EC05
– F – 4
Audit Committee
(Joint
Session with FAE Board)
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President
Langowski began the joint session with the FAE Trustees
at 10:08 a.m., introducing Warren Ruppel, chair of the audit
committee.
Mr.
Ruppel gave an overview of the process by which the audit
committee worked with the auditing firm Goldstein Golub
Kessler LLP (GGK) and with organization management during
the audit of the NYSSCPA, Foundation for Accounting Education,
Inc., and the NYSSCPA Benevolent Fund, Inc. He stated that
the audit proceeded in standard fashion, and that no problems
arose with respect to the implementation of SAS 61 and 99.
He noted several key aspects of the audit, including the
later-than-normal mailing of dues invoices to NYSSCPA members,
which was delayed in order to obtain Board approval for
a dues increase. In addition, Mr. Ruppel stated that the
audit showed significantly lower fixed assets because a
number of fully depreciated items had been written off after
the organizations’ relocation to Three Park Avenue.
He noted that accounting under the new office lease had
been reviewed. Mr. Ruppel concluded by recommending on behalf
of audit committee the acceptance of the audited statements.
President Langowski thanked Mr. Ruppel and the audit committee
for their work.
President
Langowski then called upon Mr. Cheung for a summary of the
financial statements for the year ending May 31, 2005. Mr.
Cheung stated that there net assets had increased by approximately
$569,000 from the previous year’s $803,000. Mr. Cheung
noted that approximately $67,000 in additional accruals
had been found since the year-end financial statements were
presented to the full Board in July; therefore, the variance
was lower than reported at that time. This variance was
attributed to the cost of the organizations’ office
relocation and also increased membership expenditures. In
response to a question, Mr. Cheung stated that the increase
in membership expenditures was approximately $113,000, and
he agreed to provide a breakdown to the NYSSCPA Board.
Mr.
Cheung noted that FAE had been budgeted to break even, and
finished the year $48,000 ahead of budget. In addition,
the NYSSCPA had been budgeted at an $89,000 loss, but finished
the year $500,000 ahead of budget. Mr. Grusd, NYSSCPA Treasurer,
asked that Mr. Cheung provide the NYSSCPA board with a breakdown
of the major components relating to the positive $500,000
variance. Mr. Cheung agreed to provide a detailed breakdown,
but in the meantime stated that, among other things, the
Society had savings in salaries and benefits of approximately
$340,000, and further savings in other areas including facilities.
With respect to facilities, he noted that two-thirds of
the Society’s Park Avenue office rent expenses from
June 2004 to September 2004 were being capitalized while
all the rent payments by the Society’s subtenant,
the American Institute of Chemical Engineers were recorded
as revenue.
Mr.
Grumet reminded the Executive Committee and FAE Trustees
that during the 2005-2006 budget presentation at the April
Board meeting, he had introduced the topic of creating a
reserve fund. Mr. Grumet had pointed to the success of the
$200,000 per year “Building Reserve Fund” that
was used in preparing for the office relocation to Three
Park Avenue, and had noted several examples of non-profit
organizations with reserve funds. Mr. Grumet stated that
there had been earlier discussions and agreement at the
Finance Committee to continue setting aside $200,000 per
year after the office relocation, even though no immediate
plans for its use were contemplated. He encouraged the Board
to consider such a fund in the future in order to address
projects such as system upgrades.
In response
to a question, Mr. Cheung noted that an outside investment
firm, Sanford Bernstein & Company, managed the organizations’
investment accounts. He noted that approximately $600,000
had been reallocated from the investment account towards
financing for the organizations’ office relocation.
Mr. Cheung stated that investment income nonetheless remained
relatively flat during the period. In response to a question,
Mr. Woehlke stated that the relationship with Sanford Bernstein
was overseen by the Society’s Investment Committee,
and that it had been some time since an RFP was conducted
with respect to the investment manager position.
Mr.
Cheung concluded his summary by reporting that the NYSSCPA
had received its full security deposit back from the prior
landlord, and had also added $1.4 million in leasehold improvements,
property and equipment due to the move. He noted that the
organization wrote off more than $5.5 million in fully depreciated
property and equipment during fiscal year 2005, and that
write-offs of fully depreciated assets would be performed
annually.
President
Langowski thanked Mr. Cheung for the summary and then turned
the floor over to Mr. Benjamin, GGK’s engagement partner.
Mr. Benjamin reported that a waiver letter from the Bank
of America was still pending with respect to a requirement
that the NYSSCPA maintain $2.5 million in unrestricted cash
assets at year end. He stated that the NYSSCPA was not in
compliance with this requirement because as of year end,
it had only collected $2.1 million in membership dues revenue.
Mr. Benjamin stated that this shortfall was attributed to
the later-than-normal mailing of dues invoices to members.
He stated that the Bank of America had been fully apprised
of the circumstances and had agreed to waive the $2.5 million
requirement.
Mr.
Benjamin also noted that the accounting department had experienced
turnover, resulting in two open positions. Mr. Grumet reported
that all open positions had been filled and that all accounting
staff would be on board shortly.
Mr.
Benjamin continued by noting that draft legislation regarding
not-for-profit corporations proposed by the New York State
Attorney General would require that the audit committees
of nonprofits be comprised of board members. He noted that
the NYSSCPA’s audit committee currently contained
no board members; and he suggested that this structure be
changed. He stated that the proposed legislation was intended
to bring a heightened level of fiduciary responsibility
to non-profit boards with respect to their organizations’
audits.
Mr.
Grusd noted that the management letter included a description
of an incident in which staff received two paychecks during
one pay period. He asked that the management letter be amended
to reflect that the mistake was fully resolved and that
all monies incorrectly paid to staff had been recovered.
Mr. Benjamin agreed to amend the management letter as requested.
Mr.
Benjamin then noted that GGK’s affiliated organization,
American Express Tax and Business Services, Inc. would soon
become a unit of RSM McGladrey, which raised the potential
for an independence violation stemming from NYSSCPA Vice
President Victor Rich’s professional association with
RSM McGladrey. President Langowski informed the auditors
that Mr. Rich had just resigned his position as Vice President
to avoid any actual or perceived conflicts of interest.
Mr. Benjamin stated that his firm’s practice in this
situation would be to look carefully at Board actions during
the period of Mr. Rich’s vice presidency to see if
there were any potential issues. He stated that he would
communicate any concerns, or the lack thereof, to the audit
committee as soon as possible.
President
Langowski then excused staff so that the Executive Committee
and FAE Trustees could discuss the audit in executive session
with Messrs. Benjamin and Reiss. No resolutions or material
changes to the audited statements and management latter
resulted from the executive session.
Following
the conclusion of the executive session, the Executive Committee
reconvened without the FAE Trustees and GGK representatives.
Mr. Moynihan moved to recommend full board acceptance of
the audit, subject to the changes requested by Mr. Grusd,
and Mr. Ellis seconded the motion. The motion passed unanimously.
President-elect
Riley then moved to recommend to the full Board the reappointment
of GGK as the organizations’ auditors for the year
2005-2006, subject to resolution of any independence issues
stemming from RSM McGladrey’s acquisition of American
Express Tax and Business Services, Inc. Mr. Nowicki seconded
the motion. Following discussion, the motion passed with
Ms. Schoenfeld opposed.
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