AZ CPA July/August 2020
Accelerating Growth & Value Through Acquisition Lessons in Leadership and Growth Benefits of the CARES Act for Not-for-Profits The Arizona Society of Certified Public Accountants y www.ascpa.com
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*2018 AZDOR Report
CPA The Arizona Society of Certified Public Accountants President & CEO Editor
Cindie Hubiak
Patricia (Gannon) Rife
Advertising
Heidi Frei
Board of Directors Chair Chair-Elect
Ginny DeSanto Tom Duensing Secretary/Treasurer Rachael Bertrandt Directors Keith Cowan Kelly Damron Jessica Estrada Tabitha Fox David Gephart Ross Grainger Jessica Iennarella Andrea Levy Anthony Lorenzo James McGettigan Lauren Murro Gidget Schutte Immediate Past Chair Jared Van Arsdale
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AICPA Council Members Rob Dubberly
Greg Nelson Chapter Presidents Southern Chapter Clark Goding Northern Chapter James Shankland Southwest Chapter Helen Greenwell North-Central Chapter Gidget Schutte AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends to the accounting profession. It is distributed six times a year as a regular service to ASCPA members. The ASCPA, its members, board of directors and administrative staff assume no responsibility for advertisements herein. The ASCPA and the above people also assume no liability for business decisions made by readers in reference to statements and/or claims in articles or advertisements within this publication. Opinions expressed by contributors are not necessarily those of the ASCPA.
Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com
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AZ CPA JULY/AUGUST 2020
Volume 36 Number 6
AZ CPA
July/August 2020
Features Lessons in Leadership and Growth
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Graves shares her experiences from last year’s Leadership & Growth Alliance program. by Marissa L. Graves, CPA
13 Columns & Departments
Five Ways Not-for-Profits Can Capture the Benefits of the CARES Act
Not-for-Profits have been hit hard by COVID-19 —the CARES Act can help. by Amy O’Loughlin, CPA
Chair’s Message by Virginia E. DeSanto, CPA
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Member News
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ASCPA Board Highlights
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In uncertain times, mental health issues surface at a rapid rate, particularly in the construction industry. by David James, CPA (Retired), CCIFP
Classifieds 22 Quick Quiz
I Am OK (I Think); Are You OK?
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Accelerating Growth and Value Through Acquisition Is the time right to think about a merger or acquisition? by Joel Strom
4801 E. Washington St., Suite 180 Phoenix, Arizona 85034-2040 www.ascpa.com
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ASCPA Chair’s Message
Zooming along… Cars go zoom, trucks go zoom, planes go zoom and now people go Zoom. It seems to me, as I’ve been watching all of my colleagues become experts at video conferencing and remote meetings, that we have found a way to add even more productivity to our already busy lives. The borders between home and work have blurred. Many are working more hours than they were before. Meetings end when the objective of the meeting has occurred and people do not spend as much time on small talk at the beginnings and ends of meetings. Stress levels have increased and nobody can remember what day it is.
Virginia E. DeSanto, CPA, CGMA
The other day, my assistant leaned her head back to laugh, and her head completely left her shoulders and then popped back in when she stopped laughing … a very strange thing to watch!
Many of my colleagues like the work from home environment and others cannot wait to get back to the office. However, almost all of them talk about the need for true face-to-face visits and the value that meeting in person brings to the work at hand. Problem-solving, sketching things out on a white board, brainstorming and collaboration are more challenging in a Zoom meeting. Another thing that is being talked about a lot is – what will the work environment be like when this is over? Everyone agrees that it will not be exactly like it was before, but opinions vary on how new logistics will impact everything we do. Think about going out for a business lunch ... I doubt you’ll be able to choose the salad bar or buffet options. Office space will likely change, sanitation rules will be different and paperless work is already happening in a major way. My work is closely related to Arizona State University (ASU). According to Zoom, ASU’s use of Zoom for meetings and education has made ASU the fifth largest user of Zoom in the country. Here’s something that I’ve noticed since attending meetings on Zoom all day. Many people are using fake backgrounds made from photos they have. These backgrounds make for interesting conversations and give a glimpse into people’s personalities, hobbies and likes. However, as the person uses the fake background, parts of the image of themselves disappear, like hair when they turn their heads. The other day, my assistant leaned her head back to laugh, and her head completely left her shoulders and then popped back in when she stopped laughing ... a very strange thing to watch! I’ve also noticed that there is a faint outline around the person when they use a fake background. And now that we’ve been doing this for so long, I’m noticing a faint outline around characters in movies, when a green screen has been used, that I couldn’t see before and now cannot un-see. When thinking of the future and realizing we cannot go back to the way it was, I feel sad. The social contact in business and everyday life will come back in some manner, but I keep thinking about the “good ole days” and wondering how much we will miss them.
Ginny l 6
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Member News Mitchell L. Robinaugh, CPA, was promoted to partner at Tull, Forsberg & Olson, PLC. Deloitte named Kenneth C. Udenze, CPA, as managing partner of its Arizona practice, effective June 1, 2020. Heinfeld, Meech & Co, P.C. recently promoted the following individuals: Eugene Park, CPA, to partner, Cynthia Rojo, CPA, to audit manager, Kenneth McGovern to consulting manager, Stewart K. Watkins, CPA, to senior associate and Jessica Martinez to staff associate II. Flowers Rieger & Associates, PLLC hired Ike Braden CPA/ABV/CFF, CVA, MAFF, MBA, CFE, as a tax manager and director of business valuations and litigation services.
