EN-FY11 Operating Plan and Budget 10 June 2010

Cheryl Langdon-Orr: Fashionably late, shall we say. I think it’s appropriate for us to begin at this time, recognizing that a couple of people will come in during the call, but I’m sure Kevin is quite used to hearing announcements as he speaks. First of all, thank you very much, one and all, for joining us this morning, this evening or tonight; particularly those of you at the American end of the spectrum, in time zones that have, in many cases, got up very bright and early, or in some cases just early, to join us for the call, particularly since we needed to shift the time of the call last-minute.

So thank you, one and all, for joining us. Of course, the purpose of the call from our perspective, from the At-Large perspective, is a very important one. We have contributed to the comments that have gone into the creation of the operating plan and budget and we have of course our current opportunity, which we will be exploring rather more fully at our Brussels meeting to make some additional comments on this draft, but this is our time to go through with the Chief Financial Officer, look at the details of his presentation, and give him direct feedback as well as his team, because I know he scribbles notes and listens very intently to all we say.

It’s also going to be a formal meeting of our Budget and Finance Subcommittee, Kevin, so I hope you don’t mind that I’m piggy-backing two meetings for the price of one here. Of course, it falls to our Budget and Finance Subcommittee to ensure that the regional views come into our comments on operational plans and budgets, so they’re going to be given first opportunity to ask any questions therefore. Just before we begin Kevin, can I ask you, how do you want to manage questions? Do you want to take them as you go or in small, bite-size pieces, or save them up to the end? What suits you?

Kevin Wilson: Thank you, Cheryl. I think what I’d like to do – and I purposely put the budget document, which is 80-some pages, over here to the right, so I have it as a reference tool. I have a relatively few number of slides and I have a large pad here with post-it notes and blank sheets, so from my standpoint I think this would be most productive if it’s not dominating the conversation. If there are those, if there’s any on the call, I’m looking at some of the names; I think most of the people on the call are pretty familiar with the process and where we are to here.

I’ll focus on some of the recent changes that are being discussed, but if there are calls for going back to basics and bringing everybody up to speed, I’m happy to do that, too. So to answer your question, I think that it would be fine to ask questions along the way. And I do have a hard stop at 6:50 because I have an Audit Committee Meeting at the next hour.

Cheryl Langdon-Orr: Which is another highly motivational reason for us to take questions as we go.

Kevin Wilson: Right.

Cheryl Langdon-Orr: So thank you very much, Kevin. Recognizing a few people will be joining the call, perhaps going through the basics, not in too great detail, but as not quite a filibuster either, would be a very good thing. So after you, thank you, Kevin.

Kevin Wilson: Thank you, Cheryl, I appreciate it. Thank you, everyone, for joining the call. I really appreciate that. I think the purpose of this – as I mentioned with the blank slate of paper here – is to encourage further community feedback. Obviously we’ll highlight the draft, FY ’11 Operating Plan and Budget, which was posted on the 17th of May, and highlight a few changes that were made, largely from community feedback since the framework was posted in February. And then talk about the next steps and obviously, as Cheryl mentioned, answer questions along the way.

So really briefly, on the process – I think most of you know this but just in case one or two may not be as familiar – the traditional process that we have at ICANN is that we have a three-year strategic plan and that gets updated annually. This year it was posted on the 19th of February and the current strategic plan that we’re working with, although there aren’t fundamental changes in the direction of ICANN.

It was dramatically simplified and clarified and we think more accessible and easier to understand from a high-level standpoint. So the framework follows that – both chronologically as well as conceptually – follows that strategic plan, and that framework for the next fiscal year operating plan and budget was posted in mid-February range. We had meetings in Nairobi, we had conference calls and that community feedback was synthesized.

I had something like 70 or 80 pages to digest and synthesize and we actually added an Appendix to the draft document which was posted on the 17th of May; a whole Appendix on the feedback, briefly summarized and what our response to each line item was. So we made a commitment to not only solicit feedback this year, but to commit to providing feedback to the feedback, to explain what our responses were. And that largely was a group from Sebastian and other leaders that provided that direct request, so Finance Committee directed us to do that, so we spent some resources on that.

On the 17th of May – some of you may not be familiar – I mention that because it’s a bylaw requirement that the budget gets posted 45 days before the fiscal year ends, so we always have that as a milestone marker and then after that draft budget, community feedback is received, synthesized, then we submit a final budget to the Board after more community discussion in Brussels, and that that will be submitted to the Board meeting on Friday, presumably for adoption.

The one point I wanted to make here is we’re considering altering the process for Fiscal Year ’12, so the next two slides kind of highlight that difference between the two. I’m hoping everybody is able to see Adobe Connect – it dawned on me – so just in case, I’m on the slide that shows the current chart of the way the process currently works now.

