M&A Newsletter

Will Private Company GAAP Become a Reality?

Janice Snyder, CPA — Fri, 25 May 2012 00:58:52 +0000

On May 23, 2012, significant steps were taken by the AICPA and the Financial Accounting Foundation (FAF) Board of Trustees, which is the oversight Board for the FASB and the GASB. The FAF announced its decision to establish a new body to improve the process of setting accounting standards for private companies. This decision is the result of a multi-year process which was undertaken by FAF to seek and consider extensive public commentary on the issue of Private Company GAAP.

The new group, the Private Company Council (PCC), will have two principal responsibilities which include: 1) addressing the needs of users of private company financial statements through modifications or exceptions to current GAAP and 2) serving as the primary advisory body to the FASB on the appropriate accounting treatment of new accounting standards for private companies.

The AICPA believes FAF has taken solid steps in the right direction and is encouraged by this approach. The AICPA has also announced plans to develop another comprehensive basis of accounting (OCBOA) financial reporting framework for privately held small and medium-sized entities that do not need U.S. GAAP financial statements.

Terry Polley, FAF President and CEO noted, “We welcome the AICPA’s support for the Private Company Council and for our efforts to improve the standard-setting process for private companies. We also believe that the AICPA’s plan to develop a financial reporting framework for smaller private entities, which would be used as a form of OCBOA reporting where appropriate, is an important and complementary undertaking. Taken together, these actions demonstrate the commitment of both organizations to the private company financial reporting constituency.”

Ohio Offers Amnesty To Taxpayers Through June 15

Jason Skrinak, CPA — Wed, 23 May 2012 16:59:57 +0000

Ohio will soon be closing its General Tax Amnesty Program that is available for both individuals and businesses. This program began on May 1st and is scheduled to end June 15, 2012. The purpose of this program is to encourage those who have previously unreported or underreported tax liabilities to correct these errors. Specifically, the program is for the following taxes:

Individual Income
Individual School District Income
Commercial Activity Tax (CAT)
Sales and Seller’s Use (Consumer’s Use Tax is under a separate Amnesty Program)
Employer Withholding
School District Employer Withholding
Corporation Franchise
Pass-Through Entity
Estate
Gross Receipts of a Natural Gas Company or a combined Electric and Gas Company
Motor Fuel
Cigarette or Other Tobacco Products
Dealers In Intangibles

Taxpayers qualifying for the program will be able to waive all penalties, and half of the interest due on these unpaid taxes. In order to qualify, a taxpayer must have unreported or underreported taxes due and payable as of May 1, 2011; relief will not be granted to those who filed returns and had reported tax due, but failed to pay that liability. In addition, to have an application accepted, the taxpayer must submit the proper tax application, relevant tax return (only paper returns will be accepted, not electronically submitted returns), and full payment. If the full payment is not submitted, the application will be denied. Furthermore, if the application is denied, the payment will not be returned, but instead will be applied to periods that had a tax liability due. The taxpayer will receive a letter within 30 days after the application is received indicating whether it was accepted or denied.

Circumstances that would prevent a taxpayer from qualifying are:

The tax for which amnesty was requested was not due and payable by May 1, 2011, or the tax is not one of the thirteen taxes listed above.
The taxpayer has already been audited, or is currently being audited, by the Department of Taxation for the tax for which amnesty was requested.
The taxpayer has received a billing or assessment noticed for the period for which amnesty was requested.
The application or payment is missing or incomplete.

In addition to the Amnesty Program discussed above, Ohio is also currently offering a separate Consumer’s Use Tax Amnesty Program that will run through May 31, 2013. The Use Tax Amnesty Program will be for taxes due from January 1, 2009, up to the month prior to the amnesty filing and the taxpayer will be responsible for filing and remitting tax going forward. The Use Tax Amnesty Program also offers penalty relief and limited waiver of interest.

We at McKonly & Asbury, are always available to answer questions and assist in determining if you qualify for the amnesty program as well as the filing of these applications.

