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The Magazine of the Illinois CPA Society

In this issue

Olympic bid— risk or reward? Technology bang for your buck High points in a low economy Fraud experts bust occupational crime A new stage in hacker evolution Buy American, save the economy? Put a price on company distress Pink slip alternatives | August 2009

POWER HOUSE USA Are we still the world’s business leader?

True leaders one generation at a time Guidance on tax & partnerships

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cover story 30

Powerhouse By Kristine Blenkhorn Rodriguez Is the United States still the world’s business leader? Our panel of experts grade Uncle Sam and American business potentates.

features 38

Olympic Risk By Carolyn Tang What will the Olympic bid cost Chicago?


Cost-Conscious Technology By Daniel Dern Check out these high-performance, low-cost software tools.

columns 8

index August 2009 Vol.59 No. 2


The Best & Worst of Times

By Kristine Blenkhorn Rodriguez Is there anything to cheer about in the midst of the recession?



What Lies Beneath

By Christine Bockelman Think you’re the victim of occupational fraud? Turn to the experts to reveal the murky truth.



Buy American

By Sheryl Nance-Nash Could this simple strategy turn the economy around?



Hacker Evolution

By Selena Chavis Protect yourself against a new breed of threat.



Sink or Swim

By Meta Levin A wave of bankruptcies shines a spotlight on distress—and the need to put a value on it.



Lay Off Layoffs

By Cecily O’Connor Pink slips aren’t the only option.



Mind the Gap

By Derrick Lilly The marks of a true leader bridge the generational divide.

Visit eINSIGHT today!

28 /insight.htm


Partnership in Question

By Harvey Coustan, CPA Guidance in the application of a new taxpayer-friendly rule in


partnership situations is crucial.


First Word







Finding the perfect fit doesn’t have to be a challenge, it’s what we do.

Garelli Wong and Jackson Wabash are Chicagoland’s experts in financial recruiting and staffing. Our team unites employers with the right accounting and finance talent for direct hire, temporary and consulting assignments. We look and listen beyond the job description to combine the right skills with the desired experience. To learn more about our dedication to finding the right fit, visit us on the web or call your local office.





Oakbrook Terrace







acebook, Twitter, e-zines, blogs and other

online discussion forums have certainly

Chairperson, Lee A. Gould, CPA/ABV, JD, CFE, CFF Gould & Pakter Associates LLC

upped the ante on our ability to “connect”

with others. They’re fast-paced, with immediate

Vice Chairperson, Sara J. Mikuta, CPA The Leaders Bank

results. Yet despite our fascination with the latest methods of communication, our instincts tell us that, for

Secretary, Charles F. G. Kuyk III, CPA Crowe Horwath and Company LLP

long-term relationships of any kind, and for making real connections, nothing beats talking face to face.

Treasurer, Robert E. Cameron, CPA Cameron Smith & Company PC

That’s what’s really at the heart of trade shows like

Immediate Past Chairperson, Sheldon P. Holzman, CPA, CFE, CFF Baker Tilly Virchow Krause, LLP

ours. It’s the people we encounter—maybe a presenter we’ve heard before but always enjoy, or people in the Society we don’t get to see as often as we’d like.


Where else could you gather nearly 3,000 CPAs in one physical place for an exchange of information,

Brent A. Baccus, CPA Washington Pittman & McKeever Therese M. Bobek, CPA PricewaterhouseCoopers LLP

tools and ideas?

Especially when our time and resources are a precious commodity, trade shows provide the rare opportunity to come together as a group, interacting with those who share common interests. You

William P. Graf, CPA Deloitte & Touche LLP Kelly J. Grier, CPA Ernst & Young LLP Cara C. Hoffman, CPA Blackman Kallick LLP

never know where a connection made may lead you.

The trade show industry along with so many others is being hurt by the economy. As a result, the industry is enduring the sometimes painful process of adapting to the times. As trade shows evolve using tactics such as social media and virtual and online forums, it’s important for those who hold

James P. Jones, CPA Edward Don & Company

and attend trade shows to keep in mind the strength of this concept: The in-person experience.

Charlotte A. Montgomery, CPA Illinois State Museum

That’s what we’ve done with the 29th Annual Midwest Accounting & Finance Showcase, which

Elizabeth A. Murphy, PhD DePaul University

we’ll be holding on August 25 and 26. We’ve kept our members and their experience firmly in mind. The show strives to give you time to try out new software packages and other products, share ideas with peers, and get problems solved by the people in the know. It’s also a great way to earn 17 hours

Annette M. O’Connor, CPA RR Donnelley & Sons Company

of high-quality, low-cost CPE when you need it most; namely, in a reporting year.

Michael J. Pierce, CPA RSM McGladrey Inc.

If you haven’t already made plans to attend, visit to take a look at what our Show-

Marian Powers, PhD Northwestern University

daily routines, being in awe of all the new things we see and learn, really talking to one another

case has to offer. Join us in doing what trade shows do best: Setting aside a little time to break from

Daniel F. Rahill, CPA KPMG LLP Lawrence H. Shanker, CPA Shanker Valleau Accountants Inc.

face to face, and creating more than a few “you-had-to-be-there” moments.

See you at the Showcase.

Edward H. Stassen, CPA Recycled Paper Greetings Inc.



Elaine Weiss, JD, ICPAS President & CEO

Publisher ICPAS President & CEO Elaine Weiss Editor-in-Chief Publications Director Judy Giannetto Creative Services Director  Gene Levitan Creative Services Manager Rosa Garcia Publications Specialist Derrick Lilly

Was it simply an


National Sales & Advertising  Stephanie Bunsick The YGS Group 3650 West Market Street York, PA 17404 Phone: 1.800.501.9571, ext. 137 Fax: 1.717.390.9891

Renew Your Illinois CPA Society Membership Today During these tough economic times, it’s more important than ever to stay connected to your profession.

Information Systems Manager Jim Jarocki Editorial Office 550 W. Jackson Blvd., Suite 900, Chicago, IL 60661

Your Illinois CPA Society membership provides you:

INSIGHT is the official magazine of the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA. Its purpose is to serve as the primary news and information vehicle for some 23,000 CPA members and professional affiliates. Statements or articles of opinion appearing in INSIGHT are not necessarily the views of the Illinois CPA Society. The materials and information contained within INSIGHT are offered as information only and not as practice, financial, accounting, legal or other professional advice. Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication. It is INSIGHT’s policy not to knowingly accept advertising that discriminates on the basis of race,religion, sex, age or origin. The Illinois CPA Society reserves the right to reject paid advertising that does not meet INSIGHT’s qualifications or that may detract from its professional and ethical standards. The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within INSIGHT, and makes no representation or warranties about the products or services they may provide or their accuracy or claims. The Illinois CPA Society does not guarantee delivery dates for INSIGHT. The Society disclaims all warranties, express or implied, and assumes no responsibility whatsoever for damages incurred asa result of delays in delivering INSIGHT. INSIGHT (ISSN1053-8542) is published bimonthly except monthly in July and August by the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA, 312.993.0393 or 800.993.0393, fax 312.993.0307. Subscription price for non-members: $30 U.S., $40 Canada and International addresses, $42 Mexico. Copyright © 2009. No part of the contents may be reproduced by any means without the written consent of INSIGHT. Permission requests may be sent to: Editorial Director, at the address above. Periodicals postage paid at Chicago, IL and at additional mailing offices. POSTMASTER: Send address changes to: INSIGHT, Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA.

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Free or low-cost monthly career events


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Special dues rate and CPE program discount for unemployed members

Don’t risk losing these and other valuable member benefits. RENEW ONLINE at or call 800-993-0393.

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experience the advantage.

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$5.25 billion

Federal Reserve Q1 loss on assets acquired from Bear Sterns and AIG bailouts. Source:

Hurdles in Good Times & Bad According to a new survey of 700 accountants conducted by Ajilon Finance and the Institute of Management Accountants (IMA), leadership priorities change depending on whether the economy is good or bad. In good economic times, accountants say the top three challenges for leaders are recruiting and retaining top talent (47 percent), pursuing growth opportunities (42 percent) and maintaining a competitive edge (42 percent). In contrast, productivity—or doing more with less—(49 percent), motivating the workforce (44 percent) and pursuing growth opportunities (33 percent) are the top challenges facing leaders in a down economy. What’s more, there’s a disconnect between which leadership traits are valued and which are actually rewarded. According to the survey, 33 percent of accountants feel an ability to inspire and motivate is the most important quality of leadership, followed by communications skills (15 percent) and people management skills (13 percent). In contrast, accountants say that hard skills such as global knowledge/expertise and keen decision-making are those areas most rewarded.


Average employer cost for employee compensation per work hour. Source: US Department of Labor’s Bureau of Labor Statistics

Leaders’ Confidence Rising Grant Thornton LLP's Business Optimism Index, a quarterly confidence measure of US business leaders, rose from 37.6 in February 2009 to the pre-recession level of 54.5 in May. In addition, 54 percent believe that the economy will come out of recession in the first half of 2010. Specifically, 45 percent of respondents expect conditions to improve over the next six months compared to 17 percent in February 2009. Only 13 percent think the economy will worsen. Respondents also are more positive about the outlook for their businesses, with 62 percent feeling optimistic about their companies' growth over the next six months. What’s more, the number of respondents planning layoffs in the next six months saw the first drop since the recession started in November, decreasing from 45 percent in February to 30 percent in May. 6



Conservative Hiring

Government jobs President Obama hopes to create through accelerated stimulus action. Source:

Pursue Passion, Not Money As 2009 graduates enter the most challenging job market in decades, Adecco Group North America’s latest American Workplace Insights Survey reveals that 71 percent of college-educated adults feel today’s grads should aim for career fulfillment, versus 13 percent who advise choosing a career based only on earning and salary potential. Adecco offers recent and future grads this advice: • Maximize your social networkin g prese nce. Future employers will be searching Facebook, Twitter, LinkedIn and MySpace, etc., so make sure the image you project online is employer friendly. • Take temporary and project work. These can be great resume, experience and network-building opportunities, and can serve as a paid audition for fulltime work. • Learn from mentors . The more you learn, the faster you’ll advance. • Thin k abou t ancillary in du stries. Cast a wide net, exploring secondary sectors that are looking for diverse, well-rounded employees. • Con sider re location. Many cities are poised to hire in professional hot spots. The experience offered and the increased number of jobs available might make a move worthwhile.

Employers are expected to remain cautious about adding accounting and finance professionals through the third quarter, according to interviews with more than 1,400 CFOs across the United States for the Robert Half International Financial Hiring Index. Only 5 percent of CFOs expect to hire full-time employees during this period, while 8 percent anticipate personnel reductions. The majority of respondents (85 percent) say they plan to maintain their current staff levels. For those considering hiring, be warned that financial executives continue to report difficulty finding highly skilled professionals for certain areas. Twenty-six percent of CFOs said senior and staff accountant posts are the most difficult to fill, and 23 percent said they experience the greatest challenges when hiring for audit roles. While the overall outlook remains conservative, the highest degree of optimism was expressed by executives in Alabama, Arkansas, Kentucky, Louisiana, Mississippi, Oklahoma, Tennessee and Texas. A net 2 percent of CFOs in those states anticipate adding full-time accounting and finance professionals through the third quarter.

Improvements Planned for Tax Preparer Compliance In early June, IRS Commissioner Doug Shulman announced that he would propose a comprehensive set of recommendations to help the IRS increase taxpayer compliance and ensure uniform and high ethical standards of conduct for tax preparers by the end of 2009. Recommendations may focus on new regulations, service and outreach, education and training, and enforcement related to return preparer misconduct.

ers and other fraudulent and unethical practices.

New regulations may impact tax-preparation companies that employ unlicensed preparers, and could crack down on fly-by-night tax prepar-

More information, including schedules and agendas for public meetings, will be posted on the “Tax Professionals” page on

Shulman’s first step will be to gain input from a diverse constituent community that includes state and federal licensed professionals such as enrolled agents, lawyers and accountants, as well as unlicensed tax preparers and software vendors. The effort also will seek input from and dialog with consumer groups and taxpayers.




The Best & Worst of Times Is there anything to cheer about in the midst of the recession? By Kristine Blenkhorn Rodriguez


verywhere there’s a loser, there’s also a winner, says Rebel Cole, professor of finance and real estate at DePaul University, Chicago. “In times like these, there’s a lot of opportunity for various players to benefit from our woes. Not in any bad sense, it’s just the way they’re positioned.” “Of course there’s economic opportunity to be had,” states Chris Thornberg, founding principal of Beacon Economics. “What the economy is going through right now gets a bad rap, and it’s not pleasant, but it’s also cleansing. We are getting rid of the imbalances. In the end, we will come out stronger and the economy will move forward at a better speed.” “This recession is real,” says Dean Baker, co-director of the Center for Economic and Policy Research. “The media is not overplaying it. If anything, the public is under-



playing it. But, there will be some sectors that do well.” “You can see both sides and really empathize with those folks who are caught in this crunch,” says Bob Toothaker, CPM (Certified Property Manager), chair of the National Realtors Association’s Commercial Alliance. “And yet, in my industry, there’s still an awful lot of private capital sitting on the sideline. People will buy low and profit as things improve.”

