[CCWG-ACCT] Budgetary veto/control solves the wrong problem and avoids solving the right one

Greg Shatan gregshatanipc at gmail.com
Tue Jul 28 20:51:50 UTC 2015


I read what you said originally ("financial BALANCE  of the day to day
operations (yes, balance because ICANN purpose is non for profit") as being
based on the incorrect idea that a non-profit can't have a profit (a common
misunderstanding).  Clearly, that's not what you were saying, and you
understand that "non-profit" is not quite so literal a term.  Sorry I
misunderstood you.


On Tue, Jul 28, 2015 at 4:45 PM, Carlos Raúl Gutiérrez <crg at isoc-cr.org>

> Thank you Samantha!
> Xavier was very clear on the Reserve funds strategies during his last
> presentation to the GNSO Council in Buenos Aires and I praise him for that.
> I don´t consider creating those reserve funds outside the good practices of
> Non-for-Profit corporations, like Greg Shatan tried to imply in his reply.
> Carlos Raúl Gutiérrez
> +506 8837 7176
> Skype: carlos.raulg
> On 28 Jul 2015, at 13:20, Samantha Eisner wrote:
>  Carlos, as a point of reference, ICANN has an investment policy in place
>> (https://www.icann.org/resources/pages/investment-policy-2014-07-30-en)
>> that is regularly reviewed by the ICANN Board, which includes principles
>> on how funds held by ICANN are managed, as well as the size of the reserve
>> fund.
>> On 7/28/15, 10:13 AM, "accountability-cross-community-bounces at icann.org
>> on
>> behalf of Carlos Raúl Gutiérrez"
>> <accountability-cross-community-bounces at icann.org on behalf of
>> crg at isoc-cr.org> wrote:
>>> Carlos Raúl Gutiérrez
>>> +506 8837 7176
>>> Skype: carlos.raulg
>>> On 28 Jul 2015, at 11:02, Greg Shatan wrote:
>>>> One other note -- there seems to be a misunderstanding of what a
>>>> "non-profit corporation" (and why it is called "non-profit").
>>> No problem with reserves, contingencies, etc. ICANN has to big ones of
>>> 80 million each. But still a problem with unrealistic income
>>> projections, and optimistic spending just because we have more money
>>> coming in tomorrow.
>>>  A
>>>> "for-profit" corporation pays out net profits to its owners
>>>> (shareholders
>>>> or other types of owners).  A non-profit does not have owners or
>>>> shareholders, so it does not pay out profits to anybody.  While an
>>>> entity
>>>> can be " non-profit," this does not mean it is "non-surplus."
>>>> "Non-profit"
>>>> does not mean that it is not supposed to run an excess of revenues
>>>> over
>>>> expenses, or have no more assets than it has liabilities.  So, this
>>>> idea of
>>>> "balance" is misplaced.
>>> A healthy finial balance is always in place under the assumptions as per
>>> above.
>>>  A non-profit, like a for-profit, needs to balance
>>>> its books in an accounting sense, but that does not in any way mean
>>>> that
>>>> there is a prohibition or even a presumption against having a surplus
>>>> of
>>>> cash over expenses.
>>> agree. Two sets of reserves of $80million/each is quite alright
>>>  Greg
>>> cheers
>>> Carlos Raul
>>>> On Tue, Jul 28, 2015 at 10:30 AM, Carlos Raúl Gutiérrez
>>>> <crg at isoc-cr.org>
>>>> wrote:
>>>>  Dear George,
>>>>> I agree with you that a cumulated budget veto is a pretty useless
>>>>> accountability tool (independently of how difficult it would be for
>>>>> the
>>>>> sole member to exercise itŠ)
>>>>> Moreover, I think the community on the one hand should take care that
>>>>> the
>>>>> public interest objectives (policy development and compliance
>>>>> functions)
>>>>> are properly funded. It would be much more effective if those
>>>>> separate hose
>>>>> budgets (policy development and compliance functions) would be
>>>>> developed in
>>>>> a bottom up fashion, based on the needs of the community, and through
>>>>> the
>>>>> communities direct involvement. No need for a veto then since the
>>>>> SOs/ACs
>>>>> would be DIRECTLY responsible for their budgets.
>>>>> On the other hand, it is up to management to guarantee the financial
>>>>> BALANCE  of the day to day operations (yes, balance because ICANN
>>>>> purpose
>>>>> is non for profit), as well as guarantee the demands of the community
>>>>> for
>>>>> proper funding of the public interest functions (independently of the
>>>>> line
>>>>> overseer of the functions, which is another black box altogether).
>>>>> This would be in my view a much more effective system of so called
>>>>> ³checks
>>>>> and balances²  than an absolute veto over the cumulated budget,
>>>>> where the
>>>>> community has little knowledge on the different objectives under it
>>>>> was
>>>>> produced, and remains in my eyes will very obscure, independently of
>>>>> the
>>>>> overall sum in relation to the size of the business.
>>>>> Best
>>>>> Carlos Raúl Gutiérrez
>>>>> _____________________
>>>>> email: crg at isoc-cr.org
>>>>> Skype: carlos.raulg
>>>>> +506 8837 7173 (cel)
>>>>> +506 4000 2000 (home)
>>>>> +506 2290 3678 (fax)
>>>>> _____________________
>>>>> Apartado 1571-1000
>>>>> San Jose, COSTA RICA
>>>>> On Jul 27, 2015, at 9:30 AM, George Sadowsky
>>>>> <george.sadowsky at gmail.com>
>>>>> wrote:
>>>>> All,
>>>>> These are my personal opinions.
>>>>> I suspect that the reaction to this post will be, "we are way past
>>>>> this,
>>>>> we've discussed this, and now just help us work on the implementation
