March | April 2020 | Vol. 16 No. 2 A publication of the Wisconsin Institute of CPAs | wicpa.org
CPA for All Seasons Glen Altenhofen, CPA | 8
Plus: Our evolving profession | 14 What to expect from RPA | 22 2019 year-end legislation | 34
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A publication of the Wisconsin Institute of CPAs | wicpa.org
March | April 2020 Vol. 16 No. 2
8 Features
Columns
8 CPA for All Seasons Professionally, Glen Altenhofen, CPA, CIA, CFE, CPCU, CISA, is an internal auditor for Church Mutual Insurance S.I. For fall and winter fun, his family grows pumpkins and makes maple syrup. By Marcia Tillett-Zinzow
30 TECHNOLOGY Excel’s New Dynamic Array Feature One of the best enhancements to Excel in years, the new dynamic array feature allows you to break free from the traditional “onecell, one-formula” paradigm. By Thomas G. Stephens, Jr., CPA, CITP, CGMA
14 When Trust Is Not Enough Being your clients’ most trusted advisor is now an outdated approach. Becoming the most valued and most strategic business advisor presents a new path forward. By Derrick Lily 22 Robotic Process Automation: Bringing on Bots As robotic process automation replaces mundane data processing and entry tasks, accounting activity will shift to higher-value analysis and design work. By Adam M. Costa, CISA, CCSP 26 Closing the “GAAP” Wisconsin is one of only 15 states that doesn’t follow GAAP accounting principles for budgeting. While fiscal news has been good, it could be better. By Sen. Dale Kooyenga, CPA
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34 FEDERAL TAXATION 2019 Year-End Tax Legislation Once again in 2019, just when it seemed like nothing was getting done in Congress, a major legislation was pushed through at the eleventh hour. By James D. Brandenburg, CPA, MST 38 HUMAN RESOURCES Managing Sick and Injured Employees How should employers handle a disabled employee who asks for a “reasonable accommodation” to help them perform the essential functions of their job? By Geoffrey S. Trotier, JD
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34 Departments 3 Outlook | chair’s letter 4
In Touch | president & CEO’s message
12 Kudos | members in the news 37 Memorials | departed members
42 ACCOUNTING & AUDITING Plan Sponsors: What You Need to Know About SAS No. 136 If your employee benefit plan is required to have an audit, be sure you understand your responsibilities as a plan sponsor. By Sara Johnson, CPA
On Balance
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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 2020 On Balance.
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President & CEO Tammy J. Hofstede
Chair-elect Wendi M. Unger, CPA Past Chair Michael D. Akers, CPA, CBM, CFE, CGMA, CIA, CMA, PhD
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Secretary/Treasurer Katherine L. Hauser, CPA, CGMA
Editor Marcia Tillett-Zinzow
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OUTLOOK | CHAIR’S LETTER “In the last year, I have seen the WICPA flourish and continue to show why it is a premiere association and something I want to continue to be a part of.”
GET EXCITED!
W
ith my time as board chair coming to an end, I look back on a year that flew past. I think about taking part in several important initiatives and meeting a lot of great people. However, the one thing that really sticks out to me is that I am part of a profession and organization I can be excited about. Rapidly advancing technologies, constantly changing accounting rules and a divisive political environment are all examples of major challenges for the accounting profession. These challenges can be scary, especially for a profession that has a reputation for resisting change. However, if we choose to take on these challenges with a sense of excitement, we can change the narrative from major challenges to huge opportunities. We have the opportunity to not only adapt to new technologies but to embrace them. We can use these advancements to not just stay relevant but to flourish in a new technology-driven future. I gave a presentation at the Educator Accounting Symposium on how technology has changed during my career. While at times we laughed about how we as a profession used to do things, we marveled at the new role technology will play in the accounting profession of the future. We can take the initiative to learn the new accounting rules, stay informed of changes and provide our businesses or clients with the advice to help them be successful. We can prove ourselves as experts in a complicated and everchanging profession in which we are always just one election away from brand-new rules. We can set the CPA apart as the gold standard and the pinnacle of knowledge and accounting expertise. That is an exciting way to look at your career. The craziness of politics has polarized our landscape and separated us from family and friends, businesses and coworkers. I believe what we need most during this time is the voice of reason. The CPA is still one of the most respected designations, and we continue to be viewed as trusted advisors. It is energizing to see CPAs go to Washington, D.C., or
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Madison or talking to clients and companies as the unbiased mediator who can help them get to the right decision. That is an important and exciting role. I am equally excited about the WICPA. In the last year, I have seen the WICPA flourish and continue to show why it is a premiere association and something I want to continue to be a part of. Tammy Hofstede, in her first full year as president & CEO, has been working hard to build relationships with CPAs across Wisconsin. Her forward thinking and initiatives have helped to expand and strengthen our organization. The WICPA staff is extremely talented and laser focused on making the WICPA bigger and better. The WICPA board of directors is a group of immensely smart and dedicated people who are all there for the same reason: to make the profession even better than they found it. Finally, I am excited by all the efforts of our volunteer members. Among many accomplishments during the year, our volunteer members worked with Tammy and the WICPA staff on multiple major legislative efforts affecting you and the profession. While my term coming to an end is bittersweet, I look forward to what is yet to be. So let’s get excited about where we’re going! Let your excitement be contagious, and help take our profession and the WICPA to new heights in the years to come. 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 “Thank you for your continued membership and your commitment to the accounting profession, for your donations to the WICPA Educational Foundation and contributions to our legislative funds, and for making these initiatives possible.”
WICPA Year in Review
A
s we wrap up our fiscal year on April 30, I’m excited to share what we’ve accomplished for members over the last year. We’ve had success with advocacy efforts and built valuable relationships with legislators, leaders and agencies; and we’ve connected with and gotten to know members, including new CPAs, and listened to their experiences in the profession and how the WICPA can be of service. More members are being highlighted, and we’ve become aware of more volunteer opportunities to attract students to the profession. Gov. Tony Evers addresses WICPA members. In addition, progress has been made in our efforts to provide minorities more opportunities to be exposed to accounting. New livestream Committee on Regulatory Licensing Reform) and the CPD of our conferences is now available, and new affinity Joint Committee on Administrative Rules ensured the partners have been added. process kept moving; we provided additional information and responded to questions so the administrative rules Advocacy: Enhancing Member Success for continuing education for CPA license renewal were Advocacy promotes the profession, protects its credibility passed and implemented for the next license renewal date and is a powerful benefit of your membership. Maintaining a of December 2021. strong presence at the State Capitol and attending political • An overwhelming response from members resulted in events and fundraisers are critical to ensuring our voices are creation of a task force, members of whom worked closely heard when it comes to legislation that impacts Wisconsin with the Wisconsin Department of Revenue (DOR) to CPAs. In addition to offering the WICPA members as modify and obtain clarifying language for Wisconsin a resource, we successfully succeeded in presenting our Act 368 regarding the treatment of pass-through positions on legislation impacting CPAs, their clients and the entities. The changes we addressed in our proposed business community. These included the following: legislation (Assembly Bill 753 and Senate Bill 706) • Regular visits and contact with the governor’s office, standing committees (Senate Committee on Agriculture, Revenue and Financial Institutions and the Assembly
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provide similar treatment in the rules that apply to both partnerships and tax-option corporations making the entity election to provide conformity. WICPA members
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DFI Secretary Kathy Koltin Blumenfeld talks to high school educators.
closely collaborated with the DOR to develop FAQs on Act 368 and application of the legislation. All three CPA senators — Sen. Howard Marklein, Sen. Dale Kooyenga and Sen. Chris Kapenga — signed on as sponsors of this legislation. Rep. John Macco, chair of the Assembly Ways and Means Committee, also signed on as the Assembly lead and moved it quickly through his committee. At the timing of this writing, the legislation passed the Assembly and will be voted on in the final days of the March Senate floor session. The Assembly added two unrelated lastminute amendments on the floor to this bill. It is unclear if this will impact Senate support to concur on the bill as amended. Watch for a detailed article on this legislation in a future issue of On Balance. • With only three days’ notice of the proposed DOR Taxpayer Enhancement Package (Assembly Bill 754 and Senate Bill 720), we were able to pull together WICPA members, the AICPA and the Council on State Taxation (COST) to review the DOR package and develop comments and testimony regarding how certain pieces of the package would negatively impact CPAs and businesses in Wisconsin. Several meetings and conversations were held with the DOR and members of the Assembly and Senate committees in a matter of a few days to express our concerns regarding the proposed language. As a result of our quick action, we were successful in having language removed that would have impacted pass-through entity tax, audits, partnership audits, additional assessments and refunds at the entity level and sections related to the situs of income derived in Wisconsin by nonresidents. Over the coming months, the WICPA, AICPA, COST and the DOR will collaborate and come to mutual agreement in developing new policy language that would achieve better public policy for CPAs and the state. At the time of this writing, the Assembly passed AB754 with an additional unrelated amendment during their floor session. The Senate will vote on the bill during their March floor session.
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Ally Hofstede and Jennifer Porath celebrated 5 years of membership at the Member Recognition Banquet.
Assembly Speaker Robin Vos visited with the WICPA board of directors at their Oct. 25, 2019, meeting.
Connecting Connecting with members was a highlight of the year! I provided WICPA and state and national updates, answered questions regarding membership and its benefits, listened to concerns and assisted with licensing issues and questions. These efforts gave us feedback that has been instrumental for the staff and me to be able to serve members better. It was a pleasure to get to know members personally and hear their histories and personal stories. Many were even willing to share and be featured in On Balance. Meeting with new CPAs and hearing feedback on their decisions to complete 150 hours of education and become CPAs was very informative and has helped with our messaging when we promote accounting as a profession to high school and college accounting students. Several organizations provided activities and resources for high school teachers to choose from when applying for the WICPA Educational Foundation Accounting Awareness Grants. The connections will inform and engage students in the accounting profession, helping to fill the demand in the pipeline.
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Members advocated for the profession on Capitol Hill.
