Subject: AdminRest: New version of IASA BCP document available

From: Harald Tveit Alvestrand <[email-masked]>
Date: Tue, 16 Nov 2004 19:57:10 +0100

Thanks to the dilligent effort of our editing team (Rob Austein and Bert 
Wijnen), we have a new version of the BCP describing the IETF 
Administrative Support Activity out for your review, building on the 
earlier efforts by Leslie Daigle and Margaret Wasserman.

There have been a number of suggestions for change, both private and 
public, and the editors have made their best guess at what the proper 
resolution of comments is for any given case. It is, of course, up to the 
IETF to say whether or not the proposed resolution is acceptable.

In some cases the best way to handle a particular suggestion (in the
editors' opinion, at any rate) has been to incorporate new text with
an "Editors' note" which attempts to explain the change.

A HTML version and a diff file with the previous version is available from 
the adminrest Web pages: http://www.alvestrand.no/ietf/adminrest/

The editors request that substantive comments and requested changes
be sent, one per message, with a clear and meaningful subject line on
each message, as this will make it easier for the editors to keep
track of change requests.

Minor nits may be sent straight to the editors; substantive issues should 
be sent to the IETF list.

Let there be review!

                     Harald Alvestrand

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Ietf mailing list
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---

From: Harald Tveit Alvestrand <[email-masked]>
Date: Wed, 17 Nov 2004 07:22:29 +0100

and here's the draft name.....

-----------------------------------------------------------

A New Internet-Draft is available from the on-line Internet-Drafts 
directories.

	Title		: Structure of the IETF Administrative Support Activity (IASA)
	Author(s)	: R. Austein, B. Wijnen
	Filename	: draft-ietf-iasa-bcp-00.txt
	Pages		: 17
	Date		: 2004-11-16
	
This document describes the structure of the IETF Administrative
   Support Activity (IASA) as an IETF-controlled activity housed within
   the Internet Society (ISOC) legal umbrella.  It defines the roles and
   responsibilities of the IETF Administrative Oversight Committee
   (IAOC), the IETF Administrative Director (IAD) and ISOC in the fiscal
   and administrative support of the IETF standards process.  It also
   defines how the IAOC will be comprised and selected.

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---

From: Margaret Wasserman <[email-masked]>
Date: Wed, 17 Nov 2004 07:04:18 -0500

I have some comments on Section 5.3 of the IASA BCP, "Other ISOC Support".

The first paragraph of this section says:

    Other ISOC support shall be based on the budget process as specified
    in Section 6.  ISOC will deposit the yearly amount (as agreed to in
    approved budget) in equal portions.  At a minimum such deposits will
    be made quarterly.

This seems unnecessarily restrictive.

Budgets are not always flat quarter-to-quarter.  Since there are only 
three IETF meeting a year, there is a quarter in which no IETF 
meeting is held.  Also, if there is a hiring plan for new staff 
and/or a particular project that begins or ends during the year, the 
funding needs of the IETF may differ from quarter to quarter.

I would rather that the document say:

    Other ISOC support shall be based on the budget process as specified
    in Section 6.  The amount of allocated funds and the dates on which funds
    will be transferred to the IASA account will be agreed as part of 
the budgeting
    process.

The second paragraph in this section says:

    If ISOC directly funds any other IETF expenses, such as the IETF
    share of ISOC's liability insurance premium, this will be documented
    together with the other IASA accounts.

I'm not really sure what this means...

There are some complexities to this budgeting process that aren't 
captured in this document, and I don't think that they should be. 
However, calling out one particular point (such as insurance) really 
begs the question of why other things that fall into this category 
are not called out.  I would prefer that we simply delete this 
paragraph from the BCP.

It does seem likely to me that there will be a single ISOC D&O 
insurance policy and that the costs of that policy will be allocated 
to the ISOC standards pillar as part of the overhead.  But, I don't 
understand the point of calling out this particular expense as 
something special...  There are other costs (such as paying a 
qualified accountant to figure these things out) that will also fall 
into this category.

