COCPA NewsAccount - November/December 2019

NEWSACCOUNT COLORADO SOCIETY OF CPAs • NOVEMBER/DECEMBER 2019

Connecting CPAs and Their Clients to Causes They Support PAGE 7

CPA Evolution 2.0 PAGE 4

From Wine Connoisseur to Distillery Proprietor PAGE 17

MAKING CHANGE

Together

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NewsAccount | November/December 2019

7 Contents

17

Features 4

CPA Evolution 2.0: Focus on the Core Conversations continue on the CPA Evolution initiative, a joint project of the AICPA and the National Association of State Boards of Accountancy to transform the CPA profession and its licensure model.

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ReFUND Colorado: A New Way to Support Colorado Nonprofits The Donate to a Colorado Nonprofit initiative provides Colorado taxpayers with a new opportunity to support a nonprofit that’s doing great work in their community.

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Connecting CPAs and Their Clients to Causes They Support Colorado Gives Day, Dec. 10, is the annual, statewide movement made possible

by Community First Foundation, the organization which has connected generous donors with outstanding nonprofits - including the Educational Foundation of the COCPA - since 1975.

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17

21 24

Bylaws Amendments Proposed for Member Comment The proposed changes clarify certain requirements, update specific sections, add procedural elements, and amend the related implementing resolutions.

Comments are due by December 5.

From Wine Connoisseur to Distillery Proprietor Sandy Rothe, CPA, always loved wine. Today, he’s enjoying - and making spirits at Whistling Hare Distillery, his answer to, “What are you going to do when you retire?”

21 Departments 2

Chair Column

32

Movers & Shakers / Classified Ads

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In Memoriam

HOLIDAY HOURS

The COCPA off ice will be closed:

Opportunity Zones: The Sleeper of the Tax Cuts and Jobs Act Understanding the rules and the risks is key to taking advantage of the opportunities created in the TCJA.

Thanksgiving November 28-29 Christmas December 23-25

Why Data Analytics Isn’t as Scary as You May Think Big Data has the potential to help companies improve operations and make faster, more intelligent decisions. But, the mere mention makes people nervous. Set the fear aside. Everyone can do it.

New Year’s December 31 (at noon) & January 1

November/December 2019 | www.cocpa.org

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CHAIR COLUMN

NEWSACCOUNT

Change is the New Normal

A bimonthly publication of the Colorado Society of Certified Public Accountants Vol. 65, No. 4 November/December 2019

BY BEN HROUDA, CPA

Officers

Benjamin T. Hrouda, Chair Sharon S. Lassar, Vice Chair Christopher J. Telli, Treasurer Victor A. Amaya, Immediate Past Chair Mary E. Medley, Secretary

Directors

Kristine M. Brands, Toby Clary, Audra Dixon, Renny Fagan, Georgia Z. Phillips

Editorial Board

Jack Allgood, Alan D. Bennett, Steve Corder, Peggy Jennings, Georgia Z. Phillips, Lori Anne Reinwald, Laura J. Theiss, Barbara J. Tedesko, Steve Van Meter, Michael D. West, Charlie Wright Mary E. Medley, President/CEO Natalie G. Rooney, Contributing Writer Ariana Cassard, Blue Ocean Ideas, Design 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 $12.00 one-year subscription to NewsAccount.

Periodical postage paid in Englewood, 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 = 6,388 copies; sales through dealers and carriers, street vendors, and counter sales = 0; paid or requested mail subscription = 6,312; free distribution by mail = 0; free distribution outside the mail = 20; total free distribution = 20; total distribution = 6,332; office use, leftovers, spoiled = 56; returns from news agents = 0; total sum = 6,388; percent paid and/or requested circulation = 99%.

303-773-2877 • 800-523-9082 Fax: 303-773-6344

NewsAccount is available online at www.cocpa.org.

As we wrapped up the 2019 Chair Tour in August, it was clear that change is on COCPA members’ minds. In fact, my biggest takeaway from the annual road trip around Colorado is that COCPA members, regardless of their area of practice, are all dealing with the same basic issue: How do I grow my business, serve my clients or employer, deal with IT issues, serve as the HR person, handle the millions of other things CPAs face every day, and still find the time to prepare for all of the changes the profession is facing?

M

embers expressed mixed emotions that ran the gamut from uncertainty, fear, and worry to excitement as they grapple with these issues.

I’ve written in prior columns about CPA Evolution, the joint initiative between the AICPA and NASBA (the National Association of State Boards of Accountancy) to “transform the CPA profession and its licensure model in recognition of the need for rapidly changing CPA skills and competencies necessitated by constantly escalating technological disruption.” See page 4 for an update.

To help CPAs learn more about emerging technologies and services, the AICPA and state societies are developing resources for members including: • An audit data analytics webpage with links to articles, videos, an audit data analytics to traditional procedures mapping guide, and more

• A white paper exploring blockchain and its potential impact on audit and assurance services • A “Go Beyond Disruption” podcast in which finance professionals from across the world discuss trends in emerging technologies • A Cybersecurity Resource Center that provides tools and information for organizations (including CPA firms), CPAs providing advisory services, and CPAs providing assurance services In addition to an evolving set of services, we’re seeing the skill sets for people who are joining accounting firms evolve as well.

These new team members have a very different mix of degrees – computer science, math, data analytics – who are working collaboratively with CPAs for clients’ benefit. Read more about the rise of non-CPAs in the profession in the article on page 26.

LEADING INTO THE FUTURE = HAVING THE ABILITY TO...

• Think of new solutions • Be comfortable with chaos • Understand technology unlearn/relearn

• Harness emotional intelligence • Blend people and technology

CPAs make a DIFFERENCE “As we continue to evolve as a profession, we need to keep serving our clients and employers, ensuring that we’re the value add they want and need.

We’re hearing a mix of trepidation and excitement surrounding these changes, too.

As we continue to evolve as a profession, we need to keep serving our clients and employers, ensuring that we’re the value add they want and need. What we’re doing in the future might look different. We might be planning, forecasting, or finding operational efficiencies, but we’re actually already doing a lot of those things. Now, we can start shedding some of the more mundane tasks like bookkeeping, payables, and receivables, freeing ourselves to focus on higher level thinking and creating the space we need to grow our organizations.

I can’t predict the future, but I can say with confidence that it lies in doing the one thing we’ve always done: Serving as the trusted adviser to the business world. How we accomplish that will be what changes.

November 7 • Grand Hyatt Denver Join your colleagues in celebrating the 2019 Everyday Heroes and Heroines; welcome newly licensed CPAs into the profession; support the Educational Foundation of the COCPA during the famous Wine Wall; and laugh with celebrated comedian Josh Blue.

2019 EVERYDAY HEROES & HEROINES

Alexandria A. Romero, CPA Pueblo City-County Library District

Shari Lynn Lutz, CPA Shari Lutz & Associates

Steven R. Corder, CPA Kundinger Corder & Engle PC

Julie Troutman Lerudis, CPA Boettcher Foundation

Jennifer K. Scholz, CPA Hensel Phelps Construction Company

Lauren Napheys, CPA KPMG LLP

Timothy P. Watson, CPA ACM LLP

To attend, go to cocpa.org/CPAsMakeADiff or call the COCPA office, 303-773-2877/800-523-9082.

SPONSORED BY

Email Ben Hrouda at ben.hrouda@flywheelcap.com.

November/December 2019 | www.cocpa.org

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FUTURE FORWARD

CPA Evolution 2.0: Focus on the Core Conversations continue on the CPA Evolution initiative, a joint project of the AICPA and the National Association of State Boards of Accountancy (NASBA) to transform the CPA profession and its licensure model in recognition of the need for rapidly changing CPA skills and competencies.

Escalating technological disruption is among the key drivers. The two groups developed the following guiding principles for this effort. Both groups discussed next steps at their respective national meetings in late October, as NewsAccount was going to print. More details to come.

Principle #1

The CPA profession must adapt quickly due to the technological disruptions in areas such as data analytics, robotics, artificial intelligence, and more. As such, the competencies, services, and attitudes of CPAs need to continually evolve in order to protect the public interest.

Principle #2

Principle #2: The CPA profession and state boards of accountancy recognize that technological and analytical expertise are essential to performing assurance work, as well as the other services that are currently, or will be in the future, core to professional accounting.

Principle #3

Principle #3: The CPA profession and state boards of accountancy acknowledge that sustaining the profession and continued public protection require rethinking initial licensure requirements.

Principle #4

Principle #4: The profession, and therefore entry into the profession, must be redesigned to attract individuals with technological and analytical expertise. This includes non-CPA professionals whose technology and analytics skills are critical to the performance of assurance and other core services, as well as non-accounting major students. All must demonstrate minimum required competencies necessary to perform professional accounting services as a CPA.

Principle #5

Principle #5: The changes must be rapid, transformational, and substantive without negatively impacting candidates currently in the pipeline.

SPECIFIC CONCEPTS - EXAMINATION The Uniform CPA Examination would serve all candidates, with variations within exam sections that correspond to areas of study and interest. Using the current exam structure, the breadth and depth would be modified based on future-looking practice analyses.

For more information, contact Mary E. Medley, mary@cocpa.org.

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NewsAccount | November/December 2019

Bu sin es s

Tax complia nce an d

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ng ni n a

analysis and ng rti po re

SPECIFIC CONCEPTS - EDUCATION Flexibility is needed in the education requirements to position the profession for the future. This could mean reducing educational requirements on certain existing concepts and adding educational requirements on other concepts. For example, candidates with different degrees would be required to obtain education around a common core of accounting, auditing, tax, and technology, as well as elective coursework which aligns with career goals as a CPA. The accounting graduate would need a greater understanding of technology, and the technology-oriented graduate would need a greater understanding of accounting.

CORE

ACCT : AUDIT : TAX : TECH

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FEDERAL ADVOCACY

A FISCAL REALITY:

Supporting the Fiscal State of the Nation Resolution

T

he U.S. government’s balance sheet indicates that, over time, the nation has an accumulated deficit (from annual shortfalls) of $21.5 trillion1.

To put that in perspective, if you made a stack of 21.5 trillion $1 bills, you would be able to go to the moon and back more than three times.

Recently, Representatives Kathleen Rice (D-NY) and Andy Barr (R-KY) introduced the Fiscal State of the Nation resolution, H. Con. Res. 68, with 103 additional cosponsors. It provides “for a joint hearing of the Committees on the Budget of the House of Representatives and the Senate to receive a presentation from the Comptroller General of the United States regarding the audited financial statement of the executive branch.” The resolution ensures that members of Congress are made aware of the information in the federal financial statements and helps them to better understand how current and/or future policy may affect the nation’s long-term fiscal health.

“We thank Representatives Rice, Barr, and the more than 100 other members who signed on to this important resolution, including Colorado Cong. Ken Buck and Cong. Scott Tipton,” said Mary E. Medley, COCPA CEO. “Their leadership will help ensure that key policymakers are focused on some of the most important aspects of the U.S. consolidated financial statements, including financial and stability measures. The COCPA is encouraging all Colorado members of the U.S. House to support this resolution by becoming a cosponsor.”

AICPA also supports the Fiscal State of the Nation resolution because the consolidated federal financial statements and the Government Accountability Office (GAO)’s audit report provide valuable information on the financial condition of the federal government. Policymakers should consider this information while making key decisions.

1

As of September 30, 2018

November/December 2019 | www.cocpa.org

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TAX PLANNING

ReFUND Colorado: A New Way to Support Colorado Nonprofits

BY RENNY FAGAN, CEO, COLORADO NONPROFIT ASSOCIATION

L

ast year, the state issued $1 billion in refunds to almost two million households. Starting with the 2019 tax year, Coloradans will be able to donate all or part of their state refund to any nonprofit of their choice from among 5,000 eligible organizations through “Donate to a Colorado Nonprofit Fund.” This nation-leading program provides Coloradans with a new opportunity to support a nonprofit that is doing great work in their community. CPAs are vital partners in the successful launch of this new system of charitable giving.

