COCPA NewsAccount - 2014 - May/June Issue

NewsAccount May/June 2014

Colorado Society of CPAs

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Contents Features

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On the Hill: Behind the Scenes II The story behind the demise of House Bill 14-1285

Peer Review Becomes Mandatory

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This August firms must attest they have had a peer review. This could mean you.

Colorado Sales Tax When do you have to collect local sales tax?

It depends.

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Women to Watch

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A Tale of Two Sales

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Benchmarking as a Strategic Tool

Meet six CPAs who excel in leadership, mentorship, and community service.

Reinventing your life after a successful career can be rewarding. Don't wait too long.

The process can benefit companies and provide critical client service as well.

Departments

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2 Chair Column 24 Movers & Shakers 24 Classifieds Sheila and Chris Balzer landed this big one off the coast of Kauai.

May/June 2014 • www.cocpa.org •

1

Chair Profile

NewsAccount A bi-monthly publication of the Colorado Society of Certified Public Accountants Vol. 60, No. 1 May | June 2014

Diamonds Are a Girl’s Best Career Move

Board of Directors Sheila M. Balzer Chair Steven R. Corder, Vice Chair Tawnya R. Ramirez, Treasurer Marc C. Hendrikson, Immediate Past Chair Mary E. Medley, Secretary Directors Victor A. Amaya, Craig A. Arfsten, Christine Benero, Kelly G. Boggs, Sharon S. Lassar, Mark J. Smith Editorial Board Jack Allgood, James M. Boak, Kay R. Dragon, Jennifer Emerson, Georgia Z. Phillips, Patrick A. Lytle, Mark Paller, Barbara J. Tedesko, R. Stephen Van Meter, Michael D. West Mary E. Medley, President/CEO Elizabeth M. Julin, Deputy Director Krista Flynt, Editor/Publisher Natalie G. Rooney, Contributing Writer NewsAccount (ISSN #10899952) is published bimonthly by the Colorado Society of Certified Public Accountants, 7887 E. Belleview Ave., Suite 200, Englewood, CO 80111. NewsAccount is published in January, March, May, July, September, and November and reports information, news, and trends in the accounting profession. The Colorado Society of CPAs assumes no liability for readers’ business decisions in reference to advertisements or other information included in this publication.

Membership dues include a $9.90 one-year subscription to NewsAccount. Periodical postage paid in Denver, CO, and additional mailing offices.

POSTMASTER: Send address changes to NewsAccount, Colorado Society of Certified Public Accountants 7887 E. Belleview Ave., Suite 200 Englewood, CO 80111 Net press run = 8,550 copies; sales through dealers and carriers, street vendors, and counter sales = 0; paid or requested mail subscription = 8,450; free distribution by mail = 50; free distribution outside the mail = 0; total free distribution = 50; total distribution = 8,500; office use, leftovers, spoiled = 350; returns from news agents = 0; total sum = 8,850; percent paid and/or requested circulation = 99%.

303-773-2877 • 800-523-9082 Fax: 303-773-6344 • cpa-staff@cocpa.org

NewsAccount is available online at www.cocpa.org.

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• NewsAccount • May/June 2014

Sheila Balzer and her partners (from left): Eric Lake, William Holben, and Craig Hay

S

We’re not talking gemstones. We’re talking softball diamonds and a young woman who became a CPA from out of left field.

heila M. Balzer, CPA, 20142015 COCPA Chair, wasn’t always a CPA, although once you spend time with her, you’d think she’s been in the profession since birth. There was a “BCPA” — Before CPA — time for her. It involved growing up in Littleton, playing competitive softball, and a coach who just happened to be a CPA. “That’s where I learned about being a CPA. I must have thought he was cool,” she laughs.

“I never considered anything other than accounting as a major,” Balzer says.

She took bookkeeping while in high school, and Hay talked to her about accounting as a career.

During her junior year at the University of Denver (DU), she interned for her auditing professor, Ned R. Husman, at Bretzlauf and Husman, Inc. Balzer says Husman taught her about the importance

of the audit function and public trust. “I started as an intern and never left,” Balzer recalls of the firm in which she would eventually become a partner after it was sold to another local firm in 2000. In an ironic twist, she made the introductions that initiated the sale.

Today, that former softball coach, Craig C. Hay, CPA, is one of Balzer’s partners at Holben Hay Lake Balzer CPAs LLC, the second-generation local firm in Denver that purchased Husman’s practice fourteen years ago. While the firm is primarily a tax practice, Balzer specializes in audits for credit unions, pension plans, non-profit organizations, and small businesses.

Even now, Hay says he deserves no credit for Balzer becoming a CPA. At the time, he was never sure any of the teenagers were listening to him. Clearly, Balzer was listening and is glad she did. She loves

the challenge of public accounting and the career it has given her.

Getting Involved As if having her future business partner as a coach weren’t enough, Balzer also crossed paths with COCPA CEO Mary Medley when she was teaching business writing for the DU School of Accountancy. “Mary reminded me recently that I’m the first of her former students to become COCPA chair.

She told me she’s really proud to see the day.”

Balzer says Medley’s class made an impression. “She didn’t just teach us about communication, she told us what it was like to be in public accounting, covering the things people don’t necessarily tell you. I liked what I heard.”

Part of what Balzer loves about public accounting is the opportunity to be involved with students, teaching them the things she once learned from Hay and Medley. An Educational Foundation of the COCPA scholarship winner herself, Balzer acknowledges education is near and dear to her heart. “I like talking with students about the opportunities accounting affords.”

She has served as a liaison to three different high schools in addition to her COCPA involvement, which includes serving on the Careers in Accounting Committee, the Educational Foundation as director and president, and of course, a term on the COCPA Board before becoming vice chair last year.

“I’ve always been involved,” she says. “I’m just paying back what Craig Hay did for me.

If someone doesn’t tell you what a CPA does, you don’t really understand it. I want to tell students there’s more to accounting than tax and bookkeeping. They need to hear about all the opportunities being a CPA affords you.”

Charting Her Course Balzer is excited to get her year as chair under way. On the state level, she sees continuing efforts with the Colorado Department of Revenue. On the national front, she predicts CPAs will become even more involved in helping clients and employers

through the Affordable Care Act maze as deadlines approach and the effects begin to appear on tax returns. “There’s a big learning curve ahead, and our profession holds a lot of responsibility in this area,” she says.

The COCPA’s sustainability and viability also are key areas of focus this year. “CPE revenue continues to decline, and it’s a trend we need to address,” she says. “To be clear, it’s about the future of the COCPA organization-wide. We’re fortunate that the Society is financially sound, giving us the ability to plan for that viable, sustainable future well beyond this year while I’m the chair.”

Balzer also looks forward to meeting CPAs at the state and national levels. “One thing you notice when you start interacting on a national level is the reputation Colorado has,” she says. “In comparison to other states, Colorado has a large percentage of CPAs who are COCPA members. The great things we’re doing are a reflection of our volunteer members and staff.”

All in the Family A die-hard Broncos fan, Balzer says she’s still recovering from the team’s 2014 Super Bowl loss, but now that spring is here, she’s moving on. She’s putting her softball expertise to good use by coaching her daughters’ teams. Her trio of girls includes stepdaughter Alyssa (who works at a local CPA firm), 22, Sydney, 8, and Shelby, 6.

Her husband, Chris, is also a CPA — in tax practice. When the Balzers are really in their element, you’ll find them traveling and fishing, preferably deep sea fishing. Their greatest catch? A 200-pound yellow fin tuna hauled in off the coast of Kauai. “It was so big my daughter was convinced there was a shark on the deck,” Balzer laughs. “We needed a crane to get it out of the boat.”

Fish tales aside, Balzer says she’s ready to tackle the challenges ahead. She credits Hay and Husman for giving her the opportunities that got her started in her career, and she’s excited about giving back to the profession. “I’m honored to serve the profession in this capacity and advocate on behalf of COCPA members,” she says. We say, “Let's play ball!” s Email Balzer at sbalzer@hhlbcpa.com.

Leadership Council You're Invited June 6, 2014 Hyatt Regency DTC, Denver "This event always re-energizes me."

"I feel inspired after being here!"

"I leave with a happy to-do list."

"There will be a tremendous impact on my life from the things I learned here."

Participate not only in framing the future for the COCPA but also gain insights, knowledge, and tools you can use in your professional and personal lives. Attend the 2014 Leadership Council meeting, and prepare to deep dive, learn to surf, and connect with your colleagues.

$120 Registration Fee Includes breakfast, lunch, and networking reception, and 6 hours recommended CPE credit.

To Register Contact Terry Cerv at tcervi@cocpa.org or go to

www.cocpa.org

May/June 2014 • www.cocpa.org •

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On the Hill

Behind the Scenes II: Sausage-making at Its Best

BY MARY E. MEDLEY

L

ots of clichés come to mind when thinking about the legislative process: Hurry up and wait. A watched pot never boils. Laws are like sausages; it’s better not to see them being made. So close, and yet so far away. Expect the best; prepare for the worst. All of these could apply to Colorado House Bill 14-1285 which was voted down on the Senate floor, April 15.

