On Balance Magazine - Nov/Dec 2019

November | December 2019 | Vol. 15 No. 5 A publication of the Wisconsin Institute of CPAs | wicpa.org

In the clearing stands a boxer ... who became a CPA JosĂŠ Saenz | 6

Plus: The cannabis industry | 12 TCJA and exempt organizations | 18 Women impacting communities | 22 Insight-first innovation | 26

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A publication of the Wisconsin Institute of CPAs | wicpa.org

November | December 2019 Vol. 15 No. 5

6 Features

Columns

6 In the clearing stands a boxer When José Saenz, CPA, was 9 years old, his mother enrolled him in boxing lessons so he could learn to defend himself. Nobody could’ve guessed where it would lead.

By Marcia Tillett-Zinzow

26 TECHNOLOGY

The accountant’s guide to insightfirst innovation The rapid advancement of technology can be expensive for small to mid-sized companies without large budgets to handle necessary upgrades and hire more staff.

But there are free and low-cost tools that can help.

By Kirstie Tiernan, CPA

12 Capitalizing on cannabis As the CBD market in Wisconsin surges, its marijuana counterpart is legalized in Illinois. New business opportunities abound — and so do some legal and taxation headaches.

By Clare Fitzgerald 18 How the Tax Cuts and Jobs Act impacts exempt organizations The Tax Cuts and Jobs Act created tax rules that would affect all taxpayers, including organizations that haven’t historically paid large amounts of income taxes.

By Mary Torretta, JD, and Michelle Weber, CPA 22 CPAs’ impactful commitment to our communities Founded in 2015, Impact 100 Greater Milwaukee is an organization of women — including many CPAs — who collectively make a lasting impact on the community.

By Karin M. Gale, CPA

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30 CYBERSECURITY

Tax pros: Follow the IRS’s Security Six Tax professionals and others who handle sensitive information should review their data safeguards and ensure their clients’ data is secure by taking six basic measures.

By the Internal Revenue Service online 34 BUSINESS MANAGEMENT

Successful risk management Risk management is a process with clear steps to help you identify situations that may cause financial loss and take precautionary steps to avoid them.

By Arlene Petersen, CPCU, AU

30 Departments 3 Outlook | chair’s letter 4

In Touch | president & CEO’s message

11 Kudos | members in the news

38 YOUNG PROFESSIONALS

9 attributes of successful corporate CPAs Corporate CPAs play a pivotal role in their companies’ success, helping to drive business forward and contribute to its profitability. This is especially true when the CFO is a CPA.

By Cheryl Mucha, CPA

32 Memorials | departed members

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2019-2020 WICPA OFFICERS/BOARD MEMBERS Chair Neil R. Keller, CPA/ABV, CVA

On Balance is published five times a year by the Wisconsin Institute of Certified Public Accountants (WICPA). Change of address should be sent to: Membership, W233N2080 Ridgeview Pkwy, Suite 201, Waukesha WI 53188; Phone: 262-785-0445 or 800-772-6939; Fax: 262-785-0838; email: jessica@wicpa.org. Statements and opinions expressed are those of the authors and not necessarily those of the WICPA. Publication of an advertisement does not constitute an endorsement of the product or service by On Balance or the WICPA. Articles may be reproduced with permission. © Copyright 2019 On Balance.

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Chair-elect Wendi M. Unger, CPA Past Chair Michael D. Akers, CPA, CBM, CFE, CGMA, CIA, CMA, PhD

INSIDE STAFF

President & CEO Tammy J. Hofstede Design & Layout Brett Stallman Advertising Sue Daniels

Secretary/Treasurer Katherine L. Hauser, CPA, CGMA

Editor Marcia Tillett-Zinzow

Directors Jeff Dewane, CPA, CGMA, CMA, MBA Jon C. Gaines, CPA, CGMA, MBA Patrick G. Hoffert, CPA Daniel Holzhauer, CPA Ruth A. Kallio-Mielke, CPA Wendy A. Peters, CPA Steven A. Pullara, CPA Matthew J. Schaefer, CPA, CGMA Angela C. Thomas, CPA

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AICPA Council Ryan J. Hanson, CPA, CGMA

ATTENTION! THE CURRENT CPD REPORTING PERIOD ENDS DEC. 31, 2019 Reporting Period: Jan. 1, 2018 – Dec. 31, 2019 CPD Requirement: 80 total CPD credits Ethics Requirement: 3 Ethics CPD credits

Visit wicpa.org/CPD for more information about CPD requirements.

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OUTLOOK | CHAIR’S LETTER “Clients and organizations are demanding more from CPAs as it relates to technology.”

Are you ready for the CPA Evolution?

I

t should come as no surprise that the accounting profession has undergone — and continues to experience — substantial change. Technological innovations have changed the types of roles CPAs perform and the types of services we can offer. The AICPA and WICPA are continuously monitoring this situation and its impact on our profession and addressing what we need to do to adapt to these changes.

In response to the significant increase in reliance on technology, the AICPA — in a joint effort with the National Association of State Boards of Accountancy (NASBA) — has started an initiative called “CPA Evolution.” According to the AICPA, the CPA Evolution initiative aims to transform the CPA profession and its licensure model in recognition of the need for new CPA skills and competencies necessitated by continually escalating technological disruption.

The AICPA understands that ongoing advancements in technology are causing the pace of change to accelerate at a high rate. Technology has created new opportunities for CPAs in terms of services performed and how they are delivered.

Clients and organizations are demanding more from CPAs as it relates to technology. From the use of artificial intelligence and data analytics to knowledge of cybersecurity and system and organization controls (SOC) reporting, CPAs are continually asked to evolve and improve their knowledge base. The AICPA believes the profession must embrace these changes to maintain its strength and be prepared to support evolving business needs while continuing to serve the public interest.

The CPA Evolution initiative recommends that the CPA Exam evolve to incorporate the testing of a candidate’s ability to use emerging technologies and audit systems and controls.

Recommendations also include a change in the education requirements to include additional relevant coursework on technology and analytics. The goal is that, with these changes, businesses can be assured their talent needs are being met by staff who are competent not only in accounting but also in technology. The changes to the CPA Exam will affect only new CPA candidates — not current CPAs.

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The AICPA and NASBA sought input throughout the last year, including facilitating discussions at major AICPA and NASBA meetings and conferences and eliciting comments from AICPA members and state CPA societies — including the WICPA. Once they have analyzed the feedback they received, they will start to consider potential licensure models to best meet the needs of the profession both now and into the future.

The WICPA has taken a strong interest in CPA Evolution.

The organization has actively participated in AICPA meetings on CPA Evolution, has provided feedback received from the WICPA board of directors, and will continue to monitor updates from the AICPA as this initiative evolves.

The CPA profession is experiencing continual change, and change can be difficult. But the WICPA will be here to help its members navigate this transformation.

Neil Keller, CPA/ABV, CVA, is partner-in-charge of Tax Services at Sikich LLP, Brookfield, and the 2019-2020 chair of the WICPA board of directors. Contact him at 262-754-9400 or neil.keller@sikich.com.

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IN TOUCH | PRESIDENT & CEO’s MESSAGE “As part of our efforts to promote accounting awareness to high school students, the WICPA Educational Foundation is supporting new initiatives.”

Engaging high schools to fill the accounting pipeline

A

s we know, there is a shortage of students in the CPA pipeline, and we need to reach students much earlier to influence their career decisions.

As part of our efforts to promote accounting awareness to high school students, the WICPA Educational Foundation is supporting new initiatives. This year, the foundation is offering $250 stipends to new attendees at the High School Educator Accounting Symposium and has increased the number of grants to be awarded to high school educators who attend the symposium. Grants of up to $2,500 each are awarded, and we currently have over 80 high school educators (and that number is growing) registered to attend this event. Grant application requirements for the educators include a planned activity that supports accounting as a career (and must include a CPA).

Too often, the educators do not know where to start or whom to contact. To make this as easy as possible for the educators, we would like to provide them with a listing of firms they can select from that have accounting recruitment and informational activities in place (or are willing to develop

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them). The time commitment for the activity can be anywhere from two to four hours, depending on the agenda. Typical attendance is around 25 students, but it can be as many as 50.

