AZ CPA June 2017

AZ CPA June 2017

Successful Financial Reporting for Boards The Leadership ACT for Building Trust

Uniform Guidance A Post Implementation Recap

The Arizona Society of Certified Public Accountants y www.ascpa.com

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AZ CPA JUNE 2017

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KNOWING HOW TO MINIMIZE THE RISKS. Your clients trust you to keep their confidential data safe.

At CAMICO ®, we know the risks because we’re CPAs ourselves. That’s why we introduced CyberCPASM as part of our CPA Professional Liability Insurance coverage. You’re not only protected in the event of an attack or breach, you also have access to risk management tools and resources to help minimize the risks. Including breach response services such as client notification, credit monitoring and identity theft assistance. Protecting CPAs—that’s been the CAMICO tradition for more than 30 years.

What every CPA needs to know about cyber security.

How to safeguard information, increase awareness of cyber risk, and protect your clients. www.camico.com/cyber-cpa Accountants Professional Liability Insurance may be underwritten by CAMICO Mutual Insurance Company or through CAMICO Insurance Services by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued.©CAMICO Services, Inc., dba CAMICO Insurance Services. All Rights Reserved.

CAMICO is the preferred provider of the ASCPA.

CAMICO Representative:

Scott Nugent T: 602.264.5533 Ext. 123 E: scott.nugent@stuckeyinsurance.com

JUNE 2017 AZ CPA

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AZ CPA The Arizona Society of Certified Public Accountants President & CEO

Cindie Hubiak

Editor

Patricia Gannon

Advertising

Heidi Frei

Board of Directors Chair Chair-Elect Secretary/Treasurer Directors

Molly Montgomery Mike Allen Jared Van Arsdale Michael Chesin Virginia DeSanto Tom Duensing Marcus Feder Kristen French Alan Gold Aaron Grant Julia Miessner Alice Pope Jeffrey Quick Nikki Vogt Char Woodall

Immediate Past Chair Greg Nelson AICPA Council Members

Reach 5,500 ASCPA Members Through Our Advertising & Sponsorship Programs Sponsorships: • Conferences • Webinars • Phoenix Tax Workshop • Don Farmer Tax Update Advertising: • AZ CPA • Email Newsletters • ASCPA Website • CPE Resource Catalog

Learn more at www.ascpa.com/mediakit or call (602) 324-4743.

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AZ CPA JUNE 2017

Karen Abraham Armando Roman

Chapter Presidents Southern Chapter Northern Chapter

Cathy Poore Bethany de Alva Southwest Chapter Helen Greenwelll North-Central Chapter Ellen Carpenter AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends in the profession of accounting. It is distributed 10 times a year as a regular service to members of the Society. The ASCPA, its members, board of directors and administrative staff assume no responsibility for advertisements herein. The ASCPA and the above people also assume no liability for business decisions made by readers in reference to statements and/or claims in articles or advertisements within this publication.

Opinions expressed by contributors are not necessarily those of the ASCPA.

Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com

AZ CPA Volume 33 Number 5

June 2017

Features

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The Leadership Act for Building Trust

Learn three tactics leaders can use to make teams more productive and engaged.

by Jason McKeever

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Uniform Guidance — A Post Implementation Recap

With more than two years under our belt, now is a good time for a period of postimplementation introspection on how the “Super-Circular” has lived up to its name.

Columns & Departments

by Randall L. Ottaway, CPA

Member News

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Annual Meeting Highlights

7

Board Highlights

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A Dash of SALT by James G. Busby, Jr., CPA

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Quick Quiz

21

Financial Reporting for 17 Successful Boards

Nonprofit financial information should be routine, relevant and easy to understand by both financial professionals and other board members.

by Sarah C. Zelhart, CPA

Classifieds 22

Arizona Society of Certified Public Accountants 4801 E. Washington St., Suite 180 Phoenix, Arizona 85034-2040 www.ascpa.com

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Member News Lindsay Stevenson, CPA, CGMA, has been appointed to serve on the AICPA Council as a member-at-large.

Stevenson was also asked to be one of four young CPAs to guest-edit the Journal of Accountancy.

REDW LLC added Michael Jacobson as a principal in the firm’s Phoenix office.

Heinfeld, Meech & Co., P.C. recently promoted Melanie Askew, CPA, to audit manager and Shauna R. Hetrick, CPA, to staff associate II.

Could This Be Your Mentee?

Join the ASCPA mentor/mentee match program and engage with some great professionals who have already signed up.

Andrea Garcia, a member of the staff of Allen L. Nahrwold, CPA, P.C. and student member of the Society, was elected president of the Accounting and Financial Women’s Alliance — East Mesa Valley Chapter.

There are several amazing mentees looking for mentors. Here are some of the reasons they are would like a mentor: • I am pursuing a controller position with a privately held firm and would like development suggestions and ideas on how to market myself.

• I am looking for an advisor. I started my career in public accounting where promotions happen often and expectations are high. I struggle with finding the balance and comfort in my current position.

• I would like to have a mentor who can help me to grow my management skills for how I interact with staff. In addition, I want to grow in my organization and want to build the skills that senior management is looking for as well as build up my confidence in what I have to offer.

