EC06 – C – 0
Call to Order

EC06 – C – 1
Minutes

a. Approval of Minutes of May 18, 2006, Executive Committee meeting

Mr. Riley asked if there were any changes to the draft minutes of the May 18, 2006, Executive Committee meeting. One committee member noted a typographical error.

Mr. Falbo moved to approve the minutes as corrected, and Mr. Grusd seconded the motion. The motion passed with Mss. Fierstein and Kincaid and Messrs Fordham and Sohr abstaining. Mr. Lifson did not participate in the vote.

b. Minutes of June 1, 2006, Board of Directors Meeting for Information Only

Mr. Riley referred the Executive Committee to the draft minutes of the June 1, 2006, Board of Directors meeting, which were provided in the agenda materials for information.

a. AICPA Update

Mr. Riley reported on the AICPA spring meeting of Council, which was held in Salt Lake City, Utah from May 21 to 23, 2006. He said that the AICPA’s office relocation from Jersey City, New Jersey to Durham, North Carolina was a major topic of discussion at the meeting, and that other topics included:

• the computerized CPA exam;
• expansion of AICPA membership to university accounting department academics with PhDs;
• AICPA credentialing for such designations as PFS, CITP and ABV, among others; and
• lifetime AICPA memberships.

With respect to the lifetime memberships, Mr. Riley reported that Council voted down a proposal to increase from 40 to 50 the number of membership years needed for lifetime membership privileges.

A discussion ensued regarding the financial issues which led to the AICPA’s decision to relocate substantial operations to North Carolina. Mr. Riley stated that he and Steve Langowski reported to the full Board that they were satisfied with the AICPA’s response to questions raised by New York members of Council last year regarding the Institute’s finances, and felt that the institute’s explanations indicated it was doing all it could to address its financial issues.

b. Peer Review Update

(See below for disposition of response to AICPA Peer Review Oversight Letter).

c. Update on Bylaws Process

Mr. Riley said he had identified a number of individuals to serve on a bylaws revision task force and would be finalizing the task force membership in the near future.

d. 2006 Leadership Conference

Mr. Riley reviewed the plans for the July Leadership Conference, which was scheduled for July 9-11 at the Gideon Putnam Resort in Saratoga Springs, New York. He said that the conference would be focusing on CPA ethics.

e. Operations Division Committees

Mr. Riley reminded committee members that the NYSSCPA Secretary served as the liaison between the Executive Committee and the Society’s technical committees with the exception of the operations division committees, which reported directly to the Executive Committee. He then referred committee members to a list of operations committees and their respective members, which was included in the agenda materials. Those listed included Audit, Finance, Member Benefits, Membership, Peer Review, Professional Ethics, Professional Liability and Quality Enhancement Policy, and Legislative committees.

f. Plans for Review of Committee and Chapter Manuals

The Committee and Chapter Manuals were distributed to the Executive Committee with the comment that they had not been formally reviewed by the leadership for some time. Mr. Riley stated that he was tasking the Chapter Vice-presidents to review the Chapter Manual and the Secretary to review the Committee Manual

g. Agenda for New Board Orientation

The agenda for the New Board Orientation was circulated. Mr. Riley announced that officers were expected to participate in the New Board Orientation to help bring the new board members up to speed.

h. Update on Executive Director Contract Renewal

Mr. Riley announced that a new executive director contract had been signed with Lou Grumet.

a. Quality Enhancement Policy Committee

President-elect Lifson summarized his plans for the Quality Enhancement Policy Committee, which he had been asked to chair. He said that the next focus for the group would be the Society’s professional ethics program.

a. Reports on Chapters

Vice President Fierstein gave the report for the chapter vice presidents, noting that she had participated in five chapter board organizational meetings to date and that Vice President Piluso had participated in a number of additional meetings as well. Ms. Fierstein noted a common concern in both large and small chapters regarding finding volunteers. The Executive Committee then discussed the need for a more focused leadership development program for both committees and chapters.

b. Recent Society Comments

Vice President Sohr noted that two sets of comments had been filed since the beginning of the fiscal year as follows:

• Comments submitted to the AICPA by the NYSSCPA Auditing Standards and Procedures Committee, chaired by Mark I. Mycio, on Auditing Standards Board’s Exposure Draft of a Proposed Statement on Auditing Standards: The Auditor’s Communication with those Charged with Governance, dated May 24, 2006; Principal Drafters: Robert N. Waxman and Bernard H. Newman; and
• Comments submitted to the AICPA by the NYSSCPA Auditing Standards and Procedures Committee, chaired by Mark I. Mycio, on Auditing Standards Board’s Exposure Draft of “Proposed Statement on Standards for Attestation Engagements – Reporting on an Entity’s Internal Control over Financial Reporting” (January 19, 2006), dated May 24, 2006; Principal Drafters: Robert W. Berliner, Elliot A. Lesser and Mark I. Mycio.