A few suggestions for activities include the following: • a presentation of what the organization does • a roundtable discussion with accountants who work with a variety of large and small businesses • young professional staff to talk with the students and answer questions • an accounting-related activity (with all students or students divided into teams) • a discussion of important classes to take in college and the different accounting paths to choose from • a tour of the firm and/or an interesting client’s company • lunch with firm staff • playing a game that helps staff relieve stress • swag items from the organization

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I am asking you to volunteer your organization to be part of this program in order to provide students exposure to the profession and the ability to influence the CPA pipeline for future employment opportunities. This also gives you the opportunity to promote your firm, high school or college internships, or job shadow opportunities. I encourage all areas of the state to participate!

In addition, all high school educators who attend the symposium will be offered complimentary WICPA membership and the opportunity to join the new High School Educator Committee.

This is only one of the many initiatives the WICPA Educational Foundation supports to create accounting awareness through contributions and volunteer time. If your organization would like to participate in providing a planned activity for high school educators’ accounting and business classes, please contact me for more information. Or if you would like to support these (and many other) efforts to influence and create awareness of the accounting profession through a donation, please go to wicpa.org/edfund.

Tammy J. Hofstede is president & CEO of the WICPA. Contact her at 262-785-0445 ext. 4518 or tammy@wicpa.org.

The WICPA Educational Foundation thanks Patrick Modjeski (left) of VantagePointe Financial, winner of this year’s “Inside the Circle” hole contest at the WICPA Golf Outing on Sept. 20, who generously donated his $500 winnings to the WICPA Educational Foundation.

YOU have the opportunity to impact thousands of students and educators in Wisconsin.

Through your contribution to the WICPA Educational Foundation, you can help us reach students and educators in high school and college to create awareness about the accounting profession.

As the end of 2019 draws near and you are thinking about tax planning, consider donating to the WICPA Educational Foundation.

Questions? Contact Tammy J. Hofstede, WICPA President and CEO at tammy@wicpa.org.

To contribute, visit wicpa.org/EF.

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In the clearing stands a boxer ...

Photography by John Sibilski

who became a CPA

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“

By Marcia Tillett-Zinzow

W

hen José Saenz, CPA, was growing up in inner-city Kansas City, Missouri, his idol was famed prizefighter Oscar de la Hoya. And like his hero’s quote here, Saenz’s attitude is that he owes pretty much everything he now has to the sport of boxing. Not many CPAs can say that.

Saenz attended a Catholic grade school from kindergarten through fourth grade. When he transferred to the public school system, his mother was concerned for his safety. So she enrolled him at a boxing gym close to their home — a program within the Whatsoever Community Center — where kids 8 to 18 years of age were taught how to defend themselves.

“I was a small kid, and she didn’t want me to get bullied.

But I ended up enjoying it, and the coach thought I had natural ability,” Saenz said. “So I fought my first fight at age 9.”

He went on to fight 180 bouts in amateur boxing before turning semipro in 2010 and then pro in 2011. And, by the way, part of the time he was building his reputation as a fighter he was also attending classes at Rockhurst University in Kansas City.

Saenz had enrolled at Rockhurst after graduating from high school in 2008. He trained and fought and studied for two years before being recruited by a new league called the World Series of Boxing (WSB). The WSB was organized

“Everything I have in this world, I owe to the sport of boxing, and I won’t ever forget that.”

– Oscar de la Hoya by the AIBA (International Boxing League, or Association Internationale de Boxe Amateur), which is the governing body for Olympic boxing.

“They were taking only the top amateur boxers from around the world and putting them on 12 teams on three continents. There were four teams in North America, four in Europe and four in Asia. So I was drafted to one of the American teams: the L.A. Matadors,” Saenz said.

Finishing #1 in this league would give a boxer an automatic berth to the 2012 Olympics. Putting his college career on hold, he set out for the bright lights and foggy mornings of Los Angeles.

Life in La La Land “They were basically bringing a bunch of young guys to train and fight in L.A., all expenses paid,” said Saenz.

Saenz works out in the gym at Marquette University, where he serves as director of Advanced Gift Services.

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The guys lived in furnished condos, had a driver to take them everywhere and a chef who fixed them lunch at the gym each day and meals to take home for dinner that night and breakfast the next day.

“It was a nice setup,” he smiled.

The young fighters trained for four to five hours each day and then had the rest of the day off. In their free time, they played video games, shopped and “just hung out.” They also enjoyed seeing their faces come up, larger than life, on the electronic billboards outside the Staples Center, where the L.A. Lakers and Clippers play.

When the league first started, the team was fighting at the Nokia Center, which is right across the street from the Staples Center. When it became too expensive, the league moved them to the Avalon Theater in Hollywood — where celebrities like Jenny McCarthy, Julie Benz and Romany Malco came to watch them fight.

“We would hang out with them and spend time with them, and they would ask us for photos.

It was pretty neat,” said Saenz.

One of his first official bouts for the WSB was held in Mexico City — and that was the fight that made him think hard about the future.

Returning to the Midwest When that first season was over, Saenz went home to Kansas City, took some classes at Rockhurst and planned to go back to L.A. after the summer semester.

“I was going to try to transfer to a school in L.A., but I decided to stay. After coming off the injury, I wanted to finish my degree and focus on the future,” Saenz said. “Boxing can end at any time. I wanted something a little more guaranteed, and accounting seemed like a good choice.”

Apparently staying in K.C. was a providential decision: The first year back at Rockhurst, he met his future wife, Gabriella, in a Latin American Film Study class. He might not have met her had he not taken that year off to box for the Matadors in L.A. He would’ve taken that class the year before, and they wouldn’t have found they had the mutual interest that brought them together.

Saenz earned dual bachelor’s degrees in accounting and Spanish at Rockhurst and found work in 2014 as a grant accounting assistant in Advancement Gift Services at Marquette University, where Gabriella — by then his fiancé — was attending law school. He was still fighting one or two bouts a year as a pro at that time, but he decided to hang up the gloves shortly after moving here.

“Life was getting serious, and I wanted to be sure I would be around for my family,” he said. “It’s not a safe sport. Gabriella would say, ‘I want you to be there when we’re 50; I don’t want you to not remember who I am.’”

“Anywhere outside the U.S., there were different rules on Saenz started boxing at the age of 9. He was drafted how to wrap your hands,” Saenz by the World Series of Boxing in 2010 and turned explained. “In the U.S., you could pro in 2011. use gauze and tape; whereas in the rest of the world you had to Since moving here in 2014, Saenz has moved up rapidly use these hand-wraps that were only 180 cm long. That is very within the Marquette ranks. He was promoted to accountant short for a wrap, and it doesn’t provide a lot of protection. in 2016 and then to financial accountant in 2018 — the same “In the first or second round, I landed a punch; it landed kind of funny, and I fractured my hand,” he said.

The injury didn’t end his career, but it forced him to retire temporarily. Doctors’ orders were to rest the hand for six months, but that didn’t last long. It was 2011 — the 2012 Olympic qualifying year — and Saenz was bent on training to compete.

But with his hand in less than perfect fighting condition, he didn’t make it. After that, in late 2011, he turned pro.

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year he became a CPA. In July, he was promoted to director of Advancement Gift Services. He attributes much of his success to the supervisors who mentored him.

“They saw that I wanted to keep advancing, that I wanted to improve things and that I wanted to take on more. So they would expose me to other areas of the university, different areas of finance and things like that. Eventually people saw me, and I just kept rising,” he said.

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Saenz meets with his Advancement Gift Services team at Marquette.

Still nurturing the dream Saenz fought his last bout before he and Gabriella married in 2015. His retirement, however, doesn’t mean he’s forgotten about the sport that brought him to where he is today. He says his training as a boxer taught him hard work, dedication, discipline and focus: all characteristics a CPA needs to be successful. And that’s not all.

“Boxing has treated me well,” he said. “It’s given me the opportunity to travel; it helped fund my education. In college, student debt is a big thing, but thanks to boxing I managed to get away with very little debt. I received a lot of boxing scholarships through nonprofit organizations, and then with competing and fighting I was able to pay for a lot of my education.”

