Minutes | Board Audit Committee (AC) Meeting 26 June 2016

Published 20 July 2016

AC Attendees: Steve Crocker, Asha Hemrajani, Bruno Lanvin, and Erika Mann (Chair)

AC Member Apologies: Mike Silber

Other Board member Attendees: Rafael Lito Ibarra

ICANN Executives and Staff Attendees: Susanna Bennett (Chief Operating Officer), Xavier Calvez (Chief Financial Officer), Melissa King (VP, Board Operations), Becky Nash (VP, Finance), Wendy Profit (Board Operations Specialist) and Amy Stathos (Deputy General Counsel)

Invited Guests: Akinori Maemura

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The following is a summary of discussions, actions taken and actions identified:

1. Planning for FY16 Audit – Staff presented an update on the FY16 Independent Audit. The report included information about the improved audit planning schedule that has been implemented for FY16, with the objectives of improving the process and moving up the completion date of the audit. Staff reported that planning for the audit began in December 2015 with an analysis by ICANN's auditor of what audit steps could be moved to mid year to reduce the timing at year end.

2. Post IANA Stewardship Transition Audit Requirements – Staff provided additional information from what was provided during the last BAC meeting about the fact that if the transition is completed, PTI will require a separate independent audit from ICANN. Nevertheless, the BAC discussed that because PTI would be a related entity to ICANN, the ICANN independent audit would necessarily include PTI. The BAC then discussed that PTI and ICANN could have the same or different audit firms, or different audit teams and partner with the same firm. Also discussed was the fact that even if the audit firms are different, ICANN's auditor would need to review PTI's audit in the process of conducting ICANN's independent audit. Staff emphasized, whether it is the same company or separate company that performs the audits, they will be done independently.

3. Post IANA Stewardship Transition Tax Requirements – The BAC briefly discussed that, as a separate non-profit legal entity, PTI would be required to file a separate Form 990 from the one that ICANN would be filing. In addition, ICANN will be required to make a consolidate tax filing for ICANN and PTI because PTI would be an ICANN-related entity.

4. Auction Proceeds – Staff emphasized two aspects of the auction proceeds that may impact audit processes. The BAC discussed that, from an audit standpoint, there is no change driven by the existence of auction proceeds or disbursement of those proceeds. ICANN's independent audit will still have the same purpose, which is to obtain reasonable assurance that the financial statements are free from material misstatements. To do this, the auditors will, of course, review the auction proceeds related transactions. Those transactions will be evaluated pursuant to the same types of test as any other disbursements. Further, the Board will have the same fiduciary responsibilities as it does today with respect to those disbursements. The BAC discussed the need for adequate reporting to the community related to auction proceed transactions, which would be beyond what is required as part of the audit process.

   • Action:

     • Staff to inquire with auditors for best practice recommendations on process for disbursement.

5. Committee Report – Staff reported that the committee report to the Board will be completed in the next few days and that for the BAC the first report will encompass all of FY16, and going forward it will be for every six months. It will include resolutions and recommendations that have been passed by the BAC, a brief description of the activities surrounding the annual independent audit, and the initiation of an assessment of potential impacts of the IANA Stewardship Transition on audit processes.