Referred to as the Colorado Taxpayer Protection Act, the bill would have required professional tax preparers (i.e. “paid”) to provide specified disclosures to a client. The operative words here are “taxpayer protection” which proponents were adamant the bill would accomplish.

Sponsored by Rep. Sue Ryden (DAurora) and Senators Irene Aguilar (DDenver) and Michael Johnston (D-Denver), the bill was introduced within days of the U.S. Court of Appeals decision in Sabina Loving v. IRS, agreeing with the District Court “that the IRS’s statutory authority under Section 330 cannot be stretched so broadly as to encompass authority to regulate tax-return preparers.”

In the opinion filed on behalf of the Court, Circuit Judge Kavanaugh elaborated further: “It might be that allowing the IRS to regulate tax-return preparers more stringently would be wise as a policy matter. But that is a decision for Congress and the President to make if they wish by enacting new legislation.” The sound you might have heard, Feb. 11, 2014, when the decision came down, was the slamming of the door on the IRS plan to create the Registered Tax Return Preparer designation and mandate continuing professional education and testing — for now.

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• NewsAccount • May/June 2014

Step into the COCPA Time Machine with me. In late November 2013, a representative of the Colorado Fiscal Institute (CFI), www.coloradofiscal.org, contacted me to discuss a proposal it was considering.

On Dec. 2, 2013, I met with the CFI, along with representatives of the Public Accountants Society of Colorado. We were asked for our feedback ASAP on requiring paid tax preparers to disclose to clients, using a disclosure form both would sign, the preparer’s qualifications, PTIN, contact information, whether the preparer could represent the client in an audit, and fees.

We were told this legislation was critical to protect Colorado citizens, especially since the IRS program was in limbo at the time.

We also were told such disclosure requirements are a national trend — an intriguing perspective given only four states have adopted them, with no state other than Colorado considering the concept currently.

The proposal anticipated creation of “appropriate penalty” for non-compliance. The CFI indicated that CPAs, Enrolled Agents (EA’s), and attorneys, already regulated at the federal and state levels, would not be included in proposed legislation.

Fast forward through the holidays. Opening day for the Colorado General Assembly, Jan. 8, came and went, as did the Jan. 29 deadline for introduction of House bills except for supplemental appropriation bills recommended by the Joint Budget Committee and the state budget bill, the “Long Bill.” Nonetheless, on Feb. 19, House Bill (HB) 14-1285 was introduced and assigned to the House Business, Labor, Economic, and Workforce Development Committee. CPAs weren’t exempted, and neither were EA's or attorneys. In the committee hearing, March 6, we were successful in amending the bill to exempt all three, and it passed the committee and the full House on party line votes.

Roll forward to the Senate Finance Committee where the bill was considered on

April 8. Again, we were successful in amending the bill, this time to exempt non-licensed individuals working for CPAs and CPA firms. Again, the bill passed the committee on a party line vote and headed to the Senate floor.

Why two bites at the amendment apple you ask? We didn’t want to help improve a bill that was ill-conceived from the outset, and we expected it to pass the Democratically controlled House, given that it was characterized as critical for protecting Colorado citizens from unscrupulous tax preparers.

Once it moved to the Senate side, however, we needed to make sure those working for CPAs and CPA firms weren’t scoped into the disclosure requirements.

The 35-member Senate consists of 18 Democrats and 17 Republicans. Passing the bill would require all the Democrats to vote for it which is exactly what had happened in the House committee, on the House floor, and in the Senate committee. On the Senate floor however, Sen. Cheri Jahn (DWheat Ridge) and Sen. Lois Tochtrop (DThornton) joined the Republicans in voting against the bill, and it died.

The moral of this sausage-making tale: Sometimes you have to make the best sausage possible in case you have to eat it. Fortunately, this sausage didn’t make it past the test kitchen.

Advocacy doesn’t just happen, especially when an idea looks like a good one on its face. Involved in and responsible for the positive outcome described here were COCPA legislative counsel Robert Ferm and Daniel Furman of Hall & Evans LLC; COCPA members Pamela Feely, Ronald Seigneur, and Mira Finé; PwC Principal, Public Policy Joseph Petito with The Accountants Coalition; AICPA Vice President for State Regulatory and Legislative Affairs Mat Young; and many others behind the scenes. We thank them all. s For more details, contact Mary E. Medley at mmedley@cocpa.org.

Colorado State Board of Accountancy

Mandatory Peer Review Coming Soon In the interest of public protection, Colorado law requires all CPAs and CPA firms issuing attest and/or compilation reports to be enrolled in and undergo peer review at least every three years. Upon renewal of an Active certificate or Firm registration with the Colorado State Board of Accountancy, all certificate holders and firms, except those exempt from peer review as described in Rule 8.3, must attest to having undergone a peer review during the previous renewal period. This includes providing the date of the peer review acceptance letter, the name of the peer reviewer, and whether the peer review resulted in a report rating of fail, pass with deficiencies, or pass.

Mandatory peer review became effective July 1, 2010. The August 2014 firm renewal period will be the first time CPA firms with an accounting and auditing practice must attest to having completed at least one peer review since May 31, 2011.

During the November 2015 renewal, individual CPAs with such practices will attest to having completed at least one peer review. If you have not already applied for peer review, start now. The process can take several months to complete.

What’s Included

The peer review standards define an accounting and auditing practice as all engagements performed under Statements on Auditing Standards (SASs); Statements on Standards for Accounting and Review Services (SSARS); Statements on Standards for Attestation Engagements (SSAEs); Government Auditing Standards (the Yellow Book) issued by the U.S. Government Accountability Office; and engagements performed under Public Company Accounting Oversight Board (PCAOB) standards. Engagements covered in the scope of the program are those included in the firm’s accounting and auditing practice that are not subject to PCAOB permanent inspection The most common examples of engagements which would require a peer review are: • Audits (SAS, PCAOB, Yellow Book) • Reviews (SSARS) • Compilations, with or without disclosures, where a report is or should be issued (SSARS) • Agreed-upon procedures engagements (SSAE) • Services Organization Controls (SOC) engagements (SSAE) • Examination and compilation of prospective financial statements (SSAE) Tax practitioners may prepare compilations for their clients as an accommodation without realizing these engagements subject them to peer review. Also, one might think performing only one compilation or review exempts the firm from peer review. The number of engagements performed does not matter. Any “A&A” engagement will require a peer review — even just one.

Regulatory bodies, such as the Department of Labor, and AICPA staff have identified areas which indicate misunderstanding of what’s

required. The best current example is the limited scope audit for certain ERISA plans (typically 401(k) plans) allowed by regulations.

These are, in fact, audits, and they subject the firm to peer review because the engagements are performed under SAS’s. This error has been made both by firms currently undergoing peer review (resulting in possible recall of the review report) and firms not currently enrolled.

What’s Not Included

One exception exists. Statement on Standards for Accounting and Review Services (SSARS) No. 19, Compilation and Review Engagements (AICPA, Professional Standards, AR sec. 80) includes compilations of financial statements where in specific situations the CPA may document his or her understanding with the entity through an engagement letter instead of issuing a compilation report. This approach is only available when the CPA submits unaudited financial statements to the client that are not expected to be used by a third party (i.e., compilation for management’s use only).

If the firm performs only these engagements and meets the requirements mentioned, it is not subject to peer review.

Peer Review Submissions

By Colorado law, you are not required to submit copies of any peer review related documents unless the Colorado State Board of Accountancy specifically requests them.

For information on the Colorado mandatory peer review requirements, effective for firm registration renewals in August 2014, go to the Rules document on the Board’s Laws, Rules and Policies webpage at http://tinyurl.com/dora-cpa. Chapter 8 (page 54) describes all the details for peer review compliance.

Colorado’s sponsoring organization for peer review is the Colorado Society of CPAs. For questions and further information regarding the COCPA Peer Review program, contact Susan Vachereau at svachereau@cocpa.org, 303-741-8612, or 800-523-9082, ext.

112. s May/June 2014 • www.cocpa.org •

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Educational Foundation

COCPA Connections Pay Off Molly Clark walked into her final presentation in COCPA member Dave Dirks’s classroom at Metropolitan State University of Denver as an unemployed student. She walked out with a job offer practically in her hand. Connections from the softball diamond to the classroom to a public accounting firm helped to launch this young professional in her career.

The Educational Foundation of the COCPA is accepting applications for scholarships worth $2,500.

Head to

www.cocpa.org/student to download the application.

Deadline June 1

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• NewsAccount • May/June 2014

David M. Dirks, CPA, a lecturer at Metropolitan State University (MSU) and immediate past president of the Educational Foundation of the COCPA Board of Trustees, believes in giving his accounting students a taste of the real world.

The final project for his graduate-level class requires students to serve as auditors and give a presentation to a mock audit committee composed of real professionals.

That audit committee may have been a mock one, but Molly Clark recalls that she was worried. “We were so nervous for the presentation, but we knew it was good experience for us,” she says. “We had done our research, and we were prepared.” Eventually, all that preparation paid huge dividends.