Highlights of Board of Directors’ April Meeting Among other actions at its April 22, 2020 meeting, the ASCPA Board of Directors reviewed the following:
Consent Agenda The consent agenda, which included the board minutes, financial statements, Foundation contribution and Investment Committee members was approved.
2020-2021 Society Budget Approval The 2020-2021 budget was reviewed and approved.
Outsourcing Accounting and Audit Schedule
Jessica Iennarella, CPA, has been elected to serve as a three-year term as an at-large member of the AICPA Council.
Cindie Hubiak provided an update on the outsourcing of the Society’s accounting function and the schedule for the annual audit.
Henry+Horne admitted Kevin C. Bach, CPA, CVA, Jessica Moulder, CPA, CFE, and Sharlynn M. Garza, CPA, as partners and Jaimi Koechel
Jared Van Arsdale and Ginny DeSanto provided an update on the CEO transition. After interviewing several firms, Duffy Group has been hired to assist with the search.
CEO Transition
as a principal.
Words of Wisdom
Members Volunteer During COVID-19
Outgoing board members Mike Allen, Paul Evans, Tim Hansen, Vanessa Makridis, Karen McCloskey and Sami Raynes-Houseknecht shared thoughts about the future of the Society, the profession and their experience as a board member. Jared thanked each of them for their contributions.
The following ASCPA members assisted more than 100 small businesses with questions related to staying in business during the pandemic. We appreciate ASCPA Life Member Carolyn Sechler for connecting us with Local First Arizona to support their members with accounting questions during this time. Bill Beasley Lynn Borushko Jill Foley Lori Mann Lynette Nowlan Carolyn Sechler Lisa Stevenson Jay Varcoe Ralph Willett John Zatarski
Strategic Plan Update Cindie provided an update on the ASCPA’s strategic measurements.
A Day in the Life Ginny, Sami and Andrea Levy each shared a view of the challenges and joys they experience in their life and job.
Other Business Jared thanked board members for their support during the year, and he was thanked for his leadership. If you have questions or would like additional information, please contact Cindie Hubiak at (602) 324-2888; AZ toll free at (888) 237-0700, ext. 203; or chubiak@ascpa.com.
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Discover the Resources to Help Clients Navigate COVID-19
It’s a different world we’re working in. Paychex supports the efforts of ASCPA members with resources and tools you can use to help clients navigate the complexities of getting back to business amid the pandemic. Your clients will need the guidance of their most-trusted advisor. • Return to Work FAQs • CARES Act and Families First Coronavirus Response Act • PPP Loan Forgiveness Estimator • Business continuity plan Check out these and other resources at payx.me/ascpa-covid-19
Paychex is proud to be the preferred provider of payroll, retirement, and HR solutions for the ASCPA.
© 2020 Paychex, Inc. All Rights Reserved. | 6/01/20
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Accountant Knowledge Center Free online resources including access to upcoming webinars and AccountantHQ, a dashboard to help manage all your clients’ data. Gain access at payx.me/akc
Lessons in Leadership and Growth Marissa Lynn Graves, CPA, CIA, CFE, is the director of accounting & finance at Sportiqe Apparel Co. in Tempe, AZ. She has several year’s experience in public accounting, internal audit, and now in industry as a finance executive. As a graduate of Northern Arizona University, Graves volunteers her time with the alumni association and is also the accountant for the AriZoni Theatre Awards. She is a published author in the AICPA’s consumer book, Save Wisely, Spend Happily, and also a member of the ASCPA Emerging Leaders Committee and an ASCPA Champion.
by Marissa L. Graves, CPA, CIA, CFE Like many of us, I’ve been working remotely the last few months and had some immediate and impactful changes to my professional career and personal life. I have used some of this time as an opportunity for reflection and gratitude. Most recently, I am immensely grateful for a specific opportunity from the ASCPA – the Leadership & Growth Alliance. Almost a year ago, I sat in a room with a committee of other professionals to decide the future of our training opportunities. In past years, we had offered halfday or full-day seminars with impressive speakers and topics. But this past year we decided to shake things up a bit and follow a cohort program; meeting every other month as a group to learn and connect together. Our group of 19 professionals met six times over the past year with a focus on developing our leadership skills. I wanted to share some of the topics and advice that really resonated with me from those sessions. We had a variety of perspectives on leadership, learned practical skills we could implement immediately, and even had “homework” to bring to sessions and personalize the content. Although we were led by inspiring facilitators, the participants really made this an experience worth sharing. I hope you’ll agree.
We’re in This Together One of the biggest takeaways I had during the series was that regardless of our position or company, we were all dealing with similar challenges that we were able to discuss. The irony was that at the beginning of our session a year ago, I don’t think we realized that. We focused and celebrated the diversity of the group in terms of title, area of specialty in tax or audit, working in industry or public to give us a variety of perspectives. However, we quickly formed bonds and built trust in our first exercise where we anonymously submitted our biggest personal and professional successes and defeats. Barriers went down immediately as we each read the projector screen that scrolled with honest and transparent comments; things that brought tears to eyes, and things that sparked laughter. We weren’t alone and had the ability to encourage and learn from one another in a safe environment. That unwritten theme carried us throughout our sessions and serendipitously into
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our final meeting — which was virtual as a result of COVID restrictions — an interactive panel discussion about challenges and successes working through our new environment. And no surprise, there were commonalities in what we were all working through. A sense of community comes with sharing struggles and working through them together, and we experienced this firsthand through the LGA sessions.
