Administration Financial Audit Policy
1. Policy title: Administration Financial Audit Policy
2. Version: 1.0
3. Effective date: 15 June 2025
4. Review date: Annually, next applicable 15 June 2026
5. Policy owner: Head of Operations
6. Policy sponsor: Intersect Executive Director
7. Purpose:
To ensure a consistent understanding of Intersect’s policy regarding financial auditing, where Intersect is acting as an administrator for public proposals in accordance with the Cardano Constitution.
8. Scope:
This policy applies to the beneficiary, as defined below, who enters into contractual relationships, transactions, or projects with Intersect or with Cardano Development Holdings (CDH) where Intersect is acting as its Administrator.
9. Principles:
This policy is founded on principles of openness, accountability, and the right to information, fostering trust among stakeholders/the community. It ensures a common understanding and example(s) of Constitutional financial auditing requirements for proposals.
10. Definitions:
Audit: An audit is an independently verifiable examination of financial information of any entity, whether profit-oriented or not, irrespective of its size or legal form.
Beneficiary: Individual or Company who will be receiving funds and/or entering into contractual relationships with Intersect or with CDH where Intersect is acting as its Administrator.
Cardano Budget Proposal: A request for funding from the Cardano Treasury that will be measured by milestone deliverables.
Cardano Development Holdings (CDH): CDH is a legal entity created to support the Cardano ecosystem by acting as the contracting counterparty for approved proposals by DReps.
Cardano Treasury: A treasury system is a community-controlled, decentralized collaborative decision-making mechanism for sustainable funding of the underlying blockchain development and maintenance.
Compliance: Adhering to the terms and conditions in the DRep approved funding allocated contract.
Delegated Representatives (DReps): A role introduced in the Age of Voltaire as part of the governance model proposed under CIP-1694. DReps, stake pool operators, and the Constitutional Committee are responsible for voting on governance actions. Any ada holder can register as a DRep.
Ecosystem Risk: Where the security, functionality, performance or long-term sustainability of the Cardano Blockchain may be affected.
Financial audit: Review of effective fund utilization, ensuring alignment with contract milestones approved by DReps.
Periodic: For each Statement of Work (SoW) term, a financial audit is required. Should an SoW extend beyond 12 months, a financial audit will be conducted annually.
Oversight Committee: Permissioned set of keys that provide checks and balances against Intersect’s administration.
Intersect: Intersect serves as an Administrator within Cardano’s funding ecosystem, helping to operationalize community-approved proposals by coordinating due diligence, contracting, and on-chain disbursements. This role is grounded in the principles of transparency, decentralization, and adherence to the Cardano Constitution.
11. Policy statements:
Constitutionally, all proposals are required to adhere to the following: Any governance action requesting ada from the Cardano Blockchain treasury shall require an allocation of ada as a part of such funding request to cover the cost of periodic independent audits and the implementation of oversight metrics as to the use of such ada. (Section 4, ARTICLE IV. THE CARDANO BLOCKCHAIN ECOSYSTEM BUDGET)
As an administrator, Intersect will provide periodic reporting which demonstrates the use of any ada as far as distribution to vendors
After the point of distribution by an administrator, should it be required, proposal vendors are required to periodically provide an assessment of the use of any such ada received from this point onward.
Constitutionally, all administrators of treasury funds are required to adhere to the following; any ada received from a Cardano Blockchain treasury withdrawal, so long as such ada is being held directly or indirectly by an administrator prior to further disbursement, must be kept in one or more separate accounts that can be audited by the Cardano Community, and such accounts shall not be delegated to an SPO but must be delegated to the predefined auto-abstain voting option (Section 5, ARTICLE IV. THE CARDANO BLOCKCHAIN ECOSYSTEM BUDGET)
As an administrator, Intersect will provide periodic reporting which demonstrates any ada received as part of a Cardano Blockchain treasury withdrawal is;
Kept in one or more separate accounts
Which can, as practically possible, be audited by the community or part thereof
Not used for any delegation to an SPO, but delegated to the predefined auto-abstain, where practically possible.
This does not replace Intersect's legal requirements for any business compliance, auditing or reporting needed as a registered entity.