March Construction Climbs 23 Percent

Mon, 21 May 2012 19:27:00 GMT

New construction starts in March jumped 23% to a seasonally adjusted annual rate of $482.4 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. The increase came as the result of a sharp gain for electric utility construction, lifted in particular by work at a nuclear power plant facility in Georgia. Meanwhile, public works construction and housing showed modest improvement in March, but nonresidential building lost further momentum. For the first three months of 2012, the amount of total construction starts on an unadjusted basis was reported at $94.2 billion, down 3% from a year ago. For the twelve months ending March 2012 versus the twelve months ending March 2011, total construction starts were basically unchanged.

The latest month's data boosted the Dodge Index to 102 (2000=100), up from a revised 83 for February. The annual average for the Dodge Index during both 2010 and 2011 was 91. The March construction start statistics included $8.5 billion estimated for work on Units 3 and 4 at the Vogtle nuclear power facility near Waynesboro GA. In February, the U.S. Nuclear Regulatory Commission approved a combined construction and operating license for Units 3 and 4, enabling construction work to begin on the two nuclear reactors. This follows more than $1.5 billion related to site work for Units 3 and 4 that had been entered into the construction start statistics during 2010 and 2011. If the latest entry for the Vogtle nuclear facility project is excluded, the pace of construction starts in March would be down 3% to $380.4 billion (annual rate), producing a reading of 80 for the Dodge Index. "Aside from the lift coming from electric utilities, the March statistics show that construction activity continues to hover within a set range, with gains for some project types being offset by weakness for other project types," stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.. "On balance, the construction industry can still be viewed as struggling to see renewed expansion take hold in a sustained and broad-based manner."

Nonbuilding construction in March soared 79% to $212.9 billion (annual rate). Electric utility construction advanced 249%, led by the $8.5 billion for work at the Vogtle facility in Georgia. If this project is excluded from the March statistics, then nonbuilding construction would be down 7% and electric utilities would be down 33%. While the pace for electric utilities, minus the Vogtle project, was slower, March featured the start of several noteworthy alternative energy projects. These included five large wind power facilities located in Kansas ($783 million), Montana ($300 million), Illinois ($135 million), Oklahoma ($110 million), and Massachusetts ($90 million). The public works sector in March grew 4%, helped by a 27% rebound for highway construction after an especially weak February. The trend for highway construction remains downward, however, as March contracting came in 12% below this category's average monthly pace during 2011. Water supply construction was another public works category that rebounded after a weak February, rising 59% with the help of a $90 million water treatment plant in Texas. The other public works categories retreated in March, with sewer construction down 1%, bridge construction down 11%, river/harbor development down 15%, and miscellaneous public works (site work, mass transit, pipelines, etc.) down 28%.

Residential building, at $146.7 billion (annual rate), grew 2% in March, maintaining the gradual if hesitant upward trend that's been present since the second half of last year. Multifamily housing in March increased 5%, continuing to regain upward momentum after its pause at the start of 2012. Large projects that contributed to the multifamily rise in March included a $184 million apartment building in Brooklyn NY, a $63 million apartment building in Boston MA, and a $38 million apartment building in Seattle WA. Single family housing in March edged up 1%, regaining some strength after slipping back in the previous two months. Compared to their average monthly pace for all of 2011, multifamily housing in March was up 13% while single family housing was up 16%.