Dirks had met Clark when she was preparing to start her graduate degree. He says she stood out not only because of her grades but also because of her personality and determination. “The more I got to know her, the more impressed I became,” he recalls. He attended a few of her MSU softball games and saw that her determination applied to her athletics as well as her academics.

While she had attended undergraduate school on an athletic scholarship, Dirks knew she needed financial assistance for graduate school. He advised Clark to apply for scholarship help.

“The Educational Foundation of the COCPA gives more than thirty scholarships — $2500 each — to accounting students every year,” Dirks says. “It’s a wonderful resource for them, and it’s gratifying to be able to do it. In the process of reviewing applications, you learn about the students, and hear all of these great success stories.”

Clark was destined to be one of those success stories; she was selected to receive a scholarship. She says it was a much-needed

boost at just the right time. “I’m grateful and fortunate that I was chosen.”

As the date for Clark’s final presentation drew near, a perfect and positive storm of events began brewing. COCPA Vice Chair Steven R. Corder, CPA, managing director at Kundinger, Corder & Engle, PC (KCE) in Denver, e-mailed Dirks about filling an entry-level position. KCE had hired several MSU students in the past with great success.

Dirks immediately thought of Clark.

And then, as luck would have it, the mock audit committee assembled for Clark’s presentation included COCPA member Laurie Anderson, CPA, a KCE director and shareholder. She was impressed with Clark immediately. Dirks took advantage of the opportunity to introduce them to each other. Within a week, Clark interviewed at KCE and received a job offer. She accepted and began working at the firm in January 2013.

Corder says he was impressed with Clark academically, athletically, and professionally.

She was humble, even after being called into his office to receive congratulations for her recognition as a Colorado Sportswoman of the Year for her achievements in collegiate softball.

Now, after more than year at KCE, Clark says she continues to apply the academic skills she learned at MSU to her work as a nonprofit auditor. She's also already passed one part of the Uniform CPA Examination.

She's on her way to becoming a CPA. “You can make a small world out of a large place,” Dirks says of the connections among the firm, the COCPA, and MSU. “And, the relationships benefit everyone.” s For information and to apply for an Educational Foundation of the COCPA scholarship, go to www.cocpa.org/student.

Hiring

Say YES to an Intern

You need help, and you need it fast. A student intern may be the perfect answer. Whether part-time, full-time, long-term, or short-term, interns offer you flexibility. And they benefit from real-world work experience,

BY ANGELA ROBERTS making them even more valuable in the future.

1.

4.

2.

5.

New Perspective on Organizational Issues: Interns aren’t saddled with “this is the way we’ve always done it.” They can bring fresh, new ideas to your company, question processes, and offer different ways of doing things.

Technology Savvy: Social media, computer programs, smart phones, and tablets are a part of a younger person’s DNA. Even if you’re a younger entrepreneur, it’s likely a student intern can give you some tech pointers

3.

Low Risk, High Potential Trial Period: Internships offer the opportunity to screen and work with potential entry-level employees. If an intern becomes a part of your team, you’ve saved yourself time and money in hiring and training.

Increased Capacity: You always have projects and tasks with which you need help, right? Engage an intern and expand your capacity to address that pesky “to do” list.

Attitude Bonus: Interns typically are eager to impress, productive, and appreciative additions to your team.

You gain convenience, flexibility, and positive results.

6.

Advocates for Your Company: Imagine the power of an intern’s good words about you and your company through social media. Your online presence expands, and the marketing cost is zero.

7.

Potentially Priceless Benefits: Interns provide the opportunity for

your junior-level people to gain supervisory experience. Positive word-of-mouth in the recruiting marketplace enhances your reputation and increases the pool of qualified candidates to meet your future needs.

The next time you need help with a special project or initiative, consider bringing an intern into your organization. Remember, Colorado colleges and universities are rich with potential candidates. Make the call to your favorite accounting faculty member, and experience the value interns can provide. s Angela Roberts is managing director of Aclivity, www.aclivity.com. Contact her at angela.roberts@aclivity.com.

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Professional Development

Bringing Opportunity to Graduates and Employers

BY NATALIE ROONEY

Two years ago, after several years of planning and development, the COCPA launched LeadFit, a leadership program designed specifically for CPAs and CPA-track professionals looking to grow professionally and personally. The program offers young professionals the opportunity to work with program facilitator Lorrie Blanchard Tietze, founder and manager of Interface Consulting, and explore relationship building; managing a team; performance evaluation and feedback; negotiation; rainmaking; role definition; and linking your best work to purpose, commitment, and boundaries.

Mira Finé, CPA, partner and national director of tax services with Hein & Associates LLP, Denver, was chair when the COCPA began discussing development of a Colorado-specific leadership training program. Mark Solomon, CPA, CGMA, VP-controller at SM Energy, Denver, was serving on the Board of Directors just before the program was launched. While several young COCPA members had attended the AICPA’s Leadership Academy, the Board wanted to create and grow a similar leadership program, customized for Colorado CPAs. Finé, whose firm has sent an attendee to LeadFit each year, liked the idea that LeadFit wasn’t a traditional leadership program and could evolve based on the participants’ needs. Solomon has sent five participants through LeadFit to date and says all companies need to be focused on leadership development, especially for young professionals. “Getting our CPAs up the curve in taking leadership positions is critical to what we’re trying to achieve as a financial accounting organization,” he explains.

Solomon has seen many benefits for both the employee and the company. “Not only is it motivating to the individuals selected to participate, but it’s also a way to develop them, help grow their careers, and prepare them to take on leadership roles in the company,” he says.

As SM attendees have moved through LeadFit, Solomon says he has watched them develop their leadership sense and business maturity and create networks with other emerging leaders. Finé says she has also seen LeadFit attendees apply what they’ve learned. “It makes a world of difference immediately.”

Developing Professionally and Personally Tom Zehren, CPA, a Hein tax supervisor, was a little leery when he was nominated to attend LeadFit’s inaugural class in 2012. But he says within 30 seconds of arriving at the first event at COCPA CEO Mary Medley’s home, his fear dissipated. He met the young professionals who would become his classmates and knew the experience would be positive.

Zehren appreciated the flexibility the course offered. “The class changed as it progressed,” he explains. “Our group extended the con-

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• NewsAccount • May/June 2014

flict resolution portion. Mary and Lorrie recognized that it was an area of concern for our group, and we spent more time on it.”

Zehren says he also came away with a ready-made community of professionals at his level that he can reach out to whenever he needs.

“Now I know there are other people at my level dealing with the same issues,” he says. “I’m not the crazy one.”

Carolyn George, CPA, a business analyst at SM Energy, was also in LeadFit’s inaugural class. “I thought it looked like a fantastic program,” she says. George enjoyed being one of the people to bring an industry perspective to the group and having the opportunity to learn from participants in other areas of the profession.

“This program is an investment in yourself,” George says. “People need to take the time to work on who they are and where they want to go.” She says Tietze does a fantastic job of guiding the LeadFit group. “Lorrie makes you self-aware through her exercises and the materials. She gives you a set of tools to catapult you professionally and personally.”

George says one of her top takeaways was developing her listening skills, which helped at home as well as at the office. “I thought I was a good listener, but while going through the exercises, I realized how hard it actually is to listen well.” Learning to work effectively with all generations was another key takeaway.

George encourages young professionals to apply for LeadFit. “It was well worth every minute spent out of the office given the growth you experience so quickly,” she says. “It’s an investment in yourself that has an immediate impact on your personal life and those you supervise. There are a lot of places you can take courses about soft skills, but LeadFit gives you the resources and tools to apply on a daily basis — and they are critical skills to possess.” s

The program includes two full days and two half days of content delivered over five months, individual coaching, and networking events. It is recommended for 24 hours of CPE credit. The program is limited to 16 participants who commit to attending all sessions.

2014 Schedule

July 10: Welcome BBQ July 11: Full Day Aug. 15: Half Day

Sept. 26: Half Day Oct. 23: Debrief Nov. 14: Full Day

To apply, contact Terry Cervi at tcervi@cocpa.org, 303-741-8610, or 800-523-9082, ext. 110.

Application Deadline: June 20, 2014

COCPA Annual Charity Golf Tournament

Monday June 9 Noon Registration/Lunch 1 p.m. Shotgun Start Lakewood Country Club 6800 West 10th Avenue Proceeds benefit Food for Thought $150 per Player $600 per Foursome Includes green fees, cart, range balls, lunch, and great prizes

Sponsored By Colorado Society of CPAs Young Professionals Committee

Register Contact Terry Cervi tcervi@cocpa.org 303-741-8610 800-523-9082, ext. 110 Online: www.cocpa.org

Golfers of all ages and abilities are welcome and encouraged to play. e-In-One Contest!

