Minutes of:

Board of Directors Meeting

Date & Time:

Friday December 7, 2007, 9:00 a.m. to 2:02 p.m.

Location:

3 Park Avenue, 19th floor, New York, New York

Presiding Officer:

David A. Lifson, President

Board Members Present:

Sharon Sabba Fierstein, President-Elect
Rosemarie A. Barnickel, Vice President
John J. Lauchert, Jr., Vice President
Edward J. Torres, Vice President
Richard E. Piluso, Treasurer
Scott M. Adair
Edward L. Arcara
Susan M. Barossi
Debbie A. Cutler
Joseph M. Falbo, Jr.
David R. Herman
Scott Hotalen
Martha A. Jaeckle
Suzanne M. Jensen
Lauren L. Kincaid
Gail M. Kinsella
Kevin Leifer
Elliot A. Lesser

Beatrix G. McKane
Mark L. Meinberg
Ian M. Nelson
Jason M. Palmer
Robert A. Pryba, Jr.
Robert T. Quarte
Ita M. Rahilly
Thomas E. Riley
Judith I. Seidman
Anthony J. Tanzi*
Thomas M. VanHatten
Liren Wei
Ellen L. Williams
Margaret A. Wood
Richard Zerah
Louis Grumet, Executive Director

Board Members Absent:

Mark Ellis, Secretary
Thomas Boyd
Dr. Myrna L. Fischman

Daniel M. Fordham
Robert L. Goecks

Staff Present:

Suvro C.K. Banerjee
Joanne S. Barry
Mary Jo Kranacher
Ernest J. Markezin
Dennis O’Leary

William J. Pape
Alan Schmelkin
Paul L. Sinegal
James A. Woehlke

B07 – E – 0
Call to Order

President David A. Lifson noted that a quorum was present and called the meeting to order at 9:00 a.m. He designated immediate Past President, Thomas E. Riley as Acting Secretary in Secretary Ellis’s absence.

B07 – E – 1
Minutes

a. Approval of Minutes of September 19, 2007, Board of Directors Meeting

Mr. Lifson asked Board members if they had any changes or comments to the September 19, 2007, Board of Directors meeting minutes. There being none, Mr. Piluso moved to approve the minutes as presented, and Mr. Pryba seconded the motion. The motion passed unanimously.

b. Draft Minutes of November 14, 2007, Executive Committee Meeting (for Information only)

Mr. Lifson referred Board members to the draft minutes of the November 14, 2007, Executive Committee meeting, which were distributed at the meeting for the Board’s information.

a. Chapter Town Hall Meetings

President Lifson referred members to a schedule of completed and remaining Chapter “Town Hall” meetings, included in the agenda materials. He noted that all meetings had been conducted except the Nassau Chapter’s meeting, which was scheduled for January 10, 2008.

President-elect Fierstein then provided her perspective on the meetings, likening the series to a “listening tour.” She expressed her sense that attendees generally felt the Society’s leadership was listening closely to the membership on a number of important issues such as the SET Tax and the 150-hours pre-service education requirement.

b. SET Tax Update

Mr. Lifson distributed the Society’s SET Tax marketing brochure. He said that the NYSSCPA was the only state CPA Society with a national tax reform proposal and that the brochure would be a useful informational handout for politicians, the media and the general public.

c. Oversight Committee Update

Mr. Lifson reported that the Executive Committee to date had met with the chair of the Industry Oversight Committee and chairs of two Operations Division committees: the Membership Committee and Professional Liability Insurance Committee. He reminded Board members that operations committees report directly to the Executive Committee, and noted that the Executive Committee would be meeting with additional Oversight and Operations Division committees in the coming months.

d. Progress Report on Ethics Committee Project to Revise Procedures Manual

President Lifson referred Board members to a briefing memo concerning an ongoing project of the Professional Ethics Committee (PEC) to revise its procedures manual. He noted that the first part of the revision, completed in 2005, affected part IX of the manual involving alternative procedures to close an ethics case in lieu of a full investigation. In addition, Mr. Lifson noted that the Executive Committee at its November 2007 meeting approved revisions to Part VIII of the manual relating to investigations.

