All successful audits/reviews must start with a detailed in depth review plan. A basic plan has been outlined below, but this is just to give a general idea of how it works. Once approved, it will be necessary to create a detailed risk based plan that documents each of the review steps that will be performed. It will begin by identifying all the main risks we want to cover in the treasury grant process. The tests or procedures we want to perform to cover those risks. Calculating the total review coverage we need to obtain to be satisfied with the results. A sampling plan to ensure we have reached that coverage (you typically do not test 100% of anything. You create a sample plan to determine how many you need to review to obtain enough coverage). And create the reporting framework to share the results. This will be worked on for the first quarter before any review work has begun.

In addition, agreements must be drafted between us and the proposers

This is a basic outline that will be further refined over time and after each round of work is completed. It would be run each quarter in (Jan-Mar, April-Jun, Jul-Sep, Oct-Nov). The program is run using the data from the previous quarter, for example, in April - June we would be reviewing the expenses from the previous quarter January to March.

1. We reach out to each of the funded proposers and inform them of our program and what we are doing. We create a list of teams who are willing to participate and who are not, which we will share publicly.

2. Teams keep records of their expenses. This is an accounting requirement for most countries and therefore responsible teams should be doing this on their own regardless.

3. After each quarter is completed, teams send us a listing of the expenses that they incurred during the quarter.

4. We review the expenses, and select samples from the listing.

5. We request the support detail for those samples (invoices, receipts, payment).

6. We review the support to make sure everything appears correct and valid.

7. We assess if the expenses are in line with the budgeted items in the proposal.

8. We prepare a list of questions for any discrepancies or things that need clarification.

9. We prepare a report that is first shared with the teams to give them a chance to review and comment.

10. The report is then shared with the Cardano Community.

Note: The actual expense support (invoices/receipts, payment detail, etc) is not to be shared with the greater community. This is all reviewed and tested, and a summary report is shared that the proposers first have a chance to review and provide feedback on. We want to be fair to both the community as well as to the teams being funded.

This proposal aims to implement a comprehensive expense review process for proposals that are funded by the Cardano treasury. As of April 16th, the total Cardano Budget Request is 414M ADA. In our very first attempt we already have over 400M ADA being requested. Presumably not all proposals will pass and be funded. But still, it is not difficult to see that these levels are unsustainable and can deplete the treasury before we even get started. Of course some things will be necessary to grow and evolve our ecosystem. But how are we ensuring that the money we do decide to distribute is being spent according to the proposed budget? How do we identify the proposers who receive large sums and deliver nothing? How do we understand if some massive budgets were warranted and all of that ADA was necessary? How do we assess the projects who are acting fiscally responsible to know we should continue funding them? That is what this proposal aims to achieve.

As it currently stands, there is a section that covers administering and auditing of funds received.

“It is required that you have an administrator for administering your contract (if successful) as they ensure compliance, financial integrity, and effective project execution by overseeing contractual obligations, fund distribution, and performance auditing, reducing risk and enhancing transparency.”

This seems ok, however the options to achieve this are either to have Intersect act as the administrator or “If you do not select Intersect as your administrator, you must explain who will conduct the listed services on your behalf, whether that be your organization or another vendor.”

So the two options are to have Intersect perform this service, which is going to have a large conflict of interest with most of the larger value proposals, due to the relationships and interconnectedness of Intersect and other members of the community (along with their own high cost proposals). Or you can simply say that you will be responsible for auditing yourself, which is obviously its own conflict of interest. Additionally, if Intersect or the teams themselves perform this information, there is nothing included that says they will share the results or make them public. So how do we know what occurred, if it was a thorough review, what conflicts might exist between the reviewers and the teams, or how we should proceed based on what might have been found?

The benefit of this proposal is having a mechanism to ensure the ADA we are using to fund proposals is actually being spent the way it’s supposed to. It would create an independent 3rd party with the mission of reviewing funded proposals expenses and sharing that information with the entire Cardano Community.

When it comes to funding proposals through the Treasury, what are the biggest risks?

Teams submitting proposals they never intend to build.

Teams only partially delivering what they promised.

Teams spending funds on personal expenses.

Teams never producing anything of value from the treasuries investment.

This all boils down to the same risk, misappropriation of funds. So how do we mitigate the risk? We follow the money. We can eliminate a huge amount of intended fraud in our treasury process through periodic expense monitoring and testing. Teams who never intended to build something will not want to spend money on business expenses. Teams spending money on personal expenses would be exposed. And teams who are regularly spending money appropriately and in line with their budget would be recognized.

