Minutes of:

Board of Directors Meeting

Date & Time:

Wednesday, September 19, 2007, 9:00 a.m. to 4:00 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
Mark Ellis, Secretary
Scott M. Adair
Edward L. Arcara
Susan M. Barossi
Joseph M. Falbo, Jr.
Dr. Myrna L. Fischman
Daniel M. Fordham
Robert L. Goecks
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*
Louis Grumet, Executive Director

Board Members Absent:

Edward J. Torres, Vice President
Richard E. Piluso, Treasurer
Thomas Boyd

Debbie A. Cutler
Richard Zerah

Staff Present:

Pat Agard
Suvro C.K. Banerjee
Joanne S. Barry
Nereida Gomez
Ben Kaplan
Mary Jo Kranacher
Craig Mandelbaum

Ernest J. Markezin
Dennis O’Leary
William J. Pape
Alan Schmelkin
Forrest Whitesides
James A. Woehlke

B07 – D – 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.

B07 – D – 1
Minutes

a. Approval of Minutes of July 10, 2007, Board of Directors Meeting

Mr. Lifson asked Board members if they had any changes or comments to the July 10, 2007, Board of Directors meeting minutes. Ms. Fischman asked that her middle initial be corrected on the attendance list from an “M” to an “L”. Mr. Falbo pointed out that the list of Governance Subcommittee members on page 8 incorrectly listed Shea Riley as a member, instead of Debbie Cutler.

There being no further corrections, Mr. Falbo moved to approve the minutes as corrected, and Ms. Barnickel seconded the motion. The motion passed unanimously.

b. Draft Minutes of August 20, 2007, Executive Committee Meeting (for Information only)

Mr. Lifson referred Board members to the draft minutes of the August 20, 2007, Executive Committee meeting, which were included in the agenda materials for the Board’s information.

a. SET Tax Update

Mr. Lifson provided an update regarding the SET Tax initiative. A copy of a draft SET Tax marketing brochure was distributed. Mr. Lifson noted that the piece would be a useful handout for politicians, the media and the general public to learn more about the SET Tax.

b. AICPA Update

Mr. Lifson provided a brief update with respect to the AICPA.

c. Membership Expansion Project

At Mr. Lifson’s request, Mr. Pape briefly discussed the membership expansion project. Mr. Pape stated that among other things the project would help to track the ratio of members to professional members practicing in a firm. A hand out regarding the project was distributed for Board member information.

d. Town Hall Meeting Schedule

Mr. Lifson referred Board members to the schedule of Town Hall meetings which was included in the agenda materials. A Board member noted that the address for the Buffalo meeting was incorrect. Members were directed to the NYSSCPA website for an updated list.

e. 2007 Leadership Conference (white papers on expectation gaps)

Mr. Lifson referred Board members to a draft white paper reflecting a summary of points from the 2007 NYSSCPA Leadership Conference discussions on Expectation Gaps.

f. Bylaws Revision Update

Mr. Lifson noted that a membership vote was being conducted on the proposed bylaws revisions. The deadline for the submission of ballots was September 28, with a membership meeting scheduled for October 5, 2007.

g. Peer Review Administration Update

Mr. Lifson noted that the most recent Peer Review program oversight review reflected an improvement in the Society’s grade for administering the program on behalf of the AICPA. He referred members to a copy of the written report in the agenda materials.

a. Quality Enhancement Policy Committee Update

Ms. Fierstein noted that the QEPC was developing a white paper on pre-service education and also looking at post-service education and CPE. She noted that FAE’s recently-initiated market research survey would be a useful resource for the latter.

a. Chapters Update

Vice Presidents Barnickel and Lauchert presented updates on the chapter presidents’ conference calls, noting the rapport building between chapters.

b. Recent Society Comments

In Vice President Torres’s stead, Mr. Markezin gave a brief report on comment letters, noting that seven had been released since the last Board meeting in July.

a. Financial Statements for One Month Ending June 30, 2007

No report was given.

