Stephen P. Valenti, Vice President
Mark Ellis

EC05 – E – 0
Call to Order

EC05 – E – 1
Minutes

a. Approval of Minutes of June 14, 2005, Executive Committee meeting

Mr. Langowski asked if there were any changes to the minutes of the June 14, 2005, Executive Committee meeting. Mr. Moynihan moved and Mr. Lauchert seconded, that the minutes be approved as written. Following discussion the motion was approved. Mr. Grusd, who had not been present at the June meeting, abstained from the vote.

b. Draft Minutes of the July 12, 2005, Board of Directors Meeting for information only

The draft minutes of the July 12, 2005, Board of Directors meeting were distributed for information only.

EC05 – E – 2
President’s Report

a. AICPA Update

President Langowski reported that subsequent to the May AICPA Council meeting, the nine “elected” AICPA members of Council from New York and the NYSSCPA representative to AICPA Council met twice concerning questions raised about the AICPA’s finances. (The group did not include “at-large” or other Council members from New York.) These concerns were presented by Mr. Langowski in a letter to AICPA Chair Robert Bunting, a copy of which was shared with the Executive Committee. Mr. Melancon responded to the letter, agreeing to meet with Messrs. Langowski, Riley, and Grumet with appropriate AICPA staff and the AICPA auditor. A date has not yet been set.

President Langowski reported that Executive Director Louis Grumet had written a letter to AICPA President and CEO Barry C. Melancon expressing concern over the way the Institute’s peer review staff had handled an issue posed to them by NYSSCPA staff. A copy of the letter was shared with the Executive Committee. Mr. Nowicki expressed concern that the Peer Review committee had not been contacted regarding the issue. Mr. Grumet explained that the issue was not a committee-specific issue but rather a staff-to-staff issue that was appropriately handled at the staff level.

b. SET Tax Update

It was reported that David A. Lifson, Chair of the Committee on Practical Reform for the Tax System, submitted an editorial response to the Wall Street Journal concerning the newspaper’s interview of Stephen Forbes on Forbes’s flat-tax proposal. The response had not yet been published.

c. Young CPAs Symposium Update

President Langowski reported that 85 persons recently attended the Young CPAs Conference held in Albany. The committee discussed several issues affecting attendance at the conference, including scheduling, recruiting and conference location. The committee agreed by consensus with an idea to form a statewide committee to plan future Young CPA Conferences, and requested that staff develop a formal plan to present to the Executive Committee.

d. PAC Update

President Langowski announced that the Political Action Committee (PAC) had several new officers: Anthony J. Maltese, President, Barbara Dwyer, Vice President and Nancy Kirby, Secretary. In addition, two new PAC members included Anthony Duffy, and David Moynihan.

e. FAE Update

President Langowski reported that FAE revenue trails slightly when compared to last year’s figures due to lower attendance in courses geared to members in industry. Mr. Grusd suggested that the Members in Industry Oversight Committee be consulted for additional guidance on increasing attendance, and asked that staff follow up on a members-in-industry promotional brochure that had been in development prior to the recent departure of an industry staff person. Mr. Grumet stated that he would follow up on the status of the brochure.

f. Strategic Plan Update

President Langowski referred Executive Committee members to the Society’s Strategic Plan and to written summaries of comments made by members during break-out discussion sessions at the July Leadership Conference which were provided in the agenda materials. He asked the committee to review the Strategic Plan and break-out session comments for further discussion at the September Board meeting.

g. RSM McGladrey Acquisition of Amex Tax and Business
Services, Inc.

Discussion of this matter was held in Executive Session.

a. Report on Quality Enhancement Policy Committee

President-elect Riley gave a report on the work of the Quality Enhancement Policy Committee (QEPC) which led to the development of a draft white paper examining the peer review system. The paper had been provided to Executive Committee members in advance of the meeting.

Secretary Nowicki first pointed to a potential conflict of interest of his own stemming from his position as one of the ten largest peer reviewers in New York State, and he suggested that it may be appropriate for him to abstain from voting on the QEPC white paper. He also expressed concern that several Executive Committee members, who sit concurrently on the QEPC, would be voting on the disposition of the QEPC white paper, which they had already approved in the QEPC. He felt that this too constituted a potential conflict of interest. A discussion ensued during which it was noted that the members in question had no pecuniary interest in the outcome of the policy paper discussion. Mr. Grumet also stated his opinion that no Executive Committee member, including Mr. Nowicki, had a conflict with respect to their vote on the QEPC paper. In response to a direct question, Mr. Woehlke agreed that there were no inherent conflicts of interest which would require recusals from any of the members under the circumstances.

