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

From: "Wijnen, Bert (Bert)" <[email-masked]>
Date: Fri, 26 Nov 2004 17:54:05 +0100

OK, besides the details of implementation (e.g. a specific
IASA bank account or not), we MUST (if I understoodd the
discussion on the list) specify the principles that we
(IETF and ISOC) find important w.r.t. the finances and
accounting of this IASA-IETF-ISOC relationship.

So how about inserting a section 5.1 (shifting the others
by 1) with text as follows (first draft):

  5.1 Principles

  The following sections on specific funding sources, expenses 
  and reserve funds are based on these IETF and ISOC agreed to
  principles:

  1. The goal is to achieve and maintain a viable IETF administrative 
     support activity (IASA) based on meeting fees and designated
     donations.

  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.
     
  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. 

  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.

  5. All of the IETF-related budgeting, funding and expenses have
     to be fully and transparently accounted for.

  6. At any time, the books (balance sheets) should be clear on how
     much assets and liabilities the IASA has on IETF's behalf.

  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.

In my view, that would also mean that the budget for the first 3
years includes the building of the reserve fund, and so potentially 
that means that also ISOC generic funding will help to build that
reserve fund. That reserve fund will be dedicated for IASA to draw
on when needed.

Bert

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---

From: [email-masked] (scott bradner)
Date: Fri, 26 Nov 2004 14:05:19 -0500 (EST)

>      commit funds to budgeted expenses.

to me most of these are not principals - they are operating details - 
( to me #5 is a principal and #7 comes close to one)

some comments on them anyway (even if I think this level of detail
does not belong in this document)

>      support activity (IASA) based on meeting fees and designated

I'd change "designated donations" to "ISOC generate support"
just like in #3 this constrains how the ISOC could rase funds 
to support the activity - that seems like a bad idea

>      to by IASA, IAOC and ISOC.

I'd change "generic ISOC funds" to "ISOC funds" - I see no reason 
that the IETF has to constrain what funds the ISOC uses to support 
the IETF (for example the use of "generic" would rule out the ISOC 
doing a special fund raising for the IETF support like it did for 
the RFC Editor support)

I'd also sugest some other wording tweaks such as
>      recent average for meeting contract guarantees.

to something like
>   4. Once established, over a period of 3 years, IASA should ensure
>      that an operating reserve for its activities sufficient to cover
>      recent average for meeting contract guarantees is developed.

I'm not sure that the IASA would actually rase the money but they should
ensure that a reserve is established

point number 6 sees a bit funny - whatever was intended might be
able to be covered by adding 'assets and liabilities" after 
"expenses" in point 5

I'll try to send some examples of what I mean by principals later today

---

From: John C Klensin <[email-masked]>
Date: Fri, 26 Nov 2004 18:26:31 -0500

Bert,

_Far_ too much detail.  See earlier note about the bank account 
material.  I suspect that I speak for many members of  the 
community when I say that I want to get this "admin" stuff 
fixed, and fixed as quickly and efficiently as possible, after 
which I Do Not want to have to revisit it at regular intervals, 
through Last Calls or otherwise.

Please, as you are working on and editing the BCP, remember that 
this is not a "snapshot of current thinking as of November/ 
December 2004" document, but the details of how we intend to run 
this mechanism and structure.  If you can look at a section and 
reasonably say "this is likely to be too much detail in two or 
three years" --whether because things will have evolved within 
reasonable limits or because the transition will have ended-- 
then, please, let's try to put that information somewhere 
besides in the BCP.

