EC05 – G – 0
Call to Order

EC05 – G – 1
Minutes

a. Approval of Minutes of August 26, 2005, Executive Committee meeting

President Langowski asked if there were any changes to the minutes of the August 26, 2005, Executive Committee meeting. Mr. Moynihan moved and Mr. Riley seconded, that the minutes be approved as written. The motion was unanimously approved. Mr. Ellis did not participate in the vote.

b. Approval of Minutes of the September 14, 2005, Executive Committee Meeting

President Langowski asked if there were any changes to the minutes of the September 14, 2005, Executive Committee meeting. Mr. Riley moved and Mr. Moynihan seconded, that the minutes be approved as written. The motion was unanimously approved. Mr. Ellis did not participate in the vote; however, later in the meeting, Mr. Ellis asked that the minutes be amended to reflect his vote against the release of the NYSSCPA membership mailing list to Pearl Insurance Company for the marketing of the Society’s membership insurance program. The Executive Committee by consensus accepted Mr. Ellis’s amendment.

c. Draft Minutes of September 22, 2005, Board of Directors Meeting for information only

The draft minutes of the September 22, 2005, Board of Directors meeting were distributed for information only.

a. AICPA Update

President Langowski reported on the meeting of the AICPA Governing Council, which was held in Rancho Mirage, California on October 24 and 25, as follows:

• The AICPA Council voted to relocate the organization’s entire Jersey City, New Jersey operations and select operations in New York City, to Durham, North Carolina in August, 2006. President Langowski noted that the decision was driven by labor costs in the metropolitan New York City area, as well as excess space at the organization’s Jersey City offices. He stated that the plan included relocation assistance and separation packages for affected employees.
• The AICPA would be replacing the PCAOB practice section with a new forum would be driven largely by a steering committee consisting of representatives from Big Four firms and Grant Thornton, LLP. He noted that a firm’s participation in the new forum would require that all their respective audit partners join the AICPA.
• President Langowski announced that Leslie A. Murphy had been elected AICPA Chair, succeeding Robert Bunting.

A committee member asked, as a follow up to a discussion held at the September full Board meeting, if there had been any disclosures at the Council meeting with respect to questions posed by New York members of Council to then-AICPA Chair, Bob Bunting, concerning the AICPA’s finances. A discussion ensued, during which it was noted that AICPA’s document relating to its relocation to North Carolina provided answers to many of the questions posed.

b. SET Tax Update

Mr. Langowski stated that preliminary reports were beginning to be issued by the President’s Advisory Panel on Tax Reform. In addition, he noted that Society leaders had sent letters to select U.S. Senators and Representatives encouraging them to consider the tax reform ideas expressed in the SET Tax policy paper.

c. Board Vacancies

President Langowski reminded committee members that Nancy Kirby, the Finger Lakes Chapter representative to the Board, had resigned from the Board because she had moved out of the Finger Lakes region. He announced that the Finger Lakes Chapter had selected Kathleen Brown to replace Ms. Kirby, to be effective as of January, 2006. He stated that Ms. Brown would also be the chapter’s nomination for election to the 2006-2007 Society Board.

d. FAE Update

President Langowski called upon Mr. Schmelkin to give a report on FAE. Mr. Schmelkin stated that the FAE Trustees accomplished a number of items at their September and November meetings, including:

• Voted to continue the POP (“Pay One Price”) program for discounted CPE
• Approved Excellency in Accounting program scholarship disbursements and encouraged the scholarship committee to develop an implementation plan reflecting a number of structural changes
• Approved two vendor contracts reflecting an alternative business model for the marketing and management of the 2006 FAE Trade Show (further discussed below)
• Discussed Course planning and marketing for 2006-2007
• Analyzed a marketing report of summer 2005 industry courses. The report indicated that unless New York State mandates CPE for industry CPAs, industry courses may continue to experience lower registrations than similar courses in states where industry CPE is state-mandated.
• Announced that Victor Rich would be chairing a scholarship fundraising committee.

Mr. Schmelkin also noted several recent successful FAE conferences, including the Investment Partnership

Conference which drew 520 persons. He stated that 2005-2006 POP sales have been on par with last year, garnering 90 individual and 85 firm sales to date.

