ANV5 Budget Analysis

ANV5 Is the first ANV since AGP-103 (Aragon Network Budget) passed, and the implications of this change on the ANV process may not immediately be intuitive. The budget imposes constraints on how much capital can be spent via finance track proposals each quarter, and provides a mechanism for determining which proposals will actually be paid in the event that ANT holders approve more spending then the budget allows.

In order to help both proposers and ANT holders better understand the impact each proposal has on the overall budget I’ve created a spreadsheet to help summarize this information. Its intended to be an objective and unbiased resources, so it does not make any judgement on what the proposals are for just how much they are asking for and how that will impact the budget. As proposals can still be modified up until the 27th I will try and keep this document updated and sync with the most recent changes, if you are a proposer and are making a change feel free to ping me and I will adjust the spreadsheet to reflect what is present in the AGP repo.

You can access the spreadsheet here.

Methodology

I used transparency.aragon.org to get a snapshot of the current treasury value. Since the values and amounts can fluctuate, I’ve indicated the date this portion of the spreadsheet was last updated.

The recurring budget allocations section includes all the active recurring commitments. According to AGP-103 these commitments will be debited against the budget before any new proposals, unless a proposal has been passed with decreases the amount of an existing recurring proposal. In the case of ANV-5 there have been no adjustments to these proposals so there should be no changes to these amount expected.

The static projection table projects the budget out for the current Quarter as well as the 4 subsequent quarters. This allows us to understand not just the current budget, but also the impact up to a year out. For this projection we assume that the value of treasury assets are constant (though this is unlikely to be true in practice). We also assume that there is no capital inflow, which historically has been true, but may not be true in the future. It also assumes there are no changes to recurring spending, which would not impact the projected amounts but would impact the % of the budget which is not pre-allocated.

Finally, the most important piece, the ANV5 finance proposals table lists all finance proposals which are being considered. The amounts requested have been normalized to USD value and separated into one-time and recurring (quarterly) amounts. The current impact column computes the percentage of the current budget the proposal would consume, the recurring impact computes how much over the course of the projected period (5 quarters) the commitment would represent assuming the amounts were not adjusted or canceled during that time. The cumulative impact calculates the percentage of the total projected budget for the 5 quarters the proposal would consume, this normalizes one-time and recurring payments across the 5 quarters.

Current Status

Based on this analysis the current proposals represent 205.31% of this quarters budget, and 94.07% of the cumulative budget through 2020.

Even if we wanted to pass all of these proposals as is, the budget policy would prevent some of these proposals from passing. It is still possible to restructure these proposals during the community review period and I encourage everyone in the community to actively engage this week and work to ensure that the proposals that end up on the ballot have been reviewed in the context of their budget impact so that proposers have an opportunity to adjust based on community feedback before they are locked in.

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Hi Luke!
Thank you for laying down the details for proposers and ANT holders to understand the new dynamics!
Some values in the spreadsheet are static and I can’t edit so I have made some calculations on a local copy for the purposes of this reply. Please correct me if there is any discrepancies with your measures.
A few remarks:

  • The AA one time payment takes up circa 89% of the total one time budget . Accounted on a quarterly basis it is only 22,5% and leaves rooms for other proposals to pass this ANV. Altho I believe it makes sense that AA has its own track.
  • There are also 3 investment/loan proposals for a total of 54% of the cumulative total. A separate track should be probably be created for investment proposals as these can’t be accounted in the same way as an expense as mentioned here
  • one time payments (apart from AA) stand at circa 1.2M DAI (or 500k DAI if investments are excluded) with the current batch of proposals, giving a buffer for eventual price shocks and future one time and recurring payments

Thanks for putting this together @lkngtn. AGP-103 wasn’t very clear with regards to how “market value of the Association / Aragon Network treasury” is actually calculated. Specifically:

  • There are number of liabilities that we are required to pay in the future, such as unvested ANT rewards, outstanding DAI payments from ANV#4 etc, tax liabilities etc. As it stands today, there is a net treasury balance after liabilities of approximately $35,299,266. This is an estimated figure given that we are still waiting for confirmation on some liabilities such as VAT. If figures don’t change from this, it would mean a max quarterly budget of $1,764,963.

  • It’s not clear at which date /time the “market value of the Association / Aragon Network treasury” should be calculated for the purpose the quarterly budget calculation.

I would therefore like to propose that we use the treasury value, net of liabilities and set the time for the calculation of this at 11th December 2019 at 16:00 UTC, when voting for Aragon Network Vote #5 begins.

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Great spreadsheet @lkngtn and much needed thread to dig into.

Small comment for now:

Actually, AGP-1 does state this:

The market value of the treasury, and spending relative to that, shall be measured in DAI at the closing time of every ANV.

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well spotted @stellarmagnet!

Indeed AGP-103 did not seem to explicitly say how to handle outstanding liabilities, as a matter of good faith execution I believe following accounting best practices and measuring the treasury value by assets - liabilities = treasury balance is the best way to handle it.

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Can you expand on this? I’m not sure I follow the reasoning why AA’s finance track/budget proposals should be excluded or moved to a different track?

I think we would have to treat these proposals as part of the finance track budget… I think in the case of the ANJ proposal there is some grey area in the sense that it could be considered a portfolio re-allocation and possibly fit in the Association policy track if the proposers decide to move it, however other “investments” or “loans” only make sense as part of the finance track and therefore would need to be considered in the finance track budget.

Agree on this interpretation and appreciate the clarification about outstanding liabilities @joeycharlesworth.

I’m a bit concerned that based on the delta between transparency.aragon.org and your figure of 35,299,266 that there seems to be over 4 Million dollars in liabilities that have not been publicly disclosed. It would be helpful I think to find some way to ensure that transparency.aragon.org or or some other portal can provide an accurate picture about the state of the projects finances.

In the interim I will add a liabilities entry in the treasury value column, and use your post as the source.

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It’s common to separate capital expenditures from operational expenditures for capital allocation purposes rather than fitting all proposals into one basket and budget. Thus it’s easier for the network to first decide “we want to spend x on investments and y on expenses” and then select proposals that fit a budget rather than trying to cram apples and oranges into one “ledger” :slight_smile:

As for the AA it’s to separate typical operational expenses of the network from the “administrative and managerial” overhead. Altho you’re probably right, this can also be decided within the Finance track column.

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There is a draft AGP proposal which may be relevant to that https://github.com/aragon/AGPs/pull/144/files

That said, as the tracks exist currently, I don’t think that a distinction has been made.

Furthermore, I think the intent of the current budget proposal is to but a constraint on the rate of capital outflow, so while it may be useful to take that amount and strategically portion it out based on different spending categories, it seems like moving things outside of the scope of the budget entirely by classifying proposals which allocate capital via “0% interest loans” or “Seed funding” as investment rather than expenses doesn’t really seem to align with the spirit of AGP-103 in my opinion.