Nonresidential building in March fell 4% to $122.8 billion (annual rate). The institutional building sector dropped 7%, due to weaker activity for a majority of its structure types. Healthcare facilities in March fell 30%, after showing some improvement during the first two months of 2012. There were a few noteworthy healthcare projects that reached groundbreaking in March, including a $140 million hospital expansion in Chattanooga TN and a $100 million hospital tower in Memphis TN, but the number of such projects was down from recent months. Murray noted, "Healthcare construction is being restrained in the near term, affected by the increased amount of hospital mergers that have taken place over the past year and the uncertain fate of healthcare reform legislation currently under review by the Supreme Court." The amusement-related category (convention centers, theaters, and sports arenas) dropped 21% in March, and churches also witnessed a 21% decline. Transportation terminal work in March slipped 9%, while the public buildings category (courthouses and detention facilities) was unchanged. On the plus side, the educational building category in March improved 10%, helped by a $105 million renovation to a science building at the U.S. Military Academy in West Point NY, although March still came in 20% below this category's average monthly pace during 2011. Manufacturing plant construction in March plunged 61%, as contracting in early 2012 has retreated following the improved activity reported last year.

The commercial sector in March was able to rise 10% from the previous month. Office construction in March grew 9%, supported by a $120 million office building expansion in San Francisco CA and a $101 million renovation to a federal office building in Cleveland OH. Warehouse construction in March advanced 19%, aided by the start of several large distribution centers for Amazon.com. Hotel construction in March jumped 91% relative to a subdued February, helped by groundbreaking for a $67 million resort hotel and casino in Bossier City LA and a $53 million hotel in Surfside FL. Moving the opposite direction in March was store construction, falling 18%, although March did include two $40 million shopping mall renovation and expansion projects, located in Nanuet NY and Indianapolis IN.

The 3% shortfall for total construction on an unadjusted basis during the first three months of 2012 was the result of a varied pattern by major sector. Nonresidential building was down 25% from the first three months of 2011, which had been boosted by the start of several unusual large projects, including a $1.1 billion data center in Utah for the National Security Agency, a $900 million semiconductor plant in Oregon, and a $575 million hospital in California. Nonbuilding construction during the first three months of 2012 managed a 2% gain, as a 38% increase for electric utilities outweighed a 16% drop for public works. Residential building during the first three months of 2012 climbed 21%, featuring year-to-date growth for both sides of the housing market – single family housing up 22% and multifamily housing up 17%. By geography, total construction during the first three months of 2012 showed declines in three regions – the South Central, down 23%; the West, down 22%; and the Northeast, down 13%. Year-to-date gains for total construction were reported in the Midwest, up 6%; and the South Atlantic, up 54% (reflecting in large part the boost coming from work at the Vogtle nuclear facility in Georgia).

The "no change" for total construction on a twelve-month moving total basis, meaning the twelve months ending March 2012 versus the twelve months ending March 2011, was due to this pattern by major sector – nonresidential building, down 7%; nonbuilding construction, down 3%; and residential building, up 13%. By geography, the twelve months ending March 2012 showed the following behavior for total construction – the South Central, down 10%; the Northeast, down 7%; the Midwest, down 6%; the West, down 2%; and the South Atlantic, up 27%.

To learn more about this report, visit McGraw Hill Construction at www.construction.com or contact the construction professionals of McKonly and Asbury, LLP.

Register Today for McKonly & Asbury’s Free “Buy-Sell Agreements” Webinar

McKonly & Asbury, LLP — Mon, 21 May 2012 18:32:15 +0000

The valuation provisions in the buy-sell dimension of most shareholder agreements might not work as intended. Here’s why: the valuation mechanism gets long in the tooth because it’s not revisited; therefore, when there’s a ‘triggering event’ (death, disability, retirement, etc.), the provision is out of date. Moreover, it might not have been the correct provision to start with. It might not have been funded. Key terms might not be defined accurately. Each of these can lead to litigation and, at a minimum, hard feelings, strain on family relationships, and avoidable friction. Will your buy-sell agreement work as intended?

Join presenter, Eric Blocher, CPA, CVA, Principal with McKonly & Asbury, for this webinar – Buy-Sell Agreements: Will Yours Work…or Add Fuel to the Fire? – and learn the essential valuation criteria that should be in every buy-sell agreement. It is never too late to fix it! Added bonus: we will review at no charge to you the valuation clauses in any shareholders’ agreement.