The WICPA Educational Foundation engaged high school educators at the Educator Accounting Symposium by providing stipends to assist them in attending the symposium, enabling them to hear and talk to CPAs and gain more knowledge of accounting careers to bring back to their classrooms. A high school educator committee currently is being formed to provide a setting in which high school educators can have a forum to discuss accounting in the classrooms and engage WICPA members to promote the profession at their schools through career fairs, speaking in the classrooms and providing input on topics for the Educator Accounting Symposium. Connecting with members engaged in community service resulted in a group of philanthropic CPA women being highlighted in the November/December issue of On Balance and bringing awareness for Impact 100, a nonprofit that provides deserving organizations with $100,000 grants leading to long-term transformation for the organizations and their communities. The Member Recognition Banquet also was expanded to include recognition of 5- and 50-year members. Connecting and recognizing commitment to the WICPA and the accounting profession throughout one’s career distinguishes those members who are honored. Starting with this issue of On Balance, new members will be recognized on a regular basis. CPAC/LIF contributors and Educational Foundation donors will also now be recognized yearly in On Balance. In addition, we will start promoting the new members and Kudos sections of On Balance through social media. Connections and relationships with legislators, leaders and agencies have also been instrumental to serving the CPA profession. • WICPA members visited elected officials and advocated for the profession on several issues in Washington, D.C. • The WICPA board of directors and the Public Policy and Taxation committees received state updates, were able
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Assembly minority leader Gordon Hintz discusses tax policy with the WICPA Public Policy Committee.
to ask questions and provide input to Gov. Tony Evers, Assembly Speaker Robin Vos, Rep. Gordon Hintz and Sen. Dale Kooyenga. • WICPA members attended several legislative events and fundraisers to have a noticeable presence representing CPAs. • We had several meetings and collaborations with the DOR and Secretary Peter Barca. • Members met and worked with the Department of Safety and Professional Services secretary and the Accounting Examining Board regarding customer service and licensing issues. • We also made connections with the Department of Financial Institutions, and several new opportunities were recognized for the WICPA and members to volunteer and engage in promoting the accounting profession to high school students and support financial literacy efforts. As we continue to explore benefits and discounts for services relevant to our members, we added new affinity partners: Insperity and Duff & Phelps.
Continuing Professional Development We know time is valuable to our members. To help maximize time, our conferences were livestreamed with the ability to ask questions of the speaker during the presentation. All general sessions and the most popular breakout sessions are now livestreamed on the day of the conference. On-demand session recordings continue to be available afterward.
Diversity The WICPA and WICPA Educational Foundation have been partners and supporters of the Young Entrepreneurial Scholars (YES) Program for over 25 years. The goal of the YES Program is to expand opportunities for minority students and increase diversity in the accounting profession. A flyer with information about the program for students
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2020 WICPA BUSINESS & INDUSTRY SPRING CONFERENCE Y OU R S OU R C E F OR K E Y U P D ATE S , I N S I G H TS & TI M E LY I S S U E S
YES program students celebrate successfully completing their internships.
and organizations was created and disbursed to legislators, member organizations and Milwaukee-area high schools. Thank you for your continued membership and your commitment to the accounting profession, for your donations to the WICPA Educational Foundation and contributions to our legislative funds, and for making these initiatives possible!
Tammy J. Hofstede is president & CEO of the WICPA. Contact her at 262-785-0445 ext. 4518 or tammy@wicpa.org.
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These affinity partners and more can be found at wicpa.org/discounts. wicpa.org
On Balance
March | April 2020
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Photography by Andy Manis
CPA for All Seasons
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By Marcia Tillett-Zinzow
G
len Altenhofen, CPA, CIA, CFE, CPCU, CISA, is a man with many interests. He can tell you how insurance company accounting differs from that of other private companies; explain how to use Big Data to help you work smarter, not harder; school you on the advantage certifications provide and the value of networking — and he can also show you how to run a hobby farm that sells pumpkins roadside in the fall and maple syrup in winter and early spring. With all due respect for Sir Thomas More, you might say Altenhofen is, of sorts, a man for all seasons.
First things first For the last seven years, Altenhofen has been an internal auditor for Church Mutual Insurance Co. S.I., the nation’s leading insurer of churches and other religious organizations. He’s worked with insurance companies since the early 2000s when he was a staff auditor for Clifton Gunderson (now CliftonLarsonAllen, or CLA). “I gained some good experience there because a lot of our audits were small, regionally based insurance companies,” he said. “I discovered I liked auditing. I liked verifying information and playing with data, seeing different companies doing different things and learning processes.” His experience evolved into a career. In 2005, Altenhofen left public accounting and took a job as an internal auditor for Liberty Mutual Insurance Co. in Wausau. At Clifton Gunderson, he worked with audits of financial statements for numerous different companies, but he found private industry to be much different. “In public accounting, you’re more concerned with financial statements and making sure all the numbers are right,” he said. “In private accounting, we do more with operational controls, so we can dig a little deeper. We can get into the details of what’s going on transactionally in the processes.”
A deeper dive, a longer drive Altenhofen stayed at Liberty Mutual for eight years before transitioning to Church Mutual in Merrill. The company is 25 miles from his home in Marathon, so it’s a long commute to and from work every day, but he loves the company and his job there. As internal auditor at Church Mutual, he works with management to discuss risks related to their processes and evaluate the controls they have in place to mitigate those risks. “I enjoy adding value to the areas of the audit and being a source of truth for the executives and senior management,” he said. “I like the company’s mission of protecting the greater good, and I feel like I really add value there.” He talks regularly with executives who make decisions on the information he provides — much of which comes from
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Glen with his manager, Stephen J. Lammers, Director of Internal Audit.
Altenhofen’s work with Big Data. In addition to his Certified Internal Auditor (CIA) status, he is also a Certified Information Systems Auditor (CISA). “I like data analysis and identifying trends that can’t normally be seen,” he said. “When you take data from different sources and different areas of the company and use data analytic tools like ACL to isolate the outliers, you can do 100% population testing rather than just taking random samples.” Three of the four staff members he works with at Church Mutual are people he’s worked with elsewhere in the past. In fact, his director at Church Mutual was also his manager at Liberty Mutual for eight years. He was hired just a couple of years after Altenhofen. “It’s interesting how things work that way,” he said. “The CPA profession is a relatively small world. You see each other at events and such, and you never know when you’ll be working with someone you’ve met through your WICPA network. You never want to burn any bridges.” Altenhofen has a fairly large network of colleagues and peers from a variety of industries. All his designations require continuing professional development (CPD), so he has opportunities to network with people at the many events and CPD courses hosted by a variety of associations like the WICPA.
Immersion in the industry Altenhofen’s Chartered Property Casualty Underwriter (CPCU) designation is specific to the insurance industry.
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“
The CPA profession is a relatively small world. You see each other at events and such, and you never know when you’ll be working with someone you’ve met through your WICPA network. It requires passing an eight-part exam administered by the American Institute for Chartered Property Casualty Underwriters. Each part takes two to three hours to complete. “It goes through all the major processes of an insurance company, from underwriting all the way to claims and what the language on insurance policies means,” said Altenhofen. “It gives you an in-depth, detailed analysis of the industry.” Like the CPA Exam, the parts of the CPCU exam can be spread out over time. Because he was also busy raising a family, Altenhofen spread his eight-part exam over a two- to threeyear period. Unlike the CPA Exam, there is an annual conferment ceremony for those who have passed the last part of the CPCU exam during the year. It takes place on the first day of the CPCU Society’s week-long annual meeting, and the location is
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always different. The year Altenhofen received his designation, the conferment ceremony was in Hawaii. Church Mutual paid his way. “Most organizations will pay for your trip to that graduation as a reward for all your hard work. The CPCU is a pretty high standard for the industry,” Altenhofen said. One of the things that distinguish insurance companies from other private companies is a difference in accounting methods. While private companies typically use traditional GAAP accounting, insurance companies use “statutory accounting,” which has different regulations. For example, insurance companies classify their assets into one of three categories: admitted assets, invested assets and nonadmitted assets. Altenhofen explained that nonadmitted assets are key to statutory accounting. “Certain receivables over 90 days old can’t be reported on financial statements because they’re considered nonadmitted,” he said. “So it’s a little more conservative. They say it’s not an asset because it’s getting old, but in traditional GAAP, you’d consider that customer still owing the company money. Here, however, they take it off the books as nonadmitted, and they report it as a nonadmitted asset.”
Glen and his son, Hunter, collect tree sap, which they’ll boil down to make maple syrup.
The hobby farm If you’ve ever been to Marathon in the fall and driven down County Highway NN, you might’ve seen the Altenhofen family on the side of the road selling home-grown pumpkins and gourds. Or maybe you’re one of the family’s regular customers for the maple syrup they bottle and sell in winter and early spring. Glen’s parents started this family business more than 30 years ago. For Glen and his brothers, it was the life they knew growing up. Now, it’s the life Glen’s wife and children know, too. Glen and his wife, Natalie, have been married 11 years and have three children: Haylee, 9; Hunter, 8; and Marlena, 5. Their 100-acre farm includes three acres that yield about 2,000 pumpkins and gourds each year. The woods on the property give them about 50 gallons of maple syrup per year, which they bottle and sell primarily to customers they’ve had for years.
Altenhofen children (from left) Marlena, Hunter and Haylee share some pumpkin pride with their cousin Kyle.
Photos courtesy of Glen Altenhofen
“It’s just a hobby,” Altenhofen says. “It gets us outside, we get a little exercise, and it gives us a little bit of extra money just to make life a little nicer. It’s not like I would ever quit my day job and do it full time. It’s just for fun.” But if you’re interested, he can probably tell you how to do it. And if you’re in the market for pumpkins and maple syrup later this year, you might want to call him.
Marcia Tillett-Zinzow is a Wisconsin writer and editor. Contact her at mtzinzow@icloud.com.
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The Altenhofen family bottles about 50 gallons of maple syrup each year.
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kudos
Tara Bast, CPA
D'Arcy Becker, CPA, PhD
Ken Demerath, CPA
Dan Dooge, CPA, MST, MBA, JD
Lydia Glatzel
Tara Bast, CPA, has been promoted to partner at Johnson Block and Company Inc., where she has served clients since 2007. Tara specializes in municipal and nonprofit auditing.
Mary Horton, CPA, has been promoted to shareholder at KerberRose CPAs. She is located at the firm’s Sister Bay office and has been part of the firm’s team for 10 years.
D’Arcy Becker, CPA, PhD, professor of accounting and department chair at UW–Whitewater, was consulted and quoted in a Dec. 22, 2019, article in Business News Daily online titled “What’s the Difference Between Accountants and Bookkeepers?”
Chris Iverson, CPA, has been named partner at MBE CPAs, Reedsburg. A graduate of Lake Superior State University, he has been an associate with the firm for the past 12 years.
