[Governance] "Ring Fenced Funds" Discussion and Proposal

Josh Sokol josh.sokol at owasp.org
Sun Aug 23 22:15:26 UTC 2015


Kostas,

I think we need to agree to disagree on the "*Account balances should be
the start of all funding efforts.* " idea.  This has happened with more
initiatives than just yours, so please don't take it personally.  I would
say that the term "bankrupt" isn't really appropriate in this situation.
Bankruptcy assumes that the group has reached a $0 balance and is unable to
operate.  That simply is not true.  In fact, a chapter or project with a $0
balance has several options under this model.  For one, they can continue
to request additional funding under the community engagement funds
program.  Historically, there has been more than enough money there to meet
the needs of the chapters and projects.  For another, under this model they
could simply submit a budget for anticipated expenses for the following
year.  And, as with any organization, there are always exceptions to the
rule and those can be handled on an as-needed basis, as they have in the
past.  By gifting money to chapters or projects, regardless of the money in
their accounts, we are simply perpetuating the issue of stagnant funds.  We
are saying "Here's more money when you're already not spending the money
that you have".  Now, if you can point to a line item in the budget and say
"Look, we have a plan for this money, that's why we haven't spent it yet",
then I would agree with you 100%.  Perhaps I need to clarify that more, but
this assumes that the money isn't already allocated to something else via
the budget.  So in your example, where the chapter has $700, and $700 is
budgeted for expenses, then yes, they should be able to request additional
funds such as OOTM.  I think that would address the situation that you're
talking about.  In your specific situation with "Summer of Code", if the
projects had plans for their money already budgeted, then receiving funds
from this initiative would be fine.  The problem is that they just said "We
want to be able to spend that money on other stuff." with no actual plan to
do so.  That isn't good enough to justify not spending your own funds, at
least in my opinion.

~josh

On Sun, Aug 23, 2015 at 4:53 PM, Konstantinos Papapanagiotou <
Konstantinos at owasp.org> wrote:

> Josh,
>
> This is indeed a very delicate matter. Thank you for taking the time to
> describe in detail the current situation and suggest solutions. In fact i
> think that we share the same opinions and ideas. I knew that you guys had
> done a lot of hard work at the Austin chapter, but not all those details.
> You are right that such success stories should receive more publicity. An
> interview in a podcast or an article in the connector (if you haven't done
> this already) would provide a lot of interesting information to other
> leaders.
>
> The only point I diasagree (naturally, since I proposed the initiative
> that you mention) is on the "*Account balances should be the start of all
> funding efforts.* " idea. Now, I don't want to get back into that
> discussion for the specific initiative since we provided enough arguments
> at that time. For various reasons I believe that as a general rule a
> project/chapter should be able to get money from the foundation regardless
> of its current balance. Otherwise all chapters would be required to go
> bankrupt before getting any money from the foundation. I also agree with
> you that having a budget is important. In this context I would suggest
> that if the available money is budgeted for other purposes than the one
> suggested by the initiative, then the chapter/project should be able to
> receive additional money. Eg a chapter has $500 earmarked for lunch costs
> and $200 for schwag. The chapter should be able to get an additional $300
> from the foundation, let's say from an initiative like "owasp on the move",
> to pay for the flight of a speaker, even though it still has $700 available.
>
> Kostas
>
>
>
> On Sunday, August 23, 2015, Josh Sokol <josh.sokol at owasp.org> wrote:
>
>> Board,
>>
>> *Problem Statement*
>> There is no reason why we cannot tackle this issue in parallel with the
>> conversation around the Board Member Confidence discussion as, at least to
>> me, they appear to be unrelated.  The underlying issue here is that we have
>> $499,003.33 in funds that are allocated to chapters, and $43,227.29 in
>> funds that are allocated to projects, and at least some portion of these
>> funds are not getting spent.  When funds aren't getting spent, then they
>> aren't benefiting our mission.  And, when they aren't benefiting our
>> mission, then OWASP isn't living up to it's fullest potential.
>>
>> *Background*
>> I realize that this is a highly volatile conversation to have since many
>> people are passionate about the topic, myself being one of them.  And I
>> will qualify my bias in this discussion since my roots with OWASP came from
>> being involved with OWASP Austin which has roughly $16k of that funding and
>> most would probably consider it one of these "rich chapters".  But, it
>> wasn't always that way.  In fact, when I first got involved with OWASP
>> Austin, we didn't have much (if any) money in our account at all.  We were
>> clearly lagging behind other local organizations, such as ISSA, who
>> provided lunch to members, speaker gifts, attendee giveaways, and more.
