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AZ CPA June 2018

National and Local

Economic Outlook A Guide to Nonprofit Fiscal Sustainability

Creative Financing Alternatives

The Arizona Society of Certified Public Accountants y


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

Behind the Scenes at the Arizona Lottery July 31


Cindie Hubiak Patricia Gannon Heidi Frei

Join your fellow CPAs as the ASCPA goes behind the scenes at the Arizona Lottery! We will have an opportunity to tour the lottery office and hear interesting presentations from a few members of their team, including the Deputy Director of Operations, Biju Kamaleswaran. This an exciting and rare opportunity to visit and learn more about the inner workings of the Arizona Lottery. Lunch will be provided.

Board of Directors Chair Mike Allen Chair-Elect Jared Van Arsdale Secretary/Treasurer Ginny DeSanto Directors Rachael Bertrandt Tom Duensing Paul Evans Kristen French Alan Gold Aaron Grant Tim Hansen Vanessa Makridis Karen McCloskey Alice Pope Sami Raynes-Houseknecht Nikki Vogt

Location: Arizona Lottery, 4740 E University Dr, Phoenix, AZ

Immediate Past Chair Molly Montgomery


AICPA Council Members

11:30 a.m. – 1:30 p.m. Recommended for 1.5 hour of CPE

Register at MAP_Survey_Flyer_180423_01.pdf



11:26 AM

Chapter Presidents Southern Chapter

Rob Dubberly Greg Nelson Cathy Kinzer

Northern Chapter James Shankland Southwest Chapter Helen Greenwell North-Central Chapter Ellen Carpenter









Is Your Firm as Profitable as Others Its Size? Be in the know in less time with the newly redesigned and streamlined 2018 AICPA PCPS/ National MAP Survey The CPA profession’s largest benchmarking tool is now open. 4


AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends to the accounting profession. It is distributed 10 times a year as a regular service to ASCPA members. 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

Volume 34 Number 5


June 2018

Features Annual Meeting & Awards 8 Luncheon

See pictures from this year’s event with keynote speaker Kimberly Ellison-Taylor and Life Member Layne Simmons.


National and Local Economic Outlook Despite potential headwinds, the national and local economic outlook remains positive. by Rick Merritt


Columns & Departments Chair’s Message by Michael T. Allen, CPA


Member News


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


Board Minute Highlights Quick Quiz

20 21

Classifieds 22

A Guide to Nonprofit Fiscal Sustainability 10 ways CPAs can help ensure the long-term health of nonprofits. by Michael F. Cade, CPA (in PA), CGMA


Creative Financing Alternatives

New markets tax credits can open doors and facilitate growth. by Jeff Friesen

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



ASCPA Chair’s Message

Better Together I looked around the other day and our children were adults. How in the world did that happen? Our oldest son, Nick, is married and progressing professionally while he engages in several entrepreneurial ventures. Our daughter, Sammy, recently moved to New York City to chase her dream of photography and graphic design. Our youngest son, Kyle, finished college and is pursuing his passion to play professional football.

by Michael T. Allen, CPA

The ASCPA creates a tremendous forum for our future leaders to share their values and learn how to apply them to advance their careers and the profession.

I see in our children a spirit to live life to its fullest while working hard to follow their dreams. This is different from the way my generation was raised. Our next generation of leaders seems to embrace the idea that a balanced life means blending a strong work ethic with doing something you love. As I reflect on our children’s efforts, and those of our young team members at my firm, REDW, I am excited about the future. The young people in my life have shown me that they have a core set of values that direct how they live their everyday lives. I have observed that the most successful of these young people are authentic about their beliefs in all that they do. REDW has values that our youngest team members find easy to embrace: We do what is right; We are better together; We wow; We dream big; and We lead the way. The ASCPA creates a tremendous forum for our future leaders to share their values and learn how to apply them to advance their careers and the profession. Our Emerging Leaders Series, our various networking events, and our Connect site are just a few examples of how your state society of CPAs is working to provide venues for our young members to interact. I encourage each of you to participate in these activities and support your own team members as they engage in the profession and with their peers. As I write this article, our son Kyle, along with a few hundred other young men, is hoping his name will be called in the NFL draft. Kyle would be the first to tell you that he would not have this opportunity if it were not for all the support around him. He knows we are all “better together.” With another tax season behind us, I encourage our members to take the time to reflect on their core values. Thank you for all you do to support our great profession and your state society of CPAs. n (Editor’s note: Congratulations to Mike’s son Kyle who is now a member of the Carolina Panthers!)



