August, 2013 | RKL LLP
Posted on: August 29th, 2013

RKL Supports Leadership Lancaster’s “Leaders on Board” for Not-for-Profits

LL Color Shadow Logo_2Beginning in September, board and staff leaders will have the opportunity to grow in their roles in guiding not-for-profit organizations at Leadership Lancaster’s “Leaders on Board” series. RKL is proud to sponsor the program as part of our efforts to help community benefit organizations succeed.

If you serve on a not-for-profit board in the Central PA area, you don’t want to miss this opportunity to gain new ideas, insights and perspectives on being an effective board leader. The series includes three different sessions, including the Better Boards Breakfast on September 24; the Board Leadership Academy: Governance Training on November 5; and Leadership Advantage: Operations Training on February 7.

“With more than 200 community benefit organization clients, RKL’s Not-for-Profit Services Group sees firsthand how those with engaged, effective leaders are better positioned for success,” commented Doug Berman, leader of RKL’s Not-for-Profit Services Group. “We’re proud to be part of this program, which will have a positive effect not only on not-for-profits, but ultimately the broader community.”

Throughout the series, you’ll gain a wealth of knowledge on issues relevant to serving on a board, including governance, strategic planning, financial oversight and much more in engaging sessions led by area thought leaders and experts.

Learn more about Leadership Lancaster’s “Leaders on Board” series.

Posted on: August 27th, 2013

Teaching Kids About Money

kids and money management

In the world of parenting, generally speaking, having the financial means to provide your child a good quality of life, education and life experiences is a blessing. In my 35 years of investment advisement and financial planning, I’ve also seen the flip side: how some parents’ strong financial position and their desire to give their children the world can sometimes undermine their children’s future financial independence.

In a time when today’s young people face significant obstacles to building and maintaining wealth, consider your efforts to educate them and foster healthy money management skills a gift that will benefit them for the rest of their lives. Whether they’re six or twenty-six, here are a few tried-and-true techniques to instilling the right financial values in your child.

#1 Talk Money with Kids. As a child, I remember watching my dad as he set aside cash in envelopes for the church, for the grocery stores, insurance premiums – a practice that familiarized me with the concept of budgeting. Too often, I see my own clients insulate their children completely from conversations about money until there is a problem. Perhaps it’s a feeling of vulnerability that compels parents to give their children what they want, when they want it – at their own expense.

What I’ve discovered is that families who can openly and honestly discuss their budget can more effectively work together to meet their financial goals. Enlist the kids to help you save – whether it’s clipping coupons, comparison shopping or conserving electricity or water – and show them the savings they helped make possible. You’ll be surprised how receptive they are to contributing to the cause.

#2 Save monetary gifts. If your child is older than three, you already know how quickly children accumulate toys they never play with. Whether it’s a $10 check from a great aunt or a larger cash gift, sock monetary gifts away in a bank account that your child can watch grow. Earmark the money for the child’s first car. Sure, you have the means to buy them a car. But with some “skin in the game” – having their money going toward the purchase of the vehicle – they’ll automatically have a greater sense of accountability for this big-ticket item. I feel it helps them be a safer driver, knowing it’s “their car.”

#3 Buy some stock for real-life investment experience. This was a fun learning experience I did with my own son: I bought him a few shares in Fulton Bank, Disney and, at the time, Ford Motors and together we monitored changes in his investment.  He would watch the stock price in the paper and know if his monthly brokerage statements were increasing in value.  He saw the dividends being reinvested so he knew he was saving.

#4 Invest in college for a marketable skill. This one might be a little more controversial, but hear me out: I, too, had a child who wanted to study fine art. And it’s fine. We found a compromise. Together, we decided that if he studied art, he would also need to obtain a teaching degree so that when he graduated he would be able to attain a teaching position in his field that would provide a good living wage. He ended up using his gifts to be a software engineer but that met my requirement of obtaining a degree in a marketable skill.

We all want to see our children pursue their dreams, but we also owe it to them to draw on our own life experiences to help them make sound decisions. Have a kid who’s passionate about theatre, the arts, anthropology or women’s studies? Encourage them to take on a dual major or make the less marketable course of study a minor to one that will open up more career opportunities so they earn a living when they are finished school.

