On Balance Magazine - May/June 2018 by WICPA

May | June 2018 | Vol. 14 No. 3 A publication of the Wisconsin Institute of CPAs | wicpa.org

MOMENTUM! Michael D. Akers, CPA, PhD Chair, 2018-2019 Board of Directors

2018 WICPA

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A publication of the Wisconsin Institute of CPAs | wicpa.org

May | June 2018 Vol. 14 No. 3

8 Features

Columns

6 The new WICPA website: Designed with you in mind! The new and completely redesigned WICPA website is here! By Tammy J. Hofstede

26 INDUSTRY A different animal: Nonprofits require special care Accounting is of paramount importance to nonprofit organizations. By Jill Boyle, CPA

8 Momentum! Your new board of directors chair is focused on possibilities and continuing the momentum created last year. Meet Mike Akers, CPA, PhD. By Donna Pinsoneault 12 Leading by example Organizations are embracing new strategies to shape the next generation of leaders. By Ken Wysocky 16 A GPS for staff success A clear career progression will allow employees to be engaged, motivated and eager to stay. By Robert J. Traphagen, CPA, CGMA 22 How to be a great people manager The best managers work on developing those who work for them. By Suraj Naik, CPA

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30 TAX It’s not too late to “crunch the numbers” Even if you missed the March 15 deadline, an entity conversion is still possible—and might make sense. By Chris Rosborough, CPA 34 TECHNOLOGY European cybersecurity: How will it affect you? Discover how the new regulations may affect your organization. By James Savage and Dan Weise, CPA 38 BUSINESS DEVELOPMENT 10 ways to build business during summer Summer is a great time to build your network, boost your marketability and cultivate relationships. By Sara Davis

34 Departments 2 Odds & Ends | news briefs 3 Outlook | chair’s letter 4

Membership Matters | member benefits

19 In Touch | president & CEO’s message 24 Memorials | departed members 29 Kudos | members in the news

On Balance

May | June 2018

Odds & Ends Wisconsin-based firms among Accounting Today’s Top 100

2018–19 WICPA OFFICERS/BOARD MEMBERS Chair Michael D. Akers, CPA, CBM, CFE, CGMA, CIA, CMA, PhD Chair-elect Neil R. Keller, CPA, ABV, CVA Past Chair William L. Komisar, CPA, JD Secretary/Treasurer Katherine L. Hauser, CPA, CGMA Directors Jon C. Gaines, CPA, CGMA, MBA Patrick G. Hoffert, CPA Daniel Holzhauer, CPA Debra L. Lenz, CPA, CGMA, CIA, CRMA Terri M. Lillesand, CPA Wendy A. Peters, CPA Steven A. Pullara, CPA, CGMA Matthew J. Schaefer, CPA, CGMA Angela C. Thomas, CPA AICPA Council Rick E. Dreher, CPA, CGMA Ryan J. Hanson, CPA, CGMA President & CEO Dennis F. Tomorsky, CPA, JD, CGMA Chief Financial & Operating Officer Tammy J. Hofstede Design & Layout Brett Stallman Advertising Terry Felker Editor Marcia Tillett-Zinzow Printing Delzer

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On Balance is published six times a year by the Wisconsin Institute of Certified Public Accountants (WICPA). Change of address should be sent to: Membership, W233N2080 Ridgeview Pkwy, Suite 201, Waukesha WI 53188; Phone: 262-785-0445 or 800-772-6939; Fax: 262-785-0838; email: jessica@wicpa.org. Statements and opinions expressed are those of the authors and not necessarily those of the WICPA. Publication of an advertisement does not constitute an endorsement of the product or service by On Balance or the WICPA. Articles may be reproduced with permission. © Copyright 2018 On Balance.

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May | June 2018

Appleton-based Schenck, Madison-based SVA and Milwaukee-based Wipfli all were named to the 2018 Accounting Today Top 100 Firms list, with Wipfli ranking 20th, Schenck 55th and SVA 72nd.

Schenck SC recognized for positive community impact Schenck, Green Bay, recently received the John M. & Meredith B. Rose Award from Leadership Green Bay, according to the Green Bay Press-Gazette. The award recognizes a company that has positively impacted the community. Schenck is a full-service regional accounting and consulting firm with more than 600 team members serving clients from eight locations in Wisconsin.

Sitzberger & Co. S.C. moves to accommodate growth The regional public accounting firm of Sitzberger & Co. has moved its Brookfield office on Greenfield Ave. to a new location at 611 N. Barker Rd., Suite 200. The move was necessary to accommodate current growth and future mergers or acquisitions. The new 38,000-squarefoot headquarters will be home to 26 certified public accountants and 57 total employees.

In Business magazine honors three WICPA members Several of our members have been named to In Business magazine’s 2018 Class of 40 Under 40. The annual program honors 40 of the most successful and civic-minded young professionals under the age of 40 in the Greater Madison area. Nicole Gralapp, CPA, a principal with business advisory services at SVA Certified Public Accountants SC, developed the firm’s “exit strategy” by researching options for a consulting methodology and software platform. She is a UW–Whitewater alumna and Doyenne Group ambassador who is also in the final stages of earning a certified exit planner designation. Jacob Peters, CPA, MST, also a principal with SVA’s business advisory services, recently launched a new line of business for the firm, based on innovation consulting. He also was hand selected by the firm for grooming both in sales and in helping to lead SVA’s future growth. His community service includes serving on the board of Community Coordinated Child Care. Angela C. Thomas, CPA, general accounting section chief for the Wisconsin Department of Natural Resources, is a member of the WICPA board of directors. In 2017, Thomas was named the WICPA’s Outstanding CPA in Government. She also holds the rank of lieutenant colonel with the Civil Air Patrol, auxiliary of the United States Air Force, and serves as treasurer on the Literacy Network board of directors.

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Help shape your magazine's content! We're seeking members to serve on the 2018-2019 Editorial Advisory Committee. For a minimal time commitment, you can have input into what is published in On Balance and other WICPA publications. If interested, contact Marcia Tillett-Zinzow, editor, at mtzinzow@icloud.com.

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OUTLOOK | CHAIR’S LETTER “It is my hope that during 2018–2019, we can continue the momentum of recent WICPA activities focused on enhancing the accounting profession in Wisconsin.”

Charting a course for the coming year

hank you for the privilege and honor to serve as chair of your WICPA board of directors for 2018–2019. This issue of On Balance focuses on different aspects of leadership. Leadership includes inspiring colleagues to actively engage in activities that will enhance and transition an organization. It is my hope that during 2018–2019, we can continue the momentum of recent WICPA activities focused on enhancing the accounting profession in Wisconsin. For example, the WICPA leadership team and numerous members were successful in reaching out to our legislators in Madison regarding important goals for our profession. Through the tireless efforts of our organization, we have seen passage of Wisconsin 2017 Act 88, the new law that requires continuing professional development (CPD)* for CPA license renewal. One reason this legislation is important is that it offers the WICPA and Wisconsin an opportunity to become a leader in the development of cutting-edge CPD that adds value to professional growth—as compared to simply meeting a necessary requirement. The leadership team, members of the WICPA and the board have begun and will continue to work on recommendations for CPD guidance that will be submitted to the Accounting Examining Board. Another key aspect of Act 88 is the establishment of new educational requirements to sit for the CPA Exam and become certified. The educational requirements are rigorous yet allow each accounting program to develop a curriculum that best meets their institution’s goals. The requirements resulted from a collaborative effort of the WICPA and the Accounting Higher Education Committee (AHEC), consisting of representatives from 26 accounting programs throughout Wisconsin, including several WICPA members. As a member of the AHEC, I believe this grassroots effort created the most engagement between academics and the professional community that I have ever seen in my 30 years of teaching. We need to keep the AHEC actively engaged and further enhance the interaction with high school accounting

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educators, counselors and principals, as the joint efforts of academics and practitioners are necessary to both promote and advance the accounting profession. In the January/February issue of On Balance, Dennis Tomorsky announced his intention to retire near the end of 2018. During this transition, it is critical that we continue the excellent progress made under Dennis’ leadership, select a new CEO who will continue to push the WICPA toward excellence and make the transition as seamless as possible. To accomplish these goals and maintain this momentum, we will need the continued engagement of WICPA members. I encourage you to remain committed to the profession through your membership, and I look forward to working with you in the coming year. * See the President & CEO’s Message, pg. 19, for details of the change from CPE to CPD.

Michael D. Akers, CPA, CFE, CIA, CMA, CGMA, CBM, PhD, is the Charles T. Horngren Professor and former chair of the Accounting Department at Marquette University School of Business. Contact him On Balance May | June 2018 at 414-915-6672 or michael.akers@marquette.edu.

