In this issue
Will the OFS soften the economic blow?
Shotgun mergers boom around the world
Looking for a job? Uncle Sam is hiring
Protect your investments from the taxman
CFOs take on the HR role
Take a GIAnT step in decision-making
Protect your client base in tough times
Student ambassadors lead in the job game
Exchange of debt for equity points you in the right direction
Plus, 2009-2010
ICPAS Board of Directors announced
26 Heavy Burden
By C arolyn TangThe Office of Financial Stability promises to lift us from the rocky economy and place us safely on even ground. But can it deliver on the promise?
30 Firesale M&A
By Sheryl Nance- NashA distressed economy sparks a rash of hasty M&A deals
34 Government Agent
By Derrick LillyAs financial woes weigh on the country, finance professionals are in high demand from the US government.
10 Investing Relax Your Tax Burden
By Derrick LillyTired of your earnings being eaten away by taxes?
14 CFO Hire Learning
By Meta LevinCFOs are sharpening their soft skills to better handle the world of HR
16 Risk Recession-Proof Clients
By Janet HaneyTechnology and face time help to foster client relationships in an economic downturn
18 Strategy Take a GIAnT Step
By Ted Sa n t o s & E d wa r d M Pet r o sk y
A new tool promises to assess your organization’s readiness to take on large - scale initiatives
20 Students Student Ambassadors
By Derrick LillyWant to impress recruiters straight out of college? This is how to do it
22 Tax Debt Navigator
By Harvey C oustan, C PAExchange of debt for equity gives partnerships a route to certainty
Chairperson, Sheldon P Holzman, CPA Virchow Krause & Company LLP
Senior Vice Chairperson, Lee A Gould, CPA Gould & Pakter Associates LLC
Vice Chairperson, James P Jones, CPA Edward Don & Company
Vice Chairperson, Michael J Pierce, CPA RSM McGladrey Inc
Vice Chairperson, Ray Whittington, CPA College of Commerce Depaul University
Secretary, Charles F G Kuyk III, CPA Crowe Horwath and Company LLP
Treasurer, Sara J Mikuta, CPA The Leaders Bank
Immediate Past Chairperson, Debra R Hopkins, CPA Northern Illinois University CPA Review I
Brent A. Baccus, CPA Washington Pittman & McKeever
Therese M. Bobek, CPA PricewaterhouseCoopers LLP
Robert E. Cameron, CPA Cameron Smith & Company PC
William J Cernugel, CPA Alberto-Culver Company (Retired)
Anthony Fuller Grant Thornton LLP
William P Graf, CPA Deloitte & Touche LLP
Cara C Hoffman, CPA Blackman Kallick LLP
Charlotte A Montgomery, CPA Illinois State Museum
Gerald A Olsen, CPA Illinois Wesleyan University
Annette M O’Connor, CPA RR Donnelley Logistics
Mary Lou Pier, CPA Pier & Associates Ltd
Marian Powers, PhD Northwestern University
Daniel F Rahill, CPA KPMG LLP
Lawrence H Shanker, CPA Shanker Valleau Accountants Inc
Th e e c o n o m y h a s t h r o w n a l e f t c u r v e a t everyone’s plans, and the Securities and E x c h a n g e C o m m i s s i o n ’s ( S E C ) r o a d m a p f o r I n t e r n a t i o n a l F i n a n c i a l R e p o r t i n g S t a n d a r d s
Financial woes and a change in leadership at the SEC may have complicated the shift to IFRS from US GAAP, but they haven’t stopped it And a variety of lively discussions have resulted from efforts to grapple with issues such as fair market value, m a r k - t o - m a r k e t a c c o u n t i n g , r e q u i r e d c o s t s a n d training, educational readiness and the onslaught of globalism.
According to an AICPA survey conducted last fall, 55 percent of CPAs at firms and companies nationwide are preparing for IFRS, up from 41 percent in April 2008 Global convergence of US GAAP and IFRS, in fact, is one of the top concerns for CEOs in 2009, according to Financial Executives International
Yet another survey, this time conducted by Deloitte, indicates that 42 percent of the 200 finance professionals surveyed would consider implementation of IFRS sooner than 2014 if p e r m i t t e d b y t h e S E C . C u r r e n t l y, i f c e r t a i n m i l e s t o n e s a r e a c h i e v e d , t h e S E C ’s p r o p o s e d roadmap could lead to required use of IFRS in 2014. However, consideration is being given to permit use by a limited number of companies as early as 2010.
The changing economic and political climate may have put the pause button on IFRS implementation, but we still need to pay attention Newly appointed SEC Chairman Mary Schapiro has said she does not feel bound by the existing IFRS roadmap that’s out for public comment and plans to proceed with caution Yet whether it arrives fast or slow, it will be a part of our lives At some point in the not so distant future we’ll find ourselves in uncharted territory namely, an accounting world with IFRS in it
The Illinois CPA Society continues to monitor the impact and implementation of IFRS, among other issues relevant to the profession. We will stand by you ready with information and assistance for wherever it is we’re headed. The journey is a little less intimidating when you have someone along for the ride
ICPAS President & CEO
Publisher
ICPAS President & CEO
Elaine WeissEditor-in-Chief
Publications Director
Judy Giannetto
Creative Services Director
Gene Levitan
Creative Services Manager
Rosa Garcia
Publications Specialist
Derrick Lilly
National Sales & Advertising
Janis L Mason
medrepcons@ aol com
Offi ce: 773- 325- 1804
Cel l : 312- 560- 3081
Information Systems Manager
Jim Jarocki
j arocki j @ i cpas org
Editorial Office
550 W Jackson Blvd , Suite 900, Chicago, IL 60661
Advertising Sales Office 3711 N Ravenswood Ave , Suite 146, Chicago, IL 60613
INSIGHT is the official magazine of the Illinois CPA Society, 550 W Jackson, Suite 900, Chicago, IL 60661, USA Its purpose is to serve as the primary news and information vehicle for some 23,000 CPA members and professional affiliates
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 (ISSN-1053-8542) is published bimonthly except monthly in July and August by the Illinois CPA Society, 550 W Jackson, Suite 900, Chicago, IL 60661, USA, 312-9930393 or 800-993-0393, fax 312-993-0307 Subscription price for non-members: $30 U S , $40 Canada and International addresses, $42 Mexico Copyright © 2008 No part of the contents may be reproduced by any means without the written consent of INSIGHT Permission requests may be sent to: Editorial Director, at the address above Periodicals postage paid at Chicago, IL and at additional mailing offices POSTMASTER:
$1,009,100,000,000 US Government ’ s FY 2008 budget deficit. Source: Government Accountability Office report, A Citizen's Guide to the 2008 Financial Report of the US Government
So you want your CPA firm to expand into investments? Here are four ways to do it:
1 A c q u i r e a f i n a n c i a l s e r v i c e s f i r m This allows you to expand services to the existing clients of both firms while increasing the size of your client base
2 E s t a b l i s h y o u r o w n f i n a n c i a l s e r v i c e s p r a c t i c e This is a much less expensive option, and allows you to tailor services to your overall goals, maintain your existing clients, and keep control over your practice
3 P a r t n e r w i t h a n i n v e s t m e n t f i r m This doesn't require you to expand your payroll or infrastructure, maintains control of your clients, and allows you to expand your services and client base
4 I m p l e m e n t a r e f e r r a l p r o g r a m Although requiring little time and no investment, you face the risk of losing both your clients and your control over the services being offered.
Source: Frankle, N , CFP (2008, December 18) “Offering Financial Services to Clients in This Market? Are You Nuts?” Wealth Management Insider.
“A r e c e s s i o n i s w h e n y o u r n e i g h b o r loses his job A depression is when you lose yours. ” (Ronald Reagan, 1982)
A recent survey developed by Robert Half International suggests that today ’ s senior executives are increasingly worried about hanging on to good employees and bringing in new ones Thirty-nine p e r c e n t o f t h e 1 5 0 p a r t i c i p a t i n g e x e c u t i v e s f r o m s o m e o f t h e nation’s largest companies cited employee retention as their greate s t w o r r y, w h i l e 2 2 p e r c e n t c i t e d r e c r u i t m e n t Pr o d u c t i v i t y a n d employee morale were each named by 17 percent of respondents
Source: Robert Half International [www rhi com]
$68 bil lion
Decline in FY 2008 corporate tax revenue collected by the US Government due to the weakening economy
Source: Government Accountability Office report, A Citizen's Guide to the 2008 Financial Report of the US Government
Garelli
Overall salary increase projected for finance and accounting staff in 2009. Source: Robert Half International 2009 Salary Guide.
Career expert Ford R Myers, president of Career Potential LLC and author of Get the Job You Want, Even When No One's Hiring, says, "Even in this difficult economic climate, job seekers have more control over their career circumstances than they might think There are specific strategies and tactics that consistently generate strong results in a bad job market " Myers offers the following 10 tips to get you through these tough times:
1 M a i n t a i n y o u r m o m e n t u m Stay busy, get active and be productive in both job search and non-job search related pursuits
2 S e e k h e l p Get career support from a professional career coach who can better prepare you for your next position Consult a counselor if you are struggling emotionally
3 R e a d c a r e e r b o o k s a n d a t t e n d c a r e e r s e m i n a r s Staying informed of industry trends will help you gain greater knowledge of the careers poised for future growth
4 L e v e r a g e t e c h n o l o g y Utilize websites, online services and social networking sites like LinkedIn to keep in touch with peers and colleagues
5 D i f f e r e n t i a t e y o u r s e l f Get involved in professional organizations and position yourself as an expert by writing articles, giving presentations and teaching classes
6 U s e o f f t i m e w i s e l y Gain more education by participating in classes and seminars, work towards a certification or attend professional conferences
7 P u r s u e a t e m p o r a r y, p a r t - t i m e o r c o n t r a c t p o s i t i o n Volunteer, offer pro bono work or take part in an internship/apprenticeship, especially when considering a change in industry
8 . Ta k e c a r e o f y o u r s e l f . Eat well, exercise, get plenty of rest, keep in touch with friends and family, and keep up with hobbies and favorite activities
9 R e l o c a t e Consider shifting industries and/or being more geographically flexible to expand your career options
1 0 E n h a n c e a l l t h e d o c u m e n t s i n y o u r c a r e e r p o r t f o l i o Practice interviewing and negotiation skills Focus your message on the tangible results you can produce
Source: Career Potential, 2008 Ford R Myers can be contacted at contact@careerpotential com or www careerpotential com
The recently released results of a Robert Half International (RHI) study commissioned in 2007 reveal that financial professionals around the world have significantly different work hour practices The report of this study, Working Hours: A Global Comparison, includes the opinions of 2,283 financial managers in 17 countries
While the average number of work-week hours varies from country to country, globally many financial professionals (52 percent) are working longer hours than they did in previous years Reasons include increased responsibility, company growth, increasing globalization, the need to accommodate international clients, and imp r o v e d t e c h n o l o g i e s , w h i c h k e e p e m p l o y e e s connected to work 24/7
Financial professionals in Luxembourg, Japan and Ireland lead in hours worked In fact, 60 percent of Japanese workers say they work 46 or more hours per week, and 19 percent say they log over 55 hours a week (compared to 12 percent in the United States, 11 percent in the United Kingdom and 9 percent in France ) Forty- seven percent of respondents from Ireland say they work between 46 and 55 hours a week 17 percent above the global average The average number of hours worked in Luxembourg is 47 6
For more on this report, visit www rhi com
Sa d l y, w e ’ v e a l l h a d t o a c c e p t t h e f a c t t h a t m o n e y d o e s n ’t g r o w o n t r e e s , w h i c h m e a n s a l t e r n a t i v e methods for growing and protecting wealth are essential to long-term financial stability.
