Financial Oversight

Internet2 is governed by a Board of Trustees (BOT), whose members are elected from its member/owners. BOT election rules are outlined in the organization’s bylaws. As directed in the bylaws, the BOT creates committees, including an Audit and Finance Committee (AFC). The AFC is chaired by a BOT member, who is selected for his or her special expertise in accounting and finance. In addition, six other BOT members plus Internet2’s CEO populate the AFC. Internet2’s CFO serves as the primary staff for the AFC. The AFC oversees the finances of the Internet2 organization and reports to the full Board of Trustees.

The Audit and Finance Committee formally meets with management a minimum of three times a year, in advance of scheduled Board of Trustees meetings. The AFC formally reports on the results of its meetings to the full Board. Additional meetings are scheduled as needed. The AFC Chair sets the meeting agenda based not only on issues of interest to the BOT, but also based upon the financial issues facing the organization resulting from Internet2’s fiscal calendar, which is January 1st through December 31st.

In addition, the AFC engages independent outside auditors to conduct an annual, full-scope financial audit of Internet2’s accounting and financial records and practices as well as an annual “Uniform Guidance” compliance audit of all Federal Grant activity. The independent auditors meet with the AFC each fall to present an audit plan and then again in the spring to present the results of the audit. The AFC meets with the auditors in “Executive Session,” which excludes the participation of Internet2 management, in order to receive an unfiltered, unbiased view of Internet2’s financial management competency and practices. A third AFC meeting is held in the summer to review management-prepared budgets and to shape those budgets for recommendation to the full Board. (More on the budget process below.)

As a 501(c)(3)corporation, Internet2 is obligated to prepare and file an annual Federal Form 990. The “990” is reviewed and approved for filing by the AFC, authority delegated to AFC by the Board. Upon completion of this process, the 990 is filed with the IRS.
The financial records are prepared and audits of those records are conducted based upon accounting standards known as “Generally Accepted Accounting Principles” or GAAP. From the inception of the audit process for Internet2, starting in 1999, through the current year ended, Internet2 has received an “unqualified” or “clean” opinion from the external, independent auditors for each year’s financial report. An unqualified opinion certifies that the financial information presented in Internet2’s financial statements present fairly the financial position of the organization and is materially correct. The current auditors are PricewaterhouseCoopers.

Two other duties delegated to the AFC by the Board are: 1.) Oversight of the management of the organization’s retirement plans, and 2.) oversight of Enterprise Risk. Internet2 retains the services of a professional fiduciary firm to advise and manage the retirement investment portfolio. An internal management committee meets with the consultant and a member of AFC on a quarterly basis to oversee the program. Enterprise Risk includes but extends beyond financial risk. The AFC engages the services of an outsourced “internal auditor” to look into different areas of risk within the organization. The “Internal Auditors” make recommendations to management, through a report to the AFC, to help mitigate organizational risk. The Internal Auditor’s activities are reviewed at least annually. The AFC then reports on the Risk to the full Board.

The formation of a 501c3 organization requires the articulation of the organization’s mission and not-for-profit (NFP) purpose. A major portion of the Board of Trustees’ purpose is to make certain the organization functions within the framework of its charter. But the mission and purpose of most NFP’s are intentionally broad to allow for changes in the social and economic environment in which the organization functions. Within this organizational structure, the Board of Trustees provides Internet2 management with an annual set of strategic objectives used to direct the activities of the organization.

The BOT designates an advisory committee known as the Programs and Priorities Committee (PPC). The PPC is chaired by a BOT member and includes four other BOT members as well as three Internet2 community members who do not have to be BOT members. The PPC interacts with the Internet2 senior management team who present proposed program initiatives designed to fall within the mission and purpose of the organization and to more specifically address community-driven strategic objectives. Each senior manager establishes a Program Advisory Group (PAG) from a cross-section of the Internet2 member community. The PAGs help senior managers develop the program priorities that will be presented to the PPC. The PPC weighs the options and recommends specific priorities to the full Board for discussion and approval.

The BOT delivers the final, approved strategic objectives to management, who in turn develop the budget for the coming year and related projections for at least the three years beyond. When the finance team presents the budgets to the AFC, the specific linkage to the strategic objectives are highlighted and specifically discussed as part of the review and approval process.

In addition to this website, Internet2 makes an open presentation each year at the Internet2 Annual Meeting of the Members, usually conducted as part of Internet2’s large spring gathering. This meeting addresses the most recent independent audit results as well as provides an overview of the current year’s budget objectives. Questions can also be directed to Internet2’s CFO, at accounting@internet2.edu.