INSIGHT Magazine - November December 2010

Nov/Dec 2010

THE MAGAZINE OF THE

Exploring the issues that shape today’s financial world g icpas.org/insight.htm

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34 Recession & the Entrepreneurial SpiritBy Kristine Blenkhorn Rodriguez

38 Make the Case for GreenBy Sheryl Nance NashSell the sustainable concept to the powers that be.

42 Tax Software PrimerBy Daniel DernCPAs have choices...probably more than they thought they had.

16 Social Media Blog StarBy Christine BockelmanThe internet offers infinite space in which to carve out a piece ofblogger stardom.

20 Talent Your Next Tax ProBy Clare FitzgeraldCultivate a new crew of talented young professionals.

24 Education Ph.D.s WantedBy Derrick LillyHigher education is searching for ways to remedy the accountancyPh.D. shortage.

28 Reporting Lease Law LessonsBy Glenn E. Richards, CPA, and Kevin V. Wydra, CPAHow will new lease accounting rules affect your business?

32 Corporate What Should You Ask Your CIO?By Meta L. LevinCIOs have a wish list, of sorts—10 questions they want their CFOsto ask them.

4 First WordA message from the Illinois CPA Society’s President & CEO.

6 Seen & HeardNews bytes, sound advice and practical business tips.

10 Tax Insight All Good ThingsBy Harvey Coustan, CPAA look back on 12 years of tax regulation—and 12 years ofshared thoughts and views as INSIGHT’s tax columnist.

12 Fraud Insight Beware the Holiday SpiritBy Brad Sargent, CPA/CFF, CFE, CFS, Cr.FA, FABFAEbenezer Scrooge—stingy tyrant or misunderstood realist?

14 Retirement Insight Gather & GrowBy Mark J. Gilbert, CPA/PFSAre annuities the right choice for investment growth?

46 Classifieds

46 Advertiser Index

48 Time & TalentA shout out for ICPAS member volunteers.

icpas.org /insight.htm

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Our team unites employers with the right accounting and finance talent for direct hire, temporary and consulting assignments. We look and listen beyond the job description to combine the right skills with the desired experience. To learn more about our dedication to finding the right fit, visit us on the web or call your local office.

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INSIGHT STAFF

Publisher/ICPAS President & CEO Elaine Weiss

Editor-in-Chief/Director of Publications Judy Giannetto

Creative Services Director Gene Levitan

Creative Services Manager Rosa Garcia

Publications Specialist Derrick Lilly

National Sales & Advertising Angie VanGorderYGS Group, 3650 West Market Street, York, PA 17404 P: 800.501.9571 x176 F: 717.825.2171 E: [email protected]

Circulation/Member Services Director Ron Jankowski

Editorial Offices: 550 W. Jackson Blvd., Suite 900

Chicago, IL 60661

ICPAS OFFICERS

Chairperson, Sara J. Mikuta, CPALeaders Bank

Vice Chairperson, Robert E. Cameron, CPACameron, Smith & Company PC

Secretary, Daniel F. Rahill, CPA, JDKPMG LLP

Treasurer, James P. Jones, CPAEdward Don & Company

Immediate Past Chairperson, Lee A. Gould,CPA/ABV, JD, CFE, CFF Gould & Pakter Associates LLC

ICPAS BOARD OF DIRECTORS

Brent A. Baccus, CPA, Washington Pittman & McKeever

William P. Graf, CPA, Deloitte & Touche LLP

Edward J. Hannon, CPA, JD, Freeborn & Peters LLP

John A. Hepp, CPA, Ph.D, Grant Thornton LLP

Cara C. Hoffman, CPA, Blackman Kallick LLP

Geralyn R. Hurd, CPA, Crowe Horwath LLP

Leif J. Jensen, CPA, Leif Jensen & Associates Ltd.

Elizabeth A. Murphy, PhD, CPA, DePaul University

Annette M. O’Connor, CPA, RR Donnelley & Sons Company

Michael J. Pierce, CPA, RSM McGladrey Inc.

J. Bradley Sargent, CPA, Sargent Consulting Group LLC

Edward H. Stassen, CPA, Recycled Paper Greetings Inc.

Reva B. Steinberg, CPA, BDO Seidman LLP

INSIGHT is the official magazine of the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA. Its purpose is to serve as the primary news and information vehicle for some 23,000 CPA members and profession-al affiliates. Statements or articles of opinion appearing in INSIGHT are not necessarily the views of the Illinois CPA Society. The materials and information contained within INSIGHT are offered as information only and not as prac-tice, financial, accounting, legal or other professional advice. Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication. It is INSIGHT’s poli-cy not to knowingly accept advertising that discriminates on the basis of race,religion, sex, age or origin. The Illinois CPA Society reserves the right to reject paid advertising that does not meet INSIGHT’s qualifications or that maydetract from its professional and ethical standards. The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within INSIGHT, and makes no representa-tion or warranties about the products or services they may provide or their accuracy or claims. The Illinois CPA Society does not guarantee delivery dates for INSIGHT. The Society disclaims all warranties, express or implied, and as-sumes no responsibility whatsoever for damages incurred as a result of delays in delivering INSIGHT. INSIGHT (ISSN-1053-8542) is published six times a year, in February/March, May/June, July, August, September/October, No-vember/December, by the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA, 312.993.0393 or 800.993.0393, fax: 312.993.0307. Subscription rates for non-members: $30 US, $40 Canada and interna-tional addresses, $42 Mexico. Copyright © 2010. No part of the contents may be reproduced by any means without the written consent of INSIGHT. Permission requests may be sent to: Publications Specialist, at the address above.Periodicals postage paid at Chicago, IL and at additional mailing offices. POSTMASTER: Send address changes to: INSIGHT, Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA.

FIRST WORDIn yet another year in which our lives and our livelihoodshave been strained by the unpredictable economy, it‘s heart-ening each time the media confirms what we already know—that accounting and auditing are great careers which con-tinue to provide greater opportunities. The Bureau of LaborStatistics predicts that the field will gain the most positions inthe workforce by 2018.

And such positive news couldn’t happen to a better group ofprofessionals. I am always struck by the intelligence, innova-

tion and can-do spirit of our members. In September, more than 900 members volunteeredfor our first CPA Day of Service. Our Young Professionals Group raised nearly $3,000 for theEndowment Fund, and more than 35 conferences held yearly wouldn’t be possible withoutmembers who serve on our taskforces, providing their expertise so we can offer the most up-to-date information on relevant issues. What we accomplish as a Society is the result of thededication and commitment of our members.

One of our most outstanding members in this category is long-time member Harvey Cous-tan, whose final tax column appears in this edition of INSIGHT. We’ve been honored to havehis insightful tax articles gracing the pages of our magazine for more than a decade. Thewealth of tax knowledge he shares was gleaned from an illustrious career.

This former Ernst & Young partner is a past member of the ICPAS Board of Directors, theAICPA Board of Directors, the Internal Revenue’s Service Commissioner’s Advisory Group,and the AICPA (governing) Council. What’s more, Harvey has been distinguished with anArthur J. Dixon Memorial award, the accounting profession’s highest award for tax service,the ICPAS’ 2001 Lifetime Achievement Award, and designation as a DePaul UniversityLedger & Quill Lifetime Associate. Currently, Harvey consults with the National Tax Officeand Great Lakes Economic Unit at RSM McGLadrey on technical, procedural and organi-zational matters. Although he’s going to be moving on from his writing role for INSIGHT,we’re fortunate to have Harvey as a member and friend of the Society.

Time and space keep us from recognizing everyone who contributes to the vitality of thisSociety. Please know that we are grateful to all of you who actively participate in our efforts.

The daily news always seems to focus on the negative. Focus on the positives. You’re a partof an organization filled with great people doing good things and in a great profession poisedto grow in the years ahead.

Our sincere thanks to all of you and best wishes for the New Year.

A MESSAGE FROM THE ICPAS PRESIDENT & CEO

Elaine Weiss, ICPAS President & CEO

Food, Networking & Free CPE!

Illinois CPA Society member town hall forums

TO REGISTER for this complimentary program in your area, call 800.993.0393.

Join us for a complimentarybreakfast or lunch program.Elaine Weiss, ICPAS President and CEO, and Sara Mikuta,Chair of the ICPAS Board of Directors, are traveling across thestate to talk about the impact of current trends on the CPAprofession including:

A Changing Economy

Globalization

New Technology

Recent Legislative and Regulatory Updates

The Multi-Generational Workplace

This a great opportunity to get out of the office and look atthe big picture --- all while enjoying a free meal, networkingwith colleagues and earning 1 hour of CPE!

FOR ALL PROGRAMS: CPE: 1 Credit Hour Cost: Free

Help develop the future of the profession.Register today and bring a young professional colleague with you!

Champaign-UrbanaNovember 3, 2010 | C37135

11:30AM - Networking and Lunch12:00PM - 1:00PM - Program and Q&A

I Hotel and Conference Center1900 South First Street, Champaign, IL

SpringfieldNovember 4, 2010 | C37136

8:00AM - Networking and Breakfast8:30AM - 9:30AM - Program and Q&A

President Abraham Lincoln Hotel701 E. Adams Street, Springfield, IL

GlenviewJanuary 19, 2011 | C37176


Wyndham Glenview Suites1400 N. Milwaukee Avenue, Glenview, IL

Oak BrookJanuary 24, 2011 | C37177


The Hyatt Lodge at McDonald’s Campus2815 Jorie Boulevard, Oak Brook, IL

ChicagoJanuary 31, 2011 | C37178


The Crowne Plaza Chicago Metro733 West Madison, Chicago, IL


SEEN HEARDNEWS BYTES, SOUND ADVICE AND PRACTICAL BUSINESS TIPS

Three Must ReadsWe asked ICPAS members to recommend A-list readingfor their fellow finance pros. Here are their top picks.

The Smartest Guys in the Room: The AmazingRise and Scandalous Fall of Enron, by BethanyMcLean and Peter Elkind [Portfolio Trade, 2004,recommended by Mary Delaney Ceretto, CPA,Legacy Professionals LLP].On the Brink: Inside the Race to Stop theCollapse of the Global Financial System, byHenry M. Paulson, Jr. [Business Plus, 2010;recommended by Jeffrey T. McReynolds, CFO, TheStrive Group].Aftershock: Protect Yourself and Profit in theNext Global Financial Meltdown, by DavidWiedemer, Robert Wiedemer and Cindy Spitzer,offering “alternative thought processes relying onthe historic, cyclical ebbs and flows of our USeconomy versus taking an evolutionary view.”[Wiley, 2009; recommended by Noel T. Hastalis,CPA, Partner, Construction/Real Estate Group,Baker Tilly Circhow Krause, LLP, and Paul Julien,VP Finance, Sweetener Supply Corp.].

88%Growth rate of

social network

users between the

ages of 55 and 64

from April 2009

to May 2010

Source: Socialnomics.net

&1.

2.

3.

‘Future Gifting’ Keeps Clients HappyGiftsOnTime.com is a new online tool

that allows accounting professionals

to boost client retention efforts by sch-

eduling personalized gifts for the en-

tire year. In essence, pros can show

their goodwill by recognizing clients

on their birthdays, anniversaries, and

any other important occasion or date.

Furthermore, users can facilitate tar-

geted “future gifting,” using an easy-

to-navigate data extraction tool that

uploads contacts directly from several

tax programs, Salesforce.com or an

Excel spreadsheet.

Featured App: Dictionary of Accounting TermsWhether you’re in class, the office, or anywhere inbetween, the Dictionary of Accounting Terms app forBlackBerry users is just a tap away, ready to provide youwith accurate and detailed accounting information. TheDictionary is a complete reference tool ideal for all lev-els of user, from accounting students in need of a quickreference to a seasoned professional at a client meetingin need of a way to clarify a planning strategy. The Dic-tionary contains more than 1,000 informative terms, cov-ering every aspect of accounting, from basic to advanced.What’s more, helpful charts, graphs, diagrams and exam-ples underscore important concepts, providing detail thatgoes far beyond an ordinary dictionary. The Dictionary isfully browseable, with a one-letter search feature thatallows you to retrieve information in a single tap. Oncedownloaded, no internet connection is required, so youcan access this valuable tool whenever you need it.

The app is available from BlackBerry App World for $2.99[appworld.blackberry.com].

Special Offer for State Society Members*.ADP gives you the choice of doing business the way that best fits your firm. Whether you want to refer payroll or process it yourself, ADP provides world-class payroll and beyond payroll services, so you can focus on what matters most: growing your business and helping your clients be successful. In addition, your state society membership means that you will be rewarded with the following special benefits when you partner with ADP:

Contact your local ADP representative today.

Payroll for your firm — FREE for up to 50 employees with discounted solutions to meet the needs of larger businesses

Special discounts for your firm’s clients Free access to our Accountant HR Helpdesk Free Master Tax Guides from CCH, a Wolters Kluwer business 30% discount on all CCH tax and accounting publications

* Discount/free payroll applies to companies with 1 to 49 employees that sign complete ADP sales order and to all features of standard payroll processing invoiced on client’s regular processing cycle and does not include additional non-payroll services; excludes pass through costs, courier and other delivery fees, including off cycle fees, hardware, or penalty and interest fees. Only available to new ADP Clients using EasyPaysm or RUN Powered by ADP® in the continental U.S. Must be set-up for direct debit of fees (“DDF”) as the payment method.

© 2010 ADP, Inc. The ADP Logo is a registered trademark of ADP. EasyPay is a service mark and RUN Powered by ADP is a registered service mark of ADP, Inc. All other trademarks are the property of their respective owners.

SEEN&HEARD


Tips for Public Wi-Fi Security1. Pick a Secure Network. Many hotspots have no security

settings, but if you have a choice, select one using someform of encryption. You will need the password key foraccess, but some establishments provide guests with Wi-Fipasswords. Look for networks secured with WPA2 encryp-tion, then WPA, and lastly, WEP.

