03 – D – 00
Call to Order

03 – D – 01
Minutes

Mr. Hoops asked Board members if they had any changes to the minutes of the July 15, 2003 Board of Directors Meeting. There being none, Ms. Kirby moved to approve the minutes as written and Mr. Piluso seconded the motion. The motion passed unanimously.

Mr. Hoops noted that the draft minutes of the August 13, 2003 Executive Committee meeting were provided for informational purposes only, so that the Board would be better apprised of Executive Committee actions.

03 – D – 02
President’s Report

a. Relocation Update

Mr. Hoops introduced Steven C. Baum, Chair of the Real Estate Task Force, to provide an update on negotiations for the Society’s potential new office space located at 3 Park Avenue, which was approved by the Board at its July meeting.

Mr. Baum reviewed the complicated negotiations to that point with the current leaseholder of the space, the American Institute of Chemical Engineers (“AIChE”), who it was believed would become the sublessor. After negotiations began, the AIChE board determined to set an internal reserve requirement that would make it difficult to perform all its obligations under the proposed sublease arrangement. To accommodate this new aspect of the transaction’s structure, the parties were exploring recasting the transaction with the NYSSCPA assuming the AIChE’s obligations under the lease and then subleasing space to AIChE. For the recasting of the arrangement to work, there would be no additional cash required from NYSSCPA. Mr. Baum stated that AIChE’s Board of Directors was amenable to this arrangement, and the Society’s real estate counsel preliminarily advised that the arrangement posed a low risk to the Society. Mr. Grumet added, however, that the lawyers would continue to assess the risks and that the arrangement would not proceed if any substantive risk arose.

In the discussion which ensued, a Board member suggested that the task force evaluate what impact AIChE’s financial condition might have on the overall building at 3 Park Avenue, and not just the impact on the actual space the Society would occupy. Several Board members agreed and urged diligence in assessing the overall risks of the arrangement in light of AIChE’s financial condition. Mr. Baum and Mr. Grumet advised the Board that the task force was working closely with real estate counsel to evaluate all real and potential risks.

b. Chapter Visits

Mr. Hoops reported on the status of the Officers’ Visitations to the Society’s 17 chapters, noting that six had been completed thus far. Mr. Hoops stated that the visitations had been well-attended and well-received, and included topics such as the recently passed accountancy legislation and offered a free CPE course on Ethics.

c. AICPA

Mr. Hoops reported that the AICPA Governance Task Force made 14 recommendations to the AICPA Board. He stated that the central goal of the recommendations was to affirm that the role of Council was to lead, while promoting a sense of participation among AICPA members in the overall governance process. Mr. Hoops noted that this goal necessarily envisioned cross-communication and consultation between Council leaders and their respective constituents.

Mr. Hoops then summarized the 14 recommendations as follows:

• Council members should serve as leaders and trustees of the profession and, together with AICPA Board members, sign a Statement of Responsibilities.
• Once Council had acted as a body, each member should present the endorsed view of Council.
• The AICPA Board should investigate ways to provide Council with more timely and comprehensive information on issues under discussion.
• Council members should have a mechanism in place to suggest items for Board and Council meeting agendas.
• Council members should receive more extensive training through a new Council member orientation program.
• Breakout sessions and electronic polling should be regular parts of Council proceedings.
• Rather than two regular meetings of Council and one set of Regional Council meetings, there should be one full meeting of Council and up to three Regional meetings.
• Council should be permitted to vote by electronic ballot when not in session.
• Every Council meeting should have a forum open to all AICPA members, so that they may voice their opinions on the Institute and profession.
• Members of Council should receive issues-briefing binders.
• Council should adopt a resolution urging state societies to use a more democratic process in electing their Council members.
• Council members’ terms should be limited to two years, with a maximum of six consecutive years, to allow more AICPA members to serve.
• New Council members should be elected at the Spring meeting of Council and assume their positions on August 1, the first day of the AICPA’s fiscal year.
• Attendance at Council meetings should be mandatory, and any member who misses three consecutive meetings should forfeit the seat.

A Board member opined that one recommendation implied that a Council member must take Council’s position on any issue regardless of whether he or she disagrees with it. Mr. Hoops clarified that although it was important for a Council member to represent his contingent base, he or she was nonetheless free to express his or her personal views so long as it represents Council in a fair manner.

A Board member expressed concern whether one annual meeting of Council per year would be sufficient to tackle hot issues that emerged in the profession. Mr. Hoops responded that this point was discussed by the task force, and the consensus emerged that Council utilize electronic media to hold meetings on emergent issues.

In response to a question, Mr. Hoops noted that the task force did not tackle the issue of how the AICPA Board was appointed.

d. Diversity Forum Update

Mr. Hoops reminded Board members that he had established a diversity forum to suggest and encourage ways to increase the number of minorities and historically underprivileged in the CPA profession.

