Angie Sabin, the Drupal Association Director of Finance and Operations, answers your frequently asked questions about the #DrupalCares campaign.
Who are you?
Hi! I’m Angie Sabin, and I’ve been with the Drupal Association just over a year. In that time we’ve made great strides around improving our operational and finance systems with a focus on efficiency and revenue diversification. I had over 10 years in nonprofit operations, nonprofit management, and accounting under my belt prior to joining the team.
How much money has been raised as part of #DrupalCares since the official launch?
For the latest progress on the #DrupalCares campaign you can view our landing page. Earlier today, Heather posted a short progress report here. You can also find a separate landing page for the #DrupalCares match challenge, a $100,00 matching grant funded by Dries and Vanessa Buytaert, available through the end of April.
What are the options to contribute? How are donations to #DrupalCares recognized?
… can commit to pledging your full sponsorship to the Association, regardless of what shape DrupalCon takes this year. This will prevent the gap from getting wider.
… can help us get the word out! The Drupal Association has deep, deep roots within the community, and tight relationships with those of you who build your livelihoods on Drupal. Unfortunately, there are 10 times as many end-users of Drupal out there who may not even know that the Association exists. Would you leverage your networks to help us reach them?
Your contributions to the #DrupalCares program will be recognized with the #DrupalCares badge on your individual or organizational profile. Organizational contributions will also be recognized with contribution credits in the Drupal.org marketplace.
How are donation dollars, and revenue in general, utilized by the Drupal Association? Where does the money go?
The short answer is that all money goes toward meeting our mission and the programs we run to accelerate the Drupal project. Net revenues from DrupalCon, Supporting Partner Program, memberships, digital advertising, technical programs, etc. are used to power 3 key program areas: Drupal.org, DrupalCon, and Drupal Community.
As you know, drupal.org is the update server for Drupal, home of all localization tools, centralization of the contribution system, CI testing, security advisories, and the first touchpoint for many new evaluators and potential contributors.
Though it is also our main source of revenue, DrupalCon itself is a mission-centric program bringing people together and invigorating project momentum. It’s where we host Driesnote which celebrates recent success and details the vision for where Drupal is going. DrupalCon provides business development opportunities for your organization and professional development for your team. It’s also the venue where Initiative Leads build momentum and recruit talent for key initiatives to move the Drupal product forward.
The Association has a strong focus on the Drupal Community: connecting the Project to the talent pipeline, centralizing Drupal promotional materials that can be customized and reused by those selling Drupal services, creating spaces for our international Community to coordinate and thrive, and driving Diversity, Equity, and Inclusion initiatives.
Note that while we talk about three key program areas for Drupal Association operations, they are actually very tightly entwined. Drupal promotion and marketing activities for example take place on Drupal.org and at DrupalCon. Professional development tools for Drupal community members are integrated across all program areas. Staff are multi-disciplinary, supporting member communications in one moment, improving the evaluator experience on Drupal.org in another, and collectively fielding outreach to the community to support initiatives like mentorship, local DrupalCamps, and Diversity, Equity, and Inclusion efforts. As you can see all of these programs and the people behind them are interwoven. The big ticket items like Drupal.org and DrupalCon are really just the channels that allow us to execute this mission driven work.
Why does an altered DrupalCon affect the Drupal Association so dramatically? Shouldn’t force majeure make everything ok?
As Dries mentioned in the Lullabot podcast this week, the Drupal Association originated as a need for an entity to organize DrupalCon so historically almost 100% of the Association’s revenue has come from events. The role of the Drupal Association has evolved over time to be more integral to Drupal itself, and leadership has known for years that relying on event revenue as the main source of income is risky. Much work has been done over the last few years to mitigate that risk and further diversify funding streams, but it will take more time to get to an ideal ratio. Non-event sources of revenue include technical programs like Drupal Steward, digital advertising on drupal.org, individual memberships, and the Supporting Partner program. As of today, approximately 60% of revenue still comes from DrupalCon North America. Therefore, the inability to host the event as planned has a drastic effect on revenue without another immediately available stream of income to offset the approx. $1M gap in net revenue. We plan to mitigate that gap by hosting an alternate DrupalCon event this summer, but that still leaves the $500k we are fundraising through the #DrupalCares campaign.
As for force majeure, mid-May fell outside the window to trigger this clause for our event. Through the skillful work by our small, but mighty, Events team and with the help of trusted advisors, we’ve been able to shed the additional $2million+ liability through venue and hotel contracts. Some of these were confirmed as recently as yesterday! Without these cancellations confirmed, we weren’t able to move forward with any alternate plans. Force majeure helps us avoid much of the event costs, but it does not replace net revenue needed to meet our break-even budget.
Why is the range of the potential budget gap that Heather mentioned last month so large ($400k – $1.1M)? How can there be a $600k variance in the models? Are you and Heather just bad at math?
Well, I’m a seasoned professional with many years of financial analysis experience, and Heather is an industrial and systems engineer by education, so we’re actually pretty darn good at math! 🙂
We modeled 3 potential scenarios and their impact on the overall budget for 2020; a virtual conference, a postponed conference and cancellation with tickets deferring to Boston 2021. Regardless of which path we take, we have sunk costs for conference planning to-date which we can’t recover such as staffing, marketing, site visits, and production support. These costs appear in each scenario.