Ken Demerath, CPA, retired partner of Wipfli LLP, was elected to the board of directors of East Wisconsin Savings Bank, Kaukauna. Andrew Dengel joined the VanderBloemen/Hietpas Group in November 2019 as a principal for the firm’s offices in Fond du Lac, Mayville and Juneau. Britley Diermeier has joined Vrakas CPAs + Advisors, Brookfield, as an audit associate. She is a former intern at the firm and recently graduated from Wisconsin Lutheran College with a BA in accounting. Krisztina Dommer, CPA, has been promoted to shareholder at KerberRose CPAs. She was previously a senior manager in the Shawano office. Dan Dooge, CPA, MST, MBA, JD, has joined Johnson Block and Company Inc. as a tax partner in the firm’s Madison office. Edward L. Foy, CPA, joined the VanderBloemen/Hietpas Group as a partner in December 2019. The firm is now known as the VanderBloemen/Hietpas/Foy Group LLP. Lydia Glatzel has joined Vrakas CPAs & Advisors S.C. as an audit associate. She is a former intern at the firm and recently graduated from Wisconsin Lutheran College with a BA in accounting. Nicholas J. Heckenkamp, CPA, was promoted by Vrakas CPAs & Advisors S.C. to manager in the audit department. Kayla Hembel, CPA, was promoted to senior manager at Wipfli, Milwaukee. James A. Holmes, CPA, managing shareholder of Vrakas CPAs & Advisors S.C. and chairman of CPA Associates International (CPAAI), has been named co-chair of a new organization formed by the merger of CPAAI and MGI Worldwide. 12
Britley Diermeier
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March | April 2020
Linda Kaiser, CPA, has received a one-year appointment as town auditor for the Three Lakes Town Board, according to the Vilas County News-Review. Robert S. Keebler, CPA, partner with Keebler & Associates LLP, Green Bay, was interviewed for an article titled “A new law took this retirement strategy out of play. Here’s one way to get around it,” published Jan. 14 on CNBC.com. Robin Lutz, CPA, MT, has joined Hawkins Ash CPAs in their La Crosse office. As a tax manager, she will perform tax research and planning, review tax returns and provide training. Cindy Meicher, CPA, CVA, has been promoted to managing partner of Meicher CPAs LLP, Middleton; and her father, Gordy Meicher, CPA, has the title of founding partner. Brent Nelson, CPA, has been promoted to partner at Johnson Block and Company Inc., where he has served clients since 2007. Brent specializes in governmental and nonprofit auditing. Michelle Palmquist, CPA, MBA, was appointed to the CFO position at Hydro-Thermal Corp., Waukesha. Greg Pitel, CPA, has joined KerberRose CPAs as a shareholder. He has 15 years of government audit and advisory experience and was previously a manager at CliftonLarsonAllen. Vincent Schamber, CPA, has been promoted to partner at Hawkins Ash CPAs. He will continue to provide tax and accounting services and serve as a leader in the firm’s Green Bay office. Dawn Schefelker, CPA, chief financial officer and Hearth Craft brand manager at Design Specialties LLC, Milwaukee, was named to the Biz Times “Notable Women in Manufacturing” list. Jason Stephens, CPA, has been promoted to partner at Wegner CPAs, Madison. He has been a driving force in the firm’s assurance department for more than 20 years. wicpa.org
James A. Holmes, CPA
Robin Lutz, CPA, MT
Brent Nelson, CPA
Mike Stratman, CPA, has been promoted to partner at KerberRose CPAs. He was previously a senior manager in the Green Bay office and has been with the firm three years. Martha Sullivan, CPA, CEPA, CVA/ABV, CM&AA, CVGA, a partner with Honkamp Krueger & Co. P.C., Madison, was named president of the Wisconsin Chapter of The Exit Planning Institute. Michael Thornton, CPA, MST, has joined Vrakas CPAs + Advisors S.C. as a tax manager. He has 15 years’ experience in the field and is a UW-Milwaukee alumnus.
Vincent Schamber, CPA
Jason Stephens, CPA
Michael Thornton, CPA, MST
ORGANIZATION KUDOS Vrakas/Blum Computer Consulting Inc. announced they are a winner of the Sage Diamond Partner Award — the highest achievement recognized by Sage, the market leader in cloud business management solutions. Reaching this status rewards and recognizes the outstanding performance of Sage’s top business partners that serve customers and make business and community impacts.
Want your 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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March | April 2020
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WHEN TRUST IS
NOT
ENOUGH Banking on being your clients’ most trusted business advisor is a misguided, outdated approach. Becoming the most valued — most strategic — business advisor is the new path forward for CPAs. By Derrick Lilly
“S
omething’s wrong. Something’s missing here.”
Todd Shapiro, president and CEO of the Illinois CPA Society, becomes visibly agitated — frustrated even — about the future of the CPA profession and the troubling complacency he sees within it. “People in the CPA profession have done very well and are still doing very well; they have more business than they know what to do with, but that leads them into a false sense of security about the future,” Shapiro warns. For years, he has been stressing to CPAs, CPA firm managing partners, other state CPA society leaders — basically anyone in the profession willing to listen — that this time it’s different. This time, the technological disruption impacting the accounting and
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People in the CPA profession have done very well and are still doing very well; they have more business than they know what to do with, but that leads them into a false sense of security about the future. — Todd Shapiro
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finance profession — the accelerating development of artificial intelligence (AI), blockchain, robotic process automation (RPA) and more — isn’t just an evolution of productivity tools but a revolution. The trouble is almost everyone is too distracted to really think about it. Business is good, and good long-term strategic planning isn’t easy when you’re busy. Shapiro acknowledges that CPAs are busy, even when it’s not their busy seasons, but his concerns stretch beyond who is busy now. His concerns are about who won’t be busy if action isn’t taken to prepare for what’s ahead. His concerns are for those who keep telling him that “we’ve been through this before,” that “that won’t happen” or “it can never happen.” His concerns are for the CPAs who say, “Accountants have reinvented themselves before; remember Excel?” And let’s not forget that many baby boomers say they’re just a few years away from retirement, so none of this really affects them. Shapiro believes statements like these are shortsighted, especially in the face of a slowing global economy. “We are looking at revolutionary change,” he stresses. “This isn’t like going from adding machines to 10-keys, and calculators to Excel and PCs to smartphones. We’ve witnessed a tremendous technological evolution in the CPA profession, but the change on the horizon is unlike anything we’ve ever seen. This isn’t simply a change in productivity; this is a change in how work is done. This is a change in what we do. We are talking about AI and RPA replacing CPAs, replacing people. Stop saying we’ve been through this before.”
If you speak with Shapiro long enough about his predictions for the profession, it becomes clear that his concerns stem from the fact that the vast majority of CPA firms still live or die on clients’ trust to provide accurate and timely transactional accounting, audit and tax services — services that are quickly becoming commoditized and are ripe for automation; services that many CPAs seem complacent in providing. Some will say he’s being paranoid, that there will always be a need for CPAs … right? Well, widely cited research by the University of Oxford warns that accountants and auditors face a 94% probability of having their jobs computerized, and tax preparers face a 99% probability of being automated. Intel founder Andrew Grove once said, “A fundamental rule in technology says that whatever can be done will be done. Success breeds complacency. Complacency breeds failure. Only the paranoid survive.”
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Some CPAs use the ‘most trusted advisor’ mantle as a way of avoiding necessary changes. Trust should just be the foundation on which CPAs build relationships that deliver high levels of value. — Dan Hood
Perhaps it’s time for every CPA to become a little paranoid? “Established companies, complacent in their industry position, fail to anticipate their collapse. The companies wither not because they are surpassed in their core capabilities but because they don’t recognize that the competencies that once made them distinctive no longer define success. These stories have a whiff of tragedy — companies that used to be front-runners are overtaken by a changing world and stick with the status quo rather than investing in capabilities that will bring the next win.”
The tragedy in trust
Try replacing the word “companies” with “CPAs” or “CPA firms” in the statement above. The words of authors Boris Groysberg, Whitney Johnson and Eric Line in “What to Do When Industry Disruption Threatens Your Career” should hit home.
“The most trusted business advisor.” It has a nice ring to it, and generations of CPAs have put in the work to earn such regard for all those who can place those coveted three letters after their names. But those that are still banking on this endorsement to shield them from a changing business landscape will be betrayed. Trust doesn’t ensure relevance, sustainability or success — at least not like it used to.
If not, ponder this: “There were points in the life of Blockbuster where they were sitting high and mighty. Same goes for Kodak. And the taxi businesses around the globe. … If your firm hasn’t recognized yet that the game you’re playing has shifted, it’s soon going to catch up,” says Dustin Hostetler, co-founder of Transformity Solutions LLC, in “How to Transform From an Accounting Firm Into an Advisory Firm.”
“Some CPAs use the ‘most trusted advisor’ mantle as a way of avoiding necessary changes. Trust should just be the foundation on which CPAs build relationships that deliver high levels of value,” stresses Dan Hood, editor-in-chief of Accounting Today.
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“Traditional compliance and transactional services (i.e., tax, audit and client accounting services) are well down the technology continuum to complete automation, which leads to devaluation,” Hostetler states. “That’s a slow death spiral into irrelevancy if that’s all you offer.”
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The threat of tech To better understand the threat of technology the CPA profession is facing (and the opportunities it presents), I spoke with Chris Geier, CEO of Sikich, who is on the frontline, aggressively guiding his firm to be a market leader in a techdependent future. His efforts so far have positioned Sikich as one of only two CPA firms in the top 30 that earn more than half their fees from non-accounting, audit and tax practices. Geier tells me Sikich has safeguarded its relevance and value in the eyes of clients by being “knee-deep in everything from robotic process automation to blockchain to marketing.” “Diversification is a must for any CPA firm to remain competitive,” Geier states. “Firms that don’t expand beyond the strict bounds of accounting, audit and tax — activities that are ripe for automation — will be increasingly vulnerable as the pace of technology-driven change increases and the value of traditional CPA work declines amid significant fee pressure. As a result, they will face a clear choice: Transform themselves or join a larger firm with a proven business model.” Elaborating further, Geier says his top concern is the technological threat posed on the accounting and finance industry and the CPA profession’s ability to navigate it. “The threats come from the emergence of a plurality of technologies for data management and analysis, including artificial intelligence as well as cloud technology and cybersecurity issues,” he explains. “Decades-old paradigms will be disrupted, requiring firms to retool utilizing new technologies. CPAs that continue to operate with a clear majority of their work in accounting, audit and tax will increasingly feel fee pressure and, before long, find themselves in an untenable position. “This isn’t fear-mongering. Instead, it’s an acknowledgement of reality,” Geier continues. “The good news is, this represents a great opportunity for CPAs to redefine their roles and become strategic advisers to their clients.” As outspoken as Geier can be about the CPA profession, his critiques stem out of respect for it and a desire for it to succeed. Geier understands the value of CPAs. He understands Sikich’s success largely depends on a full roster and a pipeline of talented CPAs being ready to take on a tech-driven future and bring meaningful insight to clients. “CPAs are ingrained in client organizations and understand data. Therefore, CPAs are in an ideal position to analyze client data and identify deficiencies, as well as uncover and help clients understand growth opportunities. To fully capitalize on this position, CPAs must proactively educate and redefine themselves. Improving their skillsets, business acumen and strategic thinking is of paramount importance. “The most valuable service a firm can provide for a client is forward-looking counsel that offers them a look around the bend at emerging challenges and details ways they can overcome these challenges. As traditional CPA activities move
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CPAs that continue to operate with a clear majority of their work in accounting, audit and tax will increasingly feel fee pressure and, before long, find themselves in an untenable position. — Chris Geier toward more automation, those professionals must capitalize on their unique insights into client organizations to shift their focus to less rote and more valuable work, from backwardlooking reviews of financial activity to forward-looking strategic guidance,” Geier continues. “I am confident proactive and intellectually curious CPAs can successfully make this pivot and thrive in a technology-driven profession.”