WHY THIS NEW OPTION? The Colorado Nonprofit Association (Association) spearheaded Donate to a Colorado Nonprofit in 2018 because nonprofits operate in a dynamic environment, with increases in demand for services, changes in populations served, and vagaries in corporate and government funding. Federal tax reform in 2017 created uncertainty in individual donations. With far fewer people itemizing, fewer will benefit from the charitable deduction.

Colorado was the first state to have a tax checkoff that allowed certain organizations to receive donations from income tax refunds. In recent years, the Colorado legislature debated the fairness of access to the tax checkoff form, which was limited to 20 funds in a given tax year. One solution was to open the choice broadly. Donate to a Colorado Nonprofit passed the legislature with broad bi-partisan support.

HOW IT WORKS To be eligible, the organization must be a 501(c)(3), registered to solicit donations under the Colorado Charitable Solicitations Act (CSSA) for at least five years, and in good standing as of September 1 of the tax year. Note that incorporation as a Colorado nonprofit alone is not sufficient.

Donate to a Colorado Nonprofit Fund will appear on line 19 of the Voluntary Contributions Form, DR0104CH. The taxpayer or CPA must enter the chosen nonprofit’s Secretary of State CSSA registration number (not EIN), the name of the nonprofit, and the amount of the donation, which can be all or part of the refund. Only one organization can be named for Donate to a Colorado Nonprofit although the taxpayer can split the refund among the other named organizations on the Voluntary Contribution list.

The Colorado Department of Revenue will send a lump sum check for all donations to the nonprofit after the close of the state’s fiscal year, June 30. Because tax information is confidential, nonprofits will not receive the names of their donors, which already applies to the

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NewsAccount | November/December 2019

current listed tax check-off organizations which last year collectively received $1.8 million from refunds.

To start up Donate to a Colorado Nonprofit, the Department of Revenue programmed its system to account for donations to thousands of organizations and for initial staffing required to correct errors on returns. The Association raised all the needed funds from private philanthropy – at no cost to the state. In the future, the Department will recover its actual administrative costs (which are mainly correcting errors) from the donations – just as it does for the existing checkoffs.

THE CPA’S ROLE The Association engaged a research firm to conduct a statewide survey about Coloradans’ attitudes towards donating their refund to a nonprofit of their choice. Most of the respondents supported the idea, and over half indicated that they would be likely to donate.

Finding the nonprofit’s CSSA registration number posed a barrier to some.

The Association is mounting a statewide campaign called ReFUND Colorado, which will encourage Coloradans to re-fund their refund to an organization doing good work in their community. The campaign will include tools to make it easy for nonprofits to inform donors of the CSSA registration number.

The Department of Revenue is building a webform that will allow a taxpayer or CPA to search for a nonprofit by name and find the CSSA number, and through an advanced search function, to find nonprofits in a community or those with certain missions. The Department has asked the tax software companies to link to this webform. The Association also is building a searchable webform that will be housed on a ReFUND CO website, beginning in January 2020. Until the website launches, visit www.coloradononprofits.org/refundwhatmatters for information.

The breadth of taxpayer choice makes Donate to a Colorado Nonprofit unique to Colorado. Nonprofits are excited about this new season of charitable giving during tax time. The Association’s survey shows that Coloradans favor the idea and are likely to use it. Coloradans just need to know about this new opportunity.

Colorado Nonprofit Association asks you to inform your clients about Donate to a Colorado Nonprofit when you send your tax organizer and also when you are completing returns that have state refunds.

We understand that your main job is to complete the tax forms, not advise clients on charitable donations. But we also know you likely play an active role in your community. Together, we can give a new choice to donors and re-fund dollars to the organizations that make your community strong.

PHILANTHROPY

Connecting CPAs and Their Clients

to Causes They Support

BY NATALIE ROONEY

Colorado Gives Day, which will take place on Dec. 10, 2019, is an annual, statewide movement that has raised more than $217 million for Colorado nonprofits since it started in 2010. Meet Community First Foundation, the local nonprofit that developed and maintains the online platform powering Colorado Gives Day. Community First Foundation has been connecting generous donors with outstanding nonprofits – including the Educational Foundation of the COCPA – since 1975.

I

n the simplest terms, Community First Foundation brings together nonprofits and donors who want to make a difference in Colorado’s communities.

“We work with families, individuals, attorneys, and financial planners to design gift plans that fit every economic situation, ensuring that donors receive the most benefit from their charitable contributions and that their philanthropic dollars make a meaningful difference in the community,” says Kelly Dunkin, the organization’s president and CEO. Dunkin explains that it can be overwhelming for donors and financial planners to navigate the nonprofit sector. In Colorado alone, there are more than 15,000 nonprofit organizations serving hundreds of different causes. “That is where we come in,” she says.

To better serve charitable individuals and families, the Foundation has developed tools to enhance their philanthropic capacity, including:

• Colorado Gives Day, a 24-hour, statewide giving movement • ColoradoGives.org, an online giving site • Donor-advised Funds • IRA Charitable Distribution program COLORADO GIVES DAY AND COLORADOGIVES.ORG A cornerstone of Colorado’s philanthropy movement, Dunkin calls Colorado Gives Day “the ultimate feel good experience.” While the 24-hour giving event raises a tremendous amount of money for Colorado nonprofits, the website, ColoradoGives.org, promotes local nonprofits and accepts donations 365/24/7. Last year alone, $35.3 million was contributed on Colorado Gives Day, and more than $11.8 million was raised outside of Colorado Gives Day. The more than 2,600 nonprofits are vetted to ensure they are in good standing with the state of Colorado so donors can feel confident in CONTINUED ON PAGE 8 November/December 2019 | www.cocpa.org

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PHILANTHROPY CONTINUED FROM PAGE 7 their donations. “With a minimum donation of $10, ColoradoGives.org provides giving options for everyone,” Dunkin says.

HELPING CPAS HELP THEIR CLIENTS: A WIN-WIN Dunkin says Community First Foundation has options CPAs will want to know about to offer clients.

IRA Distribution Community First Foundation helps taxpayers use their IRAs for charitable giving in a unique way.

• If a donor is 70½ or older, he or she can take advantage of a streamlined way to give back to charity and receive tax benefits.

• A taxpayer can give up to $100,000 from an IRA directly to a qualified charity without having to pay income taxes on the money.

This approach can help the taxpayer meet the required minimum distribution for the year.

Community First Foundation has taken the IRA option one step further. “We have created a way for people to use ColoradoGives.org to support multiple nonprofits through a single IRA charitable distribution,” Dunkin says. “This really simplifies the process for IRA plan administrators because they only need to process one distribution and the donor can support multiple nonprofits in varying amounts, as long as that nonprofit is on the website.”

Here’s how it works: • A donor requests an IRA distribution from the plan administrator.

• The donor notifies Community First Foundation of the intent so it can properly attribute the distribution to the donor.

“Community First Foundation is dedicated to providing Colorado residents different options for donating to organizations where we all live, work, and play.”

• Once Community First Foundation receives the distribution, it sends the donor an electronic gift card (Giving eCard) for ColoradoGives.org in the amount of the distribution.

• The donor uses the Giving eCard to donate to the chosen nonprofits. Note: Donors can choose multiple organizations.

• Deadlines: IRA charitable distributions to Community First Foundation must be received by Nov. 20, 2019, to qualify for the 2019 tax year. Giving eCards provided between January and November must be redeemed in the same calendar year. Distributions received in December will receive a Giving eCard that can be redeemed by the end of the following calendar year.

Bunching Donations with a Donor-Advised Fund Bunching charitable donations provides tax benefits as well as flexibility. A single donor who typically donates $7,000/year to charity can “bunch” donations in alternating years to exceed the new standard deduction. This person can then itemize and take a charitable deduction the year donations are made to the DAF but enjoy recommending grants every year as usual.

$14,000

Exceeds Standard Deduction

$12,000

Standard Deduction

$7,000

$7,000

$7,000

$7,000

$14,000

$14,000

Donation to DAF

No Donation to DAF

Bunch 2018-19

2018

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Donation to DAF

No Donation to DAF

Bunch 2020-21

2019

2020

2021

Donor-Advised Funds Donor-advised funds (DAF) have become increasingly popular, especially for people who wish to maximize their generosity and establish charitable legacies. DAFs are convenient to use, provide tax advantages, and enable donors to designate one source for charitable giving.

How DAFs work: • A donor establishes a fund with a minimum $5,000 contribution at Community First Foundation. The Foundation accepts gifts of cash, marketable securities, real estate, and other more complex assets.

• Bunching donations [insert bunching graphic near here] provides additional tax benefits as well as flexibility. Using this strategy, donors contribute multiple years’ worth of their charitable giving in one year to receive a greater deduction. They then can itemize for that year and take a charitable deduction to the donor-advised fund but enjoy recommending grants every year as usual. In off years, the donor can continue to take a standard deduction. All the while, the favorite charities continue to receive the financial support they need.

• The donor-advised fund is invested and managed by Community First Foundation, growing tax-free.

• Donors can access their funds online, any time, to recommend grants to their favorite nonprofits. Community First Foundation facilitates the grants and can help donors learn more about the causes that matter to them.

• The annual administrative fee is a minimum of $200, or 1.00% on the first $1 million in assets, 0.75% on the second $1 million, and 0.5% on any balance above $2,000,000.

• The Foundation also will work with a donor to create an Advisor Managed Fund, where the donor opens a DAF at the Foundation, and his or her financial advisor can continue to manage the funds.

Additional reasons to consider a DAF: • Clients wish to memorialize a loved one. A donor-advised fund can be created in the name of the loved one. In lieu of flowers or gifts, the Foundation can create a memorial page on the ColoradoGives platform so friends and family members can contribute. Periodic gifts can be made to charities that were important to this person.

• Clients are selling a house or vacation home. They can avoid paying tax on the gain in the property and generate a tax deduction. Then, gifts are made from the DAF over time.

• Clients wish to create a corporate culture of philanthropy. Set up a DAF in the name of the company and generate an immediate tax deduction. Form a committee of employee volunteers to investigate and recommend gifts to charities. Build name recognition for good deeds, and help create a healthy community.

• Clients want to give end-of-year gifts for their own clients, family, and friends. Encourage them to purchase ColoradoGives e-giving cards, allowing the recipients to make donations to nonprofits they choose.

Dunkin reminds CPAs that if clients make an IRA distribution by Nov. 20, it will qualify for the 2019 tax year. Clients will have until Dec. 31, 2019, to make their selections. After Nov. 20, they have until Dec. 31, 2020, to make the selection on the Colorado Gives platform.

WE WANT YOU

Advocacy in Action November 14, 2019 • 1:45 - 5:15 pm Colorado Capitol, 200 East Colfox Avenue, Denver Designed especially for Younger Professionals, this free program will feature a Colorado Capitol building tour and dialogue with Colorado Senator Faith Winter (District 24, Westminster) on identifying your passion and taking action to make a difference. COCPA legislative counsel Daniel Furman, Esq., with Hall & Evans LLC, will participate as well.

Space is limited to 30. For more information, contact Mary E. Medley, mary@cocpa.org.

Register now at

cocpa.org/advocacy-in-action November/December 2019 | www.cocpa.org

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FUTURE OF AUDITING

Transforming the Profession: The Dynamic Audit Solution Advances in technology are coming at us at light speed. And while this phenomenon stands to fundamentally transform all aspects of business and life, few areas are as poised for transformation as the auditing profession.

M

ajor shifts in client operations and systems are already occurring, and the time is now for the audit community to embrace the opportunity to position services to evolve with these changes.

KEY DRIVERS While technology is the spark that has ignited the fuse, auditing in the future has four interconnected drivers. Each is a critical component that must simultaneously evolve to deliver a transformative outcome: • Technology: As AI data-driven audits transform our capabilities, powerful technology will automate the routine and allow more time for analysis and insight.

• Methodology: We must reimagine how we conduct audits in the context of these new capabilities.

• Standards: The Auditing Standards Board has on its agenda the evolution of standards to keep pace with auditing in the future.

• New skills: As the role of technology expands, so too must the role of the audit professional. Rote tasks will be automated, and audit professionals will become conversant in data science, data integration, and analytics.

