Insight Magazine - Summer 2024 /// Illinois CPA Society

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Exploring the issues that shape today’s business

Merger Guidance for CPA Firms

Combating the Talent Crisis

Transforming Apologies Into Action

CPA Exam Overhaul

Creating a Culture of Engagement

Tips for Preventing Fraud And More!

ceooutlook

Geoffrey Brown, CAE President and CEO, Illinois CPA Society

We Can Fix the CPA Pipeline

Armed with new insights, I’m confident stakeholders can align on how to restore the talent pipeline and chart a path forward for the next generation of CPAs.

For several years, the accounting and finance profession has been appropriately concerned about the future of its talent pipeline. Those feelings have driven investments in research and a muchneeded, ecosystem-wide dialogue on how to address the impact on the supply and demand of certified public accountants (CPAs).

We’re at a crossroads. Demand for accounting and finance professionals (particularly CPAs) is strong—it’s time we align on how to restore the talent pipeline and chart the path forward. No single solution alone will solve the CPA profession’s human capital challenges, which means we must think big and commit to taking the steps that’ll help turn things around. The colleges and universities that educate the next generation of accounting and finance professionals, the firms and businesses that employ them, and the professional organizations that support their ongoing development all have important roles in building a robust, sustainable talent pipeline.

I’m encouraged by the profession’s focus on identifying the approaches necessary to help stem the tide and, ultimately, right the negative talent trend we’re collectively facing. For example, stakeholders are working to reimagine the experience of new accounting students and young professionals, create more flexibility and accessibility in CPA licensure pathways and, most importantly, raise awareness of the wide range of career opportunities in the accounting profession to inspire young people to pursue them.

As you can imagine, the next generation has thoughts that we must consider as we look to the future. In reviewing our latest research findings from the Insight Special Feature, “Re-Decoding the Decline: An Updated CPA Pipeline Report,” we know many of them see professional and reputational value in the CPA credential, but they also want to do relevant work that allows them to leverage the skills they’re bringing to the table.

I believe the future of the CPA profession rests squarely on the shoulders of today’s professionals. We have a responsibility to help steward the next generation’s experience:

• We need to showcase that the lifetime benefits of the CPA credential are worth the time to acquire it.

• We need to listen and be responsive to the next generation’s needs by valuing their time and helping them make the most of it.

• We need to use the insights gleaned from all the recent research available to influence resources and support for aspiring CPAs.

Armed with new insight and a commitment to the future, I’m confident that our professional community will be able to think big about the CPA credential’s long-term relevance and value and, ultimately, drive change that boosts the talent pipeline.

ILLINOIS CPA SOCIETY

550 W. Jackson Boulevard, Suite 900, Chicago, IL 60661 www.icpas.org

Publisher | President and CEO

Geoffrey Brown, CAE

Editor

Derrick Lilly

Assistant Editor

Amy Sanchez

Senior

Creative Director

Gene Levitan

Copy Editor

Mari Watts

Photography

Derrick Lilly | iStock

Circulation

John McQuillan

ICPAS OFFICERS

Chairperson

Deborah K. Rood, CPA, MST | CNA Insurance

Vice Chairperson

Brian J. Blaha, CPA | Wipfli LLP

Secretary

Mark W. Wolfgram, CPA, MST | Bel Brands USA Inc.

Treasurer

Jennifer L. Cavanaugh, CPA | Grant Thornton US

Immediate Past Chairperson

Jonathan W. Hauser, CPA | KPMG LLP

ICPAS BOARD OF DIRECTORS

Pedro A. Diaz de Leon, CPA, CFE, CIA | Sikich LLP

Kimi L. Ellen, CPA | Benford Brown & Associates LLC

Lindy R. Ellis, CPA | Ernst & Young LLP

Jennifer L. Goettler, CPA, CFE | Sikich LLP

Monica N. Harrison, CPA | Tinuiti

Joshua Herbold, Ph.D., CPA | University of Illinois

David W. Knutsen, Ph.D., CPA, CGMA, CFE | Outreach

Enrique Lopez, CPA | Lopez & Company CPAs Ltd.

Kimberly D. Meyer, CPA | Meyer & Associates CPA LLC

Matthew D. Panzica, CPA | BDO USA PC

Leilani N. Rodrigo, CPA, CGMA | Galleros Robinson CPAs LLP

Richard C. Tarapchak, CPA | Verano Holdings Corp.

Andrea Wright, CPA | Johnson Lambert LLP

Stephanie M. Zaleski-Braatz, CPA | ORBA

BACK ISSUES + REPRINTS

Back issues may be available. Articles may be reproduced with permission. Please send requests to lillyd@icpas.org.

ADVERTISING

Want to reach 20,700+ accounting and finance professionals? Advertising in Insight and with the Illinois CPA Society gives you access to Illinois’ largest financial community. Contact Mike Walker at mike@rwwcompany.com.

Insight is the magazine of the Illinois CPA Society. Statements or articles of opinion appearing in Insight are not necessarily the views of the Illinois CPA Society. The materials and information contained within Insight are offered as information only and not as practice, financial, accounting, legal or other professional advice. Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication. It is Insight’s policy not to knowingly accept advertising that discriminates on the basis of race, religion, sex, age or origin. The Illinois CPA Society reserves the right to reject paid advertising that does not meet Insight’s qualifications or that may detract from its professional and ethical standards. The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within Insight, and makes no representation or warranties about the products or services they may provide or their accuracy or claims. The Illinois CPA Society does not guarantee delivery dates for Insight. The Society disclaims all warranties, express or implied, and assumes no responsibility whatsoever for damages incurred as a result of delays in delivering Insight. Insight (ISSN1053-8542) is published four times a year, in spring, summer, fall, and winter, by the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA, 312.993.0407. Copyright © 2024. No part of the contents may be reproduced by any means without the written consent of Insight. Send requests to the address above. Periodicals postage paid at Chicago, IL and at additional mailing offices. POSTMASTER: Send address changes to: Insight, Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA.

capitolreport

Martin Green, ESQ
Senior Vice President and Legislative Counsel, Illinois CPA Society @GreenMarty

Lights, Camera, Fiscal Action Ahead

With the latest state operating budget over the finish line, the stage is now set for a challenging 2026 fiscal year.

Four days beyond its self-imposed May 24 deadline, the Illinois General Assembly finally concluded the spring 2024 legislative session. During the process, legislative leaders built in seven budget contingency days wherein the threshold for passage of legislation changed from majority vote to extraordinary vote.

From January to May, the House and Senate passed a total of 466 bills, with 288 of them being passed during the last two weeks of session. Included in the passed legislation is a $52 billion state operating budget for fiscal year (FY) 2025—the largest budget in the state’s history.

Of course, the conclusion of the spring session wasn’t without hiccups. While many members of the super Democratic majority were willing to vote for the appropriations bill (Senate Bill [SB] 251), budget implementation bill (House Bill [HB] 4959), tax omnibus bill (HB 3144), and bonding authority bill (HB 4582), it took the House three separate votes and suspending its own rules to finally pass the revenue omnibus bill (HB 4951), which included $750 million in business tax increases to fund the increased spending levels.

Despite these hurdles, the Illinois CPA Society (ICPAS) fared well in executing its advocacy initiatives during the spring session. Working with State Treasurer Mike Frerichs, we were successful in passing SB 3343, which amends the Revised Uniform Unclaimed Property Act. Of particular interest to CPAs and CPA firms, the private investigator licensure requirement for entities that perform recovery services to business clients was remedied. This legacy requirement was an oversight in certain carryover provisions of the Unclaimed Property Act. With the passage of this provision, we’ve written to Gov. J.B. Pritzker, asking him to sign the legislation. Since the measure passed unanimously in both chambers, we anticipate the governor will sign the bill. Once signed, we’ll work with Frerichs’ staff in drafting administrative rules to implement the statutory changes.

In addition, we were also successful in working with other business association stakeholders in mitigating numerous bills that enhanced workplace compliance on employers and businesses (one of the continued themes of the 2024 spring session).

Stage Set for 2026 Fiscal Challenges

Of course, now with the FY 2025 state operating budget over the finish line, the stage is set for an acutely challenging FY 2026 budget. First, revenue reports indicate revenues are tightening. Second, the General Assembly has continued COVID-era programs without COVID-era federal funding. Third, despite warnings from House

Appropriations Committee Chair Fred Crespo, progressives have embarked upon the practice of passing spending measures “subject to appropriation,” which means that new programs are being introduced and passed without an identified revenue stream. Ultimately, either the money to fund the new program is taken out of the General Revenue Fund to pay for the program or the program goes unfunded (this, of course, would be tantamount to “robbing Peter to pay Paul”).

Continuing the Fight on Professional Services Taxes

Along with the fiscal challenges identified above, Chicago Mayor Brandon Johnson and members of his administration have been openly talking to audiences about a city tax on professional services to broaden the city’s tax base to provide funding for various programs and operations. However, at this time, it’s uncertain if city officials and others are aware that the city would need state legislative authority to impose a city tax on professional services. Therefore, I suspect Johnson’s hand will be played out in this area.

Separate and apart from Johnson’s tax push, a professional services tax to fund the public transit crisis is also emerging. Legislation has been introduced to create a Metropolitan Mobility Authority, which consolidates the Chicago Transit Authority, Pace Suburban Bus, Metra, and the Regional Transportation Authority into one centralized governing authority. Included in the legislative package is $1.5 billion from the state’s General Revenue Fund to support Chicagoland’s public transportation. Over the summer months, legislative sponsors will be holding public hearings on this matter.

For many reasons, taxing professional services belies good tax policy and threatens the already struggling economic vitality of Chicago. Therefore, ICPAS has always been poised to oppose a tax on professional services on behalf of the CPA profession. In 2017, we worked with the Illinois General Assembly on the Senate’s grand bargain, which included an expanded tax base but not on professional services. In 2019, along with a broad-based coalition, we worked with the General Assembly’s legislative leaders in response to former Chicago Mayor Lori Lightfoot’s campaign proposal to tax “large law firms and international accounting firms.” Fortunately, no legislative proposal ever surfaced from the Lightfoot administration.

In the coming weeks, proposals, if any, will likely play out on this matter, and we’re prepared to respond on multiple levels. We’ll keep you informed on proposals and may call upon you to reach out to your elected officials to oppose any legislative proposal to tax professional services.

CONGRATULATIONS 2024 Award Winners

The Illinois CPA Society is proud to recognize these individuals on their accomplishments.

Lifetime Achievement Award

Larry J. Wolfe, CPA | Owner, Larry J. Wolfe Ltd.

Lester H. Mckeever Jr. Advancing Diversity Awards

EMERGING LEADER

Jonathan C. Acevedo, CPA | Manager, Wipfli LLP

EXPERIENCED LEADER

Rose Ann Abraham, CPA | Partner, Baker Tilly US LLP

Women to Watch Awards

EMERGING LEADERS

Amy Sexton | Manager, Wipfli LLP

Kelsey Straub, CPA | Audit Senior Manager, Deloitte & Touche LLP

EXPERIENCED LEADERS

Anna C. Gomez, CPA | Global Chief Financial Officer and Partner, Mischief USA and No Fixed Address Inc.

Diane L. Yetter, CPA | President and Founder, Yetter Consulting Services Inc. and Sales Tax Institute

Outstanding Educator Awards

Susan McCarthy, CPA | Clinical Associate Professor, Arrupe College of Loyola University Chicago

Kim I. Mendoza, Ph.D. | Assistant Professor, University of Illinois

Iyad Rock | Assistant Professor, Lewis University

Joshua D. Lance Young Professionals Leadership Award

Matthew C. Pelton, CPA | Audit & Assurance Managing Director, Deloitte & Touche LLP

Time and Talent Volunteer Service Award

Topel Forman LLC

Excel Awards (2023)

GOLD MEDAL

Cal B. Granite | RSM US LLP | University of Illinois

SILVER MEDALS

Jared D. Dunnet | Shore Capital Partners | Indiana University

Tyler J. Thimjon | Ernst & Young LLP | Indiana University

BRONZE MEDALS

Scott Klamm | Kuhn & Company CPAs | Northeastern Illinois University

Collin C. Martin | Gorenz and Associates Ltd. | Bradley University

Distinguished Service Awards

Tony Boras, CPA Crowe LLP

Governmental Report Review Committee

Elizabeth D. Buffardi, CPA, CFP Crescendo Financial Planners Media Expert

Amy M. Chamoun, CPA

Cherry Bekaert Advisory LLC

Taxation International Committee

Michael Chandler II, CPA

George Bagley & Company LLC

Taxation Individual Committee

Jennifer M. Culotta, CPA Plante Moran PLLC Not-for-Profit Organizations Committee

John F. Cutrera, CPA Glencoe Park District Governmental Report Review Committee

Brent DeMay, CPA, CGMA Sikich LLP

Employee Benefits Committee

Erik De Vries, CPA CohnReznick LLP

Audit & Assurance Services Committee

Anthony C. Ferreri, CPA Allegheny Technologies Inc. Accounting Principles Committee

Melissa A. Juntunen, CPA Lauterbach & Amen LLP

Governmental Report Review Committee

Kimberly D. Meyer, CPA Meyer & Associates CPA LLC

Peer Review Report Acceptance Committee

Lauren Pflugradt

John Kasperek Company Inc.

Governmental Report Review Committee

Michael Ploskonka, CPA, CFE Selden Fox Ltd.

Audit & Assurance Services Committee

Amber Sarb, CPA

RSM US LLP

Audit & Assurance Services Committee

STUDENTS & YOUNG PROFESSIONALS

New CPA Exam Brings Changes and Opportunities

In January 2024, a major CPA exam overhaul was introduced, offering more options and choices for candidates seeking to earn the coveted credential.

THE CPA EXAM has been an integral part of the accounting profession since the state of New York held its first exam in 1896. In recent years, in an effort to keep up with technology and address a shrinking talent pipeline, the CPA exam has gone through a myriad of changes.

In 2017, for example, the content and structure shifted when a problem-solving component was added, emphasizing the application of skills over rote memory, and the testing window was expanded to 18 months.

In January 2024, the AICPA rolled out its latest revision, “CPA Evolution,” which has been called “the most important overhaul in the exam’s 100-year history.”

Not surprisingly, these changes have raised some challenges for aspiring CPAs and those that help them along the way. Here, exam mentors and a recent CPA recipient offer guidance on what to expect from the new exam, tips for how to approach it, and, more importantly, why the changes offer new opportunities.

WHAT’S CHANGED?

While the new exam rolls out some changes, one aspect of the exam has remained constant: It’s still a four-part test, and candidates have four hours to complete each part.