2. Set Network Location to "Public." When connecting to anew network using Windows 7, the "Set Network Location"window pops-up automatically. Be sure to set the location to"Public Network" when prompted if you're connecting to apublic hotspot. This option blocks file and printer sharing,which are common routes for data snoopers.

3. Use a VPN. A Virtual Private Network between yourmachine and your network is a virtual tunnel securedagainst anyone who may try to intercept your web sessionwhile connected to a public hotspot.

4. Boost Your Defenses. Encrypt or password-protectsensitive files and folders. Consider encrypting your entirehard drive, in fact.

5. Avoid Banking Transactions. Don’t bill pay, access yourbank account, or use your credit card.

6. Don’t Save Passwords.Websites and browsers are alwaysasking if you want to save and store passwords, but you'reprobably better off saying “no.”

7. Put Up Your Firewall. You should have your Windowsfirewall or a third-party firewall enabled whether you are athome or on the road, but it's especially wise to turn it onwhen connecting to public hotspots.

8. Automatically Update. Make sure your mobile devicesare set to automatically update so you are always receivingthe latest patches, security updates and other criticalupdates for your apps and operating systems.Source: PC Mag [PCMag.com]

Need a few Extra Bucks?With the holiday season upon us, budgetary matters are understandablyfront of mind. And if you’re looking for ways to increase your savingsand take-home pay, these tips from Kiplinger’s Personal Finance[Kiplinger.com] may be just what you’ve been waiting for. They promiseto help you find a few bucks in places you might have overlooked.n Trim your grocery bill. Start tracking your purchases to get a handleon your spending habits. Then ditch the gourmet grocers and shop atwarehouse stores—and don’t forget your coupons. n Cut your cell phone bill. Scrutinize your bill to make sure youactually need all the minutes and features you're paying for every month.A prepaid plan may be a better option.n Boost your deductibles. An easy way to cut your auto and homeinsurance premiums is to raise your deductibles. Combining policiesfrom other insurers under one plan can achieve greater savings as well. n Switch your TV package. Competition among cable and satelliteproviders is running high. Visit the websites of the companies that serveyour area to compare plans. n Rein in your dining out budget. Try to limit your costly diningexcursions. Also, brew coffee at home and brown bag your lunch. n Get rid of your stuff. All your unwanted furniture and belongings haveto go. Try selling them on Craigslist.org or eBay.com for some extra cash. n Refinance your mortgage. With interest rates at their lowest levels indecades, it's a good time to refinance. For the best deals, check withseveral lenders, including credit unions, local and community banks,and online mortgage brokers.n Unload your second (or third) car. If you have an unused car sittingin your driveway, sell it. Even if you don't get a lot of cash for it, you'll savemoney simply by eliminating the expenses associated with owning it.

Managers Not Up to SnuffManagers take note: staff may not think too highly of you. Infact, says Right Management, according to their poll of 800workers across North America, an alarming number ofemployees (33 percent) think their managers are eithersomewhat or completely incompetent. What’s more, a mere17 percent are only marginally impressed with managerialcompetence, which could weigh heavily on employees’commitment to the job. On a happier note, despite growingscrutiny, 50 percent of all employees still believe theirmanagers are either competent or very competent.

37%manufacturing business leaders who

plan to increase hiring by Feb. 2011

Source: GrantThornton.com

We are CPAs.PAVING THE WAY FOR TOMORROW’S CPAs

CPA ENDOWMENT FUND OF ILLINOIS

meet...CPA Endowment Fund Donor

Brad SargentCPA/CFF, CFE, CFS, CrFA, FABFA,

Illinois CPA Society Board of Directors

“Without the Endowment Fund and those types of

efforts, there won’t be a CPA Profession. The young

people that the Fund supports are the future of the CPA

and the CPA Profession.”

Join us.Mail in your gi� using the pledge card or donate online atwww.icpas.org/endowment.htm.

All Good ThingsA look back on 12 years of tax regulation—and 12 years of shared thoughts and views as

INSIGHT’s tax columnist.

TAX INSIGHT


This column will be my last. I have mixed feelings about bringing this chapter in my profes-sional history to a close. I will miss the challengeof learning new rules and helping you to under-stand them. I will miss the numerous conversa-tions I have had with various readers who chal-lenge my interpretations and my prognoses aboutsubstance and policy. There is no better way tokeep on top of changes to the tax rules. I will not,however, miss the editorial deadlines and myconcerns over writing about tax topics that mightchange before my column is even published!

Many changes in the rules have occurred sincemy first tax column in 1999. They include alter-ations to preparer penalty standards, required taxreturn disclosure of certain “reportable transac-tions,” additional due diligence requirements for“covered opinions,” financial statement account-ing and disclosure changes under FinancialAccounting Interpretation 48 that bred an IRSrequirement for return disclosure of “uncertain taxreturn positions,” and mandatory registration forpaid federal tax return preparers…to name someof the more well-known.

In 1999, the preparer’s standard for signing andadvising on nondisclosed federal income tax returnpositions was that the position needed to have a“realistic possibility of being sustained on its mer-its”—the “realistic possibility of success” standard.This standard was defined by the IRS as a 1-in-3chance of success. The taxpayer’s standard foravoiding a substantial understatement penalty was

generally that a nondisclosed position needed “substantial authority.” Many practitioners esti-mated that standard as approximately a 40-percent chance of success.

Fast forward to 2007, when the preparer’s standard jumped to a more than 50-percentchance of success—or “more likely than not.” Thus the preparer was put in the extremelyuncomfortable position in certain situations of needing a taxpayer to make a disclosure onhis or her tax return to avoid the preparer penalty, even though the taxpayer didn’t need suchdisclosure to avoid a penalty themselves. Thankfully, the following year the preparer’s stan-dard was retroactively reduced to the same level as the taxpayer’s standard—or “substantialauthority”—therefore avoiding those ticklish situations with clients. The IRS has been kind inits guidance and offers alternatives that enable preparers to avoid penalties in situations

Harvey Coustan, CPAis an Ernst & Young retired partnerwho currently consults on substantivetechnical and professional standardsissues. An ICPAS member since 1986,he has also appeared as an expertwitness on several cases.

where taxpayers refuse to make disclosure,even though that disclosure is required toavoid taxpayer penalties.

Effective in 2000, Treasury regulationshave required disclosure of certain transac-tions that the IRS feels need closer scrutiny.They are designated as “reportable transac-tions” and must be disclosed on a tax-payer’s return on Form 8886, as well as sep-arately to the IRS Office of Tax ShelterAnalysis. One set of reportable transactionsis designated as “listed” transactions, andare those designated by the IRS as “taxavoidance transactions” (read “abusive”).

More recently, the category of “transac-tions of interest” has been added. These arenot yet deemed abusive but include transac-tions for which the IRS wants more informa-tion. Nondisclosure of a reportable transac-tion can result in significant penalties evenwhere the transaction itself doesn’t result inan underpayment of taxes.

Circular 230—that body of regulationsthat governs practice before the IRS—hasbeen modified to require significant due dili-gence and mandatory disclosures for certainpost-June 30, 2005 tax advisory opinionsthat fall into any of six “covered opinion”categories. The most notable of these cate-gories is the “reliance opinion” used to pro-tect taxpayers from certain penalties. Manypractitioners use an authorized disclosure atthe bottom of correspondence to avoid cov-ered opinion status.

Although I haven’t seen any sanctionsimposed for failure to meet these require-ments, a court in a recent case took shots atthe opinion written by one of the major

accounting firms. The Office of ProfessionalResponsibility, charged with administeringthe rules of Circular 230, may seek toimpose some penalties in the future.

Financial Accounting Standards BoardInterpretation No. 48 (Fin 48) requires fin-ancial statement disclosure and quantifica-tion of uncertain tax positions. Although theIRS has indicated that it will continue its pol-icy of restraint with respect to requestingaccountants’ tax accrual workpapers, recent-ly proposed regulations would require cor-porate tax return disclosure of uncertain taxpositions. The combination of FIN 48 andthe mandatory tax return disclosure requiredby the proposals not only would give the IRSa roadmap to taxpayer return positions, butalso could dampen candid conversationsbetween taxpayers and return preparers.

The proposed regulations relating toidentification and registration of tax returnpreparers have caused considerable angstfor a number of practitioners. One set ofregulations requires that all paid preparers,both signing and non-signing, obtain “pre-parer tax identification numbers” (PTIN),which must be included with each returnprepared. Under another set of proposals (atthis writing), those preparers who are notalready subject to Circular 230—CPAs,lawyers and enrolled agents (practitioners)—would need to pass an initial test andmeet continuing education requirements inorder to be “registered tax return prepar-ers,” a new category of practitioner thatwould be subject to Circular 230.

Although CPAs, lawyers and enrolledagents wouldn’t need to pass the test orobtain prescribed continuing education, allpreparers would be required to pay fees. Inaddition, by including non-signing prepar-ers in the new regulated category, non-CPAs employed by firms to assist in the taxreturn preparation process would have tobecome registered tax return preparers evenin situations where they did not sign returns(if they’re deemed non-signing preparers).This not only would add mostly unneces-sary requirements for these people, but alsocould significantly increase the cost of com-pliance for their firms. Perhaps by the timeyou read this column final regulations thataddress this issue will be issued.

Most of the changes I have described wereat least, in part, responding to the prolifera-tion of very aggressive transactions com-monly referenced as tax shelters. I have seensome very questionable transactions thatwere covered by opinions written by lawyersand CPAs. To my knowledge, that situationhas been substantially reduced, but its legacycan be found in the rather onerous changesI have just discussed.

It has been fun to communicate with allof you in each edition of INSIGHT. In thisregard, I want to thank Judy Giannetto forher patience in those situations where Imissed a deadline in anticipation of achange. She has been a gracious andthoughtful editor. Most of all, thanks toyou, the readers, for your loyalty and feed-back throughout the last 12 years.

Beware the Holiday SpiritEbenezer Scrooge—stingy tyrant or misunderstood realist?

FRAUD INSIGHT


Charles Dickens’ early childhood was scarred by the overtly hostile treatment the poorreceived in pre-Victorian London and his father’s overspending (resulting in a stretch indebtor’s prison). Many of his great works reflect these experiences, with his heroes typicallyrising above their circumstances.

One of Dickens’ best-known protagonists, Ebenezer Scrooge, Esq., had all the makingsof a great forensic accountant. He was cunning, dispassionate, had a keen eye for detail,sharp business acumen, a suspicious mind and skepticism of others. Think of all the recent

frauds that could have been avoided had therebeen a touch more “bah, humbug!” from the audi-tors. Scrooge’s “redemption” occurs when he isovercome with the Holiday Spirit; he opens hisarms, home and wallet to his fellow man and, pre-sumably, lives happily ever after.

If this jaded forensic accountant (i.e. me) wrotethe epilogue to A Christmas Carol, Scrooge wouldhave been visited by kindly, seemingly respectablefraudsters incognito who would have talked himout of his fortune under the guise of building ahome for underprivileged youth, while schemingcohorts ransack his china and silver.

Most of us try our best to be a bit more patient,giving and positive as the holidays approach, andas we close one year and welcome another. It’s atthis time of year that attendance at houses of wor-ship swells, charitable donations rise—and fraud-sters and thieves run amok. Statistics show thatcharity-based frauds are at their peak in Novem-ber, December and January. But these aren’t theonly nefarious activities witnessed around the hol-idays. Theft of physical assets (primarily comput-ers), financial reporting irregularities andemployee theft or abuse all occur more frequentlywhen businesses and individuals are simply toofilled with glad tidings to notice.

With office parties and increased vacation time, manyoffices are understaffed—and thieves know it. Several yearsago, I took a call from a client who requested that I travel outof town the next day. While the rest of my colleagues marchedoff to a great holiday party, I stayed behind in our ChicagoLoop office to prepare for my trip. While there, I was surprisedto find a complete stranger roaming our halls, presumably“lost.” He was well-dressed and looked like he belonged in anoffice suite. However, when I approached him, he disappearedquickly down the back stairwell.

Brad Sargent, CPA/CFF, CFE, CFS, Cr.FA, FABFAis the managing member of The Sargent Consulting Group, LLC,which specializes in forensic accounting and financial investiga-tions. Brad is a frequent lecturer on forensics and fraud, and is chairemeritus of the American Board of Forensic Accounting. He alsoserves on the Board of Directors of the Illinois CPA Society, and hasbeen a member of the Society since 2002.

Building security later informed me that computer thieves are mostactive during the holidays, targeting businesses they believe to benear empty. If a computer disappears from your organization, thinkof the ramifications. What kind of sensitive client/company data is onthe hard drive? How many IDs could be stolen? For any accountantin any role, this is a sobering thought. Envision The Grinch slinkingthrough Whoville, stealing everything in sight, disguised as the verypicture of respectability and benevolence—Santa Claus.

The holidays usher out the old year and usher in the New Year.Year-end reporting witnesses exceptional “giving” first-hand: Cus-tomers, possibly overwhelmed with glee and good cheer, will oftenpurchase inordinate amounts of slack inventory, miraculously boost-ing annual sales. Oftentimes, these customers give without knowing(a truly altruistic act) because once the New Year comes and the hol-iday spirit wanes, sadly these sales are often reversed. But hey, theprior year finished strong! What’s more, shipping inventory to unsus-pecting customers and booking the sale, aka channel stuffing, occursmore often at year-end than at any other time. And vendors are alsounwitting recipients of good cheer at year-end, usually in the form ofpayments dated prior to the period close, but mailed well into theNew Year. This cheerful scheme lowers liabilities without actuallyparting with the asset. And then there’s “check kiting” and “lapping”which are also schemes that rely on timing differences, and can resultin Peter sending holiday cheer to Paul.

