Going Concern

Non-Profits Are Feeling the Pain

Adrienne Gonzalez
February 3, 2010

WSJ has a Monday piece “Once-Robust Charity Sector Hit With Mergers, Closings” (the Recession Forces Nonprofits to Consolidate) that may be found here. It tells the story of a “homeless” woman with terminal lung cancer and a charity no longer able to afford to help her out. Sad.

When one charity’s COO says “we’ve had funding cut after funding cut, and we never know when the next shoe is going to drop,” that is a bad sign.

Hit by a drop in donations and government funding in the wake of a deep recession, nonprofits—from arts councils to food banks—are undergoing a painful restructuring, including mergers, acquisitions, collaborations, cutbacks and closings.

“Like in the animal kingdom, at some point, the weaker organizations will not be able to survive,” says Diana Aviv, chief executive of Independent Sector, a coalition of 600 nonprofits.

I saw that on the Discovery Channel and it wasn’t pretty.

Note: the Service says the value of your blood is not deductible as a charitable donation but cars are. As of 2005, cars are only deductible at FMV, not Blue Book. Damn you, fair value, foiled by the free market again!

Blame the Service for tightening its charitable donation rules at the worst possible time? Not sure on that one. While you’re reluctant to donate your $200 Toyota (ha) to charity because you could have claimed $2,000 under old rules, find some comfort in the fact that (alleged) terrorist “non profits” can not file for 2 years and somehow get away with it. You wonder why I advocate fixing the system from the ground up?

You can text $10 to Haiti but what about the “Economic Homeless” here in America? asks Young Money.

If this were a survey and you asked me “What do you think the IRS could do to encourage charitable donations?” I would answer “Tax breaks. It isn’t the Treasury’s job to distribute bailouts.” Yet they continue to behave as though it is their duty.

See the problem yet?

Accounting News Roundup: Is Your Next Job in Government? New Overstock.com CFO Isn’t a CPA; Death to Tax Reform Commission | 02.03.10

Caleb Newquist
February 3, 2010

• Obama’s Budget Plan to Create Government Finance Jobs [FINS]
The biggest beneficiary of CFOs not hiring may be the Federal Government. We mentioned in the routhe SEC got a decent boost in the POTUS’ proposed budget and likewise, so did the Treasury Department, “Department employment levels are projected to increase by 253 workers since 2009. Last year’s headcount of 1,089 workers is expected to grow to 1,266 in 2010, and reach an estimated 1,342 workers in 2011.”

Some of the areas within the Treasury that could benefit have yet to be created under the Financial Reform Initiatives including the Office of National Insurance and the Financial Services Oversight Council. We’re sure that Congress will get their act together in time so some of you can consider these potential employers.

One group in the Treasury that won’t have to wait is the Office of Terrorism and Financial Intelligence who was appropriated just over $1 million for new personnel. Whether or not you get to carry a weapon is not clear so just take it easy with all your 24 fantasies. Besides, financial people are the ones who usually end up dead on that show.

• Why Overstock.com and David Chidester Parted Ways [White Collar Fraud]
Sam Antar would like to know why David Chidester and Overstock.com came to a “mutual agreement” for Chides to leave the company. With new Overstock auditor KPMG on board, someone with eleven years experience at the company, that functioned as both the CFO and the Senior Vice President Internal Reporting and Information, might be able to help make the transition easier. Nope!

Sam postulates that the Chidester might have known too much, ” I believe that their so-called ‘mutual agreement’ is based on Patrick Byrne not wanting David Chidester to stay around and David Chidester not wanting to be around to answer questions as KPMG continues its audit of the company’s financial reports.”

KPMG is playing catch up with this new engagement and now they are dealing with a new CFO, Steve Chesnut, who Sam reports, “joined the Overstock.com in January 2009, was not around when most of the financial reporting improprieties under investigation were committed by management,” and isn’t a CPA. He’s got a less enviable job than KPMG.

• Obama’s Tax Reform Commission: RIP [Tax Vox]
Remember President Obama’s Tax Reform Commission? They asked you, the American Taxpayer, to give them ideas on tax reform and, by God, you delivered. After going through all that ingenuity, the commission announced that it get back to those ideas “after the holidays” to get crackin’ on our tax code.