Real Estate Real residential fixed investment decreased 38 percent in the first quarter of 2009, while real nonresidential fixed investment decreased 37.9 percent (US Bureau of Economic Analysis). In March alone, the construction industry lost 126,000 jobs. The volume of loans sold off into the commercial mortgage-backed securities (CMBS) market and the way they were

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packaged contributed to a huge downtick in real estate, according to Toothaker. “Now these loans are coming due and funding just isn’t available. Washington keeps trying to fix things but we need some realworld fixes. The three-year guarantees on CMBS AAA-rated new mortgages fell short. Recently it was announced that the government would now offer five-year guarantees, which is a good start. Most investors would not put their equity on the line for a threeyear note in a market that might not pick up until 2011. Savvy real estate investors look for a minimum of five years, and more likely seven to 10 years on the call portion of a note like that.” Toothaker says the CMBS mess is wreaking havoc for a lot of honest people. “In ordinary times, folks would have a loan that would be a conforming, performing loan. Right now, that same loan, even though it is performing, may be considered a non-conforming loan due to arbitrary devaluation of their piece of real estate. And of course, then banks don’t want this loan on their books.” So where’s the silver lining? “People who liquidated their portfolios and were in an all-cash position, either by intelligent design or luck of the draw, are in a great position to buy real estate at a considerable discount from values a year ago,” says Toothaker. “The industry says the bottom of this real estate market won’t shake out until the fall, or possibly even not until spring of next year, but who knows? There are tremendous bargains to be had right now.” These bargains are particularly attractive if you’re buying up your competitors’ assets, says Thornberg. “If you’re buying assets on the cheap from a company that you used to compete with, there’s your silver lining.”

Manufacturing The manufacturing industry led the economic slowdown in 2008 and it has continued that downward trend. Last year, durablegoods manufacturing fell for the first time since 2001, decreasing 1.3 percent. Factory employment has declined by 1 million jobs over the past six months. “It’s been a very bad cycle for manufacturing,” says Thornberg. “But we will have an export boom in the next couple of years.” Baker is of like mind. “If a company is prepared to wait this out, when we recover the dollar will fall and the United States will become more competitive.” Cole is even more optimistic. “There’s been a huge windfall on commodity prices, which have plummeted. As a result, input costs have fallen and that’s a good thing. Corn used to be $8 per bushel and now it’s $4. We’ve been in a downward spiral for decades as we’ve become a service economy. This is a sorely needed rebalancing of the scales.” Hank Cox, spokesman for the National Association of Manufacturers, sees more good news. “New orders for non-defense capital goods are up. A lot of businesses have worked through their existing inventories so they will have to crank up production soon. And even though the recession will continue, the rate of decline will slow.”

Financial Sector Finance and insurance industries’ value added (a measure of an industry’s contribution to Gross Domestic Product) dropped 3 percent in 2008, its first decline since 1992. Despite the struggle, finance is one of the few areas with a definite reason for optimism. “Banks are making solid money right now,” says Thornberg. “They borrow cheap and lend dear. That’s very profitable.” 10


The caveat, Thornberg says, is legacy costs in the form of bad debt from previous credit decisions. “It’s a good time to be a lending institution if you don’t hold a lot of legacy costs. If you do, you’re eventually going to pay dearly for these past mistakes.” Cole agrees. “This is the best time in the world to be a banker— if you’ve been prudent,” he says. “We keep hearing about the woes of the 19 largest banks. But banks of all sizes that have lent responsibly are doing quite well.” “We went from the ‘90s banking model—originate and hold in portfolio—to the more recent model—originate and securitize,” Cole explains. “Now there’s nothing wrong with the new model if it’s done correctly, but we all know it wasn’t. The residential mortgage market was the first to go, and the commercial real estate market is in bad shape. The next to go will be the auto and credit card loan markets.” The greatest cause of concern, according to Cole, is the virtual halt to any development. “I recently flew over Miami and saw miles worth of empty development lots. Pipe, etc. was laid but nothing was being built. You’re going to see a lot of community banks that are stuck with huge portfolios of development and construction loans. Those loans are current now but will not be current by the end of the year. Expect a lot of small bank failures because of this.”

Consumer Products & Services In March of this year, the Bureau of Labor Statistics released numbers showing retail trade employment had dropped by 48,000 over the month: 13,000 employees in building material and garden supply stores, 12,000 in auto dealerships and 10,000 in electronics and appliance stores. No surprises in the areas hardest hit; and no surprises in those service sectors that are doing well. Cole surmises that the services sector is saved by companies like AutoZone, which has had record profits this year. “People are trying to keep and maintain what they have instead of buying new. Consumer services companies that help them accomplish this task should do well,” he says. As for the product side of things, there seems to be no silver lining. “We went from a negative savings rate in the United States to a 5-percent rate we’ve never had before,” says Cole. “That’s great for consumers, but bad for the product sector.” Baker thinks the savings rate will go even higher, to 8 percent. “If you manage to hold on to your job during this economy, there will be an increase in real wages due to prices falling.”

Government “The trillion is the new billion, in government terms,” says Cole. Talk about a silver lining. “This is the Golden Age for government. It is awash in stimulus money. The downside is for taxpayers. We’ll have to pay more in taxes to pay for all of this.” Baker feels the new transparency pushed by President Obama is a good thing. “The President is calling for an unprecedented degree of transparency because of the stimulus package. They’re throwing everything up on the web. At the national level, this means there likely will be less chance of people giving contracts to their brothers or cousins. State and local governments will likely follow suit.”

Nonprofits The experts feel that there’s really no upside for nonprofits. According to The Center on Philanthropy at Indiana University, the Philanthropic Giving Index (PGI—similar to a Consumer Confidence Index

on charitable giving) was at 64.8 percent last December, a 21.7-percent drop from just six months before. “The collapse in asset values during this downturn has been devastating for nonprofits,” says Thornberg. “All endowments have shrunk tremendously and now these organizations have hard years ahead trying to rebalance that side of their accounts.” Cole sees worse times ahead for the nonprofit sector. “The Obama Administration’s plan to cut the tax deductibility of charitable contributions will hurt nonprofits even more at a time when they’re down anyway.”

Employees & Employers

Career Center A benefit of your Illinois CPA Society Membership

keep your career on track [ in today’s job market ]

“It’s a bleak time for employees,” says Cole. “Even if they still have a job, they’re running scared.” Jobfox conducted a survey late last year that showed 76 percent of in-house corporate recruiters feel the recession offers an opportunity to hire higher quality talent. However, 53 percent of in-house recruiters expected their organizations to hire fewer new employees. While shorter work weeks mean less pay, some workers might appreciate the temporary respite, says Baker. “Many workers’ weeks have been shortened. Even if it hurts your wallet, the leisure and family time can be a great thing if you take advantage of them.”

Search Job Listings | Post Your Resume Locate Search Firms | Career Resources Find a Career Coach*


Check out the Career Center at

“If you’ve been smart and you’ve got cash in the bank, it’s a great time to be a consumer,” says Thornberg. And smart consumers must be out there spending, even if in small amounts, because real personal consumption expenditures increased 2.2 percent in the first quarter of 2009, compared to a decrease of 4.3 percent in Q4 of 2008. And if you haven’t been a smart consumer? “Consumers have been over-consuming relative to income,” says Cole. “They have been maxing out the credit card and then taking out equity in their homes to get even more credit, which worked fine as long as housing prices were rising. It doesn’t anymore. If you’ve been smart, you can get a bedroom set for 80-percent off, like my wife and I just did. The auto industry is basically giving cars away. And renters who have saved up are in a perfect position to buy low.” Thornberg sees a “dead time” ahead, where nothing really improves in the economy, into 2010. “Businesses had better buckle down,” he says.

Overseas Expansion Many companies take a cautious route through the murky waters of a recession, opting to tread water rather than risk drowning in debt. For a well-positioned company, though, this calculated risk can pay off in spades down the road. “Overseas expansion is a great move right now,” says Thornberg. “Our trade deficit will necessarily continue to shrink. In the future, we’ll be exporting more and the dollar will be weaker. Take advantage of the strong dollar and buy those overseas assets now before our currency falls.” Baker also advises action based on the strength of the dollar. “If you were going to expand anyway and can afford to do it now, the timing is right.” Toothaker adds a cautionary note: “Unless you’re very big and very international already, you’d better do a whole lot of homework and be intelligent in your decision.” *fee-based service

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What Lies Beneath Think you’re the victim of occupational fraud? Turn to the experts to reveal the murky truth. By Christine Bockelman


ot everyone in the business world is honest. Occupational fraud— the umbrella term that covers everything from embezzlement and writing bad checks to pilfering paper clips from the office stash—remains widespread. According to the 2008 Report to the Nation on Occupational Fraud & Abuse issued by the Association of Certified Fraud Examiners (ACFE), companies lose about 7 percent of their annual revenues to fraud. When compared to the projected 2008 US Gross Domestic Product, that 7 percent adds up to a very costly $994 billion. Individually, fraud costs companies a median of $175,000, and over onequarter of the crimes in the survey involved losses of at least $1 million. Given those numbers, odds are good that you’ll encounter some kind of financial fraud in your organization at some point in your career. If it happens, what should you do? Well, what you shouldn’t do is run into the office and point your finger at the most likely culprit. The crime might be bigger than you think (in the ACFE study, the typical fraud went on for two to five years before being detected); it might involve more than one person; and, worse of all, you might be pointing the finger at the wrong person. Instead, when you initially suspect fraud, “You



want to very quickly put a box around it,” says Graham Murphy, the Midwest area forensic practice leader at KPMG LLP. “You want to preserve the information and evidence surrounding the fraud, and do an initial assessment of what you know.” Can you handle a fraud investigation internally? Maybe. Lots of larger companies have in-house legal and auditing teams, and the protocols already in place to do a fine job of fleshing out and containing the issue. For most, though, the best and only option is to venture outside company walls. “You want to stop the bleeding,” Murphy stresses. “We have seen instances where local management has tried to carry out its own investigation and as a result has cost the company more time and effort. When it becomes known that people are under investigation, it can affect morale or cause the suspects to go back to their desks and wipe their computers clean.” Your first step should be to bring legal counsel on board. A lawyer will help you take the necessary steps to build a strong, careful case that will hold up in court. “If you suspect fraud, the ultimate goal could be one of many things, but most often it’s to recover the funds, if possible, stop the fraud, or prosecute the individual(s), all of which means you’re going to have to be completely involved in the legal process from start to finish,” says Kenneth R. Neumann, CPA/CFF, CFE, director of litigation, valuation and technology services at the international forensic accounting and consulting firm of RGL Forensics. An attorney also can be helpful if the fraud has risk implications for the company. “If the fraud was done by an officer and is something like a misrepresentation of the value of the stock, the company could be sued,” explains Dana Basney, director of due diligence and forensic accounting services at CBIZ MHM, LLC. “In cases where

the company might be liable, such as c-suite or tax frauds, an attorney is also useful because of confidentiality privileges,” he adds. What’s more, “It’s a good idea to have your attorney—not your corporation—hire the forensic accountant for the fraud investigation. That way, anything discovered goes through the attorney first, making it privileged and non-discoverable,” says Basney. Attorneys who have experience in white-collar crime investigations should be able to provide a list of highly qualified financial forensic specialists. But there are still important questions to ask before taking a recommendation at face value. Fraud specialists have different credentials available to them, but the most common are the CFF—Certified in Financial Forensics—and the CFE—Certified Fraud Examiner. While you need a CPA to become a CFF, you do not need one to become a CFE. According to the ACFE website, a CFE must instead pass a series of tests in criminology and ethics, fraudulent financial transactions, fraud investigation and legal elements of fraud. Bear in mind that the CFF and CFE are not the same; you have to weigh their differences objectively and then decide who’s right to lead your investigation. “Some accountants have auditing backgrounds and understand exactly how money flows through accounts, but are not great at sitting down and sizing up situations and asking tough questions,” explains Bob McSorley, practice leader in the forensic accounting group of Plante & Moran. “Others may have an FBI-type background and may have conducted numerous interviews of a contentious nature, which is somewhat of a unique skill.” If a case goes to trial, it’s also crucial to have a fraud specialist who is good on the witness stand. “It can be a pretty brutal process with lawyers going at you from every angle,” Basney explains. “You need someone who is good under pressure, but who also understands the rules of evidence and how the lawyers are going to try to exclude your testimony. Not everyone can do it well.” Other than remaining cool while under attack, a good witness has to communicate clearly, often in layman’s terms rather than technical jargon, says McSorley. “Thirty percent of the work we do is determining the right answer, finding out what the facts are,” he explains. “The other 70 percent is proving that the findings are accurate, having workpapers assembled properly with source documents and interview notes to use as defenses to opposing counsel’s attack.” Uncovering the numerical data is “not an audit process,” adds Neumann. ”Financial forensic investigation requires a different mindset with a high level of skepticism. It’s about looking behind the numbers for what should be there and what’s not there, and then determining where the money went. Finding one person who excels in all these areas isn’t easy, so working with a team of people is often the best way to go. Most forensic accountants work with at least one other person, usually a tech specialist. “You have to have the technological capability to understand the company’s systems,” says Murphy. “I would really recommend hiring a computer forensic expert upfront,” Neumann adds. “The first thing I want to do in any of these cases is to lockdown the financial data and keep it from being destroyed or mismanaged. It’s very difficult to pursue frauds these days without the computerized data.”

