Fundraising and Funds Dissemination/Payment processing (questions for the German chapter)

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Question 1[edit]

Assuming the above holds true (specifically, that the chapter has no entitlement to retain or to control dissemination of the funds it processes), does the German chapter still aspire to payment-process in 2012 and beyond? If you would still prefer to payment process, I’d appreciate if you could share with me your thinking about why. Basically -- how do you feel payment-processing would benefit your chapter, and/or the Wikimedia movement overall?

Answer[edit]

Our aspiration to engage in local fundraising through banners on German Wikipedia and sister sites in 2012 and beyond is not contingent on whether Wikimedia Deutschland is entitled to spend a specific portion or fraction of the funds raised in Germany. Your question is surprising given that our paper Wikimedia’s Culture of Sharing puts efficient fundraising in the broader context of effective management of donor relations. From our perspective, local donor management is key for effective fundraising, effective funds dissemination, and effective organizational development. Responses to your draft recommendations have included numerous arguments in favor of payment processing by Wikimedia organisations other than the Foundation. Since these arguments were not part of your initial draft, it would be helpful to know why you still think centralized payment processing would benefit the Wikimedia movement.

As for the arguments laid out in our paper, please see our analysis of our successful fundraising development:

Wikimedia Deutschland is embedded in a specific German donation culture. Consequently, the reason for our success is that we have taken local particularities into account. Throughout the last fundraiser our local testing and evaluation revealed which communication means work best in Germany. The fundraiser was highly localized in terms of appeals, wording and landing pages - one main reason why we did so well locally.

Knowing what donors want and expect is central for localizing fundraising. According to the principle of donor-centrism, service is key. Donating must be as easy as possible. Therefore, local proximity is crucial as well. Emails and phone calls need to be answered promptly. Communication in the native language is taken as a matter of course. Inquiries regarding charity status and how donations are used must be answered instantly. Donation receipts need to be issued in a fast manner. A highly sensitive point: mistaken donation sums or cancellations of donations need to be handled quickly. Building long-term relationships with donors demands an especially high standard of service. It can be inferred from our own experience from the last two years that maintaining a similar quality level of donor management would be impossible under the centralized arrangement proposed in the Wikimedia Foundation management’s draft recommendations.

Actual donor giving is in line with our proposed principle of subsidiarity. In some previous years, donors from Germany were able to choose between giving to Wikimedia Deutschland and giving to the Foundation, in what was probably a less than clear process (two clicks to get to the chapter's page, only one to get to the WMF site). And yet, in 2009, 19,800 donors went through the process to give to the chapter, while 17,600 donors chose to give to the Foundation. It is clear that eliminating the option to donate locally will depress overall fundraising proceeds. Just in whose interests would that be?

Provided that they have reached sufficient maturity, stability, proficiency, and availability in resources, local chapters are best able to conduct effective fundraising and payment processing within the social, legal, political, and cultural framework they operate in anyway. We are certain that keeping fundraising local, where it can be effectively and efficiently done, will lead to the deepest and broadest public support of our mission. That is why decentralized fundraising, independent of how and where funds are spent, is in the best interest of the movement.

Question 2[edit]

Are there specific local requirements or incentives (beyond tax deductibility) that you're aware of that might make it more difficult or costly for the Wikimedia Foundation to payment process donations from Germany, relative to the German chapter doing it?

Answer[edit]

We believe the biggest downside of the Foundation processing donations form Germany lies in failing to meet the expectations of German donors. We laid this out in detail in "Wikimedia’s Culture of Sharing". See for instance:

Trust is probably the most important prerequisite for making a donation. What elements are favourable to developing trust? To name the most important: charity status, external auditing, donation receipts, transparency, data security, easy contact options, transparent donation usage and visible impact. Out of these, recognition of charity status by local tax authorities is of highest importance: Two of the most important charity-monitoring bodies in Germany, “Deutsches Zentralinstitut für Soziale Fragen” (DZI) and the “Deutscher Spendenrat”, as well as “Stiftung Warentest” (a consumer advocacy group) list charity status as one of the things a donor should check before giving money to an organization. Accordingly, being acknowledged as a trustworthy charity significantly increases credibility.

