0) Call to Order

President Bloom called the meeting to order at 10:15 a.m. by noting that a quorum was present.

1. Approval of Minutes of FAE Board of Trustees November 2, 2005, Meeting

Mr. Bloom asked if there were any changes to the minutes of the FAE Board of Trustees meeting held on November 2, 2005. There being no changes, Mr. Hendler moved to approve the minutes as presented, and Mr. Maier seconded the motion. The motion passed unanimously.

2. Financial Statements for five months ended October 31, 2005

Mr. Cheung reviewed the financial statements for the five-month period ending October 31, 2005, reporting total negative net unrestricted income of approximately $248,000 (deficit), as compared to positive net unrestricted income of approximately $317,000 at the same time last year. He explained that the $565,000 variance was attributed to a number of factors, a major component of which was a decrease of approximately 1,000 registrations for FAE programs so far this year. He stated that this decrease accounted for approximately $150,000 in lost income, and was attributed to a number of course cancellations among FAE industry courses. He stated, however, that he anticipated this figure to be almost fully offset by a positive $145,000 accounting entry to reflect expired, unused POP coupons. He noted that these outstanding POP coupons, which had expired as of September 1, 2005, had not yet been recognized as income, but would be by the next financial report.

Mr. Cheung explained that another major component of the variance in net income resulted from an allocation of expenses related to FAE’s conference center on the 19th floor. He explained that this expense had been budgeted at $190,000 per year; however, the Society did not start charging FAE until mid-October 2004. The additional rent accounted for about $73,000 in decreased net income.

Mr. Cheung noted that despite the negative variance in net income, cash and cash equivalents was approximately the same as reported at the same time last year. In addition, gross profit for major educational events as compared to last year was approximately the same, and that several upcoming large events were expected to positively affect FAE’s net income. Based on this, he stated that overall FAE was on par with its budget projections for 2005-2006. Mr. Bloom suggested that Mr. Cheung continue to review his methodology for booking allocations during the upcoming budgeting process, and Mr. Cheung agreed to do so. He noted that the allocations were affected in part by an outdated staff timesheet program, which would also be looked at going forward. Mr. Grumet also noted that FAE was possibly absorbing more facilities space allocations than its actual usage, due to Society’s expanded use of FAE conference space for its own programs, including committee activities. He noted that this would also be looked at going forward.

A Trustee asked how FAE took into account the interfund overheads allocation from the Society. Mr. Cheung responded that it was booked on a monthly basis, based on the direct labor dollar ratio.

3. Trade Show Vendor Update and FAE Marketing

a.) Trade Show Vendor Update

Ms. Barry announced that staff had finalized contracts with trade show manager Lois Miller and advertising representation firm Executive Publishing, in accordance with the business model and contracts approved by the FAE Board at its last meeting. She reported that Ms. Miller had since approached several potential show venues in midtown Manhattan, including the Marriott Marquis; however, the Marriott informed Ms. Miller that it had pulled out of the trade show market for business reasons, thus leaving the Hilton as the only midtown venue that could accommodate a show of FAE’s size. Ms. Barry noted that an alternative venue, the Metropolitan Pavilion in Chelsea, was just large enough to accommodate the show but could not accommodate any potential for show growth. In addition, the Javits Center, which had hosted the show in the past, was large enough but lacked appeal and had been met with tremendous member dissatisfaction. She advised the Trustees that legal staff was reviewing the Hilton proposal and would soon be forwarding a contract to the Trustees for approval.

Ms. Barry noted that a combined event with the Society’s Annual Election Meeting and Dinner could not be planned in 2006 because the Society’s contract for its dinner had been finalized with the Marriott Marquis. She noted that the Hilton was asked about a two-year contract that would lock in a 2007 combined event, but the Hilton would not commit to a date so far in advance. She stated, however, that staff would continue to pursue a combined event for 2007, as encouraged by the FAE Trustees and NYSSCPA Executive Committee.

Ms. Barry then summarized the proposal received from the Hilton Hotel for the 2006 show. She announced that the show dates were Monday and Tuesday, July 17 and 18, with set-up scheduled for Sunday July 16. She stated that space rental fees for each day of the show, plus an additional day for set-up, would be $30,000 per day, or $90,000. She noted, however, that this figure was higher than the $80,000 projected in the show budget analysis, which had been provided to the Trustees prior to its last meeting. In addition, she noted that the because FAE typically did not utilize large numbers of hotel sleeping rooms in conjunction with its show, the Hilton was requiring a minimum food guarantee of $40,000, as compared to the budgeted figure of $11,000 for coffee breaks. A discussion ensued with respect to the food minimum guarantee. Several Trustees suggested that signage sponsorships be pursued in order to mitigate the increased food and beverage expense. In addition, a trustee suggested that a $20 luncheon fee “check-off” be placed on attendee show registrations in order to help absorb the cost. Ms. Barry stated that she would discuss these suggestions and other creative ideas with the show manager, Lois Miller, and report back to the Trustees at a later meeting.