We have six months of strategic plan development with a draft and a final, and then the operating plan and budget for the fiscal year is developed over the second six months of the year, essentially starting in January and ending with the Board meeting in the June meeting. So the thought being – and several have proposed this so we’ve put this forth as a point of discussion – that we have a three inaudible 07.50, three four-month periods.

The first four month is the update to the strategic plan, the thought being that that’s pretty much set; hasn’t really changed in substance over the years, and would require less time to tweak and adjust. Then the big change in this proposal is that the financial framework for the strategic plan, the broad-based budget parameters associated with that, which is really where the discussion goes – it’s one thing to say, “Gee we want to do X, Y and Z,” it’s another thing to say, “We want to do X more than we want to do Y,” and we’re thinking about recourse allocations.

It’s hard to talk about strategic directions without putting a resource constraint on it, whether it’s time or people or agendas or dollars in the actual budget. The other suggestion there, as you can see, is more SO and AC – Supporting Organizations and Advisory Committees – input, and clarify the role of the chair and the leadership of those groups as well, on formalizing it. Thus far we’ve just invited all community members, including SO and AC chairs, to participate in this process and perhaps be more bold to set up conversations like this.

The thought being in the future that maybe we formalize that and there’s various discussions in that range. So that’s open and we’d like feedback on that. And then the final four months would be probably something similar to what we have now, which is we’d post a draft and then sort of fine-tune our final negotiations on those resource allocations. Okay?

Cheryl Langdon-Orr: Kevin, just before you do go on, I’m wondering whether we might just pause there because that’s a significant change for what I think you’ll note is increasing involvement from the At-Large Advisory Committee. And that’s going to give us a different framework – pardon the pun – to have our regional At-Large organizations working in. So I’m just wondering – and nobody may put their hand up – but I’m just wondering if the regional leaders on the call might want to comment or give you some feedback now on this new process that’s under consideration. Recognizing it’s very early for some people – perhaps you all haven’t had enough caffeine.

Adam: It’s getting late for me. It’s Adam.

Cheryl Langdon-Orr: Oh, well perhaps you also haven’t had enough caffeine.

Adam: Oh no. No I was just going to say I think the transparency of the process is greatly appreciated and the opportunity to have more input and repeated input is great. And I think that’s reflected in the recent Board review of itself, where it says that it has high confidence in the financial process. So you should be pleased with that and I think it probably reflects what we’re feeling about it as well.

Kevin Wilson: Thank you.

Cheryl Langdon-Orr: And certainly just to ensure that what’s happening in the chat – Kevin, you’re seeing and hearing nothing but positive vibes from the leadership and rank-and-file of the At-Large community, and therefore by definition are probably going to make the ALAC rather happy with this new process. Providing of course we have firm dates in enough advance time to do our planning. Alan, go ahead.

Alan Greenberg: I’ll take the devil’s advocate; someone has to. The downside of pushing things earlier and earlier is you get less and less nimble, and that is you cannot react to things that change. And we are in an industry that does change a little bit sometimes. And I wonder to what extent that is being considered; I can give some of the answers for why it doesn’t matter, but I’m curious how this was factored into the decision to move like this.

Kevin Wilson: Well let me react to that; I’ll try to turn it into a response. A decision has not been made, so this has been raised as a question in the budget to discuss. So yeah, it’s a really interesting – there’s a number of questions. I put one up in the chat room there as well, but it didn’t quite read like it was in my brain. But the point being that it could be as simple as getting better and better at what I call the EAG Reporting – the financial reporting by Supporting Organization and Advisory Committee group in accordance with ICANN’s organizational structure.

Just get more and more granularity, which as many of you have seen we’ve got more and more open, more and more transparent on how we do it. So that would be sort of one end of the continuum on heading this direction; just reporting more on it, but not changing the relationship. The other end of the spectrum is reorganize.

So we have our ICANN Staff organizational structure is a reporting – as if Cheryl becomes a department head or the At-Large/ALAC Chair or a staff chair would become a department head that would control how staff spends their day-to-day and what their goals are and bonus allocation. You can imagine it going to the ultimate extreme.

Alan Greenberg: I like the concept of bonuses for us.

Kevin Wilson: And so you could go whole reorganization and structuring and that’s one of the continuum-

Cheryl Langdon-Orr: Perhaps turning you onto a middle ground there Kevin, might be wise.

Kevin Wilson: Yeah, so that’s the point is what’s the striking point? Is it just formalize the relationship and get clear on what the directions are or some of the SO/AC Chairs want to decide who goes to which meetings and what the agendas are for every single staff meeting. Others we don’t ever hear from, or at least from a budget standpoint.

