November | December 2018 | Vol. 14 No. 5 A publication of the Wisconsin Institute of CPAs | wicpa.org
RUBBLE ROUSER Cori Schoenke, CPA | 6
Plus: Wisconsin’s new business corporation law | 12 A sea change for nonprofit accounting | 22 How to harness the Internet of Things | 30 26 tips for great communication | 38
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A publication of the Wisconsin Institute of CPAs | wicpa.org
November | December 2018 Vol. 14 No. 5
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6 Features
Columns
6 Rubble rouser When not at her Wipfli desk, you might find Cori Schoenke, CPA, building things in other countries. By Donna Pinsoneault
28 MANUFACTURING Perfect timing Numerous factors are converging to stimulate business success in Wisconsin. By Douglas Fisher, PhD
12 Benefit corporations Wisconsin’s new business corporation law benefits communities and businesses alike. By Thomas W. Moniz, JD, and Adam R. Finkel, JD 16 What are donors looking for? Whether you serve nonprofits in your practice or work for one, this new approach to familiar tools can help you help them. By Chad Bruce, CPA 22 Not-for-profit navigation A sea change for nonprofit accounting, explained in two parts: “The new not-for-profit accounting standard” By Melodi Bunting, CPA, CGMA, CMA “Nonprofit grant accounting with the new revenue recognition model” By Diana Luttmann, CPA
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30 TECHNOLOGY 7 ways accountants can harness the Internet of Things Learn how to use real-time data to allocate resources and plan strategically. By Cheryl Aschenbrener, CPA, and Evert Bos, ERP Consultant
34 Departments
34 COMMUNITY SERVICE Do well by doing good How and where to use time, talents and treasures to help others during the holidays. By Marcia Tillett-Zinzow
2 Odds & Ends | news briefs 3 Outlook | chair’s letter 4
Membership Matters | member benefits
10 Kudos | members in the news 21 In Touch | president & CEO’s message
38 PROFESSIONAL DEVELOPMENT 26 tips for great communication Enhance communication skills with tips on writing, speaking, listening and nonverbals. By Janice Warner, PhD
27 Memorials | departed members 20 2018 Past Chairs Dinner
On Balance
Past WICPA Board of Directors chairs and Educational Foundation Board presidents gathered for dinner and reminiscing in September. See photos. November | December 2018
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Odds & Ends Small businesses are at greatest risk for cybercrime 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
According to CFO magazine, more than half of top executives at small companies are blind to their risk of cybercrime. In fact, their employees may be more aware than they are. CFO reports that in a recent survey conducted by IT consulting firm Switchfast, 51 percent of executives—but only 35 percent of employees—believe their companies are not a target for cybercriminals. Many small companies are at greater risk than large companies because they lack the dedicated IT and security staff big corporations can employ. (tinyurl.com/SmallCoCyberRisk)
Fitchburg firm evolves, changes name The firm of Richard Vanden Heuvel CPA SC has changed its name to Nagel & Vanden Heuvel CPAs LLC. Rick Vanden Heuvel, CPA, founded the firm in 1996. When Peter Nagel, CPA, became a partner in January, the firm changed its name. The new name was made public in September. The firm’s Fitchburg location remains the same. (In Business, October 2018)
Linzmeier purchases Denmark firm Linzmeier Business Solutions, Green Bay, has purchased the assets of Stodola Accounting & Tax Service, Denmark, from the estate of Ronald Stodola, who passed away last summer. The new business will operate as Professional Tax & Accounting Services LLC and will offer expanded services from offices in both Green Bay and Denmark. (Denmark News, Oct. 5, 2018)
Vrakas expands into Kenosha Vrakas CPAs + Advisors, Brookfield, has announced it will open a new branch office in Kenosha, effective Nov. 1. The Kenosha office will be located in the Johnson Bank building at highways 50 and 31 and will be led by new hire Pete Sinsky, CPA, and Vrakas shareholder John Staehler, CPA. Sinsky was previously the CFO at Riley Construction, Waukesha. (Waukesha Freeman, Oct. 9, 2018)
Wipfli acquires New England firm Milwaukee-based accounting and consulting firm Wipfli LLP announced in August it has acquired Macpage LLC of Portland, Maine. The acquisition adds nearly 100 employees, bringing the total number of Wipfli staff to more than 2,000. Wipfli now has 49 locations nationwide and two offices in India. (Milwaukee Journal Sentinel, Aug. 1, 2018)
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Email your announcement to mtzinzow@icloud.com. On Balance is published five 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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OUTLOOK | CHAIR’S LETTER “As you think about sharing some of your time and talents this holiday season, give careful consideration to those activities that will have a positive impact on others.”
Make a difference sharing your time and talents
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hen we have been blessed with so much, we have an obligation to use our time and talents to help those who need assistance. And while we may be tempted to treat community service activities as an expected task and overlook how we impact individuals, I would encourage WICPA members to consider why we are engaged in community service and how our activities positively impact others. Meaningful community service makes a difference. Service is part of my annual evaluation at Marquette University, and it may be that your organization has a community service requirement as well—or that you are at least encouraged to volunteer. Speaking for myself, there are a variety of activities that allow me to meet my service obligation, but the most meaningful ones have been activities in which I knew my actions made a difference to someone. For example, as the faculty advisor for the accounting honor student organization, Beta Alpha Psi, I would often go with students to a nursing home to play bingo with the residents. We brought simple prizes for the winner of each game. The type of prize didn’t matter; the residents appreciated the opportunity to be competitive, have fun and win. Upon completion of the games, the students and I would each take a resident back to his or her room. All of us received comments from the residents on how much it meant that we took time from our schedules to spend time with them. Since many of the residents didn’t receive a lot of visitors, our visit was special to them. It is activities like our visits to the nursing home that can have an immediate positive impact—and it feels good when you know you have made a difference in someone’s life. There are many different ways we as accountants can serve our communities and give back some of the good fortune that’s been bestowed upon us. Preparing tax returns
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through the Voluntary Income Tax Assistance (VITA) program, teaching financial literacy to students or adults, and assisting with the organization and distribution of goods at a food pantry are but a few. As you think about sharing some of your time and talents this holiday season, give careful consideration to those activities that will have a positive impact on others. Even if you impact only one person, your actions will have been successful. And you can be joyful about having given back.
Michael D. Akers, CPA, CFE, CIA, CMA, CGMA, CBM, PhD, is the Charles T. Horngren Professor and former chair of the Accounting Department at the Marquette University College of Business Administration. He is the 2018–2019 chair of the WICPA board of directors. Contact him at On Balance November | December 2018 414-915-6672 or michael.akers@marquette.edu.
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MEMBERSHIP MATTERS “Whether it’s $10, $100 or $1,000, your contribution sends a clear message that you believe in the future of the accounting profession.”
Tomorrow’s CPAs Need YOU Today
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ver the next 15 years, the largest generation in the U.S. workforce will be retiring. What does that mean for the accounting profession, and what we can do about it?
Ensuring there are enough CPAs to meet tomorrow’s demand requires us to encourage students by informing them of the rewards of becoming a CPA. The WICPA Educational Foundation is dedicated to helping students find their passion for the accounting profession. For nearly 60 years, the WICPA Educational Foundation has done amazing work to help promote a healthy and vigorous CPA profession by supporting elementary, high school and college programs that encourage future generations of accountants. Some of the many initiatives of the Foundation this past year include the following: • Interacted with more than 30 colleges across the state • Awarded $47,500 in scholarships to 19 college students who are pursuing the 150-hour requirement toward becoming a CPA • Published two issues of our student publication, CPA2b, written exclusively for students interested in pursuing accounting careers • Reached tens of thousands of students by supporting and attending programs including Reading Makes Cents, DECA, Wisconsin Educators of Business & Information Technology, Future Business Leaders of America and Junior Achievement • Gave more than $52,000 in grants to high school educators for accounting awareness activities with their classes • Supported the Young Entrepreneurial Scholars (YES) Program, a one-of-a-kind program that introduces minority students to the accounting profession • Presented information about the CPA profession and networked with students at UW–Whitewater’s “Explore
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Accounting Day” and UW–Oshkosh’s “Titans Are Accountants Day,” reaching more than 500 high school students • Provided materials and student activities to volunteers throughout the state to promote accounting careers at nearly 50 high schools, reaching more than 1,700 students • Collaborated with The Student and Leaders Network to provide live web conferencing and interactive video discussion on topics about accounting careers to multiple classrooms across the state, reaching more than 3,200 high school students • Hosted an annual conference for high school teachers to network with college educators, CPAs and their peers and receive information to incorporate into their current accounting curriculum • Co-sponsored the Accounting Pilot and Bridge Project with the AICPA and the Wisconsin Department of Public Instruction to provide training on a higher-order accounting curriculum to more than 20 high school teachers • Developed marketing materials to promote the profession to Wisconsin high school students
How YOU can help Your contribution to the Foundation is vital in helping to attract future CPAs. Whether it’s $10, $100 or $1,000, your contribution sends a clear message that you believe in the future of the accounting profession. To make a taxdeductible contribution, visit wicpa.org/EFdonate; and to learn more about volunteer opportunities to reach students, please contact me! Tammy J. Hofstede is the chief financial and operating officer at the WICPA. Contact her at 262-785-0445 ext. 4518 or tammy@wicpa.org.