• Knowledge of how to advance my practice and maintain a good work/life balance.

Join the Mentor Match program today to find your mentor and/ or mentee. Go to http://connect.ascpa.com and click on “Engage in Mentoring” in the navigation bar. Select “About Mentoring” from the dropdown menu to follow the steps to becoming a mentor or mentee.

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AZ CPA JUNE 2017

The ASCPA is Moving ... but we’re not going far. We are moving downstairs in the same building. Please note our new suite number: Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040

CPAs

Members and guests helped celebrate another year of success at the ASCPA Annual Meeting and

Ignite Presenters: (L to R): Ryan Littleton, Dana Cretu, Char Woodall, Lynton Kotzin, Vanessa Makridis and Dan Shufelt

Awards Luncheon on May 19. We honored Life Members Randy Fletchall and James Susa, and Excellence in Teaching Award recipient Professor Jayanthi Sunder, Ph.D. Six CPAs then took the stage and inspired and entertained members with Ignite CPA presentations. Thanks to Gold Sponsors: ADP, CPACharge and Headfarmer.

ASCPA Chair Molly Montgomery and Immediate Past Chair Greg Nelson

Leadership Meeting Attendees

Life Member Randy Fletchall and Vickie Fletchall Life Member Jim Susa JUNE 2017 AZ CPA

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Highlights of April Board of Directors Meeting Among other actions at its April 26, 2017 meeting, the ASCPA Board of Directors reviewed the following:

guided by a CGMA Magazine article titled “Six Disruptive Forces for Boards to Tackle.�

Year-End Wrap-up Outgoing board members Brenda Blunt, Rob Dubberly, Teresa Finley, Mark Patton, Curtiss Smith and Nancy Thomas shared thoughts about their time on the board and the future of the Society. Greg Nelson thanked each member for their contributions.

Consent Agenda The consent agenda, which included the board minutes, financial statements and financial statement designation, the 2017-2018 Society budget, Foundation contribution memo and one-year term for a director, was approved.

Disruptive Forces for Boards Board members formed six groups and engaged in spirited conversations

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Strategic Plan Update Cindie Hubiak thanked board members for their support of the PAC and noted the achievement of all strategic plan measurements. She also provided information on the polling project underway to understand the views of Arizona voters about a services tax and shared highlights of three political events she and other members attended.

Accountancy Board Update Layne Simmons and Monica Petersen dialogued with Society board members about executive orders impacting the Board, rulemaking activities and other items. Greg Nelson thanked Layne Simmons for serving on the Board for almost five years.

A Day in the Life Teresa Finley and Curtiss Smith shared the challenges and joys they experience in their life and job.

Other Business Nelson thanked board members for their support this year. n If you have questions or would like additional information, please contact Cindie Hubiak at (602) 324-2888; AZ toll free at (888) 237-0700, Ext. 203; or chubiak@ascpa.com

A Dash of SALT

Arizona’s Broad Application of its Sales Tax on Rentals of Tangible Personal Property In this month’s state and local tax (SALT) column, Busby identifies two key differences between the tax base for Arizona’s sales tax on retail sales and its sales tax on rentals of tangible personal property. He explains how Arizona taxing authorities have acted on these differences to impose sales tax on the gross receipts of many service businesses — including many that most people would not consider to be in the business of renting tangible personal property.

Most states do not impose broad sales taxes on services. Likewise, Arizona’s Legislature only specifically identified a handful of services, such as telecommunications services, pipeline operations, and some construction contracting services, that should be subject to Arizona sales tax.

However, partly because of two key differences between Arizona’s sales tax on retail sales versus its sales tax on rentals of tangible personal property, many service businesses have been surprised to find that the Arizona Department of Revenue (Department) believes their gross receipts are subject to the state’s sales tax on rentals of tangible personal property.

The Taxation of Services Rendered in Addition to Selling vs.

Renting Tangible Personal Property The Legislature clearly excluded services rendered, in addition to selling tangible personal property at retail, from the scope of Arizona’s tax on retail sales.

Unfortunately, it did not provide a specific corresponding exclusion from Arizona’s tax on proceeds from renting tangible personal property.

To its credit, in one of its rules, the Department put persons engaged in the business of renting tangible personal property on notice that they may be subject to tax on a variety of services, including “installation, labor, insurance, maintenance, repairs, pick-up, delivery, assembly, set-up, personal property taxes and penalty fees even if these charges are billed as separate items, unless a specific statutory exemption, exclusion or deduction applies.”

by James G. Busby, Jr., CPA

James G. Busby, Jr., CPA, is a state and local tax attorney at The Cavanagh Law Firm. Busby previously worked in the SALT departments at Arthur Andersen and Deloitte & Touche. Before entering private practice, Busby was in charge of all transaction privilege (sales) tax audits at the Arizona Department of Revenue.

If you have any questions, please contact the author. He can be reached at (602) 322-4146 or JBusby@CavanaghLaw.com.

