Comments to Proposed FY13 Operarional Plan and Budget

["Raimundo Beca" <rbeca@xxxxxxxxxxxxxxx>]

As I mentioned in a statement in the Public Forum at San José and in a late
post in the Public Comment regarding the Framework for the FY13 Budget,
posted on January 2012, I do feel that it is my duty as a Former ICANN Board
Director and, in particular, as a Former Chair of the ICANN Board Finance
Committee, to recall the commitments engaged with the ICANN Community when
the $185K Application Fee was adopted. Mainly, these commitments are: to
repay to ICANN all the Historical Costs incurred in the new gTLD Process, to
insure that the new gTLD Process will be a cost recovery exercise and that
an eventual deficit or surplus, at the end of the process, would be
respectively recovered by ICANN or used in accordance with a policy to be
defined.

In my opinion, compared with the Framework for the FY13 Budget, the FY13
ICANN Global Operating Plan and Budget, now posted for comments, has
considerably improved the previous iteration. Namely, the Budget of the new
gTLD Process is now no more hidden in the annual ICANN Budget, but it became
a self-standing multiannual Budget.

Notwithstanding, I still have five concerns regarding, subsequently: the
Recognition of the Application Fees collected, the Estimation of the
Historical Costs, the Timeline of the Repayment of the Historical Costs, the
Contingency Risk Fund and the Refunding:

1.     The Recognition of the Application Fees collected: I’m not quite
familiar with the California Fiscal Law, however my recollection from other
places around the world - including Chile, France, Spain, Brazil and New
York – is that only exceptionally fees can be recognized in a Fiscal Year
different from the one in which they were collected. To this extent, it
seems to me that the Application Fees should be as much as possible
recognized in FY12. In fact, if all the Application Fees are recognized in
FY12, the ICANN Budget for FY13 will not be contaminated by the new gTLD
Process;

     

2.     The Estimation of the Historical Costs: The proposed FY13 Budget
estimates the total Historical Costs in $29,9M. However, this estimation is
based on costs until September 2010. Certainly, there is no reason why the
costs incurred from October 2010 to June 2012 should not be added to this
figure;

 

3.      The Timeline of the Repayment of the Historical Costs: The proposed
FY13 Budget assigns $25K per application to a Repayment Fund and defines a
timeline of payments over two years. Clearly, with more than 2000
applications this assignment would be largely excessive and the Repayment
Fund and its timeline unnecessary. Effectively, the Application Fees
collected allows repaying entirely the Historical Costs in the FY12. Of
course, if at the end of the new gTLD round there is a deficit, then ICANN
is committed to fill the gap, incurring in new Historical Costs to be added
to the next round;

 

4.     The Contingency Risk Fund: The proposed FY13 Budget assigns $60K per
application, which is consistent with the risk analysis, realized when the
$185K was estimated. However, the 100 % refunding recently adopted forces to
apply this assignment to non-withdrawn applications; and

 

5.     The Refunding: The proposed FY13 Budget assumes quite conservative
rates of refunding. My take at this respect is to adopt more realistic rates
of refunding.

 

Raimundo Beca