>> And when I took over the chapter a few years later, I set out to change
>> things to make OWASP Austin more competitive.  Initially, that meant asking
>> for funds from the OWASP Foundation for every meeting that we had.  Lunch
>> ranged from $300-500 per meeting.  Throw in speaker gifts and a book
>> giveaway and we were probably averaging right around $500 per meeting.
>> With monthly meetings, that number added up to a pretty hefty $6000 per
>> year for OWASP Austin alone.  If you do the math, if every chapter at OWASP
>> had these same needs, that's easily over half-a-million dollars a year in
>> expenses for chapter meetings alone.  Those kinds of numbers may be more
>> sustainable with today's revenue, but back then, they would have bankrupted
>> OWASP.  So, rather than be a part of the problem, we decided that OWASP
>> Austin needed to find a way to be a self-sustaining chapter, and decided
>> that hosting a conference would be an ideal way to do that, while also
>> accomplishing OWASP's mission of education.  The Lonestar Application
>> Security Conference (LASCON) was born.
>>
>> The irony here is that OWASP Austin started LASCON as a means to raise
>> money so that we wouldn't have to take Foundation funds away from others
>> and now others are talking about taking the money away from us.  All along
>> the way, we have done the community-conscious thing and split part of the
>> money we raised with the Foundation.  We even donated $10k of funds that we
>> didn't think we would need to the Africa Chapters for their conference and
>> additional funds to the Cornucopia project.  So, yes, we have $16k in the
>> bank, but we are spending a significant amount of money every month, and
>> that number will go down over the course of the year, and back up after
>> LASCON in October.  The money is not stagnant.  It is being spent, and then
>> being refreshed.  I realize that the discussion here isn't focused on OWASP
>> Austin, but I use it as an example because it is one that I know very well,
>> and I think that many of our "rich chapters" fall into a similar boat.
>> They have some events that raise money, some events that cost money, and
>> the result is that from the outside it looks like these funds are stagnant,
>> while in reality these funds are being used in more ways than almost
>> anywhere else in our organization.
>>
>> One of the best things about having money is that it allows you to
>> experiment with things that you wouldn't normally be able to using
>> Foundation funding sources.  For example, for years now the OWASP Austin
>> chapter has been recording it's chapter meetings and putting the content
>> online (https://vimeo.com/channels/owaspaustin).  This started as an
>> experiment where we used some of our funds raised by LASCON in order to
>> purchase some audio-visual recording equipment.  It was a bit rough at
>> first, but we started developing best practices and eventually put out a
>> document guiding others on the equipment to purchase, how to connect it,
>> how to record, and how to put it online.  Now, between OWASP Austin and
>> LASCON, we have a video library that rivals what is in the OWASP Media
>> Project as a whole.  Every time I hear this "Ring Fenced Funds" discussion
>> come up, what it really comes down to, to me, is that somebody else thinks
>> that they will be able to put those funds to better use than we do.  They
>> put in none of the effort to raise the funds, but want to share in the
>> reward of spending them.  That just doesn't sit right with me.
>>
>> As I said in my first paragraph, I agree that there is an issue here, but
>> let's not confuse ourselves.  The issue has NOTHING to do with revenue
>> sources for chapters or projects.  We should be encouraging our chapters
>> and projects to explore as many different revenue sources as possible as
>> long as they do not compromise our core values.  Every dollar that a
>> chapter or project goes out and gets on their own is another dollar that
>> the Foundation has available for another chapter or project to spend
>> elsewhere.  Even at the current 90/10 split on a chapter conference such as
>> LASCON, the Foundation gets 10% of the profit for an event that they
>> provided minimal support for (contracts, billing, payments, etc, all
>> required by our guidelines).  Revenue is a good thing, regardless of the
>> account that it falls into.
>>
>> *Proposal*
>> The real issue here that we are trying to address is not "ring fenced
>> funds", but rather, "stagnant funds".  We shouldn't care that chapters or
>> projects HAVE money allocated to them.  We should care that they are
>> SPENDING it to further our mission.  We need a system in place that INFORMS
>> our leaders about how much money they have, that ENCOURAGES them to spend
>> their money, and that RECLAIMS money that becomes stagnant.  Thus, I would
>> like to propose the following changes to our policies regarding funds that
>> have been allocated to a specific chapter or project.
