03 – A – 00

Call to Order

03 – A – 1

Approval of Minutes of December 17, 2002, Meeting

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Executive Session

The committee entered into executive session. The Executive Committee took no formal action as a result of the executive session.

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President’s Report

a. Bylaws Task Force Update

Ms. Golden recognized Sharon S. Fierstein, Chair of the Bylaws Task Force, who summarized the process by which the task force was developing its proposals to amend the bylaws. She then outlined the task force’s list of proposed changes.

Ms. Fierstein noted that at present there was no guidance for the recommendations from the chapters to fill openings on the Board and the Nominating Committee was not bound to choose from among the chapter nominations. One proposal would change this and require that (1) chapters propose at least three but no more than five people to fill chapter representative openings on the Board and (2) the Nominating Committee must select from among the names put forth by the chapters.

A lengthy discussion ensued. One committee member believed each chapter should only have to nominate one member and the Nominating Committee should be bound to accept that person. Another Executive Committee member countered that the Nominating Committee needed more flexibility to ensure greater diversity on the Board. The first member suggested that the chapters be informed of this rationale. He said that chapters should be advised to rank their nominations in order of preference and the Nominating Committee should be encouraged to honor the ranking.

Another member noted that some chapters have found it difficult to identify three people willing to serve on the Board. There was little agreement with this view among other Executive Committee members. Ms. Fierstein offered to have the task force revisit this area.

She related that a major issue for the task force was the number of past presidents who typically serve on the Nominating Committee. She noted that some task force members expressed concern that past presidents influence Society leadership composition long after they have ceased involvement with the current leadership. Furthermore, the use of an election process did not ameliorate the concern this year in that five out of nine 2003 Nominating Committee members were past presidents.

Mr. Love opined that members tend to trust the judgment of past presidents, which would explain why they are elected to the Nominating Committee in such numbers. Some suggested that this would be an acceptable result especially where an election was held.

The committee discussed methods to reduce the tendency for repeat service on the Nominating Committee, suggesting three approaches:

• Restrict the number of past presidents who could serve on the committee. Mr. Woehlke cautioned that this would entail discriminating against a particular class of members and may not be legally enforceable. He added that this approach would introduce a much higher level of complexity to the election process.
• Limiting the number of terms a member could serve on the Nominating Committee.
• Expanding the hiatus between Nominating Committee terms from the current two-year period.

Ms. Fierstein stated that she would take these suggestions back to the task force for its consideration.

A brief discussion then ensued regarding whether Nominating Committee candidates should disclose platforms on relevant issues. Mr. Woehlke noted that Nominating Committee candidates currently provide background biographical information, but do not run on platforms as such.

Ms. Fierstein opined that the purpose of the Nominating Committee was to identify leaders, not platforms, and that it was only relevant whether the candidate could effectively represent the membership. Ms. Doran agreed, noting that the Society’s stance on issues may change over the course of a three-year term, thereby obviating the usefulness of declared positions or platforms.

Ms. Fierstein noted that the task force would recommend that all officers must be included on the Executive Committee, that the number of vice presidents be reduced from four to three, and that two of the vice-presidents share the role of chapter vice president as the job had become too time-consuming to be done effectively by a single vice president.

Ms. Golden suggested that the remaining vice president position be designated to address professional issues, encompassing such professional areas as ethics and peer review. In the resulting discussion, several committee members agreed that this would be a good idea. Ms. Fierstein stated that she would bring this recommendation back to the task force.

Ms. Fierstein reported that the task force would likely recommend that the Executive Committee be limited to a total of eleven members. Several members disagreed with this proposal. Ms. Golden noted that a larger committee would be more conducive to effective delegation. Ms. Fierstein stated that she would bring this back to the task force for further consideration.

Ms. Fierstein thanked the committee for the opportunity to present the proposals of the Bylaws Task Force, and asked members to e-mail her with any additional suggestions or comments.

b. Legislative Update

Ms. Golden stated that the State Board for Public Accountancy recently requested that the Society respond to proposed regulations regarding commissions. Ms. Golden noted that a response was being drafted by Mr. Love that would accord with the Society’s legislative agenda.

Ms. Golden noted that Mr. O’Leary, the Society’s director of government affairs, was drafting a position paper regarding the Society’s proposed legislation, to be published on the website.

Ms. Golden reminded the Executive Committee of the meeting held at the State Education Department, including representatives of the Society, the Big 4 and representatives of the State Board for Public Accountancy. She noted that the Society had recently received minutes of that meeting and disagreed with the portrayal of much of the discussion. Mr. O’Leary was drafting a memo to correct the mistaken impressions left by the SED-drafted minutes.

