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GoingConcern
March 24, 2010

A quick word of thanks to this week’s advertisers on Going Concern:

• Serenic Software

If you’re interested in advertising on Going Concern, email us at advertising@breakingmedia.com.

Thanks!

The IRS Will Enforce Mandatory Healthcare Using the Honor System

Joe Kristan
March 24, 2010

How much tax would you pay on April 15 if the IRS couldn’t levy on your bank account, slap you with a lien, charge you penalties and interest, or send you to jail? Not much, eh? Then ponder the rules forcing individuals to buy “minimum essential coverage” under Obamacare.

The forced purchase of insurance is key to Obamacare. The “personal responsibility requirement” – a funny name for a requirement imposed by the state – is needed to make sure that low-risk individuals buy insurance to help keep it affordable for high-risk buyers (or, less politely, healthy young men are forced to subsidize everybody else). The penalty is considered vital to any semblance of fiscal soundness for the program. The rule is backed up by penalties and will be collected on tax returns.

The reaction of healthy young men in 2014 when this penalty kicks in will be “Dude. You’re not serious.”

And they will be right.

Caleb noted this yesterday from the Joint Committee of Taxation explanation of the penalties (my emphasis):

The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.

If we take them at their word – and new Code Sec.5000A(g)(2) seems to say just this – why would any sensible taxpayer ever pay the penalty?

• They can’t threaten you with jail.
• They can’t hit you with a lien.
• They can’t levy your accounts.
• There’s no interest charge, so even if you do pay it late somehow, you’ve had the interest in the meantime.

We tax preparers probably won’t be allowed to recommend non-payments to our clients, or we will be silenced by our new IRS preparer enforcement overlords, but people will figure it out in a hurry. And if you think that people will pay taxes anyway without the threat of collection, penalties or interest, then why are we wasting any money funding the IRS?

This provision means one of two things: either this penalty is a joke, and they are just kidding about the cost estimates of the bill — they will be much, much higher — or the toothless penalties are just a PR stunt that they plan to correct as soon as they can get away with it.

Dennis Nally: PwC’s Credibility with Our Clients Is Doing Just Fine, Thankyouverymuch

Caleb Newquist
March 24, 2010

Awhile back we told you about PricewaterhouseCoopers Global CEO Dennis Nally admitting that the PwC brand had been damaged because of the whole Satyam fraud.

DN has done another interview with the Indian press and he says despite this litng is on the up and up in India for PwC. The long/short of it is that Dennis & Co. are going to keep giving their clients the P. Dubs experience now and forever.

Pretty wide range of questions but we’ve presented the highlights for you.

Was the PwC Magic 8ball broken?

Q: When you look back at it do you think you could have avoided all that happened?

A: I don’t know if we could have avoided it. As we all know this was probably one of the most significant frauds that suddenly has taken place here in India but even in the global market place. So I do not know how you avoid that type of situation.

Where was the P. Dubs swagger when the shit hit the fan? Did you realize that everything was f’d and didn’t know what to do?

Q: [T]he firm didn’t seem to respond in a confident manner. The impression was that it didn’t know what it had been hit by. Do you think it could have been handled better?

A: I think with hindsight you can always do things better and that is part of learning and trying to deal with issues. But quite frankly this was a major event and of course it took us time to understand the pattern and what transpired.

In fact we are still learning and everybody is still learning. Now all the facts aren’t quite out yet but I think we are in the business of being out in the public and when something like this happens and it happens in a negative way, we are part of that. That is just a reality of being in a profession that we are involved with.

Why is this PwC’s fault?

Q: What role did the auditors have to play?

A: You are into an interesting debate and discussion because what is the role on a professional standards for the detection of a fraud. That is one of the areas that has been the focus not only on Satyam but a broader profession wide issue and we certainly welcome that debate.

I think there is an expectation out there in the public that auditors uncover every single fraud that they are involved with and that is not what professional standards call for but there is the public perception that that is what we are there to do. I define that as the expectation gap. If that is the expectation then we need to make sure that we are focused on the right kind of procedures, the right kind of standards, the right kind of reporting which is quite frankly really different than what we do today.

Will you stop all future frauds in India forever and ever and ever?

Q: Can you tell us if India will never see a Satyam again?

