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nection and Traffct with our work iand maturity of thdiscuss African narowing leadershirt the establishmanda, El Salvador,pectations in term

ncing policies an

1) Advance a ubiqcy for the fundamternet standards 

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ntegrated with or policy approachAC’s contributionsonal data, advanmmittee on the mhe IGF.  Additionay Interest Group

2012 Achiev

fic Exchange (inclin this area acroshe annual, ISOC‐oational and cross‐p in this area, ISO

ment of IXPs 30 Af, and Argentina, ams of press, polic

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l Strategy for Idehrough a highly sumaterials have alsand actions and i

our Trust and Idenhes and responses to key OECD woncing the implemodernization of Cally, ISOC also advand as a membe

vements on P

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t strengthen the 

and sustainable of the Internet Mnfluencers and inc

ntities in Cyberspuccessful workshoo been adapted is actively partne

ntity technical anes that protect usork on national cyentation of crossConvention 108, avanced significantr of the IAB Priva

Programmatic

yment) in Emergrated programman Peering and Intenection opportunby the African UnDirect IXP set‐upuntries.  Further, oial interest.     

Internet’s growt

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pace and Identityop in Europe on tinto a set of on‐liring with Identity

d ecosystem worser privacy while ybersecurity stras‐border privacy rand advancing ret work on standaacy Program. 

Goals: Objec

ing Economies –atic activities.  Amerconnection Fornities, peering strnion to conduct 6p and improvemeour highly receiv

h and evolution

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y Ecosystem Steethe issues) , and ine videos. ISOC iy Ecosystem part

rk, ISOC made gresupporting Interategies, the reviewrules in APEC, achelated multi‐stakeardization related

ctive B

–  We continued tmong our accomprum , this year atrategies, and rela60 community mont activities wereed study on the i

hat is on part witAdvance the undedards processes.

ering Group), pradvancing trust‐eis also hosting a dicipants in order 

eat strides on ounet principles.  Aw of the OECD Prhieving observer eholder privacy ad to user privacy w

o achieve substaplishments, we etracting over 200ted business andobilization and tee also carried outimpact of IXPs in 

th the rest of the erstanding of the 

ogressing enabling dashboard of to develop 

r goals to chievements rivacy status in the 

and identity with staff 

ntial xceeded our 0 participants d policy issues.  echnical t in Lesotho, Kenya and 

world, 2) value and 

 

 Developing Country Capacity Building Activities ‐  We met our goal of engaging 600 developing country network managers and decision‐makers in targeted capacity building activities on Internet principles, operations, and deployment. Spearheaded by our Regional Bureaus, we successfully completed a range of technical capacity building workshops across Africa, Latin America, and Asia on topics including basic network operations, DNSSEC, IPv6, BGP and routing, and Internet standards processes and principles, among others.  Furthermore, we continued to deepen training assistance and collaboration with network operators groups and capacity building forums in emerging regions.  Internet Governance – Our leadership and advocacy on Internet Governance issues continued to deepen in 2012, and met or exceeded goal expectations.  Among our achievements, ISOC successfully secured a role in the new IGF Multi‐stakeholder Advisory Group and influenced the UNCTAD CSTD working group on IGF improvements.  Our engagement in the 2012 IGF, including from staff, Chapters, and Membership, informed and influenced multi‐stakeholder discussions across a range of issues including enhanced cooperation, access, privacy, intellectual property, technology and standards, and cybersecurity, among others. ISOC also successfully extended its presence in regional IGF meetings, including key participation roles in Arab region IGF, the East African IGF, and IGF USA.  Additionally, our commissioned  paper on Internet Governance arrangements in Kenya, not only highlighted aspects of successful Internet governance practices in Africa, but also advanced the empirical evaluation of Internet governance arrangements by producing a framework for comparison of between countries and over time.   WCIT/WTPF Engagement – ISOC established itself as a leading voice and advocate for the Internet in the run‐up to and on‐the‐ground participation in WCIT and the WTPF, with ISOC issue analysis, expertise, and community perspectives informing and influencing key aspects of the global debate.  In addition to the broad influence of our statements, position papers, and formal contributions, we successfully galvanized the broad range of our community, including Chapters and Members, to contribute in the development of our global positions, as well as to participate in national and regional preparatory processes. [more here on outcomes]  Content, Intellectual Property, and Innovation ‐  In 2012, we substantially increased our policy engagement on the issues of content, IPR, and innovation.  Among our achievements, we successfully collaborated with UNESCO and the OECD to produce a substantial, innovative paper on the relationship between local content, Internet development, and access prices.  We heightened our participation in WIPO on these issues, including direct participation in the diplomatic conference on the protection of audio visual performances, calling upon members states to apply ISOC principles in the elaboration of IPR‐related public policies.  We also contributed to the EU Parliament’s rejection of the Anti‐Counterfeiting Trade Agreement by raising awareness of its negative impact on the Internet.  In the US, we convened a successful Regional INET workshop to generate inclusive, multi‐stakeholder dialogue on the strengths, weaknesses and challenges for the Center for Copyright Information and the Copyright Alert System.  ISOC’s increased engagement on these issues and our ability to construct dialogues across interest groups was highly received and encouraged our future work in this area.      