This free, hour-long webinar will take place on Thursday, June 21st at 2:00 p.m. EST, and CPE credit is available.

Reserve your webinar seat now by clicking here:
https://www1.gotomeeting.com/register/241845024

After registering, you will receive a confirmation email containing information about joining the webinar.

For more information, please contact us at info@macpas.com.

The RMC Advisors is Moving to M&A News

Mon, 21 May 2012 12:43:05 GMT

Change. The nature of the world is change; if we don’t grow, well, bad things can happen.

The RMC Advisors blog is ready to grow and become more than it was! We are joining with the main news site on our home site, McKonly & Asbury News! A new house, a new look, and to be honest, a much larger kitchen with new countertops.

While we hate to move and change our address (we hate missing mail), the reality is that this is best for you, the reader. The McKonly & Asbury News site will have our articles, of course, but it will also have other subject matter to bring new, different, and interesting content straight to your desktop.

In an effort to make this transition process as easy as possible for you, we will automatically transfer your subscription from The RMC Advisors to the McKonly & Asbury News site, as well as our bi-weekly newsletter which keeps you up-to-date on the latest business and financial information across all of our news sites.

We look forward to seeing you there, and tell your friends so they don’t get lost going to our new place of posting. We promise to keep you subscribed as long as you want, and we hope you like the new format as much as we do.

All the best and see you soon,
The RMC Advisors

Manufacturing Continues to Drive Economic Recovery

Fri, 18 May 2012 15:44:00 GMT

On May 15th, PNC Bank's Economic division released the following report regarding the continued expansion of manufacturing. PNC reported that industrial production increased 1.1 percent in April. There were revisions to production in the prior two months, as output fell 0.6 percent in March and rose 0.4 percent in February; previously, the Federal Reserve reported that output in both months was unchanged.

Manufacturing production rose 0.6 percent in April, after falling 0.5 percent in March. There was a 4percent gain over the month in motor vehicles and parts, with other manufacturing output up 0.3 percent. Production at mines rose 1.6 percent in April, while utilities output was up 4.5 percent; very warm weather earlier in 2012 reduced utilities demand but the weather returned to normal in April. The capacity utilization rate rose to 79.2 percent in April, up from 78.4 percent in March.

Industrial production is up 5.2 percent from one year earlier, with manufacturing production up 5.8 percent. Manufacturing, particularly motor vehicles, continues to lead the overall economic recovery. Investment demand remains strong, with production of business equipment almost back to its pre-recession peak, and demand for consumer goods is now picking up (see Chart 2). Auto production is improving as higher confidence, low interest rates, better access to credit and pent-up demand are all supporting sales.

Manufacturing payrolls are up by almost 500,000 since bottoming out in early 2010, although they are still down by more than 2 million from the spring of 2006. The improvement in manufacturing employment and incomes is boosting consumer spending, contributing to the overall economic recovery.

It is clear that the economic expansion continued at a moderate pace in the beginning of the spring quarter. Real GDP growth is still temperate, at around 2.5 percent at an annual basis, but is less dependent on a few drivers. The economy is reaching a self-sustaining expansion, where job growth drives income gains, supporting consumer spending growth, leading to further job gains. Although there will be drags in the near term from Europe and tighter fiscal policy, concerns over a double-dip recession are fading fast.

To learn more about this report or other matters impacting the manufacturing industry, contact the LEAN Accountants of Mckonly and Asbury, LLP.

Webinar Recap: Fraud Engagement from A to Z

McKonly & Asbury, LLP — Fri, 18 May 2012 12:01:32 +0000

We had another great webinar yesterday presented by Dave Hammarberg (Director of IT and Consulting Senior Manager) and Samuel BowerCraft (Senior Manager) of McKonly & Asbury on Fraud Engagement from A to Z! Thank you to everyone that attended and received CPE credit.

We reviewed some great tips and insight on step-by-step detailed walk through of an actual fraud engagement including the steps of Suspicion, Company Action, CFE Engagement, Discussion/Evaluation, Information Review, Interviews, and Reporting.

