Minutes | Board Finance Committee (BFC) Meeting
BFC Attendees: Maarten Botterman, Chris Disspain, Ron da Silva (Chair), Khaled Koubaa, and George Sadowsky.
Other Board Member Attendees: Cherine Chalaby, Göran Marby, and Lousewies van der Laan
ICANN Org Attendees: Susanna Bennett (SVP, Chief Operating Officer), Xavier Calvez (SVP, Chief Financial Officer), Samantha Eisner (Deputy General Counsel), Aaron Jimenez (Board Operations Senior Coordinator), Vinciane Koenigsfeld (Board Training & Content Senior Manager), Elizabeth Le (Associate General Counsel), Becky Nash (VP Finance), and Lisa Saulino (Board Operations Senior Coordinator)
The following is a summary of discussions, actions taken and actions identified:
- Schedule/Work Plan Discussion – The BFC reviewed the 2018 work plan.
Charter Review – The BFC reviewed the Committee's charter for the benefit of the new members, noting its scope of responsibilities and the required work, which includes: (i) oversight of the annual budget process; (ii) working with the President and CEO and the Board on what is to go into the operating plan and budget annually; (iii) developing and recommending short and long term strategic financial objectives; and (iv) providing strategic oversight on financial matters. A discussion ensued as to whether long term financial planning cycle should be a BFC deliverable or a deliverable for the whole Board.
- Action: Maarten Botterman to be the shepherd from the BFC to own the Board priorities 2.1. on behalf of the committee, and ensure the linkage between the work of the BFC and the Board priorities.
FY19 IANA Operating Plan and Budget (IANA Budget) – The BFC received an update on the IANA Budget and the PTI FY19 Operating Plan & Budget. Both the IANA Budget and the PTI FY19 Operating Plan & Budget were published for public comment from 9 October to 26 November 2017. The comments received through the public comment process were relatively minimal, were answered, and were not controversial. The PTI Board adopted the PTI FY19 Operating Plan & Budget on 8 January 2018. Upon recommendation from the BFC, the IANA Budget will be presented to the Board for approval at its February meeting. Upon Board approval, the IANA Budget is subject to the Empowered Community rejection process pursuant to the Bylaws.
- Action:ICANN organization to prepare materials for Board consideration.
Reserve Fund Public Comments – A public comment proceeding was conducted for an updated rationale and target level for the Reserve Fund from 12 October to 30 November 201. The recommendation in the public comment document was to stay with the current target level of a minimum of 12 months of Operating expenses. The Committee discussed the comments received and agreed that comments allow confirmation that the Reserve Fund level should be at minimum of 12 months of operating expenses. Upon recommendation from the BFC, the matter will be presented to the Board for approval at its February meeting. Upon Board approval of the target level and rationale, as it will be reflected in the ICANN Investment Policy, the next step will be to have recommendations on the governance and replenishment plan of the Reserve Fund offered for public comment.
- Action(s): ICANN org to prepare materials for Board consideration.
Draft FY19 Operating Plan and Budget (OP&B) – The BFC discussed the current financial outlook for FY18, the three-year trend for funding and expenses, updates to the Five Year Operating Plan, and the planning process for the draft FY19 OP&B. Initially, the BFC discussed the three-year trend for funding and expenses and the current financial outlook for FY18. The Committee noted that funding is stabilizing and therefore expenses need to be brought in line accordingly. Currently, the FY18 funding forecast reflects a decrease of US$8.3 million due to lower transaction volumes of domain name registrations. The FY18 expense forecast reflects decrease of US$6.3 million due to cost saving measures in the areas of hiring, travel, and other savings measures across the entire organization amounting to approximately three percent savings. Next, the BFC reviewed the updates to the Five Year Operating Plan, which was established for years 2016 through 2020. The BFC noted that there are no significant changes to the Five Year Operating Plan.
Next, the BFC discussed the planning process for draft FY19 OP&B. The Committee also reviewed and discussed the draft FY19 OP&B. The draft FY19 OP&B reflects a balanced budget where funding equals operations expenses equals US$138 million. The BFC discussed the funding assumptions, which includes the reduced rate of growth of transaction-based fees for new generic top level domains (gTLD) given that the majority of new gTLDs have been delegated, and a stabilization in the number of registrar accreditations. Because the stabilization of ICANN's funding, the overall approach of expenses, which is already relatively stringent, must be limited. The draft FY19 OP&B also reflects cost containment measures similar to FY18 while trying to preserve most of the services ICANN Org provides to the community. This means increased levels of scrutiny over operations spending. The Committee reviewed the cost savings in further detailed, which include planning for work related to the implementation of Board approved policies or review recommendations, reducing the inflation of ICANN Org personnel merit/promotion increases from four percent to two percent, reduction in general travel/meeting expenses, and optimizing and reducing cost of IT support. The BFC discussed the Administration and Capital Contingency, which is decreased by US$4 million from FY18. The BFC requested further breakdown by functions for the Administration and Capital Contingency allocation. The Committee was advised that the current draft FY19 OP&B does not include additional budget requests from the Supporting Organizations (SOs) and Advisory Committees (ACs), as the deadline for submitting those requests does not expire until the end of January 2018. Once those requests have been submitted, they will follow the normal process of evaluation, and submission to the Board for approval.
The BFC then reviewed the materials that will be published for public comment. The Committee remarked that the draft FY19 OP&B contains more information than past OP&Bs to provide greater transparency on ICANN's strategic goals and the rationale underlying those goals and decisions. For example, included with the materials for public comment is a list and detailed information of selected cross-functional projects and activities planned for FY19. The materials also contain a summary of the six modules of work planned in FY19.
- ICANN org to provide further breakdown by functions for the Administration and Capital Contingency allocation.
- ICANN org to publish draft FY19 OP&B for public comment.
Published on 2 March 2018