Create Resource Allocation Process

[deborahchang (Deborah Chang / 張元悅)]

We build in public. This means transparency in

• Where money is coming from
• Where money is going
• Values by which we make financial decisions
• Measures of equity in who leads at YPC
• Measures of collective impact as made possible through resources including financial ones
• Mechanisms for changing the policies
• Mechanisms for accountable community
• Mechanisms for dynamic decision-making

Let’s also consider financial resources as a question of governing the commons. In this I look to Elinor Ostrum, the only female Nobel Laureate of Economics who studied the commons and what makes them sustainable. She found these eight principles:

1. Commons need to have clearly defined boundaries. In particular, who is entitled to access to what? Unless there’s a specified community of benefit, it becomes a free for all, and that’s not how commons work.

2. Rules should fit local circumstances. There is no one-size-fits-all approach to common resource management. Rules should be dictated by local people and local ecological needs.

3. Participatory decision-making is vital. There are all kinds of ways to make it happen, but people will be more likely to follow the rules if they had a hand in writing them. Involve as many people as possible in decision-making.

4. Commons must be monitored. Once rules have been set, communities need a way of checking that people are keeping them. Commons don’t run on good will, but on accountability.

5. Sanctions for those who abuse the commons should be graduated. Ostrom observed that the commons that worked best didn’t just ban people who broke the rules. That tended to create resentment. Instead, they had systems of warnings and fines, as well as informal reputational consequences in the community.

6. Conflict resolution should be easily accessible. When issues come up, resolving them should be informal, cheap and straightforward. That means that anyone can take their problems for mediation, and nobody is shut out. Problems are solved rather than ignoring them because nobody wants to pay legal > fees.

7. Commons need the right to organise. Your commons rules won’t count for anything if a higher local > authority doesn’t recognise them as legitimate.

8. Commons work best when nested within larger networks. Some things can be managed locally, but some might need wider regional cooperation – for example an irrigation network might depend on a river that others also draw on upstream.

Other places to learn from

https://cobudget.co/

Raise and spend money with full transparency.

Funds

Related Projects

Setup CollectiveVoice to allow for Distributed Decision-Making Cross-Platform

Metagov Gateway helps communities govern themselves. This is how Metagov would work with Open Collective, where when an expense is submitted on Open Collective, it can be approved by community, not just by an admin. Here’s a great explainer video of the full concept!

Implement Beyond Budgeting

We have a proposal to Go Beyond Budgeting! In short, instead of budgeting, we separate the process into three Rolling forecasts Targets Resource allocation (with activity-based accounting) Related Projects Create 2021-2022 Budget

Implement Profit First

I just finished reading Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine and it’s the first time I’ve read anything about cash flow management that makes intuitive sense to me. It also pairs well with Beyond Budgeting because it makes visible exactly what we have available! I have a good feeling about Profit First and think it could be what we use as we budget! Check summaries of it out: Book Summary – Profit First: Transform your Business from a Cash-Ea…

Create Accounting System

Requirements Generally Accepted Accounting Principles (GAAP) Compatible with Form 990 On Form 990 all expenses must be classified into three types: Program Services expenses. Management & General expenses. Fundraising expenses Activity Based Accounting (see Implementing Beyond Budgeting Exhibit 3.10) (“Every action has a purpose and every cost can consequently be attributed to an objective.”)

Chart of Activities Example

What: Type of cost Salary Travel Rents Consultants Insurance etc. …

Create Budgeting Process

Resources 4.0 Pathways Thoughts Could we instead make targets?

Implement Virtual Cards

Open Collective supports Virtual Cards issued by Stripe. Any purchases made by the virtual card is automatically posted to Open Collective. See details: I think we can use virtual cards to ensure that people have access to the funds they need to make purchases in a distributed and transparent way! The alternatives are Purchasing remains centralized in a small number of people who have access to the bank account (inefficient and concentrates power) Purchasing through another platform like …

Todos

Reread pg. 169 Dynamic Resource Allocation section of Implementing Beyond Budgeting

[deborahchang (Deborah Chang / 張元悅)]

Term to search: Open-book Management

Open-Book Management

[deborahchang (Deborah Chang / 張元悅)]

Example of how one co-op operationalizes distributed decision making regarding budgets.

social.coop

Social.coop is run through a system of open contributions. There are no employees, but the cooperative strives for fair and sustainable remuneration for its contributors.

The procedure for paying contributors and expenses is as follows:

A member makes a proposal in the finance group (with the Title labeled EXPENSE), detailing either:
work to be done, the expected timeline, and the contributor’s qualifications, and the cost (in USD)
a service to be acquired, details about the provider, its benefits over alternatives, and the cost
a donation to be made to an external open-source developer or collective, the work they do that benefits Social.coop members, and a proposed amount
If that proposal passes, the member may proceed. They may post an invoice to OpenCollective, with a link back to the relevant Loomio thread, for up to one half of the total amount.
When the work is complete (or equivalent), the member must post a follow-up proposal (with the Title labeled INVOICE, in the same thread as the EXPENSE), including details demonstrating the work done or service obtained
The contributor should post the expense to the OpenCollective page with a link back to the relevant Loomio thread
Once passed, the expense is approved by an OpenCollective admin, and the contributor is paid within two weeks, or as soon as the OpenCollective account has sufficient balance
While general budgeting decisions are expected to be passed in the full group, all members are invited to monitor the finance group, and to join if they wish to participate in maintaining accountability.