a. Committees Update

Secretary Ellis gave a brief update on committees, noting that all were working well. He also mentioned the discussion held at the August Executive Committee meeting regarding the low attendance at the annual Leadership Conference by committee chairs. A Board member suggested that chairs continue to be given an opportunity to attend the conference but also be asked to delegate a vice chair or other committee member to attend in their place in the event the chair could not attend. The suggestion was well received.

b. Nominating Process Report

Secretary Ellis reported that eleven petitions had been received to date for service on the Nominating Committee as follows:

• Stewart Berger
• Robert Fagliarone
• Allen L. Fetterman
• Scott J. Jaffee
• John J. Kearney
• Stephen F. Langowski
• Bruce H. Nearon
• M. Jacob Renick
• David Rubenstein
• P. Gerard Sokolski
• Paul C. White

He said that a membership vote was being conducted to limit this number to nine pursuant to the Society’s bylaws. Two members from the NYSSCPA Board were also appointed pursuant to the Society bylaws (see item # B07-D-13).

a. Legislative Update

Messrs. Grumet and O’Leary provided a legislative overview to Board members on Society-endorsed legislation.

b. State Board of Accountancy Update

No report was given.

c. Task Force on Government Audit Quality Update

Board members were referred to the agenda materials for information on this topic.

d. Task Force on Fire District Auditing Update

Board members were referred to the agenda materials for information on this topic.

e. Human Resources Outsourcing Update

Mr. Grumet reported that he had signed a contract in June with an effective date of June 1 to outsource most of the Society’s HR function to CheckpointHR and noted that five payrolls had been processed without incident by Checkpoint HR. He stated that Checkpoint’s “self service” functions would be unveiled to staff the first week in October.

f. Member Benefits Update

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

a. Report from FAE President

Peter Maier, the FAE President, reported on FAE registrations for conferences and seminars, FAE’s curriculum committee and a recently initiated market research study intended to help FAE assess the CPE market in New York. He noted that FAE ran seventeen conferences and 308 seminars over the summer attracting 1,935 and 6,488 attendees, respectively. He reported that payments received in June, July, and August were $224,300 ahead of payments received at the same time last year. In addition, deferred POP Program revenue of $169,000 would be booked as course revenue as a result of unused and expired POP coupons. Total POP program sales for the period September 2006 through August 2007 were $1,128,000.

During this discussion Mr. Maier provided an overview of FAE’s methodology in setting POP program rates each year. He said that the goal was not necessarily to maximize profit, but to set a reasonable and fair price to meet the educational needs of NYSSCPA members. In response to a suggestion that FAE market the POP program earlier in the year than September, Mr. Maier explained that POP pricing could not be set annually until the results of the busy season (June through August) were assessed. September was, therefore, the earliest time FAE could set POP pricing and begin to sell coupons. Mr. Schmelkin added that staff did market the program before September; however, this early marketing lacked pricing, consisting of reminders to watch for announcements and pricing on the program in September.

b. Proposed Merger with Benevolent Fund

Mr. Maier called upon James A. Woehlke to give an update on a proposed merger of the Benevolent Fund with FAE. Mr. Woehlke noted among other things that the elimination of the negative FAE fund balance that had been carried on the consolidating financial statements for a number of years must be addressed before plans to merge the two organizations could proceed. Action on the balance was taken under meeting agenda item B07-D-9 below.

Mr. Woehlke then outlined a proposed merger roadmap as follows:

1. FAE and the Benevolent Fund would be merged into a single not-for-profit corporation with FAE being the survivor entity.
2. Benevolent Fund assets would need to be segregated after the merger.
3. The segregated fund containing the former Benevolent Fund assets are proposed to be used for the following purposes:

• To provide assistance to current and former members of the NYSSCPA and their families, who find themselves in need (the historical purpose of the Benevolent Fund), and
• To provide scholarships for accounting students; provided that $100,000 would be restricted solely for historical Benevolent Fund purposes

Mr. Woehlke stated that the proposed roadmap reflected that which was last deliberated by the FAE Board but was subject to the final approval of both the FAE and Benevolent Fund Boards.

Because the NYSSCPA Board represents all of the Benevolent Fund’s donors – all of whom were NYSSCPA members or their firms – Mr. Woehlke suggested that the NYSSCPA Board pass a formal resolution endorsing the proposed merger roadmap. Ms. Fierstein moved to endorse the proposed merger roadmap as summarized by Mr. Woehlke, and Mr. Riley seconded the motion.