Redefining the CPA “Fortunately, we’ve long shaken the public perception of the green eyeshade accountant. Yet our profession is still fighting our own biases of what it should mean to be an accountant. These biases will limit our ability to keep pace with this fast-changing world,” said Bill Reeb, CPA/CITP, CGMA, CEO of Succession Institute LLC, in assuming the role of chair of the American Institute of CPAs.
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more higher-level work we do will position us to hold a powerful place in the eyes of our clients.” “The all-important first step here is to make the mental shift from thinking of compliance services as the CPA’s primary product to thinking of them as the gateway to much more valuable and valued advisory services,” Hood suggests. “Pick your favorite client and review everything you know about them, all the work you’ve done for them, all the questions you’ve answered and advice you’ve given. You’ll probably find that you’ve done more advisory work for them than you realize — you just didn’t call it that, and you didn’t emphasize its value, and you probably didn’t charge for it either.” “There is a competitive need to do this,” Shapiro argues. “Think about the common scenario where a client calls to say they are thinking about buying a new piece of equipment or property. Most CPAs likely don’t respond by asking the ‘why’ questions and prefer to offer a quick reply about the cost or tax consequences and then hang up. Stop it!”
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The more higher-level work we do will position us to hold a powerful place in the eyes of our clients. — Sandra Wiley
Reeb made two other powerful statements: “We must accept that our technical aptitude alone won’t be enough,” and “We must challenge our own ideas of what it means to be an accountant.” “Being the most trusted business advisor simply is not enough in the profession today,” says Sandra Wiley, president of Boomer Consulting Inc., a regular on Accounting Today’s 100 Most Influential People in Accounting list. When I ask Wiley what is enough, she tells me that CPAs must move to a consultative, future-thinking and growth mindset, which means thinking about not just what clients want but what they need — even when they don’t know they need it. “We must get comfortable with the uncomfortable. Becoming the most valued and strategic business advisor starts with developing client relationships that encompass more than the traditional compliance work they expect from us,” she explains. “As clients see us acting as true business advisors, they will grow to expect deeper advice from us. They will expect us to be their thought leaders in the professions that they are in. The
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In Shapiro’s view, this type of situation presents the perfect opportunity to start selling the knowledge CPAs have about their clients’ businesses, to sit down and be a strategic thinker with them. Yes, every business needs good tax strategies, accurate audits and insights into controlling costs, but becoming the most valued and strategic business advisor demands sitting down with clients and figuring out where their business is going, not where it has been. “This is how CPAs start to change client conversations and redefine what they are to them as advisors. This is how CPA firms position themselves for a sustainable future,” Shapiro says with optimism. Given his background in corporate finance, you can see his mood shift and enthusiasm build around this transition. “At the end of the day, businesses need to grow their top line revenue, develop new lines of business, and outdo their competitors. When you can show them that you deeply understand the business environments they’re living in, that you know what drives growth in those industries, that you have the insights that are critical to their success and that you can provide an unbiased view of where their businesses are going, you will not only be viewed as a trusted advisor but as a valued and strategic advisor, and you will be rewarded for that.” “Candidly, this is the kind of rare service I’ve been receiving from my CPAs for many, many years. They come to my office once a month, we spend about 30 minutes talking about the financial results from the last month, and the rest of the time is spent talking about whatever business and strategic issues are keeping me up at night,” shares Allan D. Koltin, CPA, CGMA, CEO of Koltin Consulting Group Inc. “If another CPA firm were to call me and offer to do my financial statements and tax returns for 50% less, I wouldn’t leave because the ‘fix’ (or stickiness, as we like to call it) is the business advisory services we get from our CPAs,” Koltin says. “When it comes to strategic consulting, we need it to go from being a reactive,
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This is the lightning rod that will finally make CPAs the undisputed most valuable and strategic business advisors to their clients. — Allan D. Koltin, CPA, CGMA back-of-the-napkin conversation in passing to maybe being the most important value-added service we deliver to our clients.” If you aren’t buying into the urgency here, consider that Koltin recently spoke with a large group of owners of privately held companies with sales ranging from a couple of million dollars to over $100 million. He frankly asked if they had a magic wand, which services would they like most from their CPA firms — and there wasn’t a single mention of financial statements or tax return preparation. “The reality is that in five years, 50% of all compliance work will completely evaporate due to AI, RPA and machine learning,” Koltin predicts. “Make no mistake about it, this is not doomsday for the accounting profession. The opportunities for us are as tremendous as they have ever been. This is the lightning rod that will finally make CPAs the undisputed most valuable and strategic business advisors to their clients. “I have never been more bullish about the future of public accounting and the impact that we are going to have on clients going forward,” he continues, “but to do it, we have to take the blinders off, develop a plan, and then make the investments to retrain and retool our partners and associates and drive our firms to the next level.”
Following stints in both public accounting and corporate finance, Joshua Lance, CPA, CGMA, managing director of the Lance CPA Group, succumbed to his entrepreneurial spirit and started his own firm centered around two passions — craft beer and coffee. Since venturing out on his own, Lance has grown his firm into a virtual practice with 14 associates and a global client base. His success in reimaging what a CPA firm can be to both staff and clients allows him to bring a unique perspective to his role as a member of the Illinois CPA Society board of directors. Given where the profession is headed, Lance’s strategy has seemingly placed his firm on a path for long-term success and sustainability. “My concern about the state of the CPA profession has been that it is too reactive and defensive versus being proactive and progressive. So, my strategy was driven by understanding that businesses and consumers increasingly want to work with people who are experts in their fields and can work in a way that is accessible for them,” Lance says. He explains that starting a virtual firm highly niched in craft breweries was a way to redefine what a CPA firm could do to serve a rapidly growing market here and abroad. “By specializing, we became experts in the industry of our clients. By being cloud-based, we can work proactively in real time with our clients in a manner that is convenient for them,” Lance says. “This approach also gains us the benefit of not being geographically limited. Our small firm can serve clients across the country and globally. This strategy, I think, will become even more necessary in the future; the time of generalization is over.” When I ask him to elaborate further on his last statement, Lance says that becoming a valued and strategic business advisor starts with identifying what your clients truly value. His clients, for instance, don’t value the audit or the tax return — those
“You must define what you are going to be to your clients,” Shapiro urges. “If you are going to pigeonhole yourself into the view that you don’t have the time, or the right people, or that your clients know their industry better than you do, you won’t be anything to your clients.”
The point in practice No matter which way you approach it, redefining your role to clients is hard. It requires time, consideration, effort and, above all, a true willingness and desire to do it. Pivoting into new practice areas is perceived as being easy — or at least more accessible — for firms like Sikich. But what about for small firms, which constitute the vast majority of CPA firms in the U.S.? To show how the small firm, or even the sole practitioner, can pivot and redefine their practice and perception to clients, I spoke with someone who would be more relatable to most CPAs.
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are expected. They value his insights because he has a deep understanding of their work and what it takes to be profitable and successful in their industry. “We leverage our experience wo rking with different craft breweries to better serve each brewery we work with,” Lance states. “For example, we had one brewery client who was struggling to break even. We did a deep dive analysis of each area of the business and found one area that was causing most of the bleeding. The issue was quickly addressable with solutions we’ve suggested to other clients. Almost overnight, the business went from being cash flow negative to having positive cash flow. “Another way we provide added value is by educating our clients. We bring in speakers to help them learn to better grow and scale their breweries. We hold an annual event for our craft brewery clients where we provide benchmarks and analysis of 15 critical KPIs that illustrate how they stack up to peers and identify the business areas they need to work on,” Lance explains.
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Change won’t happen unless you make it happen. Identify the area where your firm can do something bold. — Joshua Lance, CPA, CGMA When asked how others can redefine themselves in the eyes of clients, Lance suggests the first place to start is by reimagining your firm if you had to start fresh today. “You have to understand your ‘why.’ Would your firm do exactly what it is doing now, or would you want to do something different?” Lance asks. “Why does your firm exist? What is unique about it? What type of work do you like doing? What type of client do you excel at serving? What is the best way to serve those clients?” Next, he suggests looking at your firm as it currently exists and consider the differences between it and your ideal firm. “Doing this simple exercise should make it clear what you need to work on,” Lance says. “Maybe it’s as easy as moving your technology into the cloud to make remote working a reality, or maybe it’s more involved, like specializing in a particular industry and reshaping client service. “Change won’t happen unless you make it happen. Identify the area where your firm can do something bold,” Lance encourages. “Making progressive shifts to advisory services and educating the markets on what CPAs truly offer will benefit you and the CPA profession in the long term.”
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We must look dramatically different 10 years from now for us to have something of value to pass on to younger generations of CPAs. — Bill Reeb, CPA/CITP, CGMA The need for change Reeb made one other statement that should be taken to heart: “As we’ve done for more than a century, we must continue to evolve. We must look dramatically different 10 years from now for us to have something of value to pass on to younger generations of CPAs. We must move forward together — not in steps but in leaps.” Before writing this article, I asked Shapiro what he wanted our Insight Special Feature to achieve. He told me that he wanted readers to walk away from it with “a change of mindset. An acceptance that they must change and the belief that they can change and should change.” In Sage’s white paper, “The Practice of Now 2019,” 71% of U.S. accountants said they predominantly consider themselves numbers crunchers that focus primarily on reporting. Just 29% said they are predominantly financial advisors that focus mainly on strategic advice. There’s great opportunity in change and redefining the CPA’s role. “At the core of it all, CPAs are immensely talented and capable businesspeople. Being the most trusted business advisor sells CPAs short. CPAs can and should own the most valued and strategic business advisor space,” Shapiro concludes. “I will continue to be a voice for change, and state CPA societies should continue to be a voice for encouraging CPAs and the CPA profession to think differently about the future, to embrace it and to move forward together.” Expand Your Insight
Frey, C. and Osborne, M. (2013). The Future of Employment: How Susceptible Are Jobs to Computerisation? Oxford Martin School, University of Oxford.
Groysberg, B., Johnson, W., and Lin, E. (2019). What to Do When Industry Disruption Threatens Your Career. MIT Sloan Management Review. Hood, D. (2019). Trust Is Just the Beginning. Accounting Today.
Hostetler, D. (2018). How to Transform From an Accounting Firm Into an Advisory Firm. CPA Practice Advisor. Reeb, B. (2019). New AICPA Chair Focuses on the Profession’s Leap Into the Future. AICPA. Sage (2019). The Practice of Now 2019.
Derrick Lilly is assistant director of communications and publications for the Illinois CPA Society. This article is reprinted from the Insight Special Feature, “Trust Is NOT Enough,” which is available for download in its entirety courtesy of the Illinois CPA Society at www.icpas.org/trust.
