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Wikimedia Foundation reports/Financial/Audits/2023-2024 - frequently asked questions

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Executive Summary

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The Foundation’s full year audited financial statements (“audit report”) are an annual report that presents details on the financial statements and the financial activities of the Foundation. The report is audited by an independent external auditor (KPMG) to independently validate that the financial statements are presented fairly.

This year the audit report covers the fiscal year (FY) 2023-2024 (1 July 2023 - 30 June 2024), as well as the prior fiscal year (1 July 2022 - 30 June 2023) for comparative purposes. The Foundation’s audit report is made up of 1) the independent auditor’s report, 2) financial statements, and 3) notes to the financial statements, as described below.

Note that the Wikimedia Foundation’s audit report is separate from the Wikimedia Endowment audit report. The Wikimedia Endowment (the Endowment) is a separate tax-exempt 501(c)(3) organization, with the mission to act as a permanent fund that can support in perpetuity the operations and activities of current and future Wikimedia projects. The Foundation and the Endowment are considered “related parties” under the accounting rules, which means the two parties have a preexisting business relationship or common interest. Therefore, the audit reports for both reference one another. FAQs for the Wikimedia Endowment can also be found here on Meta.

Independent Auditor’s Report

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This is a report from our external auditors, KPMG, issuing their opinion that the Wikimedia Foundation's financial statements for FY 2023-2024 are presented fairly, and in accordance with U.S. generally accepted accounting principles (U.S. GAAP).

Financial Statements

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The financial statements provide an overview of basic information about an organization's financial position and its overall financial health. These are referred to as “consolidated financial statements” since they represent the financials of both the Wikimedia Foundation non-profit and Wikimedia Enterprise, a limited liability company that is a subsidiary of the Foundation and not a separate 501(c)(3). They are made up of the three below statements.

  • Statement of Financial Position: provides an overview of assets, liabilities, and net assets as a snapshot in time - in this case, as of June 30, 2024 and June 30, 2023. As of June 30, 2024, the Foundation’s net assets were $271.6 million, which represents 17.3 months of operating expenses (based on annual plan of expenses for FY 2024-2025), in-line with our target.
  • Statement of Activities: provides a summary of revenue (primarily donations) and expenses during the fiscal year.
    • Revenue: The Foundation’s total revenue increased by $8.8 million, to $185.4 million during fiscal year 2023-2024[1]. The vast majority of this revenue came from donations, with a small portion coming from investment income and other revenue primarily related to Wikimedia Enterprise and a cost sharing agreement with Wikimedia Endowment, which, to keep the Endowment’s costs down, allows the Endowment to leverage staffing and other resources from the Foundation and reimburse the Foundation for this usage. Donation revenue increased $5.8 million, from $168.9 million to $174.7 million.
    • Expenses: Our expenses totaled $178.5 million, of which 77.5% went to programmatic activities, 10.7% went to fundraising expenses, and 11.8% went to general and administrative support. The percentage of funds we spend on programmatic activities is up from 76% in the previous fiscal year. This is in line with our Annual Plan goal to spend less on fundraising and administration and increase our expense ratio in favor of programmatic work such as platform maintenance and improvement and community support. This percentage is well within the range of best practice for nonprofits, which recommends that at least 65% be devoted to programmatic work. There is more information on these topics available in our Annual Report.
  • Cash Flow Statement: This table provides details on changes in the Foundation’s cash flows during the fiscal year. These cash flows are divided into cash flows from operating activities and investing activities. During FY 2023-2024, our cash increased by $7.1 million. This was driven by an overall increase in net assets from operating activities of $6.9 million from the Foundation’s Statement of Activities. The increase in cash helped the Foundation maintain net reserves of 17.3 months of operating expenses, in line with the Foundation’s working capital goals.

Notes to the Financial Statements

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These notes include a summary of significant accounting policies as well as additional details on specific accounts, as required by U.S. GAAP.

Audit Report Overview

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What is an audit report and why does it matter for an organization?

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An audit report is a collection of an organization’s audited financial statements. It gives an overview of an organization’s financial position and overall financial health. An organization’s audit report is typically shared with board members, donors, and other important stakeholders. The information from the audit report is then used in the financial piece of the organization’s Form 990—a form required by the US Internal Revenue Service in order for a nonprofit organization to maintain its 501(c)(3) status.

