* participated by conference telephone

04 – A – 00
Call to Order

04 – A – 01
Minutes

Mr. Hoops asked Board members if they had any changes to the minutes of the November 18, 2003 Board of Directors Meeting. There being none, Mr. Frank moved to approve the minutes, and Ms. Dwyer seconded the motion. The motion passed unanimously. Ms. Golden did not participate in the vote.

Mr. Hoops stated that the minutes of the four most recent executive committee meetings were provided in the Board agenda packet for informational purposes. Mr. Bloom asked that on page two of the minutes from the February 4, 2004 Executive Committee conference call, the words “and peer reviews” be added to the end of the last sentence of the first paragraph. It was noted that the Executive Committee would take up Mr. Bloom’s motion to amend their minutes.

04 – A – 02
President’s Report

a. Board Dinner with AICPA Chair Voynich

Mr. Hoops thanked Board members for attending the dinner with AICPA Chair Scott Voynich and stated that the event was well-received. Several Board members commented that they appreciated Mr. Voynich’s candid remarks and forward-looking vision.

b. AICPA Regional Council Meeting

Mr. Hoops stated that the next meeting of the AICPA Regional Council would be held shortly and among other things address two major issues: 1) the role and responsibilities of Council, and 2) peer review transparency.

A discussion then ensued with respect to issue one, and the recommendations of the AICPA Governance Task Force on the role and responsibilities of Council. A member opined that a task force recommendation to limit Council members’ terms to two years, in order to allow more AICPA members to serve, was too short a time period to sufficiently digest AICPA issues. Several Board members agreed, stating that many Council members lack sufficient experience at the two-year mark of a three-year term. Mr. Hoops responded by giving a brief summary of the current Council membership structure and pointing out that the task force proposal called for a limit of three consecutive two-year terms, for a total of six years. He noted that most Council members are currently elected for three years, with 73% nominated by their respective state society in proportion to its membership size. He added that there are 50 one-year terms historically represented by each state society’s president, and that the AICPA Board nominates several members in addition to past AICPA presidents who serve. He stated that in light of this structure, the central goal of the task force recommendations was to affirm that the role of Council was to lead, while promoting a sense of participation among all AICPA members in the overall governance process and allowing more members to serve.

Mr. Hoops noted that the task force, among other things, recommended that members who miss three consecutive meetings automatically forfeit their seat, represent Council views in a fair manner, and sign an acknowledgment of responsibilities. Board consensus was in favor of the recommendations.

Mr. Hoops then summarized the two issues before the Board regarding peer review: 1) whether peer review should be mandatory for Society membership, as recommended by the Task Force on Peer Review and Ethics; and 2) what the Society Board’s position was on peer review transparency as guidance to AICPA Council members from New York.

A discussion ensued with respect to peer review transparency. Mr. Grumet stated that based upon recent regional AICPA Council meetings and the views of some of the state societies' executive directors, the AICPA leadership had concluded that the requisite 2/3rds membership majority for a bylaws amendment authorizing mandatory public disclosure of peer review documents was unlikely. He noted that the AICPA Board of Directors had alternatively suggested a voluntary approach, whereby members would check a box on their membership dues renewal indicating whether he or she would allow public disclosure of their peer review reports to state regulators.

Several Board members questioned the assumption that a 2/3rds AICPA membership majority could not be reached supporting mandatory peer review transparency, and a lengthy discussion ensued.

Vice President Nowicki, who serves on the AICPA Peer Review Board and the NYSSCPA Peer Review Committee, opined that a push should be made for a public file of peer reviews available to both regulators and the general public, stating his view that the AICPA voluntary “check-box” approach was indicative of a fear of mandatory disclosure. Several members agreed with Mr. Nowicki, stating that a mandatory public file suggests a higher level of CPA professional responsibility on a national level which could improve public opinion in a post Enron world. Several others stated that taking an affirmative position displays pro-activity, instead of reactivity. Mr. Langowski, a meeting guest and the Society’s nominee for the 04-05 position of President-elect, noted that regardless of the AICPA’s stance on the issue, the federal government and General Accounting Office are already moving in the direction of a public peer review file for CPA firms who audit companies under their jurisdictions. Several board members concurred and stressed the importance of proceeding proactively.

In response to a question regarding the percentage of negative peer reviews, Mr. Nowicki stated that one percent of reviews are negative, while 43% have comments and more than 50% have no comments at all. He expressed the view that there would be a substantial increase in peer review comments due to revisions in AICPA peer review standards. Mr. Nowicki noted, however, that if a firm disagrees with the findings, they could challenge the report all the way up to the AICPA. He stated that only a couple of the over 30,000 firms have challenged their peer review up to that level. He stated that as part of a public file, any reviewed firm would be able to file a response.