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Robotic Process Automation: Bringing on bots to enhance a CPA’s work By Adam M. Costa, CISA, CCSP
R
obotic process automation (RPA) is a form of business process automation that combines traditional software user interfaces with optical character recognition, machine learning and artificial intelligence (AI) to help automate the mundane and routine tasks in your business processes. Most of the technology used in RPA is not new. Rather, RPA technology is the combination of existing technologies into easy-to-use automation platforms. Bringing together the suite of tools has created a new class of automation that can be adopted across industries. At the most basic level, an RPA task can be likened to a next-generation macro. Like macros, RPA allows you to assemble a collection of actions into a sequence that automates a business process task. Often the tasks transform a set of data into a standard output through calculations and other data manipulations. Applications of RPA can also be much more complex. One example might be automating an accounts payable solution, where RPA handles a number of associated tasks: • Setting up new supplier accounts • Receiving and recording invoices • Tracking payment due dates • Generating recurring reports and data analytics
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RPA differentiates itself from software macros, however, through its broad scope of interactivity. Interactions can occur across disparate applications with nearly any computer software system. RPA software is capable of interfacing with applications just as a person would. Traditionally, interacting with applications required an application programming interface (API), but RPA can use multiple methods to interface with applications, including a graphical user interface. Websites, legacy applications, mainframes, scanned documents, emails and more can be used in the business process making up an RPA task. Leading RPA platforms are advancing the core functionality of RPA software by integrating AI and machine learning. Use of these technologies can create solutions for understanding and manipulating your business data. Some estimates put upward of 80% of business data as either unstructured or semi-unstructured. Without structure, data becomes practically unusable. A transformation to
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structured data is necessary to extract useful insights, which you then can apply to business decisions. The ability to transform unstructured or semistructured data is the key differentiator among RPA software alternatives. The AI algorithms built into innovative RPA engines allow the software to understand the language used on different document types, such as invoices, purchase orders, bank statements and other common business documents. RPA with built-in AI capability uses this understanding to transform data from source documents into business actionable data. AI-augmented RPA bots can classify documents into groups and then extract meaning from the semistructured data present in documents. The data is then processed into standardized data sets for use in your business process. Should an AI-enabled RPA bot fail to process a document, the document is sent to a human operator for
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further processing. During the employee’s review, the bot watches the human interaction with the user interface. Observing how a person corrects an item trains the bot to handle similar exceptions in the future. Over time, the bot increases its “confidence� in how to process documents. The increased confidence decreases the number of help requests that are sent for human review. Machine learning allows bots to become better workers as experience accumulates. RPA technology creates efficiencies in rules-driven, repeating processes. The automations are designed to handle the work using defined action sequences. But, as the saying goes, all rules have exceptions. Business process rules are not different. Because predicting and handling 100% of the possible scenarios is hard and an inefficient use of development resources, RPA bots should be designed to allow for exceptions. Bots handle the routine and expected cases and deliver exceptions to human operators for resolution. In this way, bots transform the work that people
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are performing. Employees are removed from handling boring, repetitious tasks. Instead, they focus on resolving issues of unusual circumstance that require thinking and judgment.
Advantages of automation As with other forms of automation, the inherent speed and efficiency of machine processing gets work done faster. Automation can also scale to accommodate increases in volume. For a growing company, this can mean not having to add additional head count to handle the extra paperwork that comes with expansions to meet customer demand. Alternatively, scalability could mean being able to audit more documents to find exceptions to defined business rules. Greater traceability is another advantage. Every action a bot takes can be logged and controlled through strict codified rules. This feature makes all bot activity easy to monitor, trace and audit. When good software governance practices are applied to developing and deploying the RPA bots, business leaders can expect consistent and reliable results from their automated tasks. RPA helps manage risk, too. Limiting workers’ access to sensitive information is often a key control in business processes. Incorporating RPA into the workflow can reduce the possibility of data exposure by limiting access to sensitive data even further. RPA can also manage risk by being a control that provides continuous monitoring and audit of high-risk transactions and processes.
Changes underway In the accounting field, there are many processes where the required tasks are repetitious and rules-based. The nature of the work provides many opportunities to employ RPA technology to reduce the amount of time people spend on basic data processing, allowing CPAs to work on more strategic and impactful decision-making tasks. Accounts payable and accounts receivable (AP/AR) automation is an area where accounting departments are currently adopting RPA and seeing a high return on investment. RPA software is well-suited to processing the variety of forms used in AP/AR workflows. Transforming the semistructured data on nonstandard forms used when working with many different vendors is a task in which RPA excels. Data captured from forms by RPA become standardized input to your enterprise accounting system.
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Other areas of early adoption often focus on the highvolume and manually intensive tasks that have measurable cost savings or provide timelier task execution. It is in these areas that management will see the value in RPA and commit to the investment. Accounting areas where leadership will want to invest include the following: • Compiling financial reports • Managing complex billing processes • Reconciling bank accounts • Detecting fraud • Tax compliance As adoption of RPA grows, use of the technology will spread to areas where risk mitigation plays a larger role than just a cost-savings return on investment (ROI). RPA use in financial controls and audits can improve financial oversight, but
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RPA will not replace CPAs, but it will transform the accounting role. impact on company financials is hard to measure. This may be why implementation here tends to fall to the bottom of management’s priority list. Initial ROI calculations play an important role in the initial decision to begin adopting an RPA strategy. The first-year cost to establish an RPA program can be a deterrent due to licensing, development and infrastructure expenses. Looking beyond year one, though, the rate of return improves greatly as maintenance costs will be significantly lower than year one’s development costs. Enterprise software has an average expected lifetime of about six to eight years, so any developed RPAs can be expected to be in service for the same length of time. The real ROI for RPA comes when you implement automation across a number of processes. Increasing the number of automated processes allows for spreading out the fixed costs across multiple projects. In doing so, more automation projects become viable because of improved ROI calculated values. Once employees see and understand the power of RPA, they begin to see the use cases where automation can improve company performance.
Future impacts As RPA replaces mundane data processing and entry tasks, accounting activity will shift to higher-value analysis and design work. Automation will handle much of the transactional accounting work that people perform today. With this shift in job responsibilities, work typically assigned to entry-level employees will largely be eliminated. As time passes, a deep understanding of processes will tend to fade due to the lack of personnel performing the work on a daily basis. Companies will need to ensure that their process workflows are well documented and maintained. Otherwise, the nuanced knowledge of the automated accounting processes could be lost. Companies will need to ensure that new accountants receive training on the underlying process to gain the kind of insights needed to develop and enhance accounting and audit programs. Future CPAs will be focused on the business impact of the accounting data. RPA will provide an increasing amount of structured data about businesses. As a result, a CPA will have access to more up-to-date financial data about his or her company’s business efforts than ever before. Understanding and using the data to support management decisions will become
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a key responsibility for CPAs. The accounting profession itself will become much more focused on data analytics and reporting. CPAs will be asked to develop predictive data analytics to forecast future needs and trends within the business. In turn, this will aid management in running performance programs based on financial statistics and trends. Use of RPA will lead to changes in how financial records are audited, too. Current practices use statistical risk-based sampling for auditing transaction documents. For high-volume transactions, audit test procedures may cover as few as 5% of the population. By incorporating RPA into the testing process, the enhanced speed and efficiency of the automation will allow for a greater amount of audit testing. Initially, larger audit firms will promote their increased testing assurance as a way to win engagements from audit firms that are not using RPA. Eventually, auditors should expect standard testing allowances to rise as automation spreads through the industry and becomes a regular tool in conducting audit test procedures. CPAs will continue to be valued for the business insights they can provide. The interpretation of complex business laws and regulations has been and will continue to be a core skill for CPAs. Subtleties in language and the meanings of tax and business laws will defy much of the codification necessary for machines to understand them. Business leaders will continue to rely on CPAs as trusted advisers when making financial decisions. RPA will not replace CPAs, but it will transform the accounting role. The digital world is overflowing with data. As businesses adopt RPA to transform their terabytes of data into meaningful, business-focused, structured financial information, CPAs should expect to be asked to put greater meaning to the numbers.
Adam M. Costa, CISA, CCSP, is robotic process automation solution architect for Schneider Downs & Co. Inc. in Pittsburgh. He can be reached at acosta@schneiderdowns.com. Reprinted with permission from the Pennsylvania CPA Journal, a publication of the Pennsylvania Institute of Certified Public Accountants.
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CLOSING THE
"GAAP" T
he state’s audited financial statements (also known as the Comprehensive Annual Financial Report, or CAFR) have been issued, and the good fiscal news continues to accumulate. In 2010, I ran for office — in part because, as a CPA, I was astonished the By Sen. Dale state was using accounting methods Kooyenga, CPA that would land a public company’s chief financial officer in jail. After the January 2011 swearing in, the newly elected “CPA Caucus” included four CPAs in the Wisconsin Assembly. Three of us are now serving in the Wisconsin Senate. Although we have not been successful in our efforts to ensure every budget in the last decade was balanced using Generally Accepted Accounting Principles (GAAP), recent budgets have been closer to being balanced. What’s remarkable is that subsequent to the passage of the past several budgets, the actual results have been significant budget surpluses. The GAAP deficit represents the difference between accounting the correct way (GAAP) and accounting the wrong way (cash basis). This gets technical, but it’s important.
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“
The GAAP deficit represents the difference between accounting the correct way (GAAP) and accounting the wrong way (cash basis).
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First, we should expect honest budgets from our elected officials. Second, rating agencies have for years downgraded Wisconsin’s bonds because of the accumulated accounting sins over time.
has been shaved to $773 million: a 73% decrease. There’s still work to do, but the success significantly exceeds everyone’s expectations.
That’s the proper way to think of Wisconsin’s GAAP deficit — it’s not the deficit in one budget but the accumulation of accounting done erroneously for decades.
This success, coupled with the following facts, means Wisconsin’s fiscal health has consistently improved, although I believe we have more work ahead to protect Wisconsin against another Great Recession.
Deferring payments to local governments, school districts and vendors is one example. The state’s fiscal year ends on June 30. Instead of paying local governments, school districts and vendors in the period in which services are being rendered ( Jan. 1 – June 29) the state waits to pay these parties until July 1 so the “expense” is put off until the next period. Additionally, throughout the year the state withholds payroll, corporate and other taxes from businesses and individuals. The taxes collected used to average 20% more than what was actually due when taxes were settled the following year. GAAP accounting would not count this additional 20% as revenue because the amount collected would be sent right back to the taxpayers. However, the state would collect the additional money and then spend it instead of segregating it into a fund reserved for overpaid taxes. One of the changes we were able to make since 2011 was decreasing the payroll withholding throughout the year so your paycheck is larger and your refund lower. In 2010, these past accounting shenanigans resulted in a nearly $3 billion GAAP deficit. However, as of 2019 that
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• Wisconsin’s rainy day fund has increased from $1.7 million in 2010 to nearly $1.1 billion by 2021, according to the latest projection from the nonpartisan Legislative Fiscal Bureau. • Wisconsin is one of few states that have a nearly 100% funded pension plan. Last year, the main fund realized a 20% return, and Wisconsin government and employees contribute on a monthly basis (by statute) to ensure the pension system is fully funded. Wisconsin is one of 15 states that does not follow GAAP accounting for budgeting. My colleagues in the legislature and I will continue pushing for that important standard and working to ensure our budgets are honest.