As part of the audit report, an external auditor (in the Foundation’s case, KPMG) expresses an opinion on whether the organization is presenting its finances accurately and in accordance with U.S. GAAP. In this audit report, KPMG issued their opinion that the Wikimedia Foundation’s financial statements for FY 2023-2024 are presented accurately, marking the 19th consecutive year of clean audits since the Foundation’s first audit in 2006. It further affirms that the Wikimedia Foundation’s existing processes are designed with appropriate control activities to initiate, authorize, record, process, and report financial data reliably, and designates the Foundation as a responsible steward of donor funds. Receiving clean audits year over year is critical to establishing the Foundation’s credibility and reliability in the nonprofit space.

What timeframe does the audit report represent?

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The audit report covers the most recently completed fiscal year, the time period from 1 July 2023 - 30 June 2024, as well as the prior year for comparative purposes. It was prepared by the accounting staff of the Wikimedia Foundation, and the audit firm, KPMG, certified that it was presented in accordance with U.S. GAAP. The audit report was presented to the Wikimedia Foundation Audit Committee of the Board of Trustees, which has approved it and shared it with the full Wikimedia Foundation Board of Trustees.

When will the audit report for the current fiscal year (July 2024 - June 2025) be published?

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Audit reports are published in the months after the fiscal year ends, meaning that they are a retrospective look back at the previous fiscal year. The audit report for the current fiscal year (July 2024-June 2025) is targeted to be released around October / November 2025.

When will the 2023-2024 Form 990 be published?

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The Form 990 is a United States IRS form, “Return of Organization Exempt From Income Tax". While both the Form 990 and the audit report provide financial information about the Wikimedia Foundation, the two documents have different financial reporting requirements as stipulated by the IRS. We will soon begin working on the Form 990 for 2023-2024 with the support and guidance from KPMG. It is our target and intention that the Form 990 will be completed, approved by the Audit Committee, submitted to the IRS, and published on the Foundation’s website around May 2025, barring unforeseen circumstances.

What are the differences in the financial statements within the audit report versus the Form 990?

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The financial information found in the audit report is used to build an organization’s Form 990; however, there are some differences in the financial statements and their presentation and a few differences in recognition in both reports.

In terms of the overall statements, instead of the Statement of Activities reported in the audit report, the Form 990 presents the Statement of Revenue (Part VIII) and the Statement of Functional Expenses (Part IX). Both the audit report and the Form 990 have a balance sheet (called the Statement of Financial Position for the audit report and called Part X - Balance Sheet for Form 990). The audit report also includes a Statement of Cash Flows that is not required for the Form 990.

In terms of presentation, the requirements in the above statements are sometimes different - typically, the Form 990 requires more granular reporting. For example, the “salaries and benefits” expense line item in the Statement of Activities in the audit report is broken out and reported as “compensation of current officers, directors, trustees, and key employees”, “other salaries and wages”, “pension plan accruals and contributions”, “other employee benefits”, and “payroll taxes” in the Statement of Functional Expenses within the Form 990.

In terms of recognition, there are a few differences where certain revenue and expenses are recognized in the audit report but not recognized in the Form 990. The Form 990 includes a reconciliation from the audit report to Form 990 within Schedule D - Part XI - Reconciliation of Revenue per Audited Financial Statements With Revenue per Return, including:

  • Contributions of nonfinancial assets and services (also known as in-kind donations or donated services) - recognized in the audit report but not recognized in the Form 990
  • Unrealized gains and losses on investments and foreign exchange - recognized in the audit report (see q&a below for a change in how unrealized gains/losses on investments are reported) but not recognized in the Form 990
  • Returns of unused grants - recognized in the audit report but not recognized in the Form 990

Note that the Foundation typically conforms to the Form 990 in terms of budgeting.

Where else can I find information about the Foundation’s finances?

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The audit report is one of several financial documents that provide information on the Foundation’s financials and organizational policies. As part of the Foundation’s commitment to accountability and transparency, we publish several other documents annually including our Form 990 and FAQs, annual report, annual plan, fundraising report, and grantmaking report.

Key Highlights

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What are the overall takeaways?

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In addition to upholding its fiduciary responsibilities, the Wikimedia Foundation’s financial position continued to be healthy as of 30 June 2024 - the final date covered by this audit report. The Foundation’s total revenue of $185.4 million during fiscal year 2023-2024 came primarily from donations, with a small portion coming from investment income and other revenue primarily related to Wikimedia Enterprise. For a deeper dive on Wikimedia Enterprise financial results during the year, please see here.

During the 2023-2024 fiscal year, the Foundation’s growth of both expenses and revenue stabilized and slowed at around 5%. The Foundation’s total revenue increased by 5.0%, or $8.8 million, to $185.4 million, with $174.7 million coming from donations. Expenses grew at a similar rate of 5.5%, or $9.4 million, to $178.5M. This was down from 15.8% expense growth in the prior fiscal year.