A Board member expressed support for a public file in principal but cautioned that a lay public might not understand peer review comments and therefore assume that a review with comments is bad.

Mr. Hoops noted that mandatory peer review for CPAs was already supported by the Board through its endorsement of proposed New York State accountancy legislation. In a straw vote of whether peer review reports should be publicly transparent on a mandatory basis, the Board was unanimously in favor. Mr. Hoops pointed out an apparent inconsistency between support for peer review transparency and the fact that the NYSSCPA does not require its members to participate in a peer review program. (See Item 04 – A – 10, Peer Review and Ethics Task Force Recommendations, below.)

Mr. Piluso moved that the Board express its support for mandatory peer review transparency and urge the AICPA to poll the full governing bodies of all the state societies on this issue for a better reflection of the sentiment of the rank and file profession. Ms. Golden seconded the motion, and the motion passed unanimously.

c. COAP Fundraisers.

See letter “e”, Annual Dinner, below, for a report on COAP Fundraising.

d. Relocation Update

Mr. Hoops called upon Mr. Grumet for an update on the Society and FAE office relocation. Mr. Grumet reported that the main leasing agreements for the new location had been fully executed by the parties; however, the architect and build-out details were in the process of being negotiated. Mr. Grumet projected that construction would commence shortly.

e. Annual Dinner

Mr. Hoops reminded Board members that the annual dinner would be held at the Manhattan Marriott Marquis on May 13, 2004. He encouraged all Board members to attend. Mr. Hoops announced that a cocktail reception would be held prior to the dinner to honor all Society award recipients, and that a commemorative journal would be published to include award recipient information and advertising to benefit the Career Opportunities in the Accounting Profession (COAP) program. Mr. Hoops noted that over $90,000 in advertising commitments had been received to date.

f. Nominating Committee Report

Mr. Hoops announced that the 2004 Nominating Committee, chaired by former Society president Nancy Newman-Limata, identified a list of nominees for the 2004-2005 roster of Society officers and incoming members of the Board as follows:

Mr. Hoops congratulated the nominees.

g. Awards Committee Report

Mr. Hoops announced that the Awards Committee selected the following as 2004 award recipients:

Hall of Fame

* Arthur H. Carter
* Homer S. Pace

Arthur J. Dixon Public Service Award

* Nancy A. Kirby

Outstanding CPA in Industry

* Don A. Kiamie

Mr. Hoops congratulated the award recipients. No award recipients were selected for the Distinguished Service, Dr. Emanuel Saxe Outstanding CPA in Education, or Outstanding CPA in Government awards.

h. Benevolent Fund Report

No report was given.

i. Committees Report

No report was given.

04 – A– 03
Treasurer’s Report

a. Financial Statements for ten months ending 3/31/04

Mr. Bloom presented the Treasurer’s Report, noting that both the Society and FAE were on track, timely paying all bills and had not relied on any credit lines. He reported that combined NYSSCPA and FAE income for the period ending March 31, 2004 was $708K. Net income was ahead of budget by $392K. Cash and equivalents were $600K more than the previous year.

Mr. Bloom informed the Board that the Society’s 401(k) Plan had been audited by the U.S. Department of Labor, which found issues with the plan’s insurance coverage and contribution payment schedule. Mr. Bloom reported that the Society was required to pay $473 in lost interest due to several untimely contributions made over a 5 year period, and to remove all insurance deductibles from the plan’s fiduciary coverage. Mr. Bloom stated these actions had been taken and no further actions were required.

04 – A – 04
President-elect’s Report

a. Annual Leadership Conference for 2004 through 2007

No report was given.

04 – A – 05
Vice Presidents’ Reports

a. Chapters Update

No report was given.

b. Legislative Update

No report was given.

c. Professional Issues Update – Recent Society Comments

No report was given.

04 – A – 06
Executive Director’s Report

a. Document Management

Mr. Grumet announced that the Society was increasingly moving towards paperless document solutions through the use of a staff intranet portal and new document management software which has word search capabilities on scanned documents. Mr. Grumet noted that many documents had been scanned into the system already, such as the ethics and peer review files, and that he envisioned the same process to begin with Society contracts. Mr. Grumet added that staff was being trained on the new software and that other existing software used by the Society would be brought up to date shortly after the office relocation.

b. Interstate Compact Report

Mr. Grumet reported that there had been an increasing level of public interest in the concept of creating an interstate compact to address uniform accountancy standards across state lines. Several of Mr. Grumet’s articles on that subject and also on the need for accountancy legislation in New York, which had appeared in Accounting Today and the New York Bar Association Journal were distributed for Board member information.

