Disclosures July/August 2012

BROUGHT TO YOU BY THE VIRGINIA SOCIETY OF CPAs

JULY/AUGUST 2012 I VOL. 25 NO. 4 I WWW.VSCPA.COM

THE GOVERNMENT 12 ISSUE

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What’s new for government contracting Yellow Book changes Accounting for contingent payments

HTTP://DISCLOSURES.VSCPA.COM

Save the Date — 2012 Conferences Stay up-to-speed through the VSCPA’s live, group update conferences. No matter what your areas of interest are, VSCPA conferences can help you get the CPE and networking you need. Be on the lookout for more information about this year’s conferences: • Sept. 18: IRS Liaison Day • Sept. 20–21: 13th Annual Business Valuation, Fraud & Litigation Services Conference • Sept. 24–25: 42nd Annual Accounting & Auditing Conference (Roanoke) • Oct. 22: NEW! 2012 Women’s Symposium • Nov. 5–6: 22nd Annual Professional Development Conference • Nov. 13: 3rd Annual Government Contracting Conference • Nov. 15–16; 42nd Annual Accounting & Auditing Conference (Virginia Beach) • Dec. 13–14: 4th Annual Technology Conference • Dec. 18: NEW! 2012 Best of the Best: VSCPA’s Most Popular CPE Topics

Virginia Society of Certified Public Accountants

To learn more, visit www.vscpa.com/Conferences

INSIDE this issue

With its proximity to Washington, Virginia is a hotbed for government workers and contractors. And CPAs meet the demand for accounting services for all sectors of government.

This issue tackles important government topics, from Yellow Book changes to a primer on the Virginia Auditor of Public Accounts. (If you’ve ever wondered what they do, now’s your time to find out!)

FEATURES

ARTICLES

SECTIONS

WHAT’S NEW FOR GOVERNMENT CONTRACTING

THE VIRGINIA AUDITOR OF PUBLIC ACCOUNTS 8

BACKTALK

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LINE ITEMS

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DATA DRAFT

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Heightened audit scrutiny, new rules for business systems and a tightening contract market are all affecting government contractors.

This government agency does more than just audits.

ADVERTISERS INDEX

A NEW COAT OF PAINT FOR THE YELLOW BOOK

16 The 2011 Yellow Book Revision updates the 2007 Yellow Book, and with it comes changes in structure and layout.

Audimation Services Inc. p. 41 • Beth A. Berk, CPA p. 7 • Digital Benefit Advisors p. 19 • CPE Link p. 23 • GEICO p. 43 • Keiter back cover • Poe Group Advisors inside back cover

SELF-ASSESSMENT 24 VSCPA NEWS

VSCPA EDUCATIONAL FOUNDATION 40 CLASSIFIEDS 43 I AM

ACCOUNTING FOR CONTINGENT PAYMENTS

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Acquisitions are expected to increase this year, and accounting for contingent payments can be complicated. Structuring the deal properly is critical to achieving the desired result.

disclosures is published bimonthly for members of the Virginia Society of CPAs.

Our mission is to enhance the success of CPAs.

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BACKTALK you said it

VIRGINIA SOCIETY OF CPAs

4309 Cox Road Glen Allen, VA 23060 Ph. (800) 733-8272 Fx. (804) 273-1741 www.vscpa.com

disclosures http://disclosures.vscpa.com EDITORIAL STAFF Jill Edmonds Managing Editor disclosures@vscpa.com Jenny Hansen Communications Director jhansen@vscpa.com Tina Lambert, CAE Vice President, Member & Public Relations tlambert@vscpa.com EDITORIAL TASK FORCE Joan D. Aaron, CPA Lindsay S. Andrews, CPA Adam G. Chaikin, CPA David L. Cotton, CPA

FROM CONNECT >>

Chapters in Northern Virginia: Is one enough?

Do you think that there should be one chapter, or should there be more than one? I am a member of the “Northern VA Chapter,” which holds most of its monthly meetings at the Fairview Park Marriott in Falls Church. It is a great chapter, with over 400 members, and well planned CPE and meetings. The location and time slot are great for me and a lot of other members. Geographically, when VA is on the map with its 11 chapters outlined geographically, it would appear that “Northern VA” is taken care of. However, because of the sheer number of CPAs in the northern part of VA, I sometimes wonder if there are other CPAs who may be interested in holding chapter meetings in Tysons Corner, Old Town Alexandria, the Pentagon, Arlington, Leesburg or other places.

SEAN O’CONNELL, CPA,

PBGH, Fairfax

VIA FACEBOOK >> We look forward to having the VSCPA in the Watkins Meegan Tysons Corner office soon!

Just introduced Sec. Hazel at the VSCPA Health Care Industry Symposium in Williamsburg. Great crowd!

FROM A CPA CAFÉ BLOG COMMENT >> The problem with allowing the Commonwealth of Virginia to levy a new sales tax on services with the idea/promise that other taxes were be reduced is that there is no guarantee that current or future legislators will live up to the promise.

— @TINALAMBERT

DAVID E. IVES, CPA,

— @JBMONTORO

Elizabeth M. Helle, CPA George D. Strudgeon, CPA Thomas L. Visotsky, CPA DEADLINES Articles and advertising for future issues are due by 5 p.m. on the following dates: Nov./Dec. 2012 Jan./Feb. 2013 Mar./Apr. 2013 May/June 2013 July/Aug. 2013 Sept./Oct. 2013

Aug. 15, 2012 Oct. 15, 2012 Dec. 15, 2012 Feb. 15, 2013 Apr. 15, 2013 June 15, 2013

Siemens Enterprise Communications, Reston

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Thank you to the VSCPA for presenting to our summer interns and young professionals!

— @WATKINSMEEGAN

This is my first tweet...ever! VSCPA gave our first prof. issues update.

Stephanie, Emily and Maureen gave great presentations.

BLOG: www.cpacafe.com CONNECT: http://connect.vscpa.com

Statements of fact and opinion are made by the authors alone and do not imply an opinion on the part of the officers, members or editorial staff.

The Warren Group Design / Production / Advertising www.thewarrengroup.com custompubs@thewarrengroup.com

TWITTERSPHERE >>

WATKINS MEEGAN TYSONS CORNER

Gary D. Dittmer, CPA Clare K. Levison, CPA

From the

TWITTER: @VSCPANews, @FinancialFit LINKEDIN: http://tinyurl.com/VSCPALinkedInGroup FACEBOOK: www.facebook.com/VSCPA DIGITAL MAGAZINE: http://disclosures.vscpa.com

Get in touch

At the Virginia Society of CPAs, we love to hear from you.

Whether it’s a quick email to a staff member, chat on the phone, Disclosures letter to the editor, tweet, blog comment or something different altogether, let us know what you’re talking about, how you feel about different issues affecting CPAs and how we can help.

LINE items

CGMAs show only cautious optimism on global economy Despite confidence in their own organizations, business leaders worldwide are demonstrating only slight optimism in their global economic outlook, according to the first Global Economic Forecast of Chartered Global Management Accountants (CGMA).

The survey, which covers the first quarter of 2012, follows a baseline survey conducted in the fourth quarter of 2011 by the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA).

JOBS could bring jobs … And questions The Jumpstart Our Business Startups (JOBS) Act, was signed April 5, 2012, but with it comes a lot of questions. The Act helps companies raise money without the usual hurdles for initial public offerings from the U.S. Securities and Exchange Commission (SEC) — but the process is not without its challenges. Major changes from the JOBS Act include: >> A privately owned company with less than $1 billion in revenue can raise up to $50 million without registering with the SEC. The monetary cap was significantly increased from its previous $5 million limit. >> More businesses will be qualified to use “crowdfunding” to raise funds. >>The number of shareholders allowed per company without SEC registration was bumped from 500 to 2,000.

If these new provisions raise questions, the SEC has answers.

Check out http://tinyurl.com/JOBSActQ-A for guidance on JOBS Act implementation and application.

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CGMAs rated factors in the Global Economic Index more highly than the 2011 baseline survey; the Index rose seven points to a score of 65. On a scale from 0 to 100, a score of 50 is considered neutral, above 50 indicates a positive sentiment and below 50 signifies a negative sentiment.

But the lowest-scoring factor in the Index was global economic optimism. Rated only a 37, it was well below the Index’s “neutral” 50 reading, indicating continuing concern over a global economy still in flux.

Although some industries are clearly faring better than others in terms of optimism, forecast findings improved quarter-overquarter for all industries. CGMAs show the most confidence in manufacturing (63 percent), finance and insurance (62 percent) and retail and wholesale trade (59 percent). Industry enthusiasm levels are lowest in banking (50 percent) and construction (37 percent).

To view survey results, visit www. cgma.org. or scan the QR code with your smartphone.

Source: AICPA n

LINE items CULTURE OF SERVICE CONTINUES >>

CPA Day of Service is calling your name!

Whether you’re a CPA Day of Service veteran or want to volunteer for the first time, we’re ready to have you. Last year, more than 700 volunteers gave back to their communities by volunteering at dozens of organizations, from St. Mary’s Home for Disabled Children in Norfolk to Shalom Farms in Goochland. Your firm can choose its own cause, or you can volunteer on your own. The power of the Day of Service is to unite CPAs across the state in one single day to give back. This year’s fourth annual Day of Service is set for Sept. 21; visit www. vscpa.com/DayofService today to get involved. n

BACK ON TOP >>

During the 2011 CPA Day of Service, volunteers from KPMG worked at the Arlington Food Assistance Center, where they painted, cleaned and packed cabbages and sweet potatoes. Here, Michael Kurlancheek, audit associate, and Lindsay Andrysiak, senior audit associate, practice their painting skills.

>> DID YOU KNOW?

Information security resumes No. 1 worry spot

DISCLOSURES GOES GREEN

Last year, control and use of mobile devices was the top technological worry of CPAs, but it slid to No. 3 in this year’s 2012 Top Technology Initiatives survey conducted by the American Institute of CPAs (AICPA). Information security — which was at the top of the list year after year prior to 2011 — is back on top, but that’s mainly due to the proliferation of mobile technology. Despite the greater flexibility and efficiency mobile devices offer, CPAs are worried about breaches in information security because of their increased use.

• Disclosures is printed on paper stock that is certified by the

Not surprisingly, securing the IT environment is CPAs’ first priority in the coming year. Other priorities include managing and retaining data, managing risk and compliance, ensuring privacy and leveraging emerging technologies. More information on the top technologies is available at www.aicpa.org. n

Yes, the VSCPA still prints a paper magazine for the entire membership. But that doesn’t mean the Society isn’t making strides to reduce Disclosures’ impact on the environment:

Forest Stewardship Council (FSC). The magazine’s printer, Cummings Printing, is also FSC-certified (a requirement to print on FSC-certified paper), which indicates the printer’s processes are also sustainable. That’s what the FSC certification stamp signifies on the back cover. More information on FSC certification is available at www.fsc.org.

• Disclosures is printed using an efficient full-color process using the same amount of ink as black and white publications.

• As a part of its mobile strategy, the VSCPA has a digital version of the magazine, http://disclosures.vscpa.com, which is available to all members. Some specialized groups, such as high school accounting students, no longer receive paper magazines and are instead directed to the online version.

Making the magazine more viewable on smartphones and tablets is also a part of the mobile strategy.

Have more questions? Contact Disclosures Managing Editor Jill Edmonds at jedmonds@vscpa.com.

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DATA draft

A peek inside companies’ finance teams A third annual survey of finance executives from the Financial Executives Research Foundation and Robert Half Management Resources reveals how the 2011 practices of finance departments across companies worldwide compare.

Inside the U.S. corporations: >> MORE COMPANIES ARE USING TEMPS: Execs report using more

temporary staff (12 percent) than they did the previous year (9 percent). >> PAYROLL OUTSOURCING IS DOWN: Outsourcing the payroll

Virginia’s fastest-growing companies (and one is an accounting firm!)

Here are the top 10 fastest-growing companies in the Commonwealth, as named by the Virginia Chamber in April. Kearney & Company, PC, an accounting firm in Alexandria, was No. 47 on the full list of 50.

function dropped 10 percent since 2012, to 38 percent.

1. VALKYRIE ENTERPRISES LLC, Virginia Beach

>> IFRS USE IS UP: Eleven percent

2. INTEGRITY MANAGEMENT CONSULTING, McLean

of execs say their companies have begun using International Financial Reporting Standards (IFRS), up from 5 percent in 2009.

Source: CGMA.org. See http://tinyurl.com/ 7uedd8l for the full results.

>>

BY THE NUMBERS

3,212 The number of taxpayers assisted by the U.S. Internal Revenue Service (IRS) at Disaster Recovery Centers in fiscal year 2011, according to the 2011 IRS Data Book.

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WATCH THEM GROW >>

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6. MARKON, Falls Church 7. THE REHANCEMENT GROUP INC., Reston 8. 3PILLAR GLOBAL INC., Fairfax

3. AGILEX TECHNOLOGIES INC., Chantilly

9. INSIGNIA TECHNOLOGY SERVICES LLC, Newport News

4. EVOKE RESEARCH AND CONSULTING LLC, Arlington

10. EMERGENT, Vienna

5. RAND ENTERPRISES INC., Newport News

Mature businesses thrive here; new businesses have harder time Virginia has held a long-standing spot at the top of lists ranking business climate.