Of the total $178.5 million in operating expenses, 77.5% went to programmatic activities, 10.7% went to fundraising expenses, and 11.8% went to general and administrative support. This represents a 1.5 percentage point increase from the previous fiscal year in funds dedicated to programmatic activities, in line with our goal to reduce the percentage of expenses going to non-programmatic costs, and devote a higher percentage to programmatic work such as website maintenance and development and community funding. Growth in community grants outpaced expense growth overall, with the total amount spent on grants increasing 9.8% or $2.4 million. What is new on this year’s audit report? The following is new on this year’s audit report:

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A related party transaction is an accounting term that describes transactions between two parties that have a pre-existing business relationship or common interest. In this year’s audit report, we have a new disclosure on related party transactions with the Wikimedia Endowment (the Endowment), as the Endowment has now become its own legal entity.

The Endowment began operations as a stand-alone tax-exempt 501(c)(3) organization on September 30, 2023, with the mission to act as a permanent fund that can support in perpetuity the operations and activities of current and future Wikimedia projects, which are projects that are approved by and advance the purposes of the Foundation or its successor if the Foundation ceases to exist. The Endowment is legally separate and independent from the Foundation, and it has its own Board of Directors. However, under the accounting rules, the Endowment is considered a related party to the Foundation because Endowment management is also management at the Foundation. Shared management is part of a cost-sharing agreement between the two. See below for more information on cost-sharing and other transactions between the Foundation and the Endowment.

New Disclosure on Collaborative Arrangement

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A collaborative arrangement is an accounting term that describes a joint activity between two parties that are both actively involved in the activity (e.g., not just financially involved). In this year’s audit report, we have a new disclosure on a collaborative arrangement with Wikimedia Deutschland to mutually develop the Wikibase software to support the Wikidata project. This is not a new agreement, but it is a new disclosure this year since the dollar amount became material as of FY 2023 - 2024.

Both the Foundation and Wikimedia Deutschland do work toward the Wikidata project, and the Foundation also grants Wikimedia Deutschland funding to support Wikimedia Deutschland's work in developing the Wikibase software under the terms of a collaborative agreement. The agreement has a term of July 1, 2022 through June 30, 2025. The Foundation's cost related to this collaborative arrangement is included within awards and grants in the statement of activities and amounted to $6.1 million and $4.1 million for the years ended June 30, 2024 and 2023, respectively. We will have this disclosure next fiscal year because of the materiality for FY 2024, and depending on the materiality of any Wikidata collaborative agreements with Wikimedia Deutschland in the future, future year costs may be disclosed.

New Non-Operating Activity Line Item for Unrealized Gains on Investments

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In FY 2023-2024, the Foundation had a change in accounting policy to present unrealized gains on investments separately from investment income, net. Unrealized gains on investments are now reported as a non-operating activity entitled unrealized gains on investments within the statement of activities. The Foundation elected to make this change for a variety of reasons, including to mitigate the effect of market volatility on operating income, as well as to conform with the Form 990 requirement (which does not report unrealized gains/losses on investments).

Removal of Special Event Expense, Net Line Item for Wikimania Event

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In FY 2023-2024, the Foundation had a change in accounting policy to no longer present the Wikimania event as special event expense, net in the statement of activities. Revenue from registration sales is now reported within other income, and expenses are reported within travel and conference expenses. The Foundation elected to make this change to have all travel and conference costs reported together in the travel and conferences line item.

Wikipedia and the many other Wikimedia projects are created by volunteers. How do they fit into the report?

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Under U.S. GAAP, volunteer activity is typically not reflected in a nonprofit's audit report. However, Wikimedia projects would not exist without the hundreds of thousands of volunteers around the globe that are active on them, and the report simply wouldn’t be complete without mention of their tremendous efforts. For this reason, page 15 highlights volunteer contributions.

What are the Wikimedia Foundation’s other sources of revenue?

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The vast majority of the Foundation’s revenue comes from individual donations. Every year, millions of people from around the world support the Wikimedia projects, mostly in the form of small, individual contributions. We also receive donations and grants from corporations and foundations, investment income (including interest, dividends and realized gains/losses), and "other income," including revenue from merchandise sales, Wikimedia Enterprise, and services provided to support the Endowment through a cost sharing agreement. Refer to Fundraising for more details.

What is the Wikimedia Foundation’s approach to cash and investments?

