This wiki has been set up as a consolidated place in which WG members can place their suggestions regarding the draft Final Report's following sections:
- Funds and Foundations
The section can be found below, as well as on pp. 8-15 of the Draft_Final_Report_JASWG_20110824 (RHv2SGv1)(clean) draft Final Report. Please do not edit the text directly here. Instead, please place your suggestions (including suggested actual wording, if you'd like) at the bottom of the page using the "Add Comment" function. This will create a history of all comments.
As Carlton requested on 5 August, even if you introduced your suggested change during a JAS WG call, please also list it on this page (by following the instructions below).
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Support Program Development Function - Funds and Foundations
- The WG Charter, as set by the ALAC, states that the WG should establish “a framework, including a possible recommendation for a separate ICANN originated foundation, for managing any auction income, [RH1|https://community.icann.org/#_msocom_1] beyond costs for future rounds and ongoing assistance” (see Charter Section c);
- The Final Applicant Guidebook contains the following:
Possible uses include formation of a foundation with a clear mission and a transparent way to allocate funds to projects that are of interest to the greater Internet community, such as grants to support new gTLD applications or registry operators from communities in subsequent gTLD rounds, the creation of an ICANN-administered/community-based fund for specific projects[RH2|https://community.icann.org/#_msocom_2] for the benefit of the Internet community, the creation of a registry continuity fund for the protection of registrants (ensuring that funds would be in place to support the operation of a gTLD registry until a successor could be found), or establishment of a security fund to expand use of secure protocols, conduct research, and support standards development organizations in accordance with ICANN's security and stability mission.
- The two elements in these excerpts are obtaining funds that can be used to offset the costs for Support-Approved Candidates and establishing a framework for managing and distributing these funds. In discussing these two objects there is a close link between them, and in many cases it is hard to imagine one of them happening without the first. For example, without funds, there is no purpose in a framework that has been institutionally instantiated, yet without a framework it is impossible to collect funds.
Framework
- As stated in the Applicant Guidebook, feasibility studies should be carried out on creating a foundation or fund to handle any auction funds that are not used in the manner described in this comment. Additionally, funds could be obtained from other fundraising opportunities such as the auction of single character second level domain names or from donations from, for example, the incumbent gTLD and ccTLD registrars and registries. In the case that such a fund or foundation can be set up in time to provide further funding opportunities for Candidates in the later stages of the process, this should be documented at a later stage.
- The WG recommends that the Board immediately set up a planning committee to investigate the various possibilities for funds and/or a foundation and after consultation with the community to make recommendations on the formations of such a fund. The specific work items that should be included in the Board Foundation Recommendation WG include, but are not limited to:
a) Work with ICANN staff to investigate and understand the legal structures that are available to and required of a California 501C corporation [RH3|https://community.icann.org/#_msocom_3] for creating a foundation.
b) Draft a document defining the core responsibilities and activities of the fund or foundation.
c) Define methods of work for the fund or foundation, including, inter alia, investment guidelines, fundraising and grantmaking.
d) Suggest membership for the first board of the foundation, and clarify the relationship between ICANN's corporate structure and the new fund or foundation.
e) Start obtaining pledges of funding for the foundation, to augment the $2M already committed by the Board in Resolution [add reference citation].
- The WG recommends that the members of this Board Foundation Recommendation WG be drawn from all of the Supporting Organizations (SOs) and Advisory Committees (ACs) to insure that the concerns of all segments of the community be taken into account.
- In support of 12e above, the WG recommends that ICANN obtain the support of a appropriate fundraising expertise to support Support-Approved Candidates, to work with the Board Foundation Working Group.
Funds
- Funds for the foundation to manage and distribute can come from a variety of sources:
a) Budget allocation from ICANN, including the USD$2 million committed by the ICANN Board.
b) Solicitation of funds to at least match the initial allocation made by the ICANN Board
c) Auction proceeds beyond the cost of running the auctions
d) Voluntary allocation of funds from ccTLDs
e) Voluntary allocations of funds from incumbent gTLD registries and registrars
f) [RH4|https://community.icann.org/#_msocom_4] External funding sources
g) Other source yet to be determined
Donors
- Various ICANN stakeholders have indicated that if there were a way to donate that could not be gamed, they would be interested in helping. A well-formed fund or foundation could provide an opportunity for such generosity.[RH5|https://community.icann.org/#_msocom_5]
10. The domain name system has created and will likely continue to create significant revenues for some ICANN stakeholders and it is possible that a suitable fundraising campaign targeting organizational stakeholders may succeed at finding some interested in providing support to qualified Applicants.[RH6|https://community.icann.org/#_msocom_6]
Auctions
11. Since the GNSO first allowed for auctions as a possible method of resolving gTLD name contention, there has been the intent that these funds be applied to worthy causes including support for what is now being called Support-Approved Candidates. Though the quantity of these funds is unknown and they would certainly not be available for the payment of fees in the 2011--12 rounds, the funding would be available to fill the reserve and risk funds, if those funds were deferred to cover the costs for the application fee reductions, as recommended in the First and Second Milestone Reports for the fees of Support-Approved Candidates.
Availability of Funds
12. The WG has identified:
a) an immediate need to obtain funds sufficient to help a significant number of Support-Approved Candidates to participate in the application process of the first round in 2012;[1|https://community.icann.org/#_ftn1] and
b) an intermediate goal to assist the Support-Approved Candidates in setting up their registries in 2013; and
c) a long-term goal of insuring that the second and further rounds will have a stable source of funding available for assisting Support-Approved Candidates.
