Yknow what while I’m here I know we as a website agreed to oppress the business majors but all the bullshit that comes around every April over ao3’s business practices makes me think we should’ve kept at least one to explain to people how nonprofits, despite their name, still need money to function and do not in fact run on rainbows and dreams alone
Woo! It’s a good thing y’all didnt oppress accounting majors because we understand this stuff better than business majors. (We were around before capitalism and we’re already set up for after capitalism.)
First things first - I dont regularly use or donate to AO3 but I have made an account to see what the fuss was about. Fanfiction just isnt my thing but I see why people like it.
AO3 is a 501©(3) organization. What that means - No Profit for owners or investors. What that does NOT mean - no cash at year end or not paying employees a livable wage/salary. If you’re contrivance with a non-profit is that they allow their employees to survive under capitalism, then you need to rethink your priorities.
That being said, AO3 has no employees. All work is volunteer based. ABSOLUTELY ZERO people are making money from this site. (Outside of contractors and professionals who are vendors and not affiliated with AO3.)
I’m going to break down the 2019 Audited Financials because that’s the most recent. And compare them to the budget and notes:
The auditor’s opinion is “unmodified.” That means these are as accurate as they get.
Their assets: $1.3M in cash. $197k in the value of the servers. (That’s the price they bought the servers minus depreciation. Depreciation is a tool we use to slowly devalue fixed assets over time. Without it, companies would recognize huge losses at year end when they sell old assets. That’s not reliable information when you’re trying to analyze the financials.) Why would a non-profit need a million dollars in cash? Partly to fund the next year’s work - it looks like they’re trying to bring on new servers which can cost upwards of $400k each time. They also have a history of protecting fans from people like Anne Rice who wants to sue them into debt and oblivion. We’ll talk about the legal stuff later. But in the case they would lose an expensive case, they need funds on hand to pay that out.
Revenues - this is the money in. They received $733k in donations and the like. Their expenses are about 37% of these. Which tells me, they are focused on managing their cash balance, and doing well. Again. No organization would survive if they had no cash at year end.
You might see the “In-Kind Revenue” and not know what that means. $190k is a big amount. But if you look at their expense statement on page (4) you’ll see “In-Kind Expenses” for the same $190k. In-kind means services in kind of cash. Or services instead of cash. So they had $190k of pro-bono (donated) legal work in 2019. They mention it in the budget and later in the audit footnotes. There are other “professional fees” for about $28k. That’s also legal/audit work but they had to pay cash for. It wasn’t donated.
Server fees = $79k (these are higher than 2018 because they installed a new server.)
Transaction fees = $27k (these are charges from your banks/credit cards/paypal to process donations. They are roughly 3% of donations which is about correct.)
Contractor fees = $15k (the budget noted they paid for a security test - this is actually a pretty low cost for something like this.)
Supplies = $14k (I couldn’t find notes on this but it’s similar to 2018, so it’s probably just normal business things.)
Postage = $12k (This is high compared to 2018, but I hazard a guess it’s related to sending out promotional items for donations.)
Advertising = $10k (looks like a new cost this year, but is related to fundraising efforts. And might be related to those promo items.)
Other non-cash expenses:
In-kind = $190k (those donated lawyer fees we talked about earlier.)
Depreciation = $74k (again this is an accounting process that every company with fixed assets does.)
The cash flows statement just confirms which expenses were and weren’t cash. And it shows us that they have $1.3M available for the next year. Glancing at the 2020 budget they planned on spending a third of that to upgrade servers. And they have another $400k budgeted for 2021. Honestly to me, the cash looks low considering some years (2018 in particular,) their legal work was valued at half a million. There is a risk that they would have to pay that amount out of pocket the same year they plan to bring on a new server upgrade.
So all in all, if you want to donate to AO3, this looks like a reliable organization to donate to. There is no evidence in the financials that they don’t deserve the donations. (And if you do donate, remember it is a tax credit!) I also don’t see any verifiable reasons not to donate. If you have other places you would rather place your donation, that’s fine! Do that! But there doesn’t seem to be a reason to campaign against their fundraising efforts.
This is a really neat breakdown! And it’s explained so that idiots like me who don’t know how stuff works can understand!