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The Wikimedia Foundation’s goal is to ensure we have an appropriate amount of available operating funds. It is considered financial best practice for organizations of all sizes to maintain financial reserves and working capital policies. This is true for companies, nonprofits, and even governments. For nonprofits in particular, reserves are critical due to the way nonprofits raise funds, with a significant majority of funding being raised in a single quarter or season of a year. There are a range of benchmarks including from Charity Navigator that provides guidance on the level of reserves that are considered appropriate for an organization of a given size and budget.

We maintain a reserve via our cash and investments balance (which is reported within total assets on the Statement of Financial Position included in the audit report) as a source of emergency funding. In keeping with the purpose of nonprofit reserves, our reserve is designed to sustain our work and grant funding to affiliates and volunteers in the event of unplanned expenses, emergencies, or shortfalls in fundraising. In 2022, we asked our Board to consider a clear and visible policy to guide our approach to reserves. In line with organizations of our size, the Board adopted a resolution that guides the Foundation to have a minimum of 12 months of working capital in reserve and a target of up to 18 months. This capital can be drawn on in the event of sudden or unexpected loss of revenue. As of June 30, 2024, we had $271.6 million in our reserve, which amounts to just over 17 months of operating expenses and is consistent with our reserves for the last several years.

What is the nature of transactions with the Wikimedia Endowment?

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The Endowment began operations as a standalone tax-exempt 501(c)(3) organization on September 30, 2023. There are three main types of transactions between the Foundation and the Endowment:

  • Cost sharing agreement: The Endowment does not have any employees of its own. In order to maximize cost efficiency, the Endowment and the Foundation entered into a cost sharing agreement in FY 2023-2024 in which the Endowment pays the Foundation for the work the Foundation does to support the Endowment, primarily fundraising and general and administrative support. Costs include direct business expenses for which the Endowment reimburses the Foundation, such as donation processing fees, business registration fees, website hosting costs, marketing material, printing, mailing, consulting, and travel and transportation. Costs also include Foundation staff time to support the Endowment, such as Fundraising, Legal, and Finance staff time. The Foundation recognized revenue of $2.1 million related to services provided to the Endowment through the cost sharing agreement in FY 2023-2024. The revenue is recorded within other income, net.
  • Donation revenue: While the Endowment can receive donations directly, for example via wires sent to the Endowment’s bank account, donations made to the Endowment online are processed via the Foundation’s payment processors. Monthly, the Foundation transfers those donations to the Endowment for donations raised in the prior month. As of June 30, 2024, the Foundation owed the Endowment $525,607 for donations raised on behalf of the Endowment in the month of June. This was subsequently paid in July 2024.
  • Funding: During the fiscal year ended June 30, 2024, the Endowment provided the Foundation with fundings of $1.5 million for MediaWiki improvements, $600,000 for the Abstract Wikipedia project, and $500,000 for exploring strategies for expanding beyond the Foundation’s existing audiences of consumers and contributors. Each year, the Endowment uses a portion of its earnings for funding to support the long-term sustainability of Wikimedia projects. Since fiscal year 2022-2023, Endowment funds have supported technical infrastructure and innovation on the projects.

Detailed financials for the Endowment are available in the Endowment’s audit report.

On page 3, right of use asset - operating lease, net decreased to $0 from $1.8 million. What caused this decrease?

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The right of use asset at the end of FY 2022-2023 represented the Foundation’s lease of its headquarters office building at 1 Montgomery Street Suite 1600, San Francisco, CA 94104. The lease term ended in September 2024, and the Foundation did not elect to renew the lease. Instead, the organization has transitioned to a new, significantly smaller location in San Francisco, as of October 2024. In preparation of the office move, the Foundation ceased operational use of the 1 Montgomery Street office as of June 30, 2024. Staff then began the process of digitizing files transferring data to cloud storage as well as organizing and moving out all furniture and other assets, donating many of the items that would not be transferred to the new office. This process lasted through September. Since operational use ceased on June 30, we thus expensed the remaining right of use asset, as accounting rules require expensing once the asset (i.e., the office) is no longer in operational use.

On page 4, contributions of nonfinancial assets and services decreased to $0.3 million from $1.0 million. What caused this decrease?

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The FY 2022-2023 amount included $498,800 in donated engineering services and $260,000 in pro bono legal work for projects that ended in FY 2022-2023.

Terms and Definitions

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What is "contributions of nonfinancial assets and services"?

