Disclosures: November/December 2019

THE OFFICIAL MAGAZINE OF THE VIRGINIA SOCIETY OF CPAs

NOVEMBER/DECEMBER 2019

VSCPA.COM/DISCLOSURES

ALWAYS AIM high Innovative continuous improvement

+

Engagement letters can protect your firm Does 199A make sense?

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CONTENTS

Features 16

Always aim high Innovative continuous improvement can set you up for success.

22 26

Repeal and replace Section 199A Weather any clientrelated storm

Columns

FIND US...

14

WEBSITE vscpa.com

Young Professionals How to have awkward conversations

CONNECT connect.vscpa.com

Departments

TWITTER @VSCPANews

4

From the Editor

6

Line Items

LINKEDIN tinyurl.com/ LinkedInVSCPA

8

Tech Talk

10

Advocacy

12

Innovation

30

VSCPA Financials

32

VSCPA News

38

Classifieds

FACEBOOK facebook.com/VSCPA INSTAGRAM instagram.com/VSCPA PODCAST vscpa.com/ LeadingForward SNAPCHAT @VSCPA

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NOVEMBER/DECEMBER 2019

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FROM THE EDITOR

4309 Cox Road Glen Allen, VA 23060 (800) 733-8272 vscpa.com

disclosures vscpa.com/disclosures disclosures@vscpa.com

NOVEMBER/DECEMBER 2019 Volume 32, No. 6 Managing Editor Jill Edmonds disclosures@vscpa.com Editorial Task Force Olaf Barthelmai, CPA Cheri David, CPA Mike DellaRipa, CPA Melisa Galasso, CPA Genevieve Hancock, CPA Karen Helderman, CPA Alesia Lewis, CPA Gabriele Lingenfelter, CPA Harold Martin Jr., CPA David Peters, CPA Mark Plostock, CPA Zach Shoaf, CPA Barbara Sukramani, CPA Disclosures is published six times a year by the Virginia Society of Certified Public Accountants (VSCPA). The magazine’s mission is to communicate information of value to VSCPA members, including professional issues and VSCPA initiatives.

The materials and information in Disclosures are offered as material only and not as practice, financial, accounting, legal or other professional advice.

Statements of fact and opinion are made by the authors alone and do not imply an opinion on the part of VSCPA officers, members or editorial staff. Publication of an advertisement in Disclosures does not constitute a VSCPA endorsement of the product or service. Copyright © 2019 Virginia Society of CPAs.

VSCPA Preferred Providers

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Looking back on 100 magazines When I joined

the VSCPA as communications specialist in 2003 and tackled my very first issue of Disclosures magazine, I could not have imagined how many more lay ahead. I didn’t know anything about accounting, but I knew journalism and I had experience at a national professional association.

I had to learn about the accounting profession from the ground up. That included educating myself on a new law that seemed a little important (SOX), and getting called out by a member for writing Federal Accounting Standards Board instead of Financial Accounting Standards Board. (Still sorry about that one; writers don’t like making mistakes!)

This issue of the magazine is my 100th.

Throughout the last 16 years I’ve edited all of them, read every word multiple times and designed most. And while the topics may run together, and frankly some may have been a little over my head, one thing remains true: The members are the best thing about this magazine.

In 2003, Disclosures was a magazine and not a newsletter, but contained mostly Society news and very few professional articles. I got to work digging up a member submission and found “Playing Ball in the Boardroom,” sent in by Tom Visotsky, CPA. Good thing we ran it, because he’s still writing (see last issue’s cover feature).

Dozens of members followed, including Jim Cole, CPA, who went on to be instrumental in developing the VSCPA ethics course over the last several years, and Steve Holton, CPA, who was a beloved member of the Virginia Board of Accountancy and avid Disclosures writer on regulatory issues before passing away. several years ago. There are so many other writers I could mention whose words are the lifeblood of the magazine.

NOVEMBER/DECEMBER 2019

It’s my job to make sure member writers sound like themselves (just a little more grammatically correct), and I hope I’ve been able to do their words justice over the years.

After being contracted to edit Disclosures for the past nine years, it’s only fitting that I have returned to the VSCPA in my old position as communications director. It seems I can’t quit Virginia CPAs after all.

So, as always, I’m ready to listen to the issues that are on your mind and affect you every day. Thank you for the privilege. n

Jill Edmonds is VSCPA communications director and managing editor of Disclosures. She is a University of Virginia graduate and Blacksburg native. jedmonds@vscpa.com linkedin.com/in/jilledmonds

LINE ITEMS

Data and analytics pros at CPA firms

TICKER 30

What’s happened in hiring at firms in the last two years? Non-accounting grad hiring has exploded.

According to the American Institute of CPAs’ (AICPA) 2019 Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits report, issued every two years based on university responses for the 2017–2018 academic year and firm responses for the 2018 calendar year, firm hiring of non-accounting graduates is up 11 percent.

Conversely, firms are hiring fewer accounting grads — those figures have dropped 30 percent since 2014. AICPA President and CEO Barry Melancon, CPA, CGMA, says that increased demand for tech skills is shifting the hiring model.

Other intriguing results: Majoring in accounting is still popular. Nearly 208,000 students were enrolled in undergraduate accounting programs in 2017–2018, the secondhighest number on record.

Diversity in the profession is growing. Nonwhite students make up 44 percent of enrollees in undergraduate accounting programs, an all-time high, and 42 percent of total graduates.

More new hires are focusing on audit. The portion of new accounting grad hires assigned to audit-related work grew 4 percent (9 percent from 2014).

GET MORE INFO AND FREE CPE: You can receive 1 CPE credit by attending a virtual interchange on the Trends report on Oct. 24.

Visit vscpa.com/freecpe to find this and other options!

HOTTEST CAREER IN AMERICA:

tax manager

Believe it! According to a Glassdoor survey, tax managers have the strongest career opportunities in the country, with a competitive median base salary of $112,021. The report cites that tax managers are needed in a variety of industries, not just finance and consulting. Audit and accounting managers also rated highly on the survey.

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The percentage of Virginia’s electric system Gov. Ralph Northam wants powered from renewable sources like wind and solar by 2030.

295 The number of Virginia companies on the Inc. 5000 list, which ranks the nation’s fastest-growing, privately held companies.

5 Virginia’s ranking among states with the most companies on the Inc. 5000 list.

California was No. 1.

$37 billion The amount that the charitable donation deduction claimed by taxpayers declined from the 2017 to 2018 filing season.

14 Virginia’s ranking on the list of most states with federal government employees in 2018, accounting for 18.1 percent of the Commonwealth’s workforce.

90 The percentage of survey respondents who told the American Institute of CPAs Tax Section that the 2018 tax filing season was more challenging than previous years.

(Surprising exactly ... no one.)

LINE ITEMS

DON’T MISS THE TECH EVENT OF THE YEAR

We’re going under construction!

Beginning in January, the VSCPA offices in Glen Allen will undergo much-needed renovations to become the VSCPA Learning & Innovation Center! When the updated space opens in spring 2020, you can expect: > Upgraded technology, making the Center accessible from anywhere in the state and beyond

The brand-new immersive

> A larger member space for learning, meeting and hanging out

learning experience is almost

> Enhanced on-site learning technology

here! Join us Nov. 11-12, 2019, at the Richmond Marriott Downtown

> A new multimedia studio for video and online learning production

for the Technology & Innovation

> And much more!

Showcase. Get up to 17 CPE

In June, the Board approved the renovation funding plan to ensure we have a future-forward, collaborative space for members and staff that’s in line with the VSCPA2025 strategic vision. Want to learn more and see blueprints about the exciting changes to come? Visit vscpa.com/Center.

credits, learn new technologies

Plus...

with hands-on demos and MORE.

We’re still available if you need us! Staff will be displaced during the renovation process, but everyone will continue to be accessible to serve our members. Call us at (800) 733-8272 if you need help with membership, learning or anything else.

And we’re always open at vscpa.com.

register today.

and innovations to increase productivity, see 30+ exhibitors Visit vscpa.com/showcase to

4 ways to attract female talent Did you know that companies with women in at least 15 percent of senior management roles are 50 percent more profitable,

according to a Credit Suisse report? Here are four ways to attract the top female employees you need to take your CPA firm or company to the next level. Looking for more in-depth information on these strategies? Check out a full blog post from the American Institute of CPAs at tinyurl.com/4WaystoAttractFemaleTalent, and visit vscpa.com/WomensForum for info on our women’s leadership event.

