[ncc-services-wg] NCC's reserves

On 23 Apr 2014, at 06:01, Hank Nussbacher <hank at efes.iucc.ac.il> wrote:

> Since 2002 (when the financial reserves of RIPE NCC were 4.2MEuro on Dec 31, 2002), the budget surplus has been run up to around now 23MEuro.   For the past 10 years, we have run a budget surplus and have amassed a huge stockpile of money.  Why?

The NCC holds reserves equivalent to a year's turnover (or theresabouts). Most prudently run non-profit organisations and mutuals operate on this fiscally conservative metric/policy. Examples include ccTLD registries, IXPs, trade associations and membership societies. They're usually unable to borrow money for one reason or another too, so they have to depend on their own cash resources.

The rationale for maintaining reserves of around a year's turnover is that in the doomsday scenario where nobody pays their membership fees, the organisation has enough money to pay the bills and keep the lights on for a while. The reserves provide a reasonable amount of time for an orderly shutdown or for the organisation to find some other way to fund itself. The reserves also allow for stability by smoothing out any peaks or troughs in surplus/loss arising from day to day business. For instance, when the NCC has a big capital spend it could use its reserves to (part) fund that instead of putting up the membership fees or whatever.

The NCC's reserves are particularly important given the current industry uncertainties. Perhaps membership will decline as a result of the v4 run-out. Maybe new LIRs will pay fees just once to get a /48 of v6 and are never heard from again. IANA's future is unclear at present and nobody knows how it will be funded or if current funding arrangements will continue. Perhaps the NCC will need to fund a bigger footprint in some parts of its service region, say Russia or the Middle East.

If you think the NCC should not keep a year's turnover as reserves, you are welcome to suggest an alternate amount and have the members vote to adopt that at an AGM or EGM. That's probably a discussion for another list.

> Has the RIPE NCC board ever felt that membership fees could be cut by 20% across the board and to start eating away at its stockpile of cash?

It has already done something like that. A rebate was returned to the membership as a result of an unexpected windfall, the winding-up of the Personnel Fund. That would have boosted the reserves to a level well above that one year's turnover metric if the NCC had kept that chunk of member-generated cash to itself.

Incidentally, membership fees were reduced at the last AGM. BTW the 2013 financial report shows the average fee per member has declined from ~€2300 in 2010-11 to ~€2000 last year. It looks to me that the NCC is already maintaining prudent cash reserves AND cutting membership fees. YMMV.