Brought to you by the Virginia Society of CPAs
MAY/JUNE 2011 I VOL. 24 NO. 3 I WWW.VSCPA.COM
Focus on CPAs in business & industry
14 26 30
Succession Planning for Clients Unclaimed Property Compliance The Other Real Estate Bubble
One-Click
Wonder
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in One Easy Step
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Not-For-Profit
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INSIDE this issue
20
cover story >>
Microsoft’s best kept secret is that retrieving external data into Excel is almost always possible. Relieve your angst by learning how to conquer your reporting woes.
FEATURES
ARTICLES
LINK EXCEL TO YOUR DATABASE IN ONE EASY STEP
DON’T BE AN E-MAIL DUD 20
By linking Excel to your database, you can automate time-consuming management reporting, get answers to questions in real time and overcome the constraints of your software’s reporting function.
HOW TO TRACK AND ENSURE UNCLAIMED PROPERTY COMPLIANCE
10
Everyone needs a refresher now and then on appropriate e-mail behavior.
Help Your Clients with succession planning
14
If you’ve got clients who need help planning for their business’s ownership, start here.
Advertisers Index 26
More and more businesses and financial institutions are reporting large amounts of abandoned property — much of which will go directly to the state treasury instead of its rightful owner.
THE OTHER REAL ESTATE BUBBLE
SECTIONS
30
As the economy slowly recovers, so does commercial real estate. But it faces more challenges in 2011, including new accounting rules.
Accounting Practice Sales inside back cover • ADP Small Business Services p. 7 • AON Insurance p. 9 • Audimation Services Inc. p. 17 • Beth A. Berk, CPA p. 13 • CAMICO Mutual Insurance Company back cover • CPA2Biz, Inc. inside front cover • CPA Mutual p. 19 • Geico p. 39 • PNC Bank p. 3 • Tax Solutions Alliance p. 12 • VSCPA Insurance Service Center p. 33
Our mission is to enhance the success of CPAs.
Backtalk
2
Line Items
4
Data Draft
6
ADVOCAcy
8
Self-Assessment
35
VSCPA News
36
Member News
38
VSCPA Educational Foundation
40
Classifieds
43
I Am
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disclosures is published bimonthly for members of the Virginia Society of CPAs.
DISCLOSURES
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MAY/JUNE 2011
1
Virginia SOciety of Cpas
4309 Cox Road Glen Allen, VA 23060 Ph. (800) 733-8272 Fx. (804) 273-1741 www.vscpa.com
disclosures Editorial Staff Jill Edmonds Managing Editor disclosures@vscpa.com Jenny Hansen Communications Director jhansen@vscpa.com Tina Lambert, CAE Vice President, Member & Public Relations tlambert@vscpa.com Editorial Task Force Joan D. Aaron, CPA William C. Barrett III, CPA/ABV Beth A. Berk, CPA James D. Cole, CPA Cheri G. David, CPA, CVA James P. Davis Jr., CPA William C. Foote, CPA/ABV, CVA Elizabeth M. Helle, CPA Heather L. Judson, CPA Clare K. Levison, CPA Gabriele Lingenfelter, CPA Haven S. Pope, CPA, MBA, CFE George D. Strudgeon, CPA Philip H. Umansky, CPA, Ph.D. Deadlines Articles and advertising for future issues are due by 5 p.m. on the following dates: Sept./Oct. 2011 Nov./Dec. 2011 Jan./Feb. 2012 Mar./Apr. 2012 May/June 2012 July/Aug. 2012
June 15 Aug. 15 Oct. 15 Dec. 15 Feb. 15, 2012 Apr. 15, 2012
Statements of fact and opinion are made by the authors alone and do not imply an opinion on the part of the officers, members or editorial staff. The Warren Group Design / Production / Advertising www.thewarrengroup.com custompubs@thewarrengroup.com
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DISCLOSURES
BACKTALK you said it
Keepin’ it current: Reminders spur license renewal I just received your letter reminding me to renew my CPA license. I can’t thank you enough for pointing that out to me. I certainly let that one slip through the cracks. I like the way many of these annual membership renewals have gone online. It certainly makes it easy to renew, but sometimes I miss having that piece of paper sitting in front of me to serve as a reminder. Thanks again for the notice and I appreciate all of the fine work the VSCPA does on our behalf. A GRATEFUL VSCPA MEMBEr
VIA E-MAIL >> The redesigned Disclosures looks terrific! I found a number of articles of interest this month. REBECCA MAGUIRE, CPA, CVA, CFF
Robson, PC, CPAs, Glen Allen
FROM THE VSCPA LINKEDIN GROUP >> New Virginia Tax Commissioner, Craig Burns, just released a ruling that allows a company, that would not otherwise have income tax nexus in VA, to apply a PL 86-272 test to services purchased from third party and passed on to their customer. As long as the service provider was independent, there was no nexus. Great news in this Amazon tax law era!
From the
Twittersphere >> @gatewood5000:
Regarding the U.S. House passing the 1099 repeal: “Good news for anyone who doesn’t like pointless tax-time paperwork” @arj9012:
“Got accepted into the VSCPA leadership summit this summer.. :)now to hear back from all 8 scholarships I applied for from them”
PAULA TENNANT, CPA
sole proprietor, Washington, D.C., area
FROM THE CPA CAFÉ BLOG >> With a Web-generated lead, a little cursory research is done before sending e-mail. The upfront investment is less than with a traditional call. GUEST BLOGGER BRIAN SWANSON
Flashpoint Marketing
Get in touch
@CanaDezzeNutz:
“All I wanna do is curl up with a smoothie and read my VSCPA disclosures”
BLOG: www.cpacafe.com Twitter: @VSCPANews, @FinancialFit LinkedIn: http://tinyurl.com/VSCPALinkedInGroup Facebook: www.facebook.com/VSCPA
At the Virginia Society of CPAs, we love to hear from you. Whether it’s a quick e-mail to a staff member, chat on the phone, Disclosures letter to the editor, tweet, blog comment or something different altogether, let us know what you’re talking about, how you feel about different issues affecting CPAs and how we can help.
LINE items B-lieve it >>
B corps come to Virginia You’ve heard of an S corp, but what about a B corp?
Thanks to new legislation approved by the Virginia General Assembly, “benefit corporation,” known as “B corp,” will become a legal corporate classification in the Commonwealth. Virginia joins other pioneering states — Maryland and Vermont classified B corps last year — that recognize companies that aim to benefit society in addition to benefitting shareholders. Unlike traditional corporations, B corps are required by law to show they’ve netted a positive societal benefit. They must consider the effect of their decisions on employees, their communities and the environment. They also have to prove it publicly by reporting annually on their social and environmental performance based on recognized third-party standards. Intrigued? Learn more about B corps at www.bcorporation.net, and check out “B Prepared for a New Kind of Corporation,” an introduction to B corps from the January/February 2011 issue of Disclosures, available at http://disclosures.vscpa.com. n
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Private company financial reporting moves along It’s too early to tell where the storm surrounding private company financial reporting will settle. But significant gains in the movement were made on March 4, when the Financial Accounting Foundation (FAF) announced it was creating a Trustee Working Group to review recommendations from the Blue Ribbon Panel on Private Company Financial Reporting. Two significant recommendations are: >> A SEPARATE BOARD: Essentially, private companies would get their own board, equivalent to the Financial Accounting Standards Board (FASB). The new board would set standards and work in conjunction with FASB. >> GAAP CHANGES: U.S. generally accepted accounting principles (GAAP) would be modified where appropriate for private companies. CPAs who work in private companies and industries could see a major change to their jobs — namely, simplification. In recent years, paperwork for financial reporting has become overwhelming as private companies (particularly smaller ones) try to keep up with financial reporting requirements that more aptly apply to large corporations. Nonprofit finance professionals should also take note: The Trustee Working Group will include the reporting needs of nonprofits while reviewing the recommendations, which were not included in the Blue Ribbon Panel’s work. For now, the Working Group will mull the suggestions and should issue an action plan this year. Stay tuned for the announcement so you can be sure to issue your own public comment. n
LINE items Don’t miss out >>
Free CPE now included in membership renewal CPE, Disclosures, networking, oh my … There are plenty of reasons to renew your VSCPA membership. Just visit www. vscpa.com/renew by May 31, 2011, and follow the instructions provided. And now there’s another reason:
Receive up to 18 hours of FREE CPE during the 2011–2012 membership year! Choose from a variety of opportunities throughout the year, including virtual roundtables, virtual and live professional issues updates, networking breakfasts and more. For more information on these opportunities, check out www.vscpa.com/ Networking. To renew online, you’ll need to log in to www.vscpa.com. And if you have questions about renewing your membership, call the Member Services Hotline at (800) 733-8272 or e-mail membership@vscpa.com. Students, we automatically renew your free membership until you graduate, so you don’t need to do a thing. And lifetime members (those who’ve achieved 40 continuous years of membership), you don’t need to do a thing, either! n
It keeps you up at night >>
Mobile devices dethrone info security Year after year, information security has been CPAs’ No. 1 technological worry. Not anymore. The 2011 Top Technology Initiatives survey, conducted by the American Institute of CPAs (AICPA), revealed that concerns about mobile devices, such as smartphones and tablet computers, is now the chief tech issue on CPAs’ minds. Information security slipped to No. 2, followed by data retention policies and structure; remote access; and staff and management training, to round out the top five. Issues six through 10 were: process documentation and improvements; saving and making money with technology; technology cost controls; budget processes; and project management/deployment of new technology. n
Can CPAs predict the future? >>
The AICPA Top Technology Initiative survey also asked CPAs to list their top emerging technologies. They were, in order of importance: 1. Touch-screen technology 2 . Implementation of voice recognition 3. Deployment of faster 100GB LAN networks 4. High-performance supercomputing 5. Digital signage and displays 6. Introduction of Internet Protocol version 6 (IPv6)
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DATA draft >>
by the numbers
8
The number of CPAs currently serving in the U.S. House of Representatives.
OPTIMISM REIGNS >>
Economic recovery is well on its way CPA executives in business and industry are encouraged for the economy’s future, according to the American Institute of CPAs (AICPA)/University of North Carolina Kenan-Flager “Business & Industry Economic Outlook Survey” for the first quarter of 2011. Notable stats: • 57 percent of respondents are “optimistic” or “very optimistic” about their company’s economic prospect — an increase of six percentage points over the fourth quarter of 2010. • 48 percent are “optimistic” or “very optimistic” about the U.S. economic outlook over the next year. That number was only 28 percent in the previous quarter. • 66 percent expect their businesses to expand in some fashion over the next year. But what keeps CPA executives up at night? Economic recovery doesn’t mean all worries are washed away. The survey revealed that chief concerns are inflation, which includes raw material costs, interest rates, energy costs and labor costs. Other issues include collections/non-performing accounts, supplier pricing/terms/ performance and inventory levels. n Source: AICPA 6
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NOTICE ANY INDUSTRY TRENDS? >>
Top 10 fastest-growing Virginia companies Company
Industry
2006–2009 Percent growth in millions
2009 revenue in millions
1.
NetWitness, Herndon
Security
7,746
$19.7
2.
Octo Consulting Group, Vienna
Government services
7,224
$13.7
3.
Insignia Technology Services, Newport News
Government services
6,430
$8.9
4.
Provideo Management, Sterling
Government services
6,140
$8.8
5.