Secretary Nowicki then expressed concern over the lack of inclusion of the peer review committee in the white paper development process, stating that there was an exclusionary process. He said that, as a result of this exclusion, some of the data in the report was stale, incorrect or required clarification. At the request of several members, Secretary Nowicki briefly outlined several areas of his concern in the white paper. He then asked that the peer review committee be allowed to provide corrections or clarifications where necessary and also respond to issues raised in the report.

Messrs. Langowski and Riley responded that detailed information had been sought from peer review committee members during the drafting process, and that the data in the paper was accurately cited to relevant authorities, including dates where appropriate. In addition, they stated that the process had not been exclusionary and that drafts of the paper had been shared with many in the society’s leadership including at the July leadership conference. President-elect Riley noted that the paper had been restructured since the leadership conference, but that the underlying intent of the paper had not changed.

Secretary Nowicki responded that the intent behind the paper was noble, but stated that many of the ideas expressed in the piece would have no teeth without the power of law behind them. In addition, he admonished committee members to allow for a more balanced approach by letting the Peer Review Committee respond to the paper.

President-elect Riley stated that the purpose of the QEPC and Executive Committee in the white paper process was to provide uniform policy guidance on how to revise the peer review system. In the ensuing discussion, the committee agreed that corrections or clarifying comments would be welcomed from all interested parties, including the Peer Review Committee.

President-elect Riley moved to forward the white paper to the full Board for consideration at its September meeting, subject to incorporating appropriate, timely submitted corrections or comments. Ms. Cutler seconded the motion. The motion passed unanimously. There were no abstentions.

Vice President Rich suggested several structural changes to the paper, which were duly noted by the committee and staff.

a. Reports on Chapters

Vice President Rich reported on the chapter presidents’ conference call held the prior day, and distributed to the Executive Committee minutes of that meeting. He noted that they had discussed the signing of contracts at the chapter level without review by Society legal staff. The Executive Committee reviewed the issues associated with this practice, and several policy ideas were discussed. Vice President Rich asked that additional fact-finding be done before approving a formal policy. Legal counsel was asked to participate in the next chapter presidents’ conference call.

Mr. Grusd moved that the topic of a chapter contract policy be placed on the Executive Committee’s November agenda. Mr. Falbo seconded the motion. The motion passed unanimously.

b. Recent Society Comments

On behalf of Vice President Schoenfeld, Mr. Markezin gave a brief update on two Society comments that were currently being drafted and referred Executive Committee members to the agenda materials which included comments that had been issued as follows:

• Comments submitted to the AICPA Professional Ethics Division, by the NYSSCPA Professional Ethics Committee, chaired by Francis T. Nusspickel, and approved by the Quality Enhancement Policy Committee, chaired by President-elect Thomas E. Riley, regarding Exposure Draft, Omnibus Proposal of Professional Ethics Division Interpretations and Rulings, dated June 17, 2005; Principal Drafters: Francis T. Nusspickel, Kevin Baandoian, Melvin Crystal, P. Gerard Sokolski and Edward Torres.
  President Langowski commended the authors and committees for their outstanding work in issuing the comments.
  
  

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

Treasurer Grusd reported that the Society and consolidated entities realized an approximately $157,000 change in net assets, which was $210,000 less than last year and ahead of budget by approximately $205,000. Treasurer Grusd then walked the committee briefly through the financial statements. He asked members to provide him with their comments or suggestions as to format.

Mr. Cheung noted that $67,000 in additional accruals had been made since the last financial statements were provided to the Board at the July leadership conference. As a result, the reported variance in net assets at the beginning of the year was actually $527,000 instead of $594,000.

Treasurer Grusd asked for a briefing on the recommended reporting and governance structure of audit committees in non-profit or private organizations. Several noted that audit committees typically report to boards of directors in such companies.

b. Annual Audit Update

Mr. Cheung reported that the audit of the Society and its consolidated entities (including FAE and the Benevolent Fund) had commenced. He announced that the auditors, GGK, LLP, would be meeting with the Audit Committee on September 12, 2005, to go over the audit. The Committee agreed by consensus to meet at the call of the President after September 12 to review the audit report and develop its recommendation to the Board.