#5 Set clear expectations for “boomerang” kids. Is your empty nest suddenly not so empty? You’re not alone. The economic downturn saw more multi-generation families living under one roof than ever – especially college students who return home post-graduation. If you find yourself in this situation, have an open, honest conversation about your expectations sooner rather than later.

While your expectations are a personal choice, top on my list for my live-in adult child would be the expectation of employment – regardless of whether it’s in his/her field – and he must make a financial contribution toward housing expenses. For the latter, you can even consider saving their “rent” and allowing them to use it toward their first or last month’s rent (the security deposit) when they find an apartment.

We all want the best for our children. And we all struggle at times with how to give it to them. Start with a strong foundation for financial independence. It’s not always easy, but I assure you that the results will benefit you and your child alike.

Contributed by Sarah Young Fisher, CFP, ChFC, CFSC, CASL, CAP, president of Kuntz Lesher Capital LLC. Sarah manages individual portfolios and the investments of trusts, estates, charitable organizations and corporations. She is the author of four books related to individual investment strategy, including “The Complete Idiot’s Guide to Personal Finance in Your 20’s and 30’s,” an active community volunteer and the mother of two children.

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Posted on: August 26th, 2013

RKL Welcomes Jim Cassel as Partner

RKL Accountants and CPAsRKL is pleased to welcome James G. Cassel, CPA, as a partner in the firm’s Audit Services Group. Jim brings more than 14 years of auditing and accounting experience to the firm.

Jim serves the accounting and auditing needs of commercial clients in the manufacturing, distribution, food processing and agribusiness, technology, real estate and hospitality/entertainment industries. He works with privately-held companies ranging from small start-up organizations to large, middle market companies. His clients include family-owned and private equity backed companies.

Jim has experience conducting due diligence and working with clients in executing mergers and acquisitions and financing transactions. His responsibilities include leading client engagement teams, coordinating and reviewing audit and accounting services and consultation on complex accounting and reporting matters.

Jim earned a bachelor of science degree in finance from Drexel University. He is a 2008 graduate of Leadership Lancaster and a 2010 recipient of the Central Penn Business Journal’s “Forty Under 40”Award. He serves as treasurer and board member with Gretna Theatre and as treasurer and board member of the Center for Community Peacemaking.

Jim resides in Lebanon with his wife and two children. He is a fan of all Philadelphia sports teams and enjoys spending time with his family , participating in his children’s sports and other activities.

Posted on: August 15th, 2013

Purchase Card Best Practices for Governments

Many governmental agencies are still writing significant numbers of checks without having sound controls in place. Purchase cards (P-Cards) could be a cost effective way for certain organizations to improve and streamline the payment process and get out of the check writing business, while improving the payment processing time.

If an organization is utilizing P-cards or is thinking about utilizing P-cards, internal controls need to be top of mind. P-cards alone are probably not sufficient for an organization but can provide substantial benefit when there are many smaller dollar, non-recurring payments. ACH wires generally are a more secure way of making larger or more frequent payments.

P-Cards = buying power = opportunity, which is one of the three corners of the fraud triangle

 

Basics for P-Cards

Documented policies and procedures related to the authorization and use of P-Cards is a must. This should include a training element which should also involve a testing component.

Organizations should adopt and mandate a cardholder agreement that all users must sign which clearly indicates that the P-Card is not for personal use. This agreement should outline the discipline/termination for misuse, the mandate for reconciling statements in a timely manner and a mechanism for self-reporting unauthorized transactions. Another tool available is the GFOA Best Practices over P-cards.

There are three R’s of internal control related to P-cards: Responsibility, Review and Revise Procedures.