Other SO and AC chairs, I literally have asked every year for a meeting and have gotten no feedback. So it’s a continuum and striking the right balance is largely a function of the feedback we receive, so particularly addressing this issue would be good. One other point that I want to make – and Chris brought this up in the CCNSO version of this a few weeks ago – is what’s the appropriate forum to discuss this?

And he didn’t formally object to bringing this up in the budget document, but the point being that maybe the budget document itself is not the right forum. Maybe it needs to be a separate community discussion about the budget, as opposed to within the budget document, which I thought was a good point.

Cheryl Langdon-Orr: Particularly – if I may just embellish that point just slightly – in terms of the community leading, the prioritization issues, I think is something that some of us are particularly concerned about. There’s still a black box of we all put in our begging requests and then somehow the magic happens. Alan, you have the microphone; go ahead.

Alan Greenberg: Yeah, I’m trying to. There seems to be a significant lag in what I see on the screen here. My hand disappears but the microphone doesn’t appear until the both appear. I guess I’ll give you my answer was two-fold. Number one, I didn’t have the insight that Chris did, but I agree; the budget discussion is not the time to talk about the overall timing process, which really is what we’re talking about here. But part of the answer I think to my question, in my mind, is there should be all that much last-minute stuff that catches us by surprise if we actually listen to the discussions that are going on.

If you look at the GTLDs, virtually all of the issues that we are now treating as overarching issues and they’re crisis, and they’ve extended the process – and this is probably the worst case, so I’m picking it deliberately – all of them were discussed early on; all of them, people were not happy with the answers. And could we have predicted that they were going to come up and bite us again? Probably, but it was easier to push them under the rug.

Somehow we need to be better at predicting which are going to be the crucial ones and which are not, and that’s not an easy thing to do. But I think there’s a message there that none of these overarching issues forgot to be discussed; they were ignored, by the groups that were doing the discussions, to a large extent, until people got so frustrated because the reality was coming to get them. And I see the same thing happening in a number of other areas: DNS Cert, one could use as an example. For several years now people have been saying ICANN is not paying enough attention to the real critical issues that can damage the internet, and suddenly it becomes a crisis and we have to act really quickly. And there’s a message there. I don’t pretend to know what the solution is in total, but there’s a message.

Kevin Wilson: Right.

Cheryl Langdon-Orr: However, with the new process under consideration there’s a vast opportunity for us to get better at all of this and to start working smarter and not necessarily harder on how we go through each of those. So thanks for the little sidebar there, Kevin; I’m going to encourage you to move on again, but as you can see I think the concept of a new process is a very good one and how we engage in it is essential.

Kevin Wilson: Good. Okay, great, thank you. This next slide, Slide 6, just captures the community feedback process that I alluded to earlier on the types of meetings that we had – I probably missed a couple of them in my listing here but you can look on that page and see how we have – I think we’ve gone pretty far in reaching out and requesting meetings.

We can always do better and there’s always a couple of groups that complain that we didn’t reach out to them early enough or often enough or in-depth enough and so we continue to treat that as an opportunity for improvement. The travel guidelines I think are pretty stabilized; we see very few comments. I know ALAC provided some feedback on that as well, and I think that’s pretty stabilized into the overall budget discussion for next year as well.

Then just to kind of recap what the feedback was, there was a lot of requests for more information and there was some discussion about more resources in certain specific areas; a few questions and requests for either being more conservative in revenue estimates or providing more detail on the revenue calculations. And then there was a lot of discussions on how to change ICANN’s operations, whether organizationally or include benchmarking or kind of basic rules of good management efforts. And then there were also a number of comments or suggestions of how to reduce costs in various areas, and it ranged from, “We’re paying people too much,” to “We shouldn’t be supporting community travel,” so it had sort of the whole range up and down our statement of operating expenses.

The responses were that we handle the one that’s easiest, at least from our shop, which is just to provide more information. So we tried to provide it in a more organized way so that we didn’t lose accessibility. So we have more appendices, move page numbering and more table referencing and things like that than ever before, but we have a lot of pages, so hopefully for the A-level reader that can read an executive summary and can get pretty much a feeling for what ICANN’s going to do next year, plan to do next year, and for the B- and some of the people on the call, the C-level readers that don’t want to get into all the detail, we hopefully were starting the process of getting you all satiated in that; those who read at the more detailed level.

We realize that even as we provide that information, there’s still more questions that come up and we’ve received some of those questions already. As far as substantive, we did include more fact-based studies so that increase, too. I think we have $400,000 for the inaudible 22.22 areas that the GNSO actually cast a resolution on that, and we responded to that accordingly – which is by the way, just as a little aside back to the planning process, at least since I’ve been here I think that was the first time we actually received a formal resolution to spend a certain amount on a certain, specific topic from an SO or an AC.

I know the At-Large has often voted and approved community feedback, but I haven’t seen other groups provide an actual formalized request, almost like a legislative body providing a specific item, so that’s sort of an interesting development.