Margaret

---

From: "JFC (Jefsey) Morfin" <[email-masked]>
Date: Wed, 17 Nov 2004 13:45:45 +0100

Harald,
the first look of it seems to be comprehensive and balanced enough. But 
there is a problem you will have to address sooner or later which is the 
"usage" (whatever you name the technically competent users) representation. 
ISOC is supposed to include it. You can claim that them being involved, 
users are represented. But the more you split from the ISOC structure and 
formalize the things, the more you will need to introduce users/consumers 
representation. I know that ISOC has no real structure for that: this may 
be the occasion to lead that creation, and to keep it with IASA when it 
eventually probably split, some time in the future.

Taking manufacturers/operators (labelled as "market") as usage 
representatives is why IETF is not innovative. This works well to improve 
status quo. Not to move seriously ahead. We all know that at some stage 
IDNA, IPv6, etc. will be necessary/used. But experience shown that techies 
being convinced does not lead users moves, because they want more important 
reasons for investment, serious ROI opportunities and the really move when 
they cannot do otherwise. This is exactly what RFC 3869 says. IAB calls for 
Govs (which are organized and leading users) funding for R&D, indentifying 
that pure operators/manufacturers (market) funding will not be enough.

jfc

---

From: Harald Tveit Alvestrand <[email-masked]>
Date: Wed, 17 Nov 2004 14:14:48 +0100

--On 17. november 2004 13:45 +0100 "JFC (Jefsey) Morfin" 
<[email-masked]> wrote:

> "usage" (whatever you name the technically competent users)
> representation. ISOC is supposed to include it. You can claim that them
> being involved, users are represented. But the more you split from the
> ISOC structure and formalize the things, the more you will need to
> introduce users/consumers representation.

Actually the "users" of the structure being discussed here are the 
participants in the IETF process, not the public at large. That's important 
to keep in mind.

The IETF standards process is not supposed to be affected by this 
reorganization (except, hopefully, by having better support). I agree that 
the IETF standards process needs to have participation from users, but 
doing so through management of the support infrastructure would be 
*significantly* convoluted....

              Harald

---

From: "JFC (Jefsey) Morfin" <[email-masked]>
Date: Wed, 17 Nov 2004 16:27:25 +0100

>*significantly* convoluted....

This is not what I have in mind. What I have in mind is something 
equivalent to GAC in ICANN or IAB in the IETF structure. IAB has identified 
it needed the users money (Govs are the leading users), the same as ICANN 
has identified they needed Gov support (Stuarts call). The simplest and the 
least risky way is to suggest a "usage forum" (what ISOC should be/is?) 
that would have with the IETF the _only_ tie of a common secretariat. Any 
other way (at an "higher political layer") implies risks of interference 
with the Internet standard process. Through a common administrative support 
(secretariat) they will be able to channel suggestions and comments but 
only in respecting the Internet standard process. IMHO this is our best 
protection against ITU creep.

This calls for a non-committing paragraph to open the possibility of this 
administrative plug, and see if something develops. The problem you face 
otherwise is the way to interface and finance the interface of a global 
network user/consumer committee which could result from Tunis. In 
initiating the move, you better keep it under control. In being ready to 
plug a network usage advisory board with similar relations as to the IAB, 
you have modified nothing, and offered in you own terms what big users will 
ask for and obtain from others creating IETF a big pain.

jfc

---

From: Carl Malamud <[email-masked]>
Date: Wed, 17 Nov 2004 07:40:57 -0800 (PST)

> are not called out.  I would prefer that we simply delete this 

Hi Margaret -

I think the point here was not to single out insurance but
to say that the IETF would like to see what is known in
accounting circles as a "full allocation".  That means that
some attempt is made in the books to allocate general
expenses (such as "insurance") among various programs.

An alternative accounting model is simply to calculate overhead
(e.g., unallocated expenses) and use some metric (e.g., total
expenses by "pillar" or "activity") to do the allocation.
That's kind of what we have today (of $2m in revenues, $600k
is lumped into the "overhead" category).

I think what the paragraph in the bcp intended to say is
the former not the latter.

