As an audit manager of a small CPA firm, I frequently interact with and perform audits for nonprofit organizations. As such, I have seen first-hand the impact the recession is having on these entities. Over the past year and a half our economy has faced several events which have not occurred simultaneously in over 20 years:
· Significant decline in the stock market
· Rising unemployment
· Deterioration of the housing market
· Decreases in production and sales
The Nonprofit Finance Fund recently completed a survey of more than 1,100 nonprofits. The results indicated a distinct financial vulnerability. Some of the findings are astounding:
· 31% of nonprofit organizations surveyed don’t have the operating funds to cover more than a month worth of expenses; another 31% cannot cover three months’ worth
· Only 16% foresee being able to cover operating expenses in 2009 and 2010
· Just 12% expect to operate above break-even in 2009
http://www.nonprofitfinancefund.org/details.php?autoID=177
These findings should prompt nonprofits to consider what this recession means and what can be done to reduce their risk. Here are a few tips for weathering the financial crisis:
· Make sure your money is safe. Is it insured? Are your investments diverse enough?
· Cut costs. This can be as simple as reducing office perks or cutting office supplies such as paper – use email/digital copies instead.
· Two words – social media. Start marketing your good deeds. Spreading awareness may lead to unexpected donations.
· Keep your annual donors and supporters happy. Write personal thank you notes or make a brief phone call.
· Have a contingency plan for cutting costs. Can you employ more volunteers? Can board members contribute in more technical manners?
If nothing else, keep in mind that this recession can be used to improve efficiencies and sharpen the organizational focus. Make wise choices with the funds you have and you may just find that you have weathered the storm.
--LeAnn Carlson
Friday, July 17, 2009
Wednesday, July 15, 2009
Small Business Faces Big Bite on Healthcare
Headline in Wednesday, July 15, 2009 Wall Street Journal:
“$1.04 Trillion House Health Bill Hits All but Tiniest Firms for Not Providing Insurance”
As we stated in last weeks blog, we are not about political parties. We are Capitalists. Fiscal responsibility and competition are the major underpinning of capitalism.
The July 15 article in The Journal written by Janet Adamy and Laura Meckler offered further proof that the current administration is leading us into the abyss. In a previous blog, we noted the overwhelming size of the deficit being created by the federal stimulus plan. Now, you can add to that number the pending cost imposed by proposed new health-care legislation.
According to the WSJ, Senate Finance Committee, Chairman Max Baucus is trying to prepare a tax package that will cover the projected $300 billion (with a “B”) shortfall over the next 10 years.
Of course, the answer is “tax the rich”. Unfortunately, it is economic suicide to take money away from the people. People reinvest money into the financial system. This money enters the system through direct investment or through bank loans. The banks’ ability to lend depends on their available deposits. Economists tell us that direct public investment is very close to 1:1. That is to say, for every dollar put into service the consumer gets $1 in value. Economists also tell us that funds that pass through the government and then to the public are closer to 1:.50 (or less).
These investments will convert to net revenues that become taxable income. So, it seems to me that taxing $1 will create more tax revenue than taxing $ .50.
The House version of the health-care bill would require insurance companies to accept anyone. The Bill also requires individuals to carry health-care insurance or pay a penalty of 2.5% of their gross income! Is this even constitutional? If a family earns less than $88,000 annually, the government will offer a subsidy to buy the insurance or they pay a penalty. This CPA can’t wait to see how the IRS gets that on a 1040.
I do not know about other states, but in the State of Texas, anyone can get medical care regardless of ability to pay. Yes, you will have to go to a clinic and wait your turn. And yes, you won’t be in the newest hospital in town; but you can still get quality health care. It is called Medicaid and it is Federal funds administered through the State. We actually have employees that option out of our firm’s coverage because the State plan is better and cheaper!
Why in the world do we need to create a $300 billion shortfall to build something that already exists?
--Steve Cook
“$1.04 Trillion House Health Bill Hits All but Tiniest Firms for Not Providing Insurance”
As we stated in last weeks blog, we are not about political parties. We are Capitalists. Fiscal responsibility and competition are the major underpinning of capitalism.
The July 15 article in The Journal written by Janet Adamy and Laura Meckler offered further proof that the current administration is leading us into the abyss. In a previous blog, we noted the overwhelming size of the deficit being created by the federal stimulus plan. Now, you can add to that number the pending cost imposed by proposed new health-care legislation.
According to the WSJ, Senate Finance Committee, Chairman Max Baucus is trying to prepare a tax package that will cover the projected $300 billion (with a “B”) shortfall over the next 10 years.