Member News Patricia J. Elder, CPA, MBA, was promoted to chief development officer of planned giving at Banner Health Foundation. Schmidt Westergard & Company, PLLC celebrates its 50th anniversary this year. David W. Neal, CPA, is the vice president of finance and administration for the Southwest College of Naturopathic Medicine. •••

To download a list of the 2018 Arizona AICPA Committee appointments, go to:

ASCPA Visits Alhambra High School to Talk Accounting The ASCPA visited Alhambra High School to share with two accounting classes the benefits of becoming a CPA. Members Julia Allen Miessner from BeachFleischman and Marco A. Gallardo from the Arizona Office of the Auditor General motivated students by revealing inspirational stories about their professional experience. South Mountain Community College student, Adrian Trujillo, led the fun accounting activities and shared his college experience as an accounting student. This visit helped Alhambra students discover the possibilities available to them as a future CPA.



ASCPA Annual Meeting & Awards Luncheon ASCPA members and guests attended the 2018 ASCPA Annual Meeting and Awards Luncheon held at the Biltmore Resort on May 16. The event featured keynote speaker AICPA Past Chair Kimberly Ellison-Taylor, and honored ASCPA Life Member Layne Simmons and Excellence in Teaching Award recipient Heather Altman.

Layne Simmons

Mike Allen, Kimberly Ellison-Taylor and Molly Montgomery

Molly Montgomery, Kimberly Ellison-Taylor, Cindie Hubiak and Mike Allen

Cindie Hubiak

Heather Altman



Kimberly Ellison-Taylor

Past Chairs and Life Members

A Dash of SALT

Wayfair May Have a Minimal Effect on Municipal Taxes in Arizona In this month’s state and local tax (SALT) column, Busby posits that even if the Wayfair decision permits economic nexus and all 91 Arizona municipalities adopt $100,000 economic nexus thresholds like South Dakota’s, most remote vendors still may not have to collect and remit sales taxes for most Arizona municipalities. In South Dakota v. Wayfair, Inc., the Supreme Court may rock the state and local tax world by rejecting Quill’s requirement that vendors must have physical presence in a state before the state may require them to collect and remit sales taxes. If the court also approves South Dakota’s $100,000 economic nexus standard, other states are likely to pass similar laws requiring remote vendors to collect and remit sales taxes from their customers if they satisfy similar economic nexus thresholds. However, what impact, if any, would such changes have on municipal sales tax collection responsibilities in Arizona, where 91 municipalities impose sales taxes under their own municipal tax codes?

Municipal Taxes in Arizona are Not Imposed by State Statute Of the 45 states that collect sales taxes, Arizona is one of just four that permits its municipalities to impose sales taxes under their own municipal tax codes. The other 41 states impose municipal sales taxes under their state tax codes and distribute a portion of the taxes they collect to their municipalities. Because municipal sales taxes in most other states are imposed under state tax codes, when those states have sufficient nexus to collect sales taxes from transactions in interstate commerce, the municipalities in those states receive a portion of the taxes the state collects.

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

Separate Municipal Nexus Determinations in Arizona However, in Arizona, municipalities frequently may not be entitled to taxes on proceeds from remote vendors even when the state is entitled to taxes on the same transactions. Such situations arise when a remote vendor establishes nexus with Arizona and one or more municipalities in the state, but not with all municipalities in the state. For example, assume that a remote vendor establishes nexus with Arizona by sending employees, or engaging an unrelated third party, to install products it sold to customers in Tucson over several days, and that the vendor does not own or lease property or have another form of a physical presence in Arizona.



By sending employees or agents to Tucson to install products for customers over several days, the remote vendor establishes nexus with the State of Arizona and the City of Tucson. So, the state could require the vendor to file sales tax returns and pay state and county taxes on those transactions and any subsequent transactions with customers in Arizona during the same calendar year (even if the subsequent transactions are online transactions and do not involve installations or other physical presence in Arizona by the vendor or its agents). Similarly, the City of Tucson could require the vendor to do the same thing — but only for transactions with customers located in Tucson. However, under this scenario, the vendor only established nexus with the state and with Tucson, so other municipalities in Arizona could not require the vendor to pay sales taxes on proceeds from subsequent transactions



with customers located within their municipal limits.

