August, 2016 | RKL LLP
Posted on: August 31st, 2016

RKL Appoints Director of Information Technology

Pamela M. Mahoney, RKL IT DirectorPRESS RELEASE

YORK, PA (August 31, 2016) – Reinsel Kuntz Lesher LLP (RKL), Certified Public Accountants and Consultants, today announced the hiring of Pamela M. Mahoney as the firm’s Director of Information Technology.

As Director of IT, Mahoney is responsible for the overall planning, organizing and execution of all functions and staff for RKL’s internal IT department. She also oversees the support and maintenance of existing applications and development of new technical solutions for the firm.

Mahoney comes to RKL with more than 15 years of IT experience, specializing in the areas of support, procurement and asset management. Most recently, she served as a Senior Manager for IT at a regional accounting firm.

Mahoney is a graduate of Eastern University in St. Davids, PA, where she earned her B.A. in Management of Information Services. She currently resides in Springfield, PA, with her husband Andrew.

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Posted on: August 30th, 2016

Changes Ahead for Not-For-Profit Financial Reporting

Changes ahead for not-for-profit financial reportingOn August 18, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, aimed at making financial reporting less complex for not-for-profits and more user-friendly for entities relying on this data, such as donors, grantors or creditors.

The issuance of this ASU completes Phase I of FASB’s project to look at the presentation of not-for-profit statements and comes in response to stakeholder feedback to FASB’s 2015 proposal to uncouple not-for-profits from the reporting model used by for-profit entities. It improves current requirements related to net asset classifications, liquidity assessment, expense reporting consistency and methods used to present cash flow from operations. Below, we take a more detailed look at how each of these areas will change from current practices.

Simplified Net Asset Reporting and Classification

Currently, not-for-profits must present amounts for three classes of net assets (unrestricted, temporarily restricted and permanently restricted) on the face of the statement of financial position. To reduce complexity, this ASU streamlines these three net asset categories into two (net assets with donor restrictions and net assets without donor restrictions) for which not-for-profits must report amounts on the face of their statements of financial position.

For net assets with donor restrictions, the new ASU requires disclosures in the notes to financial statements regarding their composition, as well as amounts and purposes of governing board designations. When donor stipulations are not available, the ASU requires the placed-in-service approach for reporting expirations of restrictions on gifts of assets to be used to acquire or construct a long-lived asset. This approach reclassifies any amounts from net assets with donor restrictions to net assets without restrictions for such long-lived assets that have been placed in service as of the ASU’s effective date, as discussed below. This change is intended to improve the comparability and usefulness of classes of net assets.

The ASU also mandates that underwater endowment funds be included among net assets with donor restrictions, the very notion of which may contradict Pennsylvania trust laws. It also requires not-for-profits to disclose their policies concerning appropriation from endowment funds, their fair value, the original gift amounts to be maintained, and the aggregate amount by which the funds are underwater.

More Context Around Liquidity

This ASU requires more qualitative information in notes to the financial statements related to how a not-for-profit manages its liquid financial resources available to meet general expenditure obligations within one year of the date of the statement of financial position. This disclosure must also explain how net asset restrictions affect the availability of financial assets at the date of the statement of financial position to meet short-term financial obligations. This additional information will be useful in understanding limits on how, and during what time frame, resources can be used.

Expense Reporting Consistency

In addition to reporting expenditures by functional classifications, as currently required (i.e. program and supporting activities), the ASU also requires reporting by natural classification. This information must be presented in one location in the financial statements and provide an analysis of how the nature of these expenditures relate to their functional classifications. In addition, the methods used to allocate costs among functional classifications must also be disclosed in the financial statements.

Another expense reporting change concerns investment returns. While investment returns will still be presented net of investment expense, the ASU limits allowable netted expenses to external and direct internal investment expenses and no longer requires their disclosure. This netted expense limitation provides a more comparable measure of returns across all not-for-profits, regardless of how their investment activities are managed.

