Kevin J. McCoy, Chairman
Legislative Task Force

Adam Reiss, CPA
Goldstein Golub Kessler, LLP

04 – C – 00 ¹
Call to Order

04 – C – 01
Minutes

Mr. Kearney asked Board members if they had any changes to the minutes of the July 23, 2004, Board of Directors Meeting. There being none, Mr. Nowicki moved to approve the minutes. Ms. Dwyer seconded the motion. The motion passed unanimously. Mr. Ecker did not participate in the vote.

Mr. Kearney noted that the minutes of the August 17, 2004, Executive Committee meeting were provided in the Board agenda packet for informational purposes.

04 – C – 02
President’s Report

a. AICPA Council Meeting

President Kearney reminded Board members that the AICPA Governing Council's Fall meeting would be held in Orlando, Florida from October 22 to 26, 2004. He noted that agenda items included Revised Ethics Interpretation 101-3, issued by the AICPA Professional Ethics Executive Committee to promote independence when AICPA members render non-attest services to attest clients, and also included topics on literacy and improving the image of the CPA profession. He announced that President-elect Langowski would also be attending the meeting.

The Board then briefly discussed the dinner held the previous night with Robert L. Bunting, incoming Chair of the AICPA. President Kearney noted that the event was well-received and several Board members concurred.

b. Chapter Visits

President Kearney reported that visitations had already taken place in the Southern Tier and Northeast chapters, but that the Suffolk Chapter visitation was rescheduled to a later date in January. He said that the visitations were well-received and included discussions of such topics as the trickle-down effect of Sarbanes-Oxley.

c. Resignation from Board

President Kearney announced that, regrettably, immediate past-president Jeffrey Hoops would be resigning from the NYSSCPA Board of Directors and the New York State Society CPAPAC Board effective immediately. He pointed out that Mr. Hoops would continue to serve as President of the Foundation for Accounting Education, Inc. (“FAE”).

Mr. Hoops explained that because he had recently been appointed to the New York State Board for Public Accountancy, he was encouraged by a State Education Department official to resign from the boards of the NYSSCPA and CPAPAC in order to avoid any real or perceived conflicts of interest. Mr. Hoops stated that his service as FAE President was not at issue, and that he planned to continue in that role.

On behalf of the Board, President Kearney thanked Mr. Hoops for his tremendous service to the Society and to the profession, and wished him well in his new role at the State Board for Public Accountancy. The Board echoed Mr. Kearney’s sentiment by unanimously applauding Mr. Hoops.

President Kearney informed the Board that he wished to invite Mr. Hoops to attend the remaining 2004-2005 Board meetings as a guest and representative of FAE.

Ms. Dwyer moved that the Board accept Mr. Hoops’ resignation with regret and, further, that the Board welcome Mr. Hoops to attend future Board meetings as a guest for the remainder of the 2004-2005 fiscal year. Mr. Nowicki seconded the motion. The motion passed unanimously.

d. Relocation Report

Mr. Kearney called upon Mr. Schmelkin for an update on the Society’s office relocation to Three Park Avenue. Mr. Schmelkin reported that the move was scheduled to take place on the weekend beginning October 8, 2004. He noted that the Society was able to save money on the moving contract because a large amount of office furniture was already in place at the new location, therefore less furniture had to be moved. In addition, he pointed out that the Society had financed the entire relocation without dipping into its letter of credit, and would recoup its outlay for the new location’s build-out at a rate of $20,000/month over twenty four months under the AIChE sublease.

Mr. Markezin added that all committee meetings scheduled for the week of October 11, 2004 would be held at the Fifth Avenue location.

Mr. Schmelkin then reviewed several mailroom issues, noting that two Xerox production machines were being obtained at a savings of approximately $35,000 less than the current Xerox service machines.

In response to a Board member question, Mr. Schmelkin stated that all Society phone numbers, including fax machines, would remain the same. Another Board member asked if tighter security at the new location would impede member access. Mr. Schmelkin noted that security was tighter; however, any member with legitimate Society business could visit the offices after checking in at the lobby desk.