MEMBERSHIP MATTERS “The WICPA is THE association dedicated to connecting you to your peers and other business professionals and promoting our profession. By educating, informing, advocating and providing opportunities for professional development and networking, the WICPA makes individuals and the profession stronger.”

Happy new (fiscal) year!

ay 1 marks the beginning of our new fiscal year and the start of many new initiatives. It’s an exciting time for our staff and members, and I’m pleased to have the opportunity to give you an overview of the coming year’s plans.

Strategic rebranding We have continued to evaluate and strategically rebrand the WICPA. In the coming year, you’ll see new marketing materials in the way of a new membership and recruitment piece, a redesign of our conference brochures to align them with the WICPA brand, and a new logo for members so you can identify yourself as a WICPA member on your company website, business cards or letterhead.

Outreach and networking We will continue visiting areas across the state as an opportunity to meet our members and create awareness of the profession among students and nonmembers. We plan to visit over 30 colleges and universities, including technical colleges; offer networking events in many areas, starting in May; continue holding additional conferences in Wisconsin Dells and Green Bay; extend a second golf outing at Thornberry Creek at Oneida; and exhibit at public events that accounting and other business professionals attend.

On Balance

May | June 2018

Updating our terminology A significant change you’ll see on our new website and marketing materials is the change from continuing professional education (CPE) to continuing professional development (CPD). CPD more accurately represents the skills, knowledge and experience you gain both formally and informally—beyond training—in your career. Our president and CEO, Dennis Tomorsky, explains this transition in greater detail in his message on page 19. Another change you’ll see is use of the word “organization” instead of “firm.” With almost 40 percent of our members in industry, government and education, we believe this term better represents the wide variety of companies and industries with which all our members are aligned.

Advocating for the profession Flag January 2019 on your calendar now for Advocacy Day. This will be an opportunity for you to learn about the political process and meet and greet legislators in groups at the Capitol in Madison. These visits are essential to inform our legislators that WICPA members are a resource to them; that you are trusted advisors who can provide input and advice on issues such as a sales tax on services—which, in addition to affecting our profession and the business community, could mean higher prices for their constituents.

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Ongoing website enhancement As the new WICPA website launches, we will continue to add and enhance its features with social communities and a mentor program. In addition, the new website will have an expanded member focus and include additional recognition of members who have been promoted, received an award, supported legislative initiatives or donated resources to the profession through the WICPA Educational Foundation. We’ll share unique stories about our members and how they came to be CPAs, and we’ll congratulate new members and those newly certified. We’re enthused about these enhancements because they help enforce the reality—for all of us—that the WICPA is here because of YOU. We encourage you to attend our events, submit your stories for personal profiles, send us your announcements for Kudos and, of course, provide us with your feedback. We look forward to hearing from you! Tammy J. Hofstede is the chief financial & operating officer at the WICPA. Contact her at 262-785-0445 ext. 4518 or tammy@wicpa.org.

JOIN US AT UPCOMING PROGRAMS & EVENTS! MAY 15

Networking Night at Appleton Beer Factory (Appleton)

MAY 22

School District Audit Conference (Stevens Point)

MAY 23

School District Audit Conference (Milwaukee)

MAY 24

Networking Night at Old Sugar Distillery (Madison)

JUNE 7

New CPA Banquet (Milwaukee)

JUNE 21

Networking Night at Mississippi Pizza Cruise (La Crosse)

JULY 10

Networking Night at ABV Social (Wauwatosa)

AUG 17

Golf Outing at Thornberry Creek at Oneida (Oneida)

SEP 21

Golf Outing at Ironwood Golf Course (Sussex)

it’s time to

renew

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TUESDAY

WEDNESDAY

STEVENS POINT

MILWAUKEE

HOLIDAY INN STEVENS POINT CONVENTION CENTER

POTAWATOMI HOTEL & CASINO

MAY 22

MAY 23

If you have not yet renewed your 2018–2019 membership, visit wicpa.org/renew for quick and easy online payment to keep your valuable member benefits coming, including On Balance magazine. Pay your dues in the “My WICPA” section on the new WICPA website. For information regarding your membership, contact Jessica Murphy at 800-772-6939 ext. 4502 or Jessica@wicpa.org.

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On Balance

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MOMENTUM! Michael D. Akers, CPA, PhD The WICPAâ&#x20AC;&#x2122;s 2018â&#x20AC;&#x201C;2019 board of directors chair is focused on possibilities.

Mike Akers is the Charles T. Horngren Professor of Accounting and a former chair of the Accounting Department in the Marquette University School of Business.

On Balance

May | June 2018

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By Donna Pinsoneault

ike Akers hasn’t coached basketball in years, but the WICPA’s new board chair still strives to keep his eye on the ball. For starters, he plans to help the WICPA build on its current momentum— increasing membership and member involvement as well as attracting more people to the profession. Akers, who served as chair of the Accounting Department in Marquette University’s School of Business, also hopes to enhance the role of college and high school educators. “As educators training people to enter the profession, we should be actively engaged with the practice,” said Akers, who began his career serving clients of Arthur Andersen LLP. “There will be challenges, but strengthening that collaboration, enhancing the interaction between practice and academia will provide ongoing benefits. Our involvement should not end when students leave campus.” A key experience helped solidify Akers’ commitment to the collaborative approach. Licensing issues brought practitioners and educators together through the WICPA’s Accounting Higher Education Committee to influence legislation (AB 188) passed in November 2017. “The issue gave us a chance to interact in a way I hadn’t seen in 30 years,” he said. “We came together and had an impact. I want to continue that momentum.”

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Dr. Akers has taught accounting for more than 30 years.

As Akers sees it, working together effectively requires identifying and meeting shared challenges. Technology is one example. “Technology changes, including cybersecurity, are impacting how businesses operate and how accountants approach their work,” Akers said. “We all need to prepare for how technology is changing the way our clients do business.” That calls for practitioners and educators to stay on top of changes. For the WICPA, that means offering continuing education in technology skills to members. Similarly, educators need to look at how best to use technology to deliver education through online courses, utilize data analytics and management, and facilitate interaction worldwide. It also means ensuring that students are prepared with the technical skills they will use in the profession. “We all need to keep learning and training in technology skills to adapt to the changes taking place,” Akers said.

On Balance

May | June 2018

Dr. Akers has been a member of the Marquette University faculty since 1988.

Since accounting education is directly linked to the accounting profession, the engagement of accounting academics with accounting professionals is a continuing opportunity and challenge. The interaction between practitioners and academics is important in preparing students for their careers as well as enhancing research that will impact the profession.

Devoted to accounting education An educator for more than 30 years, Akers believes it is essential to engage students in the critical thinking they will need as practitioners. “We need to be sure students know to seek out information,” he said. “They especially have to be comfortable asking themselves: Do I need to ask another question?” Just as the WICPA provides professionals with ongoing opportunities for soft-skill development, Akers believes that preparing students for professional practice goes deeper. “We strive to teach students to treat everyone with respect,” he said. “We make it clear that it’s not OK to treat the bookkeeper differently than the CEO. You don’t make distinctions between people based on their roles.” As he sees it, students and practitioners also benefit from appreciating that they will deal with people from a variety of backgrounds. “With the global market, you are going to interact with people from all over the world, but I would argue that even in the U.S. we have differences geographically,” he said. “The ability to appreciate and adapt to those differences will be a key skill as we move forward.”

On Balance

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Akers cites promoting the profession on college campuses and in high schools as a continuing priority. He also believes it is important for students to experience professional challenges that go beyond the books. To that end, Akers currently serves as co-advisor to the Marquette University chapter of the student-run honorary organization Beta Alpha Psi. “We walk a fine line as mentors,” he said. “You have to allow students to agree or disagree with you. Sometimes you have to let them go down a road you might not choose, knowing that you might need to step in if they go too far in the wrong direction. There’s no formula—you need to use professional judgement.” He also has overseen Marquette University’s Accounting magazine for the past 13 years. Graduate assistants conduct the interviews and write the articles. Akers worked with his administrative assistant, Amanda Ames, to develop and review the content of the magazine. “The purpose is to showcase the accomplishments of our alumni and promote the accounting department,” he said.

Beyond the givens The ball Akers keeps his eye on moves through a wide playing field. His current personal goals include exploring ways to share his skills with more people. For example, he is serving as a financial coach to people who struggle with budgeting. Another area he hopes to explore in the future involves helping people in prison develop business skills they can use after serving their terms. “There is a hunger for these kinds of skills in the U.S.,” he said. “I’d like to see if my skills can be helpful.”

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What motivates Akers? “I try to live my faith on a day-to-day basis,” he said.