Methods to Present Cash Flow Statements

The net amount for operating cash flows will still be presented on the face of the statement of cash flows under either the direct or indirect method. However, if using the direct method, a not-for-profit is no longer required under this ASU to present or disclose the indirect method (reconciliation).

When Do These Changes Take Effect?

This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018.

Early adoption is permitted; however, initial adoption of the ASU is only for an annual fiscal period or for the first interim period within the fiscal year of adoption. The nature of any reclassifications or restatements in the initial year of adoption and their effects on the change in the net asset classifications for each fiscal period presented should be disclosed in the financial statements in the initial year of adoption. The requirements of the ASU should be applied on a retrospective basis in the year of initial adoption.

Questions about how to prepare for these reporting changes? Contact Douglas L. Berman, Not-for-Profit Industry Group leader.

Andrew D. Kehl, CPA, Manager in RKL's Audit Services GroupContributed by Andrew D. Kehl, CPA, manager in RKL’s Audit Services Group. Andrew has accounting and auditing experience serving clients in a wide variety of industries including nonprofit, healthcare and government.

 

 

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Posted on: August 25th, 2016

RKL Appoints Business Development Manager

Christopher M. Perillo, MBA, RKL's Business Development ManagerPRESS RELEASE

WYOMISSING, PA (August 25, 2016) – Reinsel Kuntz Lesher LLP (RKL), Certified Public Accountants and Consultants, today announced that Christopher M. Perillo, MBA, has joined the firm as Business Development Manager.

In his new role, Perillo will leverage RKL’s technical expertise and deep industry experience to implement solutions that deliver financial partnership value to the firm’s current and potential clients.

Perillo has more than 13 years of client relations and business development experience, working with companies ranging from closely held family entities to Fortune 1000 enterprises. He has a proven track record of assisting clients with recapturing lost productivity, refocusing on long range strategic solutions and increasing efficiencies. Prior to his time in business development, Perillo managed U.S. operations for a global management consulting organization.

Perillo holds a B.A. from the University of Delaware and received his M.B.A. from Penn State University. He resides in Phoenixville with his wife and their three children. Perillo has been active as a soccer coach for more than 20 years, and also enjoys cycling, fishing and golf.

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Posted on: August 23rd, 2016

Days Numbered for Common Estate Planning Technique

Days Numbered for Common Estate Planning TechniqueRegulations that would restrict the use of a common estate planning technique are moving through the approval process in Washington, D.C. The U.S. Treasury Department and IRS earlier this month issued proposed regulations regarding a technique used to transfer interests in family businesses at a reduced value. These proposed changes seek to prevent undervaluation of transferred interests, but will result in the elimination of a significant gift and estate tax benefit.

What is the current practice for business transfers?

Under the current laws, transfers by an individual or their estate in excess of the $5.45 million exemption amount are subject to estate and gift tax. For married couples, the exemption amount is $10.9 million. The estate and gift tax applies at a top rate of 40 percent on values in excess of these exemption amounts, so the elimination or reduction in discounts applied to ownership interests will have a sizable impact on the gift or estate tax due.

How would these regulations impact my estate plans?

The proposed regulations under Internal Revenue Code Section 2704 would severely limit the applicability of sizeable discounts commonly applied to ownership interests in Family Limited Partnerships (FLPs) and Family Limited Liability Companies (FLLCs) for estate, gift and generation-skipping transfer tax purposes. Under the new regulations, the determination of fair market value for interests transferred via FLPs and FLLCs would disregard certain restrictions in operating and partnership agreements. This would essentially eliminate the valuation discounts for lack of control and lack or marketability, which often can result in tax-friendly reductions ranging from 20 to 50 percent.

When will these regulations take effect?

The proposed regulations are open for public comment, for a period of 90 days after their initial release on August 2, 2016. The regulations would then take effect 30 days after finalization by the U.S. Treasury. It is important to note that these regulations will be applied prospectively, not retroactively, so there is still time to take advantage of the discounts up until the effective date.