And a new study from the Tax Foundation finds the Commonwealth is among the best states for mature businesses. But the study, which ranks states by their relative tax burdens for different types of operations, reveals Virginia is less friendly to newly established operations. Check out details on Virginia-specific results at www.taxfoundation.org/files/location_matters_virginia.pdf.

Attention CPAs: Whether A Decision Maker Looking To Upgrade Your Talent, Or A CPA Looking to Upgrade Yourself/Your Skills, Ask Yourself: Who really chose who in joining your company?

Are you/your professional staff really at the right level where you should be/you need them to be?

Are you/your staff in a position that truly suits your/their personality, values, and professional and personal needs?

Why leave your future to chance?

If you’re seriously interested in making the “right” move for your next hire, I can help you.

I am an actively licensed CPA in Maryland and Virginia with over 20 years of experience including public accounting (E&Y) and consulting (KPMG), financial accounting (American Cancer Society), internal audit (Moneyline Telerate), and recruiting (Acsys, formerly Don Richards). As a networker who truly enjoys helping others and sharing my career experiences to guide fellow professionals, here is how I can help you: Decision Makers:  Ask you questions, and most likely ask many more questions than other recruiters about your company, duties involved, skills required, corporate culture and more  Work with you on finding the “right” professional that is the “right fit”  Provide you with valuable information about the professionals I work with, the marketplace, what your competitors pay, and more Career Seekers:  Guide you on career paths available in public accounting and industry  Enable you to capitalize on your strengths  Coach you on how to put your best foot forward to find the “right fit”  Advise you when to stay in your current position if that is the right move If you’re interested in working with a recruiter who understands your background, skills, and is genuinely interested in helping you find the “right fit”, then I welcome meeting you!

BETH A. BERK, CPA Independent Recruiter

Phone: 301-767-0670 Email: BethABerk@msn.com

Specializing in CPA Firm, Accounting & Finance Positions in Metropolitan DC & Nearby Suburbs/Baltimore/Richmond/Tidewater Connecting You To Your Next Hire

TM

Contingency & Retained Staffing Solutions

matching skills, experience & values with needs CPA Ambassador for the state of Maryland, sponsored by the AICPA and Ethics Instructor for VSCPA

Serving clients and professionals as an Independent Recruiter since March 2005

GOVERNMENT auditing

The Virginia Auditor of Public Accounts: Audits and so much more

BY JENNIFER SCHRECK, CPA, CISA, PMP

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GOVERNMENT auditing

The Virginia Auditor of Public Accounts.

The State Auditor. The APA. You may have heard some variation of our name before, or perhaps you even know that we audit the Commonwealth’s financial statements. But you may not aware of everything else we do

over significant processes, including financial reporting. Consequently, our audit reports regularly provide process and policy change recommendations that Virginia agencies could implement to reduce expenses or enhance fiscal management of agency programs.

It is true that our primary role is to serve as the independent, external auditor of the executive and judicial branches of Virginia’s state government, and that we serve at the bequest of the legislative branch. In this role, we perform a financial statement audit for the Commonwealth as a whole, known as the Comprehensive Annual Financial Report (CAFR). We also perform financial statement audits for a limited number of state agencies, like the Virginia Lottery or Alcoholic Beverage Control, or when required to by law or as the result of bond covenants. And yes, we also perform financial statement audits of the Commonwealth’s colleges and universities. However, even with all of those financial statement audits, the bulk of our audit work falls under the scope of what the U.S. Government Accountability Office (GAO) considers performance audits.

The following are just a few examples of reports we issued over the past few years highlighting opportunities for improvement, as well as risks in key areas of government:

SUPER AUDITORS The GAO issues government auditing standards, known as the “Yellow Book.”

The Yellow Book, which guides all but a small portion of our work, focuses heavily on testing internal control

in prior audits, but were also facing other challenges.

• The E-911 Board audit highlighted impending cash flow problems and other issues for the organization in the coming year.

• A review of local ordinances and the funding of courts revealed the complicated maze of state and local tax revenues and fines that provide court funding with little connection to service delivery.

• The Commonwealth Cell Phone Study identified potential savings in wireless expenses.

• Our Accounts Receivables and Disbursement Process Reviews revealed opportunities for savings through the way agencies manage their receivables and payables.

• Review of the Virginia Gas and Oil Board revealed opportunities to improve its escrow accounting.

Beyond state agencies, we perform audits of the various courts in the Commonwealth, from the Supreme Court of Virginia down to each Circuit, General District, and Juvenile and Domestic Relations Court located across the state. Likewise, we perform audits of the Commonwealth’s Constitutional Officers and their management of state funds. These and any other report issued by the APA can be found on our website, www.apa.virginia.gov.

We also audit and monitor state agency compliance with the robust federal regulations of Office of Management and Budget (OMB) Circular A-133. Our staff helps state entities navigate the complexities of federal requirements, provide guidance on the use of risk assessments to better monitor grant recipients and help them recover funds from grant recipients that used funds incorrectly.

• A review of the Virginia Department of Transportation’s (VDOT) Asset Management System showed how the department could improve infrastructure maintenance funding decisions with better data.

• Our most recent review of the Virginia Information Technology Agency (VITA) and Northrup Grumman partnership acknowledged they were addressing issues identified

BEYOND THE AUDIT We are far more than just an audit organization. From facilitating 

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GOVERNMENT auditing government transparency, to providing oversight to local government auditors, to helping agencies improve their management of federal grants, our responsibilities touch aspects of government operations at the local, state and federal levels.

For example, the APA developed and provides ongoing support for Commonwealth Data Point, an online resource that shows where and how the Commonwealth spends its funds. Any Virginian can visit this site (datapoint. apa.virginia.gov) to learn about the Commonwealth’s spending, revenues, demographics and more. Commonwealth Data Point also gives Virginians access to similar information about Virginia’s cities, counties and towns.

Whether someone would like to see what an agency bought with a state purchase charge card or how many students are going to a particular state university, Commonwealth Data Point has the answers. The ease with which the user can navigate the website hides the complex processes required to pull data and information from dozens of sources together into a single searchable database that provides useful, timely information.

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overruns that are all too common for many system transformation projects.

Our involvement also brings to light significant areas of concern with systems development initiatives from a statewide perspective, from identifying the need for data standards to minimizing duplicative development activities.

Our information technology specialists were critical in developing the first statewide perspective on the status of information technology security across the Commonwealth. We provide regular updates to the original report issued in 2006 and work with VITA to ensure key issues under the management of Northrup Grumman remain a priority for implementation. Further, for those organizations that do not fall under the purview of VITA and Northrup Grumman, our office has the resources to provide technology-related vulnerability and penetration testing services when requested. Services such as these help the Commonwealth ensure the integrity and accessibility of its data.

LOCAL FOCUS

Our staff regularly monitors the progress of major information technology projects and state contracts, providing the Virginia General Assembly opportunities to measure their progress, assess their performance and determine when they need adjustment. Our reports on these activities not only highlight the Commonwealth’s successes, but also identify projects struggling to meet major milestones.

Even if you have not been aware of the APA because of our state government audits, you may be familiar with our local government activities. As previously mentioned, we audit the state accounts managed by the constitutional officers of the localities at least once every two years. But more than that, we retain oversight responsibility for the local government audits performed by CPA firms and are responsible for compiling the Comparative Report.

Identifying issues early can help prevent millions of dollars in cost

The Comparative Report, also known as the Comparative Report of Local

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Government Revenues and Expenditures, presents financial data representing each local government’s operations for the general government and their enterprise activities (such as water, sewer, airports and other similar services). Submitted annually in the spring, the report aims to provide the General Assembly and governing bodies and officers of Virginia’s localities a valuable analytical tool to review local government fiscal activities.

While the report uniformly presents fiscal information about the localities, it does not address the qualitative factors that affect government performance, such as the efficiency of various functions or the differences in the quantity or quality of services, which can vary widely among localities. So while we caution users not to base conclusions solely on the information included in the report, it is interesting to see how the localities stack up against each other on fiscal terms. You can gain access to the summary report, as well as greater details about each locality, at www.apa.virginia. gov/comparativereport.cfm.

Annually, we work with local governments to ensure they receive audits that meet both their needs and the needs of the Commonwealth. If you or your firm has done a financial statement audit for a local government under the Yellow Book or OMB Circular A-133, then you know there are unique nuances to how you do these audits.

Further, because local governments are major recipients of state funds for various programs (such as education, the Comprehensive Services Act or highway maintenance), many state agencies require auditors perform special procedures on their programs and funds

to determine the proper management of those programs and funds.

Through the APA’s Specifications for Audits of Counties, Cities and Towns, we provide the auditors with audit requirements for state programs, so that auditors can combine these requirements into the local government’s annual audit to streamline the audit process and ensure uniformity. Because many of these agency-required procedures may also provide evidence for the auditor’s report on compliance in accordance with Government Auditing Standards, their incorporation into the local government audit can increase audit efficiency and ultimately reduce audit costs.

Updated annually, this manual highlights the specific procedures local government auditors must perform and addresses the quality control program over local government audits administered by the Auditor of Public Accounts. Very similar to the American Institute of CPAs (AICPA) Peer Review Program, the APA’s quality control program monitors the quality of local government audits, their compliance with the required audit procedures included in the manual and compliance with generally accepted auditing standards, the Yellow Book and OMB Circular A-133.

When we observe issues across multiple CPA firms or localities, we reach out to the local government and CPA communities to ensure they are aware of the issues. You may have been the recipient of one of our alerts, seen them posted online or observed us presenting on local government issues at VSCPA- or Virginia Government Financial Officers’ Association-sponsored events.

Our office is always concerned with ensuring that state and local government officials are not abusing their use of state funds, stealing or perpetuating wasteful spending. We accomplish this by working with local, agency and institutional internal auditors investigating fraud, waste and abuse reported throughout the Commonwealth. At the conclusion of such reviews, we help to ensure state and local organizations strengthen their controls to help prevent and detect future occurrences.

SNIFFING OUT FRAUD State law requires all entities of the Commonwealth to report circumstances suggesting a reasonable possibility that a fraudulent transaction has occurred to both the APA and the Superintendent of State Police. Our office works with the state police to determine how we can best support each other in the investigation of such reports. Local governments also have the ability to request our involvement in such cases, when it involves a constitutional officer or their employees.

Over the last few years, several cases that we have been involved with were reported by local news. From the misdeeds in the Goochland County Treasurer’s office to the mismanagement of the Comprehensive Services Act in Pittsylvania County, our auditors have provided valuable information to the public, identifying where internal controls ended and fraud began. In 2010 and 2011, we disclosed more than $10.4 million in embezzlements and improper handling of funds from these and our other fraud audits.

GETTING IT DONE As you can imagine, all of these responsibilities requires a staff of auditors and other professionals from a wide variety of backgrounds. From CPAs to Certified Information System Auditors (CISA), our staff hold more than 20 different types of professional certifications and are actively involved in relevant local and national professional organizations like the National Association of State Auditors, Comptrollers and Treasurers, the AICPA, VSCPA and Association of Government Accountants.

Because we are involved with state and local government organizations in so many different ways, the APA has a unique level of insight into their operations and the reasons behind what they do and why they do it. The results of the APA’s work are a major reason why the Commonwealth has been and continues to be recognized as one of the best managed states in the country.

We look forward to finding ways to improve the Commonwealth and hopefully you can see why we take pride in our office motto: “The Auditor of Public Accounts … Making a Difference in the Commonwealth.” n

JENNIFER SCHRECK, CPA, CISA, PMP, is audit director of financial management at the Virginia Auditor of Public Accounts in Richmond. Contact her at jennifer.schreck@apa.virginia.gov.

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GOVERNMENT contracting

What’s New for Federal Contractors

BY PETER A. MCDONALD, CPA, ESQ.

The federal government is the largest purchaser of goods and services in the economy. Not surprisingly, many accountants have clients who are either bidding for or performing government contracts or grants. Practitioners may want to be aware of some of the more salient recent developments in government contracting.

FASTER PAYMENTS FOR SMALL BUSINESSES A policy announced by the Office of Management and Budget (OMB) required agencies, as of Nov. 1, 2011, to establish new payment procedures to attempt to pay small businesses within 15 days after receipt of a proper invoice.1 However, the policy of providing for faster payments to small businesses was only established as a goal, not a requirement. For this reason, bureaucratic compliance with the new policy has been slow in coming.

DCAA AUDIT FOCUS Over the past year, the following areas have been the subject of heightened audit scrutiny by the Defense Contract Audit Agency (DCAA):

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GOVERNMENT contracting

CONTRACTOR BUSINESS SYSTEMS The Department of Defense (DOD) Federal Acquisition Regulation Supplement (DFARS) was amended to require contractors to have acceptable business systems to perform DOD contracts. Accordingly, DCAA has tasked its auditors with measuring compliance in this area. The details of these requirements are discussed in a separate section below.

PROPOSAL WALKTHROUGHS Proposal walkthroughs are a new initiative that has apparently been well received by contractors. A walkthrough entails having a contractor’s cost team make a presentation to the DCAA auditors responsible for auditing the proposal, i.e., walk the auditors through the numbers, answer their questions, etc.

After this initial grounding in how the cost proposal was prepared, the auditors then do their work to ascertain whether the actual submission is consistent with what the contractor intended. Anecdotal evidence to date indicates that both contractors and auditors have been pleased with this process.