MICHAEL D. AKERS, CPA, CFE, CIA, CMA, CGMA, CBM, PhD

He also values the role his wife and four stepdaughters play in helping him stay on point. “My wife is a good sounding board,” he said. “I often solicit her input to determine if I’m on target. My stepdaughters have helped me better appreciate what our students are going through.”

Charles T. Horngren Professor of Accounting Former Chair of the Accounting Department Marquette University School of Business

Family life also helps him keep things in perspective. “Parenting is a more important job than anything we do as professionals,” he said.

FAMILY Wife: Mary Four stepdaughters: Chrissy, Becca, Victoria, Laura

Beyond faith and family, Akers’ inspiration also comes from history, specifically Abraham Lincoln. “Lincoln was a man of strong faith,” Akers said. “He was a servant leader and, for all his accomplishments, he had a lot of professional and personal challenges in his life. He had a wisdom we don’t always see in our leaders.” Ultimately for Akers, it all comes down to keeping that eye on the ball. “I care about doing a good job for the WICPA, and I care about the people with whom I interact,” he said. “Hopefully, that influences positive results for the things we plan to do.”

HOBBIES Strong commitment to serving others, family activities, boating, traveling, reading, basketball

Donna Pinsoneault is a freelance writer based in Brookfield. Contact her at dpinsoneault@gmail.com.

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On Balance

May | June 2018

Leading by Example

Organizations are embracing new strategies to shape the next generation of leaders.

On Balance

May | June 2018

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By Ken Wysocky

aced with challenges such as rapidly shifting customer expectations, disruptive technological advances and younger employees who desire more advancement opportunities, accounting firms and finance departments across Wisconsin are adopting new approaches and strategies for developing their next generation of senior-level executives. Take Milwaukee-based ManpowerGroup Inc., the accounting firm of Smith & Gesteland LLP in Middleton and the Barron County finance department in Barron. All three serve clients as different as a debit and a credit. Yet they also face a common challenge: how to groom their star, high-potential employees into future chief financial officers, partners and finance directors equipped to handle increasingly complex challenges. “Just like so many other corporations, it’s extraordinarily important for us to build a sustainable pipeline of leaders,” said Patricia Puccinelli, CPA, vice president of audit advisory services for ManpowerGroup, which has locations in 80 countries around the world. “In 2014, we launched what we call the emerging leader experience (ELE), which focuses on identifying and developing the skills of emerging leaders,” she said. “ELE is all about offering stretch assignments and providing development tools and coaching and mentoring tactics. It’s a three-year program that builds leadership capabilities as well as on-the-job experience.”

Patricia Puccinelli, CPA

In 2017, the firm established what Pellino calls an “S&G MBA” program, a two-year deeper dive into the business that exposes high-potential employees to areas their normal jobs don’t include, such as business valuation, mergers and acquisitions and profitability consulting. The pilot program began with just four employees who have a good core knowledge of the company’s traditional service and who expressed a desire for assuming more responsibilities. “They really have to be motivated because the program is time consuming,” he noted. “It’s almost like an internship in each area.” A partner leads the program for each participant; those partners are responsible for building a curriculum, so to speak, for the employee to whom they’re assigned. “It sort of models what an MBA program would look like, but more sharply focused,” Pellino explained. “We’re still working out the kinks, but at the end of the day, a lot of leadership is all about learning to listen. Great leaders are great listeners, so a big part of the training is to teach them how to listen actively to get to what our clients truly want to achieve above and beyond just audits and taxes. It exposes them to what it means to truly be business advisers who also happen to do audits and taxes.”

Government grooming Barron County’s finance department handles all of the county’s centralized accounting, financial and budget functions, supervised by a finance director and county auditor who effectively is the equivalent of a corporate chief financial officer, said County Administrator Jeff French, CPA, MBA, EA.

Puccinelli also is implementing a similar program within her department to “drive the experience deeper into the organization.”

Bill Pellino, CPA, ABV, CVA

At Smith & Gesteland, management has created a mentoring-based development program that’s augmented by skills training provided by an outside company called Rainmaker Consulting. A central component of the company’s program includes having key employees accompany the firm’s 16 partners to client meetings, which exposes them to higher-level conversations, said the firm’s managing partner, Bill Pellino, CPA, ABV, CVA.

“In general, our employees come out of college with a strong core base of knowledge on the technical side, but they don’t get too many opportunities for exposure to leadership skills in school,” he said, explaining one reason why the firm developed the program.

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In terms of leadership development, the county focuses primarily on crosstraining for various functions. “It gives us greater flexibility,” he explained. “Accounting functions for the highway department, for example, are radically different than those in the health and human services area. The highway department is treated like a business, while health and human services requires modified accrual accounting.” Jeff French, CPA, MBA, EA

County employees also are encouraged to attend semiannual and annual seminars and symposiums that cover everything from software training to new developments in government accounting rules, French said. In addition, a year-long, county-wide program called Emerging Leaders, which focuses on areas such as ethics and leadership, is aimed at preparing employees for senior-level

On Balance

May | June 2018

Preparing younger staff for future leadership positions is one key to reducing turnover.

positions. The county also is talking with officials at the University of Wisconsin–Barron County (a two-year college that’s now merged with the University of Wisconsin–Eau Claire) to develop programs for shaping future leaders. “Good leaders have to be groomed,” French said. “For some people it’s innate; it’s in their DNA. But others need to be taught in order to bloom and become exceptional leaders. We’re focused on grooming that next generation.”

Many forces spur leadership focus A variety of factors are driving this renewed focus on leadership development. At ManpowerGroup, rapid advancements in technology create demand for employees with skill sets that differ from past requirements. “The pace of technological disruption is accelerating,” explained Puccinelli. “We see that this digital age requires a new style of leadership. Leaders have to dare to lead, dare to make a difference and prepare to fail fast.” As such, future leaders must be able to adapt quickly to changing technology. “In the accounting arena, there is constant pressure to be more effective and work faster and more efficiently, so we have to develop leaders who are very comfortable with changing technologies,” she said. As an example, Puccinelli pointed to the increasing use of artificial intelligence. In addition, the velocity and magnitude of changes in the accounting world are changing expectations for senior-level roles such as chief audit executive. They have to be more agile and aware of business risks than ever before, Puccinelli said.

On Balance

May | June 2018

Two other factors also loom: a shrinking labor pool and growing numbers of millennial employees. Low unemployment in Wisconsin makes it more difficult to hire employees with the required skill sets, which in turn makes internal employee development efforts and reducing turnover more critical, she said. As for millennials, this ambitious cohort wants employment security and lifelong skills development, which they see as their “new currency,” Puccinelli noted. In fact, a recent ManpowerGroup survey revealed that four of five millennials would change jobs for the same amount of pay if their new position included more skills development. “So we need to think about how to prepare them for leadership roles … and demonstrate that staying with our company can lead to career advancement,” she said.

New client, employee expectations At Smith & Gesteland, higher expectations from both clients and younger employees also drive the need for new approaches to leadership development. The firm’s clients include many family businesses and privately owned companies that are navigating complex issues, such as family transitions and succession planning. At the same time, they’re often buffeted by global economic and competitive forces that would have been unimaginable even a decade or so ago, Pellino said. “It’s no longer only about the numbers,” he explained. “There’s also a big element of psychology involved. You need to actively listen to more than just the numbers. You’re developing strategies to negotiate some of these obstacles. Public accounting is about people and communication, especially as technology

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improves. It’s about listening and empathizing, telling a story with numbers.” Millennials also are changing the dynamics of leadership training. “They’re so much more talented than we were at the same age,” Pellino said. “You see that they can grow very quickly, so we have to provide opportunities for them to excel more quickly.” To ensure leadership development programs are successful, it’s important to monitor them and measure whether or not they’re successful. At Smith & Gesteland, for example, how well managers develop their direct reports is directly tied to their performance reviews. “We set goals for our partners that center on people and development,” Pellino said. “We’re like a sports team, where veteran players have to help new players develop and become better players. Ultimately, that’s how our team is going to win.”

Governments face different issues Leaders in Barron County government face an entirely different challenge. While employee turnover isn’t typically a big problem, attracting people to work in a more remote, rural area is, especially when an attractive metropolitan area like Minneapolis–St. Paul is only about a 90-minute drive away. Moreover, French expects the higher pay and better benefits

(such as flex time) offered in the private sector will make it increasingly difficult to recruit employees—not to mention fill senior-level positions. So far, Barron County’s top financial position has been relatively stable. The current finance director and county auditor grew up in the area and plans to stay for the long term, French said. But he said that several surrounding counties are having difficulty recruiting candidates for that position, which underscores the importance of emphasizing professional development. As companies and organizations examine how to shape their next generation of leaders with programs and educational opportunities, it’s easy to overlook a simple but critical element: the personal factor. “You have to engage your workforce and provide that human touch,” Puccinelli concludes. “Everybody is busy, and our plates are fuller than ever, so treating employees with respect and dignity is important—maybe now more than ever before.”