Take a shot at winning the $10,000 Hol Photo by Krista Flynt

May/June 2014 • www.cocpa.org •

9

Taxation

Colorado Sales Tax Collection:

The “Local” Headache

BY BRUCE NELSON, M.A., CPA

I

t seems a simple question — when do you have to collect local sales tax on your sales? The answer has traditionally been different for Colorado’s home-rule cities (cities that collect their own sales tax) and state-collected cities (those that “piggyback” on the state).

For example, if you use your own truck and make more than one delivery a year into a home-rule city, that city usually claims you are “doing business” there and you must begin collecting sales tax. However, if you ship by common carrier into the home-rule city, and otherwise do not have a presence there, no collection requirement exists.

The rule is different for state-collected cities. If you have a store, sales room, office, or some similar permanent place of business in a state-collected city, you collect the city sales tax. If you don’t have such a location, you do not have to collect city sales tax no matter how many deliveries in your own truck you make into the city each year. [See Colorado Revised Statute (“CRS”) §29-2-105(1) (b).] Unfortunately, that rule may be slipping away.

The Colorado statute governing when a taxpayer is “doing business” is CRS § 3926-102(3)(a) and (b), and its accompanying regulation, 1 CCR 26-102.3. The statute provides that a taxpayer is “doing business in this state” when a taxpayer is “selling, leasing, or delivering in this state… tangible personal property by a retail sale” and “maintaining within this state… an office, distributing house, salesroom or house, warehouse, or other place of business.”

Regulation 39-26-102.3(1) requires that a taxpayer must collect sales tax if the taxpayer both (1) sells, leases, or delivers tangible personal property in Colorado, and (2) maintains an office, salesroom, or similar place of business within the state. According to the regulation, a person meeting both these requirements must obtain a Colorado Sales

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Tax License and collect sales tax. [Emphasis added.]

If a taxpayer is simply selling, leasing, or delivering tangible personal property in the state but does not have a “place of business” as required in paragraph (1) of the regulation, paragraph (2) states that the taxpayer should, not must, obtain a Colorado Retailer’s Use Tax License and collect use tax. [Emphasis added].

It is important to note the difference between .3(1) and .3(2). Under .3(1), a seller that has a permanent place of business must get a sales tax license and collect and remit sales tax, but under .3(2), where the seller does not have a permanent place of business, the Colorado Department of Revenue can only say the seller “should” get a use tax license to collect and remit use tax. In short, a remote seller (a seller located outside of a state-collected city) will not have a sales tax collection obligation under .3(1) in that city because the seller does not have a permanent establishment.

In addition, a remote seller will not have a use tax collection obligation under .3(2) unless it decides it “should” do so. Furthermore, since state-collected cities and counties only levy use tax on motor vehicles and building materials, remote sellers selling anything other than motor vehicles or building materials do not have a use tax collection responsibility, since there is no use tax due to collect.

Based in part upon the preceding analysis, the state has, until recently, consistently held that a seller without a permanent place of business in a state-collected city or county did not have a sales or use tax filing obligation for that city or county. In fact, in Policy Position 8-88 (May 1988) the state held that the presence in the city of a vendor’s delivery trucks and personnel does not constitute “doing business” in a state-collected city. However, if a vendor such as a food truck carries its inventory with it, Revenue Bulletin 81-1

(Sept. 1, 1981) holds that mobile vendors, where the sales are conducted from a truck and the sale is consummated at the customer’s location, must collect tax for that location.

The sale is considered consummated at the customer’s location “since it is there that the order it taken, purchase price is paid, and title and possession pass.”

That said, the state may be changing its mind without changing the law. In a recent Private Letter Ruling (PLR), the state held that the “sustained presence of Company employees” creates a filing obligation in a state collected jurisdiction. According to the PLR, the “sustained presence” could be as little as an employee on site for one day a month. [See Colo. PLR-11-006 (December 20, 2011).]

It's unclear how much weight should be given this PLR. First, PLR’s are binding only upon the Department and the taxpayer to which they are addressed. They cannot be cited as precedential by either taxpayers or the Department in any hearing or litigation. Second, the PLR indicates that the physical presence addressed in the example in the PLR was of employees “stationed at [a] Company’s customer business location… for as long as the Company has a contract with the customer.”

Does this mean that such a contract, even if the employee is only on site one day a month, constitutes a permanent establishment in the jurisdiction? In any event, it does not seem consistent with the Department’s past policy nor its FYI (For Your Information) publications addressing the same topic.

The Department’s FYI Sales 62: Guidelines for Determining When to Collect State-Collected

Financial Literacy Local Sales Tax (April 2013) seems to remain consistent with the state’s traditional policy.

For example, the FYI states, “Delivery of tangible personal property into another local taxing area does not require the vendor to collect the local sales taxes of the delivery area if the vendor does not have a business presence there.” And it states, “Out-of-state retailers who file Retailer Use Tax Returns (DR 0173) are responsible for collecting state sales/use taxes but are not required to collect sales taxes for any state-collected city or county, provided the retailer has no place of business in such state-collected city or county.” Finally, this position was echoed in the January 2012 revision of FYI Sales 56: Sales Tax on Leases of Motor Vehicles and Other Tangible Personal Property: In the case where city, county, and special district taxes are collected by the state, local taxes are applicable only if the lessor has a form of business location in the same jurisdiction as the lessee. Any office, shop, warehouse, salesroom, or the temporary but frequent presence of an employee for repair, sales, or service purposes is a business location. If the lessor of tangible personal property does not have a business location in a city, county, or special district, no local tax is to be collected. In the case where there is no business location, no local tax should be collected even if the property is delivered within the boundaries of a local taxing entity. [Emphasis in the original.]

It is important to note that this paragraph was deleted from the April 2013 revision of the FYI. Does that indicate a change in the Department’s position? It may.

While these statements have been repeated and unchanged in every version of these FYIs for the last 30 years, recent audit activity indicates that some state auditors are adopting the stance long maintained by home-rule cities: Delivery in your own vehicles triggers a filing obligation. The requirement that a taxpayer must have an office, sales room, or other permanent establishment in a statecollected city before the filing obligation kicks in may be changing, too. s Bruce Nelson, M.A., CPA, is a Director with EKS&H LLLP. Contact him at bnelson@eksh.com.

Help Make an Impact You’ll Be Glad You Did Ten years ago, the AICPA launched 360 Degrees of the Financial Literacy, www.360financialliteracy.org, to help Americans understand their personal finances through every stage of life. In support of this initiative, the COCPA formed the Financial Literacy Committee to develop, promote, and implement programs of financial literacy by partnering with organizations which serve individuals and families from all walks of life.

Coloradans Need You For CPAs, managing money comes easily, but that’s not the case for many who Financial Literacy Committee volunteers help. It’s all about helping with the basics of living within your means and avoiding simple financial traps. If you’re looking for a way to make a difference in someone’s life, the Financial Literacy Committee is the place for you.

Here are a few examples of the organizations with which the committee works.

Warren Village Participants are low-income single parents working toward achieving sustainable personal and economic selfsufficiency. The program gives them the opportunity to regroup and become valuable members of society. Each quarter, volunteers provide an evening of basic money management skills to Warren Village residents.

Each fall, volunteers provide a series of training sessions on needs versus wants, tracking your spending, establishing credit, taxes, banking, and comparison shopping.

Junior Achievement Finance Park Participants are middle and high school students. As a group, Financial Literacy Committee volunteers staff Junior Achievement Finance Park for a day. During their visit, students become an adult for the day and immerse themselves in a reality-based, decisionmaking process addressing aspects of individual family budgeting including housing, transportation, food, utilities, healthcare, investments, philanthropy, and banking. The next opportunity to volunteer is May 9, from 8:00 a.m.

- 2:00 p.m. If you are interested in participating, contact Liz Julin at ljulin@ cocpa.org or 303-741-8607.

No Experience Required Committee members developed and tested the programs, and curriculum is available for volunteers to use.

More information, resources, toolkits, and train-the-trainer videos can be found at www.cocpa.org under the Member Communities/Financial Literacy tab.

Chapter Opportunities

Perhaps you’d like to be a chapter champion for local financial literacy Participants are women, generally initiatives. Volunteers are needed to single mothers, who haven’t been able either lead or assist in delivering proto keep a job and have been convicted grams already developed. For inforof a felony typically related to drugs. mation on getting involved, contact About half have their GED. They work Liz Julin at ljulin@cocpa.org or visit in the bean production area, or they www.cocpa.org. All ideas and volunmake jewelry in an effort to learn a skill teers are welcome!s that will lead to employment.

Women’s Bean Project

May/June 2014 • www.cocpa.org •

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2014 WOMEN TO WATCH NAMED LEADERS OF NOTE

Women CPAs who have attained leadership positions within their organizations, have made notable contributions to the accounting profession, help to improve their workplaces, and mentor others

STACEY E. HEKKERT, CPA

TRACY M. HUGGINS, CPA

JUDITH B. VORNDRAN, CPA

“When you look at Stacey, you see a leader,” writes her ACM LLP colleague Greg Anton, former AICPA Chair. “She is a working mother of three who actively participates in (their) lives. She is a role model for young women. She is a recognized business leader. She is a mentor. She is a force and a breath of fresh air.” Stacey made her mark through hard work, an energetic attitude, and a positive personality — characteristics Anton says she exhibits every day. A nationally recognized speaker and author, Stacey also is known for her mentoring talent and her volunteer work, especially with the Women’s Bean Project for which she serves as Board Treasurer. Former ACM managing partner Gary Mitchell noted in his farewell remarks that Stacey “is passionate about each person’s success and will continue to be an outstanding leader.” Anton adds, “Stacey is still recognized today for forging a path that other women could follow.” Thanks, Stacey.

