B05 – D – 0
Call to Order

B05 – D – 1
Minutes

a. Approval of Minutes of Board of Directors July 12, 2005, meeting

Mr. Langowski asked Board members if they had any changes to the minutes of the July 12, 2005, Board of Directors meeting. Mr. Kearney said Mr. Langowski should be listed as “president” not “president-elect.”

There being no other corrections, Mr. Nelson moved to approve the minutes as corrected. Mr. Kearney seconded the motion, which passed unanimously.

B05 – D – 2
President’s Report

a. AICPA Update

Mr. Langowski said that the New York members of Council sent a letter to Mr. Bob Bunting, the chairman of the AICPA, expressing concern about the Institute’s finances. In keeping with the duties of an AICPA Council member and the fiduciary responsibilities that this position entails, the letter asked specific questions. Mr. Langowski said the New York Council members received a full and timely response to the letter, and that he, Mr. Riley, Mr. Grumet and Mr. Cheung met with the AICPA for an hour and a half frank discussion. Mr. Langowski explained that the Institute had reasonable explanations for many of the issues raised in its financial statements.

Mr. Ellis then asked Mr. Langowski why the Board was not being told the explanations with specificity. A discussion ensued among Board members as to the appropriateness of divulging the AICPA’s explanations. Mr. Langowski reminded the Board that the request had come from the New York members of Council and not from the Society. The candid explanation of the issues raised in the letter constituted disclosures to governing body members and could well have taken a different form if made to the Society as an outside organization.

Mr. Falbo suggested that – because Mr. Langowski went to the AICPA as a Council member – the item should not be on the NYSSCPA’s Board of Directors agenda as part of the NYSSCPA President’s report. Mr. Aiken recommended that, in the future, the NYSSCPA Board should consider sending a committee to talk to the AICPA, so that committee can then report back to the Board. Mr. Grumet shared concerns that the AICPA would not be as forthcoming with its information if the Institute knew the information would subsequently be divulged to the NYSSCPA’s Board. The AICPA was, however, legally accountable to answer questions it receives from Council members.

Mr. Goldstein then moved that the NYSSCPA’s Board of Directors write a letter to Mr. Bunting asking if Mr. Langowski can divulge the information he learned at the meeting to the Board, which Mr. Ellis seconded.

During the ensuing discussion, Mr. Grumet then proposed that if the AICPA did not fully disclose the financial information at the Council meeting in October, the NYSSCPA would then write a public letter asking the Institute to do so. At that point, Mr. Goldstein withdrew his motion.

Regarding reports on AICPA activities, it was suggested that those reports be given by the AICPA Council member serving as NYSSCPA Representative rather than the NYSSCPA President. Mr. Langowski agreed to invite the NYSSCPA representative to AICPA Council to the December Board meeting to present the report on AICPA activities.

b. FAE Update

Mr. Arthur Bloom, Foundation of Accounting Education, Inc. (FAE) President, reported on the FAE. He said the FAE Board at its recent meeting reviewed:

• The 2005 Summer Season, with focus on the cancellation of certain industry CPE sessions;
• The POP program, for which members could now register online and was renewed at the current prices;
• Elimination of the $50 surcharge for POP pass holders’ attendance at most FAE conferences;
• The need to increase fundraising to expand the scholarship program and the COAP program;
• The education calendar for the upcoming year; and
• Recommendations regarding vendors for the trade show.

c. SET Tax

The President’s Advisory Panel on Tax Reform report, which was due in October, was not issued. As a result, there had been no activity regarding the SET tax.

d. Relocation Update

Mr. Cheung reported that the Society had received the final payment of all the approximately $580,000 rent security deposit held by the prior landlord at 530 Fifth Avenue.

e. Young CPAs Symposium

The Young CPAs Symposium had enthusiastic support, but the turnout was disappointing. The Society would be looking to make the Symposium a statewide effort in the future and had begun to form a Steering Committee composed of Chairs of the Chapter Young CPA Committees to work on the 2006 Event.

f. PAC Update

Mr. Langowski announced that the following officers had been newly chosen for the NYSSCPA PAC:

Anthony J. Maltese President
Barbara S. Dwyer Vice President
Nancy A. Kirby Secretary

In addition, the following individuals were newly added to the twenty-person Board of Trustees: Anthony G. Duffy and David J. Moynihan.

g. Review of Board’s Standing Rules

Mr. Langowski reminded the Board that in the two preceding fiscal years the Board had first enacted then augmented standing rules by which the Board conducted certain governance procedures. He noted that the current standing rules were included with the agenda materials and he asked the Board to review the standing rules before its December meeting.

