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-----Original Message-----
From: J. William Semich (NIC JWS7) <bsemich&#167;users.org>
To: pab&#167;gtld-mou.org <pab§gtld-mou.org>
Date: Saturday, 3 October 1998 2:16
Subject: PAB .NU DOMAIN'S PROPOSED CHANGES TO IANA draft 5


>Hello;
>
>At the request of Ira Magaziner, we have today submitted the following
>proposed modifications to the IANA's version 5 of the new Corporation's
>bylaws (attached below), as follow up to our previously-stated concerns
>(http://www.iana.org/comments-mail/msg00090.html) about maintaining
>fiscal responsibility at the new IANA.
>
>These changes are also posted at http://www.nunames.nu/spending-controls
>
>Regards,
>
>Bill Semich
>bsemich&#167;mail.nu
How To Assure Fiscal Accountability of the New IANA?

By J. William Semich
President and CFO
.NU Domain Ltd
bsemich&#167;mail.nu
http://whats.nu

With Harold J. Carroll, JD
Corporation Counsel to .NU Domain Ltd
And Partner, Gadsby & Hannah, LLP
Hcarroll&#167;ghlaw.com
http://www.ghlaw.com/bios/carrollh.html#frame1


The basic problem with the latest of the new IANA Corporation's bylaws is
the apparently-intentional lack of board accountability to the public. The
result will be an organizational structure similar to an independent public
authority. To assure accountability to the public, it is necessary to
include language in the bylaws that will give budget approval powers to the
groups that are providing the source of funds to the new corporation - the
Supporting Organizations.

Below I have proposed such additions to the IANA bylaws. If these additions
are finally included in the New IANA's bylaws, it would:

- Require that the Corporation submit an annual budget request and service
plan to the Supporting Organizations for review and approval or reduction;

- Require that all long-term bonding or bond refunding requests receive a
2/3 majority vote of by the Supporting Organizations;

- Require that the Corporation manage annual spending levels to stay within
its approved annual budget;

- Require a guaranteed, maintenance of effort, level of funding to the
Corporation regardless of any budget reductions voted by the Supporting
Organizations, in order to assure the IANA's existing level of services are
maintained. The base "maintenance of effort" level of funding is taken to be
the current annual spending by IANA under its contracts with the US
Government;

- Require that the Corporation make all its spending and other information
available to the Supporting Organizations as part of the budget monitoring
and approval process.

If these provisions are included in the bylaws to the new Corporation, it
would go a long way to assuring public accountability.

Below is a list of problems inherent in the language of the current draft of
the New IANA bylaws, and an explanation of each. These are followed by the
proposed additions to the bylaws.

Problem 1:
 The Board is controlled by the At Large Directors and the President, which
together outnumber the three directors nominated by the each of three
Supporting Organizations (total of nine for supporting organizations)
(Bylaws, Art. V, Secs. 1, 4 , hereinafter "BL.V(1,4)", etc.). The predefined
membership of one Supporting Organization (the Address Supporting
Organization, BL. VI(3)(a)(I)) is  a creature of the current IANA, and
therefore adds to the potential majority of At Large directors and the
President.
Problem 2:
The identity BL.VI(3)(b), powers, structure and number BL.VI(1)(a) of
Supporting Organizations is determined by the Board, giving further control
to the majority At Large members. Moreover, this control is
self-perpetuating in that At Large members will select their own
replacements until some unknown membership system is devised at some
indefinite future time.  BL.V(9)(c).
Problem 3:
The Board has complete control of the Corporation.  BL.(1)(a).
Problem 4:
The Supporting Organizations are advisory only, unless the Board delegates
powers.  BL.VI(1)(a).
Problem 5:
The Supporting Organizations will provide the primary if not exclusive
financial support of the Corporation through fees and charges solely to be
set by the Board, BL.IV(2). The Supporting Organizations will have to assess
their own membership for fees as yet undetermined to support a budget
controlled entirely by board members not directly answerable to those who
pay the fees.

Proposed solution:: Give Supporting Organizations the Power of the Purse

The powers of the Supporting Organizations under Article VI(1) should be
expanded to include the power to approve (or reduce) the Authority's annual
budget, along with the requirement that the Authority control spending to
stay within that approved budget. This should prove sufficient to protect
the Supporting Organizations and their constituents from the tendencies of a
non-accountable, self-perpetuating Authority with powers of assessment, to
serve ends not always in the public interest.
Such a process would also significantly increase the appearance of public
participation in the governing process. Such power to approve the budget
should include the right to review all spending, investment and borrowing
activities, the right to perform an annual independent audit of the
Authority, the right to examine books and accounts without notice, and to
use any and all the other mechanisms available to assure the Authority's
accounts are open to public view.

