0) Call to Order

President Bloom called the meeting to order at 10:07 a.m. by noting a quorum was present.

1) Approval of Minutes of FAE Board of Trustees September 14, 2005, Meeting

Mr. Bloom asked if there were any changes to the minutes of the FAE Board of Trustees meeting held on September 14, 2005. There being no further corrections, Mr. Jaffee moved to approve the minutes as presented, and Mr. Hendler seconded the motion. The motion passed unanimously. Mr. Rosenbaum did not participate in the vote.

2) Financial Statements for three months ending August 31, 2005

Mr. Cheung reviewed the financial statements for the three-month period ending August 31, 2005, reporting FAE total net assets of approximately $1.07 million, as compared to approximately $1.4 million at the same time last year. Total liabilities were reported at $847,000 as compared to $650,000 in the prior year, and net income during this period was reported at approximately $170,000, which was $71,121 under budget and approximately $314,000 lower than the prior year.

A discussion ensued with respect to the variances in net assets, income and liabilities. Mr. Cheung explained that the variances were due in part to approximately $81,000 in marketing costs related to summer programs, including brochures and artists fees, and disparately lower attendance and higher rates of cancellations for industry courses. He stated that FAE courses typically required ten to twelve registrants in order to break even; however, a number of industry courses had been run at a loss in accordance with FAE’s policy to subsidize an industry curriculum. Lastly, Mr. Cheung explained that FAE’s 2005-2006 budget had incorporated lower figures than the prior year’s budget. Mr. Schmelkin added that the financial “peaks and valleys” of FAE’s business, versus “straight line” calculations, had also contributed to a number of variances that should even out as the year progressed.

A discussion ensued, during which variances in meeting space rentals, honorariums, and materials printing and postage were noted. In response to the Trustees’ request, Mr. Cheung agreed to provide a more detailed explanation of major variance components at the end of the financial statements in future reports.

A trustee asked if FAE staff had considered educating groups other than CPAs, such as corporate CEO’s. Mr. Grumet stated that FAE’s main purpose was to serve the educational needs of NYSSCPA members; however, he suggested the idea of reaching out to other audiences be considered as part of a larger discussion at a later time. The Trustees by consensus agreed.

Mr. Cheung then provided a forecast of net income. He stated that based solely on current calculations and results, he anticipated FAE would require approximately $136,000 beyond the original budgeted educational expense from the NYSSCPA at the end of the fiscal year 2005-2006 in order to meet its obligations. He noted, however, that this figure did not account for the anticipated financial successes of several large FAE events and conferences planned to occur in the balance of the year. In response to a question, Mr. Cheung stated that the organizations’ budgets provided for up to a $640,000 contribution from the NYSSCPA to FAE. Mr. Grumet pledged to the Trustees for the record that FAE would not exceed the full $640,000 contribution in order to meet its expenses for the 2005-2006 year.

Mr. Cheung continued that COAP expenses were higher and income lower than last year due to several factors, including later-than-usual collected contributions from NYSSCPA members via membership dues invoice check-offs. He explained that this was direct result of a late membership dues mailing, which had been delayed in order to obtain NYSSCPA Board approval of a dues increase. In addition, Mr. Cheung pointed to the addition of two new COAP programs during the summer 2005, which resulted in additional overall program expenses.

Mr. Cheung noted that the late NYSSCPA membership dues mailing also contributed to lower scholarship income when compared to both the budgeted and last year’s figures. He stated that the $94,000 scholarship income reported to date in the statements would be decreased by approximately $65,000 in scholarship disbursements approved by the Trustees in September.

A Trustee suggested that on at least a quarterly basis, the financial statements include a column of financial forecasts and projections for the year in a “macro” format. Mr. Cheung agreed to do so.

Ms. Barry provided a summary of the expiring trade show vendor relationship. She stated that over the last five years, all aspects of the show, including marketing, CPE and the overall show presentation, had been outsourced to Flagg Management, Inc. (“Flagg”) under a five-year contract that ended with the 2005 show. This arrangement provided FAE with trade show revenue at little financial risk to the organization; however, many felt that the quality of the show and its educational component had been impacted. Accordingly, staff embarked upon an RFP process to identify a vendor or vendors to run the 2006 trade show. Twenty-one potential vendors were solicited and four responded, including the incumbent Flagg. Ms. Barry explained that although each RFP respondent initially proposed to run all aspects of the show, staff counter-proposed an alternative business model where management and logistics would be handled by one expert consultant, Lois D. Miller; while advertising and sponsorships would be handled by another firm Executive Communications, Inc., the NYSSCPA’s advertising representation firm. Ms. Barry stated that this model would allow the show’s CPE programs to be planned in-house by FAE staff under Alan Schmelkin’s direction, thus raising educational program quality.