Mr. Schmelkin concluded his update by announcing that a ribbon-cutting ceremony for Society leadership was being planned to coincide with the December Board meeting. More details would follow after the move.

04 – C – 03
Treasurer’s Report

a. Financial Statements for three months ending August 31, 2004
Mr. Bloom reported that combined NYSSCPA and FAE income for the period ending August 31, 2004 was $877,457. Net income was ahead of budget by $425,156. Mr. Bloom stated that the Society’s cash position remained strong, with cash and equivalents standing at $5,334,950 as opposed to $5,018,051 in the previous year. He attributed much of the favorable variance to the fact that all rent expense until the date of the move had been capitalized as leasehold improvements. Therefore, the rent paid for the property at 3 Park Avenue has not shown as an expense on the financial statements.

In response to a question, Mr. Grumet noted that a $600,000 security deposit for the Fifth Avenue leasehold hopefully would be refunded. A brief discussion ensued. A Board member cautioned that commercial landlords often seek to retain leasehold security deposits for various reasons, and that the Society may have trouble getting the deposit back. Mr. Schmelkin responded that before the Society formally vacates the premises, he would conduct a walk-through inspection with representatives of the landlord to confirm that we are leaving the old the premises in a “broom-clean” condition.

04 – C – 04
President-elect’s Report

a. Quality Enhancement Policy Committee

President-elect Langowski announced that the Policy Committee for Peer Review and Ethics had been renamed the Quality Enhancement Policy Committee (“QEPC”), and reported that the committee recently finalized its draft Committee Action Plan (CAP), subject to final approval by the Executive Committee. Mr. Langowski summarized the CAP for the Board’s information.

Mr. Langowski then reminded Board members that the committee currently consisted of the following individuals:

Stephen F. Langowski, Chair
Brian A. Caswell
Vincent J. Love
Michael L. McNee
Robert E. Sohr
Stephen P. Valenti
Maryann M. Winters
Margaret A. Wood

Mr. Ellis expressed his belief that the QEPC was not adequately representative of the NYSSCPA membership due to its lack of a CPA member in industry. Mr. Ellis further stated that failing to include an industry member would send the wrong message to members in industry. Mr. Langowski responded that the policy committee fully recognized its responsibility to all society members and the public, and reminded Board members that there are 2 non-CPA representatives would be invited to participate on the committee in furtherance of that responsibility.

President Kearney acknowledged both viewpoints and pointed out that the committee was still in its infancy stages and evolving. He welcomed Mr. Ellis to either serve on the committee personally, or work with the Industry Oversight Committee to identify and recommend an industry member willing to serve. Mr. Ellis stated that he would be glad to serve on the committee himself. The Board by consensus approved the addition of Mr. Ellis to the QEPC.

04 – C – 05
Vice Presidents’ Reports

a. Chapters Update

Vice Presidents Doran and Eassa gave reports on the Society chapters, noting that the next conference call with chapter presidents was scheduled for September 30, 2004. Ms. Doran noted that prior calls had been well-attended and well-received. Vice President Eassa added that the conference calls have made the chapter leaders more aware of Society tools and resources available for effective chapter work. He noted that several chapter presidents have requested lists of new members in their respective chapters in order to reach out to those members.

b. Recent Society Comments

Vice President Berlant noted that the following Society comments had been issued:

• Comments submitted to the Securities and Exchange Commission, Division of Market Regulation by the NYSSCPA Stock Brokerage Committee, chaired by Robert J. Kaufmann, regarding Effects of Statement of Financial Accounting Standard No. 150 on Business Succession Plans of Broker-Dealers and Related Guidance on New York Stock Exchange Information Memo 04-23, dated August 24, 2004; Principal Drafter, David H. Grumer;
• Comments submitted to the Financial Accounting Standards Board by the NYSSCPA Financial Accounting Standards Committee and the Investment Management Committee, chaired by Robert A. Dyson and Leon Metzger, respectively, regarding Exposure Draft: Proposed Statement of Financial Accounting Standards, Fair Value Measurements; File Reference 1201-100, dated September 7, 2004; Principal Drafters: Roseanne Farley, John McEnerney, Stephan Mueller, Barry Wexler, Abraham Haspel and Leon Metzger; and
• Letter dated September 7, 2004 to the Public Company Accounting Oversight Board from NYSSCPA President John J. Kearney re Staff Questions and Answers – Audits of Financial Statements of Non-Issuers Performed Pursuant to the Standards of the Public Company Accounting Oversight Board, June 30, 2004.