A: I wish I had a crystal ball but I don’t. As I said when you have a situation like Satyam or a major fraud I suspect somewhere in the world of corporate reporting, you are going to see another situation like that. Our job is to make sure we are doing everything we can possibly do consistent with the standards that are out there to ensure that we play our role in that process to avoid them.

The new India managing partner came from Singapore? You got something against Indians?

Q:But he has not come from India, you didn’t appoint him from the India firm – he was brought in from Singapore?

A: Gautam is originally from India which is great so it’s little bit of coming home programme.

Q: But it’s not a vote of confidence on the India management?

A: It is not. This is all about ensuring that we get the very best talent to focus on an important market like India and that’s exactly what we have done.

You let everyone down. Speak to them!

Q: A word to all those investors who felt disappointed with PriceWaterhouseCoopers for not alerting them to what was going on in Satyam. What is your message to them today?

A: Whenever we have situation like this, right or wrong, whatever standards are we are part of that and for that we regret what has happened. But this firm is about quality. It’s about doing the right things, it’s about being here for the investor community and we are very much focused on that.

Satyam fiasco has not dented credibility with clients: PwC [Money Control]

Ninety Percent of Nonprofit Execs Expect 2010 to be as Financially Difficult as 2009

Adrienne Gonzalez
March 24, 2010

Presented by Serenic Software. Download our free whitepaper – “5 Key Reasons Why Great Financial Management is So Important for Your Nonprofit Now”

Not to be the harbinger of doom but the Non-profit Finance Fund released a survey Monday that reflects the less-than-optimistic hopes of non-profit leaders for the year ahead. Though it’s far more depressing than Financial Armageddon, it shows that non-profits are far more prepared for the worst (and more deft at handling adversity) than their for-profit counterparts. For-profit CFOs still seem preoccupied with the credit crunch while non-profits are merely trying to meet increased demand with less to provide.

America’s nonprofits expect that 2010 will be financially more difficult or as difficult as 2009, according to a survey released today by Nonprofit Finance Fund (NFF). The survey of more than 1,300 nonprofit leaders in markets nationwide also found strong evidence of the dramatic and creative steps that organizations are taking in order to maintain and even expand service delivery to meet increased demand during this time of continued economic uncertainty.

• Nearly 90% expect 2010 to be as difficult or more difficult than 2009; only 12% expect 2010 to be financially easier for their organizations.

• 80% of nonprofits anticipate an increase in demand for services in 2010; 49% expect to be able to fully meet this demand level.

• Only 18% of organizations expect to end 2010 above break-even; 35% of organizations ended 2009 with an operating surplus.

• The majority — 61% — have less than three months of cash available; 12% have none.

“We expect 2010 to be another treacherous year for many nonprofits that routinely take heroic measures to meet demand for services,” said Clara Miller, President and CEO of NFF. “The economic ‘recovery’ has not yet reached people in need, or the organizations that serve them. We must do more to repair the tattered social safety net.”

Interestingly, only 46% of non-profits surveyed said they believed they would not be able to replace government stimulus money from other sources when the money is gone. Also curious, non-profits appear to be having an easier time of getting loans. Only 30% of survey respondents said they’d applied for a loan in the last 12 months but incredibly 74% of those secured the loan. Oh and 26% said they only applied for a loan because they were waiting for late government payments.

There were quite a few memorable responses from survey participants but I think this one sums up the theme of NFF’s results pretty well: “WE DIDN’T GIVE UP.”

2010 State of the Nonprofit Sector Survey [NFF]

Accounting News Roundup: The SEC’s Porn Problems Somehow Get Worse; The Daily News Offers Free Tax Help While the Sun-Times Has More Obvious Tax Advice | 03.24.10

Caleb Newquist
March 24, 2010

• SEC Employees Were Masturbating to Kiddie Porn While Your Economy Tanked [Gawker]
So this whole SEC/Porn fiasco has taken an unsuspecting and disturbing turn for the worse. Gawker has obtained documents that show that there have been sixteen investigations of SEC employees surfing the web for the likes of ladyboyjuice.com, kinkycomments.com, sexyavatars.net, cafebuckskin.blogspot.com and the list goes on and on and on and on.

Even more awkward is that it was discovered that one of the Commission’s porn connoisseurs computers contained videos that “potentially contained child pornography” and was referred to the FBI. Protecting our markets, people. Protecting our markets.