THE VISION FOR A DYNAMIC AUDIT SOLUTION (DAS) With technology poised to disrupt auditing, new opportunities exist for auditors to leverage AI, automation, and data analytics to provide high-quality audits more effectively and efficiently. The largest accounting firms already are moving ahead with their own proprietary platforms. This creates a unique opportunity for a profession-wide effort to ensure firms of all sizes have a defined path to the future.

The American Institute of CPAs, CPA.com, and participating firms from the AICPA’s Major Firms Group1 are answering that call.

On behalf of members and in service of the public interest, we have set out to develop a transformational audit methodology that The AICPA’s Major Firm Group consists of more than 75 of the nation’s top 100 firms. The group serves to represent the interests of national and regional firms and addresses issues affecting the accounting profession 1

Technology

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Methodology

Standards

NewsAccount | November/December 2019

New Skills

modernizes and enhances the quality, efficiency, and value of audits.

To achieve this vision, we must rethink the audit from the ground up.

It starts by embracing technological disruptions and responding to the changing environment through the development of a comprehensive Dynamic Audit Solution (DAS).

The DAS application is being developed on the CaseWare Cloud platform. The platform

Building a solution to support all assurance services

change is exceeded by the return on the effort. For example: 1. Execution of procedures — methodology. How can we assess risk and gather audit evidence in a way that is valuable and transformative to traditional approaches? How can we effectively use existing sources of data as well as new sources of data, internal or external, to enhance the audit experience for our professionals and our clients?

Fully-integrated solution

Attestation & Advisory

OnPoint PCR & RIVIO

In the Market

Dynamic Audit Solution

Under Development

allows for extensibility and scalability to support the needs of firms of all sizes, as well as a range of client complexity and IT sophistication.

It further provides the ability to custom develop every element of the DAS application, which is critical to enabling, and bringing to life, many of the transformative elements of the DAS methodology, including data analytics and machine learning.

More importantly, DAS is being built by auditors, for auditors. Firms participating in its development have dedicated top talent to re-envision and where possible re-engineer every step of the audit process. Together, we can create a significant and lasting change for all audit professionals and our clients.

DEFINING TRANSFORMATION Think of transformative activities in three distinct categories. Each should be evaluated by its ability to measurably increase the quality of our work, reduce the effort to obtain similar results, improve the ability of our professionals and/or generate better value to the client—such that the cost of

OnPoint PCR & RIVIO

Dynamic Audit Solution

Longer Term Vision

2. Coordination beyond methodology — execution. How can we leverage technology and approach the project management and execution required for following a methodology? How can we deliver greater value to our clients through insights gained and potential new deliverables?

3. How do clients and professionals interact and execute — the experience.

How can changes we implement improve client perceptions of the efforts required? Of the results received? All while engaging and challenging our professionals with higher-value cognitive engagement and less routine and administrative effort.

THE JOURNEY TO DRIVE AUDIT INNOVATION In 2017, the American Institute of CPAs, CPA. com and the AICPA’s Major Firms Group set out on a bold initiative to evaluate the profession’s multiple paths in meeting the demands of auditing in the future. Extensive engagement and dialogue with firms began, certain conditions put forth and met, and due diligence of a technology partner set in motion.

In fall 2018, approximately 40% of the firms in the AICPA’s Major Firms Group, along with the AICPA’s Private Company Practice Section and CPA.com, committed funds and resources to launch a DAS methodology. As part of this process, CPA.com developed a partnership with CaseWare International to become the distributor for the U.S. market, and the CaseWare Cloud platform was identified as the best fit for the DAS application.

In June 2018, OnPoint PCR — a preparation, compilation, and review (PCR) tool that represents the first major step in the journey toward auditing in the future — was launched. It integrates AICPA guidance into the CaseWare Cloud platform and incorporates some of the more basic components that will be found in DAS. As we continue OnPoint PCR and DAS development, we are deploying open API architecture to support integration with popular tax packages, the RIVIO Clearinghouse—for secure digital delivery of financial documents—and other apps across the spectrum of third-party vendors.

NEXT STEPS The longer-term vision: Once DAS is commercially available, firms that offer both audit and PCR engagements will access a single, integrated OnPoint PCR and DAS platform to meet their needs. The platform will include modules that firms can select based on their engagements and specialized industries.

We also envision the platform eventually supporting other non-audit assurance engagements, including attestation and advisory. In the meantime, our DAS focus remains on shaping and supporting financial statement audits.

FOR MORE INFORMATION AICPA offers a variety of tools and resources to assist you in providing preparation, compilation, and review services. For details on OnPoint PCR, go to www.CPA.com/onpoint.

To access the related webinar, go to www.cpa.com/webinars/ navigating-your-way-smarterpreparation-compilation-and-reviewengagements-onpoint-pcr.

November/December 2019 | www.cocpa.org

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COCPA GOVERNANCE

Bylaws Amendments Proposed for Member Comment

A

t its Sept. 25, 2019, meeting, the COCPA Board of Directors approved the following proposed Bylaws amendments for publication to the membership for comment. The proposed changes would clarify that only Fellow members must meet the membership CPE requirement; change the Life Member requirement from 35 to 40 years to be eligible; delete provisions no longer needed; update, relocate, and renumber sections for clarity; enable up to two non-Fellow members to serve on the Board as directors, in addition to the Community Member; provide flexibility to the Board in determining how certain activities are conducted; add procedural elements; and amend the implementing resolutions to align with the revised Bylaws.

PROPOSED ADDITIONS ARE NOTED IN ALL CAPITAL LETTERS, BOLDFACE. Proposed deletions are noted by strikethrough. Comments should be emailed to Mary E. Medley at mary@cocpa.org by Dec. 1, 2019.

COLORADO SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS BYLAWS PROPOSED AMENDMENTS, September 2019 ARTICLE I - MEMBERSHIP Section 1. (a) Fellow Members.

This class shall consist of holders of valid and unrevoked certificates of Certified Public Accountant issued by the State Board of Accountancy of Colorado, or issued by authority of other states or territories of the United States, or the District of Columbia.

The right to vote in the election of officers and directors or upon questions affecting the privileges, rights, duties, and aims of Certified Public Accountants shall rest solely in this class of membership. FELLOW MEMBERS, IN ORDER TO RETAIN MEMBERSHIP, SHALL COMPLETE CONTINUING PROFESSIONAL EDUCATION REQUIREMENTS ESTABLISHED BY THE BOARD OF DIRECTORS. (b) Associate Members.

This class shall consist of persons, other than holders of Certified Public Accountant Certificates, who are (1) members of the professional or administrative staff of a Certified Public Accountant, or firm thereof, or (2) pursuing further requirements to become a CPA, having completed the academic requirements to become a CPA, or (3) accounting professionals employed in industry, government, or not-for-profit organizations, or (4) faculty members in accounting at accredited colleges or

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universities, or (5) non-CPA owners of CPA firms. Associate members are entitled to all privileges of membership except to vote and hold elective office as an officer. Associate members who are pursuing further requirements to become a CPA or administrative staff of a CPA or CPA firm are exempted from the membership CPE requirements. (c) Student Members.

This class shall consist of students in a post-secondary business program at a college or university, which program satisfies the academic preparation requirements for taking the CPA examination. Student members, in order to retain membership, shall pay dues as established by the Society and conform with these Bylaws. Eligibility will cease upon graduation. Any student member in good standing, upon qualifying under section 1 (b) of this article, shall be transferred to the class of Associate Member. STUDENT MEMBERS ARE EXEMPTED FROM THE MEMBERSHIP CPE REQUIREMENTS. (e) Fellow and Associate Members of the Society, in order to retain membership, shall: I. Pay dues as established by the Society.

II. Conform with these Bylaws and Rules of the Code of Professional Conduct.

III. Complete continuing professional education requirements established by the Board of Directors.

IV. III. Engage in the practice of public accounting only with a firm that is enrolled in a Society approved practice monitoring program.

NewsAccount | November/December 2019

(f) Honorary Members.

This class shall consist of persons who are entitled to receive such honor by virtue of their ability and their outstanding service to the accounting profession and the community. Honorary Members shall be elected by the vote of two thirds of the members of the Board of Directors present at any meeting. HONORARY MEMBERS SHALL HAVE ALL OF THE RIGHTS OF ANY CLASS OF MEMBER EXCEPT THE RIGHT TO VOTE. HONORARY MEMBERS ARE EXEMPTED FROM THE MEMBERSHIP CPE REQUIREMENTS. (G) LIFE MEMBERS. THIS CLASS SHALL CONSIST OF ANY PERSON WHO HAS BEEN A DUES-PAYING MEMBER OF THE SOCIETY FOR FORTY (40) YEARS AND IS FULLY RETIRED AS THAT TERM IS DEFINED IN THE COLORADO ACCOUNTANCY STATUTE. Section 2.

Any person desiring to become a member of this Society shall apply to the Society office in such form as may be approved by the Directors AND POSTED ON THE SOCIETY WEBSITE. Notice of such application shall be communicated by the Secretary, in such form as may be approved by the Board of Directors, to all members of the Society for comment. Such application shall become effective without further action thirty days after such publication provided no objection has been registered with the Society Secretary. The Board of Directors shall consider all applications on which any objection has been raised, and only the Board may reject applications.

Section 3.

A membership certificate shall be issued to each individual upon election as a Fellow Member. The form and wording of the certificate shall be approved by the Board of Directors. Certificates of membership shall be returned to the Secretary of the Society upon suspension or termination of membership for any cause except death.

Nothing contained herein shall be construed

to give members the right to publicize in any manner membership in the Society except for Fellow Members in good standing.

ARTICLE II - DUES Section 1.

The annual dues for each type of membership as defined in Article I shall be established annually by the Board of Directors.

The Board may set varying rates dependent on certificate date, residency, occupation, or any combination of the foregoing.

Section 3.

No dues shall be assessed Honorary OR LIFE Members.

Any member who has been a member of the Society for 35 years and is fully retired shall be carried as a Life Member without further payment of dues.

ARTICLE III - RESIGNATION, SUSPENSION, OR TERMINATION OF MEMBERSHIP Section 1.

MEMBERS MAY RESIGN AT ANY TIME, AS ESTABLISHED BY THE BOARD Resignations of members shall be in writing and may be offered at any time. Resignations shall become effective on the date of receipt, except a resignation of a member with respect to whom a complaint is pending before the Professional Ethics Board or the AICPA Joint Ethics Enforcement Program (JEEP) which requires Board action for acceptance after considering the recommendation of the Professional Ethics Board.

An application for reinstatement from such a person requires Board action after considering the recommendation of the Professional Ethics Board.

Section 2.

The SOCIETY SHALL Board of Directors may, in its discretion, terminate the membership of a member who fails to pay dues or any other obligation to the Society within six months after such debt has become due, and terminate the membership of a member who fails to comply with the practice monitor-

ing or continuing education membership retention requirements. Any membership so terminated may be reinstated by the Board of Directors under such conditions and procedures as the Board may prescribe ON A CASE BY CASE BASIS. The Board of Directors shall consult with the Professional Ethics Board before terminating a member who is the subject of a matter before that Board or the Joint Ethics Enforcement Program or before reinstating a member who left the Society while the subject of such a matter.

Section 5. (b) In THE further event that a hearing is required to dispose of such charge or charges, the hearing shall be conducted under the terms of the aforesaid agreement, the then operative rules of the Joint Ethics Enforcement Program, and ANY ADDITIONAL procedures in effect by virtue of the agreement between the Society and the AICPA. CONTINUED ON PAGE 14

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COCPA GOVERNANCE CONTINUED FROM PAGE 13 ARTICLE IV - BOARD OF DIRECTORS Section 1.

The Board of Directors shall consist of the Chair, Vice Chair who shall be Chair-elect, Treasurer, immediate Past Chair, AND six Directors-at-large, five AT LEAST THREE of whom are SHALL BE Fellow Members and one of whom is SHALL BE a non-member COMMUNITY MEMBER, and the Secretary.

Three of the Directors-at-large shall be elected each year, in the manner prescribed

by Article VI of the Bylaws, for a term of two years.

