05 – C – 0
Call to Order

05 – C – 1
Minutes

a. Approval of Minutes of Board of Directors April 21, 2005

President Langowski asked Board members if they had any changes to the minutes of the April 21, 2005, Board of Directors Meeting. There being none, Mr. Kiamie moved to approve the minutes and Mr. Piluso seconded the motion. The motion passed with abstentions by those members of the Board who had not attended the April meeting.

b. Minutes of May 18, 2005, Executive Committee Meeting for Information Only

The minutes of the May 18, 2005, Executive Committee meeting were provided in the Board agenda packet for the Board’s information.

c. Approval of Minutes of June 2, 2005, Board of Directors Meeting for Information only

President Langowski asked Board members if they had any changes to the minutes of the June 2, 2005, Board of Directors meeting held via conference call. There being none, Mr. Westcott moved to approve the minutes and Mr. Nelson seconded the motion. The motion passed without objection. Ms. McKane abstained from the vote.

d. Draft Minutes of June 14, 2005, Executive Committee Meeting for Information only

The minutes of the June 14, 2005, Executive Committee meeting were provided in the Board agenda packet for the full Board’s information.

05 – C – 2
President’s Report

a. AICPA Update

President Langowski reported on a number of items from the May AICPA Council meeting including AICPA finances, Social Security System reform, federal tax reform and the AICPA Financial Literacy Campaign. In addition, President Langowski reported that Council passed a resolution empowering the AICPA to reach out to the Financial Accounting Standards Board and the Financial Accounting Foundation, in favor of establishing generally accepted accounting principles for non-publicly traded companies.

President Langowski noted that the nine elected AICPA members of Council from New York and the NYSSCPA representative to Council were looking into some questions about the AICPA’s finances that were raised at the AICPA Council meeting. These concerns would be presented to AICPA Chair Robert Bunting. President Langowski stated that he would report back to the NYSSCPA Board regarding this in September.

b. Computerized Uniform CPA Exam Issues

President Langowski asked Mr. O’Leary to provide an update on the computerized uniform CPA examination. Mr. O’Leary reported that the California Board of Accountancy had written a letter to the National Association of State Boards of Accountancy (NASBA), which was included the agenda materials. He noted that the California board was cooperating with New York and other states to press for a NASBA symposium on long-term issues related to examination procurement and performance.

In the ensuing discussion, concern was expressed over the skyrocketing cost of the CPA exam. It was noted that the CPA examination currently costs approximately $800, as compared to the New York State bar examination, which costs $250.

c. Committee Appointments

President Langowski announced appointments to the Audit and Finance Committees as follows:

Audit Committee:

Warren Ruppel, Chair
NYC Comptroller's Office, New York, NY

David C. Ashenfarb
Schall & Ashenfarb CPAs LLC, New York, NY

Joseph L. Charles
Fust Charles Chambers LLP, Syracuse, NY

Suzanne M. Jensen
NY Association of Homes and Services for the Aging
Albany, NY

Henry J. Krostich,
Krostich & Krostich LLP, Roslyn Heights, NY

Finance Committee:

Neville Grusd, Chair
Merchant Factors Corporation, New York, NY

Michael P. Bronstein
Loews Corporation, New York, NY

Anthony Cassella
Croscill Inc., New York, NY

John E. Oehler
Lumsden & McCormick LLP, Buffalo, NY

Rita M. Piazza
Marden Harrison & Kreuter CPAs P.C., White Plains, NY

George I. Victor
Holtz & Rubenstein Reminick LLP, New York, NY

d. Legislative Update

Mr. Grumet reported that a school district reform bill had passed both houses of the New York legislature and Governor Pataki was expected to sign it. A discussion ensued regarding the Roslyn school district. The state comptroller had issued a report severely critical of the auditing firm that conducted the Roslyn audit. Several suggested that an improved peer review process may have detected problems with this firm before it was too late. The senate passed the Society-endorsed accounting reform bill for the third year in a row. The assembly, for the first time, passed a bill covering the same areas. A brief discussion ensued concerning the differences between the two.

Mr. Grumet reported that the New York State Board of Public Accountancy had voted to endorse and propose regulations that would require CPAs to self-report litigation settlements, allegations, and convictions. He stated that the Society’s leadership was vehemently opposed to the reporting of settlements and allegations.

e. Process for Executive Director’s Contract Renewal

President Langowski reported that he was in the process of selecting an outside attorney to represent the Society regarding the renewal of Mr. Grumet’s executive director contract.

f. Review of Board’s Standing Rules

This matter was deferred until the September Board meeting.

05 – C – 3
President-elect’s Report

a. Quality Enhancement Policy Update

President Langowski, the immediate past chair of the Quality Enhancement Policy Committee (QEPC) gave an overview of the QEPC’s work and priorities over the past year. He reported that the QEPC had identified peer review as among its top priorities. He referred members to the QEPC’s June 2005 Interim White Paper on the Examination of Peer Review, which was provided in the agenda materials, and summarized several priorities of the peer review system that needed to be addressed including education (remedial and disciplinary), reviewer training and expertise, transparency, and the question of who should be a firm’s reviewer. The QEPC was exploring the possibility of the state certifying eligible reviewers and replacing the firm-on-firm system with a system similar to that used in the accreditation of higher education programs.

