Sandra A. Napoleon-Hudson,
Vice President

04 – A – 0
Call to Order

04 – A – 1
Minutes

a. Approval of Minutes of December 17, 2003 Meeting

Mr. Hoops asked Executive Committee members if they had any changes to the minutes of the December 17, 2003, meeting. There being none, Mr. Riley moved to approve the minutes, and Mr. Love seconded the motion. The motion passed unanimously. Ms. Doran, and Messrs. Nowicki and Jones did not participate in the vote.

b. Board Minutes of November 18, 2003 Meeting

The minutes of the November 18, 2003 Board meeting were provided for Executive Committee information only.

04 – A – 2
President’s Report

a. Update on Nominating Committee

Mr. Woehlke announced that the 2004 Nominating Committee, chaired by former Society president Nancy Newman-Limata, nominated the following persons in the position set opposite their names:

Mr. Hoops congratulated the nominees.

Mr. Woehlke reminded the executive committee that at a November meeting, the full Board 1) held an election recommending Society members to fill vacancies of varying terms on the AICPA Council; 2) held one three-year Council vacancy open for the Society’s 2004-2005 president-elect; and 3) made provision for a replacement Council recommendation in the event one of the initially recommended leaders were later nominated for president-elect. Mr. Woehlke noted, however, that the Board did not make provision for a replacement recommendation in the event that the 2004-2005 president-elect nominee were already serving on Council. Because president-elect nominee Stephen Langowski was already serving on Council, Mr. Woehlke advised the committee that one Council vacancy remained unfilled.

After discussion, Mr. Love moved to recommend that the Board treat the remaining Council vacancy as if it had arisen under the Board’s original contingency plan. Mr. Bloom seconded the motion.

In the discussion which ensued, Mr. Woehlke advised the committee that under the Board’s contingency plan, Mr. Riley would become the Society’s three-year member of Council rather than a one-year member, and immediate past treasurer Frank Aquilino, who had received the next-most number of votes in the November election, would be asked to fill the one-year position.

The motion passed unanimously. Ms. Doran, and Messrs. Nowicki and Jones did not participate in the vote.
Mr. Riley abstained.

President Hoops then directed staff to communicate the Executive Committee’s recommendation to the full Board by e-mail, noting that if a majority of the Board rejected this approach, the Board would hold another election.

b. Office Relocation

Mr. Schmelkin announced that the lease assignment for the Society’s future offices at 3 Park Avenue had been executed, pending final review and approval by the building’s owners and the lender holding the mortgage on the property. Mr. Schmelkin noted that the next step in the process would be to meet with architects and obtain expedited approvals and permits from the New York City Buildings Department for the office build-out.

Mr. Schmelkin stated that in accordance with a bid process, companies which the Society might engage to perform site construction and the actual move would be met. Mr. Schmelkin anticipated that the move would take place in late May or early June, in time for the Foundation for Accounting Education’s summer CPE season.

A committee member asked for a brief summary of the letters of credit which were being used by the lease assignor, American Institute of Chemical Engineers (AIChE), with respect to the relocation, including their respective durations. Mr. Schmelkin noted that AIChE was utilizing three letters of credit: one covering the entire duration of the lease as rent security, a second two-year letter of credit covering the repayment to the Society for the $500,000 cost of build-out, and a third letter of credit, expiring in October 2004, which would cover the Society’s remaining lease payments under its current lease at 530 Fifth Avenue, also expiring in October 2004.

Mr. Hoops commended Messrs. Baum (Chair of the Real Estate Task force), Grumet and Schmelkin for their work on the Society’s office relocation.

c. Recommendations for PCAOB Standards Advisory Group

Mr. Colson reported that all but three of the recommended nominees for the PCAOB Standing Advisory Group, who were approved at the December 17, 2003 Executive Committee meeting, indicated a willingness to serve if ultimately selected. Mr. Colson added that Dan Goldwasser, who had initially declined the recommendation, subsequently indicated a desire to remain on the list and serve on the advisory group if ultimately selected.

d. COAP Fundraising Update

President Hoops reported that the COAP Fundraising Committee, chaired by Frank Fusaro, was continuing to develop its membership.

e. Report on Private Company Audit Standards Task Force

Mr. Colson reported that the Private Company Audit Standards Task Force of the Auditing Standards and Procedures Committee had disseminated a private sector audit standards white paper to the AICPA, Accounting and Auditing Standards Oversight Committee, and the managing partners of approximately 25 larger accounting practices in New York for their collective comments and recommendations.

f. Report on FAE

Mr. Schmelkin gave a report on the Foundation for Accounting Education (FAE), including its efforts under the strategic plan to meet the educational needs of members in industry. Mr. Schmelkin noted that if New York legislation requiring CPE for CPAs in industry were signed into law, FAE’s efforts in this regard would be particularly important to a growing segment of Society members working in, or switching over to industry positions.