In the current economy, “flat is the new growth,” and organiza-tions have cut back on compensation in the form of wage freezesand zero bonuses. However, creative employees find new ways toreward themselves in the form of padded expense accounts, con-version of company assets (supplies and inventory) for personal use,and mischaracterization of company funds usage. These are thegifts that keep on giving…unless the organization is vigilant.

An account of fraud from a few years back comes to mind. Abookkeeper at a large construction company had bilked the businessout of millions and gave her children life-size statues of Disney char-acters for the holidays. These statues fit perfectly around the multi-million dollar mansion she lived in several states away. Only after thefraud was uncovered did her colleagues come forward and state thatthey couldn’t figure out how she lived such an extravagant lifestyleon such a humble salary. If someone is overtly over-generous andclearly giving beyond their means, it could be a red flag.

The holidays and the year-end are times to reflect and reach out toour fellow man. But that doesn’t mean it’s time to abandon commonsense. Our heroic forensic accountant prototype, Ebenezer Scrooge,was last seen running through the snowy streets of London barefoot,wearing only his nightgown. Money flying from his pockets, Scroogebuys the biggest and best goose in town to share with others. WhatDickens fails to mention is that Scrooge left the front door to his town-home open and all of his belongings were promptly withdrawn by aroving gang of street urchins. Not only that, but his trusty employee,Bob Cratchit, had been skimming receivables at Scrooge & Marleyfor years, and the entire business is now in default. Last, but certainlynot least, Cratchit’s accomplice, “Tiny Tim” Leibowicz, a circus per-former, was faking a leg injury and fraudulently drew workman’scompensation from Scrooge & Marley, exposing Scrooge to litigationfrom his insurance carrier.

Hey, it could happen…Happy Holidays!

icpas.org/insight.htm NOVEMBER/DECEMBER 2010 13

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Gather & GrowAre annuities the right choice for investment growth?

RETIREMENT INSIGHT


Annuities are great products for retirement planners. While they’ve been around for along time and continue to be primarily used as a source of retirement income, which wastheir original intent, they’ve also become investment accumulation vehicles thanks toamendment of the Internal Revenue Code over the years and sentiment in the financial

markets shifting periodically between the bullsand the bears.

Like any investment or insurance product, how-ever, there are pros and cons you have to weigh.

Accumulation and distributionThe accumulation phase of an annuity is theperiod of time in which the owner makesdeposits. This may be a single point in time, it maybe a fixed number of occurrences (such as once ayear for 10 years) or it may be as frequently as theowner wishes. Earnings grow tax deferred underthe annuity contract, making it particularly attrac-tive to some—perhaps an executive who hasmaxed out of corporate savings plans or a self-employed individual who wants to set aside moremoney than they can under an IRA.

The distribution phase is the time period duringwhich the owner takes money out of the annuity.The annuity holder may choose to either with-draw funds or annuitize the payouts. In the formercase, the owner maintains control over the timingand amount of payouts and can withdraw earn-ings, principal or a combination of both. In the lat-ter case, the owner effectively relinquishes controlof the assets to the insurance company and electsto receive a regular, recurring payment.

This annuitization feature distinguishes annu-ities from other products, since the insurer guarantees there’ll be sufficient funds to meetthe owner’s timeframe (often over his or her life, or the joint lives of the owner and spouse.)This is true even if the owner’s account hasn’t grown enough to cover the required pay-outs. Also, in some annuities there’s a provision to distribute a minimum amount to heirsif the owner dies prematurely.

Fixed or variable annuitiesA fixed annuity is one in which the issuer (the insurer) agrees to pay a fixed rate of inter-est on the invested dollars. The insurer often guarantees that a minimum interest rate willbe paid under the annuity contract. Also, insurers often pay at higher interest rates in thefirst year or years of the annuity contract as an inducement to attract deposits. A fixed annu-ity therefore may be especially appropriate for an investor who is looking for a predictableearnings credit.

A variable annuity is one in which there is no promise made with respect to the earn-ings deposits will earn. Variable annuities feature subaccounts, which are similar to mutual

Mark J. Gilbert, CPA/PFSis a principal in the financial advisoryfirm of Reason Financial Advisors, Inc.His 25+ years of finance and account-ing experience includes 13 years inpersonal financial planning. An ICPASmember since 1982, Mark currentlyserves in the Society’s IA/PFP MemberForum Group and on its Committee onStructure and Volunteerism.

icpas.org/insight.htm NOVEMBER/DECEMBER 2010 15

funds in that they’re pooled to invest in the equity, fixed income orcash markets. In fact, many mutual funds are available to investorsas annuity subaccounts. A variable annuity may be appropriate foran investor willing to take on more investment risk.

Cost structureThe cost of an annuity can vary widely, and may include theunderlying investment costs of the subaccounts (similar to mutualfund operating expenses) as well as the insurance costs (M&E) toprovide guaranteed benefits. Also, there may be additional coststo provide riders such as guaranteed minimum lifetime incomebenefits, and many annuities are sold subject to an annuallydeclining surrender charge (for canceling the annuity within aperiod of 5 to 7 years or more.)

Client useAll things weighed, I think that annuities are best used as retirementdistribution vehicles rather than for accumulation purposes. Forclients with relatively low asset levels and fairly high cash-flowneeds that are not met by Social Security and a pension, a fixedannuity can provide peace of mind that some living expenses canbe funded without having to otherwise deal with the volatility ofthe investment markets. Fixed annuities also tend to carry lowercosts than variable annuities.

Using variable annuities for accumulation purposes works muchlike a non-deductible IRA, with no annual contribution limits.Although current income tax deferral on earnings is an attractivefeature, what’s not so attractive is the fact that future earnings with-drawals will be subject to ordinary income tax rates. I feel that it’sbetter for a client to fund savings and investment accounts with thedeposits that would otherwise go to a variable annuity. Properinvestment and tax management of these accounts can minimize oreliminate income taxes on current earnings, while protecting cap-ital gains tax treatment on at least some of the future withdrawals.Of course, no one knows what future income tax rates will looklike, but traditionally, capital gains tax rates have been lower thanordinary income tax rates.

The high cost structure of annuities also makes them less suit-able as accumulation vehicles than ordinary savings and invest-ment accounts. In most situations, clients are better off fundingtheir employer-sponsored retirement plans to their maximum lim-its before even considering the use of a fixed or variable annuityas an accumulation vehicle. Retirement plan contributions aregenerally tax-deductible and the plans usually feature lower coststhan most annuities.

Advisors can often rely on an insurer’s promise to honor its finan-cial commitment to an annuity holder. Nevertheless, you need tocheck out A.M.Best insurer ratings at the very least before makinga recommendation. What’s more, each state has a guaranty fundwhich steps in to make up payments in the event of insurer default,subject to limits. Make sure you understand these limits if youadvise clients on annuities.

From a features-and-costs viewpoint, today’s annuities are moreattractive products than those offered a generation ago, and maymake sense for some retirees and pre-retirees. Especially with volatilefinancial markets, the guarantees may provide annuity holders withreassurance that their assets will provide the needed cash flow. At thesame time, understand that guarantees come at a price.

D I V E R S I T Y

Nominations for the

2011 Outstanding Leadershipin Advancing Diversity Award

are now being accepted.

The Illinois CPA Society is currently seekingnominations to honor the work of exceptional CPAs.The Outstanding Leadership in Advancing DiversityAward is designed to recognize individuals who havemade a marked contribution to diversity within theaccounting profession.

The Emerging Leader Award will recognize youngprofessionals who possess the qualities of theOutstanding Leadership in Advancing Diversity Awardbut have 4+ years of full-time work experience.

Nominees can be employed in any area of accountingor finance; including public accounting, industry, not-for-profit, education, government or consulting.

Criteria considered for ideal candidates include:

A CPA credential, but do not need to be a current member of the Illinois CPA Society

Impactful efforts on the accounting profession

Unique and creative contributions to theprofession in advancing diversity

Personal initiatives in advancing diversity outsideof one’s day-to-day job functions

Activities to advance diversity within one’s day-to-day job functions

For more information or to nominate a candidate,please visit www.icpas.org.

Deadline for nominations is November 26, 2010.


When CPA and financial fraud expert TracyCoenen started her accounting blog The Fraud

Files [sequenceinc.com/fraudfiles.com] in Nov-ember 2005, she intended it to be a way to mar-ket her name and experience. Five years andhundreds of posts later, she’s getting 30,000unique visitors a month. She also credits the blogwith bringing in at least 30 percent of her firm’sannual revenue. “And when I say 30 percent, Imean actual money in pocket,” says Coenen,owner of Sequence Inc., a forensic accountingand fraud firm with offices in Chicago and Mil-waukee. “Not bad for a little bean-counter, eh?”

Not bad at all.There were more than 145 million blogs in

existence in August 2010, according to Blog-Pulse.com, which tracks blog statistics. Ofthose, about 190 are written by practicing CPAsfor their business development, says MichelleGolden, who maintains a list of accountingblogs at GoldenPractices.com, and is theauthor of the forthcoming book, Social Media

Strategies for Professionals and Their Firms. Inother words, there’s a huge amount of opportu-nity for new accounting blogs.

“Blogging, in my opinion, is the holy grail ofmarketing options for CPAs,” says Golden. “Inthe business of selling intellectual capital, aCPA can demonstrate his or her unique knowl-edge and experience using blogs as a medium,and simultaneously develop career-changingrelationships with prospects, key trade people,media and other thought leaders. Bloggingaffords firms a level of visibility unimaginablejust 10 or 15 years ago. And it’s free, or darnclose to it. The key to success is picking theright topics.”

A look at the accounting blogs on GoldenPrac-tices.com reveals CPA-authored blogs on topicssuch as farming, dentistry and women’s financialsuccess, among other industries and niches.

“The more specific a blog is with regards toits intended audience, the better,” says Golden.“If you are thinking about starting a blog abouttax, ask yourself, ‘Who will actually care to read

SOCIAL MEDIA

Blog StarThe internet offers infinite space in which to carve out a piece of blogger stardom.

By Christine Bockelman

Before you start posting your musings online, there are legal issuesyou need to know about, says Michelle Golden. Here’s a primer.1.Be original. Don’t excerpt more than 20 percent of someoneelse’s content, and always credit the original author or organi-zation, naming and linking to the source. “With proper attribu-tion and directing people to the original work, you’re helping theother person, which they’ll appreciate,” she says.

2.Tread carefully with images. “If you use pictures, be sure tohonor licensing terms. You can purchase photos or find freeimages on sites like flickr.com,” she suggests. “Become familiarwith ‘creative commons licensing’ [creativecommons.org] andalways give the photographer appropriate credit for his or herwork, or it’s stealing.”

3.Be tag savvy. Tagging—the social media term for identifyingindividuals who appear in a photograph you post online—with-out first obtaining the subject’s permission, is also a big no-no.“It’s just not appropriate to use an image of someone publically,for business, unless they’ve said it’s ok,” she says.

Three Golden Blog Rules

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tax updates every few days?’ A client? Orperhaps just other CPAs?”

If you’re going to put in the effort towrite and update a blog—bloggers recom-mend about three posts per week, aninvestment of a few hours, at least—youwant it to draw traffic and interest. A blogabout broad tax issues isn’t providingmuch value beyond what someone couldget through a quick internet search, sincemost of that information could be foundon accounting news sites.

“For business development, you’remuch better off with a blog focused on anindustry....If I’m a farmer, you can speak tofinancial topics plus virtually any otherissue, including floods, seed technology,or the newest bailers. As long as it contin-ues to pertain to me, I’ll keep reading,”Golden explains. “Readers are quick tounsubscribe to content they don’t perceiveas relevant. Is the chairman of a familybusiness going to read tax updates everyfew days? Don’t lose them.”

If an industry focus seems too narrow foryour practice, “Consider a market segmentlike family owned businesses or womenbusiness owners, or a demographic audi-ence such as a specific ethnic or agegroup,” Golden advises. “Your contentshould stand apart; defining your desiredreaders enables you to deliver value andrelevance,” she says, adding that, “Whenyou effectively illustrate your distinctions,you’re also able to break free of competingon price. Through good content marketing,you achieve multiple benefits.”

Coenen completely agrees. “My blogreaders are not my clients, but they use thesame search terms in search engines thatmy clients do,” she explains. “I figured out

that my readers aren’t engaging me for con-sulting, but they’re enhancing my Googlemojo enough that when a potential client issearching the internet for forensic account-ants and fraud information, they get pulledto my site, which pops up first for many rel-evant search terms.”

Accounting blogs can be successful net-working tools, too. Joel Ungar, CPA, CFE,founding principal of Silberstein Ungar,PLLC outside Detroit, has a blog calledUngar Cover on AccountingWEB, an on-line media company for accountants.Ungar’s blog focuses on topics related tothe profession, and is primarily read byaccountants. Recent topics, which areoften tongue-in-cheek (his particular differ-entiator) include, “Counting the Ways FASBCodification Has Improved My Life” and“10 Ways to Know You Were Born to Be anAccountant.” Some of Ungar’s posts getabout 200 hits within two or three days.

“The blog is part of an overall effort to getmyself known out there,” he explains. “I’vealso met a lot of really interesting people,other accountants, and networked quite abit. It’s helping to build some brand recog-nition for myself and my firm.”

No matter what your blogging inten-tions—networking, attracting clients orexploring industry interests—there’s plentyof room on the internet for your thoughtsand expertise. You just have to be commit-ted to the effort.

“The reason I’ve been successful is I’vekept up with it,” says Coenen. “I’ve seen alot of people start a blog, do 10 articlesand never touch it again when it doesn’tgenerate a lot of traffic. You need to keepdoing it to see the results.”

So start writing, CPAs.