The Taxation of Inconsequential Transfers of Tangible Personal Property While there is an exclusion from Arizona’s sales tax on persons engaged in the business of selling tangible personal property for “professional or personal service occupations or businesses that involve transfers of tangible personal property only as inconsequential elements,” there is not a specific, comparable statutory exclusion from Arizona’s sales tax on persons engaged in the business of renting tangible personal property.

Worse yet, even though the Department never issued an administrative rule or transaction privilege tax ruling to alert otherwise nontaxable service businesses that their gross receipts may be subject to Arizona’s sales tax on proceeds from

JUNE 2017 AZ CPA

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602.631.2300 | 800.231.1363

renting tangible personal property if any portion of their business involves letting their customers use something that the Department considers tangible personal property, the Department is now taking that position.

For example, the Department’s director has ruled that companies that provide their customers with online access to a database containing articles and notes that their research analysts wrote are subject to Arizona’s sales tax on rentals of tangible personal property.

Likewise, the Department issued private taxpayer rulings indicating that online computer back-up service businesses and cloud storage businesses are subject to Arizona’s sales tax on rentals of tangible personal property. The Department even ruled that a company that permitted its customers to use its online “software tools” to create websites that the company hosted was subject to Arizona’s sales tax as if it had rented tangible personal property to them.

The Department’s Expansive View of Tangible Personal Property Like many other states, Arizona defines tangible personal property as “personal property which may be seen, weighed, measured, felt or touched or is in any other manner perceptible to the senses.” Despite the definition’s emphasis on things that are perceptible to human senses, the Department applies an extremely broad interpretation that encompasses many forms of intellectual property that most people would not ordinarily consider as tangible personal property.

As a result, service businesses are often surprised not only by the key statutory differences described above, but also to learn that the Department believes that their business involves rentals of tangible personal property in the first place — such as the online research database, online computer back-up, cloud storage and online website building and hosting businesses referred to above. n

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AZ CPA JUNE 2017

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The

Leadership ACT for Building Trust

by Jason McKeever Trust is the foundation that gets us through our days. When we drop off our children at day care, we trust they are in good hands. When we stop for coffee, we trust the barista to make our brew the way we like it each time. When we drive, we trust the other drivers to stay in their lanes. When trust is broken, we begin to look for a new day care facility, a new barista, and we start taking the train.

Trust is essential in all relationships, but too often we forget the importance of building trust in leadership. Sometimes we get complacent in our roles and neglect to reinforce the consistent behaviors that build trust with those we lead.

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As we examine the basic skills required to build and maintain trust, it becomes apparent that there are three common pillars we most employ: Authenticity, Consistency and Transparency (ACT).

When we demonstrate these three pillars daily, our teams know they can trust us. And when they trust us, our teams are stronger, more productive and engaged. Think about your interactions with colleagues, customers and other people. How well are you demonstrating these pillars?

How would your relationships benefit if you made changes to any or all of these areas when working with others?

Authenticity i s a b o u t b e i n g genuine. Whenever we try to project a false image of ourselves, people can tell. Is your team seeing the “real you”?

The more real you are with your team, the easier it will be for them to trust you. Amateur leaders have the false impression that they must appear to be perfect to their team and inadvertently damage trust because they are not being real. No one is perfect, and great leaders don’t try to hide their faults.

They try to improve upon them, but not in secret. They admit their mistakes and weaknesses and make the most of their strengths. Knowing your weaknesses, and not being afraid to get help from team members who excels in those areas, is an important means of establishing trust and building a strong team. Your team members will appreciate the opportunities to shine, and you will appreciate the work getting done.

Consistency is about reliability.

It’s about keeping promises. It’s about the quality of our work. How you behave, over time, says a lot about who you are, and the value that you place on those around you. When we consistently return calls and emails promptly, when the quality of our work is at a consistently high level, and when our team can count on us to reliably support them and their work, we build trust. Too often we neglect those on our team because

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Authenticity Consistency Transparency

we are busy with client or customer work, trusting that they understand the importance of what we are doing.

But if we consistently neglect them, they will quickly lose trust in us, and their work performance will suffer. It is important to demonstrate the value we place in our team by consistently demonstrating and treating them with the same level of respect we give our clients and customers. It’s an investment that pays us back many times in productivity and retention.

Transparency is about being open. What are you hiding? Are you withholding key pieces of information from your team or customers?

Knowledge is power, and sometimes leaders can get greedy and can withhold information in an effort to reinforce who is the boss. Certainly, there are times when it is necessary to withhold sensitive business information, but too often leaders go to extremes in withholding information that it ends up making it difficult for their team to get their work done. If you are finding it difficult to trust a team member with important information, be open with them about that and develop a plan to rebuild mutual trust.

Transparency allows individuals to quickly learn more about each other and allows relationships to build to

allow for stronger teams, more efficient problem solving and a greater level of performance amongst all members.

Building and maintaining trust is a skill every leader needs to embrace. It is never too late to start demonstrating a u t h e n t i c i t y, c o n s i s t e n c y a n d transparency within your organization.

If you’ve run away from these three pillars until now, it may take your team a while to adjust. But be patient. If you apply these principles consistently over time, they will learn to trust you and the rewards to you and your organization will be well worth it. n Jason McKeever is director of training and development with Eide Bailly, LLP. He can be reached at jmckeever@eidebailly. com.

