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Wikimedia Foundation Audit Committee/2023-12-12

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December 12, 2023

Audit Committee Meeting

10:00 am PST - 18:00 UTC


Participants: Tanya Capuano, Lorenzo Losa, and Kathy Collins

Board Visitor: Luis Bitencourt-Emilio

Staff: Jaime Villagomez, James Baldwin, Dhaval Patel, Nadee Gunasena, Helen Pang, Courtney Bass Sherizan, Shelby Langan, Deb Sen, Aeryn Palmer, Lisa Gruwell, Maryana Iskander, and Amy Vossbrinck

Alternates: Mike Peel, Nataliia Tymkiv

Advisors: Michael Snow, Julian Singh

Kick off - Kathy

This is an informational meeting. The Board will be doing a survey about the committees. A draft agenda for future meetings is included in this meeting. Members are asked to flag any items they would like to have covered in future meetings.

Approval of October 3, 2023 Minutes - presented by CFO

Move to approve minutes as amended: Kathy

Seconded: Lorenzo

Unanimous approval by voting members. Kathy abstained.

Amended minutes will be sent to the Audit Committee

Audit Matters by CFO and Controller

Our current audit committee chair,Tanya, was thanked for her service as Audit Committee Chair and for her support of the Finance and Administration Department. Our new and incoming audit committee chair, Kathy, was welcomed as Audit Committee Chair.

Move to invite Tanya as an advisor to the Audit Committee: Luis

Seconded: Kathy

Unanimous approval

Internal controls and control environment - presented by the Controller

On Oct 18, the automation of the approval prior to the posting of manual journal entries was launched. Going forward, all manual entries will be approved prior to posting using system functionality. A review of internal controls as they relate to the monthly financial close has also been completed. Controls and processes will be updated as needed.

Investments Update - presented by the Investment Principal

The Audit Committee will be asked to approve minor changes in the investment policy at the February meeting.

The proposed changes include:

● Reducing risk in the portfolio by not investing in any new securitized assets.

● Increasing returns by extending the duration to maturity for securities.

● Increasing benchmark allocation between fixed income and equities (from 50% to 65%) within our Long-term Fund (which is less than 20% of our overall reserve).

● Changing the benchmarks to effectively monitor performance of the portfolio given the above changes.

Accounting Policies as they relate to investments - Accounting Principal

Investment income has been a source of volatility and uncertainty in recent years due to the impact of the Federal Reserve Bank’s decisions on interest rates. The Foundation is evaluating two accounting policies to determine whether we can improve the reporting of this volatility associated with the financial activity related to investments. The Audit Committee will be asked to approve recommendations on these matters at the February 2024 meeting. Accounting for fixed income investments - investments are currently recorded at fair value, the change would record them at amortized cost which would result in increased predictability of investment income, and reduced volatility of investment income from changes in the market. This is in the review stage and no outcome has been proposed at this time but will be submitted for the next meeting.Presentation of Presentation of investment income - investment income is currently presented as operating income in the income statement. The change would present investment income (or a portion of investment income) as non-operating income in the income statement. This would mean that swings in investment income or loss due to volatility in the market would be reported “below the line” and may be more representative of our business as not a core/operating activity. These changes would also make the information on the Form 990 more consistent with the reporting on the financial statements.

Enterprise Risk Management - listed by the Controller and Deputy General Counsel

High risk work - the following risks and their remedies were presented: Evolving Regulations Compliance with the Digital Services Act Regulator education and outreach Technology Vulnerabilities Defining and identifying programs in place Threats to Financial Sustainability and Solvency The Foundation holds 12 - 18 months of working capital in reserve and has established a multi-year financial planning model. Relationships - Volunteer Communities Support community self-governance Shift towards personality-driven experiences/social platforms Future audience experiments Generative AI’s impact - knowledge creation/consumption Future audience experiments Disinformation Anti-disinformation repository

Medium and low risks that are also being addressed such as Human Capital Business Continuity and Resiliency Third-Party Provider Risk Reputation and Ethics Records Retention Policy - low risk

Plans for Risk Management charter and policy work Charter - a few items need to be added or refreshed. The Foundationʼs approach to risk governance (i.e. APP mitigating plans and objectives are applied to the Foundationʼs highest risks.) Define oversight and accountability by the board, Audit Committee and Foundation Assess and respond to risks and accepted risk tolerances.

Policy Provide the organization with guidelines in its application of risk management, define roles and responsibilities for identifying, Assessing and responding to risks, including when actual risks occur. The goal is to have both documents updated. The identification of risks has been based on industry standards and benchmarks. Risks can be defined as those things that may prevent an organization from accomplishing its goals. The risks specific to the Foundation are discussed in both the recurring Shared Services meeting and the weekly Senior Leadership Team meetings.

Endowment Cost Sharing - presented by the Accounting Financial Reporting and Technical Accounting Lead

The Wikimedia Endowment is now a separate 501(c)3 organization. It is supported by Wikimedia Foundation staff. The Endowment and the Foundation will be entering into a cost sharing agreement, which will include the type of support the Foundation will be doing and the costs for this support.

Annually, the budget is proposed by WMF (the service provider) and presented to the Endowment Board for their approval as part of the annual planning and budgeting process prior to the beginning of the upcoming fiscal 12 month period (July to June). Costs and support level expectations are based on the annual budget for each fiscal year. The budget is projected at $2.1M for FY 2023-2024 The agreement will be automatically renewed at the end of each fiscal year.

Business Operations - New HRIS - presented by the Director of People Operations

The Finance and Administration and Talent and Culture departments have been working together to launch Dayforce, a new HRIS system for the Foundation. The current system, Namely, primarily supports US information, which excludes non-US Staff. Switching to this new system aligns with an APP goal to strengthen performance and effectiveness. This shift to a more automated payroll system will reduce the amount of manual labor. Staff will be trained regarding how to use Dayforce which will go live in January 2024. A celebration is planned for the transition to the new system.

Agenda February 2024 Meeting - presented by the CFO

Finance Management & Planning Mid-Year Financial Update FY 24-25 Annual Planning - Multi-year Financial Model Timeline, Operating Decisions, Dependencies Investment Policy Approval Form 990-Timeline Audit Committee Charter ERM Update

Respectfully submitted: Amy Vossbrinck