Secretary Nowicki reported that he was scheduled to meet with several Society oversight committees and that committee membership applications had increased. He also reported that an idea to implement membership rotation on the Tax Division Oversight Committee would not be going forward

Secretary Nowicki reported that 11 petitions had been received for service on the Nominating Committee, and that a membership vote would be taken to limit the number to nine per the Society bylaws. Secretary Nowicki noted that a ballot was being prepared for distribution to the membership with a due date of September 30, 2005. ¹

¹ The due date was later changed to October 13, 2005.

a. Dues Update

Treasurer Grusd reported that the Society realized $100,000 more in dues revenue as a result of dues increases approved by the Board in April.

b. COAP Update

Mr. Grumet announced that the Society would be holding a Career Opportunities in the Accounting Profession Program in Buffalo for the first time, and that another location in New York City was being considered.

c. Insurance Update

Mr. Grumet reported that, as of July 31, 2005, the CAMICO professional liability insurance program had in-force 436 New York policies, covering 1,547 CPAs and generating $2.8 million in annual premiums.

d. Washington Press Briefing

No report was given.

e. Trade Show Update

Ms. Barry reported that the 2005 trade show included 107 vendors exhibited on the show floor and approximately 1,800-2,000 persons attended. She announced that a proposal to co-sponsor a trade show with the New Jersey CPA Society would not be proceeding, but that an RFP process was in its final stages to identify a vendor to run the 2006 show. Finalists in the process include a new proposal from the incumbent vendor Flagg Management, Inc., whose contract expires this year, as well as proposals from two other vendors.

f. State Society Cooperative Computer System Update

Mr. Schmelkin reviewed the State Society Cooperative Computer System, noting that an advisory group had been formed to prioritize “wish lists” for system performance.

A committee member asked whether, during the due diligence process, Pearl’s own corporate insurance coverage was found to be adequate. President Langowski responded that the company’s insurance coverage was not reviewed, but that extensive financial checks were conducted by both staff and a subcommittee of the Executive Committee, including interviewing Pearl’s auditors.

Mr. Moynihan moved to approve the contract with Pearl Insurance Company as presented, and Vice President Rich seconded the motion. The motion passed unanimously.

b. Thompson/RIA

Mr. Pape briefly summarized the proposal and draft contract with Thompson/RIA, which would provide discounted Thompson/RIA titles to Society members through a co-branded website. Mr. Pape stated that the contract did not provide royalty revenue to the Society as a result of the discounted sales. A discussion ensued whether royalties should be mandated for all member benefit programs. The Executive Committee agreed by consensus that the Member Benefits Committee should strive for deals encompassing a combination of royalties to the Society and membership discounts, but that all benefits should nonetheless indicate in their respective promotional literature that they are being offered as NYSSCPA benefits. Mr. Pape agreed to inform the Member Benefits Committee of this direction.

Treasurer Grusd moved to approve the contract with Thompson/RIA Publishing Company as presented, and Secretary Nowicki seconded the motion. The motion passed unanimously. Mss. Schoenfeld and Cutler did not participate in the vote.

A discussion ensued regarding a request to provide Pearl Insurance direct access to the Society’s membership list for sorting and marketing purposes. The Executive Committee asked staff to obtain more specific information on the fields of data that Pearl wished to access, and to present this to the Executive Committee at a later meeting.

Mr. O’Leary provided background on proposed updates to the Professional Ethics Committee Procedures Manual as recommended by the Professional Ethics Committee (PEC) in a confidential memorandum to the Executive Committee. The PEC is governed by the Joint Ethics Enforcement Program (JEEP) between the AICPA and the NYSSCPA for the investigation and sanction of members of either organization for violations of their respective Codes of Professional Conduct.