>>
>>
>>    - *Profit sharing splits will remain at their current levels.*  As I
>>    described above, the issue is not how money comes in, it is how it goes
>>    out.  We should be rewarding those chapters and projects who undertake
>>    fundraising initiatives by empowering them to spend the money that they
>>    raise.  This encourages them to continue with future initiatives and
>>    creates repeatable formulas that others can use to do the same.
>>    - *Leaders will regularly be made aware of their account balances.*
>>    One of the big problems that we have had in the past is that our leaders
>>    didn't even know that they had money in their account to spend.  How can we
>>    ever expect to get stagnant funds moving in that situation?  The OWASP
>>    staff will be responsible for sending out monthly e-mails to chapter and
>>    project leaders letting them know how much money they have in their
>>    account.  I would imagine that we could script this so that it happens
>>    automatically.  Regardless, awareness of funds is key to the spending of
>>    funds.
>>    - *OWASP will maintain a list of things to spend money on.*  OK, so a
>>    leader now knows that they have money, what next?  In the past, we have had
>>    a list of pre-approved expenses, but it was basic things like room rental,
>>    meeting food, speakers gifts, etc.  We need to get a little bit unorthodox
>>    here and start maintaining a list of all expenses that were approved in the
>>    past.  I mentioned before that OWASP Austin purchased AV recording
>>    equipment; let's put that on the list.  One of our chapters was talking
>>    about building a library; sounds great, let's put it on the list.  This
>>    list should grow bigger and bigger as we experiment and innovate and will
>>    serve to show leaders examples of what others are doing with their funds.
>>    - *Initiatives, not donations, are key.*  Every time I hear someone
>>    say "We want a chapter to donate funds to project X", I cringe.  Not
>>    because I don't think that it is a worthwhile project, but because moving
>>    money from one account to another only changes the account balance, it
>>    doesn't make stagnant funds move.  Instead, I would like for us to think of
>>    things in terms of "initiatives".  An initiative is an idea that someone
>>    has that needs funding to make it happen.  It is a specific goal with a
>>    pre-identified budget needed to make it a reality.  We should never have a
>>    call for "Donate to Project X".  The call should be "Project X needs $Y to
>>    print 1000 copies to give away at conference Z."  An initiative gets funds
>>    moving by giving our leaders a reason to spend them.
>>    - *Highlight those who are making funds move.*  When OWASP Austin
>>    decided to donate $10k of it's chapter account balance back to the OWASP
>>    Foundation a year or so ago, it was a very sterile transaction.  The money
>>    was deducted from the LASCON profits before it even touched the chapter
>>    account and was included as part of the 10% profit share for the
>>    Foundation.  That was it.  There was literally no record that the
>>    transaction ever took place other than an accounting transaction that
>>    reflected $10k more than what was supposed to be.  When someone does
>>    something like this in our organization, we need to highlight it, because
>>    others will see it as a positive example and potentially follow suit.  Blog
>>    it, tweet it, put it in the connector, and make it a big deal.  If a
>>    chapter comes up with a creative way to spend their funds, highlight that
>>    to show others.  I cannot understate the importance of this as it sets the
>>    example that all others will follow.
>>    - *Budgeting at the micro level is a necessity.*  I really hate
>>    saying this because it makes me sound like an old man, but budgeting is
>>    important.  We do it at the macro level for the Foundation already.  It's a
>>    necessity to ensure that our funds are being spent in a responsible fashion
>>    in order to further our mission.  I'm open to suggestions on this one, but
>>    my initial thought is that any account (project, chapter, or otherwise)
>>    with more than $5,000 in it needs to have a plan for how to spend that
>>    money, and that plan comes in the form of a budget.  This move would affect
>>    20 chapters which hold a total of $355,847.21, or to put it another way,
>>    just over 71% of the total chapter "ring-fenced funds".   It would affect
>>    two projects which hold a total of $17,653.52, or just under under 41% of
>>    the project "ring-fenced funds".  Budgeting should happen in Q4 of each
>>    calendar year with the goal of each of these groups identifying how they
>>    plan to spend the money over the course of the next year.  If there were
>>    some sort of event or longer-term goal that needs to be considered, a
>>    future projection budget could be included as well.  We can tweak the
>>    $5,000 bar in the future if we find that it is too high or too low, but it
>>    seems like a good target to me, at least to start with.