> qualified accountant to figure these things out) that will also fall 

Might it read better something like this?

      In the case of additional direct expenditures by ISOC which benefit
      the IETF and other activities, ISOC shall attempt to
      allocate such expenses by activity, allowing IASA to gain an
      accurate view of the true cost of support activities.
    
And, to the accountants: "don't lump all general expenses
into a g&a budget line: at least attempt to break stuff out by
program if it makes sense to do such an allocation."

Regards,

Carl

---

From: Brian E Carpenter <[email-masked]>
Date: Wed, 17 Nov 2004 16:59:20 +0100

> begs the question of why other things that fall into this category are
 > not called out.  I would prefer that we simply delete this paragraph from the BCP.
> 
> It does seem likely to me that there will be a single ISOC D&O insurance
> policy and that the costs of that policy will be allocated to the ISOC
 > standards pillar as part of the overhead.  But, I don't understand the
 > point of calling out this particular expense as something special...
 > There are other costs (such as paying a qualified accountant to figure
 > these things out) that will also fall into this category.

This text is my fault.

I agree - the insurance is only an example, but since it appears to be
singled out, let's lose the example. Then it could read

     If ISOC pays any other IETF expenses directly, without transferring funds
     to the IASA, this will be documented as a footnote to the IASA accounts.

And why specify this? For transparency. Otherwise we might slip back into
the old regime of hidden expenditures and lack of a clear overview of the
budget.

     Brian

---

From: Margaret Wasserman <[email-masked]>
Date: Wed, 17 Nov 2004 11:11:00 -0500

>       accurate view of the true cost of support activities.

That sounds good, Carl.  Brian's wording is also fine with me.

It just read strangely to me to single out insurance.

Margaret

---

From: Fred Baker <[email-masked]>
Date: Wed, 17 Nov 2004 16:55:00 -0800

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

/=====================================================================/
  |     Fred Baker                 |        1121 Via Del Rey          |
  |     Chairman, ISOC BoT         |        Santa Barbara, California |
  +--------------------------------+        93117 USA                 |
  | Nothing will ever be attempted,| phone: +1-408-526-4257           |
  | if all possible objections must| fax:   +1-413-473-2403           |
  | be first overcome.             | mobile:+1-805-637-0529           |
  |     Dr. Johnson, Rasselas, 1759|                                  |
/=====================================================================/

---

From: "Joel M. Halpern" <[email-masked]>
Date: Wed, 17 Nov 2004 16:01:03 -0500

From my read, there are several different aspects.
The description of the sources of funds and the directing of "deposits" is 
probably over-constrained.  I would hope that there is not a requirement 
specified by these documents for an actual IASA bank account.  I doubt that 
the document needs to mandate quarterly transfers.

At the same time, the IASA / IAD are intended to have reasonable discretion 
(with ISOC review and approval on a budgetary level) of how money is spent 
to support activities.  If the funds are not earmarked at the ISOC level 
for IETF / IASA use, then it gets complicated to create the desired flexiblity.

My guess is that we are indeed giving up the ability for ISOC to 
transparently cover "bumps" in exchange for greater control and visibility 
to the actual state of the funds.  I would expect after a bit that this 
would actually help ISOC, as it would make explicit if the IASA / IAD are 
not doing a good job planning.

Yours,
Joel M. Halpern
Not on of the document maintainers
but someone trying to understand what it will turn out to mean.

At 07:55 PM 11/17/2004, Fred Baker wrote:
>There is a fair bit of change in section five, regarding IASA funding. In 
>a nutshell, it now says:
>
>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.
>
>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.
>
>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

---

From: Harald Tveit Alvestrand <[email-masked]>
Date: Wed, 17 Nov 2004 22:15:50 +0100

Thanks for the followup, Fred!

I think the number of changes in chapter 5 reflects quite a bit of 
uncertainty about what it should say... we (the IETF community, with ISOC) 
should work together on this to make sure it says neither too much nor too 
little.....