Mr. Grumet spoke regarding the changing political atmosphere in Albany under current budget constraints. He recalled Governor Pataki previously indicated that the State Education Department was fiscally overwhelmed by its oversight of 39 professions, and that budget constraints may call for an overhaul of the department with respect to the professions.

Ms. Golden noted that she and Mr. Grumet recently met with the President of the New York State Bar Association, Lorraine Power Tharp, at a panel discussion dealing with the Sarbanes-Oxley legislation. She said that the discussion was important because both the CPA and legal professions are importantly affected by the Sarbanes-Oxley Act.

Mr. Grumet also spoke briefly regarding his recent meeting with managing partners groups throughout the state.

c. Nominating Committee Update

Ms. Golden reported that the election for the Nominating Committee had been completed and the final composition of the 2003 Nominating Committee was the following:

• Michael L. Borsuk
• Brian A. Caswell
• Debbie A. Cutler
• Katharine K. Doran
• Neville Grusd
• Elliot L. Hendler
• Stuart Kessler
• Barry B. Seidel
• P. Gerard Sokolski

She also noted that the Nominating Committee was scheduled to meet on Thursday, January 23.

d. Peer Review and Ethics Task Force Update

Ms. Golden mentioned that Brian Caswell had agreed to chair this task force, and that she would be meeting with him shortly to identify the remaining task force members.

e. Society Comment Letters

Ms. Golden commended the Financial Accounting Standards Committee, chaired by Steven Rubin, for its recent Comments on FASB Proposal for Principles-Based Approach to U.S. Standard Setting, dated January 7, 2003, principal drafter, Fred R. Goldstein.

Mr. Colson, director for technical services, then addressed the committee regarding an invitation by FASB for increased Society input. He noted that FASB had been under pressure from publicly-traded companies to solicit input from middle level lenders and supply-side analysts, and other financial concerns, as opposed to large accounting firms and demand-side advisors. As a result, FASB Chairman Jenkins approached Mr. Colson to assemble a list of the Society members.

Mr. Colson noted that at a Nassau County meeting, he discussed this request with Messrs. Neville Grusd, Mark Serelli (from Merrill Lynch), and Glen Teransky (from the New York Stock Exchange). The result of the meeting was to recommend that a task force be formed to select Society members who could advise FASB. Mr. Grusd added that it would be a good catalyst to get the Cooperation with Bankers and Other Credit Grantors Committee involved in this process as well.

Mr. Nelson moved, and Mr. Eassa seconded, that the Society form a FASB advisory task force. There being no objection, the motion was approved unanimously.

Ms. Golden expressed pride that the Society was recognized by FASB as a source for meaningful input.

f. Leadership Conference Venues 2004

Mr. Schmelkin asked members for venue suggestions for the Leadership Conferences in 2004 and beyond. He reminded members that the 2003 Conference would be held in Saratoga Springs, New York, at the Gideon Putnam Conference Center July 13-15.

In the ensuing discussion, the following venues were discussed: Mohegan Sun, the Sagamore at Lake George, Niagara Falls, and Lake Placid. The committee also discussed holding the conference at Gideon Putnam again in 2004.

Two venues were expressly excluded from consideration: Cooperstown, due to the inability to obtain a large enough room block a year in advance of the meeting, and Turning Stone, due to sensitivities over the pending land-use lawsuit.

Upon a motion made by Mr. Love, and seconded by Mr. Nelson, the committee unanimously agreed to hold future leadership conferences in New York State only.

g. AICPA Council Recommendations

Ms. Golden noted that the Society had been asked to recommend four people to fill three-year, “elected member” positions opening up on AICPA Council in October 2003 and one person to serve as the NYSSCPA representative on Council for one-year also beginning in October. She announced Sharon S. Fierstein, Stephen F. Langowski, Kevin J. McCoy, and Maryann M. Winters as her selections for the three-year “elected member” slots, and Mr. Hoops for the one-year position. She asked for a ratification of this decision.

Mr. Nowicki made a motion to ratify Ms. Golden’s recommendations to the AICPA Nominating Committee. Mr. Nelson seconded the motion, which after further discussion carried unanimously.