>>>>> details."  If so, I think that's a mistake, because what I'd like to
>>>>> do is
>>>>> question one of the fundamental assumptions behind what this group is
>>>>> doing.
>>>>> When this process started, there was general agreement that it was
>>>>> more
>>>>> important to do this right than to do it quickly  Unfortunately, this
>>>>> feeling appears to have reversed, with the current sense that it is
>>>>> more
>>>>> important to get it done quickly in the name of the transition than
>>>>> to
>>>>> spend the time needed to do it right.  This process is going beyond
>>>>> accountability to a fundamental redesign of ICANN, with IMO
>>>>> inadequate
>>>>> concern for assuring inclusivity of support as well as lack of
>>>>> concern for
>>>>> unanticipated consequences.
>>>>> So here's what I'd like to contribute ...
>>>>> I've been uncomfortable with the notion of budgetary control/veto
>>>>> since
>>>>> the idea was first presented.  I think that I now know why: in my
>>>>> opinion
>>>>> it solves the wrong problem, and it is the wrong solution to the
>>>>> right
>>>>> problem.  Let me explain.
>>>>> In general, budgetary control is exercised by groups who want to
>>>>> control
>>>>> an aggregate budget, whether for reasons of limiting growth or
>>>>> ensuring
>>>>> that aggregate expenses for a budget do not exceed some measure of
>>>>> income.
>>>>> I don't think that's the case here, although I suppose that under
>>>>> exceptional circumstances it might be.
>>>>> The alternative is that the control the group appears to want must be
>>>>> by
>>>>> program or even by line item, even though you're planning to use a
>>>>> very
>>>>> blunt instrument  --  control over approval of the aggregate budget
>>>>> --  as
>>>>> your tool to accomplish this.  If that's the case, then what you
>>>>> really
>>>>> want is programatic control, not budgetary control.  If the program
>>>>> is
>>>>> accepted, then subject to resource constraints, it's up to the staff
>>>>> to
>>>>> deliver, and any specific line item or similar objection, however
>>>>> expressed, interferes with the execution of the activity.
>>>>> If the disagreement is with the program, with the objectives to be
>>>>> accomplished, and how the objectives are to be accomplished, then
>>>>> that is
>>>>> where the control should be exercised.  Any budgetary control after
>>>>> that is
>>>>> micromanagement.  The response to that is if you don't trust the
>>>>> organization to implement a rather well defined activity, then change
>>>>> the
>>>>> management/staff, don't restrict their resources and let them
>>>>> continue
>>>>> anyway.
>>>>> I suggest pursuing this line of argument further.  In my opinion, our
>>>>> fundamental problem has two components: (1) a persistent inadequate
>>>>> level
>>>>> of trust between groups within the ICANN community, and (2) our
>>>>> inability/unwillingness to create and use structures to deal directly
>>>>> with
>>>>> this situation and improve it.   I see the mechanism as starting with
>>>>> a
>>>>> lack of trust   --  in Board, management, staff, as well as the ACs
>>>>> and the
>>>>> SOs and their constituent parts  -- that generates not only suspicion
>>>>> regarding motives, non-transparent actions, and actions that are not
>>>>> equally favorable to all groups involved, but also the sense that the
>>>>> process is not serving "me" (whoever I am) well and is therefore out
>>>>> of
>>>>> control.
>>>>> In other words, IMO we have a fundamental problem of trust, and we
>>>>> don't
>>>>> have an effective way to talk about it or to otherwise address it,
>>>>> much
>>>>> less solve it.
>>>>> The budget rejection process that is being defined by the group is
>>>>> IMO
>>>>> based more upon defining ultimate ("nuclear" if you like)
>>>>> confrontation
>>>>> mechanisms than upon finding cooperative mechanisms to identify and
>>>>> resolve
>>>>> potential conflicts at an earlier stage.  It does not address the
>>>>> trust
>>>>> issue, and to the extent that my hypothesis is correct, if not
>>>>> addressed
>>>>> the trust issue will continue to bedevil ICANN activities, in other
>>>>> probably equally destructive ways.   Should not this group be equally
>>>>> or
>>>>> more concerned about mechanisms to identify issues and encourage
>>>>> cooperative-based and trust building processes to solve problems as
>>>>> they
>>>>> arise?   It does not appear so to me.
>>>>> In summary, the current approach, gaining more control over budget
>>>>> approval, is based upon a model of checks and balances, and that may
>>>>> be
>>>>> legitimate to some extent.  However, I sense that is not the way in
>>>>> which
>>>>> it is planned to be employed.  If so, it solves the wrong problem,
>>>>> nad it
>>>>> does not address the real problem.   We need a different approach,
>>>>> one of
>>>>> getting to the root of disagreements, real and perceived, that is
>>>>> early and
>>>>> based upon increased cooperation and trust, and we need a way to
>>>>> communicate that encourages this to happen.  This is not an easy
>>>>> problem to
>>>>> solve, but IMO it's the real problem that we have to solve, rather
>>>>> than
>>>>> some well meaning but inaccurate proxy representation of it.
>>>>> Please consider these thoughts in your discussions.
>>>>> George
>>>>> _______________________________________________
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