04 – H – 0
Call to Order

04 – H – 1
Minutes

a. Approval of Minutes of August 17, 2004 Meeting

President Kearney asked Executive Committee members if they had any changes to the minutes of the August 17, 2004 meeting. Mr. Berlant amended the minutes to reflect that Secretary Nowicki was present by phone at the August 17, 2004 meeting. There being no objection, Mr. Berlant moved to approve the minutes, as amended. Mr. Bloom seconded the motion. The motion passed unanimously. Ms. Kirby and Ms. Bailey-Browne did not participate in the vote.

04 – H – 2
President’s Report

a. AICPA Council Update

President Kearney reported that he, President-Elect Langowski, Vice President Berlant and Executive Director Lou Grumet had attended the fall AICPA Council meeting in Orlando, Florida from October 22 to 26, 2004. He then gave a summary of several agenda items addressed during the Council meeting as follows:

1) Revised Ethics Interpretation 101-3

President Kearney noted that Revised Ethics Interpretation 101-3 (“101-3”) had been issued by the AICPA Professional Ethics Executive Committee to promote independence when AICPA members render non-attest services to attest clients. He relayed his observation that concern over 101-3 appeared to be more prevalent outside New York. Several Executive Committee members indicated that it was a concern in New York State particularly in regard to peer review. Others thought there was insufficient understanding of the issues and they encouraged an educational campaign to help members better understand 101-3’s implications.

A discussion ensued regarding ways to educate New York members about 101-3, including informational articles in The Trusted Professional and CPA Journal, as well as FAE course offerings. Secretary Nowicki suggested that the Society develop more practical assistance for members including a “tool kit” and practice guidelines. Several cautioned, however, that because the AICPA was the standard setter, a theoretical educational approach as opposed to a practice guide would be more appropriate for the Society. President Kearney encouraged the Society’s consideration of a campaign that would encompass both a theoretical overview and practical steps.

Mr. Grumet suggested that, in addition to its own educational efforts, the Society should formally encourage the AICPA to offer more education and guidance on 101-3. By consensus, the committee directed Mr. Grumet to have a letter to this effect drafted addressed to AICPA Chair Robert Bunting. In addition, Secretary Nowicki and Mr. Cohen offered to work on an informational piece addressing 101-3. The committee welcomed their assistance.

2) Peer Review Transparency Issues

President Kearney reported that the AICPA was planning to move forward with an educational campaign to its members regarding peer review transparency. He added that AICPA Chair Robert Bunting appeared supportive and committed to the issue of transparency.

3) Financial Literacy Campaign

President Kearney reported that the AICPA was embarking upon a financial literacy campaign designed to educate the general public about such issues as credit management, meeting medical expenses, planning for college tuition, retirement and estate planning. For more information, he referred members to a “Fast Facts” summary of financial literacy published by the AICPA and included with the meeting agenda materials.

4) CPA Ambassador Program

President Kearney reported that the AICPA was cooperating with state CPA societies to offer members spokesperson training and access to extensive background tools on reintroducing the CPA profession to the American public. For more information, he referred members to a program summary included with the meeting agenda materials.

5) Large State Societies Social Security Initiative

President Kearney reported that an initiative consisting of the largest state CPA societies’ presidents was working on a white paper addressing issues of social security reform. Mr. Berlant moved the following resolution on the subject. Mr. Bloom seconded.

RESOLVED, that the New York State Society of Certified Public Accountants joins with other state societies to encourage their elected officials in the U.S. Congress to implement reforms of Social Security and other government support programs to assure their fiscal health. The time to act is now, and CPAs should stand ready to assist public policy makers in evaluating realistic solutions to this issue.

Following discussion, the motion passed unanimously.

b. Office Relocation

President Kearney welcomed all Executive Committee members to the new Society office location at 3 Park Avenue. Committee members then toured the premises guided by Mr. Schmelkin.

c. Chapter Officer Visitations

President Kearney gave an update on the chapter officer visitations noting that all but two, Suffolk and Nassau, would be completed before January. He stated that the events had been well-received to date.

d. FAE Report

President Kearney reported that the FAE Trustees had met the prior day and accomplished several goals including revamping the Excellence in Accounting Scholarship Program and passing a contract approval policy for the organization.

1) Benevolent Fund Restructuring

Mr. Woehlke briefed the committee on the proposal to merge the Benevolent Fund and FAE.

2) Scholarship Fund

Mr. Grumet noted that the FAE Trustees revamped the Excellence in Accounting Scholarship program to allow for more statewide geographic reach and more aggressive recruiting. In addition, the Trustees voted to raise the annual scholarship amount from $1,500 to $2,500 for full time students.

