Letters to ICANN’s Accountants
Serious questions have been raised about ICANN’s accounting practices. Specifically, ICANN’s unaudited financial statements reveal that the corporation has deviated from their written accounting policy of reserving against accounts receivable that are more than 180 days past due.

According to the financial statements prepared by CPA firm of Bremer & Hockenberg, over 30% of ICANN’s net assets in 2003 consisted of accounts receivable that were more than 180 days past due and for which there is no written agreement. In contrast to the Bremer & Hockenberg statements, ICANN’s auditor, KPMG, made no note or other reference to ICANN’s decision to deviate from their written accounting policy nor of the magnitude of the corporation’s accounts receivable that are not supported by written agreements.

In an attempt to obtain answers to key questions arising from ICANN’s accounting practices, the Center for Regulatory Effectiveness (CRE) sent letters to KMPG and Bremer & Hockenberg asking questions about the financial statements. In its letters, CRE stated that they would publish each accounting firm’s verbatim response on the ICANNfocus.org website. No response has yet been received from either firm.

CRE asked KPMG several questions about ICANN’s audited financial statements including why KMPG elected to not note that:

1. ICANN’s management had decided to make exceptions to their stated accounting policy “to reserve against all invoices that remain unpaid for more than 180 days”; and
2. Over 30% of ICANN’s net assets in 2003 consisted of receivables and revenues not supported by written agreements.

CRE also asked KPMG how their decision to not note the above issues comports with Generally Accepted Accounting Principles and other accounting standards and conventions.

CRE asked both KMPG and Bremer & Hockenberg as to the significance for ICANN, as a non-profit organization, of management’s accounting policy decision to not reserve against accounts receivable that were more than 180 days past due and for which there was not written agreement.

It appears to ICANNfocus, that ICANN’s audited financial statements present the public and federal and state officials with a financial portrait of the organization that has the potential to be significantly misleading. ICANNfocus believes that ICANN and its accountants should clarify the organization’s financial position and practices as soon as possible.