Mr. Lifson stated that during the most recent approval process in November, the Executive Committee had been open to the idea that approval of PEC manual revisions could occur at the Board level; however, the Executive Committee strongly believed it more efficient to first wordsmith revisions at the Executive Committee level on a section by section basis. The Board would then be able to consider a more fully revised and completed product at a later time.

President Lifson then introduced Robert Kawa, PEC Chair, who provided an overview of the PEC Manual revisions. Mr. Kawa stated that the revisions process reflected the PEC’s ongoing attempt to continue improving its overall procedures.

A discussion ensued with respect to the state’s limited jurisdiction over CPA professional ethics issues in non-attest areas such as SEC practice and tax. It was noted that the state lagged behind the PEC and AICPA in investigations of ethical breaches and enforcement of sanctions in non-attest areas. Mr. Kawa stated however that the PEC’s and AICPA’s ties to New York State had improved in recent years with respect to the enforcement of ethical professional behavior.

a. Quality Enhancement Policy Committee Update

President-elect Fierstein reported that in addition to its work in ethics, the Quality Enhancement Policy Committee (QEPC) was concentrating on finalizing its white paper on pre-service education. She said that she had spoken recently at an accounting students’ event and found it interesting to hear students’ perspectives on accountancy education and the profession. She anticipated the QEPC’s education white paper would be presented to the full NYSSCPA Board for action in April 2008. She said the paper represents a tremendous opportunity to open discussions with the New York State Board of Public Accountancy and others on issues relating to pre-service education.

b. 2008 Leadership Conference Update

President-elect Fierstein reminded Board members that the 2008 Leadership Conference would be held July 13 to 15, 2008 at the Turning Stone Casino and Resort in Verona, New York. She encouraged all to attend.

c. President-elects’ Workshop

President-elect Fierstein noted that the chapter presidents-elect workshop, which was held on the preceding day, was well-attended and well-received by participants.

a. Chapters Update

Vice Presidents Barnickel and Lauchert reported on the full-day chapter presidents-elect workshop held the preceding day. Vice President Lauchert provided an overview of the workshop, noting in particular the roundtable discussions and chapter budgeting process for the coming year. Vice President Barnickel spoke of the cohesive nature of the group despite very individual characteristics of each chapter. She concluded the report by noting the chapters were learning a lot from each other.

b. Recent Society Comments

Vice President Torres presented the recent Society comments as follows:

• 11/12/07 – Comments to the Securities and Exchange Commission on a concept release to obtain information about the public’s interest in allowing U.S. issuers to prepare financial statements in accordance with International Financial Reporting Standards for purposes of complying with the rules and regulations of the Commission; Principal Drafters from the Financial Accounting Standards Committee: Fred R. Goldstein, Edward P. Ichart, John J. McEnerney; From the International Accounting and Auditing Committee: William M. Stocker III; From the SEC Practice Committee: Mitchell J. Mertz.
• 11/1/07 – A comment paper sent to IRS offering a recommendation to improve tax reporting related to Forms 1040 filed on extension and Schedules K-1 from Partnership Returns on extension to the same due date; NYSSCPA Taxation of Individuals Committee, William H. Jones, Chair; Principal Drafter: William H. Jones.
• 10/31/07 – Comments to the Committee of Sponsoring Organizations of the Treadway Commission on their September 2007 discussion document on guidance on monitoring internal control systems; SEC Practice Committee, Rita M. Piazza, Chair; Principal Drafter: Anthony S. Chan.
• 10/25/07 – Statement of the NYSSCPA Submitted for the Record of October 25, 2007 Hearing Entitled “Single Audits: Are They Helping to Safeguard Federal Funds”, By the Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security of the United States Senate Committee on Homeland Security and Governmental Operations.
• 9/28/07 – Comments to the International Accounting Standards Board on their exposure draft of an international financial reporting standard (IFRS) for small and medium-sized entities; International Accounting and Auditing Committee, William M. Stocker III, Chair; Principal Drafter: William M. Stocker III
• 9/28/07 – Comments to the Securities and Exchange Commission on a discussion paper for consideration by the SEC Advisory Committee on improvements to financial reporting. The discussion paper is to provide a discussion of issues, views and potential consideration points that the Committee may evaluate; Financial Accounting Standards Committee, Edward P. Ichart, Chair; Principal Drafters: Robert A. Dyson, Edward P. Ichart, John J. McEnerney.
• 9/21/07 – Comments to the Securities and Exchange Commission on Release No. 33-8818 – Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance with International Financial Reporting Standards without Reconciliation to U.S. GAAP; Principal Drafters: From the Financial Accounting Standards Committee: Fred R. Goldstein, Edward P. Ichart, John J. McEnerney; From the SEC Practice Committee: Mitchell J. Mertz, Robert E. Sohr, Joseph Troche.
• 9/17/07 – Comments to the Securities and Exchange Commission on Release Nos. 33-8819; 34-56013; 39-2447; File No. S7-15-07 on proposed rule amendments relating to disclosure and reporting requirements for smaller companies under the Securities Act of 1933 and the Securities and Exchange Act of 1934; SEC Practice Committee, Rita M. Piazza, Chair; Principal Drafters: Mitchell J. Mertz, Rita M. Piazza, Robert E. Sohr, Joseph Troche.
• 9/14/07 – Comments to the IRS on their discussion draft of a redesigned Form 990, Return of Organization Exempt from Income Tax, filed by many public charities and other exempt organizations; NYSSCPA Exempt Organizations Committee, Paul E. Hammerschmidt, Chair; Principal Drafters: Martin S. Cantor, Sonja Lepkowski, Paul E. Hammerschmidt.
• 9/7/07 – Comments to the Public Company Accounting Oversight Board on Release No. 2007-008 – Proposed ethics and independence rule, Rule 3526, Communication with Audit Committees Concerning Independence, that would supersede the Board's interim independence requirement; Auditing Standards and Procedures Committee, Robert W. Berliner, Chair; Principal Drafters: Robert W. Berliner, Anna Zubets.
• 9/4/07 – Comments to the Securities and Exchange Commission on Release No.34-56010 concurring with proposal to provide two exemptions from the registration requirements of the Securities Exchange Act of 1934 for compensatory employee stock options; SEC Practice Committee, Rita M. Piazza, Chair; Principal Drafter: Robert E. Sohr.

President Lifson commended the comment authors and their respective committees for outstanding work.

c. President-elects’ Workshop

See item 4.a. above.

a. Financial Statements for Five Months Ending October 31, 2007

Mr. Banerjee presented the Financial Statements for the five-month period ending October 31, 2007. Several highlights follow:

• Net Revenue reflected a favorable variance to budget of $681,853; and a favorable variance to Fiscal Year (FY) 2007 of $598,706.
• No contribution to FAE had been made from the Society during the first five months of FY 2008, in keeping with budget. Mr. Banerjee noted that such was the case in October 2007 as well.
• Preliminary analysis showed FAE had a favorable variance to budget of $350,000 and favorable variance to FY 2007 of $169,000 for the five months ending October 31, 2007.

Mr. Banerjee noted that the overall NYSSCPA Strategic Plan areas performed as follows:

• Professional Competency reflected a favorable variance to budget of $173,000 and a favorable variance to the prior year of $28,000.
• Public Trust showed a favorable variance to budget of $82,000 and favorable variance to FY 2007 of $149,000.
• Advocacy had favorable variance in net revenue to budget of $358,000 and a favorable variance to the prior year of $379,000.
• Recognition and Visibility showed an unfavorable variance to budget of $3,000; but a favorable variance to the prior year of $49,000.
• Recruiting and Retention was favorable to budget by $72,000 but unfavorable when compared to FY 2007 by $7K.