Saenz also credits his early start in the sport — and the life lessons it taught him — for keeping him on the straight and narrow. Many of his high school classmates are now either dead or in jail, he said.

Does he miss it? Yes, he does. And he has a dream about what he’d like to do to keep boxing in his life. It’s a dream he’s had since he was in Kansas City, and one he hopes will come true here in the future. He wants to someday open a not-for-profit boxing gym on the north side of Milwaukee to give inner-city kids a different outlet, to help them get off the streets and have something to do after school, and to teach them about building character.

“Boxing is a unique sport. It’s not like football, basketball or baseball, where you can have a substitute or have the rest

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Saenz finished up his 150 credit hours at Marquette and earned his CPA certification in 2018.

of the team pick you up if you’re having an off game. It’s up to you. You have to put in the work outside the ring, and once you step into the ring, it’ll show whether you’re prepared or not. And that’s life. You can’t depend on other people to motivate you; you can’t depend on having things given to you.

You have to work for what you want in order to be successful.”

Just like this inner-city kid — who became a boxer — and then a CPA. Marcia Tillett-Zinzow is a Wisconsin freelance writer and editor.

Contact her at mtzinzow@icloud.com.

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2019 WICPA Past Chairs Dinner Past chairs of the WICPA Board of Directors and the past presidents of the WICPA Educational Foundation Board gathered at the WICPA Past Chairs Dinner on Sept. 26 at Lake Lawn Resort in Delavan.

WICPA Board of Directors past chairs Front row L-R: Danica E. Olson (’12-’13), Michael A. Akers (’18-’19), Dennis F. Tomorsky (retired president & CEO), LeRoy R. Schmidt (retired executive director), Karin M. Gale (‘03’-’04), Douglas W. Haag (’00-’01) Back row L-R: David A. Benner (’83-’84), David O. Christianson (’05-’06), Linda S. Dicks (’06-’07), Nicholas S. Lascari (’11-’12), Daniel J. Heerey (’07-’08), William D. Goodman (’99-’00), William G. Heinrich (’10-’11), Eugene J. Miller (’90-’91)

WICPA Educational Foundation Board of Directors past presidents L-R: James P. Miller (’08-’10), Michael E. Friedman (’17-’19)

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kudos Ryan Brummund, CPA, has been hired as a cost accountant for BTD Manufacturing in Lakeville, Minnesota. He previously worked for 16 years at Standard Process, Palmyra, as a staff accountant and then a cost analyst.

Vicki Buening, CPA, CVA, MST

Vicki Buening, CPA, CVA, MST, partner at Reilly, Penner & Benton LLP, presented a workshop on tax planning strategies at Stoughton Hospital in October.

Nicholas Curran, CPA, founder and CEO of Numbers 4 Nonprofits, Madison, spoke about financial basics for nonprofit organizations at the fall program of the Network for Charitable Giving in Prairie du Sac. Jeff Docalavich, CPA, has been named chief financial officer for Goodwill Industries of Southeastern Wisconsin and Metropolitan Chicago. The agency is the largest Goodwill organization in North America.

Ludvika K. Gryskiewicz, a student member of the WICPA, has been hired by Wipfli as an intern. In April, she was the recipient of the $2,500 Elizabeth Peters Memorial Scholarship administered by the WICPA Educational Foundation Inc. Kirk Hackbarth, CPA, CPA/PFS, MS, has joined Strategic Wealth Partners, an independent wealth management firm with offices in Milwaukee, Chicago and Deerfield, Illinois, as a wealth advisor.

Jessie Mac Naughton, CPA

Jessie Mac Naughton, CPA, partner at Wipfli LLP, was promoted to geographic leader for the Madison area. In her new role, she is responsible for the overall financial results of the region, new client development, client retention, partner and associate development, and community engagement.

Want your

Mark Mirsberger, CPA, CEO of Dana Investment Advisors, Waukesha, was included in a CNBC feature story, “What inspired these top advisors to help others manage money.” Dana Investment Advisors made the 2019 Financial Advisor 100 list of top-rated firms in the U.S. Kyle Overby, CPA, owner of Overby Financial Services, Clear Lake, co-presented a wealth management and estate planning seminar for the Amery Hospital & Clinic Foundation, Amery, in September.

Gina Skibo, CPA

Gina Skibo, CPA, partner at Wipfli LLP, was promoted to geographic leader for the Milwaukee market.

In this role, she will be responsible for the overall financial results of the region, Wipfli’s recognition and value proposition in the marketplace, and community engagement.

FIRM NEWS Sikich has acquired the Brookfield-based CPA firm of Freyberg, Hinkle, Ashland, Powers & Stowell, effective Nov. 1, expanding its presence in the Milwaukee area and broadening services across the firm. The Freyberg, Hinkle, Ashland, Powers & Stowell team will join Sikich’s Brookfield office.

Wipfli has announced that the partners and associates of Atlanta-based Porter Keadle Moore (PKM) have joined the firm, effective Oct. 1. PKM had provided accounting and advisory services in Atlanta since 1977. The merger boosts Wipfli’s staff to 2,400 associates in 49 offices.

new job, promotion or award mentioned in Kudos?

H Email your announcement and photo in JPG format to mtzinzow@icloud.com. H

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SPECIAL FEATURE

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CPAs willing to wade through the weeds of evolving regulations and risk can find growing opportunities in the medicinal and recreational marijuana markets.

By Clare Fitzgerald

Cannabis-800 Mom-and-pop shops aren’t driving the U.S. cannabis market anymore. Big domestic and international players have rolled those businesses into their own as the cannabis industry has rapidly grown and evolved over the past few years. Today’s market leaders are large, complex, capital hungry, high-revenue-generating entities, and according to CPAs working in the field, they’re in desperate need of high-quality accounting and finance expertise and guidance.

For now, cannabis is still classified as a Schedule 1 drug at the federal level. It’s equated with heroin and is considered to have no medical value despite studies suggesting otherwise. But even with the stigma that classification carries, cannabis is growing into a massive market domestically and internationally, and the rush is on to grow with it.

A maturing market

Professional service providers ranging from plumbers to soil experts and lawyers to real estate agents have jumped to meet the needs of emerging cannabis growers, sellers and distributors, but the accounting and finance industry has been much slower to engage.

According to Illinois CPA Society member Taylor Schuck, cannabis industry specialist and accounting services supervisor at Mueller CPA in Elgin, Illinois, the cannabis industry has moved well beyond its infancy stages. It’s evolving, maturing and driving global economic growth and development.

That’s starting to change, according to Andrew Hunzicker, CPA, co-founder and owner of DOPE CFO, a Bend, Oregon,-based provider of education and tools designed to help accounting and finance professionals enter the cannabis industry. As more states legalize both medicinal and recreational cannabis production, sales and use, and acceptance of cannabis as a legitimate business industry grows, small accounting firms are planting their seeds, and many mid-market firms are growing full-fledged specialized cannabis divisions. Hunzicker also predicts the Big Four will enter the sector if cannabis is ever legalized at the federal level.

On the national level, the U.S. House of Representatives this summer held its first hearing on whether to end

Here in the U.S., cannabis is gaining mainstream momentum. So far in 2019, 27 state legislatures have considered bills to legalize cannabis for adults,* according to the Marijuana Policy Project, a cannabis policy reform group. Illinois — where legal recreational cannabis sales are expected to start Jan. 1, 2020 — is one of 10 states that have legalized both medicinal and recreational cannabis use. Medicinal cannabis is legal in some form in 33 states, and possession of small amounts of cannabis has been decriminalized in 26 states.*

* At time of writing.

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or reform federal marijuana prohibition. The U.S. Senate Committee on Banking, Housing, and Urban Affairs also held a hearing to discuss financial challenges facing the cannabis industry and considered legislation that would prevent federal financial regulators from punishing financial institutions that provide services to state-legal cannabis businesses. The Farm Bill that President Donald Trump signed into law last December legalized hemp — a strain of cannabis grown specifically for industrial uses of its derived products.

As policy and legislative discussions continue in the political arena, public support for cannabis is growing. In a recent Marist College poll conducted for NPR and PBS NewsHour, 62 percent of registered voters said legalizing recreational cannabis is a good idea. In a 2010 Gallup poll, only 46 percent of Americans supported legalization.

