Minutes

The meeting was called to order at 9:40 A.M.

Introduction of Committee Members

Chair Suzanne Jensen asked the Committee members to introduce themselves and briefly discuss their backgrounds.

Review and Approval of Meeting Minutes

The Committee members reviewed the minutes of the July 30, 2004, July 7, 2005, September 12, 2005 meetings and the September 12, 2005 conference call. Several members of the committee had recommended edits to the minutes, which Chair Jensen said she would ensure were incorporated. Mr. Cheung advised the new committee members to abstain from approving minutes of a meeting they did not attend. Pending all recommended edits, Chair Jensen agreed to approve the three meeting minutes and the conference call.

Review and Discussion on Committee Action Plan

Chair Jensen asked if there were any questions regarding the Committee Action Plan (CAP). The following questions were raised by the Committee members: Ms. Levine asked if CAP served as a charter.

Chair Jensen answered that it does not serve as an official charter, but rather an outline of the roles and responsibilities of the committee. Discussion ensued as to whether an audit committee charter should be created. The committee recommended that staff investigate this possibility. It was also suggested that the charter could be modeled after the one available on the AICPA website in their audit committee toolkit section.

Review of Audit Plan

Audit Issue

Mr. Ian Benjamin of Goldstein, Golub, and Kessler (GGK) distributed the Audit Plan for the fiscal year ended May 31, 2006. He noted that there would be some continuity with one change in the staffing of the audit team. The audit team will include Tax Partner, Ian Benjamin, Director, Ms. Junia Perez and a new Senior Auditor, Irmin Hutchinson. He also noted that Adam Cheung, Controller, had already prepared draft financial statements for fiscal year 2006.

During his presentation of the Audit Plan, committee members raised the following issues:

Ms. Barossi asked if there were any conflict of interests. Mr. Benjamin answered no.

Chair Jensen inquired as to whether the committee members would be required to sign Society’s conflict of interest disclosure form. Mr. Cheung responded that he would follow up with the Legal Department and send members the appropriate form for signature.

Mr. McCoy asked if the tax returns were reviewed and by whom. Mr. Benjamin answered that the tax returns are reviewed and approved by Messrs. Cheung, James Woehlke and Louis Grumet.

Ms. Levine asked for clarification on a statement made in the notes to the financial report prepared by Mr. Cheung (May 2006 Financial Highlights). It stated that there was “less rental income due to change in sublet income accounting since October ’05.” Mr. Cheung explained that this was a change in circumstance, not a change in accounting, and had to do with the timing of their office move.

Mr. McCoy asked about the internal control environment, specifically in relation to items noted in the 2005 management letter. Mr. Benjamin responded that he felt that the control environment was improving and that employee transition had substantially affected internal controls. He also noted that it’s the practice of the firm not to rely on internal controls. Anything other than minor issues will be included in the management letter for fiscal year ending May, 31 2006. Mr. Cheung informed the committee that in March 2006, a revised finance policy was approved, which covers most of the significant areas of internal controls.

Mr. McCoy asked if there were any instances of fraud. Mr. Benjamin answered that Mr. Grumet was not aware of any instances of fraud.

Chair Jensen asked Mr. Cheung to review the methodologies of overhead allocation.

There was some discussion about contributions and the interfund accounts. Mr. Cheung explained that the unrestricted fund of Foundation for Accounting Education (FAE) must be break-even. Therefore, the Society gave about $225,000 to FAE. The interfund account should equal to 0. Mr. Benjamin also added that the contribution must be consistent with the bank log.

Ms. Barossi asked if there were many audit adjustments last year. Mr. Cheung responded that there were none. He added that there were two adjustments to the yearly financial statements issued earlier in July 2006: 1) a $1,600 additional accrual to PAC after filing the 1120-POL for the year ended May 31, 2006; 2) a $20,000 write-off of uncollectible contributions from KPMG for advertising in the COAP Program. Mr. Cheung added that this amount does not affect the unrestricted fund.

Chair Jensen inquired about the intercompany payables and receivables. Mr. Cheung responded that the interfund accounts would be eliminated within 90 days per the Affiliation Agreement between Society and FAE.

There was a moment of discussion regarding the budget. Ms. Levine noticed that it was more informative to look at the actual current year to last year comparison rather than the actual to budget. Mr. Cheung explained that may be true for fiscal year 2006. However, this fiscal year 2007 budget was fine-tuned. He informed the Committee that monitoring the actual seminars and conferences had improved the budgeting process.