IZ Technologies, Ashburn
Government services
6,102
$6.3
6.
Three Pillar Global, Fairfax
Business products and 5,003 services
$5.2
7.
MicroTech, Vienna
Government services
4,200
$185.3
8.
MMC Systems, Herndon
IT services
3,529
$3.8
9.
HMS, Arlington
Government services
3,310
$35.1
10. Centuria, Reston
Government services
3,037
$18.1
Source: Virginia Business magazine
EVERYONE MAKES MISTAKES >>
Top five tax return math errors The Internal Revenue Service (IRS) tracks down millions of taxpayers this year with math errors on their returns. Here are the top errors for tax year 2008 (the latest year that the data is available): errors
Percentage of all errors
1. Recovery rebate credit*
74.4
2. Tax calculation/other taxes**
6.6
3. Exemption number/amount
4.2
4. Earned income tax credit
3.6
5. Standard/itemized deduction
3.4
Source: www.irs.gov
*According to the IRS, eligible taxpayers whose circumstances changed may have claimed a rebate recovery credit to receive some or all of the unpaid portion of an economic stimulus payment. Economic stimulus payments were special payments to taxpayers associated with the Economic Stimulus Act of 2008. The 7.4.4 percent includes cases where credit was not claimed on tax returns, but the IRS computed the credit for eligible taxpayers. **This includes all errors associated with the calculation and assessment of income taxes, as well as other taxes, such as selfemployment tax, alternative minimum tax and household employment tax. n
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Advocacy
A session success story the standalone economics and personal finance course from the delay. Throughout session, the VSCPA opposed the measures as introduced and actively sought to carve out the financial literacy course. The economics and personal finance requirement will remain in effect, beginning with students entering 9th grade this fall.
CREDIT COUNSELOR DEFINITION: CLARIFIED
The tale of the 2011 General Assembly session is one of myriad hours spent at the Virginia Capitol, letters, e-mails, constituent communications, testimony and, ultimately, success for the CPA profession. The VSCPA took action on 21 bills and closely monitored 118 in all. Read on for a recap of some of the top issues, and visit www.vscpa.com/SessionWatch for more history, background regarding the VSCPA’s involvement and the current status of each bill.
VIRGINIA TAX CONFORMITY: LAW On February 16, HB 1874 became law, conforming the Virginia tax code with the Internal Revenue Code (IRC) from January 22, 2010, to December 31, 2010, and restoring conformity to the qualified motor vehicle tax deduction. The governor also introduced a late change to the bill that expands the ability to spread the reacquisition of an “applicable debt instrument,” which is defined under section 108(i) of the IRC, over a threetaxable-year period. Previously, this could only be done for transactions that took place during 2009. The change allows transactions that occurred in 2010, on or before April 21, 2010, to be handled this way as well.
FINANCIAL LITERACY GRADUATION REQUIREMENT: PROTECTED Three bills that called for a delay in implementation of all new graduation requirements were amended to carve out
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The VSCPA asked Sen. Ryan McDougle to introduce SB 930 to clarify that the usual and customary services of CPAs and CPA firms are not included in the definition of credit counselor. Approved by Gov. McDonnell, this legislation will prevent CPAs from becoming unintentionally subject to additional licensure in the future, should the criteria requiring credit counselors to obtain a license be expanded.
SEPARATE LAND PRESERVATION TAX CREDIT LICENSING REQUIREMENT: PREVENTED This year, legislation was introduced that would have created a separate licensing requirement to conduct the transfer of a land preservation tax credit. Many CPAs with tax practices are routinely involved in the transfer of land preservation tax credits, and an additional license on top of a CPA license is unnecessary. The bills were amended to omit the new licensure requirement and to focus solely on the tax credit appraisal aspect of the procedure. They were signed by the governor and go into effect July 1.
ENTERPRISE ZONES AGREED-UPON PROCEDURE: PROTECTED As introduced, two bills would have eliminated an important part of the grant process for job creation and property in enterprise zones, which is why the VSCPA opposed both measures. The bills were subsequently amended to establish a threshold under which an agreed-upon procedure would no longer be required, rather than eliminating it altogether. According to the amendment, if more than 25 jobs are created, the agreed-upon procedure will still be required, and the agreedupon procedure requirement is intact for property grants. The bills are on the governor’s desk at press time.
Advocacy
FILING TAX RETURNS BY OVERNIGHT DELIVERY SERVICE: ALLOWED The VSCPA supported a bill to allow state and local tax filings to be submitted by overnight delivery service, saying that “expanding the means by which tax returns and payments are considered to be timely filed is good customer service for the Commonwealth and its localities.” The bill has been signed by Gov. McDonnell.
auditing standards (GAAS). It certainly makes a difference to CPAs. Thanks to all VSCPA members who got involved by answering the VSCPA’s calls to action, communicating with their legislators and attending CPA Assembly Day. n
Session sound byte
TECHNICAL CORRECTIONS: MADE
>>
In addition to taking official positions on legislation that could potentially affect members, the VSCPA also looks for opportunities to make technical comments on legislation, providing legislators with the information they need to ensure their bills are accurate. For instance, the VSCPA identified two instances of an inappropriate reference to generally accepted E-5929-0411 VA_E-5929-0411 VA 3/23/11 12:49 PM Page 1 accounting principles (GAAP) rather than generally accepted
Listen to the story of the 2011 session from VSCPA Government Affairs Director Emily Walker online at www.vscpa.com/ SessionWatch.
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MARKET knowledge
Don’t be an e-mail dud BY Jill Edmonds
Everyone needs a refresher now and then on appropriate e-mail behavior. Read on for a few tips to keep communications concise. It doesn’t matter who you are or what your job entails — writing and answering e-mails is a part of life. While slogging through your inbox can become a chore, there’s a bigger picture. With every e-mail you answer, you are showing your smarts by displaying your communication skills. Each e-mail is an opportunity to market yourself as a knowledgeable professional — to your clients, your supervisor and your peers. Fortunately, there are several easy things you can do to present yourself as a topnotch communicator.
KNOW YOUR RECIPIENT First of all, figure out who is receiving your e-mails and how. That means using the “TO,” “CC” (carbon copy) and “BC” (blind copy) fields properly: • TO: “Read this and do something,” whether that is respond, file the information or delete. • CC: “Be advised, but don’t do anything.” • BC: “Be advised, but act like you don’t know.” Tread lightly when using the “BC” field. Many a corporate scandal has erupted because someone was blind copied on an e-mail and accidentally replied to everyone, and, well, you get the picture. This field is best used very sparingly. Also, make sure you use “reply” and
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“reply all” correctly. Think before you send: Does the entire recipient list on the e-mail need to see your reply? Is the message at all sensitive in nature? Is the response a reprimand of some kind? If so, you may need to limit the recipient list.
A STRONG FIRST IMPRESSION Because the subject line is the first thing readers see, make sure yours speaks volumes. Make it clear and concise, and, if an action is required, make it known. If you were pressed for time, which subject line would help you the most: “Meeting,” or “RSVP for Board Meeting by March 10?” Readers want to know up front what you want and why, and the subject line is the first place you can reach them. Some organizations require other information in subject lines, such as using “No Response Required” and “FYI” to indicate that the e-mail contents only
>>
E-KNOWLEDGE
A typical 1,000-person organization can spend upwards of $3 million a year to fight and manage spam, according to The Radicati Group, Inc.
MARKET knowledge
need to be read and not responded to. Internally, many companies develop acronyms to use in subject lines to help employees get through e-mail more efficiently. If e-mail management is a problem in your firm, you may consider developing an internal lexicon of a few acronyms so all employees know what to do with internal e-mails when they receive them. Finally, avoid that infamous “caps lock” button. An e-mail subject line in all capital letters sends one message to the recipient: “I’m shouting at you!”
SKIP THE WINDOW DRESSING Have you seen all those cute stationery options in Microsoft Outlook and other e-mail software? You know, the ones that allow you to make your message background look like notebook paper, or have a swirly flower at the bottom? Don’t go there. First and foremost, everyone’s system is different, and there is no guarantee that all those images will show up appropriately on everyone’s computer. What is the point in sending a message to someone that is garbled because their e-mail software can’t recognize the stationery image? There isn’t any point. Along those same lines, avoid fancy fonts and colors. It may be fun for you to write in bold turquoise, but there is no place for it in business communications. It conveys a tone of playfulness that detracts from any message you’re sending.
Finally, no words are necessary about clip art. Unless you want to go back to 1996, avoid it.
A LITTLE PREP NEVER HURTS It’s tempting to quickly spout off e-mail replies and hit “send.” Probably everyone can recount a time when they hit “send” a little too early and suffered a little embarrassment. It happens. But you can minimize mistakes by taking a minute or two to figure out what you need to say before you say it. You don’t need an outline — it can be as simple as planning in your head what you would like to say. Also, be mindful of what you are saying.
How many e-mails are flying through cyberspace with content reading: “Thanks!” or “Good to know?” How necessary are these e-mails? How many pointless messages clog your inbox? Before you contribute to the deluge, think to yourself: “Is this really even necessary?”
SIMPLE AIN’T STUPID People often (and erroneously) believe that complex sentences make them sound smart. It’s actually the opposite — most
people subconsciously interpret complex sentences as trying too hard. Let’s look at an example. If you’re writing an e-mail to a colleague or client to set up a quick meeting, which would you prefer? a.) I am writing to ask you if it is possible to discuss this matter at your earliest convenience. b.) When are you available this week to chat? When writing e-mails and other business communication, such as memos, reports, etc., remember that bigger isn’t always better. Just like you would in verbal communication, avoid using inflated words. Here are examples of words that mean the same thing, and the shorter, simpler versions are vastly preferred by communicators: • Speed up instead of expedite • Plan instead of strategize • Use instead of utilize • Try instead of endeavor • Sent instead of transmitted Keeping it simple also means keeping it short. In general, remember this rule: Cut, cut and cut some more. Any initial thoughts are almost always littered with unnecessary and useless words, regardless of how good a writer you are. Even the best writers edit themselves down; you should do the same in your business correspondence. Another way to minimize reader overload is to use short paragraphs and bullet points. Both enhance readability and comprehension and help you keep your thoughts in order. Always put one idea in each paragraph, and in
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MARKET knowledge business communications, two sentences per paragraph are recommended. Everyone needs a breather between thoughts, and short paragraphs allow your ideas to settle. Sometimes you have a lot of short points to make, and that’s where bullets come in. Bullets provide a roadmap for your reader by leading them down the page, point by point, allowing your ideas to be read in a quick, succinct manner. Your thoughts will shine through.
SPELLCHECK IS THERE FOR A REASON Unless you’re a spelling champ with the typing skills of a pro, run a quick spellcheck before you send. What do you
have to lose? But while this tool is very useful, especially for catching typos, don’t become complacent. Proofreading is still your best friend. Spellcheck won’t catch a “to” that should be “too” or distinguish between “your” and “you’re.”
SIGN OFF SWEETLY E-mail signatures are imperative, but they don’t need to include every possible way to reach you. Different companies have different signature guidelines, but in general, try to avoid a signature that goes on for eight or more lines. Your name, title, company, e-mail address, phone number and company
website are good places to start. Even your company address really isn’t necessary; if readers need it, they can get it easily from the website. Some people are starting to include social networking URLs in signatures, such as links to their LinkedIn and Facebook profiles. If you use those pages for business contacts, go for it. Beyond the basic contact information and anything you’re required to include from your employer (such as a legal disclaimer or other tagline), avoid including inspirational quotes and other extraneous lines below your signature. Readers don’t like to keep scrolling and see things that aren’t obviously workrelated.