Arizona Municipal Tax Collection Responsibilities in a Post-Wayfair World Even if the Wayfair decision permits economic nexus and each of Arizona’s 91 municipalities amends its tax code to require vendors to collect and remit taxes if they sell at least $100,000 worth of products to customers within their municipal limits, most remote vendors probably still would not trigger nexus with most Arizona municipalities. Rather, in a post-Wayfair world, vendor sales volumes and municipal populations may make all the difference. For example, only two Arizona cities, Phoenix and Tucson, are home to more than 500,000 people. Eight Arizona cities house 100,000 to 500,000 people. Thirtyfive Arizona cities are home to 10,000

to 100,000 people, and 46 Arizona municipalities have less than 10,000 people. Given the size of Arizona’s municipalities and their autonomous taxing authority, while the world’s largest remote vendors probably would trigger nexus in Arizona’s largest cities in a post-Wayfair world, most vendors probably still would not trigger nexus in most Arizona municipalities. Thus, depending on the outcome of Wayfair, Arizona municipalities may want to re-evaluate how much they value the autonomy of maintaining their own tax codes — especially because the Department of Revenue now collects all municipal taxes. Historically they preferred this autonomy, but they may soon come to realize — as the businesses that have been forced to comply with numerous municipal tax codes in Arizona have long known — that such autonomy comes at a great price. n

National and Local Economic Outlook Despite Potential Headwinds, the National and Local Economic Outlook Remains Positive by Rick Merritt At a Glance-National The national economy continues to run on all cylinders. Employment grew by a very strong 326,000 jobs in February that far exceeded expectations. However, March employment edged up by only 103,000 jobs. Cold weather and the surge of job growth in February were the culprits for the low March numbers. Despite March’s disappointing performance, the unemployment rate stayed at 4.1% for the 6th consecutive month. Other good news includes a 14-year high in consumer sentiment, a continued strong single-family home market, increases in industrial production and only modest signs of issues that could end the cycle soon. Thus, despite a stock market that appeared to be overvalued and threats of a trade war, the economy should remain strong at least through 2018 and probably through 2019. If that occurs, this will be the longest recovery/expansion in American history. Keep in mind that the stimulus from the tax cuts and reductions in certain regulations are just now kicking in. In addition, there appears to be agreement on significant infrastructure spending in Congress. Thus, another layer of stimulus is likely to occur very late in the cycle. This will put upward pressure on inflation, as well as put pressure on the Fed to continue to increase interest rates. Those will be sure signs that we are later in the cycle. At that point, it will be important to watch for indicators that the cycle may be near its end. Issues worth watching include the potential for a trade war that would cause consumer prices on certain goods to increase. In reaction to that, the Fed would raise interest rates more than expected. That could slow the economy and it could slow exports and make imports more expensive. A trade war would slow, but not stop, the economy. Yet, the probability of a full-blown trade war is low. Even so, this cycle, in the absence of some unforeseen event, should continue to gain strength in 2018. The national Blue Chip consensus forecast calls



for real GDP growth to increase by 2.8% in 2018, after a growth rate of 2.3% in 2017. Currently, the 2019 estimate is for real growth of 2.5%. The current situation is about as good as it gets.

At a Glance-Local Recent employment revisions show that Maricopa County has been growing at a more rapid rate than previously thought. Employment growth in 2016 was revised upward from 2.9% to 3.2%. And, 2017 employment growth was revised upward from 2.4% to 2.9%. In total, the County grew over those two years by 114,700 jobs. This is very strong growth given the relatively slow increase in population. This caused an upward revision in our FY18 employment estimate for

the County from 2.4% to 2.9%. All sectors except information technology participated in the employment growth. In absolute numbers as well as percentage terms, educational and health services, financial activities and mining and construction lead the way. Manufacturing is also doing well. While population growth has been slower than expected since the recession, Greater Phoenix is finally seeing some improvement. For 2017, Maricopa County was ranked by the U.S. Census as the number one county in the country for population growth, increasing by 73,650 persons in the past year. This number far exceeds the next closest county of Clark County, Nevada with an increase of 47,355 persons. The Greater Phoenix metro

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area ranked fourth in net growth with a population increase of 88,772 in 2017. The leading metro areas were DallasFort Worth, Houston and Atlanta. Population growth in Greater Phoenix should accelerate in 2018, but will still be modest by historic measures. For new for-sale housing, we are at the other end of the spectrum from where we were in 2008. There is now an under supply of available homes and good deal of pent-up demand. According to the Home Builders Association of Central Arizona, single family permits for Greater Phoenix increased 12% in 2017; for the first two months of 2018, permits are up another 28.2%. Retail sales are also doing exceptionally well with growth expected to be up 4.5% this calendar year. Personal income is also expected to accelerate this year based on stronger employment growth, modestly increasing population growth, upward pressure on wages and the stimulus of the tax cuts. Overall, the economic outlook for the Greater Phoenix remains quite positive. This year and next look like strong periods. Remember though, that this is the strongest part of the cycle. There are headwinds. A trade war could reduce exports, cause higher inflation and slow the rate of growth. On the other hand, getting China to play on a level playing field could help the economy. Yet, even when the next recession occurs, it is likely to be much milder than the 2007-2009 recession. n Rick Merritt is president of Elliott D. Pollack & Company. He can be reached at or the company’s website:

Rick Merritt will be speaking on this topic at the Corporate Finance Conference on Aug. 22.

