Going Concern

CFOs

New Hartford CFO Is Latest to Flee from AIG

GoingConcern
February 18, 2010

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

Perhaps he wasn’t crazy about the new forced ranking method on pay?

The Hartford Financial Services Group announced late on Tuesday that Christopher Swift will join the insurer as chief financial officer effective March 1.

Swift, 49, is jumping ship from American Life Insurance Company (ALICO) where he was CFO. ALICO is a subsidiary of American International Group, which the bailed-out insurer is trying to sell to MetLife for $15 billion. The deal is currently hung up on a tax issue.

Hartford, which received $3.4 billion in government aid, has been undergoing a major executive shakeup.

Liam McGee, a former head of consumer banking at Bank of America, took over as chief executive in October from Ramani Ayer, who had led Hartford’s aggressive push into variable annuities and retired at the end of 2009.

Shortly after taking over, McGee tapped Hartford’s current CFO, Lizabeth Zlatkus, for its chief risk officer position. She’ll move into that role when Swift officially joins the company.

AIG, for its part, has been bleeding talent. More than 60 managers have left the company since it was bailed out in September 2008, according to data compiled by Bloomberg. Pay practices at AIG have been under intense scrutiny by the public, as well as the government.

Swift began his career as an auditor in the Chicago office of KPMG where he focused on financial services. He was made partner at 32. He then became executive vice president of Conning Asset Management, a subsidiary of General American, where he was responsible for finance, sales/marketing and information technology. After MetLife acquired Conning in 1999, Swift returned to KPMG and was eventually appointed head of the firm’s Global Insurance Industry Practice. As leader of this segment, he worked with clients in both the life and P&C segments, globally and domestically. He was responsible for matters ranging from strategic and regulatory to audit, risk, advisory and tax services.

News

The IRS’ Most Important Step Ever Has Been to Require Preparer Registration

Caleb Newquist
February 18, 2010

That’s one man’s opinion anyway! The IRS Oversight Board put out its annual Taxpayer Attitude Survey and while the survey indicates that most people are down with some regulation around preparers, the Oversight Board’s Chairma Paul Cherecwich sees it as being far bigger than that:

“Requiring tax preparers to register and verify their competency may be one of the most important steps the IRS has made in the tax system in our lifetimes,” said IRS Oversight Board Chairman Paul Cherecwich in a statement. “A tax return prepared improperly or fraudulently can have negative ramifications for years for an unsuspecting taxpayer — and it’s clear from the board’s survey that Americans know that.”

Now maybe we’re overstating this a little bit but to say that forcing tax preparers to “register and verify their competency may be one of the most important steps the IRS has made in the tax system in our lifetimes” is um, well, ludicrous. Say it’s an important step, say it’s a good step, whatever but one of the most important things the IRS has done in our f—ing lifetime? Creating additional layers of bureaucracy is not an accomplishment.

Breathe…Since we’re directly affected by this, we thought we should get a practitioner’s point of view. We dialed up our contributor Joe Kristan who is in the throes of tax season for his opinion:

All “issue” polls like that are useless because they never include costs. For example, they never follow up: “would you still support it if it drove 20% of the preparers out of the market and raised your costs by 20%?” They assume that there is no hitch between the regulators cup and your lip, and that all regulators work well. As if.

The regulations will increase costs and do little or nothing to improve tax compliance. Only a better tax law can really do that.

That’s our emphasis but Joe would probably agree with it.

Taxpayers Cheer Move to Regulate Tax Preparers [Web CPA]

KPMG

Alexandre Bilodeau Is KPMG Canada’s Phil Mickelson

Caleb Newquist
February 18, 2010

When our Olympic Fever started last weekend, we had no idea what would happen. Sure there would be torches, majesty and endless montages but if you had told us that we would discover that KPMG has got dibs on a marketing dynamo like Alexandre Bilodeau, we would have said NFW.

AB was the first gold medalist for Canada in the Vancouver games. He won the Freestyle Men Ski competition on Sunday and now he’s got people just throwing money at him.