Regardless of whether you already own or are thinking of purchasing bonds, ETFs, mutual funds, individual stocks, or all of the above, the long-term implications of paying federal and state taxes on earned interest, dividends and capital gains can significantly erode overall investment returns.
However, tax-advantage investing offers the means to dull the taxman’s axe.
By purchasing US Treasury securities and savings bonds, you are essentially making a loan to the government over a fixed period, ranging from a matter of weeks to 30 years Because Treasury securities are backed by t h e “ f u l l f a i t h a n d c r e d i t ” o f t h e g o v e r nm e n t w h i c h c a n r a i s e t a x r e v e n u e s t o cover debts this type of investment is considered to have no credit risk
“All investors should consider the appropriateness of Treasuries for some portion of t h e i r p o r t f o l i o , ” s a y s M a r k J G i l b e r t , C PA / P F S / M B A , p r i n c i p a l a t R e a s o n F i nancial Advisors Inc “For investors in states w i t h h i g h m a r g i n a l i n c o m e t a x r a t e s , d e v e l o p i n g a t a x - c o n s c i o u s i n v e s t m e n t portfolio should consider both federal and s t a t e i n c o m e t a x e s T h e r e f o r e , Tr e a s u r i e s become an increasingly important part of an investor ’s portfolio ”
In terms of savings bonds, federal taxes can be deferred until redemption, and may be redeemed fully tax-free if used for qualifying education expenses
“If a client is willing to take on relatively small risk, he or she could invest in AAAr a t e d m u n i c i p a l b o n d s i n o r d e r t o e a r n interest that is free of federal income taxes,” says Gilbert
M u n i c i p a l b o n d s , o r “ m u n i s , ” a r e d e b t obligations issued by local and state governm e n t e n t i t i e s t o f i n a n c e t h e b u i l d i n g o f schools, hospitals, roads, utilities and other public projects Munis typically offer higher yields than Treasury securities, carry a credit r a t i n g t o d e t e r m i n e q u a l i t y a n d r i s k , a n d offer interest that is generally exempt from federal income tax However, the interest on some munis may be subject to the alternative minimum tax What’s more, as long as you live in the offering locale, interest is sometimes free of state and local income taxes as well
Munis do carry some risks, however For one, they are increasingly sensitive to interest rate changes in the markets and their values fluctuate based on market conditions.
“Ordinarily, in an environment of rising i n c o m e t a x e s , t a x - f r e e m u n i c i p a l b o n d s would climb in value,” says Gilbert “Howe v e r, t h e c u r r e n t f i n a n c i a l c r i s i s h a s d epressed municipal bond prices as investors w o r r y o v e r t h e a b i l i t y o f i s s u e r s t o e i t h e r r e p a y o r r e f i n a n c e o u t s t a n d i n g b o n d s I don’t believe municipals will rise in value until investors believe that the financial crisis is under control.”
Credit ratings can impact valuations as well Generally, a bond issuer with a lower credit rating will offer a higher yield, but the risk of default may be greater.
“As the client is willing to take on greater risk, he or she could invest in lower-rated municipal bonds to earn higher amounts of tax-free income,” says Gilbert However, a general risk-aversion practice is to only purc h a s e “ i n v e s t m e n t - g r a d e ” b o n d s b o n d s that rating agencies, Moody's, Standard & Poor's and Fitch rate as BBB, Baa or better Bond
Ta x - f r e e b o n d f u n d s a n d t a x - m a n a g e d income funds (i e mutual funds that primar i l y i n v e s t i n g o v e r n m e n t a n d m u n i c i p a l bonds and securities) can be a great way to enter bond investing without the hassle of
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evaluating individual bonds and their tax policies. Funds require much less money in order to establish a diversified portfolio, and commonly make monthly or quarterly dividend distributions as opposed to the semi-annual or annual interest payouts of many individual securities
However, unlike individually purchased bonds, a fund’s holdings are determined by the will of its manager, who may move in and out of different positions. The fund’s yield or dividend rate fluctuates based on its earnings and holdings at the time of payout
“I would pay close attention to factors you'd look at in analyzing any fund Ask yourself, is the manager experienced? Are fees low? How does long-term performance look on an after-tax basis?” says Christopher Davis, mutual fund analyst at Morningstar Inc. “Overall, tax-managed funds are very underutilized They can offer you the tax benefits of investing in a Roth IRA, but you have none of the restrictions ”
W h a t ’s m o r e , a f u n d ’s s h a r e s a r e i s s u e d t o s e v e r
i n v e s t o r s , meaning that the share value fluctuates based on the fund’s asset value, the number of outstanding shares and other liabilities Subsequently, there is no guarantee that the redemption price will be the same or greater than the initial purchasing price. Management fees, commissions, or purchasing and redemption limitations also may be involved
Aside from employer-matched retirement plans like the 401(k), two account types are most often considered when it comes to investments and retirement money: A traditional IRA and a Roth IRA.
Gilbert stresses that, “All investors, regardless of their income tax bracket, should be encouraged to invest through 401(k), IRA and Roth investment structures where permitted by the tax code These vehicles provide current or future income tax savings, which results in more investment principal to grow on a tax-deferred or possibly tax-free basis ”
A significant difference between the traditional IRA and Roth IRA is the way taxes are handled. In a traditional IRA taxes are deferred, so if $10,000 is earned over the year and $1,000 is contributed, the contribution amount will be deducted from taxa b l e i n c o m e H o w e v e r, a l l c o n t r i b u t i o n s a n d c a p i t a l g a i n s , d i v i d e n d s a n d i n t e r e s t earned over the years will be subject to taxation once withdrawals are made If a lower tax rate is in effect by the time withdrawals begin, this may not be a deal-breaker, but if a h i g h e r t a x r a t e i s i n p l a c e , v a l u e s m a y decrease significantly
I n t h e c a s e o f a R o t h I R A , t h e s a m e $ 1 0 , 0 0 0 w o u l d b e f u l l y t a x e d a s r e g u l a r e a r n e d i n c o m e W h i l e t h e i n i t i a l i n c o m e tax deduction is lost, a $1,000 contribution m a d e a f t e r t a x e s c o u l d b e w i t h d r a w n i n retirement with any gains paid tax-free (as long as the contributions have been held in the account for at least five years)
“A Roth can be very beneficial over the traditional IRA and 401(k) if the employee finds they’re in a higher income tax bracket in retirement than at the time the contributions were made,” says Gilbert.
“ I t m a k e s s e n s e t o b e i n v e s t e d i n b o t h vehicles as a way of diversifying your future t a x e x p o s u r e , ” D a v i s n o t e s . “ Yo u n e v e r k n o w w h a t y o u r t a x s i t u a t i o n w i l l b e i n r e t i r e m e n t , e s p e c i a l l y i f i t ' s d e c a d e s o r even years away ”
If you’d like more information on tax-sensitive options in investing, pay a visit to www.usbonds.gov, www.morningstar.com, www investinginbonds com, or www reasonfinancial com
Email: http://tax.cchgroup.com/members/icpas (Enter member discount code: Y6202)
Phone: Wanda Brooks: 708.969.5355
Email: wbrooks@warehousedirect.com
Phone: 800.328.1935
Web: www.alliantcreditunion.org/ilcpa
Phone: 800.422.4661,
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800.325.7000
Small and mid-sized company CFOs are taking on responsibilities that, traditionally, aren’t exactly the province of finance executives Often, in fact, they’re delving into the softer side of business, more commonly known as HR.
“CFOs now are expected and required to be more well-rounded as professional people,” says Cal Stuart, CFO of Elk Grove Village, Ill.-based Aquion® Water Treatment Products LLC “The days of the bean counter are gone ”
Stuart took over responsibility for human resource functions at Aquion last year. The transition has been smooth for several reasons First, he served as CFO of other comparably sized companies before joining Aquion two years ago, which means he has had contact with and experience in various areas of business In addition, he knew from the start that HR eventually would report to him, and worked closely with the head of human resources prior to the change.
Often in an effort to streamline an organiz a t i o n ’s p r o c e s
v a l u a b l e t i m e , d e p a r t m e n t s s u c h a s H R become the domain of either the CFO or legal counsel Recruiting firm Robert Half International has noticed the trend.
“ T h e c u r r e n t r e g u l a t o r y e n v i r o n m e n t may have a lot to do with the shift,” says Mike Shapow, Chicago regional VP “It is incumbent on the CFO to be more involved in human resources.”
“Of the seven CFO positions I held, I had HR reporting to me in five of them,” says Cindie Jamison, national managing director of CFO Services for Tatum™, an executive services firm focused on creating and supporting the office of the CFO “I was always very careful to hire strong HR people to run the show,” she notes.
Tatum has pushed its CFOs to get training i n w h a t J a m i s o n c a l l s “ t h e s o f t e r s k i l l s , ” including communications and negotiation “Any CFO who runs human resources has to be strong in these areas,” she says.