Of course, the answer is “tax the rich”. Unfortunately, it is economic suicide to take money away from the people. People reinvest money into the financial system. This money enters the system through direct investment or through bank loans. The banks’ ability to lend depends on their available deposits. Economists tell us that direct public investment is very close to 1:1. That is to say, for every dollar put into service the consumer gets $1 in value. Economists also tell us that funds that pass through the government and then to the public are closer to 1:.50 (or less).
These investments will convert to net revenues that become taxable income. So, it seems to me that taxing $1 will create more tax revenue than taxing $ .50.
The House version of the health-care bill would require insurance companies to accept anyone. The Bill also requires individuals to carry health-care insurance or pay a penalty of 2.5% of their gross income! Is this even constitutional? If a family earns less than $88,000 annually, the government will offer a subsidy to buy the insurance or they pay a penalty. This CPA can’t wait to see how the IRS gets that on a 1040.
I do not know about other states, but in the State of Texas, anyone can get medical care regardless of ability to pay. Yes, you will have to go to a clinic and wait your turn. And yes, you won’t be in the newest hospital in town; but you can still get quality health care. It is called Medicaid and it is Federal funds administered through the State. We actually have employees that option out of our firm’s coverage because the State plan is better and cheaper!
Why in the world do we need to create a $300 billion shortfall to build something that already exists?
--Steve Cook
Monday, July 13, 2009
The minimum wage will increase on July 24 - but is it a good idea?
Within the next couple of weeks, the federal minimum wage will increase from its current level of $6.55 per hour to $7.25 per hour for non-tip employees. The pay rate for tipped employees will remain at $2.13, but employers are still responsible for monitoring tip income and paying any shortfall to their employees.
This wage increase is the third of three annual increases that were prescribed by Congress and signed into law by President Bush in 2007. In three short years, the minimum wage has increased from $5.15 to $7.25 per hour – a staggering 41 percent increase! It’s great for political posturing to announce an increase in the minimum wage, but is it sound economic policy? Historical statistics would seem to say 'no'.
The most popular argument for minimum wage increases is that the increase would allow workers to better provide for their families. However, Department of Labor statistics indicate that most minimum wage workers are not the breadwinners of their households. In fact, the overwhelming majority of minimum wage workers are either part-time or student workers and are not responsible for supporting their families. In fact, the Economic Policies Institute reports that only 2.8 percent of minimum wage earners were single parents, and only 1.2 percent of minimum wage earners were listed as adult heads of household. It is estimated that 57 percent of minimum wage earners are single people – mostly students.
Also worth considering is the fact that the last several minimum wage increases have spurred increases in dropout rates. At-risk high school students see the ability to make more money immediately and choose to leave school to do so. Numerous studies have shown how much less the average high school dropout will earn over his or her lifetime than the average graduate.
Finally, it can be argued that raising the minimum wage can actually lead to increased unemployment rates. When businesses – particularly small businesses – face increasing labor costs, their choices are to absorb the costs or pass them through to their customers. In a tight market, neither of these options become particularly attractive. Remember, this increase not only means raises for those currently earning the minimum wage, but also any employee whose pay scale is somehow tied to the minimum. That guy making $9 per hour is going to want a raise too! Since they can’t raise prices, and they can’t absorb the costs, the business’s only way to control the bottom line is to eliminate jobs. When the minimum wage increased from $4.25 to $5.15, the Joint Economic Committee of the House of Representatives estimated that between 100,000 and 625,000 entry level jobs were lost.
Particularly in a tough economy, the rising minimum wage could put an incredible strain on businesses. There is a rising chorus of voices asking Congress to delay or repeal the upcoming increase. If you have a vested interest in this issue, now is the time to make your feelings known by contacting your local Congressman.
--Dan Musick
This wage increase is the third of three annual increases that were prescribed by Congress and signed into law by President Bush in 2007. In three short years, the minimum wage has increased from $5.15 to $7.25 per hour – a staggering 41 percent increase! It’s great for political posturing to announce an increase in the minimum wage, but is it sound economic policy? Historical statistics would seem to say 'no'.
The most popular argument for minimum wage increases is that the increase would allow workers to better provide for their families. However, Department of Labor statistics indicate that most minimum wage workers are not the breadwinners of their households. In fact, the overwhelming majority of minimum wage workers are either part-time or student workers and are not responsible for supporting their families. In fact, the Economic Policies Institute reports that only 2.8 percent of minimum wage earners were single parents, and only 1.2 percent of minimum wage earners were listed as adult heads of household. It is estimated that 57 percent of minimum wage earners are single people – mostly students.