 

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h ISOC Letters 

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On Hold  

2012 Financial Review (Pre Audited) ISOC achieved its ambitious 2012 agenda while staying very close to our overall financial targets (see the attached financial statements). For 2012, we achieved a Surplus of $625K, compared to a budget of $749K. This surplus is less than previously forecast, as earlier surpluses in expenses (travel, project costs) were somewhat offset by year-end accruals, and some Q4 grant revenue was delayed into 2013. At the end of 2012, ISOC held $18.1 million in cash and investments. Of this amount, $2.9 million is designated for specific future use (including $1.4 million from PIR, and $1.3 million in an IXP development grant), resulting in $15.2 in unrestricted cash. Our target for Continuity funds was $14.4 million, thereby exceeding our goal. Key factors impacting the surplus:

Overall functional spending was $.8 million under budget, largely due to careful hiring practices (particularly at the Senior Director level, where we hired key personnel in the latter half of 2012), and delays in grant-funded programme expenditures (related to the aforementioned delay in Grant Revenue into 2013 as revenue and expense recognition go hand in hand).

ISOC-generated revenues were nearly $6.8 million, while about $.66 million (9%) less than the 2012 revenue plan this represented significant growth (27%) of over 2011. The shortfalls as previously reported were in membership revenues, delayed recognition of grant revenues (moved into 2013), and a programme to waive a greater number of Global INET registration fees.

As a consequence of higher IETF host/sponsor revenue (ISOC’s responsibility), favorable IETF expenses, and on target meeting registration fees, ISOC will contribute approximately $1.8 million to IETF operations (including capital tools expenditures) compared to the $2.3 million budget.

In spite of the many ways ISOC supports the IETF (both monetarily and administratively), ISOC used only about half ($583K) of the expected use ($1 million) in restricted funds (revenues) supplied in 2010 by PIR for IETF outreach programmes, leaving the remaining funds to be recognized in 2013-2014.

Revenues The $33.9 million in total 2012 revenues represents a 14.5% increase from 2011, and the $6.8 million in ISOC-generated revenue represents a 27% increase in that category. These are commendable levels of progress, as ISOC has continued to increase its revenue despite the continued impact of the economic downturn on global economies. While these historically high marks were less than the consciously aggressive 2012 revenue plan, we are building a very good pipeline for the future.