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Buy American Could this simple strategy turn the economy around? By Sheryl Nance-Nash


ith the economy still sputtering, great minds continue to search for solutions to our financial woes and worries. Among them is the concept of “Buy American”—a strategy for economic buoyancy that’s been around since the founding fathers. George Washington was one of the first to advocate a Buy American policy, and his personal decisions and actions strengthened America’s economy, says Roger Simmermaker, author of How Americans Can Buy American. Next up were Thomas Jefferson and Abraham Lincoln. The first Buy American provision was enacted at the height of the Depression. Some say it choked the economy for several years thereafter. Fast forward to today. What sparked the conversation again? The American Recov-



ery and Investment Act of 2009 contained a provision that restricts the use of federal funds to the purchase and use of US-origin materials. None of the funds appropriated or otherwise made available by the Act may be used for a project that involves the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel and manufacturing goods used in the project are produced in the United States. The European Commission quickly voiced its opposition; the provision was viewed by some as being contrary to the G-20 agreement to not raise any new trade barriers in 2009. Nevertheless, Simmermaker believes the Buy American concept has the potential to turn the economy around. “It can help us get out of the economic crisis today and keep us from getting into another one tomorrow. The answer to our economic problems is in our own backyard,” he contends. Similarly, Christine Siler, developer of the website, a comprehensive list of American-made products and their companies, says that Buy American will boost the country’s economic engine. “If everyone would buy American whenever possible, the economy would turn in a matter of months. The average quality of our products is much superior to cheap foreign products,” she says. Siler argues that Buy American will put more Americans to work, increase tax revenue, increase consumer spending and lower the trade deficit. Then too, there’s another reason to keep manufacturing close to home: Safety, says Simmermaker. “Think about China. The headlines have been filled with one tale of blatant disregard for safety after another— toothpaste, pet food, toys.” But the opposition is loud. “This appeals to our most jingoistic instincts. It will not turn the economy around, as it does not address the main issue of improving liquidity and being an attractive economy in which companies want to invest their cap-

ital, create jobs and hire educated and relevant workers,” says Blythe McGarvie, author of Shaking The Globe: Courageous Decision-Making in a Changing World. She adds that, “Waving the flag, whether it be American, Canadian, Mexican, or any other nationality, does not build trust between two parties that are seeking economic stability and gain. In my experience, a populist phrase like ‘Buy American’ creates damage because it is a belligerent approach to relationships rather than a rational approach with good intentions to help both parties.”

coincidentally do make things in the United States will emphasize that,” says Fenton. “At the end of the day, the job of a corporation is to maximize shareholder value, so very few, especially the large ones, will make a decision based on anything other than profit. So far, it’s profitable to send their work elsewhere.” For companies that offer only 100-percent, made-in-the-USA products, this could be a boom. Simmermaker cites the example of Glass City Café in Toledo, Ohio. In January when licenses were up for renewal, the switch was made to All-American beers since

“We need to sell to other countries to have a trade surplus....We need products that are competitive in the global marketplace. Isolationism and protectionist are just bad business.” David McClough, Ph.D, visiting assistant professor of economics at Ohio Northern University in Ada, is an even harsher critic. “It may be good politics, but it’s horrendous economics. It’s bad in the short run and the long run. It is a classic example of the ignorance that pervades society and politics.” Why doesn’t the theory add up in practice? “We depend on foreign trade. We need to sell to other countries to have a trade surplus. Cutting out buying does not solve that. We need products that are competitive in the global marketplace. Isolationism and protectionism are just bad business. Just look at North Korea, the ultimate in patriotic ‘buy local.’ It has destroyed their economy and furthered their isolation from the world,” says Bruce Fenton, managing director of Atlantic Financial in Norwell, Mass. Furthermore, “The freedom to trade is a key ingredient in the recipe for economic prosperity. Unfortunately this freedom is under attack by protectionist forces that would stifle economic exchange,” says Kristina Rasmussen, executive VP of the Illinois Policy Institute in Springfield. The Illinois Policy Institute joined the Freedom to Trade campaign (F2T), which launched in April 2009 in London, UK. The coalition is made up of 67 think tanks and civil society organizations from around the world. “We’re committed to monitoring the actions of governments and challenging attempts to institute protectionist policies,” says Rasmussen. “If anything, Buy American will likely hurt our longterm growth. In this increasingly global and mobile world, the king-makers should be quality and price, not geography.” Shoppers win when businesses—both domestic and international—compete for consumer dollars. Rasmussen says competition helps individuals and families save for things they wouldn’t otherwise be able to afford. “Keep in mind that many domestic companies rely on lower-priced foreign goods to manufacture products for America. When Buy American provisions force higher-priced domestic raw goods on domestic manufacturers, consumers lose,” she explains. The provisions also may invite retaliation from foreign purchasers of US goods. For example, she says, “If South Africa stops buying our goods because we disadvantage their goods with Buy American provisions, American businesses and workers that rely on exports to South Africa would suffer.” The experts are having their say. But what about consumers and corporate America? “In the interest of good public relations, companies are working on emphasizing their American connections, and those few who 16


America’s last major American-owned brewery, Anheuser-Busch, was bought by Belgium-based InBev. “The owner told me he was pleasantly surprised when most customers are told that beers like Bud Light are no longer served there that they are just as happy to try Samuel Adams or other American-owned, American-made beer,” says Simmermaker. Then too, Siler explains, companies that are really listening to the American people are keeping their companies here, and others are starting to bring their companies back so they can have greater control over their products. What does the average Joe and Jane think about all the fuss? “Just like the ‘support our troops’ bumper stickers, people pay this lip service, but do they actually do anything about it? Do you see many Wal-Marts (whose many products are made in China) hurting? Do you see anybody giving up DVDs or even giving up televisions or computers? People talk, but vote with their checkbooks. So far, the checkbook says no,” says Fenton. Scott Testa, a marketing professor at St. Joseph’s University in Philadelphia, agrees. “People want the idea, but it’s hard to pull off. Try finding American-made toys. If you decided to buy only American-made toys for Christmas you would have a very limited selection.” Testa personally made a decision to buy American-made cars. He owns three, and one that is a GM product made in Canada. “The theory is nice, but some products are just not available in the United States,” he says. Some consumers, however, are responding favorably and fervently. Simmermaker points to a Harris Interactive poll on behalf of the Alliance for American Manufacturing conducted earlier this year. The national poll found that 84 percent favor Buy American requirements and only 4 percent strongly oppose and 7 percent somewhat oppose it. Simmermaker notes that support was consistent regardless of gender, age, income level, education or region. “More taxes collected means more benefits reaped, like better public schools, libraries and parks. People are growing more aware of what Buy American can ‘buy’ them. Consumers are starting to connect the dots. I see an increase in my business,” he says. What’s more, some state legislatures are advocating Buy American policies and, based on the United Steelworker’s campaign, it seems that more than 4,000 local governments have adopted their Buy American resolutions, says Susan Kohn Ross, international trade counsel at Mitchell Silberberg & Knupp in Los Angeles. Just as all eyes remain on the economy, the debate continues.

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Hacker Evolution Protect yourself against a new breed of threat. By Selena Chavis


n May of this year, the Federal Aviation Administration (FAA) acknowledged that it had become vulnerable to hacker attacks on numerous occasions, including an attack that partially shut down air-traffic data systems in Alaska. Also in May of this year,’s subsidiary in the UK reported that the information of 4.5 million job seekers had been stolen—the largest data theft in UK history. It’s not the first of these kinds of headlines. Trends in data theft and sabotage suggest that hacker threats are becoming increasingly sophisticated and their financial ramifications increasingly far-reaching. “Financial institutions have lots of critical and confidential data housed on their systems,” explains Steven Gordon, president of Internet, Communications and Business Solutions, an Illinois-based IT consultant to small and mid-sized businesses. “They could have hundreds of thousands of Social Security numbers housed on their networks.” “Most hacker attacks are very specific in their intent. For example, a virus may be written to sabotage a company’s website for ransom,” says Bob Gaines, technology marketing manager at All Covered, nationwide IT support specialists for small businesses. In the case of financial institutions, “They are trying to directly steal financial information or personal information to turn around and sell it,” he explains. Technology vendors are warning companies that hacker threats will increase in frequency and complexity. “If you look back 10 years, most viruses were created for intellectual gain,” says Gaines. Typical virus threats were in the form of forwarded email attacks that were easily countered by perimeter antivirus software. But these days, that’s not the case. “Threats are much more challenging,” says Dan Waggoner, a manager at Grant Thornton who specializes in IT security and vulnerability threats. “We’re always going 18


to be playing catch-up. We come up with a firewall, and they learn how to bypass it.” Consider the Conficker worm, the looming implications of which are still unclear. “They’ve actually planted the seed, but no one is sure what they are going to do with it,” says Gordon. According to Gaines, Conficker represents a new approach to attack as a hybrid worm that changes on a regular basis. Once a machine is infected, the worm can download and install additional malware from attacker-controlled websites. “Every time it calls home to its base website, it will change what it does,” Gaines explains, adding that the worm turns the infected PC into a spam distributor or a distributed attack machine of sorts. “It’s constantly looking for more’s new in that respect.” A virus-infected PC is essentially under the complete control of the attackers. “Your machine has become a ‘robot’ that’s controlled by somebody else,” says Gordon. More threats like Conficker are expected to follow as the copycats gear up to take advantage of the new concept. “My guess is that there is going to be a lot more coming,” says Gordon. “The worldwide notoriety of Conficker is going to bring out the mimics.” Gaines compares the Conficker threat to that of an R&D lab. “The success and failures of this worm will determine how the next one is created,” he explains. Much of the challenge associated with counteracting these types of threats is born of the fact that they are created in unregulated environments. Gaines points out that often these threats are developed using open source systems. What’s more, there’s the global nature of the Internet to consider. “You are having to protect against anybody in the world who may be interested,” says Waggoner. Many of the threats originate in regions in the Middle East, Eastern Europe and Africa, says Gordon, where there are no regulations over this kind of activity.

“Most of these countries have no legal right to stop this from happening,” he says. “I don’t know that vendors can get ahead of this.” “We’ll always be one step behind,” Gaines agrees, as hackers develop methods to bypass the latest and greatest in firewall, antivirus and intrusion technology. “The key to all of this is education. Most security issues can be avoided with a little education. IT departments need to make it a priority to educate staff on a regular basis about new security threats and how to avoid them. Security needs to be fundamentally part of the business.” According to the Internet Storm Center, an analysis and warning service to thousands of Internet users and organizations, the Conficker threat can spread in a number of ways. One method is by looking for vulnerability in the Microsoft server service. As Waggoner explains, the virus took advantage of systems that had not updated the Microsoft patch in a timely manner. “Sometimes there are good reasons not to patch. There may be a critical system that you don’t want to patch because legacy applications don’t interact well with it,” he notes, adding that companies should still make every effort to have the most up-to-date antivirus counter attacks installed. “It makes sense to patch your system. There’s no reason to give viruses the low-hanging fruit.” Another method is to attempt to guess or “brute force” administrator passwords used by local networks, and then spread through network shares. The worm also infects removable devices and network shares with an autorun file that executes as soon as a USB drive or other infected device is connected to a victim PC. Layered security is a key defense in the battle, says Gaines, who stresses the need for the latest in antivirus and firewall protection,

as well as intrusion prevention, network sniffing and the use of managed security firms. What’s more, Waggoner encourages organizations to keep server applications simple. “Some people would like to take one server and use it to do many functions,” he says. Instead, “Take one server and dedicate it as a mail server. Take another server and dedicate it to another function.” By approaching security in this way, organizations can more easily identify problems and keep one virus from attacking all functions. Organizations also should be prepared to look at their networks. Once infected, a host system sends out messages to attack another user or system as a form of “social” attack from a familiar entity. In the case of Conflicker, organizations can protect themselves by following industry tests for infection and then making sure they have the latest Microsoft security patches. Outside threats aren’t the only security issues, however. Many security experts believe that insider attacks—threats from those who are or were part of an organization—will also increase. In fact, Microsoft executives recently warned that insider threats will continue to increase as a result of the recession and subsequent layoffs, since the number of disgruntled employees is growing. Dealing with security issues is one of the biggest technological expenses, says Gordon, and the worldwide impact is currently in the billions. “Some experts suggest that 80 percent of email worldwide is garbage,” he explains. “The most important thing is to be proactive about protecting your systems. If you don’t know enough, look to a professional. The cost of fixing a problem after it occurs can mean a lot of money and inconvenience.”




Sink or Swim A wave of bankruptcies shines a spotlight on distress—and the need to put a price on it. By Meta Levin


he numbers are sobering. By the end of 2008, the American Bankruptcy Institute reported that 43,546 US businesses had filed for bankruptcy during the preceding 12 months—12,901 of them in the fourth quarter alone. During that same period, the US Small Business Administration stated that the economy suffered its worst decline since 1982. If that weren’t enough, in December 2008 the Financial Times reported that German-based Allianz, one of the world’s largest credit insurers, predicted that 62,000 US companies would fail during 2009. Regardless of whether a business actually fails, losses have to be quantified, at the very least to determine whether there is anything worth saving. Truthfully, once you’ve identified that your business is in trouble, it’s difficult to prevent the downward slide, says Scot Campbell, director of valuation for BIK & Co., LLP, a CPA firm with offices in Libertyville and Palatine, Ill. “People generally want to stay away; they don’t want to extend credit and it has a spiraling effect, making it harder to succeed,” he explains. “We’re seeing an increased amount of valuations,” says Paul Melville, a certified insolvency and restructuring advisor and principal in Grant Thornton’s Corporate Advisory and Restructuring services practice. Melville is an automotive corporate recovery and restructuring expert. The reasons a company flounders are many. While the vast majority of entities are experiencing some kind of decline in business these days, some “are in distress because of a combination of the economic decline and an inability to absorb the downside risk because of limited resources, especially financing and financial resources,” says Dr. Mark L. Frigo, director of The Center for Strategy, Execution and Valuation at DePaul University’s Kellstadt Grad20


uate School of Business. Frigo is also coauthor (with Joel Litman) of Driven: Business Strategy, Human Actions and the Creation of Wealth, and regularly contributes to the Center for Corporate Financial Leadership (CCFL) Executive Education Series []. Frigo’s Return-Driven Strategy describes what he and Litman learned from studying successful companies. “Every high-performance company we studied in our research…faces a risk of fading, and in every case the reasons for the fade can be charted to how the tenets (of the Return-Driven Strategy)…began to be neglected or couldn’t be executed,” he explains. For Avi Deitcher, principal of operations consulting firm Atomic, Inc., the prime objective in scrutinizing a failing company is to find a way to fix it. He places a value on it as it stands, and then determines what it could be worth if its failings were remedied. He also very objectively considers what it would take to save it. Emotions run high when you’re talking about value, problems and improvements, however. “The biggest challenge for owners or management is to recognize that they have a problem and that they need to get help,” says Deitcher. “It’s often difficult for an entrepreneur or even top management to come to terms with the fact that business revenues have dropped below the point at which the company is generating a reasonable profit. You have to get past the emotional and go back to the rational.” Reno Lovison, of Reno Lovison Marketing, provides auction values for failed or folding concerns. “These appraisals are usually used to negotiate debt, set a purchase price or occasionally are used by stakeholders who want to understand their downside exposure,” he says. Lovison first compares the assets in question to similar ones recently sold at auction

