NYSSCPA and FAE Boards Approve Affiliation Agreement

By James A. Woehlke, NYSSCPA Counsel

The governing bodies of the New York State Society of CPAs and the Foundation for Accounting Education, Inc., voted on July 12 to memorialize their organizations’ relationship in an affiliation agreement.

These agreements are considered best practices by CPAs and lawyers who serve the nonprofit community.

“This affiliation agreement is an example of the progress the boards of both the NYSSCPA and FAE have made in improving the governance of our respective organizations,” said Stephen F. Langowski, NYSSCPA president. “The agreement formalizes many benefits for both organizations for five years.”

The NYSSCPA/FAE affiliation agreement confirms that FAE will grant at least a 25 percent discount to members of the NYSSCPA and will have access to membership information and intellectual property of the NYSSCPA to market FAE programs. The NYSSCPA, for its part, promised to provide staff and other support to FAE. Both organizations agreed to allocation formulae for staff time, space usage, and other items FAE needs to conduct business.

A unique aspect of the NYSSCPA/FAE agreement is that FAE agreed to seek Society board approval before changing its bylaws. Recently, FAE changed its bylaws to uncouple the officer positions of the two organizations. Previously, the past and current Society presidents, and Society presidents-elect, would serve as the officers of FAE. Under the 2004 FAE bylaw change, which the NYSSCPA board concurred in, the FAE trustees now elect their own officers.

“The new affiliation agreement clarifies the responsibilities of both FAE and the Society and recognizes their separate corporate identities,” said Arthur Bloom, the first elected president of FAE. “It enables us to move beyond the point of operating based on unwritten convention and clarifies the financial arrangment between the two companies.”

Nonprofit advisors have long touted the advantages of affiliation agreements.

“To achieve the benefits accruing from a corporate structure including a professional society and affiliated education foundation, it is critical to maintain their corporate existence by observing strict financial, management and operational separation,” said Jeffrey S. Tenenbaum, of the Washington law firm Venable, LLP, and author of the Association Tax Compliance Guide. “This should start with a written affiliation agreement that codifies the relationship between the two organizations and provides a blueprint for both organization’s staff and leadership to follow to maintain the requisite separation.”

“In the many governance reviews we perform for nonprofit organizations, we frequently recommend that the association have agreements with its related organizations,” added Jonathan T. Howe, CEO of the law firm Howe and Hutton. “These affiliation agreements are near the top of our list of association best practices. They avoid problems in the future as boards change and have no other reference point, and show due diligence on everyone’s part.”