Values are More Than Just A Company Motto In one of our sessions, we learned about the importance of values as leaders and how, whether we realized it or not, it guided much of our decision-making. Having awareness about ourselves as leaders is critical to successfully communicate, motivate and manage others. Imagine a room of eager leaders full of coffee one morning anxiously sorting through a deck of cards. The cards contained various
words (values) to help us identify and label how we instinctively make decisions; not exactly a natural habit for accountants. Narrowing down the deck of 55 to six sounded like a simple task, but we quickly learned how nuanced each term could be. And of course, it was comical to see how decisive or indecisive some of us could be! I found this exercise so rewarding that I purchased a deck that I used to facilitate one-on-one meetings with my employees at work and even spark fun conversations with my husband! We have posted our values in our work areas and celebrate examples of them in our decision-making to help us understand each other’s perspective. I’m looking at my core values right now, creatively displayed on my computer monitor. They define my decisionmaking especially in times of intense stress or pressure. Staying true to those things means not every decision will be perfect, but I will be confident that
I am showing authentic leadership consistent with my character.
Career Pivoting Pivoting was a topic we learned about before the newest buzz word appeared during COVID. The concept of career pivoting is the opposite of a career change. Rather than making an abrupt change to something unrelated, you leverage what’s already working and channel your energy toward that. Many of us are high achievers, dedicated employees, and truly invested in career success. This means we have steep learning curves and love challenges. With any learning curve, we reach a “boredom” plateau where there is a point of success with choices; we can maintain the status quo (comfort zone), we can completely change everything (panic zone/career change), but ideally we should seek our stretch zone between these two. After listening to a recorded presentation by Jenny Blake and having
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a facilitated exercise, I realized that I can quickly achieve a plateau and have to balance burnout and boredom. By focusing on something that I am already successful at (learning and teaching), I find passion and am actively seeking it out, in what could be mundane daily tasks. Consider this prompt – if you had a Saturday with no obligations, no other people involved, and could spend time on something you are passionate about, what would it be? How can you inject a little bit of that passion each day or week into something you are already doing? As with any speaker or series, we all came with different expectations and goals, so please don’t think of this as an exhaustive list of what each of us learned. Rather, just a few notes to whet your appetite for next year’s LGA cohort and encouragement for what our leaders are working on. And we’re already in the midst of planning the 2020-2021 series, so if you’re a CPA in the first 10 years of your career, stay tuned for more information and see below for the upcoming program. l Sessions Planned for the Upcoming Series • Session 1 | Zoom | August 18, 8 – 10 a.m. | Work/Life Balance • Virtual Networking 1 | Zoom | September | Networking (NonCPE Event) • Session 2 | Zoom | October 27, 8 – 10 a.m. | Vulnerability and Communication • Session 3 | In-Person | December 8, 3:30 – 6:30 p.m. | Generations in the Workforce • Session 4 | Zoom | January 7, 8 – 10 a.m. | Professional Image & Values Development • Session 5 | Zoom | February 9, 8 – 10 a.m. | Finding and Maintaining Mentorship • Virtual Networking 2 | Zoom | March | Networking (Non-CPE Event) • Session 6 | In-Person | April 29, 3:30 – 6:30 p.m. | Personalities, Values and EI
Leadership & Growth Alliance Series 2020-21 August 18, 2020 – April 29, 2021 Recommended CPE Credit | 10 hrs
The Leadership & Growth Alliance is a growing community of Arizona professionals, within the first 10 years of their CPA career, who are looking to develop leadership and professional skills and get involved in the profession and the local community. New alliance members participate in an eight-part professional development series in which they will: • Attend exclusive Zoom and in-person events designed specifically for series participants, earning up to 10 hours of CPE (based on individual attendance). • Develop leadership and professional skills and knowledge in areas such as communication, work-life balance, mentorship and professional development strategies. • Network and collaborate with series participants, alliance alumni and ASCPA Board of Directors. • Access to the online Alliance Community in Connect and early access to future alliance sponsored events hosted by the ASCPA. Space is limited! Register today to reserve your seat and become the next generation of the ASCPA Leadership & Growth Alliance.
Series Fee: $295 (members) Register at www.ascpa.com/alliance
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Not-for-Profit Conference Sept. 17, 2020
Desert Willow Conference Center Available In-Person or via Webcast Recommended CPE Credit: 8 hours Get up to speed on the most pressing issues facing not-for-profit organizations today. Plan your perfect day with a mix of auditing, accounting, technology, leadership, strategic planning and tax topics relevant to the changes in the not-for-profit industry due to COVID-19. In a fast-paced accounting world, not-for-profit leaders must know how to operate efficiently and effectively, making the most of their limited resources in an ever-changing and often challenging financial environment.
General Sessions Better Together – The Not-for-Profit Community in Arizona Kyla Quintero, Arizona Community Foundation Strategic Planning: Your Role in Providing Strategic Leadership for Organizations Jason Matthews, ASU Watts College, Nonprofit Management Institute
Breakout Sessions An Update From Washington Brenda Blunt, Eide Bailly LLP Intelligent Automation: A Buzzword We Can Finally Get Behind Nick Mortensen, Eide Bailly LLP Audit and Accounting Update Allan Klose, CBIZ MHM, LLC One Size Does NOT Fit All — Considerations for Out-sourcing Your Not-for-Profit Accounting Moderator: Lisa Lumbard, Lumbard Consulting, LLC
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Panelists: Robin Wilson, Unity of Phoenix Susan Kuster, Children’s Museum of Phoenix Jerry Mendoza, Friendly House Successfully Select and Implement Software Jim Mulligan, Makewise, LLC
Dashboards & Data Analytics: Using Data to Drive Greater Social Impact in Our Communities. David Paddison, Impact Analytics, LLC Taxes for Tax-Exempt Organizations Brian Ess, Henry+Horne Reach for the Stars (Charity Navigator) Sarah Zelhart, Make-A-Wish America Elegant Financial System Design — The Power of Aligning Your Financial Systems to Your Mission Curtis Klotz, CLA (CliftonLarsonAllan)
Common 990 Errors Amy O’Loughlin, CBIZ MHM, LLC Kristen Bass, CBIZ MHM, LLC Financial Market Update and Investing for Not-For-Profits Jason Gove, National Bank of Arizona Mark Weisbrod, Zions Bancorporation, N.A.