The committee then discussed several informal FAE trustee suggestions to change FAE’s governance structure. Mr. Hoops noted that the Society presidency entailed a long three-year commitment (one year as Society president-elect, president and FAE president, respectively). Several trustees questioned whether the third year as FAE president should be compulsory, citing post-presidential burn-out and the time commitment. Mr. Hoops recounted a FAE trustee suggestion that FAE’s governing body be chaired for two years by a Society president-appointed member, much like the Society’s committees. Mr. Hoops likened such a FAE chairpersonship to a feeder position for future Society presidents, as opposed to a repository for immediate past presidents. Mr. Schmelkin noted that before FAE was founded, each year a Society vice president was dedicated to CPE issues.

In the ensuing discussion, several committee members stated that many highly-qualified Society leaders did not vie for the presidency because of the automatic three-year commitment it would entail. Several also opined that a two-year president commitment, minus the compulsory FAE presidency, would make both positions more palatable for leaders who otherwise have to juggle their consideration of the combined positions against firm and family needs. It was noted that the FAE trustees would be considering the governance matter as a bylaws change.

A discussion then ensued regarding monitoring the quality of FAE courses. Mr. Schmelkin summarized steps to monitor course quality including computer-tabulated evaluations and an open communications policy between course-takers and staff.

Mr. Woehlke gave an update on a number of proposals to merge Benevolent Fund assets with FAE Scholarship assets. The governing bodies of both organizations raised issues about the various proposals, and would be further considering the proposals.

g. Annual Leadership Conference Location

Mr. Schmelkin announced that the Society had received a proposal from the Gideon Putnam Hotel in Saratoga Springs, New York to serve as the Leadership Conference venue for July 2006 and 2007. He reminded the committee that it had already approved the Sagamore Resort at Bolton Landing on Lake George for the 2004 and 2005 conferences.

In the ensuing discussion, Mr. Love expressed concern regarding an eight percent annual increase limit on the proposal, suggesting instead that increases be limited to one-to-two percent above the inflation rate specific to the hotel’s region. Several committee members agreed with this approach.
Upon a motion made by Mr. Riley and seconded by Mr. Bloom, the Executive Committee unanimously authorized and directed the Executive Director or his designees to execute all contracts necessary to engage the Sagamore Resort for July 2005, and the Gideon Putnam Hotel for July 2006 and 2007, as the hotel venues for the Leadership Conference in each of those respective years, and that staff attempt to negotiate an annual rate increase for the Gideon Putnam package of no more than two percent above the inflation rate specific to the Saratoga Springs region.

President-elect’s Workshop

President-elect Kearney reported on the chapter President-elects’ workshop, scheduled for January 26, 2004.
.

a. Financial Statements as of December 31, 2003

Mr. Bloom presented the Treasurer’s Report, noting that combined NYSSCPA and FAE income for the period ending December 31, 2003 was $595,247. Net income was ahead of budget by $394,058. Cash and equivalents stood at $3,340,809 as opposed to $2,393,857 in the previous year.

b. Update on Internal Controls Study

The Executive Committee by consensus reaffirmed the scope of the proposed internal controls engagement as a review of the efficiency and adequacy of internal procedures. Mr. Bloom reported that RFPs for the engagement had been sent to a number of firms, and Ms. Chambers noted that one response had been received as of the date of the meeting.

a. Report on Chapters

Vice President Nowicki gave a brief update on chapters.

Ms. Chambers then noted that four chapters, Mid Hudson, Rochester, Utica and Southern Tier, had not yet submitted their respective 2004-2005 budgets. After a brief discussion it was suggested that President-elect Kearney communicate with the presidents of each named chapter to rectify the situation. The committee by consensus agreed with this approach.

b. Legislative Update

Vice President Love reported that the New York state legislative session opened in the prior week and that a number of meetings had been scheduled with the State Education Department, Big Four lobbyists and Senator LaValle. Mr. Love then announced that eleven sponsors for the LaValle bill had been garnered in the New York State Senate thus far.

President Hoops encouraged members to contribute to and attend fundraising events for New York Senator Kenneth LaValle and Assemblyman Ronald Canastrari, noting that 33 and 27 members had already contributed to their campaigns, respectively.

c. Recent Society Comments

Vice President Rubin noted that the following Society commentary had been issued:

• Comments submitted to the New York City Tax Commission by the NYSSCPA Real Estate Committee, chaired by Barry Moss, with suggestions related to Form TC 201 on Related Party Payments and Lease Buyout Income/Expense and Abandonment of Lease Acquisition Costs, dated December 22, 2003; Robert Waxman, Margaret Wood, principal drafters.