The virtual conference model resulted in the low end of the gap with the assumptions being reduced ticket prices, refunding the difference in ticket pricing, selling a conservative number of new registrations and keeping some sponsorship intact. From the cost side of things: eliminating in-person costs such as catering but adding in new costs for a virtual conference platform. On the high end of the spectrum we modeled a cancellation scenario in which ticket sales to-date are refunded or deferred to the following year, and we are able to keep sponsorship dollars intact. From the cost side, all costs are eliminated except those as previously described for pre-event work. At the time we also assumed a cancellation might more drastically impact our ability to retain sponsorships in this scenario
The middle of the road scenario is a postponed conference with significantly fewer ticket sales, but the in-person costs remaining.
We have also been working diligently to remove any liability for hotel attrition and the venue contract, both of which add to the potential gap.
In addition to DrupalCon revenue, we have other budgeted revenue areas to meet which we modeled as conservative in all scenarios given the financial impact COVID-19 has had.
How is a postponed conference more costly than a virtual conference?
In a postponement version, we would be holding an in-person conference at the existing venue. In any in-person scenario, costs are higher because of the infrastructure, people and materials required to deliver an in-person conference. To be conservative, we assumed registrations at a postponed conference would be significantly lower than what we typically receive due to anxiety around travel as well as the unknown impact of COVID-19 moving forward. So essentially, we would burden the higher level of costs without matching revenue projections to get us to a net revenue number that works.
What steps has the Association taken to mitigate costs given the revenue shortfall, and what are you doing to be sure this doesn’t happen again?
Even before the launch of #DrupalCares, we looked at every line item that we could trim to mitigate the revenue shortfall. We came into 2020 with a very lean, break-even budget, so we’ve had to make very tough decisions including a first round of staffing reductions that took place in March. We have since revised our 2020 budget, any further costs reductions will have to come in the form of additional staff layoffs. Not only is it heartbreaking to have this affect the dedicated and hard-working Drupal Association team, but when we lose people we also lose the power behind making programs and initiatives happen for the Community.
Frankly, the impact of COVID-19 is the reason we are in this situation. We are adapting as quickly as possible, as many of you are doing with your organizations as well. Along with our board of directors, we are making realistic and conservative assumptions in our projections given the financial impact of health crisis, looking to continue diversification of revenues (as has been in our strategic plan before this event), and monitoring conditions that could affect plans for 2021 in an effort to remain as nimble as possible.
What is the transparency for Drupal Association’s annual budget? How is financial oversight handled?
Every year there is a public board meeting where financial information is presented. We release our 990 (nonprofit tax return) annually on our website (note that 2019’s 990 will go up later this year). Our financial records are audited biannually by an independent auditor, and reviewed (an “audit lite”) in the off years by an independent auditor.
We operate on a very lean budget. For 2020, the board voted to approve a net-neutral budget. This means that all of the revenue we budgeted is directly covering costs and not making a net profit. In years when we can achieve a net profit, those funds will either be reserved for emergencies and/or invested back into the organization to further meet the mission.
When will you know if the gap has been covered?
We are updating our financials and cash flow every week to monitor our overall budgeted revenue progress. We measure the existing budgeted revenue buckets as well as the new contributions coming in related to our DrupalCares campaign. In order to assess what “counts” toward the gap, we include any contributions, and upgrades to membership or items that weren’t planned as part of the 2020 revenue budget. If we are able to go with a virtual conference model with lower pricing, for those that have registered and donate the difference of their ticket value, we’ll be able to count that as well. We want to recognize everyone that contributes or has historically contributed, everything is valuable but in terms of tracking the gap specific to DrupalCon and COVID-19 we are analyzing by looking at revenue that we would not normally have received, ie, “new revenue”.
What date do funds need to be raised by?
If we are unable to fill the gap by 5/31 we will need to consider a variety of cost cutting measures. Given we’ve already had a round of layoffs, any additional cuts will critically reduce our ability to execute our existing programs. As we progress into the campaign and understand the final gap, if any, we will start to make difficult decisions about what will be scaled back.
Are there any benefits you could take advantage of from the CARES act?
We have applied for the Payroll Protection Program through the CARES Stimulus Act for 2.5x our average monthly payroll (we may or may not be funded for the full amount). If we are approved for the loan, the funds could be used to cover wages and related staff costs in the next 8 weeks. The loan is potentially forgivable. We do not want to rely on this loan to fill a gap since we do not know if we will receive a loan or if a loan would be forgiven. However, it may be beneficial from a cash flow perspective.
What are the tax benefits for giving to Drupal
We are a 501c3 non-profit, so depending on how you contribute, your dollars may be eligible for a tax deduction. The tax deduction for any nonprofit contribution is limited to the excess of the contribution over the fair market value of any items received in exchange for the donation. Our individual members receive only intangible benefits therefore the entire membership is eligible for a tax deduction. Donations are fully eligible for a tax deduction. Even your ticket to DrupalCon may be tax deductible.
Additionally, as part of the CARES Act, changes to tax benefits were made to incentivize charitable giving in the U.S. Beginning in 2020 and each year thereafter (this is not limited to only 2020), individuals can take a $300 above-the-line deduction on their tax returns for cash contributions to charities, regardless of whether or not the individual itemizes deductions. Individuals will be eligible for a deduction up to 100% of adjusted gross income.
We aren’t tax attorneys or licensed tax preparers, nor can we legally advise you on preparing your taxes, so we have to use language like “may be eligible” when providing this information.