Thank You to Our Sponsors Platinum Sponsor
Gold Sponsors CBIZ MHM, LLC CLA (CliftonLarsonAllen LLP) Heinfeld Meech & Co., P.C. Henry+Horne Your Part-Time Controller LLC
Register online at
ascpa.com/npc20 by phone at (602) 252-4144
Five Ways Not-for-Profits Can Capture the Benefits of the CARES Act by Amy O’Loughlin, CPA Not-for-profit organizations have been hard hit by the COVID-19 pandemic. Shelter-inplace orders have dwindled physical participation in religious and cultural activities, while forcing charitable organizations to either suspend or heavily curtail operations. Financial pressures including declines in contributions, investments and endowment balances will need to be addressed by organizational leadership so that your operations can be managed through these uncertain times. Recent pandemic-related stimulus legislation may provide some much needed resources — and stability — during this time. The following five benefits from the Coronavirus Aid, Relief and Economic Security (CARES) Act are particularly beneficial for not-for-profit organizations. Specialized Financing Vehicles, and Forgivable Loans The CARES Act enhanced Small Business Administration (SBA) loans and created the Paycheck Protection Program (PPP), which offers a forgivable loan that organizations with 500 or fewer employees can use to help with payroll costs. The first round of funding has been fully distributed. The President signed legislation on April 24 providing additional coronavirus relief funding to the Paycheck Protection Program. It is meant to bridge the gap between the CARES Act funding and the next round of coronavirus legislation.
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PPP loans come with a maximum allotment equal to the smaller of $10 million or 2.5 times the average monthly payroll over the previous 12 months. Loans can be forgiven if used during the eight-week period subsequent to the loan date (but not after June 30, 2020) for certain allowable costs. Payroll costs are one of the allowable costs and include salaries and wages, paid time off, group health benefits, retirement benefits, and state and local taxes, subject
to a $100,000 cap per employee. Other costs outside of payroll such has continuation of health benefits, mortgage interest, rent and utilities, and interest on debt that was originally incurred prior to Feb. 15, 2020, are also among the allowable costs, although these other costs are subject to certain caps. Not-for-profit organizations can apply for a PPP loan through a SBAapproved lender. They will need to certify that the loan will support ongo-
ARIZONA CORPORATE TUITION TAX CREDITS
ing operations, such as maintaining employees and payroll, and making rent or utility payments. Retention of staff during the eight-week relief period is required for complete forgiveness of the loan. Organizations should be advised that once a PPP loan is forgiven, other provisional relief under the CARES Act is no longer available, such as the payroll tax holiday. Another funding option to consider is the Main Street Lending Programs (MSLP). The program will operate through two facilities: the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF). It will be available to organizations with up to 10,000 employees or businesses whose 2019 revenue was $2.5 billion or less. The four-year loans feature a minimum loan amount of $1 million and a maximum of $25 million. The interest rate uses the Secured Overnight Financing Rate (SOFR) plus 250400 basis points, with principal and interest payments deferred for one year. The two programs either facilitate new loans or build on existing MSLP loans. Organizations applying for MSLP loans must commit to maintaining payroll and workers and have restrictions on how much of that loan can be put toward executive compensation.
Arizona companies and CTSO:
Deferral of Tax Liability
A powerful partnership that changes lives! In low-income families, many bright, deserving students are shut out of college simply because their families can’t afford it...and high school dropout rates are often over 50%.
But with the help of companies across Arizona, many of these children are getting an exceptional education that is changing their lives! Over the past 20+ years, CTSO has given over 70,000 children in low-income families over $124 million in scholarships. 99% of those students are graduating high school! 98% are college bound! We’ve helped so many, and yet the need for corporate support has never been greater. So many children desperately need help! If your client’s company might want to help, we’d love to talk!
If you have a client whose company might like to join us in changing children’s lives, please give Bill Osteen a call at 520.838.2573 or Gracie Marum at 520.838.2571.We’d love to meet with you!
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The CARES Act provides a payroll tax holiday, which allows deferment of the employer portion of Social Security payroll tax liability from March 27, 2020 to Dec. 31, 2020. Half of the deferral must be paid by the end of 2021 with the remaining portion paid by the end of 2022. Organizations that have loans forgiven under the PPP cannot take advantage of the payroll tax holiday subsequent to the date that they are notified of forgiveness.
Employee Retention Tax Credit Employers that did not take advantage of the PPP under the SBA will be able to apply for a payroll tax credit that incentivizes the retention of employees. The credit covers employee wages paid after March 12, 2020 through the end of the year. Eligible employers are those whose gross receipts declined by more than 50% or had to fully or partially
suspend operations. The credit will be claimed on the employers’ payroll tax returns. Employers that received a PPP loan are not eligible for the retention credit, regardless of whether any of the PPP loan is forgiven.