1

Seriously endorse gender equality and allow women to influence professional culture. Create and promote a diversity statement.

2

Offer gender-neutral parental leave. Show women they won’t be barred from advancement opportunities by taking time off for maternity leave.

3

Encourage flexible scheduling. A culture with formalized flexibility enhances everyone’s experiences, not just those of parents.

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4

Fight sexism by denouncing it – and taking steps to eradicate it. Show all employees you are serious about equality.

NOVEMBER/DECEMBER 2019

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TECH TALK

EXCELLENT EXCEL

Unhiding multiple sheets simultaneously and converting tables to a range In the last issue, I covered how you can select multiple

sheets (a.k.a. tabs) and quickly hide them. Since then, I received the next logical question from a reader: Now that sheets are hidden, is there an easy way to unhide all of them?

There is an easy way to unhide all of your sheets; however, it is not available if the workbook has cells that are referenced as a table. If the workbook does not have cells referenced as a table, you can create a view showing all the sheets, which will allow you to recall the view to unhide all sheets. To create a view showing all sheets, first unhide the sheets you want to see then under the View menu bar at the top, click on the Custom Views button, then click on the Add… button. You should now see the Add View box with a place for you to enter the Name: of your new custom view. After clicking OK, you can click on the Custom Views button to see a list of all of your custom views. To display one of your views, select it from the list and click Show.

easy. A warning: While you will gain the ability to use custom views, you may lose other functions that are dependent on table referencing. I recommend creating a test workbook before proceeding. To do the conversion you will need to complete the following for each table: 1. Select any cell in a table.

2. Under the Design menu bar at the top, click on the Convert to Range button.

Your table will lose its filtering function, which you can manually add back, but will retain its formatting. After you convert all tables to a range, the Custom Views button should not be greyed out and available for you to use.

George D. Strudgeon, CPA, CGFM, is an audit director at the Virginia Auditor of Public Accounts in Richmond. Email him if you have Excel topics you want him to cover.

If you want to use Custom Views but your workbook has cells referenced as a table, consider converting each table reference to a range of cells. Thankfully, Excel does make this conversion

george.strudgeon@gmail.com

Is your workspace a mess?

Not your desk (though that may be, too). All the other stuff: computer desktop, email in-box, phone apps. It may be time to get cleaning and regain your productivity:

Get in the cloud. Make sure you’re using virtual storage to protect your documents.

Check out your mini-computer. You know, the

Begin with your computer — and maintain order. Committing a set time each week (even 15

one you keep in your pocket. Make sure you still use all your phone’s apps and delete old pictures and videos that are saved to the cloud.

minutes) can do wonders for productivity down the road.

Adapted from “6 Tips to Decluttering Your Digital Workspace,” from the American Institute of CPAs’ CPA

Stop it with the tabs already. If you have 50

Insider. Read the full list and more tips at tinyurl.com/

tabs open on your Internet browser, just close them.

y5hjgo8c.

Email is next. Unopen, old messages? Delete.

Archive anything older than a week.

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NOVEMBER/DECEMBER 2019

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ADVOCACY

A CPA in charge Nancy Glynn, the new Virginia Board of Accountancy (VBOA) executive director, is on the public’s and licensees’ side.

Commonwealth University, Glynn spent most of her career as a CPA working in audit and compliance.

“It was a great fit for me,” she says. “I am naturally curious, enjoy the challenge of changing priorities and love to untangle complicated situations. Audits, fraud investigations and compliance reviews often provided diverse challenges.”

After working in audit at the Virginia Auditor of Public Accounts, she became senior audit manager at MeadWestvaco (now WestRock), where she traveled internationally. She later became director of global assurance at ChildFund International, which enabled her to travel to developing countries and experience different parts of the world. “In each of these positions, I was responsible for fraud investigations and compliance matters,” Glynn says. “This has provided me with some very interesting experiences!”

Nancy Glynn, CPA, CFE, is breaking the mold at the Virginia Board of Accountancy (VBOA). She is the first executive director in the VBOA’s history to hold an active CPA license. She knows the entire CPA experience; she lived through it.

“I have experienced the profession from all perspectives,” Glynn says. “I sweated through the educational requirements and the Exam when I was younger. I have lived and breathed CPE requirements — even a CPE audit or two — since I earned my CPA. I have been involved in some aspects of peer review and I have done hundreds of audits and compliance investigations.”

All that experience prepared her to lead the state government body tasked with protecting Virginia citizens by regulating CPAs and CPA firms.

A NATURAL FIT Despite initially thinking she would specialize in tax after receiving her bachelor’s degree from Virginia

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When her grandchildren were born, Glynn decided it was time to stick closer to home. With her experience in nonprofits and assurance, she thought the executive director position at the VBOA could be the right fit.

She began her new job in October 2018, replacing former director Wade Jewell, who had left for the National Association of State Boards of Accountancy.

FACING CHALLENGES HEAD ON Now that she’s got a year under her belt as executive director, Glynn says the VBOA is watching national trends like CPA candidate numbers decreasing and deregulation. The board is constantly meeting to discuss state, national and global issues. “The VBOA, other state boards of accountancy and national organizations are focused on ensuring the CPA title continues to provide value in an evolving global business environment.”

Virginia is seeing fewer candidates sitting for the CPA Exam, which some experts attribute to low unemployment rates and ample job opportunities, Glynn says. Along with national organizations, the

ADVOCACY

board always trying to attract candidates and promote the benefits of the CPA designation. “In my current position, I try to share my experiences and encourage those interested to pursue their CPA license. From my experience, and the experience of other CPAs I have spoken with, I can tell you it is worth it.”

Additionally, the national movement for deregulation creates a challenging environment for professional licenses and implementing any changes to regulations. At the same time, Glynn acknowledges, change is needed for the profession.

“We can clearly see technology and the expanding global economy continue to challenge the diversity of skills needed for accountants. We are working to ensure the CPA profession remains relevant.”

All in all, Glynn says, “I believe having an experienced CPA at the helm, especially one with years of compliance experience, is beneficial for all licensees, exam candidates, applicants and the public.”

And besides, she has firsthand knowledge that many stereotypes are untrue. “There is a perception that CPAs have dry personalities and are good at math,” she says. “I know this is not true for me or most CPAs I know, though some are very good at math!” n

PROFESSIONAL LICENSING ALLIANCE LAUNCHES As part of our efforts to advocate for smart professional licensing, the VSCPA is always monitoring regulatory efforts that affect CPAs. Our partners at the American Institute of CPAs (AICPA) and the National Association of State Boards of Accountancy (NASBA), along with other state and national professional associations representing professionals like engineers, architects and surveyors, have formed the Alliance for Responsible Professional Licensing (ARPL) to work on this issue. The Alliance was formed to ensure lawmakers recognize that technical professions require rigorous qualifications and ongoing education. Right now, legislatures around the country are considering bills to weaken licensing standards and potentially impede professional mobility. We appreciate and support the important work of the Alliance. If you have any questions, contact VSCPA Public Affairs Director Tim Barry at tbarry@vscpa.com or (804) 612-9940.

Session begins in January Join us on CPA Assembly Day — Jan. 21, 2020.

The next session of the Virginia General Assembly gets underway Jan. 8, 2020, and the VSCPA is already preparing.

Our advocacy work on your behalf has never been stronger, but we still need your help.

While we watch for the outcomes of the November elections and how they might shape leadership in Richmond, we are working with legislators to be ready for whatever changes may come. Once the polls close and the jockeying for committee assignments begins, our team is already positioned to guide elected officials through the tough tax and budget battles that lie ahead.

Some of the issues we have faced before, like tax conformity, licensure requirements and financial literacy education, but we also need your help to identify new challenges. Practicing CPAs are the first to see the financial and regulatory threats that will face our Commonwealth; we need you to be our early warners of potential obstacles or opportunities for our profession. You can always reach out to our team with thoughts on pending or potential legislation.

Stay tuned — once the electoral dust settles, we’ll ask you to help support our CPA Assembly Day efforts in Richmond on Jan. 21, 2020. This is your chance to meet face-to-face with elected officials and their staff to share your expertise. Tax and budget issues will likely take center stage again this year, and we want to be there as a resource to legislators and as a voice for CPAs across the Commonwealth.

Ready to sign up or have questions? Visit vscpa.com/ CPAAssemblyDay or contact VSCPA Public Affairs Director Tim Barry at tbarry@vscpa.com or (804) 612-9440.

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INNOVATION

INNOVATION, celebrated In November 2018, the VSCPA launched the Center for Innovation to connect members with resources in technology and talent.

