[ncc-services-wg] NCC's reserves

On 23 apr 2014, at 11:53, Jim Reid <jim at rfc1035.com> wrote:

> 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.

While I agree with the reasoning of keeping reserves equivalent of a years turn-over, there is a risk of a circular argument here. I.e, the real question is - why is the turn-over so high? One answer is "because the membership voted for the activity plan". Another answer could be "because the activity plan doesn't really provide a breakdown that would allow us to break out individual pieces". 

This means that today, one of the most effective ways for the membership to question the turn-over is to ask for a reduction in membership fees. There is no obvious way to fix this unfortunately. However, what I personally would like to see, is for the RIPE NCC board to draw up some scenarios on what would allow for a lowering of the turn-over, and which services would be affected and how. We are currently in the odd situation that as we are seeing resources depleted, we are seeing the RIPE NCC growing larger than ever. 

Best regards,

Lindqvist Kurt Erik
kurtis at kurtis.pp.se



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