SECTION 3. THE BOARD OF DIRECTORS SHALL HIRE A PRESIDENT AND CEO, WHO SHALL ALSO ACT AS THE SECRETARY OF THE SOCIETY. THE PRESIDENT/CEO SHALL BE THE PRINCIPAL EXECUTIVE OFFICER OF THE SOCIETY AND, SUBJECT TO THE CONTROL OF THE BOARD OF DIRECTORS, SHALL SUPERVISE AND CONTROL ALL OF THE BUSINESS AND AFFAIRS OF THE SOCIETY. THE PRESIDENT/CEO/ SECRETARY NEED NOT BE A MEMBER OF THE SOCIETY. THE PRESIDENT/CEO/ SECRETARY SHALL HOLD OFFICE AT THE PLEASURE OF THE BOARD AND SHALL BE PAID SUCH COMPENSATION AS THE BOARD MAY DETERMINE. Section 3 4.

The Board of Directors shall meet at least quarterly at such date and place as may be determined by the Board of Directors.

Section 4 5.

Special meetings of the Board of Directors may be called by order of the Chair of the Society and shall be called by the Secretary upon written request of any three members of the Board.

Section 5 6.

A majority of the Board of Directors shall constitute a quorum at any meeting of the Board of Directors.

Section 6 7.

Directors, not residents of Denver or vicinity, shall be allowed a fee REIMBURSEMENT OF TRAVEL EXPENSES, PURSUANT TO THE WRITTEN POLICY THEN IN EFFECT, the amount to be determined by the Board, for attendance at each meeting.

Section 7 8.

If a director is absent from more than two consecutive meetings of the Board and sufficient excuse is not presented at the next meeting of the Board, that office shall 14

be automatically vacated, and the remaining directors shall proceed to elect a new member of the Board.

ARTICLE V - OFFICERS Section 1.

The officers shall consist of the Chair, Vice Chair who shall be Chair-elect, immediate Past Chair, the Treasurer, and the Secretary.

The Secretary shall have the additional title of President/CEO and shall act as an executive officer under the direction of the Board.

The Secretary, who need not be a member of the Society, shall be appointed by the Board of Directors, shall hold office at the pleasure of the Board, and shall be paid such compensation as the Board may decide.

Section 4.

It shall be the duty of the Secretary: (1) to give notice of all meetings of the members and of the Board of Directors; (2) to keep a register of the names and addresses of all the members; (3) to attend the meetings of the members of the Society and of the Board of Directors, and to keep a true record of the proceedings of all such meetings; (4) to have custody of the corporate seal and to affix same to all documents when required by law; and (5) to perform such other duties as directed by the Board. IN THE EVENT THAT THE SECRETARY IS INCAPACITATED AND UNABLE TO PERFORM THE DUTIES, THE CHAIR SHALL APPOINT AN ASSISTANT SECRETARY WHO CAN PERFORM THE DUTIES UNTIL THE SECRETARY SHALL ONCE AGAIN HAVE THE CAPACITY TO PERFORM THEM. Section 5.

It shall be the duty of the Treasurer to oversee COORDINATE WITH THE HEAD OF THE ACCOUNTING DEPARTMENT OF THE SOCIETY TO MONITOR THE: (1) collection of all dues and amounts payable to the Society and deposit the funds to the credit of the Society in a bank approved by the Board of Directors; (2) maintenance of suitable books of account with respect to all receipts and expenditures made on behalf of the Society; (3) payment of expenses sanctioned by the Board of Directors, and (4) performance of all other duties usually pertaining to that office.

ARTICLE VI - ELECTION OF DIRECTORS AND OFFICERS Section 1.

AT LEAST THREE OF Tthe directors-ATLARGE, with the exception of EXCLUDING

NewsAccount | November/December 2019

the non-member COMMUNITY MEMBER Director-at-large, and ALL OF THE officers, WITH THE EXCEPTION OF the Secretary, shall be elected from the Fellow Members.

In the event that a vacancy shall arise, the remaining directors shall elect a replacement FROM THE SAME MEMBER CLASS to fill such vacancy for the unexpired term.

Section 3.

The Chair shall, by December 1 of each year, appoint a nominating committee consisting of the IMMEDIATE Past Chair, a director whose term does not expire for another year, and three other Fellow Members of the Society who are neither officers nor directors, which committee shall nominate one Fellow Member for each office except Chair and Secretary, and one candidate for each expiring term of director WHOSE TERM IS EXPIRING. Its report shall be sent to the membership by February 1. Any 50 Fellow Members of the Society may submit independent nominations, provided that such nominations be filed with the Secretary

by March 15. In the event there are such nominations: a) The Secretary shall, by April 15, IN A MANNER APPROVED BY THE BOARD OF DIRECTORS, send by first class mail to each Fellow Member of the Society, at the last known address as shown by the records of the Secretary, a printed ballot containing the names of all nominees for each office for which there is a contest. These ballots shall be accompanied by return envelopes addressed RETURNED to the business office ADDRESS of the Chief Teller. b) The Chair shall appoint three tellers, one of whom shall be designated as Chief Teller, AND ALL OF WHOM SHALL BE FELLOW MEMBERS, whose duty it shall be to count the ballots which shall have been received up to 5:00 p.m. of ON April 30. The candidates receiving the largest number PLURALITY of votes FOR EACH CONTESTED POSITION shall be declared elected.

ARTICLE VII - AUDITOR Section 1.

The Board of Directors on or before April 1 of each year shall select a Certified Public Accountant firm to audit the financial statements of the Colorado Society and its affiliated organizations. The report of the auditor shall be published IN A MANNER APPROVED BY THE BOARD OF DIRECTORS for the information of the membership.

ARTICLE IX - CODE OF PROFESSIONAL CONDUCT Section 2.

The Code of Professional Conduct, ATTACHED HERETO AS EXHIBIT A, IS INCORPORATED HEREIN is AS a part of these Bylaws, and the requirements for amendment of the Bylaws shall govern the amendment of the Code of Professional Conduct.

ARTICLE X - CHAPTERS Section 1.

Chapters of the Society may be established in various cities or localities of WITHIN Colorado. The petition for formation of a Chapter shall be signed by at least seven Fellow Members of the Society residing in such city or locality. Said petition shall contain the proposed rules or Bylaws for the operation of the Chapter. Upon approval of the petition by the Board of Directors, a charter shall be granted to said Chapter. THE PROPOSED RULES OR BYLAWS OF THE CHAPTER MUST NOT CONTAIN ANY PROVISIONS WHICH CONFLICT WITH THESE BYLAWS. ARTICLE XI - SEAL Section 1.

The seal of the Society shall be a band or scroll on which shall be inscribed “The Colorado Society of Certified Public Accountants, 1904.” Within the scroll there shall be the letters “C.P.A. CPA.” ARTICLE XIII - INDEMNIFICATION Section 1.

and those in retirement MEMBERS WHO ARE FULLY RETIRED, shall demonstrate that they have completed 80 HOURS OF acceptable continuing professional education. as follows: • A member in public practice shall, during each two-year reporting period, complete eighty hours.

• A member not engaged in public practice shall, during each two-year reporting period, complete sixty hours.

A member who complies with a state licensing continuing professional education requirement shall be deemed to be in compliance with this provision, provided such a requirement is for an average of forty hours per year.

The Continuing Professional Education Board shall have the authority to grant exceptions for reasons such as health, military service, foreign residency, and other similar reasons.

Members who have placed their CPA certificate/license in inactive status with a state board of accountancy and do not hold themselves out as CPAs to third parties are not required to take CPE. THE PEER REVIEW MEMBERSHIP REQUIREMENT (Adopted March 22, 1989) There is established within the Colorado Society of Certified Public Accountants a Peer Review Board with authority to establish and conduct a peer review program for the Society and Society members engaged in

providing audit, review, attestation services, and compilation services and to conduct reviews of firms enrolled in the program.

Such activities shall not conflict with the policies and standards of the AICPA Peer Review Program and shall be subject to the oversight of the Board of Directors.

Members of the Colorado Society of Certified Public Accountants (CSCPA COCPA) who are engaged in the practice of public accounting in the United States or its territories are required to be practicing as partners or employees (depending on how a CPA firm is legally organized, its partner(s) could have other names, such as shareholder, member, or proprietor) of firms enrolled in an approved practice-monitoring program in order to retain their membership in the CSCPA SOCIETY. A member in public practice associated with a firm as a proprietor, partner, or shareholder will become ineligible to retain Society membership as of May 1 following one year after the adoption of Bylaws requirements* unless the firm enrolls in an approved practice monitoring program, and a member associated with a firm as an employee will become ineligible as of May 1 following two years after the adoption of Bylaws requirements**, or two years after becoming licensed as a CPA, whichever is later, unless the firm enrolls in an approved program. * May 1, 1990 ** May 1, 1991

A director, officer, partner, trustee, employee, or agent of the Society will be indemnified to the fullest extent possible under C.R.S. 7-109-101 et seq. of 1994 and 7-129-101 et seq. of 1998, as amended COLORADO REVISED STATUTES THEN IN EFFECT. IMPLEMENTING RESOLUTIONS The Continuing Education Membership Requirement (Adopted March 22, 1989, Amended, January 20, 2003, and January 17, 2013, AND DECEMBER 11, 2019) The continuing professional education (CPE) requirements for membership in the Colorado Society of Certified Public Accountants shall be that for each two-year reporting period beginning with the 1990 calendar year, all members, except ASSOCIATE MEMBERS, student members, honorary members,

The Governor’s Office of Boards and Commissions is looking for qualified candidates to fill positions that statutorily require Certified Public Accountants. Boards that require a CPA include the State Board of Accountancy, the Colorado State Fair Authority Board of Commissioners, the Limited Gaming Control Commission, and the Colorado Lottery Commission, among others.

The Office of Boards and Commissions accepts all applications on a rolling basis, and applications are valid for a period of two years. In the application, please note your status as a CPA in the “Memberships in Organizations and Offices Held” portion of the application.

Contact the Office of Boards and Commissions at (303) 866-5232. The application can be found at www.colorado.gov/governor/boards-commissions-application.

November/December 2019 | www.cocpa.org

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MEMBER PROFILE

From Wine Connoisseur to Distillery Proprietor

BY NATALIE ROONEY

Sandy Rothe, CPA, always had a “bug” for wine. He estimates he has been to Napa more than a dozen times, making trip after trip to enjoy the simple pleasure of sitting at a winery, enjoying the view, and sipping good wine. Then he got to thinking.

“I thought owning a winery would be a pretty good option for retirement,” he recalls. Here’s how the story unfolded.

S

anford “Sandy” Rothe began his career as an audit intern in Deloitte LLP’s Oklahoma City office. He made partner, relocated to Dallas, and eventually landed in Denver where he wrapped up 41 years with the firm after having worked in nearly every industry including oil and gas and telecommunications.

In the six or seven years leading up to retirement, Rothe had been working on a plan. Yes, the vineyards of California had a lot of appeal, but as he explored winery ownership, he could see that Denver wasn’t going to work. The climate isn’t right for growing grapes, and he wasn’t ready to relocate to Napa or Grand Junction.

But distilling – that might be an idea he could get behind because while he enjoys wine, Rothe also appreciates a good scotch. “I like beer, and I like wine, but if I were going to have a cocktail or a drink, I’d choose single malt scotch,” he says.

Rothe pondered how he could replicate the Napa/ wine experience but with scotch. That, he decided, he could do in Denver.

UISGE-BEATHA (WATER OF LIFE) Now that Rothe knew what he wanted to make, it was time to dig in and do some research. What better way is there to learn how to make scotch than heading to Scotland for whisky school?

The original plan was for Rothe’s business partner to go to Scotland, as well, but when the time came, only one spot opened up. Rothe had been trying for years to get into the class that only takes small groups of people at a time. “So, I left him behind!” he says.

“While I knew I had a good business background, I didn’t know anything about fermenting grains and distilling,” Rothe says. He attended classes, studied, visited distilleries, and learned everything he could during ten days of malting, fermenting, mashing, CONTINUED ON PAGE 18 November/December 2019 | www.cocpa.org

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MEMBER PROFILE CONTINUED FROM PAGE 17 distilling, bottling, and aging. While it wasn’t a deep immersion, Rothe learned the entire process firsthand at an old distillery that makes its own floor-malted barley. The instructor was a man who is in the Whisky Hall of Fame – a legend.