Check out our Upcoming Events page for news and updates on our future seminars and webinars.

For more information on this topic or to submit a question for Dave or Sam, use our contact page at http://www.macpas.com/contact.

Watch a recording of the presentation below.

Click here to view the video on YouTube.

Youtube link http://youtu.be/QimHvjmPRhc

Last Chance To Register for the Spring 2012 Construction Seminar - Friday, May 18th

Mon, 14 May 2012 20:40:00 GMT

McKonly & Asbury, LLP along with Murray Risk Management and Insurance, Woolford Law and Fulton Bank, will be hosting the Spring 2012 Construction Seminar on Friday morning, May 18th at the Sheraton Harrisburg/Hershey at 4650 Lindle Road in Harrisburg. This morning program will feature timely subject matter impacting the construction community. Registration and breakfast will begin at 7:30 AM with the seminar running from 8:00 AM to 11:30 AM. CPE credits will be available. The cost of registration is $35.

The full agenda for the day, including speakers and topics, is as follows:

7:30am to 8:00am - Registration/Continental Breakfast

8:00am to 8:05am - Welcome

8:05am to 8:55am - Tim Woolford, Woolford Law – Top 10 Contract Provisions Most Likely to Affect Your Right to Payment in the Tight Economy

8:55am to 9:35am - Michael Hoffner, McKonly & Asbury – Revenue Recognition/Lease Accounting Changes for Contractors

9:35am to 9:55am - Break

9:55am to 10:40am - Lydia Mantle, Murray Risk Management and Insurance – Personal Surety: Is This the Right Choice for You?

10:40am to 11:25am - Bill Kepler and Jim Wagner, Fulton Bank – Current Banking Market for Construction and Contractors

11:25am to 11:30am - Evaluation Forms and Adjournment

To register for this event, please contact the events staff of McKonly & Asbury, LLP at events@macpas.com or by calling 717-972-5822.

Register Now: Manufacturers Summit - Growth and Innovation, Thursday June 7th

Fri, 11 May 2012 17:00:00 GMT

McKonly & Asbury, LLP and MANTEC with partner organization, the Harrisburg Regional Chamber and CREDC, will be hosting its second annual Manufacturers Summit on Thursday, June 7th from 8:00am to 11:00am at the C. Ted Lick Wildwood Conference Center on the campus of the Harrisburg Area Community College, Wildwood Campus (One HACC Drive, Harrisburg, PA 17110).

This informative and thought provoking morning will focus on growth and innovation to enhance both top line revenue and bottom line income as well as how to measure this growth and manage it. The program will feature presentations and facilitated discussions around subject matter and topics impacting growth initiatives for manufacturers.

The speakers and topics for the summit include:

Fred Botterbusch, MANTEC - Growth and Innovation and What Companies are Doing to Grow
Bruce Nilson, Future Direction - Small Group Discussion on Growth and Innovation
David Blain, McKonly & Asbury, LLP and Scott McMartin, McMartin Consulting - A Different Way of Looking at Performance
Garry Brinton, Facilities Planners + Architects (FP+A) - How to Save Money (and Aggravation) on Your Renovation and Construction Projects
Steve Buterbaugh, McConkey Insurance and Benefits - Growth is Great, but Do Not Forget to Manage Risk

Registration and breakfast for this event will start at 7:30 AM. The Summit will begin at 8:00 AM and will conclude no later then 11:00 AM. The cost for this event is $35 and CPE credits will be available.

To register for this event, email events@macpas.com or call 717-972-5822.

Pennsylvania Sales/Use Tax Issues for Mining Site Preparation

Mon, 07 May 2012 17:48:00 GMT

The Department of Revenue offers this sales and use tax guidance to taxpayers who clear land and prepare a site in anticipation of mining operations to be conducted at that site. This guidance is necessary because the Department’s mining regulation, 61 Pa. Code § 32.35, details the application of the sales and use tax law as applied to traditional and strip mining, but is not as specific concerning modified or enhanced mining processes, such as hydraulic fracturing used in unconventional oil and gas well development. Although much of the work done for mining site preparation does not qualify for the mining exclusion, the exclusion is available for certain site work.