Well! It appears that was time well spent because now it sounds like the tax reform commission is being put out to pasture. Tax Vox reports this exchange from yesterday’s budget briefing with Office of Management and Budget dreamboat Peter Orszag:

“Q: The President was supposed to receive tax reform recommendations in December and that was delayed indefinitely. Is there a possibility that that could be folded into the fiscal commission’s review, or is it just on the back burner?

DIRECTOR ORSZAG: I would imagine that it will be folded into the fiscal commission. I would imagine that — again, the commission will be examining a variety of things, including tax reform.”

We’ll just assume everyone’s ideas are being thrown on the scrap heap. Thanks for your help though!

Quote of the Day: Are You Saying the Plan Didn’t Work? | 02.02.10

Caleb Newquist
February 3, 2010

“[A]t Deloitte we began planning for the downturn and beyond in 2006. Not having a crystal ball, we didn’t anticipate such a violent contraction.”

~ Barry Salzberg, CEO of Deloitte.

The JDA

New Obama Proposal Would Invest $30 Billion TARP Funds in Small Banks

Adrienne Gonzalez
February 3, 2010

One can only postulate that since there was no room in President Obama’s bloated 2010 budget for small business initiatives, he instead chose to apply some TARP money that’s just lying around to get small business working again. I wish Mr President the best of luck on that plan as he’ll be needing it.

WSJ:

President Barack Obama proposed a $30 billion small business lending program Tuesday, the latest in a series of administration efforts to jump-start hiring by the nation’s small businesses.

The program, which Mr. Obama detailed at an appearance in Nashua, N.H., would invest $30 billion from the government’s Troubled Asset Relief Program in community banks to encourage them to lend to small businesses. If approved by Congress, the program would incentivize small and midsize banks to provide loans valued at several times that figure.

Didn’t we invest $700 billion in the Too Big to Fail banks for this same purpose? Not that it matters, we’ll try it again with the hopes that community banks will be able to accomplish what TBTF couldn’t.

A proactive sort of administration, White House officials were already prepared to counter the argument that TARP was never intended as a general piggy bank for funding the administration’s whims:

“The law is very clear: The monies recouped from the TARP shall be paid into the general fund of the Treasury for the reduction of the public debt. It’s not for a piggy bank,” [Sen. Judd] Gregg said.

[White House Budget Director Peter] Orszag said new legislation would be required to create the new small-business plan. He said the cost of the plan would depend on the subsidy rate of new activity and wouldn’t amount to a net cost, in terms of the deficit, of $30 billion.

Considering that he’s referring to a deficit of $3.8 trillion, I guess $30 billion isn’t really anything to get stressed out about after all.

Meanwhile, can community banks counter the continued deterioration of commercial real estate weighing on their balance sheets? I guess we’ll have to wait it out and see.

News

Dita von Teese’s Accountant Understands Why She Has to Spend $70k on a Dress

Caleb Newquist
February 3, 2010

Last month we mentioned that while we enjoy her genius, we wouldn’t want to be of Lady Gaga’s accountant. She definitely falls into the “clients that make you want to jump out the window” bucket.

Likewise, if we had our choice of clients, we wouldn’t be chasing down burlesque artists that marry rock stars, in this case, Dita von Teese. Not because we don’t enjoy burlesque artists and the rock stars they love, quite the contrary actually; it’s just seems that the headaches associated with such a client would be more trouble than it would be worth.

Surprisingly, DVT takes money quite seriously and is not as slipshod as you might expect.

“I refuse to go to the hair salon and have a $300 hair dye job – I do it myself at home with an $8 dye kit… I’ve always been a saver…I saved at least 15[%] of everything I earned and invested it in mutual funds“

Jesus, talk about sensible. However there is this glimmer:

“I think nothing of spending $8,000 on a corset for my show. My accountant once said he couldn’t understand how I spent $70,000 on a single dress but then he came to my show and saw how lavish it was and told me afterwards that now he understood.“

Those are work related expenses though; count us unimpressed. We’re expecting Gaga-esque negligent wasting of money. Like seriously getting carried away.