RKL’s Business Consulting Services Group will continue to monitor these proposed regulations. Individuals or businesses in the midst of estate planning projects should consider accelerating their timelines to take advantage of these discounts while they are still fully available. Have questions as to how this may impact your business ownership transfer plans? Contact your RKL advisor or one of our local offices today.

Paula K. Barrett, CPA/ABV, CVA, CGMAContributed by Paula K. Barrett, CPA/ABV, CVA, CGMA, partner in RKL’s Business Consulting Services Group. Paula specializes in business valuation and litigation support services, assisting clients in the acquisition or sale of closely-held businesses and general business planning services. She also has experience in tax-exempt bond financing services, including bond verifications and arbitrage rebate computations.

 

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Posted on: August 16th, 2016

Taxes and Fees for Pennsylvania’s New Medical Marijuana Industry

Taxes and fees for medical marijuana in PennsylvaniaIn May 2016, Pennsylvania became the 24th state to legalize marijuana for medical use. The Commonwealth’s Medical Marijuana Act (MMA) authorizes use of the drug to treat 17 qualifying medical conditions, with an estimated 200,000 individuals eligible for this new treatment. The Pennsylvania Department of Health, responsible for the program’s administration, expects to have the Medical Marijuana Program developed and implemented within the next two years, with temporary regulations out before the end of 2016.

The Department of Health will oversee the administrative and operational aspects of the program, such as physician licenses and annual renewal of patient ID cards, with the input and guidance of a 15-member Advisory Board. From a financial perspective, what impact will medical marijuana have on state coffers? The MMA outlines a number of fees and taxes, which we highlight below.

Application fees

The MMA provides for 25 combined grower and processor permits, with requirements for detailed record keeping, “seed-to-sale” tracking of the product and strict security measures including surveillance. Each application for a grower/processor permit will cost $10,000. Permits may be issued to no more than 50 dispensaries, which can have three locations each, bringing the number of total dispensaries to a 150 maximum. There is a $5,000 fee to apply for a dispensary permit. These initial application fees are non-refundable.

Registration fees

The Commonwealth will also charge a one-time registration fee – $200,000 for grower/processors and $30,000 for each dispensary location. These registration fees are refundable if the permit is not granted.

Tax on medical marijuana

A grower/processor will pay a 5 percent tax on the sale of medical marijuana to a dispensary. The MMA prohibits this tax from being passed onto the buyer.

Patient ID card fee

The MMA establishes a $50 fee to obtain a patient ID card or a caregiver ID for patients under the age of 18. This fee may be waived or reduced by the Pennsylvania Department of Health if financial hardship is demonstrated on the application.

Citizens and businesses interested in participating in Pennsylvania’s Medical Marijuana Program must adopt a “wait and see” approach. With patient advocates, law enforcement officials, government leaders and Advisory Board members closely monitoring this development and rollout of this program, there are sure to be alterations and adjustments along the way. RKL’s State and Local Tax team will continue to monitor these and all state tax and fee developments. Feel free to contact one of our local offices with any questions related to state taxation issues.

Jason C. Skrinak, CPAContributed by Jason C. Skrinak, CPA, State and Local Taxes (SALT) Practice Leader for RKL’s Tax Services Group. Highly regarded throughout the region for his deep knowledge and expertise in SALT consulting, Jason has significant experience representing taxpayers before Pennsylvania’s Board of Appeals and Board of Finance and Revenue.

 

 

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Posted on: August 11th, 2016

RKL Rises Among Nation’s Top Accounting Firms

RKL rises among nation's top accounting firmPRESS RELEASE

LANCASTER, PA (August 11, 2016) – A regional leader in financially oriented professional services has once again attracted national attention. Reinsel Kuntz Lesher LLP (RKL), Certified Public Accountants and Consultants, has claimed the 67th spot on the Inside Public Accounting (IPA) “2016 Top 100 Firms” list.

“This national recognition is a strong affirmation of our team’s focus on finding new ways to help our clients succeed and overcome an increasingly complex range of business challenges,” RKL CEO Edward W. Monborne said.

