CPA Success

Is retirement nothing more than a pipe dream?

The economy might be improving (or not, depending on who's talking), but Americans sure aren't feeling any better about retirement.

The most recent Country Financial Security Index found that 51 percent of those surveyed believe they will have saved enough money to retire comfortably, down 5 points from 2010. That's the lowest level since the Index's inception in 2007.

"What we've seen is a consistent decline since last October (in people's confidence about their retirement prospects)," Keith Brannan, vice president of financial security planning for Country Financial, told United Press International. "As the economy ebbs and flows, there's been a consistent decline."

Those numbers are positively oozing with confidence compared to a recent study from eRollover.com and the Siena College Research Institute. Among their findings:

• Eighty-two percent of Americans ages 29-49 admit that they aren't saving nearly enough for retirement.
• Only 41 percent have added to their employers' retirement contributions.
• Fewer than 50 percent have a 401(k) account.

"More troubling," writes Financial-Planning.com's Larry Barrett, "71 percent expect that unless something drastic is done to overhaul Social Security, the system will likely be bankrupt within the next 20 to 25 years, making their individual retirement savings and planning all the more critical."

It's an interesting paradox: Gen-Xers understand the importance of saving for retirement, but few of them are doing it.

It's also a huge opportunity for the profession: Who's better prepared than CPAs to help these folks get on the right track? (Hint: The correct answer is, "Nobody.")

Is it time to make this type of educaton mandatory? I say "Yes," and I'm not the only one.

How about you?

Top seven leadership challenges facing CPA firms

What are the top leadership challenges facing CPA firms?

Take a conference room full of CPA firm leaders (CPA firm administrators, CXOs) and break them into small groups, and you get the "wisdom of the crowd." 

That was how we started the Insights to Action session at the AAA National Practice Management Conference in Louisville. Here are the top seven leadership challenges they identified:

1. Succession planning
2. Accountability and buy-in
3. Communication (lack thereof)
4. Managing millennials
5. Work / life balance
6. Leadership development
7. Managing change

Others that made the list included technology issues, 24/7 work, shifting priorities, firm growth and client retention. Check out the full list and download the report here.

What can you do about these?

We think it requires a new form of leadership and leadership development -- leadership that has the willingness to develop insights about the rapidly changing world and the aptitude to turn those insights into action by inspiring people. 

We also think leadership is changing. It has moved from command and control to connect and collaborate, from hierarchy to network, and from push to pull. This requires new approaches and new skills. Done right, leaders can engage people in developing shared insights, align them through shared meaning and purpose, get their commitment and accountability.

Want to see how it can be done? Check out our approach and background at www.bizlearning.net/live/i2astrategicplanning.

Or see how you can develop a shared understanding of the future through our future forum process here.

Here is a copy of my presentation from AAA:

AAA - Insight to Action - Leadership in the New Normal

View more presentations from Tom Hood

Safe harbor: MACPA's biggest legislative win yet?

By now we know that Maryland CPAs went a historic 5-for-5 on their 2011 legislative agenda.

Less well-known is that one of those victories centers on what Tom Hood calls "one of the most significant pieces of legislation we've enacted in the history of the MACPA."

The issue in question -- so-called “safe harbor” legislation -- has been decades in the making. It prohibits non-CPAs who perform compilations from filing reports that reference Statements and Standards on Accounting and Review Services (SSARS) and the American Institute of CPAs and requires them to state that they are not subject to peer review.

A big deal? You bet -- nearly as big, Hood said, as the 1901 law that created Maryland's CPA license itself. Here's why.

Since the advent of SSARS in 1981, confusion has mounted over how non-CPAs may represent themselves when performing compilations.

CPAs alone are allowed to conduct audits, and in doing so they must file a report stating that the financial statements have been prepared in accordance with generally accepted accounting principles and the audit has been conducted in accordance with generally accepted auditing standards. Similarly, when compilations and reviews are prepared, a report must be filed stating that the services have been conducted in accordance with SSARS as promulgated by the AICPA.