Mr. Grumet noted that although some of the larger firms reached out to such groups in their recruiting efforts, smaller firms often lacked the resources to do so. One of the suggestions resulting from the forum was that the Society should provide outreach services for such firms, but added that this would require additional staffing. Mr. Grumet then asked Board members for feedback on whether their firms or their colleagues’ firms would utilize such a service.

In the discussion which ensued, several Board members stated that their firms regularly reached out to the underrepresented, while others questioned why colleges and universities with accounting programs were not reaching out to firms regarding such students. A Board member noted that schools with small programs may lack resources for effective career services and firm outreach initiatives. It was also suggested that a large number of minorities may be entering larger companies in industry.

A Board member said that the supply of quality candidates from underrepresented groups should be studied. Mr. Grumet responded that many otherwise qualified candidates from underrepresented backgrounds might not pursue accounting careers due to a lack of jobs for, and consequently low representation of, such groups in the profession as a whole. Mr. Grumet urged Board members to recognize this source of the problem.

By way of history, Ms. Golden reminded the Board that the Society had a committee on Minority Recruitment and Diversity in the Profession, which scope was later fused with the Women in the Profession Committee and later replaced by the Diversity in the Profession Committee.

The Board then discussed what constitutes a minority, underprivileged or underrepresented group for the purposes of outreach. A consensus emerged regarding Black, Hispanic and Asian groups, while there was some discussion regarding other groups. Mr. Grumet noted that the Society had not thus far surveyed members regarding their racial backgrounds, but suggested that this might be a good idea going forward.

e. Furtherance Committee Recommendations

Mr. Hoops noted that the Furtherance Committee had recently made a recommendation to the Executive Committee that the Society produce a white paper on accounting, attestation and auditing standards for privately held companies. At its August 13, 2003 meeting, the Executive Committee agreed and referred the matter to the Accounting and Auditing (“A&A”) Oversight Committee to develop the report. Mr. Sohr, Chair of the A&A Oversight Committee, stated that he would report on the progress of the document at the next Board meeting.

f. Appointment of Selection Subcommittee

Mr. Hoops noted that he appointed a Selections Subcommittee whose job was to recommend to the Board, persons to potentially serve as the Board-designated members of the Nominating Committee and AICPA Council. Named to the Selections Subcommittee were President-elect John J. Kearney, Chair, Katharine K. Doran, Spencer L. Barback, Philip Wolitzer and Richard E. Piluso.

Mr. Hoops noted that an e-mail had been disseminated to members asking for recommendations of individuals to serve on Council and that 60 names had been received thus far. Mr. Kearney added that the slots would ultimately be filled via election by the NYSSCPA Board.

The question was raised whether it would be useful to have those members of Council who were recommended or appointed by the NYSSCPA Board (not including AICPA Board members or at-large Council members who might be from New York) attend NYSSCPA Board meetings as a way of keeping them better apprised of NYSSCPA issues. A Board member who served as a Council member suggested that the invitation extend to all New York members of Council, not just those recommended by the Society. Discussion of this idea ensued.

After discussion, Mr. Hoops named a task force to examine the issue in more depth and recommend ways of improving communication between the NYSSCPA Board of Directors and AICPA Council Members from New York. Volunteering for the task force were Mr. Evangelista, Ms. Golden, Ms. Hudson and Ms. Dwyer.

03 – D – 03
Treasurer’s Report

a. Financial Statements for Three Months Ending 8/31/03

Mr. Bloom presented the Treasurer’s Report, noting that combined NYSSCPA and FAE income for the period ending August 31, 2003 was $529,642, as compared to $780,450 in 2002. In this respect, income was ahead of budget for the current year by $237,329. Cash and equivalents stood at $4,554,403 as opposed to $4,132,984 in the previous year.

In the ensuing discussion, a Board member inquired about the large downward variance in rental income. Mr. Schmelkin responded that a company which had regularly rented classroom space from the Society recently declined further rentals due to changes in its classroom needs. Mr. Schmelkin also noted that because of the impending move of the Society’s offices, the Society had stopped pursuing classroom rentals due to the level of uncertainty regarding when and where the Society would actually relocate.

A Board member noted that he had recently received a glossy Foundation for Accounting Education CPE catalog, and inquired about possible savings in the publication’s production costs and mailing expenses. Ms. Barry responded that the production and distribution of the catalog had been cut back considerably to save costs. The procedure then became and remained to send a catalogue to active FAE registrants and to send only a postcard to other members. The postcard provided instructions to either access the on-line catalogue or to call in for a hard copy to be mailed. She added that the percentage of on-line registrations continued to increase and in the future, the Society might be able to cut back further on hard copy distribution.

b. Internal Controls Audit

Mr. Bloom provided an update on the proposed internal controls audit. He noted that the suggestion was made to hire the Society’s outgoing auditor, for the internal controls audit engagement. In the ensuing discussion, Board consensus was that although Sarbanes-Oxley proscribes such an arrangement only for public companies, the re-hiring of the outgoing auditor for an internal controls engagement would nonetheless create a bad appearance in the eyes of the public and should be avoided.

