Minutes | Meeting of the Finance Committee of the Board (BFC) | 20 October 2022
BFC Attendees: Harald Alvestrand, Becky Burr, Edmon Chung, Avri Doria, Danko Jevtović (Chair), and León Sánchez
Other Board Member Attendees: James Galvin, Göran Marby, Patricio Poblete, and Katrina Sataki
ICANN org Attendees: 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), Giovanni Seppia, Amy Stathos (Deputy General Counsel), and Gina Villavicencio (SVP, Global Human Resources)
Invited Guests: Representative from Bridgebay Financial Inc.
The following is a summary of discussions, actions taken, and actions identified:
- BFC Workplan – The BFC discussed its Workplan for the year, which is on target.
Contracting Approval – Meeting Venue for ICANN Organization All-Hands – ICANN org briefed the BFC on a proposal that the Board authorize ICANN org to contract with, and make disbursements to, the venue and hotel for an ICANN org All-Hands Meeting in February 2023. The org noted that the meeting will provide the whole org the first opportunity since early 2020 when ICANN org closed its office doors due to COVIID-19 to meet in person. As reported, the meeting will provide training sessions to position managers to be set up for success through inspiration, expectation-setting, and education. It will also enable the org functions to meet new team members, take part in priority setting activities, team building and leadership exercises, and review the strategic and operating plans for the coming year. The committee discussed that during this meeting the functional teams will also be able to conduct their budgeted face-to-face meetings for FY23 at the All-Hands Meeting instead of holding separate meetings throughout the year for each function. ICANN org reported that it evaluated several options for a meeting location and concluded that Los Angeles is logistically and financially the best option, as the majority of the org staff are in the Los Angeles area and the area is easily accessible for the international and other US based staff. During the discussion, the BFC noted that the costs are reasonable and affordable, and that the procurement process was followed. Following discussion, the BFC approved a recommendation that the Board approve the proposed engagement.
- Action – ICANN org to prepare relevant Board materials.
- Investment Management Update – The BFC received an update from its external financial advisor, Bridgebay Financial Inc. (Bridgebay) on the investments and performance for the new gTLD application fees and auction proceeds funds, which are invested with three different banks. Bridgebay provided the BFC with a market update noting that inflation is persistent and the highest in 40 years. Bridgebay also discussed factors impacting market volatility and recession concerns such as the rise in oil, gas, commodity, food, and housing prices, as well as supply chain disruptions and product shortages, the Russia-Ukraine conflict and economic sanctions, and other global tensions. Bridgebay reported that the consolidated return for auction proceeds investments for one year is slightly negative due to inflation and market volatility, but the book yield, because the securities have been maturing and are being reinvested at a higher rate, has increased; the consolidated yield on auction proceeds has increased since inception. With respect to the new gTLD application fees investments, Bridgebay reported that the consolidated return for one year is slightly negative as a result of inflation and market volatility and the consolidated yield on the investments has increased since inception.
- Recommendation to use Supplemental Fund (SFICR) for Review Implementation – ICANN organization presented the BFC with a recommendation to allocate US$5.8 million of the US$20 million available from the SFICR to fund the implementation of the following Board-approved recommendations that have been identified by the community as a priority and that would take approximately one year to implement: (i) the third Accountability and Transparency Review Team recommendations; (ii) the Competition, Consumer Trust, and Consumer Choice Review recommendations; (iii) the second Security, Stability, and Resiliency Review recommendations; and (iv) the second Registration Directory Service-WHOIS Review Team recommendations. ICANN org provided the BFC with an overview of the process undertaken to prioritize the reviews for implementation. This process included the development of prioritization methodology by org, which was then launched to the community in the second quarter of calendar year 2022. The org reported that community members were asked to assign priority levels to 45 specific recommendations that were eligible for prioritization because they did not have any dependency on other recommendations or ICANN projects or initiatives. Following the completion of the prioritization exercise, ICANN org noted, that it conducted a cross functional assessment of resources required to complete the implementation of the prioritized recommendations. The committee discussed that prioritized recommendations were categorized into those that will take approximately one year to complete and those that will require longer than a year to implement. Following discussion, the BFC approved a recommendation to the Board to approve the use of US$5.8 million from the SFICR to fund the implementation of the foregoing community prioritized reviews.
- Action – ICANN org to prepare relevant Board materials.
Operating Fund Excess Allocation – The BFC received a briefing on a proposed transfer of excess funds from the Operating Fund into the Reserve Fund. The ICANN Investment Policy states that the Operating Fund should be at a level that would 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 June 2022 is US$71 million, while the targeted balance was US$38 million (3-months of expected expenses). Therefore, the current excess above target equals US$33 million. A key driver of the excess was due to projected face-to-face meetings and travel that, for the most part, did not occur. ICANN org recommended that US$19 million of the excess from the Operating Fund be transferred to the Reserve Fund to bring the Reserve Fund level to US$152 million. Following discussion, the BFC approved a recommendation to the Board to approve a transfer of US$19 million from the Operating Fund to the Reserve Fund.
- Actions: ICANN org to prepare relevant Board materials.
- AOB – The BFC discussed the topic of the creation of a separate IANA development fund to provide improvements, updates and enhancements to critical IANA systems .