's glut.
>
> Looking at both mid-year and end-year reports, the cashflow status
> becomes clearer:
>
> Assets (cash) versus monthly running costs (estimated)
>
> mid-2007 - - - - - $1m
> end-2007 - - - - - $2.3m - - - - - $0.21m - - - - - 11 mos.
> mid-2008 - - - - - $3m - - - - - ($0.32m) - - - - - 9 mos.
> end-2008 - - - - - $6.7m - - - - - $0.43m - - - - - 15 mos.
> mid-2009 - - - - - $6.2m - - - - - ($0.54m) - - - - - 11 mos.
> end-2009 - - - - - $12.5m - - - - - $0.65m - - - - - 19 mos.
>
> Reserves jump dramatically each year-end report, but then idle until
> the next fundraiser - as running costs increase roughly linearly,
> though, the average number of months funding in reserve seesaws.
>
> I don't know what's considered a normal margin to have - I'd presume
> around a year or so is considered quite good - but hopefully someone
> more au fait with standard practice in the field could enlighten us.
>
>  

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Re: Building up the reserves

Effe iets anders
hm, wouldn't that be more a question that would suit more the board? It
seems a rather strategic one.

Lodewijk

2010/3/4 Geoffrey Plourde <[hidden email]>

> Veronique, what would be the maximum we'd want to go with a reserve fund. I
> know that with Army Emergency Relief for example, they get dinged by Charity
> Navigator for having massive reserves of money. What do you think the
> maximum would be for Wikimedia?
>
>
>
>
> ________________________________
> From: Veronique Kessler <[hidden email]>
> To: Wikimedia Foundation Mailing List <[hidden email]>
> Cc: [hidden email]
> Sent: Wed, March 3, 2010 6:41:36 PM
> Subject: Re: [Foundation-l] Building up the reserves
>
> Hi,
>
> The question of what is the right reserve amount is a common one.  I've
> hear of ranges from 0 to 3 months to 3 years.  I agree that one year is
> a good measure and that could be increased or decreased depending on a
> variety of circumstances both internal and external.   Many non-profits
> may have a smaller than optimal reserve because they simply don't have
> more funds to keep in a reserve. We are quite fortunate to have the
> amount of reserves that we do.    As we have operated over the last few
> years with a single main fundraiser, our revenue tends to peak over a 4
> month period while we have expenses all year.  Right after a fundraiser,
> we have more reserves than we do right before the fundraiser begins
> because we have months of the year where there is little revenue but
> expenses are about the same.
>
> Veronique
>
>
>
> Andrew Gray wrote:
> > On 3 March 2010 13:35, effe iets anders <[hidden email]>
> wrote:
> >
> >> I assume you do realize that this 12.5M is /after/ the fundraiser, hence
> >> including the huge amount of donations that has been raised?
> >>
> >
> > ...as, indeed, was last December's glut.
> >
> > Looking at both mid-year and end-year reports, the cashflow status
> > becomes clearer:
> >
> > Assets (cash) versus monthly running costs (estimated)
> >
> > mid-2007 - - - - - $1m
> > end-2007 - - - - - $2.3m - - - - - $0.21m - - - - - 11 mos.
> > mid-2008 - - - - - $3m - - - - - ($0.32m) - - - - - 9 mos.
> > end-2008 - - - - - $6.7m - - - - - $0.43m - - - - - 15 mos.
> > mid-2009 - - - - - $6.2m - - - - - ($0.54m) - - - - - 11 mos.
> > end-2009 - - - - - $12.5m - - - - - $0.65m - - - - - 19 mos.
> >
> > Reserves jump dramatically each year-end report, but then idle until
> > the next fundraiser - as running costs increase roughly linearly,
> > though, the average number of months funding in reserve seesaws.
> >
> > I don't know what's considered a normal margin to have - I'd presume
> > around a year or so is considered quite good - but hopefully someone
> > more au fait with standard practice in the field could enlighten us.
> >
> >
>
> _______________________________________________
> foundation-l mailing list
> [hidden email]
> Unsubscribe: https://lists.wikimedia.org/mailman/listinfo/foundation-l
>
>
>
>
> _______________________________________________
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> [hidden email]
> Unsubscribe: https://lists.wikimedia.org/mailman/listinfo/foundation-l
>
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Re: Building up the reserves

William Pietri
In reply to this post by Veronique Kessler
On 03/03/2010 06:41 PM, Veronique Kessler wrote:
> Hi,
>
> The question of what is the right reserve amount is a common one.  I've
> hear of ranges from 0 to 3 months to 3 years.  I agree that one year is
> a good measure and that could be increased or decreased depending on a
> variety of circumstances both internal and external. [...]
>    

Thanks for the reply, Veronique.

Do you have an opinion on building up an endowment to cover core
operating costs? I know zero about non-profit finance, but it would be
comforting to me to know that, even in worst-case scenarios, the servers
would stay up and bits would continue to flow.

Don't get me wrong: a full year of reserve seems great to me. But in my
head Wikipedia is for the ages, and a financial model that matches that
-- at least for the very basics -- would be reassuring.

William


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Re: Building up the reserves

Andrew Gray-3
In reply to this post by Andrew Gray-3
On 3 March 2010 20:53, Andrew Gray <[hidden email]> wrote:

> mid-2007 - - - - - $1m
> end-2007 - - - - - $2.3m - - - - - $0.21m - - - - - 11 mos.
> mid-2008 - - - - - $3m - - - - - ($0.32m) - - - - - 9 mos.
> end-2008 - - - - - $6.7m - - - - - $0.43m - - - - - 15 mos.
> mid-2009 - - - - - $6.2m - - - - - ($0.54m) - - - - - 11 mos.
> end-2009 - - - - - $12.5m - - - - - $0.65m - - - - - 19 mos.

It occurs to me this morning that there's a major problem with that
last column - it's x months reserves *at the previous six month's
averaged operating costs*. Costs are increasing all the time. (Fun
fact: the WMF's operating costs seem to have increased linearly, at a
steady $18ish-k/month, over the past few years)

Adjusting for that, we end up with... hmm, something like

end-2007 - - - - - 7 mos.
mid-2008 - - - - - 6 mos.
end-2008 - - - - - 11 mos.
mid-2009 - - - - - 9 mos.
end-2009 - - - - - 15 mos.

Still pretty good (after the last two fundraisers), but not quite as
comfortable as it originally looked - and, presumably, it gets a
little tighter right before the fundraisers. That said, it suggests
that purely from a "safe margin" perspective, we could safely lower
the target amount for the late-2010 fundraiser - we did very well last
year, after all.

On the other hand, William's suggestion about treating this as the
nucleus of an endowment rather than as an operating margin is an
interesting one. Hrm. Further research, as they say...

--
- Andrew Gray
  [hidden email]

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Re: Building up the reserves

Anthony-73
On Thu, Mar 4, 2010 at 4:15 PM, Andrew Gray <[hidden email]>wrote:

> presumably, it gets a little tighter right before the fundraisers.
>

In 2009 it was "tightest" end of september/beginning of october.  In October
and November, revenues exceeded expenses.

That's a great chart (*) by the way.  I'd be interested in seeing that for
the entire life of the foundation.  Combined with Andrew Gray's numbers it
looks like WMF have for the most part been spending less than they've been
taking in even when there isn't a fundraiser going on.

(*) Revenue and Expense Actuals/Projections Against Plan, on the last page
of the report.
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