More states are moving to legalize recreational cannabis via ballot instead of referendum, which could increase momentum for national legalization in the coming years, according to the 2019 Cannabis Market Report from Brightfield Group, a predictive analytics and market research firm for the cannabis and CBD industries. As more markets open, the industry’s value is expected to explode. The total U.S. cannabis market is predicted to reach $22.7 billion in 2023, according to the report, and the majority of that is expected to be driven by recreational sales, particularly from newly opened, fast-growing Midwest and East Coast markets.

The Brightfield Group also reports that the hemp-driven CBD market (think edibles and other infused products) is growing even faster than cannabis in the U.S. and will soon be a $22 billion industry. Cannabis companies are increasingly pushing into the CBD space through mergers and acquisitions as a precursor to THC legalization — THC, or tetrahydrocannabinol, is the chemical responsible for most of marijuana’s psychological effects.

The cannabis and CBD industries also are driving job growth. According to cannabis information hub Leafly’s 2019 Cannabis Jobs Count, the cannabis industry added more than 64,000 jobs in 2018, and it now directly employs more than 211,000 full-time workers in the U.S.

Weighing cannabis’ complexities Producers, sellers, and distributors operating in the rapidly evolving cannabis marketplace face complex challenges — and they need solid expertise to help guide them. Many cannabis businesses have operations in several states, and the legal and regulatory environment is changing quickly in each.

According to Schuck, that complexity offers plenty of opportunities for CPAs to provide a variety of accounting, tax and consulting services.

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The hemp-driven cannabidiol (CBD) market, which is rapidly growing in Wisconsin, will soon be a $22 billion industry nationwide.

“

Cannabis companies have been massively underserved by the mainstream accounting industry.

— Andrew Hunzicker, CPA However, anyone interested in serving the cannabis industry has to be well versed in relevant court cases, committed to staying on top of legislative changes, and highly knowledgeable on Section 280E of the Internal Revenue Code, which forbids businesses from deducting otherwise ordinary business expenses from gross income associated with the “trafficking” of Schedule I or II substances as defined by the Controlled Substances Act. Helping cannabis businesses evaluate what is deductible and what isn’t under Section 280E is one of the main areas where CPAs can guide cannabis clients.

“Cannabis businesses need qualified accountants who know how to do 280E right,” Hunzicker says, adding that experienced CPAs shouldn’t try to take an overly aggressive approach to interpreting the code.

In addition to providing 280E-compliant tax returns, CPAs also are being called on to develop tax strategies, provide M&A and due diligence services and advise cannabis clients on entity choice and how to structure their businesses. Valuation is another challenging area. “Cannabis businesses need to be well capitalized because they have high operating costs and high volatility in revenues related to commodity price swings,”

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from federally illegal enterprises because of potential moneylaundering or aiding-and-abetting charges,” he explains. “As a result, cannabis clients deal primarily in cash, increasing the risk of both unreported revenue and defalcation, which increases a CPA’s professional liability risk.”

Cash transportation also is an issue, according to Schuck, but he expects some of the industry’s banking woes to be eased by new regulations. And although it can still be difficult to find a bank in some states, Schuck says many financial institutions are confidently banking cannabis clients without any federal enforcement.

National legalization of cannabis may gain momentum in years to come as more states move to legalize marijuana at the ballot box.

Hunzicker says, citing high start-up costs, rents, payroll expenses and complex tax burdens as other pressing expenses.

Even businesses that have their own accounting departments still need help. “These companies have been in need of quality accounting services for years,” Schuck says.

“Cannabis companies have been massively underserved by the mainstream accounting industry,” Hunzicker exclaims.

“Cannabis companies have a lot of compliance needs. States are coming up with their own sets of rules — and then changing them. Keeping on top of those very detailed and complex rules requires someone who is very heavily compliance oriented.

Cannabis CEOs are too busy running their businesses to do it.”

Unique market, unique risks Although cannabis is a large and somewhat untapped market offering a variety of service opportunities, CPAs and their firms also need to be aware of the unique professional risks the industry presents. Legal, regulatory, ethical, reputational and practice management considerations all arise if you’re providing services to businesses that produce, sell or distribute a substance that is still illegal under federal law.

Cash management is one issue, according to attorney Stan Sterna, vice president and accountants’ professional liability risk consultant for Chicago-based insurance broker, Aon, the national administrator of the AICPA Member Insurance Program. “Federally insured banks may not accept deposits

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Sterna encourages CPAs to be aware of other risks. He explains that many cannabis businesses struggle financially or fail, and their ability to discharge or restructure debt is limited because they have limited access to the U.S. judicial system, including the bankruptcy process. Also, the Section 7525 tax preparer-client privilege may not apply to cannabis clients. “If the client is under investigation, the CPA may be placed in the awkward position of being required to testify against that client,” he says.

The complexity of the business also can create the potential for CPAs to make mistakes. “Multiple taxing authorities may impose taxes or fees on the product. With so many returns to prepare, the likelihood that a return could be audited or that the CPA could make an error or omission increases,” Sterna cautions.

But as Schuck sees it, the big risks, such as a client breaking the law or taking an unreasonable tax position, could happen with any client in any industry, and the risks can be mitigated through proper onboarding and due diligence procedures. And as for the federal versus state law gap, Schuck says CPAs are licensed by the states, and they have a right and responsibility to provide services for cannabis businesses operating legally in them. “CPAs are actually helping cannabis companies comply with state laws and statutes,” he says, which is why he doesn’t give much weight to the idea that a firm’s reputation would suffer or a firm would lose clients simply because it provides services to the cannabis industry.

At this point, Schuck says many small practitioners are quietly serving the cannabis market and continuing to move forward confidently. “Those firms are signing tax returns without facing any repercussions. If you take proper steps, exercise normal due diligence and have strong client acceptance procedures, you don’t have anything to worry about,” he says.

Hunzicker advises CPAs to treat cannabis businesses as they would any other client. “If you apply the same risk management standards, you’re highly unlikely to encounter trouble,” he says.

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Connecting with cannabis For those willing to take on the risk, there’s a high potential for reward. According to Hunzicker, with average dispensaries hitting $1 million in sales per year, and many in the $4 million to $5 million range, accounting and bookkeeping needs alone can reach several thousand dollars per month in billing for CPAs. Providing other CFO, HR, payroll and consulting services can create additional billing opportunities. “Cannabis companies have intense, complex needs, and they understand that they need our services,” he says.

The clients certainly aren’t hiding, either. With all the media attention surrounding the industry, Hunzicker says cannabis CEOs and investors are easier to find than clients in other industries. Schuck agrees that meeting people and getting involved in the industry is relatively easy. He suggests attending municipal meetings where local governments are considering the entry of cannabis businesses, finding educational resources and training programs, and staying current on industry changes

by joining industry groups (like the Illinois CPA Society’s Cannabis Industry Member Forum) and subscribing to email distribution lists.

For CPA firms serious about developing cannabis as a specialty area, Hunzicker also recommends jumping in and participating in the marijuana movement. He notes that many industry groups are welcoming and communicate daily about constantly changing issues and regulations. “Cannabis is an exciting industry and offers an amazing opportunity to grow your success by building a niche,” he says. “It’s also a fun time to get involved. You will meet interesting people and find very appreciative CEOs.”

Clare Fitzgerald is an Illinois freelance writer and regular contributor to Insight, the member magazine published by the Illinois CPA Society (ICPAS). The article is used with ICPAS’ permission.

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Questions? Contact jessica@wicpa.org.

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How the Tax Cuts and Jobs Act impacts exempt organizations

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By Mary Torretta, JD and

t would have been interesting to be a fly on the wall as Congress labored through drafting and revising the Tax Cuts and Jobs Act (TCJA) in fall 2017. Not only was Congress concerned with figuring out a way to present a balanced piece of tax legislation, but they were also drafting tax rules that would affect all taxpayers, including organizations that do not historically pay large amounts of income taxes: the exempt sector.

