Minutes | Meeting of the Finance Committee of the Board (BFC) | 19 September 2023

BFC Attendees: Harald Alvestrand, Becky Burr, Edmon Chung, Avri Doria, Danko Jevtović (Chair), and León Sánchez

Other Board Member Attendee: Patricio Poblete

ICANN org Attendees: Andre Abed (Vice President, Relationship and Delivery Management), Xavier Calvez (SVP, Planning and Chief Financial Officer), Franco Carrasco (Board Operations Manager), Elizabeth Le (Associate General Counsel), Karen Lentz (VP, Policy Research and Stakeholder Programs), Becky Nash (VP, Planning), Shani Quidwai (Sr. Director, Finance), Vivek Sengupta (Senior Director, Procurement), Raj Sripada (Director, IT-Internal Applications), Theresa Swinehart (SVP, Global Domains and Strategy), and Amy Stathos (Deputy General Counsel)

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

1. BFC Workplan – The Committee discussed its workplan, which is on target.

2. Contracting ERP Renewal – ICANN org presented the Committee with a proposal for renewal of contract for the org's enterprise resource planning (ERP) platform. The Committee acknowledged that the issue was presented to the BFC because the total amount of the contract is above US$500,000. ICANN org reported that the ERP platform is critical for managing day-to-day business activities for accounting, procurement, human resources and financial resources through one integrated system. The committee noted that the org has been utilizing the platform for the past seven years and has made improvements to the platform over time to maximize original investment. The BFC discussed whether an analysis has been conducted on the cost implications of switching providers. The BFC determined that the procurement process has been respected, that costs are reasonable and affordable, and that the proposed contract renewal will continue to provide a stable solution for the org. Following discussion, the BFC approved a recommendation to the Board to authorize ICANN org to renew the contract with the current ERP provider.

   • Action: ICANN org to prepare relevant materials for Board consideration.

3. New gTLD Program Next Round Update – The Committee received an update on the implementation of the Next gTLD Program: Next Round (Next Round) in accordance with Board Resolution 2023.07.27.02. Resolution 2023.07.27.02 directed "the ICANN President, or her designees, to provide periodic updates to the Board on progress to resolve the dependencies and general progress on program implementation." ICANN org presented the BFC with a draft reporting template that it intends to use for the updates and a proposed reporting cadence. The purpose of the reporting is meant to provide a comprehensive view of implementation of the Next Round, including progress status, timeline, open risks and issues, budget, human resources, and resource utilization such as staff and contractors. The Committee discussed how personnel costs in terms of staff and contractors are tracked and allocated as well as shared services and overhead costs. The Committee also received a briefing on the implementation costs for the Next Round, which included information on the spend to date. The BFC also considered a funding request for US$13 million utilizing the Supplemental Fund for Implementation of Community Recommendations (SFICR) for Next Round implementation work from November 2023 through June 2024 in accordance with the Next Round Implementation Plan. The Committee agreed that utilizing the SFICR as a funding source is appropriate since the implementation work requires additional effort and resources above and beyond the annual plan and budget. Following discussion, the BFC approved a recommendation that the Board approve another tranche of money in the amount of US$13 million from the SFICR to fund the implementation work of the Next Round through 30 June 2024.

   • Action: ICANN org to prepare relevant materials for Board consideration.

4. FY23 Financial Review – The Committee received an update on the FY23 financials. The FY23 actual operating excess is US$7.6 million, which aligns with the forecast. Total expenses are lower than budget and have increased 22% compared to the prior year, primarily due to resumption of travel and meetings, increased staffing to support new projects and work, and inflation. The FY23 funds under management increased US$12 million primarily due to investment increases and excess in ICANN's Operating Fund, partially offset by operating expenses in the New gTLD Program. The Reserve Fund reflects a Board approved transfer of US$19 million from the Operating Fund as well as investment increases of US$8 million.

5. Operating Fund Excess Allocation – The BFC reviewed the net excess in the Operating Fund, which is currently above the target level of three months of expected expenses by US$24 million. The Committee considered a recommendation from ICANN org to allocate US$20 million of the excess to the SFICR to fund a portion of the implementation for the Next Round. The Committee also considered org's proposal to maintain the remaining excess of US$4 million in the Operating Fund to provide flexibility and allow for a short-term financial buffer, which can be allocated at a later stage when more information is known about upcoming needs. Following discussion, the BFC approved a recommendation to the Board to approve the transfer US$20 million from the Operating Fund to the SIFCR.

   • Action: ICANN org to prepare relevant materials for Board consideration.