Some specifc points (my opinions):

--On 17. november 2004 16:55 -0800 Fred Baker <[email-masked]> wrote:

> A question for those maintaining the document?
>

[skipping description of how ISOC works]

> On an accrual basis, that's not much of an issue, but on a cash basis, it

Actually the words are:

   In normal operating circumstances, the IASA would look to have 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 6 months of the expenses that occur throughout the year (assuming, 
probably too blitely, that they are reasonably smooth) + some funds that 
allow us to schedule at least two more meetings, beyond the ones already 
committed - or that's how I read it, which may not be the intent of the 
writers (I would think that one meeting's guarantees would be enough).

> 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 think we need to find a reasonable way to budget & expense stuff.... you 
sure make an accrual basis sound tempting, but we do have to have cash in 
hand too.

One thing that I heard people say in commenting on budgeting was that the 
IETF needs to show budgetary responsibility too - we can't ask for the sky, 
and say "it's ISOC's job to pay for it". The separation of accounts may 
also have been intended to show this - that the IETF, and IASA, has its own 
responsibility to behave responsibly wrt finances.
But there may be better ways to express this than overconstraining our 
structure...

> office to normalize these issues now, and whether the problem really
> needs to be this tightly constrained?

I think this is a very valuable piece of advice. I know that I don't know 
what I'm talking about when it comes to accounting methods....
I'd hoped that the transition team (once it's set up) could go into this - 
the IESG and IAB are hoping to finalize picking the transition team Monday 
of next week.

---

From: Geoff Huston <[email-masked]>
Date: Thu, 18 Nov 2004 10:46:44 +1100

>This seems unnecessarily restrictive.

Not at all - it seems to me to be entirely necessary and appropriate in 
these circumstances. The IASA needs to operate like any other enterprise - 
it needs to manage its cash flow, and manage its overall financial 
position. Your depiction of the financial position makes this more and more 
like an operational department of ISOC with all funding management placed 
under the control of ISOC. Frankly this is not what I understand ISOC 
offered the IETF. The use of forward planning and timed periodic payments 
according to a documented schedule of such regular payments allows the IASA 
and ISOC to understand in advance the scale of commitments in terms of the 
budgetary process for the entire year, as well as being able to manage cash 
flow based once more on the foreknowledge of the points of money transfer 
from ISOC to IASA.

>I'm not really sure what this means...

It means that there are single payments to an external entity that are for 
services provided to both ISOC and the IETF< and in such case the document 
acknowledges that ISOC may undertake such payments (rather than the IASA) 
and in such cases the ISOC and IASA accounts would show the relevant 
apportionment of the payment.

>There are some complexities to this budgeting process that aren't captured 
>in this document, and I don't think that they should be. However, calling 
>out one particular point (such as insurance) really begs the question of 
>why other things that fall into this category are not called out.

I think that 'such as" is a valid way of indicating this as an example of 
such a payment. I would see this as conventional use of the english 
language in this context.

>   I would prefer that we simply delete this paragraph from the BCP.

I believe that this is a valid point of documenting instances where the 
asset transfer to IASA is not explicit, the reason why, and the proposed 
accounting procedure to address this.

Geoff

---

From: Fred Baker <[email-masked]>
Date: Wed, 17 Nov 2004 18:40:31 -0800

>sure make an accrual basis sound tempting, but we do have to have cash in 

If you don't have any cash, how you account for it is somewhat academic :^)

What I'm saying - and I'm no more an accounting whiz than you are - is that 
when an accountant looks at these things they tend to be a little different 
than your Quicken checkbook makes them look. So lets make sure the 
accounting folks look at it.

>what I'm talking about when it comes to accounting methods.... I'd hoped 
>that the transition team (once it's set up) could go into this - the IESG 
>and IAB are hoping to finalize picking the transition team Monday of next week.

That would be a good thing. My point is to not overconstrain the problem, 
but let them address it.