or under quick or forced conditions. This comparison is part objective, part subjective, since Lovison considers information such as the state of the economy and industry, where assets are stored and what’s likely to affect potential value. “This portion can be construed as subjective, but it is important for interested parties to consider for themselves whether the assets being evaluated might be selling at a time when the market for the property is strong or perhaps not as strong,” he explains. “We are in a weak market right now, so businesses forced to liquidate will not find as many willing buyers. Since the ability to borrow also is tight, those who might want to buy may not have access to the financing they need. This all has an impact on the value.” Jim Schultz, director of business valuation services for FR&R Business Valuation Consulting LLC in Deerfield, Ill., recently worked on a case involving a construction company that did grading and roadwork. He looked at what might be on the horizon for this type of business, and in doing so considered the impact of potential federal and state government-funded infrastructure projects, as well as the types of operational controls and management changes that would be necessary to turn the business around. In many cases, he says, the business might be in distress because of the loss of a key person, whether through retirement, death or departure for greener pastures. Without that key person, the business is worth less and, in extreme cases, nothing at all. You evaluate a distressed business using the same factors you would for a viable business—assets, market multiples and earnings. Depending on the specific situation, one or more of these may be deteriorating—and fast. Ultimately, though, valuing a distressed business comes down to answering one question: How much cash flow will it generate in the future? “I look at the company’s strengths, weaknesses, opportunities and threats, and I ask: ‘Is the industry going up or down?’ and ‘Does the company have a weakness that it can turnaround?’” says Schultz. “You have to become an expert in the industry, which entails reading trade publications and talking to experts and business brokers. You also may need to establish whether or not there is a chance of renegotiating any loans or finding new lenders.” After all the analysis, you may determine that there is indeed the possibility for future business opportunities. When there is hope, ask, “At what rate is the business going to return to profitability?” “Somewhere you have to forecast what is doable,” says Campbell. “Of course, any valuation requires some educated guesses,” he cautions. That may include goodwill, intellectual property, patents, customer relations or a strong brand name—assets that may have been damaged as the company floundered. “Activity in goodwill impairment can be a test,” says Massimo Messina, a partner in Grant Thornton’s Economic Advisory Services practice and leader of the Midwest Advisory Services Group, based in the Chicago metropolitan area. The business may take significant goodwill write-offs and, in fact, revalue all its assets. And while Messina reports that M&A is still down, the activity he’s seen is amongst healthy businesses. “I haven’t seen any bargain purchases,” he comments. Nevertheless, if the Allianz prediction is correct, there may be many more opportunities to put a price on distress in the coming months.

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Lay Off Layoffs Pink slips aren’t the only option. By Cecily O’Connor


he national unemployment rate hit 9.5 percent in June, and is expected to climb even further before we see any improvement. “This is the toughest time since the Great Depression,” says Barry Chiswick, distinguished professor at the University of Illinois at Chicago. “Employers are now compelled to give more serious thought to rationalizing the way they produce goods and services.” Even as the US unemployment rate climbs to historic levels, accounting firms have several options open to them to dodge that most dreaded of words: “Layoff.” Unpaid leave, equipment upgrade delays and work-from-home arrangements are among the steps being taken to trim the fat from their budgets. And while these measures aren’t exactly revolutionary, they are effective. They’re also long- rather than short-sighted. You don’t want to forfeit the investment you’ve made in developing your staff over the years, especially since you’re going to need those talented professionals when the economy turns around, says Paul Gladen, president of market research firm Muzeview, and a former Arthur Andersen partner. An employer’s “decision is complicated by uncertainty over how long and how deep the recession will be,” says Gladen. “If the recession is going to be long, they need to act now; if the market begins to turn soon, they don't want to get caught short of resources.” While there is no one-size-fits-all solution, employers across all industries are clinging to the cost-conscious zone in a bid to maximize profits in recessionary times. “HR folks tend to stick with what they know, and the willingness to consider options other than staff reductions is noteworthy,” says David Van De Voort, consulting principal in human capital at Mercer, Chicago. Here are five strategies that could save your employees from the chopping block. 22


1. Cut the Fun Stuff Business travel is frequently the first cost to be cut, according to a January Challenger, Gray & Christmas survey of HR executives representing various industries. Hiring freezes and reductions, which are being used by 58 percent of employers, follow in popularity. In comparison, permanent workforce reductions are being made by 56 percent of companies. Other cost-cutting measures include holiday party cancellations, bonus reductions and cutbacks in employee perks. Not surprisingly, entertainment-related expenses also are being heavily scrutinized. “We are getting the message out about being more mindful of spending, and expecting that if our employees take a prospective client out to lunch that there’s an outcome,” says Suzanne Dodge, VP of HR at Perry-Smith LLP in Sacramento, Calif.

2. Take a Break While once totally alien in concept, today it’s not unheard of to ask employees to take unpaid leaves or vacations during slow periods in the business cycle. For workers who can afford it, an extended vacation might be especially enticing during the summer or holiday season. This time off also may provide an opportunity to pursue personal interests or higher education while continuing to work. “Things like sabbaticals and secondments, or opportunities to work in a not-forprofit where the firm pays you at 80 percent of your salary, are good because they are great development opportunities,” says Francine McKenna, author of the blog re: The Auditors? [], and founder and president of McKenna Partners, a Chicago consulting firm. “Furloughs are effective in discouraging workers from looking elsewhere for a job,” Chiswick adds. “In bad economic times, it’s hard to find a job, but if you’re laid off and collecting unemployment, you do have an incentive.”

3. Rethink “Work” Restructure the work day to help manage talent in an environment where you’re forced to do more with less. Some BDO Siedman professionals will work more hours between January and April, and then reduce their work time between May and December, for example. Others may spend most of their time at client sites and then work from home when necessary, which essentially reduces the company’s overhead. Telemeeting and telecommuting tools are gaining in popularity as part of this trend.

4. Save Upgrades for Later Delaying computer equipment upgrades is another cost-cutting approach. Some firms may choose to replace equipment every four years instead of every three. Policies concerning personal digital assistants and cell phones also are shifting, with firms making staff responsible for those purchases, Van De Voort explains.

5. Watch Benefits Costs Employee benefits is an area in which firms have to tread carefully. That said, these days many workers would rather forego some benefits or contribute to them themselves rather than having to give up their jobs altogether. About 10 percent of HR professionals surveyed by the Society for Human Resource Management in October 2008 said they were cutting back on benefits to reduce staffing costs. Additionally, some employers can choose to make 401(k) matches dependent upon company performance, or to cut the match altogether, says Van De Voort.

16th Annual Midwest

FINANCIAL REPORTING Symposium Accounting and Financial Reporting Updates from the SEC, FASB, IASB, AcSEC and PCAOB

Layoffs in Accounting The downturn has had a mixed effect in the accounting industry, says Geremy Cepin, director of PDI Global Executive Search in Chicago. Larger firms, especially those involved in the financial services industry, have scaled back operations, laying off staff at all levels, including professionals with lower, chargeable hours and smaller books of business. Some smaller firms, on the other hand, are in the fortunate position of making strategic hires right now. “Many have been able to build their businesses by providing service on par with larger firms, but for less money. This means that smaller firms are getting more challenging engagements and need people with large firm experience more than ever,” says Cepin. “As a result, many accountants laid off by big firms are being absorbed right away by smaller firms, which are gaining talent that was previously difficult to attract.” Perry-Smith LLP is among the firms hiring opportunistically right now, with sights on filling several senior positions in its San Francisco office. While not under the same financial constraints as other firms, Perry-Smith LLP's emphasis on staffing smartly offers an important reminder about not going overboard. “We are regional and can’t afford the luxury of hiring outside our needs,” says Dodge. “We make it clear that when we hire we keep each team member fully utilized. Where there is a downturn, we see it as an opportunity to strengthen our team.” “Laying off that excess can result in some short-term cost benefits, but it also can stir up long-term harm,” Gladen warns. “In some instances, the pressure to sustain partner earnings in the short term has outweighed...longer-term perspectives. Some firms may be damaging their long-term prospects, and badly handled situations may become magnified in the age of blogs, Facebook and Twitter.”

Don’t miss this unique opportunity to interact with an all-star lineup of financial reporting policy-setters.

Friday, September 25, 2009 Donald E. Stephens Convention Center, Rosemont, IL 8 CPE Credits | $325 members/$395 non-members

To register, or for more information visit or call 800.993.0393.




Mind the Gap The marks of a true leader bridge the generational divide. By Derrick Lilly


eneration Y, Millennials, the Net Generation—call them what you will, they’re the CEOs, CFOs, presidents and vice presidents of the future. Born roughly between 1978 and the late 1990s, these emerging professionals grew up during a time of high expectations and rapid economic and technological growth. Millennials are determined to get everything in life faster and easier. Simply put, they want what they want, and they want it now. “One of the things I’ve noticed among some of my younger employees is that they’re less patient with the pace at which their career moves forward,” says Stan Slabas, 61, senior VP and CFO of Chicagobased S&C Electric Company. “I always took it as it came and had a lot of confidence and trust in the people ahead of me that things would work out. I find that the



younger folks who work for me want things laid out for them; they want to see what their next promotion is going to be.” With the economy in its current state, however, job opportunities are thin, and patience is a virtue best mastered. “Young professionals know that they definitely need to work harder,” says Matt Krop, 23, a graduate student at Northern Illinois University (NIU), finishing up his Masters of Accounting Sciences degree, with concentrations in auditing and financial reporting. “It’s not like it was after Sarbanes-Oxley when companies were hiring anyone to put data into a computer. We’re not just going to have ‘jobs’ anymore.” Today’s marketplace is going to challenge young professionals to be more competitive and to prove their worth to an organization. “You have to be willing to go

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Today’s leaders should be...

freedom I have to do the things I want to do. When I’m not working I want the ability to go on vacations and enjoy life. I don’t want to be 75 1. Caring 1. Self Aware 1. Ethical years old looking back at my life wondering if I 2. Hard Working 2. Ethical 2. Forthright ever did anything fun.” 3. Intelligent 3. Driven 3. Hard Working Kaiman sums up the Generation X attitude to 4. Strong Communicators 4. Selfless 4. Aware work—it’s results that matter, not the 9-5. “We 5. Well-rounded 5. Consistent 5. Always Learning work 50-plus hours per week. However, I firmly believe if you can come to work for fewer hours the extra mile. You will never get ahead in life if you just do the but produce the same results, then I don’t care how many hours bare minimum,” says Krop. “You have to have something to set you’re in the office as long as it’s done right and ethically,” he says. At the same time, though, “Do I let them listen to their iPods at work? yourself apart. I understand that I have to work to get where I want No. Are they on the Internet all day? No. Will I ever be okay with to be, and that I’ll have to make some sacrifices along the way. It’s that? No,” he says. “There has to be a balance between loosening a trade-off, but I can’t have everything at once.” the reigns enough so that people can really perform and be individKrop also realizes that the profession will push him to continuuals and providing a structure within which they can work and ally develop his soft and technical skills. “If you want to be a achieve results.” leader you have to be able to communicate with people. You have If you go along with the iPod-wearing Millennial, and Starbucks to be multi-faceted. You have to be a caring, hard-working, intelsipping “I’m leaving early” Gen X image, then it follows that a navy ligent, well-rounded business person. You can’t just be an blue suit and tie pretty much define the Baby Boomer employee. accountant; you have to be everything.” Growing up during a period of vast cultural, economic, politiDon’t expect this new generation of professionals simply to concal and social change, Baby Boomers (individuals born roughly form, however. Like Generation X before them, they’ll continue a between 1946 and 1964) were exposed to many of the events that gradual move to a more laid-back business culture. “With business have shaped the world today—Civil Rights, the Vietnam War, you will always need to be professional, but I think things will get technological change, recessions, globalization, etc. And due to a little more casual in the future,” says Krop. “And if older profestheir sheer numbers (more than 75 million in the United States sionals look down on young professionals it’s to their disadvantoday), they’re major players in contemporary economics and tage. Change is just a part of life; things change and people are workplace behavior. going to be different.” As business people, Baby Boomers don’t shy away from chalMembers of Generation X (born roughly between 1965 and lenges or sacrifices—to them, climbing the corporate ladder rung 1980) came of age during the rise of the PC, Internet, video gamby rung is a due process; and they’re highly ethical and respectful ing, Grunge and Hip-Hop. Often referred to as the Me Generation of values and traditions. or the Slacker Generation, members of Generation X are stereoAs Stan Slabas explains, “I’ve always worked 60 or 70 hours a typed as disaffected, authority baulking, conservatism-scoffing week; there’s always a little bit of your personal life that must be cynics, trying to find their place in life (hence the enigmatic “X”). sacrificed. I’ve noticed over the years that the younger folks value Everything that the Baby Boomer generation came to symbolize— their personal time and aren’t as likely to give up as much of it for unquestioning diligence, over-achievement, conformity—Generatheir career as I was at that age.” tion X seeks to counter. With Baby Boomers nearing retirement, finding successors to fill But then again, generalizations never really work, do they? their leadership roles has revealed a new challenge. Like most “People have this view that Baby Boomers are very driven and Baby Boomers, Slabas’ convictions lie in hard work, integrity, put work ethic first; then Gen-Xers are counter-culture people transparency and open lines of communication. Nearing retirealways asking ‘why’; then members of Generation Y seem to want ment himself, Slabas spends a lot of time instilling those traits in more balance in their lives. But to me there are exceptions to all his potential successors. To him, a successful leader will always of those rules; I think professionalism is more about how people focus on mentoring and developing those around him—a reflecwere raised than what generation they’re a part of,” says Jeramy tion of the Baby Boomer generation’s desire to make an exit only Kaiman, 35, managing director of Chicago-based financial execuwhen they’ve changed things for the better. tive recruiting firm Garelli Wong & Associates. “One thing I try to teach my people is that you’re primarily a Generation X professionals, in fact, tend to be highly educated, risk manager when you’re running a business and have people open-minded and driven, with a developed concept of ethical counting on you for jobs. You need to be a good risk manager, and behavior. They question everything, are always looking to do I think this recession is crystallizing that need in the younger peothings better, and move freely between companies and positions ple,” says Slabas. “I don’t know about a change in their behavior, in order to achieve their personal and professional goals. As the but going through a recession like this will probably make them generation that will succeed retiring Baby Boomers, they’ve better managers and leaders in the long-term.” matured into an extremely adaptive and influential group. It’s impossible to know for certain how the business land“I measure personal and professional success by continuing to scape will change as Baby Boomers exit and Generations X and achieve the things that I set out to,” says Kaiman. “I care about the Y step in as America’s new leaders. What is certain, though, is quality of the people that I’m surrounded by at work and home, the that each generation will continue to guide and inspire the next, quality of time I can spend with those people, and the financial however unwittingly. Matt Krop, 23