• Readers turn to Daily News Tax Hotline for free help filing tax returns [NYDN]
Can’t afford a CPA? NBD. Just call up the Daily News. Their annual tax assistance hotline runs today and tomorrow from 10 am to 4 pm. The DN partners with the NY State Society of CPAs so you can rest easy that it won’t be Rush & Malloy.

• Don’t pay taxes with credit card [Chicago Sun-Times]
Not such a good idea.

Quote of the Day

Quote of the Day: Ms. Schapiro, Your Response? | 03.23.10

Caleb Newquist
March 24, 2010

“The S.E.C. seems more interested in needlessly investigating market participants rather than uncovering corporate malfeasance and protecting investors.”

~ Greenlight Capital Press Release addressing the Commission’s failed investigation of Allied Capital.

A Tax Lien Is a Much More Manageable Problem Than Say, Apologizing to Your Oscar Winning Wife

Caleb Newquist
March 24, 2010

Since Jesse James’ tax lien is relatively small — $3,918 — you can probably chalk this up to a mistake. However, since the taxes are related to 2007, could it be that it was an oversight? A mistake? Poor judgment?

Poor judgment akin to say, inviting a tattoo model/stripper/rumored white supremacist into your bike shop to cheat on your wife? Is that sort of the same thing?

Tax debt adds to sex scandal for Sandra Bullock beau [Tax Watchdog]

KPMG

(UPDATE) John Veihmeyer to Succeed Tim Flynn as Chairman of KPMG’s U.S. Firm

Caleb Newquist
March 23, 2010

UPDATE/Correction, Wednesday 3.24.10 – Previously, headline stated that John Veihmeyer was succeeding Tim Flynn as Chairman and CEO. John V. has actually been the U.S. CEO since 2008. Sorry JV, for not giving you credit there.

The suspense is over. Johnnie V. has been serving as th the U.S. Firm since 2005 and he has the full confidence of TF, “There is no finer individual to lead the U.S. firm and build upon the progress that has been made over the last five years…John is equally passionate that KPMG continues to be a great place for our people to build their careers, in a culture that embraces diversity.”

JV will be succeeded by Henry Keizer in the Deputy Chairman role. Hank will also be the U.S. firm’s Chief Operating Officer. Timmay is also excited for Keizer Soze’s promotion, “His leadership and professionalism will be vital to ensuring the firm meets the challenges and capitalizes on the tremendous opportunities ahead…he has championed the use of technology and off shoring to enhance our operational effectiveness and efficiency in an increasingly competitive marketplace.”

Tim will be focusing on his roles as the Chairman and Senior Partner of Klynveld International, dashing our wishes for him to be the next Secretary of the Treasury. He was “strongly endorsed” by the Global Board to get down to business in this “unprecedented global economic and regulatory environment.” You can probably plan on more Davos interviews next year, chatting up royalty, caddying, etc.

I am extremely pleased to announce that the partners have ratified the election of John Veihmeyer as Chairman and CEO, and Henry Keizer as Deputy Chairman and COO, of the U.S. firm. John and Henry will assume their new responsibilities on June 10, 2010, when my term ends as U.S. Chairman. John and Henry bring strategic insight, deep leadership skills and extensive experience in serving clients to their new roles.

While it was a difficult decision for me not to continue in my role as Chairman of the U.S. firm, it has become increasingly clear to me that my additional role of Chairman and Senior Partner of KPMG International requires a full-time commitment. Last week, the Global Board strongly endorsed that I serve full time as Global Chairman in this unprecedented global economic and regulatory environment and period of tremendous opportunity for our member firms and people.

Having the privilege to work side by side with John during our five-year term as Chairman and Deputy Chairman, I have seen first-hand his professionalism, leadership and commitment to KPMG, its people and clients. There is no finer individual to lead the U.S. firm and build upon the progress that has been made over the last five years.

In addition, Henry will bring a tremendous amount of operating experience and energy to the Deputy Chairman and COO role. His leadership and professionalism will be vital to ensuring the firm meets the challenges and capitalizes on the tremendous opportunities ahead.

