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Minutes | Board Audit Committee (BAC) Meeting 17 October 2019

BAC Attendees: Sarah Deutsch (Chair), Chris Disspain, Avri Doria, Akinori Maemura, and Nigel Roberts

ICANN Org Attendees: Xavier Calvez (SVP & Chief Financial Officer), Franco Carrasco (Board Operations Specialist), Vinciane Koenigsfeld (Senior Director, Board Operations), Becky Nash (VP, Finance), and Amy Stathos (Deputy General Counsel)

Invited Guests: Representatives from independent auditor firm

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

  1. BAC Workplan – The BAC received an update on the workplan and the activities between now and the Annual Meeting, which is on target.

  2. Updates

    1. Presentation by Independent External Auditor – The BAC received a presentation from representatives of ICANN organization's selected independent external auditor for FY19 regarding the status and results of its FY19 annual audit of ICANN org. The auditors explained that main purpose of the audit is to obtain reasonable assurance about whether the consolidated financial statements of ICANN org are free of material misstatements. The audit firm reported that the FY19 audit is substantially completed and the audit firm is currently in the process of completing its final review, with the expectation that the numbers will not change and only formatting and small wording changes will occur before delivery of the final audit report.  The audit was conducted in accordance with auditing standards generally accepted in the United States and the scope of the work was not substantially different than what was presented to the BAC in prior presentations.  The audit firm noted that ICANN org management's cooperation was excellent and that the audit firm received full access to all of the information it requested during the audit.  The audit firm also highlighted a proposed change by the Financial Accounting Standards Board to a key standard related to leases that will impact ICANN org for FY21.  The audit firm explained the changes observed in ICANN's presentation of its financial statements from the prior year, were done in accordance with new reporting standards for nonprofit organizations. The key three estimates were reviewed as part of the audit, including account receivable allowance, new gTLD revenue, and a valuation of investments. The audit firm also outlined the key areas it focused the audit on, including ICANN org's revenue. No issues with identified with these three areas.

      The audit firm also performed an audit of Public Technical Identifiers' (PTI) structure, allocation method, expenses and financial statements to determine that what is being reported by PTI is in agreement with ICANN org's financial statements. No issues were found within that process.

      The audit firm also performed a review of the quality of ICANN org's financial reporting and found no deficiencies, significant deficiencies or material weaknesses. The audit firm also reported that no violations of laws or regulations or fraud were identified as part of the audit, and the firm is not aware of any reorts or complaints against the organization in this respect. The audit firm also noted nothing unusual regarding ICANN org's related parties and transactions. BDO had no disagreements or difficulties with ICANN org management on any accounting or audit matters and had no other matters that required communication to the BAC.

    2. Review of the Draft FY19 Audited Consolidated Financial Statements – The BAC received a briefing from ICANN org on the draft FY19 audited consolidated financial statements, which comprise the consolidated statements of financial position as of 30 June 2019 and 2018, the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements.  The audit of the consolidated financial statements were conducted by independent audit firm.  The audit firm concluded that the consolidated financial statements present fairly, in all material respects, the consolidated financial position of ICANN and its affiliate Public Technical Identifiers (PTI) for the above referenced years, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.  The BAC reviewed the consolidated statements of financial position, and noted that it reflects that ICANN org's balance sheet is relatively healthy, with assets being mainly investments in cash and net assets largely exceeding liabilities.  ICANN org has very few liabilities, which are operating liabilities, and that ICANN org has no debt, loans or lines of credit and all funding is collected in cash. The net assets are without restrictions, meaning that the funding is not conditioned on any specific performance requirements or restrictions.  The Statement of Activities shows a balance of income and expenses and investment gains resulted from the financial market's performance.  The Cash Flow Statement shows the changes in cash that result from the activities of the year.  Overall, the Cash Flow Statement shows a slight increase in cash equivalents for an operating excess.  The audited consolidated financial statements are set out in three segments including ICANN operations, the New gTLD Program and PTI, and include the funding and expenses of each, as well as a breakdown of investments.  There are also disclosures of legal matters and related party transactions for PTI.

Published on 21 November 2019