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Minutes | Board Finance Committee (BFC)

BFC Attendees: Harald Alvestrand, Becky Burr, Avri Doria, Danko Jevtović (Chair), Mandla Msimang, and Ihab Osman

BFC Member Apologies: Tripti Sinha

Other Board Member Attendees: James Galvin, Göran Marby, and Patricio Poblete

ICANN org Attendees: Ted Bartles (Meeting Production Operations Director), Xavier Calvez (SVP, Planning and Chief Financial Officer), Sally Newell Cohen (SVP, Global Communications and Languages Services), John Jeffrey (General Counsel and Secretary), Elizabeth Le (Associate General Counsel), Becky Nash (VP, Planning), Shani Quidwai (Sr. Director, Finance), Vivek Sengupta (Senior Director, Procurement), Darrel Spearman (Director, Administrative Services and Facilities), Amy Stathos (Deputy General Counsel), Nick Tomaso (VP, Global Meeting Operations), and Gina Villavicencio (SVP, Global Human Resources)


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

  1. BFC Workplan – The BFC discussed its Workplan, which is on target. The next BFC meeting will be held in September.

  2. Contracting Approval – ICANN Managed Root Servers (IMRS) – The BFC received a briefing on the IMRS clusters. ICANN currently has four clusters: two in North America, one in Europe, and one in Asia Pacific. ICANN organization previously shared with the BFC in November 2021 a proposal to expand the global presences of the IMRS by adding four new IMRS clusters: two in Africa, one in Asia, and one in Europe. One of the clusters was purchased in February 2022. Due to global supply chain issues, hardware vendors are quoting lead times that are triple those from a year ago. As such, to ensure that ICANN org can deploy all four locations by December 2023, the IMRS project team thought it prudent to purchase all hardware for the remaining three locations in advance. ICANN org conducted a Request for Quote (RFQ), and the contract amount for the chosen vendor exceeds the US$500K threshold. As such, pursuant to ICANN's Contracting and Disbursement Policy, the Board must authorize ICANN org to contract with, and make disbursement to, the chosen vendor. During the discussion, the BFC discussed that the costs are reasonable and affordable, and that the procurement process was followed. Following discussion, the BFC recommended that the Board approve the proposed engagement.

    • Action – ICANN org to prepare relevant Board materials.

  3. Contracting Approval – Information Transparency Initiative (ITI) Vendor - ICANN org briefed the Committee on a proposal to renew its contract with the current vendor that provides software design and engineering services for ITI. The vendor has been providing services to ICANN org for ITI for the past several years, and continues to be the preferred vendor. ICANN org reported that the vendor has a history of providing on time quality services, and has been critical to the project development and delivery process. In terms of due diligence, the ICANN Procurement team was engaged from the beginning of the contracting renewal discussions such that the BFC agreed that the procurement process was followed. Because the renewal contract amount for the vendor exceeds the US$500K threshold, pursuant to ICANN's Contracting and Disbursement Policy, the Board must authorize ICANN org to contract with, and make disbursement to, the vendor. ICANN org explained that the costs are reasonable and the BFC agreed. The costs of the renewal represent a marginal increase, which is in line with expectations. ICANN org has also explained that the costs are affordable and are included in the current FY23 budget, which the BFC acknowledged. Following discussion, the BFC recommended that the Board authorize ICANN org to enter into the proposed contract renewal.

    • Action – ICANN org to prepare relevant Board materials.