Responsibility and Review

Both individual card holders and their supervisors are responsible for safeguarding the use of the card. The cardholder has to understand the ramifications for misuse and also understand the importance of timely statement reconciliation. The supervisor has the responsibility of reviewing the reconciliation and statements and comparing the two. The supervisor has other controls available as well including:

  • Access to the Data Exchange File (DEF) which contains 50 fields of information at the point of sale (accessible from credit cards/banks)
  • MCC blocks can be added so that the cardholder cannot go to a liquor store and buy liquor.  However, this in and of itself would not catch them going into a gas station and buying liquor/beer
  • Set single transaction limits
  • Set daily transaction limits
  • Set time of day limits (card only active from 8 a.m. to 5 p.m. for example)
  • Segregation of duties (cardholder also received the order for example)
  • Require documentation for management override

Revise Procedures

As the process evolves, organizations will have to be cognizant of the changing environment and revise the policy and procedures as deemed necessary to allow cardholders and supervisors the tools to comply without overburdening them.

Purchase cards can be an asset to an organization and can greatly improve and streamline the payment process. Abuse and fraudulent activity is possible but can be reduced/eliminated through proper internal controls. Having well designed controls is only half the battle. The key is making sure those controls are working effectively to address the associated risks. Ongoing monitoring is a great way to keep a pulse on the process. Attribute testing should focus on proper approvals and segregation of duties. If sampling is done on a statistical basis, the results of the testing can be extrapolated against the population. Transactional testing should be focused on lower dollar value items and focus on riskier types of purchases such as meals and incidentals.

To learn more about P-cards and other accounting best practices for local governmental entities, visit our Government page or contact Mark S. Zettlemoyer, CPA, CFE, Partner and Government Industry Group Leader, at 717.394.5666 or mzettlemoyer@rklcpa.com.

Contributed by Hunter Mink, CPA (hmink@rklcpa.com), a manager in RKL’s Auditing and Accounting Services Group. Hunter has extensive experience working with governmental and non-profit entities.

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Posted on: August 15th, 2013

Quicker Project Closeout Timeframes for A/E

The Federal Highway Administration (FHWA) is pushing for quicker project closeout timeframes. In 2012, the USDOT received a material weakness for lack of attention to project closeouts and for lack of attention to project agreements close out procedures.

The average time for a project with Federal Aid money to be closed out is 1.8 years. As we are all aware, there are some projects that have not been closed out in five years or longer. Currently, for the Federal Highway Aid program there is no national standard for closeout timeframes. It is now a goal to speed up the close out process which will benefit all parties including the contractors, A/E, firms, and state/federal agencies.  The close out process will be evolving but will likely be based on risk assessments and thresholds based on dollars involved and other relevant factors.

To learn more about potential changes to the project closeout process and other related topics that are top of mind for A/E firms, visit our Architectural/Engineering Firms page or contact Keith Eldredge, CPA, Partner, at 717.843.3804 or keldredge@rklcpa.com.

Contributed by Hunter Mink, CPA, (hmink@rklcpa.com) a manager in RKL’s Auditing and Accounting Services Group. Hunter has extensive experience working with A/E firms and a comprehensive understanding of Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS).

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Posted on: August 15th, 2013

Updated National Compensation Matrix

The American Association of State Highway and Transportation Officials (AASHTO) formed a sub-committee of the Internal and External Audit Committee to revamp the National Compensation Matrix (NCM).  The sub-committee is made up of members from State DOT’s, FHWA, and ACEC affiliated firms as well as a compensation consultant.  The common goal is to revamp the NCM that is in place and compare the new NCM with the old to test the assumptions used to develop the original matrix.  The sub-committee uses several salary surveys as the basis for the development of the matrix.

The group is expecting to complete the project and issue the updated NCM in 2014.   With the issuance additional changes are expected to Chapter 7 – Compensation of the AASHTO audit guide which will further outline requirements of executive compensation testing and provide additional guidance related to elements of compensation and superior performance.  A revised AASHTO audit guide is expected to be released in 2014. AASHTO is looking to add additional tools to the NCM as well as updating the Q&A guidance on the AASHTO website.

How will this impact A/E firms? 

The salary amounts and ranges of reasonableness are likely to be changing but the expectations are that the changes will not be dramatic at this time.  An ongoing issue that resurfaced is whether or not there should be adjustments for geographical locations since the cost of living can vary significantly depending on the location from which the executives work.  The subcommittee currently is not looking to add adjustments to take into account the location from which the executives work.