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Tax Advisors Update, Waukesha
DEC. 6
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Wisconsin Tax Update, Madison
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Photography by Mark Hines 6
RUBBLE
ROUSER
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Photo courtesy of Cori Schoenke
This CPA uses both brains and brawn to help those in need. By Donna Pinsoneault
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Photo by Mark Hines
ori Schoenke, CPA, spends workdays in a spacious, well-equipped office, the back of her wide desk edged with neat stacks of paperwork. Much of it relates to her work for Wipfli LLP, where Schoenke is a partner. Some relates to volunteer work, such as her role on the WICPA’s Not-for-Profit Conference Planning Committee. Smack in the center of all that order, though, sits a jagged clump of concrete rubble. That’s where this story really begins. Some years ago, Schoenke; her husband, Paul; and Pastor Doug Schroeder of Our Shepherd Lutheran Church in Greendale were traveling together in Asia. “We were talking about how my husband is a ‘weekend warrior,’ always fixing things around the house,” Schoenke said. “Our pastor looked around and said, ‘Hmmm. I wonder if we could do this for other people instead of just for ourselves.’”
Ecuador and the Dominican Republic. In 2018, the mission provided about $80,000 and 20-plus workers to build a school in the Dominican Republic. In January 2019, workers will head back to a remote, poverty-stricken area of Guatemala to build an addition to a school.
Inspired by the possibilities, Cori and Paul launched a mission, promoted it to church members and amassed a substantial fund. Two years later, they took their first mission trip to Guatemala.
“We are a building mission,” Schoenke said. “We’ve built schools, houses and a church. We’ve done a lot of digging, poured concrete, put in block work and painted. On one project, we went through 600 bags of concrete.”
“I think there were 20 of us on that trip,” Schoenke said. “We partnered with a missionary who took care of all the logistics for us. We paid for the building materials and were also able to pay half the cost for each person who went along to help. It was amazing! The fund still pays half the cost of the trips and funds many of the buildings we work on.”
Although each helper brings (and gains) expertise, the workers are strictly laborers. “Local foremen run the operation,” Schoenke said. “We don’t go there and say, ‘We know better,’ or ‘This is how you need to do this.’ We do things their way, not our way.”
To date, the mission has completed 10 projects in Guatemala, Costa Rica, Haiti, Peru, Honduras, El Salvador,
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Schoenke pointed out that projects can be completed in mission countries much more quickly than they can here in the United States. “Materials are cheaper, and you don’t need
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to wait for a permit,” she said. “We can build a house for three or four thousand dollars. We can get a lot done in a week.” At first, missioners worried they might be taking jobs away from local people. “Instead, we are getting things going that can help support the economy,” Schoenke said. “As one foreman explained: ‘If you weren’t paying for this building, we wouldn’t be able to pay workers to help build it.’” Mission projects rely on assistance from adults of all ages. “The oldest person who traveled with us is 73,” Schoenke said. “Another worker has Parkinson’s disease. A nurse in her 60s always comes along. She can’t do the heavy lifting, but she helps in other ways; she brings us water all day long and makes sure we drink it. Her job is extremely important.” Those who can’t go on trips give money, school supplies, eyeglasses and tools, which can be hard to find in remote areas. “People are very generous if you give them a chance,” Schoenke said. “Church members also donate suitcases they no longer need. That way, we know the things people donate will get there because we are taking them with us.” Photos courtesy of Cori Schoenke
Sometimes, there are alligators “We have seen some pretty amazing things,” Schoenke said. “While building a church in a remote area of Peru, we stayed on a huge houseboat in the Amazon basin. We saw pink dolphins and other animals you never see here. One very dark night, we went alligator hunting. Each canoe held six of us workers and two men with shotguns (whose language we did not understand). Their only requirement was if we got an alligator, they would keep the meat. We got one!” Not every situation evokes happy memories. Two years after the earthquake, the mission group was working in Haiti, a country Schoenke described as the hottest and most poverty-stricken in the Western Hemisphere; one with deep cultural differences. “On our last night there, we were bussed to an airconditioned hotel for pizza,” Schoenke said. “We could see the U.N. Peacekeeping force out in riot gear. A woman had been stoned to death in Port-au-Prince because people thought she was a witch. Some people riding on top of our bus saw the body in the street and were pretty shaken up.” Schoenke picked up the piece of rubble on her desk. “This rubble is from our project in Haiti,” she said. “That experience was pretty awful, but it doesn’t diminish what we are doing. We’re not doing this for us. We have a higher purpose; we are driven by our Christian faith.”
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“We have seen some pretty amazing things.” – Cori Schoenke, CPA That rubble reminds Schoenke of all the positives the mission work adds to her life here. Along with the freedom of being “off the grid” for a week, mission work opens up a broader understanding of the world. “We all get stressed over little things that don’t really matter,” Schoenke said. “We don’t have to deal with a lack of clean water or medicine or food. We take so much for granted here.” Schoenke has seen children in Peru add Kool-Aid packets the workers brought to bottles filled with parasite-filled river water. She has seen people in Guatemala unable to get treatment for scabies, breast cancer or appendicitis. In the Dominican
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Republic, she met a missionary couple who bring sandwiches and clean water to families who work at a garbage dump and spend entire days searching for anything recyclable that they can get money for. She has seen a woman almost leap for joy after trying on a one-dollar pair of eyeglasses from the States. “I can read!” the woman shouted. “I can read!”
What does accounting have to do with it? In addition to her work with Wipfli and conference planning for the WICPA, Schoenke uses her accounting expertise on the Finance Committee of Habitat for Humanity–Milwaukee and as treasurer for her church. Her other community service includes serving on the boards of Hope House in Milwaukee, the Waukesha Food Pantry and Eyewitness for Life in Wauwatosa. But it is her volunteer work outside the country that has been most meaningful.
“But we are not all just about what we do for a living. We have lives and can impact lives by what we do.” – Cori Schoenke, CPA Schoenke believes volunteering with the WICPA is a great way to get to know people, establish connections and have fun. But if you feel called to be a bit of a “rubble rouser” yourself, get in touch with her.
“Who would think I would be in other countries building? I’m an accountant, so of course I work a lot with numbers,” Schoenke said. “But we are not all just about what we do for a living. We have lives and can impact lives by what we do. I see myself as an ambassador for my faith, cleverly disguised as an accountant.”
“There is so much more out there,” she said. “We wouldn’t be doing this if it weren’t fulfilling. I’m hoping we’ll still be going on these trips when we’re in our 80s.” Donna Pinsoneault is a freelance writer based in Brookfield. Contact her at dpinsoneault@gmail.com.
Join the WICPA Educational Foundation Board! The WICPA Educational Foundation is seeking members to serve on its board of directors. Some of the opportunities include: • Assisting in efforts to attract students to the profession. • Providing strategic governance in accordance with the WICPA Educational Foundation mission. • Acquiring new leadership skills. The WICPA Educational Foundation plays a pivotal role in supporting programs to improve awareness and perceptions by educating students and educators about the exciting opportunities available to accounting professionals.
To apply, visit wicpa.org/EFBoardApplication through Feb. 28, 2019.
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Questions? Contact jessica@wicpa.org.
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kudos
Gary Born, CPA
Rachel Burrow, CPA
Brian J. Lightfield, CPA
Lucas Rocole, CPA
Paul D. Schoessow, CPA
Michelle Weber, CPA
Gary Born, CPA, shareholder and president of Huberty CPAs & Trusted Advisors, was elected to the board of directors of Markesan Bankshares Inc., the parent company of Markesan State Bank.
Ed Pas, CPA, was the subject of a human-interest feature story published in the Monroe Times on Wednesday, Sept. 12. He is a partner in the Monroe firm of Reffue, Pas, Jacobson, Knox & Koster LLP.
Rachel Burrow, CPA, has been hired as an audit manager by the LaCrosse office of Hawkins Ash CPAs. She was previously an audit manager with Wipfli.
Lucas Rocole, CPA, has been promoted to partner at Wipfli.