Exempt organizations were braced for the worst after the potential changes to the law in the Tax Reform Act of 2014, proposed by Rep. David Camp Michelle Weber, (R-MI4, 1993-2014), then chair CPA of the House Ways and Means Committee. Organizations were threatened with the possible repeal of the Johnson Amendment, which would have allowed religious organizations to get involved in politics. Fortunately, the amendment was not repealed in the TCJA. Exempt organizations had also braced for the elimination of tax-exempt bonds — but Congress eliminated only private activity bonds. In addition, there was a potential threat to further restrict donor-advised funds and private operating foundations (primarily museums, which are private foundations and not public charities). Congress did not make those changes either.

Well, what did Congress do? They surprised us! Let’s look at the changes to the income and excise tax rules that affect tax-exempt organizations for years 2018 and beyond.

Income taxes One of the changes that affected nearly every exempt organization was the enactment of Internal Revenue Code (IRC) 512(a)(7). This new section makes an amount equal to the cost of tax-exempt employers providing parking and transportation fringe benefits to their own employees subject to unrelated business income taxation. That’s right — an expense on the books is now subject to income taxation in a way typically reserved only for revenue streams. There is a notable exception for public use of parking lots by the public and by nonemployees, but now every organization must consider this section, regardless of whether they have had unrelated business taxable income in the past.

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Internal Revenue Code (IRC) 512(a) (7) makes an amount equal to the cost of tax-exempt employers providing parking and transportation fringe benefits to their own employees subject to unrelated business income taxation.

The point of this was parity with the for-profit sector, which saw elimination of the deduction for providing transportation fringe benefits to employees. While one can understand the logic of the parity argument, many in the exempt sector believe there is a big difference between eliminating a tax deduction and creating a new tax liability from an expense. The IRS later gave us working guidance in IRS Notice 2018-99 related to the taxability of transportation fringe benefits. The analysis in determining to what extent the employee transportation benefits impact an organization and quantifying the tax liability is quite onerous, resulting in additional tax compliance costs and tax levies on exempt organizations.

Exempt organizations that are corporations are subject to the flat rate of 21% instead of the prior graduated rates on unrelated business taxable income. However, a new code

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an officer or employee more than $1 million in a year, the organization may be liable for this excise tax. In addition, even if compensation is not above the $1 million threshold, an exempt organization may be liable for the excise tax if it pays an officer or employee an excess parachute payment.

This excess payment is broadly defined as a payout of more than three times the base amount (a five-year average of compensation) in any given year. There are limits as to what constitutes covered employees, but now organizations need to start keeping lists of such employees. The IRS has issued interim guidance under Section 4960 in IRS Notice 2019-09.

section further modifies the net tax an exempt organization may owe. In the TCJA, Congress also enacted IRC 512(a) (6), referred to now as a “siloing” provision. This new section requires exempt organizations to calculate the tax effect of each taxable revenue stream (and the correlating expenses) separately, disallowing losses from one revenue stream to offset gains earned by another taxable revenue stream.

This requirement to “silo” is likely to cause tax-exempt organizations to be in a worse net tax situation than forprofit taxpayers, who are still able to net revenue streams when calculating resultant tax liability.

With the elimination of the corporate alternative minimum tax, Congress limited the ways corporations can apply net operating loss (NOL) deductions. Now, you can carry forward those losses indefinitely, but you can apply NOLs up to 80% of taxable income. Also, in conjunction with IRC 512(a)(6), organizations may only apply post-2017 NOLs against the revenue stream that generated the activity.

Old NOLs are grandfathered and can be applied against all silos. The IRS issued guidance in Notice 2018-67 with regard to the siloing and suggested approaches to implementing the rules of this new code section.

Excise taxes In addition to income taxes, Congress also enacted some new excise taxes via the TCJA. Codified in IRC 4960, Congress now imposes an excise tax on “excess” employee compensation paid by an applicable tax-exempt organization. Now, if an exempt organization compensates

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The TCJA also imposed an excise tax on the investment income of some private institutions of higher learning in IRC 4968. If an institution has an endowment worth at least $500,000 per student and has at least 500 tuition-paying students, the college or university is subject to an excise tax equal to 1.4% of the investment income. Although relatively few organizations were affected, it put organizations with significant endowments on notice that Congress considers these endowments as money meant to be spent on students, not to serve only as a continual passive revenue stream.

Again, the IRS issued guidance via Notice 2018-55 regarding the Section 4968 excise tax.

Far-reaching effects Certain exempt organizations are also seeing the impact of the TCJA in ways that were not directly intended to impact them. Changes to the ways in which international income is subject to tax — and additional reporting related to those activities — is having an impact on organizations with direct and indirect foreign alternative investments. Similarly, some exempt organizations are also navigating the recent changes to the rules related to Section 163(j), which relates to the ability to deduct business interest expense. Lastly, it’s important to recognize that the federal tax law changes discussed above have ripple-effect impact on the tax position and reporting by the state jurisdictions.

Conclusion During this time of drastic tax change, it is very important for tax specialists and organizations to stay close and up to date on the continuing developments, specifically the stream of technical guidance the IRS is pushing out to the industry as they help us interpret Congress’s actions.

Mary Torretta, JD, is a principal in the national not-for-profit tax practice of Grant Thornton LLP, Washington, D.C. Contact her at mary.torretta@us.gt.com.

Michelle Weber, CPA, is a partner in the national not-for-profit tax practice of Grant Thornton LLP, Milwaukee, and sits on the WICPA Not-for-Profit Accounting Conference Planning Committee.

Contact her at 414-277-1536 or michelle.weber@us.gt.com.

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Terri S. Boxer, J.D.

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Jeffrey L. Hesson, J.D., CPA

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I

By Karin M. Gale, CPA

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mpact 100 Greater Milwaukee, founded in 2015, is an organization of women who collectively award transformative grants that make a lasting impact on the community.

Membership consists of women who donate $1,100 a year. Of that amount, $1,000 goes to support a nonprofit organization and $100 helps support the group’s back-office operations.

The goal of Impact 100 Greater Milwaukee is to pool the $1,000 contributions and provide deserving organizations with $100,000 grants, leading to long-term transformation for the organizations and our communities. Each member receives one vote, which allows them to rank each of the five finalist organizations.

Each year, approximately 80 not-for-profit organizations complete a grant request. Our members break into five groups to evaluate these initial requests, looking for those they would like to learn more about. Over the years, 25-30 organizations per year have been invited to provide additional information. Once they have complied, each of the five groups selects two or three of these organizations and requests a site visit from each organization.

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How it started The five founding members — which included Mary Therese Breger, Cynthia Harris, Jamy Malatesta, Sue Connor and Anne Trunzo — formed an Executive Committee and invested a year exploring best practices of other Impact 100s throughout the United States to ensure Impact 100 Greater Milwaukee would be successful in its inaugural year.

Many Wisconsin women CPAs generously give $1,100 per year to help transform nonprofit organizations and the communities they serve.

The Executive Committee accomplished a lot in its exploratory year, including establishing the organization as a 501(c)(3), selecting grant and member platforms, establishing a web presence and expanding the board from the Founding Five to 15, with a leadership group of close to 30 — and CPAs representing nearly one-third of that group. In addition, while we hoped to grow the membership to 100 in our inaugural year, we ended up with 218 generous women.

Talented CPAs who joined the group include myself, Karen Bleach, Robin Martin, Amy Hruby, Debra Kessler, Meg Boyle, Pat Locante, Christina Berger, Jill Boyle, Joy Hertlein, Kate Hauser, Barb Maloney, Julie Beres and Stacy Scheffer. These CPAs have served in various leadership roles over the past four years. They have shared their talents, treasures and connections with other individuals, enabling the membership to grow to 367 for Impact 100 Greater Milwaukee’s 2019 grant cycle.

What does a membership of 367 mean to our communities? It means we had $367,000 to award deserving nonprofit organizations whose transformations will be felt by the communities they serve.

Celebrating deserving organizations This year’s Annual Awards & Celebration event was held in early June. All 367 members plus guests and representatives

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Impact 100 Greater Milwaukee, founded in 2015, is an organization of women who collectively award transformative grants that make a lasting impact on the community. from five finalist not-for-profit organizations came together to hear each applicant’s impactful request. Afterward, the membership voted for the organizations they felt were most deserving, and a team of volunteers tabulated the votes while the attendees enjoyed a relaxing dinner. Then came the exciting announcement of three $100,000 grant recipients ( Just One More, Pathfinders and Summit Educational Association) and two merit grant recipients who split the remaining $67,000 equally.