Ken Wysocky is a freelance writer based in Whitefish Bay. Contact him at 414-962-6202 or kwysocky@wi.rr.com.

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On Balance

May | June 2018

A GPS for

Staff Success ASSOCIATE SENIOR

MANAGER

SENIOR MANAGER

PARTNER 16

On Balance

May | June 2018

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By Robert J. Traphagen, CPA, CGMA

etaining qualified talent is one of the top five issues affecting CPA firms, according to a 2017 AICPA survey. Recent surveys also show that the new and upcoming workforce comprised of millennials (ages 24–35) and Generation Z (ages 18–23) seek a sense of purpose within a transparent workplace that focuses on continued growth as a member of the team, with a performance timeline that allows them to envision their success. Establishing a clear career progression will allow employees to be engaged, motivated and eager to stay at the firm. Firms should be focusing on effectively setting staff expectations. This will also help build trust and retain staff. Firms should consider investing in up-and-coming leaders as early as they can. From the moment an employee begins his first day on the job, a clear sense of purpose should be established. Job descriptions and expectations should be communicated and tied into the firm’s mission. It is important to create a shared vision of success. Employees should feel that their work is meaningful and that their firm is willing to support and invest in their personal and professional potential. At our firm, we have adopted the AICPA CPA Firm Competency Performance Management model (CPM model) for our career development program. The model provides definitions of the five roles within our firm—associate, senior, manager, senior manager and partner—as well as the core knowledge, skill sets and abilities required to reach the next level. Each role is clearly defined by the type of work performed. The model identifies competencies that associates, seniors, managers and senior managers need to advance to the next level as they master their required competencies. The CPM model is structured around five core competencies identified below: • • • • •

Performance Measures/Productivity Technical Knowledge/Relevant Technology Client Service People Development and Teamwork Business Development

These competencies, explained in detail, give staff a clear diagram of career progression. The model provides objective criteria for all client development activities, sends clear messages to the team about what is expected of them, and allows for identification of individual and firm learning needs. At our firm, we foster an entrepreneurial culture based on education beyond credentials. Our learning environment includes a firm library stocked quarterly with the top 10 non-fiction and fiction New York Times best sellers, as well as other business resources. It fosters a friendly, fun and focused environment.

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“Since the implementation of the career development program, our employees have shared their enthusiasm and feeling of support as one of the most important perks our firm has to offer.” As part of our orientation program, each new team member is given our CPM model. We discuss their personal and professional goals, and expectations are communicated for every level and aligned with their skill sets. We create a road map for where they want to go and where we would like to see them go within our firm. Each team member has their own personal plan and performance summary, which is monitored and discussed on a continuous basis throughout the year to ensure expectations are being met. Ongoing feedback sessions are the most important part of the process. The following should be used when crafting a good career plan: • Include two-way communication. • Establish a baseline of measurement for future performance. • Empower associates to act independently. • Provide a foundation for accountability. Since the implementation of the career development program, our employees have shared their enthusiasm and feeling of support as one of the most important perks our firm has to offer. “Traphagen has helped me to develop professionally as well as personally. In addition to technical seminars, I had the opportunity to attend Strictly Business: The Dale Carnegie Immersion Seminar. This helped me gain confidence with one-on-one client sessions and group meetings,” says Craig Sikora, senior accountant. Increasingly, firms are implementing programs that focus on employees’ personal and professional development. We believe this is the pathway, the road map—the “GPS for Success!” Robert J. Traphagen, CPA, CGMA, is the managing partner at Traphagen Financial Group LLC and a past president of the New Jersey Society of CPAs. He can be reached at robert@tfgllc.com or 201-262-1040 x225. Reprinted with permission from the New Jersey Society of CPAs.

On Balance

May | June 2018

Introducing your 2018–2019 WICPA Board of Directors The WICPA Board of Directors provides strategic governance in accordance with the WICPA strategic plan, mission and vision. The board ensures the WICPA serves the diverse needs of members, enhances professional competency, promotes the value of members and the profession, advocates on behalf of the profession and builds community among members. New members began serving after they were elected May 10, 2018, at the Member Recognition Banquet and Annual Business Meeting.

CHAIR Michael D. Akers, CPA, CBM, CFE, CGMA, CIA, CMA, PhD, Charles T. Horngren Professor of Accounting, Marquette University, Milwaukee

CHAIR-ELECT Neil R. Keller, CPA, ABV, CVA, partner-in-charge, tax services, Sikich LLP, Brookfield

PAST CHAIR William L. Komisar, CPA, JD, principal, CliftonLarsonAllen LLP, Milwaukee

SECRETARY/ TREASURER Katherine L. Hauser, CPA, CGMA, manager of financial reporting, Herzing University, Menomonee Falls

DIRECTOR Jon C. Gaines, CPA, CGMA, MBA, vice president of business services and finance, Wisconsin Women’s Business Initiative Corporation, Milwaukee

DIRECTOR Patrick G. Hoffert, CPA, partner, Reilly, Penner & Benton LLP, Milwaukee

DIRECTOR Daniel Holzhauer, CPA, senior vice president & commercial lender, Associated Bank, Milwaukee

DIRECTOR Debra L. Lenz, CPA, CGMA, CIA, CRMA, audit lead, Harley-Davidson Inc., Milwaukee

DIRECTOR Terri M. Lillesand, CPA, tax shareholder, Schenck SC, Sheboygan

DIRECTOR Wendy A. Peters, CPA, accounting manager, Kohler Credit Union, Kohler

DIRECTOR Steven A. Pullara, CPA, CGMA, partner, Smith & Gesteland LLP, Middleton

DIRECTOR Matthew J. Schaefer, CPA, CGMA, vice president of regulatory risk and internal audit, Bank of Wisconsin Dells, Wisconsin Dells

DIRECTOR Angela C. Thomas, CPA, general accounting section chief, Wisconsin Department of Natural Resources, Madison

AICPA COUNCIL Rick E. Dreher, CPA, CGMA, managing partner, Wipfli LLP, Green Bay

AICPA COUNCIL Ryan J. Hanson, CPA, CGMA, financial accounting manager, MGIC Investment Corp., Milwaukee

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May | June 2018

wicpa.org

IN TOUCH | PRESIDENT & CEO's MESSAGE “We are moving beyond mere compliance-driven education to a more realistic focus on lifelong learning and career development.”

Moving beyond your (grand)parent’s CPE with continuing professional development

ou may have noticed that WICPA programs to enhance competency and career opportunities are now referred to as “continuing professional development,” or CPD.

When continuing education first emerged as a requirement for CPA association membership and license renewal a few decades ago, lifelong learning became focused on compliance with often granular educational compliance processes that generally emphasized classroom lectures. Sometimes, the narrow information presented in day-long lectures did not align with the technical areas in which seminar attendees worked. Limiting professional learning to lectures also did not always provide the range of learning activities and topics necessary for attendees to accelerate their professional growth or develop the wide range of competencies required for their professional success. To most effectively meet the current needs of WICPA members and those we serve, the WICPA board of directors approved innovative and updated lifelong learning concepts in 2016. The board’s visionary approach leverages the latest technology and neuroscience concepts to encourage convenient, inexpensive and highly effective learning activities that allow significant flexibility with respect to the length and types of creditable learning activities. The changes to Wisconsin statutes that will become effective for Wisconsin CPA license renewals beginning in 2021 also reflect the updated WICPA lifelong learning concepts. Recognizing that the most effective and meaningful lifelong learning does not result from limiting creditable learning activities to only lectures, the concept of continuing professional development has emerged internationally to reference lifelong professional learning processes. CPD

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encourages professionals to plan and participate in a variety of learning activities that will enhance their technical knowledge while accelerating their career trajectory, earning potential and executive leadership opportunities. Lifelong learning has enabled all of us to serve others accurately and efficiently by keeping up with technical developments in complex areas. The quality service we provided as a result of continuously enhancing our competency and professional growth in many areas also minimized risk and increased revenue as a result of our positive reputation for helping others achieve success. Moving beyond mere compliance-driven education to CPD replaces the historically rigid compliance focus of CPE lectures with the more positive approach of enhancing your competency and skills while increasing your career opportunities.

Dennis F. Tomorsky, CPA, JD, CGMA, is president & CEO of the WICPA. Contact him at 262-785-0445 ext. 4519 or dennis@wicpa.org. On Balance

May | June 2018

PROVEN

REASONS TO RENEW

NETWORKING: Join nearly 7,300 of your peers at professional and social events.

