By J. William Semich
President and CFO
.NU Domain Ltd
http://whats.nu
bsemich@mail.nu

With Harold J. Carroll, JD
Corporation Counsel to .NU Domain Ltd
And Partner, Gadsby & Hannah, LLP
Hcarroll@ghlaw.com

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, they 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.

The following is a list of problems inherent in the language of the current draft of the New IANA bylaws, and an explanation of each. 

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. 

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. 

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 construction 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. 

(d.) 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 must, 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.