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Minutes | Board Finance Committee (BFC) 20 January 2022

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

BFC Member Apologies: Ihab Osman

Other Board Member Attendees: James Galvin, Manal Ismail, and Katrina Sataki,

ICANN org Attendees: Michelle Bright (Board Content Coordination Director), Xavier Calvez (SVP, Planning and Chief Financial Officer), Franco Carrasco (Board Operations Specialist), John Jeffrey (General Counsel and Secretary), Elizabeth Le (Associate General Counsel), Becky Nash (VP, Planning), Shani Quidwai (Sr. Director, Finance), and Amy Stathos (Deputy General Counsel)

Invited Guests: Representatives from State Street Global Advisors (SSGA)

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

  1. BFC Workplan – The BFC discussed its Workplan, which is on target.
  2. ICANN Reserve Fund Performance Review - The BFC received a presentation from fund manager SSGA. SSGA reviewed the overall performance of the portfolio,. SSGA discussed both ICANN's long-term asset allocation, which is consistent with the objectives and risk tolerance of the Investment Policy. SSGA also discussed ICANN's tactical allocation, which reflects ICANN's positioning given shorter term views on the market environment. The portfolio has appreciated approximately seven percent since SSGA has started managing it in October 2011. The Committee engaged in a discussion concerning the economic outlook for 2022, including the impact of US inflation and market volatility. SSGA notes that overall financial health of 2022 appears to be solid, with anticipated growth. While the risks presented by COVID-19 are still present, it is likely that the bigger economic risks of the pandemic has passed as vaccine and treatment access is improving, which will allow normalization of consumption patterns over the course of 2022. It is anticipated that strong demand, supply chain pressures and better pricing power will keep inflation high.
  3. FY23 IANA Operating Plan and Budget (FY23 IANA OP&B) for Adoption – The BFC considered the org's recommendation that the FY23 IANA OP&B be moved to the Board for approval. The IANA OP&B includes itemization of all costs for Public Technical Identifiers (PTI) to perform the IANA functions, direct costs for shared resources between ICANN and PTI, and support functions provided by ICANN to PTI for the next fiscal year. ICANN org reported that the drafts of the FY23 IANA OP&B and the FY23 PTI OP&B, which were developed following numerous discussions with the ICANN community, were published for public comment from 15 September through 25 October 2021. A report of public comments was published on 30 November 2021. There were no changes to the IANA expenses resulting from the public comments received. Some of the recommended changes on how the information and text were incorporated into the proposed for adoption FY23 IANA OP&B, The PTI Board adopted the FY23 OP&B on 13 December 2021. The draft FY23 IANA Budget is US$10.4 million, of which US$9.8 million is for performing the core IANA services and US$0.6 million is for IANA support activities (not performed by PTI). The FY23 PTI Budget is US$0.1M higher than the FY22 PTI Budget primarily due to an increase in personnel costs for inflation; partially offset by lower direct shared costs for depreciation on existing and new assets. The IANA support activities component is US$0.1M lower compared to the FY22 IANA Budget due to the mix of personnel support. The Committee noted that overall the draft FY23 IANA OP&B is comparable to the FY22 IANA adopted budget, with some slight increases netting to a higher amount of US$100,000. The BFC noted that there is no excess or deficit in the PTI budget at the end of a fiscal year because the PTI budget is incorporated into the ICANN OP&B. Any excess or deficit relative to IANA will be reflected in the ICANN budget. Following discussion, the BFC recommended that the Board approve the FY23 IANA OP&B. The Committee discussed the next steps in the approval process, which includes consideration by the full Board, and then Empowered Community process will commence following Board approval.

    • Action: ICANN org to prepare relevant Board materials.
  4. Auction Proceeds Investment Strategy Update – The BFC received an update on the Auction Proceeds Investment Strategy. The BFC and the org have been discussion options for improving the returns on the Auction Proceeds Investments. The org reported that no investment changes have been executed and that the org will be reviewing proposals from the investment firms next week. The org will continue to update the BFC on its progress on this matter, recognizing that there will be no need for any formal decisions as all the proposed changes will align with the Board-approved Investment Policy.
  5. FY22 Forecast and ICANN Reporting – The Committee discussed the FY22 forecast and the improvements to ICANN's financial reporting. ICANN org noted that enhancements have been made to the org's financial report to provide greater transparency into the org's work. The financial reporting will increasingly focus on displaying how each existing fund is used, based on a cash flow approach. The draft budgets that were published for public comment in December reflect the new reporting approach. The BFC discussed other enhancements that might be made to financial reporting. With respect to the FY22 forecast, ICANN org reported that the forecast projected an increase of US$25 million to the Operating Fund at the end of the year. Funding is projected to be US$5 million higher than budget due to better planned growth from domain name registrations. Expenses are projected to be US$20 million lower than budget, largely due to savings in previously budgeted travel for the ICANN 72 and 73 public meetings that was and will be held virtually. The BFC discussed the anticipated expenses for the New Generic Top-Level Domain Subsequent Procedures Operational Design Phase (ODP) as the work has commenced January 2022.

Published on 25 March 2022