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Since its founding in 2015, Impact 100 Greater Milwaukee has invested over $1,227,000 in 20 organizations, including the following $100,000 grant recipients: ACTS Housing Benedict Center Down Syndrome Association of Wisconsin GPS Education Partners Impact Inc. Just One More Ministry Inc. Literacy Services Neu-Life Community Development Pathfinders Running Rebels Summit Educational Association

Many CPAs (as well as spouses of CPAs) have opened their hearts and shared their talents and treasures to make a difference in the Greater Milwaukee communities. In addition to our engaged CPAs, many non-CPAs have joined and chosen to give.

If you are interested in learning more about Impact 100 Greater Milwaukee, either concerning membership or how a not-for-profit can apply for a grant, please visit www.impact100mke.org. You can also ask one of the talented and giving CPAs noted in this article.

As we have seen, CPAs can make an impact!

In addition, nine other not-for-profit organizations received merit grants ranging from $4,000 to $37,500, depending on our membership total for that particular year.

Every year, Impact 100 Greater Milwaukee gives away all of its members’ $1,000 contributions.

TAX FOCUSED.

Karin M. Gale, CPA, is a principal at CliftonLarsonAllen (CLA), Milwaukee, and a past chair of the WICPA board of directors. Contact her at karin.gale@claconnect.com or 414-465-5533.

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{ Technology | Innovation }

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n today’s fast-paced digital economy, data is the DNA of an organization as well as its most valuable currency.

Like the sequencing of human genomes, this digital footprint tells the story of an organization’s past, present and future, pointing the way to untapped potential and

By Kirstie Tiernan, hidden value — that is, if you know CFE, OCA how to decode it. It isn’t data that is valuable; it’s the insights that can be mined from data that are valuable.

According to research from Forrester Research Inc., “insight-driven” organizations are sustaining an average of more than 30% growth annually, eight times faster than global GDP. These insight-driven organizations integrate data into their everyday decision-making. These are the companies that will adapt to disruption and survive their less-nimble competitors. They are faster, smarter and more resilient to change. Data is more accessible. Process optimization is a relentless quest. Experimentation is constant.

The reality is that, in the era of smartphones and the Internet of Things, where data is proliferating at exponential rates, manual methods of financial data management can’t keep up. If that sounds like a challenge for the IT department to solve for you, think again. Eventually, every business process, from core operational processes to budgeting and risk management to tax and accounting, should be data driven. The people behind those processes must step into the director’s chair to ensure that investments in technology solve real business problems and unmet needs. Accountants are no exception.

The road to becoming insight driven starts with insightfirst innovation. Insight-first innovation fuels a culture of continuous learning and improvement, one in which data not only augments human decision-making but also enables organizations to interact with data in entirely new ways. The concept is based on the premise that today’s innovations should pave the way for tomorrow’s, portending a future where business intelligence guides corporate strategy, an essential determinant of risk versus return.

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Eventually, every business process, from core operational processes to budgeting and risk management to tax and accounting, should be data driven.

Most innovation is spurred by the need to provide a specific solution to an immediate, shorter-term need — whether we’re talking about automating a repetitive task to maximize operational efficiencies or migrating applications to the cloud to enable remote access. But that’s a limited view of innovation potential. “Insight-first” innovation focuses not only on solving for the immediate need but also on maximizing the long-term potential of organizational data. By intentionally building in data capture, every digital initiative presents an opportunity to improve and democratize business intelligence across the enterprise. Basic automation and analytics are just the beginning of this journey; insight-

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{ Technology | Innovation }

first innovation lays the necessary foundation for the cognitive technologies that will enable autonomous decision-making and self-optimization, ushering in the next wave of efficiency and uncovering new value.

Each innovation project, large or small, should drive incremental improvements in your organization’s ability to access, aggregate, analyze and ultimately monetize your data.

This does not, and should not, undermine a project’s primary goal, but should ensure the intentional integration of new data sources and embedded analytics — addressing the primary need while also building in the capability upfront to capture, analyze and leverage that data to gather valuable insights and enable more informed, data-driven, strategic business decisions down the road.

What does insight-first innovation look like in action?

Picture this: The finance department of a Wisconsin-based manufacturer is drowning in work—and underperforming as a result. To free up time and resources, the company focuses on eliminating excessive manual work, starting with a simple, low-cost solution: automating slide creation for the monthly CFO update. They plan to deploy a script-driven “bot” to automatically extract and populate the information for the presentation slides, including all the formatting changes and updates to the captions in the notes. Once the data is consolidated into a unified database, the manufacturer will also be able to add value by analyzing trends over time.

The current approach involves pulling data from multiple Excel files followed by manual data entry and manipulation.

To automate presentation development, the manufacturer needs to first aggregate the information needed for the monthly update into a single database. How much work is required to combine these disparate data sets is dependent on the heterogeneity and quality of data input and the approach to data integration the company takes. A one-time data migration, for example, in which data is simply moved from one location to another, offers a quick fix. Longer-term, however, the finance department will save more time through automated data synchronization.

And in considering different methods of data synchronization, the company will ideally give thought not only to future-use cases for this information, but to their future needs for automation and data capture across the enterprise. A standalone robotic process automation project is relatively easy, but the company wants to eventually eliminate

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Insight-driven organizations are made, not born. The power of data cannot be harnessed without strategic intent and foresight. all repetitive manual activities. This bot is the first of many — so can processes be configured in such a way that they enable incremental automation? Can the bot feed into a visual dashboard that continuously tracks these financial reporting KPIs, drills down into the underlying metrics and displays them in an easy-to-read format? Should that dashboard be cloud-based to give anywhere access to other key business stakeholders? With an insight-first mindset, this simple project can trigger the transformation of financial reporting from once a month to real time and can enable deeper business insights with wider accessibility.

Any digital initiative must take into consideration not only the way you use information now but the way you want to use information in the future. Many organizations are still in the process of digitizing analog information and processes, with a focus on the automation of routine business processes.

That does not mean, however, that insight-first innovation is premature. With proper planning at the outset, every digital initiative is an opportunity to drive incremental improvement in data management and provisioning, integrate multiple sources of data and harness new insight and value.

Insight-driven organizations are made, not born. The power of data cannot be harnessed without strategic intent and foresight. Data is fuel, but insights are the engine. And even insight is only as useful as it is actionable. The journey toward becoming insight driven starts with insight-first innovation focused on improving insight collection and capabilities at every opportunity.

Kirstie Tiernan is a partner in BDO’s Technology & Business Transformation Services practice, leading data analytics and automation for the firm. Contact Kirstie at ktiernan@bdo.com.

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Le t’s make . n io t c e n n o c e h t INTRODUCING A NEW WAY FOR WICPA MEMBERS TO COLLABORATE WICPA Connect is your new and exclusive members-only networking and knowledge base designed to connect you with WICPA members and resources.

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Network with peers and grow your contact list using the member directory of more than 7,000 members.

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Contribute and download resources such as documents, whitepapers, articles, reports, guides and more.

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Post questions to find out from fellow members who have the expertise or may have been in the same situation.

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Share your knowledge and expertise by answering questions and offering your insights and ideas to fellow members.

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Personalize your profile by adding your interests, education, experience, honors and even your photo.

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Customize your experience with controls for profile visibility, discussion signatures, notifications and more.

As a WICPA member, you already have a profile on WICPA Connect.

Simply go to wicpa.org/connect and sign in using your existing website login information.

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Connect with thousands of fellow members nowOnatBalance wicpa.org/connect November | December 2019

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{ Cybersecurity | Tips from the IRS }

Tax pros: Follow the “Security Six” steps to help protect taxpayer data 30

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By IRS.gov

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ax professionals should review security steps to make sure they are fully protecting sensitive taxpayer data. All tax pros should give their data safeguards a thorough review. Part of this review is following the “Security Six” protections.

Here is more info about these basic protections that everyone — especially tax professionals handling sensitive data — should use.

1. Antivirus software o This software scans computer files or memory for certain patterns that may indicate there’s malicious software — also called malware — on the device. o Antivirus vendors find new issues and update malware daily. This is why it’s important for users to install the latest updates of the software.