DON’T SWEAT IT
Back taxes, interest and penalties due
Your client
Learn how smart negotiation can lighten the load.
ta solutions ALLIANCE 804.359.5221
Info@TaxSolutionsAlliance.com • www.TaxSolutionsAlliance.com
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When used correctly, e-mail can be a great tool to show your worth to your audiences. Clients who can easily read and understand your e-mails will view you as very professional. Colleagues will open your e-mails rather than relegate them to the trash bin because they know you have something to say. That being said, don’t spend time worrying about your mistakes. Everyone inevitably has errors in e-mail replies, or hits “reply all” by accident. Tomorrow is a whole new day, and another 200 e-mails in each person’s inbox will distract them from teasing you at the water cooler. n
Jill Edmonds is managing editor of Disclosures magazine. Contact her at jedmonds@vscpa.com.
Attention CPAs: Whether A Decision Maker Looking To Upgrade Your Talent, Or A CPA Looking to Upgrade Yourself/Your Skills, Ask Yourself: Who really chose who in joining your company? Are you/your professional staff really at the right level where you should be/you need them to be? Are you/your staff in a position that truly suits your/their personality, values, and professional and personal needs?
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Succession planning
Reaping the Rewards: Help Your Client Plan for Success in Business Succession By Ben English
Business owners dedicate their life’s work to building an enterprise that offers opportunity and reward to employees, customers and many others. The owner himself typically has most of his net worth tied to the business, which may also define much of his purpose in life and identity in the community. But despite years of diligent planning and careful management, most business owners fail to prepare for the greatest opportunity and challenge their business will face — handing ownership and control over to others. All too often, failure to plan for succession greatly limits the owner’s ability to realize his personal and business goals and enjoy the rewards of his hard work. Fortunately, a carefully developed and well-implemented succession plan identifying goals and strategies greatly enhances the prospects for success. Succession planning is not a onetime exercise; it is an ongoing process involving a number of key players. The nature of the succession plan is dictated by the goals and circumstances it is designed to address and can vary widely. The common theme is effective transition of ownership and control of the company, whether it is to the next generation in a
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Succession planning
family business; the management team in a management-led, leveraged buyout; or a sale to an unrelated strategic or financial buyer. As the “baby boom” generation of business owners reaches retirement age, the need for succession planning has never been greater. Yet many business owners find it difficult to start planning because it requires them to come to terms with difficult issues. How long can I expect to remain in control of the business? What will I do when I no longer run the business? Who could possibly carry on my life’s work? It also requires skills and expertise that are unfamiliar to many successful business owners. This challenge the business owner faces presents a unique opportunity for a knowledgeable CPA to provide an invaluable service to a client.
A company’s accountant plays an essential role in the succession planning process, and is often the trusted advisor in the best position to help owners understand the need to start the process. Doing so does not require that you have all the answers — just that you recognize
the need and take the initiative to help your client get started. The business succession process requires a variety of sophisticated accounting services. An accountant who is attuned to a client’s needs in this area can provide these services and strengthen the client relationship in the process. Let’s consider ACME Corp., founded in 1979 by Jim Ryan, who recently celebrated his 63rd birthday. ACME has a profitable business with $20 million in annual revenues and a debt-free value of about $10 million. Mr. Ryan is the sole shareholder, but he needs to reduce his involvement in the business due to health issues. He has accumulated some savings over the years, but has generally left earnings in the company to fund growth and provide stability, resulting in a lack of investment portfolio diversification. Mr. Ryan will need substantial liquidity or a reliable stream of income for retirement. He owns the real estate used in the company’s business. To help the company through the recession, he loaned the company $2 million, which it is just starting to repay. One of his four children has been involved in the business for eight years. He is best positioned to succeed the owner as president, CEO and majority shareholder. A second child with seven years of business experience in a large corporation has expressed interest in joining the business. Two other children have no present intentions of joining the business, although one has expressed an interest in doing so later.
The company has a solid management team, with capable, experienced people who report directly to the owner. Mr. Ryan is integral to most management functions; he has the key relationships with the company’s customers, vendors and bankers and is the sole guarantor on the company’s credit facilities. Concerned that the son’s position in the business would block the path to the president’s office, the CFO recently left. His understudy is competent, but does not yet have the skills to step up to the CFO position. The company’s senior lender has had an excellent relationship with the company, but sees the prospect of Mr. Ryan being unable to continue running the business as an increasing risk. The bank has encouraged him to implement a business succession plan in order for the bank to continue to be able to meet the company’s financing requirements.
SET GOALS AND PRIORITIES In the first step of succession planning, the business owner defines goals for himself and for the business. The goals identified may be contradictory, so the owner must set priorities and make compromises. For example, a goal of using the value of the business to finance the owner’s retirement with liquid assets may argue in favor of selling the company for the highest possible price. But if another goal is to pass control of a financially sound business to the next generation or the management team,
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Succession planning
the owner likely will need to have his interest in the company bought out over a number of years. The balance between these goals will determine how and when ownership and control of the business are handed over. Mr. Ryan’s primary goals are to: • Create liquidity and a stream of income to fund retirement. • Create ownership and management opportunities for his children who wish to be involved in the business, while treating fairly those who do not or should not. • Ensure the ongoing viability of the company for the benefit of its owners, employees and customers. • Implement a tax-effective transfer strategy to minimize estate and gift taxes.
EVALUATE AND POSITION THE BUSINESS With the key goals in mind, the owner and his advisors evaluate whether the business can attain the goals. Does it have good profit margins and a strong balance sheet? Are there opportunities for growth? If so, what is needed to capitalize on them? Does the management team have what it takes? As part of this process, evaluate opportunities for transition. Are family members interested in and capable of running the business? Could the management team buy it? If so, is financing available for a management buy-out of the owner, or would the owner have to provide seller financing? Are
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Despite years of diligent planning and careful management, most business owners fail to prepare for the greatest opportunity and challenge their business will face — handing ownership and control over to others. there financial or strategic buyers who may be interested in the business? An important aspect of this evaluation is understanding the true value of the business, as valuation will help to define succession opportunities and facilitate tax planning. A professional appraisal of the business is an investment that will pay dividends in a number of ways.
•
In the case of ACME, this evaluation results in issues and solutions falling into several broad categories.
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Financial issues Does the company have the financial capacity to buy out the owner while continuing to operate and grow the business? How will the owner’s retirement needs be funded? How will control be transferred to the new CEO without putting the owner’s retirement funding at risk? How will the children not involved in the business be given a fair share of the owner’s estate, and should they own company stock? Solutions • Mr. Ryan can gift stock to family members or a family estate planning vehicle to take advantage of gift and estate tax exclusions and credits.
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•
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These persons can also purchase company stock cost-effectively, taking advantage of lack of control and marketability valuation discounts and historically low interest rates. Redeem the owner’s remaining interest with a combination of cash from a bank loan secured by the real estate and a subordinated promissory note. Institute a buy-sell arrangement under which company shares held by the estate or heirs not involved in the business can be sold to the company, the CEO-son or other family owners. Use loan covenants in the company’s promissory note to the owner to keep him in control of significant decisions until the new CEO has proven his ability by paying down the note. Make Mr. Ryan a consultant to the company to provide continuing guidance and receive additional cash flow. The owner continues to hold the real estate used in the business giving him additional retirement income through a market-rate lease to the company. The value of the real estate can be directed to the owner’s heirs
Succession planning
who are not involved in the business, to help equalize their participation in the value of the estate. • Formalize the owner’s loan to the company under a promissory note with arm’s-length terms. The note also should go to heirs not involved in the company to help balance allocation of the estate among the heirs. Management issues Can the management team successfully operate the business without the owner? What issues will result from the son becoming CEO? How can the company retain key non-family employees? Solutions • Hire a CFO during this risky stage of transition. • Implement a training and mentoring program for the new CEO and other key management personnel. • Conduct strategic planning to identify and align the mission, goals, values and key strategies of the company. • Mr. Ryan should delegate key responsibilities and transition key relationships to the management team. • Retain key employees using deferred compensation arrangements such as equity incentive compensation with golden handcuffs. Family issues A family business focused on maintaining control of the business within the family presents special challenges. Is the owner ready to pass the torch? Does the son want
to be here or is he acting out of a sense of obligation? Which family members will be involved in the business? What standards apply to those who are not currently involved but would like to become involved? Should family members not active in the business have an ownership stake in the business? If so, how much control should they have? If not, how can the owner ensure that they will receive a fair share of the value of his estate?
• Use a “family council” to address family issues more effectively and at less “cost” to the business. • Establish requirements for family members seeking to join the business, and make clear that they will be subject to the same performance requirements as all other employees. • Structure a fair allocation of the owner’s estate among his heirs by leaving company stock to those involved in the business and other assets (e.g. real estate and the business loan) to others.
Solutions • Ensure that family considerations do not drive the business considerations.
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Succession planning
>>
BONUS FEATURE
Succession planning with bite More on succession planning is just a click away! When do family businesses bite the dust? With nearly 90 percent of all U.S. firms family-owned and operated, it’s a valid question. Turns out that only one-third of family businesses survive through the second generation, and more than 85 percent flatline before reaching the fourth. Succession planning advisors concentrate on the three main issues of management, ownership and wealth, but author Gary M. Giallonardo argues they miss a crucial focus: an external emphasis on business development. Family businesses must learn to be and remain competitive in an ever-changing marketplace. Read more at www.vscpa. com/Disclosures in the 2011 archives.
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After transferring a portion of his stock to children active in the business, Mr. Ryan sold the remaining shares to the company at fair market value, which accomplishes four principal goals: • It freezes the value of the company and enables the owner to get that value out of the company over time, giving the owner liquidity without placing an excessive debt burden on the company, due to flexibility in the payment terms of his note. This approach also avoids problems that can arise when family members not involved in the business hold significant stock and the voting power associated with it. • It freezes the value of the company includable in the estate of the owner and transfers future appreciation of company value to the next generation as new owners. • It creates a mechanism for getting majority control into the hands of the new CEO son and positions him to take control based on his performance. • It addresses the bank’s request (and the overall need) for a business succession plan. This plan represents a compromise of goals. The owner must remain on bank guaranties until significant value shifts to the new CEO son. While the owner has greater liquidity in his principal asset, he continues to have his financial condition tied to the operating results of the company. That is not ideal when viewed strictly from the retirement funding perspective, but it represents
a balancing of the goals of funding retirement while also enabling the business to stay in the family. Different circumstances may dictate a sale of the company to generate maximum value and liquidity.
