B0 – D – 0
Call to Order

President Thomas E. Riley noted that a quorum was present and called the meeting to order at 9:06 a.m. Mr. Riley then designated Mr. Arcara as Acting Secretary until the arrival of Secretary Mark Ellis later in the meeting.

B06 – D – 1
Minutes

a. Approval of Minutes of July 11, 2006, Board of Directors Meeting

Mr. Riley asked Board members if they had any changes or comments to the July 11, 2006, Board of Directors meeting minutes. There being none, Mr. Piluso moved to approve the minutes as presented, and Ms. Wood seconded the motion. The motion passed unanimously.

b. Draft Minutes of August 25, 2006, Executive Committee Meeting

For information, Mr. Riley referred Board members to the draft minutes of the August 25, 2006, Executive Committee meeting, which was included among the agenda materials.

06 – D – 2
President’s Report

a. Chapter Town Meetings

Mr. Riley announced that NYSSCPA Chapter Town Meetings were scheduled to begin in the following week. He noted that the meetings, conducted annually in each of the organization’s sixteen chapters, provided an opportunity for the Society’s officers to receive feedback from members on a range of topics important to the CPA profession and organization as a whole.

b. Bylaws Task Force

Mr. Riley noted that he had appointed the following persons to serve on a task force to develop NYSSCPA bylaws proposals:

John J. Lauchert, Jr., Chair
Joseph L. Charles
Andrew Cohen
Martha Jaeckle
Laurence Keiser

Mr. Riley reported that staff had sent an e-mail to the Society’s membership soliciting suggestions or comments for changing the organization’s bylaws. He said that the task force recently held its first meeting on September 6, 2006, and he referred Board members to the agenda materials for a summary of the meeting which included a proposed timeline for the bylaws revision process.

c. Appointment of Governance Subcommittee

Mr. Riley announced that he had appointed a Governance Subcommittee of the NYSSCPA Board consisting of the following persons:

Joseph M. Falbo, Jr., Chair
Arthur Bloom, ex officio
Richard E. Piluso
Robert T. Quarte
Margaret A. Wood

He noted that Arthur Bloom would be serving as an ex officio representative from the Foundation for Accounting Education’s Board of Trustees. A Board Standing Rule on Governance Committee was passed by the Board under item B06-D-13.

B06 – D – 3
President-elect’s Report

a. Quality Enhancement Policy Committee Update

Mr. Lifson summarized the role of the QEPC to review and propose changes to improve (1) peer review, (2) ethics and (3) education. He noted that the Executive Committee had expanded the QEPC’s role by assigning to it oversight responsibilities for the Peer Review Committee and the Professional Ethics Committee. He said that the QEPC had recently met with the Ethics Committee and was developing a thought paper on ethics to be presented to the NYSSCPA Board at its December 7, 2006, meeting. In addition, he noted that the QEPC had planned to thoroughly examine issues relating to ethics education and CPA training in the coming year.

B06 – D – 4
Vice Presidents’ Reports

a. Chapters Update

Ms. Fierstein and Mr. Piluso gave updates on the Society’s chapters including an idea to reach out to members impacted by the recent merging of the Finger Lakes Chapter into adjoining chapters. Both stated that during their time to date as Vice Presidents for chapters, they had increasingly come to realize and appreciate how important chapters were in serving the organization and outreaching to its members.

b. Recent Society Comments

Mr. Sohr reported that future Society comment letters would not be provided in the meeting agenda materials but sent to Board members via e-mail concurrently with their dissemination to the soliciting entities. He referred Board members to Mr. Markezin for hard copies of the most recently issued comments, and then summarized the comments as follows:

• Letter submitted to the AICPA by the NYSSCPA Auditing Standards and Procedures Committee, chaired by Robert W. Berliner, in support of Exposure Draft of Proposed Statement on Auditing Standards, Entitled “Omnibus – 2006”, dated September 21, 2006;
• Comments submitted to the AICPA by the NYSSCPA Auditing Standards and Procedures Committee, chaired by Robert W. Berliner, regarding Exposure Draft of Proposed Statement on Standards for Attestation Engagements, entitled “SSAE Hierarchy”, dated September 20, 2006; Robert W. Berliner and Robert M. Waxman, principal drafters; and
• Comments submitted to the Securities and Exchange Commission by the NYSSCPA SEC Practice and Auditing Standards and Procedures Committees, chaired respectively by Mitchell Mertz and Robert W. Berliner, regarding issues raised in Concept Release No. 34-54122 Concerning Management’s Reports on Internal Control Over Financial Reporting, dated September 20, 2006; Robert W. Berliner, Anthony Chan, Jonathan Elmi, Steve Lehrer, Lorraine A. Leotta and Bernard H. Newman, principal drafters.

President Riley commended the authors and committees for their outstanding work.

B06 – D – 5
Treasurer’s Report

a. Financial Statement for two months ending July 31, 2006

Mr. Grusd reported on the financial statements for the two months ending July 31, 2006. He reported that combined NYSSCPA and FAE unrestricted income for the period was $132,775 as compared to $128,925 reported for the same two month period in the previous year, exceeding budget by $81,065. Mr. Grusd attributed the increase over budget to a number of items, including $116,000 decrease in overheads, $47,000 savings in annual leadership conference’s hotel costs, $31,000 increase in chapter activities gross revenue and $33,000 increase in governance gross profit including investment income. He noted, however, that a number of items had not yet been accrued or incurred because the financial statements were presented in a straight line approach which did not account for seasonal fluctuations. He noted that he and staff were looking at ways to present the financial statements in a more seasonal fashion, in order to make variance observations more useful.

Mr. Cheung noted that staff had prepared a projection of FAE’s financial position for the 2006-2007 year, based on current revenue and expenses.

He said that based on preliminary figures, staff was projecting FAE would require approximately $147,421 more than the originally budgeted amount for the 2007 fiscal year. He said that staff would continue to monitor FAE projections throughout the year and keep both the FAE and NYSSCPA boards apprised.

A discussion ensued with respect to the inclusion in the financial statements of a $577,397 deficit in FAE unrestricted net assets. The Board by consensus agreed that the Executive Committee should look at whether this deficit should continue to be reflected in the statements, or whether it should be caught up. Mr. Riley stated that the Executive Committee would consider this issue and report back to the Board with a recommendation at the December meeting.

B06 – D – 6
Secretary’s Report

a. Committees Update

Secretary Ellis reminded the Board that among other things the NYSSCPA Secretary served as the voice of the Society’s committees other than operational division committees. In this role, he would communicate committee concerns to the Executive Committee.

Mr. Ellis noted that he had reviewed the current version of the Society Committees Manual, noting that he had no changes to recommend. He said that the manual was comprehensive and informative, and that he would review the manual again in the following year after he has spent more time working with the Society’s committees.

Mr. Ellis reported that staff would be looking into an idea emanating from the leadership conference to recognize past committee chairs through a plaque or other memento for their service.

b. Nominating Process Report

Mr. Ellis stated that the eleven-person Nominating Committee was comprised of nine members who petition to serve on the committee, and two members designated by the Board. He noted that eighteen individuals had submitted petitions to serve by an August 11, 2006, deadline, and that an election would be held to narrow the number to nine. He noted that election ballots had been mailed to members on September 6, with a voting deadline of October 20, 2006. He then referred the Board to the agenda materials for a list of the eighteen individuals petitioning for service, noting that the Board’s designees would be elected later during the meeting (see item B06-D-12). Mr. Ellis also noted that former Board member and former NYSSCPA Secretary, Raymond Nowicki, had embarked upon a campaign for NYSSCPA President-elect which was independent of the nominations process.

a. Regulatory Update

This matter was deferred.

b. Analysis of Lease; Real Estate Escalation

Mr. Cheung briefly summarized a worksheet provided in the agenda materials relating to an analysis of the lease for the Society’s offices at 3 Park Avenue and its associated real estate tax escalation. He noted that based on a survey of average commercial rents in the same neighborhood, the Society’s rent was significantly lower than the average even when factoring in the real estate tax escalation. In the ensuing discussion, a Board member suggested that the porter’s escalation be audited at some point in the future.

c. COAP Update

This matter was deferred.

d. Accounting Show Update

This matter was deferred.

e. Dues Update

Mr. Grumet reported that 98% of membership dues had been received to date.

f. Member Benefits Update

Discussion of this matter was deferred; however, Board members were referred to the agenda materials for a summary of member benefit program statistics.

g. 19th Floor Expansion Update

This matter was deferred.