Dale Kooyenga, CPA, is a Republican member of the Wisconsin State Senate, representing the 5th district. Contact him at 608-262-2512 or Sen.Kooyenga@Legis.wisconsin.gov.
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Welcome new members! Get to know the newest members of the WICPA. *December 1, 2019 – January 31, 2020
Amber Achterberg, Parkview High School
Tina Dilley, River Ridge High School
Heidi Hubatch, Viroqua High School
Dan McCormack, KPMG LLP
Brandon Roberts, Kaukauna High School
Michelle Ahneman, Peoples Bank Midwest
Elizabeth Dreikosen, Baker Tilly
Scott Hubatch, North Crawford High School
Amy McCutchen, Holmen High School
Christina Russo, Waterstone Mortgage
John Angeles, Kishi Consulting
Teresa Duda, Waupaca High School Karen Eslinger, Stanley-Boyd High School
Michael McFarlane, C&M Home Builders and Real Estate LLC
Cory Rutter, Erickson & Associates, S.C.
Jessica Aquino, Velvac
Korey Inman, Anguil Environmental Systems, Inc.
Kyle Ashauer, Ernst & Young LLP
Dave Evans, Tweet Garot Mechanical, Inc.
Dawn Jameson, Wausau West High School
Matt Meekma, Exact Sciences Corporation
Sean Bailey, Scribner, Cohen and Company, S.C.
Joseph Felion, Erickson & Associates, S.C.
Michael Jorgensen, BDO USA, LLP
Ana Metzler, Concordia University
Andrew Kahl, City of Neenah Department of Finance
Brandon Miles, Janesville School District
Martha Baker, Bauman Associates, Ltd. Chris Barnas, Exact Sciences Corporation Renee Bartelt, School Choice Wisconsin Paula Beine Lacey Bell, Renaissance Learning, Inc.
Jacob Forseth, CLA Jennifer Frarck Stacey Gardiner, Iowa-Grant School District Zack Gehant, Grant Thornton LLP Lydia Glatzel, Vrakas CPAs + Advisors
Gary Bergstrom
Daniel Glinert, Neider & Boucher, S.C.
Jay Bieszk, 44 Supply
David Gorecki, Froedtert Health
Camille Bourne
Brent Gostomski, Stevens Point Area Senior High School
Dan Brugger, Ernst & Young LLP Tonya Bruton, Nolan Accounting Center Darin Brzakala, Milwaukee Tool Tyler Bunge, Center for Advanced Studies in Business, Inc. Sarah Campbell, Wisconsin Dells High School Michael Carpenter, Sauk Prairie High School David Chermak, The Wagner Companies Everette Cherrix, NV Energy Sarah Christnovich, Alive and Kickin Pizza Crust Brian Coda, Boys & Girls Club of Dane County Kara Coleman, Mount Mary University Connie DeKemper, City of Sun Prairie Andrew Dengel, The VanderBloemen Group LLC Janeen Dietsche, Marshfield High School
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Julie Gross, Honkamp, Krueger & Co., P.C. Kimberly Guenther, Meicher CPAs, LLP Reidar Gullicksrud, Bauman Associates, Ltd. Daniel Gyorog, University of Wisconsin System Rachel Haberkorn, Schiller Grounds Care, Inc. Victor Hayek, UW-Green Bay Nick Heiting, Wauwatosa West High School Sherri Hendrickson, Monroe High School Andrew Hicks, Strohm Ballweg, LLP Tanya Hilgart, Auburndale High School Mark Hoeffner Judy Holappa, Mayville High School Gina Holmes, Sun Prairie High School Hayley Honeychurch, Wipfli LLP Joanne Horvath, ThedaCare, Inc.
March | April 2020
Knoel Kambak, Meicher CPAs, LLP
Christina Mitchell, Iola-Scandinavia High School
Emily Kapalczynski
Amber Mulrooney, Wausau Tax & Accounting
Sophia Karlovich, Concordia University
Amanda Nadas, UW Health
Nick Kartechner, Kartechner Brothers LLC
Jane Oberdorf, Wisconsin Education Association Council
April Kendall, Erickson & Associates, S.C. Rebecca Kitt, Brookfield East High School Heather Kormanik, HK Consulting Daniel Kratcha, Meicher CPAs, LLP Nathan Krcma, CLA Michael Kresl, American National Insurance Eric Kroll, Baker Tilly David Kruchten, Madison East High School Amber Laska, Hortonville High School Kerry Laurin, Wells Fargo Asset Management
Teresa O’Dell, Sheboygan North High School Debra O’Leary, Craig High School Sue Pacetti, Tremper High School Michelle Palmquist, Hydro-Thermal Corporation Danielle Parker, MillerCoors Nikki Paterson, Foley & Lardner LLP Isaac Patterson, Corson, Peterson & Hamann S.C. Zach Pedersen, KerberRose S.C. Thomas Pendell, Aryv, Inc. M. Susan Perkins
Debbie Leising, East Troy High School
Ross Perry, Jacobus Energy, Inc.
Paul Logan, Northland Pines High School
Jason Pertzborn, Middleton High School
Linda Lompa, The Spancrete Group, Inc.
Kevin Petersen, Thrivent Financial
Laura Madison, Wipfli LLP
Barbara Pulver, Three Lakes High School
Tammy Makovec, Verona Area High School
Kristi Ramsey, TDS Telecom, Inc.
Jessica Mallon, SVA Certified Public Accountants, S.C.
Kevin Rasmussen, KPMG LLP
Deanna Marciniak, Ernst & Young LLP
Randy Rathburn, Cornerstone Processing Solutions
Jennifer Mares, Deloitte & Touche LLP
Nathan Reynebeau, Gardner Denver
Rocio Santa, Hamilton High School Nicholas Savaglia Kristine Schaefer, Agnesian HealthCare, Inc. Michael Schafer, RitzHolman CPAs Travis Schneider, Bauman Associates, Ltd. Richard Schuh, Janesville School District Celeste Scola, Baker Tilly Ryan Siebold, Meicher CPAs, LLP Sarah Spaulding, West Bend Mutual Insurance Company Sharon Steinke, Osseo-Fairchild High School Derek Steinmetz, OnCourse Learning Renee Taitt, Reilly, Penner & Benton, LLP Jeffrey Teigen, Lakeland Care, Inc. Elizabeth Tillema, Oconomowoc High School Kim Toussaint Tanner Trombley, UW-Milwaukee Jessica Unser, Midwest Accounting of West Bend, Inc. Aron Van Pelt, Concurrency, Inc. Cameron Vander Zanden, Collier, Johnson & Woods, P.C. Jacob Walker, Harley-Davidson, Inc. Tyler Wenzel, Milwaukee Bucks LLC Sacia Wheeler, Madison Memorial High School Nate Wilkinson, Verona Area High School Taylor Willems, Grant Thornton LLP
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Friday, May 8 at 5 p.m. The Ingleside Hotel Join us for the WICPA’s signature event of the year to: • Recognize membership milestones.
• Present the 2020 Excellence Awards.
• Elect the 2020–2021 Board of Directors.
• Enjoy dinner, drinks and networking.
Complimentary for WICPA members. Registration is required to attend.
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On Balance March | April 2020 For more information and details, visit wicpa.org/banquet.
29
{ Technology | Excel tips }
Excel’s New
Dynamic Array Feature
E
xcel’s new dynamic array feature is one of the best enhancements Microsoft has added to Excel in years. With dynamic arrays, we now have the capability of creating more powerful formulas than ever before. That is, dynamic arrays allow us to By Thomas G. break free from the traditional Stephens, Jr., CPA, “one-cell, one-formula” paradigm. CITP, CGMA Instead, we can now have a single formula that places results into many cells. Further, Microsoft has added several new useful functions that return results into these dynamic arrays.
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A brief history of array formulas As an Excel feature, array formulas are not new. Prior to dynamic arrays, Excel offered traditional array formulas. In that environment, we could create a formula — typically one with several functions nested in it — and then use a CTRL+SHIFT+ENTER (CSE) keyboard sequence to enter the formula into a cell. While these types of formulas were useful — and remain so today — their complexity is overwhelming for most Excel users. Additionally, Excel offers a few functions — SUMPRODUCT, for example — that operates much like a CSE array formula yet does not require the CSE keyboard sequence. Dynamic arrays do not eliminate legacy arrays. Instead, this new feature just means that we have another powerful tool to work with in Excel.
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Understanding the concept of a dynamic array
FILTER
In a preceding paragraph, I mentioned the “one-cell, oneformula” paradigm. Before dynamic arrays, we had to enter formulas into every cell where we wanted calculation results to display. Dynamic arrays change that by allowing us to create a single formula, and the results of that single formula will appear in as many cells as necessary, given the volume of data under consideration. To illustrate, consider the example provided in Figure 1. In this example, the formula shown in the formula bar was entered only into cell D2. However, the formula dynamically copied itself to create a listing of all the unique values in the range.
As implied by its name, the FILTER function is capable of filtering data in a table or a range via a formula. The syntax is relatively simple, as shown below. =FILTER(array (table or range), include (a Boolean array for which items to include)) An optional third argument — (if_empty) — specifies the value to display if the filter returns nothing. Figure 2 below displays an example of how you can use the FILTER function to filter data without disturbing the original array.
Figure 2 - Using FILTER to Create a Dynamic Array
RANDARRAY Figure 1 - Introductory Example of a Dynamic Array
The fundamental example presented above illustrates the concept of a “dynamic array.” More specifically, it provides evidence that dynamic arrays can populate multiple “results” cells even though the formula itself is entered into only a single cell. Importantly, if the source range in the example (B2:B8) had been first converted to a table, then as the volume of data in the table changed, so too would the volume of results in the dynamic array.
New functions to capitalize on dynamic arrays To make the concept of dynamic arrays even more useful, Microsoft has released six new functions that capitalize on this model. We list each of these six functions below and have added emphasis to the FILTER and SORT functions because they are likely to be used most often.
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The RANDARRAY function returns an array of random numbers. The syntax for RANDARRAY is: =RANDARRAY([rows],[columns],[min],[max],[whole_ number]), where [rows] is an optional argument for the number of rows to be returned, [columns] is an optional argument for the number of columns to be returned, [min] is an optional argument for the smallest number to be returned, [max] is an optional argument for the largest number to be returned, and [whole_number] is an optional argument for Excel to return TRUE for a whole number and FALSE for a decimal number. RANDARRAY would be the ideal function to return a row(s) and column(s) of random numbers and serves as a useful alternative to the RAND and RANDBETWEEN functions.
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{ Technology | Excel tips }
SEQUENCE You can use the SEQUENCE function to generate a list of sequential numbers displayed in an array. The syntax of the SEQUENCE function is relatively simple, as shown below. =SEQUENCE(rows, [columns], [start], [step]), where [rows] is a required entry for the number of rows in the new array, [columns] is an optional argument for the number of columns in the new array, [start] is an optional argument for the first number in the sequence, and [step] is an optional argument for the amount to increment each number in the array.