Professor Arup Varma, PhD, of Chicago’s L o y o l a U n i v e r s i t y H u m a n R e s o u rc e a n d Employment Relations master ’s degree pro-
gram, explains that accounting and finance MBA students in his Performance Management class are “somewhat uncomfortable when I talk about perception, feelings and emotions, but relax when I connect it all to the bottom line. I tell them that as they go higher in the corporation, they are going to be managers and they will have people working for them,” he says. “That’s HR. They are going to need HR
“In the last 10 to 15 years the emphasis in HR has been that it is not just a cost center; the emphasis is on measuring and doing a cost-benefit analysis,” he adds. “The CFO will want to track and measure that ”
Those who head HR functions have mixed feelings about the CFO trend “In some cases this helps streamline activities,” says Varma. “But it can be negative if the numbers become too important and the emphasis on employee development is pushed aside ”
Human resources has reported to Bob Cantwell, VP of Finance/ CFO of B&G Foods, Inc in Parsippany, NJ, since the early 1990s “It allows us to handle situations such as insurance and employee issues much quicker,” he says “The VP of HR and I communicate regularly and discuss solutions together ”
Cantwell, who has worked for B&G Foods since 1983, took over HR when he moved up from company controller to CFO In r e t r o s p e c t , h e b e l i e v e s h i s p o s i t i o n a s c o m p a n y c o n t r o l l e r h e l p e d t o f a m i l i a r i z e h i m w i t h t h e H R f u n c t i o n T h a t a n d h i s c o l l e g e m i n o r i n p s y c h o l o g y, h e s a y s , h a v e s e r v e d h i m w e l l when working with HR issues “A CFO needs more than just a financial background,” he explains “He or she needs a wellrounded education ”
Cynthia Wojcek, VP of Human Relations at B&G Foods, notes that the relationship has had its upside “It has made me more aware of the financial aspects,” she says Wojcek has learned to speak the language of finance in order to better communicate with her boss. And, in fact, to better prepare for the current business environment, Varma encourages his HR students to take an accounting and finance course, and emphasizes the importance of being able to justify wants, needs and activities in business terms. “I tell them that they have to be able to demonstrate that they understand,” he says
“In the best-case scenario, HR sits at the table with other key players,” says Kathy Lunsky, a former corporate HR director “The challenge in reporting to the CFO is that you don’t have a place at the table and you are relying on someone whose prime background and focus has been finance to represent HR. That can mean that HR gets reduced to ‘how costly are you?’”
O n e o f t h e e t e r n a l s t r u g g l e s , s a y s L u n s k y, i s t o e n s u r e t h a t human resources is seen as a business partner You have to be “much more focused on numbers,” she says. “There’s definitely more pressure to make sure that you thoroughly articulate issues in those terms.”
“ Ty p i c a l l y t h e p e o p l e c o s t s s a l a r y, b e n e f i t s a n d t r a i n i n g comprise 35 percent of a company’s costs,” says Shapow. “It’s a significant expense item, so HR people have to become numbers-savvy.”
Tr u e e n o u g h , C F O s t e n d t o b e b o t t o m - l i n e , r e s u l t s - o r i e n t e d c o m m u n i c a t o r s , w h i l e h u m a n r e s o u rc e l e a d e r s t e n d t o b e a l l about people Their shared goals, however, center on costs, which is what makes the pairing so logical
By Janet Haney
While individuals carefully watch their personal portfolios during the current recession, accounting and finance professionals continue to c
Companies have to dig deep to stay on top of their clients’ changing business needs
KPMG is doing a variety of things to keep clients informed, says Dan Rahill, CPA/JD/
. Efforts include inviting them to tune in to webinars, listen to weekly podcasts, watch relevant webcasts, and attend an ongoing seminar series The firm offers discussions
o n t o p i c s s u c h a s t a x i m p l i c a t i o n s i n a r e c e s s i o n , m a x i m i z i n g t a x f l o w, a n d t h e i m p a c t o f S a r b a n e s - O x l e y K P M G ' s T h i s W eek i n State Tax podcasts, for example, aim to help state and local tax specialists keep up with the latest legislative, regulat o r y a n d j u d i c i a l s t a t e a n d l o c a l t a x c h a n g e s . F i r m s e v e n o f f e r C P E c r e d i t f o r some discussions
A recent Forrester Research report, Ten W ays to Recessi on- Proof Market Research, offers ideas that can be applied to various i n d u s t r i e s t r y i n g t o r e a c h c u s t o m e r s i n a downturn The report’s findings emphasize the importance of utilizing Web 2 0 technologies to get the word out about market i n t e l l i g e n c e , s t u d i e s , s y n d i c a t e d r e s e a rc h access and how-to guides.
“Distribution starts with a publishing mentality preparing information for mass distribution and a portal strategy,” writes the report’s author, Ted Schadler “The value of market research to the business is directly related to the number of business decisions affected by it. The best way to increase the value of a study or report is to get it into the hands of more people ”
Forrester Research also recommends turning to wikis, internal blogs and RSS feeds to extend information even further, noting that such technologies push data into users’ inboxes and browsers. In essence, this method creates a self-service distribution center with all the relevant text information and graphics in one location Companies typically rely on email alerts and website postings to get the word out about what they are currently
Jamshed B. Gandi’s firm Bertorelli, Gandi, Won & Behti saw the need for a client enewsletter some years ago Gandi, CPA/CFP®/CVA/Ms Tax, says this format allows the firm to make announcements and provide pertinent prepackaged and original content to approximately 450 clients on a weekly basis.
“This is an extra value-added service we give out. It’s a great marketing tool,” he says “The articles are in line with the times Anytime there is something significant happening, you have to make sure the client has the information ”
Rather than being a tool for new business, says Gandi, the e-newsletter adds to the firm’s overall visibility and timeliness Instead of having to seek out industry-wide and general information elsewhere, clients can simply click on links provided in the body of the email, log on to a webinar or attend a short panel discussion in person To keep track of the firm’s e-newsletter effectiveness, Gandi receives an email every time someone opens up an article
Forrester Research agrees that email communication is a valuable means of disseminating information to current clients, particularly in uncertain times
“Email targets your existing customers, a group far more likely to listen to your messages in a recession than new prospects,” writes author Josh Bernoff in Strategi es for Interacti ve Marketi ng i n a Recessi on “A recession is likely to increase email marketing volume.”
Often, though, the personal touch really matters most when the economy is in the tank and people are concerned about their company’s financial future
“When it comes to selling your services, a webinar can’t replace face-to-face communication,” says Shawn Kane, a state and local tax executive for Crowe Horwath LLP. Although his firm relies on both webinars and e-newsletters to reach clients, Kane feels that partnerships are imperative “Clients are having a tough time and want us to partner with them,” he says “If it’s a company we’ve had a strong relationship with, we’re willing to make that investment.”
Ka ne a dmits tha t the na ture of the pa rtne rship is de te rmine d on a c a se -by -c a se basis maybe they’ll investigate keeping the client’s fees flat or explore above-the-line s a v i n g s o p t i o n s a n d s o m e t i m e s t h e f i r m ’s s e r v i c e m o d e l h a s t o c h a n g e t o f i t t h e client’s requests.
“Our business is based on personal interaction with our clients,” says Kim Rice, CPA/MST, partner at R&M Consulting LLC “You make that effort up front then in tough economic times you don’t have to change.”
Part of R&M Consulting’s strategy is to invite clients to lunches, dinners and netw o r k i n g o p p o r t u n i t i e s R i c e n o t e s t h a t h e r e x e c u t i v e - l e v e l c l i e n t s u n d e r s t a n d t h e power of face-to-face interaction “Our focus is always to be engaged with our clients,” she says. “When our clients need help they continue to call us.”
It takes a vigorous balance of face time, technology and marketing savvy to keep current clients As Schadler writes, “In a downturn, companies will focus more on their customers than on their prospects for the simple reason that it’s easier to make money from existing customers than to spend money acquiring new ones.”
By Ted Santos & Edward M. Petrosky
The future success of an organization often depends on disruptive initiatives that drive new revenues and p o s i t i o n t h e o rg a n i z a t i o n a s a m a r k e t leader. While it’s the Board of Directors’ job t o i n t e n t i o n a l l y c r e a t e s t r a t e g i c p r o b l e m s for the CEO to solve, board members are s o m e t i m e s r e l u c t a n t t o u s e t h i s a p p r o a c h for fear of overwhelming or disrupting the CEO and staff The result: Many great ideas are never attempted
But wait What if the Board and CEO had some way of measuring the organization’s readiness to execute large-scale initiatives? What if it was possible to prepare an entire o rg a n i z a t i o n t o e x e c u t e i n i t i a t i v e s t h a t appear to be disruptive to the existing busin e s s m o d e l ? W h a t i f t h e B o a r d a n d C E O could assess the unspoken objections and concerns that might derail a particular initiative before it’s even launched, and could take the necessary steps to avoid them?
The Great Idea Alignment Tool (GIAnT) was created to do just that This is how it works
The GIAnT is an organizational satellite that provides a comprehensive vertical and horizontal picture of your organization. It indicates who is prepared for an initiative, h o w p r e p a r e d t h e y a r e , a n d w h a t i t w i l l take to get staff ready for the initiative.