Mr. Riley asked Mr. Langowski, the Society’s 2006-2007 Representative to AICPA Council, to provide an update. Mr. Langowski announced that the next meeting of Council was scheduled to commence on October 22, 2006, in Las Vegas, but that the meeting agenda had not yet been finalized. He asked Ms. Barry to provide an update on an AICPA media campaign which was intended to teach the general public about the importance of saving money. Ms. Barry noted that the campaign, titled “Feed the Pig”, had been approved by 48 state societies except New York and Nebraska. She distributed a copy of the feed the pig image to be used as the basis of the campaign and a discussion ensued.

A number of Board members expressed concern regarding the campaign as presented in the portrayal of the pig. Mr. Lifson encouraged Board members to reconsider an endorsement if the AICPA provided an opportunity to review revised proofs.

Mr. Riley introduced David Moynihan, chair of the peer review committee. Mr. Moynihan provided an overview of the AICPA peer review program administered by the NYSSCPA in New York. He noted that an AICPA peer review program oversight visit had been conducted earlier in the year which offered constructive criticism regarding the NYSSCPA’s administration of the program in several areas including its timeliness in accepting reviews. He noted that the oversight visit also resulted in a recommendation that additional training be sought for both the program’s technical reviewers and the committee’s Report Acceptance Bodies. He said that one training session had been completed to date, and a second training was scheduled to take place in October to coincide with the next meeting of the peer review committee.

Mr. Moynihan then reflected upon some of the challenges faced by him as chair of the peer review committee including updating the technological capabilities of the administrative process and eliminating a backlog of reviews. He noted, however, that progress was being made and that outside technical reviewers had also been engaged to assist in addressing the backlog.

A discussion ensued regarding peer review team captains and ways to improve their functioning within the peer review process. Mr. Moynihan noted that update courses were routinely provided to captains by the AICPA. He also stated that more monitoring, oversight and constructive feedback to team captains would be explored so as to ensure the continued delivery of outstanding services to reviewed firms in a more timely fashion.

Mr. Riley thanked Mr. Moynihan for his presentation.

a. Relationship Between Society and FAE

Mr. Riley introduced Gail M. Kinsella, President of the Foundation for Accounting Education Inc. Mr. Riley and Ms. Kinsella then gave a joint presentation to the Board covering the Society’s historical commitment to educating its members, as reflected in its 1897 corporate purpose, and spanning through the incorporation and development of FAE in the 1970’s as a valuable resource through which the Society could meet its educational objectives. Mr. Riley stressed that the Society’s investment in FAE, as reflected in part through its annual inter-company contribution to FAE, signified not only the Society’s original corporate purpose but also its strategic plan goals as they relate to education. He noted that this commitment, which had been reaffirmed by prior Boards of directors in both organizations, was what made the Society a professional association as opposed to a mere trade organization.

Ms. Kinsella then gave an overview of FAE governance and diligence with respect to FAE’s operations, mission and finances, noting in particular the Trustees’ regular review of course revenues, expenses, contracts, curricula and other initiatives associated with meeting FAE’s educational objectives. She stated that the FAE Board takes very seriously its obligations to meet its objectives in a cost effective manner that ensured the continuation of a quality educational resource for CPAs and Society members.

An in depth discussion ensued regarding the costs associated with meeting the organization’s educational objectives. Mr. Nelson moved to reaffirm the Society’s commitment to, and investment in, educating Society members through FAE. Ms. Fischman seconded the motion. The motion passed with one abstention by Mr. Fordham.

a. Draft Audited Financial Statements for year ending May 31, 2006

Mr. Riley introduced Suzanne Jensen, Chair of the Audit Committee and Ian Benjamin, Partner, GGK LLP to review the results of the organizations’ annual consolidated audit and management letter.