However, Al has had KPMG as a sponsor since 2006 (longer than Phil!) when he competed in Turin, Italy (the old man is a tax partner). All these new companies that want a piece of Golden Boy are going to have to get behind T Fly and Co. because Al strikes as a loyal guy.

KPMG Canada nailed this one. This dude is young, handsome, and doesn’t have to worry about a slimeball rival returning to steal the thunder. Now if he could only win the U.S. Open…

Accounting News Roundup: Microsoft Says Financial Reporting Model ‘Broken’; Average Tax Rate for Top Earners Fell to 20-year low in ’07; U.N. Climate Chief to Join KPMG | 02.18.10

Caleb Newquist
February 18, 2010

• Financial reporting based on bygone era, Microsoft says [Accountancy Age]
Softie’s Technical Accounting Director Bob Laux says that the financial reporting model is waaaaayyyyy behind the rest of the world in providing relevant information. In a letter to the IASB, Mr. Laux describes the broken model:

“In essence, we have a financial reporting model largely based on a manufacturing economy and the industrial age, while the economy has moved to the information age and the financial reporting model has failed to change accordingly,” he said.

He also said that arcane accounting rules, creative accounting to meet analyst expectations, etc. are all ‘symptoms of a bigger problem – a broken financial reporting model.’

This is probably the most poignant example of the “historical financial reports are of limited use” argument that we’ve ever heard. No one uses historical financial statements to make decisions about investing anymore. Sure there are fundamentals that you can derive from them but ultimately you have outdated information that’s part of a large compliance exercise and in this day and age, few people (including Microsoft, apparently) have little use for that.

• Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data [Tax.com via Bloomberg]
If you’re wealthy (Chris Rock definition) then you’ll be happy to know that your taxes during 2007 were the lowest they had been in 20 years, according to statistics provided by the IRS.

The top 400 earners paid an average effective tax rate of 16.6% during the ’07 while in 1993, the average effective rate was 29.4%. KA-ching. Now before you rich haters get all worked up, there is another way to see this data:

Bill Ahern, director of policy and communications for the Tax Foundation, a Washington research group that advocates lower taxes, said the 2007 data doesn’t reflect the current economic circumstances.

“In a good year like 2007, it’s not surprising to see that the owners and managers of the nation’s largest firms made a fortune,” Ahern said. “Notice that two-thirds of their 2007 income was in capital gains, which have dropped like a rock since then.”

Regardless of how you feel about the widened gap, it’s not a stretch to say these facts will be exploited as populist pandering during the upcoming election cycle, as Democrats see their popularity slipping.

• U.N. Climate Chief to Resign [WSJ]
Yvo de Boer will be resigning his position with the United Nations to join KPMG as an adviser on climate and sustainability as well as working with several universities on the issue.

“It was a difficult decision to make, but I believe the time is ripe for me to take on a new challenge, working on climate and sustainability with the private sector and academia,” said Mr. de Boer, who has led the U.N. Framework Convention on Climate Change as its executive secretary since September 2006…

“I have always maintained that while governments provide the necessary policy framework, the real solutions must come from business,” he said in a statement.

Plus the money is probably good. Pretty impressive for KPMG to bag such a high profile dude on a still-emerging issue. Seems that KPMG et al. are making a seriou push into climate change as the IFRS and XBRL opportunities are slow to develop.

Quote of the Day

Quote of the Day: Giving Up Spreadsheets for 10-mile Runs | 02.17.10

Caleb Newquist
February 18, 2010

“Some days, I’d think, this 10-mile run isn’t so bad. At least I’m not stuck in a conference room staring at a spreadsheet!”

~ Rebeccah Wassner, CPA and USA Triathlon’s Athlete of the Year in 2009.

CPA Exam

CPA Exam Results Are Rolling Out This Week for the Jan/Feb Window

Caleb Newquist
February 18, 2010

If you’re a glutton for punishment and you sat for the CPA Exam during this window, NASBA Tweeted the above about an hour ago. We thought busy season sucked enough but studying for and taking the CPA exam during busy season has to be one of the most hideous cases of self-loathing an accountant can engage in and we hear it’s widespread.