2. Firewalls o Firewalls provide protection against outside attackers.

The firewall shields computers and networks from malicious or unnecessary web traffic. This helps prevent malicious software from accessing the user’s system.

4. Backup software or services o Users should routinely back up critical files on their computers and hard drives to external sources.

5. Drive encryption o Because tax professionals keep sensitive client data on their computers, users should consider drive encryption software. o Drive encryption is also known as disk encryption.

It transforms data on the computer into unreadable files. This means only people who are authorized to access the data can do so.

6. Virtual private network (VPN) o Many tax firms’ employees must occasionally connect to unknown networks or work from home. So, the office should establish an encrypted virtual private network. This allows for a more secure connection. o A VPN provides a secure, encrypted tunnel to transmit data over the internet between a remote user and the company network.

3. Two-factor authentication o Two-factor authentication adds an extra layer of protection beyond a password. o The returning user enters credentials, such as a username and password. Then there’s another step, such as entering a security code.

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This article was reprinted from the IRS Newsroom online (www.irs.gov/newsroom).

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memorials Robert L. (Bob) Albrecht, CPA (1932 – 2019)

Bob Albrecht, CPA, passed away on Sunday, Sept. 8, in Waukesha. He was 87. A retired partner of Ernst & Young, Albrecht was also a longtime member of the WICPA, including service as WICPA board of directors president and as president of the WICPA Educational Foundation board. He earned his bachelor’s degree in accounting from the University of Wisconsin–Madison; was awarded membership in Phi Beta Kappa, the country’s oldest and most prestigious honor society; and became a CPA. Albrecht was stationed in Germany and served in the U.S. Army during the Korean War. He is survived by his wife, Margaret; two sons; extended family; and 15 grandchildren.

Bob is preceded in death by his parents, his sister and his first wife, Nancy. The family requests that memorial contributions go to the WICPA Educational Foundation.

John C. Patzke, CPA (1932 – 2019)

John C. Patzke, CPA, passed away on Monday, Aug. 19, at age 87. Patzke was employed by Haskins & Sells prior to becoming chairman of Badger Savings in Shorewood, and he retired as senior vice president of North Shore Bank. He volunteered his talents to nonprofit boards including TYME Corp. and the San Camillus Foundation and served as a mentor to many small business owners through SCORE. Patzke is survived by his wife, Nancy; one daughter and grandson; stepdaughters Marcia Eliason, Debra Kryzanek and Rhonda Trickey; and many other relatives and friends.

clerk for the U.S. Army during World War II. He served in the European theater and, in 1945, was assigned to search Hitler’s Eagle’s Nest in Berchtesgaden, Germany. He earned numerous medals during his service. Pitterle is survived by his six children, 11 grandchildren, five great-grandchildren, and many other relatives and friends.

Robert F. (Bob) Ploetz, CPA (1948 – 2019)

Bob Ploetz, CPA, passed away at home in Rice Lake on Sunday, Sept. 29. He was 71. Ploetz earned a bachelor of business administration degree from the University of Wisconsin–Whitewater in 1970 and worked as a CPA all his professional life. A highlight of his career was serving as CFO of the Lac Courte Oreilles Tribe in northern Wisconsin. As a side passion, he moonlighted as a disc jockey who played blues records on WOJB, the tribe’s radio station. Ploetz retired from his job as controller for Tenere Corp, Dresser, in 2012. He is survived by his wife, Rita; two children and two grandchildren; and other relatives and friends.

Boula Xiong (1978 – 2019)

Boula Xiong passed away at the age of 41 on Wednesday, Sept. 11. He had been a WICPA affiliate member since 2011 and was currently serving as a member of the WICPA Educational Foundation board of directors. An online listing states he had experience as an IRS registered tax preparer, and (apparently) he was working for H&R Block in Oshkosh at the time of his death. No other details are known.

Alphons Pitterle, CPA (1924 – 2019)

Alphons Pitterle, CPA, a past recipient of the WICPA Distinguished Career Award, passed away at his home in Eau Claire on Sunday, Aug. 31. He was 95. Pitterle earned a bachelor’s degree in accounting and graduated with honors from Marquette University in 1947. After graduation, he worked as an accountant at Haskins & Sells and, while there, passed the CPA Exam on the first try with one of the highest scores. In 1950, he opened his own CPA practice, from which he retired in 1988. Pitterle served as a finance

If you are aware of a member obituary and believe it should be included in Memorials, please send a copy of the obituary or contact Marcia Tillett-Zinzow at mtzinzow@icloud.com.

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SPECTRUM

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Investment advice offered through Spectrum Investment Advisors, a registered investment advisor. Registration with the SEC does not imply a certain level of skill or training. Spectrum has been named to the 2019 Future 50 list presented by the Metropolitan Milwaukee Association of Commerce (MMAC) and its Council of Small Business Executives (COSBE). The Future 50 program recognizes 50 companies in the seven-county Milwaukee Region that have been experiencing strong growth in both revenue and employment. To qualify for the award a company must be headquartered in the seven-county Milwaukee Region, independently owned and in business for at least three years. Spectrum was selected as a winner for 2019 Ozaukee Economic Development Business of the Year in the medium category. Winners were selected by the Business Development Committee, made up of business and government leaders throughout Ozaukee County, at Ozaukee Economic Development. The program recognizes companies that have seen significant business and job growth over the past five years and are strong community partners.

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{ Business Management | Managing risk }

IDENTIFY ANALYZE

SUCCESSFUL

RISK

MONITOR

MANAGEMENT DEVELOP

IMPLEMENT

Following five steps can help you identify risk and determine what to do about it.

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By Arlene Petersen, CPCU, AU

O

rganizations of every size practice risk management, but success varies based on individual exposures, management’s buyin and support, and the involvement of everyone on a day-to-day basis.

Risk management is the process of identifying situations that may cause financial loss to your organization and taking precautionary steps to eliminate, reduce, consciously assume or transfer this potential for loss. The process has clear steps.

1. Identify the risk First, risks must be identified. What are the best ways to do that? Walk around and observe. Do on-site inspections. Talk to and listen to others. Interview the people who work in specific departments, and get their opinions of safe and unsafe practices they notice as they are working.

In medium to large organizations, it can be useful to develop an active safety committee. People for this committee should be drawn from all levels of the organization.

Gathering statistics can be useful, but they need to be grounded in reality. There are all kinds of risk statistics available, but if they are gathered over a range that is too broad or from some other industry, they will probably not be valid for your company.

2. Assess and analyze the risk Now that you have a good grasp of the risks your organization faces, you need to assess their potential impact. Frequency and severity of the risk are the first things to determine.

Obviously, risks that happen frequently but are small would have a different potential solution than those that happen infrequently but could be large. Another consideration is this: If it happened before, is it likely to happen again?

Minor losses are certain, so they can be assumed outright or through an insurance deductible. Many losses are probable sooner or later, so they must be prefunded either through an escrow account or an insurance mechanism.

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3. Develop a plan Choose the most logical and cost-effective way to handle the risk, depending on your analysis. You can decide to eliminate, reduce, assume or transfer the risk.

If a risk cannot be eliminated, it often can be reduced, minimizing the possibility of damage or injury. A wellrun safety program can help to reduce risk to your organization. Part of your insurance premiums pay for loss-prevention services from the insurance company to help you reduce risks. Use those services.

Reducing risk should become an inherent part of your organization and involve every employee. Communication is key. It’s important to have regular communication with staff and to not only point out the areas they can improve upon, but also to provide recognition when improvements are made. In the world of manufacturing, incentive programs have become common, but these types of programs can be adapted to any industry.

Assuming risk means understanding the risk and assuming it consciously or not understanding the risk and assuming it unconsciously. Going through a process helps to eliminate the unconscious absorption of risk. When a risk cannot be economically eliminated or reduced, it may make sense to assume it. Small and recurring losses should be absorbed. Reasonable deductibles assume a part of the risk and should reduce your insurance costs.

One caution on the use of deductibles: Large organizations can save significant premium dollars using large deductibles only to have more than one deductible apply to an individual claim. Be sure you clearly understand how your deductibles would apply by running through risk scenarios with your insurance professional.