You’re the best — and definitely a Leader of Note.

Longtime colleague Mary Frances Kelley writes that Tracy “utilizes her many and diverse professional, intellectual, and personal skills for the betterment of our profession and in particular for the renewal of Denver, making it a better place to work, live, and play.” An “inclusive manager, mentor, and leader,” Tracy has provided critical resources and skill to many of Denver’s most important redevelopment efforts.

The downtown Denver revitalization, Stapleton, and numerous other projects stand witness to her leadership. She has served on the Colorado I Have a Dream Foundation, the Mountain States Employers Council, and the Denver Housing Authority, to name a few. Downtown Denver Partnership CEO Tami Door describes Tracy as a “collaborative leader who clearly understands the appropriate time for the public and private sectors to work together to make projects happen that otherwise wouldn’t.”

Jim Martinez, former DURA chair, puts it simply: “I’ve seen her take on every difficult project and make it a success, not just for today but for the next 25 years as well.”

Those who work with her, Denver, and Colorado all benefit because Tracy Huggins is a Leader of Note.

Former coworker Jenna Zhou, CPA, writes, “Judy is clearly a leader in the accounting profession. For years, she has served as an extraordinary role model, as well as an inspiration.” Her partner Ronald Hecht says, “Judy has made notable contributions to the profession, in particular in developing other women as leaders.” Senior Tax Manager Connie Zoerink calls Judy “an exceptional professional, leader, mentor, and colleague.” A CPA and attorney, Judy is recognized within the firm for building a highly respected state and local tax practice from scratch and being one of the best mentors in the office. She is active in many professional groups, a frequent author and speaker on tax topics, and currently is serving a second term as president of the Family Resource Center Association. Its Executive Director Mark King writes, “Judy is what I would call a Gold Level volunteer, and I wish I could clone her.” If you’re looking for exemplary leadership of and commitment to others, look to Judy Vorndran, a true Leader of Note.

Managing Partner/President Anton Collins Mitchell LLP, Denver

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• NewsAccount • May/June 2014

Executive Director Denver Urban Renewal Authority, Denver

Tax Partner Eide Bailly LLP, Golden

MAY 22, 2014 — 4:30 TO 6:30 P.M.

Kevin Taylor's at the Opera House 14th and Curtis St., Denver

Keynote Speaker Christine Benero, CEO Mile High United Way

$50/person

To attend, contact Terry Cervi at tcervi@cocpa.org.

EMERGING LEADERS

Women CPAs who have demonstrated leadership and have made significant contributions to the profession and their communities, while still on the path to the highest levels of advancement

MARY-MARGARET HENKE, CPA

JENNIFER K. SCHOLZ, CPA

JESSICA A. SEIDLITZ, CPA

“Mary-Margaret is a strategic business partner…focused on continuous improvement not only for herself but also for the global organization (Western Union),” writes Sandra Kasahara, University of Denver Director of its Office of Internal Audit. “Even as a teenager (when Kasahara met the then DU incoming freshman), her engagement and enthusiasm were impressive.” She leads a team of forty internal audit professionals worldwide and has developed and implemented many challenging and complex initiatives. She sponsors an annual “social ventures” event for her teams globally to give back to their communities. Currently chair of the DU School of Accountancy Advisory Board, she supports the school, its faculty, and its students with her time, as well as financially.

St. John’s Lutheran School benefits from her service as a financial expert on its board and as a committee chair for its annual charity auction. She demonstrates daily how to successfully balance important pursuits and be an inspiring role model for her colleagues, her family, and her community.

“When I retire, I know I will have left the company in a better position for success because of her,” writes Hensel Phelps Construction Co. CFO Stephen Carrico.

“Jenny fosters the development of people through training, collaboration, and team building. In the short time she has been at Hensel Phelps, she has established herself as an emerging leader.” Her team adds, “Jenny always encourages learning and personal growth. She recognizes hard work and fosters a sense of teamwork and camaraderie within our group.” Executive Vice President Richard Tucker lauds Jenny for her communication and professional skills. “She has done an exceptional job helping to implement financial system modifications in order to provide a more efficient way of doing business…Jenny is a true member of the Hensel Phelps family where she will continue to make a difference for years to come.”

Previously a senior manager with KPMG LLP, Denver, Jenny epitomizes the Emerging Leader.

“An emerging leader who will continue to do a great amount of good in the Denver community and among women in accounting” is how Jill Whelan, Alumni Relations and Development Coordinator for the DU School of Accountancy, describes Jessica.

“She is successful in her career, encouraging to the students she mentors, and active in volunteer work.” An avid University of Denver supporter, Jessica has chaired the School of Accountancy’s Alumni Engagement Council and helped organize a Women in Accounting event to celebrate women in the profession. She currently is helping to create a series of financial planning workshops for DU students and alumni. In 2012, the School of Accountancy honored her as the Young Alumna of the Year for her service with its Beta Alpha Psi mentoring program and the Pioneer Leadership Program. A member of the school’s Accountancy Advisory Board, Jessica takes to heart the importance of leading by example and giving back.

Senior Vice President, General Auditor The Western Union Company, Englewood

Controller Hensel Phelps Construction Co., Greeley

Managing Director, Assistant Treasurer Charles Schwab Investment Management Englewood

May/June 2014 • www.cocpa.org •

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Succession Planning

A Tale of Two Sales Sometimes the stories surrounding the sale of CPA firms focus solely on what went wrong. Here are stories from two COCPA members who decided to sell all or part of their practices and couldn’t have had a better experience.

BY NATALIE ROONEY

Small Town, Perfect Fit Sandy Elliott, CPA, wasn’t planning on retiring, but as John Lennon sang, “Life is what happens when you are busy making other plans.”

Elliott had been associated with a Durango CPA firm for nearly three decades when she decided to open her own tax practice. With her daughter as her office manager, she rolled along for four years before her growing practice meant adding another CPA to the firm roster. Retirement still wasn’t on her radar. “I had just turned sixtysix,” Elliott says. “I should have been thinking about retirement for years, but I was so happy with the practice.”

Then, in the summer of 2013, her father passed away. “That was a life-changing event for me,” Elliott says. “After his memorial service, I did a lot of re-evaluating and asked myself, ‘How do I want to spend the rest of my life?’ My dad had asked me — and advised me — often, ‘When are you going to retire? Don’t wait too long.’”

On impulse, Elliott talked with COCPA CEO Mary Medley and explained she was ready to retire within the next year. Medley connected Elliott with COCPA member Ron Seigneur, CPA. “Ron was gracious in sharing information, advice, and his personal struggles with me,” Elliott says.

Seigneur then connected Elliott with Tom Lang, a business broker with Touchstone Business Advisors, to help facilitate the sale of her firm. Based on the recommendations she received, she signed a listing agreement with him.

“Within days, I had a lot of very serious inquiries,” Elliott says, including one from a woman who flew in from Chicago. “Calling Mary was an impulse in the first place, and then to have such an immediate response was overwhelming.”

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Elliott says she’s not sure why so many people had such a positive reaction to her firm listing, but she credits being in the right place at the right time, the size of her firm, and the firm’s profitability. “I looked good on paper,” she says.

Ultimately, the Chicagoan wasn’t a good fit. But within two weeks, Elliott found the perfect fit when Durango CPA Thomas Meadows — a colleague in the profession locally she didn’t know — contacted her. “We had a lot of common experiences, our philosophy about client service was similar, and he had a wide variety of tax experience,” she says. “Plus, he was very likeable.”

After meeting and talking, Meadows came forward with an asset purchase agreement. “It all happened so fast; I hadn’t really

had time to digest what all of this meant,” Elliott says. “I was scared.”

Although their meetings took place in September, the two didn’t sign the agreement until January. In the meantime, Elliott and Meadows continued to talk and exchange information. Also, Meadows came to the office, met people, and did his own due diligence. “Those months gave me time to process and decide this was a good thing.

I realized it was the right decision.”

Elliott says she had heard lots of unsuccessful stories about CPAs who tried to sell their firms. She says her sale to Meadows was successful because they have so many common qualities. “He knows how important it is to take care of clients and be their advocate,” adding that Meadows was a local CPA

and didn’t have to learn the community.

“He slid into my spot. It was almost seamless, although he might not say the same,” she laughs. “It might have been a shock to him to take it all on.”

Filling the Void One of Elliott's big worries was how to fill her time. “I’d been working for thirtytwo years. Being a CPA was my identity, and I was fearful of losing that,” she recalls.