Mr. Banerjee concluded his presentation by noting several highlights with respect to key assets and liabilities as follows:

• Cash and Cash Equivalents reflected an increase of $111,000 over the prior year.
• Investments showed an increase of $227,000 over FY 2007.
• Accounts Payable showed a decrease of $72,000 from a year ago.
• Deferred Membership Dues were down by approximately $400,000 from a year ago.

In the ensuing discussion there was a question regarding long term plan capital outlay methodology. Mr. Banerjee noted that the organization was currently setting aside approximately $17,000 monthly in capital contributions.

Mr. Lifson informed the Board that Secretary Ellis could not attend the Board meeting but had submitted a written report for distribution to all Board members. He asked that the report be considered as part of the record.

a. Legislative and State Board Update

Mr. Grumet provided an update on legislation and the State Board of Accountancy.

b. Washington Testimony

Mr. Grumet provided an update on his December 3, 2007 participation in a panel discussion before the U.S. Treasury Department’s Advisory Committee on the Auditing Profession. He noted that the committee was established to examine the sustainability of a strong and vibrant auditing profession.

c. COAP Update

Messrs. Pape and Grumet gave an update on the Foundation for Accounting Education, Inc.’s Career Opportunities in the Accounting Profession (COAP) Program.

d. Member Benefits Update

Mr. Pape referred Board members to the agenda materials for statistical information regarding membership benefits programs.

Edward Torres, the Board’s representative to AICPA Council, reported on the meeting of the AICPA Governing Council held in October. He noted the similarity of issues being discussed at both the state and AICPA levels.

a. FAE Update

FAE President Peter Maier reported that FAE was progressing nicely from both a financial and education services point of view, noting that FAE did not require the entire contribution budgeted by the NYSSCPA for FAE expenses in fiscal year 2007. He said that fiscal year 2008 was progressing better 2007 and noted in particular that:

• Revenues from conferences and seminars were running $300,000 ahead of last year;
• Strong POP sales for September through November exceeded 50% of last year’s sales; and
• Headcounts for June through November were up 580 for seminars and conferences.

Mr. Maier noted that FAE’s curriculum committee identified nine additional subjects and 41 new programs from major vendors to be presented in the next CPE year commencing June 2008. Lastly, Mr. Maier reported that FAE had been busy with:

• Scholarship Awards;
• COAP programs; and
• Revisiting FAE policies for complimentary attendance at FAE conferences and fees charged to sponsor FAE events.

In response to a question, Mr. Maier gave an overview of the considerations that went into allowing free conference or seminar attendance. He noted that generally those who directly worked on, or presented at an educational event were permitted to attend the event for free; however, those not part of the active course generation process were required to pay. He also noted the historical practice of allowing conference speakers to bring one professional colleague to an event free of charge.

b. Update on Benevolent Fund Merger

Mr. Maier noted that the FAE Board was continuing to monitor the FAE- and NYSSCPA-approved roadmap of a potential merger between FAE and the NYSSCPA Benevolent Fund.

Mr. Falbo, Chair of the Governance Subcommittee, presented his subcommittee’s report. He began by recognizing the work of the other subcommittee members as follows: Art Bloom, Debbie Cutler, Suzanne Jensen and Bob Pryba. He then referred the Board to the subcommittee’s report included with the agenda materials.

He noted that the subcommittee was presenting the following “Leadership Policies” (LPs) for Board consideration and approval as follows:

LP-1 Code of Conduct for Board Members
LP-2 Resolving NYSSCPA Policy Disputes
LP-3 Acknowledgment of Board Member Responsibilities

A discussion ensued with regard to LP-1, Code of Conduct for Board Members. It was suggested that the words “and with civility” be added to the end of first sentence of the introduction, thus resulting in the following: “Individuals serving on the NYSSCPA Board of Directors must behave ethically and with with civility.” The suggestion was well received.