Jason McKeever will be speaking on this topic at the Not-for-Profit Conference on June 28.

Uniform Guidance A Post Implementation Recap

by Randall L. Ottaway, CPA Those of you who either receive or audit federally funded awards have had the opportunity to become fully immersed in the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Issuance of the Uniform Guidance dusted off the rules and regulations of nearly two decades of trials, tribulations and experiences encountered by auditees and auditors. It also provides a refreshed look at what constitutes federally funded expenditures worthy of audit consideration within a more organized uniform framework of requirements. Regardless of the underlying nature of the federal award recipient, whether for a state or local government, hospital, higher education or nonprofit organizations, the uniform guidance applies across the board from which all participants are reading from the same script. With more than two years under our belt, now is a good time for a period of post-implementation introspection on how the “SuperCircular� has lived up to its name.

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Worthy of modern technology, the Uniform Guidance has been electronically codified with well-organized subparts starting with a list of acronyms and definitions, general provisions, pre-federal award requirements, post-federal award requirements, cost principles, and audit requirements. Accordingly, the reader can easily navigate the Uniform Guidance and drill down to the applicable regulation with precision and efficiency.

One of the most refreshing aspects of the Uniform Guidance was the consolidation and elimination of eight separate OMB Circulars. No more trying to clarify the differences between circulars or evaluating the applicability of a myriad of circulars to individual recipient circumstances.

Per the pre-issuance blog on the OMB’s webpage, the objectives of the Uniform Guidance include: • Changing the focus from compliance to performance • Eliminate conflicting and duplication of cost principles • P r o v i d e c o n s i s t e n t a n d transparent treatment of costs

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Improve and strengthen federal agency oversight • Improve administration of federal awards from the application through the close-out process • Provide better identification of risks associated with federal awards • Target the audit for risk of fraud or waste In 2013, it was estimated that approximately 5,000 nonfederal entities would be relieved of the single audit requirements due to raising the annual federal expenditure threshold to $750,000. With $600 billion dollars in federal grants awarded annually, it was time to focus on the dollars expended and provide some relief to the small recipients. An overarching objective of the OMB and federal agencies was consideration for how grant policies could be reformed to increase the efficiency and effectiveness of federal programs and eliminate unnecessary and duplicative requirements by focusing on areas that emphasize achieving better outcomes at a lower cost.

The Uniform Guidance also provides relief to recipients in that they can elect to charge a de minimis indirect cost rate of 10 percent of modified total direct costs if they choose not to apply indirect costs under either the simplified or direct allocation methods. This is especially useful for not-for-profits who may not have had a federally negotiated indirect cost rates.

In addition, there are several reporting changes affecting non-federal entities under the Uniform Guidance including: • Subrecipient amount must now be shown on the face of the schedule of expenditures of federal awards (SEFA) including t h e p a s s - t h ro u g h e n t i t y ’s identifier number • Auditees may list amounts expended separately by year for multiple federal award years • L o a n a m o u n t s f r o m t h e beginning of year plus any new additions must be shown on the face of the SEFA (for loans in which the federal government

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ASCPA Conferences imposes continuing compliance requirements) and disclosure in the notes to the SEFA of the outstanding loan balances at the end of the year • Notes to the SEFA must include a disclosure as to whether the nonfederal entity elected to use the 10 percent de minimis cost rate • Corrective action plan must include both financial statement and compliance findings and anticipated completion date Another change is that the issuance deadline for the data collection form (Form SF-SAC) has been extended under the Uniform Guidance to the next business day when the deadline falls on a weekend or holiday. Federal agencies can no longer grant a waiver of the deadline and the consequences to the auditee for not meeting the deadline is a material weakness in compliance.

Criteria for a low-risk auditee had changes which require the auditee to meet all of the following conditions for each of the preceding two audit periods: • Single audits on an annual basis (i.e. no biennial audits) • Unmodified auditor’s opinion on the financial statements or in relation to the SEFA • No material weaknesses identified in the report under GAGAS (Yellow Book) • Auditor did not report a substantial doubt as to the entity’s ability to continue as a going concern • No audit findings of Type A federal programs for the preceding two audit periods for (a) material weaknesses or modified opinion in the report on internal control for major programs and (b) no known or likely questioned costs The Uniform Guidance also provides auditors with changes, including: • $750,000 minimum threshold requiring a single audit (up from $500,000).

• $750,000 (or three percent of total federal expenditures) for Type A programs (up from $300,000).

Not-for-Profit Conference — June 28 Black Canyon Conference Center Special Thanks to Platinum Sponsor: Eide Bailly LLP Keynotes: Mistakes Were Made – Heads Rolled: The Responsibilities of the Governing Board David L. Cotton, Cotton & Company, LLP Nonprofits: How Goodness Interferes With Ethics Dr. Marianne Jennings, ASU

First Concurrent Sessions: Special Events – Differences Between GAAP and Form 990 Reporting Colette Kamps, Henry+Horne Nonprofit Accounting 101: A Primer Katie Thomas, Diamond J Accounting, LLC Has Trust Become the New Core of Leadership?