>>    - *Money with no plan for spending needs to be re-purposed.*  The net
>>    result of the budgeting process is that we identify money being spent or
>>    saved with a plan vs money that is just sitting there stagnant with no plan
>>    for spending.  Money with no plan for spending, should go back into the
>>    community engagement funds pool for others to spend as needed.
>>    - *Negative account balances need to be wiped clean.*  I'm not sure
>>    how it happened, but I see a number of chapters and projects who have
>>    negative account balances.  I find myself wondering how it would make me
>>    feel as a leader to look at the scoreboard or get an e-mail and see that
>>    I'm actually in the red.  How humiliating.  And what a huge barrier for a
>>    new leader to overcome.  However this practice got started, nobody should
>>    ever be able to go below 0.  We need to wipe these deficits clean and give
>>    them a fresh start.  We're talking less than $750.  We can figure out a way
>>    to make this happen.  In the future, any amounts over what a chapter has
>>    available needs to come from the Foundation.
>>    - *Account balances should be the start of all funding efforts.*
>>    Let's be clear, there is no shortage of money at OWASP for those who need
>>    it.  The community engagement funds pool has plenty of money in it that
>>    hasn't been used up in years past.  That said, the intent of this pool of
>>    funds should be to provide money to those who don't have it, not to
>>    supplement those who do.  I've seen at least one initiative recently where
>>    the proposal ignored the fact that the projects involved all had positive
>>    account balances, and effectively gifted them the money for the initiative,
>>    rather than having them spend their funds first.  With the underlying issue
>>    here being one of stagnant funds, how can we possibly justify gifting this
>>    money, when they all had their own money that could have been used?  I
>>    heard the excuse in this particular situation that they likely would not
>>    have participated if they had to spend their own money, but in that case,
>>    what does that say about how much those projects valued the initiative?  No
>>    leader should be able to receive Foundation funding unless they no longer
>>    have "ring-fenced funds" to spend.  Otherwise, we are just further
>>    perpetuating this problem.
>>    - *Spending money needs to be easy.*  There is plenty of money
>>    available at OWASP for those who need it.  Between the chapters, projects,
>>    and community funding, we're looking at over $600k.  So, when people tell
>>    me that they have a hard time spending money at OWASP, I wonder why that
>>    is.  I suggest that if a chapter or project has a desire to do something
>>    that is either on the approved list, or that any other chapter or project
>>    has done in the past (ie. is on that list of things we are spending money
>>    on), and they have the funds in their account, they can do it, no questions
>>    asked.  With every approval, we need to be conscious that we are setting
>>    the precedent that this is an approved expense for everyone.  For those
>>    without money in their account, they can follow the community engagement
>>    process, or see my proposal below.
>>    - *Anyone can budget for the future.*  I talked above about the idea
>>    of micro-budgets for anyone with over $5000 in their account.  This helps
>>    to recoup the money that isn't getting spent, but it doesn't do anything
>>    for those who don't have any money, but have things that they want to spend
>>    it on.  Thus, I propose the idea that any chapter, project, committee, etc
>>    can create a budget in Q4 for an initiative, or other spending needs, that
>>    they would like to cover the following year, but do not have the funds to
>>    do so.  The budget would be reviewed by the Executive Director and Board,
>>    and, if approved, incorporated into the overall OWASP Foundation budget for
>>    the following year.  This would effectively set aside the funds to use at
>>    the appropriate period of time, in the future, with no further approvals
>>    necessary.  It creates empowerment for use of funds and allows the
>>    Foundation to approve them and plan for them in a responsible manner.
>>    Funds are allocated in a "Use them or lose them" fashion, however, and go
>>    back to the Foundation pool for other initiatives if they are not spent
>>    when planned.
>>
>> I did my best here to outline each of the problems that I see with
>> respect to how OWASP funds are spent today and to come up with reasonable
>> solutions to each.  I don't claim for this to be a comprehensive solution,
>> and I hope that you all will help me to further flush out these ideas in
>> order to create a long-term vision that will empower our leaders and get
>> our money moving for our mission while still maintaining a sense of fiscal
>> responsibility.  I am very interested in hearing your thoughts and feedback
>> on it.  Thanks.
>> ~josh
>>
>
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