Jeramy Kaiman , 35


S tan Slabas , 61

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Partnership in Question Guidance in the application of a new taxpayer-friendly rule in partnership situations is crucial. By Harvey Coustan, CPA


ast month I described the provision in the American Recovery and Reinvestment Act of 2009 (ARRA) that allows taxpayers to defer recognition of cancellation of debt income (CODI) realized in 2009 or 2010. This deferral is for a period of four or five years, with the deferred amount being amortized over an additional five-year period. I briefly explained the perplexing issue that might arise in a situation where a partnership is the debtor. The general partner (or managing member of an LLC taxed as a partnership) may find that this election— which is made at the partnership level according to the new law—is opposed by one or more of the partners. Other partners might want to elect other methods of avoiding recognition of taxable income on the CODI. These other methods, such as the insolvency exception or the Title 11 exception, may produce a more favorable result for some. Because the election must be made at the partnership level, and therefore binds



all partners with respect to the CODI in question, the general partner should make sure that all partners support the elective deferral. A number of practitioners, including the American Bar Association (ABA) Section of Taxation, have asked the IRS for guidance regarding the right of an individual partner to waive the partnership election in order to apply other provisions to their share of the CODI. I believe that a partner waiver will require some additional legislation. But this issue is only one of a number that arise when the partnership is the debtor. The deferral election applies only to CODI with respect to a debt issued by a C-corporation or any other taxpayer in connection with the conduct of a business. A partnership may be conducting a business and may also be engaged in activities that don’t constitute a business at the time the debt is issued. IRS guidance should provide a method for determining the amount of CODI eligible for deferral in that situation. Certain events can trigger recognition of the unamortized deferred income before the completion of the amortization period. The law requires acceleration in the case of death, liquidation or sale of substantially all the taxpayer’s assets, the taxpayer’s cessation of business, or similar circumstances. When a partnership is the debtor, a number of issues unique to that type of entity need to be addressed in IRS guidance: n Does the sale of a portion of a partner’s interest trigger immediate recognition of all CODI allo-

cated to that partner? Logically, only a proportionate share should be accelerated. n What’s the impact of the admission of a new partner after the CODI is triggered? The new law requires an allocation of CODI to the partners who are partners “immediately before the discharge in the manner such amounts would have been included under Internal Revenue Code section 704 if such income were recognized at such time.” Should the dilution of those partners’ interests caused by the admission of the new partner result in an acceleration of at least the part of the deferred amount attributable to the diluted portions of the other partners’ interests? n Will a technical termination of the partnership under Section 708(b)(1)(B) (sale of 50 percent or more of partners’ interest in capital or profits during a 12-month period) accelerate recognition of the total deferred amount, or only the amount attributable to the interests sold? Again, logic would dictate that only the portion of the deferral attributable to the sold interests should be accelerated, and that position was affirmed informally by two government officials at the May 2009 ABA Section of Taxation meeting in Washington, DC. n How will the contribution to a second partnership of an interest in a partnership that elected deferral be treated? Will this contribution trigger deferred CODI? There are also issues unrelated to acceleration that need resolution, including: n How and when should the deferral election affect the partners’ capital accounts? Should the increase be reflected at the same time as the debt is reduced, therefore making the “debits and credits” work? The ABA Section of Taxation offered two alternatives to this: Either carry the total CODI deferral as a liability on the balance sheet until the CODI is taxed, or treat the deferred amount as unallocated capital until the deferred amount is taxable. n When are the bases of the partners’ interests increased by the deferred amount allocated to them? At the time of deferral? As the amount is amortized into income? I believe the latter should be the case. n How will the “parent” partnership and its partners be affected by a deferral election by a partnership in which the parent has an interest? The new law requires that amortization of any original issue discount (OID) that arises with respect to the “reacquisition” of business debt be deferred and amortized over the fiveyear period in which the deferred CODI is

recognized. OID could arise if new debt is issued or deemed issued in exchange for the old debt. A number of the same issues described above also apply to the deferred deduction of OID. It’s clear that more guidance is needed so that taxpayers and their advisors can make the election with some degree of certainty about the ultimate result. Harvey Coustan is an Ernst & Young retired partner. He is presently consulting on substantive technical and professional standards issues and has been an expert witness in a number of cases.



POWERHOUSE Is the United States still the world’s business leader? Our panel of experts grade Uncle Sam and American business potentates. By Kristine Blenkhorn Rodriguez


ith an economic engine worth $14 trillion, $233 billion in foreign investments on American soil, and worldwide investors buying up US Treasury bills despite the recession, you’d think that the United States’ position as the world’s business leader was pretty clear. But there’s a caveat: We could easily slip from our position of preeminence at any given moment. The Organisation for Economic Co-Operation and Development (OECD), a 30-country partnership, uses its wealth of information in a broad range of economic, financial, governance and innovation centers to help governments achieve and retain economic growth and financial stability. While it predicts that the

United States will come out of the recession stronger for having gone through it, its interim report for 2009 is full of cautionary notes about how carefully the nation will need to tread with its stimulus package, debt, fiscal responsibility and trade. To drive the point home, we asked five leading business experts to grade the United States on various “hard” economic indicators, as well as a few “softer” areas such as innovation and executive leadership. We went old school on this one: A+ for excellent performance, F for failing performance, and everything that falls between. But first, here are a few facts about our pros.



MEET THE EXPERTS William (Bill) A. Brandt, Jr. Brandt, who has been in the business of turnaround and insolvency consulting for more than 30 years, is president and CEO of Development Specialists, Inc., one of the nation’s oldest restructuring firms. He has advised Congress on matters of insolvency and bankruptcy policy, and was the principal author of the amendment to the bankruptcy code which permits the election of trustees in Chapter 11 cases. More recently, he’s been working with public policy, law and banking leaders in the People’s Republic of China on approaches to the reorganization and restructuring of some of the country’s state-owned industries. He is also chair of the Illinois Finance Authority, and regularly appears on CNN, CNBC, Bloomberg, CBS Radio and National Public Radio.

Adolfo Laurenti. Laurenti is a senior economist at Mesirow Financial and authors Themes on Global Markets, a monthly newsletter providing insight into trends, issues and the forecast for the global economy. He previously served as associate economist at LaSalle Bank/ABN AMRO, where he tracked economic trends in the banking sector.

Sergio Rebelo. Rebelo is the Tokai Bank Distinguished Professor of International Finance at Northwestern University’s Kellogg School of Management, where he has served as chair of the Finance Department. Prior to joining Kellogg, Rebelo taught at the University of Rochester and the Portuguese Catholic University. He researches macroeconomics and international finance, and has served as a consultant to the World Bank, the International Monetary Fund, the Board of Governors of the Federal Reserve System, the European Central Bank, the McKinsey Global Institute and other organizations.

Dr. Raghuram Rajan. Rajan is the Eric J. Gleacher Distinguished Service Professor of Finance at the University of Chicago’s Graduate School of Business. Rajan is currently an economic advisor to the Prime Minister of India. Prior to resuming teaching, he was the economic counselor and director of research (in plain English, the chief economist) at the International Monetary Fund (between 2003 and 2006). Since then, Rajan has also chaired the Indian government’s Committee on Financial Sector Reforms, which submitted its report in September 2008.

John (Jack) Crooks. Crooks is president of Black Swan Capital, an independent advisory firm, specializing in foreign exchange and currency market investing for retail and institutional clients. Prior to entering the investment arena, Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics, and has been published in Asian Times, Futures Magazine, Barron’s, Bloomberg, Dow Jones Newswire, and across many financial websites. He has appeared on Bloomberg TV, CNBC and Fox Business News.

READ OUR REPORT CARD Foreign Investment in the United States Brandt: Grade A “I think as long as foreign investors want to put their money here it’s a good thing. Back in the 1980s, there were hand-wringing moments over how much land Japan was buying in Hawaii….I was told we’d all be working for the Japanese. Last time I looked, we’re now wondering what happened to Japan. Now the same worry starts over India and China buying in the United States. Rumors of our demise are always greatly exaggerated, as Mark Twain might say.” Laurenti: Grade A “This is the place people around the world want to come to invest in—in our companies, our technologies, etc. A few months ago, 32


at the height of the financial crisis, the dollar rallied and so did US treasuries. We are a safe place to be. On the other hand, we might be a little too complacent. We need to keep in mind that investors around the world should not be expected to buy a treasury just because it is US issued. In a few years, with the new reality of increased debt, we’ll see that it will be tougher to sell our debt.” Rebelo: Grade A “The World Bank ‘Doing Business’ database ranks the US economy as third in the world in terms of how easy it is to do business. Singapore and New Zealand rank first and second, respectively. Inward foreign direct investment accounted for roughly 10 percent of total US investment in 2007.” Rajan: Grade B+ “I think we could be a little more open to foreign investment. The United States is still a great place to do business, but foreign

investors are getting a little worried about impediments—discussion regarding executive compensation, limiting property rights and increasing taxation will make people more wary.” Crooks: Grade C “In general, our politicians are now punishing US corporate leaders. If international investors can stay away from that mess, they will. You’re seeing rising concerns about the regulatory environment being heightened. And corporate taxes are stunningly high when you consider this should be the land of free capital and enterprise.”

Productivity Brandt: Grade A “The growth in this nation’s industrial and information-related productivity has been astounding since the ‘80s. There are specific niches where we lag but productivity is, overall, a measure of the creation of wealth.” Laurenti: Grade A+ “We are still a hotbed of entrepreneurship, ingenuity and work ethics—all of which make us very productive. China has productivity but lacks the innovation and technology we have. Europe has the technology but lacks our flexibility, so productivity there suffers. In the United States, we have created an economic system in which it’s very easy to operate, very easy to open a business, very easy to hire people. It’s easy to get credit from our financial system. It’s extremely easy to lay off people. We may not like it, but the ease in layoffs is a huge incentive for companies to hire people because they can get rid of them when times are bad. All of this ease contributes to a very productive business climate.” Rebelo: Grade A “Productivity is difficult to measure and compare across countries. But the rough measures that we have suggest that the United States is one of the most productive economies in the world.” Rajan: Grade B+ “Our productivity is high because we’re one of the more flexible economies. We could be even more flexible if we extended the universality of our safety net; lots of people are not covered by health insurance and unemployment insurance is limited. This makes it difficult for workers to move, or for politicians to allow firms to fail.“ Crooks: Grade C “We’re not as productive as we could be if people could move from place to place as they lost jobs. It’s hard now to move because the housing market is so bad; you’re locked into your house, basically.”

Gross Domestic Product (GDP) Brandt: Grade B “I think all the industrialized nations are doing well in this respect. We have a greater risk tolerance in the Unites States than the European community. The impact of recessions such as the one we are in is cushioned in Western Europe because of the social safety net— employment benefits, layoff protections, etc. On the other hand, it’s our potential for steeper decline that also allows capital to be recycled faster. We have deeper valleys but greater reward. You have to look at the percentage of public spending and debt when you look

at the GDP. I favored the stimulus package but if you look right now at the expenditures the government is committed to until 2020, the amount of debt we’ll carry will come up to an intolerable amount of our GDP. This will cause inflation both here at home and possibly in the rest of the world. We could be looking at Jimmy Carterera inflation kicking in over the next decade.” Laurenti: Grade B+ “We have a very efficient market but we have imbalances built into our GDP, the major of which is excessive reliance on consumption domestically. We consume too much compared to how much we save, and it got worse during the years of credit frenzy. I have a friend who proved this by his dog getting preapproved for credit. Easy access to credit has kept our consumption on steroids. Now I’d like to see a little more saving and investing for the long term and a little less consumption.” Rebelo: Grade A “The United States has one of the highest levels of per capita in the world. There are only a few small countries such as Luxembourg, and a few oil-producing economies such as Qatar, that have higher levels of per capita income. In terms of its overall size, the United States is the largest economy in the world, with an annual income of $14 trillion. But if China continues to expand at a rapid pace it will replace the US economy as the largest economy in the world by 2050.” Rajan: Grade A “The US GDP speaks for itself. All is well here.” Crooks: Grade D “In terms of GDP growth going forward, we’ll underperform for many years because of the way it’s calculated; consumption is a big part of it. The American consumer has lost a big part of his wealth recently and is going into savings mode. Not a bad thing; the savings will rebuild the pool of US capital. On a global scale, economists want to see a rebalancing; Eastern countries balancing with Western countries. The Asians will have to stop focusing on exporting so much because we’re not buying in mass quantity.”