ALLOWABLE EXECUTIVE COMPENSATION Under FAR 31.205-6, executive compensation is limited to amounts established by the Office of Federal Procurement Policy (OFPP).

Below those limits, the amount of compensation is supposed to be

As any market gets smaller, the competition gets tougher — and the government contracts market is no exception. “reasonable” — the criteria for which all accountants know are subjective.

Nonetheless, the DCAA has established a specially trained task force to go after what it considers to be unreasonable executive compensation.2 Not surprisingly, DCAA’s attempts to disallow unreasonable compensation spawned litigation in this area. The first case to be decided, discussed in greater detail below, resulted in a win for the contractor.

COMMERCIAL/GOVERNMENT COST ALLOCATIONS Government auditors know that contractors with both government and commercial customers have an incentive to over-allocate indirect costs to their government contracts. Mindful of this, the DCAA has been more carefully reviewing the indirect cost apportionments between a contractor’s government and commercial contracts.

the case, a contractor that charges costs arising out of a related party transaction to its government contracts unwisely places a heavier burden on itself to justify the fairness of the prices. In any event, this is an area of vigilance for government auditors.

INCURRED COST SUBMISSION BACKLOG Finally, there is the chronic problem of incurred cost submissions. Simply put, there is a substantial backlog. While some contractors are only three years behind, others are six or seven years behind. This problem is so significant that it routinely receives the attention of DCAA management, who undertook various steps to address it. While some progress was made, to date the backlog persists.

RELATED-PARTY TRANSACTIONS

FAR UPDATES TO ACCOUNTING REFERENCES

Related-party transactions are a chronic problem at the small business level, given the small business owner’s proclivity to do business with family members. In the law, a business deal is generally not considered to be an arm’s-length transaction due to the relationship of the parties. This being

In a final rule that became effective on Feb. 2, 2012, the Federal Acquisition Regulation (FAR) was amended to update its references to U.S. Generally Accepted Accounting Principles (GAAP) to be consistent with the Financial Accounting Standards Board’s (FASB) Statement No. 168.3 Under 

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GOVERNMENT contracting

that Statement, FASB’s Accounting Standards Codification (ASC) is now the authoritative source of GAAP.

DFARS BUSINESS SYSTEM RULES MADE FINAL The interim DFARS Business Systems Rules encompassed the following: the accounting system (to include the billing system), the estimating system, the purchasing system, the property management system, the earned value management system, and the material management accounting system.4 With only insignificant changes, these rules were made final in 2012.5 At present,

LEARN MORE ABOUT IT >>

GOVERNMENT CONTRACTING CPE Visit the online CPE catalog at www. vscpa.com for more info, including locations and costs, on the following VSCPA CPE courses: >> JULY 10: Accounting Systems for Government Contractors >> JULY 11: Federal Contract Accounting >> SEPT. 26: Governmental & Nonprofit Annual Update >> NOV. 2: NEW! Business Systems Requirements for Government Contractors >> DEC. 20: Introduction to the Accounting Requirements of Government Contracts >> DEC. 21: How to Prepare & Survive Indirect Cost Rates for Government Contractors

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these requirements only apply to DOD contracts, but they are likely to be adopted by civilian agencies in the near future.

The DFARS Contractor Business Systems clause applies whenever the Cost Accounting Standards (CAS) apply.6 (Small businesses have an exemption from CAS, so these new business systems rules will not apply to them.) When these rules do apply, though, they allow contracting officers to withhold up to 10 percent of a contractor’s invoice for a “significant deficiency” in a business system. A “significant deficiency” is defined as a “shortcoming in the system that materially affects the ability of officials of the [DOD] to rely upon information produced by the system that is needed for management purposes.”

Since significant deficiencies for the accounting and estimating systems are determined by the government auditor, this leads directly to the next topic.

ASBCA DECISIONS Two recent decisions by the Armed Services Board of Contract Appeals (ASBCA) are of particular interest to contractors.

DCAA LOSES EXECUTIVE COMPENSATION CASE In an ASBCA decision, the DCAA lost its attempt to disallow what it considered to be unreasonable executive compensation. The case J.F. Taylor, Inc.7, involved the compensation of the top five executives for four years. After comparing their executive compensation

JULY/AUGUST 2012

for fiscal years 2002 through 2005 to compensation market surveys of similarly situated contractors, DCAA determined that the compensation was unreasonable. The DCAA further decided that the total excess compensation over the four-year period amounted to approximately $850,000.

Repayment of the excess amount was subsequently demanded in several Administrative Contracting Officer (ACO) final decisions. These decisions were duly appealed to the ASBCA. The ASBCA found the statistical methodology used by the DCAA to be flawed and therefore unreasonable.

On the other hand, the methodology applied by the contractor’s experts, who found only about $42,000 to be unallowable, went completely unrebutted by the government. In the absence of any contrary evidence, the contractor’s approach was found to be reasonable.

Executive compensation is a major initiative for the DCAA, and it is also a subject of interest to Congress.8 While the DCAA was obviously disappointed with the result in the Taylor decision, the case should be viewed as a setback for the government’s efforts in this area, and not a defeat.9 SOME INDIRECT COSTS MAY BE UNALLOWABLE The ASBCA made another noteworthy decision in Splashnote Systems, Inc.10 Although the amount in dispute was not significant (around $85,000), the issues involved disallowances of various indirect costs to include deferred independent research & development (IR&D), bonus payment and meals.

GOVERNMENT contracting

Essentially, the Board found that the deferred IR&D costs did not meet the terms of the contract or the FAR11; the bonus was actually a prohibited distribution of profits12; and the costs of the meals had not been adequately documented under any of the cost principles which might have made them allowable.13 This case is a reminder that the burden is on the contractor to satisfactorily substantiate its costs. If costs are not properly documented, they are unallowable.14

immediate future will bring increasing friction between government agencies on the one hand, and the contractor community on the other.

THE TIGHTENING CONTRACT MARKET

In my view, the good old days are behind us. Working with the changing regulatory complexities, to include enhanced oversight and “transparency,” will place a heavier burden on contract administrators. Over the next several years, there will be a market of budget retrenchment in which contractors will likely face heightened competition for diminished opportunities. n

I’m not cynical by nature (quite the opposite), but I have a pessimistic view about the next several years in the government contract market. Massive debt at all levels (federal, state and local) will require significant cutbacks to government spending. No matter who wins in November’s elections, there will have to be programmatic reductions and eliminations.

That said, the government contract market will get smaller. As funding levels lessen, there will be increasing competition for the fewer and fewer opportunities presented. In such a market, there are likely to be more bid protests as contractors fight fiercely for each award. Even after a contract is awarded, government agencies will be pressing contractors to “do more for less” (already a mantra at some government agencies). However, contractors will be increasingly reluctant to do additional work for free, so there probably will be more claims activity. In short, the

As any market gets smaller, the competition gets tougher — and the government contracts market is no exception. Accordingly, contractors with knowledgeable and experienced staff will have a competitive advantage for the diminished number of opportunities over contractors who do not. Eventually, weaker performers will be pushed out of the market.

PETE MCDONALD, CPA, ESQ., is a director with Navigant’s Government Contractor Services practice and is a nationally respected practitioner with more than 30 years of government contracting and consulting experience.

He serves on the board of advisors for the BNA Federal Contracts Report and the Thomson West Cost, Pricing & Accounting Report. He is the recipient of the Boards of Contract Appeals Bar Association Life Service Award. Contact him at pete.mcdonald@navigant.com.

1. OMB Memorandum No. M-11-32, Sept. 14, 2011.

2. 41 U.S.C. §435; FAR 31.205-6(p). The OFPP amounts for the years involved in Taylor are: FY2002 - $387,783; FY2003 - $405,273; FY2004 - $432,851; FY2005 - $473,318.

The OFPP amounts since then are: FY2006 -$546,689; FY2007 - $597,912; FY2008 $612,196; FY2009 - $684,181; and FY2010 - $693,951. As of this writing (March 2012), no amount had yet been announced for FY 2011.

3. 77 Fed. Reg. 202, Jan. 3, 2012.

4. 76 Fed. Reg. 28856, May 18, 2011.

5. 77 Fed. Reg. 11,355, Feb. 24, 2012. See also “DOD Issues Final Rule for Oversight of Contractor Business Systems,” by David Hansen, BNA Federal Contracts Report, Vol. 97, No. 182, Feb. 24, 2012.

6. DFARS 242.7005.

7. J.F. Taylor, Inc., ASBCA Nos. 56105, 56322, __ BCA ___, 2012 WL 261272 (Jan. 18, 2012).

8. FY 2012 National Defense Authorization Act; H. 1540 — limit is the salary of a Cabinet secretary (approximately $200,000), but S. 1867 — limit is President’s salary ($400,000).

See “Senate Defense Bill Limits Reimbursement of Contractor Executive Compensation Costs,” by Deborah Billings, BNA Federal Contracts Report, Vol. 96, p. 558, Dec. 2, 2011; and “House-Passed DOD Authorization Bill Aims to Boost Competition in Acquisitions,”

by Deborah Billings and Jessica Coomes, BNA Federal Contracts Report, Vol. 95, p. 571, June 7, 2011. Neither bill has been enacted, but the efforts in both Houses indicate Congressional interest in this area. More recently, the Commonsense Contractor Compensation Act of 2012 (S. 2198) was introduced in the Senate mid-March of this year. The bill, which enjoys bi-partisan support, would impose a compensation limit of $400,000 on all contractor employees government-wide. See Bloomberg BNA’s Federal Contracts Report, ‘‘Latest Developments,’’ March 16, 2012.

9. See “DCAA Loses Executive Compensation Appeals,” David B. Dixon, Esq., BNA Federal Contracts Report, Vol. 97, No. 12, March 16, 2012.

10. Splashnote Systems, Inc. ASBCA No. 57403, 2011 WL 6153096 (Nov. 29, 2011).

11. FAR 31.205-18.

12. FAR 31.205-6(ii)(B).

13. FAR 31.205-34, FAR31.205-43, and FAR 31.205-46.

14. FAR 31.201-2(d).

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GOVERNMENT accounting

A New Coat of Paint for the Yellow Book

BY CHARLIE BLANTON, CPA

Have you ever visited a neighbor’s house after it has undergone a major renovation? Such visits can be filled with surprises when you are unprepared for what you are going to see in advance. While the structure of the house will still consist of components like a kitchen, bedrooms and bathrooms, these rooms may now be in different locations and have a totally different appearance than what you were familiar with in the past.

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In recent years, the auditing standards “neighborhood” has had two major renovation projects underway in the form of the American Institute of CPAs (AICPA) Auditing Standards Board’s Clarity Project and the U.S. Government Accountability Office’s (GAO) revision of “Government Auditing Standards” (Yellow Book). Toward the end of 2011, the GAO announced the completion of its renovation project by issuing the 2011 Yellow Book Revision, which updates the 2007 Yellow Book. As auditors visit the 2011 Yellow Book Revision for the first time, they will notice the following renovations that have taken place in the structure and layout of the Yellow Book:

CHAPTER 1: AN EARLIER APPEARANCE Soon after beginning Chapter 1 of the 2011 Yellow Book Revision, auditors will be greeted by the Yellow Book’s five ethical principles. These ethical principles relate to: (1) the public interest; (2) integrity; (3) objectivity; (4) proper use

GOVERNMENT accounting

of government information, resources and positions; and (5) professional behavior. Rather than establishing specific standards or requirements, the five ethical principles provide the foundation, discipline and structure as well as the climate that influence the application of the Yellow Book. Very little has changed in terms of the content of the five ethical principles.

However, the location of the principles has changed. Under the prior Yellow Book, the five ethical principles were not seen until Chapter 2.

CHAPTER 2: FAMILIAR DISCUSSIONS WITH DIFFERENT TERMINOLOGY Upon making their way into Chapter 2 of the 2011 Yellow Book Revision, auditors will encounter familiar discussions related to: (1) the types of audits and attestation engagements that may be performed in accordance with the Yellow Book; (2) nonaudit services provided by audit organizations; (3) the use of terminology to define the Yellow Book’s requirements; (4) the relationship between the Yellow Book and other standards; and (5) stating compliance with the Yellow Book in the auditors’ report.

While these discussions are similar to the ones located in Chapter 1 of the 2007 Yellow Book, auditors will notice a change in terminology. Since the Yellow Book builds upon the AICPA standards, the 2011 Yellow Book Revision has aligned its terminology to that in the AICPA’s clarified auditing standards (i.e., SAS Nos. 117-125, except SAS No. 121). For example, the definitions of “unconditional requirements” and “presumptively mandatory requirements” have been modified to reflect the updated definitions contained in the AICPA’s clarified auditing standards. The 2011 Yellow Book Revision also reflects some of the new terminology being incorporated into the AICPA’s clarified auditing standards. For example, references to “generally accepted accounting principles” have been replaced with references to “an applicable financial reporting framework.”

CHAPTER 3: INDEPENDENCE, THE TALK OF THE NEIGHBORHOOD The Yellow Book’s independence requirements have always been a major topic of conversation. The independence requirements received a major renovation in 2002 through the issuance of

Amendment No. 3, Independence, and a guidance document titled “Answers to Independence Standard Questions.” The 2002 renovation was very rules-driven and the gossip around the neighborhood was that some thought the requirements were a little outdated.