Additionally, the CPA exam continues to be comprised of three mandatory core sections: auditing and attestation, financial accounting and reporting, and taxation and regulation. However, the fourth section offers a selection of disciplines candidates can choose from, including business analysis and reporting, information systems and controls, and tax compliance and planning.

Lastly, the testing window to pass all four sections of the exam has expanded from 18 months to 30 months from the score release date of a candidate’s first passed exam section.

CHANGES BRING OPPORTUNITY

Matthew Hutchens, CPA, JD, lecturer of accounting in the University of Illinois Urbana-Champaign’s Gies College of Business, is optimistic about the new exam. He believes lengthening the passing window to 30 months may benefit CPA candidates who are in the workforce and may need extra time for juggling work and studying. He also says giving prospective CPAs the opportunity to take the fourth test in the discipline of their choice may help them align the exam with their career interests and goals.

“You’re more likely to have a better exam experience if that fourth test is on something that may be relevant to what you’re actually going to be doing in your workday,” he says. “I think these two changes are positive.”

Hutchens also says the year-round testing process makes it more convenient for candidates navigating the process versus the old way: “Remember, in the past, CPA candidates had to take all four tests over two days, and the retake rules weren’t as generous. It’s never been more convenient to take the exam as it is today.”

TIPS FOR NAVIGATING THE EXAM

Osvaldo Ruiz, now a CPA and advisory analyst at Deloitte in Chicago, says the path to success is paved with hard work and discipline. A few years ago, while still in college, Ruiz failed his first CPA exam section. Rather than giving up, he used that failure to learn how to persevere and succeed.

Ruiz suggests treating the CPA exam like a job. “I took a two-month study break and started the exam process during the summer when I had fewer distractions,” he says. “I went through the entire exam, sitting for one part of it every four or five weeks—I don’t know if I would take such an extreme approach again, but at the time, that strategy worked for me.”

To stay on track and keep motivated, Ruiz set both short-term and long-term goals. He also minimized his distractions by deleting his social media apps and keeping his phone out of sight.

Along with minimizing distractions, he encourages aspiring CPAs to prioritize self-care, including getting enough sleep and eating healthy food.

“I recommend finding a way to exercise, take walks, lift weights, or do something active,” he advises. “Keeping yourself mentally and physically fit is essential on this journey—a healthy mind and strong body will alleviate stress when the going gets tough because everyone has bad days and studying doesn’t always go as planned.”

Ruiz adds: “Remember, this is a marathon and not a sprint, and you only fail if you give up on the CPA journey altogether. This isn’t a matter of ‘if’ you’re going to pass the exam, but ‘when’ you’re going to pass it.”

Hutchens encourages students to maintain perspective, stay optimistic, and focus on the new exam’s positive aspects.

“While it’s true that many CPA candidates fail at least one section during the course of the exam, it’s available to retake at any time, and you can do it on your own schedule,” he says. “And remember, once you pass all four sections and are a licensed CPA, the number of times you took the exam becomes irrelevant.”

Hutchens recommends that prospective CPAs tackle the three mandatory core components of the exam before choosing their elective discipline. Also, when the time comes to choose that final test, there are several factors to keep in mind.

“We generally tell students to wait to decide until their first scores come out—with a 30-month testing window, there’s still plenty of time for making adjustments,” he says. “When it’s time for them to select a discipline, I recommend students take the section that aligns with what they want to do in their careers.”

Additionally, it’s important for prospective CPAs to remember that the marketplace is saturated with a variety of study guides, materials, support groups, and other resources to help them successfully pass the exam. For example, professional organizations, like the National Association of State Boards of Accountancy, AICPA, and the Illinois CPA Society, offer resources to help prospective CPAs navigate the process of applying and sitting for the exam, including guidelines for scheduling the exam, what to expect on exam day, receiving the score, and what to do if a section isn’t passed.

Universities may also offer similar resources. At the University of Illinois Urbana-Champaign, Hutchens offers Zoom sessions, which give exam candidates an opportunity to seek advice.

“Our advisers do a great job of helping students meet the educational requirements, and the Illinois Board of Examiners also has a great website and strives to make the process as smooth as possible,” Hutchens says. “At least once a year, they come to our school and talk to our students.”

REMEMBER YOUR WHY

For many who’ve already earned their credentials and for others embarking on their journey, the many hours of studying and hard work are worth it when they put those three letters next to their name.

Andrew Guerrero, CPA, senior manager at Adelfia LLC, is committed to mentoring students and young accountants, and his firm recently launched a mentoring initiative.

“Our firm requires employees to progress in the profession,” Guerrero explains. “Part of our mentoring role is guiding new accountants, some fresh out of college, toward earning their professional credentials.”

Some of the firm’s young professionals have started testing on the new exam. Others were midway through the old exam but are now rolling over into the new one.

The key to success, Guerrero says, is persistence, determination, and remembering why you’re committed to taking the exam in the first place.

“This is a time for self-discovery and self-motivation,” he says. “The CPA exam isn’t for the faint of heart, but it teaches you who you are as a person, because when you’re in the exam room, no one will be there to help you—success must come from within you.”

For Ruiz, who struggled before devoting months of his life to nothing but passing the exam, success was sweet. And when he closed the books on his fourth test, he ended his journey on a high note.

“I have both a bachelor’s and master’s degree, but I think getting my CPA credential trumps everything,” he says. “It’s the golden ticket.”

Teri Saylor is a freelance business and lifestyles writer in Raleigh, N.C.

FRAUD & FORENSICS

Vulnerable Targets: How Not-for-Profits Can Prevent Money Laundering and Fraud

With fewer resources and oversight, not-for-profits can be more susceptible to financial wrongdoing. Here, three experts discuss how accounting and finance teams can prevent these attacks.

THE RISK OF FRAUD is a serious concern for all types of businesses, but it can be particularly crippling to a not-for-profit (NFP) organization for which a damaged reputation can have devastating consequences.

To avoid unwanted publicity, NFPs may be reluctant to report fraudulent acts when they occur, making the true scope of the problem ultimately unknowable. It’s estimated, however, that organizations in all industries throughout the world lose approximately 5% of revenue to fraud each year, according to the Association of Certified Fraud Examiners’ (ACFE’s) most recent global study, “Occupational Fraud 2024: A Report to the Nations.”

Brad Sargent, CPA/ABV/CFF, CFE, CFS, CIRA, CCA, CRFAC, FABFA, founder and managing member of The Sargent Consulting Group LLC—a Mokena, Ill.-based firm dedicated to business valuations,

economic damage calculations, expert witness services, financial investigations, and forensic accounting—says 5% is a lot to lose for NFPs. “If something like this happens, it can literally create an existential crisis for an organization,” Sargent stresses. “The entities themselves don’t want their donor base to know because they’ll stop donating. There’s a real incentive in the NFP world to sweep these things under the rug.”

WHY NFPS ARE VULNERABLE TARGETS

According to Sargent, NFPs are more susceptible to fraud for two main reasons.

First, NFPs are more susceptible to fraud because their budgets are usually tight—they don’t allocate funds for robust accounting teams.

“These are entities that are intentionally being run not to make money, so they don’t have proverbial deep pockets like a for-profit business often does in comparison,” Sargent explains. “Being vigilant and having procedures in place costs money that NFPs just don’t have, so they’re running very lean.”

Second, everyone at an NFP is working for the “common good,” so there’s less suspicion of bad actors in these settings.

“Typically, the people that manage NFPs are much more focused on fundraising revenue to do better for the community. They’re not thinking, ‘We need more accountants to watch over our books and records because somebody could steal from us,’” Sargent says.

Unfortunately, this kind of mindset could put an organization at risk. According to the ACFE’s 2024 report, nonprofits suffered a median loss of $76,000 per fraud scheme. The study broke down occupational fraud schemes into three categories: statement fraud, corruption, and asset misappropriation (the most common type). Additionally, more than half of all cases came from the following five departments: operations (14%), accounting (12%), sales (12%), customer service (9%), and executive/upper management (9%).

“The one asset that people steal and embezzle is cash,” Sargent notes. In his experience, he’s seen this among a large number of cases involving religious organizations, such as churches.

“People steal from them over and over again because who would steal from a church?” he says. “Well, if you’re the controller or the financial person at a church and there’s money there, and you have a situation where you need that money, sometimes you give in to the temptation.”

Robert Nordlander, CPA, CFE, sole shareholder of Nordlander CPA PLLC in North Carolina, says other types of fraud in the NFP sector typically involve credit card abuse, as well as check or payment tampering. Federal crimes, such as money laundering, are less common.

HOW TO SPOT THE RED FLAGS

Nordlander, who spent more than 20 years chasing tax evaders and money launderers around the world as a special agent with the IRS Criminal Investigation Division, advises CPAs to be aware of what constitutes money laundering.

In his online presentation, “Money Laundering 101 for CPAs,” Nordlander highlights the three prongs of the money laundering federal crime statute (18 U.S.C. 1956), including concealment, spending, and promotion of illegal activity. Nordlander stresses that money launderers often try to conceal the true nature of their activities by using complex transactions, multiple accounts, and shell companies.

He cautions that all accounting and finance professionals should be suspicious of clients—or colleagues—who aren’t forthcoming with information or who use complicated financial structures that make it difficult to trace the source and destination of funds.

“If you know what a straight stick looks like, everything else is crooked,” Nordlander says. “If you’re a CPA, particularly an auditor, and you start seeing weird disbursements that aren’t related to the business, you have to perk your ears up when there’s a bizarre expenditure of the money.”

Nordlander urges CPAs to be on the lookout for these three red flags:

1. Questionable transactions that aren’t conducive to the business.

2. Missing books and records.

3. Suspicious customers or suppliers.

“If you know what the industry is supposed to look like as a good auditor, anything that’s not normal is abnormal,” Nordlander warns. “Don’t ignore the abnormal—if you see something, look into it and ask more questions.”

WHAT CAN CPAS DO TO PREVENT FRAUD?

Dean Polales, JD, partner at Polales, Horton & Leonardi LLP in Chicago, says it’s crucial for NFP management to be aware of potential issues and work with their CPAs on how to do appropriate authentication of the money coming in and going out.

“NFPs have to have good compliance programs in effect, with respect to how they fundraise, how they value in-kind donations, and whether they involve themselves in valuing the contributions they receive,” Polales stresses. “Their accounting practices should be very accurate, involving quality individuals who understand the rules and follow them.”

But that’s not always the reality. Polales, who has 35 years of experience as a trial lawyer, pointed to a famous case involving a former comptroller and treasurer of Dixon, Ill. In 2013, Rita Crundwell was sentenced to 19 years in prison for stealing $53.7 million from the city over the course of two decades.

“This happened because there was no real compliance and audit function, and when the FBI got onto it, they found many years of Crundwell stealing money, buying horses, and living the high life— nobody ever looked at it,” he says. “Becoming a victim of a crime depends on your internal processes and procedures, the audit function, and accurate accounting.”

Crundwell was eventually caught when her substitute found her secret account while she was on an extended vacation. According to Polales, this is actually a creative way for organizations to protect themselves—making all employees take mandatory twoweek vacations.

“If something doesn’t balance, somebody else in the organization is going to notice and report it,” he says. “A lot of people get caught that way.”

How else do employees get caught? According to the ACFE’s 2024 report, tips were the most common way fraud was exposed. Other common detection methods reported included internal audit (14%) and management review (13%).

“A lot of NFPs run on trust and their mission,” Polales says. “Since most of the funds go to their mission, they have to realize that their mission must include the protection of the organization that’s carrying out the mission—and there are costs associated with that in terms of time, effort, and money.”

Since most fraud is an internal problem, the best way to combat it is by implementing rigorous hiring and onboarding processes, Sargent suggests. This can be accomplished by performing background checks on prospective new employees, providing in-depth job applications, calling references, and running credit checks.

“If you show somebody who’s thinking about joining your organization that you’re going to investigate their resume and their background thoroughly, you’re sending them the message that, ‘Hey, if you come on board here, we’re going to keep an eye on you,’” Sargent stresses. “Even if you really don’t or really can’t, at least in the onboarding process, you can send the deterring message that you’re diligent, detail-oriented, and care about your assets. It’s a low-cost way for any entity to help prevent fraud.”

Kasia White is a freelance writer who specializes in profiling small businesses, covering the musical products industry, and interviewing leaders of globally renowned companies.

Tax Transparency: Curbing Income Shifting

New regulations in Europe are aiming to prevent income shifting—a common tax strategy used by many large companies. Will this impact CPAs and other accounting professionals in the United States?

EU ACTION

IN LATE 2023, the IRS took a big step in what some sources are calling the “largest audit in its history,” involving potential back taxes owed by Microsoft. If found guilty, Microsoft could end up owing nearly $29 billion in back taxes, plus up to $10 billion in interest and penalties.

According to information released by Microsoft, “the main disagreement is the way the corporation allocated profits among countries and jurisdictions. This is commonly referred to as transfer pricing, and the IRS has established regulations that allow companies to use a specific arrangement for this practice, also known as cost-sharing.” The transfer pricing used by Microsoft meant that more income was reported by subsidiaries in jurisdictions with lower income taxes than the United States, with a corresponding decrease in income that was reported in the U.S. In Microsoft’s view, this income shifting complies with IRS regulations—of course, the IRS disagrees.

Many companies, including those outside the U.S., use various legal tax arrangements to shift income. However, a recent directive in the European Union (EU) aims to combat and prevent these practices. Directive 2011/16/EU on administrative cooperation, commonly known as DAC6, was approved in 2018 and requires third-party reporting on cross-border tax arrangements that meet certain conditions. “Third-party reporting” means that entities other than the taxpayer must report information directly to tax authorities. Of course, this isn’t new: Income tax reporting in the U.S. includes Forms W2 and 1099, where employers, banks, and others report information directly to the IRS, and the Foreign Account Tax Compliance Act also requires foreign financial institutions to give information to the IRS. However, the scope of DAC6 appears to be much broader.

Under DAC6, third-party reporters include external tax advisors, lawyers, banks, accountants, and anyone who “designs, markets, organizes or makes available for implementation or manages the implementation of a reportable cross-border arrangement.” DAC6 also calls for automatic sharing of reported information between EU member states.

Importantly, the intent of DAC6 is to curb the use of aggressive tax strategies that shift income to low-tax-rate jurisdictions. New research from Anh Persson and Michelle Hutchens, accounting faculty at the University of Illinois Urbana-Champaign, and their colleague Alexander Edwards at the University of Toronto, examined whether DAC6 has had this intended effect.

In their recent publication, “Third-Party Reporting and Cross-Border Tax Planning,” they compare affiliates of large multinational enterprises (MNEs) that have at least one subsidiary in an EU member state to affiliates of similar MNEs that don’t have a presence in any EU member state. “In broad terms, we’re looking at how tax transparency affects the tax avoidance behavior of multinational companies. Transparency has been brought up as one of the tools to mitigate aggressive income shifting, and thirdparty reporting is one type of tax transparency,” Persson says.