Mr. Nowicki then asked where the Society’s Secretary position stood in regards to the oversight of operations, considering the fact that the Committee on Committee Operations had been disbanded. Mr. Piluso asked that this issue be clarified, and Mr. Langowski said it would be on the agenda for the next Board meeting.

h. Update on Executive Director Contract Renewal

Mr. Langowski mentioned that Mr. Grumet’s current employment agreement was due to expire on May 31, 2006, and the Society had engaged outside counsel to prepare a new contract.

i. Resignation from Board

Mr. Langowski discussed the resignations of two Board members, Vice President Victor Rich and Nancy Kirby. Mr. Rich resigned because his firm was acquiring American Express Tax and Business Services, which was affiliated with Goldstein Golub and Kessler LLP, the Society’s auditor. To avoid any actual or potential conflicts of interest or independence issues, Mr. Rich believed it was in the best interest of the Society for him to resign. Mr. Langowski commended Mr. Rich for his selfless decision. Mr. Langowski added that Vice President Valenti had agreed to take sole responsibility for the chapter vice president function, which had been shared with Vice President Rich. Mr. Langowski also noted that Ms. Kirby had resigned because she had moved away from the area.

Mr. Langowski said the Society had received a nominee from the Finger Lakes chapter to replace Ms. Kirby, but the nominee had not yet confirmed that she would be willing to serve. Mr. Langowski also indicated that a subsequent board conference call might be necessary to fill one or both vacancies.

B05 – D – 3
President-elect’s Report

a. 2006 Leadership Conference

Mr. Riley noted the Society’s next Leadership Conference would be July 9-11, 2006, at the Gideon Putnam Hotel in Saratoga Springs, New York. He reported that a limited number of early arrival rooms would be available for Friday and Saturday nights, July 7 and 8.

B05 – D – 4
Vice Presidents’ Reports

a. Chapters Update

Mr. Valenti stated there would be a conference call scheduled for the following week to discuss chapters.

b. Recent Society Comments

Ms. Schoenfeld reported that Society committees had issued two sets of comments as follows:

• Comments submitted to the Financial Accounting Standards Board by the NYSSCPA Financial Accounting Standards Committee, chaired by Margaret A. Wood, regarding the proposed FASB staff position; dated August 31, 2005; Principal Drafters: Abraham E. Haspel; Sharon S. Fierstein; Edward P. Ichart; Mark Mycio; and Margaret Wood.
• Comments submitted to the Auditing Standards Board by the NYSSCPA Accounting & Auditing Oversight Committee, chaired by Paul D. Warner, regarding the Eight Proposed Statements on Auditing Standards Related to Risk Assessment; dated August 31, 2005; Principal Drafters: Anthony Basile; Fred R. Goldstein; Neal B. Hitzig; Mary Jo Kranacher; Stephan R. Mueller; Mark I. Mycio; Lawrence E. Nalitt; Wayne Nast; Paul D. Warner; and Robert N. Waxman.
  

B05 – D – 5
Treasurer’s Report

a. Financial Statement for two months ending July 31, 2005

Mr. Grusd reported that combined NYSSCPA and FAE income for the two months ending July 31, 2005 was $158,000. Net income was ahead of budget by $205,000. Cash and investments stood at $5,172,000 as opposed to $5,942,000 in the previous year, the bulk of the decline being due to the late mailing of dues notices. Mr. Grusd also addressed the change in peer review administrative fees, noting that the change in billing for peer review was caused by a change in peer review’s fee formula.

Alan Schmelkin then discussed the FAE’s financial status, saying that room rates had gone up significantly. He added that there were a number of cancellations for conferences and seminars targeted at members in industry and that this was being reviewed by FAE’s Board of Trustees.

B05 – D – 6
Secretary’s Report

a. Committees’ Update

Mr. Nowicki said he had met with the Industry Oversight Committee, where the adequacy of the Society’s membership database (AM4) in relation to recruiting industry committee members was discussed. Mr. Nowicki said he was looking forward to the upcoming Accounting & Auditing Division and Tax Division oversight committee meetings.

Mr. Nowicki then discussed the departure of Society staff members Bob Colson and Mark Rachleff. Mr. Nowicki said these positions needed to be filled soon and adequately, lest the Peer Review Committee (PRC) become backlogged in issuing peer review reports.