Proposed Revised Language for Version 5 of the new IANA Bylaws:

Make the following changes/additions to BL V (25):

Delete "The Board shall prepare an annual budget, which shall be published
on the Web Site."

ADD:
BL V (25) (a.) The Chief Financial Officer shall prepare an annual operating
budget, on a line-item basis, and submit it to the Supporting Organizations
four months prior to the beginning of the Corporation's fiscal year, for
their review and action. The Board shall establish, by a vote of not less
than 60% of all the members, the appropriate definition of such line items
for budgeting and accounting purposes. The Chief Technical Officer shall
prepare and submit, at the same time, an annual service plan which shall be
reflected in and complimentary to the funding requests in the annual budget.
The Corporation shall make its best effort to tie the line items in the
budget request to the detailed services to be provided during the upcoming
fiscal year.
(b.) No budget shall be deemed to be approved for the purposes of enabling
any increase in expenditures or funding any increased appropriation to the
Corporation for the following fiscal year, excepting previous year's
obligations such as payments on debts already incurred or multi-year
contractual obligations or labor agreements, until the Committee of the
Whole of the Supporting Organizations has approved an annual budget and
service plan for the Corporation for that fiscal year; excepting that, if
the Supporting Organizations have taken no action on the annual budget
request, and the following fiscal year shall commence, the Corporation shall
be required to operate on a 1/12 previous-year's operating expense,
maintenance-of-effort basis, until such time as the Supporting Organizations
approve an annual budget for the Corporation.
(c.) The sum total of all fees and charges assessed by the Corporation on or
to the Supporting Organizations and/or its members during the fiscal year
shall not exceed the amount required to support the approved annual budget
for that fiscal year, or, if such budget is not approved, shall not exceed
the amount assessed during the previous fiscal year, on a 1/12 monthly
basis, until such time as the annual budget is approved by the Supporting
Organizations.
(c.) Once an annual budget and service plan are approved by the Supporting
Organizations' Committee of the Whole, the Corporation shall manage its
affairs and operations in such a manner as to keep its expenditures and
obligations within the constraints of the approved budget.

ADD
BL VI (d)All of the Supporting Organizations which have fee-payment
responsibilities to the Corporation shall meet, no later than six weeks
prior to the end of the current fiscal year, as a Committee of the Whole to
vote, yea or nay, as submitted or as amended, on the annual budget and
services plan for the Corporation's following fiscal year. A majority vote
is required to approve the annual budget and the service plan, and a 2/3
majority vote is required to approve any long-term borrowing requests or
long-term bond refunding requests by the Corporation. The Supporting
Organizations may choose to assign weights to votes, based on the proportion
of fees paid by each voting member, or on some other fair and reasonable
method
(e)The Supporting Organizations may decide what structure or committees or
staffing to establish in order best to enable an appropriate review process,
perform any required analysis and take action on the budget, including
developing an equitable voting mechanism for such action. The Committee of
the Whole shall, prior to the beginning of the following fiscal year, either
approve the budget and service plan as submitted, make reasonable reductions
in the budget and service plan accompanied by a reasonable explanation of
any reductions, or return the budget without action to the Chief Financial
Officer, which he may subsequently re-submit to the Committee of the Whole
after making any modifications which may be suggested by the Supporting
Organizations
The Supporting Organizations' Committee of the Whole may not make any such
reductions in the budget request that will result in the loss or substantial
disruption of any ongoing Internet service currently provided by the
Corporation at its inception, excepting in those cases where both the
Supporting Organizations and the Board have agreed to terminate such
services.
The Supporting Organizations' Committee of the Whole may not reduce any
annual budget request by the Corporation to an overall amount that is lower
than the amount expended during the previous fiscal year. For the purposes
of establishing a starting point for the previous year's maintenance of
effort spending level, the amount spent in support of the US Government's
contract(s) with the University of Southern California's Information
Sciences Institute for the final year of services by IANA under that
contract(s) shall constitute the expenditure level for the first "previous
fiscal year."

(f.) The Supporting Organizations shall have all the same rights and
obligations of inspection of the Corporation's books, records, and documents
of every kind, as is granted to the Board of Directors in Article V, Section
21 of the bylaws.
-4-



{B0050967.DOC;1}


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