Moreover, we identified great risks in a centralized payment processing model. As it says in the Spendwerk Report (attached to Wikimedia’s Culture of Sharing):

If all donations from Germany were immediately and directly deposited to a U.S. account, this would be another target for suspicion and bad press. The fundraising scandals of recent years in Germany often had to do with "letterbox organizations" whose headquarters were difficult to reach. Wikimedia should not be an easy target to attack. In Germany, there is already a latent, cautious attitude towards large American web companies such as Google and Facebook. If a differentiation to these commercial, skeptically viewed websites is to succeed and Wikipedia comes to be known as being a good cause, then it is psychologically valuable that Wikimedia also differentiates itself internationally when it comes to fundraising and especially sets itself up locally in Germany.

We strongly advise not to underrate the issue of donation receipts, since it is an integral part of fundraising in the specific German cultural context. Specifically, the value of the receipt lies not necessarily in tax savings one gets from it, but from its symbol as proof that an organization has met the requirements of being a public charity in Germany. As it says in the Spendwerk Report:

The donation receipt is a symptom of a completely different culture of philanthropy. It's all about the questions:
  • What are German donors accustomed to?
  • How would German donors like to be addressed?
  • How can trust in Wikipedia and the Wikimedia Foundation be increased?
  • How can Wikimedia avoid being an easy target for attacks in Germany?
  • How can Wikimedia create a particularly high level of transparency and accountability?
These questions are best resolved in our eyes through a collection of donations in Germany via German fundraising activities.

At the same time, assuming centralized payment processing were the only model the Wikimedia Foundation will allow in the future, the question comes up what role chapters should or could play within the fundraising process. It has been suggested by some that chapters should still be heavily involved in steering local messaging, building local relationships with donors, and servicing donation inquiries. How this is supposed to work, is still totally unclear. Specifically, how does the Foundation intend to get around strict local regulations on privacy and data protection--such as those found within the European Union--so that local chapters would have access to information of donors giving directly to the Foundation? More broadly, how does the Foundation intend to get around the fact that processing of donor information outside of the European Union is subject to the US-EU Safe Harbor Arrangement and, in the near future, will be subject to the full breadth of EU data protection regulation? It is rather difficult for us to understand why the Foundation would be willing to subject itself to the jurisdiction of the European Union when it comes to donor data, yet works very hard not to be subjected to other foreign regulations when it comes to copyright, free speech law, personality rights, trademarks, etc.

Question 3[edit]

My understanding is that the restrictions faced by the German chapter in terms of transferring money outside of Germany have been basically nil, because of the organization you set up a year or two ago. But, we are now (for the first time) talking about payment-processing chapters not having an entitlement to the money raised out of their geography. So assuming the German chapter is not entitled to retain money, or to control its distribution internationally -- does that create any new problems or impediments for the German chapter, in terms of freely moving money out of Germany?

Answer[edit]

Wikimedia Deutschland, Wikimedia UK, Wikimedia Italia and Iberocoop all agree on the principle of subsidiarity’s key role for our movement’s development. This is explicit in our respective fundraising statements. Any decision on the future model for funds dissemination must take these considerations into account. We assume that our alternative recommendations convincingly sum up why it is in the best interest of our movement that Wikimedia Deutschland stays in charge of distributing money raised in its geography. That does not, however, mean any entitlement to spend the largest part of the money in Germany. We all agree that we need a movement-wide approach to devoting money to the most pressing issues our movement faces. As has been pointed out before, we do not think that this can be best achieved by one global institution (be it the WMF or a FDC or something else), but by numerous entities. Such entities could for example include the Wikimedia Foundation, the Chapters Council, a Global Grants Committee, a Wikimedia Strategic Council, etc. Again, subsidiarity is key to the success and to the culture of our movement.