$‐

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Org Membership/Pla num

Sponsorships

Individual Member Dues &

Dona ons

Sponsorships and Grants (excl

IETF)

Registra on and Fee

Revenue (excl IETF)

IETF Mee ng Hosts & NOC Sponsors

IETF Mee ng Registra on & Other Revenue

YTD Actual $1,508,553 $14,121 $1,547,656 $145,896 $1,055,043 $2,515,864

YTD Budget $1,700,000 $90,000 $2,010,000 $390,000 $966,000 $2,297,250

2012 Actual v. Budget Revenue

2012 revenue highlights include: ISOC brought in over $2.5 million in new grants in 2012. Still, recognizable revenue for

Sponsorships & Grants (excluding IETF) fell $462K short, as the timing of revenue recognition (and related programme expenses) were shifted into 2013 for both the AXIS grant (Africa) and the IL-LAC grant (Latin America) – some of these factors were outside of ISOC’s control. (As we work to increase our grant activities, we have also asked for advice on how best to report these. The financial impact of grants usually nets out as revenues are recognized only as expenses are incurred, but there can still be swings in both revenues and expenses even while not impacting the financials);

Org Membership revenue increased 15%, from $1.4 million to $1.5 million. However, this fell short of the 30% budgeted increase;

Individual Member & Donor revenue fell $76K short of the revenue plan; Registration & Fee revenue (excluding IETF) was $244K under the plan, as ISOC (with

Board support) reduced the registration fee structure for the Global INET events in line with our principles to minimize barriers to participation;

IETF sponsorships, secured by ISOC’s Membership group, exceeded the budget by $89K, while IETF meeting registration fees surpassed the plan by $218K.

At the end of 2012 (announced in 2013), ISOC also received $1.3 million grant that is dedicated to IXP development to be expended over the next two years (2013-2014). These funds were not recognized as revenue in 2012 but were received and will be recognized when spent on IXP programmes over the next two years. ISOC Functional Expenses Total functional expenses (the departmental work of ISOC, including programme costs) were $843K (3%) less than the 2012 budget. Lower staff-related costs made up the majority of savings, while delays in grant-funded projects reduced expenses and revenues alike. All departments were under budget, except for Communications (Global INET events and public relations expenses) Grants/Endowments (support costs for the Open Internet Endowment), and Strategic Development (strategy activities).

$‐ $1,000 $2,000 $3,000 $4,000 $5,000

Informa on Technology

Internet Leadership

Members & Services

Grants & Founda on Development

Resource Development

Regional Bureaus

COO & Support Func ons

Opera onal Group 2012 YTD Expenses Budget v. Actual

(in thousands)

YTD Actual

YTD Budget

Other Revenue/Expenses (Interest Income & Currency Fluctuation) Return on ISOC’s investments exceeded the plan ($571K vs. $400K), as income from fixed investments (bonds) remained relatively stable for most of 2012. This was partially offset by fluctuations in the value of Swiss francs held in Geneva (a loss of $102K), with most currency rate losses occurring in the third quarter. IETF Results and Contribution from ISOC The IETF (as previously forecast) required a lower than budget contribution from ISOC. All categories (meeting host revenue, miscellaneous sponsorship revenue, registration fees, and operating expenses) had favorable variances. Capital expenditures for tools development were slightly over plan due to project management costs, but were well under such costs recorded in 2011 ($368K).

Restricted Funds ISOC recognizes funds received from sponsors or donors in the year received or committed in one of two ways. Unrestricted funds are recorded in our main financial statement (see the Unrestricted Statement of Activities as an attachment to this report). However, donors/sponsors may direct ISOC to apply funds to future programmes or specific efforts. These funds are not immediately shown in ISOC’s Unrestricted Statement of Activities, but shown in a separate statement of “restricted funds”. In future periods, as those restricted funds are applied to programmes, those funds are then recognized as “unrestricted revenues”. To be mindful of funds held for future obligations, we show Restricted funds in a separate table.

$‐ $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

Communica ons

Strategic Development

Public Policy

Trust & Iden ty

Deployment Opera onaliza on

Standards & Technology

Strategic Group 2012 Expenses Budget v. Actual

(in thousands)

YTD Actual

YTD Budget

IETF Summary of Results IETF Revenues IETF Expenses IETF Capital ExpendituresISOC's Contribution to the IETF

IETF SFor the Ye

YTD Actual YTD Budget YTD Variance3,570,907$ 3,263,250$ 307,657$ (5,126,436) (5,409,600) 283,164(255,075) (215,000) (40,075)