A Board member expressed opposition to a CPA “pool system” of peer reviewers, as compared to a firm-on-firm system, because of a fear that legislators would require public company auditors to be selected from a similar pool system. Another member agreed, likening the peer review process to a company audit and stating that the profession would be putting itself at risk if it applied a different standard to itself than it does to the companies it audits. The member cautioned that a slippery slope could make audits susceptible to a regulated pool system. Several members disagreed and a lively discussion ensued.

Mr. Falbo moved that Board members provide comments to President-elect Riley, QEPC Chair, for further consideration and discussion of this issue by the QEPC. President Langowski indicated that the QEPC recommendation would be brought back to the Board for a full discussion at the September meeting. Following a brief discussion, Ms. Fischman moved the previous question and her motion passed unanimously. President Langowski then restated the main motion, which then passed without objection.

05 – C – 4
Vice Presidents’ Reports

a. Chapters Update (Victor S. Rich and Stephen P. Valenti)

This matter was deferred until the September Board meeting.

b. Recent Society Comments (Susan Schoenfeld)

This matter was deferred until the September Board meeting.

05 – C – 5
Treasurer’s Report

a. Financial Statement for twelve months ending May 31, 2005

Mr. Grusd briefly reported on the financial statement for the twelve months ending May 31, 2005. He stated that cash was low because membership dues notices had gone out later than usual, as the Board first had to approve a dues increase. He added, however, that net income was greater than usual during this period and that the Society’s position overall was good.

b. Audit Committee Report

This matter was deferred until the September Board meeting.

c. Dues Update

See above, item 05-C-5a.

05 – C – 6
Secretary’s Report

a. Committees Update

This matter was deferred until the September Board meeting.

b. Nominating Process Report (Incl. Review of Nominating Committee Protocols)

This matter was deferred until the September Board meeting.

This following matters in the Executive Director’s Report were deferred until the September Board meeting:

a. COAP Update
b. Trade Show Update
c. State Society Cooperative Computer System Update
d. CPAs on Boards Update
e. Insurance Update

Mr. Langowski asked counsel James Woehlke to provide background on the NYSSCPA/FAE Affiliation Agreement.
Mr. Woehlke noted that the agreement memorializes (a) the approaches currently used to allocate expenses between FAE and the Society; (b) the programs FAE co-sponsors with the Society or administers for the Society; and (c) the governance relationship between the two organizations, including a prohibition on FAE from changing its bylaws to impede NYSSCPA oversight of FAE’s governance structure.

Mr. Woehlke reported that the FAE Trustees had unanimously approved a prior draft of the Affiliation Agreement in May 2005; however, the NYSSCPA Executive Committee subsequently recommended a change to the FAE-approved draft whereby the agreement would run for five years without an automatic renewal term. Mr. Woehlke stated that the draft agreement had been prepared by in-house counsel and reviewed by Howe & Hutton, the Society’s outside counsel.

A Board member asked if the agreement had been vetted through the Society’s auditors. Mr. Woehlke responded that it had not, but that he would facilitate this thru Warren Ruppel, Chair of the Audit Committee.
Mr. Piluso moved to approve the NYSSCPA / FAE Affiliation Agreement, and Mr. Nowicki seconded the motion. Following discussion, the motion passed. Messrs. Valenti and Evangelista, who had been absent during part of the discussion, abstained from the vote.

President Langowski and Mr. Grumet provided an extensive walk-through of the Request for Proposal (RFP) process leading to the Executive Committee’s recommendation of Pearl Insurance as the broker to administer insurance-related member benefits (other than professional Liability insurance). It was noted that, most recently, a task force of the Executive Committee consisting of Messrs. Langowski, Riley and Grumet had submitted a list of questions to Pearl and, over the course of two telephone calls, spoken with Pearl’s auditor and management about Pearl’s succession planning, disaster planning, cross-collateralization of affiliated entities by Pearl Insurance, and specific questions relating to Pearl Insurance’s financials. All questions were answered to the satisfaction of Messrs. Langowski, Riley and Grumet and were relayed in detail to the Executive Committee before it made its final recommendation.

Member Benefits Committee immediate past and present chairs, Carol Lapidus and Don Kiamie, added that Pearl brokers and administers approximately 100 associations and are experts in affinity programs. In addition, they noted that Pearl had previously transitioned programs from Marsh, the Society’s current broker/administrator, and was experienced in the logistics of such a transfer process.