RKL’s position on the “2016 Top 100” list, based on the firm’s 11.2 percent growth, is two spots higher than its 69th ranking last year. Since first cracking the IPA Top 100 in 2012, RKL has seen a consistent increase in its ranking each year.

2016 is proving to be another year of growth and innovation at RKL. The firm recently expanded its Operational Consulting and Human Resources Consulting practices, and its IT consulting subsidiary, RKL eSolutions, continues to experience coast-to-coast growth, most recently through the acquisition of Boston-based Baesis, Inc.

IPA’s Top 100 ranking continues the trend of industry recognition for RKL, with another publication, Accounting Today, listing the firm 18th among its 30 “Pacesetters for Growth” earlier this year. The annual IPA Top 100 round-up is among the longest-running ranking of the nation’s largest accounting firms. Learn more and read the full ranking here.

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Posted on: August 9th, 2016

OPEB Liabilities Loom Large for Municipal Budgets

OPEB liabilities loom large for municipal budgetsMunicipal leaders in recent years have grappled with mounting underfunded liabilities for public employee pension plans, but there is an even more pernicious fiscal challenge just around the bend. “Other post-employement benefits,” or OPEBs, are health or life insurance or other post-employment benefits provided to employees after retirement, and these liabilities have largely been neglected by municipalities. New updates to accounting standards will bring OPEB obligations onto municipal books, forcing local leaders to reckon with this funding liability.

How OPEB costs are currently handled

Beyond paying the current year’s premiums on a “pay as you go” basis and reporting them in financial statement notes, OPEB liabilities are often ignored. Many municipalities have not made the actuarially recommended contribution to fund liabilities incurred, and many have not even established an OPEB trust. With the change in accounting standards and increased financial reporting, there are clear financial repercussions for municipalities that have neglected to consider OPEB obligations.

What’s changing?

In June 2015, the Governmental Accounting Standards Board (GASB) approved the issuance of the first new statements related to OPEB in nearly a decade. GASB statements No. 74 and No. 75 upend prior standards with the unprecedented requirement that governments now report OPEB liabilities on the face of their financial statements.

When do these changes take effect?

Statement No. 74 is effective for fiscal years beginning after June 15, 2016, and Statement No. 75 takes effect with fiscal years beginning after June 15, 2017. However, municipalities should begin to adapt as early as possible to the financial repercussions of this accounting change.

What will this mean for my municipality’s financial situation?

Generally speaking, many OPEB plans are completely unfunded. For plans that are even partially funded, there is immense pressure on OPEB plan investment returns to keep pace with the health care inflation rate. The “pay as you go” approach pushes the cost of benefits promised to and earned by current employees down the road for future generations to foot the bill.

Additionally, bringing unfunded OPEB liabilities to the forefront has the potential and likelihood to drag down a municipality’s credit rating. A lower credit rating could result in higher borrowing costs, which are ultimately passed on to the taxpayers.

What can municipal leaders do now to prepare for this change?

Local governments should act now to account for OPEB liabilities. Here are tactics to help municipal leaders prepare for this new liability on their books:

  • Set up an irrevocable OPEB trust: Governments can create an irrevocable trust to place assets that are restriced for use solely to pay OPEB benefits. Separate from other municipal funds and legally protected from creditor claims, OPEB trust assets are a dedicated pool of resources to meet these obligations.
  • Understand the promises made: Many governments do not realize the long-term financial impact and cost of benefit promises made. Meet with your financial professionals to review and discuss the potential financial burden of OPEB and related funding requirements.
  • Plan ahead: In addition to funding promises already made, consider the financial impact of future promises. Before making the commitment to provide new or additional benefits to employees, discuss with your actuaries and accountants the impact these benefits could have on your municipality’s financial statements.

OPEB shortfalls can have cascading impact throughout a municipality, from property taxes to credit ratings to liquidity issues. While bringing these largely ignored liabilities onto the books presents a daunting challenge for municipal leaders, required OPEB accounting changes are also an opportunity to raise funding concerns and to develop a plan to address the costs of providing promised benefits.

