0) Call to Order

President Bloom called the meeting to order at 10:04 a.m. after noting that a quorum was present.

1) Approval of Minutes of FAE Board of Trustees December 22, 2005, Meeting

Mr. Bloom asked if there were any changes to the minutes of the FAE Board of Trustees meeting held on December 22, 2005. There being no changes, Ms. Kinsella moved to approve the minutes as presented, and Mr. Maier seconded the motion. The motion passed unanimously. Mr. Jaffee abstained from the vote.

2) Financial Statements for nine months ended February 28, 2006

Mr. Cheung reviewed the financial statements for the nine-month period ending February 28, 2006, reporting total negative net unrestricted income of approximately $209,000 (deficit), as compared to positive net unrestricted income of approximately $316,000 at the same time last year. He explained that the $135,000 actual over budget variance was attributed to a number of factors, a major component of which was a 23% increase in facility rentals for large FAE conferences and a $68,000 increase in overhead expenses due to staff timesheet allocations.

Mr. Bloom asked for an explanation of the increase in facility rentals, in light of the availability of conference space at FAE’s Park Avenue offices. Mr. Schmelkin explained that although the Park Avenue conference space was used for the majority of conferences with up to 120 attendees, larger conferences created challenges and unhappiness among attendees due to inadequate restroom facilities on the 19th floor and the lack of a separate room for food service. He said that conferences with registration above 115 had, therefore, been moved to outside hotel facilities at an additional expense. He explained that hotel audio visual charges for the Not-for-profit Conference, traditionally a very profitable conference for FAE, were more expensive this year due to the number of parallel sessions conducted at this conference which required additional microphones, projectors and other audio-visual equipment. He said the high cost of hotel audio-visual rentals in general, particularly for the Not-for-profit Conference, had cut into profits and hampered FAE’s ability to offset other event expenses.

Mr. Grumet noted that staff was negotiating with its 19th floor subtenant, the American Institute of Chemical Engineers (AICHE), possibly to occupy additional space. A discussion ensued about Society committee dissatisfaction with the FAE conference center. Mr. Grumet noted that although some committees had requested to move their conferences to outside facilities, such requests were only approved in exceptional circumstances. One example was when the requesting committee provided sufficient corporate sponsorships to mitigate the higher outside food and rental costs. Mr. Jaffee suggested that staff develop guidelines governing the use of outside conference facility rentals for committee conferences.

3) Financial forecasts to May 31, 2006, Year End

Mr. Cheung noted that to date FAE had used $185,000 of a budgeted $624,000 contribution from the NYSSCPA for FAE expenses. He said that the NYSSCPA was expected to wire an additional $300,000 to FAE, but that projections indicated FAE would require $190,000 over the budgeted contribution of $624,000 to help FAE meet a projected budget shortfall. Mr. Cheung then distributed a report outlining the areas accounting for the $190,000 shortfall. In summarizing the report, he pointed in particular to lower-than-anticipated course attendance, a high number of industry course cancellations, outside facility rental costs and increased staff overhead allocations, which are made pursuant to documented time records. He said that the additional contribution request would be handled by the NYSSCPA Executive Committee as an amendment to the Society’s 2005-2006 budget.

A discussion ensued regarding the Society’s use of FAE Conference Center space and how such use should be incorporated into FAE’s budget going forward. Mr. Grumet said that this would be analyzed and adjusted, if appropriate.

A brief discussion ensued with respect to photocopying costs and how to determine FAE’s and the Society’s respective usage for budgeting purposes. Mr. Cheung noted that FAE was likely responsible for most photocopying expenses, given the number of manuals and materials produced for FAE courses. Mr. Jaffee suggested that staff develop a way to determine the actual usage and volunteered to assist staff in coming up with a possible solution. He said that he would provide information on photocopy counting and advise staff at a later date so that it could come up with a process.

The Trustees discussed NYSSCPA chapter event revenue, POP coupon revenues and investment income, which were noted as strong. Mr. Cheung reported a correction to unused POP ticket revenue reported at the last meeting, which was $103,000 instead of $145,000 reported at that time.

Several Trustees noted that in light of FAE’s need for an additional $190,000 intercompany contribution from the Society, future cutbacks may be needed to address FAE’s budget issues going forward. The Trustees discussed several areas of potential cutback, including FAE’s current subsidy of an industry CPE curriculum. It was noted that substantial revenue losses in that area required a reexamination of whether FAE should continue this subsidy. Mr. Grumet noted that he wished to switch the current FAE industry in-firm position to service the Society’s industry committees, which would help to enhance the Society’s outreach efforts to industry members and assist FAE in identifying issues regarding its underperforming industry programs. In addition, he said that the acquisition of additional space on the 19th floor would allow FAE to run larger conferences in-house, instead of at more expensive locations. The Trustees then discussed whether to look at certain upstate programs, which FAE subsidized for the benefit of upstate Society members. Mr. Grumet noted, however, that upstate members had fewer CPE alternatives and the discontinuance of upstate sessions could have an adverse impact on upstate members.

A Trustee suggested that a plan should be developed to wean FAE of its reliance on annual grants from the Society. In the ensuing discussion, Mr. Grumet stressed that membership organizations such as the Society typically underwrite the education of, and outreach to, their members through educational foundations such as those provided by the FAE. He said that, while it was important for FAE to reduce the dependence on Society support going forward, an annual grant to FAE from the Society reflected the Society’s own investment in the education of its members.