It turned out, that wasn’t a big problem after all. Between November and January, Elliott headed to Arizona to give retirement life a test drive. “I loved it. I had no trouble filling my time,” she laughs.

“Over the years I would say, ‘When I retire, I want to quilt, garden, golf, and play piano.’ Now I can.” She also took up pickleball, a blend of badminton, tennis, and ping pong. “It’s so much fun,” Elliott says.

Elliott worked full time during this recent tax season and plans to return to Arizona late this fall. Golf in Durango will keep her busy this summer. She’ll likely work with Meadows during tax season again next year.

So what about the piano lessons and quilting? “They’re two big things on my list that I haven’t gotten to yet,” she says.

But she is enjoying the freedom retirement brings. “Before, I wouldn’t even have thought about playing bridge in the daytime,” Elliott says. “I’ve never had that freedom.” She is also enjoying having the time to watch her granddaughters play high school sports.

Her advice to her peers? “I don’t pretend to have answers to succession planning, but reinventing your life after a long successful career is exciting and rewarding.

And as Dad reminded me: Don’t wait too long!”

Sell. Grow! Retire?

Taking your firm in a new direction may be a curious approach to retirement, but that’s exactly what David Irvine, CPA,

one of the founders of Cornerstone CPA Group in Denver, did.

The firm currently consists of three owners and specializes in closely held business tax, consulting, and litigation support. Six years ago, Cornerstone was composed of just two owners — Irvine and Brian Campbell, CPA. Both were reaching retirement age. “It was time to put some transition planning in place,” Irvine says.

With thoughts of selling, Irvine and Campbell spoke with several firm brokers but found it difficult to identify potential purchasers who would match well with all of their clients. While they had significant business clients at the time, they also had an extensive list of individual tax preparation and planning clients.

“The brokers suggested potential buyers that were either larger firms that would likely separate quickly from our smaller clients or smaller practitioners who wished to grow significantly and might not be qualified to serve our larger clients,” Irvine says. “We sensed that with each of the alternatives, they would prosper with some clients but not with others. We valued all of our client relationships and didn’t want to disappoint any of them. Our longstanding client relationships are very personal.”

Finding Middle Ground At first, Irvine was discouraged. He and Campbell began discussing an alternative to selling: simply selecting a future date when they would walk away from the practice.

“Rather than agonize over wringing dollars out of an unsatisfactory sale, we thought we would simply — graciously — place as many of our clients as we could, close the door, and feel that was an honorable way to complete our careers,” he says.

But when the partners took a step back and looked at their circumstances, they started thinking differently. “We realized the most difficult clients we served were the individual tax prep clients because they are the most time consuming and deadline-

oriented,” Irvine explains. “So we began to think about dividing the practice.”

It was a fortuitous decision. The firm already had a tax manager, Rob Jaffe, CPA, who Irvine knew would be happier working for himself. He and Campbell approached Jaffe.

“His initial reaction was that it was too much to undertake,” Irvine says. It took some thought, but eventually Jaffe agreed.

They drew up a contractual agreement to make it economically feasible. In addition, Jaffe stayed in Cornerstone’s suite of offices. Irvine appreciates that he and Campbell still get to meet and greet their former clients, maintaining those important, long-term relationships.

While the separation of the individual clients was a “bit traumatic,” Irvine says that after the first year, the vision of where the firm was heading was exciting. A younger CPA, Boris Sobolev, was invited into the partnership. With the firm’s focus solely on business clients and valuation and litigation work, revenues began to grow. They now exceed the revenues they generated before the sale of the individual tax prep clients.

Sobolev plans to purchase the remaining two-thirds of the firm eventually and bring in another partner to continue to grow it. Irvine’s and Campbell’s succession plans are officially in place.

Irvine’s advice for others who are thinking about selling: The longer you wait to make a final decision, the more difficult that decision is likely to be. “It takes energy and strength to accomplish a sale,” he says, six years after the fact. “The longer you wait, the less you have of those things.

If you wait until your health fails or your energy or enthusiasm wanes, it can be an entirely different situation. We were fortunate.”

One big advantage to dividing the firm the way he did: Irvine no longer has to be around for tax season. In fact, if you tried to contact him on April 15 this year, you wouldn’t have reached him. He was enjoying the sights and sounds of Turkey without a single thought of tax returns. s May/June 2014 • www.cocpa.org •

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Business Strategy

Benchmarking as a Strategic Tool Have you ever wondered how your organization stacks up against the best in the business? Benchmarking can be a useful tool to help you find out.

BY NATALIE ROONEY

Benchmarking is a system for evaluating various aspects of a business’s processes in relation to best practice companies’ processes, usually within a peer group defined for the purposes of comparison. The results allow organizations to develop plans for improvements or adopt specific best practices, usually with the goal to increase performance.

Benchmarking can be a one-time effort, but it is often used as a continuous process so organizations can improve their practices for the long haul.

Benchmarking identifies: • what you’re doing • how you’re doing it • how others do it • how well you’re doing it in comparison to others • what and how to improve Benchmarking differs from other improvement techniques because it focuses on excellence; involves detailed comparisons; pools shared information to benefit all the contributors; and encourages front line managers and staff in seeking out and implementing change.

Financial benchmarking can provide businesses with the evidence they need to identify significant differences in resource management and suggest ways to do things better, to improve efficiency, reduce costs, or identify potential savings.

Benchmarking For Change Two years ago, Denver-based SM Energy Company, an independent energy company

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engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in onshore North America, started using benchmarking to improve its accounting close process.

Pat Lytle, CPA, CGMA, financial reporting manager at SM Energy Company, was part of the project team which also wanted to look at general and administrative expenses.

“As a growing organization, we wanted to understand the best performance being achieved by other accounting organizations and how we could improve our accounting processes,” Lytle explains. “We also wanted to develop a culture of continuous process improvement. And, we wanted to know how we could be as good as or better than our peers of similar size in our industry.”

Lytle says the goal was to perform in the top quartile amongst SM’s peers. “We wanted to be among the best. Benchmarking offered that opportunity.”

Perhaps surprisingly Lytle says, a lot of companies are willing to talk about their ac-

counting close process, including their pinch and pain points. The accounting close process benchmarking effort was less formal.

Lytle says the team had conversations with other companies in the industry. “In many cases, we knew people within a company’s accounting group,” he says. “They were contacts with whom we felt comfortable sharing information.”

By talking to others, SM Energy was able to shorten its close process by a whopping 40 percent. Lytle says one benefit was being able to file faster with the SEC. But the biggest outcome was that the process improvement led to SM employees doing more meaningful work.

“If a team member was doing data entry and we found ways to automate that, the employee could focus more on analysis work,” Lytle explains. “So not only did we shorten our time to close, but during the benchmarking effort, our employees also learned new things and are now doing more value-added work.”

Lytle says the accounting close project was guided by a team of 20 accounting managers, supervisors, and accounting process experts who looked at every accounting process. SM hired a consultant to help map all of them. “We identified areas that had to change to get where we wanted to be. We knew we needed to close faster to be aligned with other companies, but we didn’t know how much faster.” Lytle says SM gained efficiencies by eliminating manual processes and letting the systems do the work.

SM’s efforts to improve in the G&A area were more formal, and the company actually joined a study. Individual company information wasn’t shared. Only aggregated responses were used to provide feedback to the study participants.

The results pointed to areas where SM needed to improve its systems. Lytle says while the company was already on a path to implement a new enterprise resource planning (ERP) system, the study highlighted the need.

“The objective of how we do better and how we compare with our peers was met,” Lytle says. “Because without knowing how we compare in different areas, it was hard to know where to focus our efforts.”

Another benefit from participating in the study was establishing a culture of continuous improvement. “We didn’t want to become stagnant,” Lytle says. “We wanted to establish a culture where continuous improvement is ingrained and people are always looking for ways to do things better.

We want to be an accounting department where the best and brightest want to work.

We want to reward people for improvement and new ideas.”

Talking Metrics with Clients The benchmarking process doesn’t just benefit companies internally; it can be a great client service as well. Just ask Steve Corder, CPA, managing director at Kundinger, Corder & Engle, PC, Denver, whose firm specializes in auditing medium and large charities.

“We do the audit, present our findings, and discuss the organization’s financial position,” Corder says. “Then, we like to talk about metrics. It’s a natural flow when you have audited financial statement numbers in front of you.”

Corder has experience on both sides of the table. Not only is he an auditor, he also has served on an audit committee for a bank where

We like to talk about metrics. It’s a natural flow when you have audited financial statement numbers in front of you.

— Steve Corder, CPA

he quickly realized the other committee members didn’t know the first thing about bank industry ratios, metrics, or benchmarking.

“I wish the auditors had explained what the committee members needed to know and think about in the banking industry,” he says. “Boards are made up of professionals – often doctors and attorneys – and they sometimes don’t know the financial side of a business, let alone a nonprofit business.”

Corder says it’s important for nonprofits to understand benchmarking because their value is based on it. As a result, nonprofits should focus on three financial reserve stages: • Can we meet payroll?

• Can we pay our bills in a timely manner?