MEMBERSHIP

DISCOUNTED CPD EVENTS:

The WICPA is the premier association for accounting and

business professionals in Wisconsin. Whether you’re looking to grow professionally, bring in new business, increase your expertise and leadership or protect the business you’ve helped build, the WICPA serves as your go-to resource to help you succeed and stay connected to the profession.

Receive discounts on conferences, seminars, breakfast programs, webinars and on-demand programs.

Renew today at wicpa.org/renew LEADERSHIP DEVELOPMENT: ONLINE RESOURCES: Connect with members through the Membership Directory, find and post jobs with the Career Center, and be listed as a resource to the public with the Find a CPA Directory.

07 06

CREDIBILITY:

Brand yourself as a WICPA member to demonstrate your ethical standards and commitment to the profession.

500+ 93% RENEW MEMBERSHIP MEMBER VOLUNTEERS

MEDIA 7,000+ SOCIAL FOLLOWERS

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OVER 2,500

WI COMPANIES, FIRMS AND ORGANIZATIONS REPRESENTED

Enhance technical and soft skills with volunteer opportunities that help advance the profession, build the CPA pipeline and give back to the community.

04 05 EXCLUSIVE SAVINGS:

Save up to 40% on products and services through our select Affinity Partners and Member Benefit Providers.

IMPORTANT NEWS:

Keep current on legislative and financial regulations, technical topics and industry trends with our award-winning publications and e-news.

MEMBERSHIP BASE PUBLIC

41%

INDUSTRY

40%

OTHER

12%

EDUCATION

GOVERNMENT

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Interested? Contact Marcia Tillett-Zinzow, editor, at mtzinzow@icloud.com.

On Balance

May | June 2018

HOW TO BE A GREAT

PEOPLE MANAGER It’s about the people

ecoming a successful manager of people seems like a straightforward task. One: Identify the manager who you prefer to work under. Two: Do exactly what they do.

So why do organizations By Suraj Naik, CPA spend countless dollars training managers on how to work with those under their supervision? After all, managers are required to possess the technical expertise relevant to their field and organization. For example, Ernst & Young (EY) requires applicants to be licensed CPAs to even qualify for a manager role. Yet a large extent of what supervisors do each day is manage people. Consequently, EY not only has continuing professional education for managers but counselors, counselor training, feedback training, regular coaching surveys and mentorship groups—all of which are designed to develop current and future leaders of the firm. Organizations spend countless resources on recruiting, training and retaining staff. But in the end, even if staff receive an outstanding benefits package,

On Balance

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they will consider leaving if they are working under ineffective managers. So how do great managers develop people? Three continuous activities seem to be most effective: listening and learning from one’s employees, providing useful feedback and preparing others for leadership.

Paying attention Listening to and learning from those we manage is critical. Opinions generally come from one of two types of employees: brand-new, entry-level staff and experienced individuals. Whereas the green staff may be best at proposing how to onboard newly hired employees, an experienced supervisee may be able to provide the manager with better ideas on assigning roles for the project or filling out mandatory documentation. Actively involving staff in decision making is an excellent development tool for future managers. Additionally, by not having staff merely complete an assignment, they will instead learn to analyze opportunities to simplify and improve the work product. On the other hand, managers must tactfully draw the line when required. With my firm, for example, assisting new hires and orientation does have limits. Those joining the engagement in October do so during

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“The best managers work on developing the people who work for them into managers themselves.” federal assurance busy season, so a proper orientation from leadership is not possible. Circumstances may prevent good ideas from coming to fruition, but to keep employees engaged, managers can explain why the plan is not feasible and offer a compromise or a better time frame for the idea. For example, a manager could use the lunch hour to explain the firm’s goals rather than a traditional office setting. As a result, the project can stay on track, but the staff does not feel brushed off or that their opinion was entirely ignored.

Providing feedback Another key aspect of managing people is the ability to coach. We often consider end-of-year feedback and counseling as the end-all, be-all. And while there is some truth that one’s year-end rating often determines compensation and job

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advancement, good managers understand that coaching is a continuous process. Informal, timely feedback can develop employees throughout the year. As a CPA, I know the hours we spent to earn the license; consequently, we tend to mirror that effort in our work. I also know that struggling early in your career or with a new firm is common, and I experienced that firsthand by joining the federal practice with no federal audit experience. So how do managers inform high achievers that their initial work may need many revisions, while still recognizing their efforts? Identification of the problem is only the first step; managers developing people must include both a potential solution and future recommendation. Managers must be truthful and state the facts as soon as possible. Not clearly explaining the problem or waiting too long to express an

On Balance

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opinion will result in the employee repeatedly producing lowquality work. Many of these disconnects are not the fault of either party and, rather, are a misunderstanding based on how different individuals receive and communicate information. Frank discussions offering insight to encourage better work in the future can be accomplished in many ways. I had one manager evaluate my first interactions with clients by inviting me to practice conference calls and in-person discussions. Another manager preferred to note his review work paper comments and requested that I “approve” their legitimacy in a subsequent sit-down meeting. Overall, the managers identified problems immediately with the same goal—they wanted me to succeed and showed me how to do so.

Cultivating new leaders While listening to one’s employees and providing appropriate feedback are two important actions for good managers of people, the most important is preparing future managers. No doubt, firms offer hours of training to develop managers, but I believe organizations can only accomplish this goal by allowing those being managed to act as managers before they are promoted to that role. I see well-liked, highly regarded managers routinely offer opportunities to younger employees at EY. As early as in their second year, staff usually take charge of an audit task or project and oversee a fellow staff to complete the task. They predictably struggle, as they would rather perform the work the way they learned it and also fix a supervisee’s tasks if not completed within

the guidelines. But eventually, staff learning to become managers begin to understand that listening to others’ considerations and offering feedback are the most efficient choices. Allowing space to let others supervise smaller projects might lead to mistakes and maybe more time resolving problems in the short term. In the long term, however, the manager can prioritize engagement-level concerns while the daily activities are performed by those staff.

Building better managers Based on the opinions of far more knowledgeable writers and thinkers out there, there are a multitude of traits good managers possess. They have strong ethics, exude the “tone-at-the-top” mentality, credit their staff routinely, accept responsibility for project failures and so forth. Most agree, though, that being a manager requires a skill set composed of more than just the knowledge gleaned from four (very difficult) accounting exams. As a result, firms spend hundreds of thousands of dollars on competitive benefits, only to realize employees continue to leave with a poor manager at the helm. In the end, managers who successfully retain employees listen, critique in order to improve and nurture and develop the leadership skills of others. Suraj Naik is a senior auditor in Ernst & Young’s government and public sector practice. He serves on the Virginia Society of CPAs’ Young Professional’s Advisory Council. Contact him at snaikcpa@gmail.com. Reprinted with permission from the Virginia Society of CPAs.

memorials Kenneth Klement, CPA, CGMA

James P. Lutz, CPA

Kenneth Klement, CPA, CGMA, passed away Thursday, March 15, at age 66, according to the Milwaukee Journal Sentinel. Klement became a certified public accountant in 1978 and was a WICPA member in good standing for 42 years. He was a senior consultant for CliftonLarsonAllen LLP in Milwaukee. Klement is survived by his wife of 34 years, Deborah; a son and daughter; two brothers and other relatives and friends.

James P. Lutz, CPA, passed away unexpectedly Monday, April 9. He was 68. Lutz served in the United States Air Force during the 1970s and, while in the service, earned his associate’s degree from the University of Alaska–Anchorage. After his honorable discharge, Lutz returned to Wisconsin and earned his bachelor’s degree at the University of Wisconsin–Stevens Point. Later, he earned a master’s degree from UW–Whitewater. Lutz had been a WICPA member since 1983 and was a controller at Silver Spring Foods in Eau Claire at the time of his death. He is survived by his wife, two daughters, six grandchildren and other relatives and friends.

(1951–2018)

Jack Thomas Plaistow, CPA (1944–2018)

Jack Thomas Plaistow, CPA, passed away Saturday, March 3, at the age of 73, according to the Cedarburg News Graphic. Plaistow was a WICPA member for 40 years, from 1977 until December 2017. He was born in Ironwood, Michigan; graduated with honors from Michigan Technological University; and had a 50-year career as a CPA. He also was a 25-year member and past president of the Cedarburg Lions Club and had been a member of Toastmasters International for many years.