A lot has happened in a year.

It’s no secret the CPA profession is facing more

pressure than ever to innovate and stay on top of emerging trends. Since the Center for Innovation launched last year, VSCPA members have received a wealth of resources and events to help them think differently and remain relevant in the areas of technology and talent.

The Center for Innovation is part of one of the VSCPA2025 bold strategies for innovation and vision as identified by the VSCPA Board of Directors. The VSCPA wants the CPA profession to be known for its visionary leadership, professional expertise and stellar reputation. An advisory council of CPAs and other leaders provides strategic direction for the ongoing development of the Center; helps identify key partnerships, resources and innovators; and ensures the Center remains future-forward to meet members’ needs.

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Check out the opportunities, programs and resources the Center for Innovation developed over the past year!

EVENTS Technology & Innovation Showcase In November, the Center for Innovation’s signature program in Richmond will bring together learning, engagement, resources and partners to provide members a one-of-a-kind experience. More than 30 accounting and tech exhibitors will display innovative tools and solutions, and 17+ hours of CPE will cover tech trends like artificial intelligences, data visualization, blockchain and more. There’s still space!

Visit vscpa.com/showcase to learn more and register.

INNOVATION

{

CURRENT CENTER PARTNERS

Women’s Leadership Forum This brand-new event in Richmond in December offers attendees a one-day, interactive forum designed to educate, inspire and champion change on behalf of women. The forum will help strengthen attendees’ leadership and communication skills, build a sense of empowerment and more. Registration is open now; visit vscpa.com/WomensForum to learn more and register.

Other educational opportunities More than 400 members attended innovation webinars, including the WOWbinar series and virtual interchanges. The VSCPA Interchange Road Show brought members together across the state to learn how to drive innovation in their organizations and build a workplace of the future. A Cybersecurity Summit and an event on blockchain and bitcoin educated members on relevant tech topics, and a “Featured Innovator” video series introduced members to exciting new ideas.

NEWS & INFORMATION Available at vscpa.com/Innovation, the Center includes

THANK YOU TO OUR 2019 ADVISORY COUNCIL George Forysthe, CPA (Chair), WellsColeman, Richmond George Beigel, CPA, Genworth Financial, Richmond April Cassada, CPA, Virginia Auditor of Public Accounts, Richmond Anita Collins, CPA, PBMares, Fredericksburg Dan Hudgens, CPA, Deloitte, Richmond Brian Kush, PCC, CPA, Intend2Lead, Chicago Waqqas Mahmood, Baker Tilly, Tysons Byron Patrick, CPA, Botkeeper, Bel Air, Md. Louise Reed, CPA, Louise Reed, CPA, Richmond Wendy Rohrssen, Sage Accountant Solutions, Atlanta JJ White, Dale Carnegie, Richmond Aditya Yerramilli, CPA, Google, Washington, DC

TECHNOLOGY

TALENT

Sage MindBridge AI Cetrom

C3 Evolution Group Dale Carnegie Intend2Lead Floricane John Maxwell

articles and resources on technology and talent, links to relevant educational programs, innovative member highlights and featured partners. The monthly Center for Innovation e-newsletter brings members tips, insight and inspiration on future-forward topics.

LEADING FORWARD PODCAST Each month, VSCPA Chief Operating Officer Maureen Dingus has conversations with leaders and experts on topics like innovation, leadership, corporate culture and technology. Check out vscpa.com/LeadingForward to see the episodes, or download the podcast from your favorite app.

AWARDS To encourage CPAs to be innovative in focusing on diversity and inclusion, the VSCPA created two new awards. Ruth Coles Harris won the Diversity & Inclusion Award, now named after her, and Jim Cole, CPA, won the Impact Award for his contributions to the profession as a dedicated instructor bringing insight to CPAs across Virginia. Visit vscpa.com/Awards to nominate.

THERE’S MORE TO COME The Center for Innovation is just getting started! We’re planning a revamped roundtables series in multiple locations across the state for Management of an Accounting Practice (MAP) topics, as well as a separate series for CPAs in corporate finance. Digital learning enhancements will include new online offerings and a webinar series hosted by the Young Professionals Advisory Council.

Innovation open houses will offer members ways to network and learn from other organizations and peers who are paving the way for the future. And a newly redesigned VSCPA headquarters in Richmond — the VSCPA Learning & Innovation Center — will open in May (see page 7).

The future is here, and we want CPAs to be ready. Thank you for your support of the Center for Innovation over the past year; continue to send us your ideas and feedback and tell us how you’re innovating! Email innovation@vscpa.com with any thoughts, ideas or examples of innovation happening at your organization, or reach out to Laura Cobb, VSCPA innovation and leadership director, at lcobb@vscpa.com. And don’t forget to follow us on social media; join the conversation with the #CPAinnovate hashtag! n

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YOUNG PROS

UNEASY SPEAKING: A path through conversation Sometimes you’re forced to have conversations at work that you would rather avoid.

Life is awkward. But generally, it is those

awkward moments that give the most life lessons. In both work and real life, people are forced to discuss things that they wish could remain unspoken. The conversations that no one wants to have are the most important, whether it be on personal life, someone’s bad breath or career discussions. These conversations may be unwanted, but without them development would be impossible.

I am not a psychologist, sociologist or anthropologist, so I cannot give technical analysis of conversations and growth based on another person’s research.

However, I do have some personal anecdotes that I think are valuable lessons in handling those hard

Lea Gray

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conversations, how I have handled some in my past, and what I could have done better.

My senior year of college, I lived in a townhousestyle on-campus apartment complex with three other roommates. I went to a small college, in the middle of the mountains, surrounded by trees and land, so we spent a lot of time sitting around talking about our dreams, goals and future plans. While these should have stayed upbeat and hopeful conversations, one of my roommates’ favorite ways to turn the conversation was to discuss, in explicit terms, what our biggest flaws were. I do not mean to say that she was trying to get us to think deeply about where we were in life and how we needed to work on ourselves to make our

YOUNG PROS

TOP 5 UNDER 35 nominations now open!

See page 32 for more information.. goals, but rather that she would list her perception of each of our flaws and ask us to defend them.

When these hot seats first began, I felt as though they were a bane to my existence and a reason to avoid my apartment. Who wants someone constantly telling them every single thing wrong with their personality? But after some time, I started to enjoy those conversations. It is not that I enjoy being criticized, but that because the criticisms were meant to be helpful and constructive, it gave me an opportunity to develop a more mature sense of self-awareness. Being open to another person’s perspective of my personality allowed me to better analyze who I am, what I want and how I could achieve those goals. This gave me practice in opening myself to criticism and allowing people with good and helpful intentions to give advice even when I do not necessarily want to hear it.

While I was in college, I interned at a small accounting firm, local to my area, for two years. As a history major, this was a completely different environment for me and is honestly one of the main reasons that I am where I am today. But here, I also learned another valuable lesson in awkward conversations, and this one had the added bonus of being at work.

In my second year of interning, I was one of four interns, the other three of which had all started that year. This meant that in some ways I was supposed to mentor or teach the others, so the accountants could spend less time on us and more time on their work.

One day early on in busy season, one of the accountants told me my boss, the partner, needed to talk, but to wait until he was done with lunch. I waited nervously for about 10 minutes for the impromptu meeting. “We have an issue.” I waited, trying to figure out the best method of apology for whatever problem I must have caused. “One of the other interns smells bad, and you need to deal with it.”

I was dumbfounded. How was I going to tell this poor man, who I had barely spoken to thus far, that he stunk? I was glad I was not in trouble, but I also had no idea how I was supposed to deal with this issue. Most importantly, I was afraid this was a sly way of letting me know that I stank without hurting my feelings. I went to all my friends that night very seriously asking if they ever noticed a bad smell.

Because I was personally so self-conscious, I decided that mentioning bad smells and the best brands of toothpaste and

soap to the other intern would cause him to be aware enough that it would solve all the issues. Eventually the smell did go away.

However, looking back now, I realize how I could have handled the situation better. Rather than using innuendo or manipulation, I should have been direct. There are polite and respectful ways to tell people sensitive information, and you should always respect their feelings. Deal with things head on, because the only way for someone to move on or to make necessary changes is if they are aware. Being unsure about what someone is saying only causes distrust and dislike and wastes time.