Mr. Berlant commended the committees and drafters for their outstanding work, and particularly mentioned the efforts of the Financial Accounting Standards Committee and the Investment Management Committee which conferred over the Labor Day holiday to complete their comments. He concluded by noting that the comment review process was working very well.

04 – C – 06
Secretary’s Report

a. Committee Update

Secretary Nowicki reported that as Chair of the Committee Operations Committee (COCO), he had appointed Richard Piluso, Susan Schoenfeld and Robert Sohr to respectively lead task forces to: 1) review COCO’s committee action plan, 2) consider committee report cards; and 3) improve the coordination between statewide and chapter committees. In addition, Secretary Nowicki reported that COCO was considering a name change, and that Mr. Piluso’s task force would develop suggestions.

b. Nominating Process Report

Secretary Nowicki reported that the Society had received twelve petitions to fill nine slots for petitioners on the 2004-2005 Nominating Committee. He noted that an election ballot had been mailed to members, which was due by September 27, 2004. Secretary Nowicki also noted that the Society Board was responsible for electing two additional Nominating Committee members, which was to occur at the September Board meeting.

c. NYSSCPA Board Designees to Serve on NYSSCPA Nominating Committee

President Kearney noted that the Nominating Committee under the Bylaws consists of nine members who are nominated by petition and two directors who are designated to serve by the Board. He reminded the Board that the election of nine members from twelve petitioners was in process; however, the Board at the instant meeting needed to hold an election of the two Directors designated to serve.

At this point, President Kearney turned the floor over to President-elect Langowski, who chaired the Selections Subcommittee. Regarding the elections to follow, Mr. Langowski stated the recommendation of the Selections Subcommittee that in the event one or more of the persons selected by ballot to serve on the Nominating Committee is later unable to serve, the person or persons receiving the next most votes should automatically be deemed to be the Board’s choice to fill the resulting vacancy. Mr. Langowski then placed into nomination the following individuals to serve as Board-designated members of the Nominating Committee:

• Spencer L. Barback
• Arthur Bloom
• Ann Burstein Cohen
• Robert N. Waxman

President Kearney then asked the Board if there were any additional names to be placed in nomination. There being none, President Kearney declared the nominations closed. An election was held and Messrs. Barback and Bloom received the most votes to serve as the Board-designated members of the Nominating Committee.

In accordance with the Selections Subcommittee’s recommendations, there was Board consensus that if either Mr. Barback or Mr. Bloom, or both, later vacated their position(s) on the Nominating Committee, the person(s) who received the next most votes in the ballot just conducted should fill the vacancy. Mr. Woehlke was directed to retain the record of the election until the day after the Nominating Committee completed its work.

a. E-mind Update

Mr. Grumet reminded Board members that a favorable decision had recently been issued in the arbitration between the Society and e-Mind over a contract dispute. In response to a question, Mr. Grumet stated that payment had not yet been made under the terms of the decision, but that staff was monitoring the situation.

b. Dues Update

Mr. Grumet noted that dues were approximately three weeks ahead of last year, with approximately 91% of dues received.

c. Insurance Update

See Item 04-C-11, CAMICO contract, below.

d. COAP Update

Mr. Grumet reported that the next round of Career Opportunities in the Accounting Profession (“COAP”) programs, were progressing well. He noted that a recently held program in the Northeast Chapter had not been as well-attended as hoped, but was well-received. A second newly-added venue in Rochester went very well. Mr. Grumet also stated that a program would be sponsored in 2005 by Dutchess County Community College and also that Baruch College had expressed an interest in hosting a COAP program, possibly in 2006.

