Criteria for Financial Need and Metrics
Introduction
The main objective of the JAS Working Group is to develop a sustainable approach to providing support to applicants requiring assistance in applying for and operating new gTLD.
Further to the presentation of its Milestone Report in which “need” has been established as the primary criterion for support, the ICANN Board request the WG to define precise metrics to demonstrate the “need” for the applicants for assistance
The mission of the Work Team AB is to propose and establish the criteria for financial need and a method of demonstrating that need, and to propose and define mechanisms for determining whether an application for special consideration is to be granted and what sort of help should be offered;
Selection Process
The selection process of applications provides a consistent, accessible and understandable application of eligibility criteria. This is so that the Community as a whole, including Applicants (designated as eligible or ineligible), understand on what grounds the eligibility has been determined. It further facilitates the Community development and allows ineligible Applicants to internally review their attributes to qualify as an eligible Applicant.
The selection process should use simple and clear standards and allow iterative flexibility. It would be reviewed periodically (annually).
Qualification
The main criterion for evaluation is Need. To be declared financially needy, an applicant should have a mean of total net profit over the 3 last years (for those that have 3 or more years of existence) of less than or equal to US$ 100,000.
Nevertheless, an applicant should also demonstrate its sustained capability to operate the gTLD, and thus should have a mean of total net profit over the 3 last years (for those that have 3 or more years of existence) of more or equal to US$ 70,000.
Those values are arbitrary, and don’t have scientific explanation. But if we assume that the applicant should provide a self funding of at least 30% of the application cost, the amounts above can be reasonable.
If we cannot provide a reason for creating this criteria, it should not be included.
Self declaration
Applicants requesting support must be able to prove that assistance is essential for the application to proceed. Their Application must have been completed and a formal offer of assistance issued before any applicant enters into a commitment to proceed with the project. Applicants would be ineligible for support if they did not provide clear accounting, on a timely basis.
Applicants who wish to benefit from the support should provide:
- A declaration of all properties and fixed assets held by themselves or their partners
- Audited Financial Reports for the 3 last years (for entities that have 3 or more years of existence)
- Audited Financial Reports for all years (for entities that have less than 3 years of existence)
- Bank statements of the 3 last years (for entities that have 3 or more years of existence)
- Bank statements of all years (for entities that have less than 3 years of existence)
To verify the self declaration, ICANN should make use of professional entities at asserting the truth and checking the exactitude of the declaration.
Any misrepresentation will lead to the rejection of the application, and will disqualify the applicant for the next 5 years.
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Cintra and Carlton completed this proposal to read:
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Criteria for Financial Need and Metrics
Introduction
The main objective of the JAS Working Group is to develop a sustainable approach to providing support to applicants requiring assistance in applying for and operating new gTLD.
Further to the presentation of its Milestone Report in which “need” has been established as the primary criterion for support, the ICANN Board request the WG to define precise metrics to demonstrate the “need” for the applicants for assistance
The mission of the Work Team AB is to propose and establish the criteria for financial need and a method of demonstrating that need, and to propose and define mechanisms for determining whether an application for special consideration is to be granted and what sort of help should be offered;
Selection Process
The selection process of applications provides a consistent, accessible and understandable application of eligibility criteria. This is so that the Community as a whole, including Applicants (designated as eligible or ineligible), understand on what grounds the eligibility has been determined. It further facilitates the Community development and allows ineligible Applicants to internally review their attributes to qualify as an eligible Applicant.
The selection process should allow iterative flexibility; to take a different approach from the existing selection arrangements that are not practical or do not reflect the specific policy objectives of Application support. The selection process and the nature of the eligibility standards, could be legitimately changed based on lessons learned and subject to full disclosure which would encourage development criteria to monitor the choices and recommendations of both public agencies involved in the process and private interests with particular Applicant and commercial concerns. Therefore the selection process would be reviewed periodically (annually), but includes the following two steps:
Step 1. Identify eligible Applicants should be identified based on their meeting the minimum threshold of eligibility, using simple and clear standards. This step is binary in nature – an Applicant falls in one of two categories, eligible or not.
