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The RIPE NCC Clearing House Procedure
Kees van Draanen
Document ID: ripe-202
This document has been written to provide additional
information as to the working of the clearinghouse
system and should be read in conjunction with
RIPE-173, General Terms and Conditions. In case of
dispute, the General Terms and Conditions and the
Standard RIPE NCC Service Agreement will be authori-
tative.
When the RIPE NCC was established as a separate
legal entity it was agreed with the Dutch tax
authorities that any surplus or deficit of income
over expenses would be distributed among the mem-
bers. The process by which this was to be done was
called the clearinghouse. The clearinghouse system
started with the 1998 financial year.
This process will be used to distribute any surplus
of operating income over operating expenses among
the current members. In the case of a shortage in
the operating income over expenses, the RIPE NCC
will use this procedure to distribute the shortage
among all its members. For the purposes of this
document these two possibilities will be referred to
as surplus and deficit.
A RIPE NCC member is defined as a Local Internet
Registry (LIR) that receives services from the RIPE
NCC and has been invoiced a service fee for the year
at issue.
Eligibility to participate in this clearinghouse
procedure depends on each member's (LIR) fulfilment
of financial obligations towards the RIPE NCC. All
members that have fully paid their invoices within
the calendar year for which they were invoiced are
eligible to participate in the clearinghouse. For
example: if an LIR received its invoice in June 1999
and has completely paid its invoice before the end
of December 1999 it will be eligible to participate.
An exception to this principle applies to members
who were invoiced during the month of December.
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The RIPE NCC Clearing House Procedure
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Those members will be eligible to participate only
if they have paid their invoice within 30 days of
the invoice date. Members who quit during the year
will not participate in that year.
The clearinghouse procedure will take place as soon
as possible 90 days after receipt of the audited
financial statements. Members will be informed of
their share of the clearinghouse by e-mail. Start-
ing for the 1999 financial year, this will not be
later than six months after the receipt of the
audited financial statements.
The first step of this process is to determine
whether a member has paid their fees and then to
calculate the member's percentage of the total fees
paid by members during the year at issue.
The member's share of the surplus will be equal to
the percentage of its fee contribution to the total
fees paid to the RIPE NCC throughout the year. Fees
in this case pertain only to the year in question
and do not include any prior years' fees that may
have been paid.
The member's percent share in the total paid fees is
calculated by dividing the member's fee paid by the
total of all other members' fees paid throughout the
same year. For example: if member A is a small Reg-
istry that paid a fee of 450 and the total paid fees
of all members during the 1999 calendar is 60,000,
then the percentage is as follows:
Member A percentage share (year 1999): 450 /
60,000 = .75%
This resulting percentage will then be used to cal-
culate the member's share of the surplus. Thus if
the total surplus is 14,000, member A used in the
previous example will have 105 as its share of the
surplus:
Member A share in surplus (year 1999): 14,000
x .75% = 105
The surplus amount of 105 will then be put in a spe-
cial member account and will be considered as credit
for the member in the RIPE NCC books.
In the case of a deficit in the operating income
over operating expenses, all members of the RIPE NCC
who have been invoiced for that particular financial
year must participate in the clearinghouse
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procedure. Each member's percentage share of the
deficit will be equal to their percentage contribu-
tion to the total fees. In summary: All members
share in a deficit and only those who have paid
their invoices within the calendar year share in a
surplus.
The member's percentage of the deficit is calculated
using the same formula taking into consideration the
participation of ALL members, whether they have paid
or not, in sharing the deficit. The idea behind
this is to reward those who pay on time and encour-
age those who do not to do so.
In the case if a surplus, only members who have paid
will participate, thus the member's surplus share
will be higher. In the opposite scenario, all mem-
bers will participate in the sharing of the deficit,
thus the cost per member will be lower.
An identical procedure will be used in following
years, taking into account the addition of new mem-
bers and the potential size changes of existing mem-
bers. If, for example, the RIPE NCC has a shortage
of 8,500 in the year 2000, the amount will be
divided among all the members in proportion to the
member's percent share of the total fees due for
that year.
Assume that the RIPE NCC invoiced 78,000 in fees and
attained a deficit of -8,500 during the year 2000.
Member A from the previous example became a medium-
sized member that was invoiced a service charge of
700 during that year. Whether or not member A has
paid its fee, it will be liable for the following
amount:
Member A percentage share (year 2000): 700 /
78,000= .90%
Member A share in the deficit (year 2000):
-8,500 x .90% = -76.50
The member's share in the deficit will then be
transferred to the same member account used in the
previous year. Member A who acquired a surplus of
105 in the previous year, receives a deficit amount
of -76.50 at the end of the year 2000, the total
account balance then becomes 35.50
Member A account balance (year 2000):
105.00-76.50 = 35.50
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After completing this procedure, the member's
account will be adjusted with the amount calculated
as outlined above. This amount will be registered
in the financial books of the RIPE NCC as a claim of
the members on the surplus of the organisation.
If the member's account balance has exceeded three
times the current (i.e. most recent) service fee of
the RIPE NCC, the member will be paid the excess
amount. The date of the payment will be determined
by the Executive Board of the RIPE NCC.
If a member quits, any positive amount in the mem-
ber's clearinghouse account is payable when the mem-
ber officially notifies the RIPE NCC that they are
quitting.
For example: if the account balance of member A from
the previous example exceeded 3 x 700 = 2,100., the
positive difference will be paid back to the member.
This example assumes that Member A will remain a
medium sized registry during the third year and that
the fees do not change.
Changes in registry size will also lead to different
results. If a "small" registry of 1999 became a
"medium" registry in 2000; its share of the operat-
ing loss is therefore greater than what it would
have been as a "small" registry while it has only a
share of the 1999 surplus for a "small" registry.
This means that it will take longer for this reg-
istry to reach the three times the current yearly
fee. The opposite is also true: if a registry goes
from large or medium to medium or small. It may be
able to attain the three times the current yearly
fee level earlier than other registries.
The RIPE NCC Executive Board reserves the right to
make changes to these procedures as necessary. The
examples provided in this document do not reflect
the reality of RIPE NCC and are in no way represen-
tative of management's thinking of future results of
the RIPE NCC.
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