THE WHISTLING HARE A year before retirement, a distillery popped up for sale, practically in Rothe’s own backyard. The business plan he had developed called for him to begin the process of constructing his own distillery several years after retirement because whisky isn’t something you just “get into.” You can crank out beer or wine and be selling it in three to six months, but whisky takes years. Rothe had estimated it would take three years to get through the regulatory process and construct a distillery before he could open its doors.

Plus, whisky needs to age anywhere from two to twenty years. “It’s a longer, more drawn out cycle than beer or wine,” Rothe says. “But buying the distillery would jump start my whole process by three years.” So, he bought it and became the proud new owner of Whistling Hare Distillery, which had been operating for a year.

“I’ve learned a lot more in the two years of owning the distillery than I did in the eight years preparing for it,” Rothe chuckles.

“There’s a lot you can’t prepare for until you have your people, equipment, grain, and processes in place.”

Currently, the distillery is selling what it makes out of the tasting room. Patrons book tours and then purchase cocktails and bottles. The tasting room also offers food, and the distillery hosts events.

Rum, gin, vodka, and bourbon are the current product mix, and Rothe has done some experimentation with single malts and rye. Rum and vodka can be made relatively quickly – in as little as two weeks – since they don’t have to be aged. “It gives you a product to sell while you’re waiting for the whisky to be produced,” Rothe says.

A few bars, restaurants, and liquor stores carry Whistling Hare spirits, and while distributors have approached Rothe about carrying the brand, he says there’s not enough volume yet to sell to a wider market.

“We’re just now coming online for a twoyear-old aged bourbon,” he says. “We’ll start ramping up to release barrels so we can go out and sell.”

The length of time needed to sell a larger amount of product has to do with the 18

“Like public accounting, reputation is everything, and I want my product to have a good reputation.”

NewsAccount | November/December 2019

process and the length of time it takes to age various spirits. “There are ways to shortcut the process and sell sooner, but I’m really not trying to do that,” Rothe says. “This is a project I want to have fun with and for it to be a good business. I want to do it right. Like public accounting, reputation is everything, and I want my product to have a good reputation. I’m building my brand around that.”

is really the American version of whisky.

It wasn’t my passion at the time, but I’ve learned to like it.”

Rothe overhauled two of the distillery’s existing products: blue corn bourbon and vodka.

He changed the mash and began sourcing the corn from the Mountain Ute Indian tribe in southwest Colorado. “We made it local to support the tribal enterprise.”

NAPA IN DENVER As much fun as Rothe is having with Whistling Hare, he’s already looking ahead. He plans to build a new distillery to fulfill his original vision of creating a more Napa-like experience. He’s on the hunt for land that would allow him to create a venue that offers patrons a completely different experience than the urban craft distillery vibe. “I want to bring a better outdoor experience, especially because we’re in Colorado, that includes a garden where I can grow the botanicals I use in my spirits,” he explains. “People can come in, learn about distilling, and have a fun, educational visit in addition to tasting.”

He made additional changes to the barrels.

“There was a lot of experimentation in the first two years. It has been fun and educational.”

Scotch whisky can only come from Scotland and typically is made from 100 percent malted barley. “The set up I acquired wasn’t conducive to that,” Rothe says. “Bourbon

Rothe is finding a new passion for gin as well and is excited about the distillery’s new release. “It may replace my whisky passion,” he says. “It’s fun to make, and it’s getting great reviews.”

The fact that Rothe owns a distillery is a little unusual since he doesn’t actually drink all that much, even though his basement contains more Napa wine than he could ever consume. His wife, Leslie, doesn’t drink, but he suspects she’s a fan of the distillery because it keeps him out of the house. His sons are excited about the venture and look forward to being more involved.

Rothe does taste and sample the barrels – for educational purposes, of course. “It’s fun to taste the differences and experiment. You’ve got to wait as much as two years to see if it’s any good. It’s a long process.” He attributes a recent delicious tasting to new, more expensive barrels even though that means he’s two or three years out from capitalizing on what he just learned. “Great whisky doesn’t just pop up and become good in a year or two.

It takes time to figure out what you like and why you like it. It’s a long skate to that puck.”

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November/December 2019 | www.cocpa.org

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NewsAccount | November/December 2019

INVESTMENT OPPORTUNITIES

Opportunity Zones: The Sleeper of the Tax Cuts and Jobs Act

BY NATALIE ROONEY

A little-known provision in the Tax Cuts and Jobs Act created 8,761 “Opportunity Zones” across the U.S. to stimulate private investment in low-income census tracts. In exchange, investors receive healthy tax incentives. Colorado CPAs are learning how Opportunity Zones can impact their practices and benefit their clients. Understanding the rules and risks is key.

O

FINDING THE OPPORTUNITY pportunity Zones are census tracts composed of economically distressed communities. People and businesses can receive federal tax breaks on capital gains they put into special funds that then invest these proceeds into the designated zones.

Opportunity Zones have been designated in all 50 states, the District of Columbia, and five U.S. territories.

In Colorado, just over 500 qualifying census tracts met the federal government’s definition of distressed. The state was able to nominate 25 percent (126) of these tracts to be formally identified as Opportunity Zones.

Jana Persky, Opportunity Zone program director for Colorado’s Office of Economic Development & International Trade (OEDIT),

says the state studied data to identify areas that truly had an economic need because the definition is so broad. “We wanted to find that intersection of true need and ability to attract investment,” she says.

OEDIT solicited input from local champions and officials on why a particular zone should be chosen. “We used that input to adjust the data and then make selections,” Persky says.

The process also incorporated statewide equity. “Urban areas have tended to grow well, but rural areas are where this incentive could be truly catalytic,” she adds. In the end, 60–70 percent of eligible areas chosen were rural (not on the Denver/Front Range corridor).

INVESTMENT BASICS Opportunity Zones provide tax benefits to investors under certain conditions:

• Investors can defer tax on any prior capital gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or Dec. 31, 2026.

If the QOF investment is held for longer than five years, there is a 10 percent exclusion of the deferred gain. If held for more than seven years, the 10 percent exclusion becomes 15 percent.

• If the investor holds the investment in the QOF for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.

A QOF is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is in a Qualified Opportunity Zone. Investors can receive the tax benefits, even if they don’t live, work, or have a business in an Opportunity Zone. Investors just need to invest a recognized gain in a QOF and elect to defer the tax on that gain.

The best thing? These opportunities aren’t just for those with millions of capital gains to CONTINUED ON PAGE 22

November/December 2019 | www.cocpa.org

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INVESTMENT OPPORTUNITIES CONTINUED FROM PAGE 21 invest. Anyone with a business idea or who has recently made a return on investments can take advantage of the program in any Opportunity Zone in the country. Investment options include retail stores, grocery stores, research facilities, hotels, restaurants, office buildings, and manufacturing and mixeduse developments. And creating a QOF is as simple as checking a box on IRS Form 8996 and submitting it to the IRS.

D’Orazio says. “Opportunity Zones really resonated with us.”

Developers, of course, were the early adopters. Some call Opportunity Zones the most significant change in the real estate industry in 20 years.

“It is a new source of capital for developers,” D’Orazio says, adding that some projects were already in the planning process when

Colorado Opportunity Zones

Clients are excited about it, especially when there are projects in their communities they know about. They can help develop and own a piece of them.”

Ben Hrouda, CPA, managing partner of Flywheel Capital, Denver, emphasizes that while the tax benefits from Opportunity Zones are a great incentive, a project has to stand on its own first. “Really just the tax side is different,” he says. “We shouldn’t need the tax benefit to make the numbers work.”

Hrouda’s company is currently developing two Opportunity Zone projects in the Denver area. One is a renovation on East Colfax and Yosemite between Stapleton and Lowry. The second is a new construction development in Thornton.

Persky says the majority of the projects happening so far are in Denver and the metro area, including large projects in Aurora and Lakewood. “But we’re starting to see some rural projects go through, which is exciting.”

On April 17, 2019, the U.S. Treasury released the second tranche of regulatory guidance, providing answers to many questions to help guide investors, fund managers, and others.

Hrouda says that because the federal government was slow to release regulations surrounding Opportunity Zones, some people still may not know much about the zones and the advantages they offer. He also reminds CPAs that Opportunity Zone benefits aren’t just for real estate projects. Those who are starting a new business or expanding an existing business in an Opportunity Zone could receive the tax benefits as well.

Areas highlighted in yellow are designated Opportunity Zones.

Source: choosecolorado.com/programs-initiatives/opportunity-zones

THE SLEEPER IN THE TAX LAW For a month or so after passage of the Tax Cuts and Jobs Act (TCJA) in December 2017, Opportunity Zones hovered under the radar, playing second fiddle to all the news coverage on tax reform. Then CPAs began to see other benefits that were tucked into the law.

Brian D’Orazio, CFA, CFP®, CDFA™, principal at CliftonLarsonAllen, Greenwood Village, says the firm’s national tax team spent a lot of time digging through the TCJA and identified Opportunity Zones as something that would dovetail perfectly with the firm’s real estate specialization. “We saw the impact it could have on our client base and also on the communities where we all live and work,”

22

the legislation was passed. “Investors were quick to continue running with the ball. Developers saw the opportunity and developed relationships with clients who had appreciation in their stock and bond portfolios and large risk assets.”

But developers weren’t the only ones to see the opportunity. As a wealth advisory firm, CLA manages $7 billion in assets. “These high-net-worth individuals are getting ready to prepare for retirement,” D’Orazio says.

“Our wealth advisory team has been the main educator for that population, explaining how Opportunity Zone investment can help meet long-term financial goals. This is a tool from an investment and tax perspective.

NewsAccount | November/December 2019

Startup Proximity Space, Inc., a software company, is likely (there is no official tracking to be sure) the first Colorado-based company to receive funding under the Opportunity Zone guidelines. Based in designated Opportunity Zones in Grand Junction and Montrose, Proximity intends to use the funding to grow the global network of its coworking software technology.

A Denver Startup Week panel drew a diverse mix of businesses – everything from a bed and breakfast to a wind and solar engineering firm to a cannabis-focused architectural firm – whose owners came to learn how to start a qualified Opportunity Zone business.

COMMUNITY IMPACT Even with all the apparent positives that Opportunity Zones offer, there are concerns that local communities won’t benefit to the extent that has been promoted. At

the last minute, specific reporting requirements were dropped from the bill before its passage.

The unknown impact on communities has been the subject of multiple news articles.

should be receiving a tax incentive,” she says.

“It’s a difficult balance to create investment and fill a need while not giving incentives for projects we wouldn’t necessarily want to incentivize.”

“It’s a difficult balance to create investment and fill a need while not giving incentives for projects we wouldn’t necessarily want to incentivize.”

Critics say investors are likely to be disconnected from the communities where they are placing money and point out that there are no requirements to follow community guidelines or in any way include communities in the planning and approval process.

In April, the Treasury asked stakeholders to offer feedback about how to measure the community impact from Opportunity Zone investments, but ultimately, that second tranche of regulatory guidance didn’t cover reporting requirements or the role of local government or economic development representatives.

It’s also difficult to know whether an investment is being driven by Opportunity Zone development. Cities and states don’t necessarily know where funding comes from. Was it because of the Opportunity Zone or would the project have happened regardless?

Some existing projects have benefitted because they already were in progress. “We were working on two projects, and they just happened to be in Opportunity Zones when the map was released,” says Hrouda.

“It’s tough,” Persky says. “The program is broad and doesn’t have a lot of guardrails for the public to ensure the tax incentives are going to projects that truly benefit the community. There is potential to do some exciting things, especially in rural areas that have been underinvested. Any investment in those areas is good.”

In an urban setting, however, Persky says there is true concern about displacement and gentrification or that a project is unneeded. She cites a Ritz Carlton going into downtown Portland, Oregon. “From the outside looking in, that’s not something that

In early May, lawmakers in the U.S. House and Senate took a step toward addressing the lack of transparency, proposing requirements for information the Treasury would have to collect about Opportunity Zones.