Shannon Campy, CPA, became certified in August. Campy is employed as a staff accountant by Northland CPAs with offices in Rhinelander, Tomahawk and Woodruff. Jim Dietsche, CPA, executive vice president and chief financial officer for Bellin Health, Green Bay, became the organization’s chief operating officer, effective Oct. 1.
Paul D. Schoessow, CPA, has been promoted to principal at Vrakas Business Valuations, an affiliate company of Vrakas CPAs + Advisors, Brookfield. Lori L. Stortz, CPA, chief audit executive for the University of Wisconsin System, has been appointed to the board of directors for Commerce State Bank, West Bend.
Krisztina Dommer, CPA, has joined the audit team at KerberRose as a senior manager for the government audit team.
Jeff Verkuilen, CPA , MBA, was featured in an article in Insight magazine. The article, titled “Between the lines: Little Chute native balances accounting, musical careers,” was published in the magazine’s September 2018 issue.
Jennifer Fahey, CPA, U.S. business and professional services leader for PwC, her husband and their business— Peck and Bushel Organic Fruit Co.—were featured in the Waukesha Freeman and West Bend News in August.
Michelle Weber, CPA, was promoted to partner in the Milwaukee office of Grant Thornton LLP. She previously served as a senior manager in the firm’s not-for-profit tax practice.
Arthur Lee, CPA, founding partner of Alliance Tax & Accounting Service, Elm Grove, has earned the certified tax coach (CTC) certification from the American Institute for Certified Tax Coaches.
Members share expertise with regional magazine Six WICPA members were interviewed for articles in the October issue of In Business, a Madison-area business magazine. Bruce Berndt, CPA, owner of Berndt CPA LLC, is quoted in “Avoiding Hiring Hiccups.” Interviewed and quoted in an article on tax reform, titled “Just Passing Through,” are Jason Grosh, CPA, tax director at BKD CPAs & Advisors; Dennis Kleinheinz, CPA, partner with Meicher CPAs; and Gordon Meicher, CPA, managing partner of Meicher CPAs.
Brian J. Lightfield, CPA, has been promoted to partner at Wipfli. Gregory D. Mleziva, CPA, has been named managing principal of Bauman Associates, Eau Claire, effective Sept. 1. Mleziva succeeds John Satre, CPA, who has served as the firm’s managing principal since 2012.
WICPA MEMBERS AMONG C-SUITE STARS In September, the Milwaukee Business Journal recognized three WICPA members as C-Suite Stars for 2018. Among those named CFO of the Year for their professional achievements were Kristin Ferge, CPA, CFO for Capri Senior Communities; Sherri Huff, CPA, CFE, CFF, CGMA, CFO for Lad Lake Inc.; and Brenda Jones, CPA, MBA, vice president of financial affairs for the Milwaukee Institute of Art & Design. Kudos from the WICPA!
Want your
Kristin Ferge, CPA
Sherri Huff, CPA, CFE, CFF, CGMA
Brenda Jones, CPA, MBA
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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Along with your expert advice, give your clients the many business benefits that WEDC provides. From technology development loans to exporting assistance, WEDC programs and resources help you bring the right solutions to the table. To learn more about helping your clients succeed In Wisconsin, visit WEDC.org.
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Wisconsin’s new business corporations law benefits communities and businesses alike, and it may help some solve the talent acquisition challenge.
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Thomas W. Moniz, JD and
isconsin counties are currently experiencing very low rates of unemployment. In fact, as of April 2018, 64 of Wisconsin’s 72 counties had unemployment rates of less than 5 percent, and 36 of those counties had rates under 2.9 percent.
While there are certainly benefits to this trend, low unemployment also increases the challenge for businesses to attract and hire the best talent. This is particularly so for Wisconsin manufacturing, industrial and consumer-discretionary businesses that are already facing looming wage inflation and having great Adam R. Finkel, JD difficulty attracting and retaining talent. To solve the talent acquisition challenge, companies must find ways to distinguish themselves in an already crowded marketplace. Recently, an innovative concept was turned into a legitimate tool to help Wisconsin businesses not only solve the talent acquisition challenge but also protect shareholders and improve the communities in which the businesses operate.
Enter a new type of corporation On Nov. 27, 2017, Gov. Scott Walker signed into law 2017 Senate Bill 298, an act that created Ch. 204 of the Wisconsin Statutes, titled BENEFIT CORPORATIONS. Thirty-four states have now passed similar legislation, and six more states are in the process of working legislation through their state governments. Passing this legislation in Wisconsin created a new category of business corporations. While Wisconsin’s business corporations statute—Ch. 180— continues to generally apply to benefit corporations, the specific provisions of Ch. 204 control when there is any conflict between the two chapters.
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To qualify as a benefit corporation, the for-profit corporation must have a “purpose of creating general public benefit,” which is considered to be in the best interest of the corporation. This aspect of the legislation forms the basis for many of the protections afforded directors and officers of a benefit corporation. The statute defines general public benefit as “a material positive impact on society and the environment by the operations of a benefit corporation taken as a whole, through activities that promote some combination of specific public benefits.” [Wis. Stat. § 204.102(5)]. Specific public benefits include the following: • Providing low-income or underserved individuals or communities with beneficial products or services • Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business • Preserving the environment • Improving human health • Promoting the arts, sciences or advancement of knowledge • Increasing the flow of capital to entities with a public benefit purpose • The accomplishment of any other particular benefit for society or the environment [Wis. Stat. § 204.102(7)(a-g)]
A benefit corporation can exist in multiple corporate categories. For example, a business can be both an S corporation and a benefit corporation. A benefit corporation may be formed as a new entity, or an existing corporation may become a benefit corporation by amending its articles.
A talent acquisition tool For Wisconsin businesses, the opportunities perhaps extend beyond the surface-level general public benefits. One of the biggest opportunities of benefit corporation status may lie in its ability to appeal to a millennial workforce in high demand at a time when low unemployment has tightened the market for talent. According to Jennifer Deal of the Center for Creative Leadership, millennials are determined to “do good AND do
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well.” Deal notes that millennials want work that not only compensates them appropriately but also allows them to contribute to society in positive ways. An effective benefit corporation will not only serve as a good corporate citizen, but it will also appeal to a competitive millennial workforce by demonstrating to them that the business is having a positive impact on society—and their work for the business could, too.
Additional incentives Benefit corporation status may provide a number of other incentives for Wisconsin businesses looking for a competitive edge, such as: Reduced director liability Unlike the traditional corporate model, which requires directors to maximize profits for the benefit of the shareholders, a director of a benefit corporation must consider a wider variety of issues when making decisions for the company. Instead of focusing solely on maximizing profits, a benefit corporation needs to consider shareholders, employees, customers, local communities, the environment and other social causes. While this may seem to increase complexity given the wider range of considerations when making a business decision, this actually creates a safe harbor for directors. In fact, the benefit corporation law includes express exonerations from personal liability for actions taken if performed in compliance with the benefit corporation law and the provisions of Ch. 180 of the Wisconsin Statutes. Ability to attract investors Becoming a benefit corporation is a way to attract socially aware investors. Benefit corporations may gain access to certain rating agencies and analytics platforms, which serve as incentives for companies because some investors are using such analytics as part of their due diligence and portfolio management. Multiple corporate categories Companies do not need to choose between a benefit corporation and another entity structure. Aside from registering as a benefit corporation, a company may still elect to be taxed as a C or S corporation. Consumer trends Consumers are becoming more socially aware, and buying patterns are reflecting their social concerns. In fact, recent studies suggest that two-thirds of global consumers would choose a sustainable product over an irresponsible competitor, and 52 percent of global consumers actively check the packaging to see if their products are sustainable. The trend of the socially aware consumer is likely to gain traction in the coming years. In fact, surveys demonstrate that a majority of millennials and
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younger consumers would be willing to pay more for a product, knowing it was sustainable. Further, media outlets are showcasing benefit corporations more frequently in media features. Increased savings Benefit corporations may be eligible for increased savings and access to services. Registering as a benefit corporation may provide access to partner discounts on various service and marketing platforms.
In conclusion The Wisconsin legislature has created an opportunity for businesses looking to stand out from their competition and present themselves as companies committed to higher standards of purpose, accountability and transparency. While benefit corporations remain for-profit entities, their purpose extends beyond just maximizing profits. They exist not only for the benefit of their internal stakeholders, but also for the benefit of the communities in which they operate. And they just might be the way to the hearts of today’s altruistic millennials, who are in high demand in a competitive market for talent.