A Board member suggested that COAP fundraising be done earlier in the fiscal year, so that contributing firms would have a wider opportunity for exposure of their program support. Mr. Grumet agreed to take the suggestion back to the COAP fundraising committee for consideration.

Another member suggested that the Board at some later point consider inviting the chairs of the COAP program to the annual leadership conference.

e. Trade Show Update

Mr. Grumet reported that the Society received approximately $112,000 from the 2004 trade show, as compared to $78,000 from the 2003 show. He noted that in prior years, the Society had an in-house trade show manager, but had outsourced the event to Flagg Management, Inc. in recent years.

A discussion ensued with respect to the trade show’s venue at the New York Hilton. Several suggested that alternative locations be considered for upcoming shows. Mr. Grumet stated that he would communicate this suggestion to Flagg.

f. Location of 2005 Young CPA Symposium

Mr. Grumet reminded the Board of a suggestion to overlap future Young CPA symposiums with the annual leadership conference, after input is sought from a steering committee of Young CPAs from throughout New York State. The Board endorsed the idea of a Statewide Planning Committee comprised of Chairs of each Chapter’s Young CPA Committee. Board members Deborah Bailey-Browne, Michelle Cohen and David Henion all agreed with a suggestion that they serve as advisors to the Planning Committee.

Mr. Schmelkin noted that because of the cost, it would not be feasible to host the symposium at the Sagamore Resort in Bolton Landing, New York, the venue for the 2005 conference, or at the Saratoga Springs Gideon-Putnam, the venue for the 2006 conference. He noted, however, that a nearby venue in the Capitol District area may be feasible for the 2005 conference.

After a brief discussion, the Board by consensus approved the idea of overlapping the 2005 Young CPA Symposium with the leadership conference at a nearby venue.

g. Update on School District Financial Oversight Policy Issues

Mr. Grumet reported on New York State Comptroller Hevesi’s initiative on increased oversight of public schools’ finances, and on recent meetings of a working group on school district financial oversight policy issues, which he attended as representative of the Society. He noted that some of the issues discussed included training for school officials, controller authority over schools, presentation of audits at public meetings, RFPs for auditing firms, an audit committee requirement for districts, and yellow book standards. A lengthy discussion ensued. Among the comments made by individual Board members were:

• Development of an effective training program for internal auditors of school districts was commendable, as that position is often occupied by a retired teacher with little to no auditing experience or knowledge. However, unfunded compliance mandates which might adversely affect smaller school districts, should be avoided. Finally, personnel audits should be considered as a way of dealing with nepotism and fraudulent time sheets.
• There should be a review of public records to identify CPA firms which audited financially troubled school districts, to communicate such information to the peer review committee. Such information could be useful to the committee to see if it had missed anything during a firm’s peer review. Mr. Grumet cautioned against conducting such a search, due to issues of confidentiality this may raise among participating members.
• There should be modifications to the bidding process on school district audits which consider the adequacy of professional hours planned as part of each bid to assist in the communication of realistic bids.

President Kearney asked board members to e-mail any additional comments or suggestions to Mr. Grumet after the Board meeting, so that Mr. Grumet could communicate them at the next working group meeting.

Mr. Grumet reminded the Board that as part of the 2004-2005 Society and FAE budget approval process, $200,000 had been dropped from an initially-proposed budget that included four new staff positions and a more frequent publication schedule for The Trusted Professional. However, the Board left open the possibility for further consideration of the initiatives.

In light of the recently completed CPE season, which had been quite successful, Mr. Grumet requested that the Board amend the budget to approve a four-month, semi-monthly publication schedule of The Trusted Professional as well as one additional staff person in the production department to help with the increased workload.