  4. Contracting Approval – Communication Public Relations Firm – ICANN org presented the BFC with a recommendation to engage with a public relations firm to develop and implement an awareness campaign to support the next round of the New gTLD Program. This is in line with the Recommendation 13.2 and 13.3-7 of the Final Report on the New gTLD Subsequent Procedures Policy Development Process that the New gTLD Program's communications plan "should serve the goals of raising awareness about the [ ] Program to as many potential applicants as possible around the world and making sure that potential applicants know about the Program in time to apply." Because the renewal contract amount for the proposed vendor exceeds the US$500K threshold, pursuant to ICANN's Contracting and Disbursement Policy, the Board must authorize ICANN org to contract with, and make disbursement to, the chosen vendor. In terms of due diligence, the BFC acknowledged that a Request for Proposal (RFP) was conducted in line with the procurement process. Respondents to the RFP provided preliminary proposals based on specific criteria, including having a global footprint and required expertise in media planning and execution, communications planning, message development, media training, event outreach and support. Following discussion, the BFC determined the costs to be reasonable as the proposed selected vendor's rates are in line with industry standards. As part of the discussion, the BFC considered whether it was appropriate to approve these funds even though the Board has yet to approve the final policy recommendations on the New gTLD Subsequent Procedures. It was noted that preparatory work needed to be done on the next round so that a plan is ready to go and can meet the requirements of a successful awareness campaign. The BFC then concluded the costs are reasonable. Following discussion, the BFC recommended that the Board approve the engagement with the proposed vendor.

    • Action – ICANN org to prepare relevant Board materials.

  5. Contracting Approval – Washington, D.C. Office Lease – ICANN org presented the BFC with a recommendation to enter into a new office lease for the Washington, D.C. office. The current 10-year lease ends on 31 January 2023. The Washington, D.C. Office Managing Director engaged a local broker and have been exploring alternative properties while negotiating with the current and potentially new landlords. While evaluating properties, ICANN org considers many factors such as cost effectiveness, safety and security, conference center availability, etc. ICANN org also conducted an analysis for the pros and cons of staying at the current location versus moving. In terms of due diligence, the BFC determined that procurement process has been followed. The Washington, D.C. Office Managing Director engaged a local broker and evaluated multiple properties and office spaces since late 2021. The costs are reasonable as they are in line with comparable properties. The BFC also agreed that the costs are affordable and reasonable given the current real estate market and ICANN org will be able to absorb the cost increase within the Annual Budget. The BFC had questions about the size of the office and ICANN org discussed the rationale for this office which includes providing office space for existing and future staff in the region along with meeting space for Board and Community sessions. Following discussion, the BFC recommended that the Board approve ICANN org to enter into the new lease for the contemplated terms for the Washington, D.C. office. One Board member voted against the BFC recommendation, noting concerns about the length of the lease and whether the per person square footage was at an appropriate level within a high cost market.

    • Action – ICANN org to prepare relevant Board materials.

  6. Contracting Approval – Venue for ICANN78 ICANN Public Meeting – ICANN org presented the BFC with a proposed hotel and venue engagement for the ICANN78 ICANN Public Meeting. ICANN org performed a thorough analysis of the proposals, as well, as other venues, and prepared a paper to identify those that met the Meeting Location Selection Criteria. Based upon the proposals received and analysis, ICANN org has identified a location and venue for ICANN78. In terms of due diligence, the BFC determined that the procurement process has been followed and that several alternative locations were evaluated against the ICANN meeting selection criteria. The recommended venue adheres to the geographic rotation guidelines established by the Meeting Strategy Working Group. The BFC also determined cost estimates for the location are reasonable and consistent with historical meeting costs. The proposed costs are affordable and will be included in the FY24 Budget. Following discussion, the BFC recommended that the Board authorize ICANN org to enter into the hotel and venue contracts for ICANN78.

    • Action – ICANN org to prepare relevant Board materials.

  7. ICANN Investments Discussion – The BFC received an update on the status of how ICANN's investments have been trending based on the events within the financial markets. ICANN's total investments have declined 4.7 percent during to the current volatility in the market primarily due to inflation concerns and the Russia-Ukraine conflict. ICANN org has been working with its banking partners to understand the situation and impact on the org's investments and strategy. ICANN org and its investment consultant are currently analyzing a proposal developed by ICANN's Reserve Fund investment manager to analyze the adequacy of current investment strategy in relation to the current market volatility. ICANN org will inform the BFC of org's conclusions and recommendations following org's evaluation of the proposal.