The confusion arises when non-CPAs use SSARS / AICPA language in the reports they file.

“Imagine that language being used by a non-CPA. What would happen?” said Hood. “A small business owner, even a bank, could potentially be misled to believe that person is a certified public accountant.”

To address that issue, “safe harbor” language has been introduced in other states specifically for non-CPAs. In performing compilations, non-licensed accountants would have to use the “safe harbor” language to state that they are not CPAs and are not subject to peer review. Such language also protects the non-licensed accountants from misleading the public and opening themselves up to potential prosecution.

Problem solved –- except in Maryland, where non-licensed CPAs have been allowed to file SSARS reports from the very beginning, thanks to an attorney general’s ruling in 1981. MACPA leaders and volunteers have been trying to get that ruling changed for nearly 20 years, to no avail.

Complicating matters even further is mandatory peer review. Enacted in Maryland in 2005, it makes peer review mandatory for all CPAs in Maryland who perform compilations, reviews, audits or other attest services. Non-CPAs are not required to undergo peer review, but thanks to the 1981 attorney general’s ruling, they were still allowed to file SSARS reports.

This year, the MACPA worked hand in hand with the state Department of Labor, Licensing and Regulation, the State Board of Public Accountancy and even the Maryland Society of Accountants to pass the groundbreaking “safe harbor” legislation. The bills in question –- Senate Bill 370 and House Bill 328 -– make it clear that only CPAs may perform audits and reviews in Maryland. It also stipulates that non-CPAs who perform compilations (a) must not use SSARS / AICPA language in their reports, and (b) must emphasize they are not required to undergo peer review.

“This protects the public -– small businesses, banks and people who rely on financial statements,” said Hood. “It certainly protects our small practitioners, who are the mainstays in issuing compilations and reviews.

“Beyond that, it was grossly unfair that a licensed CPA who was doing a compilation and review for a small company had to undergo peer review and all of the scrutiny that comes with it, and yet a non-licensed accountant could do the same service and avoid peer review -– and potentially mislead the public. This legislation corrects that."

Kudos to all involved. For CPAs, it's yet another key legislative victory in a year full of them.

We're all screw-ups. Dealing with it makes us great.

We've planned and planned and planned. Everything's going to be perfect. We've rehearsed this thing to death, backups are in place, and nothing -- absolutely nothing -- can go wrong now.

And then the curtain goes up.

Listen, we all screw up from time to time. We're human -- it's part of our charm.

One of our biggest mistakes, though, is assuming that we're in control. We're not. Sometimes, to put a family-friendly spin on the old saying, stuff happens.

And that's when we figure out who the really talented people are.

Exhibit A: Ira Glass.

Executive producer and host of the iconic weekly radio program "This American Life," Glass appeared live at Powell Hall in St. Louis recently to discuss the media, the message and his views on how to build the perfect story.

When it comes to speaking in front of a live audience, Glass is a pro. He's done it more than a few times.

On this night, though, things started going wrong from the start.

Thanks to travel SNAFUs, he arrived in town late, and his cab pulled up to the front door of the theater at the very moment he was supposed to walk onstage. He had to iron his shirt. He forgot his belt. Worse, he had no time to either test the audio elements of his presentation (which he had planned to deliver cooly from an iPad that he would hold during his presentation) or get a backup system in place.

Can you guess what happened?

Right. The audio files on his iPad -- the ones he had planned to use to accompany his live presentation -- would not play. He tried over and over and over, to no avail. And keep in mind, this was happening in front of a live crowd of more than 2,000 people, all of whom paid good money to be there.

Glass ran off stage and grabbed his backup iPad, turned it on and gave that a try. No dice. At that point, everyone in the crowd who had ever given a presentation was uncomfortably feeling his pain, but Glass soldiered on.