Ms. Jensen presented an overview of the process by which the audit committee worked with GGK and with management in the consolidated audit of the NYSSCPA, Foundation for Accounting Education, Inc. and the NYSSCPA Benevolent Fund, Inc. She reported that the audit proceeded in a standard fashion and that there were no material issues or disagreements. She then noted several key aspects of the audit, including the first full audit of the Society’s 401(k) plan in several years and the substantive testing of internal controls. She added that the process included an executive session between the audit committee and GGK. She said that both received the full cooperation of staff during the process and that no instances of fraud had been discovered.

Ms. Jensen raised an issue regarding chapter expense documentation which she said did not rise to the level of the management letter. She said that chapter expense documentation presented several challenges because of difficulties in timely obtaining chapter bank reconciliations. She said the audit committee had recommended that chapters be given an option for staff to perform their bookkeeping functions in order to alleviate delays.

Mr. Benjamin then gave several highlights of the audit. He reported that the audit risk areas of 1) revenue recognition and deferral, 2) accounting for restricted contributions, 3) salaries and related expenses, and 4) travel and entertainment expenses, required no adjustments. In addition, he said that there were no significant changes in previously adopted accounting policies or their application within the organization, and that there were no disagreements with management relating to any material matters. He noted that GGK had not tested the organizations’ internal controls to an extent required to give a professional opinion regarding them; however, he said that substantive testing had been completed and that the quality of the organizations’ internal functions had improved significantly since GGK’s first year as auditor. He stated that GGK’s assessment of the consolidated financial statements was therefore that of an unqualified standard opinion.

Mr. Cheung then provided a summary of the consolidated statements of financial position, activities and cash flows (including notes) and of the consolidating schedule of activities. He reported total assets of $9,232,274 as of the fiscal year ending 2006, compared to $6,760,918 reported at the year ending 2005. He attributed the increase in assets primarily to an increase in cash and cash equivalents, which stood at $4,549,833 as of May 31, 2006 as compared to $2,565,561 as of May 31, 2005. He explained that membership dues invoices, which had been mailed to members later than usual in 2005 in order to obtain Board approval of dues increases, had been more timely mailed to members in 2006, thus resulting in an earlier large influx of cash.

A discussion ensued regarding the NYSSCPA’s strategic plan goals and several additional classifications and schedules of functional expenses. It was noted that this information had either been provided to the boards previously, or was available through the Society’s website on which was posted the organization’s IRS form 990. Mr. Benjamin stated that all the information required to be included in the audited statements was in fact included and presented to the Boards, with the addition of a consolidating schedule of activities from the prior year which was added at the request of the NYSSCPA Executive Committee. Mr. Benjamin stated however that he would be happy to include any additional information that the Boards requested, and staff agreed to do so as well.

An executive session was held between the FAE and NYSSCPA Boards with Ms. Jensen and Mr. Benjamin in attendance.

b. Composition of Audit Committee (for discussion)

Ms. Jensen stated that the Audit Committee currently consisted of five CPAs who were independent of the audited organizations’ respective boards. She noted, however, that the Audit Committee felt strongly that board member representation would be both useful and welcomed. She also suggested that multi-year terms be considered for Audit Committee members, noting that she had been the only member of the committee who had served during a prior year’s audit. She noted that staff was assisting the committee in drafting a more extensive charter or committee action plan.

c. Change to Conflict of Interest Policy Re Related Party Receivable Write-offs (for discussion)

During a discussion of the management letter, the Boards considered a recommendation by GGK’s auditors that the organizations’ respective boards adopt policies addressing the write-off of receivable balances from related parties. The recommendation was approved without objection by both the FAE and NYSSCPA Boards, respectively.

d. Appointment of Auditors

The NYSSCPA and FAE Boards unanimously accepted the results of the consolidated audit and unanimously approved the reappointment of GGK as the organizations’ respective auditors for fiscal year 2006-2007.