T h e G I A n T c o n s i s t s o f m o r e t h a n 2 0 0 items that measure 18 human factors that w i l l d r i v e o r d e r a i l a n i n i t i a t i v e , s u c h a s u rg e n c y, i n n o v a t i o n , o w n e r s h i p , c o m m i tment, trust and sabotage These items are b a s e d o n a c o m b i n a t i o n o f c u t t i n g - e d g e r e s e a rc h , o rg a n i z a t i o n a l a n d l e a d e r s h i p d e v e l o p m e n t t h e o r y, a n d t h e c o l l e c t i v e coaching and consulting experience of the tool’s creators
T h e G I A n T i s u n i q u e i n s e v e r a l w a y s
First, it is individually tailored to assess preparedness for a specific organization initiative (i e the “great idea”) Second, whereas most comprehensive assessments focus on individual executives, the GIAnT assesses
the organization as a whole Third, many of the companies that use assessment tools to inform decision-making limit themselves to e m p l o y e e f e e d b a c k s u r v e y s T h e s e t o o l s often indicate what people are saying but not what caused them to feel the way they do The GIAnT, on the other hand, indicates not simply if people believe in an initiative, b u t w h y t h e y d o o r d o n ’t F i n a l l y, t h e G I A n T c o r r e c t s f o r p o s i t i v e a n d n e g a t i v e i m p r e s s i o n m a n a g e m e n t ; i n o t h e r w o r d s , the degree to which respondents portrayed themselves or their organization in an exaggeratedly favorable or unfavorable light
T h e G I A n T i s a d m i n i s t e r e d o n l i n e t o e a c h e m p l o y e e T h e r e s u l t i n g r e p o r t i s organized in a top-down format, beginning with a broad snapshot of the organization at 50k feet, and then drilling down by variables of interest The GIAnT indicates the percentage of the organization as a whole and the percentage of each business unit w i t h i n t h e o rg a n i z a t i o n t h a t i s a l i g n e d , r e s i s t a n t , c o n f l i c t e d / a m b i v a l e n t , a n d a p athetic towards the initiative
Leadership can take this information and use it to decide whether the organization is ready for a costly initiative Since results are also provided for each business unit, company leaders are able to determine where the most and least support lies Once they h a v e t h i s i n f o r m a t i o n i n h a n d , t h e y c a n d e c i d e w h i c h g e o g r a p h i c a l o r f u n c t i o n a l unit would be optimal for the disruptive initiative’s launch
P e r h a p s m o s t i m p o r t a n t l y, t h e G I A n T i n d i c a t e s w h y s t a f f m e m b e r s a r e e i t h e r a l i g n e d w i t h o r p u s h i n g b a c k a g a i n s t t h e i n i t i a t i v e C o m p a n y l e a d e r s c a n u s e t h i s i n s i g h t t o e x p l o i t t h e f a c t o r s s u p p o r t i n g alignment and to correct the factors causing push back
T h e e n t i r e a s s e s s m e n t p r o c e s s s p a n s about 4 weeks, and includes aligning leadership on an initiative and individualizing the GIAnT accordingly, a proprietary solu-
S Wilson,
CPA, principal of Wilson-Heidrich Associ-
explains, “A major capital improvements program along with the related financing has been approved for this corporation by the Board of Directors. Millions of dollars are to be spent over the next three years The additional debt service and continual increase in operating costs make improved operating efficiency and new revenue streams an imperative A focused, expeditious launch of a new initiative was called for and the Board didn’t have the time or skill sets to obtain the information we needed to evaluate our options or determine the probability of success
“I thought if we could obtain the organizational reasons why certain past initiatives were never fully launched or, if launched, were not successful, then this insight would provide the Board with the necessary information to modify our strategy and its e x e c u t i o n t o a l l o w u s t o a c h i e v e o u r d e s i r e d g r o w t h o b j e ctives,” she explains “The organizational assessment we chose, the GIAnT, could provide objective information we otherwise could not obtain ”
Wilson goes on to explain that, in essence, the GIAnT provides a virtual walk around the entire organization a walk around that leadership would never have the time to take on its own. It also provides a data-driven basis for predicting whether an initiative is likely to succeed and what needs to be done to increase the likelihood of success
“We interacted with the entire organization in less than two months and increased engagement throughout all levels of the corporation, therefore achieving alignment of the Board, CEO a n d m a n a g e m e n t a n d s t a f f o n a n i n n o v a t i v e i n i t i a t i v e , ” s a y s Wilson “Inv olv ing the e ntire org a niz a tion in the a sse ssme nt emphasized the importance of the project, instilled urgency and energized the management and staff.”
Today, the Board and CEO are taking action much more rapidly than they have in the past, says Wilson “Board member attendance and participation at meetings has increased. The entire Board is engaged and aligned on new initiatives with targ e t e d o u t c o m e s a n d c o m p l e t i o n d a t e s C o m m u n i c a t i o n h a s improved significantly and members of the Board are working as a team to address issues.”
Ted Santos, CEO of Turnaround Investment Partners (TIP), partners wi th CEOs and board members, serves as a trusted advi sor to compani es goi ng through change, and coaches ex ecuti ves to uncover and penetrate untapped markets, shi ft corporate cultures and al i gn staff and management to the corporate vi si on Dr Edward M Petrosky, a psychol ogi st by trai ni ng, focuses on o r g a n i z a ti o n a l a l i g n m e n t, r e te n ti o n , e x e c u ti v e de v e l o pm e n t, successi on pl anni ng, outcome measures and hi ri ng He has presented at nati onal professi onal conferences, publ i shed i n peerrevi ewed sci enti fi c j ournal s, and taught 11 di fferent psychol ogy courses to undergraduate and graduate students Dr Petrosky mai ntai ns a pri vate consul ti ng practi ce i n Forest Hi l l s, NY V i si t www turnaroundi p com for more i nformati on on GIAnT
By Derrick Lilly
Hello, I’m a Student Ambassador ” Sounds impressive, right? It seems l i k e a n i c e t i t l e t o i n c l u d e o n a resume or grad school application. But for those chosen to represent the accounting profession, it’s more than just a title.
The Illinois CPA Society (ICPAS) Student Ambassador Program was launched in conjunction with the CPA Endowment Fund of I l l i n o i s i n A u g u s t 2 0 0 8 , w i t h s i x s t u d e n t s serving five campuses College of DuPage, Eastern Illinois University, Illinois State Univ e r s i t y, S o u t h e r n I l l i n o i s U n i v e r s i t y a n d Western Illinois University.
T h e i n i t i a t i v e ’s m i s s i o n i s t o i n c r e a s e awareness of the importance of finance in o u r l i v e s , e n c o u r a g e s t u d e n t s t o c o n s i d e r accounting as a career choice, and publicize ICPAS benefits such as scholarship opportunities, CPA Exam awards and student memberships
Being a student ambassador means interacting with friends and colleagues, deve l o p i n g m a r k e t a b l e p r o f e ssional talents, garnering support from seasoned professionals and establishing networks for future success In other words, it means bridgi n g t h e g a p b e t w e e n s t u d y and the real world
“Serving as a student ambassador has given me many experiences to pull from during job interviews, and I believe it has added value to my resume Being one of the first ambassadors, I think employers are impressed and curious about the program It gives me a chance to talk about the ways I have been investing in my career,” says Heather Koertge, 21, an accounting undergraduate
and student ambassador at Eastern Illinois University.
“Many students at College of DuPage are unsure of their future careers,” says Stacey S a m s , 1 9 , a n a c c o u n t i n g u n d e rg r a d u a t e and student ambassador. “I want to expose o t h e r s t o t h e o p p o r t u n i t i e s a v a i l a b l e i n accounting and hopefully help them find a passion within the field,” she explains Brandon Vagner, 22, an accounting graduate student at Southern Illinois University, C a r b o n d a l e , a d d s , “ H a v i n g t h e a b i l i t y t o impact a student’s life in a positive way is extremely important to me. It gives me the chance to give back to my university and the accounting profession in general ”
“The ambassadors are given the responsibility to present programs and events for their fellow students,” explains Kathy Horton, CPA/CMA/MBA, professor of accounting at College of DuPage and chair of the ICPAS Student Outreach Task Force, under w h o s e u m b r e l l a t h e s t u d e n t a m b a s s a d o r p r o g r a m r e s i d e s . “ These experiences will add immensely to their personal and professional growth They will be so much further along than their peers when they start their careers. Not only does the student, their campus and the ICPAS benefit, but the profession as a whole benefits from the positive exposure It is truly a win-win situation ”
W h a t ’s m o r e , t h e I C PA S g r a n t s s t u d e n t ambassadors a stipend and academic financial aid through its Endowment Fund The Society awards more than $126,000 annua l l y i n s c h o l a r s h i p s t o s t u d e n t s w o r k i n g towards their CPA certification.
C o m m e n t i n g o n p l a n s f o r t h e f u t u r e d e v e l o p m e n t o f t h e S t u d e n t A m b a s s a d o r Program, Horton says, “My hope is that it can be extended to more and more schools in the state ”
If you woul d l i ke to hel p i n devel opi ng the Student Ambassador Program, contact Kel l y E Sl ay, ICPAS students and young professi onal s speci al i st, at sl ayk@ i cpas org
Tax considerations often mitigate the effects of an economic downturn.
P a s s - t h r o u g h e n t i t y o w n e r s w h o have loaned money to their businesses over t h e y e a r s a r e n o w l o o k i n g f o r w a y s t o spruce up their balance sheets and reduce their debt service where cash is short.
In the past, there was some uncertainty concerning the federal tax treatment of an exchange of debt for equity in a partnership setting However, Section 108 of the Intern a l R e v e n u e C o d e l i s t s s i t u a t i o n s w h e r e income from cancellation of indebtedness ( C O D i n c o m e ) i s e x c l u d e d f r o m t a x a b l e i n c o m e , a n d t h e A m e r i c a n J o b s C r e a t i o n Act of 2004 extended a limitation on inclus i o n t o p a r t n e r s h i p d e b t t h a t p r e v i o u s l y applied only to corporate debt
After amendment, if a partnership transfers capital or profit interest in the partnership to a creditor to satisfy debt, the partn e r s h i p i s t r e a t e d a s h a v i n g s a t i s f i e d t h e debt with an amount of money equal to the interest’s fair market value So, if that value is less than the amount of debt satisfied, the
C O D i n c o m e r e p o r t e d i s l i m i t e d t o t h e e x c e s s a m o u n t o f d e b t s a t i s f i e d o v e r t h e transferred interest value The COD income is allocated to partners who were partners immediately before the transaction
Proposed regulations interpreting the statute change were issued last fall, and hearings were held in February In addition to repeating the statutory language, the proposals provide a method for valuing the partnership interest transferred to satisfy the debt if four requirements are met The method results in a “liquidation value,” representative of the amount of cash the creditor would receive if the partnership liquidated all of its assets at fair market value immediately after the interest for debt transfer
The four requirements are:
(
1) Maintenance of capital accounts under Regs §1 704-1(b)(2)(iv)
(2). The creditor, debtor partnership, and i t s p a r t n e r s t r e a t t h e v a l u e o f t h e d e b t a s equal to the liquidation value of the debtfor-equity interest for purposes of determining the exchange’s tax consequences
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The Illinois CPA Society has made it easier than ever to identify the up and comers in the accounting profession. Just visit the Illinois CPA Society’s Career Center and search student resumes to fill your next internship.
All across the state, Illinois CPA Society student members have uploaded their resumes for you to view online. These students represent the future of the profession and your guidance as a seasoned member of the profession can put them on the right track. These students are available for summer, fall or spring internships.
(3) The exchange is an arms-length transaction, and ( 4 ) S u b s e q u e n t t o t h e e x c h a n g e , t h e p a r t n e r s h i p d o e s n o t r e d e e m a n d n o p e r s o n r e l a t e d t o t h e p a r t n e r s h i p p u rc h a s e s t h e d e b t - f o r- e q u i t y i n t e r e s t a s p a r t o f a p l a n p r i n c i p a l l y i n t e n d e d t o avoid COD income
Absent of compliance with these requirements, all facts and circ u m s t a n c e s w i l l b e c o n s i d e r e d t o d e t e r m i n e t h e d e b t - f o r- e q u i t y i n t e r e s t ’s f a i r m a r k e t v a l u e f o r p u r p o s e s o f a p p l y i n g I R C § 1 0 8 ’s COD rules.