Thomas W. Moniz, JD, is a shareholder with von Briesen & Roper s.c. and chair of the firm’s nonprofit and tax exemption section. He advises clients on all aspects of business and estate planning. Contact him at 920-232-4856 or tmoniz@vonbriesen.com. Adam R. Finkel, JD, von Briesen & Roper s.c., advises clients on risk management issues relating to business disputes and represents clients in commercial litigation, real estate acquisition and sale, and leasing of real property. Contact him at 414-270-2509 or afinkel@vonbriesen.com.
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Terri S. Boxer, J.D.
Robert E. Dallman, J.D., LL.M.
Thomas P. Guszkowski, J.D., LL.M.
Katie Hanley, J.D.
Megan K. Heinzelman, J.D., LL.M.
Courtney A. Hollander, J.D.
Megan L.W. Jerabek, J.D.
Thomas J. Kammerait, J.D., CPA
Benjamin D. LaFrombois, J.D.
Marcus S. Loden, J.D., LL.M.
Thomas A. Myers, J.D.
Randy S. Nelson, J.D., CPA
Timothy A. Nettesheim, J.D., LL.M.
Katelyn A. Pellitteri, J.D.
Thomas J. Phillips, J.D., LL.M.
David J. Roettgers, J.D., CPA
John A. Sikora, J.D.
Steven M. Szymanski, J.D., MBA
Robert B. Teuber, J.D.
Daniel S. Welytok, J.D., LL.M.
Peter J. White, J.D., CPA
New Tax Law. Experienced Tax Lawyers. von Briesen’s team of experienced tax lawyers, many of whom have advanced designations, help businesses and individuals navigate the new tax law. The bottom line? We get results. To learn more about our Tax Law Section and the services we offer, please contact Robert Mathers, Tax Section Chair, at rmathers@vonbriesen.com.
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vonbriesen.com/tax
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Robert A. Mathers, J.D., CPA, Section Chair
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NONPROFITS: What are donors looking for? A new approach to some familiar tools can help nonprofits succeed.
M By Chad Bruce, CPA
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any charitable organizations struggle to answer this question: What are donors looking for? Asking this question can produce lengthy discussions over marketing events, annual reports and website development. Rarely does the question result in a dive into financial statements and IRS Form 990, although many donors utilize websites, such as Charity Navigator, that make use of both when rating nonprofit organizations. This article explores
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ways nonprofit financial statements and IRS Form 990 can be used to speak directly to donors and help market a charitable organization.
Financial statements can tell a story While financial statements have historically been considered a management tool or a tool to be used by lenders to make decisions, a savvy organization uses its financial statements to tell its story.
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The current minimum requirements under U.S. Generally Accepted Accounting Principles (GAAP) fail to inform donors of an organization’s mission and financial status. This is the main reason the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities. ASU 2016-14 updates the current reporting model to better enable organizations to tell their financial stories. The update includes five key changes: (1) improving net asset classification, (2) requiring liquidity disclosures, (3) requiring expenses to be reported by natural and functional classifications in the same location, (4) changing investment return reporting, and (5) allowing for direct cash flow method reporting without a reconciliation to indirect method. As this ASU was effective for fiscal years beginning after December 15, 2017, nonprofit organizations should jump at the opportunity to revisit their financial statements. As we approach the implementation of ASU 2016-14, consider changes you can make to a nonprofit’s financial statements to speak directly to donors. Footnotes to financial statements should not be a roll-forward. The first footnote to the financial statements requires a description of the principal activity of the organization. It can and should be used to differentiate an organization from competing nonprofits. Use it to speak directly to donors by presenting the organization’s mission and how it effects change. Provide donors with the charitable organization’s accomplishments over the past year to show commitment to the mission. Right now you may be thinking, “My nonprofit (client) doesn’t make its financial statements publicly available, so why should I care?” You should care because Charity Navigator includes the availability of financial statements in its rating methodology. Many charitable organizations don’t want to make their financial statements publicly available because they’re afraid of what donors might think. They may fear being too financially stable and that donors will contribute less due to a perceived lack of need, or they may fear being too financially unstable and that donors won’t trust their donations will make it to the right place. Here’s one way to calm those fears: Include a management discussion and analysis (MD&A) in the financial statements. Public companies and governmental entities are required to provide an MD&A, but nonprofit organizations are not. However, this doesn’t mean a nonprofit cannot include an MD&A with its financial statements. The charitable
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organization’s independent auditors don’t audit this information, as the MD&A should represent the thoughts and opinions of management and provide a forecast of future operations.
Tell a story with IRS Form 990 IRS Form 990 is just an informational return for the IRS, right? Wrong! This is a publicly available document that provides a charitable organization with a great opportunity. A nonprofit can use Form 990 to tell donors its story, as the form requires disclosure of the organization’s mission, program service accomplishments, governance policies and procedures, and comparative financial information. Many organizations and accounting firms will continue to rollforward the mission in Part I; program service accomplishments in Part III; and governance, policies and disclosures in Part VI. In doing so, an organization is missing out on an opportunity to show donors dedication to its mission through program service accomplishments, good governance, organizational policies and disclosures. Most important, IRS Form 990 is used by Charity Navigator as a primary source of information.
Charity Navigator: Steer donors in your direction Charity Navigator is the most utilized evaluator of charities in the United States, with 11 million visits during 2017. It rates U.S.-based 501(c)(3) public charities that have met the following criteria: filed seven consecutive years of IRS Form 990; generated at least $1 million in revenue for two consecutive years (of which $500,000 and 40 percent is from public support); and have allocated at least 1 percent of their expenses
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to fundraising, and 1 percent to administration, for three consecutive years. Once an organization meets these criteria, it is rated on a scale of 1–4 stars based on seven financial health metrics and 17 accountability and transparency (A&T) metrics. What are donors looking for on Charity Navigator? They’re looking for 3- and 4-star ratings. This shows that a nonprofit is efficiently using donors’ funds; has programs that are well-established; and has a high level of commitment to good governance, best practices and openness of information. The rating process is complex. In simple terms, donors want to see high financial health and A&T scores. Foundations are also using Charity Navigator to evaluate charities that have applied for funding. Increasing a nonprofit’s financial health score can be difficult, but reviewing the functional allocation of expense methodology is a good place to start, as five of the seven metrics relate to expenses. If an organization is able to increase program expenses while holding fundraising and administrative expenses flat, the financial health score will climb.
Increasing a nonprofit’s A&T score is much easier. Twelve of the 17 metrics are from Part VI of IRS Form 990. The remaining five metrics are based on a review of the charity’s website, where Charity Navigator will check if board members and key staff are listed, audited financials are available, IRS Form 990 is available and a written privacy policy is listed. If an organization is willing to be transparent, it will receive all of the A&T points.
In conclusion Here’s a challenge to charities and their independent accountants: As you implement ASU 2016-14 this year, take the opportunity to change your mindset about financial statements and Form 990. Don’t just meet the minimum requirements. Even if potential donors aren’t seeking a nonprofit’s financial statements or 990, they’re most likely using Charity Navigator. Chad Bruce, CPA, is a manager in the nonprofit practice at CliftonLarsonAllen LLP, Milwaukee. Contact him at 414-721-7592 or chad.bruce@claconnect.com.
YOU have the opportunity to impact thousands of students and educators in Wisconsin.
Through your contribution to the WICPA Educational Foundation, you can help us reach students and educators in high school and college to create awareness about the accounting profession. As the end of 2018 draws near and you are thinking about tax planning, consider donating to the WICPA Educational Foundation. Questions? Contact Tammy J. Hofstede, WICPA Chief Financial and Operating Officer at tammy@wicpa.org.
To contribute, visit wicpa.org/EF.
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Spectrum Investment Advisors was named a winner in the micro category for the Milwaukee Business Journal’s 2018 Best Places to Work. To be selected for Best Places to Work, an organization must have at least 10 employees within the Milwaukee Business Journal’s seven-county coverage area. There is no fee to participate in the award. Spectrum Investment Advisors was named to PLANADVISER’s 2018 Top 100 Retirement Plan Advisers List. The list is compiled from responses to the PLANADVISER Retirement Plan Adviser Survey. The list is drawn solely from a set of quantitative variables and information in the survey supplied by the advisers themselves. For an adviser to be eligible for recognition in the Top 100, he or she had to submit a completed entry to the 2017 Retirement Plan Adviser Survey. A sub-segment of the questions was used to determine eligibility for the Top 100. Respondents are allocated into a category in which they are evaluated—these categories are defined by the number of advisers, plus support staff, in the practice. Spectrum is one of 29 advisers in the Large Teams category. A large team is a practice with 11-35 advisers and support staff, and at least 150 plans, or at least $3.5 billion in AUA. Investment advice offered through Spectrum Investment Advisors, a registered investment adviser. Registration with the SEC does not imply a certain level of skill or training.