Offset Losses Under the CARES Act, organizations subject to the unrelated business income tax that have losses incurred in 2018 through 2020 may carry back those net operating losses (NOLs) to the preceding five years and may fully offset income in those carryback years. This CARES Act provision temporarily restores the ability to carry back NOLs and allows a six-month extension to file quick refund NOL forms. Under the sixmonth extension, quick refund claims must be filed before June 30, 2020, to ensure expedient processing.
Arizona Federal Tax Institute Conference Nov. 5-6, 2020 Desert Willow Conference Center This two-day conference provides a detailed analysis of the current and recurring issues affecting the practitioner who provides tax and estate planning services to the family unit and the closely held corporation. It’s a two-day conference with one-stop shopping for all the latest updates you’ll need to ensure continued success.
Thanks to Gold Sponsors: Bedford Cost Segregation Catholic Education Arizona Institute for Better Education
www.ascpa.com/tic20
Benefits for Donations Several changes under the CARES Act may make charitable contributions more appealing. Individuals who do not itemize their taxes can take a $300 above-the-line deduction for cash contributions to a qualifying not-for-profit organization in 2020. For individuals who itemize, the charitable deduction is increased to 60% of an individual taxpayers’ AGI through 2025. Corporations also can take deductions up to 25% of taxable income for cash deductions (up from 10%), and deductions for contributions of food inventory up to 25% of taxable income (up from 15% of taxable income). l
Amy O’Loughlin, CPA, is tax director at CBIZ & MHM. She is an ASCPA member and will be speaking at the Not-for-Profit Conference on Sept. 17, 2020 on Common 990 Errors.
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I Am OK (I Think); Are You OK? by David L. James, CPA (Retired), CCIFP Many of you may remember the article in the February, 2020 Journal of Accountancy by Mark Cowan entitled, “Depression and the CPA.” Cowan bravely plowed headlong into a discussion on the challenges of those suffering from a mental illness and the stigma associated with such a diagnosis. In August, the ASCPA Corporate Finance and Construction Conference will be exploring this issue in one of the conference sessions, Workplace Safety: A Leader’s Guide to Mental Wellness. This session will focus on the critical role of the workplace in overcoming the stigma Cowan spoke about. We will also look into the occupation experiencing the highest rate of suicide deaths: construction and extraction. The multi-faceted struggles of the past few months, courtesy of COVID-19, have accelerated mental health issues across the country as evidenced by suicide crisis hotlines that have seen a spike in people reaching out. Emotional and mental wellness can be tough in good times, but is even more difficult to maintain during times of uncertainty, with financial and family stressors impacting us daily. The unique circumstances we have faced over the past few months have taken away the stability of our daily routine. Many workers have been laid off or furloughed, and social distancing and isolation/shelter-in-place lifestyle patterns have become a new norm.
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Why are we looking at these issues in the workplace? The workplace is, historically anyway, where we experience a significant amount of human contact and interaction. For those struggling with a mental illness, we need to make sure they know that they are not alone. Connectivity is important in maintaining mental and emotional wellness, and the workplace is an important setting to stay connected. Additionally, the workplace is where employees have an opportunity to notice changes in their co-workers and are in a position to help guide them to resources for help. Conversely, isolation is a leading factor for those at risk for suicide. With the recent effects of COVID-19, many workers have been isolated from their fellow workers. Especially impacted are those who are single and live alone and have been either furloughed, laid off or are working from home. A workplace culture that promotes mental wellness is a direct reflection of company leadership. Leadership is not about “being in charge,” rather it is about caring for those “in your charge.” In order for a company to achieve this cultural transformation, top down commitment to education, awareness and elimination of stigma must be a part of their strategic plan. It is important to open up the dialogue about mental illness and suicide prevention, so it becomes natural and a comfortable conversation. If a workplace environment supports a culture of openness and stigma elimination, workers will be more likely to apply this same understanding to family and community. Why are construction and extraction number one in suicide deaths? There are a number of risk factors that place someone with a mental illness or challenged by life circumstances in danger of suicide. For construction/ extraction, the nature of the occupational demands create a perfect storm of many of these risk factors. While they are certainly not exclusive to this occupational group, as several of these risks are also found within the CPA profession, the risks are heightened
by the industry stressors impacting the construction workforce. To highlight just a few: Old school stoic and “tough guy” mentality is certainly a common trait of construction workers and the culture of an industry noted for a “get it done” attitude. Construction workers who are assigned to projects away from home experience isolation, and the negative mental impact of missing family, church and community activities can be significant. In Arizona, construction has remained active during the COVID-19 crisis, but end of project furloughs and seasonal layoffs are ever present on the minds of our workers. All projects eventually are completed, and workers have no employment guarantees for the next project. The high incidence of construction worker injury and chronic pain can lead to drug and alcohol abuse. This worker risk factor has grown recently from the current COVID-19 stressors, which have resulted in a reported increase in both opioid and alcohol use. Long hours, experienced by both CPAs, as well a construction workers, do impact your mental state. And in the case of construction projects scheduled for night work and split shifts, workers will likely experience sleep disruption patterns. These risk factors and many others will be discussed at the conference, as well as ideas on helping reduce the mental and emotional impact associated with our professions. Cowen opened the door to the solution when he stated, “The profession as a whole needs to talk more about mental health.” Workers in need of help need to feel safe in asking for it, and we need to recognize when someone needs help. Education is key in providing our employees the tools to understand the risk factors, recognize the suicide warning signs and know what resources are available. Cowan was lucky, he had a friend who recognized a problem and bluntly stated, “Mark, you are in need of care.” We all must have the ability to recognize those