A new report from the Urban Institute offers suggestions for states to help ensure Opportunity Zone investments are maximized while minimizing unintended consequences to communities. States can require community input in decisions about using state and local resources to redevelop Opportunity Zone neighborhoods, the report says. Also, they can promote transparency by requiring information on federal and state incentives for all Opportunity Zone investments.

According to the report, other policies could include “financial support for local planning, taking steps to avoid gentrification, and tying state programs to Opportunity Zone investments.”

Finally, states can engage with Opportunity Zone fund managers and investors, while also recruiting foundations and other “mission-driven financial actors” to zone developments.

“If done right, states can use the Opportunity Zone incentive to leverage small amounts of public investment and use state regulatory authority to unlock private capital for public good,” the report says.

OPPORTUNITIES FOR CPAS Persky encourages CPAs to understand the rules surrounding Opportunity Zones.

“There’s a capacity constraint, especially in rural areas, but it’s a real market opportunity for CPAs to make this a part of their practices,” she says. “We’re excited for more people to learn about Opportunity Zones.”

OEDIT has visited 85 percent of the zones for outreach and education events.

D’Orazio encourages CPAs to speak proactively to clients about this tax legislation.

“It may not be appropriate or suitable for everybody, but clients are looking to their advisers for that advice.” He suggests forming a team that includes a CPA/tax adviser, legal adviser, and investment adviser “to think about whether this strategy is appropriate for the end user. This could be an opportunity for certain types of clients to think about into 2020. There aren’t too many strategies to consider after year end, but this is one. I would encourage CPAs to look at it.”

As always, with opportunity comes risk.

Issues from development, environmental, compliance, and leases to the strict timelines should all be considered. “There are a lot of zones to think about and really understand the underlying metrics of before you move forward,” D’Orazio stresses. “And understanding cash flow is critical. You may not be able to access the cash for quite some time.

There could be a potential surprise in 2026 when the original deferral is suddenly taxed.

One needs to be mindful and plan for how to pay the tax liability.”

D’Orazio emphasizes the point Hrouda makes as well. “From both a developer and an investor perspective, some of these areas need to go back to the number one rule of real estate: location, location, location,” says D’Orazio. “We need to be critical and mindful of the underlying project and really understand the risk and return profile of a project and not just move forward because of the tax benefit. Let the investment stand on its own.

The tax benefits should be the icing on the cake.”

FOR MORE INFORMATION The state offers technical support to communities to find accounting, legal, or marketing help to attract investment: www.choosecolorado.com/OZ From the IRS: https://www.irs.gov/newsroom/ opportunity-zones-frequentlyasked-questions.

November/December 2019 | www.cocpa.org

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TECHNOLOGY TRENDS

Why Data Analytics Isn’t as Scary as You May Think

BY NATALIE ROONEY

Big data. It has the potential to help companies improve operations and make faster, more intelligent decisions, but the mere mention of it makes people nervous. They’re not really sure what it is, and once they find out, they assume it’s complicated and out of their reach. Here’s some good news if you’re feeling that way yourself: Big data doesn’t need to be thought of as hard to understand or work with, even for smaller organizations. Big data is for everyone.

B

ig data is information collected from a number of sources: emails, bots, drones, mobile devices, applications, databases, servers, and other methods. This information, when captured, formatted, stored, and analyzed, can help organizations gain valuable insight to increase revenues, obtain or retain customers, improve operations, or make any number of strategic decisions.

Willert

“When people think about data analytics to evaluate big data, they often get nervous, but they don’t need to,” says Rhonda Willert, CPA, Deloitte LLP’s managing director of Risk and Financial Advisory Services in Denver.

Industry 4.0 signifies the intent of a new Industrial Revolution, marrying advanced production and operations techniques with smart digital technologies to create a digital enterprise that may not only be interconnected and autonomous but can also communicate, analyze, and use data to drive further intelligence in the physical world.

It represents the ways in which smart, connected technology may become embedded within organizations, people, and assets, and is marked by the emergence of capabilities such as robotics, analytics, artificial intelligence (AI), and cognitive technologies, nanotechnology, quantum computing, wearables, the Internet of Things (IoT), additive manufacturing, and advanced materials.

Industry 4.0 likely will transform organizations themselves - how they make sense of information and act upon it to achieve operational excellence and continually improve the consumer and partner experience. Industry 4.0 is bringing in a digital reality that may 24

alter the rules of production, operations, workforce, and even society. Big data is a critical component of Industry 4.0, taking into account how production and operations are mixing with smart and digital technology, Willert explains. “All of this data existed before, but the technology wasn’t there to harness it. Now, with the combination of computing power, data storage, and bandwidth, we can hold onto data longer and use it to gain insights. It’s a whole new world.”

But what if you don’t have the budget or resources to hire a data scientist to capture and analyze all of this big data? Does that mean you can’t take advantage of the opportunity to use it? Not at all, says Willert.

STEP BY STEP As long as you have an understanding of where your data is coming from, and know it’s complete and accurate, you’re ready to roll with big data, says Willert.

First and foremost, make sure you trust where the data is coming from, otherwise it is garbage in and garbage out. Also, know what you’re looking for; the data by itself means nothing until you take the time to organize and understand it. Use Data Visualization tools to showcase the analysis that you perform.

Data Visualization is a useful technology for any time anyone looks at data output and makes decisions based on it. And, it is viewed by many disciplines as a modern equivalent of visual communication. To communicate information clearly and efficiently, data visualization uses statistical graphics, plots, information graphics, and other tools. Visual analytics help users reach insights more quickly by more readily presenting factors and insights. Visualizations can be used to explore the interplay of different scenarios, providing the ability to change the assump-

NewsAccount | November/December 2019

tions of one scenario and quickly see the impact across others. Visualization also can highlight anomalies in large sets of transactional data, improving the ability to investigate discrepancies.

Data can be used in many different ways: risk assessment, risk analysis, historical analysis, and predictive analysis. “Looking at the data history tells the story of what has happened and helps you to predict and make better business decisions in the future,” Willert says.

“You’re breaking things down and problem solving to create better decisions.”

What is needed is someone who understands the business impacts and realities in order to interpret the data. Sounds like the perfect role for a CPA, right? “If you know what to be looking for and if you know what patterns in the financial data mean, you can make sense out of the data and turn it into useful information,” Willert says. “Without a financial background and skill set, you might miss the important outliers that tell the story. CPAs should utilize data visualization tools to find patterns in the information. It’s all about getting past the fear associated with the analysis and thinking through the data set you have in a business-centric way to determine what you need to understand from the data and how to slice and dice it by year, by category, by type. The choices are endless.”

A CPA gathers data from various sources and systems across the enterprise, uses it to uncover problems and find answers, and then delivers information in the form of return filings, reports, financial analysis, and presentations. Data analytics is fundamentally changing the CPA role by providing the ability to explore and explain data in new ways.

CPAs can use analytics to help answer questions that couldn’t be cracked previously.

For example, analytics can help illuminate the impact of financial numbers taking into consideration external and internal changes in the business environment. Or, analytics can be used to scour contracts for language that can lead to different-than-expected consequences, discovering and analyzing patterns in data, identifying anomalies and outliers, revealing relationships, mapping data across operating units, systems, products, or other dimensions, extracting useful information from a population, automating data aggregation and recalculating balances, visualizing data, and building predictive models based on history.

WHO’S DOING WHAT WITH BIG DATA? Big data is being used everywhere and in ways you never imagined.

• The energy industry is using drones to fly around assets and send images to the cloud. The information is stored and analyzed, and anomalies are reported.

• Educational institutions are drawing patterns of students and revolutionizing operations, recruitment, and retention efforts.

• The Food and Drug Administration is able to identify and examine the expected or unexpected occurrences of food-based infections.

• Financial institutions use anti-money laundering software to detect suspicious transactions and analyze customer data.

Many different ones are available online and aren’t expensive. Choose one that you are comfortable with that you have validated is secure (emphasis on SECURE).

• Play around. It’s your own data, so do what you want to with it. Organize it by spend type. Figure out and put together graphics of your own data until you’re comfortable with the technique.

• Next, change your mindset. You were just working with your own banking data but start thinking about it from your business perspective. What would be helpful to know related to your business data if you had it all at your disposal to evaluate?

• Reach out to the data analytics group at your organization, if it exists, and ask how to aggregate your information. If your organization doesn’t have a data analytics group, express your interest to your management team. Cornerstone yourself to be your own data scientist. Hold thought sessions: We have this great data. What value can we get from it?

And there you have it. You just did data analytics and survived. That wasn’t so bad, was it?

JUST DO IT Willert says many training options are available, online and in person. “The best approach is to just dive in and try it,” she says.

“Think through some trends or objectives you

want to know that only your data can provide, and go for it. Don’t be afraid of it.”

It used to be that a data analytics team would handle gathering data, and CPAs would request the information they needed. That’s not the case anymore, Willert says. “CPAs should educate themselves and be a part of the transition to using big data. Professionals in every business process are getting up to speed on data, pulling the information themselves, and making it more efficient to produce the trends and information they need to do their jobs.”

Thinking that data analytics doesn’t or won’t apply to you is old world thinking, Willert cautions. “These tools are becoming easier to use. It’s in our best interest to learn them.

CPAs need to broaden their horizons and understand how to use these tools for their business and grow themselves and their careers with this technology,” Willert says. “If not, they could very well be falling behind and be passed over for opportunities.” The profession now demands analytics capabilities, and we anticipate the day when every CPA professional will have working knowledge of data analytics/science. Learning to integrate large data sets and build a big data story will help professionals to deliver deeper insights.

Now get out there, and see what story big data and data analytics can tell you!

• If you wear a FitBit, AppleWatch, or any wearable device, you are actually collecting big data – on yourself.

The key is determining what information is important to your business and analysis.

VIRTUAL CONFERENCE

Analyzing your big data can produce information that helps you stay ahead of issues and may display trends and anomalies that might become problems for yourself or your business over time.

DIPPING YOUR TOE IN If you’re ready (or maybe even if you’re not), you can fiddle around with big data first. In fact, Willert encourages you to start small by taking an Excel spreadsheet and downloading information that is meaningful to you – the prior year of transactions on your bank statement, for example.

• Log into your online banking platform and download your transactions from the last year.

• Choose and download a data visualization software (e.g., Tableau, Google Analytics).

December 17, 2019 Online Webcast CPE: 4.0

COcpa.org/VirtualConference November/December 2019 | www.cocpa.org

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HIRING STRATEGIES

Your Next Hire May Not Be An Accounting Major

BY NATALIE ROONEY

CPA firms have a longstanding practice of hiring non-CPAs. These paraprofessionals do everything from bookkeeping to payroll to tax services for clients. But today’s hiring landscape is shifting dramatically, and non-CPAs are taking on bigger roles.

T

he AICPA 2019 Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits report released in August reveals some startling statistics: • Non-accounting graduates constituted 31 percent of all new graduate hires in public accounting in 2018, an increase of 11 percentage points over 2016.

• While overall hiring of new accounting graduates is down, new accounting graduate hires assigned to audit-related work rose to 56 percent in 2018. That’s up 4 percentage points from 2016 and nine percentage points from 2014.

• CPA firms hired about 11% fewer accounting graduates in 2018 than in 2016 and approximately 30% fewer than in 2014.

WHAT’S BEHIND THE SHIFT? The biggest driver is technology, says Sandra Wiley, president of Boomer Consulting.

“Artificial intelligence, business analytics, and other emerging technologies are opening the 26

NewsAccount | November/December 2019

door for us to consult with clients at a level we’ve never done before,” Wiley says. “CPAs are really amazing people for accounting knowledge and financial help for clients, but we’ve had a tendency to be checklist oriented and not go much further. Now, the label ‘trusted adviser’ is really becoming true.”

The trusted adviser label, says Wiley, means clients think of their CPA first when they have a business decision to make and are trying to figure out how to run the business better. “In getting ourselves to that point, we need to have a different mindset and consult at a different level,” she adds.