You might be wondering, what about tracking progress as well. We should as a community be implementing separate comprehensive progress tracking by 3rd parties as well, but tracking spending is tracking progress. You cannot bring your vision into reality without spending money. If they are spending money on business expenses, they are making progress. If teams have not made any expenses during the review period but claim to be hitting milestones, this is a red flag they are not building anything.

By supporting this proposal, and providing community pressure that funded proposals participate in this expense review, we will have implemented the first (hopefully of many) real accountability process in place to ensure that our treasury spending is not going to waste.

Milestone 1: Team will complete the detailed expense review plan.

Duration: 3 months

Deliverables: The first phase will be tol create the detailed review plan. It will identify all the main risks we want to cover in the treasury grant process. The tests or procedures we want to perform to cover those risks. Calculating the total review coverage we need to obtain to be satisfied with the results. A sampling plan to ensure we have reached that coverage (you typically do not test 100% of anything. You create a sample plan to determine how many you need to review to obtain enough coverage). And create the reporting framework to share the results. This is the basis of the rest of the work and must occur before any actual reviews can begin.

What will the community receive: The entire work plan along with all templates, agreement, etc. will be uploaded to a google drive and shared publicly through Twitter (@SCATDAO) and Discord. The plan and all of these materials are free and open for all to use. In the future if another group would like to bid to do this work instead of us, they are welcome to use any and all materials we develop.

Milestone 2: Team will contact all funded proposers from this first round ending April 24, 2025. We will explain the work we are doing, share the plan and documentation, and sign agreements with all who are willing to participate. We will make at least 3 attempts to contact each group incase we do not hear back the first time.

Duration: 1 month

Deliverables: We will compile a list of the teams who have agreed to participate and who have not agreed to participate (or failed to respond). This list will also be available in a google drive and shared on Twitter (@SCATDAO) and Discord.

What will the community receive: The listing of funded proposers who are willing to participate in the expense review process and those who are not.

Milestone 3: Team will perform the first round of expense review with those who agreed to participate. As four months have passed from the start of this proposal, this first round would be looking at the expenses that occurred during the first 3 months for the funded proposals who are willing to participate (e.g. if this phase is beginning in in October, we would be looking at the expenses that occurred in the other proposals from July to September.

In addition to the review, in the final month of the quarter, we will begin the process of reaching out to all of the teams to confirm that they are willing to do this for the next quarter, as well as all of the teams who did not previously wish to participate. This will be performed every quarter so that teams can decide to opt in and participate or choose not to participate further on a quarter by quarter basis.

Duration: 3 months

Deliverables: We will deliver the summary report for all of the funded proposals that we have been given access to review. This will provide the insights on how the funding has been spent over the previous 3 months and how it aligned with the proposed budgets of the funded proposers. This will be available in a google drive and shared on Twitter (@SCATDAO) and Discord.

What will the community receive: The summary report mentioned above.

Milestone 4: Team will perform the second round of expense review with those who agreed to participate. Similar to the first round, we would be covering the previous three months of expenses that occurred.

In addition to the review, in the final month of the quarter, we will begin the process of reaching out to all of the teams to confirm that they are willing to do this for the next quarter, as well as all of the teams who did not previously wish to participate. This will be performed every quarter so that teams can decide to opt in and participate or choose not to participate further on a quarter by quarter basis.

Duration: 3 months

Deliverables: We will deliver the summary report for all of the funded proposals that we have been given access to review. This will provide the insights on how the funding has been spent over the previous 3 months and how it aligned with the proposed budgets of the funded proposers. This will be available in a google drive and shared on Twitter (@SCATDAO) and Discord.

What will the community receive: The summary report mentioned above.

Milestone 5: Team will perform the third round of expense review with those who agreed to participate. Similar to the first round, we would be covering the previous three months of expenses that occurred.

In addition to the review, in the final month of the quarter, we will begin the process of reaching out to all of the teams to confirm that they are willing to do this for the next quarter, as well as all of the teams who did not previously wish to participate. This will be performed every quarter so that teams can decide to opt in and participate or choose not to participate further on a quarter by quarter basis.

Duration: 3 months

Deliverables: We will deliver the summary report for all of the funded proposals that we have been given access to review. This will provide the insights on how the funding has been spent over the previous 3 months and how it aligned with the proposed budgets of the funded proposers. This will be available in a google drive and shared on Twitter (@SCATDAO) and Discord.

What will the community receive: The summary report mentioned above.

Milestone 6: Team will perform the 4th and final round of expense review with those who agreed to participate. Similar to the first round, we would be covering the previous three months of expenses that occurred.

Duration: 3 months

Deliverables: We will deliver the summary report for all of the funded proposals that we have been given access to review. This will provide the insights on how the funding has been spent over the previous 3 months and how it aligned with the proposed budgets of the funded proposers. This will be available in a google drive and shared on Twitter (@SCATDAO) and Discord.