Alan Greenberg: Kevin, it’s Alan. Can I interrupt for a moment?

Kevin Wilson: Sure, yeah.

Alan Greenberg: The reason is this is the first time – and some of us almost lost our jaws on the floor when a Board member suggested this was a good way to do things. In the past when we have tried to do something similar we have been told – and I’ll use the virtually exact words – that’s not the way the ICANN budgeting works. So you haven’t received it because it was cut off way before you at the CFO level would have seen it.

Kevin Wilson: Interesting.

Cheryl Langdon-Orr: It’s never got as far as you, Kevin.

Kevin Wilson: Yeah, so that’s an interesting development. Now it’ll raise an interesting question if we have a bunch of SO/AC resolutions recommending $150 million budget. If you add up all the pieces, what do we do?

Alan Greenberg: But the issue is, yes there’s the potential of going to that and then you have a problem, but the $500,000 in inaudible 24.03 studies were known to be coming for years; they should have been in the budget somewhere. The difference is they’re now allocated in the area where the group who is deciding what kind of studies to do has some responsibility and has some ownership, as opposed to toss the request over the wall and somebody on the other side will massage the numbers and decide if, how and when we do it. And that’s a good thing.

Cheryl Langdon-Orr: It certainly is.

Kevin Wilson: And then just briefly on the other substantive changes that were made from the framework to the draft is At-Large support, we increased it based on strong feedback on that; increased it from the framework up to the draft. I know Alan and others will call me on that saying that’s not an increase, but anyway it was a formalized increase on that.

We also have queried all current revenue providers – so the registries, registrars, CC community, RARs, we didn’t actually ask the sponsors coming up with estimates for next year or the investment markets – on what we think the returns are, but the basic revenue contracted and non-contracted parties of ICANN, we’ve asked them for formalized input into that so we’re hoping to get some feedback on that, as much as we can.

Cheryl Langdon-Orr: Kevin, just because I cannot possible let this moment pass without the appropriate pause and statement that is going to come, certainly from me in whatever capacity I’m in in At-Large: providing we all remember – what you’ve done there is a very good thing – where a lion’s share of those initial resources come from, and that is registrant-derived funds. Okay? We’re all going to start turning up to ICANN meetings with t-shirts that read, “I am a source of registrant-derived funds for ICANN,” if needs be. But from an At-Large community perspective, we kind of pay and someone else does the tax collection and passes it on.

Kevin Wilson: Yeah, that’s a really interesting point. And to be honest I hadn’t – I obviously think about that all the time and one of my jobs is to prepare our Form 990 income tax information return for the Internal Revenue Service, which addresses that very directly, and one of the reasons why we are a 501(c)(3), not-for-profit organization. So believe me, from a finance standpoint it’s very up-front and center. From a billing standpoint, we obviously send the bills to the registries and get checks from the CCs and that sort of thing.

Cheryl Langdon-Orr: And we appreciate the granularity in this particular operational plan and budget. It would be good if we could actually see some of that, but don’t lose sight of the extra bit on the end.

Kevin Wilson: But what would be interesting – and actually just thinking off the top here; my creative juices, perhaps not wisely, but I think it’s kind of an interesting idea – why don’t we ask At-Large formally, the way we do for the registries and registrars, or other groups, what do they think the revenue assumption should be? Do you think our transaction volumes that we’re assuming for the internet overall or whatnot – I think that this would be a good year to start that question. Obviously you only have a couple of weeks here to respond to that so maybe that’s just planting a seed for the future.

Cheryl Langdon-Orr: Okay. Well I think it’s certainly a seed for the future, mainly because I know how overworked and under-resourced our community is, but I think it’s something that I’d like to see definitely happen in the next round, as we’re looking towards change.

Alan Greenberg: On the other hand, I’m not sure we’re any better economic forecasters than the other people.

Kevin Wilson: Yeah, I appreciate that Alan and it’s a crystal ball, and I have a lot or fun dealing with the investment reserve, what the investment income is, and sometimes I’m wildly under and sometimes I’m wildly over, and it doesn’t seem like I ever land even close to right, unlike something that’s in a normal revenue model.

So I appreciate that, but the point being that it’s open and transparent and we’re showing the calculations; it’s not just a wild number. And by the way, kind of kudos to Kurt and others and inaudible 29.12 Financing; we’re much, much better at forecasting. Those of you old ICANNers – I shouldn’t say old, I should say experienced ICANNers know that in the past we were wildly under on revenue, so we would forecast a number and we would have much, much higher revenues, and likewise our operating expenses; we would forecast a certain operating expense and come way, way under that number. We’ve fixed that problem, probably too well, as you know.

Cheryl Langdon-Orr: Go ahead, Alan.

