Re: AdminRest: Finances and Accounting
2004-11-18 15:07:04
Personally, I do not think that an IETF BCP is the correct place to
include a lot of specifics about how the accounting for the IASA
activity will be handled. I think that those details should be
worked out, and adjusted as needed, by the IAOC (in consultation with
ISOC, accountants and tax lawyers).
If we insist on including this level of detail, though, we need to
make sure that we get it right, and I don't believe that the current
text reflects the right way to handle these things.
For example, there are some serious problems with co-mingling
designated/restricted funds (such as targeted donations) with
non-restricted funds (such as IETF meeting fees), and WE SHOULD NOT
specify that these things need to go into a single account. That
would have the effect of placing unnecessary restrictions on
previously unrestricted funds, and that just isn't sound accounting
policy.
I completely agree with the idea of an annual budgeting process and
planned allocations from the general ISOC funds to the IASA function.
I think that this discipline and advanced forecasting is healthy and
responsible. However, I see no reason to restrict the planned
payments to being four quarterly payments of equal size. There is no
reason to believe that ISOC funding sources and/or the IASA budget
will be flat on a quarter-to-quarter basis. So, I'm not arguing
against the independence of the IASA budget and/or the responsibility
of the IAOC & IAD to maintain it. I am merely arguing that we (the
IETF community) should not constrain the model to a flat, quarterly
funding model when that is unlikely to best fit the needs of the
organization.
If there are some high-level guidelines within which we want the
IAOC/IAD to operate, we can include them in the BCP. But, it would
be foolish to document a detailed accounting policy in a BCP that
will later require IETF consensus to adjust or change. We need to
pick trustworthy and reasonably well-qualified people to sit on the
IAOC, and then we need to trust them to develop and maintain
reasonable accounting practices for the IASA function (in cooperation
with ISOC, accountants and tax lawyers).
Margaret
At 4:55 PM -0800 11/17/04, Fred Baker wrote:
A question for those maintaining the document?
There is a fair bit of change in section five, regarding IASA
funding. In a nutshell, it now says:
- IETF has three revenue streams:
* IETF meeting fees
* Donations of various kinds designated to the IETF
* ISOC funding derived from other sources
- the first two get deposited in the IASA checkbook
- the third gets deposited in quarterly lump payments
- there is an intent to have built up enough money for the IASA to run for
six months without receiving a dime, over a period of three years.
All that sounds good on the surface, but it differs rather markedly
from current ISOC accounting practice, and it seems to
over-constrain the problem and its solution. Someone who knows more
about accounting than I do will mention the difference between a
cash accounting scheme and an accrual accounting scheme, the latter
being more usual in corporate accounting.
IETF does indeed have these present revenue sources. CNRI/Foretec
currently collects IETF meeting fees and uses them pursuant to IETF
meetings, databases, and teleconferences. ISOC accepts donations
designated to IETF-related activities. ISOC also uses funds from
other revenue sources (other donors) to further IETF purposes.
ISOC places donations "to the IETF" in accounts so designated. When
the money is spent - usually on the RFC Editor, which is our largest
single IETF-related expense - the revenue is recognized, and the
books show both the revenue and the expense.
The effect of section 5, if I am reading it correctly, is to present
ISOC with an always-on expense - ISOC immediately transfers any such
money to IASA. The money is therefore immediately recognized as both
revenue and an expense in the ISOC ledger and as a net deposit in
the IASA checkbook.
ISOC current practice with regard to other IETF (and ISOC) expenses
is to pay them as bills are presented. Bills are not presented on
nice neat quarterly boundaries; the insurance bill is paid annually,
IAB telechats are paid out of the monthly phone bill, meeting
expenses and other payments from the IETF Chair's Discretionary
Budget are paid episodically, and so on. The current issues in the
RFC Editor's office (into which I will not delve in detail; due to
an accounting error, they have suddenly needed an infusion of cash)
result in ISOC paying an unplanned and unbudgeted lump sum payment.
In short, like any other ISOC bill, IETF-related expenses are paid
as valid bills are received, sometimes by surprise.
A significant part of IETF expenses will be in deposits for future
meetings. Generally, the most expensive way to plan and pay for an
excursion in a hotel or conference center is "at the last minute".
As a result, most organizations that plan conferences have deposits
on hotels and such at least a year out. A quick look at
http://www.icann.org/meetings/, for example, shows meetings paid for
through next summer, and on in development in December 2005. When
the document talks about a six-month reserve, I therefore have to
ask: which six months of the year? Does this cover one planned
meeting fee, or two? On an accrual basis, that's not much of an
issue, but on a cash basis, it is a big one.
The effect of section 5, if I am reading it correctly, is to
transfer these budgetary bumps and grinds to the IASA rather than
allowing the ISOC to help out, making "oops, we're low on cash"
something that has to be discussed as opposed to ISOC simply
backstopping things as we have heretofore agreed. By treating them
on a cash basis rather than an accrual basis, this section seems
maximize the pain they cause.
I wonder whether the IETF would consider talking with ISOC's
accounting office to normalize these issues now, and whether the
problem really needs to be this tightly constrained?
Regards,
Fred Baker
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