Writing style and tone, as well as length of post, are all important factors in a blog’s suc-cess. Generally speaking, conversational, informal styles of writing are the most success-ful in drawing followers. And it’s important to be “consistent with your tone, voice and sub-ject matter,” says Bridget O’Malley, who blogs about campus recruiting for Protiviti. “Ifyou’re not consistent, things can get chaotic.”It’s also important that your voice be imbued with authenticity. “Be yourself,” says Golden.“You have an opportunity to create relationships through your writing. Don’t secretlylet others post on your behalf without disclosure, and be sure that each post reflectsan author’s name, not just ‘admin,’” she warns. “People can’t develop relationshipswith ‘admin.’” What’s more, while a blog can boost your presence and recognition, it shouldn’t be overtlyused for self-promotion. That’s just a big turn off for blog readers.

Blog Style Primer

SOCIAL MEDIA

LifetimeAchievement2011

Deadline for recommendations is December 15, 2010

The Illinois CPA Society is seeking recommendations for the 2011 Lifetime

Achievement Award, which is presented each year to an individual(s) who has provided

distinguished service to the profession in Illinois and/or nationally.

Candidates are selected based on a lifetime of service to the profession.

Factors to be considered include:

> Contribution to the profession

> Professional position attained

> Length of service

> Illinois professional involvement

Recent Award Honorees:

Letters of recommendation with information supporting the individual’s qualifications

(resume, biography, etc.) can be sent to:

Eileen Robbs, Lifetime Achievement Award,

Illinois CPA Society, 550 W. Jackson Blvd.,

Suite 900, Chicago, IL 60661

Or by email to: [email protected]

2010 Edilberto C. Ortiz

2009 Cameron T. Clark Duane D. Suits

2008 Belverd E. Needles, Jr.

2007 Edwin Cohen

2006 Richard T. Sullivan

2005 Vincent E. Villinski Richard E. Ziegler

2004 Lawrence M. Gill Jerome A. Harris Cheryl S. Wilson

Award Recommendations Now Being Accepted


Skilled tax professionals are a strong asset for accounting firms today, but they aren’talways easy to find—or to keep. That’s why many small and mid-sized firms are enhancingtheir training and development programs to help to retain their top talent and groom the nextgeneration of tax professionals.

“Despite the current state of the employment market, tax talent is still in high demand,” saysRyan Paquette, president of Schaumburg, Ill.-based accounting and finance staffing firmMark/Ryan Associates. “Tax skills are still the hardest skill set to find and the hardest position to

match—and demand hasn’t wavered.”Smaller firms in particular tend to be

at a hiring disadvantage because tal-ented tax professionals typically flowinto large firms, says Ann Weatherhead,director of human resources at Frost,Ruttenberg & Rothblatt, P.C. (FRR) inDeerfield, Ill. That trend, however, maybe changing. Weatherhead says smalland mid-sized firms have been able totake advantage of changes in the jobmarket to hire talented tax hopefulswho may have been laid off from, or bedisillusioned with, larger firms.

Once snagged, smaller firms want toensure their tax talent stays—and for-malized training and mentoring pro-grams can play a big role in guiding,molding and retaining this new crop oftax professionals.

Today’s tax training and mentoringprograms focus on the basics of taxreturn preparation, but also go wellbeyond that, encompassing day-to-day technical training, research, softskills and overall career development.

At FRR, entry-level professionals arematched with senior tax professionals who not only help them master the preparation of dif-ferent types of tax return and develop more advanced technical skills, but also focus on thepersonal side of the job.

“Those mentors become a technical resource and also a go-to person for any type of issue,”says Weatherhead. “They help new hires assimilate, feel included in the team and learn howto navigate organizational challenges.”

After about two years with FRR, the firm offers a career coaching program that helps taxprofessionals improve their interpersonal, supervisory and networking skills. An outside con-sultant meets with the professional and a senior associate to discuss individual goals and areasof improvement.

TALENT

Your Next Tax ProCultivate a new crew of talented young professionals.

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“Tax professionals tend to be weaker on interpersonal and com-munications skills, and these programs can be very valuable inimproving their comfort level in building relationships with clientsand working with senior professionals on the accounting side orin other areas of the firm,” says Weatherhead.

Christine Toma, human resources director at Chicago-basedOstrow Reisin Berk & Abrams, Ltd. (ORBA), agrees. “Everyonefocuses on the technical side, but the softer skills are where every-one needs to improve,” she says.

ORBA recently rolled out a new mentoring program that sepa-rates professionals by years of experience and sets expectations foreach level. Professionals, who choose their mentors, identify train-ing areas of focus such as work product review, delegating, mar-keting and presentation skills, time management, prioritizationand managing multiple projects.

Mueller and Co., LLP, an Elgin, Ill.-based financial managementfirm with an eight-person tax department, focuses mainly on train-ing courses that keep tax professionals updated on tax lawchanges, but the firm also offers soft skills training, says AnnBehrens, tax partner. She explains that the firm has held trainingcourses on everything from cold calling and sales to working withdifferent personality types, and is actively working to enhance itstraining initiatives.

At Itasca, Ill.-based Corbett, Duncan & Hubly, PC (CDH),research and general business skills are training program focus pri-orities, explains Dan Duncan, tax principal. “Research skills canbe particularly hard to cultivate,” he says, which is why tax pro-fessionals at his firm are given research responsibilities, such as

publishing articles on the company intranet and performingresearch projects using tax software solutions.

General business knowledge also is key. “That’s often the weak-est link,” says Duncan. “People don’t always understand how acompany works.”

It’s also important to incorporate opportunities for more interac-tion for tax professionals who may not be out meeting and interact-ing with clients as much as their accounting and auditing counter-parts, says Duncan. CDH holds marketing and soft skills training,and seeks out chances to send tax professionals to client meetingsand events. “We’ll take tax individuals and get them working with asmall company or place them on an internal committee—anythingto help to get them out of their cubes and interacting with other pro-fessionals at the client’s office or within our firm,” he says.

Overall career development also comprises a significant part oftraining and mentoring. CDH holds formal career developmentdiscussions and devises action plans to help tax professionals pur-sue their career goals. The firm offers team members direct inter-action with CDH principals and exposure to a variety of clientprojects—another advantage of training programs within smalland mid-sized firms.

While training style and substance can vary, the return oninvestment is a steady value.

“What the firm gets back is amazing,” says Weatherhead.“When people know that the firm is investing in them, that theyare important to the firm and have a future here, we see a higherlevel of commitment and a real increase in an individual’s effi-ciency and presence within the organization. The payback is thestrengthening of teamwork, client relationships and loyalty.”

Weatherhead admits that the accounting industry is notoriousfor seeing talented professionals leave a firm after four or fiveyears. While that turnover trend has been tempered in the past twoyears as a result of the weak job market, she says successful train-ing programs also can send a powerful message. “When the econ-omy turns around, we want people to know that even during toughtimes, we were still committed to developing our staff,” she says.

Toma cites succession planning as another key benefit of train-ing and mentoring. “You have to foster an environment that allowsfor succession planning,” she explains. “It’s so important for firmsto develop a pipeline of future leaders internally who have theright skill sets. It’s much harder to bring people in from the outside,and mentoring programs really help with that.

“Asking our professionals to be more focused on training andmentoring has been a big shift for us,” she continues, “but it’s beenmet with enthusiasm among our staff. We’re finding that peopleare very engaged. These aren’t billable hours but our staff knowsit is still very important.”

Connecting with young professionals who are looking for morefeedback and training than past generations might have done isanother valuable payoff. “It’s important to make sure your tax pro-fessionals are getting the right experience to make sure they’re pro-gressing—especially young professionals who are really looking tobe mentored and continually challenged,” says Toma.

“Continuous training and development is key,” adds Duncan.“It’s so important to train, retrain and keep educating. Young pro-fessionals are always looking for opportunities to learn and getvaluable experience.”

TALENT


[email protected]

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• The national average cost of a year in a nursing home is $79,935.1

• The 2009 national average for an assisted-living, one-bedroom apartment with a private bath, or a private room with a private bath was $3,131 ($37,572 annually).2

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

A lot of people think Medicare is going to cover long-term care expenses, but nd the coverage very limited. And a lot of people may go into their retirement not expecting to have to pay for these personal care services.

This is why millions of responsible Americans help protect their lifestyles with long-term care insurance. But nding the right protection isn’t easy. It’s tough to compare policies with di�erent benets, features, limitations, costs, spouse coverage and more.

THAT’S WHY ICPAS HAS ARRANGED A SPECIAL BENEFIT FOR MEMBERS — the Long-Term Care Resources Network, a unique long-term care buying service. This bene�t allows you to work with a long-term care insurance representative who will give you all the information about bene�ts and rates of different, highly rated long-term care providers.

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1 Metlife Mature Market Survey of Nursing Home & Assisted Living, 6/17/10. 2 The MetLife Market Survey of Nursing Home & Assisted Living Costs, 6/17/10.

54169 ©Seabury & Smith, Inc. 2010 CA Ins. Lic. #0633005 | AR Ins. Lic. #245544 d/b/a in CA Seabury & Smith Insurance Management Program

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But if you develop a long-term health condition, you may need long-term health care.

Medicare DOES NOT PAY full benets for extended care, assisted care facilities, custodial care, or nursing home facility expenses. If you need this type of care, you could face big expenses:

• The national average cost of a year in a nursing home is $79,935.1

• The 2009 national average for an assisted-living, one-bedroom apartment with a private bath, or a private room with a private bath was $3,131 ($37,572 annually).2

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

A lot of people think Medicare is going to cover long-term care expenses, but nd the coverage very limited. And a lot of people may go into their retirement not expecting to have to pay for these personal care services.

This is why millions of responsible Americans help protect their lifestyles with long-term care insurance. But nding the right protection isn’t easy. It’s tough to compare policies with di�erent benets, features, limitations, costs, spouse coverage and more.

THAT’S WHY ICPAS HAS ARRANGED A SPECIAL BENEFIT FOR MEMBERS — the Long-Term Care Resources Network, a unique long-term care buying service. This bene�t allows you to work with a long-term care insurance representative who will give you all the information about bene�ts and rates of different, highly rated long-term care providers.

PREMIUMS ARE BASED IN PART ON AGE.

THE LONGER YOU WAIT, THE

HIGHER YOUR PREMIUM RATE MAY BE.

GET THE INFORMATION YOU NEED ABOUT

LONG-TERM CARE INSURANCE BY CALLING: 1.800.358.3795

ICPAS Long-Term Care Insurance Plan

1 Metlife Mature Market Survey of Nursing Home & Assisted Living, 6/17/10. 2 The MetLife Market Survey of Nursing Home & Assisted Living Costs, 6/17/10.

54169 ©Seabury & Smith, Inc. 2010 CA Ins. Lic. #0633005 | AR Ins. Lic. #245544 d/b/a in CA Seabury & Smith Insurance Management Program

YOU’VE WORKED HARD ALL YOUR LIFE to provide a good standard of

living for you and your family and KEEP your current lifestyle

in retirement. But long-term healthcare costs can get in the

way. After age 65, Medicare can help you with healthcare costs.

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You’ve heard about how hard it is to find bright shiny new accountingrecruits, right? Fresh graduates and young professionals aren’t well-roundedenough; their soft skills are lacking; there just isn’t enough talent to go around.But what happens when the talent shortage isn’t just affecting potential recruits?What happens when it affects higher educators—the very people charged withteaching and molding the leaders of tomorrow?

Well, that’s exactly the situation we’re sparring with now. In fact, over thelast decade, colleges and universities across the country have been strugglingwith the challenges presented by a shrinking population of academically qual-ified accounting faculty.

“The shortage is very, very severe,” stresses Steve Matzke, manager of theAccounting Doctoral Scholars (ADS) Program [adsphd.org], which is adminis-tered by the American Institute of CPAs (AICPA) Foundation. “The most recentdata from 2005 to 2008 shows the overall supply of new Ph.D.s will only meet49 to 50 percent of the demand. It’s shocking, and this is only going to get worse.”

“The question now is, will the universities have sufficient numbers of appro-priately trained professors to serve the people who come to the universities?”explains Ira Solomon, Ph.D., CPA, head of the Department of Accountancy atthe University of Illinois at Urbana-Champaign.

And in case you think this is simply a problem academic institutions and stu-dents will have to deal with, the truth is that you will feel the impact as well.“The university, and in particular the accounting professor, is a critical part ofthe supply chain of human capital to the profession,” explains Solomon. “If thesupply chain becomes insufficient in terms of the accounting professor, then itwill impose a constraint on the number—and quality—of people who areattempting to enter the accounting profession.”

“We really don’t know what’s going to happen to the profession. Largegroups of individuals that start out in public accounting leave and go intoindustry and government, so the supply of accounting professors and their stu-dents affects many aspects of the industry,” Matzke adds. “If the Ph.D. shortageis not addressed there will be a shortage of professionals.”

What’s more troubling is the complexity of the shortage issue. Professorretirements and a shrinking number of professionals choosing careers in aca-demia may be at the forefront of the problem, but countless other factors belowthe surface weigh on its severity.

To start, Matzke calls the shortage a “self-perpetuating problem.” As heexplains, “One of the big issues is the capacity of universities to bring in new Ph.D. students. With so manyfaculty members retiring there isn’t only a shortage of faculty to teach the courses, but there’s also a shortageof professors to chair dissertations.” On top of that, he points out that only 73 institutions in the United Statesgrant accountancy Ph.D.s, which in itself limits the number of new professors in the pipeline. “It’s like a per-fect storm,” he says.

“If it were to turn out that things don’t change, there will come a point in time where we will have to turn stu-dents away,” warns Solomon. Diving deeper into the shortage, he says, “More specifically, the nature of this short-age doesn’t exist evenly across all sectors of accounting. When we talk about the several different domains ofaccounting—tax, audit, financial accounting, systems, managerial accounting, etc.—it turns out that the primeshortage areas are auditing and tax. If you think about the domain of public accounting, auditing and tax run rightto the heart of that line of business.”

EDUCATION

Ph.D.s WantedHigher education is in search of a way to remedy the accountancy Ph.D. shortage.

