October 14, 1981

Executive Committee of the American Institute of Physics

Minutes of Meeting

1. Convene – Roll Call

The meeting was called to order at 7:35 p.m., 14 October 1981, by Chairman Ramsey.

Executive Committee Members Present

Norman F. Ramsey, Chairman of AIP; Robert T. Beyer, ASA; Peter B. Boyce, AAS; Joseph A. Burton, APS; Charles B, Duke, AVS; Jenny P. Glusker, MAS; John C. Johnson, Secretary; William H. Kelly, AAPT; H. William Koch, Director

Absent – 0

Nonvoting Representatives Present

Anthony J. DeMaria, OSA; Quintin C. Johnson, ACA

AIP Staff Present

Gerald F. Gilbert, Treasurer; Robert H. Marks, Associate Director for Publishing; Lewis Slack, Associate Director for Educational Services; Nathalie A. Davis, Assistant to the Secretary; Lawrence T. Merrill, Administrative Assistant to the Director

Note: For clarity in presentation with reference to the printed agenda, events recorded here are not necessarily in the same chronological order in which they occurred.

2. Review of Governing Board Action Items

Koch reviewed the organization and changes in the Governing Board agenda and commented that the primary purpose of this meeting is to review items on that agenda. He noted that the subjects of the accounting system and plans for a new computer were follow-up items from the previous Governing Board agenda and will be brought up Saturday a.m. in order to provide as much time as is needed for these. The Accounting Systems Improvement Plan has been distributed to the full Governing Board and will be discussed by Dolowich. A copy of the Computer Operations Modernization Plan (Function Planning, Appendix D) was distributed at the beginning of this meeting along with copies of the report of the Ad Hoc Committee on Computer Needs.

Koch pointed out that these items are a first effort to develop a more meaningful long-range plan; they include time-flow diagrams indicating decision points. He plans to suggest a plan dealing with the impact of electronic publishing, due to the many changes taking place in this area. As background for this, the Governing Board agenda has been designed to have three outside speakers who have expertise in these areas. He reviewed the speakers and their topics.

Lehrfeld, AIP’s tax attorney, will speak on the IRS and unrelated business income in the Saturday a.m. session.

Koch hopes to have a discussion of the impact of Federal funding cuts, relating to the talk by Thomas Moss at the Corporate Associates meeting, if the Governing Board wishes. A meeting of scientific leaders to discuss this will be held at the National Academy of Sciences on 25-26 October, to which Ramsey is invited.

1. Report of Chairman

   Ramsey will give a summary of developments and actions since the last Governing Board meeting.

2. Report of Corporate Associates Advisory Committee

   Koch reported that Roland Schmitt, Chairman of the subject Committee, will report to the Governing Board on the Committee meeting to be held Friday a.m.: items to be discussed include the dues structure and the question of complimentary subscriptions. Schmitt has been chairman of this Committee for three years and is stepping down; Ramsey is to select a new chairman by March 1982. He expects a recommendation on this from the Corporate Associates Committee.

   Since the journal prices have gone up, AIP cannot afford to give journals away without increasing the dues. Koch will suggest eliminating complimentary subscriptions, as the American Chemical Society has done.

   Sandia in Albuquerque has been proposed as next year's meeting place. Cost is a major factor to be considered at this location, particularly costs for bringing the Governing Board. A decision on this is not needed for a few months.

3. Report of Audit Committee

   Gilbert reported that this Committee met 1 October, chaired by W. W. Havens. They had a detailed review of the Touche Ross audit report, which satisfied all inquiries. They also had an extensive review of the auditors' letter of recommendations concerning internal controls and responses from staff members involved in these matters. Dolowich gave a detailed review of the accounting systems plan which has been endorsed by Touche Ross.

   1. Recommendation on Auditors for 1981

      Gilbert stated that the Audit Committee's report to the Governing Board will include a recommendation for acceptance of the report and recommendation of Touche Ross as AIP's auditors for 1981.

4. Report of Committee on Fiscal Policy

   Gilbert gave a report on the subject Committee meeting, held on 30 September, chaired by Clark; it was felt to be a fruitful meeting. The lock box plan was discussed; a pilot project using this concept has been started covering specialized billing to the affiliated members. Representatives from Bankers Trust explained this and answered questions. Detailed information on quoted prices was given; AIP will be phasing out of out-of-house quoted prices next year as accounting records are becoming more current.