Ms. Barry gave a summary of the trade show arrangement approved by the FAE Trustees. She noted that over the last 5 years, all aspects of the trade show, including marketing, CPE and the overall show presentation, had been outsourced to Flagg Management, Inc. She stated that the arrangement provided FAE with trade show revenue at no financial risk to the organization; however, many felt that the quality of the show and its educational component had been impacted. She explained that under the new arrangement, show management and logistics would be handled by an expert consultant, Lois D. Miller, while marketing, advertising, and sponsorships would be handled by Executive Communications, Inc., the Society’s existing advertising agency. Ms. Barry stated that the arrangement would allow the show’s CPE programs to be planned by FAE staff under Alan Schmelkin’s direction, thus raising educational program quality.

A discussion ensued regarding the date of the show. Several members stated that the prior show’s July date may have presented scheduling difficulties for attendees due to summer vacations. It was suggested that FAE look at holding the show earlier in the year, such as May. Mr. Grumet responded that the FAE Trustees strongly favored a suggestion to hold the show concurrently with the Society’s annual election meeting and dinner in May; however, because the hotel contract for the annual dinner had already been finalized, the combination of the two events may not be possible in 2006. He stated that the idea would nonetheless continue to be explored for a future show.

President Langowski announced that William McDonough, chair of the PCAOB (Public Company Audits Oversight Board) would be the featured speaker at the May 2006 annual dinner, and opined that this would provide an excellent draw for trade show attendees. He encouraged that FAE continue looking at the possibility of joining the events in 2006.

e. Chapter Town Meetings Update

President Langowski stated that this year, the officers emphasized more of a “town hall” approach to the chapter meetings, as opposed to “visitations” of years past. He noted that 16 Chapter town meetings have occurred to date, and the last, in Nassau, was scheduled in January. He stated that all meetings held thus far have been well received, and he summarized several common themes among the chapters, including the overall state of the CPA profession, the QEPC white paper and ethics CPE presentations. Mr. Riley added that the events have been a very valuable learning experience.

A discussion ensued with respect to the content and presentation of the various ethics presentations at the town meetings. Several opined that the course material was beginning to appear stale to members who may have taken the ethics course at prior year’s chapter visitations. Mr. Grumet responded that in order to qualify for CPE, the state education department mandates that certain foundational elements be covered in every CPE ethics course. As a result, some of the material may sound familiar from year to year. Ms. Cutler volunteered to mention the concerns raised about the course to the ethics committee, on which she serves, to solicit suggestions for improving the content during next year’s round of ethics courses.

a. Report on Quality Enhancement Policy Committee

President-elect Riley announced that the New York State Board of Public Accountancy had invited members of the Quality Enhancement Policy Committee (QEPC) and staff to attend a meeting to discuss the QEPC white paper on peer review reform. The meeting was scheduled to occur the next morning.

Secretary Nowicki stated that a member of the peer review committee, Mr. Paul Salmin, was offering to invite any member of the QEPC to accompany him on select peer reviews to observe the process first hand. President-elect Riley expressed thanks for the offer and agreed to pass along the invitation at the next QEPC meeting.

President-elect Riley summarized several points of contention between the QEPC and the peer review committee, noting that the major issue involved firm-on-firm reviews versus a “pooled” approach. Mr. Falbo suggested that to facilitate Board discussion of the issues in December, a “pros and cons” comparison of the major items of contention should be developed. The suggestion was well received by the committee.

President Langowski addressed an issue of protocol regarding non-board member attendance at Board meetings. He stated that the next meeting would not be an open meeting.

a. Reports on Chapters

Vice President Valenti reported on chapters. He stated that chapter contract expenditures and risks were discussed during a recent conference call of chapter presidents.

Mr. Pape added that after a review of chapter expense reimbursement requests over the last year, it had become clear that approximately a dozen expenses were related to contracts exceeding $10,000, and two dozen were related to contracts valued between $5,000 and $10,000. He stated that a number of these contracts, regardless of amount, were related to facility rentals which were believed by legal staff to present potentially greater financial risks than the contract’s face dollar amount.