(1949–2018)

If you are aware of a member obituary and believe it should be included in Memorials, please send a copy of the obituary or contact Marcia Tillett-Zinzow at mtzinzow@icloud.com. 24

On Balance

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RESOLVING TAX CHALLENGES The Tax Section of von Briesen & Roper, s.c. has the knowledge and experience to resolve federal, state and local tax controversies. Whether providing tax assistance to businesses, business owners or individuals, we are your resource. Our experience allows us to handle all aspects of tax challenges including complex audits and audit support, administrative appeals, the courts and tax collection. The bottom line? We get results. To learn more about our Tax Section, please contact Robert Mathers, Tax Section Chair, at rmathers@vonbriesen.com.

vonbriesen.com/tax wicpa.org

Milwaukee • Madison • Waukesha • Oshkosh On Balance May | June 2018 Green Bay • Appleton • Manitowoc

{ Government & Nonprofits | Nonprofit accounting }

a different

animal Nonprofit accounting requires special care

On Balance

May | June 2018

wicpa.org

{ Government & Nonprofits | Nonprofit accounting }

hen it comes to their financials, nonprofit organizations have many things to consider. Not only must these organizations keep up with numerous rules and regulations, but they often struggle to find a qualified board member By Jill Boyle, CPA who understands the intricacies of nonprofit accounting. Further, recent tax regulations indicate that the industry is no longer going to fly under lawmakers’ radar, which has been the perception in recent years. CPAs play a crucial role in helping nonprofit organizations maintain compliance and develop a strategic approach to their finances. As an accountant who works with nonprofits and also has experience serving on various nonprofit boards, I see both sides of the picture. Volunteering has always been an important part of my life, and moving to Milwaukee 15 years ago allowed me to embed myself into a new community. As my passion for volunteering grew, my accounting career also began to shift toward nonprofit organizations. Now I serve on the boards of local nonprofits in my personal life, while I advise nonprofits on tax and accounting strategies in my professional life. In my professional and volunteer work, I see many opportunities for organizations to be more strategic, including the opportunity for accountants to coach their nonprofit clients on how to be more purposeful with their financial reporting. Additionally, accountants should work to ensure their clients understand the implications of the new tax law and adapt to its various provisions.

“CPAs play a crucial role in helping nonprofit organizations maintain compliance and develop a strategic approach to their finances.” reporting. This individual may be a board or staff member. He or she will serve as a bridge between the accountant and the board, giving the accountant more seamless access and better insight into the internal workings of the organization. The accountant can work through this individual to ensure the organization better understands the niche and sometimes complex details of nonprofit accounting. CPAs should also educate their clients’ boards on IRS compliance requirements. The industry has very specific rules—with complexities at both the state and federal levels. While it is inside an accountant’s scope of responsibilities to ensure compliance, by taking the extra step to educate the board, they will better reconcile the organization’s goals with the requirements of the IRS or other regulatory agencies. In my work with larger organizations, which often have complex investments, an additional layer of planning is required to ensure their financial decisions are sound. Ultimately, boards of directors are better prepared to tackle strategic financial decisions when they work very closely with an outside accountant.

Set the board up for success

Prepare for upcoming tax changes

The first step an accountant should take when working with a nonprofit organization is to team up with a representative of the organization who understands financial

The Tax Cuts and Jobs Act will have numerous implications for the nonprofit industry. The legislation shows that lawmakers are paying much closer attention to

wicpa.org

On Balance

May | June 2018

{ Government & Nonprofits | Nonprofit accounting }

the nonprofit industry than they seemingly have in years past. Organizations will need to keep close watch for any updates and ensure they maintain compliance with IRS regulations. The increase of the standard deduction has the potential to be the most impactful to 501(c)3 organizations because fewer individuals will itemize to take a deduction for charitable giving. Since many people donate money for altruistic reasons, the industry is hoping the total amount of donations does not decrease significantly. However, this change will likely impact the timing of donations. The law favors bunching donations together, so many taxpayers may combine multiple years’ worth of donations into one large donation. This means nonprofits could see regular annual donors alter their giving to every other year instead. The law will also make some adverse changes in the calculations of unrelated business income tax. Nonprofits will be unable to offset losses from one unrelated business activity against income from another. Large nonprofits that have highly paid executives could also see a large excise tax on compensation. Additionally, nonprofits offering certain fringe benefits to employees, such as transportation benefits, may now be taxed on those benefits.

As an outside accountant, you won’t always have a deep understanding of the organization’s goals and mission. But by working closely with the board and thoroughly explaining the possibilities and benefits of Form 990, you can ensure that the organization tells a clear and powerful story.

Be strategic with Form 990

Ensure a bright future

While there are many ways that CPAs can help nonprofits be more strategic with financial reporting, an area where I see many organizations missing an opportunity is with their Form 990, a reporting form that most tax-exempt organizations must file with the IRS each year.

As a member of four nonprofit boards and an accounting adviser, I’ve seen how a strong board and strategic approach to financial reporting can greatly benefit a nonprofit. And with the recent tax changes, accounting issues are of paramount importance to these organizations. CPAs must help nonprofits confront these tax changes head-on and take a proactive approach to developing sound accounting strategies that will position them for financial success.

Many nonprofits don’t realize that this form is both available to the public and often a required component of grant applications. Accountants should help nonprofits consider their audiences and use this form to tell the organization’s story. While certain questions are black and white, some parts of this form offer more flexibility. For example, if a community group depends on a large grant that is typically given to organizations helping disadvantaged youth, the group should include details about its youth

programs and metrics of success in the program services description section of Form 990.

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Jill Boyle, CPA, is a senior manager in the accounting practice at Sikich. She is a 2018 recipient of the Milwaukee Business Journal’s annual 40 Under 40 Awards, recognizing her dedication to the nonprofit community. Contact her at 262-754-9400, ext. 378, or jill.boyle@sikich.com.

wicpa.org

kudos Bruce B. Bautch, CPA, has started Lake Country Business Services, dba FocalPoint Coaching and Training. He was previously with Ernst & Young.

Vicki Buening, CPA, CVA

Vicki Buening, CPA, CVA, has been named a partner at Reilly, Penner & Benton LLP and is responsible for the firm’s Madison and McFarland offices.

David Donze, CPA, owner of David Donze CPA LLC, received the Emerging Enterprise Award from the Heart of the Valley Chamber of Commerce, Kaukauna, for his successful business growth and positive impact on the community. Heather Dunn, CPA, chief financial officer at West Bend Mutual Insurance, was named to the Milwaukee Business Journal ’s 40 Under 40 list. Lynn Gardinier, CPA, CMA, a partner at Baker Tilly in Janesville, received the United Way Blackhawk Region’s 2018 Geraldine Hedberg Volunteer of the Year award, recognizing 13 years of volunteer service. Bernadette (“Bernie”) Hull, CPA, PHR, SHRM-CP, has been promoted to chief operating officer and director of human resources by Bauman & Associates, Hudson, where she is also a principal. She has been with the firm since 1981.

Want your

Paul Lyons was hired as a staff accountant for Sitzberger & Co., where he was previously an intern. He is currently studying for the CPA Exam. Mike Meckstroth, CPA, CGMA, was promoted by Cohen & Co. to director of audit and accounting in the firm’s investment industry services practice. Scott Menke, CPA, has been appointed as the University of Wisconsin–Parkside’s vice chancellor for finance and administration. He will step into the role after the current vice chancellor retires later this year.

Michelle Mulloy, CPA, AEP

Michelle Mulloy, CPA, AEP, senior manager at the Schenck SC Green Bay office, has been certified as an Accredited Estate Planner® by the National Association of Estate Planners & Councils.

Erika Nowak, CPA, MBA, was promoted to vice president/controller by Waukesha State Bank. Jane Tereba, CPA, a shareholder with Capital Valuation Group, Madison, was named to the Home Savings Bank board of directors. Ray Wilson, CPA, managing partner of PricewaterhouseCoopers’ (PwC) Milwaukee office, has announced he will retire as of June 30. Anthony Fuerst, CPA, will be PwC–Milwaukee’s new managing partner.

new job, promotion or award mentioned in Kudos?

H Email your announcement and photo in JPG format to mtzinzow@icloud.com. H

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On Balance

May | June 2018

{ Tax | TCJA and Entity Choice }

On Balance

May | June 2018

wicpa.org

{ Tax | TCJA and Entity Choice }

Miss the March 15 entity conversion deadline? It’s not too late to “crunch the numbers.” By Chris Rosborough, CPA, JD

rguably the most dramatic change contained in the Tax Cuts and Jobs Act (TCJA) was the drop in the maximum corporate tax rate from 35 percent to 21 percent. This drop fundamentally changed the “balance of power” between pass-through entities and C corporations. In the past, the slight advantage in rates enjoyed by C corporations was typically outweighed by the disadvantage of a second layer of tax on distributions, the loss of basis adjustments for undistributed earnings, and the ability to utilize active losses against the owner’s other income. So, even though the TCJA includes provisions that provide owners of pass-through entities a lower top marginal rate and—depending on the size and type of business they’re in—a new 20 percent deduction on their earnings from the flow-through, these significant tax law changes have forced many to revisit their choice of business entity.

