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Minutes | Board Finance Committee (BFC) Meeting 30 August 2016

BFC Attendees: Cherine Chalaby (Co-Chair), Ron da Silva, Chris Disspain, Asha Hemrajani (Co-Chair), and Markus Kummer

BFC Member Apologies: George Sadowsky

ICANN Executive and Staff member Attendees: Susanna Bennett (Chief Operating Officer), Xavier Calvez (Chief Financial Officer), Sally Costerton (Sr. Advisor to the President and Sr. VP, Global Stakeholder Engagement), Becky Nash (VP, Finance), Wendy Profit (Board Operations Specialist), Amy Stathos (Deputy General Counsel), and Nicholas Tomasso (VP, Meetings)

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

  1. BFC Schedule – The BFC reviewed the BFC schedule for the prior FY16 Q4, the current FY17 Q1, and the future FY17 Q2 and Q3.
  2. Financials – The BFC reviewed the Draft FY16 fiscal year end (unaudited) totals, which show total revenue of US$194.8 million for the year, total expenses of US$139.7, and a change in net assets of US$55.1 million. Staff noted that these totals are not yet final and will be amended to include additional expenses. Staff further noted that the listed revenue includes auction proceeds in the amount of US$42.6 million. The BFC noted that total ICANN revenue in FY16 exceeded the budgeted amount, and total ICANN expenses (as currently listed) in FY16 were less than the budgeted amount because the program activity was slightly lower, the costs associated with contracting were lower than anticipated for the remaining applications, and there have been fewer applications processed through the delegation phase than anticipated as a result of delays due to the initiation of various accountability mechanisms. The BFC further reviewed the four “funds” under management including the new gTLD auction proceeds, the new gTLD funds, the Operating Fund, and the Reserve Fund. As of 30 June 2016, the Reserve Fund was US$71 million, the Operating Fund was US$26 million, the new gTLD funds were US$142 million, and the auction proceeds were US$102 million. The BFC further discussed the FY16 expenditures related to the IANA Stewardship transition, which amount to US$17.887 million (US$9.429 million of which were for legal services). The BFC also reviewed the FY17 Budget, which is showing US$132.4 million in revenue and US$141.3 million in expenses, for a net deficit of US$8.8 million, which correlates to the FY17 budget for expenses related to the IANA Stewardship transition. The BFC reviewed the FY17 contingency budget and noted that, of the US$5.0 million reserved for the contingency budget, US$0.9 million has been spent, with US$4.1 million remaining.
  3. Investment of Auction Proceeds – The BFC discussed the options for investing auction proceeds, including the proceeds received since the beginning of FY17. The BFC noted that the new gTLD funds are currently invested at three different investment management firms and that the auction proceeds collected through the end of FY16 are invested at one of those three. The BFC agreed to recommend to the Board that the auction proceeds be divided among the three investment firms, and asked staff to prepare a proposal for the separation and investment of those funds.
    • Action:
      • Staff to prepare a proposal for the separation of the auction proceeds and investment of those funds amongst the three investment firms.
  4. ICANN63 – Staff presented an overview of the venue selection process and estimate of costs for ICANN63. Staff further explained that the costs associated with this venue are comparable to venues for past ICANN meetings. The BFC discussed costs and agreed to recommend that the Board delegate to the President and CEO, or his designee(s), the authority to enter into contracts, and make expense disbursements pursuant to those contracts, for the venue for ICANN63.
    • Action:
      • Staff to prepare a Board paper regarding the BFC’s recommendation regarding venue contracting for ICANN63.
  5. Reserve Fund Replenishment – The BFC noted that the Reserve Fund is projected to be US$51 million by the end of FY17, which is equivalent to approximately five months of operating costs. The BFC noted that the Reserve Fund has been depleted in order to fund the IANA Stewardship transition and accountability work. The BFC further noted that it had previously agreed that the target level for the Reserve Fund should be the equivalent of twelve months of operating costs, which means that there is a projected shortfall in the Reserve Fund of US$79 million by the end of FY17. The BFC discussed various options for replenishing the Reserve Fund, will consider additional options, and decided to continue the discussion at the next BFC meeting in Brussels.
  6. FY18 Operating Plan and Budget Calendar – The BFC reviewed the FY18 Operating Plan and Budget calendar and planning process in preparation for posting to the community. The BFC noted that this is the first time potentially there will be two budgets and two budget processes – one for the PTI operating plan and budget, and a separate one for the ICANN operating plan and budget. Staff provided an overview of the budget planning process for FY18, and explained that the CWG proposal called for the PTI budget to be submitted at least nine months in advance of the fiscal year that it relates to and that it be approved in advance of the ICANN budget approval. In the event the transition is completed, the proposed timeline is to submit a draft PTI budget for FY18 to the PTI Board and the ICANN BFC by the end of September 2016, and to submit the final PTI budget to the PTI Board and the ICANN BFC by early February 2017. A draft of the ICANN budget (inclusive of PTI) would then be submitted to the ICANN BFC and the ICANN Board in March 2017, posted for public comment in March 2017, and then submitted to the ICANN Board for approval in May-June 2017.