Jason McKeever, Eide Bailly LLP

Second Concurrent Sessions: Interstate & Multi-State Taxing Issues Dr. Laura Robichaud, Eide Bailly LLP Hot Topics: Including Group Audit, Peer Review & Standards Changes Rob Leslie, Eide Bailly LLP Are You Ready for Restatement? – 403(b) Plan Document Updates for 501(c)(3) Organizations Sylvia DeSantiago, DeSantiago Pension Consulting, LLC

Third Concurrent Sessions: UBIT 101: Where is Your Unrelated Business Income Hidden?

Amy O’Loughlin, Denise Foshe and Kristen Bass, CBIZ MHM, LLC ASU 101: Overview of Recently Issued ASUs that Could or Would Affect Not-For-Profit Organizations Rob Leslie, Eide Bailly LLP 5 Easy Ways to Let an FLSA Lawyer Ruin Your Organization Don P. Johnsen, Gallagher & Kennedy

Fourth Concurrent Sessions: Form 990 Quiz Show Jackie Eckman, CliftonLarsonAllen LLP Uniform Guidance: Two Perspectives Levi Gibson, Pinal County & Jay Parke, Walker & Armstrong, LLP Board Transparency Sarah Zelhart, Make-A-Wish America

Learn more at www.ascpa.com/conferences JUNE 2017 AZ CPA

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Type A program determination no longer considers inherent risk. $187,500 (or 25 percent of Type A expenditure threshold) for Type B programs (up from a minimum of $100,000).

A need to sufficiently document basis for determining the classification of a program as low versus high-risk.

Lowered the minimum “percentage of total expenditures test” to 20 percent for low-risk auditees and 40 percent highrisk auditees. These percentages were previously 25 percent and 50 percent, respectively.

Must classify a program as a Type A high-risk if in the most recent period the auditor issued a modified opinion (i.e. material weakness) or there were known questioned costs exceeding five percent of the total of that program’s expenditures Raised the threshold to $25,000

AZ CPA JUNE 2017

for known or likely questioned cost of an audited major program or known questions costs of a non-audited federal program (up from $10,000).

• Summary schedule of prior audit findings must include both financial statement and compliance findings As for auditors’ compliance testing of major programs, two general requirements under OMB Circular A-133 consisting of the prevailing wage regulations under the Davis-Bacon Act and real property acquisition and relocation assistance were removed from the compliance supplement.

However, certain programs retained wage-rate requirements in the special tests and provisions section.

For auditees, the super-circular has been super challenging with the additional work necessary to update policies and procedures to comply with the revised procurement requirements and cost principles. However, on a positive note, the level of documentation

for personnel time and effort reporting requirements has become more flexible.

So looking back, did the Uniform Guidance achieve its objectives? There certainly has been a significant investment by auditors and auditees to learn and implement the new requirements.

However, now empowered with this knowledge, auditees, auditors and regulators can move forward with a more modernized accounting of federal awards, increased efficiency and an improved audit process. n Randall L. Ottaway, CPA, is an audit partner with Walker & Armstrong LLP. He is an ASCPA member. Contact him at rlottaway@wa-cpas.com.

Learn more about Uniform Guidance at the Not-for-Profit Conference on June 28.

Successful Financial Reporting A Primer for Serving on NonProfit Boards

by Sarah C. Zelhart, CPA When a nonprofit fails, the most common question is, “Where was the board?”

A nonprofit board of directors has responsibility for the governance of a nonprofit, including the financial well-being.

Although some boards have fundraising elements, the primary role of the board of directors is governance. The board is responsible for: • Hiring the CEO • Monitoring the CEO’s performance • Creating a vision and direction for the nonprofit • Setting goals • Developing policies and procedures • Ensuring sufficient financial resources • Safeguarding the organization and its mission.

These duties are varied and require broad financial, operational and economic information be made available. Although many resources discuss a nonprofit financial organization’s responsibility to the public, far less discuss how to make this information available to the governing body of a nonprofit.

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Boards must not only receive relevant information, they must be educated to accept that information, receive it regularly and in a consistent manner.

Most of all, board members should receive the information within the prism of relevant operational key indicators.

Board Orientation To quote “The Sound of Music,” “Let’s start at the very beginning; it’s a very good place to start.” As CPAs, we first seek an understanding of the business before evaluating a financial statement or conducting an audit. The same should be true for board members.

Prior to being offered a seat on the board, board members and a nonprofit organization should engage in mutual vetting. Touring the organization, meeting with key leadership and learning about the nonprofit’s mission firsthand will provide the potential board member with a better understanding of the organization they are agreeing to help govern.

A formal board orientation should be held for all board members. Board orientation should include answering questions such as: What is the mission?

How is it executed? What is unique about your organization? What are your sources of funding? What are the major sources of expenses?

Providing a basic understanding of the organization will allow the board members to ask better questions as they attend board meetings and are asked to vote on initiatives and budgets.

Frequency Financial information should be provided throughout the year. The financial information should be a routine portion of the board agenda.