Mr. O’Leary noted that currently under JEEP, the PEC had authority to investigate and discipline members for violations of the Society’s Code of Professional Conduct; however, unlike AICPA, it does not have the authority to automatically discipline members who were sanctioned by AICPA Board-approved regulatory entities such as the SEC, IRS and PCAOB, whether by the entity’s determination of guilt or by consent order with no admission or denial of charges. He noted that to address this misalignment between the AICPA and NYSSCPA procedures, the PEC would recommend changes to the Society’s Bylaws to accord with the AICPA’s authority; however, such amendments would require a vote of members. In the meantime, the PEC was recommending additions to the PEC Manual of Procedures which would not require a Bylaw amendment as follows:

1. If a Society member consented to a sanction by an NYSSCPA approved regulatory agency, with no admission or denial of the charges, the PEC could, at its discretion, offer the member the option to accept a similar consent for any charges that are brought before the PEC. (The member would always retain the right to have an investigation if he or she so wished.)

2. Further, if a Society member had been found guilty by an NYSSCPA approved regulatory agency, whether by findings of fact or guilty plea, the PEC could, in its discretion, offer a member the option to plead guilty to the charges brought before the PEC. (The member would always retain the right to have an investigation if he or she so wished.)

Mr. O’Leary noted that such procedures would only be offered in cases where disciplinary action was taken by NYSSCPA Board-approved agencies, such as the SEC, IRS, PCAOB and the New York State Office of Professional Discipline.

Mr. Falbo moved to approve the PEC’s recommended changes to the PEC Manual of Procedures. Mr. Lauchert seconded the motion. The motion passed unanimously. Mss. Schoenfeld and Cutler did not participate in the vote.

Secretary Nowicki presented the Committee Action Plan (CAP) of the newly-formed Human Resources Committee, and moved that the CAP be approved as presented. President-elect Riley seconded the motion. The motion passed unanimously.

President Langowski noted that the Board had approved check signature authority for the 2005-2006 fiscal year at its June 2, 2005 meeting; however, one of the signatories, Robert Colson, had subsequently left his position at the Society. He noted that staff was requesting that the authority be amended to replace Mr. Colson with Committees Director, Mr. Markezin.

Treasurer Grusd then moved to amend the 2005-2006 signature authority to replace Mr. Colson with Mr. Markezin. Mr. Lauchert seconded the motion. The motion passed unanimously. Vice President Schoenfeld and Ms. Cutler did not participate in the vote.

Mr. Markezin provided background on the Committee and Board Member Travel Reimbursement Policy. He explained that the limitations on reimbursement for lodging, meals and incidentals were to be set each year by the Executive Committee, historically using the United States General Services Administration’s (GSA) per diem rates for Manhattan as a benchmark. He noted that the current GSA rate for calendar year 2005 for meals and incidentals is $51. The 2005 rate for lodging varied depending on the season, but averaged out to almost $200, which was the cap currently in effect under the policy. Mr. Markezin stated that the policy cap for lodging would apply before taxes.

In addition, Mr. Markezin noted that there was currently nothing in the policy that sets a time limit on how long after a meeting takes place that a reimbursement request may be submitted. He stated that staff was recommending that the policy be amended to include a time limit to submit reimbursement requests within six months of the meeting date, or reimbursement would be denied.

Secretary Nowicki moved that the Travel Reimbursement Policy continue its $200 cap on lodging costs per diem, before taxes, and its $51 cap on meals and incidentals for the 2005-2006 year, and that the policy be amended to require that reimbursement requests must be received within six months of the meeting date. Treasurer Grusd seconded the motion. The motion passed unanimously. Mss. Schoenfeld and Cutler did not participate in the vote. Staff was asked to communicate the updated policy to affected members.

1) authorized the President, the Executive Director, or designee, to sign contracts with revenues or expenses over the first twelve months following the contract’s effective date of up to $10,000;
2) required approval of at least two of the president, president-elect, and treasurer, after review and discussion, for contracts with revenues or expenses between $10,000 and
$100,000 over the first twelve months following the contract’s effective date before the contract may be signed; and
3) required Executive Committee or Board approval for contracts with revenues or expenses exceeding $100,000 over the first twelve months following the contract’s effective date.

RESOLVED, that the Society’s contract approval policy is revised to read as follows:

The President, the Executive Director, or the designee of either one of them is hereby authorized to execute any contract on behalf of the Society under the following conditions:

Any and all Society contracts shall be subject to this policy, regardless of whether the expenditures or revenues contemplated in the contract or contracts have been explicitly included in the Society’s annual budget.
Mr. Lauchert seconded the motion. The motion passed unanimously. Mss. Schoenfeld and Cutler did not participate in the vote.