Funds, fiduciaries, and the Foundation: the complex dynamics of scaling
On the first weekend in April, the Board of Trustees of the Wikimedia Foundation published several resolutions addressing issues such as finance and movement roles (Signpost coverage). The Signpost interviewed community-elected board member Samuel Klein (Sj) for last week's issue to get an overview of the topic of movement roles and the surrounding debates. In this second interview, the only trustee voting against the fundraising resolution speaks in detail on the background of decisions taken on a broader range of issues from the Berlin resolutions to the make-up of the newly founded Wikimedia Chapters Association and of the Board of Trustees itself.
Samuel Klein during the joint session of the Board of Trustees and the chapters on finance on March 31 in Berlin. Video by Manuel Schneider
The most significant development that's emerged from the recent discussions on the organisation of the movement – the most radical change – is the Funds Dissemination Committee (FDC).
- Samuel Klein: Yes. The one somewhat urgent consideration was our auditors’ suggesting that we needed to make sure there were direct financial controls for the use of a significant chunk of the funds we raise. And when they found out the scale of the fundraising that was passing directly to chapters, they said so how well do you know what those processes look like? Now they were asking for this additional layer of visibility; that was a big change for us, and we tried to respond promptly.
So this marks a turning point, from a laissez-faire attitude to these disparate far-flung chapters, to a more centralised set-up for auditing of transparency and accountability?
- Absolutely, and we should have already set some standard – that anyone who raises at least a certain amount is committed to an annual audit and global standards that we all share. The Foundation itself has grown very quickly, and that level of change, and the quality of our oversight has gotten much better. Now that sort of growth is happening to some of the national chapters. So I agree that it’s absolutely a turning-point.
One decision that you've made has been to create a two-tier system, recognising the UK, France, Germany, Switzerland, and in effect the US as the five jurisdictions where it's much easier to donate with tax-deductibility. Is this just a by-product of the Foundation’s wish to tighten up on auditing?
- Those are the five where, in 2011, people could donate with tax-deductibility. This was not an active decision to limit tax-deductible donations on that kind of principle. The first concerns, raised last summer in Haifa, were about accountability, and these financial controls we’ve just been talking about. There are still some open questions as to what the right controls look like, and as people pursued that line of thought they had discussions with the 12 chapters which two years ago had been processing donations. This was reduced to four chapters during our discussions, which laid out seven principles that groups need to follow to responsibly process fundraising.
So Switzerland, a small chapter that doesn’t process much, is recognised, but Italy is not, despite the fact that it's a much bigger chapter?
- Correct. Among other differences, Switzerland has very clear guidelines and oversights for the transfer of funds to other countries, so it is easy for them to transfer surplus beyond their budget back to the Foundation / the FDC.
Klein (centre) speaks on a panel flanked by the two chapter-selected trustees Arne Klempert (left) and Phoebe Ayers (right).
Will more chapters be able to join the tax-deductibility arrangement, or is the current list of five set in stone until the next review in 2015?
- As a result of negotiations and assessments, since Haifa the Audit Committee and others began to worry about issues of project redundancy and efficiency. This was a much more amorphous set of concerns, still about doing the right thing by donors, but deeper than the initial urgent issues of accountability.
Do you have examples at hand that were very worrying?
- Rather than a few compelling instances of cases where this was problematic, there were 10 or 15 smaller concerns. Together they seemed to some to paint a picture of a somewhat inefficient if not risky process that didn’t have any huge success stories or failures. There was also the general sense that this was an ongoing distraction for both the Foundation and for chapters that were talking about whether and when they could directly process donor contributions. And I think the strongest argument that people made against highly distributed donation processing was “if we’re doing things right, the initial flow of funds doesn’t matter – as long as we're actually all working together to figure out how the funds should be spent”.
- You mentioned tax benefits to donors. And a number of people have suggested that with the limited data available to us, this makes a small but not a huge difference to donors, and that maybe it makes less of a difference than things like getting the formatting style of the donation page right. I think it's good that we'll be able to compare a number of jurisdictions where there is tax deductibility. Certainly if it turned out that it matters greatly to groups of donors to have tax deductibility, and this was visible ... that would give the lie to one of the major analyses made so far.
So it's still a work in progress?
- What makes sense to us as a movement is very much a work in progress. In the last year and a half, it was very much a series of two-party negotiations with groups involved advocating for a certain capacity just for themselves. This has even been explicitly... tied to a group's importance in the decision-making process of the movement. As an example, Thomas Dalton, ex-treasurer of the UK chapter, proposed a model for FDC membership in which chapters that directly process funds get extra votes on how funds are distributed.
- The argument is that every entity that processes donations has a slightly greater responsibility to ensure that those funds are spent well. The Foundation thinks it is harmful to the movement to divide it that way into first- and second-class entities, with the first-class having a greater voice in what we're doing, defined for example by how much money people in a country have to give.
Whereas you're defining first-class according to auditing of transparency and governance?
- No; in the Foundation's initial draft, who has a say in decisions by the FDC would not be tied to any of those things ... The processing of donations is just not important in this regard. It doesn't make the view of the Foundation or any chapter more important; it's purely a technical and procedural "fact", a mechanism at the point of donation that welcomes the donor to become part of the movement.
If the FDC is to be explicitly a "volunteer-driven" body, does that mean a clear majority of its members will be volunteers rather than Foundation trustees and employees?