Applicants that come from countries that are eligible for grants and loans from the “soft” or concessional IDA window of the World Bank (and of the other multilaterals, including the IMF).
Qualification
The main criterion for evaluation is Need. To be declared financially needy, an applicant should have a mean of total net profit over the 3 last years (for those that have 3 or more years of existence) of less or equal to US$ 100,000. Nevertheless,
An applicant should also demonstrate its sustained capability to operate the gTLD, and thus should have a mean of total net profit over the 3 last years (if he/she has 3 or more years of existence) of more or equal to US$ 70,000.
Those values are arbitrary, and don’t have scientific explanation. But if we assume that the applicant should provide a self funding of at least 30% of the application cost, the amounts above can be reasonable.
Self declaration
Applicants requesting support must be able to prove that assistance is essential for the application to proceed. Their Application must have been completed and a formal offer of assistance issued before any applicant enters into a commitment to proceed with the project. Applicants would be ineligible for support if they did not provide clear accounting, on a timely basis.
Applicants who wish to benefit from the support should provide:
- A declaration of all properties and fixed assets held by themselves or their partners
- Audited Financial Reports for the 3 last years (for entities that have 3 or more years of existence)
- Audited Financial Reports for all years (for entities that have less than 3 years of existence)
- Bank statements of the 3 last years (for entities that have 3 or more years of existence)
- Bank statements of all years (for entities that have less than 3 years of existence)
To verify the self declaration, ICANN should make use of professional entities at asserting the truth and checking the exactitude of the declaration. Any misrepresentation will lead to the rejection of the application, and will disqualify the applicant for the next 5 years.
Applicant support shall involve expenditure in resources of all types including finance and/or in kind services. Any resource expended on an application by an applicant does not automatically disqualify the applicant for support, but can be taken into account when establishing the need for assistance.
Additionally, financial support need is focused on high-quality, innovative, knowledge-based Applications which have the potential to provide skilled jobs. The emphasis is on raising representation, productivity and improvement in the skills base.
Once applicants meet the initial need criterion, the WG recommends that the following categories of applicant receive support (not in priority order):
- Community based applications such as cultural, linguistic and ethnic. These potential applicants have the benefits of being relatively well defined as groups. Facilitating community on the web is one of ICANN’s Core Values. Applicants would be given special credit if they increase skills and investment in the skills base of a target community. Experience and expertise balance with special focus should be placed on organizations with scientific and/or technical specialization. Applications would also be favoured if they contribute positive benefits to both the regional and national economies and will be assessed for their impact on existing investment within and outside of the region. Consideration of applications may be rotated to regions and/or sub-regions to ensure wide participation and circulation of support.
- Non-governmental Organizations (NGOs), civil society and not-for-profit organizations.
- Applicants located in emerging markets/nations, whereby the applicant must be committed to operating from and benefitting an Assisted Area, as set out in the Assisted areas database.The criteria must signal to all applicants the policies and practices that can be adopted to increase the potential for aid to be given and should indicate to the applicants that are currently ineligible what steps they could take to become eligible. Special attention will be given to geographical balance whereby all regions should be represented in ratio that accounts the number of successful applications in each region.
- Applications in languages whose presence on the web is limited.
- Local entrepreneurs, who otherwise meet other criteria in this section, in those markets where market constraints make normal business operations more difficult. The applicant's ability to benefit from the help sought is evaluated. It would be self-defeating to support an applicant who, by virtue of other disabilities, may not be able to avail themselves of any support granted e.g. if the applicant is already bankrupt, etc.
- A number of factors may be also assessed, for example wages, research and development content and training and development, as well as gender balance by fostering gender participation in order to ensure equal representation.