• Do we have a three- to six-month financial reserve?

Creating an Endowment “Many nonprofits live hand to mouth and can barely make payroll or pay their

bills,” Corder says. But clients who followed the three-stage process were able to withstand the recent recession. “The smart ones were actually able to increase their spending in that time to meet the greater need of those they serve,” he says.

To help board members understand the metrics when they see them, nonprofits need to have at least one financial expert on their boards. “Someone needs to say, ‘These are the metrics you need to be aware of,’” Corder says.

For example, a key metric for nonprofits is the program spending ratio, which Corder says should be more than 75 percent. “For every dollar that comes into an organization, charities want to tell donors they spent at least seventy-five cents of it toward the mission,” he says. “As donors, we like to give to organizations that spend more dollars on programs. Board members need to hear that information.”

Corder also helps nonprofits understand their fundraising metrics. “When nonprofits seek donations, they need every dollar. If they hire a fundraiser and pay ten thousand dollars for the service, they should be able to raise thirty thousand dollars or more in donations,” he says.

“That’s a benchmark for an effective fundraiser in the nonprofit world, but if you’re just starting out, you don’t know that.”

Corder cites another example of nonprofits which receive money from the Combined Federal Campaign (CFC), which is similar to United Way. If an organization receives funding from the CFC but doesn’t spend at least 75 percent of its total revenue toward programming, the CFC may cease its funding. Those dollars can be critical to an organization’s ultimate success or failure.

“We have these conversations with our clients, but those newer to receiving this kind of funding need to know and watch how they spend their money,” Corder says.

“Nonprofits are doing great things in our communities. They’re passionate, and they’re committed to their missions. They just need help with the financial metrics.” s May/June 2014 • www.cocpa.org •

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Members in Service

Giving Back to the Community Whether answering tax questions, stuffing backpacks with food for kids and their families, teaching financial literacy concepts to single moms, or through countless other volunteer efforts, Colorado CPAs make a difference in their communities every day. Here are just a few examples of your colleagues' recent good works.

Donating Expertise: Answering Tax Questions "Hello, Taxline 9." This is what callers hear when they call in to the KUSA Taxline 9 program. For 19 years, COCPA volunteers have staffed the telephones at Channel 9 to answer questions from the public.

An average of 35 calls are answered by each volunteer during each program — more than 1,200 calls are answered during the season. This year the program ran from Jan. 23 through April 8. It's successful thanks to dedicated volunteers who include: Bev Beattie, Brenda Clarke, Fran Coet, Larry Fike, Mira Finé, Don Kaniecki, Sarah Knight, Larry Robinson, Allan Rosenbaum, Ron Seigneur, and Greg Truitt.

We give our sincerest thanks to these CPAs who truly who make a difference.

Volunteering for Taxline 9 from left: Greg Truitt, Larry Robinson, Brenda Clarke, and Ron Seigneur

Donating Time: Members Help Out at Food for Thought One Powersack: Cookies, Rice-a-Roni, or a bag of rice. One box of Cheeseburger Helper. Green beans or corn. One can of ravioli, one can of chicken, one juice, four individual bags of oatmeal, three granola bars, and a toothbrush.

Thanks to the 100% volunteer efforts of Food For Thought, www.foodforthoughtdenver.org, four Denver elementary schools and their students ages 3-12 receive Powersacks every week. Through a joint effort with Metropolitan State University of Denver, Food for Thought has delivered over 43 tons of food to the 600+ students of Columbian, Greenley, Garden Place Academy, and Fairview elementary schools since its inception.

The COCPA Young Professionals Committee helps Food For Thought by filling Powersacks and raising funds to support the program at its annual golf tournament (this year, June 9, at Lakewood Country Club).

To participate in this and other volunteer opportunities, contact Terry Cervi at tcervi@cocpa.org.

18

• NewsAccount • May/June 2014

Chris Anacker, Dori Suess, Claire Steinke, COCPA Deputy Director Liz Julin, and friends stuffed Powersacks for Denver kids and their families.

The Food for Thought Mission: The elimination of weekend hunger in Denver's Title 1 schools. By providing a Powersack to each child each week, Food for Thought seeks to assure no child goes hungry over the weekend.

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19

CGMA

How to Become One of the World’s Most Ethical Companies

BY SABINE VOLLMER

F

or much of the past six years, the toy industry has been in crisis. More than three dozen U.S. companies have been forced to recall toys with lead paint levels that exceeded federal limits.

The crackdown started after lawmakers passed more stringent testing and documentation requirements and stiffer punishments.

But Hasbro, a major U.S. toy and game manufacturer whose brands include Easy Bake Ovens, G.I. Joe action figures, and board games such as Candy Land, wasn’t among those companies.

The reason: A culture of ethics backed by senior management and directors — one that is reflected in auditing, internal controls, and compliance programs, says Kathrin Belliveau, Hasbro’s vice president for compliance, government affairs, and corporate responsibility. “We always talk about doing the right thing,” she says. “Sounds pretty simple, but it’s been our guiding mantra.”

That mantra has helped the company earn the distinction of being one of the World’s Most Ethical Companies, an award granted by Ethisphere Institute, a research organization that spun out of a corporate compliance and ethics training and consulting firm in 2007.

The awards are given annually to companies that exceed legal compliance minimums and shape future industry standards by introducing best practices. Recently, 144 companies — including 38 based outside the U.S. — received the award.

The awards are determined by scores given for ethics and compliance programs (25%), reputation, leadership and innovation (20%), governance (10%), corporate citizenship and responsibility (25%), and culture of ethics (20%). Scores are confidential, and Ethisphere does not rank companies that are honored.

20

• NewsAccount • May/June 2014

Among the 2014 honorees were 17 corporations that have been named to the list for eight years in a row, including UPS, PepsiCo, Texas Instruments, and Deere.

Hasbro has won three years in a row.

company employs quality-assurance inspectors on factory floors and requires testing before the toys are shipped to the U.S. The company has also been active in environmental initiatives. In 2012, Hasbro announced plans to reduce materials used in product packaging for many of its highly popular global brands. And, in 2013, the company pledged to phase out PVC in new toy and game product packaging. Hasbro has also sought to redesign disposable boxes and other kinds of packages that use less material.

To distinguish its corporate brand from competitors, Hasbro decided to go public with its corporate culture of ethics — the kind of transparency that is a common denominator among many of the award winners.

Examples of what other repeat honorees have accomplished in recent years, according to company responsibility reports, include: • UPS reported in its 2012 corporate sustainability report that the company reduced greenhouse gas emissions from operations and purchased energy by 2.1% despite a 2.3% increase in shipping volume.

Transparency and Sustainability During the past five years, the U.S. Consumer Product Safety Commission and U.S. Customs and Border Protection stopped at least 9.8 million units of about 3,000 different toys that violated applicable standards from reaching consumers.

Hasbro avoided being sucked into the lead paint crisis because, true to its mantra, the company set standards for lead in paint that were more stringent than the 2008 federal limits.

The company also extended the same standards to foreign contractors. And the

• Texas Instruments invested $1.9 billion in research and development in 2012 and forged new university relationships in the U.S. and overseas to advance medical, automotive safety, and energy-efficient technologies.

• Aflac’s commitment to diversity was reflected in a workforce that included 39% minorities and 67% women in 2012, according to the company’s corporate citizenship report. Forty-nine per cent of supervisory positions are held by women.

Increased Awareness The ethics awards, for which companies must apply, reflect an increased awareness of

corporate ethics that goes beyond mere compliance.

A crackdown on corporate corruption, bribery, and fraud, and the reputational damage that multinationals risk when they get caught have propelled ethics concerns to the top of corporate general counsels’ minds worldwide, research suggests.

A 2014 survey by the Association of Corporate Counsel, which polled more than 1,200 chief legal officers or general in-house counsels in 41 countries, found that 88% of respondents named ethics and compliance as their top concerns, ahead of regulatory changes (83%) and information privacy (79%).

Businesses, particularly in the era of social media, have recognized that ethical behavior builds trust with outside stakeholders.

To maintain its reputation as one of the world’s most ethical companies, Hasbro, for example, makes sure retailers, regulators, and consumers are aware of its stringent standards and requirements.

Trust in business worldwide has been improving in the past five years, the 2014 Edelman Trust Barometer has found. But results of the study, which is based on a survey of about 33,000 respondents in 27 countries, also suggest demand for government oversight remains strong.

In 2014, 58% of respondents trusted business to do what’s right, up from 49% in 2009. Especially in emerging economies, such as Indonesia, Brazil, and the United Arab Emirates, trust in business improved.

But companies based in emerging economies were perceived less trustworthy than companies based in Europe or North America, according to the research.

Technology was the most trusted industry worldwide (79% of respondents), and banks were trusted the least (51% of respondents).

Despite the increased trust in business, 42% of respondents said government regulation of business is not enough, compared

with 27% who felt business was regulated too much.

Three Tips To become and remain a trusted company, Belliveau recommends three basic steps: • Understand corporate risks, and stay abreast of potential problems. Hasbro does that by being active in industry associations in the U.S. and globally, particularly on the associations’ safety standard committees.