- At most a third of the members will be WMF staff. That's not because the WMF is processing funds, but because it's designed to have this global scope and has been doing this already. I think once the FDC has been around for a while, we can find better criteria to figure out who should be on it.
With the dual creation of a new Wikimedia Chapters Association and the Foundation's own revamped Chapters Committee, we have two bodies that could conceivably overlap in their interests and duties.
- They certainly will have a lot of work to share and to coordinate. Some of the people who have been helping to plan the chapters association have been part of the chapters committee, and some of the definitions of the new expanded chapters committee or the affiliations committee assume the future existence of a chapters association.
- The Foundation's chapters committee will always have a unique responsibility to make the final recommendation to the WMF board on whether any group should be recognised for the first time, and it could be responsible for some of the mentoring when groups are approaching recognition, whereas the chapters association is interested in mentoring groups as soon as they're recognised, so there will definitely be overlap in that respect.
Is the chapters association going to be strongly encouraging good governance among its own members? Are there areas where there could be conflicts of interest? For example, what if delegates of a chapter are participating in the audit of that chapter?
- Yes, if they were directly responsible, there would be a conflict; but as a peer-review group, it seems ideal.
Is there a chance that lobbying the Foundation's board might turn out to be the principle function of the chapters association?
- I believe one of the association's founding goals (not in the context of lobbying) is to provide a framework for chapters to coordinate their ideas and to present sensible unified ideas that all of their members can support.
||We've not been bound by confidentiality – trustees have always been willing to talk in general terms about a vote; but they'd get uncomfortable if it came to saying exactly who said what. There was just light social pressure against being the only trustee to talk about one's vote: you ran the risk of outing the votes of other trustees.
You were the only Foundation trustee to vote against the board's recent fundraising resolution. Why was that?
- There was strong consensus to respond to the somewhat urgent need to be stricter about accountability for anyone handling hundreds of thousands of dollars of donations. But this was combined with other less urgent concerns, and I think we just don't have all of the data about what's distracting, what's empowering, what the benefits and drawbacks are of a system that encourages everyone with the capacity and skill to deal directly with donors [to do so].
So you thought it was premature?
- Not premature, but I think people got excited about trying to improve what had previously been an unconsidered framework for raising funds, and ended up combining responses to urgent needs with longer-term ideas about what might be more efficient but [where] I think the answer is not clear. We also discussed the need to explicitly empower chapters by helping them with funding and to develop capacity, and the need to avoid single points of failure.
So that risk of failure was why you voted against it? In your view there wasn't sufficient caution on the board about things that could go wrong?
- What I'm hearing from lots of chapters is... not that they care about the technicalities of processing funds, but they hate being told "we know you want to do this, and it's not that you're bad at it, but we don't think you should". And personally I think that's a valid complaint, and I don't think the funding resolution considered that trade-off.
No doubt you'll be hoping that your fears are not borne out.
- Well, the response at the chapters meeting in Berlin was very productive, and even people who were disappointed by the results said, "it doesn't actually keep us from doing the work we care about". No one said, "I really personally care a lot about this technicality". The Foundation's said, "Let's focus on something else: let's get the distribution of power right and not worry about the technical issue." The FDC aims to decentralize and share power. The real power is how you decide what to spend, and until this year the Foundation has always made 90% of those decisions, so it's explicitly saying we want to share, we don't want to be that body.
Although in the end, the Foundation has the last say on every cent that is spent. True?
- Since you mentioned fiduciary responsibility earlier ... if the FDC made a decision that the Foundation felt it could not responsibly accept, it might refuse to support an investment the FDC had recommended. But [that] would be like the Foundation rejecting the recommendations of its chapters committee – something we've never done.
||The Foundation's view is that processing [sitewide] donations does not imply any extra rights to spend those donations.
But you must foresee that some of the chapters might feel that they have to work a bit harder to get their money, to put it crudely: not only do they have to come under your microscope of governance and financial scrutiny, but they might actually have to apply for their special purpose money. Do you think that's behind some of the chapters' fears about the new arrangements?
- Only a few chapters were in a position to process donations last year. Everyone I have read, including those chapters, agreed that processing donations does not imply any extra rights to spend those donations. There was surprising unanimity – on internal mailing lists and on Meta – that chapters should not be granted easy access to funds just because donors in their country gave those funds to the Foundation as a whole.
- Of course this refers to funds donated through the sitewide fundraisers, which are predominantly from donors supporting the movement as a whole who are not, as far as we know, particular about which part of the movement they're giving to, [not] funds either restricted or unrestricted that are explicitly given to an organization.
In the chapters association, we have for for the first time a high-profile mouthpiece to speak plainly for the chapters, perhaps particularly for the stronger, more powerful, more vocal chapters. Might the association – subtly or not – put pressure on the two chapter-selected trustees?
- Absolutely – that's not necessarily a bad thing. It's only an imbalance in that the Wikimedia projects don't have a strong institutional voice analogous to the chapters association to synthesize, coordinate, and articulate a more nuanced set of desires, interests, and ideas, more than just the single vote for the community-selected trustees. So I would like to see a strong voice for the projects as well, which would benefit the project communities.
The Signpost will as always be keeping a close watch on the changing dynamics of organisation and relations between the Wikimedia Foundation and the sometimes nebulous array of movement entities in the coming weeks and months. In the meantime, for the latest developments surrounding the nascent and powerful Funds Dissemination Committee, consult this issue's "News and notes" report.