Minutes | Board Finance Committee (BFC) Meeting 27 October 2017

BFC Attendees: Becky Burr, Cherine Chalaby, Ron da Silva, Asha Hemrajani (Chair), Markus Kummer, George Sadowsky, and Lousewies van der Laan.

Other Board Member Attendees: Maarten Botterman, Chris Disspain, Rafael Lito Ibarra and Khaled Koubaa.

ICANN Organization Attendees: Xavier Calvez (Chief Financial Officer), Elizabeth Le (Associate General Counsel), Becky Nash (VP Finance), Wendy Profit (Manager, Board Operations), Lisa Saulino (Board Operations Sr. Coordinator), and Amy Stathos (Deputy General Counsel).

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

1. Minutes – The BFC discussed the draft minutes of the 17 August 2017 meeting. The BFC noted questions from some of the members regarding the representation of the discussion on ITI concerning the number of pieces of content to be structured. The BFC agreed to address the questions offline.

   • Actions

     • ICANN organization to revise the draft preliminary report and redistribute to the BFC for approval online during ICANN 60.

2. Financial Review: FY17 Year End Financial Statement – The BFC was presented with the two segments of ICANN organization's financial statement: ICANN operations (including Public Technical Identifiers or PTI) and the New gTLD Program. ICANN organization finished the year with an excess of US$1 million instead of the budgeted deficit of US$9 million corresponding with the anticipated expenses of the Work Stream 2 (WS2) of the IANA Stewardship transition. However, WS2 spent much less than anticipated. The remainder of the US$9 million that was unspent by the end of FY17 will carry into FY18. The BFC noted that for the pending Board resolution regarding replenishing the reserve fund with US$5 million, it should be clarified that the US$5 million is comprised of US$1 million of excess, not US$5 million. The New gTLD Program expenses were also lower than budgeted largely due to a small amount of refunds of withdrawn applications. This is partially offset by higher defense costs and auction fees incurred. ICANN organization's funds under management is around US$460 million, which includes: (1) the operating fund and the reserve fund that aggregate to approximately US$90 million; (2) auction proceeds which is about US$235 million; and (3) the unspent portion of the New gTLD Program application fees which are about US$120 million. The financial monitoring of WS2 has been ongoing with the co-chairs and has been very smooth. The BFC noted that one of the priorities of the Board is to take the concept of Project Cost Support Team (PCST) beyond the WS2 and to consult with the SO/AC leaders.

   • Actions:

     • ICANN organization to review the draft Board resolutions relating to replenishing the reserve fund to ensure that it is sufficiently clear.

3. FY19 Planning Process Status Update – The BFC was presented with the FY19 planning overview timeline. Board adoption of the approval of the budget is planned for the end of May 2018. Twenty-eight days following the Board decision to approve the budget, the Empowered Community must whether or not to reject the budget. Once the 28 days expire and there is no rejection, the decision of the Board to approve the budget becomes effective. Currently, the PTI and IANA operating plans and budgets are under public comment until 26 November 2017. After which, they will be submitted to the PTI Board approval for the PTI budget and for ICANN Board approval for the IANA budget. This year, ICANN organization is planning for two years, FY19 and FY20. From a budgeting standpoint, ICANN organization will continue to budget on an annual basis for one year, but will also add projections for a second year. ICANN organization intends to continue doing this on an ongoing basis every year. ICANN organization will host two engagement sessions with the community at ICANN60 in Abu Dhabi. The first will be an ICANN Budget Basics Session, which will take place on Monday, 30 October from 15:15 to 16:45. This session will aim to lower the complexity of the budgeting process. The second Budget Working Group session will take place in two parts on Wednesday, 1 November 2017 from 10:30 to 12:00 and 12:00 to 13:15. The budget working group is a completely open working group. There is no membership and is open to anybody who is available and interested to discuss in an interactive way.

4. Reserve Fund Public Comment – The reserve fund working group was created in 2015 and came up with the conclusion that the ideal target for the reserve fund would be a 12-month level. ICANN organization put together a reserve fund paper that highlights the rationale behind the reserve fund, what the reserve fund is meant to be used for, and the ideal target level. The public comment period for the reserve fund paper is from 12 October 2017 until 30 November 2017; the public comment is aimed to get community feedback on the rationale, and whether a 12-month target level is appropriate.

5. Observations from Departing Chair – Asha Hemrajani, the departing chair of the BFC offered some of her observations regarding the changes that took place during her time as the chair of the BFC. Among other things, Asha noted that during her tenure the BFC initiated a new budgeting process, oversaw the budget split from ICANN budget only to ICANN and PTI, started a performance review for each of the three funds, set up the Project Cost Support Team (PCST), the PCST model, and most importantly, kick-started a long-term financial planning process. Going forward, Asha encouraged the BFC to focus on: (1) the long term financial planning process; (2) helping the Board to further develop a fiscal discipline mindset; (3) auction proceeds; and (4) the reserve fund. Asha wrapped up the meeting by emphasizing the importance of the work the BFC performs and expressing deep gratitude for each member of the BFC. On behalf of the members of the committee, Lousewies van der Laan thanked Asha for her hard work and dedication and expressed that she will be missed.

Published on 10 November 2017