EC07 – D – 0
Call to Order

EC07 – D – 1
Minutes

a. Approval of Minutes of June 14, 2007, Executive Committee Meeting

Mr. Lifson asked if there were any comments or corrections to the draft minutes of the June 14, 2007, Executive Committee meeting. There being none, Mr. Piluso moved to approve the minutes as presented, and Ms. Fierstein seconded the motion. The motion passed unanimously.

b. Minutes of June 27, 2007, Executive Committee

Conference Call
Mr. Lifson asked if there were any comments or corrections to the draft minutes of the June 27, 2007, Executive Committee Conference Call. There being none, Ms. Kinsella moved to approve the minutes as presented, and Mr. Piluso seconded the motion. The motion passed. Mr. Falbo abstained.

c. Minutes of July 10, 2007, Board of Directors Meeting
for Information Only

Mr. Lifson referred Executive Committee members to the draft minutes of the July 10, 2007, Board of Directors meeting, which were distributed with the agenda for information only. He additionally stated that the discussions held at the July leadership conference on expectation gaps would be summarized and included in the agenda for discussion at the next Board of Directors in September.

a. AICPA Update

President Lifson referred committee members to an index of important issues relating to the CPA profession and the positions on them developed by the AICPA. He mentioned that the document was shared with the AICPA Council members so they could have a summary of key positions and talking points if they were asked about any of these issues. The full book is available from him or any Council member.

b. Update on Proposed Bylaws Change

President Lifson updated the Executive Committee on the bylaws revisions process, noting that a proxy/ballot detailing the proposed amendments was scheduled to be sent to the membership during the following week, with a return date of September 28, 2007. He informed the committee that he had set a special meeting of the membership to vote on the proposals had also been scheduled for 10:00 a.m., Friday, October 5, 2007.

c. Town Hall Meeting Schedule

President Lifson referred members to the schedule of Chapter “Town Hall” meetings, which was included in the agenda materials.

d. FAE Update

President Lifson asked Mr. Schmelkin to provide the FAE update. Mr. Schmelkin reported that FAE’s summer CPE session was off to a strong start and that he would shortly be compiling the first set of statistics for presentation to the FAE Board of Trustees for the 2007-2008 season. He referred committee members to a flash report included in the agenda materials which indicated a favorable trend of approximately $226,000 ahead of last year’s registration fees as of early August. Deferred POP revenue balances were approximately $62,000 above the 2006 amounts, and registration figures were up by 700. Mr. Schmelkin said, however, that two of four courses on physician finances had to be cancelled due to the unavailability of the speaker. Lastly, he pointed out that the financial results for the fiscal year ending May 31, 2007 showed FAE would require a smaller allocation from the NYSSCPA than was budgeted for member education expenses, and that approximately $175,000 would be booked as FAE revenue due to the lack of POP usage.

e. PAC Update

Mr. Grumet gave a brief update regarding the Political Action Committee (PAC), noting that approximately 10% of Society members contributed to the PAC.

a. Quality Enhancement Policy Committee

President-elect Fierstein referred Executive Committee members to the agenda from the Quality Enhancement Policy Committee’s (QEPC) July 18, 2007, meeting. She stated that the QEPC was in the process of revamping its draft white paper on education by including in it more historical background. She reported that the QEPC was additionally undertaking a review of the recommendations that originated in its peer review white paper, particularly those relating to the practical considerations of the “pool” concept. She also noted that the QEPC was in the process of reviewing and commenting upon the investigative procedures of the Professional Ethics Committee.

a. Chapters Update

Vice Presidents Barnickel and Lauchert reported on the most recent conference call of chapter presidents, noting that all but two presidents participated. They said that a big focus of discussion during the call was how to increase membership involvement in chapter activities. Mr. Lauchert additionally mentioned an idea to arrange conference calls for young CPAs of the respective chapters.

Mr. Lifson indicated that he had learned of a situation where a chapter CPE event and an FAE event were scheduled on the same day at the same venue. He noted that both events were well-attended and that there appeared to be no substantial impact of one event on the other. Ms. Kinsella, immediate past FAE President, added that staff scheduled and publicized FAE events well in advance so as to avoid potential conflicts with chapter CPE events.

b. Recent Society Comments

Vice President Torres reported that five comments had been issued thus far during fiscal year 2008, as summarized in the agenda materials. President Lifson commended the comment authors and their respective committees for outstanding work.

a. Committees Update

Secretary Ellis reported on a confidential survey he conducted of committee chairs regarding their reasons for not attending the 2007 leadership conference. A discussion ensued regarding the written comments received by Secretary Ellis, which were shared anonymously with the Executive Committee under Mr. Ellis’s grant of confidentiality to the responders.