In the ensuing discussion, a board member asked if the increased publication schedule would result in increased advertising revenue. Ms. Barry, Communications Director, responded that increased revenue was a possibility, but added that several advertisers had been allowed free exposure for the second issue of the month. She noted that the Society’s outside advertising firm, Executive Publishing, was continuing to look at the revenue issue.

Mr. Piluso moved to approve a publication schedule for The Trusted Professional on a semi-monthly basis over a four month period and the hiring of a staff person, and Mr. Bloom seconded the motion. The motion passed unanimously.

President Kearney introduced guest, Kevin J. McCoy, Chairman of the Legislative Task Force.

Mr. McCoy gave an update on the status of pending accountancy legislation in the New York State legislature. He stated that although the New York State Senate unanimously passed Society-endorsed accountancy bill 302-D, the Assembly did not favor an identical bill and therefore introduced a different bill, A. 11695, near the end of the 2004 legislative session. He noted that the Assembly bill did not address mandatory peer review, CPE for all registered CPAs, expansion of experience requirement for licensure, temporary practice permits, and commissions and referral fees from non-attest clients. Mr. McCoy stated that the Legislative Task Force was continuing to work with the Assembly to ensure that Senate bill 302-D would be passed by the Assembly with the addition of language on substantial equivalency, but noted that there were issues standing in the way of a workable solution between both houses.

Mr. McCoy encouraged the Society to support a change in strategy to get an accountancy reform bill through both houses, and suggested several approaches including: 1) focusing on a grassroots campaign on individual assembly members; 2) requesting meetings with the Assembly speaker in order to more effectively communicate the Society’s concerns; and 3) mounting a major press campaign.

Several Board members asked that talking points and or a sample letter be drafted to assist in the implementation of the proposed strategies, and that any Board-adopted strategies be communicated to members during the remaining officer visitations.

President Kearney suggested that the strategies be approved first to allow the Legislative Task Force to develop an overall implementation process.

Mr. Stubbs moved that the Board support the three strategies as presented by Mr. McCoy, and that the Board direct the Legislation Task Force to develop an implementation process. Mr. Barback seconded the motion. The motion passed unanimously.

a. Drafted Audited Financial Statements for year ending May 31, 2004

President Kearney introduced Warren Ruppel, Chair of the Audit Committee, and representatives of Goldstein, Golub & Kessler, LLP (GGK), Ian J. Benjamin and Adam Reiss.

Mr. Ruppel gave an overview of the process by which the audit was conducted, noting that the process was conducted in a professional manner with the full cooperation of management. He stated that at an August 17, 2004 meeting, the Executive Committee recommended approval by the full Board of the draft audit now presented. Mr. Benjamin then gave a brief summary of the August 9, 2004 letter regarding required auditor communications before turning the floor over to Society Chief Financial Officer Ms. Chambers.

Ms. Chambers summarized the results of the financial statements of the Society and consolidated entities for the year ending May 31, 2004, as well as accompanying notes. She pointed out the elimination of a prior $2,656,000 interfund liability between the Society and the Foundation for Accounting Education, Inc., as well as an $803,000 increase in net assets for the year. In response to a question, Ms. Chambers agreed to tie liabilities to cash flows and send to the Board within the next week.

Mr. Weiss then reviewed the management letter with the Board, including management’s responses. After the presentations and discussion, Ms. Doran moved to accept the auditor’s report and approved the audited financial statements and Mr. Berlant seconded the motion. The motion passed unanimously.

b. Appointment of Auditors

In the absence of GGK representatives, President Kearney reported that the Audit Committee had recommended GGK be reappointed as the auditors of the NYSSCPA and consolidated entities for the 2004-2005 fiscal year. Mr. Berlant so moved to reappoint GGK as the Society’s auditors for another year and Mr. Wolitzer seconded the motion. There being no objection, the motion passed unanimously.

Vice President Eassa, Chair of the Professional Liability Insurance (PLI) Committee, reported that at an August 17, 2004 meeting, the Executive Committee recommended approval by the full Board of a renegotiated endorsement contract with CAMICO Mutual Liability Insurance Company. A copy of the renegotiated contract was provided to Board members with the agenda materials. He then gave an overview of the process by which the PLI Committee negotiated the presented contract.

