0) Call to Order

Vice President Hoops called the meeting to order at 12:17 p.m.

1) Minutes of January 31, 2004 meeting

Mr. Riley moved to approve the minutes of the January 13, 2004 meeting, and Ms. Fierstein seconded the motion. The motion passed unanimously. Ms. Golden did not participate in the vote.

2) Financial Statements Through March 31, 2004

Ms. Chambers reviewed the financial statements for the ten-month period ending March 31, 2004, noting that FAE experienced a net loss of $260,763, which was approximately $100,000 over the budgeted amount. Ms. Chambers pointed to losses in rental income of $70,000, noting that the organization had lost most of its renters during the past six month period. Mr. Schmelkin explained that because of the anticipated move of FAE’s offices to 3 Park Avenue, the organization was not renting classroom space at 530 Fifth Avenue to the same extent as previously. He also said that two major renters had merged their businesses, therefore decreasing their rental needs. A member asked if the lost rental income would be recaptured after the move. Mr. Schmelkin responded that it was unlikely, due to the increased use of in-house space by FAE to run its conferences and other programs.

Ms. Chambers continued that program fees for education were under budget by $186,000, noting that every type of seminar was under budget while conferences were over budget by $86,000. She reminded the Trustees that FAE had budgeted its overall net losses at $500,000, but predicated that FAE might ultimately realize between $500,000 and $600,000 in overall losses for the fiscal 2003-2004 year. Ms. Chambers concluded by pointing out that FAE’s cash position remained strong, and that FAE would not need to borrow to meet its expenses.

3) Discussion of FAE Investments and review of FAE Investment Guidelines

President Golden welcomed Paul J. Cobuzzi from Sanford Bernstein, FAE’s investment advisor.

Mr. Cobuzzi then presented various investment allocations, performance objectives and fundraising goals for the temporarily restricted scholarship funds. He was asked to work with Tom Riley to refine the rate of scholarship disbursements, and prepare further scenarios for the next meeting. Among the Trustee suggestions that emanated from the discussion was to look at funding internships for college students.

The Trustees also reviewed FAE’s existing investment guidelines. Ms. Chambers distributed a draft with changes proposed by the investment committee. Ms. Fierstein moved to accept the proposed FAE investments guidelines and objectives as presented, but to have the Trustees continue to look at and refine those guidelines and objectives in the coming years. Mr. Hoops seconded the motion. The motion passed unanimously.

4) FAE Marketing Plan – Industry Course Curriculum

President Golden called upon Mr. Schmelkin and Ms. Barry to provide some background on the process that went into the development of FAE’s marketing plan for industry courses.

Mr. Schmelkin began by recognizing the efforts of Mr. Strangis and Ms. Fierstein to develop a report on new approaches to education curriculum for CPAs in industry. Ms. Barry added that staff studied the report and drew from it to develop a strategic marketing plan. She then called upon the plan’s main architect, marketing manager Peggy Urso, to present the plan to the Trustees.

Ms. Urso highlighted several goals of the marketing plan, including 1) building awareness that FAE provides courses necessary for success as a CPA in industry; 2) increasing attendance at FAE courses designed for industry CPAs; and 3) adding value to the membership of NYSSCPA members in industry. Ms. Urso pointed out that nearly a third of NYSSCPA members, or 8,428 out of approximately 30,000, identified themselves as members in industry, and stressed the importance of meeting the professional needs of this large membership contingent through the enhanced marketing strategies identified in the plan. She added that the plan not only envisioned reaching members, but also non-member CPAs in industry. Ms. Urso also talked about competitive forces to the plan, advertising and a proposed industry program budget. The report was well received.

In the discussion following the report, a Trustee raised the issue of course cancellations and the reach of the program throughout the state. Mr. Schmelkin responded that FAE still required at least eight registrants two weeks in advance of a course for it not to be cancelled. He added that the plan envisioned running the industry courses in major markets throughout the state in such areas as Albany, Syracuse, Buffalo, Rochester and New York City.

After discussion, Trustee consensus was expressed in support of the plan as presented. Mr. Schmelkin encouraged the Trustees to contact him directly with any further feedback.

Mr. Woehlke reminded the Trustees that because the NYSSCPA was changing its banking affiliation from the Bank of New York to Fleet Bank, the Trustees at its December 16, 2003 meeting, authorized transferring FAE’s bank accounts to Fleet as well.

Mr. Woehlke stated that Fleet also offered to facilitate the move of NYSSCPA and FAE to the 3 Park Avenue location, and that at a July 2003 meeting, the NYSSCPA Board approved various credit devises needed to accommodate that move, including:

• A letter of credit in an amount equal to a year’s rent to serve as collateral for the lease; and
• A two-year term loan of $500,000 to finance the build-out. The build-out was ultimately to be financed by the current tenant over a period of two years, but the cash for the build-out was needed up front.

Mr. Woehlke noted that Fleet had agreed to extend a line of credit for $500,000, equivalent to the line then in place with the Bank of New York.