Finally, I want to share some of what I have learned during my limited career. As I previously wrote, I did not start out to be an accountant. I was a history major and had a job as a tech writer (technically my title was word processor) after college. During my internship, I decided to pursue accounting, but I still took off a year between undergrad and graduate school to work. Though I knew when I started my job that I had been accepted into grad school and would be leaving after the year, I waited far too long to announce it to my coworkers. Of course, I did not wait until the day I was leaving, but we worked on projects that lasted years, so my managers were not just planning how to get through the next couple busy seasons, but deciding how the program would be funded and staffed for sometimes decades. Now, there will always be some give and take in communication at work, but it is also very important to be open and honest with career advisors and managers when decisions affect other people.

Conversations should be two-way, and real conversations allow differing opinions and perspectives to come together to form growth. Life is the path of the individual, and just like life, sometimes conversations can lead to awkward and difficult situations. But sometimes, just like in life, it is those difficult times and conversations that provide the opportunity for the most growth and impact. n

Lea Gray, CPA, is a senior tax associate in the Richmond office of BDO USA, LLP. She was a member of the 2018–2019 VSCPA Young Professionals Advisory Council (YPAC). graylm27@gmail.com linkedin.com/in/lea-gray-cpa-baa5b1b4/

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MANAGEMENT

ALWAYS AIM

high:

Innovative continuous improvement and the CFO Total operational excellence can be achieved.

It just takes a committed approach.

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MANAGEMENT

In today’s

business climate, industry consolidation and technological improvements are creating stronger competition. Companies must ensure the right culture is in place to foster innovation and continually improve. An innovative continuous improvement (ICI) culture, as shown by three companies below, can establish a foundation leading to total operational excellence — in which every facet is focused on meeting customers’ current and expected future needs, while significantly improving income.

Mike DellaRipa, CPA, MBA, CGMA

This article shows one path of culture change based on the best common practices of the three companies and their CFO’s key role. (For proprietary reasons company names cannot be disclosed.)

To achieve the goal of total operational excellence, these companies applied innovation through seven stages: commitment, planning, communication, training, implementation, measuring results and recognition (see Exhibit 1 on page 18).

In helping develop the strategic plan, the CFO understood the importance of identifying what markets the company competed in and was brutally honest as to its competitive position. The CFO acknowledged what customers’ specific needs were when buying, and how the company could satisfy and fulfill those needs. The CFO knew to avoid the mistake of trying to be “everything to everybody,” and focused on where the company had strong product demand or expertise in unique operational capabilities versus their competitors. It was important to confront reality and define where the company should be positioned so that it could excel where it competed.

The CFO designed a financial accountability reporting system to identify if the company was on track and see where are the planned results were not occurring.

The CEO and CFO then established incentives for achieving results and were not tolerant of continued poor performance, reflecting the expectations of customers.

COMMITMENT AND PLANNING Getting started, these three companies each had an innovative CEO who had a vision to transform the company culture to one of ICI. The Board of Directors gave the CEO authority to make changes and a commitment of their support of at least three to five years. Everyone understood that patience was required, because a dramatic culture change often causes disruption before it shows positive results. In return, the CEO committed to the Board to deliver improved financial results.

COMMUNICATION The CEO then rolled out a company-wide communication plan explaining the need for change to an ICI culture supported by participative, not autocratic, management. The primary focus was on the goal of attaining total operational excellence in relationship to satisfying the customers, current and long term.

The CEO then ensured there was an innovative CFO in place, followed by the same for the balance of the senior management team. The CFO had the important role of being the facilitator, or catalyst, supporting the culture change and also acted as the company’s primary information resource. The CFO had the necessary skill to be able to interpret large amounts of data and then present it as meaningful metrics that the CEO and the management team could act upon to lead to operational excellence.

After the CEO and senior management team completed their vision and mission statements, they started the annual strategic planning process. The

CFO facilitated putting together the strategic plan by working with the senior management team and then presented the consolidated plan to the CEO for approval, which was then sent to the Board.

ICI is a tool to reach that goal, not an end in itself.

During the communication process, the CFO acted as a facilitator to ensure the message was understood and, when necessary, gave confidential feedback to the CEO as to how to be more effective.

The communication explained the requirement of everyone focused on a common goal and that working in a silo of excellence in each department was not acceptable. Working independently was going to be replaced with working interdependently to create efficiency. Employees learned why the change was necessary and the benefits to each person — this last point being very important. u

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MANAGEMENT

EXHIBIT 1: INNOVATIVE CONTINUOUS IMPROVEMENT BUSINESS MODEL TRAINING After the initial communication to all employees, the CEO and senior management were trained on how to lead a team using a participative approach. Training covered how to encourage participation, generate innovative ideas and gain consensus on the direction to proceed. They learned ICI principles such as focusing on process before people and knowing the importance of internal and external customers.

All departments would be managed with input from everyone affected as to how best to improve efficiency — especially before changes were made. Management were trained on how to effectively gain consensus within a team with different solution ideas. Innovation would require an atmosphere of psychological safety in meetings to solve problems, with people free to make any suggestions or disagree respectfully.

Everyone was advised to expect “the only constant will be change,” and there would be no hidden agendas. People would be given the tools, time, training and resources necessary for change, but if people chose not to change, it would become necessary, as a last resort, to change people. There would be no “sacred cows” in the company.

In summary, messaging established they would be on a continual journey for a defined competitive position with their customers: that the company was a strategic business partner able to supply information as well as “worry-free” products and value-added services. Achieving operational excellence through ICI would be only one point in a never-ending journey.

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The CEO and senior management then trained middle management and sales managers, thereby sending a strong message of the required commitment by all management to the ICI culture — a very important step in the training process.

Producing consistent quality products by reducing process variability was critical to operational excellence. Training in statistical process control was taught in a brief, clear and concise manner to achieve these goals.

This training led to data-based decision making and eliminated “pointing fingers” at people.

Other training included using Enterprise Resource Planning software, vendor partnerships, effective communication and listening, forecasting and succession planning. The CFO monitored the training processes to ensure the right people were properly trained and the ICI culture was in place to generate results.

Training was continual and played a key factor to the success of the companies.

IMPLEMENTATION Implementation started by establishing ICI teams in every department of the company. Some of the examples of success teams had are below.

As manufacturing was a major cost component of the three companies, that team had a first assignment to fully document the processes being used to ensure consistency as to the bills of material and product specifications. This ensured consistent, quality products were produced regardless of who was working or when or where the products were made. Once this step was

MANAGEMENT

done, the manufacturing team then innovated and took on the larger task of continually reducing waste and improving processes, which resulted in large cost reductions saving more than hundreds of thousands of dollars annually. These results were important to the CFO, as they led to more accurate product costing and competitive pricing — growing sales.

The concept of empowering the hourly workforce and self-directed work teams became part of the new culture and, in one company, a ratio up to 90 hourly workers to one manager became the norm.

The new manager standard was “managers manage processes, not people.” To ensure efficiency, process documentation was also done for all other business processes, such as receiving and processing customer orders, issuing purchase orders and all other administrative processes. No stone was left unturned.

Satisfaction measures were reported back to the CEO and CFO for purchasing, IT, human relations, accounting and customer service, which were tracked and expected to continually improve. Fixed

overhead costs decreased without layoffs as cross training was employed and used where possible when employee attrition took place.

One company implemented a monthly, cross-functional internal partnership meeting between middle managers in sales, operations, purchasing and finance. Together they improved customer and item profitability, forecast accuracy and resolved many other unmet customer expectations, contributing to sales divisions growing by millions of dollars. Management realized quickly that those closest to the problems usually have the best solutions. After five years, one company reported annual cost reductions in the millions.

While the implementation results in total were impressive for all three companies, it should be noted a key reason to one company’s success was that the CEO, CFO and senior management team went on site to each business location at least a few times per year to ensure process improvements were in u

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MANAGEMENT

EXHIBIT 2: COMPANY RESULTS

RECOGNITION

A comparison of one company’s annual results before and after implementing an innovative continous improvement culture for 10+ years.

As author Jim Collins states in his book “Good to Great,” “the right people in the organization make the difference,”1 and management took steps to ensure those people received recognition.

BEFORE

AFTER

Revenue

$110M

$310M

Units Produced

120M

295M

Employer/Supervisor Ratio

15/1

90/1

Units/Employee

53,300

245,800

Order Fill Rate

87%

99.7%

Consumer Complaints

15/million units

0.3/million units

Profit Before Tax

5%

12%

place, check that the results were real, evaluate management and meet with and listen to employees. It was also a morale boost to hourly employees to see the CEO and senior management team on the “front lines.”