By Derrick Lilly

Illinois CPA Society | 2011

OUTSTANDING EDUCATORA W A R D

Nominations for the 2011Outstanding Educator Awardsare now being accepted.The Illinois CPA Society is currently seeking to recognize threeoutstanding educators. Two educator awards may be from 4-yearschools--one from a school that offers a graduate accountingprogram and one from a school that does not. One educatoraward may be from a 2-year school.

Nominations are welcomed from any interested person(colleague, student, administrator, etc.). Nominees must be anIllinois educator at a community college, college, or university witha minimum of five years teaching experience.

Educators who are noted for their teaching abilities, but are nowpredominantly involved in administration or research are eligiblefor the award. Nominees do not need to hold a doctoral degree orbe a member of the Illinois CPA Society, but must be a CPA.

The primary criteria to be considered in making the selection arethe following factors:

Excellence in teaching

Student motivation and mentoring

Educational Innovation

Contributions to the academic community, and/or contributionsto the accounting profession

For more information or to nominate a candidate, please visitwww.icpas.org/students.htm.

The deadline for nominations is Friday, November 26, 2010.


A 2005 study by the American Account-ing Association and the Accounting Pro-grams Leadership Group found that the sup-ply of new Ph.D.s specializing in audit andtax would meet only 22.8 and 27.1 percentof demand in these disciplines, respectively.

The reality is, there’s no simple, or single,solution to the problem. “This is somethingthat is going to have to be addressed by allaspects of the profession, not just the aca-demic institutions, but public accountingfirms, business, industry and government; thisis going to be far-reaching,” says Matzke.“This issue is going to have to be tackled frommany angles.”

In the short-term, universities and collegesare supplementing their professorial rankswith lecturers and adjunct faculty members,but Solomon warns that this approach has itslimits. “There are accreditation constraints asto how far one of these educators can go. Fur-ther, while we can rely on these people toshare their rich knowledge and experiences,they aren’t going to be conducting research—or not nearly to the extent of a Ph.D,” he says.

“Ultimately, research is what furthers theprofession. It really does offer new insightsinto things that otherwise may not beexplored,” Matzke explains.

Since June 2008, the ADS Program hasbeen working to bring the shortage in taxand audit Ph.D.s under control. “The goal ofthe ADS Program is to incrementally increasethe pool of Ph.D.s that aren’t currently in thepipeline,” says Matzke. “Over a four-yearperiod, we want to increase the current Ph.D.pool by 120 Ph.D. faculty members.”

To do this, the Program collaborates withacademic institutions to boost their rostersof Ph.D. entrants. “For example, on averageIndiana University accepts two Ph.D. candi-dates per year,” says Matzke, “The ADS Pro-gram says, ‘Great, but we want you to takea third and we’ll fund it.’ There are a lot ofpeople interested in getting a Ph.D., but theissue is that it is a financial hardship; thisprogram addresses that.”

Leaders and sponsors from more than 70of the largest accounting firms and over 47state CPA societies, including the IllinoisCPA Society, CPA Endowment Fund of Illi-nois and the AICPA, have committed finan-cial support totaling more than $17 millionover an eight-year period for the Program.

“The ADS Program has created a hugebuzz within the professional community.What I have seen consequently is the largest

number of very intelligent and highly expe-rienced people expressing an interest inaccounting Ph.D. programs at any time dur-ing my 32 years as a faculty member,” saysSolomon. “It’s clearly having a big impact interms of making people aware of the oppor-tunities and the financial support the pro-gram provides; it’s making a Ph.D. feasiblefor people.”

To date, 54 ADS Program Scholars havebeen enrolled at participating universities.The program is now in its third year, andwhile no Ph.D. graduates have been pro-duced yet—it takes a minimum of four to fiveyears to earn a Ph.D.—the supporting univer-sities are continuing to take on prospectivePh.D.s across the country.

With the Program showing early signs ofsuccess, it looks to be just what the doctorordered. And while the focus is on the pub-lic accounting side of tax and audit, withany luck this Program is the beginning of amore all-encompassing solution.

“I think the successes the ADS Programis seeing are going to go a long waytowards future programs of a similar scopethat address different aspects of the profes-sion,” says Matzke.

“It’s reassuring that AccessTek stays involved even after implementation is completed.” -Nancy T.

It’s Time to Move to Better

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“I’ve finally got control of my inventory since switching to GP. Thanks AccessTek.” -Tom S.

www.AccessTek.net (630) 868-5050

Lindy Antone!i CITP. CPA

EDUCATION

Unlicensed CPAs Must

REGISTERAre you licensed? If not, you must be registered.

Illinois law requires that all CPAs who are not licensed but hold themselves outto the public in Illinois in any way as a CPA, must register with the IllinoisDepartment of Financial and Professional Regulation. This would includeanyone who uses the CPA designation on resumes, business cards orletterhead, or in any other manner.

The registration option has been extended to July 1, 2012. Specialaccommodations are in place for out-of-state CPAs meeting certain criteria.

Visit www.icpas.org for more information.

How Registration Works:

> $90 for initial registration and $90 every three years after that to renew your registration.

> Registration does not require CPE or experience.

> If you are not registered by the new July 1, 2012 deadline, you willhave to be licensed in order to use the CPA designation, and will besubject to all license requirements, including CPE.

> If you don’t register now and continue to use the CPA designation, you could be fined up to $5,000.

Register Today.

To download theregistration form, and for help in filling it out,visit www.icpas.org

Please share this with other CPAs in your firms and companies.


The Financial Accounting Standards Board (FASB), as part of a joint project with the Interna-tional Accounting Standards Board, has proposed new accounting rules that, if adopted, will sig-nificantly change how companies and nonprofits treat their leases on financial statements.

Under the current rules, proper treatment turns on whether a lease is classified as operating orcapital. Operating leases aren’t recognized on a lessee’s balance sheet, and rent payments aretreated as an expense. Capital leases, on the other hand, relate to property acquisition and financ-ing, and therefore produce an asset (i.e. the rights granted to the lessee) subject to depreciation andliability (the obligation to pay rent), which are both recognized on a lessee’s balance sheet. Capitalleases result in the recognition of both depreciation and interest expenses. Under current rules, cap-ital lease assets and liabilities are measured in terms of the present value of the minimum lease pay-ments over the fixed term of the lease, without considering optional renewal periods.

The proposed rules, however, make no distinction between operating and capital leases. Theydo require a lessee to recognize a right-of-use asset and a liability from the date the lease begins,much as the current rules do for capital leases. Rent payments are recorded as principal and inter-est payments on the lease obligation. However, unlike the current rules, these new rules requirea lessee to estimate the term of the lease based on the “longest possible term that is more likelythan not to occur.” This concept is broadly structured so that a lessee considers factors such asthe lessee’s contractual ability to extend the lease, the statutory and business consequences of ter-minating the lease (such as the existence of significant leasehold improvements or whether theleased asset is specialized or crucial to the lessee’s operations), and the lessee’s intentions andpast practices. The lessee then would be required to reassess the value of the lease obligation overeach period. These changes could have far-reaching effects on a company’s financial statements.

Financial Statement ChangesCompanies with operating leases will see the most dramatic effects. Take this example (see table),where Company A leases a manufacturing facility under a 10-year lease, and where the facilityis used exclusively for manufacturing. The lease calls for annual minimum rental payments of $1million, and the present value of the obligation as of January 1 is $6.7 million.

REPORTING

Lease Law LessonsHow will new lease accounting rules affect your business?

By Glenn E. Richards, CPA, and Kevin V. Wydra, CPA

Current Rules Proposed Rules

Assets Current assets $29,700 $29,700

Property, equipment & othernoncurrent assets

$40,100 $46,800

Total assets $69,800 $76,500

Liabil i ties & Equity Current liabilities $11,000 $11,925

Noncurrent liabilities $20,000 $25,775

Total liabilities $31,000 $37,700

Total equity $38,800 $38,800

Total liabilities & equity $69,800 $76,500

Current Ratio 2.70 2.49

A benefit of your Illinois CPA Society

Membership

Reach NEW CLIENTS by listing your firm on the Illinois CPA Society’s FIND A CPA Directory.

Listing in this directory is FREE and a benefit only available to IllinoisCPA Society members.

This easy-to-use online feature allows individuals, businesses and not-for-profits to access your firm’s information through a simple CPAsearch on the Society’s website.

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Add your firm listing today, visit http://www.icpas.org/CPAdirectory.htm

Increasing EBITDAAlthough the underlying economics of leaseagreements haven’t changed, companieswith operating leases could experience ajump in their earnings before interest, incometaxes, depreciation and amortization—betterknown as EBITDA. Under the current rules,rent paid on an operating lease would be rec-ognized as an expense and therefore wouldreduce a company’s EBITDA. However,under the proposed rules, the present value ofall lease payments would appear as an assetand a liability. As rent is paid, the majoritywould be applied against the liability, withthe remaining portion recognized as interestexpense. The asset would be depreciated.

Timing ChangesOver the course of the lease, total deprecia-tion and interest expenses recognized willequal the total rent expense reported undercurrent rules. However, the proposed newrules do accelerate expense recognition.This is because interest expense would berecognized using the effective interestmethod, versus a straight-line basis over thecontractual term of the lease.

Changing Ratios Presuming the proposed new FASB rules areadopted, not only will EBITDA and netincome be affected, but a number of finan-cial ratios commonly used in debt agree-

ments will change as well. Many companiesalso will see an increase in the current andnoncurrent liabilities presented on theirbooks, since they’ll be required to recognizethe current and noncurrent obligationsinherent in lease agreements. The currentportion of lease liabilities will adverselyaffect the working-capital ratio.

What’s more, many companies have debtagreements that restrict or prohibit theamount of debt a company can assume (fre-quently referred to as “permitted indebted-ness”). The added indebtedness caused byleases might affect fixed-charge coverageratios, since the lease payments would nowbe considered debt or obligation payments.

Consolidating VIE LeasesThe proposed rules could lead companies toperform a de facto consolidation of theirrelated-party leases with variable interestentities (VIEs). Currently, a company would-n’t record the lease on its financial statementsunless it is a primary beneficiary of the VIE.The proposed new rules require all leases,including related-party leases, to appear onthe balance sheet regardless of whether thelessee is a VIE primary beneficiary.

Increasing Operating CashA company’s statement of cash flows identi-fies three types of activity: operating, invest-ing and financing. The focus is usually oncash flows from operating activities, and

currently a rent payment on an operatinglease represents an outflow from operatingactivities. Under the proposed new rules,however, most of the rent payments (otherthan the interest component) would betreated as a reduction in lease principal—oran outflow from financing activities.

Forewarned Is ForearmedThe FASB released an exposure draft of thenew lease accounting rules, “Leases (Topic840),” on Aug. 17, 2010, and requested thatcomments be submitted by Dec. 15, 2010.The FASB expects to issue the final ASU in2011. The complete exposure draft and futureupdates can be found at fasb.org/home.

If and when implemented, the rules couldsignificantly impact a company’s EBITDA andbalance sheet. The quicker companies under-stand how these proposed rules will affecttheir business, the better equipped manage-ment will be to address related issues.

ICPAS member Glenn Richards is with Crowe

Horwath LLP in the Oak Brook, Illinois office.

He can be reached at 630.575.4323 or

[email protected]. ICPAS

member Kevin Wydra is a partner with

Crowe Horwath LLP in the Oak Brook office

and serves on the ICPAS Audit and Assurance

Services Committee. He can be emailed at

[email protected], or you

can call him at 630.586.5242.

Are You Ready?Take these four steps to prepare for the proposed new rules.

1. Perform pro forma calculationsThe proposed transition rules provide a simplified retrospective application of the guidance. This applies to the beginning of thefirst comparative period presented in the first financial statements in which the new guidance is applied. However, companiesshould also consider recasting their other financial metrics (such as EBITDA) according to the proposed new rules, so thatcomparative information is readily available. It’s common for lenders and owners to use EBITDA to estimate a company’s valueand evaluate management’s performance. Re-measuring these metrics will allow an apples-to-apples comparison going forward.

2. Restructure existing debt covenants in loan agreementsLoan agreements typically include debt covenants based on metrics such as debt-to-total assets and cash-coverage ratios.Because the addition of lease-related assets and liabilities to the balance sheet could affect these metrics, companies should lettheir lenders know about the proposed rules and their implications for the company’s debt covenants. If management is in theprocess of refinancing or renewing the company’s loan agreement, making the necessary changes—and knowing debt ceilings—sooner rather than later might be a good idea.

3. Improve internal controls for lease-related financial dataUnder the current rules, companies often treat their operating leases like any accounts payable expenditure, with managementsimply reviewing the check as payments are due. The proposed new rules call for more record-keeping to separately track leaseasset depreciation and amortization, and classification of lease liabilities. They also require companies to develop policies forestimating the term of lease agreements.

4. Understand the implications for acquisitionsEBITDA is widely used to gauge a target company’s operations. To avoid misinterpreting the increased EBITDA as a fundamentalimprovement in a target company’s financial situation, companies considering an acquisition have to fully grasp the effects of theproposed new rules. Acquiring companies also need to be aware of implications in order to effectively compare the acquisition’sresults before and after the rules take effect.


REPORTING

Congratulations to the 2010

WomentoWatchAward Recipients

The Illinois CPA Society’s Women’s

Executive Committee and the American

Institute of CPAs Work/Life and Women’s

Initiatives Executive Committee are

pleased to honor these women who have

made significant contributions to the

accounting profession, their organizations,

and to the development of women as leaders.

These deserving women will be presented

with their awards at the Illinois CPA Society

“Women’s Leadership Breakfast” on

Thursday, November 18, 2010 at the

Standard Club in Chicago.

The mission of the Women's Executive Committee is to

enhance the recruitment, volunteerism, retention and

leadership of women CPAs in the Illinois CPA Society and the

profession through various programs and networking events.

This program is one in an ongoing series designed to help

women CPAs learn more about important professional issues,

expand business networks and foster career advancement.