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2018 WICPA Past Chairs Dinner Past chairs of the WICPA Board of Directors and the past presidents of the WICPA Educational Foundation Board gathered at the WICPA Past Chairs Dinner on Sept. 27 at The Iron Horse Hotel in Milwaukee.
WICPA Board of Directors past chairs Front row L-R: Larry J. Rose (’04-’05), Lucretia S. Mattson (’98-’99), Douglas W. Haag (’00-’01), Danica E. Olsen (’12-’13), Joe A. Sperstad (retired executive director) Back row L-R: Daniel J. Heerey (’07-’08), William G. Heinrich (’10-’11), William D. Goodman (’99-’00), Karin M. Gale (’03-’04), Theodore E. Hart (’08-’09), Robert L. Albrecht (’80-’81), Nicholas S. Lascari (’11-’12), LeRoy C. Schmidt (retired executive director), Eugene J. Miller (’90-’91), David O. Christianson (’05-’06), David A. Benner (’83-’84)
WICPA Educational Foundation Board of Directors past presidents L-R: James P. Miller (’08-’10), Robert L. Albrecht (’90-’91)
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IN TOUCH | PRESIDENT & CEO’s MESSAGE “I encourage you to continually expand your knowledge and experiences in a wide variety of areas to increase your efficiency, effectiveness and fulfillment in all your activities—throughout your career and beyond.”
Continuous transitioning
A
s a naïve college freshman, my concept of a career path included only graduating from college, working hard for decades in the same field (and perhaps the same organization), and believing that merely working hard would result in promotions, raises and increased opportunities. It never occurred to me that little of the technical information I memorized in college would be applied directly in my specific employment assignments or that learning would be continuous throughout my career. It was not obvious to me that experiential learning and communication skills would have the greatest positive impact on my career or that massive technological changes would require skills and experiences completely different than those required for success when I graduated from college. The prevalence and enriching experience of nonlinear career paths was also unknown to me when first entering the workforce. Reflecting on both my 45-year career and my 2019 retirement transition, it’s occurred to me that the activities resulting in the greatest fulfillment for me are those that include continuously learning and applying new skills and information to navigate changing situations. The specific types of information and skills I continuously learned and applied during my career focused on helping others navigate ever-changing technical rules to achieve business success. My post-retirement skill development seems most likely to focus on learning and applying new technologies to a wide variety of areas, including music, knowledge transfer, communication and increasing efficiencies in routine tasks and human interactions, among others. I currently use the following: • wearable technology (VR headset and Apple Watch) • artificial intelligence and bots (six Alexa devices controlling 40+ home devices) • the Internet of Things (multiple home cameras, switches, lights, thermostat and sensors) • a hoverboard, several drones and five home computers
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They have given me insight into the many ways technology can help increase efficiency, fun and the overall quality of life. I look forward to updating my ancient Fortran and HTML coding skills to include more modern programming languages—such as Python, C++, JavaScript and others— along with application programming interfaces to facilitate gathering, analyzing and accelerating communication of information that can efficiently enrich life’s experiences. I encourage you to continually expand your knowledge and experiences in a wide variety of areas to increase your efficiency, effectiveness and fulfillment in all your activities— throughout your career and beyond.
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
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You might say nonprofit accounting is undergoing a sea change. Accounting Standard Update (ASU) 2016–14, Presentation of Financial Statements of Not-for-Profit Entities, went into effect this year and contains changes in reporting requirements that will significantly impact stakeholder communications. In addition, earlier this year the Financial Accounting Standards Board (FASB) issued new guidance that will help not-for-profits account for grants and contracts under the new revenue recognition principles. Bone up on details and effective dates in this informative two-part article so you can safely navigate all these changes.
Part 1
The new not-for-profit accounting standard
T
he new accounting standard, ASU 2016–14, marks the first significant not-for-profit accounting update since 1993. This change becomes effective for 2018 calendar year-ends or 2019 fiscal year-ends and will impact all 29 types of notBy Melodi for-profit entities—not just charitable Bunting, CPA, 501(c)(3) organizations. The change CGMA, CMA is intended to address the needs of financial statement users and enable not-for-profits to better tell their stories. The impact of ASU 2016–14 is on financial statement presentation and disclosures.
“The change is intended to address
Net asset classification
Liquidity and availability of resources
Under the current standard, net assets are classified as unrestricted, temporarily restricted or permanently restricted. The new standard consolidates these into two classifications: net assets without donor restrictions and net assets with donor restrictions. The goal was to reduce complexity and facilitate comparability so the financial statement user could identify and assess key trends. Enhanced financial statement footnote
The new standard provides information for stakeholders to assess the availability of resources to meet cash needs for general operations as well as the financial liquidity and flexibility of the not-for-profit. The availability of financial assets is affected by the nature of the asset; external limits imposed by donors, grantors, laws or contraction; and internal limits imposed by the board.
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the needs of financial statement users and enable not-for-profits to better tell their stories.” – Melodi Bunting, CPA, CGMA, CMA disclosures will provide information on how and when net assets can be used by disclosing the nature, amounts and effect of the restrictions.
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The standard requires disclosure of both quantitative and qualitative information about how the not-for-profit manages its resources to meet the cash needs for general expenditures within one year of the balance sheet date. The standard does not provide details on these disclosures, but it does provide examples. The quantitative disclosure may be in the form of a reconciliation or a list of financial assets available for meeting general cash needs. The qualitative disclosure includes information on the not-for-profit’s goals and policies for maintaining financial assets and meeting the general expenditures needs for the next year.
Expense reporting The new standard requires all not-for-profits to report expenses by both their natural and functional classifications in a single location. The location may be as a separate statement, a note disclosure, or within the Statement of Activities. This new requirement is intended to give donors and other financial statement users better insight into where the organization’s money goes. Functional categories for reporting generally include program service(s) as well as the supporting services of general management and fundraising. The distinction between program service expenses and management and general expense is based on whether the activity directly relates to execution of the organization’s mission. The standard provides examples for guidance on what is considered a direct program service activity versus a support service. Support services do not directly relate to goods or services being provided to a third party in fulfillment of the organization’s mission. The method used to allocate expenses to the functional categories must also be disclosed.
Investment return Not-for-profits are required to present investment returns net of the related investment expenses under the new standard. Related investment expenses include both external and direct internal expenses.
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Endowments The new standard changes the reporting requirements for “underwater” endowment funds. An endowment fund is underwater when the fair value of the fund is less than either the initial gift amount or the amount required to be maintained by law or contract. Current standards require the deficit to be included in unrestricted net assets. The new standard groups the endowment balance with other donor restrictions reported as net assets with donor restriction. ASU 2016–14 provides additional disclosure requirements, including the initial value of the endowment and the organization’s policy for spending from underwater endowment funds, in alignment with the Uniform Prudent Management of Institutional Funds Act (UPMIFA). The adoption of UPMIFA by 49 states replaces the previous restriction on not spending below the initial value of an endowment, with a “prudent” standard granting the governing board discretion on spending.
Statement of cash flows The standard did not change the option for a not-for-profit to choose either the indirect or direct method of reporting cash flows from operations. However, ASU 2016–14 encourages the use of the direct method by removing the requirement to present a reconciliation from the change in net assets to cash flows from operating activities if the not-for-profit elects to use the direct method.
Part 1 Conclusion Once ASU 2016–14 is implemented, not-for-profit organizations and their stakeholders will be able to gain a better understanding of the organization’s overall liquidity and sustainability.
Melodi Bunting, CPA, CGMA, CMA, is the training and career development manager at Wegner CPAs, Madison. Contact her at 608-274-4020 or melodi.bunting@wegnercpas.com.
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Part 2
Nonprofit grant accounting with the new revenue recognition model
N
ew guidance issued in June will help not-forprofit entities account for grants and contracts under the new revenue recognition principles. This article addresses details and effective dates for the changes. The new revenue recognition
By Diana principles included in the financial Luttmann, CPA accounting standards update ASU
2014–09, Revenue from Contracts with Customers (Topic 606), is a convergence of the U.S. Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS). The new model is established to clarify and unify the two sets of principles to improve the quality of revenue reporting of transactions with customers. The basic idea of the new standards is that recognized revenue should match the benefit being provided. ASU 2014–09 resulted in questions from non-profit entities about the treatment of grants received from governments, foundations or similar contracts. To address these concerns, on June 21, 2018, FASB issued ASU 2018–08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made, the goal of which is to help entities determine reciprocal and nonreciprocal transactions and clarify areas within the current codification. For contributions received, an entity would follow Subtopic 958–605, which will be renamed Not-for-Profit Entities—Revenue Recognition—Contributions upon the effective date of ASU 2014–09, while for exchange transactions an entity would follow Topic 606, Revenue from Contracts with Customers.