MEASURING RESULTS At a formal monthly review meeting, the CFO would explain the financial results and state if the company delivered the forecasted results. There was little acceptance of the “bad forecasting” excuse or those responsible not achieving their targeted sales and income.

The company wisely made use of documented contingency plans by the CFO to implement when and if income performance did not measure up to targeted expectations.

A research and development team would then report on current products being improved and new products in development to meet expected future demand. The majority of the meeting was led by the CEO to discuss delivering on forecasted sales and income and to answer: “Was the company prepared to meet the future needs of customers the next 12 to 36 months?”

All three companies were successful after implementing an ICI culture and achieved total operational excellence resulting in significantly improved income and higher customer satisfaction, even to the point of some customers agreeing to be a reference.

See Exhibit 2 above for one company’s success story. All stakeholders of the business realized a benefit. Most importantly, these three companies were now on a path with a more secure future.

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While changing to an ICI culture to achieve total operational excellence was challenging at times, the determination, persistence and results of the teams and their leaders were recognized and celebrated with the local management frequently.

The CEO and senior management team also recognized and celebrated the cost reductions and process improvements of teams during on-site visits. Sometimes customers were brought in to give recognition, which was very well received.

Recognition steps ensured enthusiasm for team innovation continued and maintained the momentum of the new ICI culture, with the company-wide expectation of “never being satisfied.” This required management discipline to continue to follow the same steps of the success cycle already in place without taking shortcuts.

CLOSING SUMMARY We can all learn from these three companies. Creating an ICI culture was necessary to achieve total operational excellence.

Culture can fluidly blend the intentions of top leaders with the knowledge and experience of frontline employees.2 The CEO, CFO and balance of the senior management team were strategic and innovative in their approach as to where they should compete and where they should not. They were careful to make not only tough, but more importantly, smart decisions, especially regarding opportunities for mergers and acquisitions, where the CFO played a major strategic and advisory role. The CFO, with support from the CEO, was also able to facilitate change.

Being one who understood the business and customers, the CFO was able to work with the management team as a catalyst.

Without taking over, the CFO accelerated process improvements throughout the company.

Innovation requires creativity, bold leadership and the willingness to take risks. The Amazon warehouse in Chester, Va. now uses a four-day, 10-hours-a-day workweek to give employees three days off per week. Televerde, a technology-focused B2B marketing firm, has experienced an 8.5 percent growth rate by employing 650 people, 425 who are inmates, by showing them respect and not seeing them “as another orange suit.”3

MANAGEMENT

With the emergence of artificial intelligence (AI), companies will have to embrace this change into their culture and address the probable concerns.

Leaders need to reassure workers AI will enhance, not diminish their roles. Relationship managers who pride themselves on being attuned to customers may reject the notion that a machine could have better ideas about what customers want.4 In closing, Mandy Ginsberg, the successful CEO of Match Group, said it best: “Perhaps the biggest lesson I’ve drawn from this experience is that companies need to innovate constantly — with technology, pricing, products, product features and business models — to stay ahead of competitors and continue to grow.”5 n

Mike DellaRipa, CPA, is president of Mike DellaRipa LLC in Mechanicsville and was a controller and facilitator/catalyst in a company division that implemented ICI and achieved total operational excellence. He was also formerly a CFO for two companies. dellaripa67@comcast.net 1. Collins, Jim. Good to Great. HarperCollins Publishers Inc. 2001.

2. Groysberg, Boris, Jeremiah Lee, Jesse Price & J. Yo-Jud Cheng. “The Leader’s Guide to Corporate Culture.” Harvard Business Review. January–February 2018.

3. Rogers, Kristie. “Do Your Employees Feel Respected?” Harvard Business Review. July– August 2018.

4. Fountaine, Tim, Brian McCarthy & Tamim Saleh. “Building the AI-Powered Organization.”

Harvard Business Review. July-August 2019.

5. Ginsberg, Mandy. “How I Did It: Match Group’s CEO on Innovating in a Fast Changing Industry.” Harvard Business Review. July-August 2019.

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Contribute to the VSCPA PAC today vscpa.com/PAC

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21

TAXATION

REPEAL AND replace IRC SECTION 199A A VSCPA member finds 199A to be a complicated and frustrating solution to reduce income taxes on certain businesses.

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TAXATION

The Tax Cuts and Jobs Act of 2017 created

Internal Revenue Code Section 199A , which represents Congressional intent to reduce income taxes on trade or business income from passthrough entities, including sole proprietorships, in light of the reduction of the corporate tax rate from a maximum progressive rate of 35 percent to a flat or proportional rate of 21 percent. (Due to double taxation, corporate earnings are still taxed at a combined rate of 36.8 percent, assuming all after-tax earnings are distributed as qualified dividends.)

Gary Dittmer, CPA

While the intention of 199A is commendable, the execution is the opposite. Section 199A introduces new definitions, computations, a phase-in of limitations and no deduction for professionals other than for architects and engineers earning more than $421,400 if their filing status is married filing jointly or $210,700 in 2019 for any other filing status. These amounts will be adjusted for inflation annually.

Section 199A violates at least two of Adam Smith’s maxims of taxation in his landmark book, “An Inquiry Into the Wealth of Nations, Volume II”: certainty and ease of collection. Certainty refers to the ability of taxpayers to determine their tax liability within a reasonable degree of confidence, while ease of collection relates to the cost-benefit of collecting a tax.

That is, it should not be excessively costly to verify a taxpayer’s self-determination of tax.

In designing this system, Congress had two choices.

The first is a relatively simple solution and the second is the opposite: 1. Create a separate tax rate for qualified business income as was done for capital gains and qualified dividend income, or 2. Create a deduction to reduce taxable income for a qualified business that indirectly reduces the effective tax rate.

Unfortunately, Congress chose the deduction method, which includes new definitions, complex computations and deduction limitations that either phase in or completely eliminate the benefit of a lower effective tax rate.

At taxable income levels below $321,400, if married filing a joint return (MFJ) or $160,700 for all others, the deduction is fairly straightforward: compute 20 percent of qualified business income (a new definition) not to exceed a maximum of 20 percent of modified taxable income (also a new definition). The maximum effective tax rate for a qualified trade or business income (QBI) at these income levels is 29.6 percent, computed as follows: with a 20 percent deduction, 80 percent of income will be subject to tax. Therefore, 80 percent (100 percent minus 20 percent) of the maximum individual tax rate of 37 percent is the effective rate of 29.6 percent.

Once taxable income is within the limitation phase-in range of $321,400 to $421,400, the computation is more challenging, and depends on whether the taxpayer is a professional in a specified services trade or business (SSTB: another new definition). Essentially, an SSTB is any professional other than an architect or engineer. Exhibit 1 (page 24) is a comparison of the deduction for taxpayers within the phase-in range between an SSTB (example 6) and a non-SSTB (example 5). These examples are from Regs. 1.199A — 1(d)(4) Examples 5 & 6.

In this example, the taxpayer’s taxable income and modified taxable income are the same ($375,000), while the QBI is $300,000 from an S Corporation.

The S shareholder is not an SSTB in example 5 but is in example 6. The excess of taxable income over the threshold amount is $60,000, which makes the reduction percentage 60 percent and the applicable percentage is the inverse, 40 percent. For those interested in the details, I show the detailed computation step by step in the exhibit.

The effective tax rates are 32.6 percent for the nonSSTB professional (an architect), and 35.2 percent for the SSTB taxpayer (a CPA). In addition to the complexity of computing both the phase in for the non-SSTB example and phase out in applying the applicable percent, what logic could possibly justify the difference in treatment for these two professionals — a better lobbyist? Could it be an incentive for production-based professionals whose work yields tangible property as opposed to intangible property?