Alan Greenberg: Kevin, we’re very open these days on these things, except in a number of areas, and I was for instance not very happy when the new RAA was adopted last May or whenever it was, and Kim Cole and a number of other people were saying, “Don’t worry, registrars are not obliged to sign onto this for up to five years, but we’re going to entice them by reducing fees.”

And nowhere did we ever see a statement of how much was is being reduced, for what period was it going to be reduced – for the rest of the whole contract? Or for what the bottom-line impact was of that – we were told this year was a crunch; our revenue was reduced. I’m still wondering to what extent that was because of the way we implemented the RAA. I don’t know if that was a 0.01% minor noise or if we took a big hit on it.

Cheryl Langdon-Orr: And that’s a question a number of us have asked.

Alan Greenberg: Yeah, it’s fine to be open at budget time, but when the inaudible 30.56 that come on through the rest of the year have potentially major budget impact – or at the very least we should be told it doesn’t – it gets obfuscated because in that case, to be candid, registrars are involved and we don’t want to talk money and things like that. So we’ve got to play the same game throughout the year, and it have to be played by all of the teams, not just the financial people.

Kevin Wilson: Okay, so the short answer – let me address it directly, the first part – the reduction was from 20 cents per transaction year or domain name year to 18 cents, and the budget assumption in the FY ’10 budget is at 100%, which would actually convert to the 2009 RAA. And I think – there’s different ways of calculating it – but I think-

Alan Greenberg: But with this two cent reduction for what period of time? Forever going forward or…

Kevin Wilson: Well, for the FY ’10 budget it’s a one-year budget, right? ICANN’s budget is a fiscal year budget. There’s forecast for multi-years, but it’s a one-year budget. So our budget assumption was that everyone would be at 18 cents, and so that’s the number we’ve been doing. And we’ve pretty much been tracking to that, by the way, as far as transaction volume and that sort of thing. So that’s a few hundred thousand dollars less than forecasts. But you raise an interesting question obviously. If the registrar fee was 25 cents it would be-

Alan Greenberg: Which it is, officially.

Kevin Wilson: Yeah, I understand. Okay, let me say again so I’m clear on the recording – if we didn’t discount it down to 18 cents from the 25 cents in the contract then it would be a much higher revenue number, obviously, and likewise with registries, etc, going on. So anyway, it’s a good point that you’re making, but the only thing I would push back is we were pretty open and transparent in the budget document on explaining that our budget assumption was conservative; we assumed that everyone would go to the 2009 RAA. I think Tim’s latest report was something like 90% of registrant volume – 95, or something very high percentage or registrant volume – was actually converted to the RAA.

Alan Greenberg: You got that by converting 10 registrars.

Kevin Wilson: Yeah, that’s true too, but still a high percentage.

Alan Greenberg: Yeah. The point was more on when the decision was made or the recommendation was made to do that, the impacts on budgets and things like that should be more open, as opposed to patting us on the head and saying, “Don’t worry; we have that under control.”

Kevin Wilson: Got it.

Cheryl Langdon-Orr: And particularly when things change, as has happened in this recent FY ’10 year and is carrying over its effect into the FY ’11, Kevin I think it’s really important that while you’re having this conversation with us you realize how seriously concerned, downright scared, and shall I say almost paranoid parts of our community – and here I’m talking about whole bunches of regional leaders – were about this, “Oh dear, we have to be very fiscally tight.” We had emails going around that were going, “How bad of trouble is ICANN in? How financially unstable is it?”

In the absence of information, people will make assumptions. A whole lot easier if we have what probably seems like an excess of detail to make proper assumptions. But the things such as what caused the reduction in income were not able to be drawn out of the stuff we had access to in the past. Let’s hope it’s different in the future.

Kevin Wilson: Okay.

Cheryl Langdon-Orr: I’m going to encourage you to move on to your next slide but before you d – one thing. Because you’re looking at responses to community feedback and this is something I’ve held off since the CCNSO Briefing that I had the luxury of attending, thanking you very much for Appendix C and the way Appendix C is laid out but a small plea to make it easier for those of us who are the C-level readers, I guess. Perhaps that was coincidental that you made that Appendix C and you referred to C-level readers.

Kevin Wilson: Cheryl I have to admit, you caught me on a very subtle piece of humor that only you and Alan would appreciate.

Cheryl Langdon-Orr: I realize that it is work but to be able to, in lengthy documents, when people do want to cross check and go for the dotted I’s and crossed T’s, if we could have some hyperlinks for example when it says, “Go to Section 5E”, dear, it would be nice to actually go to section 5E by, you know, hitting that link.

Kevin Wilson: Got it, yup. That’s it.

Cheryl Langdon-Orr: It’s just the formatting, but it would be as greatly appreciated as the pretty graphics that come in the next Appendix.