Chapter 3 of the 2011 Yellow Book Revision has changed all of that with an updated principles-based approach to independence. Under the new approach, auditors will apply a conceptual framework at the audit organization, audit and individual auditor levels to: (1) identify threats to independence and evaluate the significance of the threats identified both individually and in the aggregate; and (2) apply safeguards as necessary to eliminate the threats or reduce them to an acceptable level.

The 2011 Yellow Book Revision describes seven broad categories of threats to independence that auditors are required to evaluate when they are identified. Auditors will evaluate these threats both individually and in the aggregate because such threats can have a cumulative effect on an auditor’s independence. The seven threat categories include: (1) self-interest threat; (2) self-review threat; (3) bias threat; (4) familiarity threat; (5) undue influence threat; (6) management participation threat; and (7) structural threat.

Once a threat is identified, the auditor first determines whether the threat relates to a nonaudit service. The 2011 Yellow Book Revision prohibits the auditor from performing certain nonaudit services, described in the standards, in addition to performing the audit. For example, the auditor cannot determine or change journal entries, account codes or classifications for transactions, or other accounting records for the entity without obtaining management’s approval. The 2011 Yellow Book Revision allows some nonaudit services to be performed provided certain requirements are met. However, even for allowed nonaudit services, the auditor will need to ensure that the nonaudit services either do not create significant threats to independence or the auditor can identify and apply safeguards to eliminate an unacceptable threat or reduce it to an acceptable level.

For all significant threats to independence, the auditor will identify and apply safeguards. Safeguards are controls designed to eliminate or reduce to an acceptable level threats to independence. Under the conceptual framework, the auditor applies safeguards that address the specific facts and circumstances under which threats to independence exist. In some cases, multiple safeguards may be necessary to address a threat. The 2011 Yellow Book Revision contains 

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four example safeguards: (1) consulting an independent third party, such as a professional organization, a professional regulatory body or another auditor; (2) removing an individual from an audit team when that individual’s financial or other interests or relationships pose a threat to independence; (3) involving another audit organization to perform or reperform part of the audit; and (4) having a professional staff member who was not a member of the audit team review the work performed. When safeguards are applied, auditors will document the threats identified and the safeguards applied. In certain situations, the auditor may be able to partially rely on safeguards that the auditee has implemented.

After auditors have applied safeguards, auditors will assess their effectiveness. If the applied safeguards did not eliminate an unacceptable threat or reduce it to an acceptable level, independence would be considered impaired. Additionally, the 2002 “Answers to Independence Standard Questions” guidance document will be retired once the 2011 Yellow Book Revision becomes effective.

CHAPTER 4: A BETTER USE OF SPACE Chapter 4 of the 2011 Yellow Book Revision contains the performance and reporting standards for financial audits. These standards incorporate by reference the AICPA’s clarified auditing standards and build onto that foundation with additional performance and reporting requirements. For the most part, the changes found in Chapter 4 simply reflect changes found in the underlying AICPA clarified auditing standards. For example,

LEARN MORE ABOUT IT

When compared to the 2007 Yellow Book, the financial audit standards housed in the 2011 Yellow Book Revision appear shorter than ever. This is because the 2011 Yellow Book Revision has eliminated discussions of requirements already contained in the AICPA standards (as they are incorporated by reference).

Finally, the 2007 Yellow Book contained two separate chapters to discuss the field work and reporting requirements related to financial audits. The 2011 Yellow Book Revision has torn down that wall and combined the performance and reporting requirements into one chapter.

CHAPTER 5: MORE DEFINED AREAS Chapter 5 of the 2011 Yellow Book Revision contains requirements, guidance and considerations for performing and reporting on attestation engagements. An attestation engagement can provide one of three levels of service as defined by the AICPA, namely an examination engagement, a review engagement or an agreed-upon procedures engagement. In the past, it was somewhat difficult to delineate the specific requirements that applied to each level of service. Auditors performing attestation engagements under the 2011 Yellow Book Revision will find that the requirements for each level of service are now clearly found in separate defined areas of Chapter 5.

>>

SOME FEATURES HAVE BEEN RETAINED

CPE FOR GOVERNMENT AUDITORS

The GAO really liked the look of certain areas of the 2007 Yellow Book and thus the 2011 Yellow Book Revision left these areas for the most part untouched. Requirements related to the use of professional judgment, audit quality control and assurance (including peer review) and performance auditing had only minor changes. The competence (including CPE) requirements received a minor touch-up related to specialists.

Visit the online CPE catalog at www.vscpa.com for more info, including locations and costs, on the following VSCPA CPE courses: >> SEPT. 26: Governmental & Nonprofit Annual Update >> OCT. 17: Applying A-133 to Nonprofit & Governmental Organizations >> NOV. 5: NEW! Now I Oversee: Advanced OMB A-133 Issues

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the additional Yellow Book “field work standards for financial audits” are now referred to as the additional “requirements for performing financial audits” to match the terminology in the clarified auditing standards.

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OPEN HOUSE DATE Right now, the GAO is encouraging visitors to tour the 2011 Yellow Book Revision at www.gao.gov/yellowbook. For those wanting to take the Yellow Book on vacation with them, the 2011 Yellow Book Revision is also available on the Amazon Kindle.

The 2011 Yellow Book Revision is effective for financial audits and attestation engagements for periods ending on or after Dec. 15, 2012, and for performance audits beginning on or after Dec. 15, 2011. Early implementation is not permitted, as the 2011 Yellow Book Revision is timed to become effective with the AICPA’s clarified auditing standards. However, because auditors need to be independent for the entire audit period, they will need to consider the new Yellow Book independence requirements prior to the effective date. For example, an auditor performing a June 30, 2013, Yellow Book financial statement audit will need to comply with the new independence requirements at the beginning of the audit period (i.e., July 1, 2012).

EXTRA READING It is critical that the 2011 Yellow Book Revision be implemented in tandem with the AICPA’s clarified auditing standards. The changes that the AICPA’s clarified auditing standards will bring to audit planning, performance and reporting will also affect financial audits performed in accordance with the Yellow Book.

Thus, it will be important for auditors to also visit and become familiar with the AICPA’s clarified auditing standards.

A FEW SUGGESTIONS FOR IMPLEMENTATION Prior to implementation, auditors will want to ensure that the audit publications, guides, programs, checklists,

CPAs Take Note.

documentation tools and training have fully incorporated both the 2011 Yellow Book Revision and the AICPA’s clarified auditing standards. Do not assume that resource providers will fully incorporate all the changes as quickly as you would like them to. You may definitely need to ask some questions before you buy. Auditors will want to take time to study the standards and discuss key issues with other auditors to gain from their understanding and approach to the new standards.

Also, let your clients know in advance that they are going to see some differences in items like the engagement letter, some of your audit procedures, the report wording, etc., due to the AICPA’s clarified auditing standards. This will help to affirm the client’s confidence in you as their auditor. Finally, remember that the end of 2012 and 2013 will be a period of major transition for auditors. However, this too shall pass, and a year from now the challenges will seem much smaller than they do now. n

CHARLIE BLANTON, CPA, is the director of Governmental and Nonprofit Product Development for Surgent McCoy CPE, LLC, in Devon, Pa. He is the author of several CPE courses, including “A Complete Guide to the New 2011 Yellow Book” and “I See It! Bringing into Focus the New Clarified Auditing Standards.” He can be contacted at blantonc@cpenow.com.

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M&A

The Details in the Deal:

Accounting for contingent payments in increased acquisition environment

BY TOM VISOTSKY, CPA, AND JIM CARTER, CPA

“Private equity (PE) fund managers are approaching 2012 with cautious optimism,” according to Lee Duran, partner and leader of the PE practice at BDO USA, LLP, based on results of the firm’s annual PErspective Private Equity Study conducted in the fourth quarter of 2011.

Concerns over the fragility of the economic recovery and its potential impact on the post-acquisition performance of the acquired company, as well as the desire to retain and incentivize management, will often lead to the inclusion of contingent payments or earn-outs as part of the package. The accounting for contingent consideration can be complicated and structuring the deal properly is critical to achieving the desired result for all involved.

PRIVATE EQUITY DEALS EXPECTED TO INCREASE The BDO study found that 70 percent of PE fund managers, regardless of fund size, expect to close two or three deals in 2012, an increase from 2011 when 47 percent reported closing no new deals and 19 percent reported closing only one. Twenty-two

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M&A

percent expect to deploy $30 to $50 million of capital to new deals and add-on acquisitions and another 16 percent expect to deploy $51 to $100 million. Those expectations are up sharply from the 10 percent and 11 percent of funds, respectively, that reported investing those amounts in the last year.

Consistent with these expected increases, PE funds have more than $400 billion in dry powder ready to invest, 4,000 portfolio companies ready to sell, and new incoming cash as noted by the 63 percent of respondents that indicated they are receiving new commitments from limited partners, up from 56 percent last year and only 40 percent the year before. PE professionals see the greatest opportunities over the next 12 months in the following sectors: manufacturing (28 percent), health care and biotech (21 percent), natural resources and energy (13 percent), technology (10 percent), financial services (9 percent) and retail and distribution (6 percent).

RETAINING & INCENTIVIZING KEY MANAGEMENT EXECUTIVES CONTINGENT CONSIDERATION Fund managers are increasingly focused on creating value by improving operational performance at their portfolio companies to generate returns for their investors. “Ensuring the right management team is in place to run the company is critical to driving performance,” says Tim Mohr, partner in the PE practice at BDO Consulting.

An acquiring company may enter into a contract that includes contingent payments to the selling shareholders or employees of the target company, to either ensure continuity of management and key employees, or as assurance that a purchase based on projected performance is substantiated by actual subsequent results.

THE STANDARD How to account for contingent payment arrangements is a frequent challenge in business combinations. Companies that acquire targets with consideration including contingent payment

arrangements must analyze the facts and circumstances carefully.

The accounting for these arrangements depends on whether they represent consideration for the acquisition, or are transactions separate from the business combination, such as compensation arrangements. Guidance is dictated by ASC 805-10 (formerly (FASB 141R): “A transaction entered into by or on behalf of the acquirer or primarily for the benefit of the acquirer or the combined entity, rather than primarily for the benefit of the acquiree (or its former owners) before the combination, is likely to be a separate transaction (and recorded as an expense and would) not be included in applying the acquisition method.”

“Whether arrangements for contingent payments to employees or selling shareholders are contingent consideration in the business combination or are separate transactions depends on the nature of the arrangements, (including factors such as) why the acquisition agreement includes a provision for contingent payments, who initiated the arrangement, and when the parties entered into the arrangement…”

If the arrangement was a profit-sharing plan designed to benefit the target, then the arrangement may be considered part of the consideration for the acquisition. If the arrangement is a plan designed to retain employees in the period after the acquisition, then the arrangement benefits the acquirer and the combined entity and represents compensation expense.

If the arrangement was established by the target, then the arrangement may be for the benefit of the target and considered a part of the consideration for the acquisition. However, if the arrangement was initiated by the acquirer, then the arrangement may be for the benefit of the acquirer or the combined entity, postacquisition, and accounted for as acquisition consideration.

An arrangement made by the target prior to sale negotiations tends to indicate recognition as acquisition consideration, while an arrangement made during sale negotiations at the direction of the acquirer provides evidence toward some form of postcombination expense. ASC 805 starts with the presumption that contingent payments will be expense items if they are tied to future service. 

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M&A

Additional indicators that point to treatment of contingent payments as post-combination business expenses include the:

CONTINGENT PAYMENT TO EMPLOYEE AT DIRECTION OF ACQUIRER

• Requirement of continued employment, where payment is forfeited if employment terminates

An acquiring company approached its target company and began negotiating a deal. The acquirer wanted to ensure the target company’s operations continued running smoothly, and a contract was signed calling for the CEO to be paid a $1 million severance package in cash, one year after the change-of-control, as long as the CEO was still employed at the combined entity, i.e. the CEO has not resigned or been terminated for cause. This transaction would be treated as a post-combination expense because the contract was entered during sale negotiations and the CEO’s continued employment was a condition for payment. Contingent payments that are automatically forfeited if employment terminates are treated as post-combination business expense and accrued over the period of the contract term, or one year in this case.

• Duration of terms, if the length is at least as long as the payment period • Disparity of payments, if selling shareholders receive different amounts based on continued employment • Number of selling shareholders, when substantially all of the selling shareholders remain as employees • Linkage to valuation, if the contingent payments are consistent with prior profit-sharing arrangements • Formula for determining consideration, should the calculation be based on a percentage of earnings

CONTINGENT PAYMENT TO EMPLOYEES ESTABLISHED

BY TARGET

EXAMPLES CONTINGENT PAYMENTS TO EMPLOYEE AT DIRECTION OF TARGET COMPANY Two years ago, a target company hired a CFO under a five-year contract, with a provision to pay out $1 million if the company was acquired before the contract expired. This typical change-ofcontrol provision would be accounted for as an accrual in purchase accounting, since the contract was entered into before sale negotiations, and there is no continuing employment requirement.

GOVERNMENT CPAS: GET CONNECTED >>

Now you can leverage the knowledge of other members who work in government agencies or for government clients. Access the Government Specialist community on Connect, the VSCPA’s social network, at www.vscpa.com/ GovernmentSpecialist. Not a member yet? It’s easy. Just update your community preferences at www.vscpa.com/ Communities.