Mr. Grumet stated that he had been invited to speak on interstate compacts at the American Law Institute – American Bar Association Committee on Continuing Professional Education program on accountants’ liability, which would be held in Chicago on May 20 and 21, 2004.

c. Semi-annual Evaluation Process

Mr. Grumet gave an update on the semi-annual staff evaluation process, noting that he meets with staff at every level of the organization after written reviews have been completed between each staff member and their respective supervisors and department head. Mr. Grumet added that the process is very informative and is tied closely to fiscal year-end merit pay increases.

d. AICPA Peer Review Proposals

See item number 04-A-2(b), AICPA Regional Council Meeting.

e. AICPA Private Sector Accounting Standards

Mr. Grumet called upon Mr. Ellis to give an update on the AICPA’s Special Task Force on Private Company Financial Reporting, of which Mr. Ellis is a member. Mr. Ellis reported that the task force was looking at changes to Generally Accepted Accounting Standards (GAAP) by the Financial Accounting Standards Board and their effect on large versus small companies. A discussion then ensued regarding this issue, with several members agreeing that a bona-fide issue existed for small companies in light of changes in standards. Mr. Ellis thanked Board members for their input.

f. NASBA Recommendations

No report was given.

g. Not-for-profit Coordinating Committee

Mr. Grumet spoke of an interest by the Not-for-Profit Coordinating Committee of New York, Inc., an organization established to help nonprofits meet common challenges and strengthen the nonprofit sector as a whole, to co-sponsor educational events with the Society and increase the number of Society members who serve on non-profit corporation boards. Board consensus was in favor of the ideas so long as pro bono professional services were not being sought by the non-profits.

Mr. Bloom led the Board through the proposed 2004-2005 Society and FAE budget, which had been reviewed and recommended for Board approval by the Executive Committee. He noted that the originally proposed Finance Committee budget had included several new initiatives, including four new staff positions and an increased publication schedule for The Trusted Professional; however, the initiatives were temporarily deferred so as to ensure a balanced budget.

Mr. Bloom stated that the budget is a break-even budget and added that Mr. Grumet had requested Board consensus to revisit the deferred initiatives at a later time depending on the Society’s performance.

A Board member inquired about the budget allocation for chapter newsletters, noting that all chapters should be publishing their newsletters via The Trusted Professional. Mr. Grumet noted that the budget allocation was transitional for three chapters which would shortly be moving their newsletters to the newspaper.

A member expressed concern that website advertising revenue was not higher, given the large number of hits to the site. Ms. Barry responded that Executive Publishing, the Society’s advertising consultant, was looking into the issue, but was focused on The CPA Journal at present. Ms. Barry cautioned, however, that website advertising had not traditionally been viewed by vendors as a choice form of advertising in generating business.

After discussion, Mr. Nowicki moved that the Board approve the proposed 2004-2005 budget. Mr. Piluso seconded the motion. The motion passed unanimously.

Mr. Hoops informed the Board that the Society had hired the firm Loeb & Troper to review and evaluate the organization’s internal controls in several key areas including:

1. Cash disbursements
2. Cash receipts
3. Payroll
4. Contracted Services
5. Investments
6. Membership dues including dues revenues, receivables and deferrals
7. Acquisition of property equipment and recording of annual provision of depreciation
8. Compliance with donor restrictions for temporarily and permanently restricted funds
9. Education fees and related receivables
10. Publications
11. Chapter activities
12. Allocation of expenses to program and administrative areas
13. Controls over computer access to the general ledger and financial reporting system.

Mr. Hoops reported that upon Loeb & Troper’s completion of the review, the Executive Committee reviewed the firm’s report and staff’s response to each area of review, and formally accepted the report during its March 29, 2004, conference call.

Mr. Hoops then called upon Mel Zachter and Allan M. Blum, CPA partners of Loeb & Troper, to present their findings.

Mr. Blum gave an overview of the process by which the firm conducted the review, and then went through his firm’s findings in several areas. Several board members inquired about the testing procedures used by Loeb & Troper.

Mr. Blum reported that overall, Loeb & Troper reviewers found the internal controls of the Society to be working as established. Mr. Grumet added that staff agreed with the suggestions which emanated from the review and prior Executive Committee discussion of the report.
In response to a question, Mr. Hoops stated that the review was not intended specifically as an annual process.