03 – D – 04
President-elect’s Report

a. Annual Leadership Conference for July 2004 and July 2005

Mr. Kearney asked Mr. Schmelkin to provide an update on Leadership Conference venue negotiations. Mr. Schmelkin reported that he had followed an Executive Committee suggestion to propose a two-year commitment to the Sagamore in exchange for a more favorable rate for each year of the conference. Mr. Schmelkin noted that the Sagamore responded favorably, offering a two-year package which placed the resort in a competitive posture relative to the Gideon Putnam of Saratoga Springs, New York, which hosted the most recent conference. The date for the 2004 conference had been arranged for July 11, 12, and 13.

b. Policy Task Force

This matter was deferred.

03 – D – 05
Vice Presidents’ Reports

a. Report on Chapters

Vice Presidents Napoleon-Hudson and Nowicki gave reports on several of the Society’s 17 Chapters. Both expressed personal joy in interacting with the diversity of Chapters, and noted that a common theme among all Chapters was a call for stronger leadership at the national level.

b. Legislative Update

Mr. Love noted that because of the state legislature’s summer recess, there was little to report; however, a discussion ensued regarding the issue of substantial equivalency, which had been left out of the accountancy bill recently passed by the New York State Senate and endorsed by the Society.

It was noted that if substantial equivalency were allowed in New York, a person with a valid CPA license from a state other than New York would be able to practice public accountancy in New York under certain conditions, so long as the foreign state’s licensure requirements are deemed “substantially equivalent” to those of New York.

Mr. Love stated that 40 states had been deemed substantially equivalent, but because licensure was a prerogative of state legislatures, only 23 states had legislatively enacted such reciprocity. Several Board members opined that given the multi-state landscape of many businesses today, New York’s lack of substantial equivalency legislation was antiquated. The Board then agreed by consensus to support substantial equivalency in the accountancy bill.

03 – D – 06
Executive Director’s Report

a. Peer Review and Ethics Staffing Update

Mr. Grumet reported that a member of staff had recently been promoted to the newly created position of Quality Assurance Administrator, which would have the responsibility of overseeing the records management for the peer review program and ethics program, as well as legal contracts. He added that another member of staff had been named to the position of Peer Review Manager, and the search for a CPA for the Ethics division was continuing.

b. Insurance Update

Mr. Grumet reported that CAMICO Mutual Liability Insurance Company, which the Society exclusively endorsed as a provider of CPA liability insurance, had reached a total of $1.6 million in annual premiums, covering 328 firms and over 1000 CPAs. He added that the Society’s Professional Liability Insurance Committee which oversaw the CAMICO endorsement had a new Chair, former Board member Andrew Eassa. In addition, Gerry Golub, of GGK, LLP, had become the Society’s representative to CAMICO’s Board of Directors. Mr.

Grumet announced that CAMICO was preparing to give a report to the full Society Board of Directors at its April 2004 meeting.

Mr. Grumet also summarized the in-force policy statistics for Marsh Affinity Group Services, which administered the Society’s Term Life, High-Limit Accident, Medicare Supplement, Catastrophic Major Medical, Hospital Indemnity and Disability Insurance programs. The Marsh programs collectively reported 5,000 total policies in force, generating over $3.6 million in annual premiums.

c. COAP Update

Mr. Grumet reported that the Rochester Chapter was exploring the possibility of hosting a Career Opportunities in the Accounting Profession (COAP) program at the State University of New York at Brockport. Siena College was also being looked at. Mr. Grumet also reported that Long Island University had offered to provide a residential opportunity in conjunction with the program, at no extra charge to the Society.

Mr. Pape added that 41 persons, including 11 parents, had signed up for the program called “Homecoming”, sponsored by the energy company Keyspan, which would provide COAP students and their parents with information about applying to college, including scholarship and financial aid opportunities. The program was scheduled for late September.

d. FOIL Action

Mr. Grumet reported that the State Education Department (SED) had rejected the Society’s Freedom of Information Law request for the names and addresses of newly certified accountants due to privacy concerns. Mr. Grumet stated that he would contact his colleagues at other New York state professional associations in the hope of finding out whether the SED privacy policy was being applied to all professions. Depending on the responses, Mr. Grumet suggested asking the Executive Committee for guidance on whether a lawsuit filing was desired.