Their publication notes that “unlike prior corporate transparency initiatives, which put the reporting responsibility primarily on the taxpayers, this directive puts the initial reporting responsibility on the third-party intermediaries who are involved in the reportable arrangement at any stage during the planning and execution process.” In a recent interview, Hutchens adds: “Under this regime, reporting occurs at the first stage of implementation, before these transactions are even fully implemented. So, tax accountants and tax lawyers have to report on plans for transactions that might not even have happened yet.”

DOES THIRD-PARTY REPORTING CURB ABUSE?

To answer whether third-party reporting curbs income shifting, the researchers compared pre-tax income and other accounting measures for companies affected by DAC6 to similar companies that weren’t impacted by DAC6 (the control group), while controlling for other factors known to impact results (e.g., company size and local gross domestic product). As Persson explains: “If you have one country with a really high tax rate and another country with a really low tax rate, with income shifting you see abnormally higher pre-tax profits reported by companies in the low-tax-rate country. You can assess the correlation between these things over time and across countries to get a sense of the income shifting. We also look at the effective tax rates, which is a rough way to capture tax burden.”

In the first part of their analysis, the researchers found a significant decrease in income shifting among companies impacted by DAC6, translating to a 2.2% to 3.4% higher reported pre-tax book income. Affected companies also have higher effective tax rates (ETRs) after DAC6—anywhere from 0.9% to 2.6% higher, depending on whether you look at book or cash ETRs, or one- or three-year ETRs. Compared to other research on income shifting, the researchers refer to this as a “significant but more modest” response.

Therefore, it appears that the increased transparency from DAC6 has reduced income shifting. However, while all member states in the EU have agreed to DAC6, not all of them have implemented it in the same way, as EU member states have flexibility in how DAC6 is encoded in their local laws. Although DAC6 says that penalties for third parties who fail to report should be “effective, proportionate, and dissuasive,” specific penalties vary from country to country. For example, in Germany, the maximum penalty is 25,000 euros, while in the Netherlands it’s nearly 35 times higher at 870,000 euros. One other large difference across countries is the legal protections extended to third-party reporters. For example, similar to the typical lawyer-client privilege, some, but not

all, EU countries have extended legal privilege to tax advisors other than tax lawyers when implementing DAC6.

In addition to their main conclusion that the third-party reporting required by DAC6 decreased income shifting, the researchers also examined how the differences in country-level implementation of DAC6 impacted this conclusion. “You do see differences,” Hutchens says. “After DAC6, income shifting decreases, and it decreases more where we expect it to, in instances where the penalties are higher and where there aren’t generous legal privileges for the third parties.”

A WARNING TO AMERICAN CPAS

For certified public accountants (CPAs) and other accounting professionals in the U.S., these findings could influence how crossborder transactions are structured and reported. The research suggests a shift toward greater transparency in cross-border tax planning, leading to potential changes in how tax accountants advise on international tax strategies and structure transactions to comply with an increasingly stringent global regulatory environment.

Hutchens stresses that although DAC6 is a big deal in Europe, it’s also important for accountants in the U.S. to take note. For example, the Big Four firms have already highlighted and discussed the directive with their boards. Additionally, other countries are looking to see whether DAC6 succeeds, and if so, will likely adopt similar legislation.

According to Persson, transparency in tax reporting is only going to expand with time: “For CPAs, the scope of work is going to increase with respect to reporting and transparency. And this information is being shared across tax authorities and across countries, so CPAs will also have to consider the risks that they’re willing to tolerate under these new reporting regimes.”

Joshua Herbold, Ph.D., CPA, is a teaching professor of accountancy and associate head in the Gies College of Business at the University of Illinois Urbana-Champaign and sits on the Illinois CPA Society Board of Directors.

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Creating a Culture of Engagement

With more workers feeling detached from their employers, some accounting firm leaders say building a strong work culture is the key to engaging and retaining top talent.

ON ANY GIVEN WORKDAY, just 33% of employees are engaged in their work—a decline from 2020’s engagement rate of 36%, according to 2023 survey data from Gallup. At the other end of the scale, 17% of the United States’ workforce is actively disengaged.

“In 2023, employees in the U.S. continued to feel more detached from their employers, with less clear expectations, lower levels of satisfaction with their organization, and less connection to its mission or purpose, than they did four years ago,” a 2024 Gallup Workplace article points out. “They are also less likely to feel someone at work cares about them as a person.”

These are ominous indicators for the accounting profession, an industry where attracting and hiring skilled labor is getting harder to come by and even more difficult to retain. Add in the fact

that younger generations of workers are after more than just big paychecks (think work-life balance, career advancement, purpose, diversity, etc.), the responsibility for increasing employee engagement becomes a tall order for organizational leaders. In response, many accounting and finance leaders are focusing more of their efforts on building corporate cultures that retain, nurture, and engage employees.

CULTURE’S IMPACT ON RETENTION

At Lance CPA Group, building a culture of “care and relationships” was always a top priority of its founding partner, Joshua Lance, CPA, CGMA, who passed away in 2023 following a battle with cancer. Today, this priority continues to carry on at the firm.

Samantha Aycock, the firm’s co-owner and director of strategy and growth, says although the team is 100% remote, the staff still makes time to connect through weekly group check-in calls and, when needed, sets up quarterly in-person workdays. Most recently, the

firm’s team members met at a local library for four hours and then grabbed lunch afterwards.

“There was a lot of teamwork and collaboration happening in the library that day,” Aycock recalls, who also got problem-solving help from an employee during that in-person session. “We laughed so much at that meeting that my face hurt after work.” She sees those bonds as one of the firm’s biggest strengths, and says engagement and retention really comes down to cultivating strong relationships— right down to the one-on-one time that she schedules with both direct and indirect reports.

Aycock also stresses that employee retention impacts client retention, as many of the firm’s clients prefer and enjoy working with the same CPAs and support staff on a regular basis: “When firms are plagued by ‘revolving door’ syndrome, it’s nearly impossible to form those tight client bonds.”

WHAT EMPLOYEES WANT

With more than 11,000 baby boomers hitting traditional retirement age every day between now and 2027, organizations across all business sectors are looking for new ways to find, recruit, and retain skilled labor—not only to replace retiring associates, but to also support their own growth and expansion.

Kristin McGill, CAE, vice president of member experience and engagement at the Illinois CPA Society (ICPAS), says not a day goes by that accounting firms aren’t thinking about retaining their best and brightest: “They know that employee turnover is happening and that keeps preventing burnout top of mind for the profession.”

Citing ICPAS’ research findings from the Insight Special Feature, “Righting Retention,” McGill says too many hours, burnout, and a lack of work-life balance are among the top reasons why accounting and finance professionals voluntarily quit their jobs. This reality opens the door for accounting firms to react and make change if they value their talent, especially if they don’t want to lose talent to competing firms that may be known for putting their employees first and having initiatives in place to improve job satisfaction.

It seems career advancement opportunities are another area where firms could be doing better, particularly since two-thirds of accounting professionals are demanding them. “It’s not just about becoming a partner,” McGill explains. “Individuals want to know what internal opportunities relevant to them exist and how they can attain them.”

Likewise, mentorship is another advancement area that associates are interested in, but many employers haven’t quite mastered it yet. “Employees are very interested in mentoring opportunities, yet roughly only half of the employers surveyed either don’t or don’t know if they communicate clearly defined advancement paths for employees, and less than half don’t or don’t know if they offer mentoring opportunities—this clearly indicates a communication issue,” McGill says.

Similarly, ICPAS found that one-third of the accounting and finance professionals they surveyed have never been asked what they value about working for a particular company, and nearly an equal percentage of employers never ask what their employees want.

“We hear a lot about ‘exit interviews,’ but by then it’s too late,” McGill says, who suggests using regular pulse or engagement surveys to open the lines of communication between leaders, managers, and other staff. These simple steps can be especially impactful with

younger associates who are dividing their time between work, family, passion projects, volunteerism, and community outreach.

Better understanding employees’ goals—and then finding ways to support them—can help position CPA firms as employers of choice for both millennial and Gen Z job candidates. “It’s becoming imperative for employers to learn what resonates with their employees and then tailor some internal opportunities to meet them where they’re at,” McGill suggests.

Sirmara Campbell, chief human resources officer at LaSalle Network, is well aware of the high cost of employee turnover, particularly when those that depart are high-value workers who then must be replaced. Unlike the roughly 50% of CPA firms that don’t know someone is leaving until the exit interview, LaSalle Network has implemented what Campbell calls “stay interviews” to keep a pulse on existing employee sentiment and concerns: “I use these interviews to help reengage our workforce, especially for the employees that we really want to retain.”

During these interviews, Campbell says she sits down with all staff members that are anywhere from three to five years into their careers with the organization to ensure they’re still learning, happy with their positions, and feeling supported by their managers.

INVESTING IN EMPLOYEE WELLNESS

In addition to regularly checking in with employees, Campbell also points to the importance of mental health, as she understands just how demanding the accounting and finance field can be (especially during the many busy seasons). She encourages employers to view mental health as the whole of an employee’s overall health. Regular meditation sessions, midday workouts, and one-on-one walks with managers and employees are just some of the healthy practices that Campbell’s firm encourages.

“In this field, there’s always going to be that period of ‘hustle time,’ and there’s not much we can do about that,” Campbell says. “However, if you can find a few minutes for your employees to take a break—and you know that they need it—tell them to go for it.”

Aycock says that infusing fun into the workplace also supports employees’ mental health and overall wellness, as it helps them feel appreciated, recognized, and part of a results-oriented team. For example, after one particularly busy tax season wrapped up, Aycock’s firm put together a scavenger hunt that included 10 different tasks, like “take a picture of yourself wearing the company swag in your local downtown cafe” and “take a picture holding a family heirloom.” The individual with the most creative ideas won a $100 gift card to use at a local restaurant.

Additionally, Aycock’s firm places a big emphasis on self-care and offers a “perk-up program” that gives associates a monthly $50 stipend to spend on facials, massages, and other types of self-care. She says these and other initiatives go a long way in making employees feel valued, respected, and heard.

To other CPA firms looking to improve employee retention and engagement, Aycock says the best first move is to simply get started: “The sooner you start investing in your associates—even if it’s just small steps—the more it’ll help you in the long run. You never know when you’re going to lose an incredibly valuable employee because you weren’t investing in them—it’s just not worth the risk.”

Bridget McCrea is a Florida-based freelance writer specializing in business and technology.

August 27-28, 2024

Donald E. S tephens Convention Center, Rosemont, Illinois

Expert Keynote Speakers

Expand your possibilities with innovative ideas and strategic insights from national thought leaders:

The State of the CPA Profession: It’s Time to Think Big

Geoffrey Brown, CAE President and CEO, Illinois CPA Society

A Look Ahead at the U.S. Economy

LaVaughn Henry, Ph.D., CBE Former Sr. Economist, Council of Economic Advisers, Executive Office of the President (the White House) and Sr. Regional Officer and VP, Federal Reserve Bank of Cleveland

Deborah Rood, CPA, MST Chairperson, Illinois CPA Society and Risk Control Consulting Director, CNA Insurance

Human Capital Management: How to Best Engage and Retain Top Talent Techs and Trends: 2024 Update

Sirmara Campbell Chief Human Resources Officer, LaSalle Network

Maintaining Ethical Objectivity and Independence

Kathy Enstrom, MBA, EA Director of Investigations, Moore Tax Law Group LLC

Guinevere Moore, JD Managing Member, Moore Tax Law Group LLC

Roman Kepczyk, CPA, CITP, CGMA, LSS BB Director of Firm Technology Strategy, Rightworks

REAL Leadership: Navigating Today’s Workplace

LaTonya Wilkins, MBA Founder and CEO, Change Coaches

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WorkShare IL

All exhibitors will be available in person and virtually. As of 6.21.24.

“I look forward to the ICPAS SUMMIT each year. The virtual option has been a big plus for me with an extremely busy schedule.”

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All program information is subject to change. Please verify upon registration. Some of the SUMMIT24 speakers may be presenting remotely for both the in-person and virtual venues.

For the latest speaker updates, visit www.icpas.org/summit.

AT-A-GLANCE

Women Owning Their Actions Is the Shift the Workforce Needs

Female leaders share how women can transform apologies from a reflex to a deliberate expression of ownership and action.

the workplace, apologies are a unique beast. Sometimes they’re warranted, perhaps for a missed meeting or a botched deadline, or sometimes they’re a political necessity to help save face. For women, however, apologies happen too often, many without a warranted need at all.

A 2010 study out of the University of Waterloo, Canada, for example, found that women tend to apologize more often at work because they have a lower threshold than men for what they consider offensive. More recent research suggests that women’s behavior in the workforce may actually be a product of societal expectations. A 2020 study out of Stanford found that women who openly engage in confrontations or pursue positions of power evoke negative reactions from supervisors. This negative response motivates some female professionals to shift their behaviors, perhaps unconsciously, into more traditional gender expectations.

In combination with societal expectations and workplace culture norms, women have often felt the need to grapple with a delicate balance of assertiveness and empathy—and have for many generations.

Here, six female leaders offer advice for how to transform apologies from a reflexive response to a deliberate expression of ownership and action.

Multigenerational Societal Expectations

“I encourage women to be mindful of when they’re trying to conform to traditional gender roles of being nurturing and overly friendly, so they’re not reinforcing that expectation in their workplace,” says Stacey Chazin, MPH, MSODL, founder of I-Factor Leadership, who coaches introverted professionals to tap into their core strengths in order to become more powerful, effective leaders.

Gender stereotypical behavior for women often involves conforming to societal expectations of compassion, empathy, and gentleness. The way these expectations translate into the workplace is that women may feel pressured to downplay their achievements or avoid assertiveness in order to align with perceived gender norms.

“Women have been told for generations to be ‘nice’ and ‘proper’ and not to be ‘strong’ and ‘vocal.’ Women who take credit for their accomplishments are often termed arrogant, while men are termed successful,” says Diane L. Yetter, CPA, MST, president and founder of Yetter Consulting Services Inc. and the Sales Tax Institute. Yetter was also recognized with the Illinois CPA Society’s (ICPAS’) 2024 Women to Watch Experienced Leader Award.

Yetter suggests one way to shift this societal thinking is to recognize the accomplishment for what it is instead of who did it.

More importantly, she encourages more women to stand up and speak up.

“It’s fine to talk, and even brag, about success that we attain. It’s also important to speak up in meetings and make your voice heard—don’t be afraid to be the first one to answer or talk,” Yetter says. “It’s also important to celebrate and acknowledge other women and their accomplishments.”