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Contributions of nonfinancial assets and services (formerly known as "in-kind service revenue") includes goods and services that the Wikimedia Foundation would normally pay for, but have been donated to us at no charge, such as bandwidth and hosting services, subscription services, and pro-bono legal services. Further detail is available in the footnotes of the audit report under Contributions of Nonfinancial Assets and Services (Note 1(l)).

What is "other income, net"?

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"Other income, net" for the Foundation consists primarily of revenue for Wikimedia Enterprise, receipt of payment for services to support the Wikimedia Endowment through a cost sharing agreement, merchandise sales from our online store, and rebate from our corporate credit card program.

What is "investment income, net"?

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

What is “salaries and benefits”?

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"Salaries and benefits" includes salary, benefits, retirement, wellness, and payroll taxes for full-time and part-time staff members in the U.S. and outside of the U.S. 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. Those costs are reported in the Professional Services expense line.

What are "other operating expenses"?

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"Other operating expenses" include expenses for facilities such as rent and office and non-office supplies, software, insurance, annual staff convenings, recruiting, staff development, and personal property taxes. Prior to fiscal year 2023-2024, this also included Wikidata project funding, but Wikidata costs have now been reclassified to the “awards and grants” line item.

What is the "functional allocation of expenses"?

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The functional expense statement is created to break out the purpose of spending. Expenses are reviewed and allocated among three categories: Programs, General and Administrative Support, and Fundraising.

What are "Programs" expenses?

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The "Programs" category includes all the work done by the Wikimedia Foundation that directly supports the Wikimedia mission. For example, it includes all technology spending with the exception of spending supporting the office (e.g., office equipment). In addition to our two main data centers, five caching data centers, we maintain the software and infrastructure on which we operate some of the world’s most multilingual sites with over 950 separate wiki instances and over 3,400 community-contributed tools, many of which are essential to maintaining the content and quality of Wikipedia, as well as seven mobile applications. We also maintain substantial data infrastructure that enables volunteers to gain direct access to wiki content and to analytical information about the wikis. This data is useful for our volunteers, but is also widely used by researchers, companies, and others as one of the largest free and open-source corpus of multilingual content, metadata, and supplementary data. Maintaining this infrastructure and continuously ensuring Wikipedia is online, available, and secure for its hundreds of millions of readers and editors around the world takes significant financial and staff resourcing.

The “Programs” category also includes salaries for technical staff that contribute to the maintenance of our systems, distributed among site reliability engineering, software engineering, security, and a range of other supporting roles. It also includes expenses for all our grant programs, including funding for affiliates, conferences, research, and individual contributor projects, as well as internal staff time to support the grants program. The category also includes movement communications and an allocation of Chief Executive Officer, Legal, Administrative, and Finance staff for the portion of their time spent directly supporting programmatic activity.

The Better Business Bureau standard percentage benchmark for allocation to programmatic spending is 65% or more of total spending; the Foundation spent approximately 77.5% towards the programmatic activities.

What are "General and Administrative" expenses?

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The "General and Administrative" category includes costs for general and administrative expenses such as business insurance, staff recruitment expenses, and an allocation for general office expenses such as rent. The category also includes the personnel cost for the People department, as well as an allocation of costs for Chief Executive Officer, Legal, Administrative, and Finance staff.

What are "Fundraising" expenses?

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The "Fundraising" category includes all spending associated with fundraising activities. For example, it includes the salaries of the Fundraising staff, donation processing expenses related to online fundraising (e.g., Adyen processing fees), and all fundraising-related travel and conference costs. This category also includes expenses related to fundraising for the Wikimedia Endowment.

What are "Internet Hosting" expenses?

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The category “Internet Hosting” expenses in the audit report only includes the costs we pay to data center and telecommunication providers for physical hosting (space), power and cooling for our servers, and Internet connectivity. This category is just a small portion of all of the costs related to run a top-10 global website, deliver on wiki experiences that enable the distribution of free knowledge worldwide, enable the data, models, insights, and tools infrastructure, and more. The total budget of our investment in this work is defined by our Infrastructure goal and was 48.7% of our budget in FY23-24.

What are "Contributions Receivable"?

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Contributions receivable represent gift amounts due from various entities, which are occasionally directed at specific activities. As of June 30, 2024, current and non-current contributions receivable totaled $1.6 million and represents contributions receivable from two grants, as well as contributions receivable from payment processors.

Note

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  1. In prior fiscal years, we reported unrealized gains/losses on investments as part of this figure. We have now moved unrealized gains/losses to a special designated part of the non-operating section of the audit report for clarity. Read more about this change in the FAQ. Figures that draw comparisons to previous fiscal years also remove unrealized gains/losses from prior years in order to make the comparisons comparable.