   Gilbert reported that the Committee discussed investments and the workings of the new depositary account at Woodbury. The cash connector with the Bankers Trust Co. computer was demonstrated.

   1. Approval of Payment of Short-term Investment Income to the Societies from Dues and Subscription Collections

      Gilbert discussed the subject plan. He stated that AIP will have a substantial increase in cash flow due to the increase in subscription prices, so it is necessary to maintain tight rein on this. He pointed out that this plan is a new one for AIP; it has been discussed with Member Society treasurers. The Societies will have daily reports which they can tie in with their statements.

      Gilbert referred to a handout (copy attached to official minutes), consisting of a page copied from “Money Management” explaining bank floats and electronic fund transfers and a table showing the arrangement with Chemical Bank, Woodbury. Sample worksheets were distributed which shows the disposition of daily deposits from date of deposit, number of days of bank float, date of wire transfer to Bankers Trust (NYC) and investment date (copy attached to official minutes). He feels it is a fair and equitable arrangement and it can be computerized. The Societies will get a detailed auditable report on their investments and their interest. This is a by-product of the cash allocation system. He asked that the treasurer be authorized to pay the short-term investment income, per the recommendation from the Committee on Fiscal Policy.

      The following motion was made by Duke, seconded by Kelly, and unanimously passed.

      MOVED that the Executive Committee approve the payment of short-term investment income to Societies from dues and subscription collections.

      Duke asked for a discussion at some point of accounts receivable and the time elements involved. Gilbert replied that this will be covered by Dolowich in the Governing Board meeting and it can be discussed at the December Executive Committee meeting.

5. Report of Ad Hoc Committee on Computer Needs

   Koch referred the Executive Committee to p.9 of the Computer Operations Modernization Plan as a point of reference, then referred to the handout of the draft report of the subject Committee (copy attached to official minutes). The Committee met 6 Oct., formulated their recommendations, and submitted the draft report on 13 Oct. As a result of discussions at the Executive Committee meeting in Sept., each Society had been sent the Preliminary Specification and a letter asking it to respond to the Specification with respect to meeting its own needs. These responses were reviewed, the main concern being that Societies would be given the facility to access the data base interactively, and that they would be able to keyboard transactions at their own devices and batch transmit them to the computer for processing, in order to eliminate duplicate keyboarding. The Ad Hoc Committee has approved the structure of the strategy as outlined on p.9.

   He reported that accounting procedures are moving along well; the estimate by Dolowich is that it will take another few months to get the systems streamlined so that next year there can be monthly statements and quarterly prorations. He prefers to wait to computerize these operations until the systems are proven, perhaps next spring, giving the Subscription Fulfillment plan the opportunity to proceed first.

   Koch reviewed the diagram on p.8 which shows the elements of the action plan leading toward awarding the contract for a turnkey system. The plan at present is based on allowing time for Governing Board approval. However, Feb. 22 is considered to be a possible projected date for the contract award after proposals have been received and evaluated, AIP staff feel it would be better to move ahead on this decision before the next Governing Board in March, and would like approval from the Board to have the Executive Committee approve this decision.

   Koch referred to the draft report of the Ad Hoc Committee on Computer Needs and reviewed the 11 recommendations therein.

   Burton stated that it is reasonable that the Governing Board should be willing to delegate the responsibility to the Executive Committee, with input from the Ad Hoc Committee. He then asked how much capital investment is being discussed. Koch said that the figures are only ballpark, but as a point of reference the present figure for the Univac and peripheral equipment is $214,000. When it is downgraded to do only accounting, AIP can get rid of the high speed printer which is used for mailing labels and some other parts. When purchasing a computer, the costs involved are $250,000 to $300,000 including the peripherals. The software development would be $200,000 to $400,000. These needs are for subscription fulfillment only. Burton said it is understood in the Executive Committee that the expense of the new system will be less than the c1ost of the Univac system. This should be made clear to the Governing Board. Maintenance costs will be over and above purchase (ca. $30,000 to $40,000). Marks and Gilbert confirmed this fact, also that there will be less personnel in a new system. Over a five-year period, one can anticipate the amortized costs to be less.

   Ramsey thought that $700,000 is a good figure for a ceiling. Marks commented that this figure shouldn’t be disclosed or the bids will come in to match this.