Mr. Rubin announced that the New York City Tax Commission agreed to revise its glossary based upon the above comments, and commended the committee and authors for excellent work in achieving this positive response.

The committee then discussed the potential for professional liability in handling technical hotline inquiries. Mr. Rubin noted that the potential for liability transcended hotline-routed inquiries, referring to his own experiences where he had received calls from persons who were referred to him by other members, or who had obtained his name and contact information through other channels. Individual members of the committee suggested the use of an inquiry tracking system so that volunteers would know whether a call was referred via the hotline or through another source, and several noted that such a system might assist in identifying over-users of the service. The committee also discussed the use of disclaimers where appropriate to mitigate liability.

Mr. Colson noted that Society staff members who handle inquiries were instructed not to answer specific questions, but to direct callers to relevant literature and reference material that address their issues. Mr. Markezin added that technical hotline committee volunteers were similarly advised to handle calls in this manner.

a. Compliance with Society Policies

Mr. Woehlke reported on leadership and staff compliance with a Society policy concerning conflicts of interest, noting a 100% response to the policy questionnaire by the Executive Committee and staff. A brief discussion ensued regarding the high, but not-yet-complete level of response by other volunteer segments. Mr. Woehlke stated that he would follow up as necessary and update the committee at its next meeting.

b. Dues Update

Mr. Grumet announced that 94% of membership dues had been received, which slightly exceeded the budgeted figure, and expressed hope that the remaining 6% be collected in the remaining months of the fiscal year.

c. Update on Dan Dustin Letter on Ethics CPE

As reported at the December 17, 2003, Executive Committee meeting, Mr. Grumet reminded the committee that staff had requested a letter from Daniel J. Dustin, Executive Secretary of the New York State Board for Public Accountancy, to resolve issues regarding the Society’s Ethics CPE programs and state guidelines. To date, the letter had not been received.

d. Industry Committees

Mr. Grumet reported that the Industry Oversight Committee had responded favorably to the addition of several new committees under its purview, including a committee on risk management, newly-transitioned industry CPAs, corporate governance and a second committee on financial products with a post-SEC/Sarbanes-Oxley focus. He noted that the Committee on Committee Operations would be considering the new committees for the 2004-2005 committees year.

The Executive Committee approved the membership report which included 157 new members (including 95 new associate members), 182 reinstatements, 10 deaths and 7 resignations. These changes reflected a total membership of 29,661, two less than reported at that time the previous year.

Ms. Doran moved to accept the membership report, and Mr. Riley seconded the motion. The motion passed unanimously.

The Executive Committee reviewed the recommendations of the Peer Review and Ethics Task Force on Quality Control and Ethics, which had received 33 comments from the membership in response to a general e-mail solicitation. Mr. Colson then summarized the 33 comments, and the committee made a number of changes to the document.

The Executive Committee discussed at length the task force’s recommendation of an interstate compact for the standardization of CPA licensing, ethics enforcement, peer review and continuing professional education, including the perception by some that the idea competes with state Uniform Accountancy Act initiatives. Several committee members opined that the interstate compact could possibly distract Society efforts to pass updated accountancy legislation in New York, but suggested that an interstate compact nonetheless be further studied and revisited at a later time. The committee by consensus agreed with this approach and directed staff to conduct further studies on the issue. Mr. Grumet spoke of a need to continue educating the public regarding the issue of compacts in the accountancy arena, in order to address any misunderstandings that had emerged or might emerge in the future. The Executive Committee by consensus agreed that Mr. Grumet’s efforts could be helpful, so long as he proceeds in his individual capacity and not on behalf of the Society.

With respect to the remaining report recommendations, the Executive Committee made the following suggestions:

• Supported mandatory peer review as part of a quality-monitoring program for NYSSCPA members performing engagements under PCAOB rules, SASs, SSAEs, or SSARS.
• Supported a senior policy committee with members drawn broadly from the membership and the public along the lines recommended by the task force. In addition, this policy committee would take responsibility for the following:

  o Determining whether existing or new peer review programs for accounting and auditing engagements satisfy NYSSCPA membership requirements.
  
  o Periodically reviewing, updating, and amending NYSSCPA membership requirements as they relate to quality monitoring, ethics, and CPE (e.g., minimum requirements if performing accounting and attest services).

  o Developing new conceptual models for quality monitoring in areas of CPA practice and employment not covered by existing peer review.

  o Creating a disciplinary capacity to handle ethics cases that fall outside the Joint Ethics Enforcement Program (JEEP).

• Supported the development of a Quality Enhancement Support Team (QEST) as outlined in the task force report.
• Supported cooperation with New York State in ethics investigations.
• Supported continued participation in JEEP.
• Supported expansion of ethics CPE offerings and underwriting their cost as outlined in the report.