The Trustees discussed credit card service fees of $65,000 for course registrations, and whether these fees could be lowered by requiring alternative payment methods or through hiring an alternative credit card payment processing vendor. Mr. Schmelkin explained that there was a substantial convenience to course attendees by allowing credit card registration for courses online. With regard to an alternative credit card payment processing vendor, Mr. Pape said that the Society’s member benefits committee would soon be entertaining proposals for card processing vendors as a potential Society member benefit. He said that this process could assist the Society and FAE to identify an alternative, more cost-effective vendor.

Ms. Kinsella then moved to amend the 2005-2006 grant request FAE made of the NYSSCPA to request an additional $190,000. Mr. Maier seconded the motion. The motion passed unanimously. The Trustees asked that staff communicate to the NYSSCPA Executive Committee the Trustees understanding that certain cutbacks may be needed to help alleviate FAE’s budget shortfall going forward.

4) July 2006 Trade Show Update

Ms. Barry announced that $261,000 had been booked in trade show revenue to date, with an additional $71,000 anticipated shortly. She said that $381,000 had been budgeted in trade show revenue, thus efforts were progressing well towards the budgeted goal. She noted there were several new prominent exhibitors to the show, including Microsoft, Blackberry and the show’s first law firm. She noted that Blackberry had agreed to sponsor the show’s cyber café.

In the ensuing discussion, several Trustees had a number of additional suggestions for potential trade show exhibitors and advertisers. Ms. Barry stated that she would look into all the suggestions and report any successful contacts back to the Trustees.

Mr. Woehlke stated that of the nine members of the FAE Board of Trustees, three were traditionally derived from the NYSSCPA’s immediate past president, president and president-elect under the then bylaws of the both organizations. 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 would be restricted to a list of nominees provided by the NYSSCPA Board, so long as the NYSSCPA nominated at least twice as many individuals as there were FAE vacancies. The Society and FAE agreed to this approach pursuant to revisions in the FAE bylaws, which had been locked into effect by the 2005 Affiliation Agreement between the organizations.

Mr. Woehlke noted that at its April 5, 2006, meeting the NYSSCPA Board nominated the following individuals to fill the three FAE Trustee vacancies opening up on June 1:

• Ann Burstein Cohen
• Alan D. Kahn
• Laurence Keiser
• D. Edward Martin
• Raymond M. Nowicki
• George Victor

The FAE Trustees then reviewed and discussed the relevant background information of each nominee, which was provided in the meeting materials. Upon a duly-held election, D. Edward Martin, Ann Burstein Cohen and Alan D. Kahn were elected to join the FAE board as of June 1, 2006 for three-year terms. Gail M. Kinsella, now FAE-President-elect, would automatically assume the FAE Presidency as of June 1. It was noted that the remaining 2006-2007 FAE officers would be elected from among the Trustees themselves during their next meeting scheduled for July at the NYSSCPA Leadership Conference.

A brief discussion ensued regarding the contract approval process. Mr. Woehlke summarized the process whereby contracts between $10,000 and $100,000 were typically approved via e-mail by the FAE President, President-elect and Treasurer, and asked for feedback regarding the process. Those officers currently participating in the process stated that the contract volume was not excessive, but expressed concern as to the quick turnaround requested on several contracts. It was noted that staff was often at the mercy of hotels as to acceptance deadlines, but staff agreed to strive for at least three and preferably five business day’s turnaround whenever possible.

Mr. Sinegal then summarized two contracts which required full Trustee approval because each had total anticipated expenditures of $100,000 or more: K2 Enterprises, Inc. and Surgent McCoy CPE LLC. He noted that these were two of FAE’s largest course vendors and that the contracts were on standard forms developed by legal and business staff for all FAE course vendors.

Mr. Jaffee suggested that going forward, legal staff look into whether or not there was an issue regarding insurance coverage of copyright claims. Staff agreed to do so.

Ms. Kinsella moved to approve the contracts, and Mr. Maier seconded the motion. The motion passed unanimously.

President Bloom noted that via e-mail, several additional vendor and author/discussion leader contracts under $100,000 were sent to the officers for their approval. He indicated his approval of those contracts, as did Ms. Kinsella and Mr. Jaffee.

Mr. Schmelkin gave a brief summary of the Leadership Conference, scheduled July 9 – 11 at the Gideon Putnam Resort in Saratoga Springs, New York. He encouraged all to attend, noting that the FAE Trustees were scheduled to meet on Sunday, July 9, 2006.

Mr. Jaffee suggested that a curriculum committee be formed as a standing committee of the FAE Board. Mr. Schmelkin then addressed timing of the FAE course planning cycle, noting that a six to eight month lead time was generally required to develop courses from scratch.

After a discussion, the Trustees agreed by consensus to form a FAE curriculum committee which would include representation from the following Society committees: Accounting and Auditing Oversight Committee, Tax Division Oversight Committee, Chief Financial Officers Committee, Small Firms Practice Management Committee, and Medium and Large Firms Committee. Mr. Schmelkin agreed to put together an official invitation to send to the chairs of the named committees asking them to participate in the committee.

Mr. Jaffee suggested that the FAE Investment Committee be separated from the NYSSCPA Investment Committee. Mr. Woehlke suggested that Mr. Bloom contact NYSSCPA President Stephen Langowski to discuss the matter. Mr. Bloom agreed to do so, and suggested that this matter be placed on the agenda for the July FAE meeting.