   Marks added that it will be made clear that the functions of accounting and subscription fulfillment will be treated separately and that they are decoupled. The accounting problem solving is being done by changing procedures and systems. Accounting is a much simpler and much smaller system than subscription fulfillment.

   Duke noted that it is essential to make clear that the Univac will be kept until the new computer is fully operational. Koch said it is hoped that eventually the new computer will be applied to accounting. A rough ballpark figure for this addition would be $100,000.

   Duke said that the Board should be given a package so that they understand how the costs go with the timing. Marks replied that there is a wide variation in estimates, ranging from $300,000 to $600,000, in both cases including equipment and software. Koch commented that he is working with a Grumman employee who will be helpful in evaluating these proposals and making clear the differences. The Ad Hoc Committee will be shown how the evaluation procedure was done.

   1. Recommendation on Accounting Plans

      Gilbert reported that the Task Groups have been working out plans for achieving timely financial statements. Their goals were set as follows: 1) to issue variance statements by 30 Sept.; 2) to issue a financial statement for AIP as of 30 June, 1981; 3) to supply the last six-months' variance statements to the Societies by 31 March 1982; and 4) to expedite the audit. A meeting was held with Touche Ross and a timetable was drawn up. They will be able to come ln November to do the interim work on the audit. They will then come in March to complete the audit by 31 March. [Subsequent to the meeting, clarification with Touche Ross changed the completion of audit date to 30 April and the completion of prorations to 31 March.]

      Gilbert distributed copies of the 2-page AIP Balance Sheet as of 30 June 1981, which was completed the morning of the meeting (copy attached as Exhibit A). This will be given to the Governing Board. It has been prepared with the help of Kuczmarski, our liaison with Touche Ross, who feels that it is completely auditable. He reviewed the items on the balance sheet. There was a good cash position as of 30 June due to money from Guardian invested in short-term. He noted that last year the General Fund showed a deficit of $264,000, due to furniture and equipment for Woodbury. It now shows a plus figure of $41,906, due to depreciation. Accounts receivable are up to $1.3 million. Total assets come to ca. $13.5 million. There is now an excess of revenue over expenses; usually there is a high figure in midyear as expenses are higher in the second half of the year.

      DeMaria asked how the fund balance is arrived at; Gilbert replied that it is the depreciation cost. The figure can be reconciled and he explained it. (There was a round of applause.)

      Boyce pointed out that next year it will be easy to make a comparison using these figures.

      Gilbert stated that next year quarterly financial statements will be available.

      Ramsey commented that AIP has to guard against too high revenue, but Gilbert pointed out that the reserves are practically zero. Burton qualified that statement in that liquid reserves are low but real reserves are high.

6. Report of Committee on Publishing Policy

   1. Conclusion of Physics Briefs Negotiations

      Marks explained that AIP would not be the publisher of Physics Briefs because politics in Germany dictated keeping it as a German publication. We will continue our arrangement to provide input at $5.00 an abstract and $4.25 per abstract for special indexing, and we will market it. The Indexes are now coming in regularly and are being supplied to subscribers. Koch noted that the Germans would be visiting AIP on 9 Nov. to discuss our further involvement in their computer tape and other marketing aspects.

   2. IUPAP Concerns about Abstracts

      Koch reported that Havens, Marshak and Schawlow attended the last IUPAP meeting in Sept. in Paris and noted that three hours were allotted at this meeting for discussion of the physics community in abstracts. Brian Coles, the Chairman of the Institute of Physics Publications Committee, led the discussion. He brought to the meeting the fact that the international physics community cannot involve itself and influence the various physics abstracting services, particularly Physics Abstracts. The discussion was not at all unfavorable to AIP.

   3. Release Three ATEX Hardware

      Marks reported that the new ATEX equipment arrived in August and is now being debugged. Production is continuing on Release 2 software. There are four additional keyboards on Release 3. AIP won't switch over until all the kinks are worked out, perhaps in a month. The response time with Release 3 will be much faster than with Release 2. Another advantage is that more terminals can be used, for two shifts.

   4. Physics of Fluids Editors

      Marks reported that the new editors as of Jan.1982 will be Ribe (editor-in- chief and editor of the plasma physics component) and Acrivos (editor of the fluid dynamics component).