The key take-a-ways concerning the NCM and salary surveys are:

  • Executive Compensation is still a hot button topic receiving significant attention by both State and Federal agencies
  • The NCM continues to gain momentum as the preferred mechanism for analyzing executive compensation  due to its ease of use and the bright line nature of the results
  • Firms can still perform executive compensation based on salary surveys if they feel the results could benefit their firm. The downside includes additional time to pull survey results together and analyze information and opportunity for invalidation of results based on difference of opinions by State and/or Federal agency auditors
  • The sub-committee will not disclose the salary surveys they use but were extremely vocal about the importance of firms of all sizes and from all locations to respond to those surveys so that there is ample salary data from which the sub-committee can produce realistic and relevant compensation benchmarks

Answer:  YES, IT MATTERS. In addition to shaping the results of the current and forthcoming NCM the salary surveys are critical in maintaining statistically relevant salary benchmarks.  Once the NCM comes out in 2014 it can be indexed for inflation for up to three years and still be statistically accurate.  Not completing the surveys this year could impact your compensation limits for years to come.

To learn more about the NCM, executive compensation matters, and other related topics that are top of mind for A/E firms, visit our Architectural/Engineering Firms page or contact Keith Eldredge, CPA, Partner, at 717.843.3804 or keldredge@rklcpa.com.

Contributed by Hunter Mink, CPA, (hmink@rklcpa.com) a manager in RKL’s Auditing and Accounting Services Group. Hunter has extensive experience working with A/E firms and a comprehensive understanding of Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS).

 

 

 

 

Posted on: August 15th, 2013

Safe Harbor Overhead Rates

The recent past economic recession has caused many smaller A/E firms that have not historically worked in the public sector to jump in as a way to help smooth out the trough that has been experienced in the private sector. These smaller firms generally do not have the background to prepare FAR compliant overhead rates and are willing to receive lower margins to gain access to the public sector. FHWA, AASHTO, and State Agencies have established a ten-state pilot program to address this issue.

The program allows small firms to bid on a project by project basis with a safe harbor overhead rate of 110% for up to three years. There is no associated audit requirement to use that rate. The idea is to allow these smaller firms to get work at reasonably safe overhead rates while they develop their internal controls and structure so that as they grow and get familiar with the standards they can then develop FAR compliant overhead rates and start using those actual rates vs. the safe harbor rate.  After the three year program is over the results will be analyzed and the results will influence whether or not the program is extended and whether or not the rest of the states will be able to participate.

Posted on: August 12th, 2013

RKL vs. RKL Softball Showdown Recap

RKL’s softball showdown between the Reading and Lancaster offices ended with a Reading victory on Friday, August 9 in Lancaster. Several team members from the York office joined in the fun and played for each side.

Team Reading and their York colleagues’ bats were hot, early and often, scoring several homeruns in the first inning. Lancaster’s wily veteran pitcher Ron Miller challenged the Reading hitters with input from Clint Rider and Ron Fink.  Nevertheless, he did not have an answer for Steve Frank, who was able to hit three homeruns in the game. Actually, he did have an answer: hide Steve’s bat next time up.

Lancaster’s Kevin Lee hit a nice homerun to the left off of Dave Engle, who otherwise pitched seven strong innings for Reading. Both defenses made some nice plays. Ron Fink showed the glove at 1B with some sweet scoops. Steve Fisher took a nice tumble at first base running out a ground ball.

In the end, Reading was victorious with a 15-4 score. Best of all, there were no major injuries to speak of and we ended the day with some great food and conversation with our fellow RKL team members. Thanks to Brian Murphy who organized this very fun and successful event.

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Posted on: August 6th, 2013

Is Your Company Ready for Sale? Selling Your Business

business acquisitions in PAYour life’s work has been devoted to building a successful business. Your company may represent the largest asset in your portfolio. Whatever your future plans, it is in your best interest to assess whether or not your business is ready for sale. Is your business in a condition to ensure the best financial outcome should an opportunity arise? If not, there are steps you can take to prepare your company for sale.