Significance of the March 15 deadline Calendar-year S Corporations that wanted to revoke their S elections must have done so by March 15, 2018, in order for the revocation to be effective Jan. 1, 2018. Similarly, partnerships that wanted to convert to C Corporation status via a check-the-box election must have filed that election within a similar time period if the election was to be effective Jan. 1. However, performing a comprehensive analysis in a short period of time was very difficult, given the passage of the TCJA at the very end of 2017 and the numerous demands on most CPAs’ and tax advisors’ time in the first three months of any calendar year. Therefore, although a decision to revoke or convert a pass-through will no longer be retroactive to Jan. 1, it can still be done prospectively and may very well make sense to analyze now, given that most 2017

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35% Maximum corporate tax rate

Tax Cuts and Jobs Act

21%

financials and tax returns have been finalized and CPAs have had a chance to “come up for air.”

Considerations beyond the federal tax cost of different structures • Do the owners of the pass-through have an exit strategy, and what is the time horizon for such a transition? If the founder of an S corporation is near retirement and planning to sell the business outright, that makes a conversion much less attractive than for a family-owned business where the next generation plans on taking over and keeping the enterprise in the family. • Does the entity have international subsidiaries or operations? The TCJA also contained numerous

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{ Tax | TCJA and Entity Choice }

“Companies that saw the March 15 deadline come and go without making a decision on which direction their business should take shouldn’t view this as an opportunity lost.” significant changes to the taxation of these types of entities; some of those changes favored C corporations, while some did not. Those issues need to be part of the analysis. • Is it an all-or-nothing proposition, or should the company consider pass-through status for some portion of the business and C corporation status for the remainder? If a spin-off of a division is imminent, it may make sense to not convert that portion but to convert the balance of the entity. • Does the entity have operations or nexus in multiple states? One of the significant drawbacks to multistate flow-throughs after the TCJA will be the limitation on state tax deductions by their shareholders, a limitation that doesn’t affect C corporations. • Even if transitioning to a C corporation makes clear sense given the tax costs, are there things that should be done before making that transition? For example, is the company prepared to calculate and account for deferred tax liabilities and assets under ASC 740? Also, has the flow-through maintained accurate historic business and shareholder information, such as tax basis schedules? If the company is diversely held, has this decision been vetted by at least a majority of the owners?

Questions to ask as you prepare for analysis • What is the current value of the business? When was the last formal valuation performed? • What are the expectations regarding annual return on equity? What are the expectations for borrowing rates and discount rates? • What are the distribution plans of the entity? Entities that have relied on distributing a significant portion of their cash flow as a means of compensating their owners will likely not benefit from a conversion as much as an entity that typically rolls most of its cash flow back into the business. • For S corporations, what is the total basis of the stock in the hands of the shareholders? And for partnerships and LLCs, what is the owners’ total outside basis in the entity, excluding debt basis?

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• In addition, what is the total adjusted tax basis of company assets less liabilities? How much ordinary income would be triggered by a sale (such as from depreciation recapture and cash basis receivables)? • What is income expected to look like in the next several years, and what types of income will that include (interest vs. capital gains vs. dividends, etc.)? • How much payroll expense is the entity expecting in the next several years? • What percentage of the company is currently owned by passive investors, and what tax brackets are the owners expected to be in? • Are there any lingering S corporation attributes still out there—for example, remaining built-in gain amounts and periods, LIFO recapture or C corporation net losses? Although much of this information may be based on estimates or budgets, a significant swing in any of these variables can have a dramatic impact on the tax costs of each type of entity, so expectations have to be set on which numbers are solid and verifiable today versus which are more fluid and out of the company’s control. These lists of considerations and information that needs to be gathered are by no means comprehensive and serve only to highlight that such a decision should not be made quickly. Companies that saw the March 15 deadline come and go without making a decision on which direction their business should take shouldn’t view this as an opportunity lost, but rather a choice that can now be made after a full, thorough analysis. This analysis may very well reveal that maintaining flow-through status still makes sense, despite the changes introduced by the TCJA.

Chris Rosborough, CPA, JD, is senior tax director in the Madison office of RSM US LLP. Contact him at 608-829-6524 or chris.rosborough@rsmus.com.

wicpa.org

SPECTRUM

INVESTMENT ADVISORS

Retirement Plan Investment Seminar 13th Annual Seminar

NEW - 2nd Location!

Ingleside Hotel, Pewaukee, WI

Radisson Hotel & Conference Center, Green Bay, WI

S��

(formerly the Country Springs Hotel)

F��

Wednesday, June 20, 2018 Tuesday, October 23, 2018 8:15 am - 12:15 pm Program

Topics Include:

8:15 am - 12:15 pm Program

Global Markets Outlook, Retirement Plan Fiduciary Concepts, Investment Committee Best Practices

Co-sponsored by

Spectrum Investment Advisors and

Colors Simplify Investing®

The Wisconsin Institute of CPAs

-More Information & Registration to Follow- spectruminvestor.com

From the WICPA

sia@spectruminvestor.com 800-242-4735

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On Balance

May | June 2018

{ Technology | Cybersecurity Compliance }

EUROPEAN CYBERSECURITY: How will it affect you?

he European General Data Protection Regulation (GDPR) is a hot topic in information technology, and it’s highly relevant for CPAs and other financial professionals. This article outlines three reasons why a European regulation matters here in the U.S.—and how GDPR fits in with other cybersecurity frameworks, including National Institute of Standards and Technology (NIST) and the new American Institute of CPAs (AICPA) reporting standards.

By James Savage & Dan Weise, CPA

On Balance

May | June 2018

Adopted by the European Union (EU) Council and Parliament in April 2016, GDPR replaces 1990s-era regulations with rules consistent with the rise of cloud computing—and the vastly greater quantities and subtleties of data now collected.

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{ Technology | Cybersecurity Compliance }

GDPR is already the legal standard, though enforcement won’t begin until May 25 of this year. The approaching deadline has meant a big scramble for European companies and for non-European companies who store or process personal information of residents in the EU. U.S. companies with a physical presence in the EU are directly affected. But even those without a physical presence should be paying attention, as the EU claims rights under international law to levy hefty fines (up to 4 percent of global revenues) on any company that processes personal data of its residents. Here in the U.S., GDPR compliance is a major focus for cloud computing providers. Microsoft, for example, has added a compliance manager tool to Office 365 to help its customers demonstrate compliance with the new rules—which are an order of magnitude more stringent than anything that’s come before. To take just one example, GDPR requires deletion of personal data upon a person’s request. How many companies are actually prepared to effectively delete records upon request? The data-identification and technical demands require a whole new level of privacy orientation. For companies that don’t directly serve European customers, GDPR is still relevant and important. Here are three reasons why: 1. The need for large companies to comply with GDPR is prompting them to require certifications from other companies in their supply chains. 2. As a set of rules, GDPR foreshadows what we may see in the U.S.—either from Congress or regulators or through intensifying market-based standards. 3. The GDPR standards for privacy and security are simply good business practice. Let’s look at each of these points in turn.

GDPR and supply chains Although GDPR is one of the biggest topics in technology news, too many companies have failed to understand its relevance to them. Let’s say an organization has no physical presence in Europe and doesn’t handle personal data of European customers. (This could apply to an accounting practice or a client of that practice.) The impacts of GDPR may arrive sooner and more powerfully than these organizations expect, in the form of supply chain certifications. Our firm, for example, is a vendor-partner to Microsoft. As part of Microsoft’s intensive effort to certify its own compliance with GDPR regulations, we received a 76-question document requiring formal attestation regarding how we handle personal data.

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“Although GDPR is one of the biggest topics in technology news, too many companies have failed to understand its relevance to them.” The questions are based on a new reporting guide from the AICPA, which addresses cybersecurity in a supply chain/ vendor risk management context. (This new AICPA guide follows last year’s publication of new AICPA reporting standards at the entity level; see pg. 36.) Based on our experience supporting clients’ progress in data security, we are certain that most Wisconsin businesses in all industries will struggle when faced with supply chain certifications as intensive as these—and they are likely to come, not just from tech companies but also from multinationals as a normal part of doing business.