Question 4[edit]

If you were to payment-process in 2012 and beyond, the Wikimedia Foundation Board of Trustees might want to have increased visibility into your chapter’s internal workings, to make sure it’s able to uphold its fiduciary responsibilities. Just as illustrative examples -- this might include an assessment or independent audit of the German chapter’s legal and financial practices and policies, site visits to your office, and/or the Wikimedia Foundation requesting a seat on your Audit committee or on your Board of Trustees. In general, can you provide your perspective on requirements such as those? Are there legal or cultural impediments to the kinds of possibilities I've raised, and if so, are there alternatives that might be better or more appropriate? (Please bear in mind I’m not necessarily saying that the Wikimedia Foundation would propose any of these: at this point I don’t know. Before the Board considers the options, I’d like to get your general thinking.)

Answer[edit]

Taking up your illustrative example, in the best interest of an efficient movement it cannot be part of the Wikimedia Foundation’s work to perform chapter auditing. That would be inefficient and misusing valuable resources better spent on project work. As laid out in "Wikimedia’s Culture of Sharing" we propose a stricter, external solution:

Charity status in Germany requires fulfilling tight restrictions: we are audited by an external accounting firm regarding accounting standards, financial track records, and the proper correlation of gifts and accounts. On the basis of this, our financial management is subjected to an annual examination of whether several legal requirements are met or not. This external control guarantees proper use of money and of the trust we receive from our supporters. It is also a cornerstone of sustainable reputation management. Charity status is not only about fundraising - it is a social assignment. In order to set a common framework for all Wikimedia chapters, we propose to ask an established advisory firm (such as KPMG) to help our movement work out an international catalogue of financial and legal requirements for chapters that want to participate in Wikimedia fundraising. This catalogue should be the prerequisite for chapter fundraising. We propose that it be implemented in fundraising agreements, starting with the earliest possible date: July 1, 2012.

Please also see propositon two, subsection “We need to act”:

As laid out in detail in section 2 of this document we propose the Wikimedia Foundation commission KPMG to develop auditing guidelines for fundraising eligibility, in order to achieve process safety for the next annual fundraiser. With the Chapters Council, we propose to establish a strong self-governing body that oversees and enforces these standards. Second, we need a set of binding auditing guidelines and standards for general organizational development of Wikimedia chapters.

Question 5[edit]

If your chapter were not going to payment-process in 2012 and beyond, either because the Wikimedia Foundation disallowed it, or because you chose not to, what would the reaction of your chapter be? ("Your chapter" could mean you, the Board as a whole, or chapter members.) Would the German chapter want to be allowed to payment process in 2012, even if you couldn’t payment-process in years after that? (If so, why?) What problems might stopping payment-processing cause for your chapter, and are there ways the Wikimedia Foundation could help resolve them? What kinds of issues would we need to resolve in a transition period? (Fast answers are totally fine here: I think I can imagine much of what you might say, so I am looking mainly to i) confirm or deny my own assumptions, and ii) make sure I'm not missing anything that's important to you.)

Answer[edit]

It is rather difficult to respond to vague speculation. In general, we would hope that the Board of Trustees of the Wikimedia Foundation will make a wise and sensible decision that does more opening of doors for opportunities than closing them. It is our sincere hope and belief that the Board will not take the easy route on the very complex issue of how global fundraising can best be done.

In that regard, we are less concerned with how Wikimedia Deutschland would cope with an ill-advised move to all-centralized fundraising but rather what damage it will do to our movement. The damage would be incurred not only in terms of operational efficiency when the Foundation tries the unimaginable task of adhering to dozens of jurisdictions or, even worse, cares only about a handful of them and shuts out everyone else. A decision against localized fundraising would cost the Wikimedia movement greatly, in terms of money, but even more importantly in volunteer morale, in local motivation to develop and become effective, and in encouragement that every contribution counts, regardless of kind, size, or location.