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A Guide to Nonprofit Fiscal Sustainability 10 Ways CPAs Can Help Ensure the Long-Term Health of Nonprofits by Michael F. Cade, CPA (in PA), CGMA CPAs who serve nonprofit organizations have access to data not readily available to others; information that can enable the success of meeting an organization’s mission. Historically, CPAs at nonprofits reported on financial performance and helped to ensure compliance, but today nonprofits need more from their CPAs. Nonprofits need business leaders who balance short- and long-term views, and who can apply data from all facets of the organization. CPAs in nonprofits need to look beyond the financial reports to help their organizations attain fiscal sustainability. Fiscal sustainability is a term applied to governments that can be easily translated for the nonprofit sector: Nonprofit fiscal sustainability is the ability of a nonprofit organization to successfully deliver its mission over the long term, by remaining financially and operationally viable, as well as programmatically relevant. Fiscal sustainability has two primary components: viability and relevance. For a nonprofit to sustain itself for the long term, both components must be understood and proactively managed. For this feature, viability is defined as the ability to deliver programs effectively and efficiently throughout the life of the program. Relevance is defined as the ability to maintain alignment between the clients’ needs and the organization’s services. Sometimes an organization can focus so closely on delivering client needs that it ignores or is blind to the fact that those programs are no longer viable. Perhaps a new client requirement drives up the cost, or a gap in training decreases efficiency. In this situation, the program will only continue to be relevant to its clients up to the point when the nonprofit runs out of money.

The reverse is true, as well. Focusing too closely on operational performance, and not thinking enough about the future, can drive an organization to deprioritize research, education, and technology. Thus, an organization may become the best provider of a service, but they will eventually find that they are providing a service that no one needs. Nonprofit fiscal sustainability requires a comprehensive approach. The components do not act in isolation; so, to drive improvement, there needs to be conscious decision-making on viability and relevance issues. At the center is the nonprofit’s mission. The components of relevance and viability are two halves surrounding the mission. Another way to think of these concepts is to consider that relevance represents the organization’s capabilities, while viability represents its capacity. To remain relevant, an organization must develop and maintain a strong set of capabilities that will allow it to lead and respond. In addition, it must be able to handle new competition and a complex, fluid regulatory environment. The organization needs to be able to build strong relationships, assemble qualified leadership, maintain service differentiation, continually learn, effectively apply new skills to the delivery of the mission and be well-versed in managing change. To remain viable, a nonprofit must attain and develop the capacity to deliver its programs effectively and efficiently. It must have the systems, processes and qualified people that can achieve expected performance while remaining in line with budgets. The organization needs to have appropriate financial controls, adequate funding, quality staffing and technology, strong operational and program management skills, and strong processes and procedures. Items that support both relevance and viability are advocacy, culture, risk leadership and strategy. They can be capabilities supporting the organization’s relevance, but also as they are executed they are capacities that ensure viability.



10 Ways You Can Improve Fiscal Sustainability In a nonprofit, as a CPA, you are likely the strongest financial resource and best prepared to take ownership of these recommended actions. These 10 items represent incredible learning opportunities and provide a clear path to improve the fiscal sustainability of your organization. Apply Business Acumen  — Add value by applying business acumen, perspective, and the transformation of data into useful information. CPAs must look at the business in its totality, in terms of results and process. No other function within the organization has access to the breadth and depth of data. Use your innate talent for analysis and analytics to identify needs. Then apply your expertise to take all of that data and turn it into useful information for decision-making.  Spot Trends and Analyze Performance — You should monitor results, run analytical analysis to identify



trends and provide forecast scenarios on potential impacts. This information is critical to decision-makers who are considering both current and long-term actions. In addition, tailor reporting metrics to limit unneeded data, and focus on the areas of greatest impact to the organization. In a nonprofit organization, clear program-level reporting helps leadership understand performance across service groups or portfolios. If a program is underperforming, and it is a trend that is continuing, you must ensure the information is clearly presented so that leaders can make decisions. These types of performance analyses surpass composing financial statements and reconciliations. They provide specific, actionable information where issues and opportunities are highlighted, improvements are monitored and impacts easily determined. Support Proposal Efforts —Nonprofit CPAs should have an important role in the proposal process. Applying for