Perhaps, but the distinction appears arbitrary and capricious. u

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TAXATION

EXHIBIT 1: NON-SSTB VERSUS AN SSTB Non SSTB Example - Example 5

Non - SSTB and SSTB example - MFJ filing status

Qualified Business Income

300,000

20%

QBI Deduction Computations 60,000

Modified taxable income Threshold Excess Range Applicable percentage

375,000 315,000 60,000 100,000

20%

75,000

50% W2 Wages limitation, which is greater than investment limitation Excess Amount - excess of computation over 20% of QBI

=

60%

SSTB Example Example 6

Applicable Percent 40%

QBI Deduction Computations 24,000

Reduction percent

40% Applicable percentage 40,000

20,000

40%

8,000

40,000

40%

16,000

60%

24,000

40%

9,600

20% QBI less Reduction

36,000

Final QBI deduction re: Non SSTB

50%

Reduction amount(ex. 5)/applicable amount (ex. 6)

Final QBI deduction re: SSTB

QBI

$

QBI Deduction Taxable QBI Tax rate Income tax $ QBI Effective Rate

I suggest Congress should repeal and replace Section 199A to a tax rate computation like net capital gains and qualified dividends, which is much simpler and easier to compute and audit, and eliminate SSTB status. Neither method is perfect, but I believe Congress should be required to consider a straightforward approach over a more complex method to achieve a tax policy goal. By incorporating a succinct intent or principle within the Code when drafting new tax legislation that simplifies deductions, credits or computations of taxable income, tax policy can be efficiently and cost effectively enforced and adhere more closely to Adam Smith’s maxims of taxation. n

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300,000 (36,000) 264,000 37% 97,680

32.6%

14,400

$

300,000

$

(14,400) 285,600 37% 105,672

35.2%

Gary Dittmer, CPA, CMA, CGMA, retired as senior tax director for Spok, Inc., in Springfield. He is an adjunct professor at George Mason University and the University of Virginia School of Continuing and Professional Studies, where he teaches taxation. gdittmer@comcast.net

BREAKING NEWS: IRS released Revenue Procedure 2019-35 on Sept. 24, 2019, that specifies criteria for a safe harbor for real estate investments to be treated as a qualified trade or business.

TAXATION

1640 Huguenot Road | Midlothian, VA 23113 804.323.1886 | acgworldwide.com

CLIENT RELATIONS

WEATHER ANY CLIENTRELATED storm

Protect your firm with clear and effective engagement and disengagement letters.

26

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NOVEMBER/DECEMBER 2019

CLIENT RELATIONS

Engagement

Suzanne Holl, CPA

and disengagement letters are two of the fundamental building blocks of effective CPA risk management. Along with client screening and ongoing documentation practices, engagement and disengagement letters are crucial for addressing the high expectations that clients and the public have for CPAs. These expectations affect the way that CPAs are perceived in the world of professional liability, where CPAs are judged by jurors, judges and arbitrators who generally have a limited understanding about what CPAs do in their profession.

• Note client instructions, responsibilities, deliverables and dates.

Judgments and verdicts rendered in liability disputes create what are sometimes referred to as jury or claims standards, which have almost always been higher than the standards the profession has established for itself.

CPAs who pay proper attention to their professional liability exposures gear their risk management techniques not only to what the profession expects of them, but also to what the public expects of them.

• Indicate the firm’s record retention policy.

ENGAGEMENT LETTERS CPAs must reach an understanding with the client about the engagement, and that understanding should be in writing with an engagement letter. Engagement letters help CPA firms improve communication with clients, document engagements more effectively and protect the firm from litigation. Letters should be as detailed as possible in describing the nature and extent of the services that the firm is being retained to perform, as well as the services that the firm is not being retained to perform.

Similarly, engagement letters should be as detailed as possible regarding the client’s responsibilities and obligations that will facilitate the engagement (e.g., providing necessary documents and accurate information in a timely manner).

• Outline terms of fee collections and the consequences of late payment.

• Include a stop-work clause. (Enforce the clause to prevent unpaid fees from building up to the point where the firm wants to sue for them, or the firm is in financial distress.)

• Include third-party service provider language, if applicable.

• Confirm client’s acknowledgement to the terms of the agreement and request client’s signature.

Additional considerations: • Include warnings regarding inadequate internal controls.

• Explain limitations regarding financial statement distribution.

• Include alternative dispute resolution language (i.e., mediation for all disputes, and an arbitration clause for fee disputes only).

• Efficacy of limitation of liability clauses.

• Engagement letters should not include: Marketing information. Defer promotional information and other forms of marketing to other documents. The engagement letter should be viewed as a contract and composed accordingly. It is not the place to convince a client that your firm is the answer to all their problems. An engagement letter limits your services, rather than selling your services. Wording such as, “We are particularly suited for this type of work” may be appropriate for a proposal letter, but not for an engagement letter.

The following guidelines of dos and don’ts can help you write effective engagement letters.

Engagement letters should: • State the purpose of the engagement.

• Define the scope and limits of the engagement (specifically what the firm will and won’t do).

• Specify known negative conditions or adverse situations.

• Note reliance on facts provided by the client.

All-encompassing language. An engagement letter should not contain all-encompassing language.

Because an engagement letter limits the scope of your firm’s work, avoid superlatives and absolutes.

For example, use words such as “notice, examine, u

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CLIENT RELATIONS

follow, observe, study, investigate, test, watch and comment on.”

However, avoid words and terms such as “all, every, analysis, any, absolute, complete, confirm, judge, determine, totally, thorough, validate and verify.”

Legal jargon or ambiguity. Make the engagement letter easy for the client to understand. Don’t use abbreviations or words only a CPA would understand. Any ambiguity in the engagement letter will most likely be decided in the client’s favor in a court of law, so keep the language simple and clear.

Additional areas to consider: • Limit the use of unilateral language to lower-risk engagements (signed engagement letters are always the strongest “first line of defense”).

• Avoid evergreen letters — update letters annually to reflect changes in the scope of the engagement.

• Avoid usurious interest charges. Instead, assess a “late fee” for unpaid balances.

General engagement letter tips: • Every engagement letter should include the full or exact name of the client, entity type, specific state names and tax years for tax engagements, and purpose of engagement.

• Review the letter with the client and agree on the terms and conditions before beginning work.

• Update engagement letters at least once per year.

• Update engagement letters whenever engagements change.

The best way to improve client communications and manage risk is to use a detailed engagement letter that the client understands and signs. A well-documented engagement, and a strong defense, begin with an effective engagement letter.

formally, in writing. At a minimum, the disengagement letter should always contain the following: • A clear statement that you are disengaging and the effective date of the disengagement (e.g., We must formally end our relationship with you as your accounting firm <effective immediately, or as of [date]>.); • A description of any work that is in process or unfinished; and • A statement of any due dates or filing deadlines that exist with regard to the work, whether finished, in process or unfinished.

It is often essential to provide ample lead time before a client’s deadlines to better protect the firm from a claim or from being forced to provide some crucial services before disengaging.

Review and edit your disengagement letter carefully to ensure that it is professional, objective and rational. Situations that provoke disengagements are often emotionally charged. Don’t let your letter reflect your personal feelings. Your client needn’t feel antagonized in any way. When done effectively, disengagement can leave your client feeling that you have acted in the best interests of both parties.

Disengagement is an important practice management tool, and knowing how to do it skillfully and professionally will serve to help you expand your practice and avoid liability. Any time you need advice about a client situation or a disengagement letter, call your risk advisor.

Effective communication is a key factor in any CPA-client relationship. When the firm stays informed and in control, it is better protected. In the end, good risk management is good practice management and will help the firm enhance its clientele and avoid liability. n

DISENGAGEMENT LETTERS Most CPAs — even those highly skilled at client screening — will periodically encounter situations and client relationships that call for disengaging. While the subject of disengaging is typically thought of as (at best) unpleasant, disengaging can be a practice management tool that increases firm profitability and creates a better situation for both the CPA and the client.

Proper client disengagement procedures should be used to avoid causing a loss for the client. When you decide to disengage, you should seek to terminate the relationship professionally and

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Suzanne M. Holl, CPA, is senior vice president of loss prevention services with CAMICO. With more than 28 years of experience in accounting, she draws on her Big Four public accounting and private industry background to provide CAMICO’s policyholders with information on a wide variety of loss prevention and accounting issues. sholl@camico.com camico.com CAMICO is a preferred provider of the VSCPA.

CAMICO – Sponsored Provider of VSCPA “CAMICO’s expertise, stability, and commitment to CPAs provide strong reasons for the VSCPA to choose CAMICO as its sponsorship program, year after year. The company assists policyholders with a wide variety of practice and risk management issues specific to CPAs, and the society’s partnership with CAMICO supports our efforts to provide strong benefits to our members.”

Stephanie Peters, CAE VSCPA, President & CEO

Why CAMICO? • For more than 33 years, CAMICO has been protecting CPAs with insurance solutions tailored to the professional services and concerns faced by CPA firms every day.

• CAMICO’s depth of services for CPA firms is unmatched by other insurance programs.

• CAMICO policyholders have unlimited access to proactive loss prevention and potential claims assistance.

• Policyholders can call CAMICO as often as needed and consult with in-house experts on loss prevention, tax, and accounting and auditing issues — all at no additional cost.