Ellen Burton, executive coach, international business and leadership lecturer, and best-selling author, agrees and says the problem has been so ingrained in our culture over multiple generations: “Being a woman raised in the 1960s and 1970s, I can attest to research stating how many women, in all generations, have been raised to be unobtrusive, not make waves, and just be grateful for anything we’re given.”

In a 2019 report, the National Bureau of Economic Research found that when asked to describe their performance on a test, women reported that they performed worse than men, even though, on average, the scores were equal. In the workforce, this discrepancy also plays out in interviews, self-assessments, and annual reviews, activities in which being able to accurately communicate one’s abilities and achievements can significantly impact outcomes. In these instances, if women downplay or minimize their achievements, they could impede the trajectory of their career growth.

So why does it happen? Anna C. Gomez, CPA, global chief financial officer (CFO) and partner of Mischief USA and No Fixed Address Inc., who was also honored with ICPAS’ 2024 Women to Watch Experienced Leader Award, suggests it may be just the way many women are wired, citing their natural ability to be more empathetic and conscious of their actions.

“We expect more from ourselves because our everyday lives demand that we do so. Women are expected to juggle everything— home, children, career—and because we divide our time into so many parts, we never feel like we’ve done enough or know enough,” Gomez relates. “Thus, this brings the tendency to downplay our expertise.”

Overcoming Imposter Syndrome

In addition to juggling multiple responsibilities, women are often faced with imposter syndrome (i.e., they doubt their abilities in fear of being seen as incompetent to others), despite extensive evidence of competence and achievement. According to a 2020 KPMG survey of 750 high-performing senior women leaders in Fortune 1000 companies, 75% of respondents had personally experienced imposter syndrome at certain points in their career. What’s more, 57% of respondents said they most often experienced imposter syndrome at times when they were promoted or transitioning into new roles.

“I’ve certainly experienced imposter syndrome, and it can be challenging to overcome,” shares Kelsey Straub, CPA, audit senior manager at Deloitte & Touche LLP, and recipient of ICPAS’ 2024 Women to Watch Emerging Leader Award. In fact, Straub says she personally experienced imposter syndrome when she found out she was anonymously nominated for that award.

“I was so surprised by the nomination, thinking, ‘There’s no way I’m qualified,’ and ‘Everyone else has more accomplishments than me,’” Straub explains. “I really had to convince myself that I was just as worthy to apply as anyone else. I realized that I would be doing a disservice to both my nominator and myself if I didn’t even try.”

Straub says one way to overcome imposter syndrome is to listen to your mentors or team leaders’ opinions of your performance and strengths: “Trust that what others say about your performance and capabilities is genuine.”

Of course, going hand-in-hand with the tendency to downplay or second-guess expertise is the greater willingness to overapologize. This is especially true for many women of color who are taught at an early age to not draw attention to themselves for both job security and overall safety.

“Our mothers, aunties, and male and female mentors modeled how not to make waves and how to apologize for being in the way, for having a win, and for others’ mistakes,” Burton says.

Straub notes that it can be surprisingly easy to over-apologize: “I’ve found myself apologizing when I ask a clarifying question, express a differing viewpoint, or even when taking responsibility for others’ mistakes.”

Chazin agrees, saying part of it has to do with social conditioning and women’s desires to avoid conflict or appearing impolite.

“This can lead us to preemptively apologize for things that oftentimes don’t warrant an apology at all,” Chazin observes. “I think we want to eliminate the possibility that someone will be offended by something we say to the point where saying sorry has become ingrained in our communications with others.”

Chazin suggests that women should first audit their apologies: “Track how often you’re apologizing, under what circumstances, and with whom. Do this for three days.”

This way, Chazin says, you’ll have a better idea of the extent to which apologizing has become a part of your communication with others. Then, with this data in hand, you can be more mindful of any written or verbal communication you’re about to put forth that contains an apology.

“Reread your emails before sending them and replace apologetic language with powerful language,” Chazin advises. She recommends using these examples:

• Instead of: “Sorry this took so long.”

Try: “Thanks for your patience.”

• Instead of: “Sorry to bother you.”

Try: “I’m seeking some help.”

• Instead of: “Sorry to take up your time.”

Try: “Thanks for your time.”

Apology Perceptions

While compulsive over-apologizing may be perceived as a weakness, recent research suggests that the perception of an individual may have less to do with the frequency of apologizing and more to do with how an apology is delivered.

Beth Polin, Ph.D., associate professor of management at Eastern Kentucky University and lead author of the study, “Sorry to Ask But … How Is Apology Effectiveness Dependent on Apology Content and Gender?,” found what constitutes an effective apology differs depending on the gender of the person delivering it. The researchers studied whether an apology with stereotypically feminine language would be more or less effective for women, and whether an apology with stereotypically masculine language would be more or less effective for men. Their data showed that using apology language that goes against expected stereotypes is more effective at repairing trust.

“Specifically, women’s apologies are more effective at repairing broken trust when they include more stereotypically masculine language, because this increases others’ perceptions of their competence, which augments their assertiveness,” Polin says.

“Oppositely, men’s apologies are more effective at repairing broken trust when they include more stereotypically feminine language, because this increases others’ perceptions of benevolence, which augments interpersonal sensitivity.”

Polin emphasizes that the way to interpret these findings is to recognize that an apology is more effective at repairing trust “when we push past our defaults and consider apology language carefully.”

According to Polin, there are six components to an effective apology:

1. Expression of regret.

2. Explanation for why the violation occurred.

3. Acknowledgment of responsibility.

4. Declaration of repentance.

5. Offer of repair.

6. Request for forgiveness.

Of these components, the expression of regret and request for forgiveness are stereotypically more feminine language components of an apology; the explanation and offer of repair are stereotypically more masculine; and the acknowledgment of responsibility and declaration of repentance are neutral components of an apology. Given that, Polin says the best way for women to deliver an effective apology would be to leverage stereotypically masculine language along with neutral language. She suggests something along the lines of:

• “The reason trust was broken was because of … (explanation, masculine).”

• “I recognize I’m responsible for this incident (declaration of repentance, neutral).”

• “To make up for the damage done, I’m going to … (offer of repair, masculine).”

To Apologize or Not Apologize

Notably, experts say it’s important to recognize that there are times when you should apologize and times when apologizing is either inappropriate or unnecessary. For example, an apology is warranted if you’ve said or done something that somehow harmed another person, or if you’re recognizing a group of people for their contributions to a project and you neglected to include someone.

However, Burton stresses not to confuse a “sorry” with an “amends.” Sorry conveys taking responsibility for either a misstep or for being caught; a flippant sorry could be perceived as worse, telegraphing little interest in creating solutions and even less regret. But Burton says making amends is deeper: “It’s a promise that follows aberrant behavior, ownership, introspection, and learning of new skill.”

Burton recommends that when a mistake is made you should own it: “Take responsibility sooner rather than later. Then ask for help and present viable options for repair.”

Chazin says that we shouldn’t apologize for things that happen that aren’t intentional or controllable. She explains that doing so implies that we’ve fallen short or are incompetent: “Many times, we couple our apologies with some self-deprecating statement about our competence.”

Instead, Chazin recommends acknowledging the issue but withholding the apology. “If you respond to an email after a longer-

than-expected number of days, rather than apologizing for that, consider writing, ‘Thanks for your patience as I’ve juggled a number of priorities.’ Or if you make a mistake in a work product and someone else flags it, try saying, ‘Thanks so much for catching that.’”

Gomez related similar advice she received from one of her mentors while she held a previous role as a controller of a large Chicagobased advertising agency: “She told me never to apologize for any of my actions or decisions, whether it was answering an email late or making difficult business decisions. I’ve taken that with me and learned through experience what she truly meant by that.”

Over time, Gomez has learned to stop apologizing for who she is, what she stands for, and the decisions she makes as a CFO. “I’m a human being who makes errors in judgment, reacts emotionally, or pivots on decisions that no longer serve their purpose. In those instances, I learned that being a good leader means also being able to admit my mistakes,” Gomez says. “There’s a big difference between apologizing for something and being open about making mistakes.”

Straub advises young women to build a personal board of directors comprised of mentors, coaches, and leaders that they admire: “Mimic the characteristics that you respect in these individuals, share your aspirations with them, and lean on them when you need assistance or guidance.”

Chazin has similar advice and reminds women to lean on the support of other women. “I implore women entering the workforce to never apologize for who they are—the best way to break the apology habit is to never start it,” she stresses. “Women can, and should, support each other in this space by ‘calling each other out’ when they see another woman apologize unnecessarily.”

Carolyn Tang Kmet is a clinical associate professor at Northwestern University and a frequent Insight contributor.

Although popular and successful in other industries, returnships have remained largely untouched by the accounting profession.

Experts share why CPA firms should consider tapping into this retention tool to combat the ongoing talent crisis.

inding and retaining talent continues to be one of the greatest management challenges plaguing the accounting profession.

Over the years, firms have served up various solutions to the crisis, including more pay, remote work, flexible arrangements, and employee wellness benefits, just to name a few. But, perhaps, not all the stops have been pulled out quite yet.

Across other industries, for example, one retention tool has been growing in popularity: returnships, a short-term engagement for professionals who want to reenter the workforce after an extended period of time.

According to Path Forward, a nonprofit that empowers and connects people with returnships and job opportunities, “returnships bridge the gap between employers and highly qualified returners.”

The highly qualified returners, of course, being largely women and underrepresented groups who often bear the brunt of child care and caregiving responsibilities that force them to leave the workforce for extended periods of time. In fact, Path Forward reports on their website that “caregiving is the leading reason why prime working-age people aren’t active in the workforce, and they’re mainly women by a 12:1 ratio.”

Notably, big companies, like Amazon, Chevron, IBM, PepsiCo, and Wells Fargo, have implemented returnship programs with success. For example, in an April 2024 Worklife article, PepsiCo attributes retaining its female leadership, in part, due to its returnship program. Further, since their program’s initial launch in 2022, PepsiCo has nearly doubled the number of returnships it offers, and in 2023, the company had 97% retention of over 200 female leaders in their south division.

Despite success in other industries, returnships within the accounting profession are still few and far between—but why? Here, experts share why more CPA firms should consider leveraging these programs as a means to help turn the talent retention tide.

Returnships In Action

One of the few returnships in the accounting profession can be found at Big Four firm Deloitte, which has actually worked to improve its program over the last couple of years.

Launched in 2015, the firm’s Encore program was first piloted to allow professionals who had a break from employment to join the workforce through an internship. In 2022, however, Deloitte decoupled from the short-term nature of the experience and now offers the program for full-time employment.

Anjali Sinha, national talent acquisition lead at Deloitte, says the program is designed to enable professionals to return to work with confidence by offering opportunities to improve skills in a client service environment.

“Professionals who voluntarily leave the workforce can find that going back to work is daunting,” Sinha says. “Encore is structured to

enable a smooth transition through accelerated learning to help refresh skills and provide mentoring, coaching, and a personalized development plan.”

Further, Sinha says Encore participants are given opportunities to learn from each other and network with other Deloitte professionals.

Deloitte’s program has been hugely successful, as shown through numerous testimonials of employees who leveraged the program to reintegrate into the workforce after a break. That includes Marsha Waters, who decided to become a stay-at-home mom in 2011. In 2015, after Waters’ youngest child began elementary school, she was ready to return to the workforce.

“After looking at openings on the Deloitte job site, I found the Encore program, and it seemed like a perfect fit, so I applied,” Waters says in a Deloitte 2019 blog post. “It allowed me to reenter the workforce without having to respond to those questions about the gaps in my resume due to my time at home with the children, and it also took away the stigma sometimes associated with stepping away from the workforce.”

Throughout the course of her career, Sinha has watched returnships evolve over time across all industries, closely tracking how many are available to support professionals who would like to return to work. In 2014, she says she only knew of four. Today, there are over 100.

“The list will continue to grow,” Sinha stresses.

A Harder Landscape in Accounting

While Sinha is hopeful more CPA firms will jump on returnship offerings, some experts argue that there are roadblocks that make these programs harder to replicate within the profession.

“While returnships are common in many industries, they’re not as prevalent in accounting,” says Travis C. Hunter Jr., office managing partner at KPMG LLP’s Chicago office. “In accounting, there’s a need to maintain professional certifications and stay up to date with the ever-changing regulatory landscape—and staying current with these changes during an extended leave can be challenging.”

Because of these obstacles, Hunter says KPMG doesn’t currently offer a formal returnship program, but they do value the diverse experiences and perspectives that professionals returning from a career break can bring: “We offer a supportive environment to help them transition back into the workforce, including flexible work arrangements, mentorship programs, and tailored training to enhance relevant skills and knowledge.”

Path Forward agrees with Hunter on the aforementioned challenges, noting that “they don’t see a lot of returnships in the CPA profession due to the difficulty of maintaining a license during a career break.”

However, in 2023, Path Forward partnered with the Public Company Accounting Oversight Board (PCAOB) to offer a 24-week paid returnship—The PCAOB Path Back to Work Program—where returning employees inspect public company audits.

A Push Forward

Hunter stresses that promoting more returnships in the accounting profession will require a concerted effort from all stakeholders to build more flexible pathways for maintaining certification during career breaks and ensuring that their environments are supportive for those looking to return.

Amber Sarb, CPA, audit senior manager at RSM US LLP, agrees with Hunter on this approach. While RSM doesn’t have a formal

returnship program in place, Sarb has closely followed returnships in other industries due to the nature of their flexibility.

“Being a working mother of two, a six-year-old and two-year-old right now, I can absolutely see the benefit,” Sarb says. “The more accounting firms can be outside of the box, the better chance we have at attracting and retaining talent.”

Sarb notes that, for women, taking a career break leaves a lot of uncertainty and concerns for their future.

“It’s a very hard decision as a working mom to decide if you want to proceed with working, or if you want to take some time off during those formative years,” Sarb stresses. “But at the end of the day, you’re also concerned about your ability to come back.”

Beyond returnships, flexibility, in general, will remain key for employers to stay competitive.

While many people leave their employers and careers behind to tend to personal duties outside of work, many simply leave due to sheer burnout. In fact, the Illinois CPA Society’s Insight Special Feature, “Righting Retention,” reports survey findings that show nearly 49% of employees in the accounting and finance profession voluntarily leave their employers because of “too many hours/burnout,” and nearly 48% leave because of a “lack of worklife balance.”

Sarb thinks returnships, paired with greater flexibility, could help bring some of those people back. Before she was pregnant, Sarb admits burnout played a role in her thinking about leaving the profession entirely. She reached out to her firm to request a change. Her firm responded with, “We want you to stay.” That meant allowing Sarb to go to a remote, part-time workload in 2016.