1. Determine Your Company’s Value.

Obtaining a realistic idea of what your company is worth from an objective, outside source is an important first step in preparing for a potential sale. A professional valuation will give you a basis for gauging buyer offers and will also provide an assessment of the company’s market position, financial situation, strengths and weaknesses.

2. Ensure Your Financial Information is in Excellent Condition.

Are your accounting records and financial statements up-to-date and organized? Financial statements and historical financial statements are essential to providing an accurate assessment of your company’s financial position and performance. You should have at least three years of historical statements, balance sheets, cash flow statements and tax returns available for prospective buyers.

3. Demonstrate Growth Potential.

You should be able to demonstrate the future growth potential of your business and your competitive position within your industry. How will your business expand over the next five years? Where will new sales come from? How well do you know your competitors? How does your business differ?

4. Address Employee Issues.

Your key employees play a critical role in the ongoing success of your company. A team of well-trained, highly-motivated, experienced and appropriately compensated employees also sends a positive signal to a buyer.

5. Evaluate Facility and Lease.

A poorly maintained facility suggests that you may not have been investing in your company for the long term. Review your lease and maintain a positive relationship with your landlord.

6. Focus on Inventory.

The way in which you handle inventory can make or break a potential sale. Do you have accurate inventory records? Do you have obsolete or slow-moving inventory that should be sold to a liquidator before the sale?

7. Assemble a Team of Experts.

The sale of your business is not a transaction that you should handle on your own. A team of professionals including an accountant and a transaction attorney can guide you through the process, allowing you to focus on the ongoing operation of the company.

Thinking about selling your company? Learn more about RKL’s Business Valuation and Consulting Services or contact Paula K. Barrett, CPA/ABV, CVA, at 610.3760.1595 or pbarrett@rklcpa.com.

Contributed by Gretchen G. Naso, CVA, MBA, a principal in RKL’s Business Consulting Services Group. As a Certified Valuation Analyst, Gretchen has extensive experience in general and family limited partnerships as well as valuations for finance reporting, purchase price allocation and gifting and estate tax purposes.

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Posted on: August 4th, 2013

PA Budget 2013-2014 Tax Implications for Businesses and Individuals

The 2013-2014 PA Budget will have a more widespread impact on businesses and individuals throughout the Commonwealth, with some noteworthy changes to the tax code introduced in the form of several bills. While the $28.3 billion spending plan was approved by the General Assembly and signed by Governor Tom Corbett on June 30, several bills were signed July 9 including the General Fund Budget bill (HB 1437), the Tax Reform Code bill (HB 465) and the Public Welfare Code bill (HB 1075). The Fiscal Code bill (SB 591) is still awaiting action.

RKL PA Budget Recap 2013-2014

The 2013-2014 PA Budget will have a widespread impact.

The plan spends about $28.3 billion, or $645 million (2.3) percent more than the 2012-2013 budget. The General Operating Budget calls for spending of $67 billion, including an additional $11 million for the continuation of the Department of Revenue’s Technology and Modernization project. Absent from the final budget agreements are any of the “Big 3” legislative initiatives – pension reform, liquor privatization and transportation funding – that Governor Corbett had been seeking.

Corporate Tax Changes of Significance (under House Bill 465)

  • Capital Stock Tax – Delay of the complete phase-out. Instead of the planned reduction to 0% in 2014, the tax will be imposed at.89% for 2013 (no change); .67% for 2014, .45% for 2015 and (we’ll see) 0% in 2016. [effective tax year 2014]
  • Board of Finance and Revenue reformation to a three-member tribunal. Two members will be appointed by the Governor and confirmed by the Senate. The Treasurer will appoint the third member and retain administration of the Board. The new process had the support of the Department of Revenue and is intended to expedite the appeal process, provide greater transparency and allow compromise authority. [effective April 1, 2014]
  • Corporate tax expense add-back provision to require add-backs of intangible expenses (patents, royalties, insurance, trademarks, royalties, etc.) between related parties unless the purpose of the transaction in not tax avoidance and the transactions were made at arm’s-length. [effective 1/1/2015 ]
  • Change to corporate tax sales factor apportionment formula requiring market based sourcing for sales of services. [effective 1/1/2014]
  • Guidance on sales tax apportionment for satellite TV service receipts. [effective 1/1/2014]
  • Increase to the cap for the NOL deduction
    • $4 million or 25% of Taxable income for 2014. [effective 2014 ]
    • 5 million or 30% of Taxable Income for 2015. [effective 2015 and thereafter]
  • An additional $500 non-filer penalty for C-Corporations. [effective 1/1/2014 ]