3) Registration

Mr. Schmelkin reported that FAE courses for CPAs in industry, which were budgeted to break even, were not performing as well as budgeted. He stated that despite this, overall FAE course registrations were up and the organization was operating ahead of last year.

e. Member Demographic Tracking

Mr. Pape gave an overview of Society membership demographic tracking and noted that the Society did not track the racial makeup of its membership. A discussion ensued. Several members stated that obtaining such racial demographic information would assist the society in its outreach efforts to minority CPAs.

Mr. Eassa then moved to authorize the collection of membership data based on racial background, and Ms. Bailey-Browne seconded the motion. The motion passed unanimously.

a. Quality Enhancement Policy Committee Update

President-elect Langowski referred members to the minutes of the latest Quality Enhancement Policy Committee meeting, which were provided with the agenda materials. He announced that three new members had joined the committee, Mark Ellis, John Eickemeyer and H. Steven Grace, and that the next meeting was scheduled to include a discussion on peer review with Henry Krostich as guest.

b. Selections Subcommittee Update

Mr. Langowski reported that the Selections Subcommittee had received ten names for consideration as potential NYSSCPA Board nominees to serve on AICPA Council from New York. Of the ten, the following four are being recommended to the full board:

• Mark A. Alimena
• Frank Aquilino
• Steven Edelman
• Michele Mark Levine

Mr. Langowski noted that at the next full Board meeting in December, the Board would be expected to select one or two AICPA Council members from among this list, depending on whether the to-be-identified president-elect was already serving on Council. Mr. Woehlke added that the Selections Subcommittee had, without Mr. Langowski participating, unanimously recommended to a future Society Board to extend Mr. Langowski’s term on Council in that his term would be ending before he had completed his service as immediate past Society President.

Mr. Langowski added that the Selections Subcommittee would next be looking at potential nominations for the FAE Board of Trustees, and that he had asked the current FAE Trustees to provide selection criteria to help guide the committee in this task.

c. Governance Subcommittee

President Kearney noted that he had appointed a governance with the following members:

• Stephen F. Langowski, chair
• Peter L. Berlant
• Arthur Bloom
• Katharine K. Doran
• Neville Grusd
• Raymond P. Jones
• Raymond M. Nowicki

Mr. Langowski reported that the Governance Subcommittee’s purpose was to, among other things, help the organization assess and develop best governance practices.

a. Reports on Chapters

Vice Presidents Doran and Eassa gave reports on Society Chapters and of a recent meeting of Chapter presidents. Ms. Doran stated that the last meeting had not been well-attended, but that both she and Mr. Eassa were encouraging the participation of Chapter vice presidents in situations where the president could not participate. Ms. Doran then announced that the “Chapters Report Card” would be renamed the “Chapter Activities Report”.

A discussion ensued regarding CPE during the officer chapter visitations. Mr. Eassa relayed feedback he had received which suggested that more Ethics case studies and perhaps a mock trial would be better-received at future visitations. He stated that CAMICO offered to assist in this regard, but not at all 17 chapters. Mr. Grumet suggested as an alternative that CAMICO provide materials which could be utilized at all 17 chapter events. Mr. Eassa agreed to approach CAMICO with this request.

A lengthy discussion ensued regarding the level of activity in a particular chapter due to its lack of officer turnover. Presidents Doran and Eassa welcomed the involvement and commitment of those chapter leaders, but suggested that more outreach be done within the chapter beyond those leaders’ own professional realm. Vice Presidents Doran and Eassa stated that they would continue to monitor the chapter and look for solutions.

a. Committees

A lengthy discussion ensued with respect to the Committee Operations Committee (COCO) and its role. Several opined that because the oversight committees serve proactive roles in overseeing their respective divisions, COCO’s role had become redundant in some respects. It was suggested that a more optimal reporting structure be developed whereby the oversight chairs report directly to the Executive Committee through the Secretary. Several agreed with this approach, noting that this would empower the Secretary in the fulfillment of his or her duties and help alleviate the potential for redundancy.

Ms. Kirby moved that the Executive Committee direct the Committee Operations Committee to develop and recommend a new committee structure by May 31, 2005 that accomplishes the following goals:

1. Optimizes the reporting structure of the Society’s committees; and
2. Aligns the committee structure with the Society’s strategic plan.