A brief discussion ensued regarding the date of the show. Mr. Grumet noted that staff had hoped to schedule the trade show to coincide with the date and venue of the NYSSCPA’s Annual Election Meeting and Dinner. The Trustees responded favorably to this idea and agreed by consensus that staff should continue to pursue combining the two events at a future show.

Ms. Barry continued her presentation by summarizing the financial risk analysis prepared by staff. She stated that profits were conservatively projected at approximately $145,000, which was higher than the $124,000 received from Flagg for the 2005 show under the expiring contract.

Mr. Woehlke then walked the Trustees through the penultimate draft contracts with each vendor. He stated that each vendor had largely agreed to each draft contract in principal, subject to FAE Trustees approval and authorization to proceed.

In response to a question, Ms. Barry expressed full confidence in Ms. Miller’s ability to perform, noting that her qualifications and references had successfully passed staff review. Mr. Grumet echoed Ms. Barry’s confidence, noting that Ms. Miller had been interviewed by senior members of staff who unanimously concurred with the decision to engage Ms. Miller. Ms. Barry reminded the Trustees that the Society had already enjoyed a successful, three-year relationship with Executive Publishing, which had resulted in steadily increased advertising revenue to the organization.

A Trustee asked if there were any known conflicts of interest with respect to either vendor. Mr. Grumet responded that both vendors had been appropriately vetted, and staff was unaware of any actual or potential conflicts.

It was noted that the draft contract with Executive Publishing provided for a renewal term at FAE’s option, while the contract with Ms. Miller did not. A discussion ensued with respect to the possibility of incorporating a renewal option in the contract with Ms. Miller. Ms. Barry explained that staff did not include a renewal option in Ms. Miller’s contract so that her performance could first be evaluated. A Trustee encouraged staff to negotiate a renewal option at FAE’s discretion into Ms. Miller’s contract which would be on the same terms and conditions. The suggestion was well-received by the Trustees, who then reached consensus that subsequent negotiations of the renewal option should not be considered a “deal breaker”. Staff agreed to proceed in accordance with the Trustees’ suggestion.

Mr. Hendler then moved to authorize staff to proceed to contract with Ms. Miller and Executive Publishing, in accordance with the recommended business model and the negotiation of a renewal option at FAE discretion in Ms. Miller’s agreement. Mr. Martin seconded the motion. The motion passed unanimously. Mr. Rosenbaum did not participate in the vote.

A brief discussion ensued regarding the use of the term “trade show”. Mr. Schmelkin responded that staff was sensitive to issues surrounding the use of that term, and thus had marketed the show over the years as the “NY CPA Technology Show and Conference”.

Mr. Schmelkin reported that after the Trustees’ September approval of the POP program for the ensuing year, marketing of the program had commenced, including the distribution of a number of membership e-mails and brochures. He stated that to date 63 individual and 55 firm POP coupons had been purchased, which was similar to last year’s purchases. He reported that the heaviest POP sales typically occurred during the month of November.

Mr. Schmelkin pointed out that there generally had been a downward trend in annual POP sales, with the 2003-2004 POP program year realizing 185 firm and 225 individual sales, and the 2004-2005 program year realizing 165 firm and 201 individual sales. In response to a Trustee suggestion, Mr. Schmelkin stated that POP marketing had been adjusted in recent years in light of the downward sales trend. Mr. Grumet added, however, that the downward trend was not unusual in these types of discount programs after an enthusiastic initial response. He stated that the POP program nonetheless remained a vital part of FAE course planning and an important benefit for a large number of NYSSCPA members and their respective firms. In response to a question, Mr. Schmelkin stated that he had not received any comments regarding the POP program changes instituted by the Trustees in September.

Ms. Barry presented the analysis of a survey conducted of NYSSCPA members for the following industry courses: Fringe Benefits, Payroll Taxes and 1099 issues, Getting Lean in Administrative Costs, Only Financial Officer, Planning for Profits, and Religious Organizations. She stated that 17,000 members were sent the survey based on their interest codes and that 186 responded, resulting in a response rate of 1.1%. She noted that as an incentive for responding, the members were offered an opportunity to receive a free iPod.