---

From: Brian E Carpenter <[email-masked]>
Date: Thu, 18 Nov 2004 11:07:21 +0100

Geoff Huston wrote:
> these circumstances. The IASA needs to operate like any other enterprise 
> - it needs to manage its cash flow, and manage its overall financial 
> position. Your depiction of the financial position makes this more and 
> more like an operational department of ISOC with all funding management 
> placed under the control of ISOC. Frankly this is not what I understand 
> ISOC offered the IETF. The use of forward planning and timed periodic 
> payments according to a documented schedule of such regular payments 
> allows the IASA and ISOC to understand in advance the scale of 
> commitments in terms of the budgetary process for the entire year, as 
> well as being able to manage cash flow based once more on the 
> foreknowledge of the points of money transfer from ISOC to IASA.

I fear that Geoff is right. He and I both chaired ISOC during a period
when it had serious cash flow problems. If for some unpleasant reason
that happened again, we wouldn't want IASA to be at their mercy. Having
ISOC formally committed to a regular rate of transfer seems prudent.

OTOH if ISOC received an unexpected donation for IETF purposes, that
should be transferred promptly - does this need to be stated somewhere?

    Brian

---

From: Brian E Carpenter <[email-masked]>
Date: Thu, 18 Nov 2004 11:21:42 +0100

Fred Baker wrote:
>>> 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 think we need to find a reasonable way to budget & expense stuff.... 
>> you sure make an accrual basis sound tempting, but we do have to have 
>> cash in hand too.
> 
> 
> What I'm saying - and I'm no more an accounting whiz than you are - is 
> that when an accountant looks at these things they tend to be a little 
> different than your Quicken checkbook makes them look. So lets make sure 
> the accounting folks look at it.
> 
>> I think this is a very valuable piece of advice. I know that I don't 
>> know what I'm talking about when it comes to accounting methods.... 
>> I'd hoped that the transition team (once it's set up) could go into 
>> this - the IESG and IAB are hoping to finalize picking the transition 
>> team Monday of next week.
> 
> 
> That would be a good thing. My point is to not overconstrain the 
> problem, but let them address it.

This relates to my previous comment in response to Geoff. It's
all about how to smooth cash flow, given that both income and
outgoings are bumpy.

If, in practice, some help from the IASA account is needed to smooth
ISOC's cash flow temporarily, that is fine by me but I'd like it
to be transparent and explicit. It should show up in IASA's accounts
and in ISOC's IETF pillar as a debt from ISOC to IASA (or the
opposite, if it's IASA that has a cash flow issue) but it would
be a wash externally. However, it should be constrained in such a way
that it is only for smoothing, and cannot be used to cover a real
cash shortfall. I agree that some accounting type person should
review the text.

     Brian

---

From: Fred Baker <[email-masked]>
Date: Thu, 18 Nov 2004 07:13:26 -0800

At 11:21 AM 11/18/04 +0100, Brian E Carpenter wrote:
>to be transparent and explicit.

Actually, that's the opposite of what I was pointing out. I was pointing 
out the bumps and grinds in *IASA* cash flow.

---

From: Brian E Carpenter <[email-masked]>
Date: Thu, 18 Nov 2004 16:36:34 +0100

yes, it goes both ways - I thought I indicated that

     Brian

---

From: Carl Malamud <[email-masked]>
Date: Thu, 18 Nov 2004 07:27:15 -0800 (PST)

> cash shortfall. I agree that some accounting type person should

This sounds to me like people would like this to be based on a seperate
account and pre-arranged quarterly transfers (pre-arranged meaning whatever
was agreed by the budget process as subsequently modified by any
supplementary agreements during the course of the year).  In addition
there is a requirement that tagged donations are promptly accounted
for and one that (to the extent reasonable) a full allocation be made
on other isoc expenditures that also benefit the IETF.

The cash issue, however, is kind of a red herring.  Assuming solvency,
this is a wash to the outside world.  My point is that cash is only
one of many accounts, and there are other asset accounts such as 
operating funds and other iasa accounts.  You're getting into specific
bookkeeping directions here.