Suicide Crisis Hotlines by County Maricopa — (800) 631-1314 and (602) 222-9444 Pima — (800) 796-6762 or (520) 622-6000 Graham, Greenlee, Cochise and Santa Cruz — (866) 495-6735 Gila River and Ak-Chin Indian Communities — (800) 259-3449 Yuma, La Paz, Pinal and Gila — (866) 495-6735 Mohave, Coconino, Apache, Navajoand Yavapai — (877) 756-4090
needing help and be brave enough to ask the hard questions. Resources are available, and once again, the workplace can be a vital connection to needed services. An employee assistance program (EAP) can be an effective way to provide confidential services to employees on many issues that impact their lives. An EAP can be a great partner to help with your worker education efforts on this topic. Not all EAPs are created equal, so do your homework. Additionally, companies should provide workers with community resources, so they know they have alternatives. If you have not read the article by Mark Cowan, I recommend that you do. If you are looking for more information as a construction professional, go to www.preventconstructionsuicide. com. If you would like to research more general workplace resources, go to www. workplacesuicideprevention.com. If you, or someone you know, are at risk and in need of mental health services, call the National Suicide Prevention Lifeline (800) 273-8255 or one of the county resources listed on this page. To find out more about this topic, we hope to see you at the Corporate Finance and Construction Conference on August 28 at the Desert Willow Conference Center in Phoenix. l
David L. James, CPA (Retired), CCIFP, is formerly the CFO for FNF Construction, Inc., a heavy highway contractor based in Tempe. He has over 45 years of financial and corporate experience in the construction industry. In 2019, James received CFMA’s Danny Parish Outstanding Leadership Award. James is active in suicide prevention, and was appointed to the National Action Alliance for Suicide Prevention. He currently serves as chair of the CFMA Suicide Prevention Committee and serves on the Construction Industry Alliance for Suicide Prevention, a 501(c)3 dedicated to suicide prevention awareness, education and providing workplace resources to the construction industry. James will be speaking on the subject of: Workplace Safety: A Leaders Guide to Mental Wellness at the Corporate Finance and Construction Conference on Aug. 28.
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Corporate Finance and Construction Conference August 28, 2020
Desert Willow Conference Center Available In-Person or via Webcast Recommended CPE Credit: 8 hours Enhance your knowledge on a broad range of topics relevant to leaders in the construction and corporate finance industries. This conference is not just for CPAs who work in construction – it is for CPAs who work in corporate finance in any industry. Get the latest insights on popular topics such as succession planning, cybersecurity and an economic update. Personalize your conference experience by choosing sessions from one or both industry tracks. General Sessions: KEYNOTE: Economic Update for the U.S. and Arizona Dennis L. Hoffman, W.P. Carey School of Business
Check ascpa.com/cfcc20 for the most current schedule.
Thank You to Our Sponsors: Platinum Sponsor:
Current Cyber Threat Joseph Hooper, Supervisory Special Agent, FBI Supporting a Workforce During a Crisis Aaron Peterson, MBA, CPM, City of Tempe Breakout Sessions Impact of COVID-19 on Construction Projects Mike Holden, Holden Willits PLC
Gold Sponsors: Paychex STO4KIDZ Wallace, Plese + Dreher, LLP
Succession Planning in Periods of Uncertainty Mary Anne Sisco, The Northern Trust Company The New Lease Standard: The Bark and the Bite Matthew J. Waller, CPA, Henry+Horne An Interactive Experience With Blockchain Technology and How It Applies to Accounting Vincent Michael LoRusso, CPA, TrueUp Co. Workplace Safety: A Leader’s Guide to Mental Wellness David L. James, CPA (retired), CCIFP Backup Withholding/Employment Tax Implications & 1099-NEC Lisa Novack, IRS Updates on the Evolving Area of Pandemic Alphabet Soup and Managing Risks Julie Pace, J.D., Gammage & Burnham Strategic Planning for a Business’s Overall Success Daniel R. Siburg, CPA, CVA, The Siburg Company
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Register online or by phone at (602) 252-4144
www.ascpa.com/cfcc20
Accelerating Growth and Value Through Acquisition by Joel Strom Accelerating a company’s growth through acquisition is a frequent topic in a growth advisory practice. In the past, I’ve shared tips on how to assess growth strategy for a company; then, if it was the right way to proceed, the actions necessary to ensure that the acquisition was successful and achieved management’s goals. Then we entered a new reality. Something called “Business in the COVID-19 Era.” Preparing a presentation for a refresh on growing through acquisition in May, we still had no real idea how bad this situation would get and how it would affect all of our businesses. So, we pivot and address the times we are in. It’s how businesses survive. We are right in the heart of the crisis and now we have no idea what the economy will look like when we come out of this on the other side.
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A safe assumption is that no matter what the recovery looks like, acquisitions will continue to be an important component of many businesses’ growth strategy in 2021 and beyond. In fact, there may be more businesses on the market than we have ever seen in the history of the U.S. economy. Who wins? Are you poised to take advantage of such a market, as an acquirer or acquired business? A truth that will likely remain consistent is that companies typically consider making an acquisition for a limited number of reasons such as accelerating company growth beyond what they can realize organically or perhaps to gain a competitive advantage, in good times and in bad. Another constant will be that some of these acquisitions will meet or exceed expectations while others will result in total disasters. There will continue to be some proven steps to ensuring a successful acquisition. These steps can help evaluate the company’s readiness for an acquisition, determine what needs to be done to prepare for an acquisition, and finally develop a successful acquisition strategy. Specific to the current situation, there may be some opportunities for certain acquirers that did not exist prior to the crisis. There may be situations that arise during or after the crisis where a company desperately needs cash, more distribution, or just some new ideas ,and a sale could provide new life for the troubled company; a win for both sides of the acquisition. Also, like in the aftermath of other downturns, there will likely be additional acquisition opportunities as some owners who, after struggling through this, are just tired of the fight and will feel that it is time to sell their businesses and eliminate their anxiety and risk. As tempting as it might be, before simply jumping into the search for an acquisition target, stakeholders need to take one step back and thoroughly understand why they are considering an acquisition. In other words, they need to develop an acquisition strategy. If they are not clear on the reason for
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As tempting as it might be, before simply jumping into the search for an acquisition target, stakeholders need to take one step back and thoroughly understand why they are considering an acquisition.
