that all sounds good and I have no particular objection I'd just to
have the auditors that will be auditing the books give the OK before
chiseling the rules into tablets
(I do think that the current text is overly constrainning and
even if OKed by the auditors may come back to bite the IAD in the future)
Scott
ps - I sent a pile of comments on the document to the IETF list yesterday
but they have not yet shown up so I'll resend
----
From carl(_at_)media(_dot_)org Fri Nov 19 11:44:00 2004
X-Original-To: sob(_at_)newdev(_dot_)harvard(_dot_)edu
Delivered-To: sob(_at_)newdev(_dot_)harvard(_dot_)edu
From: Carl Malamud <carl(_at_)media(_dot_)org>
Subject: Re: AdminRest: Finances and Accounting
In-Reply-To: <419DB5C2(_dot_)1090505(_at_)zurich(_dot_)ibm(_dot_)com>
To: Brian E Carpenter <brc(_at_)zurich(_dot_)ibm(_dot_)com>
Date: Fri, 19 Nov 2004 08:42:05 -0800 (PST)
Cc: scott bradner <sob(_at_)harvard(_dot_)edu>, hardie(_at_)qualcomm(_dot_)com,
margaret(_at_)thingmagic(_dot_)com, isoc-board(_at_)isoc(_dot_)org,
fred(_at_)cisco(_dot_)com,
ietf(_at_)ietf(_dot_)org
Organization: Memory Palace Press
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Hi -
I'm not aiming this note at anybody in particular, but I sense some
confusion about some basic accounting principles. I hope nobody
will be offended by a brief tutorial.
An income statement shows expenses and revenues over a period of time,
often one year. When I hear "full allocation of expenses and revenues
in order to have a good financial picture of the IASA", I imagine
an income statement that looks like this:
Income
Unobligated general revenues $100
Revenues specificaly tagged for IASA $100
General In-Kind Contributions $ 50
In-Kind Contributions for the IASA $ 50
Total Revenues $300
Expense
ISOC meeting expense $ 50
IASA meeting expense $ 50
ISOC other expense $ 20
IASA other expense $ 20
General expense $ 60
Depreciation $ 20
Total Expense $220
Note the listing of non-cash (in-kind) contributions under
income. Depreciation writes off a portion of the value of the
equipment each year to reflect the lower value of the asset
over time. This is accrual-based accounting, which is what
Fred mentioned.
This income statement meets the criteria I've heard on this
list: you can break out the IASA-specific expenses and
revenues, allocate the general expense and depreciation, and come
up with a pro-forma income statement for the IASA activity.
The basic message is: please don't lump everything over
into general & administrative costs, try and allocate those
costs that can be identified into IASA specific categories.
Where I see the confusion is on the concept of the balance
sheet, which lists assets and liabilities at any point in time.
You can imagine two balance sheets:
Assets:
Bank Account $200
Physical Assets $100
Total Assets $300
Liabilities
Funds obligated for the IASA activity $100
Other Liabilities $100
Goodwill and Equity $100
Total Liabilities $100
Alternatively, one could do this:
Assets:
General Bank Account $100
IETF Bank Account $100
etc... etc...
The "gooodwill and equity" line is the excess of assets
over liabilities.
What I'm not hearing a consensus on this list about is
the concept of what to do with the balance sheet On the
one hand, I hear things like "quarterly payments" and
"shall be deposited into the account." On the other
hand, I hear that this overly constrains the accountants.
The answer is you could do this either way. Even if the
financial statements don't break things out into seperate bank
accounts, the IASA can still receive a management accounting
report that shows how assets, liabilities, expenses, and
revenues are allocated. You can also add the requirement
of seperate accounts on the balance sheet.
That makes accounting a little bit harder, and you spend
a bit more on things like bank fees, bookeeping time,
and other transaction fees, but it isn't a huge deal.
What I've heard on this list is quite a bit of talk
about generally accepted accounting practices. I don't believe
there is any doubt that ISOC practices those practices and
it is a no-brainer to request allocation of line items.
The request for periodic transfers of funds based on the
budget process, the seperate accounts, etc... are not
unusual for a self-contained "profit center" in a company.
So, that can be done as well. The question for the IETF is
whether the request for seperate accounts is important to
you and should go into the BCP.
Before everybody jumps in: the latter seems symbolically
important to some folks and maybe the question is political
and should be handled as such (e.g., don't ask "is this
optimal" but ask "is this important enough to some people that
this is a way to get consensus and move on.").
$0.02, YMMV.
Carl
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