“I bought [a Jaguar] one night on eBay for $35,000 when I’d had too much champagne.“

Yes. That’s the best she can offer. Plus, there’s this:

“I pay my [credit card] balances off every month.”

More sensible behavior. Doesn’t sound like she’d be that bad of a client at all. Hell, she probably even keeps all her receipts. L. Gaga’s accountant might consider asking her for some advice.

Dita von Teese: ‘I spent $70,000 on a single dress for my show’ [Telegraph]

Managing Diversity for the Accounting Firm of the Future

Daniel Braddock
February 3, 2010

E&Y tweeted an interesting release this morning regarding their outlook on cultural diversity and how it relates to future success, both at their firm and in tomorrow’s global economy. I encourage you to read the full text (linked above), but here is an exercept I want to focus on:

“Our recent study “Redrawing the map: globalization and the changing world of business” reveals that the boards of many global companies lack the diversity to deal with intercultural challenges. At the same time, they cite the need for internationally experienced staff as the most important cultural factor in conducting business globally.”

Every firm is well aware of the importance for cross-cultural efficiencies as an accelerator to getting business done in the global markets. I agree with the article’s point that, “If an organization does not leverage the potent weapon of diversity, it risks limiting its creative potential and ultimately losing its competitive edge.” This is absolutely true. But how does a firm balance the “need” for cultural diversity with the reality that the leadership of many clients oftentimes resembles more of an Old White Man’s Club than that of an idealistic HR workplace? From schoolyard to the boardroom, we as people are naturally drawn to the bubble of comfort created by surrounding ourselves with those who are similar to us; commonalty breeds security. Think back to your last happy hour or the lunch table in 4th grade – what has changed?

On a personal level, E&Y isn’t failing at its internal diversity efforts; per Caleb’s post last week, they are second among the Big4 in terms of overall diversity hires (29%) and their male/female ratio is an even-steven 50%. These numbers are most likely bolstered by increased retention over the last 18 months as well as a focus on diverse hiring from the campus pipelines.

That’s not to say that the ongoing effort to strike a better diversity balance is unrealistic or futile. The next generation of partners (i.e. you new associates sweating through your first 80 hour workweek) are better prepared for the global workforce than the average 20 year veteran partner. The influx of group work, community service, and international students enrolled in American higher education institutions remains at the origin of preparedness. Couple these attributes with the fact that these colleges and universities see the statistical advantage to stirring the Diversity Melting Pot, today’s students are prepared more than ever for the corporate boardroom. If only you could send your partners back to experience the same thing.

The challenge for any firm lies in managing the differences created across cultures and generations. The basis of this responsibility lies within personal relationships formed between colleagues; something that no report or Fortune statistic can analyze.

You can follow Daniel Braddock, your friendly Human Resources professional, on Twitter @DWBraddock.

CFOs
Tax

White House Backs Down on Corporate Foreign Earnings Tax

GoingConcern
February 3, 2010

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

The Obama administration is slowly starting to pick its battles; starting with taxes on corporations’ foreign earnings.

The administration has abandoned its proposal to eliminate U.S.-based multinationals’ ability to defer tax on income by shifting assets to foreign subsidiaries, according to a published report.

While details are sketchy, Bloomberg reported on Tuesday that the administration’s proposed budget for fiscal 2011 shows that it has abandoned its plan to eliminate the so-called “check the box” system under which U.S. companies can defer U.S. tax on income by shifting income-generating assets to foreign subsidiaries without recognizing gains on the transfer.

The proposal would have eliminated companies’ ability to avoid tax on such transfers and forced the repatriation of earnings shifted in this way.

According to Bloomberg, the administration backed down in the face of intense opposition from multinationals. Observers note that Congress has tried to squelch the efforts of the Internal Revenue Service to clamp down on U.S. companies getting foreign tax breaks at the same time as U.S. tax breaks, although many of those breaks are facilitated by the check the box system.