EMPHASIZE TIMING AND TEAMWORK Business owners tend to think they will handle transition of the business on their own schedule. There are many factors beyond the control of the business owner, such as health or financial problems, changing industry conditions, accessibility of capital and cycles in the market for buying and selling privately held businesses, which may dictate the timing of the process. Implementing components of a succession plan, such as training successors or making an acquisition to increase company value prior to a sale, takes years rather than weeks or months. These considerations underscore the need for advance planning and preparation. Ideally, the owner should start the process at least three years, and preferably five years, before he plans to implement the succession. The business owner should build a team of advisors having expertise in areas such as business valuation, investment banking, accounting, law, estate planning and insurance, and experience working with the unique and multi-faceted challenges of business succession. Because the business owner may be too close to the situation to
Succession planning
evaluate important aspects of the business objectively, he should have access to other business persons whose opinions he respects. This access can be facilitated through an advisory board, which provides independent perspective and serves as a sounding board for the owner’s ideas. While the business owner is the ultimate decision maker, given the numerous demands of operating the business, it may be wise to delegate management of the process to an experienced team member.
held business, and business owners frequently identify succession as one of the foremost risks to their businesses. Failure to plan for succession often results in a decline in the business when the owner is no longer able to guide it forward. But an effective succession planning process, designed and implemented well in advance, greatly increases the owner’s likelihood of achieving his personal goals and his goals for the business. n
Business succession presents many challenges and opportunities to a closely
© 2011 J. Benjamin English. All rights reserved. The contents are not to be construed as legal advice.
Ben English is a partner with Hirschler Fleischer, PC, in Richmond, where he represents entrepreneurial companies in all aspects of the growth of their businesses. Contact him at benglish@hf-law.com.
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Technology
One-Click Wonder: Link Excel to Your Database in One Easy Step By Joel Pollard, CPA
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Technology
When I spoke at a national software conference about integrating accounting data with Excel, the response of the standingroom-only audience was overwhelming. The attendees relayed story after story of frustration caused by inadequate reporting functionality from their accounting packages. Later, many reported better, faster and more reliable reporting using what turns out to be Microsoft’s best kept secret: Retrieving external data into Excel is almost always possible. You are probably aware that Excel has the capability to tap into external databases. But you may not know how straightforward the process is or how powerful the results can be. After all, it’s pretty easy to copy a report from your accounting software and paste it into Excel, right? Well, yes, but think about the copy/paste process for a moment. First you log into your software, then maneuver through menus to the report you need. Next you set the parameters for the report, print and do a quick check of the totals. Now you copy, paste into Excel and deal with formatting the report. Sound familiar? It’s actually more of a hassle than it appears
to be and all steps must be repeated every time you need to update your spreadsheet. But when you link Excel to your database, you can reduce all these steps to one click. Here’s how: 1. Establish a link to the accounting software by taking advantage of Microsoft’s built-in data sharing capability. This is a one-time process and is available in Excel 97 and after.
management reporting, get answers to questions in real time and overcome the constraints of your software’s reporting function. Sound good? Let’s get started. We’ll use a hypothetical but common situation in which the accounting package gives us the ability to report on Invoices By Client, but does not offer the option of listing the associated project manager. So for illustration purposes, we’ll prepare a Billing Report By Project Manager.
2. Choose the data you need. 3. Prepare the analysis or report using familiar Excel functions and formatting. 4. Click to update. That’s it. Consider the possibilities: You could automate time-consuming
ESTABLISHING THE LINK Microsoft built Excel with an eye to connectivity. A discussion of the connection options such as opendatabase connectivity (known as ODBC) or ActiveX Database Objects
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Technology (ADO, a Microsoft terminology) can be found at http://tinyurl.com/6z62rn2. We’ll look to our IT professional resources to perform this one-time setup while keeping these two important points in mind: 1. The connection must be read-only so we don’t inadvertently change our accounting data. 2. We must protect our company’s data confidentiality requirements for payroll, ownership, etc. because the connection setup often circumvents permissions granted during normal log-in. Once the connection driver has been added to our computer, we’ll be ready to link a spreadsheet to our database. From Excel 2007, we choose the Data ribbon, then Get External Data, then From Other Sources. (In other versions of Excel, the menus will vary a bit.) From the Other Sources menu, we can select any of several options. This article is based on selecting From Microsoft Query (see Figure 1, page 23).
Choosing DatA The MS Access-like interface makes using MS Query easy to explore the tables in our system. The Query wizard will be helpful the first few times, but we’ll uncheck the wizard box once we get more confident. And we’ll set aside some time at first to explore and get the hang of the process. At the Access-like main query screen, we’ll see menus for choosing, linking and filtering tables. It’s best to bring back only essential data to Excel, so we reduce the volume by selecting one accounting period or one account. With a
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little experience, we’ll get a sense for how much data is reasonable to retrieve. Our accounting software’s documentation includes a data dictionary that describes the content of each table. We’ll review the dictionary to get an idea of the most likely source for information that we need. In our case, data from the Invoice, Project and Employee tables are needed. And here’s a big plus for using this approach: Now we’ll be able to link data that cannot be linked at all through our package’s built-in reporting module. As we said, the Billing Report by Project Manager is not possible to obtain out-of-the-box in our software’s reporting function. But by using MS Query, we’ll be able to link the Invoice table to the Project table and the Project table to the Employee table. Now we’ll have the connection that’ll enable us to create the most helpful report for management. The data dictionary also gives us guidance on common fields within our tables, so we can join the tables appropriately. This is very easy in MS Query: We simply click on a field in one table and drag to the corresponding field in another. So we’ll click on “Client_ID” in the Invoice table and drag it to “Client_ID” in the Project table. Next, we’ll connect “PM_ID” in the Project table to “Emp_ID” in the Employee table. Once joined, we’ll select the fields we want to display on our report by double clicking on any field name. As we select fields, MS Query instantly displays actual data in rows and columns. This enables us to see in real time whether the choices we are making are giving us the results we want. This interactive approach is a powerful and time-saving feature of MS Query.
We’ll filter our data by using the Criteria section. We can drag fields from any open table and then specify our selection preferences. In our example, we want to report on billings in period 4 of 2011, so we drag down the Period field from the Invoice table and choose Equal 201104 (see Figure 2, page 23). As we filter, we evaluate the data displayed for reasonability. If we see unanticipated results, we simply click “undo” and try again. When we’re satisfied with our selection, we’ll click Return Data to Microsoft Office Excel under the file menu and select where we would like the data to be located in the workbook. In this example, we’ll return our data to a tab we named Accounting Data.
PREPARING THE REPORT Now the real fun begins. Since our data is accessible from the spreadsheet, we can format, sort, enhance and analyze using all the tools we’re familiar with in Excel. For the Billing By Project Manager report, we’ll create a pivot table from the Accounting Data tab. In the pivot table, we’ll select Project Manager Name, then Client for the row section and Date for the Column Section. For the Data section, we’ll select Sum of Amount (see Figure 3, page 24). As our report displays, we can change fonts, alignment, number formats, borders, etc. until we are satisfied with the results.
CLICK TO UPDATE Here’s the real power of this approach: Because all the connections are to our live database, we’ll update the report simply by clicking Refresh All from
Technology >>
FIGURE 1
the Data ribbon. Our report will be instantly updated with the most current information in the accounting system.
TAKE IT TO THE NEXT LEVEL While the basics of connecting Excel to our accounting data are compelling enough, there’s even more that we can do to make our lives easier and more productive by taking advantage of some built-in capabilities in Excel and MS Query.
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FIGURE 2
First, we’ll make updating the information in our report even easier. Microsoft has included a capability in a button on the Data ribbon called Refresh All for simultaneously refreshing both the data extracted from our accounting database and the calculation of the resulting pivot report. Since we’ll be updating our report often, we’ll add that button to our Quick Access toolbar. To do this, we right click on the toolbar in the upper left of our Excel screen, choose Customize Quick Access Toolbar and then select Data Tab from the Choose Commands From dropdown dialog. Next, we’ll scroll down to find Refresh All and click Add>> and OK. That’s it! Now we can update our report (plus any more that we add) just by clicking the Refresh All icon, which will always be visible when we open Excel (see Figure 4, page 24). Next, we’ll set up a parameter query. Instead of having to edit the query whenever we want to update our report, a prompt will ask us what period we would like to extract. We’ll click the Data ribbon and choose Connections since we’ve already established the link. Next we’ll select our connection and click Properties. Here, we’ll select
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Technology >>
FIGURE 3
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FIGURE 4
Data to Microsoft Excel. To test, we’ll click Refresh All from our Quick Access Toolbar and we’ll be prompted for Which Period? To make our lives even simpler, we’ll designate cell A1 to control the period selected in our query. First, we type 201104 in cell A1. Then, we’ll navigate to the Definition tab for our connection and choose Parameters (which wasn’t available until we added the bracketed criteria). Here, we’ll select Get the value from the following cell and enter =Sheet2!$A$1 (see Figure 5, page 25). Now we can change cell A1 to any period we desire, click the Refresh All button and instantly update the report. I often end up saving a spreadsheet for every period. Doing so increases productivity by allowing me to make notes in real time and refer back to the historical format or content. Using this approach, we’ll save our spreadsheet as 201104 Billing Report.xlsx. Now, we’ll put the following formula in cell A1: =MID( CELL(“filename”,A2),FIND(“[“,CELL(“fil ename”,A2))+1,6). the Definition tab and then Edit Query. If we get the wizard screen, we’ll cancel to edit in MS Query. Now we’re back to the Query screen where we made our initial selections. On the criteria bar, we’ll select 201104 under Period. We’ll change the 201104 to [Which Period?].
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The square brackets tell MS Query that we want this to be a parameter prompt, and it will immediately respond by opening a dialog box with the words we entered between the brackets: Which Period? We’ll type 201104. Now we’ll return to Excel by clicking Return
Cell A1 still contains 201104, but now it’s based on a formula which is linked to our file’s name (see Figure 6, page 25). We won’t have to remember to change cell A1 each time we refresh our report. And next month, we’ll simply copy our file and rename it 201105 Billing Report.
Technology >>
FIGURE 5
When we open the file and Refresh All, our report will be automatically updated with the most current Period 5 data from our accounting package.
SUMMARY
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FIGURE 6
I have found that the ability to have a company’s data available in Excel is one of the most powerful features available to increase my productivity and effectiveness as a financial leader. The time and commitment necessary to get up and running are probably a lot less than you think. You only need to negotiate a one-time process to establish your connection driver so that you can create links from Excel to your data, select the data you need using MS Query, report and analyze in Excel, and then click to update. This tool can be used for everything from quick account analyses to preparing sophisticated monthly reporting packages to budgeting and forecasting. The power comes from knowing that the data is current, accurate and not dependent on an errorprone copy/paste process. When you can effectively use your package’s inherent reports to achieve your needs, you should. But when they don’t suffice, this is a sound alternative. n
JoEL POLLARD, CPA is with Resources Global Professionals. His career includes leadership roles in accounting, finance and IT. Contact him at Joel@Pollardspace.com.
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CORPORATE finance
Money Pit: How to Track and Ensure Unclaimed Property Compliance BY Laura Lane
Did you know that normal business and life events could create circumstances that generate unclaimed property compliance obligations? As state budget deficits continue to grow, so does the importance of unclaimed property. Today, more and more businesses and financial institutions are reporting large amounts of abandoned property — much of which will go directly to the state treasury instead of its rightful owner.
