2011/09/19 Minutes

Minutes of the Meeting of the CIRA Board of Directors held at the Pan Pacific Hotel in Vancouver, British Columbia, on September 19, 2011 at 1:00 p.m. Pacific time

Directors attending: Paul Andersen, Richard Anderson, Kerry Brown, John Demco (ex-officio), Heather Dryden (ex-officio), Byron Holland (ex-officio), Jim Grey, John King, Rowena Liang, Louise Macdonald, Lynne Mackan-Roy, Ross Rader, Barry Shell , Tom Williams, Victoria Withers
        
Corporate Secretary: Michael Stewart

Guests: David Fowler, Paul Havey, Jacques Latour,
             Pamela Miller (Industry Canada)

Recording Secretary: Lynn Gravel

1. Approval of Agenda

The Chair proposed that the agenda be amended to change the order of item 2.3 (Review of Q1 2012 Financial Results) and item 3. Review of Revised Budget.

It was the consensus of the Board of Directors that the agenda distributed with the material for the meeting be adopted with this amendment.

2. Financial and Operational Update

2.1 Report on all Statutory Obligations

This report was provided to the Board of Directors as information and tabled at the meeting.

2.2 Management Report

This report was provided to the Board of Directors as information and tabled at the meeting.

Staff noted registrations were progressing in the right direction, the .CA had gained more registrations than .COM, a result of a wide range of activities.  B. Holland noted that, within the ccTLD community, .CA was the fastest growing ccTLD in the first quarter of this year at 4.9% and over the last five years it was the fourth fastest growing ccTLD among its peers. Staff reported approximately 7,500 new registrations resulting from the Google initiative earlier this year. Other questions were raised regarding succession planning and risk management.  Staff noted that the focus at the moment was on cross training employees, an opportunity for staff to learn new skills and move up should an opening present itself.  As for the risk management, the risk review team had identified and categorized individual risks by probability and severity.  Once the team had agreement on the risks, staff will share with the Audit Committee and gather input from the Board of Directors.  
 
3. Review of Revised Budget

The revised FY12 budget was provided to the Board of Directors and tabled at the meeting.

P. Havey noted that at the time the original FY12 budget (with a budgeted surplus of $35K) was constructed it did not reflect the GAAP adjustments subsequently identified through the FY11 audit; the revenue recognition was based on the old method and no amortization was reflected for the capitalizing the .CA Registry.  As an overview, it was further noted that the FY12 budget GAAP Adjusted Recast Budget prepared isolated the preliminary impact of applying the new method of revenue recognition and the Registry amortization.  It was also noted that the FY12 Revised Budget re-allocation identifies the largely one-time incremental costs resulting from the FY11 audit and finance assessment (system development, Registry system internal control assessment and remediation, audit/policy change, Finance department rebuild and IFRS).  These incremental costs were offset by other departmental re-allocations so that the overall budgetary impact to the organization would be limited to the impact of the GAAP adjustments.  

P. Havey noted that the impact to the FY12 budget due to the policy change for the revenue recognition and capitalization of the Registry had a net effect of $810K.  As well, the original revenue budget was just under $15.5M and with the GAAP adjustment, revenue is budgeted at $14.9M with the portion of revenue attributable to the year-end Deferred Revenue and released during the year much higher than originally budgeted.  As a result of the change in revenue recognition, the new pattern of revenue recognition from Deferred Revenue, Renewals and Net New Growth will be very different than previously experienced by CIRA.  As a result the new pattern of revenue recognition, anticipated   revenue is expected and budgeted to be down in the first quarter through the third quarter and start to recover in last quarter.  P. Havey also illustrated the difference between old and new revenue based on the purchase of 12 individual domain names, each having a 1 year registration term and registered in the middle of the month.

P. Havey presented the FY2012 budget re-cast and re-allocation, all as a result of the reporting changes.  The budget re-cast represents an adjustment of $369K in Finance and Administration and $278K in Development.  These adjustments correspond to the additional effort for the FY11 audit preparation, “scrubbing & truing-up” of FY11/FY10 records, rebuilding the Finance team,  resources for the implementation of IFRS and the design and reporting tools for the change in accounting policy on Revenue/Deferred Revenue within Business Intelligence data warehouse.

For this transition year,  it was agreed that staff would present the re-forecasted budget (and provide comparative reporting under the old revenue recognition methodology).

It was therefore resolved that the Board of Directors approve the proposed recast and re-allocated FY2012 budget reflecting an operating deficit of ($775,239). This incorporates the impact of the change in the accounting policy, the incremental costs pertaining to required system development, financial expenditures and the related departmental re-allocations.

(Moved: J. Grey, seconded: V. Withers, unanimously carried)

4. Review of Q1 2012 Financial Results

P. Havey gave a brief overview the actual financial results as compared to the GAAP adjusted budget for the period ending June 30, 2011 (Q1).  

It was noted that the Q1 revenue was also reported under the old revenue recognition methodology and the actual number of renewals and net new domain registration compared to the original budget on a metrics basis to provide the Board of Directors an overall sense on the continued operational health and tracking of the organization.  As for the expenses, the variances are mostly due to the timing of new resources with the exception of the costs within Finance & Administration as a result of the year-end audit, accounting policy changes and calculation of revenue.  With respect to the Statement of Financial Position, it was noted that the reduction in Cash and increase in Restricted Investments was largely attributable to new cash management processes implemented by staff.  Capital Expenditures, Leasehold and Furniture were over budget due to taking on additional office space, whereas the under spend in Computer Hardware is a timing difference (with outlays expected in Q2 and Q3).  As for the Investment Portfolio, staff noted the average yield by term and indicated that the investment portfolio will continue to be shifted more towards short term and medium term investments to more adequately match and reflect our Deferred Revenue distribution.  