Also worth considering is the fact that the last several minimum wage increases have spurred increases in dropout rates. At-risk high school students see the ability to make more money immediately and choose to leave school to do so. Numerous studies have shown how much less the average high school dropout will earn over his or her lifetime than the average graduate.
Finally, it can be argued that raising the minimum wage can actually lead to increased unemployment rates. When businesses – particularly small businesses – face increasing labor costs, their choices are to absorb the costs or pass them through to their customers. In a tight market, neither of these options become particularly attractive. Remember, this increase not only means raises for those currently earning the minimum wage, but also any employee whose pay scale is somehow tied to the minimum. That guy making $9 per hour is going to want a raise too! Since they can’t raise prices, and they can’t absorb the costs, the business’s only way to control the bottom line is to eliminate jobs. When the minimum wage increased from $4.25 to $5.15, the Joint Economic Committee of the House of Representatives estimated that between 100,000 and 625,000 entry level jobs were lost.
Particularly in a tough economy, the rising minimum wage could put an incredible strain on businesses. There is a rising chorus of voices asking Congress to delay or repeal the upcoming increase. If you have a vested interest in this issue, now is the time to make your feelings known by contacting your local Congressman.
--Dan Musick
Wednesday, July 8, 2009
HOLD ON TO YOUR WALLET…..The Tax Man is Coming
“Money is not an issue”….anonymous Democrat
I am neither Republican nor Democrat. I’m a Capitalist. I believe that government’s duty is to provide basic services. The rest of my well being is my responsibility. Since neither party seems to care for my opinion, my political leanings are mostly “away”.
As a CPA, however, I am in a position to offer an informed opinion on financial matters. I am a numbers person and the numbers that I see today coming out of Washington scare me to death.
The current Congress is spending our children’s money at an unbelievable pace. Let’s call these “expenditures”. They are proposing to pay for these expenditures by increasing taxes on a select few citizens. Let’s call these “revenues”.
Several years ago David Walker, the former head of the Government Accountability Office, noted in his “Fiscal Wake-up Tour” that the U.S. was in an imprudent and unsustainable fiscal path. Mr. Walker’s focus at that time was on Social Security, Medicare and Medicaid.
The statistics presented by Mr. Walker revealed that the costs for just these programs would exceed projected revenues by $50 trillion (yes, that’s with a “T”) over the next 75 years, if unchanged. Now add the current Federal bailout program to this, and you have yourself some serious expenditures.
According to S. J. Leeds, a finance professor at the University of Texas at Austin, the original estimated cost of the bailout at a paltry $1 trillion was probably not accurate. Although he failed to make an educated guess, he suggested that trillions (plural) would be a better estimate.
The current budget forecast for this year is a deficit of $1.84 trillion.
And where is the revenue going to come from? Here is the plan. The current budget agreement calls for $861 billion in taxpayer cuts over the next 5 years with $97 billion in increased revenues. Unless my math is flawed, that is a $764 net reduction in revenue!
There is only ONE cure, and that is higher taxes. Tax revenues can increase from two directions. You can increase the effective tax rate and you can decrease the available deductions. The latter will create more taxable income while the former sends more to the government. Make no mistake, government can’t keep its promises of “only increasing taxes on the rich” and still spend at the rate it’s been spending.
I don’t know what the rest of the story is, but I will be hanging on to my wallet with both hands.
--Steve Cook
I am neither Republican nor Democrat. I’m a Capitalist. I believe that government’s duty is to provide basic services. The rest of my well being is my responsibility. Since neither party seems to care for my opinion, my political leanings are mostly “away”.
As a CPA, however, I am in a position to offer an informed opinion on financial matters. I am a numbers person and the numbers that I see today coming out of Washington scare me to death.
The current Congress is spending our children’s money at an unbelievable pace. Let’s call these “expenditures”. They are proposing to pay for these expenditures by increasing taxes on a select few citizens. Let’s call these “revenues”.
Several years ago David Walker, the former head of the Government Accountability Office, noted in his “Fiscal Wake-up Tour” that the U.S. was in an imprudent and unsustainable fiscal path. Mr. Walker’s focus at that time was on Social Security, Medicare and Medicaid.
The statistics presented by Mr. Walker revealed that the costs for just these programs would exceed projected revenues by $50 trillion (yes, that’s with a “T”) over the next 75 years, if unchanged. Now add the current Federal bailout program to this, and you have yourself some serious expenditures.