grants from foundations or government agencies can be onerous. Often, proposals are denied because a requirement was not met or the information provided was not clear. CPAs are skilled at understanding complex instructions, and you can use this skill to interpret funder requirements or to aid in the development of program-level budgets. Use your attention to detail to review proposals before they are submitted to make sure that they are consistent, clear and concise. Above all, understand the impact of the proposal and assess if it will be beneficial to the organization or a detriment. Watch and Interpret the Sector —To help your nonprofit, you should be spending a good amount of time engaging in your nonprofit’s sector. Building your network, attending events and participating in social-media conversations can all provide useful information that you can bring back to your organization. Engaging the sector will help you identify best practices, as

well as hear about issues and trends that could impact your nonprofit. One great way to learn about the sector and your organization’s area of focus is to review the Form 990s of competitors, partners or organizations with related missions. The Form 990 has a wealth of information, and CPAs know more about it than pretty much anyone in the organization. Apply your expertise to look for comparable information, trends, risks and practices. This data will not always be fresh, but it remains useful for identifying patterns and getting different perspectives. Most importantly, translate the data into information your organization’s leadership can use. Suggest improvements, identify concerns at partner nonprofits and discuss issues and trends at organizations that directly or indirectly compete with your nonprofit. Provide Early Warnings — One of the most important ways a CPA can help protect a nonprofit is by identifying and communicating areas of risk. This is a continuous process, so it is something you should be considering on a regular basis. The CPA has access to all of the financial and most of the transactional data in the nonprofit. In addition, you have expertise in identifying unusual items and results that do not fit with expectations. There are three specific areas of concern that you can monitor. First, there are issues associated with concentration. If the nonprofit’s funding comes from only one or a small number of sources, it is at risk. You should communicate the importance of revenue diversity and provide regular updates to leadership if trends point to a concentration risk. The same holds for partners and vendors. If the nonprofit concentrates purchases with only one vendor, there is potential risk to the nonprofit. The second action is to actively monitor the condition of clients, vendors and funders. If you notice issues with these business partners, communicate the findings to leadership. With warning, a nonprofit can either alert a partner of an issue or start looking

for alternative partners. Risks can be greatly reduced if the CPA regularly assesses the financial and operational condition of critical business partners. Third, communicate clearly the need for, and status of, the nonprofit’s reserves and any negative value generated when actual overhead costs exceed overhead recovery limitations on programs. Reserves are critical to a nonprofit to hedge against temporary funding issues or to ensure resources are available to invest in the future. The CPA should be instrumental in establishing the minimum available cash reserves to ensure business continuity. Support Procurement Activities  — Nonprofit CPAs can support nearly every phase of the procurement process. You can add value to the organization by ensuring that products and services purchased meet requirements at the best cost. The CPA should be available to assist in cost/benefit analyses and to provide insight into decisions on alternatives. Develop and Educate — A nonprofit’s CPA plays a critical role in the longterm success of the organization by developing the financial staff and educating nonfinancial employees on some of the critical concepts in finance. In both cases, you generate value by creating a force multiplier for good financial decision-making. Regardless of the size of the organization’s financial support staff, you should encourage staff to learn continually. This will improve existing skills and provide new ones. Educating nonfinancial employees will help lay a foundation for understanding the concepts behind the answers you provide.

Be a Techie — A nonprofit’s CPA needs to champion innovative technology and solutions, including automation, work share and outsourcing. The goal is to accelerate efficiency to process transactions quicker with less human interaction, to spread work to those more familiar with the transaction, or to find service providers that can process some transactions faster and more effectively. Your broad access to data and process flows help you identify the areas that generate delays, errors, missing data and mistakes in transactions. You are a top resource to help define the ongoing technology requirements of the organization. Assess Transaction Impacts  — Nonprofit organizations grow and change over time. This sometimes leads to a consideration of strategic partnerships or consolidations. Nowhere can you make a larger impact than by being involved in the planning, development and execution of structural transactions. Often, these moves are initiated at the most senior level of an organization, and a general assumption is made that specialists or consultants must be used to determine the financial impacts. While that is sometimes true, the nonprofit’s CPA can provide insight and advice that an outside party cannot. You know the business, its processes and the web of interactions necessary for the organization to function. Your insight can provide critical guidance, from the early phases of a transaction all the way through the execution of a deal. Remain Vigilant  — N o n p ro f i t organizations rely on their good



Not-for-Profit Conference: The Speed of Change June 26 Black Canyon Conference Center