the acquisition, there is little chance of finding the right target. How well the strategy is defined, will have a lasting impact on the success of the entire process. However, even with a defined strategy, it is crucial to stay focused on candidates that meet that criteria as the search progresses. For example, if the strategy is to gain efficiencies of scale then a candidate that would instead provide vertical integration would be eliminated, no mater how interesting the company. Other common strategies for an acquisition include market diversification, talent, capacity, speed to market, IP and reducing competition. Once the acquisition strategy has been defined, there is still one more step before going out looking for the perfect match to that strategy. The goal of this step is to realistically assess the company’s ability and resources to handle an acquisition and then decide what type of acquisition would best fit that ability. This assessment is not related to the monetary investment required to make the acquisition; this is about the organization, the systems and the management team and their ability to find, check out and absorb an acquisition without damaging its core business. Acquisitions are exciting — sometimes so exciting that people who should be minding the core business get distracted and lose focus on dayto-day operations. An assessment of
AZ CPA JULY/AUGUST 2020
the organization’s ability to absorb an acquisition should help guide its choice of candidates. It may be determined that the only viable acquisition would be one that can be left operating independently (at least for a while) from the core business due to system, structure or cultural reasons. This assessment of the organization’s capabilities and capacity for an acquisition is even more important if the company is considering a business weakened by the crisis. A business like that could take some special attention and nurturing in order to grow again. Once it has been decided to go forward with an acquisition attempt, there may be some targets that are known to be a good match for the strategy. Management can make a list of those, though it is recommended that they do not move forward just yet. From this point on in the process, long-term success “without regrets” depends on doing things right, dotting i’s and crossing t’s. This is where putting together the right outside advisory team may become a necessity; from hiring the right investment banker and M&A professionals to help identify and vet potential acquisition candidates, to attorneys and CPAs who are M&A specialists to again make sure everything is done right, to consultants and advisors experienced in acquisition and cultural integration. Most business owners and management teams have years of experience operating and grow-
ing their businesses; however, they may only acquire one company in their entire career. An acquisition is too important to not have professionals help with the specific issues involved in the process. There are two more keys to a successful acquisition process that need to be mentioned here, because if not heeded, they can often cause major long-term headaches. The first would be management deciding to go forward with an acquisition while ignoring many “red flags,” including the advice of their advisors that it is not the right choice. An acquisition is exceedingly difficult and often impossible to reverse, so taking in all factors and information from a thorough due diligence process is critical to making the right decision. Finally, once it is decided to move forward with the right acquisition, the team’s work is nowhere close to being done. Before signing those final papers, a post-acquisition transition plan needs to be developed because studies show that more mergers and acquisitions fail due to integration issues than financial ones. Of those that do fail during integration, 70-90% of them are due to lack of attention to human capital and cultural fit. Whenever we come out of this crisis, and hopefully it will be soon, whatever the new normal is in the post COVID-19 era, acquisitions will be an important option for accelerating growth and enterprise value. l Joel Strom is a founding partner and head of the Value Creation Consulting Practice of CKS Advisors. He brings more than four decades of executive business management and strategic consulting experience to help his clients achieve substantive results in value creation, family business management and succession, strategic planning, and organizational restructuring. He developed the firm’s exclusive Strategic Value Acceleration Process that provides clients a means to maximize their company’s sustainable strategic enterprise value. Joel can be reached at jstrom@cksadvisors.com or (602) 377-1383.
Free Webinar for ASCPA Members!
All About Hemp | Exploring This Emerging Industry Presenters: Helen Goldstein, J.D., and Josh Schneiderman, J.D., of Snell & Wilmer, LLP
August 6, 2020 Noon – 1 p.m. Receive an introduction to the hemp industry, including the current challenges and opportunities for service providers to add value. You will gain an understanding of the unique regulatory backdrop that applies to this emerging crop and the factors driving this commodity.
www.ascpa.com/fw4
Take the Steps Toward the Retirement You Deserve Grow Your Practice by Double Digits as You Have Prepared! Stand Up for Arizona and Plan the Future of Our Profession! Remember 2020 as the year we stepped up! Experience shows that combining and strengthening practices has a lot of value and benefit during periods of economic uncertainty. We have practices preparing to sell in 2020 and the partners are anxious to work with buyers for a strong transition, assist with training staff, maintain client confidence and satisfaction. Financing has been confirmed as available. Now is the time for sellers and buyers to plan their future optimistically and contact Able Tax and Accounting Practice Sales for a confidential/no obligation discussion about Stepping Up in 2020.