Trade Brandt: Grade B “We’ll always have a trade deficit. We export ideas, not cars anymore. We suck at trade so the rest of the world can live. The Chinese economy will be in the toilet if Americans decide they want to stop maxing out their credit cards. We endemically run a trade deficit because we support the rest of the world’s economies…when the United States sneezes, the rest of the world catches a cold.” Laurenti: Grade B “We have been running too large a trade deficit for too long a time. For too long, we’ve relied on consumption, on foreign countries financing our trade deficit. We are in the process of correcting this imbalance. In terms of trade policy, though, we’re at a C and fast sliding to an F. President Obama needs to be able to rein in Congress.” Rebelo: Grade A“The United States has dramatically lowered tariffs and other barriers to trade since 1945. This openness has brought significant benefits, reducing substantially the prices that US consumers pay for many goods. These low prices are often taken for granted, but



they depend critically on free trade. There continues to be room to improve US trade policies, namely in the agricultural sector where government subsidies and barriers to trade continue to play a significant role.” Rajan: Grade B “I’m more worried about this than any other issue. The United States has a role to play in the world here. We want to pick and choose—be open in good times but force others to be open while we close down in bad times. President Obama made the right noises at the G20 summit, but he needs to exercise more control over Congress.”

tutions of higher learning are the envy of the world; our colleges and universities are importers of students because of that status. But our high schools and elementary schools are another story. That does not bode well for lower-income Americans who are not college bound. Of necessity, the private sector is now taking over and educating people on what they missed in school.” Laurenti: Grade F “This is a very tough environment. We knew that American businesses were lean going into the recession, and despite that they’re cutting positions very quickly. My hope is that we are cutting so much up front in this recession that when the market stabilizes,

Crooks: Grade B “The United States is still an extremely open market. That may change, depending on what China decides to do during this rebalancing period. China will need to take the majority of the readjustment pain. If it doesn’t take that pain domestically, if it pushes its currency lower and forces its pain on trading partners, the United States will close some of its markets.”

many companies will realize they cannot really operate successfully at this lean level. Hopefully, the turnaround will be a little faster than we think, but it’s a Hail Mary pass; I stress the word ‘hopefully.’ The length of unemployment is growing, and we’re at our worst number in 25 years.” Rebelo: Grade A“The current recession notwithstanding, the US labor market has performed well in terms of creating new jobs and maintaining high levels of employment. As a society, we can choose to protect existing jobs, giving workers a high level of job security. Alternatively, we can create a more flexible labor market in which it is easier for firms to shed workers when they need to restructure. The United States has chosen flexibility. “This flexibility comes at the cost of making jobs less secure, but it has some advantages. It generates an environment in which firms can experiment and take risks, creating a more dynamic economy. It also makes it easier to reallocate the labor force

Employment Brandt: Grade D “We have a much more fluid labor force than most countries. We can turn on a dime and redevote our energies. Our labor is productive precisely because it can move so quickly. Sadly, there is a human cost involved in that this fluidity often requires layoffs and change. In urban areas and among minority groups, we’re doing a horrible job. The unemployment rate among African-American men is so high that we might as well be in Kenya. American insti34


across sectors, so that workers are not trapped in underperforming sectors. Europe has chosen to emphasize job security. This policy has obvious benefits in terms of social stability. But when you protect the jobs of today, it becomes more difficult to create the jobs of tomorrow.” Rajan: Grade C+ “It’s just a stage of the cycle; we’re in a bad recession.” Crooks: Grade D “Unemployment will continue to get worse. The Obama Administration is tight with labor so you will see more labor rules putting more pressure on businesses. The giant ones can handle it but it can stymie growth for small business. The US entrepreneur creates jobs as well.”

Debt Brandt: Grade D “I’m in the restructuring and bankruptcy business; I abhor debt….At the end of the Clinton era, we were doing well and public debt was essentially paid off. Now we have to overcome a debt load disproportionate to our ability to carry it and easily pay it off. That’s never smart.” Laurenti: Grade F “Most Americans were living beyond their means in terms of housing, credit cards, cars—not just how many, but how frequent the purchases. You don’t need to change your car every two years just because credit is easily available. People failed to realize how exposed they were to short-term debt. As for public debt, we went from an A- to a full F over the past six months. We’re spending too much in an unproductive way. We’re not getting bang for the buck. Congress and the Administration are spending $1 trillion; I’ve never seen a problem where you can throw $1 trillion at it and not get anything done. I’m hoping something will stick but there’s no real plan, no thinking through. “Overall, I think we could jump-start the economy for one-third of the money we’re spending. If we had a plan, we would go through the list selecting spending based on its impact on job creation and enhancing productivity—maybe a fast train from Chicago to St. Louis, an improved electric grid, better air-control systems for O’Hare, better broadband systems. But without a plan, we will not get the productivity bang. Just the debt.” Rebelo: Grade B“The debt of the central and local governments represents roughly 70 percent of US GDP. This debt level is not unusual, but the government will surely add to its debt as it continues to restructure the financial system. In addition, the United States has some important fiscal challenges on the horizon associated with Social Security, Medicare and Medicaid. These challenges are likely to rise to the top of the political agenda once the United States gets its financial system in order and recovers from the current recession.” Rajan: Grade C+ “Clearly, the public debt numbers are not terrible right now, but we are going towards much worse. Medicare, Social Security— these are things we need to figure out how to take care of; this recession and our response to it will imply they are much more serious than we thought. We will have to make hard choices.”

Crooks: Grade D “From a relative standpoint, there’s still flexibility in the United States to issue more debt; that’s not available to Europe. That’s why Europe has pooh-poohed our stimulus package. European tax rates are already at 50 percent; ours is only 18 to 20 percent of our total economy. The private sector is writing down debt. We shouldn’t create more with public debt.”

Worker Benefits Brandt: Grade B “I worry we’re beginning down a slippery slope based on the European model. If we do that, we’ll jeopardize our ability to lay off, to restructure, to lean a company. Europeans don’t hire and grow like we do because they know they’ll be handcuffed to these people.” Laurenti: Grade B “Nothing exceptional here. We have a very flexible system in that I think we do a relatively good job of matching productivity and outcomes to pay. I think the system here is better than practices I’m familiar with in Europe. We failed in one crucial system— healthcare. That’s an F. It doesn’t make sense. How many people are stuck in a job they do not like and do not move for fear of losing their health benefits? It’s a big inhibitor to flexibility.” Rebelo: Grade B“While the quality of US healthcare is generally high, healthcare policy and access to healthcare leaves much to be desired. It makes no sense to tie healthcare benefits to jobs. And many US health insurance systems are cumbersome, bureaucratic and opaque.” Rajan: Grade B“We are not great. Again, this is where the economy divides. Whitecollar service workers who are in high-level jobs probably enjoy a higher level of satisfaction than their counterparts in other parts of the world. Blue-collar, lower-quality service jobs tend to have a much worse time because benefits are not all-encompassing.” Crooks: Grade B “I’ve had several of my own businesses and know how hard I’ve worked. It’s a piece of cake when you’re working for somebody else. I think many US employees don’t realize that. Look at Fortune’s ‘100 Best Companies to Work For’ list—we’re doing just fine, and it’s reflected in productivity.”

Executive Leadership Brandt: Grade B “Frankly, I see a lot of global leaders that outstrip American leaders. Talent is far more diffused globally than people think; but much of that talent was educated here in this country. Lack of the long view and the constant drive for quarterly earnings disturbs me. We’re not head and shoulders above the rest of the world.” Laurenti: Grade A+ (small/mid-sized biz), C- (large corporations) “Despite SOX and regulatory efforts, corporate boards are still not up to the job. There is too much complacency among CEOs with no clear idea how to control bonuses and perks—too much emphasis on short-term results rather than long-term outcomes.” Rebelo: Grade B “The United States has some of the most successful executives and entrepreneurs in the world. But there has been clear



ment in the financial sector, which accounted for roughly onethird of total corporate profits between 2000 and 2006.” Rajan: Grade B “In general I would have given executives high marks, but now I’m actually appalled at their lack of leadership in this crisis. Executives have been hiding in their bunkers.” Crooks: Grade B “The government is demonizing executives...leadership is good in sectors that actually produce something.”

Innovation Brandt: Grade A “There is no country on the planet, except for singular exceptions in certain niches, that leads the world in innovation like America. It’s because of risk. In America, we love the person who’s failed twice and finally succeeded; we get that innovation means occasional failure. In Europe, failure often carries vast social consequences in addition to economic ones.” Laurenti: Grade A “We are still a hotbed of technological innovation if you look at what’s cutting edge right now: nanotechnologies, green technologies, medical technologies, communication technologies—all of these are coming from the United States. Some countries come into the picture because you can produce the goods abroad cheaper—like your iPod. Amazing technology is designed in America but it’s produced in Asia because it’s cheaper. The technology is the higher value added.” Rajan: Grade A “All these things come together—the flexibility, the quality of the universities, the openness to diversity—and make the United States the most exciting and innovative place still. Again, we have to be careful to keep these advantages.” Rebelo: Grade A “The US universities are the envy of the world. US-based researchers account for half of the citations in scientific papers. Innovation also thrives outside of academia. In fact, roughly 70 percent of R&D expenditures are financed by the private sector. One encouraging sign about the future is that investment in R&D remains strong even in the midst of the current recession. But there are also signs that the United States is losing its edge in some research disciplines. Complacency in this area will cost dearly in terms of the ability of the American economy to compete in global markets.” Crooks: Grade B“We have the entrepreneurial core and great technology leadership. Those combined equal great innovation. But the small-business sector is taking a hit, so the innovation that would normally funnel upwards is slipping.”

HOLD THE TOP SPOT What’s the single-most important thing the United States can do over the next decade to ensure it maintains its position as the world’s business leader? Investing in education is crucial, says Rebelo. “The United States needs to maintain and increase its capacity to innovate,” he explains. “Everybody has heard the story of how Sir Isaac Newton discovered the laws of gravity after seeing an apple fall from a tree. This story can suggest that innovation is the fruit of happenstance, but nothing is farther from the truth. Only someone as highly edu36


cated (and immensely talented) as Newton could use an event so simple as the linchpin to a fundamental discovery. The quality of the education system is essential to modern innovation. To continue to lead, the United States must produce high-quality education at all levels.” Brandt agrees, recommending that the nation “commit significant expenditures and substantial attention to improving our primary and secondary schools, as well as reinvigorating our institutions of higher education.” For Crooks, leadership is inextricably linked to dynamic entrepreneurship. “Unleash the entrepreneur and he will create the jobs and the products of the future,” he says. “Reduce the regulatory constraints at the same time.” “The free trade of goods, services and people is really the key,” Laurent contends. “It’s what really helps us to concentrate on what we can do better and where we can get more value added. It forces us to get rid of what’s not really working for us, to move on from the things that really don’t need to be produced in the United States.” Trade is vital, Rajan agrees: “Keep our borders open to trade, investments and people. The United States has benefited tremendously from that. This is the wrong time to close borders.” Despite their words of caution, our experts are bullish on America’s continued preeminence. “I’ve been through more than a few of these economic down times,” says Brandt. “There’s one thing that Congress and the President can’t do: Repeal the laws of economics. For every boom, there’s a bust. People thought the good times would never end; now they think the bad times will never end. Our economy is resilient. We will come back again.” “The entrepreneur can still succeed here,” Crooks adds. ”The United States is still better off, from a capital markets perspective, because risk capital is still available here. That is in jeopardy because of what’s happened in the global capital markets, but as long as reasonable risk is allowed and encouraged, we’ll come out on top.” That long-term view is admittedly hard when things in the short term are so tough. And, in fact, Laurenti sees “a big divide between two classes of people. One says, ‘This period of recession is not pleasant and I need to make adjustments, but I’ll come out with the upper hand.’ This same pool of talent thinks this way: ‘I may have gotten metaphorically punched in the stomach by losing my job, but I’ve got talent and I’ll make new connections, learn something new and it will all come out even better than before.’ The second class of people is scared by this recessionary process. It only wants to deny reality and go back to the way it was in the jolly good old days…But we cannot go back. The price to go back means putting a lid on the whole economy and underperforming for years to come. “You cannot prevent history from going forward,” he adds. “You cannot insulate from the reality of the rest of the world. I’m not being demeaning of this latter class; I know these are real feelings they have. But they have the wrong reaction. They’re giving into fear.” “The US economy is going through a very tough recession,” says Rebelo. “In the midst of this difficult period, it is easy to forget that the US economy has good long-run economic fundamentals. These strong fundamentals have delivered steady growth and prosperity for the past 60 years.”


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Olympic Risk What will the Olympic bid cost Chicago? By Carolyn Tang


ccording to Chicago 2016, the committee heading up Chicago’s bid to host the 2016 Olympic and Paralympic Games, the city would benefit from “enormous visibility on the global stage” if it were to be selected as the venue for these prestigious events. Such an opportunity is expected to enhance Chicago’s global reputation by highlighting the city’s cultural and educational institutions, strong business community and overall diversity. Tourism dollars would flow, the unemployment rate would shrink and the local population—including the city’s youth—would benefit from the long-term use of structures built to house the Olympics. “Through our legacy organization, World Sport Chicago, Chicago 2016 is already making an impact on the city, introducing thousands of kids to Olympic and Paralympic sport by increasing the sheer number of programs available and enhancing those that already exist,” says Patrick Sandusky, spokesperson for Chicago 2016.

But at what cost?