Pennsylvania law excludes from sales and use tax machinery, equipment, parts and foundations therefore, and supplies that are predominantly used directly in mining operations. 72 P.S. § 7201(k)(8); 61 Pa. Code § 32.35(a). Even if property may be considered essential to the conduct of the business of mining because its use is required either by law or practical necessity, that does not necessarily mean that the property qualifies for the tax exclusion. 61 Pa. Code § 32.35(a)(1)(iii). For example, property used prior to the actual mining operation, such as property used to store raw materials prior to their use in the mining operation, is not considered to be directly used in mining and is subject to tax. 61 Pa. Code § 32.35(a)(3)(iii)(G). Also, “property used for waste handling and disposal of pollutants other than in the course of production operations” is taxable unless the equipment, machinery and supplies are designed and used to control, abate or prevent air, water or noise pollution generated in the mining operation. 61 Pa. Code §§ 32.35(a)(2)(ii) and (a)(3)(iii)(J).

The regulation specifically states that the mining exclusion does not apply to property or services used in the “construction, reconstruction, alteration, remodeling, servicing, repairing, maintenance or improvement of real estate.” 61 Pa. Code § 32.35(a)(3)(i). That clause further states that “property used to remove trees and clear ground preparatory to extraction activities is not deemed to be directly used” and therefore not covered by the mining exemption.

Generally, equipment and parts used in site preparation – including, but not limited to, removal of timber, building of access roads and removal of dirt and rocks from the land – are taxable as pre-mining activities. However, the foundation directly underneath the drilling rig is excluded from tax. Therefore, although equipment used to build rigging pads is taxable, any foundation material supporting the drilling rig, such as sand, stone or other similar material, would be excluded from tax as foundation material for exempt mining equipment. The construction of ponds or any other vessels for storage of fresh water or raw materials prior to their use in drilling or hydraulic fracturing is not a mining activity.

Therefore, equipment used to construct these ponds and the actual materials used in the ponds, such as liners, are taxable pre-mining property. Ponds to be used to control or abate pollution generated in the mining operation, however, are excluded from tax. Therefore, although equipment used to build such ponds is taxable, any materials used in that construction, such as liners, sand and gravel, would be excluded from tax.

Tp learn more aboiut sales and use tax related to mining activities, please contract the construction professionals of McKonly and Asbury, LLP.

Sale of Donated Securities – FASB issues an exposure draft impacting the Not-For-Profit Community

Jim Shellenberger, CPA — Thu, 03 May 2012 19:33:13 +0000

Virtually all not-for-profit organizations (NFP) rely on donations in order to fund programs and operations centered at meeting their defined mission. While most donations are made in cash, often these donations include securities. Securities are defined as “a share, participation, or other interest in property or in an entity of the issuer or an obligation of the issuer” and most commonly take the form of shares of corporate stock, bonds, or other investments. When a NFP sells donated securities in order to utilize the cash for operations, or other purposes, they are left with an accounting decision on how to report these inflows on their statement of cash flows. The Financial Accounting Standards Board (FASB) issued an exposure draft on April 17, 2012 to help clarify these reporting requirements.

The FASB concluded that immediately converting donated securities to cash is economically similar to receiving a cash donation, and accordingly, the cash inflows from this type of transaction should be a component of cash flows from operating activities, rather than cash flows from investing or financing activities. The criteria established by the FASB for operating cash flow treatment are:

Upon receipt by the NFP, the securities are directed for sale, and
The NFP has the ability to avoid significant investment risks and rewards through near immediate conversion to cash

This is particularly relevant because many NFPs have accounting or organizational policies in place that require donated securities to be immediately converted to cash. By classifying these transactions as an operating activity, the FASB is attempting to avoid instances where the reader of the financial statements would inappropriately rely upon investing results of the NFP.

