[CCWG-ACCT] Regarding financial reporting versus auditing

[Paul Rosenzweig]

Forensic audits means something slightly different to me Bruce, but to be clear I am not suggesting misconduct.  I am, however, suggesting that the absence of detail in the financial reporting is a barrier to good governance.  I suppose that means that I =am= asking what percentage of ICANN's funds are spent on the IANA function.  That would seem to me to be a critical question since, after all, that is the core of ICANN's mission.  If it were to turn out, hypothetically, that ICANN spends 90% of its funds on the IANA function and related policy development and compliance, broadly defined, that would be good news.  If that number were 30% that would be something that the community would want, very much, to take into account in its oversight of the staff and corporation.

If, in fact, you are telling me that such records do not exist in the form I'm speaking about, that seems to me to call for greater scrutiny rather than less.  In my experience a "deep dive" or "forensic audit" or "detailed financial" could, at a minimum, sample the past several years and give us a sense of how the funds are expended at a finer level of detail ....

Regards
Paul

Paul Rosenzweig
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-----Original Message-----
From: Bruce Tonkin [mailto:Bruce.Tonkin at melbourneit.com.au] 
Sent: Tuesday, March 24, 2015 2:36 AM
To: accountability-cross-community at icann.org
Subject: [CCWG-ACCT] Regarding financial reporting versus auditing

Hello Paul,

>>  That’s why I called it a “forensic audit” – it’s a practice I’m familiar with that I’ve heard go by that name, but I am comfortable with “deep dive.”   I am not asking after the annual financials for the last 5 years – but a deeper examination of line-item expenditures and such.  At the top level, the financials ICANN releases which talk about thinks like administrative expenses have much less detail than I am suggesting we should be interested in – either as part of the CCWG’s review or as part of a longer-term WS2 project for the “Community Council” (of what ever form it takes) to undertake to see where the expenditures are going on a more granular basis.


I think what you are asking  for is more detailed financial reporting.    One of the challenges at ICANN is each group wants reporting in a different format.   E.g. groups like to know how much is spent on the function that is of most interest to them - e.g. IANA, policy development, , or compliance.   Accurate reporting will require time-sheets and projects codes - which is not in place right now.   The finance system can certainly report how much is spent on phone calls  Internet access, building, rent etc - but not how much of the phone bill is related to IANA.

Ultimately the community needs to reach agreement on exactly what level of detail they want to see - and the organization can design systems and processes to get to that level.   

An audit – is to check that the organization is complying with accounting standards, and internal policies relating spending authorities,  travel expense policies etc.   The auditors identify  any issues found in compliance with policies and account standards  to the audit committee and the audit committee ensures that staff fix any issues found.

A forensic audit – would be if you have some evidence or suspect illegal behaviour – e.g. a employee stealing money from the organization – in which case you use a forensic audit to gather evidence for prosecution etc.   It is not something you do as part of normal financial governance.      If an auditor found big discrepancies between stated revenue or assets - then that might trigger a forensic audit. 

Regards,
Bruce Tonkin


 

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