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CORPORATE finance
THE BASICS OF UNCLAIMED PROPERTY AND WHO’S RESPONSIBLE Unclaimed property is any financial obligation that is due and owing to another party, i.e. a customer, vendor employee, investor, etc. The key rule to remember is that this property never becomes the company’s property — it always belongs to the person or entity owed. There are 54 reporting jurisdictions — including all 50 states — that have abandoned or unclaimed property laws. These laws require public and private, for profit and non-profit companies (“holders”) to report and remit all liabilities owed to third parties on an annual basis after a specific amount of time has passed (known as the “dormancy period”). By virtue of these state laws, if this property cannot be returned to the rightful owner, it must be reported and remitted to the state in which the owner was last known to reside once the dormancy period for that type of property has expired. Dormancy periods vary by state but typically are one year for wages and three or five years for other property types. The jurisdictional rules establishing which state has priority to take custody of these funds were established and confirmed by
the U.S. Supreme Court and subsequently enacted by the state legislatures. The state of the owner’s last known address has the first priority, and if there is no known address (or if the state of last known address’s law does not provide for the escheatment of the funds), the property is reportable to the state of the holder’s corporate domicile (i.e. incorporation). There are more than 100 types of unclaimed property, including un-cashed vendor and payroll checks, escrow balances, accounts receivable credit balances, overpayments, unidentified remittances, unredeemed gift cards, rebates, health and welfare plans, selfinsured benefit plan payments, stocks, bonds and dividends (to name a few). Unclaimed property is often the stepchild in an organization — no one quite knows where it belongs or and wants responsibility for it. It generally falls within the purview of the tax department, even though unclaimed property is not a tax. As a CPA, however, you can assist management in understanding how to deal with unclaimed property. Through your assessments and findings, you can recommend what policies and processes need to be implemented and monitored internally to help create an efficient, effective compliance process. Participation in implementation should include the
business’s internal audit, controller and tax departments to ensure the right people are engaged and on board. As accounting professionals, you may not think that unclaimed property compliance applies to you, but think again. Your knowledge and understanding of the unclaimed property requirements and risk factors are invaluable in comprehending the potential impact to your clients’ financial statements. If your clients are not correctly managing and reporting unclaimed property, past due liabilities coupled with state penalty and interest assessments can become material to your annual financial statement reviews, findings and opinions. Fines and penalties for noncompliance can sometimes double assessments.
STATE AUDIT INTENSITY Given the current fiscal crises in many states, unclaimed property audits are occurring more frequently than ever. The states have recognized unclaimed property as a way to raise revenue without imposing tax hikes on residents. This practice has become so widespread that unclaimed property has quickly become one of the more important sources of state revenues across the country.
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CORPORATE finance >>
A WINDOW INTO VIRGINIA’S UNCLAIMED PROPERTY LAWS
Virginia adopted its initial unclaimed
FAILURE TO REPORT ON TIME:
property act in 1961 and modified to
5 percent penalty plus interest at
the uniform act in 1981. For reporting
the Federal Short Term Rate plus
purposes, Virginia recognizes 128
3 percent. Also, $100 per day the
property types with seven dormancy
report is late — up to $10,000.
periods. In 2010 alone, the Virginia Department of Treasury collected
FRAUDULENT REPORT: 100
$74,505,791 in unclaimed property.
percent penalty plus interest at the Federal Short Term Rate plus
Virginia has a strong reputation for
3 percent. Also, $100 per day the
promoting educational awareness,
report is late — up to $10,000.
enforcing audits and responding timely to claims. The Treasury
WILLFULLY REFUSES TO FILE OR
currently estimates that approximately
FILES FALSELY: 100 percent of
31 percent of holders in Virginia
penalty plus interest at the Federal
are reporting unclaimed property.
Short Term Rate plus 3 percent.
In addition to utilizing an internal
Also, $1,000 per day the report is
audit team, the Commonwealth
late up to $50,000.
also currently has contracts with the Unclaimed Property Clearinghouse
FAILURE TO PERFORM DUE
and Audit Services US, LLC, to assist
DILIGENCE: $50 for each account
the state in its efforts to ensure that
on which the holder did not
holders are filing accurately and
perform due diligence.
performing adequate due diligence.
These are just some of the reasons that CPAs must take heed and quickly learn and understand the complex world of unclaimed property. This will enable them to educate management to recognize where the risks exist, implement the necessary policies and procedures to achieve compliance and establish adequate reserves to negate the effect on financial statements if audited. Businesses should also be aware of another area of exposure: its level of merger and acquisition activity. Mergers and acquisitions lead to potential exposure stemming from the acquired entity’s historical accounting practices and lack of compliance. CPAs must conduct a thorough analysis and due diligence to determine the impact of historical liability on the client’s financial statement, because in stock acquisitions, the unclaimed liability of the predecessor becomes the liability of your client.
THE CPA’S ROLE Here are some suggested best practices to assist corporate management in becoming more compliant with these laws.
Holder penalties for failure to comply with the Virginia statute may include:
Nationwide, the total value of unclaimed property in states’ custody is approximately $35–$40 billion — and it is estimated that in most states, less than half will ever be reunited with its rightful owner. Adding insult to injury to many lost shareholders and owners, some states have the ability to liquidate property soon after it has been delivered. The Virginia statute mandates the sale of property
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reported to the Commonwealth; however, securities must be held for at least one year before being sold. Surprisingly, a notable percentage of businesses are not in full compliance with the laws: 15 to 35 percent! And even those who are in “technically” in compliance may be underreporting because they aren’t reporting all property types or are using the wrong dormancy period.
IDENTIFY POTENTIAL OUTSTANDING LIABILITIES. Encourage management to assess and analyze the various sources within their organizations that may produce an unclaimed property liability. Review existing policies, including unwritten practices, for how liabilities are resolved for each of these areas. UNDERSTAND WHY UNCLAIMED PROPERTY IS BEING GENERATED. Management needs to take time to
CORPORATE finance understand why individuals or businesses have failed to take action with regard to the obligations the company owes them. Customers often relocate or get acquired, or their businesses simply fail. Recipients of health benefit checks can easily become confused between obligations owed to them versus their insurance providers. Duplicate or alternate modes of payment can go unidentified if not properly reconciled. Are there miscellaneous income entries without adequate explanation? Are comprehensive and written unclaimed property policies and procedures in place? Are the policies followed consistently throughout the organization? MANAGEMENT CAN PREEMPTIVELY RESOLVE OUTSTANDING LIABILITIES. The primary threat presented by past due obligations is a state or multi-state initiated audit. A majority of states now use third-party, generally contingent fee auditors, to perform the unclaimed property audits. Discuss with your clients the need to undergo a rigorous self-audit or third-party evaluation to make sure that historical practices and reporting are sound. If risks are identified in the process or compliance history, it is important for the client to take corrective action as soon as possible. There are still opportunities in most states to take advantage of amnesty and voluntary compliance programs that provide favorable incentives with respect to delinquent reporting and, in some cases, waive interest and penalties. ASSIST CLIENTS IN DEVELOPING A CORPORATE POLICY REGARDING DUE DILIGENCE. The best defense is good offense. In the unclaimed property world, due diligence
is the practice of mitigating unclaimed property liability at its source — by finding missing owners and helping them take action to reconcile their accounts. Rather than waiting until statutory due diligence is required, recommend that your clients reach out to customers six to nine months after a check goes stale or a credit remains unused — this will create a better opportunity to find them. In addition, be sure to also address the undeliverable mail population a client may have by suggesting research alternatives for locating accurate addresses.
MONITOR AND TRACK REGULATORY CHANGES.
RECONCILE ACCOUNTS TO PREVENT OVERPAYMENT. Management should review practices to identify areas of duplicate payments and other costly accounting errors. Reducing these factors can minimize risks.
CPA FIRMS, TAKE NOTE
DOCUMENT AN ANNUAL COMPLIANCE ROADMAP. Recommend that clients formalize all compliance goals and expectations of professionals who play a role in unclaimed property compliance. It is critical to establish a working environment where compliant behaviors are standard and executives are committed to and encourage transparency. Suggest that management maintain electronic and hard copy documentation of all previous unclaimed property reports for at least 10 years so that they can quickly and easily demonstrate compliance in the event of an audit. This will help to facilitate internal audits, contribute to long-term compliance efforts and serve to demonstrate that controls are in place in the event the company is selected for an audit.
The laws are continually evolving. States frequently add property types, reduce dormancy periods and change process requirements. A range of unclaimed property software systems and outsourcing options exist to help clients with planning and execution. If efforts are coordinated in-house, recommend that your clients document the workflow, staff responsibilities and informational needs at each step in the process.
As accounting professionals, it is very important to remember that unclaimed property laws also apply to your accounting firms. Your processes and practices are important in ensuring that your firm is also in compliance with state’s abandoned and unclaimed property laws, especially in areas of escrow accounts that maintain funds on behalf of clients. Be knowledgeable and vigilant in your reviews. Arm management with the tools needed to attain accurate and timely compliance and this will help in ensuring that the client’s financial statements “present fairly.” n
Laura Lane
is vice president of consulting and advisory services at Keane Unclaimed Property in Wayne, Pa. She assists clients on a broad range of unclaimed property advisory services and directives aimed at minimizing exposure, reducing risk and managing compliance strategies. Contact her at llane@keaneup.com.
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REAL estate
The Other Real Estate Bubble How lenders and holders are navigating commercial real estate’s current financial market and new accounting rules. By Dennis Diersen, CPA
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REAL estate
The state of the housing market is constantly reviewed and analyzed by homeowners, investors, financial analysts and the media, but what about commercial real estate (CRE)? How is that other sector of real estate holding up in light of the current economy? The answer is that CRE continues to recover slowly, but faces more challenges in 2011. Market conditions, valuations, new rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act and a proposed new accounting standard for leases are leading people to question how refinancing will take place. We’ll examine the issues, discuss creative financing and explore what companies are actually doing in the marketplace. The state of the CRE market varies by sector, but all show rents that are stable to down less than 4 percent year over year, according to recent reports from the Urban Land Institute. Vacancies were coming down slightly in most areas and hotel occupancy rates were up slightly, with revenue per available room up close to double digits. The “office, retail, and industrial sectors have all bottomed out,” according to Steve Gentil, chairman of Grubb & Ellis|Harrison & Bates. Gentil believes that “with no significant new construction, these markets will improve over time.”
Paul Silver, president & CEO of Cushman & Wakefield|Thalhimer, is seeing an increase in leasing activity and says that “building owners are holding to quoted rates, but [still offering] lease concessions.” Silver forecasts a “decrease in vacancy in 2011 [and] rents to remain flat with fewer concessions.” A large amount of CRE loans are coming due over the next 18–36 months. Financing all but evaporated as lenders searched for metrics (underwriting requirements) that limited risks in response to the recession and the collapse of CRE values. In recent months, the underwriting environment has improved for properties with quality tenant profiles to levels allowing deals to happen. Loan-to-value (LTV) ratios between 65 and 75 percent are available for various property types and debt-yield requirements have begun to decline. In addition, the return of Collateralized Mortgage Backed Securities (CMBS) financing has also begun to add liquidity to the market.