Ms. Bailey-Browne seconded the motion. Following discussion, the motion passed unanimously. Ms. Doran and Mr. Eassa did not participate in the vote.

b. Nominating Process Status Report

Secretary Nowicki reported that (1) the Nominating Committee election had been completed in late September, (2) President Kearney had appointed the chair, and (3) the 2004-2005 Nominating Committee was composed of the following individuals:

• Robert Fagliarone, Chair
• Spencer L. Barback
• Rosemarie A. Barnickel
• Warren M. Bergstein
• Arthur Bloom
• Peter H. Frank
• Arnold L. Haskell
• Stanley M. Heller
• Ronald J. Huefner
• Martin Leventhal
• Walter M. Primoff

He noted that the committee would be meeting per the bylaws on January 13, 2005.

a. Financial Statements as of October 31, 2004

Treasurer Bloom reported on the financial statements as of October 31, 2004, noting that cash was at same place as last year. He then referred members to a breakdown of leasehold improvements made to the Society’s new office location at 3 Park Avenue. He noted that after applying the Board-reserved moving fund, the net cash effect of the leasehold improvements was approximately $240,000 to date. Mr. Schmelkin added that approximately $100,000 in additional improvement expenses were anticipated, which would affect this figure.

Mr. Bloom then reported that positive variances in the combined balance sheet were due in part to several open staff positions which were anticipated to be filled later in the year. He reported that combined NYSSCPA and FAE net income for the period ending October 31, 2004 was $93,000 over budget because of three items: 1) FAE’s Program Fees were $125,000 ahead; 2) The CPA Journal was over budget by $43,000 because of a combination of display advertising revenue and subscriptions revenue; and 3) Investment Return was under budget by $57,000, because operating funds were being used to offset bank fees instead of being invested for an under 1% return.

b. IRS Examination of FAE Form 990

Ms. Chambers noted that the IRS would soon commence its review of FAE’s Form 990.

a. Comptroller Hevesi’s Financial Oversight of Schools Initiative

Mr. Grumet reported on New York State Comptroller Hevesi’s initiative on increased oversight of public school finances. He stated that as part of that initiative, Comptroller Hevesi, education officials and himself, on behalf of the NYSSCPA, recently announced in Albany a five-point plan to increase financial accountability in schools statewide. Mr. Grumet then summarized the five-point plan as including, among other things, enhancing the effectiveness of external audits, requiring audit oversight and competitive RFP processes for selecting auditors, establishing an internal audit function within each school district and requiring financial oversight training of school board members.

b. Editorial Board Meetings

Mr. Grumet stated that he and President Kearney had participated in editorial board meetings regarding accountancy legislation with two publications, which had gone well. He noted that several other newspaper publications were also interested in meeting with the Society.

c. Insurance Update

1) Professional Liability Insurance Program

Mr. Eassa reported on the Professional Liability Insurance committee’s meeting with CAMICO representatives. In particular, he noted that CAMICO reported that approximately 25% of its New York insured firms had previously been without insurance. He reflected that this statistic showed CAMICO was continuing to meet a Society goal to endorse coverage for its uninsured members. He noted that after the meeting, CAMICO met with Society staff on such issues as marketing and CPE.

2) Member Benefits Insurance Program

Mr. Grumet addressed issues relating to the New York Attorney General’s investigation of Marsh, Inc. and several other insurance companies. He stated that there appeared to be no effect on the Society’s member insurance programs brokered through Marsh Affinity Group Services, a sister company of Marsh, Inc., but that both staff and the Member Benefits Committee continued to monitor the situation. He added that to date the Society had received no calls from members regarding the investigation.

3) Society Risk Management Program

Mr. Grumet also noted that the New York State Attorney General’s investigation implicated the parent company of one of Society’s corporate insurance policy underwriters. Mr. Grumet noted that the investigation did not appear to affect the Society’s program and that staff was continuing to monitor the investigation as it develops.

d. 2005 Young CPA Symposium

Mr. Schmelkin reported that Kevin O’Leary was working on a proposal, with anticipated input from a steering committee of Young CPAs from throughout New York State, for the Northeast Chapter to host the 2005 Young CPA Symposium. Mr. Schmelkin stated that the proposal thus far was very well thought out and cost effective, and that he recommended the Society proceed with the downtown Albany venue. The Executive Committee approved the venue by consensus.

e. Affinity Program Update

Mr. Pape, responding to a request made at the August Executive Committee from Secretary Nowicki, reported on the Society’s major affinity contracts.