03 – A – 4

Treasurer’s Report

a. Financial statements for period ending December 31, 2002

NYSSCPA CFO Lynn Chambers presented the financial statements for the period June 1 through December 31, 2002. They showed combined total assets for the NYSSCPA and FAE of $5,657,851, total liabilities of $5,100,949, and, therefore, net assets of $556,902. (These numbers excluded FAE’s permanently restricted fund, the NYSSCPA Benevolent Fund, and the CPA PAC.) The current year’s net income was $886,963, which was $112,869 higher than budget.

Turning to several specific items of interest, Ms. Chambers noted that the balance sheet showed $675,000 in deferred revenue from FAE, which could be carried over into January 2003. In connection with this deferral, Mr. Schmelkin noted that the deferred revenue figure represented the POP program and January conferences.

Ms. Chambers added that FAE had paid back $412,000 to the Society, because it had done so well in the current year. She also reported that the Society would not have to use all of its line of credit this year.

Ms. Chambers reported that approximately $150,000 of revenue from eMind was subject to dispute and that the FAE Trustees had authorized the engagement of an attorney to represent FAE in arbitrating the matter.
She reminded committee members that the Society was now using an outside firm to solicit advertisers and that there was an expected learning curve as they took over this new responsibility. Advertising revenue was, therefore, under budget $119,000. She added, however, that the Society was now reaching advertisers that it had never reached before; so the outlook was optimistic.

Ms. Chambers also explained a budget shortfall in dues revenue of approximately $300,000. She noted that in preparing the budget, staff had used membership numbers that were outdated. Once updated, the numbers presented a smaller revenue outlook.

Finally, Ms. Chambers noted that looking at FAE’s net income alone, it stood at $178,000 on December 31, 2002. This was approximately a $900,000 improvement over December 2001.

b. Investment Committee report

Mr. Aquilino presented the Investment Committee Report. He noted that the Investment Committee met with representatives from Sanford Bernstein and Merrill Lynch, regarding handling the Society’s investment accounts. He noted that Sanford Bernstein’s fees appeared reasonable. Merrill Lynch had requested more information before it could quote a fee; however, its representatives indicated that Merrill Lynch could possibly save the Society up to $20,000 in fees over the Bank of New York. Mr. Aquilino noted that the Bank of New York had been invited to the Investment Committee meeting, but failed to appear.

A member asked what effect, if any, switching investment managers would have on the Society’s line of credit with the Bank of New York. Mr. Aquilino noted that Merrill Lynch was unable to say whether it could extend a line of credit similar to that offered by the Bank of New York, but would follow up and let the committee know in the future.

03 - A – 5

Membership Report

Mr. Pape presented the membership report, which included 96 new members (including 42 new associate members), 58 reinstatements, 8 deaths, and 2 resignations. These changes reflected a total membership of 28,663 as of January 14, 2003.

Mr. Pape amended the report to include applicant, Chadda Guy, for approval. In addition, Ms. Golden added three names to the report: Todd Ichihara, CPA, and Christine Sacco and Donald Helfert, Associate CPA firm employees.

Mr. Nowicki moved, and Ms. Doran seconded, that the Board accept the membership report, as amended. The Board unanimously approved the motion.

03 – A – 6

Report on FAE

a. FAE Board of Trustees Meeting January 14, 2003

Mr. Schmelkin noted that the FAE Board of Trustees had reviewed and approved the FAE budget for 2003-2004. He noted that the Trustees used a very conservative budget methodology. Regarding the POP program, Mr. Schmelkin reported the budget for the current year assumed a 20% POP attendance, which turned out to be 40% in the 2003 busy season. The proposed 2003-2004 budget assumed the higher POP attendance rate.

He noted that overall, $3.5 million was anticipated in course revenues, with a budgeted loss amounting to $100,000 less than the previous year.

Mr. Schmelkin announced that the Trustees approved the “FAE University” concept, a crash-course program offering 24 hours in audit and tax CPE. He noted that the new program would be held at three locations throughout the state, currently planned to be Syracuse, New Paltz, and a Long Island location.

b. Chapter Pricing

Mr. Schmelkin handed out a chart outlining the new approach to chapter conferences recently approved by the FAE Trustees.

He noted that chapters would be required to pay to FAE, and include in their event budgets, either $1,600 or $3,900 per event, depending on the level of service they required from FAE. The lower amount would be charged if the chapter utilized the minimum-permitted level of staff support, required to maintain the quality control necessary to support FAE’s SED course-sponsor status. When the chapter wanted Society/FAE staff to assume a greater role in planning the event, the charge would be $3,900. He added that the new cost structure would only apply to chapter courses in excess of three credits.

03 – A – 7

Adjournment

There being no further business, the meeting adjourned at 3:17 p.m.