Mr. Hoops reminded Board members of a postponed resolution which was made at the July 15, 2003 Board of Directors Meeting by Mr. Westcott, and seconded by Mr. Sypolt, that the Society communicate to the AICPA Board the recommendation that Mr. Barry Melancon be asked to resign his position as AICPA President and CEO. Mr. Hoops noted that the resolution had been postponed to allow an opportunity for dialogue between the NYSSCPA Board and William F. Ezzell, the AICPA Chairman.

Mr. Hoops then gave a brief recap of the Board dinner held the previous night at which William Ezzell was the guest. He stated that Mr. Ezzell posed a very important question to the Board: Is the AICPA a trade organization or a professional association? He then opened the floor to discussion of the resolution, asking Board members to comment one by one. A spirited discussion ensued.

During the discussion, the suggestion arose that Mr. Hoops send a letter to Mr. Ezzell, thanking him for attending the prior evening’s dinner, and publicly reiterating that the NYSSCPA Board believes the national organization should indeed be a professional association, not a trade organization. Ms. Golden agreed with the idea, suggesting instead that such a letter be signed by the entire NYSSCPA Board.

Ms. Dwyer moved to indefinitely postpone the motion, and Mr. Evangelista seconded the motion. During the ensuing discussion, it became clear that the Board wanted to take some action in the general area addressed by the main motion, though not what was proposed. In the end, the Board unanimously rejected the motion to indefinitely postpone.

Mr. Wolitzer then moved the previous question, and Mr. Moynihan seconded the motion. The motion passed with only Messrs. Westcott and Sypolt opposed.

Mr. Hoops conducted a vote on the main resolution that the Society communicate to the AICPA Board the recommendation that Mr. Barry Melancon be asked to resign his position as AICPA President and CEO. The motion failed.

Ms. Kirby then moved that the Board draft a letter of concerns to AICPA Chairman William Ezzell, making sure that the Board’s actions in voting down the resolution not misconstrued as a tacit vote of confidence in the AICPA’s leadership, and that a clear indication was made that New York wants its national organization to be a professional association, not a trade organization. Mr. Westcott seconded the motion. The motion passed with one Board member opposed.

Mr. Hoops thanked Board members for their candid responses, and also thanked Mr. Westcott for raising the issue which led to the dialogue and final action.

This matter was deferred.

Mr. Pape presented the Membership Report which included 237 new members (including 138 new associate members), 15 reinstatements, 19 deaths, 3 terminations and 51 resignations. These changes reflected a total membership of 30,092 as compared with 29,827 at the same time the previous year.

Mr. Kearney moved to approve the Membership Report, and Ms. Cohen seconded the motion. The motion passed unanimously.

This matter was deferred.

a. Draft Audited Financial Statements as of May 31, 2003

Mr. Hoops introduced former NYSSCPA Vice President Stephen Langowski, Chair of the Audit Committee, and Julie L. Floch and D. Edward Martin, partners of the Society’s auditing firm Eisner LLP.

Mr. Langowski briefly reviewed of the process by which the Audit Committee worked with the Society’s auditors and Society management then asked the auditors to review the audit.

In the discussion which followed, Ms. Golden said that a statement of functional expenses was needed for transparency’s sake, even though such a statement was not required under generally accepted accounting principles for non-profits. Several members agreed, and suggested that it be published in The Trusted Professional.

Mr. Martin then reviewed the current year and prior year variances and management letter considerations resulting from the audit. After the presentation, the Board went into executive session, from which no resolutions emanated.

Following the discussion, the board approved the audited financial statements without objection.

b. Appointment of Auditors

The auditors were then dismissed. Mr. Langowski noted that the Society’s Bylaws required the appointment of a new auditor every four years. This being Eisner LLP’s 4th and last year, Mr. Langowski noted that following an extensive RFP process, to which two dozen firms had responded, it was the recommendation of the Audit Committee that the Board appoint the firm GGK, LLP to be the auditing firm for the Society and consolidating entities for the year ending May 31, 2004, with renewal of the engagement to be dependent on performance.

A lengthy discussion ensued regarding the appointment of GGK, and the potential for perception among members that American Express Tax and Business Services (AMEX) would be involved in filing the Society’s taxes. Board consensus emerged that the appointment of GGK as the Society’s auditor should only be made if contingent upon GGK signing the Society’s tax returns. There was no concern expressed about the ability of AMEX to do this tax work, only that it should be done by a CPA firm for a CPA society.

The Board then recessed while Mr. Langowski checked whether this contingency was acceptable to GGK and AMEX. Mr. Langowski then reported to the Board that GGK was amenable to preparing and signing the Society’s tax returns, instead of AMEX.

Ms. Golden moved to appoint GGK as the Society’s auditors, provided that GGK would also prepare and sign the Society’s tax returns. Mr. Berlant seconded the motion. The motion passed carried. Mr. Westcott opposed.