Overall, with firms competing over a limited talent pool of highly qualified professionals, Sarb points to the ultimate benefit of what a returnship could do for those willing to think outside of the box.

“We all know that it’s so hard to get experienced talent,” Sarb says. “Personally, I would gladly welcome back somebody who’s been out of the workforce for four or five years but who’s done the job I need done in the past. I feel like I could onboard them just as quick, if not quicker, than someone brand new.”

She continues: “As long as both sides can get on board with what it looks like and what the end goal should be, I think returnships and a formalized structure of flexibility seem like excellent ways to help retain talent and attract talent to transition back in the workforce.”

Cloey Callahan is a New York-based writer, who specializes in topics related to the future of work, spanning from workplace benefits and flexibility to technology and office design.

Merger Guidance for CPA Firms:

Start Early, Plan Strategically for Long-Term Success

The papers are signed, and your merger is officially closed—but what comes next? Experts share their guidance for achieving post-merger success.

Somewhere between 70%-90% of mergers fail during postmerger integration, according to a report from the Harvard Business Review. Why? Momentum falls, due diligence was poor, synergies didn’t happen, inadequate communication, or maybe an unexpected amount of talent leaves. “It could be some or all those things,” says Allan Koltin, CPA, CGMA, CEO of Koltin Consulting Group.

During and prior to closing a merger, leaders tend to focus on the “event” of the closing itself, neglecting the “what comes next” phase, and that’s a big misstep, according to Dan McMahon, CPA, CMAA, founder and managing partner of Integrated Growth Advisors LLC. “Post-merger integration success is actually rooted in how you begin the merger itself,” he says. McMahon coaches clients to consider the merger as a process covering months, if not years, of time rather than a standalone event. “Treating it as a ‘perpetual process,’ starting before and extending beyond closing, exponentially enhances a successful merger and acquisition (M&A) outcome,” he adds.

Trent Holmes, business broker at Accounting Practice Sales, says post-merger struggles often have their genesis in a mismatch of expectations. “Acquiring companies, especially larger practices with private equity (PE) involvement, are looking for firm partners who are going to stick around. But in the merger, there’s usually at least one firm partner who’s looking to scale back hours or exit,” he says. “These buyers may work with CPAs and have them on staff, but they don’t always understand what CPAs do, nor do they always have the talent and capacity lined up to compensate the owner who’s stepping back. It’s a post-merger challenge that needs to be addressed.”

Post-Merger Planning Strategies

To get ahead of these challenges, there are five key planning strategies CPA firm leaders can leverage to create a smoother postmerger transition from day one.

Start Early

Don’t wait until the deal is closed to start integration planning because it’s only half of the process; the other half is integrating systems, technology, and people. “Let’s not have a shock to the system after the deal closes,” Koltin advises. “Build a foundation early so nobody is caught off guard the first day.”

Ideally, post-merger planning begins simultaneously with merger talks, but McMahon suggests a smooth integration can still occur if planning starts just 90 days prior to closing—a timeline that can often be met with resistance in the accounting and finance space. “Accountants tend to live in the now. They ask why they should plan when they’re not even sure the deal will close,” he says. “There’s not always an understanding of the risks that can take place after closing, so evaluating the risks in advance, and getting a plan in place as early as is practical, can help ensure a smooth integration post-closing. Firms serious about making a successful investment will approach it in a way that’s forward thinking regarding the needs of the surviving entity.”

Develop

an Integration Team

Without a team, there may be a mad scramble once the deal closes. “It’s difficult to settle into a rhythm that’ll carry you through the transaction if this effort isn’t approached as a process,” McMahon warns.

To start, form a group of high-level, in-the-know people from each firm to create a game plan and steer the transaction and transition. “This committee can’t be just for show,” McMahon cautions. “It should include people who have impact.”

McMahon recommends that the team determine timelines and continue to add key members as their “need to know” status about privileged information arises.

Communicate Clearly and Often

Change makes people nervous, and with employee and client retention critical to most deals’ success, how and when you communicate will set the tone.

“There’s an old saying: Tell them once, tell them again, and then remind them you told them,” Holmes says. “This applies not only to your employees but also to your clients. All stakeholders like to know what’s going on and to feel respected throughout the process. You don’t want to reveal too much too early, but that doesn’t mean you can’t have a plan in place to roll out as the timing dictates.”

Experts say leadership teams should carefully consider critical messaging and communication to employees, not just to shareholders and customers. Additionally, firm leaders should be consistent when communicating their goals, objectives, changes, and risks associated with the transaction.

Cultures and roles should also be redefined at all levels, and the expectations of both firms’ employees should be clearly communicated—everyone will be wondering what the deal means for them and how, or if, they’ll fit into the new company.

As for clients, don’t kid yourself that they’ll automatically stay. “Your clients are going to be pursued by competitors because everyone assumes there’ll be turmoil after a merger,” McMahon says. “Your revenue needs to be secured through your relationships and postclosing messaging to the marketplace.”

Phone calls, letters, and personal visits all have their place in the communication plan. Holmes recommends organizing client lists by size, and then after the deal is done, meet personally with the largest ones to ensure you’re on the same page.

Carefully Consider Changes

Holmes says it’s natural for there to be changes after a deal is made but suggests too many changes too quickly may cause problems: “We tell buyers to target firms with a similar operational dynamic to their own. A lot of rapid-fire change doesn’t guarantee failure, but it can be a recipe for disaster.”

Debrief

Post-merger learning comes from debriefing. “Ask yourself, ‘Where did we screw up? Where did we cause heartburn?’” Koltin recommends. “We learn from what made the deal more complicated than anticipated or almost not go through. Some people think it’s beneath them to ask these questions, but this is how we continuously improve and transform in integration.”

With Opportunity Comes Profitability and Accountability

A new firm structure brings news ways of making decisions, especially in PE deals.

“PE deals provide the capital for accounting firms to go out and buy the best in class,” Koltin says. “They’re making better and deeper investments, and because of that, firms are reaping the rewards of greater profitability.”

Koltin says changes after a PE deal will be felt most keenly at the partner level, and PE culture means more accountability for partners who might have had more autonomy in the past: “Goals are set, and partners are expected to meet those goals.”

PE also brings a change in expectations and culture with more accountability for actions and a lot of new opportunities for personal growth. “If you want to make a lot of money, go out and perform,” Koltin says. “If you want to try something new, be prepared to explain the return on the investment. You’re setting goals, getting coached, being held accountable, and getting paid for how well you perform. That’s going to be a little bit of a shock to some, but not all, firms. There will be greater scrutiny on every dollar.”

Overall, Koltin says PE firms bring a greater focus on profitability and growth to the accounting firms they’re investing in. “At the end of the day, the firms that perform at a high level are the ones where the culture is focused on profitable growth of revenue and talent. You need one to feed the other. They go hand in hand.”

Koltin sees chief financial officers (CFOs) having a big post-merger wake-up call, especially after a PE deal. “Leadership is looking for a much more proactive CFO. The CFO is expected and challenged to talk at a much deeper level about performance and trends and then provide recommendations for improvement.”

Staff Are Key to Post-Merger Success

McMahon says staff also have an important role in the merger process. In accounting firm mergers specifically, the people factor is crucial. “People drive the revenues and client relationships,” McMahon says. “Firm leaders should pay critical attention to the retention of their people and clients. The selling firm especially needs to ensure their people are going to stay—if the people stay, the revenue stays.”

Making the Deal Work

McMahon recommends that sellers explore engaging an M&A firm that can help ensure a proven process is followed.

Holmes says it takes both parties in a merger to play fair and set guidelines on what the roles of each will be going forward: “It’s about both working together if they really want this deal to run smoothly. It takes active communication to get everyone on the same page when you transition.”

Koltin emphasizes that every deal is unique: “We can’t try to fit a round peg into a square hole, so it’s important to ask what’s the best integration plan for each specific firm. What matters to them? What matters to us? Let’s pretend to be married before this deal is even done.”

Additionally, Koltin says there’s a stereotype that PE firms care only about making money. “Just like there are great, good, and not so good accounting firms, it’s the same in the PE world,” he points out. “If you’re going to partner with someone, focus less on the economics and a lot more on the culture and strategic fit.”

In the end, Koltin says that on the day you close and the wire clears, what’s most important is having long-term alignment on what you’re looking to build together as one new, promising entity.

Natalie Rooney is a freelance writer based in Eagle, Colo. A former vice president of communications for the Ohio Society of CPAs, she has been writing for state CPA societies for more than 20 years.

How to Foster a Culture That Helps Women Own Their Talents

Regardless of level or gender, everyone has a role to play in fostering a culture that supports and develops women within their organization.

Throughout my career, I’ve had the good fortune of reporting to some very supportive managers who’ve helped me develop into the senior-level leader that I am today. These managers encouraged me to step outside of my comfort zone, take chances, gain confidence, and own my executive presence. These managers were also both male and female.

One of my most pivotal career moments happened as I was progressing toward the senior leadership level. My male manager at the time took me to lunch and inquired why I didn’t speak up much in our senior leadership staff meetings. I told him that as someone new to the team with not as much experience as the others on it, I didn’t feel comfortable speaking just to speak. His response? He told me that, at a minimum, I should ask questions because others in the room likely had similar questions (and maybe they didn’t know as much as I thought they did). He encouraged me to voice my opinions and perspectives to show I was engaged in the discussions during these meetings. Additionally, he made me realize I had a lot of value to provide, which really boosted my confidence. Of course, it wasn’t easy at first since I was the only female on the senior leadership team. However, I soon found my voice and became comfortable asking questions, adding my thoughts to the conversation, and respectfully challenging others.

My manager, who happened to be our CEO, helped me own my gifts and talents in a way I hadn’t done earlier in my career. That’s why the theme from the Illinois CPA Society’s Women’s Leadership Forum in May, “No Apologies: Own Your Gifts and Talents,” really hit home for me. It took some time for me to feel comfortable owning my gifts and talents.

We’ve all heard that women generally don’t promote themselves as well as their male counterparts. There are various theories as to why this is: Some say women tend to believe their accomplishments speak for themselves and, therefore, spend less effort ensuring they’re being recognized; others may want to avoid attention and just blend in; and like my former self, some remain silent, failing to speak up and express themselves in meetings. Unfortunately, all of these can lead to a lot of missed opportunities for women, such as working on highly visible projects, securing promotions, and earning pay raises, just to name a few—not to mention the missed opportunities for employers as well.

But this shouldn’t fall completely on the shoulders of each individual woman. Everyone within an organization can help foster a culture that adequately supports and develops women, regardless of their level or gender. So, how can we do that? I have a few ideas:

• Mentor: As a mentor, you can lift women up by helping them develop their talents and showcase their gifts. You can encourage them to take stretch assignments and ensure their voices are heard. As a mentor, you should also provide direct feedback to mentees. Women often receive less—and less helpful—feedback, while men generally receive specific recommendations for improving their performance. Receiving specific, direct feedback helps women build skills and advance. This can also provide you with the opportunity to better get to know the female talent within your organization, which can lead to developing this talent for the good of the organization. Keep in mind that being a mentor isn’t just for those with a lot of experience—you can still be early in your career and be a great mentor to someone just starting out.

• Advocate: Advocates help connect their protégés with opportunities and contacts, and campaign for them on their behalf, as opposed to the more advice-focused role of mentors. As an advocate, you’ll fight for opportunities for the protégé to work on special projects, advocate for them when a promotional opportunity arises, and defend them during talent discussions. You’ll also ensure their achievements are brought to the attention of senior management, which can go a long way when opportunities arise.

• Support: You don’t need to be a senior leader—or a woman—to help lift women within your organization. However, speaking directly to women, it’s important to develop a strong network with

other women as a means for support and allyship. Remember to celebrate each other’s accomplishments and defend each other when being criticized for demonstrating behaviors where male counterparts wouldn’t be. Make sure to give each other feedback, treat feedback from others as a gift, and solicit it often. Above all, look for opportunities to boost other women’s confidence and encourage them to “go for it.”

Countless studies have shown that organizations benefit from fostering a strong culture that supports the development of women. Not only does it enable an organization to take full advantage of its available talent by creating an environment where women can thrive and be visible, but it can also have positive downstream effects on the entire workforce. Additionally, this type of culture can further strengthen the organization by attracting a strong talent pool.

I’m at a point in my career where I know the importance of being vigilant when it comes to recognizing the talented women at my company. I want their gifts and talents to shine, so they too can have access to the same opportunities that I had thanks to the mentors and advocates that championed me throughout my career journey. I want my company to benefit from leveraging their gifts and talents, as this just makes us more competitive and successful on all fronts. I encourage you to look at the practices within your organization to see if there are opportunities to strengthen your culture as it relates to women. We’ve come a long way when it comes to women in business—and accounting and finance—but there’s still more that can be done.

Moving Beyond a Compliance Mindset

The Illinois CPA Society’s Strategy Academy helps CPAs develop the skills and competencies needed to become a strategic business advisor who provides proactive insights and helps build profitability.

For more information on how to apply, please contact Gayle Floresca at florescag@icpas.org or 312.517.7618.

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Breaking Tradition May Yield the Best Strategic Planning Results

It’s time for us to break up with rigid strategic planning processes that hold us back from spurring growth. Instead, consider testing these methods.

I recently had a discussion with a colleague on how to better structure the strategy development process to yield the best results. He referred me to two articles about strategic thinking. While the articles were over a decade old, they rang true for me, as if they were written yesterday.

‘GOOD STRATEGY BAD STRATEGY’

The first article was a summary of the book, “Good Strategy Bad Strategy: The Difference and Why It Matters,” by Richard P. Rumelt. Rumelt’s use of the term “bad strategy” resonated with me. He summarizes it through four main bullet points:

• The failure to face the challenge.

• Mistaking goals for strategy.

• Bad strategic objectives.

• Fluff.

Embedded in these statements is the template of modern-day strategic planning, which is followed by almost every strategic plan ever written. The plan starts out with a description of a company’s mission, vision, values, and then goes into a list of strategic objectives and priorities. The list of priorities typically read like a to-do list of things that need to be accomplished, and because there are often so many of them, they’re more aspirational than actionable.

Of course, strategic planning meetings that follow this structure usually start out with brainstorming about the pertinent issues and their potential solutions, followed by a proverbial session on why they won’t work, which eventually leads to a plan that’s largely status quo.

‘BRINGING

SCIENCE TO THE ART OF STRATEGY’

The second article, “Bringing Science to the Art of Strategy,” was penned in the Harvard Business Review (HBR), and as the title suggests, it applies the scientific method to business strategy. In science, when framing a problem, an observation is made, the topic is questioned and researched, and a hypothesis is formed. The hypothesis is then tested, the data is analyzed, and conclusions are reached and reported on. This, of course, allows action to be taken on the proven hypothesis.