A discussion ensued regarding ways to limit risks to the Society and to chapter representatives individually by implementing a legal review process. President Langowski asked staff to develop a detailed proposal for consideration at the next Executive Committee meeting. In addition, Mr. Grusd asked that staff provide legal guidance on the risks inherent to facility contracts and insurance coverage. Staff agreed to do so.

b. Recent Society Comments

Vice President Schoenfeld referred Executive Committee members to the agenda materials and additional hand-outs which included comments that had been issued as follows:

• Comments submitted to the Financial Accounting Standards Board by the NYSSCPA Financial Accounting Standards Committee, chaired by Margaret Wood, regarding Proposed SFAS: Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140; dated October 19, 2005; Principal Drafters: John J. McEnerney and Sharon Sabba Fierstein;
• Comments submitted to the Financial Accounting Standards Board by the NYSSCPA Financial Accounting Standards Committee, chaired by Margaret Wood, regarding Proposed SFAS: Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140; dated October 19, 2005; Principal Drafter: Sharon Sabba Fierstein;
• Comments submitted to the Financial Accounting Standards Board by the NYSSCPA Financial Accounting Standards Committee, chaired by Margaret Wood, regarding Proposed SFAS: Accounting for Certain Hybrid Financial Instruments; dated October 19, 2005; Principal Drafters: Roseanne T. Farley and Sharon Sabba Fierstein;
• Comments submitted to the Financial Accounting Standards Board by the NYSSCPA Financial Accounting Standards Committee, chaired by Margaret Wood, regarding Proposed SFAS: Accounting for Transfers of Financial Assets, and amendment of FASB Statement No. 140; dated October 19, 2005; Principal Drafters: John J. McEnerney and Sharon Sabba Fierstein;
• Comments submitted to the Information Systems Audit and Control Association by the NYSSCPA Technology Assurance Committee, chaired by Joel Lanz, regarding Proposed Information System Auditing Standard on Audit Evidence; dated November 7, 2005; Principal Drafters: Yigal Rechtman, Joseph B. O’Donnell, Ph.D. and Joy M. Paulsen;
• Comments submitted to the Internal Revenue Service by the NYSSCPA Taxation of Financial Instruments and Transactions Committee, and the NYSSCPA Investment Management Committee, chaired respectively by Steven Kaplan and Leon Metzger, regarding Statement on Credit Default Swaps Provided in Response to IRS Notice 2004-52; dated November 7, 2005; Principal Drafters: Peter Connors, CPA, JD, Michael Cyprys, CPA, Neesha Das, JD, R. E. Jeff Jeffreys, CPA, Steven Kaplan, CPA, Leon Metzger, CPA and Lester Wigler, MBA; and
• Comments submitted to the American Institute of Certified Public Accountants by the NYSSCPA Accounting and Auditing Oversight Committee, chaired by Paul D. Warner, and the NYSSCPA Auditing Standards and Procedures Committee, chaired by Mark I. Mycio, regarding Auditing Standards Board’s Exposure Draft of proposed Statement of Auditing Standards entitled Communication of Internal Control Related Matters Noted in an Audit; dated November 2, 2005; Principal Drafter: Stephen R. Mueller.

President Langowski commended the authors and committees for their outstanding work in issuing the comments.

a. Committees Update (Reports from Tax and Industry Oversight Committees)

Mr. Nowicki introduced Anthony Cassella and Maryann Winters, chairs of the Industry Oversight and Tax Division Oversight Committees, respectively. Each gave a report on their divisions.

1. Tax Division Oversight Committee

Ms. Winters began her presentation by outlining the structure of the Tax Division Oversight Committee (TDOC) as it relates to its divisional committees. She stated that the division is comprised of 14 separate committees but, unlike other committee divisions, TDOC was not comprised of the chairs of each constituent committee. She stated that this structure prevented TDOC membership from regularly rotating, thus contributing to a perception that TDOC membership had grown stale over the years. A discussion ensued regarding the possible implementation of TDOC committee terms limits, merit- or performance-based reappointments, and divisional chair “rotation” similar to other oversight committees. Ms. Schoenfeld stated that this issue would continue to be explored during her tenure as TDOC chair during the 2006-2007 committee year.