[sort_order1..2..3..etc.] is the order to use for sorting, where 1 is ascending (default) and -1 is descending.
UNIQUE The UNIQUE function identifies and returns a list of all unique values in a list or range. The syntax for the UNIQUE function is: =UNIQUE(array,[by_col],[exactly_once]), where [array] is a required argument from which to return the unique rows or columns, [by_col] is an optional argument indicating how to compare. An entry of TRUE will compare columns against each other and return the unique columns; an entry of FALSE (or omitted) will compare rows against each other and return the unique rows; and
You can use SORT to sort a table or range of data based on the values in a specific column. The syntax for the SORT function is:
[exactly_once] is an optional, logical argument that will return rows or columns that occur exactly once in the range or array. TRUE will return all distinct rows or columns that occur exactly once, and FALSE will return all distinct rows or columns from the range or array.
=SORT(array (table or range), Sort_index (column), Sort_order (1 for ascending, -1 for descending))
Unfortunately, not all excel users will get this functionality
SORT
An optional fourth argument — [by col] — exists to allow you to choose the sort direction. By default, the sort direction is by row. If you need to sort by column, you can change that to TRUE. Thus, the formula =SORT(Data,5,-1) sorts the table named Data based on the values in the fifth column, and the sort would be in descending order, as shown in Figure 3.
Microsoft has started gradually rolling out dynamic array functionality to Office 365 subscribers on version 1912 of Excel or newer. If you are an Office 365 subscriber, the exact date you will receive an update that contains this feature depends upon your update channel. It is expected that most Office 365 subscribers will receive access to dynamic array functionality in 2020. Presently, there do not appear to be any plans for users of Excel on an existing perpetual license — such as Excel 2019 or 2016 — to receive access to dynamic arrays.
Summary
Figure 3 - Using SORT to Create a Dynamic Array
SORTBY Excel’s new SORTBY function sorts a range or an array based on the values in a corresponding range or array. The syntax for SORTBY is: =SORTBY(array, by_array1, [sort_order1], [by_array2, sort_ order2],…), where [array] is a required argument for the array or range to sort, [by_array1..2..3..etc.] is the range or array to sort on, 32
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Dynamic arrays and related dynamic array functions are among the most powerful features ever added to Excel. With their strength and capability to handle large volumes of data easily, they will no doubt prove to be one of the best additions to Excel in years. If you are an Office 365 subscriber, you should be on the lookout for dynamic arrays, because you will likely receive access to them soon. Unfortunately, if you use a perpetual license of Excel, it is unlikely you will gain access to this feature in your current version of Excel. To see a video that more thoroughly describes and demonstrates dynamic arrays, we encourage you to visit https://k2e.fyi/dynamicarrays. Thomas G. Stephens, Jr., CPA, CITP, CGMA, is a shareholder in K2 Enterprises (www.k2e.com), where he focuses on creating and delivering content and is responsible for many of the firm’s management and marketing functions. Contact him at tommy@k2e.com.
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YOUR PROPERTY TAX PARTNER The Property Tax Section of von Briesen & Roper, s.c. has extensive experience and is your comprehensive resource for property tax issues. From public to private entities, the Property Tax Section has assisted clients in contesting and defending property tax assessments, chargebacks, tax exemptions, and advising on PILOT agreements and TIF/TID districts. Our creative approach to the most complex matters has positioned us to be your trusted advisor on property tax. The bottom line? We get results. To learn more about our Tax Section, please contact Robert Mathers at rmathers@vonbriesen.com.
vonbriesen.com/tax Milwaukee • Madison • Waukesha • Oshkosh • Green Bay • Appleton • Neenah
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{ Federal Tax | Year-end legislation }
At the eleventh hour, Congress passed SECURE and extenders but ignored the dreaded glitch.
C
ongress completed its legislative work for the 2019 year in late December. As usual, a major spending bill with a looming government shutdown was on the agenda. It seems like nothing is getting done for months in Congress, and then major legislation is pushed through in a matter of a few days. This was again the case for 2019.
By James D. Brandenburg, CPA, MST
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The House and Senate needed to pass this spending bill by December 20, 2019, to avert a government shutdown; and this bill was viewed as “must-pass legislation.� Thus, there was speculation for months that several tax bills stalled in Congress could be attached to year-end legislation. There was much uncertainty, however, as to what tax legislation would be included in a year-end package and what would be left out.
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Summary of tax provisions in 2019 yearend spending bill Three Affordable Care Act (ACA) tax measures to be repealed : 1. The 40% excise tax on high-cost employersponsored health insurance (more commonly known as the “Cadillac Tax”), already delayed by Congress, will now be fully repealed. 2. The 2.3% medical excise tax will be repealed. 3. The annual fee on health care providers will also be repealed. This health insurance tax (HIT) is a fee placed on specific health insurers based on their market share. As with the medical device tax, a hold was adopted on collecting the HIT tax in 2017 and 2019, but collections were scheduled to resume in 2020. This repeal will be effective beginning in 2021.
SECURE Act The Setting Every Community Up for Retirement Enhancement (SECURE) bill passed the House last summer but languished in the Senate. It was added to this spending bill, and there were no changes from what was included in the initial version passed by the House. Here are a few SECURE highlights: 1. Increase in credit up to $5,000 for small employer plan start-up costs 2. Change of rules for election of “safe harbor” 401(k) status There were at least a half-dozen separate tax bills that were waiting all year for Congress to act on. While much smaller in scope than the recent comprehensive Tax Cuts and Jobs Act (TCJA), there still were many significant tax items on the table.
Tax provisions in the year-end spending bill With a deadline looming, Congress announced last-minute tax provisions to be included in this massive year-end spending bill. These tax items might not have passed on their own as separate pieces of legislation, but they may have drawn less objection when attached to a much larger spending bill. The large spending bill was broken down into two major related spending bills, one of which contained the tax provisions. Congress approved the legislation on December 19, 2019, by a large bipartisan margin, and it was signed into law on December 20, 2019.
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3. Repeal of maximum age for traditional IRA contributions (Individuals can now make IRA contributions if over age 70 and working) 4. Qualified cash or deferred arrangements [401(k)] must allow long-term employees to participate if they work >500 hours but <1,000 hours per year 5. No 10% penalty incurred for retirement plan withdrawals to individuals in case of the birth or adoption of a child 6. Increase in age for required beginning date for mandatory distributions from age 70½ to age 72 7. Plans adopted by tax filing due date to be treated as in effect at close of year 8. Expansion of Section 529 plans 9. Modification of required distribution rules for designated beneficiaries (The prior law allowed for
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35
{ Federal Tax | Year-end legislation }
payout over life expectancy of designated beneficiaries. This is now reduced to a 10-year payout. There are some exceptions to this rule, including spouse beneficiaries.) 10. Increased penalties for failure to file the following: a. tax returns (increased from $330 to $435) b. retirement plan returns (significant hikes — one penalty jumps from $25 per day to $250 per day) 11. Change in tax on investment income of children (“kiddie tax”)
Extender items This was one of the last items added to the spending bill by congressional leaders. The extenders are a wide-ranging collection of tax provisions that have been given a short shelf life of one to two years, which causes Congress to deal with these nearly every year. In some cases, these have expired, but Congress eventually extends these items, sometimes retroactively. In this case, the extender items had expired on December 31, 2017. These were extended retroactively by this legislation for 2018 and 2019, and most were renewed through 2020. Several of these will be extended through 2022. Here is a partial list of the extender items included in this legislation: 1. Extension of the exclusion from gross income for discharge of indebtedness on qualified principal residence 2. Extension of mortgage insurance premiums treated as qualified residence interest 3. Extension of medical expense deduction for expenses in excess of 7.5% of AGI 4. Extension of deduction for qualified tuition and related expenses 5. Biodiesel and renewable diesel incentives — extend present-law income tax credits, excise tax credit and outlay payments
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6. Extension of credit for nonbusiness energy property 7. Extension of alternative motor vehicle credit for qualified fuel-cell motor vehicles 8. Extension of credit for construction of energy-efficient new homes 9. Extension of energy-efficient commercial buildings deduction (Section 179D) 10. Extension and clarification of excise tax credits relating to alternative fuels 11. Extension of employer credit for paid family and medical leave 12. Extension of Work Opportunity Tax Credit (WOTC, or Jobs Credit) 13. Extension of certain provisions related to beer, wine and distilled spirits 14. Extension of look-through treatment of payments between related CFCs under foreign personal holding company income rules 15. Extension of credit for health insurance costs of eligible individuals
Disaster relief The legislation covers certain tax relief for recent natural disasters, including tax relief for retirement plan payouts to impacted individuals. It also includes an employer credit for retaining employees during designated disasters.
Private foundations Included in the disaster relief items noted above was a change in the tax rate for private foundations. Beginning in 2020, the tax rate on investment income for a private foundation will drop from 2% to 1.39%. However, the lower 1% tax rate if certain distributions are made by the private foundation will be repealed.
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Technical corrections from the TCJA One of the major items that has been percolating in Congress over the past year has been making technical corrections to certain provisions in the Tax Cuts and Jobs Act. There were several items that had drafting errors in them when the TCJA was enacted in December 2017. Legislators and staff agree that these were drafted incorrectly, but the IRS indicated it could not change these items and needed Congress to remedy the matter. Congress needs to make these TCJA changes, and they have been unable to agree on this over the past two years. One such item that has drawn the most attention relates to Qualified Improvement Property (QIP). This involves certain additions and capital improvements a business makes to its property that was intended to qualify for the 100% bonus depreciation. But due to a drafting error, this glitch led to QIP instead receiving a 39-year straight-line depreciation life. Much discussion and lobbying efforts have occurred to get this fixed, including by many retailers who often incur large CapEx amounts that would be treated as QIP and, thus, could be entitled to 100% bonus depreciation if this glitch were fixed. A QIP fix was not part of this year-end spending bill. So, this “retail glitch” was not fixed in 2019 and will now be something Congress will wrestle with this year.
Repeal of tax on fringe benefits for tax-exempt groups While not really a technical correction, one of the unintended consequences of the TCJA was a tax imposed on tax-exempt organizations for certain transportation fringe
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One of the major items that has been percolating in Congress over the past year has been making technical corrections to certain provisions in the Tax Cuts and Jobs Act. benefits. This even applied to employee parking costs and was often referred to as the “parking tax.” This led to much uncertainty and controversy for these organizations. This 2019 legislation, however, repealed the parking tax. The change would be effective as if it was not part of the TCJA when it was enacted in 2017. This change is welcome relief to many taxexempt groups. That’s it for year-end tax legislation in 2019. While much smaller in scope than the comprehensive TCJA in 2017, it still made some significant changes. Jim Brandenburg, CPA, MST, is a tax partner with Sikich LLP. He has 35 years’ experience assisting manufacturers with corporate and partnership tax law, tax legislation, and mergers and acquisitions. Contact him at 262-754-9400 or jim.brandenburg@sikich.com.
memorials Jordan Werner, CPA (1923 – 2019)
Jordan Werner, CPA, who was a member of the WICPA for 68 years, passed away at the age of 96 on Friday, Dec. 20, 2019. He was a past president and senior partner of the Milwaukee CPA firm Scribner, Cohen and Company and a proud World War II veteran, serving in the U.S. Army. After retirement, Werner served his community as a volunteer mentor and advisor to new business owners through the Service Corps of Retired Executives. He is survived by his wife, Alta; three sons, one daughter and two stepsons; 12 grandchildren and two great-grandchildren; one brother, and other relatives and friends.