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A target company decides to put itself up for sale and wants to make itself more marketable with continuing value after it is acquired. The company institutes a bonus plan that will pay each employee 25 percent of their compensation if they are still employed by the combined entity one year after the acquisition date. The acquiring company subsequently purchases the target.

While the target company established the plan, it was created to benefit its anticipated acquirer, and the bonus was contingent on continued employment. As such, the payments would be recorded as post-combination business expense and accrued over the oneyear time period.

BONUS PAYMENTS BASED ON EBITDA AND DUAL FACTORS An acquiring company purchases a target company with three key executives, who are also the only shareholders. Contracts with the executives were negotiated that included base contingent consideration of 1.5 times earnings before interest, taxes, depreciation and amortization (EBITDA) if net income exceeds $5 million by the second year after acquisition. If the executives are still employed after three years post-acquisition, they would be entitled to an incremental payment of one times EBITDA in year

Monitor CPE Compliance the Easy Way! three. The base contingent payment does not require continued employment and is based on a multiple of EBITDA; therefore, it will be recorded as an accrual in purchase accounting. The incremental bonus is also based on a multiple of EBITDA, but is contingent on continued employment and should therefore be recorded as post-combination business expense.

LAST MAN STANDING An acquiring company purchases a target company and offers all employees and shareholders employment in the combined entity.

An irrevocable trust is set up with 25 percent of the stock for the acquisition, subject to a four-year vesting period. If, prior to vesting, a shareholder/employee resigns or is terminated for cause, the forfeited shares are allocated to the remaining shareholders.

If no employees remain at the end of four years, the shares will be issued and distributed to charity. Since the acquiring company designed the program for the benefit of the combined entity, and receipt of the distribution is dependent on continued employment, the payments would be recorded as post-combination business expense, and accrued over a four-year period. The substance of the agreement is to promote post-combination employment and overrules the fact that the forfeited shares were not returnable.

CONCLUSION Deal activity is expected to pick up and frequently includes contingent payments to selling shareholders and employees.

To accomplish their goals and desired accounting treatment, acquiring companies and selling shareholders of the target companies should structure contingent payment agreements carefully. n

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TOM VISOTSKY, CPA, is a VSCPA past president and is currently an independent consultant in Richmond. He can be reached at tvisotsky@gmail.com.

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VSCPA self-assessment Complete this 12-question test and submit to the VSCPA for 1 CPE credit. Exams will not be graded until after the submission deadline. A 75 percent or better pass rate is necessary to receive credit. After your exam is graded, you will receive either a certificate of completion via email for your records or an email notification that the 75 percent grade was not met.

SUBMISSION DEADLINE: August 31, 2012. Exams received after this date will not be graded and your money returned.

COST: $15 for VSCPA members / $30 for nonmembers.

Please note that this exam will not be live online until July 1, 2012 SUBMISSION INSTRUCTIONS You may submit this selfassessment and make the exam payment online at www.vscpa.com/ July2012DisclosuresExam.

You may also circle your answer to each question and mail this paper exam to: CPE Team Virginia Society of CPAs 4309 Cox Road Glen Allen, VA 23060 Fax submissions are acceptable to (804) 273-1741.

Name _________________________ Address _______________________ _______________________________ Email Address ___________________ Date __________________________ Method of Payment

• Check (payable to the VSCPA) • Credit card Credit Card Number _______________________________ Expiration Date ________________

1. THE OFFICE OF MANAGEMENT AND BUDGET (OMB) ANNOUNCED NEW PAYMENT PROCEDURES TO ENABLE SMALL BUSINESS INVOICES TO BE PAID FASTER. THIS BASIS FOR THIS PROCEDURE IS: a. A federal acquisition regulation. b. An OMB policy. c. A federal statute. d. A court decision.

2. IN A RECENT CASE INVOLVING THE DEFENSE CONTRACT AUDIT AGENCY’S (DCAA) DISALLOWANCES OF EXECUTIVE COMPENSATION, APPEAL OF J.F. TAYLOR, THE COURT DECIDED: a. In DCAA’s favor and the executive compensation was not permitted. b. Against DCAA, but found that a reasonable amount of executive compensation could not be recomputed. c. For DCAA because the court agreed that the executive compensation was unreasonable. d. In the contractor’s favor, and DCAA’s executive compensation disallowances were denied.

3. RECENT DCAA AUDITS HAVE FOCUSED ON ALL OF THE FOLLOWING AREAS EXCEPT: a. Firm fixed price contracts. b. Related party transactions. c. Proposal walkthroughs. d. Commercial contract/government contract indirect cost allocations.

4. IN FEDERAL CONTRACTS, THE BURDEN OF PROVING THAT COSTS: a. Are unallowable is on the government auditor. b. Are unallowable is on the agency’s contracting officer. c. Are allowable is on the contractor, as long as the costs are properly entered into the accounts. d. Are allowable is on the contractor who must support its expenses with proper documentation.

5. AUDITORS WILL FIND WHICH OF THE FOLLOWING IN CHAPTER 1 OF THE 2011 YELLOW BOOK REVISION? a. Detailed requirements for reporting on financial audits. b. Detailed requirements for reporting on review engagements. c. Detailed requirements for performing agreed-upon procedures engagements. d. The Yellow Book’s five ethical principles.

6. WHICH OF THE FOLLOWING IS TRUE OF THE 2011 YELLOW BOOK REVISION? a. The 2011 Yellow Book Revision did not align its terminology to the terminology appearing in the American Institute of CPAs’ (AICPA) clarified auditing standards. b. The 2011 Yellow Book Revision has aligned its terminology to the terminology appearing in the AICPA’s clarified auditing standards. c. The 2011 Yellow Book Revision does not address the relationship between the Yellow Book and other standards. d. The 2011 Yellow Book Revision does not address the use of terminology to define the Yellow Book’s requirements.

Signature _____________________ Date

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7. WHICH OF THE FOLLOWING IS TRUE OF THE YELLOW BOOK’S INDEPENDENCE REQUIREMENTS? a. Under the 2011 Yellow Book Revision’s principles-based approach, auditors will apply a conceptual framework at the audit organization, audit and individual auditor levels. b. The Yellow Book’s independence requirements have not been renovated since 1985. c. The 2011 Yellow Book Revision has moved the independence requirements from a principles-based approach to a more rules-based approach. d. The 2011 Yellow Book Revision describes two broad categories of threats to independence.

8. WHICH OF THE FOLLOWING IS TRUE OF THE 2011 YELLOW BOOK REVISION? a. The 2011 Yellow Book Revision contains major changes in the area of professional judgment. b. The 2011 Yellow Book Revision contains major changes in the area of audit quality control and assurance. c. The 2011 Yellow Book Revision is not effective for financial audits or attestation engagements until periods ending on or after Dec. 20, 2014. d. Auditors performing attestation engagements under the 2011 Yellow Book Revision will find that the requirements for each level of service are now clearly found in separate, defined areas of Chapter 5.

9. WHY ARE CONTINGENT PAYMENTS OFTEN NEGOTIATED IN A DEAL? a. Concerns over the fragility of the economic recovery. b. Desire to retain and incentivize management. c. Assurance that a purchase based on projected performance is substantiated by actual results. d. All of the above.

10. ACCORDING TO THE BDO STUDY, PRIVATE EQUITY PROFESSIONALS SEE THE GREATEST OPPORTUNITIES OVER THE NEXT 12 MONTHS IN WHICH SECTOR? a. Technology b. Manufacturing c. Retail and distribution d. Financial services 11. WHAT ADDITIONAL INDICATORS POINT TO TREATMENT OF CONTINGENT PAYMENTS AS POST-COMBINATION BUSINESS EXPENSE? a. Requirement of continued employment, where payment is forfeited if employment terminates. b. Duration of terms, if the length is at least as long as the payment period. c. Linkage to valuation, if the contingent payments are consistent with prior profitsharing arrangements. d. All of the above.

12. IN THE EXAMPLE ON BONUS PAYMENTS BASED ON EBITDA AND DUAL FACTORS, HOW WERE THE CONTINGENT PAYMENTS TREATED? a. Both were expensed for consistency. b. Both were capitalized as part of the acquisition accounting. c. The base contingent payment was accrued in purchase accounting, and the remainder was an expense, since the payment was contingent on continued employment. d. The base contingent payment was expensed, and the remainder was accrued in purchase accounting.

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VSCPA news

Leaders’ Summit:

Accepting the challenge

VSCPA leaders went back to school in May at the 2012 VSCPA Leaders’ Summit. The event’s theme, “Challenge Everything: Challenge U,” was aimed at getting the leaders in the CPA profession to challenge the ways they do business.

Held May 10–11, 2012, at the Richmond Hilton Hotel & Spa in Short Pump, VSCPA volunteers and leaders from across the state gathered to discuss the main issues and trends affecting the CPA profession. For the first year, the VSCPA held a separate Virginia CPA Honors & Awards ceremony on Thursday, May 10.

More than 250 people attended to recognize this year᾽s standout honorees.

The VSCPA held its 103rd annual meeting on Friday, May 11.

At the meeting, the Society installed the 2012–2013 VSCPA and Educational Foundation Board of Directors.

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VSCPA news

2012–2013 VSCPA Board of Directors

Front row: Jamie Wohlert, Staci Henshaw, Rebecca Bartholomae, John Montoro, Susan Ferguson, Marshall Northington, Clare Levison, Andrew Martin, Stephanie Peters. Back row: Carl Hoecker, Jim Shepherd, Lawrence Schwartz, Marc Filer, Jim Phillips, Roy Peters. Not pictured: Gary Romer, Colette Wilson.

The VSCPA installed the following 2012–2013 Board of Directors at the 2012 Annual Business Meeting on May 11 at the Richmond Hilton Hotel & Spa: CHAIR:

John B. Montoro, CPA CHAIR-ELECT:

James M. Shepherd, CPA VICE CHAIRS:

Carl W. Hoecker, CPA Roy D. Peters, CPA James L. Phillips, CPA Colette Y. Wilson, CPA

CHAPTER CIRCLE OF EXCELLENCE AWARDS >>

BOARD OF DIRECTORS:

Rebecca Bartholomae, CPA Susan Q. Ferguson, CPA Marc E. Filer, CPA Staci A. Henshaw, CPA Clare K. Levison, CPA Andrew T. Martin, CPA A. Marshall Northington, CPA Gary E. Romer, CPA Lawrence W. Schwartz, CPA Jamie C. Wohlert, CPA

Congratulations to these 2011–12 Chapter Circle of Excellence winners!

The VSCPA Chapter Circle of Excellence program encourages VSCPA chapters to achieve excellence by striving for 21 different benchmarks in activities that support VSCPA goals and member satisfaction. Chapters strive to meet objectives in membership, meeting attendance, community service and more.

GOLD: Tidewater SILVER: Richmond BRONZE: Thomas Jefferson

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VSCPA news

Outstanding Member of the Year: O. Whitfield “Whit” Broome, CPA Kaulback Professor Emeritus of Commerce and Professor of Law, University of Virginia and later became a principal and a superintendent. Broome went to Duke University planning to major in history, but a chance compliment altered his career path forever.

“Sometime in my first year at Duke, someone said to me, ‘You’d make a good accountant,’” he said. “I had no idea what he was talking about. After my freshman year, I went into the only CPA firm in town and said, ‘Tell me what you do.’

“I don’t remember what they told me, but it interested me enough to get me to drop a course I’d pre-registered for to take an accounting course. I liked it a lot. I liked the logic of accounting. I like the way that things balanced and that there were answers.”

Accounting educators are charged with helping protect the future of the profession.

Whit Broome has made it his mission to go a bit further and bring accounting knowledge into non-accountants’ lives.

Broome, 72, helped develop the law and business program at the University of Virginia for students who might want to go into business law. Broome made his mark on that program by helping select the accounting and finance portions of the curriculum.

“They should have some financial accounting and reporting,” he said. “They should have some corporate finance. Those would be the financial topics on which they would build other things.”

Broome comes by the education part of his career honestly — his father was an English and history teacher at a high school

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Through his time at Duke, Broome never lost his itch to become an educator. He nearly accepted an offer to work at the Atlanta office of Price Waterhouse (now PricewaterhouseCoopers), but had a good experience tutoring as a senior. He also had a professor, Tom Keller, who encouraged him to go to graduate school and become an educator, so he decided to give graduate school a shot.

Broome chose the University of Illinois to earn his master’s and Ph.D., partly because his other choice, the University of Michigan, wanted him to wait a year before becoming a teaching assistant.

“I taught my first class at Illinois before I took my first class at Illinois,” he said.

Broome joined the U.Va. faculty in 1967 and has been there ever since. He officially retired in 2010, but has stayed on to teach his financial reporting course each semester. His current contract is up after the 2012–2013 academic year.

But Broome’s teaching career is just part of his influence on the CPA profession in Virginia. He spent eight years on the Virginia

VSCPA news Board of Accountancy (VBOA), ending last year, after former VSCPA President & CEO Tom Berry urged him to get involved.

Congrats, life members

During Broome’s time on the board, the VBOA instituted its annual ethics CPE requirement, and he chaired the committee that developed the first outline for that course. He also implemented improved oversight of the peer review process and helped simplify the Virginia accounting statutes to make them more user-friendly, cutting them from 30 pages to 11.