President Lifson noted his view that executive committee and other members in a leadership position should discuss with the President or Executive Director clearance for conducting “confidential” surveys of the membership to avoid overuse or potential inappropriate use of such surveys. He commented that in general, the Society functions in “sunshine” and welcomes open and constructive criticism.

A discussion then ensued regarding the substance of the comments and reasons for the low attendance by committee chairs. President Lifson contrasted the low attendance level of committee chairs with that of other segments of the NYSSCPA leadership including the Board of Directors, AICPA Council members, chapter presidents and presidents-elect, FAE Trustees, PAC members and past presidents, which attendance was substantially higher.

The committee also discussed but did not take action on a suggestion by Mr. Ellis that a second session on “expectation gaps” be held in New York City for committee chairs who did not attend the leadership conference.

Finally, the committee discussed a suggestion that only oversight committee chairs and vice chairs, as well as appropriate subject matter experts including relevant committee chairs be invited to the leadership conference, rather than simply all committee chairs. The initial reaction of the committee was that this seemed like a more appropriate identification of the leadership of the Society. With this narrower definition of the “leadership group” at the conference, the Executive Committee expected that the oversight chairs would be more open to discussion of specific committee related issues, as well as more attuned to learn about the general leadership issues typically discussed at the conference. The committee asked Mr. Ellis to investigate this potential change in policy and report back in the near future.

b. Nominating Process Update

Secretary Ellis reported that eleven petitions had been received to date for service on the Nominating Committee as follows:

• Stewart Berger
• Robert Fagliarone
• Allen L. Fetterman
• Scott J. Jaffee
• John J. Kearney
• Stephen F. Langowski
• Bruce H. Nearon
• M. Jacob Renick
• David Rubenstein
• P. Gerard Sokolski
• Paul C. White

He said that a membership vote would be required to limit this number to nine pursuant to the Society bylaws.

a. Legislative and Regulatory Update

Mr. Grumet briefed the Executive Committee on developments regarding accountancy legislation and regulation of the CPA profession. President Lifson suggested that time be allocated on the September Board meeting agenda for an overview of NYSSCPA-sponsored accountancy legislation. The suggestion was well received.

b. Access to Website

Mr. Pape reviewed membership privacy options relating to the appearance of membership information on the NYSSCPA website. In the ensuing discussion, it was suggested that unauthorized “data mining” from the site be monitored through various methods currently used by similar organizations...It was also suggested that a time-out feature be implemented whereby one could look up only a certain number of members at one time before being locked out of the member directory. The suggestion was well received.

c. Dues Update

Mr. Grumet reported that 84% of membership dues invoiced in April had been received to date. An Executive Committee member asked whether the recent dues increase had any effect on the receipt of dues to date. Mr. Grumet responded there was no indication that the increase had any adverse effect.

d. Member Benefits Program Update

Mr. Grumet referred Executive Committee members to the member benefits program update, which was included in the agenda materials for committee information.

e. Membership Information Privacy Policy

Mr. Pape provided the Executive Committee with a summary of NYSSCPA policies and membership privacy options relating to the receipt of Society-approved marketing information and material via e-mail, mail and phone.

David Moynihan, Chair of the Peer Review Committee, reported on the results of this year’s AICPA oversight review of NYSSCPA peer review administration. After providing a brief overview of the prior year’s “modified” oversight review, he stated that this year’s review was favorable and that the NYSSCPA was found to be compliant in all material respects.

Mr. Moynihan then summarized a proposal to partially compensate peer review committee members for time incurred in connection with their respective conduct of peer review oversights. In the ensuing discussion, a number of members commented that the compensation was not unreasonable under the circumstances. It was suggested that society counsel review the compensation arrangement in light of the NYSSCPA Conflict of Interest Policy.

Ms. Kinsella moved to approve the compensation proposal at a rate of $100 per hour, with a per member cap of eight hours per committee year, subject to counsel’s review of the compensation proposal in light of the NYSSCPA Conflict of Interest Policy. Mr. Falbo seconded the motion. The motion passed. Mr. Wei abstained.