Mr. Grumet responded by noting that the Quality Enhancement Director duties of Mr. Colson pertaining to supervision of the staff supporting the PRC had already been assigned to Mr. Markezin, Director of Committee Services, and Mr. Banerjee had agreed to assume the position being vacated by Mr. Rachleff.

b. Nominating Process Report

Mr. Nowicki reported that for the second time in three years there was sufficient interest in serving on the nominating committee that a member election would be held. Ten members had submitted petitions to fill the nine positions.

a. Update on School District Financial Oversight

Mr. Grumet noted that the effect of the school-district crisis was being seen at all levels of government. The state Legislature and governor had given the State Comptroller $2.9 million to hire staff to audit school district. A new reform law had been passed regarding the oversight of public authorities. And, furthermore, the U.S. Departments of Education and Justice had announced that they would be investigating the Long Island school district situation. Mr. Grumet added that the profession would be in the spotlight for a long time, and that he believed the comptroller’s office would be reporting on additional troubled school districts. In addition, it appeared solid waste, water, and other public authorities were also being investigated throughout the state.

b. Trade Show Update

Mr. Grumet said that the trade show attendance numbers and the number of exhibitors were essentially the same as the previous year. He reported that FAE had issued a request for proposals for trade show managers and that it was possible a new company might be chosen to run the show in the future.

c. State Society Cooperative Computer System Update

Mr. Schmelkin reported that the joint effort of some state societies and the AICPA to create a national computer database system had been abandoned by the state societies, though the AICPA was continuing its software development efforts on its own. Mr. Grumet said the NYSSCPA was wise to continue with CDS with its Association Management, version 4, or AM4 system. At one point, AM4 was the choice of over 30 state societies, though, in anticipation of the pending AICPA-developed software, many had not continued to maintain their CDS systems.

Mr. Schmelkin noted that the state societies had agreed to work together with CDS in the future development of AM4, which in its next version would include a web-enabled interface. Mr. Grumet added, however, that CDS had been put on notice that the NYSSCPA expected to receive the same excellent level of service it had enjoyed during the period the NYSSCPA had virtually alone continued to support CDS.

a. Draft Audited Financial Statements for year ending May 31, 2005

Mr. Langowski welcomed Warren Ruppel, chair of the Audit Committee, who in turn introduced Messrs. Ian Benjamin and Adam Reiss, partners with Goldstein Golub Kessler LLP (GGK), the Society’s auditors. Mr. Ruppel discussed the activities of the Audit Committee and said the Audit Committee and Executive Committee recommended that results of the audit be accepted by the Board.

Mr. Grusd then provided an overview of the Society’s financial statements. He said the Society had savings in salaries and benefits of $340,000, $150,000 on facilities, and $48,000 on FAE in comparison to the budget. Mr. Grusd said the Society was in good shape from an operations perspective, and although the Society had a decrease in cash and deferred revenue, primarily because dues notices were sent out late due to the timing of the approval of the 2005-2006 budget, the cash flow picture was improving every day. He continued by noting the Society had collected the entire security deposit from its previous landlord, and mentioned that the Society had written off $5,000,000 in fully depreciated assets. He then asked Mr. Cheung, the Society’s controller, for his comments.

Mr. Cheung walked the Board through the key items on the Society’s financial statements. He said the Society had only had twelve business days to collect dues payments this year, as opposed to 45 business days last year at the same time. This was due to the fact that the Board had to approve the dues increase. He concluded his presentation by saying that the Society had a savings in the past year of $600,000 over its budget.

Mr. Ellis stated that a big payroll savings as compared to budget was not necessarily a good thing, and expressed concern about what member service the Society might not be rendering to cause the significant savings. Mr Grumet said much of the savings came from staff compensation which went unpaid during the periods staff vacancies were being filled. He noted that during these vacancies, the work of departed employees was assumed by other staff.

Mr. Piluso asked about the Society’s investments, investment policies, and use of derivatives. Mr. Grusd described the Investment Committee and Mr. Langowski said the Society did have an investment policy in place. Mr. Kiamie then asked why the dues had been sent out late. Mr. Grusd said it was because the Board had to approve the dues increase and this occurred after the time dues would normally have been sent out.

Mr. Langowski asked Messrs. Benjamin and Reiss to brief the Board on the overall results of the Society’s audit. Mr. Benjamin said there had been a significant improvement in the status of the records and accounting function since Mr. Cheung had joined the Society. Mr. Benjamin said the Audit Committee gave the Society a standard, unqualified opinion, and then Mr. Cheung took the Board through the auditors’ management-letter comments. Mr. Langowski said the Society should make the management letter more of a working tool, and asked staff to update the leadership on a quarterly basis regarding the Society’s progress in addressing management-letter comments.

Mr. Evangelista moved and Mr Piluso seconded a motion to accept the audited financial statements. Following discussion, the motion passed unanimously. Mr. Langowski thanked everyone involved in the audit process.

b. Appointment of Auditor

Mr. Langowski made, and Ms. Cutler seconded, a motion to renew the appointment of GGK as the Society’s auditors for the 2005-2006 fiscal year. Mr. Falbo made and Mr. Palmer seconded a motion to amend the main motion to make the appointment contingent upon a review by outside legal counsel or the Audit Committee to determine that there were no independence issues, with the decision as to which would make the determination to be made by the Executive Committee. The motion to amend was approved with Messrs. Lorch, Piluso, and Waxman opposed.