According to S. J. Leeds, a finance professor at the University of Texas at Austin, the original estimated cost of the bailout at a paltry $1 trillion was probably not accurate. Although he failed to make an educated guess, he suggested that trillions (plural) would be a better estimate.
The current budget forecast for this year is a deficit of $1.84 trillion.
And where is the revenue going to come from? Here is the plan. The current budget agreement calls for $861 billion in taxpayer cuts over the next 5 years with $97 billion in increased revenues. Unless my math is flawed, that is a $764 net reduction in revenue!
There is only ONE cure, and that is higher taxes. Tax revenues can increase from two directions. You can increase the effective tax rate and you can decrease the available deductions. The latter will create more taxable income while the former sends more to the government. Make no mistake, government can’t keep its promises of “only increasing taxes on the rich” and still spend at the rate it’s been spending.
I don’t know what the rest of the story is, but I will be hanging on to my wallet with both hands.
--Steve Cook
Tuesday, July 7, 2009
As American as....Taxes?
As we emerge from the July 4th weekend, we all find ourselves thinking about all things that are quintessentially American: baseball, apple pie, mom, and the flag. But what about taxes?
True, other countries pay income taxes too, and in fact, some pay them at a much higher rate than we do here in America. However, our system of government "for the people, by the people" means that we as a citizenry are uniquely positioned to make sure our tax dollars are spent for their best purpose.
Consider this: the highest earning Americans pay federal income taxes at 35 percent and state or local income taxes as high as 12 percent, plus payroll taxes, sales tax, property taxes, motor vehicle taxes, and the list goes on......it's conceivable that our top "inclusive" tax rate here in America can approach 60 percent! Even on the low end of the spectrum, Americans can see their total tax burden at 20 percent or more of their income.
This isn't meant to be a political blog, so I won't offer my opinion on whether that's a good or a bad thing. But it is reality, and each of us - no matter how much we pay in taxes - has a duty to keep our Government accountable to spend our tax dollars wisely.
As we return to work and get over our "barbecue overdoses", let's all take some time to remember that we the People are the ones who technically run the government and that this power comes with responsibility. Everyone knows of their civic duties to vote and pay taxes, but let's not forget that we also have a duty to hold Government responsible for proper stewardship of our tax dollars.
--Dan Musick
True, other countries pay income taxes too, and in fact, some pay them at a much higher rate than we do here in America. However, our system of government "for the people, by the people" means that we as a citizenry are uniquely positioned to make sure our tax dollars are spent for their best purpose.
Consider this: the highest earning Americans pay federal income taxes at 35 percent and state or local income taxes as high as 12 percent, plus payroll taxes, sales tax, property taxes, motor vehicle taxes, and the list goes on......it's conceivable that our top "inclusive" tax rate here in America can approach 60 percent! Even on the low end of the spectrum, Americans can see their total tax burden at 20 percent or more of their income.
This isn't meant to be a political blog, so I won't offer my opinion on whether that's a good or a bad thing. But it is reality, and each of us - no matter how much we pay in taxes - has a duty to keep our Government accountable to spend our tax dollars wisely.
As we return to work and get over our "barbecue overdoses", let's all take some time to remember that we the People are the ones who technically run the government and that this power comes with responsibility. Everyone knows of their civic duties to vote and pay taxes, but let's not forget that we also have a duty to hold Government responsible for proper stewardship of our tax dollars.
--Dan Musick
Friday, July 3, 2009
Using the Fraud Triangle to Prevent Employee Theft
A recent article in the Austin Business Journal titled “Fighting Fraud” got me thinking. What can small businesses do to reduce fraud in the workplace?
The Association of Certified Fraud Examiners estimates that fraud costs U.S. companies nearly 7 percent of gross revenues annually, or $994 billion in 2008. Often, fraud and theft go unreported because employers are too embarrassed to have it publicly known. Regardless of whether fraud becomes public knowledge, its effects can be devastating.
As an employee of an accounting firm, I am constantly made aware of the many threats that can face a small business. Employees can wear many “hats”, and combination of duties can allow for fraud. For example, someone who has access to business checks and authorization to sign those checks can be tempted to use those funds improperly. Small business owners should become familiar with the “fraud triangle”:
The Association of Certified Fraud Examiners estimates that fraud costs U.S. companies nearly 7 percent of gross revenues annually, or $994 billion in 2008. Often, fraud and theft go unreported because employers are too embarrassed to have it publicly known. Regardless of whether fraud becomes public knowledge, its effects can be devastating.