Chair Jensen inquired about any unrelated business income. Mr. Benjamin informed the Committee that Mr. Cheung to review all instances of unrelated business income. Amendments to IRS Form 990-T may be needed. Still, the dollar amount was immaterial.

Ms. Levine inquired about the royalty income, noting variances between 2005 and 2006. Mr. Cheung explained that it was due to a change in reporting this income under Member Insurance in 2006 as opposed to under Communications in 2005. Ms. Levine asked if the 2005 royalty income would be restated in the 2006 financial statements. Mr. Cheung responded that he would not restate the statements without actual posting of the figures. Mr. Benjamin added that it would be advisable to keep the figures traceable.

Ms. Levine noted that of the $16,000 in dues receivable as of May 31st, 50 % was reserved for bad debts. Mr. Cheung responded that the amount was arbitrarily determined and immaterial.

In conclusion, the Committee discussed the management letter of fiscal year 2005 to ensure that the audit issues raised were resolved. Mr. Cheung responded that the employee manual was updated to reflect the change in vacation policy. Revenue, cash receipts and cash disbursements except those of Chapters continued to have adequate support. A new position was created to handle cost analysis for FAE’s CPE courses.

Time Frame of Audit

Mr. Benjamin stated that the consolidated audit by GGK would begin on July 24, 2006 and end in the first week of August.

Mr. Benjamin informed the Committee that the 401(K) full scope audit was complete except for the pending investment confirmation and revised 5500 from MetLife.

There was some discussion about the late payment with interest to 401(K) plan. Mr. Benjamin informed the committee that there was a delinquent remittance of one contribution to the plan. Typically, 3 days following the payday participants’ contributions and loan payments are submitted. Mr. Cheung was keenly aware of this but still needed time to perform a reconciliation and upload the remittance spreadsheet to MetLife. Additionally, a Board officer’s approval is required to release the wire transfer, as it is usually in excess of $10,000. The delinquency is disclosed in the revised 5500. Mr. Cheung added that the lost interest was about $88.

Ms. Levine asked why the Society needed a full scope audit for the 401(K) plan. Mr. Benjamin answered that it was requested by Mr. Grumet for the Society to meet higher reporting standards.

Ms. Barossi asked the price of a full scope audit. Mr. Benjamin answered that the fee was $11,000.

Mr. McCoy questioned the validity of the purchase price column on the schedule of reportable transactions in the draft audited financial statements of the 401(K). Mr. Benjamin answered that the numbers came from MetLife. Committee members agreed that these figures looked erroneous. Mr. Benjamin stated that he would further investigate this.

Chair Jensen asked about the profit-sharing contribution, how it was determined and what employees are eligible. Mr. Cheung answered that the 3% profit sharing has been policy for a while applicable to all employees except Mr. Grumet, whose employment contract entitles him to the maximum contribution allowable under a 401(K) plan.

Ms. Levine asked why the benefits paid out of the retirement plan to employees went up about 1 million dollars. Mr. Cheung responded that a Department Head left and subsequently transferred his funds.

Mr. Charles asked about the staff turnover rate. Mr. Cheung responded that the turnover rate was about 17 to 18 percent. Most of the terminations were voluntary and either filled or scheduled to be filled.

In conclusion Mr. Cheung distributed the NYSSCPA organization chart to the Committee members.

Other Business

Chair Jensen asked Mr. Cheung to update the Committee on the vacancies in the accounting department. He responded that a senior accountant has been on a leave of absence since mid June 2006 after completing most of the year end work. He had planned to fill the position with a temporary employee but found it more difficult than expected to find a competent temp person.

Chair Jensen expressed that it was advisable to have one or more Board members on the Audit Committee. Mr. Benjamin stated that without a Board member it makes the Committee more independent. Conversely committee members recommended that at least one board member should be on the committee. Chiar Jensen asked Mr. Cheung if the Committee was established by a change in bylaws. Mr. Cheung did not recall but promised to follow up with the committee.

Next Meeting

The Audit Committee members did not determine the next meeting but agreed to meet 3 days before the presentation to the Society’s Board of Directors.

With no further business to be discussed, the meeting was adjourned at 11:10 AM.

Respectfully submitted,
Myoshi Moore

Approved by Audit Committee August 24, 2006