August, 2014 | RKL LLP
Posted on: August 25th, 2014

Executive Compensation Update

The new OMB max compensation limit has been established at $487,000. The limit is for contracts entered into after June 23, 2014. As a response to the change, the National Compensation Matrix (NCM) has been updated to flag comps that are in excess of the new threshold.  A footnote will appear at the bottom alerting the user that the comp limit may have been surpassed and tells the user to check the date of their contracts for possible disallowance.

As in previous years, no serious conversation was had to add a geographic adjustment to the matrix. The new limit of $487,000 can be reached by two positions (CEO/President at about $28,700,000 of top line revenue and EVP at over about $440,000,000 of top line revenue).  The index was adjusted again for 2014 based on responses to executive compensation surveys. The NCM group expects to index the matrix for inflation for 2015.

Have questions about FAR cost principles or other issues impacting your A/E firm? Contact Keith Eldredge, partner, at 717.843.3804 or

PCC Accounting Financial ReportingContributed by Hunter Mink, CPA, ( 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 25th, 2014

Grey Areas: How to Interpret FAR Cost Principles to Stay on the Right Side of DOT Auditors


When claiming expenses as part of a project with the state or federal government, A/E firms need to be diligent about documentation.

When it comes to doing business with State and Federal governments, there are many guidelines about what types of costs can and cannot be claimed on these contracts.  Most of these guidelines are laid out in FAR Part 31, specifically 31.205. However, when it comes to applying these principles, many states will differ in their interpretation.

Without debate, all state DOTs and Federal Government Agencies will agree that the costs of alcohol are unallowable no matter what.  But, that may be where the consistencies stop.  For instance, let’s say you treat your employees to breakfast.  Some state DOTs will take the position that the meal is unallowable because an employee should provide their own breakfast and it’s not reasonable for you to pay for it.  But, if as part of that breakfast, you are gathering your employees to report on company performance, most states would agree that the costs are allowable.

Another area that is an area of debate is travel, specifically, first class airfare costs.  You may encounter some states that see first class airfare and automatically disallow the costs.  But, what if the use of coach or economy class caused you significantly delays in travel and circuitous routing that wouldn’t allow you to get to your destination in a timely manner?  Then the cost may be justified.

How do you protect your firm and try to achieve consistency?  The best thing you can do is keep appropriate documentation.  Any time you wish to treat your employees, make sure to provide an explanation on the expense report and keep as much detail about the gathering as possible (e.g., an agenda and list of attendees); and as long as it is not an everyday occurrence it should be considered reasonable to want to take care of your employees to keep morale high.  On the off chance you do have to use first class airfare, make sure it’s documented that the coach/economy class airfare would have taken too long and it was time sensitive that you get to your destination.

Overall, the best bet is to be consistent in the way your firm accounts for its expenses and maintain sufficient documentation for the DOT auditors to understand your firm’s justification for those costs.

Have questions about FAR cost principles or other issues impacting your A/E firm? Contact Keith Eldredge, partner, at 717.843.3804 or

Contributed by Marco Angelone, CPA, staff accountant, who brings experience working with government contract audits with a focus on compliance with FAR and cost accounting standards. 

Posted on: August 19th, 2014

The Little-Known Deduction Your Construction or A/E Firm Can’t Afford to Miss

Section 199 Deduction for Construction Companies

Part of the American Jobs Creation Act of 2004, Section 199 offers often overlooked tax savings opportunities for construction and A/E firms.

Now I know that there are few things more exciting than quoting a section from the Internal Revenue Code in the title of an article, but there is a great opportunity to reduce your tax liability that should not be overlooked. The American Jobs Creation Act of 2004 enacted Section 199, a tax deduction related to income attributable to domestic production activities. While many associate this deduction with manufacturers, it also applies to construction of real property, as well as architectural and engineering services.

A taxpayer may claim a deduction against gross income equal to 9% of its qualified production activities income (QPAI), limited by the amount of its taxable income (also note that the Section 199 deduction is limited to 50% of the company’s W-2 wage expense). QPAI is calculated by subtracting cost of goods sold and other direct expenses from the company’s domestic production gross receipts.

 Construction. Construction of real property in the U.S. is eligible for the Section 199 “manufacturing deduction.” The real property may consist of residential or commercial buildings; permanent structures, including land improvements and infrastructure. Real property does not include machinery unless it is a “structural component.” Examples of businesses conducting eligible construction activities are commercial and institutional building construction contractors; residential remodelers, foundation, structure and building exterior contractors; structural steel and precast concrete contractors; and electrical, plumbing, heating and air-conditioning contractors.