Notably, both articles describe methodologies that encourage teams to break with this traditional version of strategic thinking by focusing on choices rather than issues. The beauty of this approach is that it’s rooted in action.

When applying this method of thinking to a business problem, I’ve found that there are two strategic shifts. First, the spot in the process where data is analyzed can be pushed back to where the strategic choice is first considered rather than focusing on diagnosing the problem. This model encourages the formation of multiple choices, many of which may serve as the correct path for the organization to pursue.

I’m sure we all can point to decisions that were made in our work that were approached as a binary decision—either we do this or that. Typically, one of the choices catches momentum, especially when discussed in a group setting, and the outcome is essentially locked in. The actual decision on which direction is chosen is made further down in the process. By evaluating multiple choices there are options to research and debate, leading to additional rigor in the decision-making process.

My second observation is a fundamental shift from discussing and analyzing “what is true today,” to “what must be true for each strategic choice to be successful.” When applying that slight but powerful modification in thinking to a business problem, it changes the way the strategic choice is viewed and discussed. Rather than focusing on why a solution won’t work, the conversation focuses on how it could work.

So, if you reread this last sentence above with a particular business problem in mind, how does it make you feel? For me, it provides a sense of calm, or almost relief, that the problem will be discussed from a collaborative point of view. Discussing how something can work feels positive versus focusing on why a solution won’t work, which may feel combative.

Since scientific testing is a part of the model, the following steps are taken around each choice:

• Develop a list of barriers and obstacles.

• List and discuss what would have to be true for the choice to be successful.

• Conduct tests.

• Analyze data.

• Tackle the barriers and obstacles.

Through debate and collaborative discussion on each of the options, a couple of choices can be selected to perform more detailed testing and, ultimately, a decision can then be made.

BREAKING TRADITION: A TEST CASE

Recently, I commissioned a group of individuals to solve a go-tomarket business problem we were having. The group was given specific instructions, indicating there were no wrong answers to the problem and no constraints to their recommendations—from marketing, sales, delivery, firm structure, etc.

Using the frameworks presented above yielded three choices. We could stay the status quo, approach the market with a product focus, or approach the situation from a client focus. The status quo option was a mix between the client and product options, and while it wasn’t considered to be valid, it served as a benchmark for comparing the other two options. The group analyzed each of the choices from the perspective of what would have to be true for the choice to be successful.

The group started out with a version of bad strategy, meaning the discussion was rooted in their own ways of positioning our solutions. Yet, as they worked through the framework, that quickly dissipated, and the ideation and strategic thinking flowed. The group ultimately recommended the choice of going to market from a client focus, as it was believed it would yield the most impact to the client and to us as a firm. Admittedly, before a final decision could be reached, certain structural barriers and obstacles had to be worked through, and further testing and data analysis was needed.

Every business decision carries consequences and risks, but a decision reached through a scientific and collaborative model mitigates risk thanks to testing and data. Further, since this type of strategic planning requires so many potential paths to success to be laid out, a solid action plan for moving forward once a decision is made should follow rather quickly.

In the end, I believe much of the time our approaches to solving problems and/or developing go-to-market solutions are weakened by the structure of our planning processes. While the alternate strategic planning options I’ve outlined aren’t new, they’re proven to be highly effective. As we navigate today’s challenges, I encourage you to explore new strategic planning options with your team. After all, at the heart of good business strategy is making choices, and at the heart of choice is focus—and focus spurs energy and growth.

Executive Leadership Coach, Your Best Leadership LLC jon@yourbestleadership.com

Become an Ethical Leader to Drive Crucial Business Results

Building a sound ethical foundation will not only keep your leadership from running aground, it’ll also be good for business.

How does one devolve from being a proponent of effective altruism to having a 25-year prison sentence for one of the most notorious fraud crimes of our time? It’s a great question to understand the downfall of Samuel Bankman-Fried, the founder and central figure in the collapse of the giant digital currency exchange platform, FTX.

Bankman-Fried once said his belief in effective altruism propelled him to pursue high earnings and substantial wealth, which he would use to support charitable causes and do good in the world. However, in November 2022, his net worth (estimated $10.5 billion) was wiped out when FTX declared bankruptcy under allegations of massive fraud. By December 2022, he was arrested and eventually convicted after standing trial in the United States.

Was Bankman-Fried well-meaning, with a bent toward altruism that unraveled when sloppiness, shortcuts, and seemingly minor improprieties mushroomed out of control? (Perhaps he should’ve recognized that he was on a collision course between conflicting values and an unstable ethical foundation.) Or was he just another greedy, self-important charlatan whose name will be forever associated with financial crime, like Charles Ponzi and Bernie Madoff? In either case, Bankman-Fried’s downfall serves as a pointed reminder to build a sound ethical foundation that’ll keep your leadership from running aground.

Beyond protecting your personal and professional reputation, being an ethical leader is also just good business. According to the “LRN Benchmark of Ethical Culture” report, companies with the strongest ethical cultures outperform their peers by 40% in customer satisfaction, innovation, adaptability, and growth. Additionally, an analysis by Zenger Folkman found that employee engagement averages 77% for workers whose leaders score in the top 10% for honesty and integrity, compared to only 26% for workers whose leaders score in the bottom 10%.

HOW TO BUILD A STRONG ETHICAL FOUNDATION

So, what principles, beliefs, and values serve as your foundation for ethical decisionmaking? This is a crucial question to consider if you want to understand the foundation on which your ethical perspectives are built. According to author Louie V. Larimer’s assessment-based monograph, “The Ethical Type Indicator,” there are six underlying philosophies that drive responses to moral and ethical dilemmas:

1. Egoism: Acting in the best interest of the decision-maker (i.e., maximizing the greatest good for themselves).

2. Utilitarianism: Acting in the collective interest of the greatest number of people (i.e., benefiting the many rather than the few or the one).

3. Existentialism: Acting in accordance with the inner voice and notions of right and wrong, regardless of the consequences or results.

4. Divine Command: Following the principles of one’s personal deity or higher spiritual power, in accordance with their religion.

5. Deontology: Following prescribed duties or obligations stipulated by one’s profession, business, or similar group (i.e., adhering to a code of ethics).

6. Conformism: Looking to the norms and expectations of family, friends, colleagues, or peers.

While each of these philosophies is useful in navigating ethical dilemmas, they each have pitfalls. For instance, egoism and existentialism favor expediency, as the decision rests with the individual. However, whenever an individual acts alone, there’s an increased risk of manipulation or self-interest that invites temptation for unethical behavior.

The other philosophies go beyond an individual acting alone, including others in determining standards for ethical behavior or including them in the decision-making process. Utilitarianism, for example, removes self-interest and focuses on benefits to a much larger group of people. Unfortunately, utilitarianism can lead to unintended consequences where an “in-group” benefits while others are left out, causing certain members or groups within society to become disenfranchised. Incidentally, Bankman-Fried has also been described as a utilitarian.

Philosophies like divine command and deontology rely on standards derived from religious or professional leaders, training, creeds, and codes. These standards aren’t left up to individuals alone; they’re typically developed through due process within a defined group. However, these standards don’t cover every possible scenario, and members of the group might interpret them differently or find loopholes that create risk of questionable behavior.

Conformism also has its pros and cons. For example, parents of teenagers know all too well how much their kids’ peer groups influence their behavior. Perhaps one of your parents asked a similar question like mine did when I wanted to do something with friends that increased the risk of poor choices: “If all of your friends jumped off the High Street bridge, would you do it too?” (The answer might well have been yes.) Yet, we frequently rely on the influence and stickiness of positive relationships and role models who promote positive behavior, along with wise moral and ethical choices.

By performing a quick scan of Larimer’s six philosophies, you’ll be able to see the strengths and pitfalls of the ones most prevalent in your foundation for ethical decision-making. Better yet, take the assessment in his publication, not just as an individual but as a leadership team, and discuss the insights you gained and the implications for creating a positive, ethical climate within your team or organization. Additionally, make sure to identify potential pitfalls that create a risk for unethical behavior and develop safeguards to prevent it.

ARE YOU STRONG ENOUGH TO BE THE ‘VOICE OF ONE’?

Another beneficial resource to add to your ethics toolbox comes from the book, “Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations.” In it, authors Bob and Gregg Vanourek ask an imperative question for any leader to consider: “Are you strong enough to be a ‘voice of one?’” Meaning, are you someone who calls out the danger of a situation when everyone else is going along with a questionable course of action? Are you willing to stand up for what’s right? Are you ready to “see something, say something,” as the caution signs at the airport suggest?

These questions offer an exceptional gut check as you apply what you’ve learned from exploring and articulating your ethical foundation. They underlie the strength of character needed to prevent ethical lapses or to call them out when they occur. After all, if individuals within FTX’s inner circle had been willing to be a voice of one, perhaps Bankman-Fried’s actions would’ve been prevented, and he would’ve been spared the consequences of his crime.

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Navigating Your Moral Compass for Self-Promotion and Corporate Branding

By balancing self-promotion and branding with ethical guidelines, you can foster both trust and authenticity with others.

As we live in a digital era, personal and corporate branding are essential for staying competitive and building a strong professional reputation. How should ethics help you develop and maintain your brand? It comes down to striking a balance.

SELF-PROMOTION

Self-promotion is helpful for forming your own brand, expanding your opportunities for career advancement, and increasing your network of contacts. It involves highlighting your skills, experiences, and accomplishments to give others a sense of who you are and how you can help them be successful in their goals.

When self-promoting, consider these best practices:

1. Be honest and authentic. These traits are two of the most crucial components to selfpromotion. To shape an effective brand, determine which skills, qualities, knowledge, and experiences make you unique and enable you to help others. Decide what you would like to achieve professionally and how you would like to be perceived when approaching how to brand yourself.

2. Ensure the information you provide is consistent. One way to build a trustworthy brand is to be reliable with your message and the topics you promote. For example, if you like content that supports adopting artificial intelligence (AI) and automation into accounting work, then share content consistent with this message. If you share or create content that is counter to your regular content and do not convincingly explain your deviation, you may lose your credibility with your audience. Additionally, your communication style and content should be recognizable to those who know you. Ask for feedback from those you trust regarding how to better reflect who you are online and in person.

3. Exercise humility. While you want to showcase who you are, your wording and tone could come off as boastful. One tip is to review the adjectives you use to describe yourself and your accomplishments. As an example, you could say you effectively led a team; the adjective “effectively” may be perceived as an opinion word. Instead of using “effectively” on its own, think about how you can highlight your successes as a leader with supporting examples, such as how you reduced turnover, onboarded additional team members, and prioritized professional development.

4. Recognize the successes of others on your team. If you are excited about completing a joint project, thank and celebrate the people who helped contribute to the achievement. This acknowledgment will augment your personal integrity and encourage a supportive work environment for your team and organization. When you encourage people who are doing well, it helps build relationships and spread positivity.

CORPORATE BRANDING

It is important to promote your organization to inspire stakeholders, attract customers, and recruit and retain team members. Stakeholders are looking for effective branding to be able to increase customer consumption, loyalty, and awareness. Customers may consider how honest an organization is about their offerings and think about how socially responsible and ethical its professional practices are for creating products and services. Team members are looking for an organization with a noble mission, a well-defined vision, and meaningful values.

With this framework in mind, consider these best practices for corporate branding:

1. Follow truthful, ethical advertising practices. Just like in selfpromotion, it may seem appealing to use adjectives about products and services that may not be as truthful. We can see several instances in the marketplace that illustrate this type of deception. One is around excessive packaging (i.e., product packaging that is larger than what is provided inside) or shrinkflation (i.e., a reduced product in the same-sized packaging). Another approach similar to shrinkflation is called non-functional slack-fill, which involves inserting an intentional empty space in the middle of a package that serves no functional purpose, like product preservation. Additionally, there is greenwashing, which involves claiming products are environmentally friendly when they are harmful to the environment to produce.

Companies may also be tempted to overstate their expertise in services. For example, an accounting firm may advertise they can perform a certain type of audit (e.g. benefit plan, A-133, etc.) while not having the training or knowledge to be able to perform it well. Likewise, someone could be advertising a CPA credential even if they never had one or have let their license lapse.

While there are many other examples of deception in the marketplace, some of which are tolerated more than others by consumers, it is important to consider the ethics of these approaches and consider the short-term gains of these methods compared to the potential long-term reputational risks.

2. Avoid criticizing competitors. It may be tempting for organizations to tear down competitors to make their organization look better. This practice, known as attack advertising, could result in ethical, legal, and reputational risks. Companies should strive to constructively contribute to the communities they serve and enhance their own brands based on their own merits instead of criticizing others.

3. Be consistent with your organization’s mission. An ethical corporate branding strategy is one that develops a compelling voice that reflects what your organization does, why it does it, and how it helps others. When these messages are regularly promoted across content, the organization will better attract and maintain its target audiences. Consider using search engine optimization to

help with consistency of messaging and identifying key words and phrases that are most likely to resonate with your company’s target audiences.

4. Find advocates for your organization. Endorsements in the form of case studies, quotes, and content sharing go a long way to fostering credibility for your organizational brand. Advocates who incorporate storytelling can connect with your audience on an emotional level, making your brand more memorable and relatable.

TYING YOUR INDIVIDUAL BRAND TO YOUR ORGANIZATIONAL BRAND

It is helpful to you and your organization if your professional brand and the brand of your organization are similar, especially if you are a leader of your organization. While they do not need to be identical, they should promote similar values and avoid contradicting each other. Interlinking your professional brand with your organizational brand may allow you to personalize the content of your organization to be able to provide examples of how you specifically live organizational values.

Overall, while promoting your professional and company brand, it is important to maintain a strong moral compass in how you approach the world with who you are, who you aspire to be, and who you would like to serve. When you balance self-promotion and corporate branding with sound ethics, you will foster trust and authenticity for yourself and your organization.

Best Practices in Post-Merger Integration

Two seasoned public accounting firm leaders share their tips for finding success when combining firms.

There’s no denying that merger and acquisition (M&A) activity in the accounting profession has been making headlines. New deals are in the news almost daily. This, of course, is being fueled by several factors: succession planning, the talent crunch, firms’ desires for growth and expansion of services, and private equity entering the profession, among others.

Many of you reading this may either be thinking about or have already immersed yourself in this trending market by seeking to sell a practice or acquire one—and with good reason. But before you get ahead of yourself, I’d suggest you take some time to create a postmerger integration plan, as it’s the most critical step for long-term M&A success.

Recently, I had the pleasure of sitting down with Jeffery Mowery, CPA, JD, LLM, CFP, managing partner at Mowery & Schoenfeld, and Katie Thomas, CPA, CFP, CGMA, president and CEO at Honkamp, to ask them some top-of-mind questions. Both Mowery and Thomas have been through several M&A deals in the past few years. Here, they share their keys to success in this space.