Ms. Winters expressed that a strong disincentive existed amongst tax committee members to write articles for The CPA Journal, due to a perception that the publication preferred articles from academics, as opposed to practitioners. She stated that several articles published in the journal by academics may have lacked current or accurate information which could have been provided from a practitioner’s standpoint. A discussion ensued. Several committee members pointed out that academics are required to publish articles to obtain tenure, and were often granted professional time with which to write such articles. As a result, a disproportionate number of articles may be written by academics because practitioners may not be afforded professional time to write. Ms. Winters noted that Tom Morris, Associate Editor of the journal, would be meeting with TDOC to discuss these issues.

At President Langowski’s request, Mr. Grumet agreed to have CPA Journal staff provide the full executive committee a presentation on the journal’s publishing process at its next meeting. Mr. Grumet also agreed to include staff presentations on The Trusted Professional and the organization’s website, nysscpa.org for the next meeting.

Mr. Grumet informed the committee that he had received several calls from tax division committee members who were concerned about the overlap of committee conference topics with TDOC’s own tax conference. Ms. Winters responded that it was impossible to avoid some overlap on topics, but agreed to raise the issue for discussion at the next TDOC meeting.

2. Industry Oversight Committee

Mr. Cassella began his presentation by briefly outlining the 16 constituent committees of the industry division. He then summarized several common themes of concern among the committees including:

• committee participation and attracting new members;
• staffing as it relates to minutes preparation, attendance at off-site meetings, returning calls and e-mails, and the turnaround rate of CPE course evaluations;
• improving inter-committee communications where, for example, a speaker at one committee meeting may be addressing a topic of interest to another committee;
• the availability and quality of committee meeting rooms and issues related to the 19th floor classrooms space;
• speaker budgets for conferences;
• publicizing the capabilities of the Society’s membership database;
• obstacles to obtaining CLE (continuing legal education) provider status
• providing committee members with an annotated staff organizational chart, as well as a governance chart addressing the Board, officers, executive committee and FAE Trustees;
• a detailed checklist of what is necessary to put together a CPE session;
• a detailed list of marketing opportunities;
• consideration of creating 2 full time conference rooms on the 19th floor; and
• establishment of procedures for the removal of committee members;

a. Dues Update

Mr. Grumet reported that despite the later-than-usual mailing of dues notices to members, membership dues were in at just under 92%, which was on par with last year.

b. Insurance Update

Mr. Grumet reported that, as of September 30, 2005, the CAMICO professional liability insurance program had in-force 437 New York policies, covering 1,536 CPAs and generating $2.8 million in annual premiums. In addition, the group insurance program administered by March Affinity Group Services reported approximately $3.5 million in annualized premiums, and the GEICO automobile insurance program reported 6,678 policies in force.

c. Legislative Update

Mr. Grumet stated that during each of the last three years, the New York State Senate had passed the society’s sponsored legislation; however, the Assembly had not during this time. No current activity regarding accountancy legislation was occurring at this time in either house.

d. State Society Cooperative Computer System Update

Mr. Grumet reported on a meeting of state society executive directors concerning the updating of the state society cooperative computer system. He stated that approximately 35 state societies had signed on to participate in the updated system, and that implementation steps would be discussed at the groups’ December meeting. He noted that the California CPA Society would be migrating its current version of the cooperative system to a “net” version from which its members would be able access their data via a secure internet connection as opposed to a localized internal system.

In response to a question regarding the need for a cooperative system, Mr. Grumet stated that cooperating was very beneficial to smaller state societies which would otherwise not be able to afford their own membership data systems. Mr. Schemlkin added that an advisory group had developed a number or prioritized “wish list” items for system performance, many of which would be incorporated into the updated system.

President Langowski called upon Mr. Woehlke to present proposed revisions to the staff vacation policy. Mr. Woehlke stated that during the audit of the Society’s financial statements ending May 31, 2005, the Society’s auditors, GGK, noticed deviations from the Society’s existing vacation policy with regard to certain senior staff persons who report directly to the executive director (department heads). Staff was therefore requesting the amendment of the policy going forward as it relates to department heads and the ratification of prior vacation policy deviations.

Mr. Woehlke stated that the change pertained to the policy language affecting "exempt" employees. Under the existing policy, all exempt employees including department heads would receive two weeks vacation in their first year, three weeks for their second through fourth year, four weeks from their fifth to fifteenth year, and five weeks thereafter. He stated that the requested change would award department heads four weeks vacation from date of hire until they reach their 15th year and then award them five weeks vacation.