Outside auditors should present the financial statements in detail to the board annually. The audit presentation may be likened to an employee’s annual review; there should be no surprises when you receive the annual evaluation. Any issues or concerns should be brought to the board’s attention as they become available to the leadership of the organization.

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With the use of internet-based board portals, financial information and key performance indicators may be made available on a monthly basis even in the absence of a board meeting. This also allows board members to regularly review financials and compare the data from period to period.

Consistency Consistency is one of the basic tenets of accounting. Providing consistent financial statements allow for comparability. Non-profits, at a minimum, should present a balance sheet and income statement.

The format makes a difference. Some organizations choose to present in summary form. An organization may also choose to present in the same form as the audited financial statements.

Whatever format is chosen, the format should be relevant to decision making and should be similarly presented so the readers can easily move from month to month. Segmented financial statements by service segments or areas of focus provide better information.

Comparability Financial data is only useful if it is understandable. Financial statements should be presented in context. Relevant data such as the budget or prior year, and preferably both, should be included. Providing this information allows board members to ask questions about positive and negative fluctuations. Ideally, the financial team would address those fluctuations as part of their prepared presentation.

Be Flexible Although consistency is important, it is also important to reevaluate the format every few years. The nonprofit landscape is fluid. Funding sources, especially government funding, may change with each new administration.

When financial statement presentations are not changed for years, you may run the risk of becoming the “Charlie Brown adult” and all the board members will hear is “wonk, wonk, wonk.”

The financial team should regularly ask themselves the following questions: • Is the format in which you are providing information still relevant?

• Does the chart of accounts need to be reviewed or revised?

• Do we need to add or delete a line of business?

Regular reviews of the organization’s needs should be conducted in concert with the finance committee. This will ensure that the financial statements are relevant to the conduct of business and easily understandable.

Use Multiple Presentation Methods Your board should be composed of a variety of different personalities, educations and professions. That diversity should be represented in how you present the financial statements as well. In addition to a balance sheet and income statement, the use of a financial narrative can be helpful.

In this age of readily available information on all topics, board members expect more than a dry financial presentation.

A narrative can be arranged by segments of the financial statements (assets, liabilities, revenue segments or expense segments). A narrative includes any unusual event, perhaps a delay in funding, which changes the timing of revenue while service levels are maintained.

Consider Visual Methods In this age of readily available information on all topics, board members expect more than a dry financial presentation. Board members want to understand the relationship between

operational and financial data.

Dashboards have become a popular tool. Dashboards may provide a visual representation of progress toward a goal, financial indicators or service levels. A successful dashboard conveys in one page the key indicators for an organization.

So why doesn’t every organization have a dashboard? Because selecting the indicators for a dashboard is difficult and may be time consuming. The goal is to provide relevant information without overwhelming the readers. A strong dashboard would have five to eight

Your Corporate Clients May Qualify for a 100% Arizona Income Tax Credit!

C & S corps and insurance companies that pay a premium tax can help improve educational outcomes for k-12 students by redirecting their AZ income tax liability to Brophy Community Foundation.

• Tuition aid based solely on verified financial need • Average family income = $35,279 • BCF assists students attending 35 schools statewide • Low operating costs - average 5%

To start the process, contact Dawn Kennedy before July 1st at dkennedy@brophyprep.org or 602-264-5291 x6521 JUNE 2017 AZ CPA

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ASCPA Conferences

key indicators that provide a snapshot of the overall health and progress of the organization.

Where can you turn for help? Thanks to the abundance of information on the internet, examples of dashboards are readily available. The website, BoardSource, has also published two excellent resources written by Lawrence Butler, “The Nonprofit Dashboard: A Tool for Tracking Progress” and “The Nonprofit Dashboard: Using Metrics to Drive Mission Support.”

Have a Detailed Budget Approval Process

Corporate Finance Conference August 23 Desert Willow Conference Center

Special thanks to Platinum Sponsor: Bank of Arizona Value Through Collaboration – The Art of Relationship Management Peter Margaritis, The Accidental Accountant Economic Outlook: The State of Greater Phoenix Brad Smidt, GPEC Preparing for an Audit Allan Klose, CBIZ MHM, LLC Negotiate a Contract Like a Boss Dan Siburg, Siburg Company, LLC and Brian J. Burt, Snell & Wilmer L.L.P. White Collar Crime Special Agent, FBI Anatomy of a Cyberattack Michael Cocanower, IT Synergy

Learn more at www.ascpa.com/conferences 20

AZ CPA JUNE 2017

The budget process should be used to drive accountability and comparability.

The presented budget should include key assumptions and changes from the prior year. These should include realistic goals for the organization rather than “pie in the sky.” Board members should require the budget be segmented by lines of business or lines of service.

Many nonprofits strive for a zerobased budget. We recommend board members ask questions during the budgeting process about any large fluctuations either positive or negative. Be especially cautious about large increases in fundraising revenue.

Conclusion Overall, nonprofit financial information should be routine, relevant and easily understandable by not just financial professionals but board members with other backgrounds. By routinely evaluating and choosing supplemental methods of presentation, board members will be able to evaluate and perform their governance responsibilities with confidence. n Sarah C. Zelhart, CPA, is director of compliance for Make-A-Wish America and an ASCPA member. She can be reached at szelhart@wish.org.