For background, Mr. Eassa reported that the Society had endorsed the CAMICO program since 2000 and that the current endorsement contract was scheduled to automatically renew on a year-to-year basis on January 1, 2005 unless either party gave notice of termination. He then pointed out several program highlights since inception, noting that CAMICO:

• As of August 31 2004, insured 404 New York firms covering 1,319 CPAs and generating $2.33 million in annual premiums;
• Provided coverage to many previously uninsured Society members;
  • Provided free Ethics CPE at 17 Officer Chapter Visitations 2 years in a row;
• Provided 3 full-day Fraud Prevention seminars in 2003;
• Rented a booth at the Society’s Trade Show for each of the last 5 years;
• Provided sponsorship revenue to the COAP program;
• Regularly took out paid advertising in both Society publications and on the website; and
• Paid endorsement fees to the Society in the amounts indicated in the confidential memo distributed to the Executive Committee.

Vice President Eassa stated that given the success of the program and the continuing benefit to the Society and its members, the PLI committee recommended that the CAMICO/NYSSCPA relationship continue. He then called upon Mr. Dodsworth to give a brief presentation.

Mr. Dodsworth gave a brief overview of CAMICO and its founding philosophy, noting that the company was founded as a mutual “policy-holder owned” company that would be available to its insureds through both hard and soft market conditions. He stated that out of all the insurance companies initially considered by the Society, only two including CAMICO remain in the marketplace today. He noted that although CAMICO was not headquartered in New York, its growth had allowed it to work through four agents in New York covering all upstate, downstate and Long Island regions. Mr. Dodsworth then addressed CAMICO’s underwriting capacity, stating that it could currently write policies up to $15 million in coverage.

President Kearney thanked Mr. Dodsworth for his presentation and opened the floor to questions. A number of Board members asked questions that were answered either by Mr. Eassa or Mr. Dodsworth.

One Board member suggested that CAMICO give educational presentations to members on claims and insurance underwriting, in order to further address the issue of uninsured firms. Several Board members agreed that the suggestion was a good one. President Kearney asked Mr. Eassa to have the PLI Committee work with CAMICO and staff to flesh out the logistics of such a presentation. Mr. Eassa agreed to do so. Mr. Eassa added that CAMICO agents would be present at the 2004-2005 officer visitations with information about the program and applications for coverage.

There being no further questions, President Kearney thanked Mr. Dodsworth who then left the meeting.

President Kearney asked Board members if they had any issues or questions they wished to discuss without Mr. Dodsworth present. There being none, President Kearney entertained a motion to approve the CAMICO contract as presented. Mr. Eassa so moved, and Mr. Nowicki seconded the motion. The motion passed unanimously. Mr. Ecker did not participate in the vote.

Mr. Pape presented the Membership Report which included 112 new members (including 55 new associate members), 6 reinstatements, 15 deaths, 29 candidate terminations and 52 resignations. These changes reflected a total membership of 30,675 as of September 22, 2004, as compared with 30,092 at approximately the same time the previous year.

A brief discussion ensued with respect to the recruitment of students, who pay $5 for their annual memberships, versus regular CPA members who pay up to $360 annually. It was noted that although membership numbers are up, dues income might not increase due to the shifting membership demographics. Mr. Pape reaffirmed the Society’s strong commitment to attracting future CPAs as associate members, but added that aggressive efforts are being made to also attract full regular CPA memberships.

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

President Kearney called upon Mr. Schmelkin to give a report on the FAE Trustees meeting. Mr. Schmelkin stated that FAE had cancelled the meeting which had been scheduled for the previous day.

For the Board’s information, Mr. Schmelkin provided a list of in-firm trainings that FAE had conducted over the period January through September 2004. He stated that FAE’s program cancellation rate to date was less than 15%, which was an improvement over previous years, and that course evaluations showed that registrants were generally very happy with the quality of FAE courses and speakers.

An executive session was not held.