These are just some of the reasons why VSCPA selected CAMICO as the Society’s sponsored provider of Professional Liability Insurance.

Rachel Painter, AINS Senior Account Executive T: 800.652.1772 ext. 6773 E: rpainter@camico.com W: www.camico.com

Accountants Professional Liability Insurance may be underwritten by CAMICO Mutual Insurance Company or through CAMICO Insurance Services by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued. ©CAMICO Services, Inc., dba CAMICO Insurance Services. All Rights Reserved.

VSCPA

Statements of Financial Position & Statements of Activities The following Statements of Financial Position and Statements of Activities reflect the VSCPA’s and VSCPA PAC’s financials for the 2018–2019 fiscal year. The full audited financial statements are available online in the “About the VSCPA” section of vscpa.com. More information on the VSCPA’s 2018–2019 programs and initiatives is available in the “State of the VSCPA” report, also available at vscpa.com/StateoftheVSCPA.

APRIL 30,

2019

2018

ASSETS Current Assets Cash and cash equivalents

$

Trade accounts receivable Investments Prepaid expenses Total current assets

2,447,760 72,339 1,448,142 290,193 4,288,434

$

224,411 1,229,351 5,742,196

Investments Property and equipment — net

1,798,813 179,724 997,357 232,208 3,208,102 1,039,324 1,334,373 5,581,799

LIABILITIES AND NET ASSETS Current Liabilities Accounts payable

$

Accrued expenses Accrued retirement Deferred revenue Deferred compensation Total current liabilities

34,840 206,531 189,889 783,075 190,700 1,405,035

$

21,605 192,616 171,648 849,645 110,000 1,345,514

Net Assets Without donor restrictions: Invested in property and equipment Board designated for facility and technology Board designated for operating expenses Undesignated With donor restrictions (VSCPA PAC) Total net assets

30

DISCLOSURES

•

NOVEMBER/DECEMBER 2019

$

1,229,351 952,175 1,268,284 832,544 4,282,354 54,807 4,337,161 5,742,196

$

1,334,373 826,056 1,100,184 900,777 4,161,390 74,895 4,236,285 5,581,799

VSCPA YEARS ENDED APRIL 30,

2019

2018

Change in Net Assets Without Donor Restrictions Revenue Program Revenue:

Continuing education Seminars

$

1,138,402

Conferences Ethics Online Other CPE Total continuing education Peer review Innovation Membership Communications Students and educators Net assets r eleased from restriction, VSCPA PAC Total program revenue Other: Affinity income Investment income, net Rental income Gain (loss) on disposal of property and equipment Miscellaneous Total support and revenues without donor restrictions

Expenses

Program Services: Learning Governance Peer review Membership Innovation Students and educators Public relations Government affairs VSCPA PAC Supporting Services: Administrative and general Total expenses Change in net assets without donor restrictions

Change in net assets with donor restrictions

Contributions to the VSCPA PAC Net assets released from restriction, VSCPA PAC Change in net assets with donor restrictions Change in net assets Net assets — Beginning of year Net assets — End of year

$

DISCLOSURES

•

$

1,288,092

448,897 1,123,791 298,447 6,709 3,016,246 262,139 44,503 2,567,052 58,310 44,126 74,536 6,066,912

527,270 1,071,948 334,765 20,125 3,242,200 188,427 31,557 2,400,793 62,124 44,441 82,169 6,051,711

150,185 73,550 27,017 (4,208) 2,500 6,315,956

178,958 25,741 32,557 625 3,820 6,293,412

2,376,837 357,361 344,472 1,032,191 380,256 269,440 132,889 246,914 74,536

2,425,536 350,931 258,994 901,995 301,727 293,469 156,600 177,485 82,169

980,096 6,194,992 120,964

911,774 5,860,680 432,732

54,448 (74,536) (20,088) 100,876 4,236,285 4,337,161

72,051 (82,169) (10,118) 422,614 3,813,671 4,236,285

$

NOVEMBER/DECEMBER 2019

31

VSCPA

CPAs deserve to be awarded!

Chapter name change The VSCPA Blue Ridge Chapter has rebranded and is now the Shenandoah Valley Chapter, serving Amissville, Bridgewater, Broadway, Edinburg, Front Royal, Harrisonburg, Luray, Middleburg, New Market, Staunton, Waynesboro, Winchester and Woodstock. Find and join your chapter today at vscpa.com/ chapters.

Nominate yourself or an outstanding colleague for a VSCPA Distinguished CPA Award

by Friday, Dec. 6. Award nominations can be made in the following categories: Outstanding Member Award Recognizes a VSCPA member who has provided outstanding service to the profession through participation in VSCPA activities, civic engagement and charitable activities that further a positive image of accounting and the CPA profession.

Impact Award The Impact Award recognizes a VSCPA member who has made a recent contribution to the advancement of the profession with innovation and disruption in the areas of technology, talent, learning, advocacy or student activities.

Ruth Coles Harris Advancing Diversity & Inclusion Award Recognizes a VSCPA member who champions diversity and inclusion in the field of accounting by doing one or more of the following: • Plans and implements organizational initiatives to help ensure a diverse, inclusive workplace environment • Champions policies and programs aimed at improving diversity in the profession • Demonstrates leadership and commitment to raising awareness of diversity principles • Serves as a role model for current and future CPAs through mentorship, coaching or other types of volunteer work in the community

Thanks to all the VSCPA members who have already signed up to volunteer!

Visit the Volunteer Manager on Connect to see the full list of current opportunities at connect.vscpa.com/ VolunteerOpportunities. We are currently looking to fill: Board of Directors Political Action Committee Board of Trustees Educational Foundation Board of Directors Innovation Advisory Council CPAs in the Classroom Young Professionals Advisory Council

Top 5 Members Under 35 Award

Accounting & Auditing Advisory Committee

Recognizes a young CPA member (35 or younger as of April 30, 2019) who has shown excellence in one or more of the following: professional achievement, VSCPA or local VSCPA chapter accomplishment, community contribution or dedication to the CPA profession.

Tax Advisory Committee

Visit vscpa.com/Awards for nomination information.

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OPEN VOLUNTEER OPPORTUNITIES

DISCLOSURES

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NOVEMBER/DECEMBER 2019

Peer Review Committee Professional Ethics Committee

VSCPA

CPAs still optimistic on economy, place emphasis on security Is a recession in the air

for 2020?

Despite some fears of an economic downtown, the majority of Virginia CPAs, 66 percent, believe the U.S. economy is headed in the right direction, according to the VSCPA’s 2020 Virginia Economic Expectations Survey (a partnership with Virginia Business magazine). That number, however, is down around 10 percent from last year.

A strong plurality of the 292 CPA respondents (48 percent) do not see a recession coming next year, but a large

number aren’t quite sure (29 percent) — perhaps reflecting a bit of uncertainty.

Two main trends emerged as clear areas of interest for Virginia CPAs: health care and security.

Sixty-six percent of respondents say health care is the biggest area for the Virginia General Assembly to address this year, with 33 percent citing health care as the most pressing issue statewide, and 37

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DISCLOSURES

percent believing it is the No. 1 issue facing businesses in the Commonwealth.

Infrastructure came in second place, with 22 percent responding.

Not surprisingly, 78 percent rate cybersecurity a significant concern, with 19 percent revealing their organization has been a victim of a cyber attack. As one respondent remarked, “We have good protection, but every day there are emails that have links to put our firm at risk.”

In addition, a majority of respondents, 56 percent, said tax reform has been good for their clients’ and customers’ businesses.

Twenty-five percent said it had no impact, and 19 percent said it had a negative effect.

Beyond these issues, CPAs are also tracking tax conformity legislation in the coming General Assembly session. More than 86 percent of respondents would like Virginia to implement automatic — or rolling —conformity to federal codes. The VSCPA advocacy team is already working with legislators toward this goal and will provide more updates soon.

Further analysis of the results can be found in the November issue of Virginia Business magazine, including region-specific interviews with five VSCPA members: Hope F. Cupit, CPA, president and CEO of Southeast Rural Community Assistance Project Inc. in Roanoke; Cathryn Michie, CPA, CFO of Shenandoah Valley Workforce Board Inc. in Harrisonburg; Aaron L. Peters, CPA, president and CEO of Peters & Associates PC in Falls Church; Amanda Phelps, CPA, recruiting manager at Robert Half International in Norfolk; and Gary R. Thomson, CPA; managing partner at Thomson Consulting LLC in Richmond.