(1,810,604)$ (2,361,350)$ 550,746$

Statement of Activitiesear Ended December 31, 2012

Of particular note, in 2010, ISOC received an additional $2 million in funding from PIR, dedicated to support of IETF outreach efforts. During 2012, ISOC recognized $583K in such support expenditures (e.g., IETF fellows, IETF Journal, media outreach, Leadership and DO programs), thus releasing these funds from restriction (see the Unrestricted Statement of Activities, where these IETF support funds are reported in the unrestricted revenue section). The remaining funds to be used toward IETF outreach will be used in 2013-2014. Public Support Test The Public Support Test factor for 2012 will be calculated with the filing of the 2012 Form 990 (US tax filing) in November. The factor is expected to increase slightly (a positive impact), from about 13.8% in 2011 to about 14.0% for 2012. This would be the first increase since before 2006. With a $10 million non-recurring contribution from PIR, this factor would retract somewhat in 2013 (to an estimated 13.5%), but resume its trajectory of improvement in 2014. Continuity Funds, Restricted Funds At the end of 2012, ISOC held $18.1 million in cash and investments. Of this amount, $2.9 million is designated for specific future use (including $1.4 million from PIR, and $1.3 million in an IXP development grant). Therefore, net of these designated funds, ISOC held $15.2 million in unrestricted funds. Our target for Continuity funds was $14.4 million, thereby exceeding our goal as we move toward our 2015 target for Continuity funds. Unaudited 2012 Financial Reports The 2012 audit fieldwork began March 21st, with a target date for final audited statements in May. The results of the audit will be reported to the Audit Committee, and subsequently to the Board at its May Board call. The unaudited financials statements for 2012 are included in this package.

Statement of ActivitiFor the Year Ended D

Restricted Funds Received

Funds Received for Future Programme Use

Total Restricted Revenues

Funds Used for Directed Purposes

IETF Outreach

Dr. Jun-Ichiro Hagino

Postel Award

Other Grants and Sponsorships

Total Funds Used for Directed Purposes

NET CHANGE IN RESTRICTED FUNDS

BEGINNING RESTRICTED FUND BALANCE

ENDING RESTRICTED FUND BALANCE

ies - RESTRICTEDDecember 31, 2012

Actual Budget $ Variance

1,444,451$ -$ 1,444,451$

1,444,451 - 1,444,451

583,304 1,000,000 416,696

8,683 (8,683)

11,685 11,685 -

178,146 - (178,146)

781,818 1,011,685 229,867

662,633$ (1,011,685)$ 1,674,318$

2,210,000$ 2,259,718$ (49,718)$

2,872,633$ 1,248,033$ 1,624,600$

  

   

RevenuesMemberships and Platinum Sponsorships Org Membership/Platinum Sponsorships Individual Member Dues & DonationsMemberships and Platinum SponsorshipsSponsorships and Grants (including IETF) Programme Grants & Sponsorships ITE Programmes Other Programmes INET Sponsorships DO Hub Sponsorships ION Sponsorships NDSS Sponsorships Marketing Grants & Awards Internet Leadership (NGL, Fellowships) IETF Sponsorships (incl new sponsor opportunities)Sponsorships and Grants (including IETF)Registration and Fee Revenue 20th Anniversary Gala & Global INET Registrations NDSS Registrations IETF Meeting Registration & Other RevenuesRegistration and Fee Revenue PIR Contribution to ISOC PIR Restr Funds Applied for Unrestricted UseTotal Unrestricted RevenuesDepartment & Program Exp (excl IETF) Departmental Expenses Operations Group COO & Support Functions Regional Bureaus Resource Development Grants & Foundation Development Members & Services Internet Leadership Information Technology Total Operations Group Strategic Group Standards & Technology Deployment Operationalization Trust & Identity Public Policy Strategic Development Communications Total Strategic Group Total Departmental Expenses Other Program Expenses NDSS & Itojen Service Award Internet Ad Award Exp (Incl in Grant Rev) Total Other Program ExpensesTotal ISOC Department & Program ExpIETF Expenses (excluding Capital)Net Operating Surplus (Deficit)Other Revenue (Expense)NET UNRESTRICTED SURPLUS/(DEFICIT)