PROPOSED NEW FASB FOR LEASES Additional pressure on the CRE market may come from accounting standard setters. A proposed new standard for leases from the Financial Accounting Standards Board (FASB), to be issued in April 2011 at press time, will require companies to book the present value of all future lease payments as a liability on their balance sheets with a corresponding right-of-use asset to comply with generally accepted accounting principles (GAAP). Currently, many companies list leases as footnotes on their financial statements rather than on balance sheets. If the change is made, significant amounts of debt will be added to balance sheets, with estimates running in the trillions. This could have significant implications for investors, borrowers and lenders alike. The accounting update could affect the leasing market because it removes many differences in the way companies account for properties they own compared to those they lease. Companies may decide to buy offices, driving down demand for leased space, according to some experts. Shrinking the term of a lease also may become more common because the longer the lease, the higher the debt loads on the balance sheet. Another complication involves
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REAL estate renewal terms and estimates of contingent rents over the entire lease term. Options to renew that are likely to be exercised may be included in the lease term as if the renewal will definitely occur. This would mean adding more debt to the balance sheet and so make renewal options less popular. The Dodd-Frank Wall Street Reform and Consumer Protection Act will likely have a broad impact on the financial services industry for years to come. No one knows for sure what all these effects will be, as the act allows for regulations to be passed which can dramatically change the effect of the law. We do know that the rules generally limit bank derivative activities to engaging in hedging and risk litigation activities related to operations, rate and currency swaps and swaps on other national bank permissible investment assets. Under the “Volcker Rule,” restrictions are imposed on bank proprietary trading activities and investments in hedge funds and private equity funds. How much Dodd-Frank affects the CRE market will depend on the details of the regulations approved. Financial institutions and other originators of loans will have to respond to such stresses as more stringent standards in order to underwrite loans, and the requirement to retain an economic interest (as determined by regulators) in a material portion of the credit risk in loans sold in securitization transactions.
HOW WILL REFINANCING TAKE PLACE? Other than the continuation of “hold and hope,” there does not appear to be a
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plan in place to address the refinancing of properties financed at the height of the market. Lenders are more active in taking possession of assets, but seem willing to hold and operate the assets in order to market and sell as market conditions improve. Financial institutions may have the capital and willingness to continue this non-strategy for the foreseeable future. However, it is unclear what will happen with properties financed with securitized debt as the special servicers are forced to deal with the requirements of the pooling and servicing agreements in addressing these loans. In addition, banks have been telling developers when a loan reaches maturity that current underwriting is now based on more stringent standards. The result has been that when loans are being restructured, each party needs to clearly understand the motives of the other party. Appraisers, on their part, are being ultraconservative. Instead of using existing rents as the basis of determining value, they are assuming lower rental rates and arriving at a lower value for the property. The property owner may not be willing or able to refinance a maturing loan based on the current value of the property. The concern of the borrower is that there is a likelihood that the property will rise in value in the foreseeable future and they will be unable to access additional financing if forced to refinance based on the current “conservative” appraised value. From the point of view of the bank or other lender, the property owner may need to agree to a shorter loan maturity or such enhancements as additional collateral or guaranties.
ALTERNATIVE “FINANCING” — CASH FLOW MORTGAGES Even properties with relatively low LTV ratios may experience extended bouts of cash shortfalls. A borrower failing to meet its debt-service obligations under existing commercial mortgage terms may negotiate with the lender to modify the loan to a cash flow mortgage. With a cash flow mortgage, the borrower’s debt service obligation at any point during the loan term is measured by the availability of cash flow at that time. The scenario that most often calls for a cash flow mortgage is a property temporarily in distress, such as a property with a large tenant vacating space, and reasonable expectations exist to release the space for comparable or higher rents. In this situation, a lender with an outstanding mortgage loan likely to be defaulted may be willing to convert to a cash flow mortgage rather than foreclose or take a deed in lieu of foreclosure. Alternatively, the owner of a distressed property may be able to sell it for a price somewhat above the amount of the existing mortgage, with the seller taking back a purchase money cash flow mortgage in lieu of cash. Changing over to a cash flow mortgage may also alleviate problems that arise when a lender is in control of a noncompliant property’s receipts and expenses by bringing the loan back into compliance under the revised terms. A bank approving a loan modification may reap some benefits. These may include having one less non-performing loan or Real-Estate Owned (REO) property on its balance sheet, avoiding costs associated with foreclosure and
REAL estate the risks of property ownership, the opportunity to increase the interest rate and to seek a partial loan pay-down. On the other hand, the borrower may obtain advances for tenant improvement or releasing costs, in effect obtain a “bridge loan” without incurring the costs of seeking short-term financing, gain time to stabilize the property and seek alternate longer-term financing, mitigate a potential going-concern issue, and maintain its reputation, relationship with the lender and credit history. A CMBS note has multiple note-holders compared to a bank-held note. Therefore, a special servicer of a securitized note may be less inclined to modify a loan for fear of lawsuits from different tranche holders. Similarly, the senior CMBS tranche holders may push for foreclosing and liquidating the property to ensure their return of capital and potentially squeezing out the junior tranche holders. A modified loan may yield a lower return to the lender or noteholder, even if the cash flow mortgage is satisfied at maturity, because the delayed interest and principal received adversely affect the rate of return. Net cash flow available for debt service under a cash flow mortgage may be lower than owning the property outright because of special expenses. Before both parties agree to the loan modification, they should also consider whether accounting issues in the transaction would result in the recognition of cancellation of indebtedness for income tax purposes. Lenders also have to consider FASB’s recent proposal to require banks to mark-to-market notes held on their balance sheets. These notes are recorded at amortized cost under current pronouncements. Borrowers should
consider alternate financing, including hard-money lenders, as the credit markets continue to gain traction. This type of modification should not be mistaken for the widespread practice of “extend and pretend,” wherein the lender or servicer extends a cash-flowing property’s maturing loan that cannot be refinanced in the current market. In such cases, the lender may only be delaying the inevitable and losses will eventually need to be recognized upon price discovery if CRE prices, LTV and occupancy levels do not return to their pre-recession levels in the near term. One of the finer points with respect to structuring a cash-flow mortgage is how to calculate cash flow. Many disputes could be avoided if the parties take the
time up front to spell out what constitutes revenue and allowable deductions from revenues to arrive at cash flow.
MARKETPLACE COMMENTARY Stuart Eisenberg, assurance partner and real estate practice leader for BDO USA, LLP, says, “with declines in market values of 25 percent or more, and banks not likely to make loans at ratios of more than 65–75 percent, new equity will be needed to address the debt maturities.” Eisenberg “expects some of the capital will be provided by private equity and hedge funds that have amassed significant amounts in the past year and from real estate investment trusts (REIT) that have access to capital markets.”
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Banks will be able to deal with the CRE financing, he adds, with the help of “the economic stimulus and the continued quantitative easing, which will allow them to increase capital and permit them to dispose of or, in limited circumstances, refinance non-performing loans and originate new loans over the coming 24 months.” Tom Winfree, president & CEO of Village Bank, says that “CRE loans are being impacted in multiple ways during this economic downturn. The intense regulatory environment has placed pressure on banks, particularly community banks, to significantly curtail CRE lending and reduce their portfolio of loans in this category.” He sees this as “perhaps why many larger banks are calling loans at maturity or if there is a technical violation in the loan covenants, even if the borrower has been making timely payments.” Winfree confirms that LTV ratios are stricter now in the “65–75 percent range, as compared to 75–85 percent just over two years ago, and the LTV approach is based on current appraisals that have decreased in value.” These factors, coupled with stricter underwriting requirements, leave you with the potential for the “perfect storm” in CRE financing, as fewer borrowers qualify for loans today, Winfree says. Lawrence Gray, president & CEO of GrayCo, sees “liquidity coming back into the sector, with some institutional investors having under-allocated positions in CRE, significant recapitalization of REITs, $40–60 billion in projected CMBS issuance this year and larger banks looking to lend into the sector this year.” This renewed liquidity has generated a relatively strong recovery in pricing and should help avoid the apocalyptic CRE
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outlook in the 2012–2014 time frame that many had 12–18 months ago when trying to figure out how CRE loans would get refinanced, according to Gray. “Financing is more available for incomeproducing property sectors from institutional investors, opportunity funds, CMBS originators and large banks than from community banks sources, which are still significantly constrained by regulators,” he says. Although the housing market seems to be “bumping along the bottom,” with the rate of deterioration slowing dramatically, Gray sees that there appears to be an increase in distress and failures among smaller builders and projects. This dichotomy is a function of “banks, which have had many quarters of solid earnings and capital building, finally realizing their losses; engaging with individual, problem borrowers; and taking effective control of the properties. This activity has resulted in an increase in bankruptcies among the smaller-sized properties and builders. Although this will cause short-term pain, it is very healthy for the entire industry on a long-term basis.” Paul Silver sees “banks performing more due diligence trying to validate the property will increase in value [and asking] borrowers to put in additional capital” in order to refinance. Silver indicated that mezzanine financing is also becoming an option on properties with good fundamental value. Steve Gentil raises one red caution flag beyond the current issues of LTV, occupancy and underwriting standards: “What happens to CRE values [and thus the ability to get financing] when interest rates move up to more normal levels, say up 150 to 200 basis points?”
CONCLUSION The stabilization and gradual improvement of CRE markets will likely avert the feared doomsday scenario that many thought possible not too long ago. But that does not take the pressure off individual CRE holders. The old adage of CRE being dictated by “location, location, location” is similar to the availability of getting a property re-financed, which is going to be specific property by specific property, and lender by lender (especially type of lender). It would behoove CRE owners requiring financing to pursue this well in advance, and with different types of sources. CRE holders will have to contend with the ongoing concerns of intended and unintended consequences of the proposed changes in accounting standards for leases, final regulations imposed through Dodd-Frank and the potential for interest rates to rise to more normal levels. n
Dennis Diersen, CPA is a tax partner and tax business line leader at BDO USA, LLP, in Richmond. BDO is the world’s fifth largest accounting network, providing assurance, tax, financial advisory and consulting services. Contact him at ddiersen@bdo.com.
Editorial Note: Subsequent to completion of this article, the FASB and International Accounting Standards Board agreed to changes in the original exposure draft on leases, which revert back to two categories of leases. The boards intend to issue a final leases standard in 2011. Stay tuned for updates or visit www.fasb.org.
VSCPA self-assessment Complete this 12-question test and submit to the VSCPA for 1 CPE credit. A 75 percent or better pass rate is necessary to receive credit. After your exam is graded, you will receive either a certificate of completion via e-mail for your records or an e-mail notification that the 75 percent grade was not met.