      Marks read a resolution that had been prepared honoring Frenkiel, the retiring editor, and asked for a vote of acceptance by the Executive Committee. The resolution is as follows:

      The American Institute of Physics extends its heartfelt thanks to Dr. Francois N. Frenkiel for his twenty-three years of distinguished leadership and service as Editor of THE PHYSICS OF FLUIDS. The editors of AIP journals play an important national role in the communication of scientific information produced by physics research and development. The leadership of Dr. Frenkiel has resulted in the creation and publication of a journal of highest scientific standards. His editorship, from inception in January 1958, is largely responsible for its preeminent position among similar journals. In addition, he also served the organizational interests of AIP and its Member Societies during his term on the AIP Governing Board in 1975, 1976, and 1977.

      The following motion was made by Duke, seconded by Kelly and passed unanimously.

      MOVED that the resolution honoring Francois N. Frenkiel be accepted.

7. Report of Committee on Manpower

8. Report of Committee on Public Education and Information

9. Report of Advisory Committee on Physics Today

   Agenda items 2. g., h., and i. were not discussed as Koch pointed out that they would be covered in written reports and in the Governing Board meeting.

10. IRS Position on Unrelated Business Income

    Gilbert reported that we have had resolutions from both the federal government and New York City concerning our tax problems. Concerning the NYC real estate question, AIP has received an adverse decision, which means that all administrative remedies have been exhausted and the only remedy is in the courts. He distributed a handout which consisted of the letter regarding this decision from Windels, Marx, Davies, & Ives, signed by Philip S. Agar, and a copy of the Tax Commission decision dated October 1, 1981 (copy attached to official minutes). He read the letter aloud and noted that AIP has four months to decide if we want to litigate the matter. The letter noted that AIP may have to anticipate one or more appeals.

    Gilbert noted that we had paid $106,000 under protest for the fiscal years 1980 and 1981, based on the rate of $2.83 per square foot for 37,500 square feet. The bill received in July is for $117,000 ($3.10 per square foot).

    Gilbert then reported on the IRS decision on unrelated business income. AIP was generally successful on these issues; Lehrfeld will speak to the Governing Board on this. There were five areas under discussion; we were successful on three. One adverse decision was concerning journals (RSI and APL) which have page charges, paying tax only on advertising. The second was paying tax on net advertising revenue we get from selling advertising in Society journals (this was insignificant and felt not worth getting into). Doman of the IRS will come to AIP on 19 Oct. to determine our assessment; he did not in the past object to prorations. AIP has signed another extension to 31 March 1982 (the present one expires the end of 1981).

11. Liabilities of Directors

    Slack distributed a handout entitled “Professional Liability of Directors of an Institution,” which included a summary of AIP professional liability insurance (attached as Exhibit F). He had looked into the available literature on this subject as a result of the Sept. Executive Committee discussion and found that there is a slight difference in the way the courts regard the responsibilities of volunteer directors in non-profit organizations. They are held to a somewhat lesser definition of responsibility. The essential ingredient for liability is whether or not the actions are taken in good faith; another factor is whether or not they have exercised prudence and due care in their decisions. He reviewed the general provisions of AIP's insurance plan; it is a non-deductible policy. Gilbert reported that our policy is renewed every year; the cost is about $7000.00. It is a publisher's liability policy.

    Boylan, AIP’s lawyer, thought this could be released as public information. If the directors feel the need of a bylaw, he would help draft it. There is a statute in force in New York State with which the bylaw would have to comply.

3. AIP Contributions to TIAA-CREF for Over-65 Employees

Gilbert distributed a handout which explained the eligibility of the present plan for AIP employees (copy attached to official minutes). He explained the three plans (presented with figures) in the handout as follows: Plan 1: The Institute continues its 10% contribution to the plan for those employees continuing to work from age 65 to 70; Plan 2: The Institute continues its contribution to the plan for those employees continuing to work from age 65 to 70 at a declining rate; and Plan 3: Incentive for early retirement. He has canvassed the sister organizations; they continue at the 10% rate through age 70.

Ramsey stated that he is interested in knowing what the benefit to the employee is if he stays on to age 70; this would mean that the employee would get much more retirement income. He would like to see how big an incentive this is to employees.