The VSCPA honored its newest life members at its first Awards Dinner on May 10. The following members have been VSCPA members for 40 consecutive years:

One of his proudest achievements, however, was improving the relationship between the VBOA and the VSCPA. “When I came on the board initially, the two organizations were pretty much at arm’s length,” he said. “There’s a reason for that.

The Society has a mandate to do good things for its members, and the Board has a mandate to protect the public interest. But I’m very happy that the Society sends representatives to every meeting of the Board. We would ask for advice and give them the floor on issues where we needed their expertise.”

Broome’s time on the VBOA also helped him provide CPA Exam expertise to U.Va.’s accounting students.

“I learned a lot about the licensure process and about how important communications are between the board and its constituents, including educators,” he said. “My knowledge made me the go-to professor at the University of Virginia for questions on the CPA Exam and the licensing process. I think a lot of my colleagues breathed sighs of relief at that.”

It’s that expertise and devotion to his students that has helped Broome make such an impact on the profession. He cites his connection with his students as one of the most enjoyable parts of his long career.

“I’ve had the privilege of teaching with two of my former students who went and got Ph.D.s and came back to teach at U.Va,” he said. “I’ve written letters for a lot of students who’ve applied to Ph.D. programs. That’s one of the real joys of teaching — staying in touch with students you’ve taught, not just for a few years after, but for decades. “…You sort of get to bask in their glory. You can feel good about their success even though you know you were responsible for only a piece of it — a small piece, at most. Having that kind of mentoring relationship and counseling relationship with students is crucial.” n

Gary F. Allen, CPA Roger Anglin, CPA John R. Branner, CPA Jerry G. Bridges, CPA Gary C. Carlton, CPA Donald W. Coleman Sr., CPA Mensel D. Dean Jr., CPA Dennis R. Deans, CPA Stephen Y. Dickinson, CPA John F. Estes III, CPA J. Dennis Farrell Jr., CPA Ruth C. Harris, CPA L. Peyton Humphrey, CPA David E. Hunt, CPA J. Richard Jenkins, CPA Reid W. Johnson Jr., CPA James B. Lee, CPA John L. Matherly Jr., CPA Glenn D. McMillion, CPA Robert P. Mowery, CPA Jack D. Nicholas, CPA

Gerald A. Parker, CPA Nicholas P. Paul Jr., CPA James E. Pearman Jr., CPA Larry W. Perdue, CPA Daniel Pharr, CPA Patricia A. Phillips, CPA Marion L. Powell, CPA O. Ralph Puccinelli Jr., CPA W. Dewey Rasnake, CPA Roy J. Reynolds, CPA James M. Scearce Jr., CPA Gerald A. Schultz, CPA Harry Schwarz, CPA Howard C. Seal, CPA G. Wyatt Skinnell, CPA James V. Strickland Jr., CPA Harry C. Sutherland, CPA Michael E. Taylor, CPA Howard W. Weaver, CPA Hunter G. Webb Jr., CPA Samuel H. West, CPA

THREE-YEAR FOCUS: NEW VSCPA STRATEGIES >>

The VSCPA recently unveiled its top strategies for the next three years. The Society’s Board of Directors and Strategy Team developed the new strategies to help keep the VSCPA at the forefront of the profession’s top issues. The VSCPA’s top strategies for 2012–2015 are:

>> ADVOCACY: Achieve our legislative and regulatory agenda by strengthening our influence, engaging more members and developing strategic relationships.

>> KNOWLEDGE: Develop an integrated approach to becoming the premier broker of relevant knowledge to Virginia CPAs.

>> ENGAGEMENT: Create a more dynamic community by better engaging members.

>> TECHNOLOGY: Develop and implement a comprehensive and overarching technology plan.

Visit www.vscpa.com/TopStrategies for more information.

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VSCPA news

Young go-getters: Top 5 Under 35 LAUREN ALEXANDER, CPA DIRECTOR, VERIS CONSULTING Lauren Alexander isn’t the type to take what she hears at face value. That quality has led her down a unique path in her accounting career.

From left to right, award winners are: Harvey Johnson, Adrian Taylor, Lauren Alexander, Nick Harrison and Tres Brackens.

Family is a recurring theme with the third class of the VSCPA’s Top 5 Under 35 honorees. Two winners followed their fathers into the accounting field, and this group of young standouts has 10 children among them.

One honoree, putting the lie to the stereotype of the accountant buried under piles of paper, went as far as to single out the profession and her firm as conducive to good work-life balance. That’s not the only balance shown by this group — they represent the public and private sectors and serve as experts on tax, audit, government accounting and standard-setting.

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Alexander, 31, a director at Veris Consulting in Reston, specializes in forensic accounting and litigation services, a focus befitting the law career she once thought she’d pursue. But her interest in rules and regulations led her in a different direction — to the Financial Accounting Standards Board (FASB), where she’s an associate practice fellow specializing in insurance contracts.

“I have always been interested in financial accounting concepts as opposed to the application of standards,” she said. “Why we account for transactions the way we do, what information to communicate to users of financial statements, how to think about accounting standards as a part of a larger coherent conceptual framework, etc. Practicing in litigation support, I found myself especially enjoying technical debates about the subjective nature of some accounting guidance, and that led to my interest in standard-setting.”

That led her to FASB and her work in the standard-setting process, which has taken her around the world to work on projects in conjunction with the International Accounting Standards Board (IASB). Her standards work has helped her gain professional expertise and confidence.

Alexander was drawn to the legal field during her time at the University of Virginia (U.Va.) before she switched to the school’s McIntire School of Commerce. Her duties as a consultant at Veris allowed her to get a law-like experience.

She still has one professional dream left unfulfilled, however.

When asked what she’d be doing if she weren’t an accountant, Alexander said, “That’s an easy question. I’d work in the fashion industry. Maybe one day I’ll be CFO of a fashion house.”

VSCPA news

JAMES “TRES” BRACKENS III, CPA

NICK HARRISON, CPA

FIXED ASSET ACCOUNTANT, CITY OF RICHMOND

SENIOR MANAGER, KPMG

Tres Brackens has an unusual nickname (although it’s pronounced like the more common “Trey”), a distinction that was necessary in order for him to forge his own path in the accounting industry.

Nick Harrison hit a career crossroads earlier than most people.

Coming out of the University of Virginia’s McIntire School of Commerce in 2002, he went deep into the interview process with two firms and liked each one a great deal. When it came time to choose an employer, he went with the familiar and chose the firm where he’d completed an internship.

His father, James Brackens Jr., CPA, is the vice president of ethics and practice quality at the American Institute of CPAs (AICPA), and his influence over the profession’s ethics goes even further than that. He authored the first edition of the VSCPA’s Ethics — Your License Depends on It! course in 2004.

James Brackens’ path had a major effect on his son’s career. Tres, 29, has carved out a niche of his own in his work with the city finance department in Richmond, serving as a trusted resource in the field of government accounting.

“His career, and more importantly, his involvement in the profession has served as the most significant influence on the path my career has taken, something I'm very grateful for,” Tres said. “As much as I have tried to follow in his footsteps growing up, I don't think he or anyone else was surprised to see me go into accounting.”

Tres also followed in his father’s footsteps by attending Virginia Tech. He started his career on a similar path to his father, working in public accounting, but decided that focus wasn’t for him. He took the Richmond job in 2009 and has become a key member of the finance department, working with a departmental group that monitors, analyzes and implements recent Governmental Accounting Standards Board (GASB) pronouncements. Since then, he’s led department projects related to the implementation of GASB pronouncements 51 (treatment of intangible and leased assets) and 54 (fund balance reporting).

Tres has made that last point, public service, a key component of his own career. In addition to his day job, he’s taken a leadership role within the profession as chair of the VSCPA’s Young Professionals Advisory Council (YPAC). He also serves on the AICPA’s Government Performance and Accountability Committee and as treasurer of the West End Jaycees.

Under most circumstances, an employee would go with that choice and not look back. But Harrison, 32, wasn’t starting out under normal conditions. The firm whose offer he originally accepted was Arthur Andersen, which was coming under intense scrutiny for its role in the Enron scandal.

Faced with incredible uncertainty over his future employer, Harrison reached out to the other firm, KPMG, and was told their offer was still good. And for all the uncertainty he faced at the start of his career, it’s been smooth sailing for Harrison since he started at KPMG’s Tysons Corner office. He’s been with the firm for his entire career, moving to the Richmond office in 2005, and he’s grateful to have the advantages of a Big Four firm in his job leading the firm’s state and local tax efforts in Virginia, as well as his role on KPMG’s State Tax Resource Network (STRN).

“Our resources are tremendous,” he said. “There is not a lot I need to know that someone here has not done at some point.

You just have to find out who it is. … I don’t think I’ve ever sat in a meeting with a new client, had them talk about a problem they’re having — whether it’s tax, business or otherwise — and had to say, ‘We can’t help you there.’”

His workload keeps him busy throughout the year, but he does have plenty of interests outside the office. He spends most of his time off with his wife, Susan, and their three daughters, Hannah Kate (5), Julia (3) and Evie (1). He also helps the lacrosse team at Mills Godwin High School as an assistant coach — he played club lacrosse at U.Va. — and gets in “the occasional bad round of golf.” 

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VSCPA news

HARVEY JOHNSON, CPA

ADRIAN TAYLOR, CPA

SENIOR ASSURANCE MANAGER, WITT MARES

TAX ACCOUNTANT, YOUNT, HYDE & BARBOUR

When discussing why he took the career path he did, Harvey Johnson harkens back to his high school football experience. The analogy makes more sense than you might think.

Like Tres Brackens, Adrian Taylor also grew up with an accountant father. Her path diverged in college when she entertained going into law or business, but she chose to become a CPA in the end.

Johnson, 32, started his career in the tax field before embarking on his current audit specialty. He cites the “team environment” of the audit field as a big reason he’s taken to it so much.

“Getting thrown into both and doing audit, I realized within six months that I was an auditor,” he said. “…I never played sports in college, but I’ve been a part of sports since I was in fourth and fifth grade, being in rec leagues, playing basketball and football all through high school. I’ve always been on a team, and in the audit world, we operate in a team environment. Even if it’s a really small job, I’m always working with a team. I think that environment suits me better.”

Johnson’s status as one of Virginia’s top young accountants wasn’t a given at the beginning of his career. After graduating from the University of North Carolina at Wilmington, but before earning his master’s at Old Dominion University, he started out in the field as a temporary employee, working as a file clerk and in the mailrooms. After getting his foot in the door, he landed a job with the Norfolk office of Witt Mares, where he still works, describing himself as “one of those weird people that loves their job.”

“I really enjoy the client interaction you get on the audit side,” he said. “And more importantly, I really enjoy the problem solving and helping people on the consultant stuff we do. I’ve got a knack for solving problems and figuring out the unknowns.”

Johnson has taken that knack beyond the walls of Witt Mares and into the field at large — he’s had several articles on accounting standards published in industry journals. That’s part of his belief that CPAs have the responsibility to be information leaders for the public on financial and economic issues.

When he’s not helping clients solve their audit issues, Johnson describes himself as a “beach bum” and an avid surfer and devoted father. He and his wife, Sarah, had their third daughter, Lucy, in May, after starting their parenting experience with twin daughters, Stella and Madelyn, two years ago.

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Taylor, 34, grew up watching her father, Craig Unger, worked as an accountant and then for the U.S. Department of Justice. She tried different majors at Old Dominion University — “trying to blaze my own trail,” in her words — but graduated in 1999 with a degree in accounting.

“Economics wasn’t satisfying me,” she said. “Accounting allowed me a little bit of econ, a little bit of finance, a little bit of marketing, a little bit of management. It was just the most satisfying degree.”

For someone with a family history in the profession, Taylor works hard to balance her job with her own family. She and her husband, Todd, have four children — Jackson (10), Ellie (8), Wilson (4) and Anna (2).

Far from the stereotype of the harried tax-season accountant, Taylor says her job at the Winchester office of Yount, Hyde & Barbour actually lends itself to the proper work-life balance.

“One thing that I like about being a working parent is that I can identify that tax season is going to be about two months of the year, and it’s very demanding and challenging,” she said. “But the rest of the year is very flexible and allows me to work and balance the home life in a way that I feel good about.”

One of Taylor’s most passionate causes is the future of the profession, which is why she’s become involved in the VSCPA Educational Foundation, where she has served on the Board of Directors.

“I say I stumbled into [accounting], and I didn’t choose it purposely,” she said. “But I feel it’s a wonderful area of study, and I like to spread the word. The Educational Foundation is one way of trying to recruit and attract new talent into a profession that I think is very satisfying and rewarding.” n

Introducing...

C nnect

Our new, interactive member directory makes it easy to  Add your picture  Use LinkedIn® to update your profile  Add contacts  View accounting jobs  Access members-only resources  Create industry-specific discussions  View event attendees  And more!

Complete your profile at connect.vscpa.com.

VSCPA news

Meet your 2012–2013 Chair: John Montoro, CPA engagement was an audit in tiny Floyd County in Southwest Virginia, which provided a bit of a culture shock for the native of the Buffalo, N.Y., suburbs.

“The treasurer said, ‘Montoro — that’s not a name from around these parts,’” he said.