It doesn't seem reasonable to create the chart of accounts or develop
the cash management policies in this forum.  Instead, more general
policies that establish principles are a better level to be at.
Things like "periodic transfers of isoc donations during the course of
the year according to the pre-arranged timetable established during
the budget process", "full allocation of expenses", and "ISOC shall
establish and maintain prudent cash management policies to insure
the continued viability of the IASA" are the level I think we should
be talking.  

The basic point seems pretty simple: the ietf seems to want a
seperate set of accounts so that iasa will have an accurate 
financial picture and a degree of financial control in regards
to ietf-specific activites.

Regards,

Carl

---

From: [email-masked] (scott bradner)
Date: Thu, 18 Nov 2004 15:05:46 -0500 (EST)

> to ietf-specific activites.

not unreasonable - why not leave the description to say just that and
leave the details of how to do this to the accountants?

Scott

---

From: Margaret Wasserman <[email-masked]>
Date: Thu, 18 Nov 2004 16:35:18 -0500

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:
>There is a fair bit of change in section five, regarding IASA 
>funding. In a nutshell, it now says:
>
>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.
>
>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.
>
>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 
>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
>

---

From: Ted Hardie <[email-masked]>
Date: Thu, 18 Nov 2004 14:45:26 -0800

At 4:35 PM -0500 11/18/04, Margaret Wasserman wrote:
>worked out, and adjusted as needed, by the IAOC (in consultation 

Personally, I think you're flat wrong.  The IETF has to come to a 
consensus opinion
on how this is going to work, and a BCP is how we state consensus opinions
on how things work when they aren't technical standards.  The elements that
you seem to believe are details are, for many of us, fundamentals.  We're
not enshrining account numbers and naming our auditing team here--we're
trying to identify how the money is expected to flow.  That's something
that the community should expect to understand and consent to; after
all, a great deal of it is money they will contribute either through meeting
fees or memberships.  Expert review to make sure that we're saying what
we want correctly (and that we understand the consequences) is certainly
appropriate.  Asking external parties to make those decisions for us
is not a good idea.  Waiting to make those decisions until the die is cast
is a startling bad one, and it isn't fair to ISOC or the IETF.

If you wish to argue that these matters should *also* appear elsewhere, I
support that--ISOC may have other ways it needs to say these things so its
other constituents hear them and know whether or not to agree.  But
not talking about the money flow here when we're making an organizational
change of this magnitude would border on negligence.

Speaking personally,
				Ted Hardie

---

From: Margaret Wasserman <[email-masked]>
Date: Thu, 18 Nov 2004 18:40:52 -0500

Hi Ted,

At 2:45 PM -0800 11/18/04, Ted Hardie wrote:
>  That's something

Do you consider the IAOC to be "external parties"?

I don't consider the IAOC to be any more external than the IESG and 
IAB, so I think it is appropriate for them to run their own function 
(the IETF Administrative Support Activity) with the same level of 
authority and discretion that we afford the IESG in running the IETF 
Standards Process.

Margaret

---

From: Ted Hardie <[email-masked]>
Date: Thu, 18 Nov 2004 17:17:39 -0800

>Do you consider the IAOC to be "external parties"?

No, I consider the attorneys and accountants you mentioned in your message
to be external parties.  You don't go to either set and ask "What you should
we do here?" --you say "Here's what we want to do" and then they help
you make it work.  The point I am trying to get across it that it is up
to this community to say "Here's what we want to do" *before* saying
that they consent; saying "We consent" without having said "Here's what
we want to do" won't work.
				Ted

---

From: [email-masked] (scott bradner)
Date: Thu, 18 Nov 2004 22:27:04 -0500 (EST)

Ted sed:
> to be external parties.

I must be misunderstaning you because it sounds like you are
saying that it does not make any difference if lawyers and/or
accountants say that the structure proposed in the document
is illegal or not reasonal accounting practice because
that would be the opinion of "external parties" and the opinin of
external parties should be ignored

I hope that is not what you are actually saying

 fwiw - its my opinion that we should fins out if someting makes
legal or accounting sense before deciding to take that path

Scott

---

From: Brian E Carpenter <[email-masked]>
Date: Fri, 19 Nov 2004 09:58:42 +0100

> legal or accounting sense before deciding to take that path

For sure. That has applied to all our process BCPs in the past,
for good reason. I assume that once this discussion converges,
the lawyers and accountants will be asked to review the draft.