Ramsey stated that TIAA-CREF has a grave problem: since it is a fund that accumulates, if an employee stays on to age 70, even if there is no added contribution to the plan, he gets a larger retirement income. This makes great financial incentive for the employee to stay on. If AIP contributes, there is even more of a financial incentive to not retire.

Ramsey suggested considering the people who are coming up in 1982, and asking TIAA-CREF how much it would cost for the Institute to continue paying 10% to age 70 and how much would be added to the employee's income at age 70. From the point of view of the employee, when he is given full information at age 65, how much more will he get paid per year. He stated that he feels it is bad for the individual and for the organization to have this financial incentive.

Gilbert stated that he will get the information on these figures for the next meeting. He stated that the AIP staff would like the continuance of the 10% contribution for those who continue to age 70.

Glusker asked if the employees should not be given an option.

This matter does not need to go to the Governing Board. A report on additional figures will be made at the next Executive Committee meeting for consideration.

4. Appointment of Committee on Constitution, Bylaws, and Memorandum of Agreement

And

1. Enlargement of Executive Committee

   Koch summarized the reasons for needing a new subject Committee, as follows: 1) it has been suggested that APS have two representatives on the Executive Committee; 2) the study on computer needs has suggested new uses of AIP by the Member Societies and the enormous investment involved causes concern over the nature of commitment for its use; 3) liability and protection of Board members need to be considered as a possible subject for a new bylaw; and 4) possible benefits from switching to a federal charter should be considered. Koch suggested forming a new Committee, since the old one had been discharged. Crane would be willing to serve as Chairman of the new Committee or to serve on the Committee; it is felt that someone such as Crane who is an AIP veteran is needed. Koch added that one of the items the Committee must consider is the Memorandum of Agreement.

   After more discussion Ramsey stated that he can appoint a committee and welcomes suggestions for members.

   The following motion was made by Duke, seconded by Kelly and passed unanimously:

   MOVED that a new Committee on Constitution and Bylaws be formed, this Committee to deal also with the Memorandum of Agreement.

   (It is yet to be decided whether this is to be an ad hoc or standing committee.)

5. Approval of Cost Over-run on Anniversary Handbook

Marks distributed a handout (attached as Exhibit H) and discussed the reasons for the cost over-run of $9,600. The cost varies with the number of pages and the 300 pages went over the goal of 250. He stated that AIP can break-even if 2500 to 2700 copies are sold at a list price of $25.00. A motion is needed to approve the cost over-run.

The following motion was made by Beyer, seconded by Burton, and passed unanimously.

MOVED that the Executive Committee honor the expense of $53,000 for the Anniversary Handbook in accordance with the economics required.

6. Negotiation on Publishing Proration

Marks reported that he had had a meeting with APS concerning the subject. Koch reported that APS had made the payment which was questioned with a letter stating that they did not feel the prorations were made correctly and with the understanding that negotiations would take place on this matter.

Duke asked how AIP proposed to let the Member Societies know the disposition of this issue.

Marks answered that when a resolution is made it will be reported. Koch stated that Marks had produced a written description of the editorial mechanics involved; this will be made available to all Societies. There are 22 prorations; most are simple, but this one is complicated. The Committee on Fiscal Policy will review this before it is brought for acceptance.

7. Other Business

1. Administrative Review Committee

   Ramsey stated that in the past the Executive Committee as a whole had served as this Committee. If there were no objections, he felt it could be handled in this way again; there were no objections.

8. Next Meetings

Koch reported that the next Executive Committee meeting is scheduled for 16 December. He thinks one is needed in February and suggested Thursday, 25 February, in New York City. This was agreeable to those present. There will be a brief Executive Committee meeting the evening of 25 March 1982 prior to the Governing Board meeting on 26-27 March.

Burton commented that as the December meeting is the budget meeting, he would like to see the proposed budget before the meeting. Gilbert stated that the first draft is scheduled for the end of November and all the proposed figures will be included.

9. Executive Session

The staff was excused at 10:20 p.m. and the Executive Committee met in executive session. No substantive issues were identified as needing special guidance. It was observed that there has been an apparent marked improvement in both general and fiscal operations and reporting since Merrill and Dolowich have been added to the staff. It was specially noted that Dolowich is very sound technically as well as organizationally.

10. Adjournment

The meeting was adjourned at 10:55 p.m., following the executive session.