  8. FY22 Forecast – ICANN org provided the Committee with a forecast for FY22 to date. The FY22 forecast projects an increase of US$26 million to the Operating Fund at the fiscal year end, which is 30 June 2022. The FY22 funding is projected to be US$6 million higher than budget due to better than planned growth from domain name registrations. The FY22 expenses are projected to be US$19 million lower than budget, primarily due to savings in unused budgeted travel and meeting expenses for the ICANN72 and ICANN73 public meetings that were held virtually and the ICANN74 public meeting that will be a hybrid meeting. The lower than budgeted expenses also benefit from savings in personnel expenses as staff members continue working from home due to the pandemic, lower headcount, and timing delays with new Security, Stability, and Resiliency initiatives.

  9. Net Excess Discussion – The BFC noted that the Operating Fund will be assessed at the end of the fiscal year per usual. The ICANN Investment Policy states that the Operating Fund should be a level of funds to cover three months of operating expenses. ICANN org reported that based upon the evaluation of the adequacy of the Operating Fund level, the three-month average as of 30 April 2022 is US$70 million. The target level is US$40 million. Therefore, the current excess above target is calculated as US$30 million. ICANN org will be making recommendations on the operating funds excess allocations in the upcoming months.

  10. ICANN FY24 Planning Process and Timeline – ICANN org provided the BFC with an overview of the planning process for FY24.

  11. AOB – ICANN org provided an update on the Securities Exchange Commission's investigation into an investment firm which happens to be one of ICANN's investment managers for the New gTLD Program and Auction Proceeds funds. As ICANN org reported to BFC last year, the SEC and German financial watchdog BaFin launched separate investigations into allegations made by the investment firm's former headof sustainability that the company was overstating how it used sustainable investing criteria to manage investments. ICANN org informed the BFC that, on 31 May 2022, German officials raided the investment firm's headquarters over allegations of misleading investors about "green investments." ICANN org stated that the investment manager under investigation does not hold the ICANN funds for which it provides advice to ICANN and that the funds are held separately by a different custodian. There is no risk to the safety of the funds due to the structure with having a separate custodian. ICANN org will continue to monitor the situation and update the BFC, and will make recommendations to the BFC relating to this matter as appropriate.

Published on 2 August 2022

Domain Name System
Internationalized Domain Name ,IDN,"IDNs are domain names that include characters used in the local representation of languages that are not written with the twenty-six letters of the basic Latin alphabet ""a-z"". An IDN can contain Latin letters with diacritical marks, as required by many European languages, or may consist of characters from non-Latin scripts such as Arabic or Chinese. Many languages also use other types of digits than the European ""0-9"". The basic Latin alphabet together with the European-Arabic digits are, for the purpose of domain names, termed ""ASCII characters"" (ASCII = American Standard Code for Information Interchange). These are also included in the broader range of ""Unicode characters"" that provides the basis for IDNs. The ""hostname rule"" requires that all domain names of the type under consideration here are stored in the DNS using only the ASCII characters listed above, with the one further addition of the hyphen ""-"". The Unicode form of an IDN therefore requires special encoding before it is entered into the DNS. The following terminology is used when distinguishing between these forms: A domain name consists of a series of ""labels"" (separated by ""dots""). The ASCII form of an IDN label is termed an ""A-label"". All operations defined in the DNS protocol use A-labels exclusively. The Unicode form, which a user expects to be displayed, is termed a ""U-label"". The difference may be illustrated with the Hindi word for ""test"" — परीका — appearing here as a U-label would (in the Devanagari script). A special form of ""ASCII compatible encoding"" (abbreviated ACE) is applied to this to produce the corresponding A-label: xn--11b5bs1di. A domain name that only includes ASCII letters, digits, and hyphens is termed an ""LDH label"". Although the definitions of A-labels and LDH-labels overlap, a name consisting exclusively of LDH labels, such as""icann.org"" is not an IDN."