A brief discussion ensued with regard to the application of LP-1 to chapter and committee members. It was noted that although those constituents were expected to behave ethically and with civility, LP-1 was nonetheless intended to cover only NYSSCPA Board Members. Mr. Falbo noted that a policy for chapter and committee members would be handled in the near future. He also noted that LP-1 would be shared with the FAE Trustees in anticipation that they too would adopt a similar policy following NYSSCPA Board approval.

Mr. Pryba moved to approve LP-1, Code of Conduct for Board Members, as amended. Ms. Fierstein seconded the motion. The motion passed unanimously.

Mr. Falbo then presented LP-2, Resolving NYSSCPA Policy Disputes. It was noted that although the policy provided for representation by a third party in connection with disputes, it did not provide for the reimbursement of potential fees associated with such representation. A discussion ensued during which Ms. Cutler expressed her view that such fees should be reimbursed by the NYSSCPA because of the volunteer nature of Board membership. Ms. Cutler then moved to amend LP-2 to provide for the reimbursement of presentation fees. Ms. McKane seconded the motion. Following discussion, the motion failed.

Mr. Piluso then moved to approve LP-2 as presented. Mr. Lesser seconded the motion. The motion passed. Mss. Cutler and McKane abstained.

Mr. Falbo then presented LP-3, Acknowledgment of Board Member Responsibilities. Mr. Lesser moved to approve LP-3 as presented, and Mr. Hotalen seconded the motion. The motion passed unanimously.

Mr. Lifson said that he had appointed a working group of the Executive Committee to review the final written report of the Committee on Governmental Audit Quality to determine when it would be appropriate to circulate the final report to the Board. He noted that the working group consisted of Mss. Jensen and Kinsella, and Mr. Wei. A copy of the report was included in the agenda materials.

Ms. McKane, Chair of the Governmental Audit Quality Committee, then summarized the committee’s “Report on National Single Audit Sampling Project” and recommendations.

A discussion ensued, during which several suggested amendments were made regarding the wording of the report. Ms. McKane thanked the Board for its input and suggestions.

Mr. Lifson moved to approve the report, as amended, of the Governmental Audit Quality committee and to formally thank the committee and its Chair, Ms. McKane, for their work. Ms. Kinsella seconded the motion. The motion passed unanimously.

Michelle Levine, Chair of the Audit Committee, summarized the process by which the Audit Committee’s reached its recommendation of Loeb & Troper as the next auditor of the NYSSCPA and its consolidated entities: Foundation for Accounting Education, Inc., NYSSCPA Benevolent Fund, Inc. and New York State Society CPA PAC, Inc. She noted that four firms had responded to the committee’s RFP, two of which emerged as highly competitive. She said that those two firms were interviewed directly by the Audit Committee and, after a careful and thorough deliberation, the Audit Committee unanimously recommended Loeb & Troper. Ms. Levine stated that the Audit Committee reviewed the independence of Loeb & Troper on a comprehensive set of factors including leadership activities of its staff in Society and consolidated entity functions and the firm’s prior internal controls review of the organization in 2003, among other factors. She said the Audit Committee was satisfied there were no independence issues.

Ms. Fierstein moved to approve the appointment of Loeb & Troper as the auditors for the NYSSCPA and consolidated entities. Mr. Lauchert seconded the motion. The motion passed. Ms. Jensen abstained.

Mr. Grumet noted that the respective Boards of the consolidated entities were also expected to also vote on the appointment of Loeb & Troper after NYSSCPA Board action.

President-elect Fierstein provided background on the Selections Subcommittee. She said that per NYSSCPA Standing Rule SR-1, President Lifson had appointed the Selections Subcommittee to, among other things, vet and recommend for full Board vote individuals to serve on the AICPA Council from New York. She noted that the 2007-2008 Selections Subcommittee was presently chaired by herself and comprised of Board members Elliot Lesser, Thomas Riley, Margaret Wood and Richard Zerah.