To register to attend this breakfast, please call the IllinoisCPA Society at 800.993.0393 or visit www.icpas.org.

Lindy Antonelli, CPAPresident and Founder, AccessTek

Experienced Leader

Wendy Hambleton, CPADirector, National SEC Department, BDO USA

Experienced Leader

Jo Ellen Helmer, CPAPartner, Midwest Health Science IndustryLeader, Ernst & Young LLP

Experienced Leader

Heidi Verbiscer, CPASenior Manager, Federal Tax Services, Crowe Horwath LLP

Emerging Leader

Jennifer Oinounou, CPAManager, Management & Distribution Services Group, Baker Tilly

Emerging Leader


L aura Huska draws a picture to illustrate each element of the computer network at Chicago Botanic Gardenin Glencoe, Ill. Huska, director of information services, isn’t being condescending to her CFO. She‘s just mak-ing sure that the person who not only controls the purse strings, but also is responsible for bringing her depart-ment’s issues and proposals to upper management, understands as much as possible about the IT function.

Truthfully, more and more CIOs are reporting to CFOs, as chief financial executives see their roles continu-ally expand to encompass more pieces of the corporate puzzle.

“After Y2K there was a bit of a backlash on IT spending and a lot of corporations shifted oversight to the CFOin an effort to control costs,” explains Michael Shapow, Chicago-based senior vice president of Robert Half Inter-national. “In the last two years we’re seeing the same thing, because of the downturn in the economy.”

There are one of three people to whom CIOs traditionally report: the CEO, the COO or the CFO. Of allof them, the CFO usually is seen as the least desirable for most CIOs, says Shapow. “Rightly or wrongly, theCFO has a reputation for tamping down on spending,” he says. And they’re often viewed as technologicallychallenged.

“I think this speaks to the responsibility gap between the technology people and the business executives,”says John Jackson, executive vice president of Fusion Risk Management, Inc. in Rolling Meadows, Ill. “There’sa view that executives are strictly financially driven and don’t understand technology, but the CEO and the CFOthink that most technology people just want to spend money on the latest gadgets.”

“I’m sure that the CFOs are aware of their reputations,” says Shapow. “Good CFOs are broadening their under-standing of IT.” Conversely, CIOs are making an effort to not only learn more about the business side, but alsobecome skilled at couching IT issues in business terms. In fact, says Shapow, some CIOs have brought account-ing people into their departments in an effort to tighten controls and become more business friendly.

Still, there are some questions that CIOs wish their CFOs would ask them. Here are their top 10.1. Do we always do a build-versus-buy analysis before making a decision and, if so, what criteria do we use

for the comparison? Also, are we decommissioning technology as the systems are no longer effective? 2. When you do the annual budgeting for the IT department, do you build on last year’s base or start with a

clean slate and question every expense? “Times change,” says Jackson. “Is it the right decision for now orare you including it because someone else has done it that way?”

3. What are the pros and cons of outsourcing our data center, development staff, help desk and network oper-ations center? “This comes back to the risk management issue,” says Jackson. Outsourcing may mean lossof control and visibility and there may be security issues, but if it all stays in-house there’s more onsite con-trol, which may be crucial to the risk management of the whole business.

4. If this was your company and the cost of IT was directly tied to your personal compensation and net work,would you do anything differently?

5. What can I do, as the CFO, to improve the effectiveness of our IT services to the company? 6. Can you tell me how the technology works and how it impacts operations? In Huska’s case, “We’re connected

inside and outside with fiber-optic cable throughout the Garden. And there’s also wireless internet access.”7. Can I be part of your IT interdepartmental meetings, so that I better understand the wants and needs of

the IT department’s end users?8. What will this technology upgrade, new equipment, additional investment, etc. do for me and my depart-

ment? Are our investments in line with key business goals?9. Are we making the right technology investments in various areas? Where do we stop? Terry Merkley, vice pres-

ident of IT at TCS Education System in Chicago, notes that, “It would be great to build a measurable model”and to put together an ROI for all areas. “That would be a good conversation for the CFO and CIO to have.”

10. What are the technology aspects of regulatory compliance? This is crucial for an institution that accumulatesdata about its clients and customers, and that has to worry about privacy issues and client safety, says Merkley.

The CFO and CIO functions are becoming evermore intertwined, and the relationship between them will con-tinue to develop in the interests of corporate stability moving forward.

CORPORATE

What Should You Ask Your CIO?CIOs have a wish list, of sorts—10 questions they want their CFOs to ask them.

By Meta L. Levin

upcoming eventsNovember 10, 2010 - Chicago, IL

Generations Apart...Yet Only a Cubicle AwayDennis L. FaurotePresident, The Faurote Group and Adjunct Professor, Kelley School of Business, Indiana University

December 16, 2010 - Chicago, IL

Strategic Cost Analysis: Tools forLowering Your Company’s CostsJohn W. Hill, PhD, JDArthur M. Weimer Chair in Business, Kelley School ofBusiness, Indiana University

December 1, 2010 - Oak Brook, ILDecember 8, 2010 - Chicago, ILNetworking BreakfastForecastingThomas L. Zeller, PhD, MBA, CPAProfessor of Accountancy and University Scholar in the School of Business Administration at Loyola University Chicago

December 17, 2010 - Chicago, ILTechnical WorkshopAdvanced FASB Review and Update:Tackling the Tougher GAAP IssuesDr. Joann N. Gross, CPA, CMA, CGFMUniversity of Wisconsin Oshkosh

February 2, 2011 - Chicago, ILTechnical WorkshopShaping Up Your Accounting Function:Trimming the Fat and Going LeanJames Lindell, CPA, MBAThorsten Consulting Group Inc.

February 9, 2011 - Chicago, ILTechnical WorkshopForensic Accounting: FraudulentReporting and Concealed AssetsGlenn Helms, CPA, PhDGlenn L. Helms, Inc.

March 2011 - Rosemont, IL

Controllers Conference

Dedicated to meeting the needs of corporate finance professionals through high-quality executiveeducation, knowledge resources and networkingcommunities

making your life easierCheck it out today at www.CCFLinfo.org

The Center for Corporate Financial Leadership is a service of the

Illinois CPA Society


Recession & the

EntREpREnEuRiaL SpiRitBy Kristine Blenkhorn Rodriguez


W hen you’re in the throes of an economic spin cycle, logic dictates that new ventures can wait. Cautionarytypes will tell you, in the hushed tones usually reserved for situations of grave importance, that the timing is notright. They’ll use words like “potential bankruptcy,” “capital drought” and, if they’re feeling particularly persnick-ety, “unrecoverable losses.” Their concerns are real and deserve studied consideration. That said, the startup expertswe interviewed for this story are of a different mind. Having helped hundreds of entrepreneurs start businesses, theseexperts are less particular about the timing of a startup and more concerned about the idea behind it.

Recession & the

EntREpREnEuRiaL SpiRitBy Kristine Blenkhorn Rodriguez

icpas.org/insight.htm | NOVEMBER/DECEMBER 2010 35

good thingS foR EntREpREnEuRSA recession spurs entrepreneurs to action forvarious reasons, including the existence of lesscompetition; more room to enter as a low-priced alternative; and a surplus of laid-off qual-ified, intelligent employees who can metamor-phose into budding business leaders.

In fact, in the second quarter of 2009, whenpundits were bemoaning the worst of the eco-nomic downturn, the Challenger, Gray &Christmas job market index showed that 8.7percent of job-seekers gained employment bystarting their own businesses. Not an impres-sive number, unless you look at the compari-son—just 2.7 percent had done the same inthe last quarter of 2008. Do the math; that’s a300-percent increase in just one quarter.

According to the Kauffman Index of Entrepre-neurial Activity, 558,000 new businesses werecreated in the United States in each month of2009. That’s 27,000 more startups per monththan in 2008 and 60,000 more than in 2007.Entrepreneurship in 2009 was highest among35 to 44 year olds, as well as African Ameri-cans. Although the Western states continued tohave the highest rates of entrepreneurial activ-ity, this region saw a sharp decline from 0.42percent in 2008 to 0.38 percent in 2009. In themeantime, business creation rates increased inthe Midwest and the South.



Jim Petras, managing director of Early Stage Partners, which pro-vides early-stage venture capital financing to Midwest companies,says the virtual space, in particular, has seen an upsurge in entrepre-neurial activity.

“Virtual businesses don’t have the challenge of a large initial cap-ital outlay,” he comments. “Getting that first funding during a reces-sion where capital is restricted is the biggest hurdle. If you can avoidthat, then no time in the economic cycle is better or worse thananother to build out a good idea. Businesses that need significantfunding upfront take on greater risk, obviously. Because if you’re notfunded fully from the day you march out with your business idea,your burn rate may hurt you.” The burn rate, or rate at which a com-pany uses up initial capital to run the business in its early stages, iswhat endangers most startups, says Petras, usually because theydon’t plan for the unexpected. Or, in a recession, for the slowergrowth that may come as part and parcel of a slow economy.

Petras’ firm manages two small early-stage funds (a $44-millionOhio fund and a second for Ohio and Michigan). “We’re heavilyinvolved with two manufacturing-centric states that are near the topof the list in terms of unemployment,” he explains. “And I’m not see-ing a decrease in deal flow, honestly. Since we started in 2002, Ithink there’s been an emergence of more investors and jumpstartorganizations in states like Ohio and Michigan. Government andbusinesspeople in these areas have realized they’ve got to create aventure environment for the local economies to succeed.”

“i’vE nEvER BEEn in thE REd”Sarah Evans, a twenty-something just eight years out of college, wasnamed one of Forbes’ “14 Power Women to Follow on Twitter,” andher company, Sevans Strategy, headquartered in Elgin, Ill., wasnamed one of Entrepreneur’s “10 Hot Startups” in June. Sevans Strat-egy, a public relations services firm that specializes in new mediasuch as Twitter, Facebook and blogs, turned a year old in Septem-ber, and in Evans’ words, has “never been in the red.”

While there was an investment to be made to start the business,it was not a large one. “The website was obviously the most costlything,” she says, “and my Mac environment, which my husband hasgraciously given me the formal living room to house.” Four teammembers, including Evans, work from her living room. A fifth teammember works from home in Colorado.

As with most entrepreneurs, Evans gave herself a timeline. “Mytimeframe was simple: Our savings versus our mortgage payment,”she says. “My husband’s thing was not to lose the house.” It seemsthat’s not a worry anymore, since the business is now national andabout to go international.

Jeff Todd, founder of EPIC Business Planning, explains that SarahEvans is a good case study, stating that, “Very few business ownerswe work with actually quit their jobs before they get funding, andmost already have a job within the industry they’re looking at whenthey begin, especially in a tough economy. The successful ones areexperienced in their field. They’ve already done several componentsof the job they want to do as an entrepreneur. They have a broadskill set. And experience in sales or marketing is usually a must ifthey want to make a go of it.”

“i thinK i can, i thinK i can”According to the Small Business Administration’s (SBA) Office ofAdvocacy, small businesses in the United States employ a little morethan half of all private-sector workers, pay 44 percent of total US pri-

vate payroll, and have generated 64 percent of net new jobs overthe last 15 years.

And yet,“You’re not going to replace the Twinsburg, OhioChrysler stamping plant that shut down and laid off 1,000 workerswith a business that has 20 knowledge workers, some of whom arein Europe and Israel,” says Petras.

While Petras is neither hardhearted nor immune to success sto-ries, he is a realist. “Starting a virtual business is one good option.But businesses that employ a significant number of people will gen-erally require venture capital because they’ll have significant upfrontexpenses. We’re in a situation now where the massive institutionalfunds such as pension and bank funds view venture capital as analternative asset class. Many pension funds are over-allocated inthese areas and are doing their own triage to fix the situation. Overthe next three to five years, fewer venture capital funds will haveaccess to this kind of capital because of the over-allocation. Thatskews the capital continuum in an unfavorable way.”

Todd sees more than half of the business plans written by hisorganization requiring bank or SBA loans, at least for a certain per-centage of startup capital. “Collateral, owner equity and credit scoreare king,” he says, “no matter what economy you are in, but espe-cially now. When clients come to me, I ask them if they’ve alreadytalked to a banker. I’m not in the business of throwing cold water onpeople’s dreams, but a good banker will tell it to you straight. He’llsay that regardless of your business plan or experience, he wouldn’tfund a loan of this type for XYZ reason.”

Todd says the scenario is so common that his firm offers potentialnew entrepreneurs a feasibility study that includes a financial modeland recommendations on what may need to change if they want tomove forward with their current business idea.

Kelly King Anderson, founder of Startup Princess, has seen toomany entrepreneurs begin without a feasibility study, a businessplan or even sufficient capital. Her organization provides womenentrepreneurs with networking opportunities and educationalresources to help them start and succeed with new ventures. Whilethe name may provoke some eye-rolling, her roster of membersincludes some millionaires, as well as women earning in the highsix figures.

“Our mentors do quite well,” she says, “but most did their home-work and due diligence ahead of time. They used advisors and everyresource available to them. The ones that break my heart are theentrepreneurs who come to me for help after they’ve already maxedout a credit card or two with $75,000 worth of business expenses.And they can’t tell you how many units per month they need to selljust to break even.”

In terms of timing a business launch, Todd recommends the endof a recession as ideal, “Although nobody can predict the end of arecession with any accuracy,” he explains. “If you have anextremely cost-competitive product and price is an issue in yourindustry, a recession is a good time to launch a business assumingyou’re well funded. If customer service or unique product featuresis your advantage, then a recession is a less-than-ideal time to start.”

That said, Todd has worked with enough mavericks to know thatnot everyone listens to his advice. “Entrepreneurs are aggressivetypes,” he says. “They are adventurous. They have higher aspira-tions. They’re not satisfied with a job; they want more. They want tobe in control and not limited in their income.”

Doesn’t sound like a recession is likely to hold that tiger down.