Lastly, Ms. Barry noted that Ms. Miller, in accordance with her disclosure obligations under her contract with FAE, had notified staff about a 10% sleeping room commission that would be paid to her by the hotel for her duties as the show’s organizer. She stated that Ms. Miller had agreed to sign this commission over to FAE, so as to maintain the status quo with respect to Ms. Miller’s contracted management fee.

b) FAE Marketing

Ms. Barry reminded the Trustees that, as surmised from a recent NYSSCPA member survey, unless New York State mandates CPE for industry CPAs, FAE industry courses would likely continue to experience cancellations and lower registrations than similar courses in states where industry CPE is state-mandated. She noted that several FAE courses had been marketed in a more targeted fashion and had garnered the following results as follows:

1. Government and Non-profit Auditing, Melville
100% increase in attendance over last year’s figures, from 24 to 48 attendees;

2. Individual Tax
128% increase in attendance over last year’s figures, from 32 to 73 attendees;

3. Applying OMB Circular A133 to NonProfit and Governmental Organizations
116% increase in attendance over last year’s figures, from 30 to 65 attendees;

4. Financial Statements, White Plains (industry course)
Slight decrease in attendance over last year’s figures, from 20 to 19 attendees; and

5. Trends in Corporate Finance (industry course)
Course not yet held, but current registrations only indicate 3 persons registered so far, while last year garnered 20 persons in total.

Ms. Barry stated that the results indicated that target marketing worked for all but industry courses, which further bolstered the analysis that the lack of mandatory CPE for industry CPAs would continue to negatively impact FAE’s industry courses.

In response to a question regarding the additional marketing efforts, Ms. Barry stated that three e-mails per course had been sent at three-week intervals to NYSSCPA members who had indicated an interest in each course’s subject area. Ms. Barry shared with the Trustees a chart which indicated a spike in registrations after each e-mail had been sent. In addition, Ms. Barry noted that additional course advertisements had been placed in a special edition of The CPA Journal. With regard to the cost of these additional efforts, Ms. Barry stated that the only additional cost was staff time.

A discussion ensued, during which Mr. Grumet noted a larger scale targeting campaign needs to be considered carefully due to legal issues related to e-mail. Several Trustees agreed that an appropriate balance needed to be stricken with respect to enhanced marketing.

4. Course Planning and Budget 2006-07

a. Overview of CPE Schedule

Mr. Schmelkin provided a brief overview of the CPE schedule. He noted that course pricing was based on a number of factors, including class size, fees, and locations. With respect to the latter, he noted that FAE conference and seminar coordinators had developed good working relationships with a number of quality venues throughout the state, further bolstered by good ratings from course attendees. Mr. Schmelkin also addressed the vendor market for programs, noting in particular a merger between two major tax program providers, Surgent and Associates, LLC, and Garverick McCoy Tax Seminars Inc. Mr. Schmelkin noted that the new company, Surgent McCoy CPE, LLC, combined the two largest regional providers of tax and financial-planning CPE in the nation, which would allow FAE to provide even more courses in the tax area, including many that had never before been offered by FAE. He stated that his review of 90 titles offered through the new company revealed approximately 42 new titles.

Mr. Schmelkin then noted that Ilene Persoff, a former FAE Trustee, would be taking over the FAE Annual Updates in Accounting, Auditing and Internal controls. In addition, a former NYSSCPA Vice President and former chair of the Professional Liability Insurance Committee, G. William Hatfield, would be developing a course on white collar crime and risk management.

Lastly, Mr. Schmelkin noted that FAE would be expanding its offerings in the technology area, including approximately eight new offerings from a leader in the field, K-2 Enterprises Company.

b. Draft Budget 2006-2007

Mr. Schmelkin reviewed two versions of the proposed FAE budget. He pointed out that the difference between the two budgets was attributable to the possible acquisition by the NYSSCPA of additional space on the 19th floor. He noted that there had been a call for expanding the Society offices on the 19th floor to meet emerging needs for more committee meeting rooms, teleconferencing, expanded peer review activities, and better graphics capabilities for The CPA Journal and The Trusted Professional, as well as better registration, food service and restroom facilities for FAE conference and seminar attendees. Because such an expansion would impact the organizations’ respective allocations of rent and overhead, two versions of the FAE Budget had been prepared. Under the first budget scenario (no additional space), the net education expense from the NYSSCPA to cover FAE operations would be $585,912, as compared to $623,725 for the current year. The second budget scenario (inclusive of additional space) would result in a net education expense of $623,248, which was approximately the same as the current year. Either budget scenario would allow FAE to remain steady or flat with the prior year, with FAE requiring well below the available $660,000 contribution from the NYSSCPA.