This matter was deferred.

Mr. Grumet noted that at a January 14, 2004 meeting, the Executive Committee made amendments to and approved recommendations of the Task Force on Quality Control and Ethics, chaired by Brian Caswell, and agreed to forward those recommendations as amended to the full Board for its consideration. Discussion ensued regarding the recommendations before the Board.

A member expressed some reservation at the recommendation that a senior policy-setting committee include non-CPA members of the public, cautioning that lay members of the public might not be able to fully-understand issues facing the profession. Ms. Golden responded in support of a public member on the committee, stating that CPAs protect the public and therefore should be open to public involvement in setting policy. Several members agreed with Ms. Golden.

A lively discussion ensued with respect to the recommendation that Society members performing engagements under PCAOB rules, SASs, SSAEs, or SSARs, participate in a peer review program as a mandatory membership requirement, and whether the requirement should be firm-directed or individual-member-directed. Several Board members questioned the fairness of depriving an individual CPA of membership where his or her firm chooses not to participate in peer review, and cautioned that an overly broad policy might result in the loss of a substantial number of Society members. Several other Board members responded that the Society should take a leadership position and impose a mandatory requirement to improve the quality of practice of its members and to set an example. It was also suggested by several Board members that because the Society supports mandatory peer review in its accountancy legislation, it should also support mandatory peer review for membership for consistency of position.

After a lengthy discussion on several suggested approaches and the inherent logistics of each, the Board by consensus supported a mandatory peer review requirement for membership, as suggested by the Quality Control and Ethics Task Force, and Mr. Hoops delegated the task of forming a resolution to this affect for subsequent Board approval to Messrs. Sohr, Colson and Woehlke. Mr. Hoops also suggested that a policy committee be formed to examine implementation issues. The Board by consensus approved Mr. Hoops’ suggestion.

The following resolution was approved by consensus:

Whereas, at its October 6, 1998, meeting, the NYSSCPA Board of Directors expressed unanimous support for the mandatory peer review requirement contained in the Uniform Accountancy Act, 3rd Edition; and

Whereas, the NYSSCPA Board of Directors has continuously supported mandatory peer review as a licensure requirement since that time; and

Whereas, the accountancy legislation currently pending before the New York State Legislature contains a mandatory peer review requirement, and the Board and Executive Committee have expressed unanimous support for this proposed legislation on numerous occasions; and

Whereas, at its July 16, 2002, meeting the NYSSCPA Board of Directors unanimously approved a resolution that the then existing Bylaws Revision Task Force should add peer review as a mandatory membership requirement for membership in the Society; and

Whereas, the Bylaws Revision Task Force was later discharged without having drafted language imposing peer review as a membership requirement whereupon the President formed the Peer Review and Ethics Task Force (“Task Force”) to further explore the concept of peer review as a mandatory membership requirement, and

Whereas, on October 1, 2003, the Task Force issued its final report wherein it recommended that peer review be a mandatory membership requirement for engagements performed under SAS, SSAE, SSARS, and PCAOB standards; and

Whereas, the overwhelming majority of CPA firms in New York State performing such engagements already participate in a qualified peer review program;

Now, Therefore, Be It Resolved, that the NYSSCPA Board of Directors, in light of its longstanding support for mandatory peer review as both a licensure requirement and a Society membership requirement, (1) commends those CPA firms which employ NYSSCPA members and which already participate in a qualified peer review program, (2) urges those CPA firms which employ NYSSCPA members but which do not now participate in peer review to register immediately for a qualified peer review program; and (3) authorizes and directs NYSSCPA officers and staff (or their delegates) to prepare a proposed by-law amendment to require members who own or otherwise control CPA firms that perform engagements subject to peer review to register their firms for and participate in a qualified peer review program.

The Board then discussed deferring support of an interstate compact to standardize ethics, peer review and continuing professional education pending further study by staff, and support for: 1) a senior policy committee; 2) a Quality Enhancement Support Team; 3) cooperation with New York State in ethics investigations; 4) continued participation in JEEP; and 5) expansion of ethics CPE offerings and cost underwriting, as outlined in the recommendations and report.

Ms. Golden moved to approve the recommendations and report of the NYSSCPA Task Force on Quality Control and Ethics, and Mr. Barback seconded the motion. The motion passed unanimously.