12. Roles and responsibilities:
Intersect (administrator)
Intersect serves as an administrator, offering guidance. Intersect can advise but not enforce constitutional requirements. In relation to Section IV of Cardano’s Constitution, Intersect will:
Provide expert advice on financial best practices.
Offer recommendations to enhance audit processes and financial oversight.
Offer audit coordination services, ensuring the initiation of necessary audits for each contract associated with the Cardano Treasury and providing support and guidance.
Ensure that all financial activities align with contractual agreements originally approved by the DReps.
Put in place reporting mechanisms to ensure clear and timely communication, including conducting Delivery Assurance checks and promptly escalating any identified issues, discrepancies, or risks.
Beneficiary
The Beneficiary holds a critical role in maintaining financial integrity and transparency:
Taking full accountability for the responsible use of received funds, ensuring alignment with approved proposals.
Upholding transparency in all financial dealings related to the funds.
Audit Cooperation: Collaborating completely with financial auditors, providing all requested documentation in a timely manner.
Responding promptly and thoroughly to all audit questions and inquiries.
13. Procedures:
This section outlines the step-by-step processes for planning, conducting, and finalizing financial audits of treasury-funded entities. These procedures ensure that all beneficiaries are held to appropriate standards of financial transparency. There are tiered audit expectations scaled by organizational size, funding level and/or economic risk.
Audit tier
Tier criteria
Audit requirement level
Examples
Tier 1 - Basic Assurance
Organization Size: Small.
Treasury Exposure: Low Proportion of Cardano Treasury Funding.
Economic Risk: Minimal or low-risk profile.
Basic Assurance
Provide basic, independently verifiable documentation or on-chain evidence showing that funds reached the intended recipients.
Self-attestation permitted (eg showing total funds received per individual via on-chain transactions).
Small development teams or individual contributors.
Low ecosystem risk: non-core functionality with minimal sustainability or market impact.
Treasury funds are small, easily refundable or recoverable.
Tier 2 - Intermediate Assurance
Organization Size: Medium
Treasury Exposure: Moderate Proportion of Cardano Treasury Funding.
Economic Risk: Acceptable or moderate risk profile.
Intermediate Assurance
Supply clear, independently verifiable evidence that funds were used in line with the approved proposal.
Verification by a capable third-party auditor or detailed on-chain records that enable community-led audit (eg milestone-based transactions).
Maintain complete financial records and participate in milestone reviews.
Implement corrective action plans for any audit findings.
Mid-sized entities or multiple teams within established organisations.
Moderate ecosystem risk: projects delivering broadly useful functionality or serving specific user groups, with some potential market impact.
Treasury funds are moderate and may be harder to recover.
Tier 3 - Full Assurance
Organisation Size: Large
Treasury Exposure: High or significant proportion of Cardano Treasury Funding.
Economic Risk: Elevated or significant risk profile.
Full Assurance
Formal third-party audit engagement is mandatory.
An independent audit conducted by a qualified external auditor to verify proper use of treasury funds.
Auditors must provide formal assurance that funds were used strictly as approved in the proposal.
Large institutions or organisations responsible for critical ecosystem deliverables.
High ecosystem risk: single points of failure or unique solutions, with significant potential market impact.
Treasury funds are large and difficult to recover or reimburse.
Note: As outlined in the Constitution, financial auditing is not intended to assess value, profit, or margin. Its sole purpose is to verify that treasury funds were used as approved, specifically for the intended proposal and its stated benefits.
14. Monitoring and compliance:
Monitoring: Intersect, as the administrator will monitor the completion of milestones, documentation and payment throughout the contract lifecycle, overseeing that the appropriate financial audit is undertaken.
Compliance: Financial records should be kept for a minimum of 7 years for IRS compliance. Significant audit findings and compliance breaches may be disclosed to the community through public reports and escalated to DReps as appropriate, in alignment with transparency commitments.
15. Review and amendment:
To ensure the policy remains current and effective, it will be reviewed at least annually. In response to significant organizational changes or regulatory updates, the policy will be updated as required by the Intersect Operational Services team and approved via the Intersect Executive team.
16. Related documents/references:
This policy should be read in conjunction with the following documents, guidelines and regulatory frameworks:
Cardano governance and policy documents
Transparency Policy
External regulation and best practices
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