Statement oFor the Year

YTD Actual YTD Budget YTD $ Variance YTD % Var

1,508,553$ 1,700,000$ (191,447)$ ‐11%14,121 90,000 (75,879) ‐84%

1,522,674 1,790,000 (267,326) ‐15%

107,413 450,000 (342,587) ‐76%524,786 300,000 224,786 75%486,341 600,000 (113,659) ‐19%

‐ 210,000 (210,000) ‐100%‐ 20,000 (20,000) 0%

31,000 40,000 (9,000) ‐23%215,661 ‐ 215,661 182,455 390,000 (207,545) ‐53%

1,055,043 966,000 89,043 9%2,602,699 2,976,000 (373,301) ‐13%

23,475 310,000 (286,525) ‐92%122,421 80,000 42,421 53%

2,515,864 2,297,250 218,614 10%2,661,760 2,687,250 (25,490) ‐1%26,500,000 26,500,000 ‐ 0%583,305 1,000,000 (416,695) ‐42%

33,870,438 34,953,250 (1,082,812) ‐3%

859,406 949,990 90,584 10%4,683,820 4,923,403 239,583 5%885,164 1,168,943 283,779 24%956,398 834,072 (122,326) ‐15%

2,935,769 3,112,059 176,290 6%2,087,613 2,156,997 69,384 3%1,739,011 2,142,087 403,076 19%

14,147,181 15,287,551 1,140,370 7%

1,525,111 1,790,632 265,521 15%1,130,238 1,483,140 352,902 24%1,207,340 1,409,688 202,348 14%2,925,273 3,013,452 88,179 3%921,449 865,968 (55,481) ‐6%

6,414,903 5,264,128 (1,150,775) ‐22%14,124,314 13,827,008 (297,306) ‐2%28,271,495 29,114,559 843,064 3%

99,799 80,000 (19,799) ‐25%215,661 ‐ (215,661) 315,460 80,000 (235,460) ‐294%

28,586,955 29,194,559 607,604 2%5,126,436 5,409,600 283,164 5%157,047 349,091 192,044 55%468,264 400,000 68,264 17%625,311$ 749,091$ (123,780)$ ‐17%

of Activities ‐ Unrestrictedr Ended December 31, 2012

 

ASSETS December 31, 2012 December 31, 2011 Current

Cash & Cash Equivalents (incl Restricted Funds) 18,127,083$ 15,841,266$

Accounts Receivable 652,324 366,321

INTERNET SOCIETY

December 31, 2012Statement of Financial Position

Prepaid Expenses 546,690 738,101

Total Current 19,326,097 16,945,688

Long Term

Furniture, Equipment, Leasholds (Net) 2,210,266 2,510,460

Total Long Term 2,210,266 2,510,460

Other Assets

Deposits 165,307 154,460

Total Other Assets 165,307 154,460

TOTAL ASSETS 21,701,670$ 19,610,608$

LIABILITIES & NET ASSETS

Current Liabilities

Accounts Payable 1,290,877$ 891,191$

Accrued Employee Benefits 1,632,412 1,330,153

Deferred Rent 228,671 166,346

Deferred Construction Allowance 633,629 754,320

Security Deposit Payable 4,035 4,035

Deferred Revenue 680,264 609,010

Total Current Liabilities 4,469,888 3,755,055

NET ASSETS

Unrestricted Fund Balance 14,333,541 13,708,553

Restricted Fund Balance 2,872,633 2,210,000

Permenantly Restricted Fund Balance 25,608 -

Total Net Assets 17,231,782 15,918,553

Total LIABILITIES & NET ASSETS 21,701,670$ 19,673,608$

BEGINNING NET ASSET BALANCE - 1 January $15,918,553 13,313,520

NET CHANGE IN NET ASSETS (Unrestricted/Restricted) 1,299,567 2,605,033

ENDING NET ASSET BALANCE $17,218,120 $15,918,553