Of the 186 respondents, Ms. Barry reported that 179 answered that they did not take similar courses with another vendor, while only seven admitted to doing so based on course subject matter. In sum, the survey indicated that a course’s subject matter was not a determining factor. A number of respondents also indicated that price, location or timing of courses were a factor. With respect to timing, since CPE is not mandated for licensure of industry CPAs, the traditional August 31 deadline for annual CPE appeared to be meaningless to industry CPAs. As such, Ms. Barry noted that industry CPAs were unlikely to take seminars in August, FAE’s busiest month. Ms. Barry further surmised from the survey that unless New York State mandates CPE for industry CPAs, industry courses would likely continue to experience cancellations and lower registrations than similar courses in states where industry CPE is state-mandated.

A brief discussion ensued with respect to e-mail marketing versus brochure mailings, as well as target-marketing based on member interest codes. Ms. Barry noted that target-marketing had garnered some success in the past, and that enhanced targeting was being planned for several upcoming courses to members in industry including Government and Non-profit Auditing, Financial Statement Analysis, Trends in Finance, Tax Review and What is Your Risk IQ. Ms. Barry stated that all but one of these five courses was scheduled to take place before the next FAE meeting; therefore, marketing results would be available for analysis at the next FAE meeting.

Mr. Schmelkin recounted a concern voiced by several committee members to Mr. Grumet that the Tax Division Oversight Committee may have incorporated a number of course topics in its tax conference that overlapped with or replicated certain topics of its constituent committees’ conferences. He noted that ordinarily conflicts are managed by a division’s oversight committee, but that he would communicate the concerns to the committee.

a. Survey of CFO Committee

(See below.)

b. Curriculum Committee

President Bloom reported on the Curriculum Committee which consisted of Messrs. Jaffee, Strangis and himself. He noted that the committee had e-mailed a request for input on CPE topics to the NYSSCPA CFO Committee and to NYSSCPA Chapter Presidents-elect, which resulted in a number of comments which were summarized in the meeting agenda materials.

Mr. Jaffee added that NYSSCPA committee chairs were also being contacted for feedback regarding committee conference topics which could individually be expanded into full-day courses. He stated that expanding such topics into full-day courses would provide more in-depth coverage of a subject instead of a general overview. Mr. Jaffee concluded by noting the NYSSCPA Human Resources Committee, which he chairs, was looking at the possibility of holding a full-day human resources conference, including a section on labor law.

c. Draft Budget Preparation 2006-07 including Cost Saving Considerations of Alternative Venues for FAE off-site events

Mr. Schmelkin gave an overview of the process by which FAE plans its budget for an ensuing year. He stated that a calendar of events is developed by staff, with overhead costs and anticipated profits applied and analyzed. He stated that this analysis was performed with a view toward minimizing the NYSSCPA’s financial contribution to FAE. He then noted that a draft budget is typically presented to the Trustees for review at their December meeting and, if needed, for subsequent discussion by conference call. He stated that the Society’s finance committee would then meet to review and recommend a consolidated budget for the Society and FAE, for ultimate approval at the Society’s Board meeting in April.

A brief discussion ensued with respect to cost considerations of alternative venues for FAE off-site events. Mr. Schmelkin noted that FAE did not typically reserve large numbers of sleeping rooms in conjunction with its events; therefore, some venues have chosen not to accommodate FAE events because sleeping rooms provide a large revenue source for the hotels.

d. Tax Plenary Conference (additional agenda item)

Mr. Schmelkin informed the Trustees of a request by several Society committee chairs to cancel the two-day annual Tax Plenary Conference, due to lower-than-anticipated registrations. Mr. Schmelkin stated that the conference had 65 registrants to date, but typically drew approximately 150 persons or more. After a brief discussion regarding the registration numbers and the overall educational value of the course, the Trustees by consensus directed staff to proceed with the conference.

Mr. Pape continued his report by noting that Mr. Victor Rich had agreed to chair the fundraising aspects of the scholarship committee.

The Trustees discussed whether the investment guidelines allowed the investment committee to reallocate investments into safer funds, or whether board action were required. Mr. Woehlke noted that board action was not required because the guidelines themselves would address the issue.

December 13, 2005 (Tuesday)
January 25, 2006 (Wednesday)
April 26, 2006 (Wednesday)

The Trustees went into executive session. No resolutions resulted.