The Board was then joined by Gary P. Pearl, President and CEO, Mike Murphy, Executive Vice President and Chief Sales & Marketing Officer, and George Bode, Senior Vice President and Director of Affinity Business of Pearl Insurance, the organization being recommended by the Member Benefits Committee. The Pearl Insurance representatives then made a presentation to the Board, during which the Board conducted extensive questioning. During the question/answer period, the following was noted:

• Pearl representatives stated that the company was not yet operating in a “paperless” environment, but was working closely with an outside imaging and data firm to develop a paperless workplace within the next three to four years. In response to a question, Mr. Pearl noted that the project had already been in process for a year and a half.
• With regard to major medical insurance, Mr. Bode noted that federal HIPPA laws made it extremely difficult for associations to create group-rated plans for their members, but that a community-rated or individual medical insurance program could be looked at.
• A member asked if Pearl would assist members in analyzing their in-force insurance policies for adequate limits and insurance types. Mr. Bode responded that Pearl representatives would spend time with members to identify insurance products and limits that work best for individual members.
• Mr. Pearl noted that customer service representatives could be reached by phone Monday through Friday between the hours of 8 am to 6 pm Central Standard Time. He stated that Pearl does not outsource its customer service operations, and that all calls are answered at the company’s Peoria, Illinois headquarters.
• A member asked if there was any business line that could potentially put Pearl Insurance out of business. Mr. Pearl responded that the company was highly diversified in the property, casualty and affinity areas. As such, Mr. Pearl stated that there was no one business concentration that made the overall company vulnerable to collapse.
• A member asked what were the advantages and disadvantages of being a small, closely-held corporation in the insurance field. Mr. Pearl stated that one disadvantage was a lesser ability to absorb costs without passing them on to consumers, but he stated that Pearl was large enough to bring the financial and technological resources to serve the NYSSCPA membership comparatively well. With respect to its advantages, Mr. Pearl stated that the company’s smaller size enabled it to bring a human touch to the administrative process so that NYSSCPA would not be treated like “just another account”.
• Regarding security, Mr. Pearl stated that the company utilizes the latest and most sophisticated security systems to protect policyholder information and prevent data intrusion.
• In response to a question, Mr. Pearl stated that the Society’s royalty percentage was based on gross collected premiums, not a percentage of Pearl’s commission. Mr. Pearl added that the proposed commission and royalty structure was typical in the industry.
• A member asked if Pearl had provided the Executive Committee with a SAS 70 internal controls report for review. Mr. Pearl responded that Pearl had not had a SAS 70 report prepared, but agreed to work on the development of a report in the future.
• Mr. Pearl stated that his company did not have a formal succession plan in the event he and his father were unable to run the company. He stated that the high level and qualifications of Pearl’s top executives and overall staff assured that the company would be in good hands.
• Mr. Pearl responded to a question that, in the event of an insurance RFP process, the company would include among its list of RFP distributees any highly qualified firm with which Pearl does not already maintain a business relationship.
• A member asked how Pearl Insurance learned of the NYSSCPA’s RFP for a broker/administrator, as Pearl was not among the original list of distributees. Mr. Pearl responded that he learned of the RFP from his colleagues in the field.
• Mr. Pearl stated that his company maintained a professional liability unit, but did not currently have a relationship with NYSSCPA’s endorsed carrier CAMICO Insurance Company. Mr. Pearl stated that his company was open to the possibility of working with CAMICO to reach Society members.
• In response to a question, Mr. Pearl assured the Board that he was aware of no conflicts of interest that would impact his or his company’s service to the NYSSCPA.
• Mr. Pearl stated that his company was taking on an existing portfolio of business, not starting from scratch. He added that he was looking forward to further developing the existing portfolio of NYSSCPA-insureds, and offering new insurance opportunities to the membership.
  

The Pearl Insurance representatives were then thanked and dismissed from the meeting.

The Board continued the discussion. Mr. Woehlke answered several questions regarding the proposed contract with Pearl, noting that the term would be for five years and include suitable clauses for terminating the agreement for non-performance. Mr. Woehlke stated that the current administration and brokerage agreement with Marsh Affinity Group Services would expire on December 31, 2005 and that, following a transition period commencing in August 2005, Pearl would assume its administration role as of January 1, 2006.

Mr. Falbo moved to approve the Pearl Insurance as the broker and administrator of the Society’s insurance at the conclusion of the Marsh contract. Mr. Stubbs seconded the motion. The motion passed with one abstention from Mr. Duffy, who had missed the presentation.

Mr. Palmer then moved that the Board direct the Member Benefits Committee to request that Pearl Insurance Company review and present options to the Member Benefits Committee, and subsequently to the Board, for facilitating the purchase of major medical coverage by the members in time for the next Board meeting. Mr. Nowicki seconded the motion.

After a brief discussion, Mr. Nelson moved to postpone the motion indefinitely, and Ms. Cutler seconded the motion. Mr. Nelson’s motion carried, with Mr. Palmer opposed.

This matter was deferred until the September Board meeting.

Mr. Pape presented the Membership Report which included 139 new members (including 62 new associate members), 8 reinstatements, 7 deaths and 59 resignations. These changes reflected a total membership of 30,481 as of July 12, 2005, as compared with 30,845 at approximately the same time the previous year.

Mr. Moynihan moved to approve the Membership Report, and Mr. Grusd seconded the motion. The motion passed unanimously.

A Board member suggested that the report be broken down into 10 year age demographics, and Mr. Pape responded that this was possible to do on future reports to the Board.