Kevin Wilson: Okay, great. I appreciate that. Thank you for sharing that. Before I leave I just wanted to emphasize this too because this was a pretty significant point of confusion, that the DNS Cert, in particular, was not included in the framework and is still not included in the draft budget, meaning you know, the staff time discussing it and evaluating, but there isn’t you know a preparing or operationally ready.

There was a separate document that explained how much you know straw man and how much it might cost to operate a DNS cert and I think that was translated into confusion and I think that was translated into confusion. Oh boy, ICANN is cutting back all kinds of other places to do that. That’s not true so there was, I know there was discussion about a DNS Cert but in the budget assumption, it does not include that, so we kept.

Alan Greenberg: But Kevin, the corollary of that is we’re planning some major activity without any funding for it.

Kevin Wilson: Well okay.

Cheryl Langdon-Orr: What gets cut to pay that bill?

Kevin Wilson: Yeah I mean I think the point is that we don’t have - when you say planning for, I mean discussions are going around. I don’t think there’s any staffing or real estate being assigned or servers bought or whatever else would need to be done on that, as far as I know.

Alan Greenberg: Touché.

Kevin Wilson: Alright, alright. Good, so…

Alan Greenberg: I have a question in a completely different area so and I suspect you have a hard stop at the end of the hour.

Kevin Wilson: Okay. I would say in about five minutes, yeah.

Alan Greenberg: Okay then let’s keep on going.

Kevin Wilson: Okay then. Let me move forward. This is just the recap of the budget, for those how would like to look at that, think in terms of numbers and tables that we still have a growth, and this answers Cheryl’s question, that ICANN is still strong. There is still contribution to the reserve fund. That is still planned and the Finance Committee keeps us fiscally responsible in that way and so we wanted to emphasize that.

This is the chart which shows how we’re spending by the fifteen major functional areas of ICANN’s operating expenses and so we still have growth in SSR with an internal focus, meaning stability, business continuity, disaster recovery, that sort of thing and some development in policy, including the At-Large staff support and the fact-based studies that we mentioned. There is a reduction in the new GTLD year over year, but obviously it’s still a significant dollar amount - $8 million but the thought being to complete that it’s required.

And complete the implementation plan as well as become operationally ready, although some costs are held up till further sense of – we’re getting closer to launch before we actually pull the trigger and, you know, we’re not planning on getting real estate and staffing up completely for handling applications until that’s further along in the process. I think I’ve covered all of these so I’m going to skip through that. Heidi or Matthias - if you want to send these slides around, if that helps, we can do that if there’s any follow up questions.

I think I covered everything that I’d planned to cover and then just emphasize that there’s still a time for community feedback. Obviously, it’s getting close and I get on a plane on the 16th, so I’ll be synthesizing for the Finance Committee meeting on the 20th so please try not to have late entry. We’ll obviously consider everything until the Friday before the Board meeting but we’d like to have as much as we could so that the Board members have a chance to synthesize our synthesis.

Cheryl Langdon-Orr: Thanks Kevin and I know we only have a very minutes so if you don’t mind, first I’ll ask if there are any members of the ALAC subcommittee for budget and finance that have any particular burning questions they would like to raise.

Adam: Yes, yes. My hand’s been up for a while, inaudible 40.56.

Cheryl Langdon-Orr: Well it is now accepted. Go ahead

Adam: Thank you, thank you. Kevin. Thank you very much. One question is about legal spending, which wasn’t mentioned on the chart. You showed a couple of slides ago. I know it was something that took the budget over last year by about $3 million and I was wondering what forecasting you might have done depending on different Board decisions that might be made, because I imagine a lot of this will relate to ICM and XXX and you know, those decisions have a cost.

One of them has zero cost and some of them I imagine have costs in the region of more millions of dollars, so I was wondering – that’s one question about the possible legal fees and you may not want to address XXX directly because I don’t know, you know because it’s a scary issue and the other thing is really about – well there’s one thing about cash that’s you know got to come from somewhere and this is about Alan’s comment about unexpected spending.

One of the things we heard lots about during the Nairobi meeting was spending on the new North California office for Rod and others, and that doesn’t seem to be broken out anywhere and I imagine that it’s quite extensive. I know there was – what was it - $600,000 that was added to the budget by the Board after he was appointed. I don’t know why they didn’t work that out while they were recruited him I think and since then they have stopped being added and there’s the new super, you know, security expert and so I was wondering if that shouldn’t be costed out in some way.

It also would relate to the fact there’s an Australian office that I was wondering if that’s going to continue, you know, because that was originally, I imagine, in support of the previous CEO and President. So there’s a whole bunch of issues around offices and I’m not saying that the Australia office should go. It would be horrible because they’re great people. Anyway and then we did have a comment about and this is getting to more specifics about travel in general.