Gary W. Hankins, CPA • Able Tax and Accounting Practice Sales • www.ableta.com • (817) 738-3287
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Classifieds Business Opportunities SEEKING CPA SELLERS! Selling in 2020? — Selling your firm is complex. ACCOUNTING BIZ BROKERS can make it simple. With over 23 years of combined experience in selling CPA firms, our process is confidential and we work hard to bring you the “win-win” deal you are looking for! Our brokers are all Certified Business Intermediaries (CBI) specializing in the sale of CPA firms. Knowing what your firm is worth is the first step, so CONTACT US TODAY to receive a free market analysis or to start the confidential sales process! Kathy Brents, CPA licensed in AR, CBI (866) 260-2793 office, (501) 514-4928 cell, Kathy@AccountingBizBrokers.com. TAX AND ACCOUNTING PRACTICE FOR SALE — Tax and Accounting Practice for sale in North Phoenix. Gross revenue $160,000. Owner will
help in transition. Good opportunity for young CPA to start or expand a practice. Please contact: llemmon @q.com. Office Space OFFICE SPACE FOR LEASE — Beautiful garden-style office complex in a great office environment located in north Phoenix. Easy access to SR 51 and SR 101 just north of NWC of Tatum and Shea Blvd. Executive office $800. Ample parking, beautiful conference rooms and seminar room. Copier, telephone and internet ready. Includes Receptionist to greet your clients. Contact Clara or Mary at (602) 953-5000.
and opening into courtyard. Available in premiere professional location with great visibility. Access to breakroom & conf. room. Call Ira at (602) 8505101, or e-mail ira@felco.biz.
For more information on classified advertising, go to www.ascpa.com and go to classifieds.
OFFICE SPACE IN CENTRAL PHOENIX (16th Street Corridor) Recently renovated office space approx. 1,150 with separate entrance
Don Famer’s Tax Update Oct. 30, 2020
The Scottsdale Resort at McCormick Ranch or via Webcast Recommended CPE Credit: 8 hours Get the latest on 2020 developments with practical solutions to problems and tax planning opportunities. Join Farmer and your peers for a review of the major developments in federal income taxation for individuals and businesses having the greatest impact on participants, clients and companies. The seminar includes a review of: the latest developments and guidance for important TCJA provisions; SECURE Act provisions first effective in 2020, and other significant 2020 tax legislation. Farmer will also share releases regarding the Taxpayer First Act, proposed regulations for determining when contributions to charitable organizations are deductible as trade or business expenses, new tax cases, rulings and regulations expected to have the most significant impact on individuals and businesses.
Register online at www.ascpa.com/donfarmer20 or by phone at (602) 252-4144 22
In addition to the 200+ page reference manual, you will also take home: • A checklist of developments first effective in 2020 • A checklist of expiring and/or recently expired tax provisions • Selected new or modified federal tax forms for 2020
AZ CPA JULY/AUGUST 2020
Thank You to Our Sponsors: Paychex, Jewish Tuition Organization, CPAcharge, Arizona Community Foundation & Catholic Education Arizona
AZ CPA Quick Quiz
m The Payroll Tax Holiday m Free Airline Tickets m Unrelated Business Tax
You’ve Read It, Now Get Credit Take this quiz on AZ CPA content online or submit this hard copy. Receive a score of 70 percent or more and earn one hour of CPE credit in specialized knowledge. It’s that easy! Fees: Members: $25 Nonmembers: $40 Online Access Go to www.ascpa.com/quickquiz to access links to all active quizzes. Once a quiz is purchased, a link and password will be emailed to you. Your results will be sent immediately after completion, and certificates are emailed within two business days. Hard Copy Please select one answer for each question. Fill out registration/payment information below and mail or fax to the Society office. Quiz results and certificates will be emailed to the address provided on the registration form. *This quiz will be available until July 2022. Please note that users have three attempts to pass the quiz with at least a 70 percent score.
July/August 2020 Issue of AZ CPA* 1. In this month’s Chair’s message, Ginny De Santo talks about: m COVID “Fever” m Zoom Meetings m The Annual Meeting 2. What did the ASCPA Board of Directors do at its last meeting? m Approved the 2020/21 Budget m Moved the Office m Sent a Letter to the Governor 3. What buzz word recently appeared during COVID-19? m Career Pivoting m Virtual Harassment m Covidity 4. The Leadership & Growth Alliance program is for people who: m Want to learn how to be a mentor m Are in the first 10 years of their career m Want to gain weight
5. The CARES Act created the Paycheck Protection Program (PPP), which offers a forgivable loan that organizations with 500 or fewer employees can use to help with payroll costs. m True m False
7. What occupation or profession is experiencing the highest rate of suicide deaths? m Dental Services m CPAs m Construction and Extraction 8. EAP stands for: m Equal Amendment Policy m Employee Assistance Program m Employee Activity Program 9. Of the mergers and aquisitions that fail during integration, 70-90% of them are due to: m Monetary and Funding Problems m Unforseen Legal Issues m Lack of Attention to Human Capital and Cultural Fit 10. According to author Joel Strom, will COVID-19 offer more or less opportunities for mergers/ acquisitions? m More m Less
6. Once a PPP loan is forgiven, other provisional relief under the CARES Act is no longer available, such as:
Quick Quiz Registration Name: ____________________________________________________ Email:_____________________________________________________ Telephone: _________________________________________________
Payment
m Member: $25 m Nonmember: $40 Checks: Please make payable to: The Arizona Society of CPAs Credit Card:
m Visa m MasterCard m American Express
Credit Card #: _______________________________________________ Expiration Date: _____________________________________________ Name on Card. _____________________________________________ Mail to: ASCPA, 4801 E. Washington St. Suite 180, Phoenix, AZ 85034-2040; fax to (602) 252-1511 scan and send to ASCPACPE@ascpa.com.
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AZ CPA JULY/AUGUST 2020