“The cost of this bid, as near as we can add it up, is $5 billion,” says Tom Tresser, communications coordinator of No Games Chicago, a coalition of activists that believes hosting the Games would not be the best use of funds, especially given the budgetary health of both the city and the state. “It’s a lot of money to spend to get some visitors here.” Tresser’s estimate may not be far off. The Chicago 2016 Economic Impact Analysis, a report commissioned by Chicago 2016 and issued in February 2009, lists the following costs: For temporary venue construction and operation, $994 million; Games planning and delivery, $2.4 billion; and Olympic Village construction, $1.2 billion. Of this $1.2 billion, $100 million would be allocated to constructing the permanent portion of competition venues. Despite the price tag, Chicago 2016 continues to project economic and financial benefits, with no risk to the taxpayer. “Chicago 2016’s Games plan would be entirely privately financed, and no taxpayer dollars will be used,” says Sandusky. “Projections that have been the result of careful research put the cost of operating the Games, from building venues to hiring employees, at $3.3 billion, and estimated revenue from ticket sales to sponsorships at $3.8 billion.” In fact, Chicago 2016’s report explains that the total incremental economic impact of hosting the Games is expected to be $22.5 billion. Of that, $13.7 billion would be realized by the City of Chicago. This number includes total incremental revenues from all sources of income, as well as indirect business taxes and labor income. This report, however, was based on preliminary estimates developed in late 2006 and early 2007. And indeed, with the Olympic/Paralympic Games seven years away, forecasting costs and benefits this far in advance is certainly a risky exercise, especially since the City of Chicago is not best known for accurate forecasting. “We’re talking about construction costs five years from now,” says Tresser. “This from the city that brought you Millennium Park overruns, the Monroe Street Parking Lot overrun, the Soldier Field overrun, and the overruns on O’Hare Airport going up to $10-15 million.” He believes that the potential overrun associated with Chicago hosting the Olympic Games would make those prior estimates look like “chump change.” In response, Chicago 2016 officials point to the strong publicprivate partnerships in Chicago as proof that the city has what it 40


takes to host the Games. Some criticize Millennium Park as being over budget. Chicago 2016, however, says the scope of the project changed—an issue that is not a concern for bid planners. “Our Candidate File clearly outlines the costs associated with hosting the Games and the scope of this endeavor is very clearly defined,” says Sandusky. Olympic Games history, though, lends support to Tresser’s concerns. Dr. Will Jennings is a research fellow at the University of Manchester, UK. His studies focus on governments’ and organizers’ management of risk in bidding for, planning and staging the Olympic Games. He points out that there was a deficit of around $1 billion linked to the 1976 Montreal Olympics. “The financial risks associated with hosting the Games can be significant. Over the past 30 years, staging costs have varied, but typically the final figures have far outreached initial estimates,” he says. The uncertainty associated with the Vancouver 2010 Winter Olympics, due to be held in February of next year, is a case study that hits close to home. Fortress Investment Group, a New Yorkbased hedge fund, dropped financing of the Olympic Village after the city of Vancouver’s credit rating was downgraded by Moody’s Investors Services in January. Subsequently, Vancouver covered construction costs with a $100 million bailout loan. “And Vancouver must complete the Village. They have to do it. They have to go into debt and they have to do whatever needs to be done to satisfy the Olympic contract,” says Tresser. In addition to this obligation, the Canadian federal government indicates that the estimated $175 million cost associated with providing security for the 2010 Games has now soared to $900 million, more than five times the original projection. Experts suggest that this increase is related to political issues, increased gang violence and potential protests. Tresser also points out that the London Olympics, to be held in 2012, is over budget by $9 billion. And, in fact, in May 2009, Tom Russell, the man who oversaw the development of London 2012’s Olympic legacy plan, left his post after less than 18 months on the job. No reasons were given for his departure. Given prior history, Tresser is understandably worried when the Games’ track record is extrapolated to include Chicago 2016. “Our federal government is broke today. The State of Illinois is $12 billion in the hole. The City is $290 million in the hole,” he says. “Yet we can somehow find $86 million to buy Michael Reese Hospital, and they’re going to tear it down when we need more health clinics, we need more doctors, we need more places for people to go.” “The apparent ubiquity of Olympic risk is an inevitable symptom of the increasing complexity of the physical and organizational structure of modern Olympic Games,” says Jennings. “Risk casts its shadow through the potential contingency of public support and political and reputational risks attached for government and organizers.” Chicago 2016 bid officials counter that their proposed Games plan is economically responsible and sustainable, even in today’s turbulent economic climate. “Chicago is fortunate enough to have the largest convention center in North America—a venue that would be utilized to its fullest potential if Chicago is chosen as host city,” says Sandusky. In fact, McCormick Place would be home to 11 Olympic and 8 Paralympic sport competitions, and would be home to the Main Press Center and the International Broadcast Center. “London is essentially building a facility that already exists today in Chicago,” says Sandusky.

“There is no reason why this Games should not be ‘the best games ever’ in keeping with the post-Olympic proclamation of the International Olympic Committee (IOC) in recent times. However, with continued growth in the scale and complexity of organizing the Games, this most recent installment may also be the riskiest yet,” says Jennings. Jeff Owen is an assistant professor with the economics and management department of Gustavus Adolphus College in St. Peter, Minn. He specializes in sports economy and previously studied the cost and benefits associated with the 2008 Olympic Games in Beijing. “Even if the Olympics could be part of a fiscal stimulus, the time delay between when you bid for the Games and when they are held is so long that you could never plan the Olympic building program for when the economy is slow,” he explains. “The winning city is announced seven years in advance. No one can forecast how the economy will be doing that far into the future.” Owen states that there are several misconceptions associated with forecasting the economic benefits of being an Olympic Games host city. Of these, one of the biggest is treating costs as benefits when trying to determine economic impact. “The expense of the stadium, which does include local labor and materials, is a cost. It is resources devoted to one purpose that can no longer be used for something else,” he says. Owen also explains that, in many cases, the cost of constructing stadiums is largely comprised of hiring construction workers and purchasing materials from local suppliers. These costs are often considered a benefit to the local economy. According to Owen’s study of the Beijing Olympics, which was published in The Industrial Geographer, “This is arguably the most egregious error in economic impact studies. It is backward-looking in that it looks at the production aspect of the project and ignores the effect of the actual consumption of the product.” Another example of cost being portrayed as benefit is the claim that winning the Olympic bid and hosting the Games would result in a decrease in unemployment. Chicago 2016’s commissioned report states that 315,000 job-years would be created between 2011 and 2021. Owen says that a period of unemployment can reduce the opportunity cost of the stadium by utilizing labor and other resources that would not otherwise be employed, but, he adds, this is not a justification for the Olympics. “The Keynesian economic theory on which this is based is a macroeconomic theory. The benefit of public spending exists no matter what it is spent on and should not be credited to a particular project,” he explains. “Those resources could be spent on other infrastructure projects such as roads, etc.” Tresser agrees, and says that funds from Chicago’s philanthropic community would be of better service to the local community if applied to other projects. “In times that are so hard, when people are so stressed out, the economy is collapsing and the social safety network is completely frayed,” he says. “For Chicago’s philanthropic community to put their money into the Games is reprehensible. “The way you get economic growth is by building roads and infrastructure. Build another El line. Build a school. These are the things that bring long-lasting benefits to a local economy,” Tresser adds. He is also concerned that civic resources are being diverted toward bid preparation. He suggests that the staff of Chicago 2016 is comprised of former City Hall employees who were reassigned

from Mayor Daley’s administration to run the Games. Of note is Lori Healey, who was the Mayor’s chief of staff, and is currently president of the Chicago 2016 committee. Earlier this year, Arnold Randall left his post as commissioner of the Department of Planning and Development to become director of neighborhood legacies for Chicago 2016. “So, essentially, the 2016 committee is an adjunct of the fifth floor of City Hall, just privatized,” Tresser contends. Chicago 2016 responds that having former city staffers on the team ensures that the bid’s proposed Game plan meets the needs of the city and its residents. “Lori and others bring a tremendous amount of insight and expertise to the table that helps us put a beneficial legacy plan in place so that residents, and particularly youth, realize the long-term benefits of hosting the Games,” says Sandusky. Tresser also argues that the city is redirecting resources from other offices to support the bid, without public approval. “The Chicago Park District has signed a master contract with the committee basically turning over park land to be used for the Games should we get them, with no oversight, no discussion. Washington Park, Douglas Park, Lincoln Park, Jackson Park and the harbors will all be turned over to the Olympic Committee for construction, more construction and complete disruption,” says Tresser. According to the Chicago 2016 Committee, though, any disruption is worth it. The committee points to its publicly available reports, in which one of the main benefits it touts is an increase in tourism dollars before, during and after the Games. In its February 2009 report, specifically, the committee references Games in Atlanta, Athens and Barcelona, and cites relevant financial gains: n Atlanta: “[C]urrently has almost 280 more international businesses in the region than it did prior to the 1996 Games.” n Athens: “Since the 2004 Games in Athens, the number of tourists visiting Greece increased by 5.6 percent and 8.4 percent in 2005 and 2006, respectively.” n Barcelona: “[F]rom 1990 to 2002, the number of hotels nearly doubled to 215 from 118, and the number of overnight stays grew to 8.7 million.” As both Tresser and Owen point out, however, this may not be the case for Chicago. “Chicago’s economy, and its place in the world economy, is already well established. The Olympics are not necessary to spur any infrastructure investment,” says Owen. “Instead they are more likely to divert resources away from more practical needs.” Additionally, Tresser believes that the Olympics may dissuade companies from doing business in Chicago. “Research indicates that when the Games come to town, the convention business stays away. Chicago is already a major destination for tourism, for both business and pleasure, but when it’s known that the Games are coming, all your convention business will avoid that time period,” he says. While the fiscal viability of hosting the Games is still in question, Owen feels that the Olympics don’t have to be economically beneficial for people to support hosting them. “Personally, I would find being in an Olympic city a fascinating and memorable experience, and would be willing to see some of my tax dollars go toward making that happen,” he says. “As an economist, my point is not that a city should never want to host the Olympics, but that we should be more honest to local residents by saying, ‘If you want to be an Olympic city, you are going to have to pay for it.” As the debate wears on, both supporters and naysayers anxiously await the looming IOC decision on October 2, 2009.





Check out these high-performance, low-cost software options. By Daniel Dern

Small businesses, whether they're CPA firms providing accounting services to clients or companies managing their own books, have to be cost-conscious—and that extends to their choice of accounting and business software. Some accounting software and online services are free, like Intuit's QuickBooks Online [] or PostBooks [], an open-source program that provides not only accounting, but also ERP, CRM and financial reporting. And you can’t get much cheaper than free. JAVA & Co. Small Batch Recipes, a gourmet syrup, sweet shop and gift store based in Henry, Ill., started off its technology upgrades with Microsoft's free, downloadable Accounting Express []. "Our accounting needs were basic—no employees," explains JAVA’s owner Jamie L. Knoll. "Recently, we upgraded to their professional system with full-integration capabilities—payroll, inventory, etc. It is userfriendly with great customer service, and has the basic software accounting components we utilize." You can certainly purchase basic accounting functions affordably. For $100 and under for a single-user, you can enjoy options like Microsoft Excel, or starter programs from Intuit or Peachtree. While you can spend up to $13,000 for a 40-user license with, say, Peachtree Quantum, the company’s Product Marketing Manager Chris Claude points out that you can save dramatically on license and update costs by signing up for the Sage Accountants Network []. For $419, you can get the latest version of Peachtree Quantum Accountants Edition, which otherwise would cost about 10 times that amount. And you get support and training thrown in.



Who’s the Leader? There are dozens, even hundreds, of accounting packages for small, medium and large businesses, including add-ons and industry specific products and versions. SAP, for example, has around 20 different manufacturing versions. (Lists, links and reviews of many of these accounting/ financial management packages can be found at Accounting Software World [].) The biggest player by far, according to Ray Wang, VP of Forrester Research, Inc., is Intuit, with approximately 80 to 85 percent of the market, followed by Peachtree by Sage, with 5 to 8 percent of the market. Major names within the remainder include, in no particular order, Everest Software, IntAcct Corporation, Microsoft and NetSuite Inc. Forrester is in the process of compiling a survey that will provide a big picture view of the most in-demand software packages. In the meantime, an IDC survey that asked 1,000 small and midsized firms, "What software do you primarily use for accounting?" found that the most popular was "overwhelmingly Intuit in general and Intuit QuickBooks Pro in particular, followed by Peachtree and Microsoft Money," explains Ray Boggs, VP of SMB research at IDC. Interestingly, he notes, "Six percent still use Microsoft Excel." "The reason that Intuit is overwhelmingly widely used is because it pioneered the idea of small-business accounting as a larger product, having all these other functions that a small business needs to better manage itself," says Isaac M. O'Bannon, technology editor for The CPA Technology Advisor []. "Both Intuit and Sage have developed very tailored versions for specific industries, such as for retail, wholesale, nonprofits and construction." For mid-sized companies, says Boggs, "The market is much more competitive, but Intuit is still number one. And instead of Peachtree and Microsoft Money, it's Sage MAS90 and Microsoft Dynamics GP." "As the company grows, small to mid-sized businesses should consider solutions like Sage Software MAS 90 and the Microsoft Dynamics product line," confirms Mickey Scheffki, CPA, partner, director of technology consulting at Clifton Gunderson LLP. "These solutions offer more flexibility and cover all areas of business management. They allow for solutions tailored to your specific business type. "Companies with extensive industry specific needs normally move to a variety of industry specific software products, like Deltek Vision, Sage MasterBuilder, Sage MIP and Sage Medware," she adds. In the enterprise space, based on worldwide revenues, the main players are SAP, Oracle, Sage, Intuit and Microsoft, with no one company having more than 20 percent of the market, Boggs comments.

The Intuit Family Taking a closer look at the top of the list, Intuit's family of products for accountants includes QuickBooks Premier Accountant, which provides all-in-one bookkeeping, write-up and financial reporting tools, starting at $399.95. "Productivity improvement and practice growth are accountants' highest priorities today," says Sanjiv Waghmare, VP of customer user experience at Intuit. New features added in QuickBooks Premier Accountant 2009 to meet this demand include Client Data Review, which serves as a “detective tool” to find and fix errors in clients' books, saving accounting professionals many hours of tedious and time-consuming work. Also, Intuit Statement Writer enables accounting professionals to easily create and 44


update professional-looking financial statements, saving them hours of time in each engagement. Premier Accountant includes all related Intuit 2009 accounting programs intended for use in concert with clients. For example, Simple Start, Pro, Premier and the Premier industry specific editions allow an accountant to access the same screens and features as his or her clients.