As an employee of an accounting firm, I am constantly made aware of the many threats that can face a small business. Employees can wear many “hats”, and combination of duties can allow for fraud. For example, someone who has access to business checks and authorization to sign those checks can be tempted to use those funds improperly. Small business owners should become familiar with the “fraud triangle”:
Pressure, opportunity, and rationalization are the three key elements present when committing fraud. Pressure is what makes an individual commit fraud. It generally stems from financial issues such as outstanding debt, expensive tastes, or addiction issues. Opportunity is the ability to commit fraud. Opportunity arises through weak internal controls, inadequate oversight, or a high management position with plenty of freedom. Rationalization, the third element, is a crucial aspect in committing fraud and occurs because individuals feel the need to justify their actions. Examples of rationalization include thoughts such as “I deserve to be paid this much”, “I’m just borrowing the money”, or “My family will starve if I don’t take it”.
Employers should be aware of behavioral “red flags” that employees display that may indicate potential fraud:
· Overassertive or controlling
· Smooth talking
· Intense desire for personal gain
· Living beyond their means
· Working excessive overtime
· Not taking vacations or sick leave
· Not comfortable with people reviewing their work
Keep in mind that displaying just one or two of these characteristics may not be suggestive of fraud. However, combining several of these traits with the presence of elements of the fraud triangle can be a tell-tale sign of impending theft.
--LeAnn Carlson
Employers should be aware of behavioral “red flags” that employees display that may indicate potential fraud:
· Overassertive or controlling
· Smooth talking
· Intense desire for personal gain
· Living beyond their means
· Working excessive overtime
· Not taking vacations or sick leave
· Not comfortable with people reviewing their work
Keep in mind that displaying just one or two of these characteristics may not be suggestive of fraud. However, combining several of these traits with the presence of elements of the fraud triangle can be a tell-tale sign of impending theft.
--LeAnn Carlson
Wednesday, July 1, 2009
COMMUNICATION POLICIES VS THE NEW SOCIAL MEDIA?
While drinking my morning coffee, I came upon an article regarding implementation and execution of social media and its effect on the company’s communication policy. The article was written by Michelle Golden and appeared in The Practical Accountant (an oxymoron, by the way). As our firm plunges headlong into the uncharted world of social media communication, I found this article very insightful.
The 30 and under crowd is comfortable with all the new communication technology. So why are the over-30s (the managers) uncomfortable? Ms. Golden points out that there are five basic reasons:
1. Fear of the Unknown (ie, lack of knowledge in the area)
2. Professionalism (ie, how will the client receive the message)
3. Time Waste (ie, these are personal activities, not business)
4. People Skills (ie, are we under developing basic people skills)
5. Legal Concerns (ie,will these new media hold up in court)
A closer look at these items reveals that the issue is not generational, but rather one of understanding. It is understanding how each individual delivers his message, and understanding how the client will receive the message. As a manager, this should be our focus.
So how do we learn and implement these skills? There are three possible solutions:
The first option is to hire a professional communication firm to implement and teach your staff. A second option would be to rely on the under-30 employees to educate the rest of your staff. Finally, a company can incorporate both options one and two. We chose the third option, as young staffers rarely understand the significance of client communications.
One word of warning, though. Ultimately, the decision of how to communicate with a client is not yours….it is your client’s. The one person that should dictate how you reach a client is the CLIENT!
by Steve Cook
The 30 and under crowd is comfortable with all the new communication technology. So why are the over-30s (the managers) uncomfortable? Ms. Golden points out that there are five basic reasons:
1. Fear of the Unknown (ie, lack of knowledge in the area)
2. Professionalism (ie, how will the client receive the message)
3. Time Waste (ie, these are personal activities, not business)
4. People Skills (ie, are we under developing basic people skills)
5. Legal Concerns (ie,will these new media hold up in court)
A closer look at these items reveals that the issue is not generational, but rather one of understanding. It is understanding how each individual delivers his message, and understanding how the client will receive the message. As a manager, this should be our focus.
So how do we learn and implement these skills? There are three possible solutions:
The first option is to hire a professional communication firm to implement and teach your staff. A second option would be to rely on the under-30 employees to educate the rest of your staff. Finally, a company can incorporate both options one and two. We chose the third option, as young staffers rarely understand the significance of client communications.
One word of warning, though. Ultimately, the decision of how to communicate with a client is not yours….it is your client’s. The one person that should dictate how you reach a client is the CLIENT!
by Steve Cook
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