Subject: Memo on Selecting CPA for IFCSS Financial Engagement

From: Hongguang Zhou <[email-masked]>
Date: Sun, 16 Jan 1994 03:10:49 -0500 (EST)

Memo on Selecting CPA for IFCSS  HQ

From: 		5th IFCSS Council Finance Committee
		signed by Zhou Hongguang for FC)

Status: 	Immedaite Release

TO:		IFCSS Council
		
CC:		IFCSS HQ 
		IFCSS Supervisory Committee

RE:		Recommendation on selecting CPA

Date:		January 15, 1994

	After having carefully reviewed the proposals from four 
CPAs for the call from the HQ regarding the compiling the 
financial statements, (please note this is NOT auditing) this IFCSS 
Council Finance Committee  would like to recommend to the Council 
that the recommendation by the HQ for Mr. Jeff W.S. Lin, CPA, 
for IFCSS financial engagement be rejected on the following grounds:

1. The bidding procedure on the open bidding

	The HQ has kept the Council in dark about the bidding 
procedures. The HQ began to take action to contact CPAs for 
open bidding only after the first on-site inspection by the Council 
Financial Inspection Team. On December 12, 1993, the Council and its 
Finance Committee welcome in the Council News Release 
CN5006 the move by the HQ and requested the HQ to provide 
necessary information regarding the bidding process. In spite 
of the Council's requirement, the HQ has never provided the 
demanded information such as timetable. Only until January 
10, 1994, the HQ issued a statement which sounds like an ultimatum 
without any elaboration on the OPEN bidding procedures. Given 
the circumstances, the Finance Committee cannot but to reject 
any possible recommendation by the HQ for any CPAs.

2. Scope of the bidding invitation

	The open bidding is not PUBLIC enough. Only four out of 
thousands of registered CPAs in the Greater Washington, DC area have 
responded to the bidding calls from the HQ. Since HQ has never 
substantially informed the Finance Committee of the 
development on the bidding invitation, this Committee can only 
conclude that the so-called open bid for the IFCSS financial 
engagement is not open enough. Given this conditions, the 
Finance Committee deems it impossible to make fair 
recommendation out of the four CPAs proposed by the HQ for 
the open bidding of IFCSS.

3. The bidding reviewing process

	The HQ misled the attention of the Council to the 
reviewing process in its recommendation for Mr. Lin, CPA as 
the IFCSS financial engagement , claiming the service and 
charges by Mr. Lin is better choice. However, in his only two-
and a-half-page bidding letter, Mr. Lin himself states his flat 
fees of $1,500 is based ONLY on:

"If management elects to omit substantially all disclosures, and
statement of cash flows, I will include an additional paragraph
that will read as follows:

          Management has elected to omit substantially all of the
          disclosures and statement of cash flows required by
          generally accepted accounting principles. If the
          omitted disclosures and statement of cash flows were
          included in the financial statement, they might
          influence the user's conclusions about the Company's
          financial position, results of operations, and cash
          flows. Accordingly, these financial statements are not
          designed for those who are not informed about such
          matters."

The Finance Committee has failed to understand why the HQ 
insists that  "This ( refers to Mr. Lin's profile closely fits to 
the need of IFCSS) is clearly reflected in his proposal, which we 
think is the best among the four (CPAs)". Instead of seeing 
clearly any commitment to provide a clear picture of the IFCSS 
financial situation, the Finance Commitee can only see that Mr. 
Lin charges $1,500 for doing simplified and compromised quality 
work for the IFCSS -- by omitting the Cashing Flow and other forms.

In contrast, Cohen, Rutherford, Blum & Schott, PC in their eight-
page bidding letter states in detail of their objectives and 
commitment to the IFCSS financial engagement for at least three 
years' run. They also provide the plan on how to proceed their 
engagement for IFCSS. They do charge fees higher than that Mr. Lin 
claims but with assured quality. They also leave the door open for 
further price negotiation. The Finance Committee again has failed 
to understand why the Cohen and associates should not be the best 
choice among the four CPAs suggested by the HQ.
	
4. Deadline

	The "deadline" set by the HQ in its January 10, 1994 
Announcement ("if the Council is unable to reach a vote or 
verdict by January 14th, the HQ will proceed as this memo has 
recommended while continuing to seek the Council's endorsement" ) 
is totally UNACCETABLE. It is beyond the imagination that, under 
the Maryland Cooperation Laws that, the executive branch of a non-
profit organization like the IFCSS HQ to order its Board of 
Trustees or Directors like the IFCSS Council to do something by 
certain date and take action on its own recommendation without 
approval of the Council. And it is also unlawful. Even the HQ had 
provided all necessary information on the bidding procedures and 
made unbiased recommendation, the demand by the HQ on the Council 
to make a decision within FOUR days' time is absolutely 
unreasonable.

	Nevertheless, in case the Council has to make a decision 
under above-mentioned conditions, the Finance Committee would 
recommend that the Cohen, Rutherford, Blum & Schott, PC be the CPA 
for the IFCSS financial engagement.

	As the financial watchdog of the IFCSS Council, the Finance 
Committee deems it that it is its responsibility to remind the HQ 
as follows:
	
	If the HQ takes any action on CPA without the Council's 
decision based on the recommendation by the Finance Committee, the 
HQ must bear any subsequent responsibilities and consequences of 
both the IFCSS Constitution and By-laws and legality under US laws.