How many deals have your firms completed in the past four years? And, approximately how much revenue and how many team members have joined your firms as a result?

Mowery: We’ve closed three deals, adding approximately $11 million in top-line revenue and 15 full-time associates.

Thomas: In the past four years, we’ve completed four acquisitions, adding approximately 55 team members and $9.5 million in revenue.

While considerable effort and time comes before any deal is signed, what percentage of the “work” would you say comes after the ink is dry?

Mowery: I’d say 80% comes after the deal closes. The primary reason is that prior to signing, only the leadership teams are involved. Once the deal is signed, all the employees and clients become involved, and then technology, operations, processes, and procedures come into play to effectively execute the merger.

Thomas: I’d estimate that 90% of the “work” happens after. With each acquisition we’ve completed, we’ve learned new lessons and have continued to improve both our integration process and the quality and quantity of work we do upfront. However, in our experience, the pre-merger phase typically lasts less than 90 days from start to finish, while the integration phase can last up to two years for larger acquisitions. The pre-merger work is important and necessary, but the real work starts upon the closing of the transaction.

What are some of the key steps in a successful post-merger integration process?

Mowery: Our process includes key steps in client notification, staff onboarding, training, and work allocation. It’s important to keep in mind that integration impacts all aspects of office operations, human resources, systems training, tax and audit processes, quality control, technology, client communication, and more. Then there’s the need to align key operation functions, like marketing, administrative support, and practice management.

Thomas: We assemble an acquisition transition team as soon as we sign a letter of intent; this team starts with the pre-merger work and plans for post-merger integration very early in the process. Having a transition team in place is essential to strategically handling all aspects of the integration, including the areas of human resources, IT, marketing, learning and development, quality control, etc. We believe some of the most important steps include making sure that all new employees are onboarded and welcomed into our team, the clients are notified and are comfortable with the acquisition, and the transition of systems and technology is seamless.

In your opinion, what are the three most important considerations in a post-merger integration?

Mowery: I’d say number one is getting the new team acclimated, followed by getting the clients acclimated, then looking at work allocation to make sure everything is appropriately balanced.

Thomas: For me, the three most important considerations are talent retention, client retention, and operational integration, in that order.

How has your integration process evolved over the years?

Mowery: We’ve become more focused on business combinations that bring in clients who are a good match to the clients we already serve. A key step for us is carefully reviewing the top 10 clients of the firm being acquired or merged to evaluate if they’re a strong profile match with our existing top 10 clients. We’ve also refined our client transition process, which is especially important when a partner expects to retire within a few years of the deal closing.

Thomas: Honestly, our process continues to evolve each time we complete an acquisition. For example, we learned the hard way how challenging it can be to transition an acquired firm off their tax software. Now, unless there’s a reason why we must move quicker, we typically allow the acquired team to stay on all of their familiar software (except time and billing) until after the first completed busy season. I’d like to think that we continue to learn from our mistakes; each time we make another acquisition, it goes a little bit better than the last.

Have you ever had to reverse a merger or acquisition due to issues arising during integration?

Mowery: No, but we’ve thought about it! With 80% of the work happening after the deal is closed, the integration process can uncover challenges that aren’t easily identifiable in advance— even with the most conscientious due diligence. The lesson? Expect some surprises along the way.

Thomas: Thankfully, we haven’t had to reverse an acquisition. However, there are always things that we wish we knew in advance, or things that weren’t exactly as we understood them to be. Anyone making an acquisition should expect this, and if you do a thorough job of assessing culture and doing your due diligence, anything that pops up shouldn’t be more than just minor bumps in the road.

What’s your advice to a managing partner embarking on their first transaction?

Mowery: Expect the unexpected. Analyze your target’s internal processes and structure for portability. The better systems they have in place, the more easily they’ll be able to adapt to your systems.

Thomas: As I mentioned, we continue to learn with every acquisition and have made more than our fair share of mistakes. While I have plenty of advice, my top three tips are these:

1. Make sure you like the firm you’re acquiring. If you genuinely like the leadership team of the target firm, things tend to go well. I’ve heard plenty of horror stories of acquisitions done purely to meet a revenue or geographic goal despite the teams not liking each other.

2. If you’re serious about starting to acquire firms, build a great cross-departmental acquisition team before you even find your first target and start to develop your pre- and post-merger plans so you’re ready to move quickly when a deal presents itself.

3. Don’t underestimate the people side of the transaction. Being acquired often means that partners in a firm are selling their baby that they built from the ground up. It’s very difficult to go from being in charge of a firm you built to no longer being the decision-maker. It’s also scary for employees to be part of something they didn’t sign up for, often with short notice. Take the time to ensure that you have your talent on board and excited for the future, because if done correctly, an acquisition should be a net positive for both sides.

Mowery & Schoenfeld is headquartered in Lincolnshire, Ill., with additional offices in Chicago, Miami, and the Philippines. The firm reports $44 million in revenue and has 20 partners.

Honkamp is headquartered in Dubuque, IA, with eight additional offices throughout Iowa, Wisconsin, and Missouri. The firm generates $49.7 million in revenue and has 34 shareholders.

awright@JohnsonLambert.com

ICPAS member since 2010

New CPA Exam Aims to Bring More Than a Test to the Profession

With

recent exam changes, the profession can anticipate a new breed of CPAs who are poised to drive innovation and efficiency across the industry.

Passing the CPA exam is a crucial milestone for anyone aiming to enter the accounting profession. As of Jan. 1, 2024, the exam has been thoroughly updated to a core-plusdiscipline model, reflecting the dynamic shifts within the accounting landscape and the need for modern competencies and technological skills in today’s workplace.

UNPACKING THE NEW CPA EXAM SECTIONS

One of the most exciting updates to the CPA exam is the introduction of specialized disciplines. Although CPA exam candidates are still required to take the three core exam sections (auditing and attestation, financial accounting and reporting, and taxation and regulation), candidates can now choose from one of three new specialized disciplines for their fourth section. These include:

1. Business analysis and reporting: Reflecting on the strategic role that CPAs play, this segment evaluates the ability to consider business operations and financial reports. This section focuses on financial statement analysis, performance metrics, and comprehensive reporting—both financial and nonfinancial. Candidates must demonstrate not only their analytical capabilities but also their effectiveness in communicating these insights to stakeholders—all crucial for informed decision-making and risk management.

2. Information systems and controls: In an era where technology is pivotal, this section assesses knowledge surrounding information systems and the necessary controls to protect assets. Covering cybersecurity, data governance, and financial information integrity, this part ensures that CPAs are well-prepared to oversee and audit the technological frameworks that underpin all facets of accounting operations.

3. Tax compliance and planning: This section delves into the critical area of taxation, stressing not just the understanding of tax laws but also the strategic application of tax compliance and planning. During the exam, candidates will face scenarios that challenge their proficiency in applying tax regulations across different contexts—individual, corporate, and international. This segment is designed to equip CPAs with the skills necessary to navigate the complexities of tax obligations, while maximizing benefits and strategically aligning with financial planning and business strategies.

WHY THESE CHANGES MATTER

The new disciplines create a flexible structure that’ll significantly benefit candidates by allowing them to tailor their learning paths to better suit their career goals—making studying for the exam more relevant and engaging.

Additionally, the inclusion of the new disciplines directly responds to the evolving role of accountants in business settings. By broadening the exam to encompass these essential areas, the AICPA aimed to equip CPAs with broad and relevant skill sets. For students, this new format allows them to adopt an interdisciplinary approach in their studies, integrating traditional accounting knowledge with strategic, technological, and regulatory insights.

I think these enhancements not only expand the CPA credential’s scope but also elevate the profession’s standards, integrating CPAs more deeply into the strategic, operational, and technological fabric of modern businesses.

IMPLICATIONS FOR PROSPECTIVE CPAS

In a decisive move to support candidates during the transition to the new exam format, all jurisdictions have agreed to a credit extension policy as of Dec. 19, 2023. This policy grants an 18-month extension for unexpired credits from previous exam sections, extending the deadline to pass remaining sections until June 30, 2025. This ensures candidates have ample opportunity to complete their certification without penalty during the transition period. Additionally, the National Association of State Boards of Accountancy recommends that states adopt a 30-month timeline to pass the exam going forward and advises candidates to monitor for updates from their state boards.

The exam changes have prompted major exam preparation organizations to overhaul their review courses, as candidates will have to adapt their preparation strategies to cover more technologically inclined content and ensure proficiency in both core accounting principles and relevant tech applications. Additionally, candidates should be cognizant of the longer waiting periods

between score releases. The first grading period in 2024 is substantially longer for each exam section because the content has never been tested before.

ADVICE FOR CPA CANDIDATES

If you’re just beginning your CPA journey or are feeling overwhelmed by the prospect of starting under the new system, don’t forget to tap into your network! Engaging with classmates, colleagues, mentors, online forums, and professional associations (like the Illinois CPA Society) can be incredibly beneficial. Sharing strategies and experiences, or simply discussing how to overcome challenges, can help relieve the stress that comes with such a rigorous testing process. Drawing on the support and advice from those who understand the journey can also be instrumental in building your confidence and guiding you through the complexities of preparing for and passing the CPA exam.

Despite the challenges, it’s important for CPA candidates to remain committed to developing the essential skills needed to stay current with the rapidly changing accounting sector. After all, adapting to new learning styles and materials on the fly, although daunting, is crucial for aligning with the industry’s evolving demands, and it’ll make you more resilient to other challenges in the long run.

The recent changes to the CPA exam have become about more than just passing a test—these reforms aim to shape the future of accounting, ensuring it remains relevant and proactive in an everevolving business world.

This column was co-authored with Jake Sulaski, audit associate at Johnson Lambert LLP.

FINANCIALLY SPEAKING

mgilbert@reasonfinancial.com

ICPAS member since 1982

The Great Generational Wealth Transfer (or Not)

Will the so-called great generational wealth transfer be more hype than reality? Only time will tell— the key is to start planning now.

Almost from the time I began my second career in personal financial planning in 1997, I can remember hearing about the great amount of wealth that would be passed down in America from the Greatest Generation (born between 1901-1927) and the Silent Generation (born between 1928-1945). And while there’s already been a fair amount of wealth received by the children and grandchildren of these generations over the last two decades, the future transfer of wealth from baby boomers (born between 1946-1964) and Generation X (born between 1965-1980) to millennials (born between 1981-1996) and Generation Z (born between 1997-2012) will outpace it substantially by most accounts.

It seems, collectively, today’s “kids” will have it made down the road—at least financially speaking. Of course, nothing in personal finance is ever as easy as it seems, which begs the question: Is the great generational wealth transfer more hype than reality? Let’s first look at some facts and numbers.

Without context, the numbers are almost too large to appreciate. According to global real estate consultant agency Knight Frank, approximately $90 trillion in wealth will move from the Silent Generation and baby boomers to millennials between now and 2044. According to financial services industry consultant Cerulli Associates, baby boomers alone will leave about $68 trillion through 2044 to their Gen X, millennial, and Gen Z heirs. By comparison, at the end of fiscal year 2023, the accumulated government debt in the United States was $33.2 trillion.

Cerulli Associates further estimates that 68% of the wealth transferred through 2045 will come from only 6.9% of U.S. households—the estimated number of households with at least $1 million in investable assets.

Knight Frank believes that the nature of wealth will change as it passes between generations. They point to Gen X and older investors, whose wealth creation occurred with the help of historically low interest rates through ownership of publicly traded securities— especially in individual retirement accounts and 401(k)-type plans—and real estate. On the other hand, millennials and Gen Z have mostly seen higher interest rates, which has made property ownership less attainable and, in some instances, publicly traded securities less appealing. As a result, these younger folks often rent rather than buy their residences and look for other opportunities to grow their wealth, such as through private and entrepreneurial business ventures.

The use of wealth also seems likely to change among the younger generations. According to a 2023 Modern Affluence Summit report, 49% of Gen Xers focus on investing with purpose, compared to 66% of millennials. The environment is another area that shows clear differences among younger generations. According to Knight Frank’s 2024 Wealth Report, “The Next Chapter,” a smaller percentage of baby boomers (59% male; 67% female) let environmental concerns influence their investment decisions, compared to millennials (80% male; 79% female).

IMPEDIMENTS TO THE WEALTH TRANSFER

Despite the trillions in wealth held across generations, there are several hurdles that may impact transferring wealth.

1. Increased credit and debit card spending. In a June 2023 report, Bank of America reported that the Silent Generation and baby boomers are spending more on all types of cards, and increasing spending at a faster clip, than younger generations. The logic, of course, is that the older generations are wealthier than their children’s generations, so why not spend more of their assets? However, if this trend continues, then there will be less wealth to pass along to heirs. It’s ironic given that parents of these older generations historically tended to reduce, not increase, spending in their later years.

2. Increased health care and long-term care spending. Credit and debit card spending is typically discretionary and can be reduced as needed. On the other hand, health care is often looked at as a non-discretionary cost. Long-term care costs—typically in the last years of a person’s life—are even less discretionary. According to a 2023 Fidelity study of retiree health care costs, a 65-year-old is projected to spend, on average, $157,500 in lifetime retirement health care costs (almost double the $80,000 estimate from 2002). A 2023 Genworth survey of long-term care costs estimates the median annual cost of living in an assisted living facility to be $64,200, while the annual median cost of a full-time home health aide is $75,500. Additionally, the median annual cost of a semi-private room in a skilled nursing facility is $104,000. These costs, even if incurred for a short period, can certainly deplete a meaningful amount of wealth that would otherwise be left to younger family members.

3. Wealth remains among wealthy families. There’s a very real chance that much of the wealth to be transferred will come from wealthy members of the older generations and pass to alreadywealthy members of younger generations. It’s predicted that only 1% of the households in the U.S. (the wealthiest 1%) will pass as much as 42% of the available generational wealth or about $38 trillion. Though, it may largely go unnoticed, as the beneficiaries of this wealth transfer will likely be able to handle it discreetly. The bottom 50% of the Silent and baby boomer generations will pass approximately $6 trillion to their heirs (though, I predict a more conspicuous show of this newfound wealth).

PREPARING YOUR CLIENTS

As your clients’ trusted CPA advisor, you can play a tremendous role in assisting them in successfully transferring their wealth to the next generation. By successful, I mean a transfer of wealth with a minimum loss due to taxation and legal or administrative processes, and in such a way to meet the expectations of all parties. Here’s how you can do that:

1. Make your clients aware of the urgency to plan for the transition of their wealth, especially if it’s reasonable to believe the amount left to their heirs will have a material impact on those heirs’ financial positions.