The Peachtree Advantage "We offer 10 'flavors' of Peachtree, ranging in cost from $99 to around $13,000," explains Claude. "Peachtree First Accounting, MSRP $99, is suitable for small businesses with basic accounting needs, or someone currently using paper or Excel. Peachtree Pro includes inventory and payroll support and additional reporting tools, and is good if you deal with employees or 1099 contractors. Peachtree Quantum supports up to 40 users, can handle larger transaction volumes and perform faster, and provides additional security." Peachtree offers two products specifically for use by accountants: Peachtree Premium Accountants Edition and Peachtree Quantum Accountants Edition. "The Accountants Editions will allow an accountant to access any other Peachtree product in that same release, so whatever version an accountant's clients are on, the accountant can work with them, look at their data, open and edit, etc.," says Claude. Given the disparity in market share, it's worth asking what in particular Peachtree offers that Intuit doesn't. Differentiators from Intuit products, according to Claude, include security features like peruser audit tracking and lock-down after two years. "We are known for our inventory management solutions," he says. "For customers looking for strong accounting and/or business management, but who also carry heavy inventory, we have a niche for them."

Microsoft Flexibility Not surprisingly, Microsoft has a number of accounting products, including Microsoft Office Accounting Professional and Microsoft Office Accounting Express 2009 (which integrates with Office), plus other small-business through mid-market offerings like the Microsoft Dynamics products. "Some companies are technically small but have more complex processes and need something like this, or other mid-level programs like QuickBooks Enterprise," says O'Bannon. "These offer greater inventory controls, more user capabilities, more pricing structures and geographical support for multiple locations."

Software as a Service Accounting power is now available not only as software you install or websites you browse, but also as SaaS (Software-as-aService) solutions, accessed through your network connection. Business SaaS offerings from NetSuite (, for example, are aimed at businesses rather than accountants, specifically, and include accounting, CRM (Customer Relationship Management), eCommerce, inventory management and ERP. These offerings support a variety of languages and currencies. IntAcct’s [] IntAcct Accountant Edition, a cloudbased accounting system "designed specifically for CPA firms and their small-business clients," includes general ledger, accounts payable and receivable, cash management, financial reporting,

order entry, purchase order, analytics and dashboards. The only financial management solution endorsed by the American Institute of Certified Public Accountants (AICPA), IntAcct Accountant Edition starts at $60 a month.

What’s Best for You? There are "over 4,400 common features found in today’s top accounting software products," says J. Carlton Collins' Evaluating Accounting Software. Collins offers seven steps for basic evaluation of your accounting software options: 1. Print a financial statement to the screen. 2. Customize a data input screen. 3. Enter an inventory item. 4. Process a sales order. 5. Evaluate the account number structure. 6. Drill down and around. 7. Integrate to popular add-on report writers and tools. “If the product passes my initial review, then a more detailed evaluation is warranted. However, if the product fails this test, I usually conclude that the product is not worthy of further consideration,” Collins explains. "Make sure that the product you need meets your business requirements," stresses Wang. "The best ways to tell a good choice is to see what your competitors are using, and see what the resellers for your industry are offering." "In evaluating a set of tools, the cleaner, crisper and more focused your definition of the functions you need, the better solution you'll be able to identify," states Bill Hurley, managing partner in the Downers Grove, Ill. office of national CPA firm Barsema, Tuzik & Hurley, Ltd. "Buy according to that specification, recognizing that you won't get a 100-percent solution." Also look beyond accounting to what else the tools can do for your business, says Scheffki. "Companies are looking to their data and the programs that create and access it to (also) provide CRM, inventory and other functions that really help them run their business. The accounting aspect is essential, but businesses want to do more with their data; they want this system to be business management rather than just accounting." For example, says Scheffki, "Deltek Vision, which is for projectbased consulting organizations like architects and engineers, managing people and resources, doesn’t just do accounting, but also does project management, cost allocation, milestone tracking and other tasks. This is where the real value to the business is." In some cases, specific features will drive the decision. For instance, "If you're doing historical forensic accounting, using QuickBooks allows you to extract all transactions beginning with the first entry," says John Tyler, president of Cambridge, Mass.based Tyler Lynch PC. "You can then export the data to Excel and engage in data-mining techniques. This way you can easily reach back to prior years' details." And when evaluating price, remember that, as with any acquisition, it's not the price but the TCO (Total Cost of Ownership) that matters, as well as the value delivered. A low price can easily be overshadowed by the length of time it takes to install, and the need for expensive support or pricey add-ons. A higher price can quickly pay for itself if it makes tasks go quicker, increases productivity, or gives you access to higher-value features.





Look at our D N A We are KUTCHINS, ROBBINS & DIAMOND, LTD., a growing Schaumburg Illinois full service CPA firm. Come meet with us to hear first-hand about how we are Different, New and Attractive –

We are a 65 person full service CPA firm that would like to discuss purchasing and/or merging with your firm. We have completed 15 such transactions over the past 30 years. Please contact me at to begin building our future together.

our DNA. Different Hands on responsibility / Consistent firm growth / No “killer hours”

New Entrepreneurial spirit / Highly computerized/internet based software (state-of-the-art equipment) / Charitable involvement at both firm and individual levels

A ttractive Friendly work environment with good workspace / Fully stocked kitchen year around / Great benefits and compensation package

Thank you, Earl Holtzman

We have openings in our audit and tax departments for the right professionals with two or more years of experience.

Michael Silver & Company 5750 Old Orchard Road Suite 200 Skokie, IL 60077 847 982-0333

Contact: Al Kutchins, CPA 847-240-1040 x135 VALUATION OF YOUR CLIENT’S BUSINESS OR PRACTICE By: Crandall & Brackett, Ltd. (630) 653.7922 email: Web: Our only service is performed on your behalf in a mutual engagement setting. From basic research to a full valuation, we tailor our services to your needs. We author, teach and participate on policy setting committees and boards within the valuation profession.

SucceSSion Planning For Your accounting Practice! We are consultants not brokers. Realizing full practice value

may depend on knowing the difference. Our experience of 900+ successful closings help you know your options. Valuations, Transaction Assistance, Transition Strategies, Documentation, Consulting, Introductions. FREE REPORT on strategies for your succession plan and additional information available at We also assist in growing through merger/acquisition. confidential. reference. Joel Sinkin or lon goforth: 312.251.1775, e-mail: Ask about our free to the seller program.

ADVERTISER INDEX Visit these websites for more information on the services and products provided by advertisers featured in this issue of INSIGHT.




1st Global Inc.

11 37 13

Accounting Practice Sales AICPA Insurance Trust Alliant Credit Union

7 1

Audimation Services Inc. Bisk Education CPEasy



Garelli Wong


Institute of Management Accountants

17 9 27

Marsh Affinity Group Services National City Professional Advisors Alliance

Robert Half International Sure Payroll Warehouse Direct

Back Cover

Inside Front Cover 19 29




BuY or Sell an accounting or taX Practice ILLINOIS PRACTICES FOR SALE Palatine gross $476K; Southern IL (Serving Jackson & Perry Counties) gross $130K; Springfield Area gross $131K; SW Suburbs of Chicago gross $618K. See listing details, inquire about available opportunities and register for free updates at www.accountingpractice Or call 1-800-397-0249. THINKING OF SELLING YOUR PRACTICE? Accounting Practice Sales is the leading marketer of accounting and tax practices in North America. We have a large pool of buyers, both individuals and firms, looking for practices now. We also have the experience to help you find the right fit for your firm, negotiate the best price and terms and get the deal done. To learn about our riskfree and confidential services, call Trent Holmes with The Holmes Group at 1-800-397-0249 or email trent@accountingpractice


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Licensed CPAs need 120 hours of CPE* by September 30, 2009. *Must include 4 hours of Ethics CPE



Tax Help For Low-Income Families More than 150 Society members contributed over 4,200 hours of tax preparation service at tax preparation sites hosted by the Center for Economic Progress throughout the state. Volunteers prepared income tax returns for low-income individuals and families, giving a helping hand during difficult financial times. A thank you to our many volunteers, including:

Volunteer Consultants at the 2009 Creative Chicago Expo On April 5, 2009, more than 5,000 members of the Chicago creative arts community participated in the 6th Annual Creative Chicago Expo hosted by the Chicago Cultural Center. This was the first year that the Expo included a “consultathon” for artists and arts-based nonprofit organizations, and the Illinois CPA Society was invited to participate. Thank you to our four volunteer consultants—Susan Budak, Toni Diprizio, Cliff Shapiro and Nancy Wallace—who met individually with artists and nonprofit organizations with questions about financial management, taxes, financial reports and accounting standards for nonprofits. Please note: We have done our best to compile the full list of volunteer names. However, if we missed anyone, we deeply regret the omission. For more information about these or other volunteer opportunities, please contact Jill Wiles, community service manager, at 312.993.0407 ext. 277 or 48


Danielle Aeschbacher Monica Aguirre Bruce Aiello Richard Bail Craig Ball Stephanie Bass Kevin Beatty Vanessa Bechtel Mary Berndt Katerina Bolbas Antonino Bondi Jeff Brashares Diego Bullon Jennifer Bunjes Alva Butenaite Gina Chang Veronica Chavez Shelly Christensen Clint Costa Jason Crider Rita Crim Michael Cross Marilynn Crossman Thomas Dammrich Martha Davidson Benjamin Davidson Pedro Diaz de Leon Jerry Dillenburg Kathleen Donahue Donald Duszynski Bill Eaga William Erdmann Shawn Erickson Gregg Ferlin Arcelia Flores Ann Fox Sheila Frisk Mary Geoghegan oseph Gerharz Olga Gesell Jason Gill Margaret Glynn Larry Goldstein Sheila Grabowski Chad Grosam Myrna Guadarrama Catherine Haener Pauline Halgas Kenneth Harris Pam Hays Curtis Helwig

Alan Hemminger John Hodge Andrew Hoffman Russell Holmgren Larsenia Horton Shiann Hotopp Justin Howard Nenif Ibrahim Gerard Inguagiato Hiromi Ishii Donald Jacobsen Faris Jafar Ramdev Jagarlamudi Kimberly James Larry Johnson Anthony Jones Jennifer Wolf Keen Susan Keith Sylvia Kellogg Carol Kelly Gerald Kerns Jerry Kibe John Kintner Drew Kipfer Cynthia E Kirk Brenda Kirkpatrick Nathaniel Klose Tom Kotlarczyk Elizabeth Krah Judith Kranjc Matthew Kroll Robert Kuehnau Gary LaBedz Hoang Lam Jane Liang David Lilek Elda Lopez Marnell Love Phil Lovell Amanda Lowry Winnie Luk Ming Mac Rose Marie Mack Dan Malone Anderson Manuel Ghadir McCauley Rebecca Mesplay Gerlanda Miller Sandra Minard Somya Munjal Robert Murphy

Tiffani Muse Gary Neumayer JoAnne Nudelman John O' Hara Larry Owens Anna Panagos Maria Daisy Paule Jaime Peters Carla Peterson John Petrone Elizabeth Phelps James Plucinsky Constance Pocock Elizabeth Pritchard Lisa Racioppi Roger Randolph Jessica Reed Jeanine Reiss Chris Remitz Roxanne Reyes Susan Riordan Joe Rose Judith Ruhlig Mark Rusiewski Warner Russell Ponni Shanmuganathan Nainar Karen Sider Edward Skoczylas Frank Smoczynski Linda Stawicki George Sterling Randi Stewart Muthuswamy Sunder Marites Sy Brandon Thompson Yi-Shan Tian Annette Tomal Carol Tuck Graziella Umlauf Sean Wallinger Ralph Weiland Theodore Weitzel Emily Wells Leslie Williams Dorthy Willis Ann Withey John Wright Anne Yates Annie Yeh Martin Zeidman

upcoming events making your life easier

September 8, 2009 - Chicago, Illinois Executive Roundtable Series:

The Transformation of Finance from Watchdog to Strategic Business Partner Mike Muldoon - President, Muldoon Consulting, Inc. and Professor, Lake Forest Graduate School of Management September 9, 2009 - Chicago, Illinois

Astute Cash Flow Management: Improving Company Value Marian Powers, PhD - Adjunct Associate Professor, Kellogg School of Management, Northwestern University September 14, 2009 - Northbrook, Illinois September 16, 2009 - Chicago, Illinois September 21, 2009 - Oak Brook, Illinois

BREAKFAST SERIES: All Customers are NOT Created Equal Thomas L. Zeller, PhD, MBA, CPA - Professor of Accountancy and University Scholar in the School of Business Administration at Loyola University Chicago September 25, 2009 - Rosemont, Illinois

Midwest Financial Reporting Symposium October 16, 2009 - Chicago, Illinois

Implementing FIN 48 for Privately-Held Companies Mark A. Sellner, CPA, JD, LLM (taxation) - Graduate Tax Professor in the Master of Business Taxation Degree Program at the University of Minnesotaâ&#x20AC;&#x2122;s Carlson School of Management December 15, 2009 - Chicago, Illinois

Strategic Cost Analysis: Tools for Lowering Your Companyâ&#x20AC;&#x2122;s Costs John W. Hill, PhD, MBA, JD - Arthur M. Werner Chair in Business, Kelley School of Business, Indiana University February 5, 2010 - Chicago, Illinois

Strategic Risk Management: Aligning Strategy and Performance Measures with ERM Mark Frigo, PhD, CPA, CMA - Director, The Center for Strategy, Execution and Valuation, Kellstadt Graduate School of Business, DePaul University

The Center for Corporate Financial Leadership is a service of the

Illinois CPA Society


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INSIGHT Magazine August 2009  

INSIGHT is the award-winning magazine of the Illinois CPA Society. August 2009 issue. INSIGHT Magazine presents global and local issues of p...

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