What will the community receive: The summary report mentioned above.

This is all we would have been funded for at this point. We will proceed to submit an additional funding request and if the community has found value in this work they can vote to continue to fund this review. If they do not or another competing team wants to use their own bid, as mentioned, they are welcome to use all of our materials and review plan that has been created through this funding.

1. Creating Detailed Review Plan

Explanation: It will be necessary to create a detailed plan that documents each of the review steps. Calculating the total review coverage we need to obtain to be satisfied with the results. A sampling plan to ensure we have reached that coverage. And created the reporting framework to share the results. This will be worked on for the first quarter before any review work has began. As this is the most in depth part which will provide the basis of all work going forward.

Budget: We are budgeting 40 hours per week for 12 weeks. A rate of $60/hr is used for this work, which is a total of $28,800 (57,600 ADA)

2. Legal

Explanation: Regulatory compliance is very important for a project like this. Discussing the work programs with legal counsel. Creating contracts between us and the proposers to agree on what will be shared, reviewed, disclosed will all need to be reviewed and approved by legal counsel. As well as the reports that will be shared with the broader community. Because of this we have included a large budget for legal counsel to review the initial plan, assist in creating the agreements, and reporting documentation.

Budget: The budget for this is $34,800 (70,000 ADA)

3. Expense Review

Explanation: As mentioned above, this will cover a full year of expense review, performed quartlerly on a retrospective review of the previous quarter.

Budget: We are budgeting 30 hours per week for 12 weeks. A rate of $60 per hour is used for the budget, which is a total of $21,600 per quarter. Four quarters (1 year) would make this a total of $86,400 (172,800 ADA).

This team will consist of 2 key members who have spent 10+ years each working in public and private Audit for both the Big 4 and Fortune 500 Companies. They both have a great deal of experience in creating risk based audit plans as well as performing testing. These two will be working on creating the audit work plan. In addition, we have identified 2 additional CPAs (inactive licenses) who will be available to assist with the actual review work, depending on how many teams decide to participate. A breakdown has been provided below.

Milestone 1: Team will complete the detailed expense review plan. Duration: 3 months 2 people assigned to work on this

Milestone 2: Team will contact all funded proposers from this first round ending April 24, 2025. Duration: 1 month 1 Person assigned to work on this

Milestone 3-6: Team will perform the 4 rounds of expense review with those who agreed to participate and reach out to teams for participation in upcoming round. Duration: 12 months Up to 4 people assigned to work on this depending on how many teams have signed up to participate.

Eric Helms - Team lead I have been part of the Cardano community for 4 years. I am the founder of SCATDAO and have been helping to teach people how to research Cardano projects and hosting monthly DYOR Contests using our in house tool DYORTool.io. I am a CPA (inactive) who has spent over ten years auditing in the Big 4 as well as for Fortune 500 companies. I received a BA from UC Irvine in Economics with a minor in Accounting. I have spent a decade doing this type of expense review and am confident in my ability to create a detailed work plan as well as properly review and assess the expenses of funded proposers. https://www.linkedin.com/in/eric-helms-97866a3b/

Diego - Second lead Diego has 15 years working in Public and Private audit, currently holding an upper management position with a Big 4 accounting firm. He is an expert in expense review and spends the majority of his time now creating audit plans and review work that his staff performs. As he currently holds this position, he prefers not to list his full details for now.

In addition, we have identified 2 other CPAs (inactive) who have years of experience performing audit work and are willing to help with the expense reviews depending on how many teams sign up and we need additional help to get through all of the work.

We have included a plan here for initial development as well as a full year of review work for a price of $150,000 which we believe is fair to the Cardano treasury and fair to our team. At the end of the term which we are funded for, we can apply for another round of funding similar to how we are doing now. If the Cardano community has found value in the work that we performed, they can continue to fund us going forward. Or if they believe in this type of work but want to fund another team to perform it, they are welcome to use all materials we have created through this process.

The most difficult part of this is compliance. To perform this work, we will need to have proposed teams provide us with specific information. As it currently stands, we are unable to compel funded proposers to provide us with a list of their expenses and the expense support detail (invoices, receipt, payment). This information is crucial to be able to do this program. If the community sees the benefit of something like this, we would like to work to have this be a requirement going forward that all funded proposers must agree to. But until then, we will approach each funded team and inform them of what we are doing and ask them if they would voluntarily be willing to participate in the program which will review their expenses and make a report publicly available to the community that shares how they have spent their funds so far. We believe that teams that wish to continue being funded will be interested in doing this as it is a clear way to demonstrate that they are being good stewards of community funds. We believe that if the community is putting pressure on teams to perform this type of review in order to be funded, they will participate.