John has served as Deputy Chairman of KPMG since 2005, and he brings a unique combination of skills and experience, across all aspects of our strategic priorities, to the role of chairman. John is equally passionate that KPMG continues to be a great place for our people to build their careers, in a culture that embraces diversity.

Henry comes to his new role after serving as U.S. Vice Chair, Audit since 2005 and Global Head of Audit since 2006. In these roles, he has championed the use of technology and off shoring to enhance our operational effectiveness and efficiency in an increasingly competitive marketplace.

John and Henry’s professional depth, integrity and commitment to our clients, partners and the people of KPMG will serve the U.S. firm well as we move forward. Please join me in congratulating John and Henry and welcoming them to their new roles.

In closing, there was never a day that I was not grateful and humbled by the opportunity to lead and work with the truly exceptional people of KPMG. I have been awed by your talent, proud of your accomplishments and appreciative of your dedication. It truly has been an honor to serve as Chairman of the U.S. firm for the last five years.

Thank you for all that you do every day to support our firm and deliver on our promise of professionalism to each other, our clients and the capital markets we serve.

All the best,

Tim

Big 4
DWB

Big 4 Firms Are Planning for Your Exodus

Daniel Braddock
March 23, 2010

For some time now, Caleb has been touching on the upcoming/ongoing/always-occurring exodus from Big 4 into the private sector. The obvious reasons for the change from public to private are obvious, but here’s a few for kicks:

• Bigger pay day (and potential growth)

• CPA requirements completed

• Actual work/life balance

&ill set transition to a new career

There are other reasons of course, but it is the ferocious combination of these that leads to the breaking point – low morale.

Going Concern received an email from a distraught and burnt out Big 4 auditor from the Southeast region:

The level of morale in the [XYZ] office is at an all time low. Discussion with low level staff, through managers, have yielded the same opinion of overwhelming expectations without the needed support from the firm. They want us to draw blood from a turnip, and they want it done better, faster, and with less resources than last year. This has caused everyone to start exploring options in the market. A vast majority have started fielding resumes and contacting recruiting firms. The select few who have made it past that hurdle are interviewing with no looking back.

Not to downplay what this auditor is saying (and I’m not), but this sounds like the unfortunate reality of many auditors working on smaller, non-public clients. You know, the not-as-sexy-as-ABC Bank but just as important to the firm’s bottom line. You won’t get tickets to the pro sport’s game, but thankyouverymuch for your efforts.

The reader goes on:

Primarily, people have expressed their interest in holding out any real intentions of leaving until promotions roll around in the later part of the summer. They’re hoping that maybe there will be some juicy 20% raise waiting for them, but the stark reality of a measly 5% raise is what they know is coming. Any fifth year Seniors who are waiting for the promotion to manager are just using it for resume purposes.

Our offices are already using under qualified second year staff at the Senior level, as well as retaining new managers in the Senior position because they are extremely understaffed at that level. This, in turn, is causing all of those people to take measures to leave perhaps after busy season and certainly after the insulting promotions come through in August.

It’s a matter of time before this individual (and half of their respective office) becomes another statistic that the Big 4 HR guru’s term “natural attrition.” From an HR perspective, here’s a loose idea of the attrition formula:

Fall 2010: 100 new hires

Fall ’11: 95 new hires become “2nd years”

Summer/Fall ’12: 88 2nd years promoted to senior staff, 70 seniors remain

Summer/Fall ’12: 2 years of public experience reached, 55 seniors remain

Summer/Fall ’13: 45 seniors remain

Summer/Fall ’14: 35 seniors remain

Summer/Fall ’15: 25 seniors remain; 15 promoted to manager, 10 remain on as seniors

Summer/Fall ‘XX: 10 senior managers are eligible for partner

The recession stunted this formula for every firm, as they were forced to make cuts, not only for cost cutting purposes, but also to keep their staffing formulas close to being in-check. But think about it – your firm expects this kind of turnover. They know it’s a matter of time before their hiring class is whittled down to 10% of its original size.

And in the case of the reader, their firm dropped the analytic ball 3-5 years ago. Had they better estimated the percentage of projected losses, there would be more seniors to handle the work.

Remember that time you felt bad about leaving? They’re waiting for you to do so.

Career Center

Job of the Day: Wescott Financial Advisory Group Needs a Senior Accountant

GoingConcern
March 23, 2010

Wescott Financial Advisory Group is a growing Philadelphia based financial advisory firm that is looking for a senior accountant to join their accounting team.