Maybe sleeping and eating aren’t that crucial to your survival but we’re not really sure how you’re pulling this off. Are you listening to the Jr. Deputy Accountant on this? Since we’re too old to have taken the computerized exam, we were never tempted to try such a monumental feat.

So if you sat for BEC go find out if you passed and let us know because we care (seriously) and if you need to cry, make sure you don’t do it front of anyone. Nobody likes weeping at the office.

Fraud

Koss: Financial Results Will Be Better Now That the Whole Fraud Thing Is Over

Caleb Newquist
February 18, 2010

Hopefully! Headphone master Michael Koss officially announced that things are back to business as usual at casa de Koss now that Sue Sachdeva’s sticky fingers aren’t around.

“The company has continued to operate in the normal course of business despite the disruption resulting from the discovery of the unauthorized transactions,” Chief Executive Officer Michael J. Koss said in a statement. “We believe that the elimination of these unauthorized transactions will enhance our future operating results.”

What a relief! No mention of how the pending lawsuits against Koss will affect operating results, however. We understand that it could be a sensitive issue at the moment.

The Company filed its 10-Q yesterday and an 8-K today that explains that those restated, not-so-good results that you’re expecting will be done pronto. Don’t expect to see anything before April but not past June, swear.

After that, watch out everybody, Koss will be on fire, blowing those analyst estimates out of the water. In the meantime things are moving along and those internal controls, yeah, they’re working on them but they reminded everyone in the 10-Q that even if they designed the best internal control systems on Earth, it still wouldn’t guarantee that bad stuff won’t happen:

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. It is possible for even the best control system to be circumvented by those with the intent, knowledge and opportunity to do so.

Not to put to fine a point on it but a half-assed control system would have detected this fraud, never mind the “well conceived and operated” part.

With fraud claims exposed, Koss expects better financial results [Milwaukee Journal-Sentinel]

A Lawsuit Seeks To Find Out How Old is Too Old to Become a Partner at PwC

Caleb Newquist
February 18, 2010

[caption id="attachment_3069" align="alignright" width="260" caption="That's a good one Bob but you really shouldn't tell old people jokes"]

[/caption]

Or any firm for that matter. There’s probably some opinions on this but allegedly at PwC it’s 54 on the low end and if you’re approaching the firm’s mandatory retirement age of 60 then you’re definitely not getting the bump.

The reason we bring it up is that the U.S. Court of Appeals for the District of Columbia Circuit has granted new life to an age discrimination lawsuit against PwC. Two advisory professionals, Harold Schuler and C. Westbrook Murphy’s lawsuit alleges that P. Dubs de-nied their admittance because they were close to the Firm’s mandatory retirement age.

The partner track at accounting firms is a long and tough road the way it is and for partners to allege age discrimination seems like insult to injury.

The DC Circuit ruled that the plaintiffs deserve some closure on whether or not the bigwigs in New York really snubbed them based on their age:

Judge Douglas Ginsburg said a 2008 D.C. Circuit ruling involving Schuler entitled the plaintiffs to a “reasonable inference” that PricewaterhouseCoopers’ decisions not to promote them were made in New York, where the firm is based.

“PwC says (the earlier case) ‘does not control’ because it addressed only PwC’s adoption and maintenance of a discriminatory policy, not the ‘discrete decision’ not to admit (Schuler) to partnership,'” Ginsburg wrote. “To which we say: Pettifoggery and piffle!”

Nice touch, Judge Ginsburg. So this means the case goes back to the district so they can get to the bottom of this.

We left messages at the other firms to find out what their mandatory retirement policies were to get some context on the age issue but so far we haven’t heard anything back. We’ll update you with those if we hear back from anyone.

It’ll be interesting to see how this shakes out since we’re pretty confident that their is no document anywhere at 300 Madison that says Schuler and Murphy were just too old to become partners. If we were to take a wild-ass guess, we’d say that the firm will point to performance reviews, etc. to rationalize the snub even if these guys were rainmakers.