Available in-person or via webcast Keynotes: GuideStar: Untapping Your Fundraising Potential Cybercrime Scams, Trends and Other Financial Frauds Tax Track: • 990 Common Errors • Using Charitable Lead Trusts to Maximize the Economic Benefits of Charitable Giving • Using the 990 as a PR Tool: How to Tell Your Story • New Tax Laws: Update and Developments for Exempt Organizations Audit & Accounting: • Revenue Recognition: Does This Really Apply to My NFP? • Changes in Financial Reporting for Nonprofits (ASU 2016-14) • Implementation of ASU 2016-14 • 2017 Yellow Book Management: • Leveraging – Doing Good With Other People’s Money • Healthcare Reform Update: The Post ACA Era • Reasonable Compensation: Is it All Relative? • Fraud, Waste & Abuse in Not-for-Profits

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reputations far more than for-profit companies. For this reason, you must maintain the highest ethical standards and emulate and enforce ethical practices throughout the organization. In addition, you must actively search for potential areas of fraud. Nonprofits are particularly susceptible to fraud because they have smaller staffs and there is a preconception that nonprofit staff members are inherently selfless. The reality is that smaller staffs mean less separation of duties. And while staff members may be selfless, they often are working for lower salaries in an environment that often deals with a lot of cash donations. A nonprofit’s CPA understands ethics, controls and the analytical analyses that can detect fraud. There is a natural path for the CPA to lead by example and help educate the organization’s leaders on ways to encourage ethical behavior. Conclusion These 10 actions impact multiple components of the fiscal sustainability model. Take ownership of these topics, and encourage peers and staff members to share in addressing them. Help leaders find the right mix of focus on relevance and viability to effectively deal with challenges and explore opportunities. Engage in discussions on culture, strategy, risk and advocacy to ensure that the organization benefits fully from your knowledge and experience. These are the ways that CPAs can best support a nonprofit organization’s continual quest to attain and maintain fiscal sustainability. n Michael F. Cade, CPA (in PA), CGMA, is a strategy consultant and executive coach for MFCCoach LLC in Morrisville. He serves as a nonprofit board member for the Internship Institute. He can be reached at or on Twitter @mfccoach. A version of this article first appeared in the Pennsylvania CPA Journal.

Creative Financing Alternatives New Markets Tax Credits Can Open Doors, Facilitate Growth by Jeff Friesen Whether it’s time to expand to a new market, expand operations or open a new location, most businesses need a loan at some point. Traditional loans work well for many financing needs. But there are other creative financing options – sometimes with more favorable terms – that you should consider for your next project. There are many ways to finance growth beyond the traditional loan. One of these options that many businesses have never heard of is New Markets Tax Credits (NMTC). The NMTC program was enacted by Congress in 2000 and allows corporate taxpayers to receive a credit against their federal income taxes for making investments in low-income communities. NMTC financing are loans that provide flexible financing to qualified business and real estate projects. The intent of this legislation is to encourage investments that stimulate jobs and other benefits to the people living in the low-income communities that are served. The program incentivizes private investment through a federal tax credit. This creates the perfect public, private partnership to fill financing gaps traditional lenders aren’t able to provide because of regulatory guidelines. According to the New Markets Tax Credit Coalition, $698 million in NMTC allocation leveraged an additional $673.1 million from other sources for a total of $1.4 billion in Arizona project investments between 2003 and 2015. A total of 81 businesses and economic revitalization projects in Arizona received NMTC financing, resulting in the creation of 17,315 jobs. It is always wise to look at funding options outside of traditional financing. NMTC is a great example of “patient capital,” meaning the loan can be repaid slower than a traditional loan. It is a debt solution with flexible features that may include a below market interest rate, subordinated debt, lower origination fees, longer period of interest only payments, higher loan to value or a longer payback period. To qualify for a NMTC, your project or business must be located in what is called a qualified census tract. Go to to see which areas qualify. Arizona is one of the states with the highest percentage of qualified census tracts. In fact, 44% of the census tracts in Arizona qualify for NMTC, and 41% of the

census tracts in Pinal and Maricopa counties in the Phoenix area qualify for NMTC. Yet, the majority of companies we work with in the Phoenix area are not aware of this program. Beyond the physical location, there are other factors that play into the evaluation of your NMTC eligibility. The community impact of your project will also be evaluated such as: • Ability to create jobs that pay a living wage and offer benefits such as health, dental and vision benefits, retirement plans, vacation, and holiday and sick pay. • Jobs with training opportunities for advancement or jobs that are accessible to people without a college degree or formal training. • Goods and services to the people living in the community – food, health services, education, job training, childcare or lodging. NMTC can help fill gaps in your financing structure on a smaller side as well. For example, if you have a $1 million financing need and a traditional loan will only cover $700,000, a NMTC loan can help you bridge the gap without having to do things like selling equity in your company. These loans can give you a competitive advantage by enabling expansion of your business in ways you may not have been able to do with traditional financing alone. While there are many benefits to NMTC, there are things to be aware of as you consider this option. Some business types are not eligible, including casinos, liquor stores, and golf courses. Companies with substantial cash on hand may not qualify. In addition, NMTC is somewhat complicated during the closing process and you want to arm yourself with partners, like your banking partner, accountant and attorney, who have done this before. The more complex the deal, the higher the costs, and the easiest way to manage expenses is to have experienced parties involved. If you’re ready to explore NMTC further, look for a lender who has experience with the program. The right banking partner is critical to helping