Mr. Schmelkin noted that each budget scenario assumed 448 seminar days and 47 conference days for the 2006-2007 fiscal year. In addition, the budgeted course schedule contained 42 new titles, of which fourteen were industry-related. Mr. Schmelkin stated that the number of industry course days in the 2006-2007, calendar would be 74, representing a decrease from the prior year due to poor industry course registrations.
Mr. Schmelkin continued his presentation by noting that the current year actual attendance averages for each major course location in the State was used as a starting point for next year’s estimated attendance. He noted, however, that as reported by Ms. Barry, FAE had recently experienced extraordinary success in the direct target marketing of several seminars, which garnered an average 115% increase in attendance figures for those programs. As a result of this favorable outcome, he stated that staff would continue to apply more targeted and strategic marketing efforts to a number of FAE courses in 2006-2007; therefore, a conservative increase in baseline attendance was added to the budget, along with the appropriate gross profit figures associated with each category of seminar programs. Specifically, a conservative attendance increase of 65% in 40% of FAE’s seminars was incorporated into the budget. He noted that this increase would conservatively provide an additional $176,000 in gross profit to FAE. Mr. Schmelkin closed his presentation by noting that the expenses for the FAE trade show had also been built into the budget, as well as consideration for the expansion of NYSSCPA’s strategic plan from three to five goals.

A Trustee asked Mr. Schmelkin to summarize the NYSSCPA’s newly expanded strategic plan goals. Mr. Schmelkin said that peer review and ethics had been removed from the purview of the Professional Competency goal of the strategic plan and made into a fourth goal titled, “Maintaining the Public Trust”. In addition, recruitment and retention was removed from the purview of the Advocacy goal and made into a fifth goal with the same name, “Recruitment and Retention”. He said that because the organizations’ budget process was in fact the implementation of the NYSSCPA Strategic Plan, FAE’s budget had been revised to conform to the new structure.

When Mr. Schmelkin completed his summary, Mr. Maier moved to approve both versions of the budget with the request for a grant from the Society to be $585,912 if the Society does not acquire more space on the 19th floor and $623,248 if the Society does acquire additional space. Mr. Hendler seconded the motion. Following discussion, the motion passed unanimously. Mr. Rosenbaum did not participate in the vote.

Mr. Maier moved to approve the scholarship distribution system, including the establishment of the campus ambassador program, and further moved to support the ambassador program by presenting to ambassadors an annual FAE complimentary one-day event pass. Ms. Kinsella seconded the motion. The motion passed unanimously. Mr. Rosenbaum did not participate in the vote.

Mr. Woehlke stated that of the nine members of the FAE Board of Trustees, by bylaws requirements three were traditionally derived from the NYSSCPA’s immediate past president, president and president-elect. These NYSSCPA officers would then serve as FAE’s President, Vice President and Secretary/Treasurer, respectively. Of the remaining six FAE Board members, two rotated off the board each year and were filled by the FAE itself either by accepting the FAE president’s nominees or through a nominating committee approach.

Mr. Woehlke explained that, beginning June 2005, a new approach was used. Under the current bylaws, there would continue to be nine trustees; however, three would rotate off the board annually, instead of the traditional two. In addition, the Trustees would elect their own officers. The Board of Trustees would continue to fill their own vacancies; however, they are restricted to a list of nominees provided by the NYSSCPA Board, so long as the NYSSCPA nominates at least twice as many individuals as there are FAE vacancies. The Society and FAE agreed to this approach pursuant to revisions in their respective organization bylaws and subject to the 2005 Affiliation Agreement between the organizations.

Mr. Woehlke then shared with the Trustees a membership letter from the Society’s 2004-2005 President, John Kearney, which had been used to reach out to interested candidates for nomination to the FAE Board. Mr. Woehlke noted that similar efforts, including membership e-mails and articles in The Trusted Professional, would soon be commencing to attract candidates for consideration. He asked the Trustees to consider if there were any characteristics they would like to emphasize in that promotional effort, and to notify him as soon as possible.

Mr. Maier noted Mr. Kearney’s letter indicated that the FAE Board met four times annually; however, the FAE Board was actually scheduled to meet seven times in 2005-2006. Mr. Maier’s point was duly-noted by staff, who agreed to amend the number accordingly in future outreach efforts.

As to timing, Mr. Woehlke stated that the final vote by the NYSSCPA’s board regarding nominations to the FAE Board was scheduled to occur on April 6, 2006. He expected that the membership solicitation would be commenced in January. The final election of the new FAE board members would occur at FAE’s April 26, 2006, Board meeting.

Mr. Woehlke provided an update on the process to amend FAE’s articles of incorporation. He noted that the amended articles had been received from the State Education Department and would be signed by a Justice of the New York State Supreme Court. He anticipated that the signed articles would returned within a week so that they could be filed with the New York Secretary of State, the final step.

Mr. Pape shared with the Trustees a letter from COAP Fundraising Chair, Robert Colson, soliciting contributions through advertisements in the 2006 commemorative journal for the NYSSCPA 2006 Annual Election Meeting & Dinner. He noted that the journal had brought in approximately $90,000 in contributions to the COAP program last year.

January 25, 2006 (Wednesday)
April 26, 2006 (Wednesday)

President Bloom stated that all meetings were scheduled to commence at 10:00 a.m. on these dates at 3 Park Avenue.