Ms. Fierstein explained that there were traditionally nine “directly elected” members of AICPA Council from New York, each having three-year terms. She said that in January of each year, the NYSSCPA submitted to the AICPA its recommendations to fill the directly elected Council member vacancies opening up the following October and that two vacancies would be opening in October 2008. In addition to these two, one “Society Representative” would represent the NYSSCPA for a one-year term. With the two directly elected Council vacancies and the Society representative position, there were a total of three vacancies that needed to be filled in 2008.

Ms. Fierstein then reminded the Board that Standing Rule SR-3 reserved one of the three-year Council recommendations for the Society’s President-elect designee, once he or she was identified by the Society’s Nominating Committee each January. She said that the intent was to assure that the NYSSCPA President-elect served on Council through his or her terms as president-elect, president and immediate-past president of the Society; however, because there was the possibility that the president-elect designee could currently be an AICPA Council member (which had occurred in four of the last five years), the Board needed to act as if it were filling all three positions plus one alternate, should any of the three recommended candidates not be able to serve for any other reason.

Ms. Fierstein said that the Selections Subcommittee identified the following seven individuals for Board consideration, grouping them into Classes A and B, with Class A being the more highly recommended:

Class A

• Peter L. Berlant
• John J. Lauchert
• Edward Torres

Class B

• Elliot L. Hendler
• Steven S. Goodman
• Daniel Fordham
• Martin Leventhal

Mr. Lifson opened the floor to additional recommendations from the Board. Mr. Nelson moved that Ms. Cutler be added to the list for Board consideration, and Mr. Piluso seconded the motion. There being no objections voiced, Ms. Cutler was added for consideration.

There being no further recommendations, President Lifson declared nominations closed.

Ms. Fierstein explained that Standing Rule SR-1 currently required that each director cast no more than one vote for any candidate. It was suggested that the Board instead use a process of preferential voting whereby 4 votes would be cast for one’s first choice, 3 cast for one’s second choice, 2 cast for one’s third choice and 1 vote for one’s fourth choice. A discussion ensued regarding the suggestion.

At the conclusion of the discussion Ms. Kinsella moved to suspend SR-1 for purposes of the election and use the preferential voting process as suggested. Ms. Kincaid seconded the motion. The motion passed unanimously.

Mr. Lifson appointed Ms. Barossi and Mr. Hotalen to serve as tellers for the election. The election was then conducted.

Upon a duly-held election, Mr. Torres received the most votes followed in order by Mr. Lauchert, Mr. Berlant and Ms. Cutler.

As a result of the election and SR-3, then, the individuals to be recommended for three-year elected Council positions are the incoming president-elect, provided he or she is not already sitting on Council, and Messrs. Torres and Lauchert. Also, Mr. Berlant would serve the 2008-2009 one-year term as NYSSCPA representative to Council. If the president-elect is serving on Council, Mr. Berlant would be recommended for a three-year term and Ms. Cutler would become the NYSSCPA representative.

Mr. Kawa presented the reinstatement recommendations of the Professional Ethics Committee (PEC) concerning two members. He said that Article XII.15 of the NYSSCPA bylaws provided that a person who had been expelled from membership may apply for restoration of membership anytime after two years from the date of expulsion and that such application must be approved first by the PEC and, finally, by the NYSSCPA Board.

Mr. Falbo moved to go into executive session for a confidential discussion of the recommendations. Ms. Kinsella seconded the motion. There being no objection, the Board went into executive session. Staff was not excused. No resolutions resulted.

Following executive session, Mr. Falbo moved that one of the members be reinstated to full membership in the New York State Society of Certified Public Accountants effective immediately. Mr. Riley seconded the motion. The motion passed unanimously.

Ms. Cutler then moved that the other member be reinstated to full membership in the New York State Society of Certified Public Accountants effective immediately. Mr. Lesser seconded the motion. The motion passed unanimously. (Names of the members for reinstatement were intentionally omitted due to confidentiality concerns.)

There being no further business, President Lifson declared the meeting adjourned at 2:02 p.m.