That means learning to be comfortable with being uncomfortable. “Sometimes you don’t have all the answers. You’ll walk into a client meeting and not necessarily know where the conversation is going. Then you’ll have to find out the answers and think on your feet.

It’s opening the door for non-CPAs to be a collaborative part of a team within a firm.”

For those who are concerned hiring nonCPAs means they’re taking the place of CPAs, Wiley assures that is not at all the case.

“Non-CPAs will come in and help build up the CPAs who are in the room. It’s like having Legos. Stick them together, and they’re strong.”

Wiley describes hiring people who will actually build the collaborative team along with CPAs to become an “amazing long-term adviser and consultant to our clients. We’ve been talking about hiring people who know business analytics and can pull the reports we need to get great information for our clients,” she says. That tech-savvy person may make the information look great and then the CPA delivers the information.

Or a firm might hire an incredible thought leader in a specific segment – maybe someone who understands how to run a nonprofit organization or a construction company that improves the firm’s knowledge base in its niche. Another may know how to build a business and what services that business needs. The goal: a CPA, a project manager, and a data analyst working together to really understand a client’s business and deliver new services.

“It’s collaboration,” Wiley asserts. “Yes, it might be uncomfortable for some CPAs because they’re used to being lone rangers.

But that isn’t what will make you successful going forward. This is how new blood will help CPAs be successful.”

According to Wiley, hiring of non-CPAs isn’t limited to individuals, explaining that in the last two years, she has heard more people talk about hiring and/or acquiring full companies. The reason is two-fold: acquiring a service line to build that service for clients and as a consulting company, to use the new firm’s expertise with the existing stable of individuals. “It infuses a whole group of new people into a firm,” Wiley says.

attorneys, and health care consultants. A year ago, the firm hired its first data scientist.

“We have started to explore big data and data analytics,” Callahan says. To that end, the firm recently acquired a data analytics company in Utah whose two partners are data scientists. They not only are working on Eide Bailly’s own dashboard but also working with the firm’s IT consultants to help clients build their dashboards.

Eide Bailly also is experimenting with bot technology in its compliance practice. “What we’re finding is we need non-traditional skills to help us program the bot,” Callahan says. “We’re not hiring the traditional CPA candidate right out of college.”

THE NEW HIRE PROFILE Brian Callahan, CPA, partner-in-charge, Colorado, for Eide Bailly LLP, says the pace of change in the business world is like nothing it has ever been before, and that is driving how the firm is hiring.

In the IT Advisory Group, a cybersecurity team is assisting the audit team with IT risk.

“Those of us who are auditors have struggled for years with the concept that we audit inputs and outputs,” Callahan says. “But we don’t know what happens in the box in

“People really need to spend more time thinking about the opportunities and where they can plug in. Everybody should be looking at this. Not just large firms.

Everybody.”

Sandra Wiley, Boomer Consulting Two years ago, Eide Bailly held its first Innovation Summit and appointed a Chief Innovation Officer, who just happens not to be a CPA. “We were looking ahead at how the profession would be changing over the next ten years with additional non-traditional services,” Callahan says.

The firm’s health care consulting group was the genesis of a lot of non-CPA hires. After the passage of the Affordable Care Act, two health care consulting partners were integral in consulting with rural areas and nursing homes to assess the impact of healthcare reform on the firm’s client base.

Eide Bailly’s different service specialties also are hiring professionals such as engineers,

between. These non-CPAs in IT can evaluate the IT risk assessment.”

Callahan says today’s college graduates have excellent technological skills and are quick to pick up on the analytical tools. “We have a tool we purchased from CCH that our senior managers and partners don’t even use because the kids coming out of school are such wizards that it would be a waste of time for us to learn it!” he laughs.

On a more serious note, Callahan explains that the challenge is learning how to change who you hire. “We’ve been recruiting the same types of people for as long as the profession has been around. The problem with CONTINUED ON PAGE 28

November/December 2019 | www.cocpa.org

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HIRING STRATEGIES CONTINUED FROM PAGE 27 any recruiter or hiring manager is the bias to hire someone like yourself. We need to look at different types of candidates out of college who can be successful at a CPA firm – like data scientists and bot technicians. How do you as a 35-year old senior manager in audit or tax lead a recruiting effort to know how to recruit a data scientist out of college?

That’s the transformation and challenge we have as a profession and firm. We recognize it, but how do we make that shift? We’ll still need those traditional candidates but not as many.”

Peggy Jennings, CPA, partner at Eide Bailly, puts some numbers to the trend of nonCPAs in the profession. She says at a recent partner meeting, out of 300 people attending, 20 were non-CPA principals. (The firm uses the term “principal” for non-CPAs rather than “partner”.)

“Twenty years ago, there were maybe a couple of people who weren’t CPAs at these meetings, and they were health care consultants only,” Jennings says. “Ten years ago, out of 130 partners, maybe five were non-CPAs. That was three percent. Now it’s more like eight or nine and pushing ten percent.”

A FIRM FULL OF AMAZING PROFESSIONALS Wiley is brutally honest. “This shift has been coming for a while. Firms have been talking about hiring people outside the norm for the past five years, but it’s finally taking hold.”

Ignore the change at your peril.

Wiley says client accounting services (CAS) and paraprofessionals at firms have been treated like second-class citizens over the years because they’re not CPAs. “A lot of the work they do will be digitized going forward,” she says. “And those paraprofessionals have an amazing connection with clients. If we can teach that group of people to be advisers and to have a consultative role, it opens the door to a lot of great business.”

Outsourced operations, the CFO function, or AP/AR offer real value in the CAS area, Wiley adds. “They’re not CPAs, and they don’t need to be. They can do the work without that designation. They’ll get other designations, and we’ll have to get comfortable with that.” Those designations might be a PMP 28

for a certified project manager, a SHRM for human resources, or CMMP for marketing.

“What we need to understand is that it’s still a firm full of amazing professionals. Their designations just may be different.”

“It gives people the opportunity to stay at the firm and try something different,” Callahan says. “That’s helping us retain talent as well as find people who aren’t necessarily cut out for traditional CPA work, even if they are CPAs.”

Callahan says one of the challenges facing firms is that recruiting is happening earlier and earlier. “Someone may not be starting his or her career until three years from now, but we’re recruiting those people today,” he points out. “We’re recruiting for a profession, and we don’t even know what it will look like.” He also emphasizes that new graduates won’t be doing traditional new hire activities. “We need to find other things for them to do that are more exciting than footing the phone book. It’s an exciting time to be coming into the profession but daunting for us as leaders. How do we keep them engaged?”

Callahan says while auditing isn’t dead, as some have predicted, it has evolved dramatically and will continue to do so. “Our workforce is going to have to change with it.”

Two years ago, Eide Bailly started an exchange program – think of it like a semester abroad program – to encourage engagement and help retain talent. “We always have those individuals who come into public practice, but they don’t like it,” Callahan says.

“They’re smart, they’re talented, and they want to try something different.”

The exchange program offers that opportunity. Ranging in length from eight to twenty

FOR EVERY FIRM. EVEN YOURS. Whether you’re a small, medium, or large firm, Wiley encourages everyone to ask these questions: • What talent will make us stronger as business advisers?

• Where would we find that talent?

Large firms already are going through the process, and it’s a huge opportunity for small firms, Wiley says. “I’m fearful that if they don’t start looking at these issues, they’ll be behind the times. People really need to spend more time thinking about the opportunities and where they can plug in.

Everybody should be looking at this. Not just large firms. Everybody.”

Wiley says it’s time to move the needle. “You have to put on your growth mindset leader hat. Look at the opportunities that might have never presented themselves to you

“You have to put on your growth mindset leader hat.

Look at the opportunities that might have never presented themselves to you before. They’re in reach.” weeks, program participants step away from their roles in tax or audit and join another part of the practice, whether that’s due diligence, R&D, forensics, the Netsuite practice, or a cost segregation study exchange. Six exchanges are currently taking place in the Colorado practice. In summer and fall, in excess of 25 exchange programs occurred across the firm.

NewsAccount | November/December 2019

before. They’re in reach,” she encourages.

“You must let yourself take that chance. Find some new talent who will make you stand out from your competition and make you the firm to be reckoned with in the future. Go out and find something new.”

To download the 2019 Trends Report, go to http://bit.ly/2019AICPATrends.

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2. Barron’s is a registered trademark of Dow Jones & Company, L.P. All rights reserved. The rankings are based on data provided by over 4,000 individual advisors and their firms and include qualitative and quantitative criteria. Factors included in the rankings: assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. Investment performance is not an explicit component because not all advisors have audited results and because performance figures often are influenced more by clients’ risk tolerance than by an advisor’s investment picking abilities. The ranking may not be representative of any one client’s experience, is not an endorsement, and is not indicative of advisor’s future performance.

Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. Barron’s is not affiliated with Raymond James.

3. The FT 400 was developed in collaboration with Ignites Research, a subsidiary of the FT that provides specialized content on asset management. To qualify for the list, advisers had to have 10 years of experience and at least $300 million in assets under management (AUM) and no more than 60% of the AUM with institutional clients. The FT reaches out to some of the largest brokerages in the U.S. and asks them to provide a list of advisors who meet the minimum criteria outlined above. These advisors are then invited to apply for the ranking. Only advisors who submit an online application can be considered for the ranking. In 2017, roughly 790 applications were received and 400 were selected to the final list (50.6%). The 400 qualified advisers were then scored on six attributes: AUM, AUM growth rate, compliance record, years of experience, industry certifications, and online accessibility. AUM is the top factor, accounting for roughly 60-70 percent of the applicant’s score. Additionally, to provide a 2019of |anywww.cocpa.org 29 diversity of advisors, the FT placed a cap on the number of advisors from any one state that’s roughly correlated to the distribution of millionaires acrossNovember/December the U.S. The ranking may not be representative one client’s experience, is not an endorsement, and is not indicative of advisor’s future performance. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. The FT is not affiliated with Raymond James.

FINANCIAL MANAGEMENT

Best Practices to Implement a New Business System This article first appeared in Financial Management magazine. For more articles, sign up for the daily email update CGMA Advantage at http://bit.ly/2svn2AY.

BY KATE O’FLAHERTY

Technological innovation, new regulations, and corporate changes require upgrading or replacing legacy business systems to allow businesses to streamline processes and increase efficiency.

C

ompanies also are seeking integrated systems to streamline data and increase automation in finance departments. They are generally looking to fulfill a need that is not being met by their current systems and processes, said Jan Kushner, CPA, CGMA, at the 2017 AICPA Financial Planning & Analysis Conference in Las Vegas.

At the time, Kushner was a project manager with Source Consulting Group, a strategic and operational business process and technology consulting group. She is now manager of tax compliance, finance, and administration at the Project Management Institute, which represents more than half a million project managers worldwide.

“It could be putting in a system for one particular function, like income tax provision, or it might be a whole new ERP (enterprise resource planning) system,” Kushner said. “At the same time, other companies are using a selection of systems that are going to integrate with each other.”

In some cases, the chosen system will be used primarily or exclusively by finance. However, finance can also be involved as a partner with another group implementing a solution.

“This is where finance is both the partner and the adviser.”

Many human resource departments, for example, have adopted Workday, an HR management system that can handle multiple projects across different functions, Kushner says.

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NewsAccount | November/December 2019

Using a cloud-based tool such as Workday is an alternative to an in-house ERP solution, so its impact must be considered.

Finance also can be involved in overall implementation on the budget side. “There is the budgetary concern of, ‘can we afford this’, and ‘does it make sense to choose this from a cost method and analysis perspective,’” Kushner says. “This is where finance is both the partner and the adviser.”

HOW TO SELECT AND IMPLEMENT A NEW SYSTEM To select a new system, it is important that companies understand their unique needs, ideally making a list of issues and requirements to be addressed. As part of this, Kushner advises: “Ask, what are your goals? What is your internal scope? Whatever those parameters are, it’s very important they are formally documented and agreed upon.”

Then it is time to look for a reliable IT partner to help advise on and implement the new system.