“Maybe the administration figured this was one it did not need to pick a fight on,” Jasper Cummings, a partner in the Raleigh, N.C., office of Alston & Bird and a former associate chief counsel of the IRS, said in an email to CFOZone Tuesday. “They have enough fights as it is.”

Still, Cummings noted that the administration still has “a pretty long list of other changes” in international taxation that it is pursuing. Chief among them is a plan to tighten the pricing rules for transfers of intangible assets.

As CFOZone reported last fall, one such proposal would crack down on asset transfers of employee compensation. In a paper released in May outlining its budget for the last fiscal year, the administration said it would “clarify” the treatment of transfers of intangible assets to include shifts of such expenses.

At present, many companies avoid paying tax on gains resulting from transfers of so-called “workforce in place” under rules that also allow goodwill and “going concern” to go untaxed. In early 2007, however, the IRS issued a staff directive and audit guidelines warning that it was “improper” for taxpayers to classify workforce in place as goodwill and going concern. And an IRS official in September indicated that transfers of workforce in place should include the value of products or services the employees create if much of the work is complete at the time of the transfer.

According to Bloomberg, the administration’s proposals to toughen the rules on transfer pricing would generate $15.5 billion in tax revenues for the coming year and along with other international tax changes produce $122.2 billion over a decade.

Career Center

Job of the Day: Fund Accounting Analyst at J.P. Morgan

Caleb Newquist
February 2, 2010

Who wouldn’t want to get into Jamie Dimon’s house? JPM is looking for an AVP/Fund Accounting Analyst in Boston.

Check the details for this position after the jump.

Company: J.P. Morgan

Title: Fund Accounting Analyst – Supervisor

Location: Boston, MA

Description: As an Assistant Vice President in the Global Support Unit, you will be responsible for establishing and reviewing the controls of the daily operation, ensuring adherence to procedures and policies, and for providing necessary data to senior management and clients.

Responsibilities: Manage up to four supervisors, each with a staff of four to six fund accountants, senior fund accountants and support positions; Your core responsibilities include: interviewing, hiring and coordinating the training of new employees; performing salary and performance reviews of the staff; reviewing key areas of daily operations in order to ensure accuracy and compliance with procedures and controls; ensuring the completeness and timeliness of reporting to clients, outside parties, and other internal departments; assigning responsibilities and ensuring an efficient work environment; reviewing accounting related issues including posting corporate actions, interpreting tax rulings

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

Fraud

Ernst & Young Gives Going Concern Warning to Allen Stanford Liquidator

Caleb Newquist
February 2, 2010

If you’re given the task of running down assets that are left over from a Ponzi scheme, you’d think somone would throw in a little something for the effort. That stolen money is going to find itself after all.

Well! Apparently this is not so, especially as it relates to UK recovery firm Vantis. Vantis has been scouring the Earth for any of the plunder left over from the Allen Stanford hide the $7 billion game.

Six months into it, Vantis can’t get paid for its treasure hunt services and now Ernst & Young has said that the firm’s very life is at stake if they can’t start convincing some people to pay up.

Among the excuses that Vantis is claiming are the fact that most of the assets in the U.S. have been frozen and that the U.S. liquidator Ralph Janvey doesn’t play nice.

But hey! They’re still confident everything will be hunk-dory, “The UK recovery firm said it remained ‘confident’ that it would be able to recover its fees ‘in due course’ but said the timing remained uncertain.”

So more or less you’re day-to-day, right? Welcome to the prestigious Club of Those Ripped off by Allen Stanford.

Vantis faces going concern threat over liquidation of Allen Stanford’s bank [Telegraph]

Salaries

Accounting Salaries Mapped by Region

Caleb Newquist
February 2, 2010

Back again to decipher more of the data that you so graciously shared with us on our salary thread from December.

After noting that average Big 4 salaries and non-Big 4 salaries were essentially even, we now present the average regional salaries for you enjoyment or dismay:

• Mid-Atlantic– $88,831

• Northeast– $72,024

• Southeast– $56,000

• Midwest– $65,124

• Southwest– $73,185

• West – $64,706

Some analysis and the map, after the jump.