Should you use your 401(k) to start your business?Sarah Evans didn’t.

“I remember (my accountant) saying, ‘If you were my daughter, I’d ask youif you’re sure you know what you’re doing and all the implications that fol-low from taking from retirement funds at your age.’ I took his advice anddidn’t use it—and I’m glad,” says Evans.

And yet, many of us don’t have the option to start a business without draw-ing from retirement funds, given the current loan and credit crunch, says LenFischer, founder and CEO of BeneTrends, a company that helps people startbusinesses with their retirement savings.

According to Fischer, you need at least $50,000 in 401(k) assets, a lot ofconfidence in your idea, and a firm understanding of the risk you’re taking.Thatsaid, “The majority of my clients are soon-to-be franchisees, so risk is some-what mitigated,” he explains. “These are people who’ve spoken to a dozen orso people already running their own businesses in that field. They’ve read thedocuments, met with business advisors of all types and know what they canreasonably expect to make in the first and second years of the business. Manyof them are 45 to 55 years old and have been downsized from corporateAmerica. There aren’t many jobs available to the downsized 50 year old. Oh,and they’re entrepreneurs. They’re the worst kind of employee but the best kindof business owner. I should know. I am one.”

Stace Hilbrant, managing director of 401(k) Advisors LLC in Wilmette, Ill.,says he sees more people asking about dipping into 401(k) funds because ofthe downturn. “The common wisdom is don’t do it. It’s always best to leaveyour money invested over the long term.” However, Hilbrant, an entrepreneurwho founded his own business, sees the flip side. “I firmly believe if you’regoing to start a company, you’re a risk-taker. In an economy like this one, espe-cially, you’ve got to use all the funding sources available. If you’re successful,in the long term you’ll see the retirement savings generated from a profitablebusiness far outweigh what you might make on your 401(k) via more tradi-tional means.”

A cautionary note: In 2008, the IRS began to pay more attention to entre-preneurs who finance their businesses using 401(k) funds. Doing so usuallyrequires the help of a qualified professional who specializes in the area. Fis-cher says in 14 years, about 1 percent of a total of 40 plans created by hisfirm have been audited.

Usually, a business owner creates a new corporation, sets up a 401(k) for thebusiness, and moves his or her retirement funds into that 401(k). The owner usesthe money to infuse the operation with capital (usually buying shares) but retainsthe tax advantages of the 401(k). Monika Templeman, acting director ofemployee plans at the IRS, explained to BusinessWeek that the problem is thatthe process is “open to abuse.” Some owners buy personal assets such as cars,which doesn’t sit well with the agency.

“These plans are a viable option,” Fischer explains, “but they must be doneright. You need a clear business link and case for where the money goes andwhat it is used for.”

make the caSe for greenSell the sustainable concept to the powers that be.By Sheryl nance nash

going green isn’t just about doing the rightthing for the environment; it’s also about doing what’s profitablefor the business.

“For businesses, sustainability equals profitability. If it doesn’t sus-tain itself, it doesn’t pay off in the long run,” says Gregory Unruh,author of Earth Inc. and professor of global business at ThunderbirdSchool of Global Management in Glendale, Ariz.

A lot of companies get it. Just take a look at a recent GreenBiz sur-vey, where more than 85 percent of companies interviewed saidthey were committed to maintaining or even increasing their sus-tainability investments in 2010, despite the economy.

Some companies have announced large-scale, highly visible sus-tainability initiatives. Walmart’s goal is to eliminate 20 million metrictons of greenhouse gas (GHG) emissions by 2015 across the lifecyclesof the products it sells. On the manufacturing side, Procter & Gamblecites new research that finds strong consumer interest in goods thatoffer both environmental and economic benefits. The companyannounced plans to reach more than 50 million US households withinformation on how P&G products such as Tide Coldwater liquidlaundry detergent can save water, energy and waste.

Beverage companies are making a major push to conserve water,too. Anheuser-Busch InBev said it will reduce the amount of waterit uses to brew beer, from five liters of water per liter of beer in 2007to 3.5 liters of water per liter of beer by 2012—a 30-percentdecrease. PepsiCo is making similar progress on its own water-con-servation goals. In 2008, the conglomerate reported water usagecuts of more than 7.5 billion liters from its 2006 baseline.

And audit, tax and advisory firm KPMG LLP recently reported thatit had achieved a 26-percent reduction in its carbon footprint from2007 to 2009, exceeding the firm’s stated three-year commitment ofa 25-percent reduction in just two years. During the course of KPMG’sLiving Green program, the firm has reduced its electricity consump-tion by 9 percent and reduced paper consumption by 33 percent,while increasing the percentage of recycled paper used by 85 percent.


make the caSe for green


“KPMG’s successful carbon reductions represent the kind ofcorporate leadership we need at this time of environmentaland economic crisis,” said Matt Petersen, president and CEOof Global Green USA, an environmental nonprofit organiza-tion, in a prepared statement. “They are establishing—andbeating ahead of time—reduction goals that save money andresources while reducing the carbon pollution that causesglobal warming.”

For KPMG, the payoff is clear. Kathy Hannan, nationalmanaging partner of Diversity and Corporate Social Respon-sibility, explains that, “Being a responsible corporate citizenis a key driver of KPMG’s business, affecting our relationshipswith clients, shaping the experiences of our people, andinspiring us to be a positive force in our communities.”

explore green optionsWhile some companies are embracing sustainability, othersare sitting on the sidelines. They just aren’t convinced of thebusiness case.

“The definition of ‘green’ has broadened to the point whereit is now a term that lends confusion rather than clarity,” saysSteve Linton, LEED AP, BPI certified professional and directorof sustainable technologies at Deltec Homes. However, inmany cases, green improvements such as lighting upgrades,insulation and air sealing or mechanical system tune-ups canprovide very compelling paybacks, he says.

“The economies of going green can vary greatly from strat-egy to strategy, state to state, and company to company. Somestates may have generous incentives for improving the energyefficiency of your building; others may have attractive incen-tives for generating renewable energy. Some businesses willrealize a quick payback on waste stream modifications, whileothers already produce very little waste,” Linton explains. Heoffers an example from his own company: “In 2007 weinstalled one of the largest solar arrays in the state on the roofof our manufacturing facility. Generous incentives from thestate and federal government helped us achieve a simple pay-back for this project in eight to nine years. Considering thatenergy prices are rising, the actual payback is likely to beeven greater. In addition, the system has provided myriadopportunities for media coverage and helps us exhibit sustain-ability as one of our core values.”

There’s plenty of money out there. The US government hasset aside $83 billion in stimulus funding for sustainability ini-tiatives, primarily to increase energy efficiency and reduceGHG emissions in the private sector. These incentives come inthe form of tax credits, grants and loans.

Listen to your customersSo does being green matter to customers? “They have always beenextremely interested in green practices. Not just in the way that webuild homes, but the ways we promote sustainability within the com-pany and its operations. When we can find ways to improve the sus-tainability of our company, reduce operational expenses, anddemonstrate our commitment to the environment, green trulybecomes a win-win,” says Linton.

“Walmart didn’t decide to go green just because it made them feelgood. They are green because it makes business sense—they are sav-ing operational costs and expanding sales/markets at the same time,”says Michael Andresen, RDG Sustainable Design Learning Commu-nity co-chair for Des Moines, Iowa-based Planning & Design.

He cites the McGraw-Hill Construction Smart Market Reports asan example of the type of savings to be achieved. The perceived ben-efits of greening in 2007 and 2008 were a 24- to 50-percent reduc-tion in energy use (and therefore in energy bills) and a 33- to 39-per-cent decrease in CO2 emissions.

But he argues beyond the quantitative measures, citing studies thatsuggest qualitative impacts as well: Increased worker productivity,increased job satisfaction and positive public relations “goodwill,”for starters. What’s more, students entering the job market are moreaware of corporate stewardship. A company’s green image is becom-ing a decision-making factor for prospective employees, saysAndresen whose local economic development organization, TheGreater Des Moines Partnership, recently formed a sustainabilitycommittee to educate community businesses.

make the business caseTo get buy-in on the sustainable concept from the powers that be,however, you have to go for “The Triple Bottom Line approach:people, planet, profit. Show how green can not only save money(profit), but also reduce resource use (planet), while at the sametime positively impacting employees and the community (people),”says Andersen.

Education is key. “I walk into a company and I have the CEOand president of the company in front of me and I’m making acase for some alternative technology. I have to educate them onthe reasons why. We need to invest $54,000 to put 37 solar pho-tovoltaic panels on our roof because it’s going to save us thismuch money. Then you’ve got to educate them on how thisworks. Educate them on the process so they’re comfortable withit. Then that parlays to the financial side. Wow! We’re going tosave 60 percent over what we spent last year. I’ve had to provethe math every time,” says Ron MacKinnon, a renewable energyconsultant and creator of WhoKnowsThisStuff.com.

MacKinnon is quick to point out, too, that sometimes costs are notas great, thanks to rebates and tax credits. He gives the example of

the Grumpy Troll restaurant that put a solar photovoltaic system onthe roof that cost them $54,000 on the front end. “The restaurant got55 percent back through tax credits and rebates. So when you’relooking at the financial case, look at the long-term savings to beginwith. If you’re able to save 30 to 40 percent on annual energy usagethrough lights, heating and cooling, that allows you to have morefunds to do more things within your company, like doing a website,doing a customized video to promote your business, instead of pay-ing the energy company $10,000 more a year than you need to bepaying” says MacKinnon.

“It’s about operational savings. It’s about having those savingsavailable to do other things to grow your business. Sure, it’s alsoabout lowering carbon footprint, but lowering your carbon footprintis not the number one driver,” he adds.

And, if you want to make shareholders happy, sustainability canhelp you there too. A recent report by PricewaterhouseCoopers andthe Grocery Manufacturers Association (GMA), Forging Ahead in

the New Economy, analyzes the financial performance of con-sumer-packaged goods (CPG) companies along sustainabilityreporting lines. A company that reported sustainability data at anytime during the five-year reference period was included in thereporting group (those companies that report through one or moreof six well-known sustainability indices, and receive recognition fortheir sustainability activities).

What were the results? As was the case in the past two years,reporting companies continue to trend notably higher than non-reporting companies (those that only report standard financial data)in median gross margins. Over the past five years, reporting compa-nies’ gross margins have been, on average, 10 percentage pointshigher than those of non-reporting companies. Higher marginshelped reporting companies to produce more cash than their non-reporting counterparts, as evidenced in their notably higher freecash-flow-to-sales performance. On average, reporting companieshave generated higher shareholder return than non-reporting com-panies over the past three- to five-year periods.

Simply put, reporting matters to regulators, investors and cus-tomers. “Companies must know their stakeholders, be aware of theirexpectations and ensure company reporting feeds stakeholderexpectations,” says Grant Hellwarth, a partner in the Chicago officeof PricewaterhouseCoopers.

And, in fact, according to Ceres, a coalition of investors and envi-ronmental groups, investors filed an unprecedented number ofshareholder resolutions in 2010, pressing companies to boost theirattention to the risks and opportunities posed by climate change.Investors filed a record 101 climate and energy-related resolutionswith 88 US and Canadian companies, which is nearly 50 percenthigher than last year.

The tide, it seems, is turning decidedly green.


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Tax SoftwarePrimerCPAs have choices...probably more

than they thought they had.

By Daniel Dern

When it comes to tax software for CPAs andfinance pros, there's a stable short list of "usualsuspects"—those companies and products thatpeople tend to think of first—CCH Tax, Thom-son Reuters TAX CS and GoSystem Tax RS, andIntuit's Lacerte Tax, included. But beyondname recognition, it pays to get specific: Whoare the leaders based on revenues, what’s thenumber of CPA firms served, and what’s thenumber of returns prepared?


“GoSystem is the cream of the crop, the Rolls Royce," says Isaac M. O'Ban-non, technology editor for The CPA Technology Advisor [cpatechnologyadvi-sor.com]. But “it's only a match for practices with requirements above a cer-tain level of complexity. GoSystem is good for a small upscale practice withinternational tax issues, or clients with interrelated businesses....Small to mid-sized practices with less complex client requirements might not find the samevalue in it."

Outside of the celebrity list of tax software providers, there's a surprisingnumber of alternatives—some of which you may have heard of, and some not.

The AICPA's 2010 Tax Software Survey, The Tax Adviser and the Journal of

Accountancy, surveyed AICPA members who prepared 2009 tax returns for afee to determine which tax preparation software products were the most pop-ular. Seventeen programs were identified for the survey, of which nine madeit into the report: ATX 1040 Office and ATX MAX (from ATX, Inc., owned byCCH), Drake (Drake Software), GoSystem Tax RS (Thomson Reuters), Lacerte(Intuit), ProSeries (Intuit), ProSystem fx (CCH), TaxWorks (RedGear Technolo-gies) and UltraTax CS (Thomson Reuters).

According to the AICPA’s survey, "Drake and UltraTax CS, a ThomsonReuters product, were in a virtual tie for first place for the highest overall rat-ing." Lacerte, from Intuit, "came in a close third." And in last place was GoSys-tem Tax RS from Thomson Reuters.

The survey also reported a wide range in pricing, with prices for Federal 1040tools spanning $1,154 for ATX MAX, between $1,400 and $1,500 for DrakeSoftware and TaxWorks, $2,375 for UltraTax CS, $2,799 for Lacerte and $3,585for ProSystem. These numbers may not represent identical user licenses oroptions, or other features, but the basic spread is roughly a factor of three.

A number of the lesser-known programs actually belong to the large play-ers, notes O'Bannon. Based on parent companies, CCH, Thomson Reuters andIntuit collectively account for about 85 percent of the professional tax com-pliance market, he says, with another 10 percent going to Drake Software; theother players divvy up the remainder. In terms of number of users, though,"CCH's two small brands probably have more total users than their main prod-uct," says O'Bannon. And there are numerous others to consider, likeAdvanceCPA accounting, audit and tax tools; Avalara Sales Tax Software Solu-tions software for managing sales, use and VAT taxes; CFS Tax Software, Inc.'sTaxTools software for tax professionals; and TaxSlayerPro, a professional taxsoftware package that includes federal tax, state tax and business tax software.