Submission deadline: June 30, 2011. Exams received after this date will not be graded and your money returned. Cost: $15 for VSCPA members/$30 for nonmembers. Submission Instructions You may submit this selfassessment and make the exam payment online at www.vscpa.com/ May2011DisclosuresExam. You may also check the box next to your answer in each question and mail this paper exam to: CPE Team Virginia Society of CPAs 4309 Cox Road Glen Allen, VA 23060 Fax submissions are acceptable to (804) 273-1741. Name _________________________ Address _______________________ _______________________________ E-mail Address _ _________________ Date __________________________ Method of Payment Check (payable to the VSCPA) Credit card
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Credit Card Number _______________________________ Expiration Date ________________ Signature _____________________ Date
_________________________
1. In MS Query, which characters in the criteria area indicate a parameter prompt? a. Parentheses b. Square brackets c. Question marks d. Quotation marks 2. What combination of Excel functions can be used to place a portion of the filename on the worksheet? a. =Filename() =Parse() =Char() b. =Choose() =Name() =Right() c. =Info() =File() =Date() d. =Mid() =Cell() =Find() 3. What Excel button is used to update data? a. Data b. Update c. Refresh d. Return 4. When choosing tables to bring into MS Query, refer to: a. Data dictionary b. Excel help c. Access reference guide d. MS Query wizard 5. Approximately what percentage of businesses are not in compliance with state unclaimed property laws? a. 65–75 percent b. 15–35 percent c. 5–10 percent d. 40–50 percent 6. Unclaimed property usually falls within the purview of which internal department? a. Tax b. Internal audit c. Controller d. Communications 7. How many property types does Virginia recognize? a. 105 b. 52 c. 77 d. 128
8. What is the primary threat presented by past due obligations? a. State or multi-state audit b. Fines and penalties c. Risk of shareholder fraud d. Negative effect to financial statements 9. What is the currently available range of loan-to-value (LTV) ratios on commercial real estate loans? a. 60–70 percent b. 65–75 percent c. 70–80 percent d. 75–85 percent 10. What impact might the implementation of the Financial Accounting Standards Board’s proposed new standard on leases have? a. Significant amounts of debt will be added to balance sheets. b. Companies may decide to buy offices rather than lease them. c. Lease terms may shrink. d. All of the above. 11. When are cash flow mortgages generally used? a. When a commercial borrower experiences cash shortfalls on a property temporarily in distress. b. When a lender would rather not foreclose. c. When a lender has the opportunity to increase the interest rate and seek a partial loan pay-down. d. All of the above. 12 How much in Collateralized Mortgage Backed Securities (CMBS) is projected to be issued this year? a. $20–30 billion b. $30–40 billion c. $40–60 billion d. $60–80 billion
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VSCPA news
It’s ethics time again As a reminder, CPAs are required to take an ethics course each year based on the Virginia Board of Accountancy’s outline. The VSCPA can help you fulfill that requirement with its course, “Ethics 2011 — Your License Depends on It!” Whether you want to attend a class in person or fulfill the requirement online, the VSCPA has an option to cover your needs. “Ethics 2011 — Your License Depends on It!” also satisfies part of the requirements for licensure in Maryland, North Carolina, Tennessee and Washington, D.C. For more information on the requirements for those states, contact that state’s Board of Accountancy. n For more information on “Ethics 2011 — Your License Depends On It!” visit www.vscpa.com/Ethics.
IN THE SPOTLIGHT >>
CPA candidate membership Know someone who’s set their sights on a CPA career, but isn’t there yet? Becoming a member of the VSCPA would help them receive the news and information they need as they prepare to enter the profession.
There’s a great VSCPA membership category packed with value: CPA Exam candidates pay just $45 a year and get all the benefits of membership. Associate members may qualify for the CPA candidate dues rate if they have completed a bachelor’s degree within the last five years and are pursuing a CPA license. If a CPA candidate membership is right for you, be sure to mention it when renewing your membership. This is one way the VSCPA supports the pipeline of new CPAs filling the profession. n
Your Membership Includes 18+ Hours of FREE CPE Each year, the VSCPA develops a variety of free member programs that qualify for CPE credit. Earn 18+ CPE credits by attending:
CPAx
LIVE! Professional Issues Updates
Leverage the latest technology, earn up to 5 CPE credits and learn how to drive new business to your firm or company. Visit www.cpaxshow.com for details.
Meet with VSCPA staff in person and earn up to 4 CPE credits while staying up to date on professional issues and new VSCPA initiatives.
Virtual Roundtables
Management of an Accounting Practice (MAP) Breakfasts
These lunchtime webinars invite you to earn one CPE credit while discussing hot topics.
Virtual Professional Issues Updates
Earn up to 2 CPE credits while examining the trends and issues facing CPA firms today and in the future.
These lunchtime webinars invite you to earn one CPE credit while getting a quick overview of timely professional issues and new VSCPA initiatives.
For details, visit www.vscpa.com/Networking or call (800) 341-8189.
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VSCPA news
VSCPA 100% Member Firms VSCPA 100% Member Firms show their commitment to their employees, the profession and the association. A 100% Member Firm is simply a Virginia CPA firm or company that has all of its CPAs enrolled as members in the VSCPA. Interested in being listed as a 100% Member Firm? Contact VSCPA Member Relations Director Brenda Fogg at bfogg@vscpa.com or (804) 612-9409. Thank you for your commitment, 100% Member Firms! Anderson & Reed, LLP Beck & Company, CPAs, PC Bennett, Atkinson & Associates, PC BlackHeath Company, PLC Bowling, Franklin, & Co., LLP Boyce, Spady & Moore PLC Britt & Peak, PC, CPAs Burgess & Co., PC, CPAs Cameron, Moberly & Hamrick, PC Charles S. Pearson, Jr., CPA Charles W. Snader, P. C. Cole & Associates CPAs, LLC Coley, Eubank & Company, PC Corbin & Company, PC Craver, Green and Company, P.L.C. Creedle, Jones and Alga, PC CST Group, CPAs, PC Dalal & Company David L Zimmer CPA PC Didawick & Knopp, PC Dominion Benefits Donald W. Coleman, CPA, Inc., PC Duvall Wheeler, LLP Elmore, Hupp & Company, PLC Forrest & Markos Frank Edward Sheffer & Company Fritz & Company, PC GL Roberson CPA, PLLC Garland & Garland, CPAs, PC Garris and Company, PC Gregg & Bailey, PC Gregory & Associates, PLLC Hantzmon Wiebel Harris, Harvey, Neal & Co., LLP Henry R. Hortenstine III, CPA, PC Homes, Lowry, Horn & Johnson, Ltd. John M. Watkins, CPA Honeycutt & McGuire CPAs Jones & Radman, PC Jones, Madden & Council, PLC
Keiter, Stephens, Hurst, Gary & Shreaves, PC Kositzka, Wicks and Company Kuehl Shepherd Kozlowski & Associates, Inc. L. P. Martin & Company, PC Lane & Associates, PC Larry D Greene CPA PC Lent & Hawthorne, PC M. Lee Winder & Associates, PC McPhillips Roberts & Deans PLC Michael B. Cooke, CPA, PC Michael R. Anliker, CPA, PC Miller Foley Group Mitchell, Wiggins & Company, LLP Moss & Riggs, PLLC Murray, Jonson, White & Associates, Ltd., PC PBGH R.T. McCalpin & Associates Renner & Company, CPAs, PC Roger L. Handy, PC Rubin, Koehmstedt & Nadler, PLC Rutherford & Johnson, PC Sells, Hogg & Jones, CPAs, PC Spencer, Hager & Mosdell, PC Stephen Merritt CPA, PC Steve Guy & Associates, PC Strickland & Jones, PC Sullivan, Andrews & Taylor PC Swart, Lalande & Associates, PC Terry L. Jones, CPA, LLC The Burdette Smith Group, PC Thomas E. Fraley, CPA Thompson, Greenspon & Co., PC Tongelidis Consulting, LLC Updegrove, Combs, McDaniel & Wilson, PLC Valderas & Fishel, PC Walker Consulting Group Wall, Einhorn & Chernitzer Wells, Coleman & Company, LLP
The above list was compiled March 1, 2011. Check www.vscpa.com/100percent for a complete, up-to-date list. n
Play golf in NOVA >>
The Northern VSCPA Chapter will hold its 16th Annual Celebration of Golf on May 24, 2011. The fourperson scramble will be held at the South Riding Golf Club, and proceeds benefit the chapter’s scholarships at George Mason University. For more information, visit www.northernchaptervscpa.com.
VSCPA CPE & NETWORKING: GET IT ALL ONLINE >>
Visit the CPE Catalog at www.vscpa.com/CPE for the latest VSCPA seminars, conferences, webcasts, networking events and more.
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VSCPA news
Congratulations to the following members! NEW HIRES >> Bennett, Atkinson & Associates, PC, in Manassas has hired Kathleen O. Bowman, CPA.
Anna M. Cuff, Shannon Daugherty and Laura Godfrey
have joined Goodman & Company, LLP, as associates in the Norfolk and Virginia Beach offices. Becky Earnhardt, CPA, joined the firm’s Danville office. Edward Darr, CPA, was named
director of finance at Timmons Group.
At Murray, Jonson, White & Associates Ltd., PC, in Falls Church, Christopher P. Noyes, CPA, has been promoted to audit manager, Abigail D. Salcedo has been promoted to in-charge accountant and Andrew M. Youhas, CPA, has been promoted to tax manager. Andrew Rountree, CPA, has been
appointed vice president of finance and chief financial officer for the Dulles Metrorail Project. David H. Watson, CPA, has been
named chief financial officer of Gladstone Capital Corp. in McLean.
Stanardsville, has been elected treasurer in Greene County. Beth Ann Luther, CPA, a sole
proprietor, joined the Greater Williamsburg Chamber & Tourism Alliance. David W. Marshall, CPA, of Keswick,
has been named to the Longwood University Foundation Board of Directors. Marshall is a former member of the VSCPA Board of Directors. Edward J. Mazur, CPA, of Clifton
deputy chair and chief operations officer of Dixon Hughes Goodman.
Gunderson LLP in Richmond, received the Private Sector Financial Excellence Award from the Association of Government Accountants at its 9th annual National Leadership Conference.
vice president/director of internal audit at Franklin Federal Savings Bank in Richmond.
APPOINTMENTS & AWARDS >>
Michael Meegan, CPA, of Vienna,
Promotions >>
Rogers were named as recipients of the
Michael W. Decker, CPA, has joined
Kilmer & Associates, CPA, PC, in Winchester. Robert G. Jones, CPA, is now senior
At Wall, Einhorn & Chernitzer in Norfolk, Eileen Gwaltney, CPA, has been named accounting manager and Stephanie Howe and Nan Zhang have been promoted to senior accountant. DesRoches & Company, CPAs, PC, has promoted Robin Harvey, CPA, to partner. >>
Thomas Wilson, CPA, has been named
Angelina Avalos and Shenelle
2010–2011 AICPA Minority Scholarship. Avalos is a student at Virginia Tech and Rogers attends Virginia Commonwealth University. Both earned VSCPA scholarships in 2010. Thomas E. Burdette, CPA, has been
named to the board of directors of Virginia Commerce Bancorp, Inc.
WE WANT TO HEAR ABOUT IT!
E-mail disclosures@vscpa.com if you have exciting news to share. The VSCPA prints news of members’ awards, appointments and promotions as well as new hire and job change announcements. Firm news, as well as mergers and acquisitions, is also welcome.