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NOVEMBER/DECEMBER 2019

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VSCPA

Sponsor a CPA Ready Workshop Join the VSCPA as a sponsor at our CPA Ready Workshops, designed to help college accounting students start their journey to become CPAs. These one-day workshops are free and geared toward, but not limited to, sophomores and juniors. We’ll hold sessions throughout each workshop that focus on different career paths and readiness, as well as the CPA Exam. Workshops take place from 10 a.m. – 2 p.m. and include lunch and networking opportunities. Dates and locations are: • • • •

Friday, Jan. 24, Norfolk State University Friday, Jan. 31, UVA Darden School of Business in Arlington Saturday, Feb. 8, Radford University Saturday, Feb. 15, University of Richmond

If you have any questions about the CPA Ready Workshops or to sponsor, contact Academic Engagement Director Molly Wash, CAE, at mwash@vscpa.com or (804) 612-9417.

Register FOR A DON FARMER Fairfax | Richmond | Roanoke | Online Don Farmer’s 2019 Federal Tax Update Nov. 14: Fairfax | Dec. 2: Richmond & Online | Dec. 12: Roanoke Don Farmer’s 2019 Individual Tax Update Dec. 3: Richmond & Online Don Farmer’s 2019 Corporate/Business Income Tax Workshop Dec. 4: Richmond & Online

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SEMINAR NEAR YOU!

Register for a Don Farmer near you vscpa.com/conferences *Simulcast options are available Dec. 2–4

34

DISCLOSURES

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NOVEMBER/DECEMBER 2019

VSCPA

Congrats to the following members

Brag, please!

Send your member news to disclosures@ vscpa.com.

Top row: George Brooks, CPA, Jim Kelly, CPA, Krystal McCants, CPA, Kim Skinner, CPA Crystal Stewart, CPA. Bottom row: Matthew Taylor, CPA, Lisa Timbrook, CPA, Hillary West, CPA, Jonathan Wright, CPA.

NEW HIRES Amy Seibel, CPA, has been appointed chief financial officer at CrossCountry Consulting in McLean.

PROMOTIONS CST Group, CPAs, in Reston, has promoted Krystal McCants, CPA, Crystal Stewart, CPA, Lisa Timbrook, CPA, and Hillary West, CPA, to principal and Jim Kelly, CPA, and Kasey Rosen, CPA, to senior manager.

Ty Kehrer, CPA, has been promoted to managing director at Dixon Hughes Goodman in Tysons.

George Brooks, CPA, Kim Skinner, CPA, and Jonathan Wright, CPA, have been promoted to partner at Danville-based Harris, Harvey, Neal & Co.

Lanigan, Ryan, Malcolm & Doyle, PC, in Gaithersburg, Md., has promoted Matthew W. Taylor, CPA, to manager.

Kate Desai, CPA, has been promoted to tax director at RyanSharkey in Vienna.

Fairfax-based Thompson Greenspon has promoted Gray Coyner, CPA and Timothy Wilson, CPA, MT, to principal.

IN MEMORIAM

Robert Freeman, CPA, a VSCPA Life member from Newport News. He served on numerous VSCPA committees, including the Membership, Legislative Affairs, Peer Review and State and Local Taxation committees, and served on the VSCPA Board of Directors in 1961–1962.

DISCLOSURES

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NOVEMBER/DECEMBER 2019

35

VSCPA

Appointments & awards

THE VSCPA’S NEWEST VIRGINIA CPA LICENSEES Ishrah Ahmed, CPA, Ashburn Sarah Kasten, CPA, McLean Andrew Koehler, CPA, Yorktown

Paul Merab, CPA, McLean Left to right: Hope Cupit, CPA, Staci Henshaw, Harold G. Martin, CPA/ABV/CFF, Jill Mitchell

Austin Newell, CPA, Chesapeake

Hope Cupit, CPA, president and CEO of the Southeast Rural Community Assistance Project, Inc., in Roanoke, was named by Gov. Ralph Northam to the Virginia African American Advisory Board.

Gary Fitzgerald, CPA, owner at Fitzgerald & Co., CPAs, in Vienna, was recognized

by Continental Who’s Who as a Pinnacle Lifetime Achiever in the field of accounting.

Staci A. Henshaw, Virginia’s Deputy Auditor of Public Accounts, received a special recognition award at the 2019 National Association of State Auditors, Comptrollers, and Treasurers annual conference.

Harold G. Martin, Jr., CPA/ABV/CFF, ASA, CFE, is the first Virginia representative admitted into the American Academy of Matrimonial Lawyers Foundation (AAML) Forensic and Business Valuation Division. He is the partner-in-charge of Keiter’s Valuation and Forensic Services Group in Glen Allen.

Jill Mitchell, accounting professor at Northern Virginia Community College, received the 2019 American Accounting Association/J. Michael and Mary Anne Cook/Deloitte Foundation Prize in the two-year college category.

Robert Scorso, CPA, Centreville

Joshua Sibio, CPA, Falls Church

Thomas Shevis, CPA, Norfolk David Silvester, CPA, Henrico Shanthi Sundaresan, CPA, Glen Allen List from August and September.

Compiled Oct. 8, 2019.

Pete Reilly, CPA, president and managing partner at Councilor, Buchanan & Mitchell in Bethesda, Md., was named Managing Partner of the Year by the Rainmaker Companies.

FIRM NEWS

Don’t miss the...

Meadows, Urquhart Acree & Cook, LLP, in Richmond, celebrates its 15-year anniversary this year.

All new Women’s Leadership Forum Nationally recognized speakers, stellar networking opps. Join live or online!

Dec. 11, 2019, Richmond. vscpa.com/WomensForum

36

Latia Rowland, CPA, Newport News

DISCLOSURES

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NOVEMBER/DECEMBER 2019

VSCPA

Staff news

Get back in the classroom to inspire!

Volunteer with students around the state Are you interested in sharing your expertise about the CPA profession with middle and high school students? As part of a year-long campaign to help educate students of all ages about different career paths in accounting, the VSCPA is currently looking for members to speak at schools through CPAs in the Classroom.

Pictured clockwise:

This initiative is a great way to grow your leadership skills and give back to your community! Now we have two easy ways to get involved with CPAs in the Classroom — you can schedule your own visit or search existing opportunities near you. Questions?

Contact Molly Wash, CAE, academic engagement director, at mwash@vscpa.com or (804) 612-9417.

ANNIVERSARIES Nov. 13: Senior Director, Learning Linda Newsom-McCurdy, CAE, 12 years Dec. 1: President & CEO Stephanie Peters, CAE, 22 years Dec. 4: Membership Marketing Specialist Evan Taylor, 2 years NEW HIRES The VSCPA has hired Tim Barry as its new public affairs director.

He was previously a campaign consultant for Markham Group, working on national political campaigns.

Jill Edmonds has returned to the VSCPA as communications director. She previously held this position until 2010 but remained as Disclosures managing editor. She will continue to edit Disclosures.

DEPARTURES Communications Manager Chip Knighton has left the VSCPA. We wish him luck!

“I scheduled a classroom visit with a former high school teacher, and they were very excited to have an alumni speak to their business students. I would encourage all CPAs to take advantage of this program because teachers are looking for real-world stories to share with their students.”

— Brian Benson, CPA, VSCPA Member since 2017

DISCLOSURES

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NOVEMBER/DECEMBER 2019

37

CLASSIFIEDS

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WE ARE INTERESTED IN ACQUIRING CPA practices in Northern Virginia, Maryland and D.C. An ideal firm would be providing mix of services mostly to business clients and working in a paperless environment. If interested, please email us at ajit@affluentcpa.com

MERGER OPPORTUNITY — Well-established 2 partner Northern Virginia CPA firm is looking for a sole practitioner, with clients, interested in merging with and managing the firm in the near future as retirement approaches. A similar sized CPA firm would also be considered. The ideal practitioner or firm would have the ability to assist with our current workload. We specialize in individual income taxation but also have small business tax, payroll and compilation clients and prepare a significant number of trust tax returns. We have extra office space available. Reply in confidence to Box #105 at classifieds@vscpa.com. Please put “Blind Box 105” in the email subject line.

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DISCLOSURES

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NOVEMBER/DECEMBER 2019

Classified ads are a great way to reach VSCPA members — 94 percent rate the information in Disclosures as excellent or good. What are you waiting for? Contact us at classifieds@vscpa. com or visit vscpa.com/ Classifieds for rate information. Members receive a discount.

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Virginia Society of CPAs 4309 Cox Road Glen Allen, VA 23060

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