• Audit Committee
• Committee Operations Committee
• Finance Committee
• Mediation and Arbitration Committee
• Member Benefits Committee
• Membership Committee
• Peer Review Committee
• Professional Ethics Committee
• Professional Liability Insurance (PLI) Committee
• Public Relations Committee
• Quality Enhancement Policy Committee

Mr. Pape presented the recommendations of the Member Benefits Committee to endorse several new Society member benefits as follows:

• Automated Data Processing
• Staples Business Advantage
• Traders’ Library
• Long Term Care Insurance

A discussion ensued with respect to each of the recommended benefit programs. Mr. Berlant moved that the Executive Committee approve the recommendation of the Member Benefits Committee to endorse the new member benefits, and further moved that the Executive Committee recommend full Board approval of the benefits. Ms. Bailey-Browne seconded the motion. Following discussion, the motion passed unanimously. Ms. Doran and Mr. Eassa did not participate in the vote.

Ms. Chambers and Mr. Woehlke reported on renewal options for the Society staff’s health insurance plan with Health Net, Inc., and dental coverage with Aetna U.S. Healthcare, including quotes for comparison from several other insurance carriers. It was noted that based on the quotes, staff was recommending that the Society remain with Health Net, Inc. under one of two presented renewals options, and that it also continue with Aetna U.S. Healthcare for dental coverage at a 5% premium increase for out-of-network dental care only (there would be no increase for in-network dental care).

Mr. Woehlke then presented the renewal options for Health Net. He noted that option #1 called for a 12% premium increase with no changes to the plan design, while option #2 called for a 9% increase with a concurrent increase of the specialist co-payment from $15.00 to $25.00 and the addition of a $250 hospital co-payment.

Mr. Grumet expressed concern that the $250 hospital co-payment under option #2 might be too substantial a financial burden on some of the Society’s employees. Several Executive Committee members agreed. To alleviate this burden, it was suggested that the Society advance or reimburse employees for the $250 co-payment. Based on past hospital usage statistics, the committee by consensus agreed with the reimbursement approach.

Mr. Cohen moved to renew the coverage under Health Net, Inc. under option #2, with the understanding that the $250 hospital co-payment would be either advanced or reimbursed by the Society, and further moved that the Society renew its coverage with Aetna U.S. Healthcare for dental coverage as presented.

President-elect Langowski seconded the motion. The motion passed unanimously. Ms. Doran and Mr. Eassa did not participate in the vote.

Mr. Woehlke summarized the proposed 401(k) Plan Safe Harbor Election for 2005, noting that the impact of the election would be the immediate 100% vesting of that portion of the employer contribution equal to 3% of each employee’s salary.

After a brief discussion, Ms. Kirby moved to approve the election, and President-elect Langowski seconded the motion. The motion passed unanimously. Ms. Doran and Mr. Eassa did not participate in the vote.

Mr. Pape presented the membership report which included 446 new members (including 274 new associate members), 10 reinstatements, 11 deaths, and 9 resignations. These changes reflected a total membership of 31,111 as of November 16, 2004, as compared with 28,962 at approximately the same time the previous year.

President-elect Langowski moved to approve the membership report, and Ms. Kirby seconded the motion. The motion passed unanimously. Ms. Doran and Mr. Eassa did not participate in the vote.

President Kearney reminded committee members that in 2003, the NYSSCPA engaged Hodgson Russ, LLP (Fred Jacobs, Partner) for the purpose of providing representation in connection with accountancy legislation and other matters before the New York State Assembly. He noted that the Society also engaged Philip Pinsky of Pinsky and Skandalis, Syracuse NY, to cover accountancy issues in the Senate. The initial Hodgson Russ engagement ran from 4/1/03 to 11/30/03, and was extended from 1/1/04 to 8/31/04. The Executive Committee approved the initial engagement and subsequent extension on March 11 and December 17, 2003, respectively.

Mr. Grumet noted that much work was still needed to push forward the Society’s legislative agenda in the Assembly, and that staff recommended the engagement of Hodgson Russ be continued for the balance of the 2004 legislative session (9/1 to 12/31/04), and continue from January 1 through August 31, 2005 of the 2005 legislative session. He stated that the monthly retainer would be the same as the expired engagement, as detailed in the engagement letter provided to the committee. Mr. Grumet added that the firm had already performed work on behalf of the Society in September and October 2004, and that the continuation of the engagement would cover this prior period.

Mr. Berlant moved to approve the continued engagement of Hodgson Russ, LLP for the balance of the 2004 legislative session (9/1 to 12/31/04), and from January 1 through August 31, 2005 of the 2005 legislative session. Ms. Doran seconded the motion. Following discussion, the motion passed unanimously.