Personal Income Tax Changes

  • A $5,000 start-up business deduction. [effective 1/1/2014 tax year ]
  • Intangible drilling cost deduction
    • Taxpayers can amortize over 10 years or expense 1/3 of costs as defined by IRC Sect. 263. [effective tax year 2014]
  • Elimination of the resident credit for taxes paid to foreign countries. [effective 1/1/2014]
  • Enhanced provisions for enforcement of pass-through entities. [effective 1/1/2013 ]
    • Requires partnerships to maintain complete record of all partners.
    • Required withholding of taxes at the entity level.
    • Assessment of taxes owed at the entity level.
    • Requires Trusts and Estates to withhold taxes from non-resident beneficiaries.
    • Requires non-resident Trusts and Estates with resident beneficiaries to file a report
  • Elimination of several “check-off” boxes. [effective tax year 2014 ]
  • Creation of two new “check-off” boxes. [effective tax year 2014]
    • Children’s Fund Credit
    • American Red Cross Credit

Sales and Use Tax Changes

  • Tax exclusion for the repair of fixed-wing aircraft. [effective 90 days after passage ]
  • A reduction of the appeal period from 90 to 30 days.
  • A repeal of the local (county) receivers of use tax.
  • A repeal of the Call Center Tax Credit. [effective 7/1/2013 ]
  • A requirement for the Department of Revenue to draft a report of state of compliance with regard to the Federal Marketplace Fairness Act. [effective 90 days after passage of federal legislation]

Other Important Changes Included in H.B. 465

  • A significant change to the Bank Shares Tax [effective CY beginning 1/1/2014]
    • Replaces the six-year average valuation formula with a one-year valuation formula.
    • A reduction of the tax rate from 1.25% of Total Equity Capital to .89% of Bank Equity Capital.
  • Elimination of the Inheritance Tax for small business (on transfer of business assets among family members). [effective 7/1/2013]
  • An elimination of the 89/11 loophole for Realty Transfer Taxes. [effective 1/1/2014]
  • Realty Transfer tax exemption related to Volunteer Fire and Emergency Organizations. [effective immediately]

Tax Credits

  • The bill establishes the City Revitalization and Improvement Zones (CRIZ) program. [effective immediately]
  • Changes to several existing tax credit programs.
  • Technical changes to the Film Production Tax Credit. [effective 7/1/2013 ]
    • Changes to the Educational Opportunity Scholarship Tax credit related to eligibility for students who live in non-approved districts. [effective 7/1/2013 ]
    • Repeal of Coal Waste Removal and Ultraclean Tax credit [effective immediately]
  • A new Mobile Telecommunications Broadband Investment tax credit [effective tax year 2014]
  • A new Innovate in Pennsylvania tax credit. [effective immediately]

Senate Bill 591, the Fiscal Code bill, is currently pending in the House which will not reconvene until September. Contained in the Fiscal Code bill is:

  • A repeal of the Corporate Loans Tax. [effective 1/1/2014]
  • A prohibition against the use of contingent fee auditors.
  • An e-filing mandate for 3rd party preparers.
  • A requirement of electronic payment of corporate tax payments in an amount of $1,000 or more (formerly $10,000).

Contributed by Frank Tobias, CGFM, (ftobias@rklcpa.com) a principal in RKL’s Tax Services Group. He specializes in the area of multi-state planning and compliance with extensive experience in all areas of Pennsylvania taxation. Frank brings a well-rounded perspective on state and local tax issues with his experience in both public accounting and his previous professional experience overseeing the administration of PA Corporation taxes for the PA Department of Revenue.

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