Mr. O’Leary presented a recommendation of the Professional Ethics Committee to waive the bylaws disciplinary expulsion publication requirement in a situation where the NYSSCPA had already publicized a prior expulsion of the same member on the same set of facts. He stated that the issue of the second expulsion arose when subsequent action was taken by the New York Board of Regents to suspend the member’s license; however, the member had already been reinstated to membership after the first expulsion. He said the first publicized expulsion was required due to the member’s initial guilty plea to a felony charge on the same matter. Mr. O’Leary said that it was the consensus of the Professional Ethics Committee that publication of the second expulsion would be unfair, akin to double jeopardy.

Mr. Lifson expressed concern that the Executive Committee was being asked to “waive” a bylaws requirement. He suggested instead that the recommendation be clarified not as waiving the publication requirement, but rather as recognizing that the initial publication fulfilled the requirement.

Ms. Jensen moved to approve the recommendation of the Professional Ethics Committee as clarified by Mr. Lifson, and Mr. Piluso seconded the motion. The motion passed unanimously

a. Review of Draft Audit Report

The Executive Committee met with Michelle Levine, Chair of the Audit Committee and Ian Benjamin, Goldstein Golub Kessler LLP (GGK) regarding the preliminary results of the organizations’ consolidated annual audit and management letter.

Ms. Levine began by giving a brief overview of the process by which the Audit Committee worked with GGK and with management during the audit of the NYSSCPA, Foundation for Accounting Education, Inc. and the NYSSCPA Benevolent Fund, Inc. She mentioned, however, that the audit had not wrapped up by the time the Audit Committee last met; therefore, the Audit Committee did not formally vote on the audited statements or review its footnotes. She stated that the Audit Committee was scheduled to reconvene on Thursday, August 23, 2007, to vote formally on the audit. She noted however that she was preliminarily comfortable with the financial statements provided by staff, and that she anticipated no major or material differences between those statements and the fully audited statements.

Mr. Benjamin outlined more specifically the status of the audit. He said that audit fieldwork was substantially complete and that draft financial statements and notes had been received from staff and reviewed. Mr. Banerjee added that an outstanding disclosure checklist had also been provided to GGK. Mr. Benjamin stated preliminarily that no material or substantive changes were anticipated to the financials, but said additional documentation was required to complete the audit process including audited PAC financial statements, back up for contributions and fundraising accounts, confirmations from certain banks, receivables, investments and lawyer statements. He anticipated the receipt and review of the materials shortly and welcomed the opportunity to report back to the Executive Committee upon completion of the review process.

With respect to the management letter, Mr. Benjamin said preliminarily that the draft letter would include comments regarding the financial statement preparation process, chapter bank reconciliations and the proposed merger of the Benevolent Fund into FAE. With respect to the statement preparation process, Mr. Benjamin noted that there were no systemic or significant issues but rather a recognition of the impact turnover in the department had on the company accounting function and the timing of the audit. He also pointed out that comments relating to the proposed merger of the Benevolent Fund into the FAE had appeared in several management letters past, and that the matter was still being explored by staff.

Mr. Banerjee then presented the consolidated financial statements for the fiscal year 2006 – 2007. He said that cash and cash equivalents stood at $5,940,285 as of May 31, 2007, as compared to $4,549,833 as of May 31, 2006. Investments were up, reported at $2,963,326 as compared to $2,431,610 at year end 2006. Mr. Banerjee stated that this increase was predominantly due to the favorable performance of the stock market during the period. Mr. Piluso added that he had discussed revisiting the organization’s investment policy with immediate past FAE Treasurer, Scott Jaffee, and would further discuss the issue at the October meeting of the Finance Committee.

Mr. Banerjee continued that there was a negative variance in prepaid expenses at year end 2007, reporting $203,483 as compared to $352,035 at the same time last year. He attributed this variance to the FAE trade show being held in May this year as opposed to its traditional July date, thus show expenses had already been paid by year end 2007, as opposed to being prepaid in advance of a July show. He added, however, that because there were two shows during the 2006-2007 fiscal year, there was both an increase in exhibitor booth revenue and show expenses during the period. Committee expenses were also up due to additional training, and recruitment/retention expenses were up due to the filling of staff openings in that area. He reported that the governance function saw unforeseen legal fees of $160,000 which, after adding in associated staff time, resulted in a $390,000 increase in expenses in this area. Depreciation and amortization of property and equipment amounted to $350,566 and $328,716 for the fiscal years ending 2007 and 2006, respectively. He mentioned that this variance resulted from the writing off of fully depreciated property and equipment in the amount of $37,992. Total net assets stood at $4,042,399, compared to $3,538,554 as of year end 2006, while total liabilities and net assets were reported at $10,855,733, compared to $9,232,274 at the same time last year.