If the partnership maintains capital accounts in accordance with the regulations for determining the presence of “substantial econ o m i c e f f e c t ” o f p a r t n e r s h i p a l l o c a t i o n s [ R e g u l a t i o n s § 1 7 0 41(b)(2)(iv)], the creditor partner ’s capital account will be increased by the fair market value of the indebtedness exchanged
The proposed regulations also indicate that, with some exceptions, certain other rules applicable to an exchange of property for a n i n t e r e s t i n a p a r t n e r s h i p s h o u l d a p p l y t o t h e d e b t - f o r- e q u i t y exchange. Under this application, neither the creditor nor the partnership will recognize gain or loss on the debt’s contribution for equity in the partnership. Unpaid interest (including accrued original discount), rent, or royalties are not eligible for this treatment.
Under the proposal, the creditor ’s tax basis in the partnership interest is increased by the creditor ’s tax basis in the debt transferred (See IRC §721) Therefore, the creditor does not report a tax loss equal to the excess of the transferred debt’s basis over the value of the partnership interest received Consistent with this, the holding period for the debt-for-equity interest includes the period during which the creditor held the debt [See IRC §§722 and 1223(1)]
The proposed regulations include an example: AB partnership owes C $1,000. In an arms-length transaction, C agrees to cancel the debt in exchange (debt-for-equity exchange) for an equity interest (debt-for-equity interest). The four requirements are satisfied. The fair market value of the debt is $700 This is based on the liquidation value of the debt-for-equity interest AB transfers C’s capital account is increased by $700 AB is treated as satisfying the debt for $700 Although this example doesn’t specifically indicate it, the COD income recognized by AB should be $300
If adopted as presently written, the proposals should provide a roadmap for determining the tax consequences that flow from a transaction that likely will become more common in these troubled economic times. A method for determining transferred interest fair market value that can be used in valuing debt provides certainty in a sometimes difficult calculation.
By applying the non-recognition rules for the exchange, a potential mismatch is avoided If the creditor partner was a partner before the transaction, and the non-recognition rules did not apply, a loss might be where the value of the debt-for-equity interest received was less than basis in the debt It’s likely that the loss would be a capital loss, and the creditor partner would have ordinary income on his share of the partnership’s COD income
I’ll keep an eye on this topic as it unfolds In the meantime, my suggestion is that you don’t rely on the proposed language.
Harvey Coustan i s an Ernst & Y oung reti red partner He i s presentl y c
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The Of fice of Financial S tability promises to lif t us from our rocky economy and place us safely on even ground But can it deliver on the promise?
By Carolyn TangO c t o b e r 1 0 , 2 0 0 7 . T h e D o w I n d u s t r i a l Av e r a g e closed at 14,078.69. NASDAQ stood strong at 2,811.61. Analysts w e r e , f o r t h e m o s t p a r t , o p t i m i s t i c a s t h e d o m e s t i c e c o n o m y entered the fourth quarter.
O c t o b e r 1 0 , 2 0 0 8 . T h e D o w I n d u s t r i a l Av e r a g e closed at 8,451.19, a drastic 40-percent drop in value compared to the previous year. Stalwart stock AIG was removed from the I n d e x a n d r e p l a c e d w i
1,649.51, a 41-percent reduction in value. Analysts scrambled to keep up with the unraveling banking and finance sector.
You could see the first fissure back in August, if you knew where to look. The FDIC took over XYZ Bank, then, within months, the giants began to fall When one fell, another was shaken First, a government takeover of troubled siblings, Fannie Mae and Freddie Mac. Then, investors helplessly watched as prestigious Lehman Brothers’ frenzied calls for help went unanswered Washington Mutual and AIG followed soon after, banking bastions no longer
Such change in the span of a year Could we have avoided this crisis? In hindsight, the temptation was too great. Interest rates were at such a record low that banks were almost incentivized to e x t e n d s u b p r i m e l o a n s t o l e s s - t h a n - q u a l i f i e d b o r r o w e r s M a n y consumers, both at the personal and the commercial level, were sufficiently enticed by free-flowing credit that they underestimated their security and overextended their spending
But as in every fairytale, doomsday finally came Foreclosed homes, a rash of bankruptcies, and complicated derivatives that, when unraveled, yielded nothing. The castle in the clouds collapsed, and at the end of the day, there was nothing on the books but empty, extended capital The economy grinded to a halt as credit froze and all forms of lending ceased.
“Imagine that you were driving down the road on a two-lane highway,” explains Gerry Sparrow, portfolio manager of Sparrow Growth Fund “You trust that the other guy is going to stay in his lane, but that doesn’t always happen. And if you see an accident like that, you start driving a little bit better, keep your eyes open, and you’re more careful about speed and such Right now, with the mortgages that went bad on the books of all the financial institutions, you can see why they’re a little reluctant to loan money.”
The US economy is reliant on the flow of credit For the system t o w o r k , b a n k s m u s t l e n d t o b u s i n e s s e s , c o n s u m e r s , a n d e v e n other banks However, when there is no trust in the system, there is no lending.
“The credit freeze up was a terrible problem for financial instit u t i o n s T h e y s i m p l y w e r e u n a b l e t o u n d e r s t a n d v a l u a t i o n s o n assets, and weren’t willing to lend to each other even That was a huge, terrible problem for those institutions and for our economy as a whole,” says John Douglas, a partner with the law firm of Paul Hastings
Wi t h b a n k s f e a r f u l a t t h e c r o s s r o a d s , c o n s u m e r s a n d b u s inesses clamped down on spending even harder “It is a vicious cycle,” says Dan Sondhelm, partner of SunStar, a finance indust r y c o n s u l t i n g f i r m . “There is significant fear and lack of confidence in the marketplace. As a result, businesses and individuals are paralyzed in terms of earning and spending It’s difficult for Americans to get the credit they need to pay bills, buy cars, renovate or buy homes At the same time, it‘s difficult for businesses to get paid from these services and expand,” he explains
And so, in October 2008, the US government passed the Emergency Economic Stabilization Act, which authorized the Treasury to establish a troubled asset relief program (TARP). Seven-hundred billion dollars was earmarked to lubricate the country’s economic gears: $250 billion was allocated upon enactment, with an additional $100 billion disbursed if the President certifies its need to Congress A final $350 billion will be disbursed upon presidential request, unless Congress disapproves. To administer this kitty, the Act established a new Office of Financial Stability (OFS), headed by Interim Assistant Secretary for Financial Stability Neel Kashkari
“The law gives the Treasury Secretary broad and flexible authority to purchase and insure mortgage assets, and to purchase any other financial instrument that the Secretary, in consultation with the Federal Reserve Chairman, deems necessary to stabilize our financial markets including equity securities,” Kashkari stated in a speech to the Institute of International Bankers in Washington, D C
Indeed, such a statement gives the Treasury significant leeway in determining how to apply the funds However, regardless of the vehicle, the OFS’ main charge is to provide the financial system with the resources necessary to jumpstart stalled markets
“This $700 billion is really designed to get our financial markets working again. Otherwise, economic activity as we know it may slow down dramatically, with severe repercussions in the economy,” says Douglas
Joseph Ament, professor of accounting and taxation at Roosevelt University, Chicago says the creation of the OFS is necessary in order to provide the financial system with the resources necessary to help alleviate the serious circumstances the domestic economy is facing in many of its basic and major sectors “In recent past
“ T h e vo l a t i l i t y a n d vo l u m e o f t r a d i n g o n t h e ex c h a n g e s , a n d the deep dr ops and steep climbs in mar kets dail y, sometimes sev-
l
u p a n d d o w n e a c h d a y, a r e a c o n t i n u e d i n d i c at i o n of the g r eat uncer tainties pr evalent in the economy.”
decades, there hasn’t been a perceived need for such an agency in the US government. With the international and national financial crisis, such a requirement has been determined by our Congress and our Treasury,” Ament comments.
In conjunction with the OFS, the Treasury also announced the appointment of several key interim TARP leaders, including Tom Bloom as interim CFO, Jonathan Fiechter as interim CRO, Donna Gambrell as interim chief of homeownership preservation, Don Hammond as interim CCO, and Reuben Jeffrey as interim CIO.
No doubt an experienced cohort. But will it be enough? “Does anyone have the experience and knowledge to deal with the catastrophic set of circumstances that is now being faced?” Ament asks.
Initially, the program was established to purchase troubled assets from financial institutions, in essence removing them from the system However, this proved to be a difficult task “It’s actually very hard, and very complicated,” Douglas explains “It’s tough to figure out the pricing Once you buy assets, you’ve got to figure out what to do with them If you’re buying problem assets, you’ve got to figure out how to manage them The government is not a particu l a r l y g o o d m a n a g e r o f p r i v a t e - s e c t o r a s s e t s , s o i t w o u l d m o r e likely try to sell them Selling them might exacerbate losses ”
So instead the US government used the bailout funds to purchase preferred stock in some of the nation’s largest banks: Goldman Sachs, Morgan Stanley, JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Bank of New York Mellon and State Street C o r p T h e g o v e r n m e n t i s a l s o e x p e c t e d t o p u rc h a s e a d d i t i o n a l equity from potentially thousands of other insured financial institutions; raise the FDIC cap on deposit insurance for certain types of b a n k a c c o u n t s ; a n d r e s t r i c t e x e c u t i v e c o m p e n s a t i o n , b o n u s e s , “golden parachutes” and other incentives at institutions participating in TARP
“I think what happened is that the government decided that the best bang for the buck would be simply to take institutions that really are the lifeblood of our economy and strengthen those institutions through the capital program. Perhaps this approach would be easier, better and, in the long run, more effective. I hope they’re right,” says Douglas.
While many institutions have queued up for their share, there will be a small number of financially strong institutions that will c h o o s e n o t t o a p p l y f o r g o v e r n m e n t f u n d s . “ F r o s t B a n k s h a r e s down in Texas is one example,” Douglas explains.
“There also will be a number of institutions that won’t get the money because they are so financially weak that the Treasury is just not going to do it, and the regulators won’t support it. Those
institutions will either have to find new capital, find a merger partner, or fail. That’s going to be pretty dramatic,” says Douglas.