2. Wherever possible, develop financial projections that tangibly show estimated levels of wealth, administrative and probate costs, taxes, and the net wealth left for their heirs.

3. Develop a wealth transfer team to assist clients in transforming their hopes and wishes into tangible action steps to be followed through appropriate estate planning documents. The team should consist of a CPA, estate planning attorney, financial planner, and any other professionals you and your clients see fit.

4. Share findings concerning traits and attitudes around wealth among millennials and Gen Zers so that your clients can consider their heirs’ interests and financial abilities to handle wealth.

Advising on the proper way to transfer wealth is among the most important, endearing services we can provide to our clients. Only time will tell whether the great generational wealth transfer will be proven to be more hype than reality (likely over the next couple of decades or so). Until then, I highly recommend that you educate yourself on this potential opportunity so your clients can be wellprepared to pass on their assets to the next generation.

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kstaats@ilchamber.org

ICPAS member since 2001

O Tax Revenue, Where Art Thou?

As state and city leaders scramble to find additional tax revenues for their future fiscal budgets, they’ll likely want to steer away from taxing services. Here’s some history on why.

Even though the Illinois General Assembly’s spring legislative session has only recently concluded, and the budget for fiscal year 2025 began on July 1, there’s already talk of a need for additional tax revenues for the fiscal year 2026 budget.

For example, the Chicago area’s transit agencies—including the Regional Transportation Authority (RTA) and Chicago Transportation Authority—have already announced their intentions to seek additional funding from the state. For background, these transit agencies have been receiving a significant amount of federal funding since the pandemic, and that funding runs out at the end of the year. In fact, beginning in 2026, the RTA system is facing a projected $730 million annual budget gap.

Of course, the state doesn’t have an extra $730 million to give, and the City of Chicago is facing its own unique fiscal challenges, with Mayor Brandon Johnson already looking at several different revenue sources. Because the City of Chicago doesn’t want to raise additional revenue by increasing property taxes, there’s been talk of taxing services at both the state and city levels.

While my focus for this column isn’t to give my opinion on the merit or lack of merit of taxing services, I will provide some historic context on prior attempts to tax services in the state and City of Chicago and why legislative leaders will face challenges if they steer in this direction.

THE HISTORY OF ILLINOIS’ SERVICE TAXES

Illinois has a Service Occupation Tax, and like most things that are sales tax related in the state, this tax is unique. Despite its name, the Service Occupation Tax doesn’t tax services. Instead, it’s a tax imposed on tangible personal property (TPP) transferred to a purchaser in the course of providing a service—the service itself isn’t taxed.

So, how did Illinois end up with a “service” tax that doesn’t tax services? The answer lies in the restrictions on taxation that were included in the 1870 Illinois Constitution that was in effect when Illinois enacted its sales taxes, as well as political inertia that prevented Illinois from revamping its sales tax laws since the enactment of the 1970 Constitution.

As I’ve shared in previous columns, Illinois’ sales tax is actually four separate taxes: the Retailers’ Occupation Tax, the Use Tax, the Service Occupation Tax, and the Service Use Tax.

• Retailers’ Occupation Tax and Use Tax: In 1933, Illinois enacted the Retailers’ Occupation Tax, which is a tax on the sale of TPP imposed on a retailer. However, the tax had a major loophole—purchasers could make purchases tax-free from out-of-state sellers who weren’t located in Illinois. To close that loophole, Illinois enacted the Use Tax in 1955. The Use Tax is imposed on purchases of TPP and gives Illinois the authority to collect tax from purchasers when they made purchases from retailers that aren’t subject to the Retailers’ Occupation Tax.

• Service Occupation Tax and Service Use Tax: In 1961, Illinois enacted the Service Occupation Tax and the Service Use Tax. These taxes are imposed on the selling price of TPP transferred (sold) to an end user in the course of providing a service. A classic example is automobile repair: The tax is imposed on the selling price of the repair part(s), but the charge for the mechanic’s service in repairing the automobile isn’t taxed. (There are arcane and, in some instances, virtually incomprehensible rules about how a bill from a service provider can be divided up to properly allocate charges between taxable and nontaxable aspects of the service transaction—but that’s a whole other column in itself.)

SERVICE TAX PUSHBACK

In 1967, the Illinois General Assembly passed, and the governor signed, legislation to impose a true tax on certain services. The tax base of the Service Occupation Tax was expanded to include the charges for these services. This expansion was limited to four types of services:

1. Selling certain tools and equipment.

2. Printing graphic arts (not taxable under the Retailers’ Occupation Tax).

3. Repairing, renovating, or reconditioning TPP.

4. Selling prescription drugs or medicines.

However, a group of service providers and customers challenged the validity of this legislation, and in 1968, the Illinois Supreme court ruled in Fiorito v. Jones that the amendments to the Service Occupation Tax were unconstitutional, as they limited taxed services to the four types of services. If the tax was deemed to be levied on the performance of a service, the court concluded that it was unreasonable to exclude transactions in which no personal property was transferred. Also, if the tax was deemed to be levied on the TPP transferred by a service provider, the court concluded it was unreasonable to measure the tax by the gross receipts of the entire transaction.

Another example that was challenged was in 1981 when the City of Chicago enacted an ordinance that imposed a 1% tax on purchases of services in the city. In 1982, the Illinois Supreme Court ruled in Commercial National Bank of Chicago v. City of Chicago that the city’s services tax was unconstitutional on two grounds:

1. It violated a provision of the Illinois Constitution requiring approval by the General Assembly for the imposition of occupation taxes by home rule units.

2. It violated the Illinois Constitution’s uniformity clause by taxing certain businesses and transactions and exempting others.

Needless to say, if the General Assembly attempts to craft legislation that taxes services next year, these are some of the challenges they’ll be up against again. After all, Supreme Court precedent will make it difficult, if not impossible, to pick and choose which services can be taxed.

If Chicago pushes forward with its proposal to tax services, it’ll face challenges because Supreme Court precedent and Illinois law restricts Chicago from imposing a local services tax without specific authority from the General Assembly. Of course, even if such authority were granted, uniformity principles will limit the ability of the city to pick and choose which services are taxable.

That said, if state and city leaders go looking for additional tax revenues for the years ahead in the form of services taxation, in my opinion, both the city and state will be unlikely to craft taxes on services that are both politically viable and legally defensible.

9.20.24

A good day for doing good! Be part of the Illinois CPA Society’s 15TH annual CPA Day of Service.

Participating is easy:

Visit www.icpas.org/CPADayofService for more information. 1 2

Choose a community organization or charity to help and register your event as an individual or group at www.icpas.org/CPADayofService.

Order your free CPA Day of Service T-shirt using the link from your registration confirmation email. (while supplies last; free to ICPAS members)

Volunteer as an individual or get a group together and volunteer as a team any day this fall.

Anna C. Gomez, CPA

After facing the hard realities of immigrating to the United States, this ‘Woman to Watch’ has made it her passion to help other women like her rise up the ranks.

Whether it stemmed from her obsession with American franchises, or it’s just simply built into her DNA, Anna C. Gomez, CPA, recipient of the Illinois CPA Society’s 2024 Women to Watch Experienced Leader Award, knew from an early age she had a passion to do more.

Growing up in the Philippines, Gomez was surrounded by a family of businesspeople. Her grandfather, who she calls her “total mentor” and “idol,” had his own business ventures, and she would often lean on him for professional advice.

“As a family, we would vacation to the States, and I became obsessed with Arby’s,” Gomez laughs. “So, after I graduated from college with a degree in accounting and finance, I asked my grandfather if he would help me set up a franchise in the Philippines.”

But Gomez’s grandfather didn’t leave her with the advice she expected to receive: “He said, ‘Why would you pay another company, and pay for every plate, every cup, every fork and spoon, when you could just create something on your own and make it your own.’”

Gomez took that advice, and at age 23, with the help of a friend, she opened a small restaurant. “We both flew to San Francisco, did some research, and became obsessed with Cinnabon and cinnamon rolls. So, we brought that idea home but with a Filipino twist,” Gomez explains. “Before we knew it, we had lines out the door.”

Yet, even with this success, including receiving some franchise offers of her own, Gomez still had a desire to do more with her career. After having her second child, Gomez and her husband made the decision to pursue a move to the United States, and like many immigrant stories, she would be met with some hard lessons on resilience.

“Despite coming into the U.S. with an education and so much business experience, it’s a reality check when you learn it doesn’t matter—I had to start from scratch,” Gomez admits. “I took the train from Indiana to downtown Chicago every day and sat in recruiting offices with a folder and all the humility I could muster.”

For Gomez, this process went on for about a year until she received a call from a recruiter seeking a copy girl. “I took the job and just said to myself, ‘I’m going to be the best copy girl ever,’” Gomez laughs. “I think this is where I found the strength to just continue to be humble and keep at it.”

Today, Gomez is far from her position as a copy girl. She now serves as global chief financial officer (CFO) and partner of Mischief USA

and No Fixed Address Inc. However, the hardships she endured while immigrating to the U.S. have fueled Gomez’s career with a passion for advancing women like her.

“As an immigrant, I really had a front row seat to how it is for people who aren’t from here or who don’t look like everybody else,” Gomez stresses. “They don’t have that self-confidence—and for women, it’s so much worse.”

In the accounting profession, Gomez says it can be especially difficult for women of color who want to rise up the ranks. “I think for a lot of diverse women in this industry, there’s a tendency to shy away and stay in the background. There’s no impetus to help us rise into a strategic or operational role.”

To combat this challenge, Gomez stresses the need for greater mentorship: “There’s so much room for women like me to grow, but there’s not enough opportunity. I was lucky enough to have mentors that saw my potential and hunger for challenges and learning.”

Interestingly, leaning on her mentors opened another career venture for Gomez: writing romance and women’s fiction. Specifically, writing gave Gomez an opportunity to connect with other women and talk about her culture and other experiences. “I wanted to show commonality. It doesn’t matter where you come from: friendships are friendships, love is love, business is business, and it’s the same all over the world.”

While writing has become a passion for Gomez, she insists it’s just a side gig and has no plans of giving up the accounting career she fought so hard to earn. In fact, writing books has carried over into her role as a CFO.

“From my books, I have a Facebook group of about 300 women. Just the humanity that goes through this group—it’s really opened my eyes to the plight of women and what women go through, and it’s made me a better leader.”

Of course, making Gomez an even better leader is ultimately remembering where it all started.

“I think a lot of who I am today started when I was 23 and owned my restaurant. I would never have been able to lead the way I lead today, or have the insights I do, if I didn’t have that experience of starting something on my own,” Gomez says. “I come from a thirdworld country, and I was always very cognizant of the hardships of some of my restaurant employees—I’ve carried that into my leadership today.”

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NEW $609K Wheaton, IL EA Tax Practice; NEW $491K St. Louis Metro Area Tax Practice; $241K Chicago Area CPA Firm; $365K Kankakee, IL CPA Firm; $398K Mokena, IL CPA Firm; $635K Kewanee, IL CPA Practice.

For practice details call 1.800.397.0249. Or, visit us at www.APS.net to inquire about available opportunities and register for free email updates.

THINKING OF SELLING YOUR PRACTICE?

Accounting Practice Sales is the leading marketer of accounting and tax practices in North America. We have a large pool of buyers, both individuals and firms, looking for practices now. We also have the experience to help you find the right fit for your firm, negotiate the best price and terms and get the deal done.

To learn about our risk-free and confidential services, call Trent Holmes at 1.800.397.0249 or email Trent@APS.net.

Selling or Buying a Firm? Now’s the Time!

Selling your firm is complex. Accounting Biz Brokers can make it simple. Contact us today to receive a FREE Market Analysis and get started!

FOR SALE! Lincolnwood CPA Firm Gross $200K, Asking $250K (Sale Pending) Kathy Brents, CPA, CBI

Creating My Own Version of

‘Having It All’
You can have everything you want out of life—it just requires finding an employer that’s willing to work with you.

CPA
Audit Manager | ORBA

GROWING UP, I had a front row seat to the world of public accounting. My father was a tax accountant, so I understood the long days of busy season. He showed me early on what dedication and a successful career looked like. My family was fortunate to always drive somewhere warm for spring break (far away from our home in Indiana), but my father could never join us because of the various tax deadlines he was up against. Of course, I knew these sacrifices were all to pursue his ultimate goal—giving his family all he could.

When I decided I wanted to study accounting as a sophomore at Purdue University, I thought about my dad, and like him, set my own career goals. I knew I would put in the time early on—working long days, working on the weekends, and making myself available to work as much as possible. I learned as much as I could so I could continue growing as an audit staff member. Early on in my career, I also knew the importance of being a well-rounded professional, so I made sure to get involved with the Illinois CPA Society (ICPAS) and began serving as their Firm Ambassador within ORBA.

In 2020, my priorities slowly started to shift when I became pregnant with my first child. From that moment on, I knew that my son was going to have to be my main focus. Yet, like many women, I also wanted to try and “have it all.” (So much, in fact, that I even started ORBA’s Community Outreach Committee in the fall of 2020 while I was five months pregnant!)

After my son was born in December 2020, I shifted to a flex schedule at ORBA. The thought of missing any of my son’s “firsts” or not being

able to take part in any of my professional extracurriculars (e.g., ORBA’s recruiting and outreach committees and ICPAS), seemed unimaginable to me. But thanks to a few women at ORBA (long before me) who helped pave the way for more flexibility at the firm, I’m now able to work a set number of hours per week during busy season and have time in the evenings and on the weekends to enjoy time with my family.

Despite cutting down my work hours to focus on my family, the flexibility of my employer allows me to pursue new and exciting professional endeavors. Even now as my family continues to grow, I’m continuing to get more involved with ICPAS, for instance. In fact, in addition to formerly serving on the ICPAS Young Leaders Advisory Council, I was recently elected to serve a three-year term on the ICPAS Board of Directors.

Over time, I’ve learned it’s important to find an employer that’s willing to support your goals so you can prioritize what you want out of life. For me, this means being able to create my own version of “having it all.” I want a fulfilling career where I continue to grow my audit knowledge, but I also want to be involved with different committees inside and outside of work, all while getting to spend quality time with my family. Of course, I’ve had to learn it’s OK to say no to things—you can’t simply do it all (and that’s OK too). But I’m fortunate to have both the support of my family and ORBA to continue my fulfilling work-life balance—and I hope you can find that too.

Paving the Way for Tomorrow’s CPAs

CPA Endowment Fund of Illinois

Becoming a CPA wouldn’t have been possible without your support.

$260K AWARDED 400 ASPIRING CPAs 1,070 DONORS

Academic Scholarships

CPA Exam Awards

Laptop Scholarships

Virtual Career Fair

Student Influencer Program

Internship Preparation Program

2023-24 Impact Report:

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