The Farrer Park Co. in Singapore, which builds healthcare and hospitality complexes, expanded and in 2011 needed an ERP system to help streamline accounting processes while maintaining internal controls.

The new system went live in 2013.

Lisa Mok, ACMA, CGMA, financial controller at The Farrer Park Co., advocates a sound project methodology and having subject-matter experts on the issues being faced. “They should have an idea of what needs to be done and how to do it.”

Organizations must be careful to assess the capabilities of their providers. It could require asking for more technically sophisticated people or talking to other clients already using the products to discover the pitfalls that must be avoided.

“Read the contract very closely, assume nothing, question everything, and make sure you are absolutely comfortable that what you are expecting is exactly what they are going to be providing you with,” Kushner says.

It is also important to ensure the vendor is credible and has good knowledge about the ERP product to be implemented.

When implementing a new system, Mok advised a step-by-step approach: • Identify, verify, list, and document all potential issues.

• Internally, these issues should be discussed, completed, and vetted.

• Seek vendors, and invite requests for proposals.

• Meet and determine the right vendor to work with, based on qualities such as industry knowledge, experience, and communication skills.

• Understand how the system will be implemented, and commit resources.

• On implementation, identify the main issue and the solution.

• Identify key constraints.

• Identify prerequisites for the solution.

• Plan accordingly.

YOU’VE 30 YEARS YOU’VE SPENT 30SPENT YEARS BUILDING YOUR NEST EGG. BUILDING YOUR NEST EGG. Other considerations: NOW COMES THE HARD COMES THE HARD • Costs v benefits:NOW In terms of implementation costs and user license fees, as well as post go-live support • Whether the server is on premise or in the cloud PART: IT LAST PART: MAKING ITMAKING LAST • Cybersecurity • Data security and data privacy • Business continuity

ANOTHER 30.ANOTHER 30.

OVERCOMING CHALLENGES When implementingThe any newchallenges technology, there are facing challenges to today’s be The retirees challenges facing are today’s unique. retirees are unique. overcome. “Resource — people, time, and budget — is almost always Low interest rates, sky-rocketing Low interest healthcare rates, sky-rocketing costs, healthcare longer costs, longer the key issue,” Mok says. life expectancies, and complex life expectancies, Social Security and complex Social rules Security all rules all make much of the conventional make much retirement of the conventional wisdom retirement of wisdom theof the Companies also need to decide whether to configure or customize past obsolete.

In this new era, past it’s obsolete. crucial In this new that era, you it’s crucial take that you take software. These options are not the same. “A configuration is choosa fresh look challenges a fresh ahead look atand the challenges create ahead a and create a ing from a series of sometimes infinitely longat liststhe of options, and comprehensive plansays. to address comprehensive them. plan to address them. customization is essentially putting in new code,” Kushner But the latter can increase costs as systems are upgraded. “You need to ask: Does this customization work in this new version? If it doesn’t, For 25 years, we’ve been 25 that years, we’ve been it’s going to cost youFor to maintain customization, to tweak it, and working with people like you working with people like you keep it functional as you upgrade,” Kushner says. to address the challenges to address the challenges She concedes that every company will use customizations at some of the transition from of the transition from point, but she says it is important to use them sparingly and cauMark Kuhn Mark Kuhn Scott Ranby, CFP ®® Scott Ranby, CFP their nest egg accumulating their nest egg accumulating President & Founder President & Founder Advisor FinancialFinancial Advisor tiously. As part of this, organizations should ask themselves: “Do you to using it to support their to using it to support their really need it; is there a way that the system can meet your need retirement lifestyle.CALL Get in retirement lifestyle. Get in CALL 303-803-1016 303-803-1016 without it; is it a regulatory requirement?” touch today to schedule a LEARN touch today to schedule a TO MORE LEARN MORE TO Change management is another challenge often encountered during complimentary consultation. complimentary consultation. any implementation. As part of this, training is essential. “Make sure everyone knows what they are doing when they go live,” Kushner notes. “If no one knows how to use it, it’s not much of a system.”

+

Kate O’Flaherty is a freelance writer based in London. To comment on this article or to suggest an idea for another article, contact Sabine Vollmer, an FM magazine senior editor, at Sabine.Vollmer@aicpa-cima.com.

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2373 Central Park Blvd., 100 Suite 100 2373 Central Park Blvd., Suite Denver, Colorado 80238 Denver, Colorado 80238 Phone: 303-803-1016 Phone: 303-803-1016 KuhnAdvisors.com KuhnAdvisors.com

Certified Financial Planner Board of Standards Inc. owns Certified Financial the certification Planner Board of Standards marks Inc. CFP®, owns the certification Certified marksFinancial CFP®, Certified Financial Planner™ Planner™ and CFP® in the U.S., which it awards to individuals who and CFP® successfully in the U.S., which it awards complete to individuals CFP who successfully Board’s complete initial CFPand Board’songoing initial and ongoing certification requirements. Kuhn Advisors, Inc. is a registered certification requirements. investment Kuhn Advisors, adviser.

Inc. is a registered Moreinvestment information adviser. More about information Kuhn about Kuhn Advisors, Inc., including its advisory services and fee Advisors, schedule, Inc., including can its advisory be found services and in fee itsschedule, Form can ADV be found Part in its Form 2, which ADV Part 2,is which is available by calling 919-493-3233 or visiting kuhnadvisors.com. available by calling 919-493-3233 or visiting kuhnadvisors.com.

© 2018 Association of International Certified Professional Accountants.

All rights reserved.

November/December 2019 | www.cocpa.org

31

MOVERS & SHAKERS MARK J. SMITH, CPA/PFS Mark J. Smith, CPA/PFS, founder of M.J. Smith & Associates, Greenwood Village, has been named to Forbes Magazine’s list of America’s Top Wealth Advisors for the fourth consecutive year.

DIANE GRANGER, CPA Congratulations to Diane Granger, CPA, with Taylor, Roth and Co., PLLC, Denver, on 25 years of service with the firm.

ALEXANDRIA ROMERO, CPA & SARAH FLISCHEL, CPA Congratulations to Colorado graduates of the 2019 AICPA Leadership Academy Alexandria Romero, CPA, Pueblo CityCounty Library District, Pueblo, and Sarah Flischel, CPA, Kundinger Corder & Engle P.C., Denver.

DERROL MOORHEAD, MBA, JENNI KNUDSEN, CPA, MAGDA GIAMPIETRO Welcome new COCPA team members Member Services Director Derrol Moorhead, MBA; Accounting and HR Specialist Jenni Knudsen, CPA; and Accounting and Reporting Specialist Magda Giampietro.

WHO’S WHO IN ACCOUNTING Congratulations to the 31 individuals named to the Denver Business Journal’s 2019 Who’s Who in Accounting list, including past COCPA Chair Sheila Balzer, CPA, Holben, Hay, Lake, Balzer, a Division of SingerLewak, Denver; former COCPA Board of Directors member Debbi Warden, CPA, RubinBrown LLP, Denver; past Colorado State Board of Accountancy member Kevin Collins, CPA, CLA, Greenwood Village; and 2019 Trailblazer Award recipient Greg Anton, CPA, ACM LLP, Denver.

PAM FEELY, CPA Pam Feely, CPA, Lakewood, received the 2019 Board Member of the Year Award from the West Metro Denver Fire Protection District. In recognition of her service, on Oct. 15, Colorado Cong. Ed Perlmutter read a resolution in her honor into the Congressional Record for the U.S. House of Representatives.

RICHARD J. FLEISCHMAN, CPA Richard J. Fleischman, CPA, joined Causey, Demgen & Moore P.C., Denver, as a shareholder in the audit group.

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NewsAccount | November/December 2019

CLASSIFIEDS PRACTICES FOR SALE, PURCHASE, OR MERGER Selling your firm is complex! ACCOUNTING BIZ BROKERS can help!

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CPA Firms or Partners. We represent a number of quality CPA firms and sole practitioners who are looking to merge, acquire, or sell their practices to other CPA firms. Locations are in the Metro Denver, Boulder, Colorado Springs, and Evergreen areas. 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 Colorado: 720-446-7020, or email dandrassociatesofco@aol.com.

Buy 1/3 of a Denver Tech Center CPA practice, $942,000 total revenue. Interactive tax practice in Lakewood area, non-CPA, revenue $164,000. Some seller financing for both practices. We also can help sell your practice. Over 50 practices sold. We have qualified buyers.

Contact Fred Mehring, Select Business Group, at 303-771-3100 or fmehring@selectbg.com, or visit www.selectbg.com for additional information.

BITS & PIECES The AICPA 2019 Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits Report is available for download at http://bit.ly/2019AICPATrends. Among the key findings: • Total projected accounting enrollments are down 4% from the highs of 2016, but still are among the highest on record. Racial/ ethnic diversity increased in the 2017-18 academic year.

• Projected accounting graduates trended downward in the 2017-18 academic year with decreases of 4% at the bachelor’s and master’s levels and overall. In 2018, female graduates outnumbered male graduates at the master’s level. Racial/ethnic diversity increased a 7% increase in Hispanic or Latino accounting graduates.

• Of firms which hired one or more accounting graduates in 2018, 58% expect to hire the same number or more in 2019. Ninety percent of all U.S. CPA firms expect to have the same number or more CPAs on staff in 2019.

• Across the last two Trends reports, hiring of new accounting graduates has declined about 30%.

Non-accounting hires as a percentage of all new graduate hires are up 11 points to 31%.

IN MEMORIAM

TAX STUDY GROUPS

We extend our sympathy to the families and friends of the following COCPA members:

Boulder/Longmont Tax Study Group AT THE MEADOWS BRANCH PUBLIC LIBRARY

Frank Allen Member since 1984, Centennial, Colorado

Wednesday, Nov. 20 and Wednesday, Dec. 18

C. Gerald Monroe Member since 1964, Denver, Colorado

This informal roundtable discussion group meets at the Meadows Branch Public Library, 4800 Baseline Rd., Boulder, BYO Bag Lunch. For additional information, contact Lynn M. Mitton, CPA, MT, MPA, 303-499-7445, or email lynn@flewellingcpa.com.

Gordon Pedersen Member since 1961, Estes Park, Colorado Mary Southworth Member since 1984, Littleton, Colorado

Denver Tax Study Group AT THE COCPA OFFICE

Tuesday, Dec. 3 This informal roundtable discussion group meets over lunch, the last Tuesday of most months, at the COCPA office, 7887 E. Belleview Ave., Ste. 200, Englewood. Register at www.cocpa.org.

2019 Women to Watch Congratulations to the recipients who were honored at the Women’s Summit, Aug. 23. Pictured left to right: Rosie Sanchez, Kelly Kozeliski, Stephanie Drew, Amanda Jo Erven, Janeen Hathcock, and Elizabeth Maldin.

RENEW NOW To retain your Colorado CPA license in active, inactive, or retired status, you must renew it by Nov. 30, 2019. Look for the email from the Colorado State Board of Accountancy, to your email address on file, notifying you the online system is open for renewal processing. Update your email address now, if it’s changed since you last renewed. Go to www.colorado.gov/pacific/dora/DPO_Update_Contact and log in to your account.

If renewing in active status, you will attest that you have or will have completed the required CPE between Jan. 1, 2018, and Dec. 31, 2019 - 80 hours for the two-year period, including four hours in Ethics. No more than 16 hours can be in Personal Development.

Careers At ACM, we work hard, play hard, and greet each day with optimism. This commitment is shared by each and every member of our firm – and it’s why we’ve been consistently recognized as one of the best accounting firms to work for in Colorado and across the nation.

“ACM is a family. It’s an amazing group of people who bring their best to the table each and every day.”

- melissa k. hooley, partner-in-charge, employee benefit plan services

“ACM encourages each employee to take on new challenges and grow professionally – all while being able to maintain a quality family life.

-

dennis tschacher, partner

“I love working at ACM because we’re given opportunity for personal and professional growth.

You can pick your own path and your own pace.”

-

tim stueven, audit director

303.830.1120 ∙ www.acmllp.com/careers Denver ∙ Boulder ∙ Northern Colorado ∙ Laramie

November/December 2019 | www.cocpa.org

33

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