This job requires 4 years experience with QuickBooks familiarity and a CPA license is preferred.

Check out more details for this position, located in Philadelphia, after the jump.

Company: Wescott Financial Advisory Group

Title: Senior Accountant

Compensation: $55,000 – $65,000

Location: Philadelphia, PA

Responsibilities: Evaluating, improving and maintaining the accuracy and integrity of all financial databases and reporting systems; Providing accurate and timely financial reports; Developing an annual budget; Working on special financial analysis, forecasting and business modeling projects as assigned; Provide system-wide testing assistance to Wescott’s Chief Compliance Officer and, along with other members of the Wescott team, identify, recommend and implement improvements to Wescott’s financial reporting practices, processes and systems.

Qualifications: 4-year degree with a emphasis on accounting or finance; Minimum of 4 year’s general accounting experience, Familiarity with Quickbooks and advanced Microsoft Excel spreadsheet construction and financial analysis skills; Financial Services experience in a multi-business unit/ regional operation and a CPA are a strong plus.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

Small Business

Venture Capitalists Pushing Bill That Would Help Small Businesses Create New Jobs

GoingConcern
March 23, 2010

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

With all the talk lately about how small businesses are vital to job creation, turns out it’s a relatively small number of high-growth entrepreneurial firms creating much of that employment. And, now, there’s pending legislation, pushed heavily by venture capitalists, that could encourage the growth of such companies.

First, about those high-flying startups. According to recent research from the Ewing Marion Kauffman Foundation, fast-growing relatively young firms generate about 10 percent of all new jobs in any given year. That includes what the study calls “gazelle” firms–enterprises three to five years old. And, these ventures create all those jobs even though they’re less than 1 percent of all companies. The average firm in the top 1 percent contributes 88 jobs per year; most end up producing between 20 and 249 employees. The average firm in the economy as a whole adds two or three net new jobs each year.

Of course, these findings have important implications for government policy and what types of small business it should focus on. Among other recommendations, the study urges the passage of legislation just introduced in the Senate, informally known as the “Startup Visa Act.” Sponsored by Senators John Kerry and Richard Lugar, the bill would address the problem facing many foreign entrepreneurial wannabes who can’t get a visa to come here and start a company.

To that end, it would create a new visa for such entrepreneurs who are sponsored by a US venture capital firm or angel making an investment of at least $100,000 in an equity financing of no less than $250,000. The legislation would modify the EB-5 visa program; that requires recipients to invest at least $500,000 in a US company and create no fewer than 10 jobs.

The bill is the product of heavy lobbying by such investors as Brad Feld, who is with the venture capital firm the Foundry Group. Of course, they have their own business reasons to push this legislation but there seems to be sound research to back it up.

Is the Shortage of Good Accountants in the Sex Industry an Opportunity?

Caleb Newquist
March 23, 2010

Okay my friends, this is a serious problem in our country that needs addressed. The vast shortage of competent, professional, tax advisors and accountants for escort service businesses, brothels, and your run-of-the-mill houses of ill repute can go on no longer. If not for the business opportunity, then for the good of your fellow Americans and maybe your state’s dire fiscal situation.

Today we learned that the one of the proprietors of Companions, “a call-out escort service” in Salt Lake City that was convicted of one count of tax evasion. Jodi Hoskins and her husband Roy were both convicted of dodging taxes (he in May 2009) for the year 2002. They managed to underreport their gross receipts by $1,204,354 which resulted in evaded taxes of $485k-ish. As you can tell, this is a bit of a problem. And with all challenges/problems/giant pains in the ass, therein lies an opportunity.

Our position is that these businesses simply cannot go on without more accountants and tax professionals stepping up to help these pillars of the business community run their whorehouses better. This means you, GC readers. Your knowledge of the double-entry accounting, inventory, derivatives, and payroll will be invaluable for these entrepreneurs and their employees.

Plus! If more of these businesses are in compliance with state and federal taxes, that’s one more step to states becoming fiscally solvent AND Tim Geithner can give the cash printing machine break. Everyone wins!

Escort Service Operator Convicted of Tax Evasion [Web CPA]
Companions Website [Warning: NSFW]

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