Mark S. Zettlemoyer, CPA, CFEContributed by Mark S. Zettlemoyer, CPA, CFE, Partner in RKL’s Audit Services Group. Mark has nearly three decades of public accounting experience serving local governments, not-for-profit organizations and a broad range of corporate clients. He also leads RKL’s Government Industry Group. Mark served for seven years on the board of a municipal authority and has served as a township supervisor, experiences which provide him insight into the unique challenges local governments face.

 

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Posted on: August 2nd, 2016

Maximize CapEx Benefits with Lean Six Sigma

How to use Lean Six Sigma to maximize benefits of capital expendituresThe weather is hot and humid right now, but business owners and financial executives know that budget season is just around the corner. An important part of the budgeting process is the strategic conversations around capital expenditures (CapEx). Priority should be given to CapEx investments that foster growth, increase margin and improve customer service and quality performance, and it is critical that these investments generate the expected payback.

Evaluating CapEx investments from a Lean Six Sigma perspective can help ensure the desired return on investment (ROI). Below we look at two common areas for CapEx investment and highlight lean considerations that can help your business achieve its goals.

Automation and New Equipment

Whether on the shop floor, in the office or in the field, everyone likes the idea of task automation and increased efficiency. The cost-benefit for investments in robots, automation or new equipment is typically justified by the faster processing time and lower workforce costs; however, taking a Lean Six Sigma perspective prompts the analysis of several aspects that can better capture the true ROI of the proposed equipment.

Ask yourself the below questions; if the answer to any is “no,” it is likely that capacity can be increased without a capital investment. The more “no” responses, the greater the possibility for capacity growth with the existing equipment.

  • Is the current operation, process or department as efficient as it can be now?
  • Is it capable of consistently running at target capacity?
  • Are delays and downtime minimal?
  • Has all excess motion and processing been eliminated to minimize cycle time?
  • Has changeover time been shortened?
  • Is it capable of doing a quality job the first time?
  • Is it scheduled based on demand and not forecast?

Another lean consideration is to take a value-stream view of the potential investment. Step back and ask the following questions to determine if the capital expenditure will contribute to your company’s overall value:

  • Will the new automated equipment allow you to actually ship more product, take more orders and/or cut customer lead time?
  • Will overall output increase at the end of the line, or is only the throughput of the workstation increasing?
  • Will the automation create more work-in-progress, causing a new bottleneck to pop up downstream?
  • How is the higher capacity of the new equipment being balanced with upstream and downstream processes to ensure higher total output?

Facility Expansion

Similar to equipment investments, facility expansion investments require the same considerations like cost, implementation time, staff attention, risk, opportunity, etc. Whether you run a small business or a Fortune 100 company, planned expansions could be unnecessary if significant gains in free space can be created from existing facilities, so be sure to ask these questions before expanding:

  • What has been done to streamline material and people flows in the current facility?
  • Has a critical analysis of space demand from stored material and parts, WIP and aged inventory been completed?
  • Has 5S, Point of Use Storage and Cellular Flow been fully implemented?

If the expansion is justified by “yes” answers to these questions, take it a step further and ask more questions from the lean perspective to optimize performance of the new facility:

  • Is the new layout incorporating lean concepts to minimize footprint, travel distances, reduce handoffs and integrate smoothly with the existing facility?
  • Is the on-going operating cost (OpEx) and total cost of ownership going to be lower because of the new, efficient layout?

Lean helps maximize CapEx benefit

These two categories demonstrate the value of evaluating potential CapEx investments from a lean perspective to ensure maximum benefit. After all, re-investment of your company’s hard-earned profits or new investments should generate immediate, tangible return.

Businesses with questions about how to apply lean considerations to potential CapEx investments should contact me at rpozesky@rklcpa.com or 717.394.5666.

Robert E. Pozesky, RKL Operational ConsultingContributed by Robert E. Pozesky, manager in RKL’s Business Consulting Services Group. Bob specializes in operational consulting, with extensive experience working with clients to execute Six Sigma, lean and organizational development strategies to support growth and performance improvement.

 

 

 

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