If it goes in the BCP, then any change requires that we reopen 
this whole time-consuming and expensive process.  Or, to avoid 
that, we encourage the IAOC to simply ignore the written rules 
on the theory that they don't really apply.  I think the second 
is worse than the first, but I have trouble being enthused about 
either.

    john

--On Friday, November 26, 2004 5:54 PM +0100 "Wijnen, Bert 
(Bert)" <[email-masked]> wrote:

>   1. The goal is to achieve and maintain a viable IETF
> administrative       support activity (IASA) based on meeting
> fees and designated      donations.
>
>   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.
>
>   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.
>
>   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.
>
>   5. All of the IETF-related budgeting, funding and expenses
> have      to be fully and transparently accounted for.
>
>   6. At any time, the books (balance sheets) should be clear
> on how      much assets and liabilities the IASA has on IETF's
> behalf.
>
>   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.
>
> In my view, that would also mean that the budget for the first
> 3 years includes the building of the reserve fund, and so
> potentially  that means that also ISOC generic funding will
> help to build that reserve fund. That reserve fund will be
> dedicated for IASA to draw on when needed.
>
> Bert
>

---

From: Sam Hartman <[email-masked]>
Date: Fri, 26 Nov 2004 19:16:58 -0500

>>>>> "John" == John C Klensin <[email-masked]> writes:

    John> Bert, _Far_ too much detail.  See earlier note about the
    John> bank account material.  I suspect that I speak for many
    John> members of the community when I say that I want to get this
    John> "admin" stuff fixed, and fixed as quickly and efficiently as
    John> possible, after which I Do Not want to have to revisit it at
    John> regular intervals, through Last Calls or otherwise.

So, what level of detail do you think is appropriate?  

Is the community still interested in guaranteeing that the IASA is
reasonably seperable from ISOC if necessary?  How much detail is
needed to allow the community to evaluate whether the IASA will in
fact be seperable?  Is it sufficient to simply state seperability as a
goal or do we want to deal with specific details like the bank
account?

Personally, I do believe that stating some details would help me
evaluate whether IASA is seperable and would require the IETF's
consent in order to change the details.  I do think that requiring
IASA keep separate bank accounts is probably desirable at the BCP
level.

--Sam

---

From: [email-masked]
Date: Fri, 26 Nov 2004 20:08:47 -0500

> IASA keep separate bank accounts is probably desirable at the BCP

OK - I admit I've Just Hit Delete on much of this discussion - but care
has to be taken with "separate bank accounts".  We *do* need some way
to prevent IASA from separating (either at their request or ours) and
then find out all the money was in "their" account not "ours"....

(OK.. maybe I'm just paranoid on that one, having been on the losing
end of a "been there done that" in my personal life. :)
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---

From: Margaret Wasserman <[email-masked]>
Date: Sat, 27 Nov 2004 09:32:33 -0500

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:

>      support activity (IASA) based on meeting fees and designated

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.

>      provisional 3-year budget will be created so as to minimize

I think that the BCP already says this, but I don't consider it a 
basic principle.

>      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.

>      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.

>      to be fully and transparently accounted for.

This is good.

>      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.

>      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

---

From: John C Klensin <[email-masked]>
Date: Sun, 28 Nov 2004 11:20:29 -0500

--On Friday, 26 November, 2004 20:08 -0500
[email-masked] wrote:

>> Personally, I do believe that stating some details would help
>> me evaluate whether IASA is seperable and would require the
>> IETF's consent in order to change the details.  I do think
>> that requiring IASA keep separate bank accounts is probably
>> desirable at the BCP level.
> 
> OK - I admit I've Just Hit Delete on much of this discussion -
> but care has to be taken with "separate bank accounts".  We
> *do* need some way to prevent IASA from separating (either at
> their request or ours) and then find out all the money was in
> "their" account not "ours"....
> 
> (OK.. maybe I'm just paranoid on that one, having been on the
> losing end of a "been there done that" in my personal life. :)

This is interesting.  Almost all of the discussion about
"separate bank accounts", etc., has been focused on "protection
of the IASA from ISOC".  But you drew the other inference, which
I discussed at more length in my "blowing the bolts" note, i.e.,
that it is at least as likely that the IETF might need
protection from the IASA or even, once large amounts of money
are involved, from some combination of the IAB, IESG, and IASA.

   john