And with that, Douglas also notes the subtle irony of the bailout process “This money was put in place to strengthen the financial system, and yet it will accelerate the failure or consolidation of a number of institutions ”
“This is an experimental process an indicator of whether the business community is supportive of the steps that the Administrat i o n i s t a k i n g i n t h e f i n a n c i a l m a r k e t s , ” A m e n t e x p l a i n s “ T h e volatility and volume of trading on the exchanges, and the deep drops and steep climbs in markets daily, sometimes several times up and down each day, are a continued indication of the great uncertainties prevalent in the economy.”
It’s not as though the government has been entirely hands off with the nation’s economy In fact, the current level of involvement rivals that of the Great Depression. Additionally, with the purchase of equity, the government has in effect intertwined the fates of the banking sector with that of US taxpayers
“The levers the government is using on the fiscal and monetary side are normal levers, but I think that the degree is different,” says Sparrow “The magnitude is much larger than people expected, and bigger than anything in recent memory.”
The nature of the stimulus aside, the resulting impact is textbook economics “Once credit begins to flow again, you get lending That lending will spur job growth. And when there are more jobs, the economy will begin to grow You’ll get housing starts again Car sales go up Consumer spending goes up Then the stock market will respond. The stock market will go higher, people will feel more secure in their retirement and their spending, and it’ll loop around again,” says Sparrow.
He goes on to explain that by guaranteeing credit instruments, the OFS is essentially providing a safety net for the US economy “For example, GE is getting guarantees on its commercial paper, so when institutions loan GE money, they know that GE is backed by the government and their fears are assuaged ”
And, in fact, the government may help to boost the economy with aid to the auto industry, a sector that employs a large percentage of the population, and whose failure would likely counteract any fiscal bailout activities.
“As the media headlines die down, people will spend more, and businesses will once again grow,” says Sondhelm “There will be new winners in the business community, and it will be interesting to see who makes it to the top ”
“To survive you eat or are eaten,” says Greg W. Needham, VP of marketing & business development at NorthShore Capital Advisors
These days, the appetite for mergers and acquisitions is generally lukewarm. In 2008 the number of transactions was down almost 30 percent and the value of those deals down nearly 35 percent. The economy has quieted the urge to merge. Not just here, but around the world Through early November 2008, the global M&A deal value was approximately $2 7 trillion, down from a record $4 4 trillion in 2007
If distressed financial institutions are excluded from the $2 7 trillion figure, the drop is even more precipitous “What is interesting about 2007 is that a record for M&A deal value was set, even though M&A activity slowed in the second half of 2007 due to the beginning of the credit crunch,” says Bill Baxley, a partner in the corporate law practice of King & Spalding.
“The limited availability of debt financing, uncertainties about the financial impact of the impending recession and the increasing desire to preserve liquidity are part of the reasons the market is down sharply,” explains Scott George, managing director, P&M Corporate Finance
That said, the economy has also sparked an increase in shotgun mergers and acquisitions nuptials between companies without much time to date before the big day
Because corporate valuations have been significantly pushed down, buying opportunities for cash-rich corporations, private equity (PE) firms and sovereign wealth funds (SWFs) wanting to scoop up strategic assets at bargain prices are on the rise According to a recent Ernst & Young (EY) poll, companies currently performing at successful levels are trying to assess supplier stability, optimize their portfolios and execute opportunistic acquisitions EY suggests that now is the time for well- capitalized companies with strong balance sheets to consider acquisition opportunities, because valuations are low and some wellrun companies can be had for pennies on the dollar
Bargains can also be found in stressed and distressed companies wishing to divest business units that are not aligned with core business practices Because of the frozen credit markets and financial crisis spurring risk aversion, the days of leveraged transactions are ending and greater cash and equity to fund deals is becoming a prerequisite This means that even corporations with cash on hand and strong balance sheets are expected to face greater competition from PE firms, SWFs and other foreign buyers Source: Ernst & Young LLP
“About the only type of deals getting done are those that were arranged a long time ago or the distressed deals that are being done hastily because they have no choice,” says Bill Kirsch, chair of the global private equity practice at the law firm of Paul, Hastings, Janofsky & Walker.
The number of hostile deals increased in 2008 With stock market prices at lower levels, strategic buyers are looking for attractively priced opportunities. On the other hand, many target companies are reluctant to sell when they are undervalued, says Baxley
I t ’s n o t j u s t s m a l l a n d m i d - s i z e d c o m p a n i e s t h a t h a v e c o m e together out of necessity. “The acquisitions of Washington Mutual, Merrill Lynch and Wachovia are high-profile examples of large companies that needed to be acquired in order to avoid becoming insolvent,” says George.
These deals grabbed headlines “Wells Fargo’s acquisition of Wachovia was pretty interesting because it could be viewed as a shotgun wedding, but one where they were aggressively courted by multiple suitors Bank of America’s acquisition of Merrill Lynch was another very interesting deal due to the speed of negotiations a n d i m m e d i a t e i m p a c t i t h a d o n B a n k o f A m e r i c a ’s p l a n s t o become the national leader in each of its primary lines of business,” George explains.
When Hewlett Packard bought Electronic Data Systems for $14 billion, it more than doubled its services revenue, making it more competitive with IBM, says Needham. “The acquisition of EDS will provide additional diversification that likely will help the company weather economic storms,” adds Bill Venema, a member of the business law practice at Epstein Becker Green.
W h i l e m a n y f i n a n c i a l i n s t i t u t i o n a c q u i s i t i o n s a r e c o m p l e t e l y shotgun, companies in other sectors are being forced to become acquisition candidates by steep declines in revenues and a sharp d e c l i n e o f c r e d i t a v a i l a b i l i t y, s a y s J a y C h a t z k e l , c o - a
l : M e r g e r s & A c qu i s i ti o n s T h a t A c h i e v e B r e a kthrough Performance Gai ns. “Companies across the spectrum are under pressure to keep adequate profit margins and to eliminate any business units, or even put themselves up for sale, if strategic requirements are not met. This crisis is not solely involving finan-
cial institutions It is a global economic one affecting all sectors,” says Chatzkel
“Companies that are less exposed to major losses, have good balance sheets and strong acquisition readiness capabilities will be in a position to acquire these struggling but often undervalued major firms,” he continues “These acquiring companies may be domestic US firms, but a sizable number of acquisitions will be by non-US firms based in Europe or Asia These pressures will continue until the current economic disruption eases “
As in matters of the heart, a rush to the altar can make for a pairi n g o f l e s s - t h a n - p e r f e c t p a r t n e r s I d e a l l y, s a y s C h a t z k e l , e v e r y major enterprise has a strategic planning component that scans acquisition and combination opportunities Preferably, each of the companies involved has a high level of acquisition readiness.
However, he adds, only a few companies have cultivated the c r i t i c a l s e t o f c a p a b i l i t i e s r e q u i r e d t o r a p i d l y s e i z e a c q u i s i t i o n opportunities and complete the acquisition/integration process in a thoughtful, highly integrated and extensive manner
“ F e w a c q u i r i n g c o m p a n i e s h a v e a p l a y b o o k a t t h e r e a d y t o guide these acquisitions,” says Chatzkel. Mostly, there are kneejerk reactions with the emphasis on “the deal,” and even then, on the financial side of the deal “There is a real question of what these acquiring firms are buying, what legacy issues they need to deal with and how these acquisitions mesh with strategic goals that can be brought in line with organizational cultures, operational practices and any real chance for significant transformational change.”
M o v i n g q u i c k l y p u t s a l o t o f p r e s s u r e o n t h e d u e d i l i g e n c e process When you undertake an M&A deal, you have to have a solid understanding of the company you are acquiring its business model, earnings capability and risks, assets, liabilities, and more “If you move too quickly, there is greater risk that you may miss key issues in the due diligence process that could affect the success of the deal,” says Baxley.
How do you know when you’ve nailed down your due diligence? “When you reach diminishing returns When you start hearing the same answers, you know you’re getting close,” says Kirsch.
Another danger is failing to begin with the end in mind; in other words, not having a clearly defined objective “Transactions that are done well require careful planning, which should start with h o w t h e t r a n s a c t i o n w i l l s a t i s f y d e s i r e d g o a l s , ” s a y s Ve n e m a “Detailed planning should begin with how the integration of the t a rg e t w i l l t a k e p l a c e a n d t h e n w o r k b a c k w a r d s i n t h e M & A process to its beginning and due diligence phase. In this way the parties will have a better idea of what needs to be done and a realistic idea of when it can be accomplished ”
Historically, 70-80 percent of acquisitions fail to deliver their intended benefits With a global recession, there’s a danger that synergies will not be realized soon enough to justify the premiums paid.