5. Report from the Governance Committee

The Chair of the Governance Committee reported that the Committee had reviewed the work plan that had been put together at the beginning of the year.  Only a few items remained and all were on target to be achieved.  The Committee had also discussed the mandate, structure and composition of the various Committees.  A note had been prepared to send to the Directors that included a number of questions where Directors would rank their interest in Committees as well as Committee Chair and also a consideration from a skills perspective.  

The Governance Committee also discussed the motion being presented to the Board regarding the Nomination and Election process. It was noted that all members of the Committee were in favour of endorsing the proposed framework and to approve the motion to the Board.   

The Chair of the Committee reminded the Board of Directors that a Governance workshop is being held on October 17, 2011 and Directors were asked to go through the pre-reading material before the workshop.

6. Review of Governance Reform Project

M. Stewart reported that at its meeting on June 14, 2011, the Board of Directors determined that the Governance Committee would review and recommend changes to the Election process with the intent of seeking Member approval at the 2012 Annual General meeting.  Within the context of the review, the Governance Committee suggested that the following goals be adopted for the review, evaluation and recommendation of changes to the governance process:  ensure compliance with the new Act; create a process that reflects current best practices; results in a process that is more open, transparent and fair; and increase efficiency and effectiveness of the process by reducing the complexity and time it takes to complete the process, as well as the associated expenses and staff time. As well, in light of the new legislation for not-for-profit expected to come into force shortly, the framework proposed by Governance Committee encompasses four broad themes: 1) alignment to the new legislation; 2) Board recruitment process; 3)  Board Selection process; and 4)Board characteristics, e.g. size, terms.

The proposed framework for consideration is based on two key activities within the election process: the identification of potential candidates and how the candidates get on the final slate. It also ensures that the best slate of candidates is put forward for the Members to vote on.

The proposed Election framework would also significantly reduce the number of major steps required and the duration.

M. Stewart noted that if the recommendation from the Governance Committee is approved by the Board of Directors, the Working Group of the Governance Committee would then review the various options and alternatives within the framework and make its recommendations to the Board of Directors before the anticipated March 2012 Board meeting. Staff noted that under the proposed framework, the process and rationale for determining attributes is done more openly, transparently and published upfront, a significant improvement to what we have today.

Discussions ensued regarding the proposed framework and some members of the Board were not in favour of the recommendation. While many Directors were supportive of this initiative, some were concerned that there were flaws in the proposed framework, and that the Board could be too homogenous. It was noted that the intent of the proposed recommendation was simply to allow the Governance Committee to continue their mandate, especially with the necessity to comply with the upcoming not-for-profit legislation, rather than approve any particular specific changes.  

It was therefore resolved that the Board hereby directs the Governance Committee to review and recommend various options and alternatives within the framework presented today, with such recommendations to be provided to the Board on or before March 2012.

(Moved: T. Williams, seconded: J. King, against: K. Brown, B. Shell, motion carried)

7. Report from the Technical Oversight Committee

The Chair of the Committee reported that the Committee had met earlier that day and staff had provided an update on the Disaster Recovery Plan as well as the status on IPv6, DNSSEC and the Middleware project. The Committee also reported that staff is currently developing a roadmap and a framework to support the long term vision.

8. Report from the Audit Committee

The Chair of the Audit Committee reported that the Committee had met earlier that day and staff had provided an update on the Finance staffing and the incremental fees from KPMG for the additional work on the 2011 audit.  

9. Report from the Executive Committee

The Chair of the Board reported that the Committee had not met recently.
 
10. Policy Advisory Committee
    
The Chair of the Policy Advisory Committee referred the Board of Directors to the notes that were circulated recently.  The Committee had met in July to discuss the matters of recruiting new members for the Committee and identifying potential policy issues for discussion by the Committee. The Committee had reached consensus that the composition of the Committee should be kept small. It was noted that the short list of members will be reviewed at an in-person meeting to be held in October.

11. Strategic Planning Update

B. Holland provided the Board of Directors with an update on the Strategic Planning process. A consulting firm was engaged to look at the external changes that are occurring in the domain name system industry.  As a result, staff held a series of workshops over the summer on how these external changes might impact the organization going forward. The Board of Directors was also engaged in order to gain individual input and perspectives on the key issues facing the organization. The results will be summarized and used during the upcoming strategic planning session. The Board of Directors should be prepared to discuss what other product line might tie in with the mission, vision and values of the organization.

12. Other Business

12.1. AGM Logistics

The Chair reviewed the agenda and noted that B. Holland would be presenting the financial statements.

12.2 Auditors

The Board of Directors agreed that the Audit Committee should undertake a review of the external auditor relationship and/or change the audit engagement partner every 3 to 5 years and be tasked to prepare such as policy.

12.3 Thanks to Retiring Directors

On behalf of the Board and staff, the Chair conveyed CIRA's thanks and appreciation to L. Mackan-Roy and R. Rader for their time and dedication to the organization as a Member of the Board of Directors and Chair of various committees.  

13. Next Meeting

The next meeting of the Board will be held in Ottawa on October 18, 2011.

D. Fowler, L. Gravel, J. Latour and M. Stewart withdrew from the meeting.  

14. CEO Update

The CEO and Board of Directors held an in camera session.

Following the CEO Update, B. Holland withdrew from the meeting.

15. In-Camera Session

The Board of Directors held an in camera session.

16. Adjournment

There being no further business, on motion by L. Mackan-Roy and seconded by R. Rader, the meeting was concluded at 5:20 p.m.