Mr. Pape presented the Membership Report which included 158 new members (including 115 new associate members), 18 reinstatements, 47 deaths, 1 termination and 4 resignations. These changes reflected a total membership of 30,083 as of April 21, 2004, as compared with 29,478 at the same time the previous year.

Ms. Dwyer moved to approve the Membership Report, and Ms. Napoleon-Hudson seconded the motion. The motion passed unanimously.

Mr. Hoops asked Society Legal Counsel Woehlke to review the proposed standing rules for the Board. Mr. Woehlke reminded the Board that at its October meeting the Board had before it standing rules approved by the Executive Committee addressing

• The appointment of a selections subcommittee,
• Identification by the selections subcommittee of board members to serve on the nominating committee,
• Identification by the selections subcommittee of individuals to recommend for service on the AICPA Council, and
• The roles of vice presidents.

d. The Board shall receive the report of the selections subcommittee; and during the ensuing discussion, the President shall solicit additional names from the Board. A secret ballot shall be held of the Board members with each director permitted to cast a number of votes equal to the number of Council vacancies sought to be filled; however, each director may cast no more than one vote for any candidate. For however many “elected” Council member vacancies remain after the position reserved to the president-elect designee, the individuals receiving the most votes shall be recommended for such “elected” Council positions. The candidate receiving the next highest number of votes shall serve as the NYSSCPA representative to the AICPA Council when the term of the then current NYSSCPA representative ends, except as noted below. In the event one or more of the persons so selected to serve on the AICPA Council withdraws from consideration for Council or is later nominated for Society president-elect, the election results shall be redetermined, eliminating the name(s) of the president-elect candidate or withdrawing member(s).

Mr. Hoops recognized Andrew Eassa, Professional Liability Insurance Committee chair. Mr. Eassa provided a brief overview of the process by which the Society came to exclusively endorse CAMICO Mutual Insurance Company as the provider of CPA professional liability insurance for Society members. He noted that the Society was in its fourth year of a five-year contract with CAMICO and pointed out some of the benefits to Society members arising out the relationship, including CPE credit, loss prevention advice and risk management tools.

Mr. Eassa then informed the Board of the results of a survey that was taken of a sampling of members in public practice regarding their risk management and insurance practices. He noted that ten percent of the respondents, many of them sole or small practitioners, did not carry insurance coverage. Mr. Eassa added that CAMICO was making substantial progress in reaching those firms.

Mr. Eassa then introduced Society member Gerald Golub, of GGK LLP/American Express Tax and Business Services, Inc. noting that Mr. Golub served as the Society’s representative to the CAMICO board of directors. Mr. Eassa also introduced John Raspante, CAMICO East Coast Loss Prevention Specialist.

Mr. Eassa then introduced John Dodsworth, CAMICO’s President, and turned the discussion over to him. After a brief video presentation, Mr. Dodsworth gave a PowerPoint presentation to the Board including historical background on the founding of CAMICO, the insurance marketplace, CAMICO’s loss experience in New York and the company’s goals for the future. Mr. Dodsworth emphasized during his presentation that CAMICO is a mutual insurance company, i.e., is owned by its policyholders. Mr. Dodsworth stated that given the “hard” state of the insurance marketplace in general, the fact that CAMICO was policyholder-owned gave the company an advantage for marketplace longevity. With respect to New York business, Mr. Dodsworth noted that CAMICO had in force 373 policies covering 1,247 CPAs at annual premiums of $2,066,635.

Mr. Raspante also gave a brief presentation on loss prevention activities in New York, noting CAMICO’s Ethics CPE courses, fraud prevention seminars and monthly articles in The Trusted Professional.

Mr. Hoops thanked the CAMICO representatives and guests for an informative presentation.

a. Modification of FAE Bylaws

Ms. Golden, President of the Foundation for Accounting Education (FAE) Board of Trustees, reported that the FAE Trustees, at their April 20, 2004 meeting, affirmed the shared organizational objectives between FAE and the New York State Society of CPAs (NYSSCPA), but recognized a need for a certain level of organizational independence.

She noted that ultimately the Trustees unanimously approved a resolution recommending several FAE governance changes, some of which would require changes to both FAE’s bylaws and the bylaws of the NYSSCPA. She outlined the specific changes, several of which evoked Board discussion.

Mr. Hoops asked if there were any further comments regarding the FAE Trustee governance recommendations. There being none, Mr. Hoops suggested that a task force be appointed by the Society President to work with the FAE Trustees representatives on the recommendations. The Board by consensus approved this approach.

b. Report on FAE Board of Trustees Meeting – 4/20/04

See above.