Q u i t e s i m p l y, “ Wi t h m o v i n g t o o q u i c k l y, t h e o p p o r t u n i t y t o make mistakes grows exponentially,” says Michael Fixler, managing director, CM&D Capital Advisors in Chicago
When is it a good time to merge? For the company being acquired, the answer is at the peak of its earnings potential Alternatively, a good time is when the company needs an infusion of capital to continue to grow or maximize its growth potential, says Steve Ferrara, Midwest regional business line leader for assurance services in the Chicago office of BDO Seidman
A n a c q u i r i n g c o m p a n y s h o u l d h a v e m a n a g e m e n t r e s o u rc e s available to properly integrate the acquired company and maximize both the growth opportunities and synergies of the merger. Merging also makes sense if it promises more pricing power in the marketplace, alleviates competitive pressure, or if the two companies “have similar products but completely different distribution channels, effectively increasing your distribution power and r e a c h , w i t h o u t d i r e c t l y o v e r l a p p i n g w i t h y o u r c u s t o m e r b a s e , ” says
Brian Boyle, senior managing director, McGladrey Capital Markets in ChicagoWhat’s more, merging is a viable option if you have the opportunity to reduce operating costs. For example, you create overlaps in your sales force and reduce redundancies, or scale back overhead and streamline processes With high energy costs, merging for geographic sakes can make a difference, too And it makes sense to merge if you sell similar products in different parts of the country, and combining resources will help to save money on freight and logistics You can then pass those savings on to your customers
These guidelines will help to avoid pitfalls in the M&A process. First, assemble a strong team. “Deals are about mitigating risks, and that’s the role of the deal team You must open all doors and look deep to uncover potential issues I know of acquisitions that were quickly closed without performing the needed due diligence by qualified people, and the result cost the acquiring company,” says Needham
Pull together a group of advisors An investment bank, for example, can help you deal with sensitive issues Both sides will be reluctant to share confidential information. The investment bank can spoon out that information in pieces, says Boyle It also can assist with valuations and help to complete the deal in stages so th a t c o n fid e n c e is in s tille d a n d n e ith e r s id e is g iv in g a wa y to o much information in the process. G e t e x p e r i e n c e d M & A p r o f e s s i o n a l s i n v o l v e d “ I t ’s d i f f i c u l t t o undertake successful M&A transactions on a part-time basis and
without the experience that allows for an understanding of the complex issues that arise in these deals,” says Baxley Have an integration plan. Thoughtfully develop and relentlessly execute an integration plan that ensures a seamless transition following the completion of the transaction. “Execution of the integration process is viewed by most people as where most of the m
t e g r a t i o n t i m e Cultures must be compatible,” says George Jilt if you need to. “Never fall in love with a potential deal Always be prepared to walk away from it if the price and other key terms are not right, if due diligence reveals major issues, or the target company’s fit with the buyer ’s corporate strategy is not what was expected at the outset It’s okay to get cold feet,” says Baxley In October 2008, more than any other month on record, 142 deals worth $120 billion were withdrawn, says Kirsch Don’t overpay. “Even if debt is available, exercise restraint Don’t over-leverage the transaction. Be sure you have adequate cash f l o w a f t e r t h e c l o s i n g . I n p a r t i c u l a r, h a v e a c u s h i o n a g a i n s t unknown liabilities,” says Kirsch
W h a t ’s t h e j u d g m e n t o n t h e d e a l s b e i n g d o n e ? Wi t h s o m a n y mergers still in the honeymoon phase, the jury is still out
Truth is, says Chatzkel, “The acquiring firms are taking on companies with serious and often severe problems If the acquired firm were healthy they wouldn’t be forced to make themselves available for acquisition. These are not ideal acquisitions and demand far more imaginative and extensive treatment than the norm It’s reasonable to expect that a few of these acquisitions will have a positive outcome, some will be a wash value wise at best, and many will cost more than the purchase price in the end ”
Over the long term, George expects some deals to be gamec h a n g i n g t r a n s a c t i o n s t h a t s i g n i f i c a n t l y e n h a n c e t h e a c q u i r e r ’s competitive position in the marketplace He does have one caveat, however: “It’s too early to know whether the liabilities those institutions assumed in their acquisitions were properly valued ”
As for the 2009 M&A outlook, traditional M&As may be about the same or may experience a decline, depending on the econo m y. “ B u t e x p e c t a l o t o f b u y i n g o p p o r t u n i t y i n t h e d i s t r e s s e d space,” says Kirsch
Shotgun M&As are not likely to fade into the sunset “There’s a lot of private equity money on the sidelines that can take advantage of prices There’s an opportunity to get good companies that have long-term value. It’s a great time to have cash,” says Kirsch.
In fact, some suitors from overseas, particularly from Europe and Asia, are likely to enter the US M&A marketplace as exchange rates make US companies particularly attractive, Venema predicts Take, for example, the $52 billion Inbev acquisition of AnheuserBusch Anheuser-Busch shareholders got a substantial cash premium for their shares and Inbev completed an important strategic transaction, says Baxley.
And while there are elements of the current financial cycle that are unique in recent times (particularly the dramatic effect on wellrecognized, major financial institutions), in many ways the current pattern is similar to downturns historically, says Baxley Ultimately, increased M&A activity will return when there is credit to support acquisitions, greater certainty in stock market valuations and more confidence in the direction of the economy.
“History suggests that when these factors turn positive,” says Baxley, “M&A activity will return in a very substantial way ”
While financial woes plague the country, financial pros remain in high demand among US government agencies. By
Derrick Lilly
Over the last year the nation has witnessed the failures of household names like AIG, Bear Stearns, Countrywide Financial, Fannie Mae, Freddie Mac, IndyMac Bank and Lehman Brothers. And turmoil among the remaining big name institutions is constantly streaming across media headlines With our nation’s financial backbone in a fragile state, major layoffs at financial institutions across the United States have added to accelerated unemployment levels, meaning that a career move is a disheartening and daunting task just now
But, despite the seemingly unending doom and gloom engulfing our financial world, there may be a safe haven the US government.
“The federal government (is) now assuming additional oversight and management responsibility for financial institutions, (meaning that) new federal positions will undoubtedly become available for individuals with finance backgrounds and experience,” says Tim McManus, vice president of Education and Outreach with the Partnership for Public Service
Even before the current economic downturn, a Partnership for Public Service survey, W here the Jobs Are Mi ssi on Cri ti cal Opportuni ti es for Ameri ca (2007), reported that accounting, budgeting and business jobs within government entities would increase significantly through September 2009 They estimated 21,248 new hires in the positions of accountant, auditor, budget and financial analyst and manager, and contracting specialist.
“Most people don’t think about specialized fields within the government,” says McManus, “yet our government is the nation’s single largest employer ” Who, then, offers the most opportunities?
Nearly every government department, agency and entity requires t h e s k i l l s o f f i n a n c i a l p r o f e s s i o n a l s ; h o w e v e r, c e r t a i n b r a n c h e s often require a greater concentration of employees in the field
The Department of the Treasury is projected to be at the top of the hiring list, with the Internal Revenue Service (IRS) planning to a d d a r o u n d 4 , 6 0 0 t a x e x a m i n e r s a n d 3 , 3 5 0 r e v e n u e a g e n t s through the end of FY 2009 Opportunities with the IRS range from entry-level internal revenue agents to senior-level domestic and international agents, tax examiners and audit specialists
The Treasury is responsible for printing the nation's money; setting domestic financial, economic and tax policy; managing the public debt; collecting taxes; and combating terrorist financing domestically and internationally
An organization well worth looking into is the Securities and Exchange Commission (SEC). Although the SEC is considered a small federal agency with just over 3,000 employees, its role as the primary regulatory entity responsible for managing and enforcing the federal securities laws that protect investors in our securities markets is a major task The SEC regulates and oversees market p r o f e s s i o n a l s , b r o k e r- d e a l e r s , i n v e s t m e n t a d v i s o r s , i n v e s t m e n t companies, transfer agents and clearing agencies, as well as securities exchanges and other self-regulatory organizations. The Division of Corporate Finance, the Division of Enforcement and the Office of the Chief Accountant are the three branches within the SEC responsible for hiring the most accountants
w o r k d i r e c t l y w i t h c o r p o r a t e officers, underwriters and outside public company accountants and counsel, in addition to SEC lawyers and financial analysts to ensure compliance with regulations under Sarbanes-Oxley, GAAP, GAAS and other accounting standards These accountants also focus on improving the quality and timeliness of financial disclosures to investors.
Division of Enforcement accountants essentially take on a policing role for the US securities markets and its participants This division’s primary focus is battling fraudulent financial reporting by public companies and their accountants and auditors According to the SEC, accountants working in this division have played important roles in high-profile investigations at major US companies. These investigations have led to fundamental changes in accounting standards, financial reporting, auditing and corporate governance
T h e C h i e f A c c o u n t a n t i s t h e p r i m a r y a d v i s o r t o t h e S E C o n accounting and auditing securities laws. Accountants within the Office of the Chief Accountant review domestic and international private accounting and auditing standard setters, processes and p r o
s i o n s o n r e g u l a t i o n s a n d restraints; monitor registered SEC auditors; and develop supplements to private-sector accounting standards In addition to fulltime accountants, this division also hires Fellows who work with the Chief Accountant on the development and proposal of securi-
ties laws over a two-year term The SEC also places economists and financial examiners in its other divisions
If you’re interested in politics and federal government actions, t h e n a p o s i t i o n w i t h i n t h e G o v e r n m e n t A c c o u n t a b i l i t y O f f i c e (GAO) may be the right option. The GAO is an independent, nonpartisan agency that works for Congress Often referred to as the “congressional watchdog,” it investigates how the federal government spends taxpayer dollars. Through the agency’s auditing and evaluation duties, reports and testimonies are prepared to advise Congress on methods to achieve a more efficient and effective government. In fact, officials from the GAO testify before Congress some 200 times a year on a number of domestic and international issues that impact government services to the population.
GAO financial auditors perform a variety of tasks in order to strengthen the accountability of the federal government’s assets and operations. Auditors typically perform financial analyses, promote better management practices, assess internal controls, and develop ways to improve the government’s financial management and infrastructure They also conduct audits of the government’s consolidated financial statements and financial statements prepared by major federal agencies.
L i k e t h e S E C , t h e G A O i s c o n s i d e r e d a “ s m a l l ” e n t i t y, w i t h around 3,200 employees Despite its size, the GAO’s workforce consists of very diverse and highly skilled professionals more t h a n h a l f o f t h e e m p l o y e e s h a v e d o c t o r a l o r m a s t e r ’s d e g r e e s Researching and auditing government agency operations to determine whether federal funds are being spent efficiently and legally is the GAO’s primary focus, but the agency also researches and reports on many significant issues like national defense, internat i o n a l a f f a i r s , e n e rg y, e d u c a t i o n , t h e e n v i r o n m e n t , h e a l t h c a r e , h o m e l a n d s e c u r i t y, t r a n s p o r t a t i o n , f i n a n c i a l m a n a g e m e n t a n d information technology.
Another option is to support the US military might in the ranks of the Department of Defense (DOD). The DOD is the nation’s l e a d i n g e m p l o y e r, w i t h m o r e t h a n 2 4 m i l l i o n a c t i v e d u t y a n d reservist positions, and more than 669,000 civilian personnel positions around the world. When a finance pro thinks of employment opportunities, the armed forces are probably not the first to come to mind, but the military employs various finance professionals in its civilian personnel ranks
Finance Officers with the DOD oversee a variety of tasks, including budgetary and fiscal matters, and program analysis and evaluation that improves general management within the Air Force, Army, Marines, Navy and other defense entities Large numbers of contracting specialists, accountants and auditors also play an active role in business operations that ensure the DOD has the funds and equipment necessary to maintain America’s military standing.