Montoro adjusted quickly to the rural lifestyle, working under RFCA partner Wally Cox, who owned a farm in the small town of Bedford. He was used to being pretty self-sufficient in his small office — “I didn’t really have any office support when I was there…I had to know how to perform the audit, print the reports and everything,” he said — but he took on some tasks that aren’t taught in any accounting programs.

To say John Montoro, CPA, is going through a period of transition would be selling it short.

As he takes the reins of the VSCPA Board of Directors as the newly installed 2012–2013 chair, he’s also getting started at a new company, having retired from the Richmond office of Cherry, Bekaert & Holland (CBH) effective May 1 to run The Bookkeeping Department, a 5-year-old cloud-based firm he recently purchased.

Montoro, 56, views his new firm as “kind of like an outsourced accounting department” that targets nonprofits and small governmental agencies. At first glance, that sort of forward-thinking, technology-driven focus is a far cry from where he began his career. But Montoro has had plenty of experience with nontraditional accounting operations.

COUNTRY LIFE He began his career with Robinson, Farmer, Cox Associates (RFCA), working in Roanoke and the rural areas surrounding it. After graduating from the University of Virginia in 1978, his first

“On weekends, if we were writing reports, we did it in his dining room,” Montoro said. “He had a farm, and we would help him with the cattle. It was different from your typical KPMG experience.”

BEING HIS OWN BOSS He left his farm equipment behind and moved to RFCA’s Richmond office in 1986, but not before meeting his wife, Mindi, in Bedford. He moved on to Robinson, Lakes & Associates for two years before starting his own firm, Montoro & Associates.

“When you’re your own boss, you have lots of flexibility,” he said. A lot of times that means you’re flexible to work 24

VSCPA news

hours a day, weekends and keep your own books. So there’s an upside and a downside.”

Montoro spent five years running his own firm before joining CBH in 1996.

Now that he’s hanging his own shingle again, he relishes that flexibility and thinks it will make it easier to fulfill his VSCPA duties.

“When I accepted the chair-elect, I had it in my mind that I was going to retire and that it would coincide,” he said.

“That flexibility is going to come in handy when it comes to dealing with the requirements of the position of chair.

Even as a partner, in a regional firm, a lot of stuff gets scheduled for you.”

THE ACCIDENTAL CPA

“When you’re in your own world for so many years, you get a very narrow focus.

When you work on a board, even though they’re in the same profession, they have different experiences. You always learn stuff.”

Montoro joined the Board of Directors in 2007, then cycled off and joined again as vice chair in 2010. He spent his year as chair-elect watching and learning from his predecessor, Damon DeSue, CPA. While DeSue focused on establishing and promoting the value of VSCPA membership, Montoro has his eye on the areas of fiscal responsibility and governmental sustainability. He gave a presentation at the Society’s first Fiscal Responsibility Town Hall in November and hopes to carry that momentum into his term.

Montoro’s unusual career is fitting for a man who didn’t set out to become an accountant in the first place. He got his degree in urban planning and took a class from a professor who moonlighted as a consultant for a CPA firm. He later got an internship with that professor and called him later when he needed a fulltime job. He landed on the Floyd County audit, and the rest, as they say, is history.

He also hopes to use technology to engage members and draw a more geographically diverse crowd into VSCPA leadership.

With that background, it’s no wonder Montoro is looking forward to tapping into the expertise of his fellow Board members.

“I want to look to ways we can use technology to better build a community.

That’s our future at the Society — building a virtual community to make people feel more connected.”

“It’s a cliché, but the whole is greater than the sum of the parts,” he said.

“My new office is less than 10 minutes away from the CPA Center,” he said.

“It’s pretty easy for me to show up and participate here. But if I had to travel three or four hours several times a year, I wouldn’t do it.

LATE-CAREER RENAISSANCE Montoro and his wife have two adult children, Carami and Christian. When he’s not spending time with his family (or learning the ropes of his new business), he enjoys fishing and playing soccer.

He picked up the sport in high school and played on the club team at UVA, and that experience turned into a lifelong love for the game. He’s played for Central Virginia Soccer Association adult teams for 15 years and currently plies his trade as an attacking-minded midfielder on an over-40 team.

“I’m more of a support player,” he said.

“I’m a good passer. I was never fast, but I was, at one point, fairly quick. I’m more of a playmaker.”

Like his soccer career, Montoro came to the VSCPA relatively late in life. And like soccer, he’s seen the value in the professional and personal relationships he’s made with the Society, and he hopes to promote that experience to the rest of Virginia’s CPAs. “I started participating with the Virginia Society fairly late in my career,” he said. “I felt that I didn’t have time for it. I regret that — I’ve gotten a lot more out of it than I’ve given it, in terms of relationships and personal and professional development. It’s been rewarding.” n

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VSCPA news

Congratulations to the following members!

NEW HIRES >>

TOMAS ESTERRICH, CFO at

JOSEPH BURRIS, CPA, was named

interim chief financial officer at Rockingham Memorial Hospital (RMH) in Harrisonburg. Burris will continue his work as CFO of Charlottesville’s Martha Jefferson Hospital, a sister hospital to RMH. DIANE CARTER, CPA, has joined the

Newport News office of Cherry, Bekaert & Holland as a tax director.

KELLYE JENNINGS, CPA, has returned

to Argy, Wiltse & Robinson on a fulltime basis. Jennings was a partner at Argy before retiring in 2010 and providing consulting services to clients.

ValueOptions has hired SCOTT TABAKIN as chief financial officer.

PROMOTIONS >> to assistant vice president at Chain Bridge Bank, N.A., in McLean.

APPOINTMENTS & AWARDS >> NANCY BAGRANOFF, dean at the

University of Richmond, will begin serving on the American Institute of CPAs Board of Directors in fall 2012.

BILL BARRETT, CPA, of Barrett PC

in Richmond, has been elected vice president of the American Accounting Association’s Forensic and Investigative Section.

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BOB KEITER, CPA, of Glen Allen firm

Keiter CPA, was named to the advisory board for the Central Virginia Division of Fulton Bank.

ROCIO GIBBS

MOLLY WASH

BRENDA FOGG

LARITA BOZE

DARSHAE DABNEY

BETH BICKFORD

STEVE PIASCIK, CPA, of Piascik &

Associates in Glen Allen, has been named to the board of directors for Richmond 2015, the organization that will produce the 2015 World Road Cycling Championships.

ALVIN WALL, CPA, of Wall, Einhorn

& Chernitzer in Norfolk, was elected vice chair and chair of the investment committee for The United Way of South Hampton Roads.

VSCPA STAFF NEWS >>

ALAN REYNOLDS, CPA, was promoted

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MicroTech in Vienna, was honored with a CFO Award at SmartCEO’s SmartCXO Awards.

Member Relations Coordinator ROCIO GIBBS celebrates her 12th anniversary with the VSCPA on Aug. 13.

Development & Academic Relations Director MOLLY WASH marks her eighth anniversary with the VSCPA on July 26.

Technical Services Specialist DARSHAE DABNEY celebrates her fifth anniversary with the Society on July 9.

Two employees celebrate their seventh anniversary with the VSCPA: Member Relations Director BRENDA FOGG

JULY/AUGUST 2012

on July 11 and Senior Manager of Education LARITA BOZE on July 18.

Finance Director BETH BICKFORD, CPA, marks her third anniversary on July 14.

Education Assistant ANITA POUNCY and Member Relations Specialist COURTNEY NEAL have left the VSCPA. Good luck, Courtney and Anita! n

VSCPA news

The VSCPA mourns the loss of:

FIRM NEWS >>

FRANK BENSON, CPA, of Virginia

KEARNEY & COMPANY, CPAS PC, WALL, EINHORN & CHERNITZER, PC, WELLS COLEMAN & COMPANY and the VSCPA were honored in Virginia Business magazine

and Best Companies Group’s “Best Places to Work” awards. At a luncheon honoring award winners, firm representatives mingled. From left to right: Marty Einhorn, CPA, Wall Einhorn & Chernitzer; Stephanie R. Peters, CAE, VSCPA; Erin Ogburn, Kearney & Company; and George Forsythe, CPA, Wells Coleman & Company.

Richmond firm KUEHL SHEPHERD KOZLOWSKI & ASSOCIATES, INC., has changed its name to VERUS FINANCIAL PARTNERS, INC., effective May 1.

VSCPA MEMBERSHIP TERMINATION NOTICES >>

As a result of a decision by a hearing panel of the Joint Trial Board, SHARON HART was found guilty of violating American Institute of CPAs (AICPA) Bylaw 7.4.6 and Section 7.4.2.6 of the Virginia Society of CPAs (VSCPA) bylaws by failing to comply with the educational and remedial or corrective action as directed by the Ethics Charging Authority in two letters of required corrective action. Ms. Hart was expelled from membership in the VSCPA and the AICPA.

Girl Scouts learn financial skills Girls from grades kindergarten through 10 in the Tidewater area got a dose of financial fitness at the “A Place for Girls” event on April 21. The Tidewater VSCPA Chapter offered workshops on fiscal responsibility: Brownies and Cadettes learned about budgeting, Girl Scout Juniors designed their dream businesses and created logos and Girl Scout Seniors learned what it takes to fund a college education. n

JAMES MARTIN JR., CPA, of

Friendswood, Texas. He served in the U.S. Navy Supply Corp in Sicily and served on the VSCPA’s Accounting and Auditing Procedures Committee from 1978–1982.

IRENE PROVOST, CPA, of Prince George.

A New York native, she worked as an accountant for Dennis M. Stuart, CPA. CHARLES SHER, CPA, a VSCPA Life

As a result of a decision by a hearing panel of the Joint Trial Board, GREGORY ESTEP was found guilty of violating the Virginia Society of CPAs (VSCPA) Bylaw Article VII, Section 7.4.2.6 and American Institute of CPAs (AICPA) Rule 501 — Acts Discreditable, as adopted by VSCPA Bylaw Article VIII, Section 8.1. Mr. Estep was expelled from membership in the VSCPA.

CHAPTER NEWS>>

Beach. A former accounting teacher at his alma mater, Old Dominion University, he served as a first lieutenant in the U.S. Army.

member from Amissville. He spent 40 years with Thompson and Greenspon in Fairfax before starting his own firm.

A former lieutenant commander with the U.S. Coast Guard and Reserves, he also served as deputy sheriff in Arlington County from 1965–1980 and Rappahannock County from 2004–2009.

He served on several VSCPA committees and chaired the Federal Taxation Committee from 1984–1986. n

GET IT ALL ONLINE >>

VSCPA CPE & NETWORKING Visit the CPE Catalog at www.vscpa.com for the latest VSCPA seminars, conferences, webcasts, networking events and more!

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2012 CPE Clusters 2012 CPE Clusters Participate in timely seminars from expert instructors and earn up to Participate timelyfor seminars from you expert instructors and earn up to 16–24 CPE in credits each cluster attend.

16–24 CPE credits for each cluster you attend.

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Virginia Beach CPE Cluster July 9–11, Hilton Virginia Beach Oceanfront Virginia Beach CPE Cluster

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Seminars in Bechtel accounting and auditing,Center tax and Nov. 8–9, Conference

Seminars in accounting and auditing, July 9–11, Hilton Virginia Beach government Oceanfront

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contracting, tax and industry Seminars in accounting and auditing, government contracting, tax and industry

Walter J. Haig CPE Cluster Oct. 16–18, at Springfi eld Walter J.Waterford Haig CPE Cluster

Oct. 16–18, 30 – Nov. 2, Richmond CPA Center Waterford at Springfi eld Seminars in accounting and auditing Oct. 30 – Nov. 2, Richmond CPA Center Seminars in accounting and auditing

Don Farmer Tax Seminars Oct. Hotel Roanoke & Conference Center Don29,Farmer Tax Seminars 30, Hotel Waterford at Springfi eld Oct. 29, Roanoke & Conference Center Dec. 30, 3–5,Waterford RichmondatMarriott Oct. SpringfiHotel eld Seminars in Richmond tax Dec. 3–5, Marriott Hotel Seminars in tax

Staunton CPE Cluster Nov. 1–2, Stonewall Hotel Staunton CPE Jackson Cluster & Conference CenterJackson Hotel Nov. 1–2, Stonewall Seminars in tax and technology & Conference Center

Reston CPE Cluster Nov. 8–9, Bechtel Conference Center Reston CPE Cluster

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nonprofit in accounting and auditing, tax and Seminars nonprofit

Thanksgiving CPE Cluster Nov. 19–20, Richmond CPACluster Center Thanksgiving CPE Seminars in technology, industry tax Nov. 19–20, Richmond CPA and Center

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Seminars in technology, industry and tax

Winchester CPE Cluster Nov. 27–28, Yount, HydeCluster & Barbour Winchester CPE Community Nov. 27–28, LINKS Yount, Center Hyde & Barbour Seminars in taxLINKS Center Community Seminars in tax

Richmond CPE Cluster Dec. 13–14, Richmond CPA Center Richmond CPE Cluster

Seminars in accounting andCPA auditing, tax and Dec. 13–14, Richmond Center industry in accounting and auditing, tax and Seminars industry

Seminars in tax and technology

More information at (800) 341-8189 or More information at (800) 341-8189 or www.vscpa.com/Clusters www.vscpa.com/Clusters 38

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VSCPA news

VSCPA 100% Member Firms VSCPA 100% Member Firms show their commitment to their employees, the profession and the association. A 100% Member Firm is simply a Virginia CPA firm or company that has all of its CPAs enrolled as members in the VSCPA. Interested in being listed as a 100% Member Firm? Contact VSCPA Member Relations Director Brenda Fogg at bfogg@vscpa.com or (804) 612-9409.