PricewaterhouseCoopers age bias lawsuit revived [Reuters]

Career Center

Job of the Day: BlackRock Needs a Hedge Fund Accountant in Seattle

GoingConcern
February 17, 2010

BlackRock’s Emerald City locale needs someone that’s ready to dive head first into the world of alternative investments.

They are looking for a hedge fund accountant who will be responsible for several duties including preparing financial statements and acting as the liaison for the external auditors and the fund administrator.

Get more details after the jump.

Company: BlackRock

Title: Hedge Fund Accountant

Location: Seattle, WA

Responsibilities: Accounting (GAAP) for several of the firm’s Hedge Fund Products, including monthly valuation procedures; Preparation of monthly, quarterly and annual Financial Statements with supporting documentation (tie outs); Continuous cash reconciliation procedures for Fund investment purposes; Liaise with Funds’ independent auditors and offshore administrator; Communicating performance results to investors and resolving investor’s questions; Custom reporting and projects for investor specific needs; Partnering and Communicating with various internal business units regarding ARS Fund Products and performance data; Group project opportunities related to implementation of new product accounting and operational procedures.

Qualifications: Bachelors Degree in Accounting or Finance or commensurate experience; 1-3 years of relevant accounting work experience. Investment or fund accounting experience is desirable, as is public accounting experience.

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

Busy Season Interns: Don’t Waste Their Time

Caleb Newquist
February 17, 2010

Continuing with the busy season theme, let’s touch on everyone’s favorite coffee jockeys, the interns. This isn’t prime season for interns at accounting firms but we know there are a few lucky (?) teams out there that have an extra set of hands on deck.

Getting serious for two, this time of year, everyone is under pressure to get things done and if you happen to have an intern on your team, they either make your job infinitely easier or they are the bane of your existence. If you fall into the latter category, why is this the case?

It’s pretty easy for you to conclude that the blade of grass tapping you on the shoulder every ten minutes is the person at fault but a lot of times, interns get thrown into bad situations where they end up working for seniors or managers that are so swamped (or helpless) that they can only think about their own workload while there’s a 21 year old that needs something to do (besides looking through menus and making copies).

Since accounting firms put so much effort into recruiting the next wave you’d think that this enthusiasm would spread to teams like the Plague. Unfortch, there are many that see interns as an annoyance during this time of year because, “I have so much work to do and I don’t have time to handhold interns” and we think that’s bullshit.

We’re not saying that there aren’t bad interns out there. And we’re not saying you’re not busy. We know better. But if you gave that intern something meaningful to do instead of whining about how busy you are, they might make your life a speck (or a few) easier.

And interns need hand holding because they’re interns. Don’t forget that up until this point, they’ve been wearing sweats 24/7 and that you used to be just like them. Experienced team members should take this time to utilize them in a meaningful way and not as gofers. If you’re one of those teams that needs a gofer, at least squeeze some meaningful work somewhere so they can learn something and they probably won’t mind the gofering as much.

Yeah, it might take some effort on your part but it’s definitely worth your time to mentor these future associates. If you give them some challenging work now and show them a little bit of appreciation for their efforts, they’ll run through walls for you later.

News

Grant Thornton’s Valentine to Employees Did Not Consist of Heart Candy

Caleb Newquist
February 17, 2010

It’s the middle of February and many of you are somewhere between completely exhausted and death warmed up. This is not lost on blogger extraordinaire Steve Chipman. SC’s weekly info session has been crucial to your survival (even though it’s not meant for all of you). Knowing that his soothing words will only get you so far, he’s taken a different approach this week.

Since it was St. Val’s on Sunday, Chip figured he would mark the day for lovers by boosting your spirits by using the words of GTers less CEO-y than himself.

Today I’d like to offer some inspiration to help us push through busy season. The last year and a half have required so much more from everyone that it’s hard to imagine we can work even harder, but it’s evident that we are everywhere I look.

So what keeps us going? That’s what I was looking for when I reviewed the “I am Grant Thornton” interviews we conducted last fall. We asked a variety of people in different roles, in different offices and at different levels if they felt they made a difference, and, if so, how.