GDPR foreshadows U.S. developments to come Many of the considerations addressed in GDPR will likely be embraced by U.S. regulators. Indeed, Facebook’s Mark Zuckerberg was recently called before Congress to address a number of privacy considerations currently almost absent from U.S. government regulation. Right now, the best-known cybersecurity framework in the U.S. comes from the NIST, which is part of the U.S. Department of Commerce. The NIST Cybersecurity Framework (CSF) is not a technical standard but rather a holistic risk management tool. Gartner Research and other observers have identified the CSF as the most mature framework. Its use is growing rapidly, with projected use by 50 percent of U.S. organizations by 2020. The NIST CSF provides organizations with a useful tool to evaluate their maturity on a wide range of security and privacy topics. However, it doesn’t go as far as the European GDPR in addressing topics relevant for this age of cloud computing and devices that have turned nontech companies into tech companies. (Consider the personal data collected by a smart thermostat, for example.) Future revisions of the NIST CSF may start to look more and more like GDPR. It could one day form the basis for a

On Balance

May | June 2018

{ Technology | Cybersecurity Compliance }

compulsory, regulatory-driven approach to privacy standards in the U.S. Or perhaps U.S. regulators might adopt something along the lines of GDPR itself. That’s not known. What is known is that things aren’t standing still at the industry level. Two examples stand out. First, the Payment Card Industry (PCI) Data Security Standard, which focuses on controls for handling credit card data: Merchants who accept credit cards must comply with PCI standards or risk fines and/or higher merchant fee percentages. The second example is the AICPA’s new reporting standards. Published last year, this framework for management reporting on cybersecurity controls—and auditors’ formal examination and reporting on those controls—has the potential to provide a market-based, versus regulatory-based, solution to what we see as a desperate need for solid cybersecurity standards here in the U.S. As boards and audit committees at large corporations prompt System and Organization Controls-level cybersecurity examinations, the higher standards will necessarily flow out through those companies’ supply chains in like manner to the GDPR impacts noted above.

GDPR as good business practice The third reason financial leaders should look to Europe to prompt their action now is that GDPR embodies good business practice. Here are its six guiding principles: 1. Transparency, fairness and lawfulness in the handling and use of personal data.

5. Limiting the storage of personal data, ensuring that personal data is retained only as long as necessary to achieve the purposes for which the data was collected. 6. Ensuring security, integrity and confidentiality of personal data. Eventually, one way or another principles along these lines will become standardized here in the U.S. As the AICPA put it last year regarding its work on frameworks, “… we recognize that cybersecurity is not just an IT problem; it’s an enterprise risk management problem that requires a global solution.” 1 That global solution is best addressed through clear principles. Those principles are available now for U.S. companies that recognize the importance of not falling behind.

Conclusion The accounting profession is entrusted with highly sensitive, personally identifiable information. Consequently, accounting firms are natural targets for hackers seeking to expose sensitive data. GDPR demands a level of privacy protections that help keep firms and their clients safe and, therefore, serves as a useful model even for companies not directly affected. Expect, too, to see clients impacted by GDPR through supply chain certifications. Work done now toward these privacy standards puts organizations in a better position for cybersecurity examinations under the new AICPA standards or in preparation for any new regulations that may emerge in the U.S. 1

“Cybersecurity risk management reporting fact sheet,” AICPA, April 2017.

2. Limiting the processing of personal data to specified, explicit and legitimate purposes. 3. Minimizing the collection and storage of personal data to that which is adequate and relevant for the intended purpose. 4. Ensuring the accuracy of personal data and enabling it to be erased or rectified.

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May | June 2018

James Savage is founder and president of Microsoft-focused technology consulting firm Concurrency Inc., and Dan Weise, CPA, is vice president–finance. Contact James at jsavage@concurrency.com and Dan at dweise@concurrency.com. Both authors can also be reached at 262-364-5800.

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On Balance

May | June 2018

{ Business Development | Personal Marketing }

E M M U S G N I INESS DUR

S U B D L I U B 10 WAYS TO

s summer approaches and the fury of year-end and tax deadlines fades to black, businesses can’t help but look forward to the more relaxed attitude of summer. While “slow season” may be a thing of the past in most industries, many look forward to a more leisurely pace in By Sara Davis the coming few months. That makes summer the perfect time to bring focus back inward: to building your professional network, boosting your marketability and cultivating business relationships. Here are 10 ways you can develop your business this summer.

1. Get out of the office! Especially in Wisconsin, everyone

welcomes the opportunity to sneak out of the office and enjoy our fleeting warm weather. Whether it is for a quick lunch, a

On Balance

May | June 2018

game of golf or a Brewers game, most busy professionals are more open to making time to get out of the office in summer. That makes it a great season for networking in a relaxed environment.

2. Nurture important business relationships. Whether

your boss, your subordinate, your best client or a difficult hot prospect, your most important business relationships deserve to be tended. Spend time this summer getting to know your MVPs. Let them know you value them. Invite them to join you for a game, a volunteer event or a networking meeting. Follow them on social media and through Google Alerts so you know about the significant happenings in their lives—and be sure to congratulate them on their accomplishments! A gift is a grand gesture, but a simple email or (gasp!) handwritten note is effective, too.

3. Volunteer. More than ever, professionals understand the

merit of donating their time and talents to our community. That makes volunteering a great place to connect with others in business who share your values of giving back. The WICPA is a terrific resource for matching members with volunteer opportunities.

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{ Business Development | Personal Marketing }

Associations like Fuel Milwaukee and the Waukesha County Business Alliance offer group volunteer outings, too.

4. Join a league. Do you love to play softball? Sand volleyball? Golf ? Summer leagues are a great way to connect with others with similar interests. And the beautiful thing about leagues is that they pair you up with random opponents. Among them are bound to be decision makers of today (and of the future!).

5. Update your LinkedIn profile. In today’s social media

world, it is more important than ever to make sure your LinkedIn profile hits the mark. While savvy users update their profiles at least monthly, the average user should review their profile every quarter to make sure it is still relevant. At a minimum, you should make sure your work experience, education and summary are authentic, current and prospectfocused. And please, make sure it is free of typos and grammatical errors! Nothing kills credibility as quickly as poor grammar or sloppy mistakes.

6. Brush up your elevator speech. If you’ve just updated

your LinkedIn profile, renewing your elevator speech should be easy! This 30-second “commercial” about who you are and what you do should be practiced, compelling and tailored to your audience. Make it ready to pull out next time you meet a new contact or attend a networking event.

7. Learn more about different parts of your business.

Get to know colleagues in different departments, and help them understand what you offer, too. Understanding the multitude of services your firm or company provides will not only make you better at your job, it will open opportunities for cross-selling services or expanding offerings to customers and clients.

8. Do some housekeeping. This is a great time to review

your contact list to update invalid information and ensure your new and most important contacts are included. Be sure to share your updates with your marketing department so your contacts will receive company- or firm-wide newsletters, alerts, announcements and invitations. Marketing department efforts like these take the burden off you during your busier times by keeping you top of mind year-round.

9. Reconnect with old colleagues. Your “housekeeping”

efforts will undoubtedly remind you about associates with whom you’ve lost touch. Find and follow them through social media, invite them to lunch, and start to rebuild your connection.

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“Regardless of your role within your company or firm, building relationships and developing business will help you stand out.” 10. Develop a year-long personal business development plan. Plan now for busier times. Identify your most important

business contacts, and set a plan for how you will connect with them throughout the year. Out of sight is out of mind! If you know you will be swamped in fall, set up reminders now to reach out to your key contacts each quarter. While in-person contact is always best, a quick email or shared article will suffice during busy times to keep you from being forgotten. The strongest business developers will continue this mix of activities all year, but schedules don’t always allow that kind of focus. Take advantage of the impending warm weather, a lighter workload and a relaxed environment. Regardless of your role within your company or firm, building relationships and developing business will help you stand out. What are you waiting for? Get out there! Sara Davis is an experienced independent marketing consultant and the owner of Sara Davis Marketing. Contact her at 414-303-5149 or SaraDavisMarketing@gmail.com.

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May | June 2018

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May | June 2018

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Donâ&#x20AC;&#x2122;t miss this chance to connect with your colleagues and other business professionals! Networking Nights offer the opportunity to build your network with a group of peers in a relaxed setting.

atures e f t h g ing Ni k r o w you to t r e o f N y h t i ac ate, e portun t p s o e n h hout t es as a g v r u e o s r h d ity an Held t v i t c a rent . a diffe w way e n a ize in social This is also a great venue for strengthening relationships

UPCOMING NETWORKING NIGHTS: May 15 Appleton Beer Factory, Appleton

Oct. 16 Sprecher Brewery, Milwaukee

May 24 Old Sugar Distillery, Madison

Oct. 24 Lambeau Field, Green Bay

June 21 Mississippi Pizza Cruise, La Crosse

Nov. 7 Capital Brewery, Middleton

July 10 ABV Social, Wauwatosa

Nov. 13 Great Dane Pub, Wausau

with clients, co-workers, and business associates... So invite them to join you! Networking Nights are held 5:30 â&#x20AC;&#x201C; 8:30 p.m.

Sept. 18 Leinie Lodge, Chippewa Falls

For more information and to register, visit wicpa.org/NetworkingNights.

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