Clarification of terms To determine if a transaction is a contribution or an exchange transaction, the entity must determine if the
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resource provider (for example, a government) receives equal value in return for what the resource provider pays (the grant). The guidance clarifies that when the general public is the recipient of the services or goods, the transaction is not considered a reciprocal transaction with the resource provider; it’s a contribution. If the resource provider is acting as a third-party payer (such as payments under Medicare and Medicaid programs, Pell grants or government tuition assistance programs), the third-party payer is considered to be acting on behalf of the service recipient in an exchange transaction that already exists. When a third-party payer is involved with these types of exchange transactions, the entity would need to follow Topic 606. An entity must determine if a contribution is conditional. A contribution is conditional if it has both a barrier that must be overcome and an agreement requiring advance payment to be returned or future payment not to be obligated whence that barrier is not overcome. Barriers might include measurable performance requirements, matching requirements, specific use stipulations that expand further than a general activity or timeframe, or stipulations about the purpose of the agreement, such as serving a certain number of units or program deliverables. Conditional contributions are not contracts that include standard language referring to return of funds but without a specified barrier to overcome. After a condition is met, there could be additional donorimposed restrictions. Based on the current varying practice of accounting for grants and contributions, it is expected that the clarified guidance will result in more grants being considered contributions and more contributions being considered conditional. The standards acknowledge that there are differences in practice about the naming of grants, contributions and membership dues, and require that the accounting treatment be indicative of the substance of each transaction rather than determined by labels used. The guidance offers no requirement for renaming or using specific labels for different revenue types. However, it is
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necessary for the entity to consider that each revenue source could include either or both contributions and exchange categories. The standards should be applied to agreements that are not completed as of the effective date or that are entered into after the effective date. The standards should not be used to change reporting of revenue and expenses that have been recognized before the effective date. Because of this prospective approach, there will be no prior-period restatement or cumulative effect change in net assets. However, the entity should disclose the nature of and reason for the accounting change and also the impact of the accounting change to each line item that is affected by the new guidance.
Effective dates The effective date differs for entities that are resource recipients and resource providers. The annual reporting period effective dates for resource recipients are for periods beginning after June 15, 2018, for public business entities or a nonprofit that issued—or is a conduit bond obligor for—securities that are traded, listed or quoted on an exchange or an over-thecounter market; and periods beginning after Dec. 15, 2018, for all other resource recipients. The annual reporting period effective dates for resource providers are for periods beginning after Dec. 15, 2018, for public business entities or a nonprofit that has issued—or is a conduit
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bond obligor for—securities that are traded, listed or quoted on an exchange or an over-the-counter market; and periods beginning after Dec. 15, 2019, for all other resource providers.
Part 2 Conclusion The clarified language and examples within the amendments to the codification under Not-for-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made are very useful in determining appropriate reporting of grants and contracts. In practice, the amendments will help accountants consistently report grants as either exchange or contribution transactions. Both conditional contributions and exchange transactions require financial statement disclosures; however, it is expected that disclosures for conditional contributions would take less effort than disclosures under Topic 606. Grants for the benefit of the public are contributions in nature, and this alignment will result in more consistent reporting.
Diana Luttmann, CPA, is a partner at RitzHolman CPAs, where she has focused on serving nonprofits in audit, tax and advisory services for more than 18 years. Contact her at 414-271-1451 or Diana@ritzholman.com.
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memorials Nawazish Ali, CPA
David M. Ragsdale, CPA
Nawazish Ali, CPA, of Des Moines, Iowa, passed away at age 72 on Tuesday, Aug. 21, after a long battle with acute myeloid leukemia. As a CPA, he helped many individuals with their small business and tax needs for more than 30 years. Ali was respected and loved by people around the world and will be missed by many. He is survived by his wife of 44 years, Frances, four children and five grandchildren.
David M. Ragsdale, CPA, age 81, passed away Monday, July 30, at Hope Hospice in Bonita Springs, Florida. Ragsdale earned his accounting degree from the University of Wisconsin–Madison in 1958, after serving in the U.S. Army. He was a founding partner of the CPA firm of Ragsdale, Spitz, and Reuschlein. Ragsdale is survived by his wife of 52 years, Jean Ann, a son and two grandchildren.
(1946–2018)
(1937–2018)
Rex G. Breger, CPA
Werner Dennis Rhyner, CPA
Rex Gene Breger, CPA, passed away Monday, Oct. 1, at age 64. Breger was active in Boy Scouts as a youth and earned the Eagle Scout designation. He graduated from John Marshall High School, Milwaukee, in 1972 and attended the University of Wisconsin–Milwaukee, graduating with an accounting degree in 1976. Breger became a CPA and worked for Bemis Manufacturing Co. for 30 years, retiring in 2009. He is survived by his wife, Nancy; his mother, Ruth; two children and three grandchildren; two brothers and other relatives and friends.
Werner Dennis Rhyner, CPA, age 70, passed away suddenly Monday, Sept. 10, at his home. Rhyner graduated with an accounting degree from University of Wisconsin–Madison in 1975 and practiced as a CPA for 42 years. In December 2017, he retired from Bock Water Heaters, where he had worked for 23 years. He is survived by his wife of 48 years, Betty, one daughter and one granddaughter, six siblings and many other relatives and friends.
(1954–2018)
Elmer J. Lemon, CPA (1943–2018)
Elmer J. Lemon, CPA, age 75, passed away Wednesday, Aug. 29. Lemon earned a bachelor’s degree in accounting from University of Wisconsin–Madison and joined Ronald Mattox & Associates, which later became Grant Thornton. He retired from the firm after 33 years, 28 of which he was a partner. Lemon was inducted into the Wisconsin Interscholastic Athletic Association’s Basketball Hall of Fame in 2013 and is recognized as a top scorer in the state. He served as president of the Monticello High School Foundation, and the floor and gymnasium at the high school bear his name. Lemon is survived by his wife, Elizabeth, two children and three grandchildren.
(1947–2018)
Raymond J. Stalowski, CPA (1933–2018)
Raymond J. Stalowski, CPA, age 85, passed away Wednesday, Sept. 12, at All Saints Memory Care in Madison. Stalowski graduated from Marquette University in 1955 and worked for Price Waterhouse & Co. in Milwaukee from 1955 until 1962, during which time he earned his CPA designation. He moved to Madison in 1962 to join the Kayser Automotive Group as corporate controller and treasurer. In 1971, he was named president of Kayser Leasing Corp., and with the help of his friend and mentor, Ken Kimport, built Kayser Leasing into a large regional vehicle leasing company that was ultimately sold to Associates Corp. of North America in 1984. Stalowski was then named senior vice president of the parent company and remained in that position until he retired in 1991. He is survived by his four children, many grandchildren and great-grandchildren, and other relatives and friends.
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.
TRACK YOUR CPD WITH THE WICPA’S CPD TRACKER The CPD Tracker is an easy-to-use tool created to keep track of all your CPD in one convenient location. • Automatically tracks WICPA formal learning activities • Add any non-WICPA CPD courses • Print reports for any reporting period
To get started, visit wicpa.org/CPDtracker
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{ Manufacturing | Supply chain management }
Perfect Timing Numerous factors converge to spell “success” for business in Wisconsin.
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By Douglas Fisher, PhD
here’s never been a better time to be in business, to be in supply chain management— and to be in Wisconsin. The economy is good, and it has been for some time—more than 110 consecutive months, to be exact, approaching the longest expansion to date of 120 months and much longer than the average expansion of approximately 58 months since the end of World War II.
In addition, unemployment is at a 17-year low, consumer and business confidence are both near record highs, the stock market is regularly setting records, and there is a pro-business political environment. However, economies and politicians come and go, and this expansion will, too. So let’s move to the real drivers of the optimism.
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First: Advance of supply chain management Supply chain management (SCM) is rapidly coming into its own. In the article, “Manufacturing trends to watch in 2018,” published online by RSM-USA in January, the company says the field of SCM is “gaining increasing importance as the most promising driver of profitability and supporter of growth initiatives.” Anecdotal conversations with executives increasingly indicate that future leaders of organizations will be sourced from SCM because they know more about the business and what drives the business than any other discipline in the organization. To level-set everyone’s understanding, the practice of SCM encompasses the following: business operations, sourcing, inventory management, logistics and customer service. Supply chain management moves raw materials, components and finished goods, information and cash. It operates at operational, tactical and strategic levels. Think of Apple—at the strategic level, they have chosen to put the money into
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intellectual property (IP), not factories. But at the operational and tactical levels, SCM is as important as IP. While it is rare that companies place all these functions under one roof, successful SCM companies think about managing these functions as a system and view SCM as a strategic business asset.
