[NA-Discuss] Budget Follow-up Question

[Kevin Wilson]

Danny,



Below is a quick response to your budget follow up question.  Feel free to call me if you need more clarity.



Best regards,

Kevin



Q1:     What is included in the $4MM contingency? This contingency is significantly larger than last year (up from $1.9MM); why this large increase?

A:       ICANN formally included a contingency in its budget in FY08. At the time this provision was made, the organization committed to operating within the stated expense budget, and only use this contingency if absolutely necessary. As FY08 is closing, the projection is that almost none of this contingency will be used, and nearly the full amount returned to build ICANN's reserves. The same approach will be used in FY09.

          Specifically, this contingency:

-        Has some growth to cover a larger total budget

-        A more cost-controlled approach to forecasting legal fees requires a larger contingent amount to cover unanticipated legal activity

-        An amount sufficient to cover possible Board compensation



Here is what we have in the posted draft document.


Contingency



FY09

FY08 Budget

FY08 Forecast

Contingency

4.0 million

 1.7 million

 n/a


·         Individual FY09 budget items were estimated based upon the most reliable information available.  In order to allow for the possibility of costs exceeding original estimates, an overall contingency of $4.0 million is included in the budget.
·         A formal contingency was identified in the FY08 budget as well.  At that time, ICANN management committed to spend money in accordance with the base budget and spend money from the contingency only if truly necessary. FY08 projections show that little, if any, of that contingency will actually be spent.

·         Board compensation.  The contingency budget has been increased to ensure that there are adequate resources set aside in the event that planned studies and consultation result in a recommendation for ICANN to begin compensating Board Directors and Liaisons for the significant amounts of time they devote to ICANN matters.  Any such compensation program would only be adopted subsequent to community consultation and a Bylaws amendment (http://www.icann.org/general/bylaws.htm - VI-22<http://www.icann.org/general/bylaws.htm#VI-22>).  (The Bylaws currently require that Directors and Liaisons be reimbursed for expenses they incur in performing their duties, but prohibit compensation to Directors for their services.)

·         Litigation. The contingency budget is being established in part to accommodate any excess substantial litigation costs that occur.

·         Currency Exchange Risk:  The continuing weakening of the US dollar vis-à-vis other currencies caused erosion of purchasing power for ICANN in FY08.  As ICANN's costs are being increasingly incurred in non-US currencies, some contingency is set aside for currency exchange risk.  Key currency exchange rates used in the FY09 Operating Plan and Budget are:


Non-US Currency

Currency Exchange Rate

Euro

1.55 Euro per US$

Canadian Dollar

0.998 US$ per Canadian dollar

Australian Dollar

0.947 Australian dollar per US$






-----Original Message-----
From: Danny Younger [mailto:dannyyounger at yahoo.com]
Sent: Thursday, June 05, 2008 11:03 AM
To: na-discuss at atlarge-lists.icann.org; At-Large Staff
Cc: Kevin at yahoo.com; Denise Michel; Kevin Wilson; Doug Brent
Subject: Budget Follow-up Question



Dear Kevin and Doug,



The budget states:



"Legal costs are budgeted to be $2.7 million largely based upon existing litigation, legal support of organizational initiatives, and the continued work required supporting the new gTLD launch as well as providing all other legal support services for baseline activities. The contingency budget is intended to cover any excess litigation costs that occur.



The contingency budget is listed at $4,000,000.  Why do you deem it appropriate to set the contingency budget at that very high level?  Are you anticipating a massive amount of litigation in response to the new gTLD launch?



Thanks,

Danny