you effectively navigate NMTC. Since there is a component of debt involved, your finance partner should help you handle your cash management needs holistically. Here are some additional resources: Community Development Financial Institutions Fund:; Internal Revenue Service:; New Markets Tax Credit Coalition: www. n

Highlights of April Board of Directors Meeting Among other actions at its April 25, 2018 meeting, the ASCPA Board of Directors reviewed the following: Consent Agenda The consent agenda, which included the board minutes, financial statements, 2018-2019 Society budget and Foundation contribution memo, was approved.

Advocacy Strategy

Jeff Friesen is the Arizona Region president of Enterprise Bank & Trust and is experienced with the NMTC program, with $183 million in NMTC allocation to date and over $500 million in loans in this program. Contact Friesen at (602) 8245744 or

Cindie referenced the March 20 meeting of the services tax coalition that met to discuss the ballot initiative by the Protect Arizona Taxpayers group to ban services tax.

This topic will be featured at the ASCPA Corporate Finance Conference on Aug. 22.

CEO/Executive Director John Phelps provided an update on the State Bar of Arizona activities.

State Bar of Arizona Update & Dialogue

Year-End Wrap-Up Outgoing board members Marcus Feder and Julia Miessner shared

thoughts about their time on the board and the future of the Society.

Strategic Plan Update Cindie thanked board members for their support of the PAC and noted the achievement of all strategic plan measurements for FY2018.

A Day in the Life Mike Allen and Aaron Grant shared the challenges and joys they experience in their life and job.

Other Business Molly Montgomery thanked board members for their support during the year and was thanked for her leadership. 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@

Arizona’s #1 Corporate Tax Credit Leader for 6 straight years. Tax Strategies as it relates to SALT Deductions for S-Corp’s and LLC’s • • (480) 220-0593 A school tuition organization cannot award, restrict or reserve scholarships solely on the basis of donor recommendation. A taxpayer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayer’s own dependent.



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 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 2019. Please note that users have three attempts to pass the quiz with at least a 70 percent score.

June 2018 Issue of AZ CPA* 1. The theme of ASCPA Chair Mike Allen’s column is: m CPAs know best m We are better together m Be sure to stay out of trouble with the Board 2. Who was the keynote speaker at the ASCPA Annual Meeting? m Kimberly Ellison-Taylor m Greg Nelson m Barry Melancon 3. What Supreme Court case may rock the state and local tax world by rejecting Quill’s requirement? m Nebraska v. Wayfair m South Dakota v. Wayfair m Arizona v. Wayfair 4. In a post-Wayfair world, most vendors probably still would not trigger nexus in most Arizona municipalities. m True m False

5. Nationally, unemployment stayed at what rate for the past six months? m 5.5 percent m 4.1 percent m 8 percent

7. One great way to learn a nonprofit organization’s area of focus is to: m Hire a PI m Interview Other Companies’ CFOs m Review 990s of Competitors 8. No n p r of i t s a r e p a r t i c u l a r l y susceptible to fraud because: m They have outdated technology m They have smaller staffs m They don’t hire CPAs 9. NMCT stands for: m New Market Tax Credits m New Mininum Tax Credits m New Mandatory Tax Credits 10. NMTC is a great example of “patient capital,” meaning: m The loan can be repaid slower than a traditional loan. m It is a debt solution with flexible features that may include a below market interest rate, subordinated debt and lower origination fees. m All of the above

6. Employment figures grew by this many jobs in Maricopa County over 2016-2017? m 114,700 m 700,100 m 220,003

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


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



Classifieds Business Opportunities TUCSON CPA LOOKING TO START RETIREMENT TRANSITION — Tucson sole practitioner with $200K+ tax billings and $110K+ attestation billings seeking to start transitioning t o w a r d r e t i r e m e n t . Wo u l d b e interested in initial office sharing or outright merger into a small firm with plan for ultimate buyout. Have one flex-time tax staff. Or alternatively, would be interested in taking on an entrepreneurial minded CPA with plan for ultimate buyout. cpascott1@ PROFITABLE SMALL ESTABLISHED CPA TAX PRACTICE FOR SALE — The CPA owner is retiring and ready to sell this profitable small practice located west of Phoenix, AZ, in the Sun Cities area. The practice has been

in business for over 35 years and has a loyal client base with the majority of revenue coming from individual tax preparation plus business accounting and tax preparation. Note: this practice has excellent growth potential as the owner has been declining new clients as part of plan to downsize and retire. Contact information: suncitycpaforsale@ or (623) 432-2710.