Surprisingly the Mid-Atlantic boasted the highest average salary based on the data collected. This was due primarily to two salaries that were reported from “JDs” working in “Washington National Tax.” The Mid-Atlantic average also included an Associate Director that reported a considerably higher salary than the average. If these three salaries are removed, the average salary is $76,254. which may be more in line with your expectations.

Another surprise that we saw was the higher than expected Southwest average salary. Again in this case, a brave Senior Manager in an advisory practice reported a much higher salary than most submitted. When this is removed the Southwest average comes down to $68,134, again, probably closer to what you would expect.

The Northeast, Southeast, and West all seem about right to us although we might have expected the West salaries to be a bit higher but then again we’re going with what we’ve got.

The map below shows how we grouped the states in the respective regions, with a few additional details on the regions.

Dennis Nally: Satyam Scandal Has Damaged PwC Brand

Caleb Newquist
February 2, 2010

While kicking it in Davos, Dennis Nally had to have known that eventually he was going to have to answer questions about his mother of all nightmares, Satyam. Having just passed the one year anniversary of the cat being let out of the bag about, you know, totally bogus numbers, everyone is talking about it. In India.

CNBC India caught up with Nalls and considering everything that’s going down, DN doesn’t seem worried. He’s leading P. Dubs full steam ahead into India; there’s no crying over failed audits, “Without question the firm has had real challenges in India but that has not changed my outlook and view on the importance of India economy to global economic picture.”

Stoic; as he should be. Not that the firm hasn’t had to do a little damage control. But no worries; Dennis is a man with a plan, “We just need to continue to deliver, service our clients, respond to their needs, help them deal with their issues and challenges. If we do that and we do that consistently over a period of time the PwC brand in India will be as strong and as good as it has been in the past and where we want it to be into the future.”

Plus, this is a blip, an outlier, a rare occurrence, “Any one-off instance can do harm to your brand and that is the reality. Our job is to make sure we are doing everything and we have done a number of things in India to ensure that this would not happen again,” so there’s no cause for concern.

This isn’t Tiger Woods brand damage we’re talking about. It will all be a distant memory before you know it.

Satyam scam has hurt PwC brand: Global Chairman [Money Control]

Accounting News Roundup: SEC Budget Gets a Boost; PwC Wants More Audit Committee Disclosure; Madoff Ex-CFO to Sell New Jersey Home | 02.02.10

Caleb Newquist
February 2, 2010

• Obama Seeks 12 Percent Budget Increase for SEC [AP via NYT]
Figuring the troops could use some help, PBO’s new budget will increase the Commission’s budget to $1.3 billion, including $419 million for new enforcement personnel.

In addition to the feds generous appropriation, the Commission is also budgeting for $1.7 bil in fees from new stock registration for 2011. Mary Schapiro seemed pleased saying that the truckloads of budget dollars will “do a great deal to help us keep pace with the continuing growth of the markets and provide necessary resources to support important regulatory initiatives in 2011.”

Whether or not $3 billion is going to save the sinking ship will remain to be seen although the “throwing money at the problem” solution seems to be in full effect.

• We need more disclosure from audit committees: PwC [Accountancy Age]
Someone had to say it! PwC seems to have had enough of the give, give, give action they’ve been doing and would like a little transparency sent their way courtesy of the audit committee.

In a submission to the UK’s Auditing Practices Board P. Dubs “believes there should be new disclosures which articulate the principles that audit committees apply in deciding whether the auditor should provide non-audit services.”

It’s not good enough that you won’t engage us for non-audit services, we want to know why! It’s important that we know. And for those of you that feel that non-audit services undermine independence, you simply don’t have all the facts, and therefore should BTFO.

• Madoff’s Ex-Finance Chief to Give Up NJ Home [NYT]
Frank DiPascali, not so much a CFO as he was a really good liar, has agreed to sell his home in Bridgewater, New Jersey. The feds will being doing the honors and it will come with all the appliances, furniture, etc. which probably makes for a decent deal. This is possibly where one would insert a Jersey Shore reference but we don’t know anything about the show other than most people on it aren’t from New Jersey. Happy hunting.

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