The issue of maintaining controls over the restricted nature of the funds was discussed, including documentation of donor instructions and auditing compliance. The board also discussed the dormancy of the fund over the years and award criteria. It was noted that there had been very few applications for funds over the past two decades. Ms. Fierstein added that even after 9/11, the fund was heavily marketed but barely used.

After discussion, a vote on the motion was held. The motion passed. Ms. Fischman abstained.

Mr. Lifson referred Board members to the briefing memo on the proposed FAE funds balance transfer, which had been distributed with the agenda materials. He said that proposal was endorsed by the Executive Committee at its August meeting, and that the auditors were comfortable with the proposal provided there were full board approval.

Mr. Palmer then moved to approve the following resolution:

WHEREAS, the Foundation for Accounting Education, Inc. (FAE) had begun its most recent fiscal years with a deficit unrestricted fund balance and operations for each of those years have resulted in FAE’s ending the year with the same deficit; and

WHEREAS, at its April 5, 2007, meeting, the NYSSCPA Board requested that management inquire into the feasibility of making a contribution to FAE to eliminate the deficit effective the end of the 2006-2007 fiscal year; and

WHEREAS, management has determined that a contribution sufficient to offset the deficit balance may be made by the NYSSCPA to FAE effective May 31, 2007;

NOW, THEREFORE, BE IT

RESOLVED, that the NYSSCPA make a contribution to the Foundation for Accounting Education, Inc. of $577,403, effective May 31, 2007; and

RESOLVED, FURTHER, that the NYSSCPA officers and the directors are authorized and directed to take any action necessary to carry out this resolution.

Ms. Wood seconded the motion. The motion passed unanimously.

a. Draft Audited Financial Statements for Year Ending May 31, 2007

President Lifson introduced Michelle Levine, Audit Committee Chair, and Ian Benjamin, GGK Audit Partner. Ms. Levine gave a brief overview of how the Audit Committee worked with staff and GGK during the audit. Mr. Benjamin stated that the audit was substantially complete but that the firm’s opinion letter was pending the receipt of bank confirmations which he said would not materially affect the results of the audit.

Mr. Lifson then called upon Suvro C. K. Banerjee, who presented the consolidated financial statements for the fiscal year 2006 – 2007. He noted a number of highlights as follows:

• Cash and cash equivalents stood at $5,940,285 as of May 31, 2007, as compared to $4,549,833 as of May 31, 2006, reflecting an increase of approximately $1.4 million over the prior fiscal year.
• The investment returns for FY 2007 were $518,139 which represents an increase of $268,769 over the previous fiscal year.
• FAE had its most successful year in recent memory, noting that FAE required $7,000 less than the budgeted contribution from the Society to break even for fiscal year 2007. In contrast, in fiscal year 2006, FAE required a total of $847,000 in contributions from the Society to break even, which was approximately $230,000 more than budgeted for that year.
• Total contributions to FAE would include an additional $577,000 to eliminate a structural deficit that has existed in the opening balance of the FAE unrestricted fund since fiscal year 2004 (see agenda item B07-D-9).
• FAE revenue from courses, the single biggest FAE revenue source, was $104,000 better than budget and $356,000 better than the prior fiscal year.
• Consolidated net income decreased by $126,000 due to the contribution to eliminate the FAE structural deficit, resulting in Society negative net income change of $364,000.
• Dues Revenue increased $117,000.
• Education fees increased $435,000.
• Shows and exhibits increased $598,000 due to the timing of the 2007 show which was moved from August to May, resulting in two shows occurring in fiscal year 2007 as opposed to one show in fiscal year 2006.
• The governance function saw unforeseen legal fees of $160,000 which, after adding in associated staff time, resulted in a $390,000 increase in expenses in this area. Governance and administrative expenses overall had a total increase of $546,000.
• Professional competency also saw an increase in expenses of $955,000.
• Depreciation and amortization of property and equipment amounted to $350,566 and $328,716 for the fiscal years ending 2007 and 2006, respectively. He mentioned that this variance resulted from the writing off of fully depreciated property and equipment in the amount of $37,992.
• Key liabilities included deferred dues and unearned subscriptions and fees – an increase of $848,000 from fiscal year 2006.
• Total net assets stood at $4,042,399, compared to $3,538,554 as of year-end 2006, while total liabilities and net assets were reported at $10,855,733, compared to $9,232,274 at the same time the preceeding year.