Risk transfer involves the shifting of pure risk from one party to another through the use of a contract. Risk transfer can be accomplished through both insurance contracts and non-insurance contracts. If you cannot eliminate the risk, and you don’t want to completely assume it, you will most likely transfer the risk through insurance.

Transferring risk through a non-insurance contract is not always reliable. When using a non-insurance contract

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{ Business Management | Managing risk }

to transfer risk, you can use indemnification clauses or hold harmless agreements and waivers of subrogation. You can ask to be an additional insured on another entity’s policy so their insurance would defend you in the event of certain covered claims. In cases where insurance policies need to be amended or endorsed to provide these protections, copies of endorsements should be obtained. Certificates of insurance are not part of the policy and cannot, by themselves, amend an insurance policy.

4. Implement the plan So now that you have a plan in place, you need to get it set up and then communicate and put the plan into action.

If management does not buy into the concept of a risk management process, no implementation is going to work, so make sure there is buy-in at all levels and a commitment to make the plan work for the company.

Once you have buy-in and a plan (or probably more than one since you will have more than one risk), you will need to ask yourself some questions: Who is going to be responsible for its implementation and monitoring? Who will they report to?

What authority do they have to take the appropriate steps and

spend the money that may be necessary? How will information about the implementation be gathered and put into writing?

How will it be distributed and to whom?

5. Monitor the impact Over the next few months, observe how well the plan is working. Information gathered from monitoring the process can be very informative and is an ongoing necessity. Follow-up should be done on a regular basis, such as monthly or quarterly, so incremental progress can be documented or adjustments made. If you did not get the desired result, find out why.

Using a process and involving others in the organization can help you identify risk and figure out what should be done about it — giving you peace of mind. However, without buy-in, responsibility and a reporting system that is actually used, this will just be another document sitting on the shelf.

Don’t let that happen.

Arlene Petersen, CPCU, AU, is president and owner of T.E. Brennan Company, Brookfield. Contact her at 262-754-1160 or petersen@ TEBrennan.com.

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{ Young Professionals | Corporate careers }

9 ATTRIBUTES OF SUCCESSFUL

CORPORATE CPAS

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A career as a CFO can stretch a CPA’s accounting muscles in new and engaging directions beyond financial expertise.

By Cheryl Mucha, CPA

C

orporate CPAs play a pivotal role in their companies’ success, helping to drive business forward and contribute to its profitability. This is especially true when the CPA is in the position of chief financial officer (CFO).

How does a corporate CPA-CFO enhance their skills in the C suite and/or on the board of directors? How do they develop long-term, career-building relationships? Whether the employer is a for-profit or nonprofit organization, there are several attributes and qualifications that define (and can elevate) that professional’s value to an organization.

1. Perspective CFOs are valuable partners to the board or leadership because they are able to see and convey the company’s big picture. From the business owner to the mail clerk, the CFO understands how every employee fits into the company puzzle and how each role affects the other (intra- and interdepartmentally). Because of their perspective on each area’s revenue stream and the company’s overall operation and financial health, they are in a unique position to help direct the CEO toward more strategic growth.

inventory, a savvy CFO is always looking to deploy business technology that improves accounting practices and backend reporting. The goal: to drive smarter business decisions, improve profitability and contribute to the company’s future growth. As technology rapidly changes, CFOs will be challenged to stay abreast of what’s new and what’s best for their organization.

4. Tax expertise CFOs must be well versed in corporate tax matters that affect long-term financial strategy as well as short-term tax issues. This is especially important as changes associated with the Tax Cuts and Jobs Act come into play. Keeping up with tax code revisions requires diligence and specific continuing education. The CFO will also be the liaison with the company’s CPA firm for audits and to ensure tax compliance.

Since they speak the same financial language, the CFO will ensure that all relevant reports and figures will be made available efficiently — another check on that valuation list.

5. Industry-specific knowledge

Hand in hand with operational perspective is sharp business acumen. Those who understand business beyond the data are well suited to an advisory role in upper management.

They know how financial metrics affect short-term and longterm stability and growth and where the key business drivers are. As such, they are instrumental in making solid business judgments based on current financial data, market changes and industry trends on an executive level.

No one person can be an expert in all matters, but a CFO with expertise in a particular industry will surely be more valuable to employers in that sector. Understanding industry nuances and the trends affecting the vertical make him or her a vital team member to any organization — someone who can weigh in on how industry trends affect sales, the customer base, production or other matters related to the business. The CFO also plays a pivotal role in helping the company plan for and leverage those changes. Today’s marketplace waits for no one, and leaders need a partner who can help them plan effectively for a sustainable future.

3. Tech savviness

6. Vendor relationships

Staying abreast of rapidly changing technology is a challenge in many fields, and accounting is certainly one of them. CFOs must be aware of all the accounting software and systems available that streamline processes and produce better reporting. Whether it’s bookkeeping and accounting modules, order processing, timekeeping and payroll, sales or

Ideally, a strong corporate CPA has developed a resource pool to bring to any company interaction, particularly with lending institutions, business consultants, insurance agents, IT contractors — any service provider that the company will need to remain productive and competitive. CFOs should always be networking.

2. Business acumen

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{ Young Professionals | Corporate careers }

7. Analytical skills

9. Communication skills

It’s not enough to pull the right reports; the CFO must be able to look at the numbers and see how they relate to stated business goals. What do the reports really tell you about the company’s financial health? Do the statements support corporate objectives? If not, where are the opportunities to improve and what can be capitalized upon to enhance margins? The ability to drill down into the numbers provides great financial value to an organization.

A CFO has to be a good listener. He or she has to get out from behind the balance sheet and speak and write in such a way that clearly, succinctly explains what the figures mean. A strong CFO is able to communicate to others who don’t have the same financial acumen or skills and explain the results in a meaningful, accessible way.

8. Leadership skills CFOs may be called upon to form an in-house accounting department or manage the existing one.

Therefore, being a strong leader who possesses human resource skills may come with the job. This may be especially true as organizations downsize based on market conditions and seek to do more with fewer people in senior management roles.

A career as a CFO can stretch a CPA’s accounting muscles in new and engaging directions beyond financial expertise.

Individuals who aspire to CFO positions should seek a career path that provides opportunities to develop skills and gain experience in human resources, business technology, the sales process and other operational areas. Those who have strong interpersonal and leadership skills as well will be able to compete most effectively for those positions — in today’s marketplace and in the future.

Cheryl Mucha, CPA, is the owner of CFO Your Way LLC. The firm creates pathways to profitability for growing businesses with outsourced accounting services. She can be reached at 973-897-0650 or cheryl@cfoyourway.com.

Reprinted from the May/June 2019 issue of New Jersey CPA magazine with permission from the New Jersey Society of Certified Public Accountants.

When small businesses thrive, we all win.

We’re proud to be named the #1 SBA lender in the region1. But what really makes us happy is helping people start and grow their businesses in Wisconsin. Because we know when small businesses thrive, our communities thrive. So let’s get to work, together.

Visit huntington.com/WisconsinSBA to find a specialist.

SBA loans subject to SBA eligibility. Huntington is the #1 SBA 7(a) lender in the number of loans in the region made up of Illinois, Indiana, Kentucky, Ohio, Michigan, West Virginia, Western Pennsylvania and Wisconsin. Source: U.S. Small Business Administration (SBA) from October 1, 2008 to September 30, 2018.

1

Member FDIC. ⬢®, Huntington® and ⬢ Huntington® are federally registered service marks of Huntington Bancshares Incorporated. WelcomeSM is a service mark of Huntington Bancshares Incorporated. ©2019 Huntington Bancshares Incorporated.Bancshares Incorporated.

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CAN WE

PARTNER WITH THE STATE TO BETTER PARTNER WITH CLIENTS?

In WisconsinÂŽ, we can. When Brakebush wanted to expand their Marquette County-based poultry products company, they turned to Baker Tilly, who then turned to us. We worked together to identify refundable tax credits that enabled Brakebush to pursue an initial $51 million expansion and bring 100 new jobs to the state. Just think what we could make happen with you and your clients. See the whole story at WEDC.org/success-stories-brakebush.

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