Finally, he figured out the problem: A closed door in the wings of the stage was blocking the signal to his iPad. Some staffers propped open the door, and -- voila! -- game on. From then on, he delivered a brilliant show.

Here's the point: Nothing went right for Glass that night, and he didn't panic. He calmly went through his checklist until he found the problem. And he was great from that point on -- so good, in fact, that by the end of the show audience members were inviting him out for drinks.

The moral of the story: Our problem isn't being perfect. Nobody's perfect.

Our problem is dealing with imperfection. If we can do that well, we're gold.

IRS gets social in its search for tax preparer feedback

Don't look now, but the IRS is getting downright social with its tax preparer community.

First came word that the agency had built a Facebook page for its Return Preparer Office.

"Here’s what we envision: the IRS and the tax professional community working in partnership to improve tax administration," office Director David Williams wrote on the page. "We see this page as a place where we can have informal conversations on issues that affect your profession, especially the new regulations for federal tax return preparers."

It'll be interesting to see how preparers respond. More than 2,300 of them "liked" the page in its first few days, so it's off to a promising start.

Next came the Return Preparer Office's announcement that it wants help in creating specifications for its upcoming registered tax return preparere competency exam.

The office is asking tax preparers to fill out a "job analysis survey" that will help test vendor Prometric create specifications for the exam.

If you want to be part of the process for building the preparer competency exam, be sure to fill out the survey by the June 21, 2011 deadline. You might receive more than one reminder about the survey, but the IRS wants to remind you to take the survey just once.

You'll find the survey here.

MAP survey proves opportunities abound for firms

Congratulations, CPA firms. You're dodging the economic darts better than most folks these days.

You did a great job of managing expenses and keeping costs down during the recession. Your revenues were down a bit, but your net income per partner remained steady. In short, the generally accepted adage is proving true: You were the last ones into the recession, and you were among the first ones out.

That's Mark Koziel's take, anyway. Mark is director of specialized communities and PCPS/ firm practice management at the AICPA, and he's been crunching the numbers from the 2010 National Management of an Accounting Practice (or MAP) Survey. He found a little bit of everything for CPA firms:

Opportunities: The recession and subsequent regulations have turned corporate America into a minefield. Firms can help businesses cross that field unscathed. "Regulation and tax complexity is ever growing," Koziel said. "Being able to make sense of that complexity for clients is a huge opportunity for firms."

Challenges: At the same time, firms are businesses too, and they're dealing with many of the same complexities their clients are facing. They kept their expenses in check, but according to Koziel, the real challenge is finding a way to reinvest those savings back into the firm to spur growth.

The future: As time goes on, firms will be bombarded with ever-increasing change and complexity, especially on the technology front. "Firms need to stand up and recognize the technology changes that are taking place," Koziel said. "Even if they don't want to play in that space today, it's going to come very quickly." And that circles back to opportunities: Keeping up with these changes not only helps firms, but positions them to help their clients as well.

I spoke with Mark about some of these issues during the 2011 Maryland CPA Summit in Baltimore. Listen to our conversation in its entirety.

• Get details on the MAP survey.
• View MAP survey results for Maryland firms.

Personal finance: An obligation to learn ... and teach

Check out these personal finance questions, courtesy of the National Institute on Aging's Health and Retirement Study:

1. Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow? More than $102, exactly $102 or less than $102?
2. Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After one year, how much could you buy with the money in this account? More than today, the same, or less than today?
3. True or false: Buying a single company stock usually provides a safer return than a stock mutual fund.

That's not the toughest test in the world, but only 34 percent -- 34 percent! -- of Americans surveyed correctly answered all three questions.

Here's the problem:

"If two-thirds of Americans were to fail a basic reading test, most people would call it a national crisis," writes David Nicklaus in the St. Louis Post-Dispatch. "We should hear a similar hue and cry about financial illiteracy, but we don't."

Why not?