Employment ARIZONA WATER COMPANY — Private utility serving customers throughout Arizona, is seeking management-level Controller with strong utility accounting and rate regulation experience, to oversee its accounting department in its Phoenix headquarters. Responsibilities include budgeted and actual financial reports, investable cash reports, income tax and 5500 filing, overseeing independent

and government audits, and rate case preparation. Reports to Vice President – Treasurer and supervises staff of four professional accountants. Requirements include: Bachelor’s degree in Accounting, active CPA license, 10 years’ experience in accounting, and five years’ experience as a supervisor. Please send your resume to: awc-hr@

Office Space CPA FIRM OFFICE SPACE IN CENTRAL PHOENIX (16TH STREET CORRIDOR) — Possibility of shared resources/services with 8 other CPAs in the building. Recently renovated office space approx. 2,300 SF with separate entrance available in a premier professional location with great visibility. Call Jason at (602) 850-5100, or e-mail

YOU HAVE THE DRIVE. NOW GET THE DISTINCTION. Introducing the CGMA® Program: Learning Pathway bundle. It’s the one-click solution that includes all the learning resources you need to progress through the program, plus the cost of one exam sitting. It’s an end-to-end experience that not only fulfills your yearly CPE requirements, but also moves you along the pathway toward earning the CGMA designation.

Marie M. Hibbert, CPA/CITP, CGMA





To learn more, visit

Phoenix Tax Workshop Series 24 Hours of Live CPE for $375 * Added Bonus for purchasing 2018-19 Phoenix Tax Workshop Series! You will gain access to all 2018-19 recorded sessions for later viewing.

Who’s on the agenda? Presentation topics are selected and then matched with the expertise of speakers drawn from the Advisory Committee, members of the Legislature and Arizona government.

The Phoenix Tax Workshop was established in 1961 to educate professionals in all areas of taxation—federal, state and local. We invite you to join this elite group of tax professionals at their Saturday CPE/CLE sessions (eight times per year). This series is also offered as a webcast.

What is the Advisory Committee? The Advisory Committee is comprised of the Valley’s top legal and tax accounting professionals who have agreed to volunteer their time.

What does it cost? The annual fee of $375 (due by the first meeting in May) includes the opportunity to earn 24 hours of CPE/CLE credit per year, which includes eight, three-hour meetings. You may attend individual meetings for $70. (Payment can be applied toward annual fee if you decide to enroll in the series). To enroll in the Phoenix Tax Workshop Series, complete the registration form below. Members of the ASCPA may also join by checking the box on their dues invoice.

Meeting dates and times The following Saturday meetings are held at the ASCPA offices in Phoenix from 9 a.m. to noon. A full breakfast is included with each meeting. You may also participate by webcast from your home or office.

What’s on the agenda? Topics are drawn from current tax issues, court cases and current legislation on both federal and state arenas. You will have the opportunity to take part in question and answer sessions to ensure you leave with a complete understanding of the material. Updated agendas will be sent prior to each meeting and will be available in the online CPE catalog. Check periodically for updated information.

Name ___________________________________________ Company ________________________________________ Address ________________________________________ City ___________________State _____ Zip ___________ Phone __________________ Fax ____________________ Email ___________________________________________ Check all that apply: r ASCPA Member r Nonmember r CPA r Not a CPA r Attorney r Other I will be attending: r In-person r On Webcast

May 26, 2018

Jan. 19, 2019

June 16, 2018

Feb. 16, 2019

Sept. 22 2018

April 27, 2019

Oct. 20, 2018 Nov. 17, 2018

Method of Payment: r Check r VISA r MasterCard r American Express Name on Card _______________________________ Card Number ________________________________ Exp. Date ____________ Amount $ Signature of Card Holderr______________________ Please return this form and payment to: Arizona Society of CPAs 4801 E. Washington St., Ste. 180 Phoenix, AZ 85034 Fax credit card orders to: (602) 252-1511 or register online at JUNE 2018 AZ CPA 23

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AZ CPA June 2018  

The official publication of the Arizona Society of CPAs

AZ CPA June 2018  

The official publication of the Arizona Society of CPAs