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Stephanie Allen Deal, CPA, of
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was named to the Virginia Public Safety Memorial Commission by Gov. Bob McDonnell. Sean O’Connell, CPA, of Fairfax,
was named to the Board of Directors of the Mount Vernon-Lee Chamber of Commerce. O’Connell is the chairman of the VSCPA Educational Foundation. Patrick L. Shuler, CPA, senior partner
at Goodman & Company, LLP, in Virginia Beach, was named vice secretary/treasurer of the American Diabetes Association. Mark B. Suiter, CPA, vice president of
finance at Maida Development Company in Hampton, was appointed to the Planning Commission of York County. The Russell County Board of Supervisors selected Marycarol White, CPA, as the county’s administrator. n
VSCPA news Firm News >>
VSCPA Staff News >>
Blue Ridge Tax, Inc., opened its doors on December 20. The
Two employees mark five years with the VSCPA this year: Education Assistant Janie Medley on June 5 and Accounting Manager Diane Jones on June 19.
firm’s owner is Charles E. Hartman, CPA. Cherry, Bekaert & Holland, LLP, has acquired Burrus Paul & Turnbull, PLC, adding two partners and nine
professionals in the Hampton Roads area. Chesapeake Accounting Group, PC, in Burgess, is now
under the ownership of Paige Biddlecomb, CPA, Lois Gorman, CPA, and Debra Whaley, CPA. Faber CPA Firm of Hardy celebrated its grand opening on
December 2. The firm’s owner is Erich Faber, CPA. Jean C. Moses, CPA, has relocated her office to 11837 Rock
Landing Drive, Suite 202, Newport News, VA 23606. Yount, Hyde & Barbour, PC, was selected in the Certified
Two employees celebrate their fourth anniversary with the VSCPA: Executive Vice President Maureen Dingus on May 15 and Information Technology Consultant Randy Cooper on May 21. The VSCPA welcomes Marketing Consultant Talley King, who began March 9, Accounting Assistant Catherine Meehan, who began March 14, and Conference Planner Valerie Vaughn, who began February 7. Welcome to the team! Shawnte Reynolds, public relations specialist, and Lydia Sartori, programs manager, are no longer with the VSCPA. We
wish them luck. n
Public Accountant category in the 2010 Best of Business Awards in Winchester. n
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VSCPA educational foundation
Foundation announces annual scholarship recipients The VSCPA Educational Foundation has selected its 2011 scholarship recipients, with the winners coming from 12 universities and four states. Virginia Commonwealth University and Virginia Tech led the way with three scholarship recipients apiece, while George Mason University, Old Dominion University, the University of Virginia and the College of William & Mary produced two winners. In all, the Foundation awarded 20 scholarships worth a total of $34,750. The 2011–2012 scholarship recipients are: AUSTIN M. CLOYD, MATTHEW G. GWALTNEY & MAXINE S. TURNER DOCTORAL SCHOLARSHIP: $2,500
VSCPA PH.D. SCHOLARSHIP: $2,500
Kerry Inger, Blacksburg, Virginia Tech
WALL, EINHORN & CHERNITZER ANNUAL SCHOLARSHIP: $2,500
Cocke, szpanka & Taylor ANNUAL SCHOLARSHIP: $2,500
Cambria W. Garman, Berryville, Old Dominion University
Sarah Rayfield, Princeton, Ill., University of Virginia GOODMAN & COMPANY ANNUAL SCHOLARSHIP: $2,500
Alyssa Pietrobono, Newark, Del., Old Dominion University MURRAY, JONSON, WHITE & ASSOCIATES ANNUAL SCHOLARSHIP: $2,500
Johnny R. Amin, Alexandria, George Mason University THOMAS M. BERRY ANNUAL SCHOLARSHIP: $2,500
Erica L. Ellermeyer, Ashland, University of Richmond
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Ryan Leece, Blacksburg, Virginia Tech
YOUNT, HYDE & BARBOUR ANNUAL SCHOLARSHIP: $2,500
Rebecca Perron, Reston, University of Virginia H. BURTON BATES JR. ANNUAL SCHOLARSHIP: $1,750
Sara E. Sloman, Lynchburg, Roanoke College VSCPA GRADUATE SCHOLARSHIP: $1,000
Alex Hess, Fairfax, George Mason University Tejdev S. Sandhu, Stafford, Virginia Tech
VSCPA MINORITY SCHOLARSHIP: $1,000
Adrienne Essiaw, Warrenton, College of William & Mary Jia-Ping L. Nowlin, Richmond, Virginia Commonwealth University Fatima Sbai, Alexandria, George Mason University VSCPA UNDERGRADUATE SCHOLARSHIP: $1,000
Chris Caputo, Dunwoody, Virginia Commonwealth University Lanine M. Fisher, Richmond, Virginia Commonwealth University Chloe A. Lewis, Arlington, James Madison University Kelly M. Miller, Charlottesville, Lynchburg College Candice R. Owens, Churchview, Longwood University
VSCPA educational foundation
Why I donate >>
“I never would have gone to college without financial aid” Ellis Dunkum, CPA, has been retired for 12 years, but he’s still making an impact on the CPA community. Dunkum is a longtime donor to the VSCPA Educational Foundation — when asked how long he’s been a donor, his response was “How long has it been around?” — and refers to his own career when discussing the reasons for his relationship with the Foundation. “I never would have been able to go to college without financial aid,” Dunkum, a Richmond native who graduated from the University of Richmond, said. He’s doing his part in retirement, donating to the Educational Foundation each year and endowing an accounting scholarship at UR.
“I believe in education and I believe in helping young people get into a profession that I believe provides many opportunities,” Dunkum said. “Frequently, young people have no idea about the opportunities that do exist, and I think a program like the Society’s Education Foundation not only finds individuals that are worthy of help, but also helps them to identify the profession as a good opportunity.” Dunkum, a former VSCPA president and former chair of the Virginia Board of Accountancy, retired from PricewaterhouseCoopers in 1999 after spending his entire career at the firm and its predecessors. While he’s no longer practicing, his contributions to the CPA profession will be felt for years to come. n
Donors speak out According to the 2010 Donor Satisfaction Survey, VSCPA Educational Foundation donors are pleased with the results of their contributions. More than 95 percent of respondents said they were satisfied as a Foundation donor, and 90 percent said they were “very likely” or “extremely likely” to continue their donation. Respondents indicated that they thought it was important to help with the high cost of college and ensure the quality and future success of the accounting profession. Donors indicated that they’d like more information regarding how the Foundation communicates the use of gifts, and we’ve taken note of your suggestions. We’ve increased the frequency of e-mails from Foundation Chairman Sean O’Connell, helping us stay in touch with the donors who are the lifeblood of the organization. Keep an eye out for further communications from O’Connell and the Foundation. n A helping hand >> Foundation donors contribute because they believe it is important to help accounting students with the high cost of college.
Support the Foundation’s Annual Fund >>
The VSCPA Educational Foundation is seeking donations for its Annual Fund, which provides money for accounting scholarships and grants and supports the Foundation’s general mission and goals by covering operating expenses. Unrestricted gifts to the Annual Fund help ensure the Foundation can fulfill its mission of supporting future CPAs year after year. By investing in the Educational Foundation, you enable the next generation of CPAs to have the same rewarding opportunities you have experienced, and provide a tangible symbol of your support for the future of the profession. To donate to the Annual Fund, visit
www.vscpa.com/Public/Secure/Donation.aspx.
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Market to 8,300 CPas and accounting professionals in Virginia
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Northern Virginia CPA seeks to associate with energetic CPA who is interested in the eventual takeover of the practice. Strong technical skills in both reporting and tax a must. Ideal candidate will be individual who is committed to working in public accounting and has started their own practice. Respond with resume and cover letter to: CPA, PO Box 10712, Burke, Virginia 22009.
Looking for a CPA Practice or established accounts to purchase. If you are thinking about retiring from public accounting and would like to find a respectful and driven CPA who can take over for you; look no further contact me today. Reply in confidence to VSCPA CC # 82, 4309 Cox Road, Glen Allen, VA 23060 or vscpa@vscpa.com. Sale/Merger Opportunity Well established and diversified small Northern VA CPA firm seeks sale/merger opportunities. Practice clientele includes reviews, compilations, write-up services and three nonprofit audits. The firm has a significant individual income tax practice as well as a variety of business tax returns. The firm enjoys a long-standing on-site and unqualified or pass peer review history. The firm is that of a sole practitioner seeking retirement or semi-retirement over the next two years. Growth and referral opportunities are excellent. Reply in confidence to VSCPA CC # 74, 4309 Cox Road, Glen Allen, VA 23060 or vscpa@vscpa.com.
Position Available Accountant: Prepare or analyze accounting records to assess accuracy and conformance to standards. Prepare tax returns and financial reports for managements. Audit and advise clients in business operation and financial strategy. Advise client tax matters in international trading with customers in Korea. Develop accounting systems utilizing Quickbook software. Master in Accounting. Mon. – Fri. 9–6. Report or send resume to Employer & Job Place: Paul Lee & Associates, P.C. at 5103-B Backlick Rd, Annandale, VA 22003.
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I AM the vscpa
<< WALTER STOSCH, CPA
He’s served in the Virginia General Assembly for nearly 30 years, and he’s contemplating running for re-election this fall.
A love for the legislature >>
Two minutes with Walter Stosch, CPA Since 1982, the Virginia CPA community has had one of their own in the Virginia General Assembly. Walter Stosch, CPA, served in the House of Delegates from 1983–1991, and since 1992 as been a member of the Senate — even serving as Senate majority leader from 1998 to 2008. A pro-business legislator, Stosch has championed tax- and business-related bills throughout the years. Every year, he advocates for early passage of legislation to conform Virginia’s tax code to the Internal Revenue Code, which results in less headaches for his fellow CPAs. Stosch is passionate about encouraging other CPAs to enter public service. I AM PASSIONATE ABOUT… Preparing
our young people for the many opportunities for success as a CPA.
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PEOPLE DON’T KNOW THIS, BUT…
MY ADVICE TO NEW CPAs IS…
I like to play the guitar (making slow progress).
Always honor our profession by being willing to give back and make a difference in the lives of others we serve and those less fortunate we come in contact with daily.
IF I WEREN’T A CPA, I WOULD BE…
In the health care industry (served three years in the Army as a medic). I WISH CPAS KNEW…
How important it is to develop communications and social skills to complement technical skills early in their careers. WHEN I TOOK THE CPA EXAM…
I was a late blooming senior in college and apprehensive. I NEVER LEAVE HOME WITHOUT…
Planning my day and trying to cultivate a positive attitude.
I AM A CPA BECAUSE…
Of happenstance. One of my senior officers in the Army Medical Corps advised me to become a doctor. When I rebelled at the notion of having to repay the Army with two years of service for every year they would sponsor me in college and medical school (total of 24 years), he said, “then become a CPA. They know all about how to help people be financially and personally successful.” The rest is history. n
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virginia Practice — Featured Listing Middle Peninsula, $915,000 Well established CPA practice with excellent cash flow to owner. The practice has talented, long-term staff and great clients in a variety of businesses. The minimum 1040 fee is $350, with an average 1040 fee of approximately $700. No audit work. This is an exceptionally good opportunity! BRANNON POE, CPA | 1.888.246.0974 | POE@KNOLOGY.NET
dc Metro Practices Montgomery County CPA Firm – $582,060 Highly profitable CPA practice provides a mix of 43% tax, 49% accounting and 8% other services to individual and small business clients. The prime location and established reputation of this practice make this a solid opportunity for many types of buyers. Silver Spring CPA Firm – $282,298 Established CPA practice has experienced tremendous growth in the past 4 years. The owner has implemented a highly profitable service model, and the practice is showing over 50% in owner’s discretionary cash flow! Vienna Accounting Firm – $39,951 This Vienna, Virginia based practice provides back office support services for Accounting, Bookkeeping, CRM and Technology Management to Emerging Businesses, Small Businesses, Non Profits, NGO’s and Political Action Committees. This would be a solid acquisition opportunity for an existing practice that wants to start or expand a small business consulting service line. Don’t wait on this unique listing. DEREK LEROUX | 1.866.850.6565 | DEREK@ACCOUNTINGPRACTICESALES.COM
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Virginia Society of CPAs Virginia Society of 4309 Cox Road Glen Allen, VA 23060 Certified Public
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