I tend to think we should be reasonably prescriptive, but should
include a disclaimer that the IAOC is authorized to vary the
procedures for legal, accounting or practical reasons as long as it
reports the variance to the community and triggers an update of the
BCP.

     Brian

---

From: Carl Malamud <[email-masked]>
Date: Fri, 19 Nov 2004 08:42:05 -0800 (PST)

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

---

From: [email-masked] (scott bradner)
Date: Fri, 19 Nov 2004 12:16:07 -0500 (EST)

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 [email-masked]  Fri Nov 19 11:44:00 2004
From: Carl Malamud <[email-masked]>
Subject: Re: AdminRest: Finances and Accounting
To: Brian E Carpenter <[email-masked]>
Date: Fri, 19 Nov 2004 08:42:05 -0800 (PST)
Cc: scott bradner <[email-masked]>, [email-masked],
	[email-masked], [email-masked], [email-masked],
	[email-masked]
Organization: Memory Palace Press

Hi -

Income

Expense

Assets:
Bank Account                               $200
Physical Assets                            $100
Total Assets                               $300

Liabilities

$0.02, YMMV.

Carl

---

From: Ted Hardie <[email-masked]>
Date: Fri, 19 Nov 2004 10:40:49 -0800

Replying in-line to both Scott and Brian.

>the lawyers and accountants will be asked to review the draft.

The critical point, though, is that the community needs to converge
on what it wants to happen *before* this document is called
done.  I'm very concerned by the idea that we should say
that something so fundamental to organizational relations
as the basic money flow would be decided after the fact.   Leaving
that fuzzy in the documents means that the we are liable
to misinterpretation later when the cast of characters changes
or the circumstances change. Later disagreements on that won't help
ISOC and they won't help the IETF; to avoid them, these things have to
be part of the structure described *in the documents*, not the lore
surrounding them.

Again, I don't mean "name the auditing team" in the document; I
mean the far more fundamental questions of how money comes in,
who decides how to spend it, and what happens when the money
coming in doesn't match the needs (either in shortfall or surplus).

And let's face facts, guys, we did not choose an organizational
form in which this is clear cut.  Had the IETF decided to merge
fully with ISOC, this would be clear; had the IETF decided to
stand up a fully fledged organization, this would be clear.  But
we've chosen a form in which ISOC nurtures an organization
that is responsible for the administrative support of the IETF
while the IETF organization itself remains separate and loosely
structured.  To make sure that works right over a long
time period, we're going to have to be very clear about our
expectations.  If they change, we can change the documents,
but starting with them fuzzy is just the wrong mistake.

In my more folksy moments, I have said that we're aiming for a
situation in which the "IETF's administration is under ISOC's wing"
rather than one in which the "IETF is a wing of ISOC".   That
resonates reasonably well for those I've talked to, as it captures
both the fact that they are independent but closely related and
that ISOC is taking on a custodial role for the administrative function.
But this is not exactly something we can hang a document on; we need
to spell out what we expect to happen.  If we don't do that,
we've just handed the headache on.  That's not what any of us wants.
			regards,
				Ted Hardie

---

From: [email-masked] (scott bradner)
Date: Fri, 19 Nov 2004 15:49:18 -0500 (EST)

> rather than one in which the "IETF is a wing of ISOC". 

I like that way of thinking about it

> on what it wants to happen *before* this document is called done

I agree

two things along that line
1/ if there is anything that people feel needs to be very specific 
   there someone should consult with experts who work in the specific
   area (accounts, IPR rules, etc) before the document is "done"

2/ in all cases the principal of what the IETF wants should be
   specifically stated - i.e. a reader should not have to guess what
   the IETF wants by looking at the mechanism and trying to 
   reverse engineer to see what the mechanism was trying to ensure

   see the begining of the rewrite of the paragraph I included 
   in my longer posting for a cut at trying to do that

Scott