THANK YOU FOR YOUR COMMITMENT, 100% MEMBER FIRMS! Anderson & Reed, LLP Anderson, White & Company, PC, CPAs Barnes, Brock, Cornwell & Heilman PLC Beale & Curran, PC Beck & Company, CPAs, PC Bennett, Atkinson & Associates, PC Biegler & Associates, PC BlackHeath Company, PLC Bowling, Franklin, & Co., LLP Boyce, Spady & Moore PLC Britt & Peak, PC, CPAs Burdette Smith & Bish LLC Burgess & Co., PC, CPAs Cameron, Moberly & Hamrick, PC Charles S. Pearson, Jr., CPA Charles W. Snader, P. C. Cherie A. James, CPA, PLC Chesapeake Accounting Group PC Cole & Associates CPAs, LLC Coley, Eubank & Company, PC Corbin & Company, PC Craver, Green and Company, P.L.C. Creedle, Jones and Alga, PC CST Group, CPAs, PC Dalal & Company David L Zimmer CPA PC Diane Y Smith CPA PC Didawick & Company, PC Dominion Benefits Donald W. Coleman, CPA, Inc., PC Douglas L. Thompson, CPA PLLC Duvall Wheeler, LLP Eggleston & Eggleston, PC Elmore, Hupp & Company, PLC Everett O. Winn, CPA, PLC First Capital Bank Frank Edward Sheffer & Company Fritz & Company, PC Garland & Garland, CPAs, PC Garris and Company, PC GL Roberson CPA, PLLC Gregg & Bailey, PC

Gregory & Associates, PLLC Gurman & Company, PLLC Hantzmon Wiebel Harris, Harvey, Neal & Co., LLP Henley & Henley, PC Henry R. Hortenstine III, CPA, PC Hogan & Reed, PC, CPAs Holland & Brown LLP Homes, Lowry, Horn & Johnson, Ltd. Honeycutt & McGuire CPAs Hunt & Calderone, PC, CPAs Jay E. Reiner CPA PLLC John M. Watkins, CPA Johnson, Equi & Co., PLC Jones, Adams & Delp, PC Jones, Madden & Council, PLC Jones & McIntyre, PLLC JS Morlu, LLC Keiter Kositzka, Wicks and Company L.P. Martin & Company, PC Lane & Associates, PC Larry D Greene CPA PC Lauren V. Wolcott, CPA, PC Lent & Hawthorne, PC M. Lee Winder & Associates, PC Mallard & Mallard CPAs, LLC Martin, Beachy & Arehart, PLLC McPhillips Roberts & Deans PLC Michael B. Cooke, CPA, PC Michael R. Anliker, CPA, PC Miller Foley Group Mitchell, Wiggins & Company, LLP Moss & Riggs, PLLC Murray, Jonson, White & Associates, Ltd., PC PBGH R.T. McCalpin & Associates Renner & Company, CPAs, PC Roger L. Handy, PC Rubin, Koehmstedt & Nadler, PLC Russell, Evans & Thompson, PLLC Rutherford & Johnson, PC Salter & Associates, PC

Scheulen, Patchett & Edwards, PC Sells, Hogg & Jones, CPAs, PC Spencer, Hager & Mosdell, PC Spitler, Stephens & Associates PLLC Stephen Merritt CPA, PC Steve Guy & Associates, PC Steve Walls & Associates, PLLC Strickland & Jones, PC Sullivan, Andrews & Taylor PC Terry L. Jones, CPA, LLC Thomas E. Fraley, CPA Thompson, Greenspon & Co., PC Tongelidis Consulting, LLC Updegrove, Combs, McDaniel & Wilson, PLC Valderas & Fishel, PC Verus Financial Partners WalkerChaney CPAs Wall, Einhorn & Chernitzer Wells, Coleman & Company, LLP Wilkinson Consulting & CPA PLC William B. May, Jr., CPA, PC Yancey, Miller, Helsley & Bowman, CPAs, PLLC Yount, Hyde & Barbour, PC

The above list was compiled May 22, 2012.

Check www.vscpa.com/100Percent for a complete, up-to-date list. n

WE WANT TO HEAR ABOUT IT! >>

Email disclosures@vscpa.com if you have exciting news to share. The VSCPA prints news of members’ awards, appointments and promotions as well as new hire and job change announcements. Firm news, as well as mergers and acquisitions, is also welcome.

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VSCPA educational foundation

Meet the Foundation chair: Bradley Nicklin, CPA Bradley Nicklin is relatively new to his role as chair of the VSCPA Educational Foundation Board of Directors. But he’s got plenty of experience dealing with the Foundation’s programs.

Nicklin, an assurance partner at Baker Tilly in Vienna, was part of the group that developed the first Leaders’ Institute, a program the VSCPA instituted to develop future leaders in the CPA profession. The program fell under the Foundation umbrella when it first started, and Nicklin has been heavily involved in Foundation affairs ever since.

“We provided the initial seed funding for the Leaders’ Institute to be the founding sponsor, along with the VSCPA,” he said. “I became involved just to learn more about what the Leaders’ Institute was going to be, developing the programming, kind of getting it off the ground with the lead gift. Since then, they’ve drawn me in to be more involved with the Foundation.”

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“I could have used a whole lot more than that,” he joked. “It just seems like the students that I see running around campuses are so well-prepared in relation to where I thought I was at that point in time.

“The programs that either firms or schools or societies make available to them are really raising the bar for those students that are maybe not doing all the things that are available to them. They stand out as maybe not being as strong of a presented candidate when we’re hiring.

You can see when a person has been through a networking session or a mock interview.”

After graduating from WVU, Nicklin took a job in the Pittsburgh office of Ernst & Young. He spent a few years working for a client, then moved back into public accounting with Baker Tilly (then Beers + Cutler) where he worked for five years.

He was drawn to accounting growing up in Martinsburg, W.Va., by observing some friends’ parents who were in the profession.

In the six years of the Leaders’ Institute, Nicklin has seen the program grow from its humble beginnings into a major event. More than 70 of Virginia’s top accounting students attended the 2011 event at Virginia Tech.

“I wanted to be in business and spoke to many mentors in my life growing up,” he said. “I knew of a couple very successful public accountants that grew up in my town. I was friends with their children and got to know the families and the livelihoods that they could lead.”

Nicklin spoke wistfully about how such a program could have helped him when he graduated from West Virginia University (WVU) in 1991.

That word, “mentor,” is central to the Leaders’ Institute and to the Foundation itself. Both programs seek to provide opportunities for students to pursue

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accounting as a career and connect them with people who can help them in that pursuit.

Those are just some of the issues that Nicklin will take on during his term as Foundation chair. He hopes to build on the work of his predecessor, Sean O’Connell, CPA, who recently hired an outside consultant to help the Foundation with its fundraising needs. Nicklin recognizes the value of an outside perspective in helping the organization plan for the future.

“We’re a bunch of accountants,” he said.

“We don’t always do fundraising. That’s not our day job, and it’s not always something that’s comfortable for everyone involved. … Having someone from the outside look at how you are doing things, and that’s their full-time job, and they know how these foundations run and how campaigns run and what’s successful — having an outsider will bring value to us who don’t do this on a full-time basis.”

Nicklin was also involved in the Foundation’s recent mission change.

The mission now reads, “To inspire and support future CPAs,” and the Foundation’s new chair is deeply invested in helping achieve those goals.

His main aim is to continue to help the Foundation realize its mission. He plans to work toward statewide support constantly. “We all need to remember when we were in need of support,” he said.

He is challenging every CPA in the state to make a meaningful contribution to the Foundation to help those that follow behind in the profession. According to him, “it is our fiduciary duty.” n

VSCPA educational foundation

Meet the Board of Directors

The VSCPA Educational Foundation Board of Directors for the 2012–2013 membership year is: CHAIR:

Bradley P. Nicklin, CPA CHAIR-ELECT:

Gerald L. Hagen Jr., CPA VICE CHAIRS:

Randolph Shapiro, CPA Monique T. Valentine, CPA SECRETARY-TREASURER:

Tina Lambert, CAE DIRECTORS:

Front row: Vugar Shahtakhtinskiy, Heather Flanagan, Marian Millikan, Kristin White, Randolph Shapiro, Robin Ransom, Tina Lambert, Lisa Germano. Back row: Gerald Hagen, Doug Ziegenfuss, Cheryl Fields, Sarah Nutter, Frederick White, Monique Valentine, Thomas Lyden, Brad Nicklin. Not pictured: Thomas Crutchfield, Martin Einhorn.

Thomas M. Crutchfield, CPA Martin A. Einhorn, CPA Cheryl A. Fields, CPA Heather K. Flanagan, CPA Lisa C. Germano, CPA Thomas J. Lyden Jr. Marian R. Millikan, CPA Sarah E. Nutter, Ph.D. Robin A. Ransom, CPA Vugar T. Shahtakhtinskiy, CPA Frederick L. White, CPA Kristin L. White, CPA Douglas E. Ziegenfuss Sr., CPA

audimation.com

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VSCPA educational foundation

It’s unanimous — VSCPA Educational Foundation donors are satisfied with the way their money is spent.

Every respondent to the 2011 Educational Foundation Donor Satisfaction Survey said they were either “very satisfied” (71 percent) or “satisfied” (29 percent) as a Foundation donor. Ninetythree percent described themselves as “extremely likely” or “very likely” to continue their donation, and 60 percent said they were at least “very likely” to encourage a friend or colleague to donate.

Donors also love how easy it is to donate to the Foundation. When asked what prompted their first donation, the most common response (at 39 percent) indicated that they donated through a check box on dues renewal. With the membership renewal season still in full swing, it’s easy for you to take this simple step to help ensure the future of the CPA profession. n

Virginia CPAs earn AICPA Accounting Doctoral Scholarships The American Institute of CPAs (AICPA) announced their Accounting Doctoral Scholarship recipients recently, and two honorees have Virginia connections. The VSCPA is a partner in this program, which helps interested students pay for accounting Ph.D. programs. Winners receive a stipend of $30,000 a year for a maximum of four years. Congratulations to Paul Demere, CPA, of Arlington, who will attend the University of Illinois, and Mark Sheldon, CPA, of Westlake, Ohio, who will attend Virginia Tech. n You can help! Donate to the Foundation today by visiting www.vscpafoundation.com.

GR WTH It’s what CGMA stands for.

Officially, of course, it’s Chartered Global Management Accountant.

A new designation representing accomplished professionals that drive and deliver business success, worldwide.

Find out more at cgma.org

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Copyright © 2012 American Institute of CPAs. All rights reserved.

Foundation donors show their satisfaction

1/30/12 11:16 AM

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I AM the vscpa

COLETTE WILSON, CPA >>

Wilson helps government clients see a clear picture of their financial positions.

GOVERNMENT GURU >>

Two minutes with Colette Wilson, CPA Wilson joined Cotton & Company, LLP, in Old Town Alexandria as a staff auditor in the 1990s and was elected partner within six years.

I AM PASSIONATE ABOUT… Helping

others. This passion has assisted me greatly in my professional life. I love assisting federal agencies with financial reporting requirements, implementing corrective actions and improving financial operations. Contractor support is needed to meet aggressive and challenging requirements and our firm stands ready to provide such services. In addition, I enjoy coaching and training young professionals and those new to public accounting in the federal environment.

PEOPLE DON’T KNOW THIS, BUT…

I love the ocean and I love to travel! I developed this love after living on the island of Guam for three years, one of many assignments my father had in the Air Force. Even after being bit by a shark on the toe in Daytona (yes, it’s true), I still go back to the beach for rest and

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relaxation. If there is sun, sand and deep blue waters … I’m there.

I WISH CPAS KNEW… The amount of

time and effort that goes into protecting the CPA name and license that we all worked so hard to obtain. The VSCPA Political Action Committee (PAC) works hard to safeguard our profession through advocacy and giving the CPAs a voice in the legislative process. I encourage all members to support the PAC and to take time to understand the work that involved.

MY ADVICE TO ASPIRING CPAS IS…

To focus on the “marathon” that is your career. Take time to properly prepare for your career path. Choose your industry and type of firm wisely based on your talents and interests. Start out at a moderate pace. Take in all that your superiors have to teach so that you can master your skills. Don’t rush the learning process or burn yourself out too early.

WHEN I TOOK THE CPA EXAM… The

examination took two days and I had

JULY/AUGUST 2012

to study and learn ALL the information for ALL four parts. You could only take it twice a year, so there was really no putting it off until the next testing window. Waiting three months to get test results was the worst, but I guess that was to be expected when the exam was “handwritten” in pencil. Once the mail arrived, I had to do the “feel test” on the envelope … Was it thin with just the notice of passing, or where there additional forms included for registering to take it again? The exam was a mob scene, with people bringing in pillows to sit in the folding chairs and hoping for a good table that was wasn’t too bumpy with splinters (gotta love the Arthur Ashe Center). But all in all, I loved the grueling nature of it, as I know it has made me more grateful for the achievement I AM A CPA BECAUSE… I wanted

to stand out in my career field. I am a dedicated, trusted professional who enjoys providing accounting services to others. CPA: Continuous Professional Assistance. n

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