Mr. Langowski then restated the motion as calling for the reappointment of GGK to be the auditor of the Society and related entities, except the CPA PAC, subject to review by outside legal counsel or the audit committee to determine that no independence issue exists, with the decision as to which would make the determination to be made by the Executive Committee. The motion passed unanimously.

Mr. Riley reviewed the background of the Quality Enhancement Policy Committee (QEPC), its membership, and its interim report. He then moved that the Board approve the policy initiatives in the interim QEPC report and direct the QEPC to complete the remainder of the policy recommendations on its agenda. He further moved that the QEPC be instructed to develop implementation steps regarding the interim report’s policy initiatives and submit a supplemental report at the Board’s meeting in December. Mr. Piluso seconded the motion.

At the start of the ensuing discussion, Mr. Riley noted that if the Board approved the motion and did not expressly oppose referral to the Legislation Committee, he intended to ask Mr. Langowski to ask the Legislative Committee to develop legislative proposals based on the interim report’s recommendations.

Mr. Evangelista disputed one statement in the White Paper: He said that the Department of Labor cannot require firms that review ERISA to undergo peer review. Mr. Grumet said the Society would research this statement and make any corrections found necessary.

Mr. Grumet said that if the Board approved the direction in which the QEPC was heading, the following would occur:

1. The White Paper would be sent back to the QEPC to finish working on unresolved conceptual issues.
2. The QEPC would work with the PRC to address implementation issues.
3. The White Paper would go to the Society’s Legislative Committee to be integrated into the Society’s legislative positions. Mr. Grumet said that the New York State Legislature would not mandate Peer Review unless it were meaningfully strengthened, and that the Legislature would find someone else to takeover the program if the profession were not to take affirmative action to revise the program.

The question of whether the PRC were adequately consulted in the process of creating the QEPC’s White Paper was addressed and discussed. At this point, Mr. Grumet discussed the Caswell Task Force and its directive to the QEPC to take a broader view of peer review and ethics.

Mr. Goldstein addressed his concern that employing the pool concept of selecting peer reviewers could be a concept that regulators would adopt for financial statement audits, resulting in both public and private businesses losing their ability to select their own auditors. Ms. Cutler directed Mr. Goldstein to footnote nine in the White Paper, which addressed this concern.

Mr. Goldstein then moved the previous question, and Ms. Fischman seconded. Mr. Woehlke noted that this motion would cut off debate and required a 2/3 vote to carry. The motion failed.

Mr. Nowicki then requested that Messrs. Pitcher and Krostich – members of the PRC – be allowed to address the Board with their comments regarding the White Paper. Several members of the Board noted that the meeting was a closed Board meeting and that uninvited guests were not ordinarily given the privilege to speak at closed Board meetings. Mr. Casey then moved that the board informally consider the main motion to enable Mr. Krostich and other representatives of the PRC to address the Board. Mr. Evangelista seconded the motion, which was unanimously approved.

After an informal presentation by Messrs. Krostich and Pitcher and extensive additional discussion, Mr. Falbo made a motion to limit debate to an additional five minutes, a motion that also required a 2/3 vote. Mr. Evangelista seconded the motion, which passed unanimously.

Mr. Riley reread the pending motion. Mr. Nowicki then proposed an amendment to Mr. Riley’s motion that there be consultation with the PRC in the process to identify and reconcile any differences the PRC might have. Mr. Nelson seconded the motion. The motion failed, with Ms. Fischman and Mr. Evangelista abstaining.

Mr. Langowski restated the question for the Board as follows:

Resolved, that the Board approve the policy initiatives in the interim QEPC report and direct the QEPC to complete the remainder of the policy recommendations on its agenda. Resolved, further, that the QEPC be instructed to develop implementation steps regarding the interim report’s policy initiatives and submit a supplemental report at the Board’s meeting in December.

The motion carried; 24 in favor and 7 opposed.

By consensus, an update on the Society’s Strategic Plan was postponed to the next Board of Directors meeting.

By consensus, an update on the proposed Continuity of Practice Program was postponed to the next Board of Directors meeting.

Mr. Piluso moved to approve the Membership Report, and Mr. Nelson seconded the motion. The motion passed unanimously.

Mr. Riley, chair of the Board’s Selections Subcommittee, presented the subcommittee’s report regarding its four recommendations for the Board to consider in identifying two designees to serve on the 2005-2006 NYSSCPA Nominating Committee. The four candidates were

• Ann Burstein Cohen
• John J. Lauchert
• Raymond M. Nowicki
• Robert T. Quarte

Mr. Langowski asked if there were any additional nominations. There being none, Ms. Fischman moved that the nominations be closed. Mr. Evangelista seconded the motion, which carried unanimously.