Engineering and architecture. Engineering and architectural services are eligible for the Section 199 “manufacturing deduction” only if these services are performed in the U.S. for real property construction projects in the U.S.  Eligible engineering services include consultation, planning, design, investigation, evaluation and supervision of construction. Eligible architectural services include consultation, planning, design, and supervision of construction.

How can we help?

  1. Determine whether you business meets the tests to qualify for the deduction
  2. Identify and maximize the gross receipts that qualify for this tax benefit – Domestic Production Gross Receipts (DPGR)
  3. Properly identify cost of goods sold associated with DPGR
  4. Properly identify direct costs associated with the DPGR
  5. Determine what portion of indirect costs need to be allocated to DPGR

Have questions? RKL’s Real Estate Development & Construction Services Group is here to help assist your with the Section 199 Deduction. Contact your RKL advisor for more information.

Weidman_webContributed by J. Andrew Weidman, CPA, MST, a partner in RKL’s Tax Services Group and leader of the firm’s Real Estate Development & Construction Services Group. Andy has more than 30 years experience in tax planning, specializing in closely-held entities, the real estate industry and tax planning for mergers, acquisitions and sales of businesses.


Posted on: August 13th, 2014

RKL Named Nation’s Fastest-Growing CPA Firm by Inside Public Accounting


Central and Eastern PA-based CPA and business consulting firm RKL was named the nation’s fast-growing CPA firm in August.

LANCASTER, PA (August 12, 2014) – A regional CPA and business consulting firm with deep roots in Central and Eastern Pennsylvania is again earning national attention with the release of Inside Public Accounting’s (IPA) “2014 IPA 100 Firms.” The industry publication recently ranked Reinsel Kuntz Lesher (RKL), Certified Public Accountants and Consultants the fastest-growing firm in the U.S.

The ranking, based on its 21.8% growth, underscores the successes of the firm, which include becoming the dominant CPA firm in the York, PA market in 2012 and opening a new office in Harrisburg, PA to expand its tax, accounting and business consulting services into the Capital Region. RKL was also named 2nd out of the Top 10 Fastest Growing Firms Three Years Running by IPA.

The firm climbed from 84th in 2013 to the 73rd position in 2014 in the IPA survey when ranking firms by overall net revenue and was ranked the 17th largest firm in the Northeast Region, a position primarily occupied by metropolitan-based firms.

The IPA Top 100 rankings follow a survey released earlier this year from another industry publication, Accounting Today, which named the firm 9th on its list of “Pacesetters in Growth.”

“RKL is completely focused on the success of our clients – which range from small, home-based businesses to leading manufacturing operations – and the communities we’re privileged to serve. When they succeed, we succeed,” commented Edward W. Monborne, RKL CEO.

The firm has offices located in Harrisburg, Lancaster, Reading and York and employs 292 full- and part-time team members, as well as 32 seasonal employees and interns. RKL has experienced growth in various services areas including audit, business valuations, cost segregation, forensic/fraud accounting, litigation support, mergers and acquisitions, international tax and others. Additionally, RKL’s client base saw growth in the manufacturing/distribution, nonprofit, construction/real estate development and government sectors, among several others.

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Posted on: August 12th, 2014

Achieve Higher Levels of Productivity with Board of Director Committees

Creating committees focused on specific areas of responsibility allows boards to remain high-level and strategic.

Creating committees focused on specific areas of responsibility allows boards to remain high-level and strategic.

If your Board of Directors is functioning at a high level, chances are, its members are doing important work supporting your leadership.  The strategic advice and feedback, oversight on the company’s financial performance and recommendations on major decisions are all high powered activities which demand a lot of resources.  At a certain point in your board’s life cycle, it may make sense to consider creating board committees.

While required for public companies, board committees can play an important role in a privately-held company by helping the Board “stay nimble.” Each committee has specific responsibilities and focuses on particular areas.  Much of the logistical work required for decision-making is done within the committees at meetings held between board meetings. The committee presents a report and/or recommendations to the full board at regularly board meetings. This structure frees up meeting time for important conversations on issues such as strategy, innovation and growth.  Committees also allow you to get the most from your director’s experience, knowledge and skill sets.