I think it would be appropriate to breakout the Board travel as they are community members so as we do for other parts of the community, breaking out the Board travel for their ICANN meetings and retreats and probably any other business that they officially travel and then the final element – I’m sorry – is about specifically support for one General Assembly for each of the RALOs for the next three years. What does support mean?

Kevin Wilson: And?

Adam: And I’m imagining that this means effectively one General Assembly every two times that ICANN rotates through a region of three general areas. I’m sorry I’ve taken so long.

Kevin Wilson: Yeah, no. I appreciate that. Let me make a stab at it and probably…

Cheryl Langdon-Orr: Take them on notice and get back to us is fine.

Kevin Wilson: Yeah and I’d love it if you formalize those questions so we make sure we get them right. Probably the most important is no I’m not afraid of the XXX question, or ICM question, but obviously in a minute to explain all the legal costs for that is probably inappropriate.

Cheryl Langdon-Orr: We know they were significant, don’t we?

Kevin Wilson: Yeah. They were. I actually don’t think it, they are significant and I don’t want to say, you know, but it wasn’t $3 million that’s for sure. I think the total legal budget is something like that and that includes support for the new GTLD – obviously legal’s involved in everything. At ICANN there are lots of contracts.

There’s lots of important Board support work that happens with the legal department and a lot of institutional confidence and so you know I’m not defending everything that everyone does but I just want to make it really clear that it’s, you know, we didn’t throw a tremendous amount of resources just at that one issue but there is a pretty methodical process by which we estimate you know conservatively estimate what the total legal expenses are for the year, including support for services and things that are managed, consulting services and whatnot that are managed under the legal department and then an estimate on litigation expenses.

There’s been something like sixty lawsuits since ICANN started ten years ago, or sixty legal actions. I’m not sure if they’re actually raised to lawsuits, but that’s a lot and so we’ve come up with an estimate. We’ve kind of reduced that somewhat and then put it and then factored in the contingency then as well. That’s part of the contingency. We can’t really, with good conscience, we can’t put into a budget, you know, the worst case scenario for a litigation situation, so we factor that into the contingency.

Cheryl Langdon-Orr: Yeah.

Kevin Wilson: The other couple points I just wanted to mention. The Board travel is posted on the website so we do that as a matter of purpose and if you want me to, Heidi or Matthias, we can send the group the link, so you can actually see by Board member what the total costs are. This last year we improved it so that the bylaws actually require us to show reimbursement to Board members. Now we show third party payments, so if.

Adam: Where is that roughly on the website?

Kevin Wilson: In the finance section by inaudible 46.30.

Alan Greenberg: Is it in the dashboard?

Kevin Wilson: No. In the, if you go – Documents, Financial Information and the look for each fiscal year, we post it as part of the audit and there’s actually – this last year the finance committee asked us to improve upon that so that if one Board member uses our travel agent, then we pay for a travel agent directly and the other Board member buys their dinner on their own and isn’t, you know, we don’t pay for the dinner directly – it would show up the same.

In total it shows up the same, so we answer the question of the bylaws to show reimbursements to Board members and then we also answer the kind of logical question which is well how much are you actually spending for the Board members? So we actually do that. I’d be happy to have you take a look at that and see.

Alan Greenberg: That’s on a per Board member basis or the whole Board?

Kevin Wilson: Per Board member. Yeah and in the budget document it talks about what we spend per Board meeting as well, so we’ll get more and more on that so I think the question is accessibility, not openness, to make sure that you Adam and others would know technically where that is.

Cheryl Langdon-Orr: Yes and I think it’s less a matter of it not being there but how easy it is for us to know and find it.

Kevin Wilson: Right. I do need to hop off. The General Assembly question, it’s circled around a bit and Steve and I have talked about it so I’d really like to – maybe it’s email format, but certainly…

Cheryl Langdon-Orr: Is there an opportunity for us in Brussels to pick up specifically on that question?

Kevin Wilson: Could we do that? Could Heidi or Matthias, could you calendar that in and make sure that we do that and maybe then get Steve on conference call and I’d like to have that cleared up so it’s not hanging out there.

Cheryl Langdon-Orr: Well it’s going to be like the Hydra otherwise – you can try chopping of its head but we’re just going to keep growing back new ones.

Kevin Wilson: I think let’s nail it down.

Heidi Ulrich: Kevin, I just want to let everyone know that you’ve confirmed to speak to the At-Large, ALAC members and At-Large RALO leaders on Thursday during their wrap up session.

Kevin Wilson: Okay, great.

Cheryl Langdon-Orr: So this could be the topic of what we speak of.

Kevin Wilson: Good so let’s focus that in and hopefully Adam you’re there and we can maybe talk in the hallway to clarify that. I know Alan and Cheryl and others have had that as well, so I’d like to bring that to a head and make sure that we’re really clear on that.