Mr. Grumet explained that due to the lower salary structure in non-profit organizations such as the Society, it had been necessary during employment negotiations with a department head to offer four weeks of vacation at the outset, in order to attract this high quality individual to the society. Out of fairness to other department heads who had been employed by the Society for less than five years, Mr. Grumet stated that he extended the same 4 week vacation package to all department heads with less than five years service, believing that it was in his executive authority to do so. In response to a question, Mr. Grumet noted that 4 weeks vacation was the norm in the industry with respect to similar high level executives. Mr. Woehlke reiterated that the requested change in the vacation policy would apply only to department heads.

Mr. Woehlke summarized the proposed 401(k) Plan Safe Harbor Election for 2006. He noted that the first such election was approved by the 2000-2001 Executive Committee for the 2001 plan year and had been renewed each year since.

Mr. Woehlke stated that the contribution experience of the Society’s 401(k) plan for the 1998, 1999, and 2000 plan years (calendar years) resulted in a partial refund of contributions to a number of higher paid staff members following the plan year end. This significantly lessened the ability of these staff members to contribute to their retirement savings. He noted that staff requested and received Executive Committee approval for the filing of safe-harbor elections for plan years (calendar years) 2001 through 2005. The filing of the elections resulted in the immediate 100% vesting of that portion of the employer contributions equal to 3% of each employee’s salary. This election results in a smaller forfeiture upon the departure of employees with less than 100% vesting. (A smaller forfeiture results in increased out-of-pocket costs to the Society, because forfeitures reduce the amount the employer is otherwise required to pay contributions.) Mr. Woehlke noted that staff estimates that the amount of these reduced forfeitures would be significantly less than $10,000. Notice of the 2006 safe harbor election, if approved, must be made to plan participants by November 30, 2005.

President Langowski asked Mr. Woehlke to provide a briefing memo on the composition of the Finance, Audit and Investment Committees for the next Executive Committee meeting. He stated that the Executive Committee would consider the points in the briefing memo before going to the full Board in April.

Mr. Markezin presented the Agri Business Committee CAP (Committee Action Plan), stating that it was a new committee at the Society. Several committee members noted that Agri Business was a substantial industry in New York state. Mr. Grumet expressed a desire to link the new committee with the “Extension Service” at Cornell University.

Mr. Moynihan moved to approve the Agri Business Committee CAP as presented. Mr. Nowicki seconded the motion. The motion passed unanimously. Messrs. Grusd, Ellis and Valenti did not participate in the vote.

Mr. Markezin presented the Agri Business Committee CAP (Committee Action Plan), stating that it was a new committee at the Society. Several committee members noted that Agri Business was a substantial industry in New York state. Mr. Grumet expressed a desire to link the new committee with the “Extension Service” at Cornell University.

Mr. Moynihan moved to approve the Agri Business Committee CAP as presented. Mr. Nowicki seconded the motion. The motion passed unanimously. Messrs. Grusd, Ellis and Valenti did not participate in the vote.

Mr. Pape presented the Membership Report as of November 15, 2005, which included 816 new members (including ** new associate members), 4 reinstatements, 10 deaths, 62 resignations, and 2 ethics terminations. These changes reflected a total membership of 30,589 as compared with 31,111 at that time the previous year.

Mr. Riley moved to approve the Membership Report and Mr. Falbo seconded the motion. The motion passed unanimously.

Mr. Grumet referred executive committee members to the proposed engagement letters with lobbyists Hodgson Russ, LLP (Fred Jacobs, Partner), and Pinsky & Skandalis, which had been separately e-mailed to Executive Committee members. He then presented a summary of the Society’s relationship with each firm, noting that Hodgson represented the Society in connection with accountancy legislation and other matters before the New York State Assembly, while Pinsky represented the Society in legislative matters before the New York State Senate.

In the ensuing discussion, it was noted that Society-sponsored legislation had successfully passed before the New York State Senate each of the last three years; however, no such legislation had been passed by the Assembly. In light of these results, a committee member suggested that the Society continue its engagement of Hodgson for matters before the New York State Senate as proposed by its engagement letter, but engage Pinsky on an as-needed basis instead of by retainer. The committee by consensus agreed with this approach and directed staff to proceed accordingly.