Proposal: Establishment of a Financial Budgeting and Audit Mechanism in DAO Governance Framework （DRAFT）
Summary
This proposal introduces a formal financial budgeting and audit mechanism to be integrated into the DAO’s governance framework. It aims to standardize how funds are planned, allocated, monitored, and reviewed. This will ensure financial accountability, transparency, and sustainability of the DAO’s operations and treasury. The mechanism includes a structured budgeting process, mandatory reporting, community audits, optional third-party financial review, and accountability.
Motivation
As the DAO grows and handles increasingly significant assets and recurring expenditures, the need for institutional-grade financial governance becomes critical. Without a clear framework, the risks of fund misallocation, unchecked spending, and loss of community trust increase. This proposal mitigates these risks by introducing a repeatable and auditable budgeting and financial review cycle that reflects the DAO’s collective will.
Proposal Details
This proposal recommends adopting a quarterly budget approach during the first stage after approval (from 2025 to December 2026), a semi-annual budget approach in the second stage (January to December 2027), and transitioning to an annual budget method starting from January 2028 onward. The purpose is to better accommodate the dynamic nature of early-stage investments and expenditures.
Annual Budget and Project-Based Funding Process
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Annual Budget: Prepared annually by a finance team or committee based on strategic goals. The draft should categorize major expenses (e.g. payroll, marketing, audit) with defined amounts.
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Approval Process: Budget drafts undergo public feedback before community voting, and follow the governance process for the proposal. Upon approval, funds are disbursed from the treasury.
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Project-Based Grants: Independent teams may request funding via separate proposals. These must align with DAO goals and follow the same process.
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Budget Rollover or Return: Unused funds at year-end should either return to the treasury or be conditionally rolled over by governance decision.
Budget Proposal Format and Requirements
All budget proposals must include:
- Summary and Objectives
- Team Description
- Milestones
- Detailed Budget Breakdown
- Value and Return to DAO
- Risks and Mitigation
- Alignment with Julian
- Supporting Materials (e.g. audits, legal reviews if applicable)
Discussion, Voting, and Execution Flow
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Follow the governance process for the proposal.
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Execution: Upon approval, funds are disbursed by multi-signature wallets based on proposal terms.
Budget Reporting Requirements
Funded entities must submit regular reports (bi-annually), including:
- Actual vs. planned expenditures
- Remaining funds
- Achieved deliverables
- Adjustments and next steps
Community Audit Mechanism
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Community-Based Audit Group: Recommending the establishment of the Budget Audit Committee(BAC), BAC designed for reviewing spending proposals from the community pool, verifying financial reports, and ensuring alignment between stated objectives and actual outcomes.
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Key features of BAC include:
• Proposal Review: BAC members independently evaluate funding proposals submitted to the DAO, assessing clarity, feasibility, and financial prudence before voting.
• Post-Grant Auditing: After grants are disbursed, BAC reviews execution reports, monitors fund usage, and identifies any discrepancies or misuse.
• Transparency & Accountability: Findings and audit opinions are publicly published to the forum, contributing to broader DAO oversight and encouraging responsible spending.
• Membership: BAC members are elected or appointed from within the active community, including OGs, contributors, and domain experts, maintaining both independence and contextual awareness. -
Audit Frequency: At least once or twice per year to detect irregularities early.
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Third-Party Audits (optional): When DAOs with large treasuries (>$10M), an external financial audit (annual or bi-annual) may be commissioned by DAO vote.
Attack Mitigation
Accountability and Enforcement
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Violation Response: Misuse of funds or reporting failures may result in:
- Repayment demands
- Freezing of funds
- Removal of roles
- Disqualification from future grants
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Transparency: All disciplinary processes must be made public.
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Legal Codification: All enforcement procedures shall be incorporated into the DAO’s operating agreements or governance charter.
Alignment with Julian
This proposal aims to introduce a budgeting and audit mechanism to ensure the quality and reliability of DAO fund usage, and to prevent the use of funds from deviating from the DAO’s intended course.
Conclusion
This proposal introduces a comprehensive budgeting and audit mechanism to the DAO’s governance framework. By defining transparent workflows for budget planning, execution, and review, the DAO will improve financial integrity and long-term resilience.