In the ensuing discussion, a committee member asked about an approximately $300,000 negative change in net assets between the April and May financial statements. Mr. Banerjee noted that he would distribute a reconciliation statement to the Executive Committee to more fully account for the difference, but said much of the variance resulted from subsequently accounted accruals and other factors.

Mr. Lifson thanked Ms. Levine and Mr. Benjamin for their attendance at the meeting and informed all present that a conference call should be scheduled in the coming week to review the complete audited financials and management letter. Executive Committee members agreed by consensus to schedule the subsequent meeting on August 28, 2007 by conference call at 10:00 a.m.

An executive session was then held with Ms. Levine and Mr. Benjamin. No resolutions resulted.

b. Review of Draft Management Letter

See above.

Mr. Sinegal presented a proposed leasing contract between the NYSSCPA and Pitney-Bowes for mailroom postage meter equipment and related services. He stated that the lease required Executive Committee consideration and approval under the contract approval policy, because it entailed an expenditure of just over $100,000 during the initial 63-month term of the lease.

In response to a question, Mr. Sinegal noted that Pitney-Bowes and the incumbent equipment provider, Neopost, submitted competitive proposals, but that operations staff highly preferred and recommended the Pitney Bowes’ equipment because of a number of additional functions and services they could provide.

Ms. Jensen moved to approve the lease, and Mr. Wei seconded the motion. The motion passed unanimously.

Mr. Lifson referred Executive Committee members to the briefing memo on the proposed FAE funds balance transfer, which had been distributed with the agenda materials. He said that proposal was raised at a recent Audit Committee meeting with the auditors, and that the auditors were comfortable with the proposal provided there were Executive Committee direction and full board approval.

During the ensuing discussion, a proposed resolution which was included in the briefing memo was amended to correct the balance transfer amount to be consistent with the general ledger.

Ms. Kinsella then moved to approve the following proposed resolution:
WHEREAS, the Foundation for Accounting Education, Inc. (FAE) had begun its most recent fiscal years with a deficit unrestricted fund balance and operations for each of those years have resulted in FAE’s ending the year with the same deficit; and

WHEREAS, at its April 5, 2007, meeting, the NYSSCPA Board requested that management inquire into the feasibility of making a contribution to FAE to eliminate the deficit effective the end of the 2006-2007 fiscal year; and

WHEREAS, management has determined that a contribution sufficient to offset the deficit balance may be made by the NYSSCPA to FAE effective May 31, 2007;

NOW, THEREFORE, BE IT

RESOLVED, that the NYSSCPA make a contribution to the Foundation for Accounting Education, Inc. of $577,403, effective May 31, 2007.

RESOLVED, FURTHER, that the NYSSCPA officers and the directors are authorized and directed to take any action necessary to carry out this resolution.

Mr. Lifson seconded the motion. The motion passed unanimously. Messrs. Ellis and Torres did not participate in the vote.

Mr. Falbo, Chair of the Governance Subcommittee, presented the Governance Subcommittee’s report on proposed leadership policies relating to a Code of Conduct for Board members, related provisions concerning Respect, Enforcement and Acknowledgment, and additional policies relating to chapters, committees and public commentary.

A lengthy discussion ensued regarding the Code of Conduct, Respect for Others policy and Enforcement provisions of the policies. After a number of editorial changes and considerations, Mr. Lifson directed that the policies be redrafted by the Governance Subcommittee more like an arbitration, with attention to a more even-handed and balanced process which provided both sides of a conflict protection against retaliation and respective opportunities to appeal to the full Board of directors. In addition, he asked that references to specific timing as outlined in the policy be reconsidered, in order to balance constraints on the volunteer hearing body with the parties’ desire for a speedy resolution of the matter. Mr. Lifson suggested that a revised policy be considered at the next Executive Committee meeting in November, before consideration by the full Board.

The Membership Report as of August 20, 2007 included 179 new members (including 39 CPA candidate and 31 student associate members), 13 reinstatements, 58 resignations and 13 deaths. These changes reflected a total membership of 29,098 as compared with 29,725 at approximately the same time the previous year.

In the ensuing discussion, Mr. Pape summarized a number of reasons why some chose to resign from their NYSSCPA membership, including leaving public practice for industry and moving out of the state. He noted, however, that membership retention efforts were conducted on a regular basis with some success.

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