Typical board committees for private companies can include the following, based on your company’s size and operations:

  • Finance/Audit Committee. The finance/audit committee provides financial oversight and helps to ensure the integrity and reliability of financial information.  Typical review areas can include budgeting, financial planning, financial reporting, internal controls and accountability.  These committees can be particularly beneficial to private companies with shareholders who are not involved in daily operations.
  • Compensation Committee. The compensation committee provides oversight of the Company’s compensation plans, including equity compensation, and in some cases may be directly involved in making recommendations for the compensation of the CEO and the senior management team. The compensation committee can help ensure that the company’s compensation plans are appropriate to allow it to attract and retain the best talent in the market.
  • Governance Committee. The governance committee can be responsible for recruiting and nominating new board members, setting the board meeting schedule, and a host of other “self governing” issues for a board.  This is typically accomplished in close coordination with the CEO.

Boards of Directors in a privately held company can create a competitive advantage.  Directors may offer important business connections and supplement internal management skills in ways that can help catapult the company to the next level.  However, just as your company has grown, evolved and become more sophisticated, so will your board.  Creating board committees could be a significant strategic decision, capable of bearing long-term implications for financial and operational success.

Looking for professional help determining whether your company is structured for success? RKL offers a wide range of resources and expertise in the areas of strategic planning, succession planning, benchmarking, mergers and acquisitions and more. Contact Paula K. Barrett, CPA/ABV, CVA, partner and leader of RKL’s Business Consulting Services Group, at or 610.376.1595.

gretchen_2Contributed by Gretchen G. Naso, CVA, MBA, a principal in RKL’s Business Consulting Services Group. A Certified Valuation Analyst, Gretchen has extensive experience in general and family limited partnerships and valuations for financial reporting, purchase price allocation and gifting and estate tax purposes.



Posted on: August 5th, 2014

Got Unclaimed Property? How to Stay in Compliance with PA’s Unclaimed Property Rules

unclaimed property rules in Pennsylvania

Not properly reporting unclaimed property – such as unclaimed paychecks or unused gift certificates – can get you in hot water with the Commonwealth.

It happens: a vendor forgets to cash a check, a gift certificate is never claimed or a former employee neglects to cash her paycheck. At some time or another, most businesses will have to deal with unclaimed property. What’s important is that you’re aware of and in compliance with Pennsylvania’s Unclaimed Property Act. Failing to do so can have some pretty severe consequences, from fines to jail time.

What exactly is “unclaimed property?”

Any financial asset such as cash, stocks, dividends, unclaimed insurance benefits, activated gift cards and items abandoned in safe deposit boxes that have been left with a “holder” – likely a business – without activity or contact from the owner for a specified dormancy period ranging from two to fifteen years. Several other criteria for the residency of the owner also apply. The Unclaimed Property Act does not require holders to search for lost owners; however, holders are encouraged to make a reasonable effort to locate owners prior to the expiration of the holding period.

What do “holders” need to do to stay in compliance?

Holders of unclaimed property must report to the State Treasurer on or before April 15 of the year following the year in which the property first became subject to the custody and control of the Commonwealth. Any amount of unclaimed property is reportable to the Treasury; however, the Treasury does not require the name and address of an owner in report filings if the aggregate amount per owner is $49.99 or less.  Holders reporting ten or more properties are required to file electronically.

Unclaimed property reports must include:

  • Name and last known address of owner
  • Description and amount of property
  • Date the property became payable or found to be without a rightful owner
  • Date of the last transaction with the owner of the respective property

When preparing the unclaimed property for delivery to the Treasury, be sure to keep property separated by owner and properly labeled.  Form AP-1 must be completed and included with the property being delivered, in addition to Form TUP-40 for those turning over tangible property items.

What are the consequences of failing to comply with the Pennsylvania Unclaimed Property Act?

Failure to file required reporting will result in interest, calculated at 12 percent per annum from the reporting due date, fines of one hundred dollars per day for each day past the filing deadline (not to exceed $10,000) and, possibly, imprisonment of up to 24 months.

Have unclaimed property and are out of compliance?  

Fortunately, the Pennsylvania Treasury offers a Voluntary Disclosure Agreement that can get you in compliance and up-to-date with annual filings. Best of all, by doing so, you’ll receive a waiver of penalties and interest.

What can I do to ensure I’m complying with the Pennsylvania Unclaimed Property Act in the future?

Conduct yearly reviews for dormant accounts to identify unclaimed property and make appropriate annual filings.

If you are holding unclaimed property, now is the time to take action to protect yourself and your business.  RKL can help you get into compliance – contact your RKL advisor today or visit the PA Department of Treasury’s website to get more details.

akers_webContributed by Lindsey Akers, CPA, a supervisor in RKL’s Small Business Services Group with more than eight years experience helping small business owners and their management teams meet their financial reporting and individual and corporate tax return preparation needs.