The Central Intelligence Agency (CIA) also employs finance professionals as part of its efforts to provide the United States with intelligence on the infinite changes in political, social, economic, technological and military environments around the globe The agency relies on its analysts, auditors, economists and finance officers to
monitor CIA programs and activities, keep operations running efficiently and within budget, and actively protect the United States from global threats
Specifically, economists within the CIA assess foreign economic policies and foreign financial issues that affect the security of the United States According to the careers section of the CIA website [www cia gov/careers], there is a particular need for economists with knowledge of China, the Middle East and South Asia, and s p e c i a l i s t s i n i n t e r n a t i o n a l b a n k i n g s y s t e m s , f i n a n c i a l m a r k e t s , t r a n s a c t i o n s a n d i n s t r u m e n t s E c o n o m i c a n a l y s t s a s s e s s i l l i c i t f i n a n c i a l a c t i v i t i e s , i n c l u d i n g t e r r o r i s t n e t w o r k s a n d c r i m i n a l groups, financing and procurement of weapons of mass destruction, money laundering, and corruption among foreign governments and companies
These agencies are only a few of the high-profile government entities offering finance-related employment opportunities. Other government agencies that anticipate the need to hire financial professionals include the US Agency for International Development (USAID), the Department of Education, the Department of Energy, the Department of Homeland Security, the Department of Housing and Urban Development, the Department of Transportation, the Department of Veteran Affairs, the Federal Bureau of Investigation (FBI), the Federal Deposit Insurance Corporation (FDIC), the General Services Administration and NASA.
At this point, you may be asking what benefits a federal government job will offer. The answer is many.
“Working for any governmental entity, federal, state or local or a n o t - f o r- p r o f i t c a n b e a n e x t r e m e l y r e w a r d i n g c a r e e r c h o i c e , whether it be in education, healthcare, justice administration or government financial management,” says Peter Aliferis, deputy executive director of operations and director of professional certif i c a t i o n w i t h t h e A s s o c i a t i o n o f G o v e r n m e n t A c c o u n t a n t s H e adds that, “The variety of jobs is immense, and the rewards of public service can often go far beyond opportunities offered in the private sector.”
McManus explains that, “Federal service does as well if not better than the private sector in ‘lookout benefits’ like vacation time, healthcare and even retirement plans ”
As a full-time employee with the federal government you can e x p e c t c h a l l e n g i n g w o r k t h a t o f f e r s o p p o r t u n i t i e s f o r a d v a n c ement, good pay and performance bonuses, and excellent benefits packages that commonly include immediate health and life insurance coverage; pension plans, social security and an employermatching 401(k)-like retirement account; annual paid vacation, national holidays, and sick leave that can be transferred between g o v e r n m e n t a g e n c i e s ; f l e x i b l e w o r k s c h e d u l e s a n d p o s s i b l e telecommuting opportunities; student loan repayment and tuition assistance programs; public transportation subsidies; and fitness and child-care services
Just as benefit offerings span a wide range, so too do pay scales. An entry-level accountant within the Navy Field Offices may start
with a salary of around $19,000, while a senior-level accountant with the SEC can earn well over $120,000. Like any job, government salaries are determined by factors such as the scope of the agency and its location, seniority, security or military clearance (if applicable), qualifications and skills level required, etc Keep in m i n d t h a t t h e g o v e r n m e n t a l s o p e r s o n a l l y t r a i n s m a n y o f i t s employees or provides career development support and guidance
“The government does a great job of supporting and mentoring its employees so they are encouraged to stay with the job,” says M c M a n u s , a d d i n g t h a t , “ T h i s o f f e r s e m p l o y e e s m o b i l i t y w i t h i n their agency and growth opportunities throughout the government as well Whether you are college age looking for a first career, or retiring from the private sector and seeking an encore career, the federal government is a great place to consider ”
The Certified Government Financial Manager (CGFM) designation is a good idea if you’re interested in pursuing a government job “The CGFM designation is growing in value and recognition, and indicates to a potential employer that the candidate knows and understands the field of government financial management,” says Aliferis. “The opportunities in government for people with demonstrated financial management skills such as the CPA and the CGFM are great. I would always suggest that the candidate with the best credentials is the most valuable If you wish to do attestation work for a government then I would recommend that you pursue both credentials More is better,” he explains (Information about the CGFM is available at www agacgfm org/cgfm )
“There is no best way to secure government employment as there are over 88,000 units of government in the United States,” says Aliferis But there are a few easy ways to go about narrowing down your options
w w w
a k i n g t h e d i f f e r e n c e o rg These sites provide resources to help you determine employment candidacy, and to aid in researching training programs, internships and career profiles.
Another resource is the Best Places to Work in the Federal Gove r n m e n t w e b s i t e [ w w w. b e s t p l a c e s t o w o r k . o rg ] , w h e r e y o u c a n review surveys and rankings from more than 283 federal agencies and subcomponents This website breaks down the data even further to help you find the best agency by matching agency characteristics with your personal profile
A must-have resource is www.USAJOBS.gov, the official job site o f t h e U S F e d e r a l G o v e r n m e n t H e r e , y o u c a n s e a rc h t h r o u g h thousands of job postings from nearly every government agency. The site offers a variety of categorized search options, numerous resources to help you create a resume accepted by the agencies, and the means to identify the right government job for you
And, of course, each agency has a dedicated website that will provide you with a complete overview, including information on careers, candidacy requirements and application processes
ILLINOIS PRACTICES FOR SALE Southern IL (Jackson & Perry Counties) gross $150K; Springfield Area gross $126K; SW Suburbs of Chicago gross $618K
See listing details and register for free updates at www accountingpractice sales com
PRACTICE?
Accounting Practice Sales is the leading marketer of accounting and tax practices in North America We have qualified buyers waiting and cash-out financing available to sell your practice quickly and get you the best deal possible To learn about our risk-free and confidential services, call Trent Holmes with The Holmes Group at 1-800-397-0249 or email trent@accountingpractice sales com
Central Illinois solepractitioner seeks to sell practice grossing $134,000. Sale includes all office furniture and equipment and long-term lease or purchase of existing building Practice consists of 28% accounting, 15% auditing, 52% income tax and 5% financial planning. Reply to email cpa.1204@hotmail.com.
PARK
Deluxe: private entrance office space Ready to move in Landscaped courtyard, public transportation excellent parking Aprox 807 SF on up 190-A Skokie Valley Road Woodridge Center Crossroads area 847-853-8811
1st Wednesday Fox Valley Chapter 7:30 –.9:30 AM
Panera Bread –1600 16th Street, Oak Brook, IL
1st Friday North Shore Chapter 7:30 –9:30 AM
Panera Bread –2512 Waukegan Road, Glenview, IL
2nd Tuesday Fox Valley Chapter 7:30 –9:30 AM
Peoples First Bank –3100 Theodore Street., Joliet, IL
2nd Wednesday Fox Valley Chapter 7:30 –9:30 AM
Panera Bread –1191 East Ogden Avenue, Naperville, IL
2nd Friday Fox River Trail Chapter 7:00 –9:00 AM
Panera Bread –730 Northwest Hwy, Fox River Grove, IL
3rd Friday O’Hare Chapter 7:00 –9:00 AM
Panera Bread –90 Biesterfield Road, Elk Grove Village, IL
3rd Monday Chicago Metro Chapter 7:00 –9:00 AM
Boston Blackies –120 South Riverside, Chicago, IL Cost: $10 –Breakfast included
Next to Chicago South Chapter 7:00 –9:00 AM
Last Wednesday Panera Bread –Harlem and 159th, Orland Park, IL
3rd Thursday Chicago South Chapter 7:00 –9:00 AM
Panera Bread –2314 West 95th Street, Chicago, IL
Last Wednesday Chicago South Chapter 7:00 –9:00 AM
Panera Bread –Harlem and 159th, Orland Park, IL
CPE Credits: 0 hours
For info on monthly Networking Breakfasts and other upcoming Chapter Events, visit
www.icpas.org
Questions: Contact: Becky Whitehurst, Chapter Relations Coordinator
Email: whitehurstb@icpas.org or call 312-993-0407 ext. 221
December 4, 2008
Charles F. G. Kuyk lll
Secretary, Board of Directors Illinois CPA Society
550 W Jackson Blvd Suite 900 Chicago, IL 60661
Dear Mr Kuyk: As provided in Article V of the Illinois CPA Society's Bylaws, the Nominating Committee hereby presents its unanimous nominations for Officers, Directors and Affiliate/Public Members We are also indicating our nominee for AICPA Council State Society Representative
OFFICERS
(To hold office for one year, June 1, 2009-May 31, 2010)
CHAIRPERSON
Lee A Gould
VICE CHAIRPERSON
Sara J Mikuta
SECRETARY
To succeed Sheldon Holzman
To succeed Lee Gould
Charles F G Kuyk lll 2nd year of an original 2-year term
TREASURER
Robert E. Cameron To succeed Sara Mikuta
CONTINUING DIRECTORS
(To hold office for the second year of a two-year term, June 1, 2009 – May 31, 2010)
Brent A. Baccus Charlotte A. Montgomery
Therese M Bobek Daniel F Rahill
Cara C Hoffman Lawrence H Shanker
CONTINUING DIRECTORS
(To hold office for a new 2-year term, June 1, 2009 – May 31, 2011)
William P Graf
Annette M. O’Connor
James P Jones
DIRECTORS
(To hold office for three years, June 1, 2009 – May 31, 2012)
Elizabeth A. Murphy
Michael J Pierce
Kelly J Grier
Edward H. Stassen
Sheldon P. Holzman, Chairperson, becomes a Director for one year beginning June 1, 2009, in accordance with Section 4 2 of Article IV of the Bylaws
In accordance with Section 4 2 of Article IV of the Bylaws, an affiliate member or a representative of the public may be elected as a director
PROFESSIONAL AFFILIATE DIRECTORS
(To hold office for one year June 1, 2009 – May 31, 2010)
Marian Powers
RETIRING DIRECTORS
William J Cernugel, Mary Lou Pier, Gerald A Olson, Anthony Fuller, Ray Whittington and Debra R Hopkins
AICPA COUNCIL
(To serve for three years October, 2009 – October 2012)
Lee A. Gould
Michael J. Pierce
Mary Lou Pier
AICPA COUNCIL STATE SOCIETY REPRESENTATIVE
(To serve for one year October 2009 – October 2010
Sara J. Mikuta
A l l o f t h e a f o r e m e n t i o n e d n o m i n e e s h a v e c o n s e n t e d t o s e r v e i f elected The Nominating Committee has ascertained that all nominees to be elected are qualified in accordance with the provisions of Section 4 4 of Article IV of the Bylaws, and information on nominees for the membership as required by Section 5 3 of Article V thereof, is set forth following this report.
SUBMITTED BY THE NOMINATING COMMITTEE:
DEBRA R. HOPKINS, Chairperson
Daniel P Broadhurst Kimberly R Rice
Wayne R Ebersberger Michelle M Scheffki
Lester H. McKeever Jr. Joyce M. Simon
Sheldon Holzman, ex-officio
