Audited financial statements for 2018 available

Martin Michlmayr tbm at
Sat Nov 16 15:26:33 UTC 2019

Audited financial statements and the 990 tax form for 2018
are now available on SPI's web site:

This was the first time SPI got an independent audit of the
books done.

Since the 2018 annual report contained provisional figures,
I've updated the report to reflect the audited books:

As I mentioned on this list before, as part of the preparation
for the audit, I completely overhauled the 2018 books and
fixed a number of issues.  Below is a description of the
changes I made.

If there are any questions, let me know.

(contractor for Software in the Public Interest, Inc.)

# Changes to the 2018 report

## Wrong project allocations

There were a few cases where expenses were charged to the wrong project.

Impact: some closing balances were overstated and some were understated

Affected projects: DebConf17, DebConf18, Debian,,
HeliOS, LibreOffice, OpenZFS, PostgreSQL

## SPI 5% not charged

We had a small number of transactions where the SPI 5% fee was not
charged (and one where the fee was too low).

Impact: some project balances were overstated and SPI's balance was

Affected projects: DebConf18, Debian, OBF, OpenZFS, PostgreSQL

## SPI 5% not charged correctly on foreign PayPal donation

The SPI 5% fee was not charged correctly on PayPal donations in foreign
currency (which are very rare).  The 5% was charged on the original
amount in the foreign currency.  So if 10 CAD were donated, which at the
time was 7.37 USD, the 5% fee (which is in USD) was charged on 10
instead of 7.37.

Impact: the 5% was overstated when the foreign currency / USD exchange
rate was < 1 and understated when it was > 1.

Affected projects: 0 A.D., Arch Linux, ArduPilot, Debian, Privoxy.

## Handling of foreign currencies in PayPal

For most PayPal transactions, we show the gross amount as income and the
PayPal fee as an expense.  For donations in foreign currencies (which
are very rare), we only showed the net amount received in USD.

We now show the gross amount (converted to USD) and the PayPal fee.

Impact: income is higher, but so are expenses.  There is no impact on
the closing balances.

## Folded FFmpeg Outreach into FFmpeg

FFmpeg Outreach was folded into FFmpeg.

Impact: FFmpeg Outreach no longer exists; the opening balance for FFmpeg
increased accordingly.

## Removed DebConf

There was an attempt during 2018 to fold all DebConfXX accounts (one per
year) into a generic DebConf.  This attempt was incomplete and resulted
in inconsistent usage (some DebConf18 income was for DebConf and some
for DebConf18.)

Since the DebConfXX accounts are here to stay (for now), I removed the
generic DebConf (which was introduced in 2018 and only partially used).

Impact: DebConf no longer exists; the opening balances for DebConf18 and
DebConf19 increased accordingly.

Affect projects: DebConf, DebConf18, DebConf19

## Improved classification of some expenses

Some expenses were not classified correctly (or at least not optimally).

For example, travel to the GSoC mentor summit was classified as
development whereas it should be travel according to our classification.

Impact: some expense classification changed; there is no impact on
closing balances.

Affected projects: 0 A.D., Debian, FFmpeg, PCP, PostgreSQL, YafaRay

## Redesigned the chart of accounts

I redesigned the chart of account, so some classification of expenses
has changed.

Impact: expense accounts and classifications are different; no impact on
closing balances

## Brought check handling in line with GAAP

In the past, SPI recognized income from checks when they were deposited
and similarly recognized expenses when checks sent were deposited.  This
is not in line with GAAP (Generally Agreed Accounting Practices) which
require you to treat checks as cash -- the expense is recognized when a
cash is written and income recognized when a check is received.

This means that checks received in December 2018 but deposited in
January 2019 have to be recorded in the 2018 books.

Impact: income of $7,055 was moved from 2019 to 2018, increasing the
closing balance of 2018 (and reducing income in the January 2019 report)

Affected projects: DebConf19, Debian, LibreOffice, OpenZFS, PostgreSQL

Similarly, a check SPI sent out in 2018 (but not deposited as of the end
of 2018) has to be recognized in 2018.

Impact: decrease the closing balance

Affected project: PostgreSQL

(2017 was not changed: a handful of checks received in 2017 are
recognized in 2018.  The amounts are not material.)

## Got rid of Liabilities:Banking:CPFee

We used the `Liabilities:Banking:CPFee` account to keep track of some
Click & Pledge fees but a liability account doesn't make sense since SPI
operates on the cash basis.

Impact: Liabilities:Banking:CPFee is gone, the actual expenses haven't

## Got rid of negative project balances

Some projects (some of the DebConfXX earmarks and OpenZFS) had a
negative balance at the beginning or end of the year.  While SPI has
historically been lax about this (in the assumption that this is just a
cashflow issue and that donations will come in later to pay for the
expenses), the auditors didn't like that for a good reason: a restricted
fund can't be negative.  You can spend it down to zero, but you can't
go negative.

For DebConfXX, the solution was simple: merge all DebConfXX into one
"Debian Conference", which has a positive balance.  The financial
statements will show one "Debian Conference" earmark because of this
reason while we retain the separate DebConfXX earmarks for the treasurer
reports (with some of the earmarks being negative).

For OpenZFS, there was no clear solution.  SPI basically extended a loan
to OpenZFS but the OpenZFS restricted fund is not separate from SPI so
we can't have a real loan.  What it means in practice is that OpenZFS
spent down all their funds and their remaining expenses were covered
from SPI's general fund.  However, in order to be fair, we're treating
this as a loan and will move funds from OpenZFS back to SPI's general
fund in 2019 to cover the excess 2018 expenses.

Martin Michlmayr

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