Use of funds
13. Funds collected can be used for various purposes to assist Support-Approved participants. Included among these uses in the first round are:
a) Application assistance beyond the JAS recommended reduction in fees
b) Assistance in defraying the cost of the required continuity instrument
c) Overcoming technical requirement gaps, such as the IPv6 and other technical requirements which may require technical upgrade not obtainable through non-financial support.
14. Where appropriate, the WG recommends the creation of additional funding and support mechanisms (e.g., a development fund for qualified new gTLD Candidates who are determined to meet the criteria established for support; and/or a regional non-profit RSP service to support multiple applicants in developing economies). Eligibility for support from these types of mechanisms would be determined by the SARP described in Section XX below.
Fee reduction and self-funding requirement
Self-funding requirement[RH7|https://community.icann.org/#_msocom_7]
15. In terms of funding the New gTLD Program, there are two aspects:
a) Cash flow for the application process
b) Final accounting to match the established budget
16. Cash Flow - In terms of the cash flow for processing applications, the ICANN Budget refers to the New gTLD Budget in which the figures show that US$100,000 of each fee paid is budgeted for processing an application, including any refunds that might be made for applications that are withdrawn. If each Support-Approved Candidate is required to provide US$47,000 of the fee (as recommended by this WG, the GAC and the ALAC), then the balance of the immediate application costs would be US$53,000. One way to bridge this gap would be through application of the risk cost contingency fees (US$60,000) paid by a single non-Support-Approved Candidate (i.e., each Candidate paying the full $185,000 fee). This means that half of the Candidates could, theoretically, be processed as Support-Approved partial fee waiver Candidates without affecting the cash flow of the application process. No one, however, expects that half of the Candidates would be eligible for a partial fee waiver; an upper-limit estimate would be that 10-20% of the applications might be able to meet the JAS qualifications as the eligibility conditions are rather narrow[RH8|https://community.icann.org/#_msocom_8] ..
17. Final Accounting - Some basic arithmetical assumptions give the WG confidence that the final accounting will match the established budget. Presume that no more than 18% of the applications will be eligible for support. Then for every 100 applications, those paying the full fee (82%) will contribute $2.050m towards sunk cost repayment. The maximum fee reduction is 18 x $138. = $2.484m of which only 2.034m will go to offset actual costs (18 x (138-25)).
18. Since ICANN is receiving all of the fees at the start, there is no cash flow issue until the very end of the process.
19. Assuming there are indeed auction proceeds as expected, they will be used to repay the (up to) $2.034m. If there are insufficient auction proceeds, ICANN will defer the repayment of sunk costs.
20. The only challenge is to limit the funded applicants to 18%. But if this is really a problem, then ICANN has more problems with the new gTLD program than this one[RH9|https://community.icann.org/#_msocom_9] .
21. Thus, it does appear that with this proposal there should be enough money coming into ICANN in the short term to cover ICANN expenses in 2012--13 budgets, and with use of expected auction proceeds to make up the difference, the ICANN coffers would be indeed filled and the New gTLD Program would pay for itself when the final project accounting is done as required by the GNSO Policy recommendations.[2|https://community.icann.org/#_ftn2] This does not exclude that donors may elect to make larger grants or contributions directly to the ICANN-created Foundation, notably reducing their grant-making costs. Most Foundations and donors do not have sufficient Internet governance related expertise to make proper individual grants to our Applicants[RH10|https://community.icann.org/#_msocom_10] .
Financial support distributed by external funding agencies
22. There is consensus opinion within the WG that external funding agencies could (and should be encouraged to) make grants according to their own requirements and goals. ICANN would only provide those agencies with information regarding support approved candidates (i.e., those who meet the established criteria as determined by the SARP).
[1|https://community.icann.org/#_ftnref1] Note that this additional funding support, as recommended by the WG, is in addition to the fee reductions (to $47,000) recommended above.
[2|https://community.icann.org/#_ftnref2] This argument takes as a given the appropriateness of including recovery of development costs and risk contingency costs as part of the application cost which the GNSO required be program neutral. There are many who would not accept this assumption, but that argument has not prevailed in any discussions to date.
[RH1|https://community.icann.org/#_msoanchor_1]AB notes, “this US-based foundation, beyond managing auction proceeds, would also be able to receive outright donations or concessionary loans for development assistance to support-approved candidates for purposes deemed charitable under 501 c 3 IRS rules.”
[RH2|https://community.icann.org/#_msoanchor_2]AB asks, “is that different or the same than the ICANN originated foundation referred to in para 8? I find this confusing. What does community-based fund mean? it may be confused with a community foundation?”
[RH3|https://community.icann.org/#_msoanchor_3]AB asks, “why limit to California?... other US states may offer more-friendly less costly legal and regulatory frameworks, like Delaware for instance... I believe the common reference is to section 501 (c) (3) of the Internal Revenue Code not California 501C.... see http://www.irs.gov/charities/charitable/article/0,,id=96099,00.html”
[RH4|https://community.icann.org/#_msoanchor_4]AD suggested adding “voluntary” to items d & e.
[RH5|https://community.icann.org/#_msoanchor_5]AB notes, “it is a bit naive IMHO to talk about generosity only.... a 501 (c) (3) foundation will issue tax donation receipts which will entitle the donors to claim substantial allowable tax deductions!!!!”
[RH6|https://community.icann.org/#_msoanchor_6]Edits prompted by AM.
[RH7|https://community.icann.org/#_msoanchor_7]EL suggests that, since this is an explanation behind the recommendation and not part of the recommendation itself, that the section moved to an appendix.
[RH8|https://community.icann.org/#_msoanchor_8]AB suggested edit.
[RH9|https://community.icann.org/#_msoanchor_9]AG suggested this simplified explanation. Need to confirm WG agrees. [ed]
[RH10|https://community.icann.org/#_msoanchor_10]Suggested AB add.