Second: Onset of Industry 4.0 We are in the beginning stages of the Fourth Industrial Revolution, or Industry 4.0. The first three focused on improved manufacturing at increasing scale. The fourth enables all aspects of business through a unique convergence of the internet; the Internet of Things (IoT); big data; artificial intelligence; machine learning; advanced manufacturing, such as robotics and additive; self-driving vehicles, both over-the-road and within the factory and warehouse; augmented and virtual reality; and more. These new technologies can be deployed in marketing, sales, SCM, finance, accounting, human resources and information technology. The major implications of Industry 4.0 include the following: • The scale of digital disruption is increasing. • Manufacturing scale can drop, allowing smaller “forward” manufacturing positions. • Logistics costs can decline by as much as 50 percent, and service can improve significantly—as much as double. • Business-to-consumer online sales of 8 to 15 percent now are projected to grow to 30, 40 or 50 percent depending on sector, and the pressures will migrate to business-tobusiness online sales. • Non-asset, “app-based” companies will grow. For more information on business cases being implemented under the range of technology advances in Industry 4.0, try searching online. Type “Industry 4.0” into Google Alerts, and you’ll get daily updates of activity worldwide.
Third: Wisconsin’s manufacturing heritage Wisconsin’s deep heritage as the Machine Shop of the World places us in a great position to leverage an existing ecosystem. Quoting John Gurda, Wisconsin’s resident historian, in the forward to “The Magnificent Machines of Milwaukee and the engineers who created them,” by Thomas H. Fehring, PE: “Before Steve Jobs, there was Edward Allis. Before Silicon Valley, there was the Menomonee Valley. Before the army of innovators who ushered in the Digital Age, there were the Milwaukeeans like Henry Harnischfeger, Lynde Bradley, Bruno Nordberg, A.O. Smith, Ole Evinrude, and dozens of others who
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helped lead America into the Machine Age. … [It] all started in the city that made beer famous.” The very long heritage of manufacturing in southeastern Wisconsin and the number of successful companies that have been here for a long, long time is very unique. It says something about the work ethic and culture of success. For a long list of examples of Milwaukee’s inventiveness and business success, read Thomas Fehring’s book. You can find it on Amazon.
Fourth: Foxconn comes to Wisconsin The final driver is the totally unexpected arrival of the world’s largest electronics manufacturing company: Foxconn. A few years ago, no one would have guessed that a company of this size and type would ever locate here. There is no supply chain to support it. But here we go. Foxconn will bring these benefits: • Scale: The company has #1 market share; even combining competitors 2 through 11 will not equal Foxconn’s share. • Smarts: It is New Equipment Digest’s fifth largest and most innovative company. • Industry 4.0 expectations: Foxconn plans to use the latest IoT and advanced manufacturing technologies in the Mt. Pleasant plant. • An incredible supply base: The company is a global ecosystem—not “just” a plant. In addition to manufacturing, Foxconn will bring knowledge development, sharing and spillover, development of an efficient supply base and development of a local labor pool. The catalytic effect will be incredible, and it will expand beyond business. Company leaders truly want to establish “smart companies.” We can now connect smart business with smart government with smart citizens with smart health care with smart education with smart buildings with smart energy with smart transportation … and the list goes on. In summary, we have a strong economy, an emerging business discipline poised for impact, an emerging industrial revolution, a region with an incredibly strong heritage and the arrival of an incredible catalyst—all aligning right here, right now. We may not know what the future will bring, but it is coming. It is time to engage and establish a narrative—your narrative. The opportunity to benefit from disruption is huge. It is also ours to lose. Douglas Fisher, PhD, is an assistant professor and director of the Center for Supply Chain Management at Marquette University. Contact him at 414-288-3995 or douglas.fisher@marquette.edu.
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{ Technology | The Internet of Things }
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T
By Cheryl Aschenbrener, CPA and
Evert Bos, ERP Consultant
he Internet of Things (IoT) is an informal description of the possibility to bring hardware devices online—such as consumer products like air conditioners, thermostats and refrigerators, but also industrial devices like computer numerical control machines, industrial robots and more. The received sensor data from these devices is combined with artificial intelligence to create hardware with intelligent behavior. At the foundation of IoT is the connectivity of various devices, which enables businesses and individuals alike to send and receive data and makes IoT useful for nearly every industry. In 2016, the Gartner group published “Leading the IoT,” a document that offered a detailed description of technologies used in the workplace—ranging from machines on your warehouse floor to your vending machine and even your customer’s dishwasher—and how they might be connected through IoT. They predicted that by 2020 there would be more than 26 billion connected devices. However, just as we’ve seen with “the cloud,” IoT adoption has been slow; yet IoT is applicable in so many ways that more companies will likely adopt it soon. Businesses can leverage IoT by knowing and understanding their customers’ needs and using the information to improve their products. As accountants, we must ask ourselves how we can use real-time information to allocate resources and plan strategically. This article describes seven ways IoT can help us do so.
1. Manage inventory If accounting is the brains of a business— having a significant role in nearly every division of your company—consider IoT your eyes, providing the visual information you need to make critical decisions. For example, sensors can gauge when inventory gets low, which then kicks off a process to automatically reorder stock through your suppliers and notify your accounting department to make necessary billing updates.
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2. Improve audits Instead of rifling through towers of paperwork and inspecting spreadsheet after spreadsheet, accountants can use IoT as their own personal assistant. Since IoT provides real-time data from all sources involved in your billing, accounting, inventory and so forth, you can easily filter and capture the data you seek. Best of all, you can use the company’s software of choice to create a dashboard to streamline the information you seek. Information gathered onto these dashboards could help raise a red flag and highlight a gap in process or activities. This can reduce loss from fraud, as potential issues should present themselves earlier.
3. Improve forecasting and budgeting Accountants can take advantage of realtime data to improve both cost forecasting and budgeting. Cost forecasting originates from demand forecasting. For example, with IoT devices like smart shelves or connected vending machines, the accuracy of forecasting improves significantly because these machines provide us with real-time demand, giving us an understanding of how best to prepare for future supply and demand. This has a direct impact on production and transportation planning, both of which become more accurate when tuned to demand.
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{ Technology | The Internet of Things }
Manage Inventory
Improve Audits
Improve forecasting and budgeting
Maximize the efficiency of a business operation
Engage employees
Minimize risk in transfer of ownership
4. Maximize the efficiency of a business operation
6. Engage employees
Since IoT offers such a clear view of a business’s inner workings, it allows accountants and their clients alike to determine which processes are running efficiently and which ones can use improvement. For example, with IOT, we as auditors can see early signs of anomalies in financial statements; then we can quickly locate the unusual and focus on the why. An example of this could include a built-in GPS locator in every item of your client’s products. Every product will have its own unique identifier. Therefore, as an auditor, we will be able to identify which items are selling, not selling or damaged, providing the necessary information to help us determine a better substantiation of the inventory obsolescence recorded by the client. Such data can help guide investment decisions and set priorities in managing operations.
While accounting may seem solely number based, much of accounting is also human based. An accountant’s findings can drastically change the way a company views its labor force. For example, an accountant’s findings can tell the company whether it should add more jobs, streamline operations in a certain division, or whether there might be cost savings in automation.
5. Minimize costs Businesses can also utilize IoT to optimize costs. For example, overhead is a major cost for most businesses; however, IoT can work across various devices to ensure an efficient operation. This not only provides energy cost savings, but may also help reduce costs related to human error. Speaking of humans, these devices can indirectly help you determine your business’s most productive hours, what workflows seem to be the most efficient and which employees are making the best use of their time. This insight can help accountants find cost savings in time, labor and even general upkeep and overhead expenses.
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On the other side of this human component is determining how and when a workforce is most efficient by learning when teams are the happiest. Wearable devices provide insight into such data. They can tell management if employees are getting enough breaks, if they’re moving about enough, or if they’re too inactive (which can lead to sick days and possibly a higher turnover rate). In this way, IoT can help accountants factor in the human component to create a happier and more efficient workforce.
7. Minimize risk in transfer of ownership The Internet of Things is also changing the concept of transfer of ownership. Without IoT, a manufacturing company delivering a device or equipment to a customer loses control of the device as the ownership changes. Although the device may be regularly serviced and maintained by technicians, the equipment is rarely actually seen. With IoT, the manufacturer retains an intimate connection with the equipment in operation and can offer a very attractive service contract at minimal extra cost. In addition, risk is reduced and becomes easier to anticipate.