[deborahchang (Deborah Chang / 張元悅)]

Favorite so far!!
Enspiral Handbook

Excerpts

Financial Agreement

Context

This agreement defines how handles money as a collective, specifically the funds in the accounts of . Our goals are to ensure legal compliance, financial solvency, and operational reliability, make financial flows across the network as transparent as possible, and direct significant resources to discretionary funds to be decided through participatory processes.

Type of Funds

Money held by the foundation falls into the following two categories.

Core Fund

The core fund is controlled by the Foundation Board. These funds are flagged for operational expenses and providing an economic runway for .

The board is expected to maintain a viable level for the core fund account (e.g. minimum of 12 months of fixed expenses) and to periodically allocate any surplus to the approved collaborative funding processes of their choice.

Collaborative Funds

Funds allocated to an approved collaborative funding process governed by the rules that define the specific process.

Income

receives income from individuals, companies, trusts or other entities. Income can be broken into the following categories:

Gifts

All one-off gifts to the foundation go to the core funds.

Membership

All recurring membership fees go to core funds. The board is responsible for setting membership fee levels and processes via the membership fees guide.

Sponsorship

A recurring sponsorship with . All sponsorships have a written memorandum which outlines the terms of the sponsorship and where funds are allocated.

Sponsorship monies can be allocated to any fund, as defined by the sponsorship memorandum.

An agreement (in the form of a memorandum) with the Board and the sponsor. The Board will sign off on and maintain a record of all memorandums.

Other income

All other income is allocated to core funds.

Outgoings

Money spent by the Foundation falls under the following categories.

Fixed Costs

The board is responsible for managing the fixed costs of the from core funds, which are expected to be kept at ‘minimum viable’ to ensure smooth operations of core processes for the network.

Discretionary Costs

All discretionary costs are managed through an approved collaborative funding process and taken from collaborative funds.

Emergency Costs

The board can approve one-off expenditures from any fund when exercising their emergency powers.

Collaborative Funding Processes

A collaborative funding process must have a facilitator who takes responsibility for the process. Specifically the facilitator is responsible for:

• Ensuring the rules for the process are clearly documented and approved by the board

• Budgeting for the process, including themselves running the process.

• Facilitating the process

• Reporting the outcomes to the network

• Holding entities that receive funding accountable

Funds may only be allocated to a collaborative funding process that has clearly documented rules that have been approved by the board. If no such rules have previously been defined, a proposal must be made to the board and approved.

Overall Compliance & Reporting

All financial compliance is managed at the discretion of the board. The board will provide a periodical financial report on s funds/accounts balances and budget/financial forecast.

[deborahchang (Deborah Chang / 張元悅)]

I had an idea!

What if we approached budgeting using the principles and features of You Need A Budget?

Principles

Rule One: Give Every Dollar a Job
Rule Two: Embrace Your True Expenses
Rule Three: Roll With The Punches
Rule Four: Age Your Money

The Four Rules | YNAB

Features
https://docs.youneedabudget.com/category/133-quick-start

Platform
I’m tempted to see if YNAB could, well, be our budgeting software. But Open Collective with its Fund and Projects feature may be able to take this on instead.

Using YNAB For Small Business

Update

I found the business version of YNAB!

Implement Profit First

I just finished reading Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine and it’s the first time I’ve read anything about cash flow management that makes intuitive sense to me. It also pairs well with Beyond Budgeting because it makes visible exactly what we have available! I have a good feeling about Profit First and think it could be what we use as we budget! Check summaries of it out: Book Summary – Profit First: Transform your Business from a Cash-Ea…

[deborahchang (Deborah Chang / 張元悅)]

Here’s another great example from the Ouishare Network, which encourages complete independence with a 10% contribution to structure costs.

Decision making

Key excerpts:

All OuiShare projects manage their budget and decisions completely independently. Their only obligation towards the organization is to contribute 10% structure costs to their local OuiShare non-profit. We rely upon the good judgement of the project leaders to know when a decision about a project could have a large impact on the rest of the organization and / or brand and thus make it necessary to consult the rest of the Connectors community before.

Budget Decisions

Decision Type	Passing Criteria	Minimum time frame	Description
> 300 €	Decision of each local communities financial steward(s)	none	Example for uses of such budgets are travel costs, event tickets, office costs, etc. The financial steward is reponsible for knowing the current status of finances to make this decision
> 2000 €	As long as there are no blocks	3 working days on Loomio	Decision is made in the local community whose budget is in question.
< 2000 €	As long as there are no blocks	5 working days on Loomio	Decision is made in the local community whose budget is in question.
Annual budget for local commons	Depends on local community, see decision making principle #1	Validated once a year in November on Loomio for the budget of the following year	Operational costs of local OuiShare entities and their communities
Annual budget for global commons	Each local community votes with money via the collaborative funding tool Cobudget	November - December for funding the budget of the following year.	Global operational costs. See examples of what is part of the global commons.

I believe in the independence part of things, but I’m not sure about a fixed percentage! There will always be some streams of work that “attract” more funding than others and it would be good to make the commons the default “pot” as opposed to the project itself. In addition, the Ouishare Network’s global commons relies heavily on volunteer labor, which is not financially accessible, so that’s again why money going into the commons would be ideal!