If we expect people to accept responsibility for their own fiscal health, aren't we obligated to give them the tools they need to succeed? Don't we owe it to ourselves -- and our economy -- to teach them how to answer the questions above?

When people are illiterate, we teach them and make them literate -- and we all benefit from that literacy.

Personal finance is no exception.

"At a time when budgets are tight, some administrators may complain that they can't afford to invest in financial literacy programs," Nicklaus writes. "As a society, however, we can't afford not to."

Amen.

Check out these related resources:

• Former MACPA Chair Pat Reese talks financial literacy
• Financial literacy tips from Maryland CPAs
• AICPA's 360 Degress of Financial Literacy
• Feed the Pig campiagn

MACPA and XBRL: A small biz case study

When folks talk about XBRL, it's usually from a public company perspective -- as if public companies are the only ones that can benefit from efficiency, transparency, speed and cost-effectiveness.

Everyone wants those things -- public companies, sure, but private companies, non-profits and governments as well.

The MACPA wants them too, so it embraced the promise of XBRL and set off to find them.

In an effort to demonstrate XBRL’s scope and versatility, the MACPA is using the data tagging language to populate its financial information and key performance indicator reports. The project could become a blueprint of sorts for how private companies and non-for-profit organizations can take advantage of XBRL’s power.

I had an opportunity to talk to the principals involved with the MACPA's project recently, and to a person, they all agreed: XBRL goes way beyond the public company arena.

Here's MACPA Finance Director Skip Falatko: "XBRL would be an excellent application for the non-profit community. There are about a million and a half non-profits in the U.S., and probably hundreds of thousands of them file Form 990 (the annual non-profit tax return) every year. If the IRS required non-profits to file Form 990 via XBRL, that would greatly increase and improve accountability, transparency and comparability in the non-profit world."

Here's Salisbury University accounting student and MACPA intern Thomas Hood, who volunteered his technical wizardry: "Our ability to take (XBRL) in-house, implement it and see benefits fairly quickly at a pretty low cost made us realize that XBRL Global Ledger is real and can really help."

Here's Beth O'Brien from Altova, which provided the software the MACPA used in its XBRL project: "The MACPA has showed that not only can the benefits of XBRL extend to smaller companies, but they brought the project in-house, did the project very cost-effectively and were able to show some tangible results. ... It's a model case study, really."

Here's XBRL co-founder Eric Cohen, who smoothed out the rough edges with sage guidance and advice: "People think XBRL is all about big companies doing public company filings with the SEC. What's being proven here is that it's an awful lot more than that. There is value to not-for-profits and government entities."

Skip, Thomas, Beth and Eric joined forces to bring the MACPA's XBRL project to life. Listen to my interviews with them in their entirety:

Altova has produced a white paper that examines the MACPA’s project in detail. Read the report in its entirety.

Now tell us: How are you going to harness the power of XBRL?

MACPA panel: Private company standards are essential

Maryland CPAs have a message for the folks who have been debating private company accounting standards:

Let's get on with it already.

The time is right to establish a separate private company accounting standards board that will develop exceptions and modifications to GAAP for private companies, an MACPA task force has concluded in a new white paper.

The paper, "Private Company Standards: Responding to the Reporting Needs of Private Companies and the Users of Their Financial Statements," was produced by the MACPA's Accounting Standards Task Force and released as part of the association's 2011 Maryland CPA Summit in Baltimore.

“We have studied this issue for more than 30 years, and the small business community needs relief from onerous financial standards,” said Arthur Flach, CPA, managing partner of Grant Thornton LLP’s Baltimore office and chairman of the task force. “We urge the Financial Accounting Foundation to move forward with its Blue Ribbon Panel report and get started on separate private company standards.”

Created in October 2010 to respond to recommendations from the FAF's Blue Ribbon Panel on Standard Setting for Private Companies, the MACPA task force developed a series of recommendations for how standard setters can best meet the unique needs of private companies.

