Re: AdminRest: IASA BCP: Finances and Accounting - principles

Hi Bert,

I agree with Scott and others that the "principles" you have outlined 
below are not high-level enough to be basic principles.  Basic 
principles would, IMO, be things like:
1. Transparency:  The IETF Community should be informed of how all 
monies related to the IASA are collected and spent.
2. Accountability:  All IASA expenses must be approved by people who 
are accountable to the IETF community (the IAOC) or by people 
accountable to the IAOC (IAD and/or other IASA employees).
3. Integrity:  The IASA finances should be tracked and maintained in 
accordance with generally accepted accounting practices and shall 
scrupulously adhere to all applicable laws and rules.
I have some other comments on your proposed principles in-line:

At 5:54 PM +0100 11/26/04, Wijnen, Bert (Bert) wrote:
>   1. The goal is to achieve and maintain a viable IETF administrative
>      support activity (IASA) based on meeting fees and designated
>      donations.
Personally, I don't understand why this is an important goal.

I see no reason why the IETF needs to change the nature of its 
funding model to rely solely on meeting fees and designated ISOC 
donations.  Today, approximately 35-40% of the costs that will become 
part of IASA are covered by ISOC (the RFC Editor, Chair's fund, IAB, 
and Insurance).  These costs have traditionally been funded through 
ISOC donations, but not only through donations designated for IETF 
support.  In fact, in some years, the great majority of ISOC's 
donations went to support this function.
Requiring that the IETF is funded by meeting fees and designated 
donations alone is a detail-level restriction that  just doesn't make 
sense to me.  One of the reasons that I favored the Scenario O 
approach is that ISOC is already stable as an organization and has 
the proven ability and commitment to raise funds for IETF-related 
activities.  Why mess with that?
There is one important, short-term issue that I think that we should 
understand, but that I don't think is appropriate (due to its 
impermanent nature) for inclusion in the  BCP...  Today, ISOC 
receives funds in two primary ways:  donations (from individual 
members and organizational members, mainly) and PIR surplus funds. 
Because of the potentially temporary nature of the PIR surplus 
(contract up for renewal in 2008), I think that we all understand the 
need for the IETF to have a stable financial basis that is not 
dependent on PIR funds.  There are also other funds that ISOC 
receives (grants and stuff) that are either temporary in nature 
and/or designated for other purposes, and the IETF should not rely on 
those funds.
Leslie and I tried to capture that in our version of the BCP by 
indicating that the goal should be for the IASA budget to fit within 
IETF meeting fees and "specified donations" (note that we did not say 
"IETF-designated donations").   At the time, we were thinking that 
the budget should fit within the sum of IETF meeting fees and ISOC 
Organizational Member donations (the full budget, which will include 
costs for ISOC fund-raising and overhead above what Harald and Leslie 
distributed to the IETF list).  We are going to substantially miss 
that goal this year, due to transition costs.  But, I hope that we 
will be able to show a credible three-year projection that has IASA 
returning to an appropriate budget level.
>   2. All income and expenses will be budgeted on a yearly basis and
>      agreed to by IASA, IAOC and ISOC. In addition, each year a
>      provisional 3-year budget will be created so as to minimize
>      future surprizes.
I think that the BCP already says this, but I don't consider it a 
basic principle.
>   3. Until the goal in point 1 is achieved, ISOC will support the
>      IASA from generic ISOC funds, based on a yearly budget, agreed
>      to by IASA, IAOC and ISOC.
I have no question that ISOC will continue to support the IETF to the 
best of its ability no matter what happens.  But, I think it would be 
better form for the IETF to _ask_ for that support than for us to 
demand it.
I also echo others' thoughts on the term "generic ISOC funds" -- it 
really isn't clear what that means.
>   4. Once established, over a period of 3 years, IASA should build
>      an operating reserve for its activities sufficient to cover
>      6-months of non-meeting operational expenses, plus twice the
>      recent average for meeting contract guarantees.
This is already elsewhere in the BCP, as well, and is not (IMO) a 
general principle.  The general principle could be:
4.  Stability:  ISOC and IASA should establish sufficient reserves 
(in cash, credit, insurance, etc.) to allow the IETF to survive six 
months without any meeting-related income, including the (highly 
unlikely) possibility that two IETF meetings in a row may be 
cancelled for political, environmental or other reasons.
Maybe we should remove all of the detail regarding reserves and just 
state this principle?
The are two "elephants in the room" regarding this point:

(1) Does this reserve need to be held in cash.  I say 'no'.  If 
ISOC/IASA has sufficient credit and/or meeting-cancellation insurance 
that we could cover a 6-month period with no meeting revenue, could 
continue to pay the secretariat during that time and would have funds 
available to hold the third meeting, then this would meet the 
requirement IMO.
(2) Is this reserve held in a separate IASA-designated bank account 
that IASA will own if it leaves ISOC?
This is the real question, isn't it?

I don't believe that the majority of this reserve should be held in 
cash, so it really doesn't make sense to talk about what bank account 
it will be held in...  As the original BCP versions indicated, I 
think that ISOC should build a reserve (in credit, insurance and/or 
cash) sufficient to protect the IETF from a six-month interruption in 
our meetings/revenue.  But, I don't see any reason to mandate that 
this reserve should be held in cash (which would just cut down on 
ISOC's ability to support the IETF or other ISOC activities in the 
short term), nor do I see any reason why it needs to be maintained as 
IASA-restricted funds.
Apparently, though, you do think that this reserve should be held in 
cash in an IASA-restricted bank account?  Why?
We are talking about approximately $2 million.  If you want this to 
build up over a three-year period, you are talking about $666,000 per 
year.  Where are you hoping that this money will come from?  As-is, 
the IETF is asking ISOC to cover significantly more IETF-related 
expenses this year than last year...  are you suggesting that we add 
$666,000 to that amount and then demand in an IETF BCP that ISOC find 
a way to cover it?  Does that actually make sense to other people, 
because it doesn't make sense to me.
Personally, I think that we should be looking to build a stable, 
properly-funded, well-managed, transparent and accountable IASA 
function _within_ ISOC.  I believe that should be our priority, and 
that we should not be so focused on planning our exit _from_ ISOC.  I 
do think it is important that we retain the option to exit later if 
things are not working, but I don't think it is reasonable for us to 
ask ISOC to set aside substantial funds for that exit, just in case 
we ever think it is necessary.
>   5. All of the IETF-related budgeting, funding and expenses have
>      to be fully and transparently accounted for.
This is good.

>   6. At any time, the books (balance sheets) should be clear on how
>      much assets and liabilities the IASA has on IETF's behalf.
What do you mean by "on the IETF's behalf"?  It is my understanding 
that we want to be quite clear that the IASA function (and all money 
related to it) is separate from the IETF itself.
>   7. The IAD (or another designated member of the IAOC in case of
>      the disability or unavailability of the IAD) has an ability to
>      commit funds to budgeted expenses.
This is also already covered in the BCP.  Personally, I don't think 
that there is any *magic* about the IAD being an IASA employee that 
will automatically make him/her infallible.  So, I think that the 
IAD's spending approval should be subject to the same type of 
review/limits (to ensure that expenses are within budget, not over an 
approved spending limit, etc.) as are applied for executives in 
virtually every company in the U.S.  I don't know exactly what those 
reviews/limits should be, but I will trust the IAOC to work them out 
in cooperation with ISOC's President/CEO and accountants.
Margaret

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