• Raise the bar for the company by adopting a philosophy of continuous improvement.

• Be transparent and communicate with outside stakeholders. Hasbro shares its best practices and offers a reporting tool on its website at www.hasbro.com. s

May/June 2014 • www.cocpa.org •

21

Specialty Credentials

ABV

•

CFF

•

CITP

•

PFS

A Few Little Letters Can Change Your Career When there are hundreds of thousands of CPAs at work in public accounting, business and industry, government, academia and consulting, how can you stand out in the profession?

Many CPAs do this by leveraging the rapid growth of advisory services. By offering specialized knowledge to your clients or employer, you’re positioned to be more competitive in the marketplace and are able to differentiate yourself from others in the field.

That translates into increased compensation and career advancement opportunities.

Firms are finding that offering more services can increase their bottom line. When you move beyond compliance work to more future-oriented, value-added work, you are able to do more for your clients, serving them in new ways. Organizations with credentialed professionals realize increased profit margins through the management of risk, improved controls, process and workflow improvements, and faster decision-making through simulations and data analytics.

The fact is, value-added services are not just a trend, and they are not going away. Of Accounting Today’s Top 100 Niche Services, business valuation consistently has ranked in the top five for the past 15 years. Also, an IBISWorld 2012 report projects that forensic accounting will grow at a rate four times that of the U.S. accounting profession through 2017. Financial planning follows closely at a growth rate that is double that of the accounting profession. According to the Robert Half 2014 Salary Guide, the need for financial professionals with technology experience is rising, given the complexities of systems and tools, and emerging technologies.

Unlock the Possibilities The AICPA offers the only credentials built on the CPA foundation of competency, objectivity, and integrity. The credentials are:

22

• NewsAccount • May/June 2014

Certified in Financial Forensics (CFF®), Personal Financial Specialist (PFS™), Accredited in Business Valuation (ABV™), and Certified Information Technology Professional (CITP®).

Want further evidence that a credential can be an effective career boost? First, 66% of CPAs say holding an AICPA credential in advisory services makes a difference in receiving job offers. What’s more, the average salary for CPAs who hold these credentials is 15% greater than CPAs without a specialty credential according to a recent study.

Recognizing the Value In the U.S., forensic accounting has become one of the fastest growing specialty practice areas. CPAs who want to demonstrate their knowledge, skills, and experience in the forensic accounting area are pursuing the CFF credential. It encompasses fundamental and specialized forensic accounting skills that you can apply in a variety of service areas, including bankruptcy and insolvency, computer forensic analysis, family law, valuations, economic damages calculations, and fraud prevention, detection, and response. In addition, the CFF credential sets you apart as an expert witness in the courtroom.

The PFS credential showcases a CPA’s expertise in personal financial planning. This credential is an excellent next step for CPAs seeking to expand or diversify a tax-focused practice. Your comprehensive knowledge in financial planning and tax enable you to bring a holistic approach to your clients’ financial needs, whether advising in retirement, estate, tax, risk management, and/or investment planning.

Two major factors are driving the demand for CPA financial planners. First, given the complexities of the American Taxpayer Relief Act of 2012 (ATRA) and the new

net investment income tax that will impact every area of financial planning, clients are looking for the objective guidance that CPAs provide. Second, large numbers of boomers are heading into retirement and seeking advisors to help them plan accordingly to avoid outliving their financial resources.

The ABV credential is ideal for CPAs who want to enter this in-demand area by positioning themselves as a premier business valuation service provider who goes beyond the core service of reaching a conclusion of value to creating value for clients through the strategic application of this analysis.

The rise in demand for business valuation experts and firms that offer this service has been fueled by a rapid increase in merger and acquisition activity, gifting, and estate transfers, and the Small Business Administration’s requirement for independent business valuations on loan regulations. Other valuation services include valuing a business due to transfer of ownership, divorce settlement, fair value accounting, ESOP valuations, economic damage calculations, and expert witness or litigation support.

CPAs who have considerable expertise in information management and technology assurance should seek the CITP credential. CPAs who have earned the CITP credential are recognized for their unique ability to provide technology-related assurance and business insight by leveraging knowledge of information, data relationships, and supporting technologies. This credential spans a broad base of knowledge — from IT assurance, IT risk management and security, and privacy to analytics and emerging technologies. CITP credential holders are helping their clients or organization improve operations, ensure financial data integrity, determine risks associated with financial reporting, and prevent and detect fraud.

A Closer Look at Requirements In addition to holding a valid and unrevoked CPA license or certificate issued by a legally constituted state authority, being an AICPA member in good standing, and signing a Declaration of Intent to comply with the requirements of credential recertification, each candidate must also meet the requirements of the table at right.

Exam Requirement

Business Experience Requirement

Education Requirement

CFF

Pass the CFF Examination

1,000 hours of business experience in forensic accounting within the 5-year period preceding the date of the CFF application

75 hours of forensic accounting continuing professional education (CPE) within the 5-year period preceding the date of the CFF application

PFS

Pass one of three comprehensive exams: Personal Financial Specialist (CPA/PFS), Certified Financial Planner® (CFP) or Chartered Financial Consultant (ChFC)

3,000 hours of personal financial planning experience within the 5-year period preceding the date of the PFS application; up to 1,000 hours of tax compliance experience can count toward the total experience requirement

75 hours of personal financial planning CPE within the 5-year period preceding the date of the PFS application

ABV

Pass the ABV Examination (waived for Accredited Members and Accredited Senior Appraisers of the American Society of Appraisers)

Either 6 business valuation engagements or 150 hours of business valuation experience within the 5-year period preceding the date of the ABV application

75 hours of valuation CPE within the 5-year period preceding the date of the ABV application

1,000 hours of business experience in information management and technology assurance within the 5-year period preceding the date of the CITP application

75 hours of information management and technology assurance CPE within the 5-year period preceding the date of the CITP application

Resources Available From the AICPA No matter which credential you pursue, the AICPA supports you every step of the way by providing everything from exam prep materials to exclusive tools and technical resources that will help you, as a credential holder, maintain the highest level of competency in delivering advisory services.

When you’re ready to take your career to the next level with an AICPA credential, visit aicpa.org/credentials. s

CITP Pass the CITP Examination

Get the Facts

ON AICPA ADVISORY SERVICE CREDENTIALS

4

15%

exclusive credentials — ABV , CFF ®, CITP ® or PFS — from the AICPA differentiate you as having specialized knowledge and expertise. ™

™

additional salary is the average for CPAs who have an advisory service credential versus CPAs who do not.*

possibilities await those who practice in business valuation, forensic accounting, information management and technology assurance, and personal financial planning.

Now that you know, pursue a credential at aicpa.org/credentials. * 2013 AICPA Compensation Survey

Copyright © 2013 American Institute of CPAs. All rights reserved.

May/June 2014 • www.cocpa.org •

23

Classifieds

Movers & Shakers EKS&H LLLP acquired Infolink Consulting, a technology company that implements information delivery and business analytics solutions. Based in Denver, it will be integrated with EKS&H’s current Business Technology Services group. Infolink managing partners Bob Tinglestad and Tim Deskin are joining EKS&H consulting partner Sean McBride to lead the group.

Dalby, Wendland & Co., P.C., was recognized by Accounting Today as one of the Top Firms of 2014.

For the second consecutive year, the Financial Times named Mark J. Smith to its list of the top 400 financial advisors in the U.S. Smith is one of four Colorado advisors named to the list. He is president of M.J. Smith and Associates, an independent wealth management firm. As well, Smith was named to Barron’s Best Colorado Financial Advisors for 2014.

CORRECTION

Educational Foundation of the COCPA trustee Kristine Brands, CMA, was incorrectly identified as a CPA in the March/April 2014 issue. We apologize for the error.

Practices for Sale, Purchase, or Merger Senior CPA would like to associate with a sole practitioner and/or a small 2 to 3 member firm to share expenses. Must use Quickbooks and Lacerte. My preference is to stay in the Denver Tech Center between Quincy and Orchard. If things work out, to ultimately sell out. Send responses to eg@egarbercpa.com.

CPA firms or partners. We represent a number of quality CPA firms who are looking to merge, acquire, or sell their practices to other CPA firms or partners with business. Locations are in the Denver area.This is an opportunity to ensure your future as well as help your clients by expanding your services to them. Why settle when you can select? Established in 1939. For further information, please contact: Phil Rubeck at D&R Associates of Colo., 720-446-7020 or email: dandrassociatesofco@aol.com.

Fred Mehring, Select Business Group, Inc., specializes in the sale, merger, and acquisition of accounting and tax practices. Over 25 years of experience. Confidentiality stressed!

Call Fred Mehring at 303-771-3100, fax 303-477-6010, or fmehring@selectbg.com.

The American Institute ofBenevolent CPAs Benevolent Fund was established The American Institute of CPAs The Fund American was established Institute of CPAs Benevolent Fund was estab 1933

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24

The Benevolent Fund is a 501(c)(3) organization.

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