Alan Greenberg: Kevin can I have thirty seconds to raise an issue? I don’t want an answer.

Cheryl Langdon-Orr: Please go ahead Alan.

Alan Greenberg: One of the things that came up when we were trying to look at the ALAC improvements and we’ve been asked for budget costs and stuff like that and there’s a huge amount of obfuscation in ICANN as to what staff resources get billed back to individual projects and what gets absorbed. You know we’ve been told variously that if he takes responsibility for some software package. It goes into their budget. It’s not in ours.

We’ve seen other causes in the new detail. The new implementation perhaps is the best one, you know, where we’re told we expect to recover staff costs. You know ALAC improvements was given $50,000 which will disappear in a fraction of a year if it includes any staff costs, or is useable if it doesn’t and I understand there’s a good reason to be flexible and change the decisions you know based on the situation but just a little bit more transparency as to how you decide that would make it a lot easier for us to do real budget work.

Kevin Wilson: Great. Good. Great meeting. Great. I understand and we will address that.

Alan Greenberg: Okay.

Cheryl Langdon-Orr: Kevin, thank you and more importantly thank your team for us. We see a huge step forward. We appreciate the granularity and the greater detail I know it’s a marathon but it makes enormous difference for us out here and what we think is the trenches. I know you feel you’re in the trenches but you know, we get the brunt end of this and the consequences as well and helping us as you clearly are as looking at the new models and getting us inaudible 50.43 is great.

I hope that your audit meeting is nowhere near as challenging as they can be and they we’ve given you time to absorb some of what we’ve said and we look forward to picking this up again in Brussels, particularly on the all-important general assembly questions.

Kevin Wilson: Yes, great, thank you. I appreciate that too. That’s great. Okay.

Cheryl Langdon-Orr: Thank you everybody. Thank you Kevin. For those of you who are still on the call, I think it’s essential that any questions that weren’t able to be raised to Kevin while he was available to us are recorded and that we put them formally through. I’ve asked Heidi to make sure we capture accurately the questions raised.

I think it’s very important though that if you didn’t have a question raised that it goes, shall we say, through to the working list as soon as possible and well before Brussels if at all possible. Many of you will be starting to travel through next week so it doesn’t have to be a beautifully formulated or particularly detailed question.

Put the question to the list and the budget and finance subcommittee will meld those pre-Brussels to give to Kevin as early as is practical as a result of today’s meeting and then we can expect our answers and our responses and we can look forward to, I think, a fairly focused discussion on the matters that are very much important to the future outreach development and how we manage our regions with the opportunity for how we look at funding for general assembly’s in the future as we search from the horse’s mouth. No guarantees but at least we’ll have the conversation in the Brussels wrap up meeting on the Thursday.

So that’s one that I would encourage each of the regional leaders and members who are able to influence their At-Large structures to join us remotely if they’re not planning to be in Brussels. I think we need a significant showing during that Thursday wrap up meeting so that the numbers, see if we’re talking to a numbers man, can be seen. Any questions? Any other business to today’s meeting?

Alan Greenberg: No, thank you.

Cheryl Langdon-Orr: Okay, saying no. Thank you one and all for both late evenings and early starts and I believe, correct me if I’m wrong, but Kevin’s slides are already up on the Wiki page.

Alan Greenberg: Oh one thing that, just one thing. It would be interesting to see the director’s travel expenditure things. I wasn’t particularly, I was thinking it should just be integrated in the travel report but if it’s already available, it would be interesting to see, but it was more about making that report complete than some strange interest I have in seeing how much people spend if you see what I mean.

Cheryl Langdon-Orr: Well that’s why I wondered if it was part of the dashboard because it’s got what we all individually cost every meeting, is out there in the dashboard.

Alan Greenberg: Yeah, but it just seems like why isn’t it in the travel policy but it’s interesting that they already do it. It’s good but it’s just, in the travel reports, but whatever.

Male: If we could find something inaudible 45.18

Cheryl Langdon-Orr: And Heidi has proposed that we set up a Wiki page for the questions and I think that’s probably very good. Obviously we’ll take those questions in any language and we’ll sort out the translation requirements at our end. Any other questions for anybody? Any other comments? If not thank you and let’s get typing because we have a short amount of time and I think a little bit of additional tweaking to get some of the analysis questions.

And I think they should also include comments on format and better readability or greater granularity from what is a seriously large budget, I admit, in terms of eighty-odd pages but it is getting to the point where when we are interested in how our funds are managed and they are in the main our funds, I think it’s important to have that degree of detail should members of the community want to see it. Thank you one and all and look forward to seeing many of you in Brussels and for those of you who aren’t travelling, sorry darling about the unearthly hour you’ll be joining us but the remote participation should be working effectively. Good morning. Good evening.

-End of recorded material-