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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{ Human Resources | Employment law }
Managing Sick and Injured Employees
The quick-and-dirty lowdown on “reasonable accommodation”
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O
ne of your employees fails to report for their scheduled shift. Halfway through the shift, they text their supervisor, stating that they won’t make it in that day. The next day, the employee again is a no-show, again texting their supervisor to By say that they can’t make it in but Geoffrey S. that they will be in tomorrow. The Trotier, JD next day, they show up late with the explanation that their medical provider put them on a new prescription for their “condition” that makes it hard to get up on time. You want to discipline the employee, but you remember that under the Americans with Disabilities Act (ADA) and the Wisconsin Fair Employment Act (WFEA), you might be obligated to offer assistance in the form of a reasonable accommodation. How do you lawfully go about doing that?
Starting the reasonable accommodation process When a disabled employee asks for a “reasonable accommodation” to help them perform the essential functions of their job, the employer and the employee are obligated to enter into the “interactive process.” Simply put, the employee and employer must talk about possible solutions after the employee has provided medical documentation explaining the need for help. When these steps are followed, the interactive process is fairly straightforward. Unfortunately, employees frequently do not understand that the first two steps in the process — asking for help and providing documentation — are their responsibility. Employees do not always understand that they have the right and obligation to clearly request accommodation. Instead, they passively give notice that they suffer from a medical condition that could merit accommodation. For reference, courts have found that the following statements provide notice: • My supervisor makes me anxious.
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Unfortunately, employees frequently do not understand that the first two steps in the process — asking for help and providing documentation — are their responsibility. • I have a medical condition that won’t let me get a tetanus shot. • I need more medical leave because of my condition. • I need more time to write down instructions because of my issues. • I need to write down passwords because of my new meds. However, the following statements typically do not provide notice of the need for accommodation:
• This workplace is giving me a rash.
• Work-related tests make me nervous.
• I’m having difficulty getting to work on time because of my new medications.
• I need more time to write down instructions.
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• I’d be more comfortable if I can sit.
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{ Human Resources | Employment law }
Of course, if there is an obvious need for accommodation regardless of the employee’s failure to directly request help, the employer should take the cue and ask the employee whether accommodation might be necessary, letting them know that medical certification will be needed to continue the conversation.
How to respond: It’s all about that note Now that the employee has provided notice, they must provide documentation to continue the interactive process. Frequently, medical providers will include in their note a statement that the employer does not have a right to certain information. Regardless, the employer has a right to information about diagnosis, prognosis and restrictions. If the medical provider’s note is too vague, the employee has broken down the interactive process. Although this creates a stumbling block in the interactive process, it may not be constructive to cease conversation at this point. Rather, employers should emphasize to the employee that the company needs this information to help them return to work. Be clear that their medical provider has provided only a portion of the information, which does not answer the questions asked. The request may need to be put on hold until the information is provided. If the medical provider offers a note stating that the employee can return to work without restrictions, then no reasonable accommodation is necessary. Similarly, if the employee states that they are fine and do not need an accommodation, then the process has ended. However, if it subsequently becomes obvious that accommodation is necessary, the employer should revisit this discussion. In short, be practical.
The follow-up: Document, document, document! Reasonable accommodation is an ongoing process and likely will require adjustment over time. After your accommodation meetings, you should create a clear record of your discussions, proposed accommodations and solutions. Documentation should include the following: • The employer’s offer to help • The employee’s specific request • Documentation requested and provided
Reasonableness: where the interactive process breaks down
• The employer’s offered accommodation
Employers understand that they will not be required to provide a particular reasonable accommodation if it would be an “undue hardship.” However, undue hardship is difficult to substantiate. When an employer claims undue hardship, it is monetizing the worth of an employee. Typically, an undue hardship defense will be valid only if it would make other employees work substantially harder.
• That the employer followed up after a period of time to make sure the accommodation was effective
Instead, employers should consider whether the requested accommodation is reasonable. Reasonable typically means “feasible” as opposed to “utterly impractical.” For example, complying with a medical provider’s note will likely be considered reasonable. If the employer has found its own accommodation that is feasible, then it does not have to
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choose the accommodation proposed by the employee or their medical provider.
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• Whether the employee accepted
Reasonable accommodation and the interactive process can become fairly complicated because of these moving parts. If that occurs, simply ask the employee, “How can I help?” Listen to the employee’s request, and ask for a medical provider’s note. If the request does not seem feasible, provide a practical alternative. Then follow up to make sure the accommodation was effective. Geoffrey S. Trotier, JD, is an attorney with von Briesen & Roper s.c., Milwaukee, and a shareholder in the firm’s Labor and Employment Law Section. Contact him at (414) 287-1369 or gtrotier@vonbriesen.com.
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{ Accounting & Auditing | Employee benefit plan audits }
PLAN SPONSORS: What you need to know about SAS No. 136
T
he Employee Retirement Security Act of 1974 (ERISA) generally requires that employee benefit plans with over 120 employees eligible to participate be audited as part of their obligation to file an annual return/ report (Form 5500 Series). If your By Sara Johnson, employee benefit plan is required to have an audit, it is important to CPA understand your responsibility as plan sponsor to not only hire an independent qualified certified public accountant, but also to ensure that the plan has obtained a quality audit in accordance with ERISA and U.S. Department of Labor (DOL) requirements. In 2015, the DOL conducted an assessment of Form 5500 filings and related audit reports. During the assessment, the DOL reviewed a sample of 400 plan audits from a pool of 81,162 Form 5500 filings. The DOL found that 39% of audits contained major deficiencies with respect to one or more generally accepted auditing requirements. Because the assessment yielded such troublesome results, the DOL asked the AICPA to initiate a project to help strengthen the quality of employee benefit plan audits and enhance the related audit reporting. As a result, in July 2019, the AICPA Standards Board issued a final standard: Statement on Auditing Standards (SAS) No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. SAS No. 136 clarifies what is expected of the auditor, which includes new requirements at all phases of the audit as well as a new form of report that provides greater transparency about the scope and nature of the audit. It also describes the procedures to be performed on the certified investment information.
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What you need to know about SAS No. 136 3 The effective date is for periods ending on or after December 15, 2020, which means that for calendar yearends, the standard becomes effective for your plan’s 2020 plan year (for an audit that would be performed sometime in 2021). 3 Early adoption is not permitted. 3 Plan management can still elect to have a “limited scope audit,” which excludes from audit procedures certain investment information held by and certified by a qualified institution. The term “limited scope audit,” however, will be replaced by ERISA section 103(a)(3)(C) audit. 3 Modified opinions (typically a disclaimer) that were previously used with limited scope audits will be replaced with a two-pronged opinion, which will now be used with ERISA Section 103(a)(3)(C) audits. The revised twopronged opinion will indicate whether the … a. information in the financial statements not covered by certification is presented fairly, and b. investment information contained in the financial statements agrees with, or is derived from, the information contained in the certification. 3 Engagement acceptance procedures now require the auditor to inquire of management how they have determined that the entity preparing and certifying the investment information is a qualified institution. 3 In order to properly identify and assess the risks of material misstatements, the auditor will need to obtain and read the most current plan instrument for the audit period, including effective amendments, and must consider relevant plan provisions when designing and performing audit procedures.
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3 The auditor needs to obtain a substantially complete draft Form 5500 and read the draft in order to identify material inconsistencies and material misstatements of fact — if any — with the audited plan financial statements prior to dating the auditors’ report. 3 Emphasis is placed on communicating reportable findings to those charged with governance. Reportable findings include any identified or suspected noncompliance with laws and regulations and deficiencies in internal control. 3 Management representation letters will now include acknowledgements related to management’s responsibilities with respect to the investment certification. In connection with the DOL assessment completed in 2015 (referenced earlier) the DOL issued a letter that was circulated to all plan sponsors to stress the importance of audit quality and hiring an experienced benefit plan auditor and to remind plan sponsors that it is the plan sponsor’s fiduciary responsibility to hire a qualified and experienced auditor (find this letter from the DOL at vrakascpas.com/services/benefit-plan-audit-services/).
Questions to ask Questions you should consider asking when selecting your plan’s auditor are as follows. 3 Does the firm have extensive experience auditing employee benefit plans? How many plans does the firm audit annually? 3 Does the firm have a standardized approach to efficiently address all audit requirements? 3 Does the firm ensure there is active involvement of experienced employee benefit plan auditors during all stages of an audit engagement? 3 How does the firm communicate to plan sponsors reportable audit findings, regulatory updates and any bestpractice suggestions identified during the audit? 3 Does the firm require that all employees associated with benefit plan audits receive continuing professional education necessary to keep up with employee benefit plan developments, technical guidance, regulatory requirements and compliance issues? 3 Is the firm a member of the Employee Benefit Plan Audit Quality Center (EBPAQC)?
The EBPAQC provides members with best practices, guidelines and tools CPAs need to perform quality
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SAS No. 136 employee benefit plan audits and better serve their clients. The DOL assessment referenced above noted that EBPAQC members are far less likely to have deficient employee benefit plan audits. You can visit EBPAQC’s website at aicpa.org/EBPAQC for a list of member firms and to find other valuable tools prepared for plan sponsors. 3 Is the firm licensed by the Wisconsin Accounting Examining Board (AEB)? The Wisconsin Administrative Code, which governs the AEB, requires CPA firms to undergo a peer review of their accounting and auditing practice every three years. The peer review standards require CPA firms to design and comply with a system of quality control that provides the firm with reasonable assurance that they are performing and reporting in conformity with professional standards. The peer review program’s primary objective is to protect the public interest by improving the quality of services performed by AICPA members in public practice. This peer review includes scrutiny of employee benefit plan audit work. As you enter the 2020 employee benefit plan audit season, be sure your plan auditors are talking to you about SAS No. 136 and how this new standard impacts you and your plan. Sara Johnson, CPA, is an audit manager at Vrakas CPAs + Advisors S.C., Brookfield, and holds an AICPA Advanced Defined Contribution Plans Audit certificate. Contact her at 262-798-7658 or sjohnson@vrakascpas.com.
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WICPA conferences offer you an opportunity to connect with fellow accounting and business professionals while hearing from local and national experts. Business & Industry Spring Conferences
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