Minutes | Meeting of the Audit Committee of the Board (BAC) | 11 October 2024

BAC Attendees: Alan Barrett, Christian Kaufmann, and Sajid Rahman (Chair)

BAC Member Apology: Catherine Adeya

Other Board Member Attendee: James Galvin

ICANN org Attendees: Xavier Calvez (SVP, Planning and Chief Financial Officer), Franco Carrasco (Board Operations Manager), Becky Nash (VP, Planning), Margarita Palange (Director, Accounting), Shani Quidwai (VP, Finance), and Amy Stathos (Deputy General Counsel)

Invited Guests: Representatives from independent audit firm and BAC Independent Adviser

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

1. BAC Work Plan – The Committee reviewed its work plan, which is on target.
2. Required Communications from Audit Firm – The BAC received a briefing from ICANN's independent audit firm on the FY24 audited financial statements, which includes PTI's financial statements. At the outset, the audit firm reported that it will be issuing an unmodified opinion, meaning the financial statements were presented fairly under U.S. GAAP (Generally Accepted Accounting Principles). The audit firm noted that the new accounting standard for evaluating bad debts (Current Expected Credit Loss) was adopted, but it had minimal impact on ICANN's financial statements. The audit firm concluded the estimates related to investment, receivable, and expense allocations were found to be reasonable. The audit firm reported that it found no significant deficiencies or material weaknesses during the review of the internal controls or individual transactions.

1. BAC Independent Discussion with Independent Audit Firm – The BAC had a discussion without ICANN org audit staff present.
2. Key Items within FY24 Audited Financial Statements – The BAC received the following high-level overview of the FY24 financial statements: (1) ICANN's funding for FY24 was US$149 million, flat compared to FY23; (2) a net decrease of US$5 million in assets; (3) market gains on investment totaled US$30 million; (4) US$17 million expenses related to the next round of the New gTLD Program; and (5) total funds under management at the end of FY24 was US$518 million, including the Reserve Fund balance of US$183 million.
3. Review of the FY24 Audit Financial Statements – The BAC received a briefing on the draft FY24 Audited Financial Statements. In particular, ICANN org noted the adoption of the Current Expected Credit Loss (CECL) ASC Topic 326, which mandates the use of forward-looking methodology in calculating the allowance for credit losses from trade receivables. The most visible impact of CECL is that receivables that are either current or not yet due will have an allowance for expected credit losses. ICANN org reviewed existing method of calculation for potential credit losses for trade receivables and determined that existing method already incorporated the forward-looking methodology. Thus, there are no material differences coming from ICANN's adoption of CECL; the only updates were in terminology where the term "Bad Debt Expense" was replaced with "Current Estimated Credit loss" and the term "Allowance for Doubtful Accounts" was replaced with "Allowance for Current Estimated Credit Losses". ICANN org reported that as of end of FY24, ICANN had US$458 million of investments that were managed by four different investment firms. These funds consisted of the Reserve Fund, Auction Proceeds from 2012 Round of the New gTLD Program and unspent application fees from 2012 Round of the New gTLD Program. The BAC also discussed certain disclosures in the financial statements and agreed on continuing to enhance transparency in the disclosures.
   • Action – ICANN org to update the full Board during ICANN81 regarding the completion of the audit and post the results on ICANN's webpage.