Mr. Sohr reported that two additional comment letters were currently under development. He expressed concern with the short comment period typically used by standard-setters at the present time.

President Riley commended the comment authors and their respective committees for their work.

a. Committees Update

Mr. Ellis spoke of his plans to make a presentation at the Leadership Conference regarding committee service. Mr. Riley noted how the responsibility of the Executive Committee had shifted in the wake of the dissolution of the Committee on Committee Operations and how the role of the Secretary had shifted from being a chair of COCO to more of a liaison role between the Executive Committee and the Oversight Committees.

b. Nominating Process Update

Mr. Woehlke gave a brief summary of the NYSSCPA nominating process, noting that the Society website section devoted to this process had been changed to reflect the beginning of the 2006-2007 nominating cycle. He said that nominating petitions could be downloaded from that site, and that August 11, 2006, would be the deadline to submit petitions.

a. Regulatory Update

Mr. Grumet reported on the recent negotiations he had been facilitating between the profession and the New York State Health Department and other agencies responsible for Medicaid cost reporting.

b. Legislative Update

Mr. Grumet announced that on that day the New York State Senate had passed the Society-endorsed accountancy legislation for the third year in a row; however, negotiations were continuing with the New York State Assembly to pass a similar bill. He noted that substantial equivalency continued to be an issue of contention for the Assembly in reaching agreement on a bill.

c. Dues Update

Mr. Grumet announced that 56% of membership dues had been collected to date, which was slightly below last year’s collection percentage at the same time.

d. COAP Update

Mr. Grumet noted that FAE’s COAP programs were scheduled to occur in the latter half of June. He said that this year, a board member was scheduled to attend the concluding dinner at each program.

e. COAP Video

Mr. Woehlke provided background on the COAP video project, noting that a contract with the videographer was still being negotiated.

f. Member Benefits Update

Mr. Grumet referred members to the agenda packet for a performance summary of the Society’s member benefit programs. Several committee members asked that staff follow up with Pearl as to the status of their advertising program. Mr. Pape noted that Pearl had not done any direct marketing during the busy tax season, but had planned to increase its marketing activities shortly.

In the ensuing discussion, a member asked staff to ascertain the number of distinct individual members utilizing the Society’s member benefits. A member also suggested that staff should begin reporting any sponsorship revenue obtained from Society affinity companies. Staff agreed to look into the suggestions.

g. CPAs on Board Update

Ms. Barry gave an update on the Society’s CPAs on Boards initiative, which matches CPAs with nonprofit organizations for potential service as directors. She reported that to date, there had been 20 matches of CPAs to nonprofit boards, and announced that there would be an article in The Trusted Professional regarding the initiative.

h. Background on Banking Relationship with Bank of America

Mr. Grumet referred members to a report in the agenda materials on the history of the Society’s banking relationship with Fleet Bank, which had later merged with the Bank of America. He noted that the bank’s financial package was what had made the move to the Society’s new location possible.

i. Student Outreach/CPA Recruitment

No oral report was given.

j. 19th Floor Expansion

Mr. Grumet reported that the Society’s 19th floor tenant indicated it was not interested at the present time in releasing any of its floor space. Mr. Grumet said that he would therefore be asking the Executive Committee in August for a budget amendment to reduce the funds presently budgeted to build out the hoped-for additional space.

k. Election Ballot Mailing Update

Ms. Barry reported that the problems identified in May with the delivery of election ballots to Syracuse had been traced to a post office error, for which the post office had apologized. She added that postal officials had indicated that the problem was system-wide due to automation upgrades and could be impacting other mailings as well.

l. Trade Show Update

Ms. Barry reported that plans for the FAE-sponsored Trade Show were proceeding along the lines budgeted. All Executive Committee members were encouraged to attend the event, scheduled for July 17 and 18 at the New York Hilton Hotel.

This matter was deferred.

See above items relating to Peer Review

Mr. Riley introduced Robert Kawa to present the report of the NYSSCPA CPA Computer Based Exam Task Force. Mr. Kawa summarized several issues concerning the exam including scoring, the cost of the exam, registration, problems with exam sites, and computer hardware and software issues. With respect to scoring, he said that students were notified only that they had “passed” or “failed” the exam in New York, thus preventing failing candidates from adequately identifying weak areas of performance. He said that diagnostic reports, which were provided to failing candidates in lieu of a numerical score, were considered not very helpful, based on a poll of recent CPA exam candidates. He said that New York was the only state that did not give exam takers their score, and suggested that the New York State Board for Public Accountancy begin reporting test scores numerically.

A brief discussion ensued regarding the cost of the CPA exam in relation to other professions’ qualifying exams. Mr. Grumet agreed to provide a comparative summary to the Executive Committee at a later time.

Mr. Stubbs moved to refer the report of the Computer-based Exam Task Force to the full Board of Directors for action at the July Board meeting. Mr. Sohr seconded the motion. The motion passed unanimously. Mr. Ellis did not participate in the vote.