THE BIG DIVIDER

In terms of capability, the biggest differentiator among "the big four" is work-flow, says O'Bannon. "CCH Tax, Thomson Reuters Tax CS, Intuit's Lacerte Taxand GoSystem Tax RS are the four products for practices with more complexclients, that also have work-flow designs and structures in the firm, such asmultiple preparers, detailed reviews and signoffs, with electronic routing ofdocuments and work papers," he says. "There's something called automatedworkpaper management, a new part of the paperless process. When some-thing gets scanned it affects what the program does."

Also, says O'Bannon, "There are advanced tools to automatically organize allthe client paperwork, so if a client brings or mails in all their tax documents—acomplex client who may own three or four businesses, is a partner in three orfour others, has multiple investments, more than one house, is drawing an hon-orarium, is getting K1 statements and more, what may be 20 or 30 different doc-


uments—they may not be organized in the way that a return is pre-pared. Tax returns are generally prepared in a routine order. Thesesystems can scan in a pile of documents and know where to put themin one PDF with bookmarks, for a CPA with multiple displays to flipto the right places to see data, enter data, etc. Some systems can auto-matically import data from the forms, and use OCR (optical charac-ter recognition) to extract data from W2s and other forms. Those arefor the firms that want and need a system that can support a morecomplicated workflow environment."

Tax products with more workflow are generally more expensive,says O'Bannon, "But the firm realizes value in the increased work-flow efficiency and productivity, letting them handle more returns perprofessional, and perhaps remove some manual data management,like having to manage the workpapers and files. You can better uti-lize your staff resources."

MID-FLOW REPORTING

Even if they don't have the same degree of advanced work-flow sup-port, most tax programs for CPAs have what it takes to prepare com-plex returns and support high volumes of clients. "Most of the othertax preparation programs are designed for higher-volume firmsdoing 1040 returns, but some firms have business clients, so theyneed software that also does K1 integration and includes other fea-tures," says O'Bannon. "For this type of firm, these work-flow toolsaren't 'bells and whistles'—extra, perhaps unnecessary features—they're necessary.”

ATX, Inc. and TaxWise, two popular tax systems for smaller andmid-sized accounting firms, both offer OCR scan-and-enter technol-ogy. Other brands include RedGear Technologies.

"RedGear has a professional product, TaxWorks, and a speed-entryproduct, 1040Works,” explains Lynn Tenney, director of marketingand communications at TaxWorks.

TaxWorks is much less expensive than many big name options, sheargues. "While bigger vendors would charge around $4,800 for aCPA firm, TaxWorks would cost about $1,400.” Both TaxWorks and1040Works handle individual, business, entities and state systems.

Aside from price, TaxWorks distinguishes itself with its Asset Man-ager, which offers more than 20 methods of depreciation, and “letsyou customize reports for tracking purposes.”

"We handle multiple states with an apportionment grid, allowingyou to simplify allocation of revenue across states, all on one screen.You can e-file a return with an unlimited number of states, and e-fileis free. ‘Ease of use’ is the comment we hear most from our clients,"says Tenney. Every RedGear tax product includes financial soft-ware—RedGear Accounting powered by CYMA. A paperless officesolution and tax research institute is also available.

Drake Software, however, is one of the most popular software solu-tions from a user standpoint. In fact, "They have won the Readers’Choice in our annual survey for the past three years," says O'Bannon.

John Sapp, VP of sales and marketing at Drake Software, explainsthat, "It’s a complete professional tax preparation program for federal

and state returns, business and individual. We offer all the taxpackages for CPA offices, including state packages, and we alsohave an accounting package, Client Write-Up, which handles livepayroll, 1099s and more. We have a document management sys-tem integrated into our product, and we provide tax research."Drake has more than 33,000 customers in terms of professional taxsites, says Sapp.

Drake's biggest differentiator is that, “We offer our software for oneprice, bundled together, so a CPA doesn't have to go back and buy astate-specific module or package and install it." The retail price forone site, says Sapp, is $1,495. Also, "We include the ability to sup-port remote offices with site licenses. And we have a Software-as-a-Service (SaaS) model, which can be remotely accessed; plus we offera website that does 1040s."

TAX PREP IN THE CLOUD

Cloud-based computing provisions software from outside the office,avoiding the need for the firm's IT department to buy and maintainhardware, and to buy, install, maintain and support tax preparationsoftware. Instead, CPAs and their clients access the program via aweb browser, and typically all data is stored securely offsite. This notonly alleviates significant onsite IT costs and challenges—especiallybeneficial for smaller CPA firms—but also makes it easier for CPAsand clients to examine data simultaneously, share data, upload andmanage documents, enter data, and even access and manage datausing notebooks, netbooks and smartphones, wherever they haveinternet access.

Cloud-based accounting software for CPAs and their clients is wellestablished. However, notes O'Bannon, it's taken longer for CPAs toadopt cloud-based tax preparation tools. GoSystem is one of the rel-atively few web-based tax programs for professionals that is web-based, he explains. Another, lesser-known option is Orange Door'sOrange Tax Suite Pro.

Although limited now, this sub-field of the market is about towiden, he adds.

TIME FOR A CHANGE?

According to the AICPA’s survey, only a small percentage of CPAshave switched to a new tool, and for these, price was a dominatingfactor. Other factors include ease of use, technical support, the num-ber of forms offered, comprehensiveness and accuracy.

"We see a 95-percent retention rate in tax packages," O'Bannonexplains. "It's such a perceived challenge to change software solu-tion, because of issues of staff retraining, new output, new workflow,etc. The key is looking at what the end result is. If it’s more produc-tivity, the ability to take on more clients, or to not work until 10 p.m.during tax season, then it’s worth doing. There is a discomfort initiallyin making a change. But most professionals, when they're forced tomake a change, find there is incredible selection, and great new techthat lets them streamline their work."


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and boards within the

valuation profession.

We are a 65 person full service CPA firm that would like to discuss purchasing and/or merging with your

firm. We have completed 15 such

transactions over the past 30 years. Please

contact me at [email protected] to begin building our

future together.Thank you, Earl Holtzman

Michael Silver & Company5750 Old Orchard Road

Suite 200Skokie, IL 60077

847 982-0333www.msco.net

Take Your Practice tothe Next Level!

Brown CPA Group hasserved the Chicago areafor more than 35 years,with a focus on closelyheld businesses and

individuals.

We are looking toprovide support,guidance, and the

opportunity for financialsuccess to a local practicewith an existing client

base. If you areinterested in merginginto an environment of

high levelprofessionalism andsuperior client service

please contact:

Arnold D. Brown, [email protected]

847.509.4100

Mark Your Calendar!

2010 CONFERENCES &WEBINARS

For the most current information or to register,visit www.icpas.org.Dates and locations are subject to change.All conferences offer CPE Credit; check ourwebsite regarding CLE and other specialty credits.

Conferences

Webinars

C

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Tuesday, November 9, 2010 | Rosemont, IL

Tax

Wednesday, November 10, 2010

Business Fraud, Internal Controls & ForensicAnalysis

Thursday, November 11, 2010 | Chicago, IL

Fraud

Tuesday, November 16, 2010 |

Rosemont, IL

Not-for-Profit Half-Day Pre-Conference

Wednesday, November 17, 2010 |

Rosemont, IL

Not-for-Profit Full-Day

Thursday, December 2, 2010 |

Springfield, IL

Employee Benefits Half-Day

Tuesday, December 7, 2010 | Rosemont, IL

Employee Benefits Half-Day

Wednesday, December 8, 2010 |

Springfield, IL

Not-for-Profit

Wednesday, December 8, 2010

Annual Tax Update

Wednesday, December 15, 2010 |

Rosemont, IL

Accounting & Auditing

Thursday, December 16, 2010 |

Springfield, IL

Accounting & AuditingC

C

C

C

C

C

C

C

C W

W

W

W

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W

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BUY OR SELL AN

ACCOUNTING OR TAX

PRACTICE

ILLINOIS PRACTICES FOR SALE:

Chicago EA Practice gross $1,100K (3

offices); Joliet CPA Practice gross

$360K; Lombard CPA Practice gross

$300K; Lombard Public Accounting

Practice (non-certified) gross $205K;

Northern Illinois CPA Practice gross

$204K; Peoria Area Tax Practice gross

$17K; Rochelle CPA Practice gross

$96K; Rural North Central IL CPA

Practice gross $402K. For details, call1-

800-397-0249 or visit us at

www.accountingpracticesales.com to

inquire about available opportunities

and register for free email updates.

THINKING OF SELLING YOUR

PRACTICE?

Accounting Practice Sales is the leading

marketer of accounting and tax

practices in North America. We have a

large pool of buyers, both individuals

and firms, looking for practices now.

We also have the experience to help

you find the right fit for your firm,

negotiate the best price and terms and

get the deal done. To learn about our

risk-free and confidential services, call

Trent Holmes at 1-800-397-0249 or

email

[email protected].

Sole practitioner CPA in St.

Charles has reached maximum

client capacity. Looking for

CPA for future partnership.

My goal is to semi-retire in

approximately 10 years. Please

respond only if you have an

established client base.

[email protected]

MERGER/SALES

Use INSIGHT Magazinereprints to promote or

supplement your seminars,meetings and tradeshows.

Reprints make a greatmarketing tool and can be

used as handoutsor toenhance your media kits. We

will work with you to create acustomized piece that suits

your needs.

Call 312.993.0407 ext. 227 for further

information.

INSIGHTReprints



A SHOUT OUT FOR ICPAS MEMBER VOLUNTEERS

TIME TALENT&

On September 24, hundreds of CPAs across the state gotout of the office and into their communities to volunteerfor the first ever CPA Day of Service in Illinois. Volunteersstocked food pantries, cared for homeless pets, collectedprofessional clothing for donation, raised funds for awide range of important community causes, hosted acasino day at a senior center, and beautified their neigh-borhoods through repair and clean up efforts, to namejust a few of the many examples.

We’d like to thank the more than 900 volunteers whomade the inaugural CPA Day of Service such a great suc-cess. Unfortunately, there are far too many names to listhere; however, please visit the CPA Day of Service pageon the Illinois CPA Society website [www.icpas.org/volun-teer.htm] to access the full list of volunteers.

First CPA Day ofService a Great Success Volunteer to work with Students

Junior Achievement – Dollars and Sense for KidsTeach money management skills to elementary and middle school–agedchildren in classrooms around the state. Fall and winter Junior Achievementopportunities are now available.College Financial Aid Application AssistanceAssist high school students as they complete their college financial aid forms.Volunteer training is offered from December to February, and financial aidapplication workshops are offered in schools from January through March.

Tax Time Volunteer OpportunitiesMilitary Tax PreparationProvide free tax preparation services for members of the military in Illinois.While this service is offered throughout the year, volunteers are most neededfrom January through April.Tax Preparation for Low-Income FamiliesHelp low-income individuals and families at tax sites around the state.Volunteer training sessions begin in November, and tax sites are open fromJanuary through April.

Volunteers Needed Now!

FOR MORE INFORMATION contact Jill Wiles Wolf [email protected] or 312.993.0407 ext. 277. Or visit us online atwww.icpas.org/volunteer.htm.

ADVICE YOUR CLIENTS CAN COUNT ON

AT PNC WEALTH MANAGEMENT, we understand your

desire to build a deep, lasting relationship with your clients. At PNC,

we’re committed to supporting that goal with a full range of services

and proven financial insight. We work closely with you to form a

comprehensive plan that suits and meets your clients’ needs. We help

you build on their strengths and examine all of the opportunities along

the way, so your clients can achieve more than ever.

Find out more at pnc.com/wealthmanagement

or call Terri L. Cable, Managing Director,

312-214-2145

The PNC Financial Services Group, Inc. (“PNC”) provides investment and wealth management, fi duciary services, FDIC-insured banking products and services and lending and borrowing of funds through its subsidiary, PNC Bank, National Association, which is a Member FDIC, and provides certain fi duciary and agency services through its subsidiary PNC Delaware Trust Company. PNC does not provide legal, tax or accounting advice. Member FDIC, Investments: Not FDIC Insured. No Bank or

Federal Government Guarantee. May Lose Value. ADV-3281 ©2010 The PNC Financial Services Group, Inc. All rights reserved.

WEALTH PLANNING TRUST AND ESTATE PLANNING PRIVATE BANKING INVESTMENTS

AICPA business solutions

To learn more, contact your local Paychex representative, call

877.264.2615 or visit

www.cpa2biz.com/PaychexProgram

MORE THAN

20,000 CPA firmsNATIONWIDE PARTICIPATE IN THE

Paychex Partner ProgramIt’s the preferred provider of payroll and retirement plan services

for AICPA business solutions

You may already know Paychex is one of the largest payroll and human resource companies in the U.S., servicing over 550,000 businesses nationwide. But that’s just the beginning. Paychex is also one of the industry’s largest 401(k) recordkeepers, and offers a full complement of HR-related services. Paychex can provide your clients a wide range of integrated payroll and HR offerings, allowing you to broaden the client services you provide, while enhancing your status as a valued and trusted advisor.

The Paychex Partner Program from AICPA Business Solutions is a valuable resource in this challenging economic environment. Paychex will ensure that your firm and clients are staying up to date with ever-changing legislation–including the new tax incentives and COBRA premium subsidy programs. Learn why over 20,000 CPA firms rely on the Paychex Partner Program to continually keep their firms and clients in compliance with all the latest regulations.

www.cpa2biz.com/PaychexProgram877.264.2615

INSIGHT Magazine - November December 2010

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Transcript of INSIGHT Magazine - November December 2010