Mr. Riley 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. He reminded the Board that an election of the nine members, out of the eighteen petitions received was proceeding; however, the Board was required to hold an election of the two Directors designated to serve.

President Riley turned the floor over to President-elect Lifson, Chair of the Selections Subcommittee. Mr. Lifson noted that the Selections Subcommittee consisted of Edward L. Arcara, Debbie A. Cutler, Anthony G. Duffy, Stephen F. Langowski and himself. Regarding the elections to follow, Mr. Lifson stated that the Selections Subcommittee had been tasked with identifying at least four Board members from which the full Board would elect two to serve on the Nominating Committee. He noted that in the event one or more of the persons selected by the Board to serve were later unable to do so, the election results would be re-determined by eliminating the names or names of the withdrawing member or members, pursuant to Board Standing Rule SR-2. Mr. Lifson then placed into nomination the following individuals identified by the Selections Subcommittee to serve as Board-designated members of the Nominating Committee:

• Joseph M. Falbo, Jr.
• Robert T. Quarte
• C. Daniel Stubbs
• Margaret A. Wood

Mr. Riley asked if there were any additional names to be placed into nomination. There being none, he declared the nominations closed and designated Ms. Fischman and Mr. Fordham to serve as tellers for the impending election. An election was then held. Messrs. Falbo and Stubbs received the most votes to serve as the Board-designated members of the Nominating Committee. Mr. Woehlke was directed to retain the record of the election count until the day after the Nominating Committee completed its work.

Mr. Nelson moved to approve the following Board Standing Rule on Governance Committee as presented to the Board:

Board Governance Subcommittee

On or before the first regular board meeting each year, the President shall appoint a board subcommittee, the purpose of which shall be to advise the Board on matters of Society and Board governance. The governance subcommittee shall comprise five individuals, four from the board of directors, two of which shall be Executive Committee members, and a member of the FAE trustees, who shall serve ex officio with right to vote on subcommittee matters.

Mr. Palmer seconded the motion. The motion passed unanimously.

Mr. Riley provided a summary of the practices surrounding appointments to statewide committees. He noted that under the NYSSCPA bylaws, the President had final authority regarding all committee appointments; however, given the large number of statewide committees, the President’s authority had been delegated to committee chairs for all committees in the practice divisions and for several in the operations division. He said that committee vice chair appointments were made by the President-elect because those vice-chairs would become chairs when the President-elect became President. Other than vice-chairs, appointments to committees were typically vetted by staff and approved (or disapproved) by committee chairs before new members were added to committee rosters.

Mr. Riley noted an instance where he had learned of an appointment to a committee that, as President, he would not have approved had he known about it beforehand. He said the Executive Committee had recently considered this issue at its August meeting and recommended that a Board Standing Rule be developed to provide guidance to the President on operations committee appointments.

Mr. Sohr then moved that the following proposed standing rule be adopted by the board:

Sense of the Board Regarding Committee Appointments

The Board recognizes that the Society’s President has full authority under the bylaws to appoint members to committees (except the Executive Committee and Nominating Committee), and that he or she, therefore, has the authority to appropriately delegate tasks related to committee appointments. However, the sense of the Board is that the President should not delegate the selection of members of any committees within the operations division.

Mr. Langowski seconded the motion. The motion passed unanimously.

Mr. Pape presented the membership report noting that as of September 21, 2006, there were 29,574 members compared to 30,359 at approximately the same time in the previous year. Of the 29,574 members included were the following: 134 new members, 4 reinstatements, 6 deaths, and 36 resignations. Ms. McKane moved to approve the membership report and Mr. Nelson seconded the motion. Following discussion, the motion passed unanimously.

Mr. Pape told the Board that he would be providing members in CPA firms with data regarding their firm’s professional staff versus the number of staff who are NYSSCPA members. He asked that board members review this data to ensure accuracy noting that the most direct method of increasing membership was to encourage CPA firms to enlist professional staff as NYSSCPA members.