Sarah Zelhart will talk about Board Transparency at the Not-for-Profit Conference on June 28.

AZ CPA Quick Quiz You’ve Read It, Now Get Credit Take this quiz online or submit this hard copy on AZ CPA content.

Receive a score of 70 percent or more and earn one hour of CPE credit in specialized knowledge. It’s that easy!

Fees Members: $25 Nonmembers: $40 Online Access Go to www.ascpa.com/QuickQuiz to access links to all active quizzes. Purchase quiz and the quiz link and password will be emailed to you. Your results will be sent immediately after completing, and certificates are emailed within two business days.

Hard Copy Please select one answer for each question. Fill out registration/payment information below and mail or fax to the Society office. Quiz results and certificates will be emailed to the address provided on the registration form. *This quiz will be available until June, 2018. Please note that users have three attempts to pass the quiz with at least a 70 percent score.

June 2017 Issue of AZ CPA* 1. There is NO exclusion from Arizona’s sales tax on persons engaged in the business of: m Transferring tangible personal property m Renting tangible personal property m Selling tangible personal property 2. All of the following are subject to Arizona’s sales tax on rentals of tangible personal property except: m Real estate m Cloud storage businesses m Company hosted online software tools 3. Arizona defines tangible personal property as “personal property which may be seen, weighed, measured, felt or touched or is in any other manner perceptible to the senses.” m True m False 4. Which is not one of the three common pillars to building trust (ACT):

m Authenticity m Consistency m Tenacity 5. Transparency allows relationships to build to: m Create weaker teams m Be more efficient at problem solving m Maintain the level of performance amongst members

6. The Uniform Guidance consolidated and eliminated how many separate OMB Circulars? m 8 m 10 m 12

7. Uniform Guidance provides relief to recipients of 10 percent of modified total direct costs if they: m Choose not to apply indirect costs under the simplified allocation method m Choose not to apply indirect costs under the direct allocation method m Choose not to apply indirect costs under either method 8. The primary goal of the board of directors is: m Collecting titles m Governance m Fundraising 9. A successful “Dashboard” conveys: m Hundreds of key indicators for an organization m Financial charts m One page of key indicators for an organization 10. Board members and organizations should engage in mutual vetting by: m Touring the organization m Jumping right into the role m Meeting with random employees

Quick Quiz Registration Name: ____________________________________________________ Email:_____________________________________________________ Telephone: _________________________________________________

Payment

m Member: $25 m Nonmember: $40 Checks: Please make payable to: The Arizona Society of CPAs Credit Card:

m Visa m MasterCard m American Express

Credit Card #: _______________________________________________ Expiration Date: _____________________________________________ Name on Card. _____________________________________________ Mail to: ASCPA, 4801 E. Washington St. Suite 180, Phoenix, AZ 85034-2040; fax to ((602) 324-6045 scan and send to ASCPACPE@ascpa.com.

JUNE 2017 AZ CPA

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Classifieds Business Opportunities/ Practices for Sale LOCAL CPA PRACTICE FOR SALE —Local CPA who is retiring seeks to sell a well-established tax practice on the east side of Tucson located in a busy shopping plaza. The practice has a very loyal and diverse client base. This practice has experienced significant growth every year and has a great potential for additional growth in a rapidly expanding area of Tucson. Owner will assist in the transition. Call or email: (520) 574-0829 or denise@mstaxtucson.com.

Website: http://www.mstaxtucson.com.

O R O VA L L E Y / M A R A N A C PA PRACTICE — Oro Valley sole practitioner CPA is seeking to buy a comparable practice in Oro Valley, Marana or NW Tucson. Our practice is personal tax preparation/planning as well as fee-only financial planning and investment management. We would also consider a merger partner or an office sharing arrangement. Our firm is a Registered Investment Adviser and we are focusing our growth in that area.

Contact John Daniels at (520) 572-8774 or john@johndanielscpa.com. Website: http://johndanielscpa.com.

TUCSON CPA TAX PRACTICE seeks succession plan with new partner — A two partner firm of over $1 million seeks a tax partner or manager to buy out partners over time. Beneficial if interested person has an existing practice to merge in. Over 30 years, the practice is highly profitable with a strong concentration in business and individual tax preparation and consulting. Firm would also consider merger with equal or larger firm. Firm has a 90-day lease cancellation notice. Please contact CPAfirm3@ gmail.com.

Employment AUDITOR/CPA — Schutte & Hilgendorf CPAs is a leading local public accounting firm in the beautiful pines of Prescott, Arizona, specializing in

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AZ CPA JUNE 2017

auditing, accounting, and tax solutions for individuals, small businesses, nonprofit organizations, and homeowners’ associations throughout Northern Arizona. We are looking for a well-rounded, accountant/CPA (or candidate) with 2-3 years’ experience in audit planning, fieldwork, and financial reporting. A strong candidate will possess proven job management skills and be an excellent communicator. Team member will also participate in tax preparation, accounting, and special projects. Full Time with benefits. Send resumes to jobs@prescottaccountants.com

ties as the company grows. Education: Degree in Accounting; or a minimum of 5 years’ experience in Accounting/Bookkeeping. Please Contact Bob Crompton at: bob@jupiterresearch.com.