Specifically, the task force found that:

1. The current structure does not properly address private company standards and needs to be improved.
2. A separate board for private companies is warranted. The principle of “distinct but linked” with a parallel and joint process to avoid unnecessary divergence was viewed as critical to the process.
3. A “sunset” provision of five years would be appropriate, with the understanding that the five-year term begins with the formation of the new board.
4. The development of a differential framework for developing exceptions and modifications to extended GAAP is an essential element of the new board’s work and critical to the successful development of private company standards.
5. A proper cost-benefit balance is critical to the success of the new private company standards while taking into account the relevance to the financial statement users.
6. A single source of GAAP is imperative and would be codified in the same manner for private and public companies, with private company exceptions noted and contained within the respective pronouncements.

"It is clear private company stakeholders see a need to improve standards for private companies," the white paper concludes. "... Any further studies should be limited to determining how the recommended changes can be implemented and not continuing to study whether changes are needed."

The task force's findings mirror the opinions of a vast majority of MACPA members. The private company standards issue has been reviewed and discussed with more than 1,500 MACPA members at a series town hall meetings throughout Maryland over the past year. More than 90 percent of members polled at those meetings believe GAAP modifications and exceptions for private companies are the best solution to the problem.

• Read the white paper in its entirety.
• Check out "Private Company Standards: Is It Time?" The presentation was part of the 2011 Maryland CPA Summit in Baltimore.

What do you think: Is it time for a separate set of private company standards?

A vow to protect the public ... and dance!

I'll admit it: The thought of nearly 100 new Maryland CPAs vowing to protect the public is enough to make me want to dance.

I'm apparently not alone.

The MACPA celebrated its fifth New CPA Swearing-In Ceremony on June 2 by delivering its annual oath to dozens of Maryland's newest CPAs. With state and national dignitaries looking on, the CPAs recited these words in a vow to protect the public at all cost:

"I solemnly swear that I will assume the responsibilities and obligations as a certified public accountant in the state of Maryland and in the United States of America. I will support the laws and regulations and perform my professional duties to the best of my ability in an ethical, professional and objective manner. As a CPA, I will uphold the honor and dignity of the accounting profession and abide by the rules of professional conduct."

Though strictly ceremonial, those aren't empty promises.

"This a huge accomplishment. You've passed one of the toughest professional licensing exams there is," MACPA Executive Director Tom Hood told the new CPAs. "By being here, you are committing to the state of Maryland that you will always represent the public above everything else."

The vow also represents some pretty serious opportunities for the new professionals.

"You're in the accounting profession at an extraordinary time," said Ken Bishop, current chief operating officer and incoming CEO of the National Association of State Boards of Accountancy. "Your license in Maryland essentially means you have a license to practice in 47 states, thanks to mobility. This is a global economy as well, and your CPA license is recognized as the premier accounting credential in the world."

As I said last year, this is one of my favorite MACPA events of the year. Not only does the ceremony give new CPAs and their families an opportunity to celebrate their accomplishments, but it encourages those attending to actually verbalize their commitment to serving the public. Passing the exam and earning your license is one thing. Standing in front of state and federal regulators, raising your right hand and promising to do the right thing is a powerful step. I'd be willing to bet it's one the new CPAs will remember when faced with professionally and morally difficult decisions.

Sounds like a reason to celebrate to me, so I wasn't terribly surprised when, at a post-oath reception, the new CPAs were greeted by a flash mob of dancing MACPA employees and volunteers, all movin' to Flynt Flossy's "Did I Mention I Like To Dance."

Rest assured, new CPAs: The ability to dance and have fun isn't a requirement for most accounting jobs, but it does come in handy from time to time.

Check out the dancing CPAs here:

Congratulations once again, folks, and welcome to the profession. Make us proud ... and have fun doing it!

• Check out photos from the Swearing-In Ceremony and the Maryland CPA Summit.