After discussion of the financials, Mr. LIfson noted that this was the last year of GGK’s audit engagement with the Society. He thanked Mr. Benjamin and GGK for its work, and also thanked Ms. Levine for her chairmanship of the Audit Committee.

The Board entered into executive session with the auditor, audit committee chair and FAE trustees. No resolutions resulted.

Ms. McKane then moved to approve the audited consolidated financials and management letter. Ms. Kincaid seconded the motion. The motion passed unanimously.

b. Appointment of Auditors

Mr. Lifson noted that an RFP process was being conducted to identify the next auditors of the NYSSCPA and its consolidated entities.

Mr. Lifson called on Mr. Falbo, Chair of the Governance Subcommittee, to present its report. Mr. Falbo began by recognizing the other Governance Subcommittee members: Art Bloom, Debbie Cutler, Suzanne Jensen and Bob Pryba. He then referred the Board to the subcommittee’s report that was included with the agenda materials and proceeded to summarize same.

With respect to the “Strategic Policies” (SP) relating to Chapters, Committees and Committee Comments – SP-3, SP-4 and SP-5, respectively – Mr. Falbo stated that they merely document current arrangements regarding chapters and committees in a revised format and, in the case of committee comments, update the current policy approved over five years ago. He therefore entertained a motion to approve the updated SP-3, SP-4 and SP-5 as presented. Ms. Kinsella so moved. Mr. Hotalen seconded the motion. After discussion, the motion passed unanimously. Ms. Wood did not participate in the vote.

Mr. Falbo noted that the Leadership Policy (LP) concerning a code of conduct for Board members (LP-1) was included in the report for Board information only. He said that further vetting of the policy was required at the next Executive Committee in November but encouraged Board members to call or e-mail him with any concerns or suggestions regarding the policy.

Mr. Falbo noted that LP-8, Leadership Receivables, was a new policy resulting from a recommendation of the companies’ auditors, GGK, during its 2005-06 fiscal year audit of FAE and the NYSSCPA. The recommendation was that both the FAE and NYSSCPA Boards adopt policies for writing off receivables from related parties. Ms. Fischman moved to approve LP-8 as presented, and Mr. Pryba seconded the motion. After discussion, the motion passed. Ms. Wood had not participated in the discussion of the motion and therefore abstained from the vote.

Ms. Fierstein, Chair of the Selections Subcommittee, noted that pursuant to Society Bylaws, the Nominating Committee consisted of nine members who were nominated by petition and two Directors designated by the Board. She reminded the Board that an election of the nine members out of the eleven petitions received was currently proceeding (see item #B07-D-6 (b) above); however, the Board was required to hold an election of the two Directors designated to serve. She stated that NYSSCPA Board Standing Rule SR-2 provided that the Board Selections Subcommittee was to propose at least four names to the full Board, which would then chose two to serve on the NYSSCPA Nominating Committee. The Selections Subcommittee consisted of Ms. Fierstein (Chair), Elliot Lesser, Thomas Riley, Margaret Wood and Richard Zerah.

Ms. Fierstein then placed into nomination the Selections Subcommittee’s recommendations to serve on the nominating committee as follows:

• Lauren L. Kincaid
• Mark L. Meinberg
• Robert A. Pryba, Jr.
• Margaret A. Wood

She noted that Selections Subcommittee member Ms. Wood did not vote to add her name to the list.

Mr. Lifson then asked if there were any additional names to be placed into nomination. There being none, he declared the nominations closed.

An election was then held. Ms. Kincaid and Mr. Pryba were elected to serve as the Board-designated members of the Nominating Committee. Ms. Wood was elected as the alternate to serve in the event Ms. Kincaid or Mr. Pryba were unable to do so.

There being no further business, President Lifson declared the meeting adjourned at 4:00 p.m.