UNIVERSITY OF ARIZONA — BUSINESS MANAGER — The University of Arizona Cancer Center seeks qualified applicants for the position of Business Manager, Senior.

This position will be responsible for independently managing and controlling accounting, budgeting, auditing and other financial or related functions to ensure the financial integrity of the TAX MANAGER AND TAX STAFF — University of Arizona Cancer Center.

Eight-person Tucson CPA firm, has Tax This position will perform professional Manager and Tax Staff positions open accounting activities for specialized, for CPAs with a minimum of five years complex, and functional areas of the of recent CPA firm experience with University of Arizona Cancer Center. partnership potential. Proven sales and The University of Arizona Cancer Center marketing skills are highly desirable. (UACC) is dedicated to preventing and We offer highly competitive salaries curing cancer. The UACC is the only and comprehensive benefits, including NCI-designated comprehensive cancer group health insurance, 401(k) with center in Arizona. https://uacareers.com/ company 4% contribution, eight paid postings/16948. holidays, paid sick time and vacation, Office Space and complete reimbursement of all CPA related expenses. Please apply for OFFICE SPACE AVAILABLE — 16th the Tax Manager or Tax Staff opporStreet & Glendale Ave. Large Executive tunity today, by sending your resume office space in our professional suite. and salary requirements to cpafirm3@ Share space with other CPAs, with access gmail.com. to all of the typical amenities {conference room, copy room, file room} and posRAPIDLY GROWING COMPANY IN sible shared services. A staff cubicle is PHOENIX, AZ SEEKS FULL-TIME also available. Call or email Ira Feldman ENTRY LEVEL COMPTROLLER — for more information. (602) 850-5101 or Jupiter Research LLC. Qualifications: • ira@felco.biz. Website: http://www.felco.biz Experienced in QuickBooks Enterprise desktop version• Experienced in Excel Beautiful North Peoria Lospreadsheets • End of month reconcation — This is it! Premier Office ciliations and preparation of monthly development located by Happy Valleyfinancial statements • Ability to comLake Pleasant intersection, in the heart municate with outside CPA for the anof thriving North Peoria. This 2,797 nual tax return preparation • Familiar sq.ft. suite has the highest quality wood with Adjusting Journal Entries • Ability trim and finishes giving it Biltmore area to close books monthly and prepare quality. It is the last suite in a 98 percent financial statements monthly reportoccupied highly professional center. ing to COO • Knowledge of inventory Contact: Tevis (623) 707-5280 or email: and management of inventory; great tevis@essex-companies.com. attention to detail is required • Ability to analyze data and work with Chief Operating Officer on a regular basis • For information about classified ads, visit www.ascpa.com.

Desire to increase level of responsibili-

ASCPA Conferences Expert Witness Tips – Be On Your Game From Engagement to Testifying Jonathan Ibsen, Canterbury Law Group Starting and Growing a Forensic Practice Donald R. Bays, Henry+Horne, and Joe Epps, Epps Forensic Consulting PLLC

Forensic & Litigation Services Conference September 7 ASCPA Learning Center or Via Webcast War Stories: Tales From Experts Who Have Survived the Front Lines Tim D. Tribe, REDW, Mark R. Hughes, Gorman Consulting Group, Josephine Giordano, Kotzin Valuation Partners, and Donald R. Bays, Henry+Horne The Behavioral Analysis Interview: Eliminating the Innocent & Identifying the Guilty Dennis Nebrich, Arizona Attorney General’s Office

Business Valuation Conference September 8 8 a.m. to noon

ASCPA Learning Center or Via Webcast DLOM Guide & Toolkit: A New Way to Look at DLOM Calculations Jim Alerding, Alerding Consulting LLC

Forensic Accountants: An Essential Part of the Bankruptcy Team Bryan Albue, Sherman & Howard LLC, and Jeff Sumpter, CBIZ Valuation Group, LLC

What’s Behind the Curtain of the Market Approach That Can Hurt You Frank Pankow, Pankow Company, P.C., and Lance Meilech, IBG Fox & Fin Financial Group, LC

The Marital Residence — Community, Separate or Both David Cantor, Cantor Forensic Accounting PLLC

Valuation vs. Calculation: How They Fit in Your Practice Ed Dupke, Dupke Consulting, LLC

Memory Dynamics — Transform Your Memory from a Liability Into Your Most Powerful Asset Sean O’Neil, Memory Dynamics FBI Perspective: Current Cyber Threats and Trends Martin Hellmer, FBI

Never-Ending Story: The Life and Times of the Financial Expert Kevin Yeanoplos, Brueggeman and Johnson Yeanoplos PC

Learn more at www.ascpa.com/ conferences

JUNE 2017 AZ CPA

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LEAD. DELIVER. TRANSFORM. 1-877-384-BLUE | Or, call your broker. | azblue.com/brand D13591B 05/16

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