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IoT by itself does not represent a technological breakthrough. The breakthrough is the combination of the following technologies, which have made significant progress on their own: - Ubiquitous wireless internet - Connectivity that can be built into even the smallest of sensors - Remarkable progress in artificial intelligence IoT is most applicable to tangible “things” that have a service life. For instance, instead of getting customer phone calls once a hardware device has been shipped, the manufacturing company that sells intelligent equipment has complete insight into the hardware’s operation. In addition to providing increased visibility into a hardware’s efficiency, the goal of IoT is to make the equipment capable of checking its own health and sending signals and updates to human operators or, in some cases, fixing itself or applying its own maintenance. This will extend the useful service life of the equipment and drastically reduce the cost to maintain it, which means manufacturing
companies can offer an attractive extended service plan while reducing their own maintenance costs.
Coming to a business near you The accounting industry is on the cusp of adopting this technology. While it has been slow to do so until now, we may soon see an uptick. IoT ultimately opens new revenue streams for businesses by dramatically expanding the options for service. From accounting services to inventory management, IoT can be used across various business divisions to help organizations and their accountants make stronger, more evidence-based financial decisions. Would IoT make sense for your business? Cheryl Aschenbrener, CPA, is partner in charge of the private equity industry group for Sikich LLP and director of business development and the manufacturing/distribution practice for the firm’s Milwaukee office. Contact her at 262-754-9400 or cheryl.aschenbrener@sikich.com. Evert Bos is an ERP professional with Sikich and has more than 20 years of implementation experience in the manufacturing space. Contact him at 262-754-9400 or evert.bos@sikich.com.
Earn CPD by Speaking at WICPA Breakfast Programs Speakers are needed for Eau Claire, La Crosse, Madison, Milwaukee, Northeast Wisconsin, Waukesha and Wausau.
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Earn CPD while sharing your expertise, developing leadership skills and promoting your organization. Contact the CPD team at 262-785-0445.
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{ Community Service | Giving back }
“ Do well by
doing good.� - Benjamin Franklin
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Let this Ben Franklin quote encourage us to indulge our generous nature and brighten the holidays for those less fortunate. By Marcia Tillett-Zinzow
W
hat better months of the year than November and December to exercise our generosity muscles and give back to our communities.If you’re looking to share your time, talents or treasures this season, here are just some of the ways you can do so.
Visit a local nursing home or assisted living facility Some older folks have families who live far away and few remaining friends to visit them. This can lead to feelings of loneliness, isolation and exclusion, especially around the holidays. Check with your local facility to see if someone there would appreciate a visit from you or your family; or if you’re a musician, offer to give a concert for residents. Even those with serious memory deficits would enjoy music or a chat with you or your children, even if they don’t remember it the next day. Be sure to call ahead a couple of weeks in advance so the facility can plan for your visit. You’ll find some valuable tips on visiting the elderly in this article at http://www.legacyproject.org/guides/visitnursinghomes.html.
Donate to a food pantry Even as the economy steams along, 40 million children, seniors and working adults in our country suffer from hunger. According to data released in September by the U.S. Department of Agriculture, 11.8 percent of Americans are “food insecure,” meaning they don’t have enough food due to lack of money or other resources. Those who struggle with hunger must often choose between food and medicine, rent or other necessities. Food pantries do their best to provide
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{ Community Service | Giving back }
for those in need, but the holiday season can put additional demands on their resources. Donations of canned pumpkin, yams and cranberry sauce; box mixes of stuffing, macaroni and cheese, pasta, rice and similar items are greatly appreciated during the holiday season. Canned beans, tuna, chicken, chili, soups and stews are appreciated any time of the year. Find out more about hunger in America at www.feedingamerica.org, and locate a food pantry in your area at this website: https:// www.foodpantries.org/st/wisconsin.
Make a cash contribution to your favorite nonprofit If you’ve made cash contributions in the past, your mailbox has probably been jammed with requests for year-end donations. Even if you haven’t been a regular donor, now may be the time to think about becoming one. Although charitable contributions aren’t as easy to deduct from your income taxes as they have been in the past, there still is a tax benefit—which you may already be aware of. And there is always a feel-good benefit to knowing you are helping others or supporting a cause you believe in. It may be childhood cancer research, an animal shelter or humane society, a national park you love to visit with your family, the performing arts, your alma mater, public radio or television, a religious community, military veterans, a homeless shelter, a safe home for battered women and children, your place of worship or another worthy cause. Open your checkbook and give what you can. You’ll be glad you did.
Volunteer your time There are scores of worthy organizations that need volunteers. You can find a broad range of opportunities, from
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using your accounting skills on a board of directors to putting on an apron and serving a meal to the needy. Many of those listed in the previous paragraph utilize volunteers, and here are a few more ideas: Salvation Army (they need more than just bell-ringers!), Ronald McDonald House, Children’s Hospital of Wisconsin, Marshfield Clinic, meal programs like The Gathering (Milwaukee) and those offered by many churches throughout Wisconsin, Girl Scouts of America, the YMCA and many, many more. Google any of these or just enter “volunteer opportunities Wisconsin” and scroll through all the options to find the opportunity that fits your time and talents. Marcia Tillett-Zinzow is a Wisconsin freelance writer and editor. Contact her at mtzinzow@icloud.com.
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On Balance
November | December 2018
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{ Professional Development | Communication skills }
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26 TIPS FOR
GREAT
COMMUNICATION By Janice Warner, PhD
T
he role of the CPA is changing. Clients are demanding that accounting firms offer more business advisory services than ever before. Communication is critical for maintaining productive relationships with clients. Corporate accountants need to master their communication skills to have meaningful conversations with shareholders and internal teams. Therefore, good communication skills are more important than ever. There are four types of communication: writing, speaking, listening and nonverbal. A study by the University of Pennsylvania found that 70 percent of communication is body language, 23 percent is voice tone and inflection, and only 7 percent is your spoken words. When it comes to the written word, many people write in such a way that it is difficult to interpret and understand what they are trying to say. This is because people think it is important to impress readers with their command of the English language (vocabulary and grammar skills). Using an overly sophisticated word, words that are out of context but sound good, jargon and long sentences can make the correspondence difficult to comprehend. Business communication needs to be clear, concise and to the point. Your written and spoken words should be deliberate. The tone of your voice should be professional, and most of all, your body language should be in line with what you are saying. This explains why sales people are taught to smile when they are on the telephone with prospects and clients, public speakers practice their delivery and press secretaries have a serious posture when delivering bad news. Communication also needs to be targeted. Understand all the stakeholders and craft your message on common ground. Work to collaborate with clients and colleagues instead of forcing your agenda and ideas on them. Find a path toward a common idea or solution by giving everyone the opportunity to express their opinion by shared ownership and shared reality of the situation at hand. The following communication tips can enhance your skills.
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{ Professional Development | Communication skills }
WRITING
LISTENING
1. Use a professional writing style. 2. Be brief and to the point. 3. Stress the main points in the first paragraph. 4. Use bullets whenever possible. 5. Keep sentences around eight words. 6. Avoid the use of words above a 10th-grade level. 7. Use headings and sub-headings. 8. Carefully craft emails, and be formal. 9. Check your grammar and spelling, especially when texting.
1. Focus your attention on the speaker and avoid distractions. 2. Ask questions to ensure you understand. 3. Think about how the speaker feels. 4. Avoid making assumptions, being defensive and interrupting. 5. Take notes if appropriate.
SPEAKING 1. Watch your tone of voice (be positive). 2. Be aware of the words you choose and how they will be heard and interpreted. 3. Be honest, specific and sensitive to the receiver’s reactions (nonverbal clues). 4. Use “I” statements versus “you” statements. “You” expresses criticism. “I” defines another’s behavior. 5. Use “we” instead of “I.” “We” is team focused. “I” refers to your actions. 6. Be succinct when making presentations. 7. Write notes as a guide for discussion. 8. Use visuals to make data more understandable or to focus on key ideas.
NONVERBAL 1. Match your nonverbal message with your verbal message. 2. Mirror the other person’s body language to convey understanding. 3. Respect personal space (about three feet or an arm’s length away). 4. Think SOLER (Smile, Openness, Lean forward, Eye contact, Relax). Good communicators are influencers. They express wellthought-out points based on facts. People depend on and trust what they say. Good communicators are also good listeners and tend to address the appropriate concerns in their responses. Internal communication is key and should support external communication. It is important for all employees to know where the company is going and how they fit into the future of the organization. Employees are the face of a company and can be your best brand ambassadors. Janice Warner, PhD, is the dean of the School of Business & Digital Media at Georgian Court University. She can be reached at 732-987-2662 or jwarner@georgian.edu. Reprinted with permission of the New Jersey Society of CPAs.
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