The Executive Committee briefly discussed a suggestion by the current FAE Treasurer to restructure the joint FAE/NYSSCPA Investment Committee into two separate committees for each respective entity. No action was taken regarding the suggestion.

Mr. Riley gave a brief overview of issues occurring over the prior year relating to CPA peer reviews in New York, commencing with the QEPC’s development of a white paper on peer review reform. He said that the Society’s Peer Review Committee had expressed concerned regarding several concepts in the white paper. The paper had been presented to members throughout the state and had garnered support from them as well as from the Society Board. He then reminded the committee that the AICPA Peer Review Board had recently conducted its first oversight review of the NYSSCPA-administered peer review program under recently issued, more stringent standards. He referred members to the AICPA report which had been e-mailed to Executive Committee members. Mr. Riley noted that the report found no fault with the reviews themselves, but provided constructive criticism regarding a number of issues including the timeliness of Society in accepting reviews. The report also suggested that additional training be obtained both for the program’s staff technical reviewers and the committee’s Report Acceptance Bodies (RABs). He noted that an RFP had recently been issued to several experienced technical reviewers for the purpose of acquiring additional training.

Mr. Riley called upon David Moynihan, Chair of the Peer Review Committee, to present a summary of the Society’s draft response to the oversight report. The draft response addressed such issues as administrative procedures, website and other media information, working paper retention, technical review procedures, review presentations, committee procedures and the oversight process itself. Mr. Moynihan expressed confidence that the committee and staff were on the right road to addressing all the issues identified in the report. He noted that the draft response had been sent to Peer Review Committee members for their input and comments, and he recommended that the Executive Committee approve the draft.

A brief discussion occurred regarding issues of timeliness in accepting peer review reports and the ensuing backlog. Mr. Moynihan explained that the bulk of peer reviews occurred each fall, which coincided last fall with staff turnover in the Society’s peer review department and the training of new technical review staff. He said that outside technical reviewers from Connecticut had been engaged to assist with the backlog and that this may need to be looked at again until the process was brought back up to speed. He noted that an RFP process had begun to engage an experienced technical reviewer for training, which was expected to help address several issues affecting administrative timeliness.

Mr. Moynihan gave an overview of the process leading up to a RAB’s recommendation of acceptance, or deferral of a peer review report. He noted that there were eight RABs on the Peer Review Committee, each consisting of three committee members. He said that in the best case scenario, the Society’s technical reviewer would be expected to clear all issues with reviews before a RAB’s consideration of the review, but ultimately each RAB presented its report to the committee as a whole for final disposition.

Mr. Moynihan reflected upon some of the challenges faced by him as chair, including clarifying for the committee that (1) staffing decisions are made by the Executive Director and not the committee, and (2) the committee reports to the Executive Committee through the Quality Enhancement Policy Committee and not directly to the AICPA. He also noted that a number of committee members themselves earned significant income by performing peer reviews in New York. In response to a question regarding the potential for conflicts of interest, Mr. Moynihan noted that RABs do not review the work of their constituent reviewers and that any committee member whose reviews were being assessed was excused from that portion of the committee meeting.

The committee then discussed peer reviewer qualifications, mandatory peer review and the concept of an independent pool from which a firm’s reviewer would be chosen. It was noted that legislation was needed to effectively address many of these and other issues with peer review in New York.

Mr. Lauchert then moved to approve the draft response to the AICPA peer review oversight report. Ms. Fierstein seconded the motion. The motion passed unanimously.

Mr. Grusd provided background on the organization’s $500,000 line of credit renewal. He said that the Society was not projecting a need to draw from the line credit; however, he advised that it was prudent to have the credit line in place for any unanticipated expenditures. In addition, he noted that the Society had funds remaining in its capital budget for the build-out of the organization’s new Park Avenue offices, but noted a preference to also build up a reserve fund for unanticipated expenses instead of relying solely upon a credit line. Mr. Grusd then walked the committee through the credit line documents which were provided in the agenda materials. He said that the documents required a minor change to the maturity date from May 31 to a later date in July. He said that this change would allow for the election in July of FAE’s 2006-2007 officers, who would be required to sign documentation on behalf of FAE relating to its guarantee of collateral. He closed his summary by noting that the credit line renewal entailed no cost to either the Society or FAE, and he recommended that it be approved.

Ms. Cutler moved to approve the $500,000 credit line renewal and Mr. Sohr seconded the motion. The motion passed unanimously. Mr. Ellis did not participate in the vote.

Ms. Barry briefly summarized the new editorial policy for The Trusted Professional, attached as Exhibit I. She noted that the policy was the codification of existing policies and other considerations currently enforced with respect to the publication’s editorial process.

Mr. Lifson moved to approve the policy as presented, and Ms. Kincaid seconded the motion. The motion passed unanimously. Messrs. Ellis, Grusd, Lauchert and Stubbs, and Ms. Fierstein did not participate in the vote.

The review and renewal of the Society’s investment policy was deferred to the August meeting.