It is hard to imagine that you can work harder, isn’t it? Your spreadsheets are bleeding through your monitors, you’ve ingested far more MSG than is recommended, and your cube farm neighbor (who ordinarily smells funny) is looking hot .

And we weren’t aware of this “I am G to the T” exercise but it sounds stupendous. Who knew your personal experiences would be used at this most crucial time of year? Bet you would have really put some thought into if if you had known your words could possibly have been immortalized on Steve-o’s blog.

Here are some carefully selected examples from SC’s list and our thoughts on each:

“When a client calls me and says, “Can I pick your brain?” it’s so great because (1) they recognize I have a brain” – We agree that it’s nice when your client recognizes that you are of the same species.

“I had a client tell me recently, and I’m quoting, ‘We hire Grant Thornton because you get [stuff] done.’” – That’s Stephen’s edit. This is a family blog, people.

“I make a difference every day because I work here.” – And because my mother said so.

“Every day is a great achievement.” – We agree. Crawling out of bed is tough.

“How do I make a difference? . . . You know, I’m happy.” – God, you’re one of those happy people.

“I’ve worked at the big firms. We are not bigger by any means, but it’s a question of caliber. I knew it from my first day on the job here. We’re just a different caliber of firm.” – We’re not size queens at GT.

Steve-o’s send-off has us begging for more and also causes us to wonder A) who is this homecoming queen? and B) is Chip a Bass or a Tenor?

I’m also proud to say that among our great people are a former homecoming queen and a professional make-up artist. Of equal wonder, one of you found the most surprising thing about coming to Grant Thornton was “that all the partners have great singing voices.”

There’s more where that came from, but this is the firm’s Valentine to you.

Thanks for you!
Stephen

You could do back-to-back busy season now, couldn’t you?

Not-for-Profits

Is Kansas Squeezing Non-profits to Close Its Budget Gap?

Adrienne Gonzalez
February 17, 2010

Kansas has a bit of problem with its tax code, or perhaps the issue at hand is not necessarily Kansas’ broken tax system but the suspicious absence of those all-important tax revenues. Seeking to fill a $416 million budget gap for the FY beginning July 1, it has begun looking at simplifying complicated exemptions but the change could hit already struggling non-profits in the state hard.

NYT:

Lori McMillan, an associate professor of tax law at Washburn University, said the proposal to not grant exemptions to specifically named organizations but rather categories, such as nonprofit and charitable organizations, was a better policy for the state.

”Sometimes it seems that the criterion for an exemption is one’s ability to find a parking place and the committee room,” said Mark Desetti, a lobbyist for the Kansas National Education Association.

Emily Compton, president and CEO of Goodwill Industries of Kansas, said removing the exemption would increase her operating expenses by $40,000. She said the organization also must come up with $125,000 in unemployment tax contributions this spring and the combined increase in expenditures could result in fewer services and employees.

The change would mostly mean Goodwill sacrificing its sales tax exemption but that’s not all that’s on the chopping block.

Also up for debate, a program that would reduce seldom-used tax credits for low-income individuals to buy a home, fund education, or start a business:

John Scott, president of the Interfaith Housing Services Inc. which administers the program in Hutchinson, said the IDA program is budgeted to receive $500,000 worth of 50 percent tax credits each year. For example, if someone invests $100,000 in the program, they receive a $50,000 tax credit.

He said that if the program has to be changed, reducing the amount to $250,000 would be acceptable and still allow it to receive matching grants from other sources.

“We feel this is a win-win compromise. It helps you cut the budget without losing outside revenue, and it does not force us to close the program and possibly cause loss of jobs,” Scott said.

As is, the state exempts $4.2 billion in sales taxes and proposals currently under review by the House Taxation Committee could bring in an additional $196 million – still leaving a $220 million budget gap.

Is Kansas penalizing non-profits is the way to make up the gap? Goodwill Industries claims 83 cents of every dollar generated in its retail stores goes to serving its mission of providing work to individuals in need. Can the government of Kansas claim that level of efficiency when it comes to tax revenues?

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