| | At Large Membership and Civil Society Participation in ICANN |
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"In a Note to the financial report and in the cover letter for the report, the CPA firm states that ICANN has not adhered to their own accounting policy for unpaid invoices. Specifically, Note C to the report explains that 'it is the policy of the Company to establish a reserve for all invoices that remain unpaid for more than 180 days.' The Note goes on to state, 'Management has deemed it appropriate to make an exception to this policy for accounts totaling $1,211,000 and $676,000 as of December 21, 2003 and 2002, respectively. Written agreements have not yet been obtained from the name and address registry operators from whom these balances are due.'
The cover letter to the financial report clarifies the impact of the divergence between ICANN's accounting policies and practices by stating, 'Had a reserve been established in accordance with the stated policy, the net assets in the accompanying financial statements would have been reduced by approximately $1,211,000 and $676,000 as of December 21, 2003 and 2002, respectively.'
The impact of the deviance between accounting policy and practice is non-trivial. If ICANN had followed their own accounting policies, ICANN's net assets would have been reduced by over 22% in 2002 and just over 32% in 2003. It is not clear why ICANN has selectively refused to adhere to their own stated accounting policies of establishing a reserve for aged past due receivables, even though there appears to be no legal agreements requiring the funds be paid.
For more information, please visit www.ICANNfocus.org."
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ICANN's Accounting Practices
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A couple of years ago the RIRs made a payment of several hundred thousand dollars to ICANN. It was very unclear whether that amount constituted an advance payment on some future contract that the RIRs might enter into with ICANN or was a gift or something else.
ICANN's management was apparently unable to consider this a problem, leaving me, as a Director, the task of writing a letter to the RIRs and asking for clarification. (The RIRs did respond, but the matter was only partially reconciled - the RIRs did not expect the money to be refunded should a contract never be entered into, but it was not clear whether that money was an advance payment if such a contract did eventually come into existance, in which case it may well be that some of what ICANN is counting as accounts receivables is money that has already been received.)
ICANN has had a long history or recognizing income even when there is a substantial chance that the money will never actually be paid. There have been several notes by auditors in this regard on many of ICANN's annual statements.
I hope that what we are seeing is the last ripples of the "accounting" methodology used by ICANN's previous President.
On the other side, it seems that ICANN's board has silently decided to forego what I believe are significant and well grounded claims. claims potentially amounting to numbers with many trailing zeros, against one of its major professional service providers.
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ICANN's Accounting Practices