To support this commitment, Mr. Woehlke stated that Fleet was requiring the normal security arrangements, which included a guaranty by FAE, and a security interest in FAE’s assets, excluding restricted assets such as the scholarship fund. He stated that staff was therefore seeking authorization and direction from FAE to execute (1) the guaranty, (2) a security agreement, (3) the letter of agreement describing the credit facilities, and (4) a standard governing body resolution.

A discussion ensued regarding the anticipated acquisition of Fleet by the Bank of America. Mr. Woehlke noted that staff had been assured that the acquisition would not affect the substance of the banking arrangements.

There being no further questions, Ms. Fierstein moved to approve the execution of (1) the guaranty, (2) security agreement, (3) the letter of agreement describing the credit facilities, and (4) a standard governing body resolution, and to direct staff to so execute the documents. Mr. Kearney seconded the motion. The motion passed unanimously. Mr. Hoops did not participate in the vote.

Mr. Woehlke summarized the two initial merger proposals as follows:

1. Dissolve the Benevolent Fund and pay over its net assets to FAE to be used for (a) scholarships; or (b) for scholarships plus the current use of the funds to alleviate hardships; and

2. Pay over the FAE funds used for scholarship purposes for the Benevolent Fund to administer.

Mr. Woehlke noted, however, that one or the other of the governing bodies of FAE and the Benevolent Fund was uncomfortable with each of these alternatives, due in part to issues associated with the large inter-company payable from FAE to the NYSSCPA.

Mr. Woehlke reported that during a Benevolent Fund Board conference call on February 17, staff was asked to draft a briefing memo for both entities on a proposal that would address each board’s concerns regarding the proposals, and which would still enable the organizations’ resources to be combined. A copy of that briefing memo was distributed to the Trustees in advance of the meeting, and is attached to the official set of minutes as Exhibit A.

Mr. Woehlke then summarized staff’s alternate proposal as follows:

1) Eliminate the intercompany payable from FAE to NYSSCPA, which would require action by the NYSSCPA Board of Directors or Executive Committee; and

2) Merge the Benevolent Fund into FAE, with the net proceeds to be restricted on terms mutually agreeable to the two corporations’ governing bodies, which would entail that:

• Benevolent Fund assets be made available for use on scholarships while still continuing the current purpose of assisting Society members suffering financial hardship;
• FAE assets would continue to be available only for use on scholarships¹;
• Because post-merger FAE assets would be available for two slightly different purposes, they would need to be segregated; and
• Benevolent Fund assets would be restricted so as not to be available to satisfy the claims of FAE creditors.

Mr. Woehlke concluded that the merger would entail a restatement of the surviving entity’s (FAE’s) corporate purpose, and outlined procedural steps and other considerations detailed in the briefing memo.

In the discussion which ensued, a Trustee asked why the intercompany payable from NYSSCPA to FAE needed to be eliminated. Mr. Woehlke responded that not doing so would leave the impression that FAE was insolvent.

After discussion, Mr. Hoops moved to approve staff’s suggested approach to merge the Benevolent Fund into FAE as outlined, with the understanding that the resulting net proceeds would be separate restricted funds, and directed that a proposed plan of merger be presented at the next FAE meeting. Mr. Kearney seconded the motion. The motion passed unanimously.

• That FAE Trustees be elected by NYSSCPA members as a whole, under the same process by which NYSSCPA Directors and Officers are elected.
• That the NYSSCPA Board eliminate the requirement that the immediate-past NYSSCPA president, current NYSSCPA President and NYSSCPA President-elect serve as FAE president, Vice President and Secretary/Treasurer, respectively.
• That FAE officers be elected by the FAE Trustees from among its ranks for one-year terms.
• That the FAE President serve as an ex-officio voting member of the NYSSCPA Board of Directors. If the NYSSCPA Board were to determine that its size be maintained at 42, this would necessitate the elimination of an at-large directorship.
• That the Trustees serve three-year staggered terms, and have a required one-year hiatus between terms, consistent with current NYSSCPA practices.
• That the NYSSCPA Board of Directors designate one of its members to serve as a liaison to the FAE Board of Trustees and attend all Trustee meetings in a non-voting capacity.
• That the NYSSCPA Nominating Committee protocols be amended to permit service as FAE President as qualifying a person for nomination as NYSSCPA President-elect.
• That the NYSSCPA Board name a bylaws task force, which would include at least two FAE Trustees, to explore ways to bring the above recommendations to fruition.

Mr. Woehlke noted that Mr. Hoops’ suggestion to have NYSSCPA members elect the FAE trustees could present legal problems in that FAE was organized to be without members. He asked that the above proposal be revisited in the event further research confirmed this concern. The Trustees agreed with this suggestion.

Ms. Golden noted the anticipated vacancy of two trustee positions due to the expiration of the terms of Messrs. Benjamin and Riley at the end of the 2003-2004 fiscal year. Ms. Golden noted that under the bylaws, vacancies were to be filled through the following procedure:

1. Appointment by the Board of a nominating committee composed of the president and two other trustees; and

2. Entertainment of recommendations from the nominating committee with the full Board of Trustees then to fill the vacancies from among the nominating committee’s recommendations and any other nominations made by individual Trustees from the floor.