Overall potential Applications will also be evaluated on their potential viability and competitiveness having a reasonable chance of success. The gTLD will generally be expected to become profitable within three years. Viability will be assessed by the Applicant’s ability to generate operating cash flows sufficient to repay debt obligations or the Applicant’s ability to secure financing and business from the community.
Step 2. Invite eligible Applicants to participate in the gTLD application process to receive support. [2-3] year financial and technical aid. Selection in this step is not ‘all or nothing’, but could include a continuum of support based on the eligible Applicant’s requirements and technical quality of proposals.
Step 3. Review Applicant’s circumstances
Another assessment may be done if the financial or other situation changes (earnings rise or fall, no longer require in kind support or obtain money from selling a capital asset) before the gTLD application is granted.
Aid may stop if:
- the applicant does not give information when requested;
- the applicant's financial and other circumstances change so that they are no longer pass the means test;
- the applicant withholds information about financial and other circumstances; or
- it is discovered that the applicant does not pass the means test.
The applicant's support can be stopped in two ways:
- ‘Discharged’, which means support will stop from the point when applicants are notified. The applicant may have to repay some or all of the funds already spent on the application.
- ‘Revoked’ (cancelled), if it is found the applicant was wrongly granted aid, for example by giving false information about finances. In this case, the applicant may have to repay all the funds spent on the application.
Step 4. Partial payment and re-payment when the gTLD application is granted
The applicant that is granted aid may have to pay some of the costs, depending on the financial situation and the application’s viability. This ensures the fund is self sustaining and does not diminish quickly; there are three ways the applicant may have to pay:
- ‘capital contribution’--a lump sum;
- ‘income contribution’-- monthly installments from income until the case finishes; and
- ‘base charge’-- repaying full or percentage of base costs of the application if the gTLD is profitable.
The charge has three main objectives:
1. It allows public money to be ‘recycled’ so that it can be used to fund other applicants in the future.
2. It helps to deter applicants from requesting aid unnecessarily.
3. It puts the successful applicant in the same position as a normal applicant.
1 Comment
Alan Greenberg
A lot of the specific words we need are already in the above text, and I have not tried to incorporate it all. But I am trying to capture the important principals and the issue that we are not capable of going farther than to specify the overall constraints.
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Discussion of the criteria by which an applicant will be judged worthy of support.
Members of the JAS WG did not have the skills or experience to specifically define criteria. ICANN does not likely have the skills in-house either, but presumably there are organizations that do. The skills do reside in a number of international donors, and in development cooperation groups of many of the governments that participate in the GAC.
It was agreed that there are a number of goals to be met by the criteria.
- Financial need is a key. Other missing resources can be outsourced if money is not a limitation.
- Criteria should be as objective as possible, but it is clear that ultimately judgment calls will need to be made, and the criteria should reflect that.
- The WG explored a variety of specific criteria such as net worth of the applicant, net annual profit and annual revenues [add any more here that we have looked at], but found all lacking in that they could be relatively easily gamed or would eliminate certain applicants who should otherwise be supportable.
- The intent of this support is to provide initial support for an otherwise viable application. [Note: this does not mean that we should ignore lowering the operational costs, but that should be in a separate section.]
- Support should not exceed XX% of the fees due from ineligible applicants.
- The actual judging of financial need and deciding whether an applicant meets the established criteria to be supported should be outsourced to those who make similar judgment calls with respect to developing economy requests (is “developing economy” the term we are using??) on a regular basis. This will also serve to distance ICANN from the actual decision and the politically dangerous ground.
For discussion:
- We do not want gaming, but we also do not want to miss really deserving applicants. We need to decide which of these is the more important goal, since any set of criteria will likely tend to allow either false positives or false negatives.
- Similarly, there will be many profiles of prospective applicants. If we want the overall criteria to fit all of them, it may become far too unwieldy and impractical. Are we willing to sacrifice some classes of applicant to allow a more manageable process.