As is normally the case with NFP accounting, the donor ultimately dictates proper accounting treatment. If the donor restricts the donated securities, or its proceeds, for long-term purposes, the cash inflows should then be reported in the financing section of the statement of cash flows. Examples of long-term purposes include the purchase or construction of long-lived assets, or the establishment of a permanent endowment. Cash inflows from the sale of donated securities that do not meet the operating requirements above, or are not restricted by the donor, should be reported in the investing section of the statement of cash flows.

The full exposure draft can be found on the FASB website (www.fasb.org) and is open for public comment until July 16, 2012. Public comments received by the FASB are also available for viewing. The date of adoption has not yet been determined, and it is proposed that the standards in the exposure draft will be applied prospectively to cash receipts from the sale of donated securities, with retroactive application permitted, but not required. The provisions of this exposure draft are limited to “securities” and do not apply to donated items such as works of art, equipment, and other long-lived assets.

Please feel free to contact Jim Shellenberger, Senior Manager at McKonly & Asbury, at jshellenberger@macpas.com to further discuss this exposure draft, or any other questions or comments you may have regarding the not-for-profit industry.

Reshoring Could Create 2-3 Million Jobs by the End of the Decade

Thu, 03 May 2012 17:16:00 GMT

A new report from MFG.com, the world’s largest online sourcing marketplace for the manufacturing industry -- shows that while reshoring is increasing, American manufacturers might not be able to carry the load . . .

“There’s a severe shortage of workers,” says Mitch Free, Manufacturing Analyst and CEO of MFG.com. “Indicators are showing good signs; the market is active, reshoring is gaining speed, and there’s a high potential for growth. However, job shops are reporting that they cannot take advantage of this industrial growth because they’re unable to find skilled machinists.”

MFG.com surveyed over 250 of America’s job shops for its just-released “Job Shop Health & Capacity Report” (April 2012). CEO, Mitch Free, talks results and impacts on future industry health:

Reshoring is Real: “The results of this survey confirm that reshoring is real and job shops are benefitting. 40% of job shops reported getting a new contract that was previously sourced to a foreign supplier,” reports Mitch Free, CEO of the world’s largest online marketplace for the global manufacturing industry.

But It’s Limited By Unskilled Workers: “Job shops are reporting one of their greatest challenges is finding skilled employees. Sourcing professionals have reported that they want to reshore more work but are having a tough time finding high quality suppliers with capacity. This is especially true in the areas that were hit hard by offshoring.”

We Need To Start Educating NOW: “As manufacturing began leaving the U.S. twenty years ago, it became an unattractive career choice, especially in the areas of high volume machining, forging, casting, die/mold making, textiles. Trade schools should revive their training programs to address the shortage. Job shops need to re-introduce the apprentice program.”

Job Shops Need to Attract More Foreign Customers: “Over 80% of job shops get little to no business from outside of the U.S. Small businesses in the United States need to learn how to become exporters. Dependency on the United States market and economy going forward is a risky strategy. Job shops must learn how to connect with and sell to customers abroad.”

Marketing Is Crucial To New Business Generation: “Marketing is more important to job shops than ever before. Potential customers are very active in the market right now sourcing for varied reasons like moving to a more distributed supply chain or looking for local partners they can innovate with. Job shops need to become savvy marketers to attract this new business.”

American Optimism Abounds: “The fact that 78% respondents reported being optimistic about their sales and profits for 2012 is a great sign for the U.S. economy. Job shop owners are very in tune with where “the rubber meets the road” and are usually the leading indicators for greater economic trends.”

To learn more about this post, please contact the LEAN Accountants of McKonly and Asbury, LLP.

McKonly & Asbury’s Nonprofit Seminar – Monday, June 4

McKonly & Asbury, LLP — Mon, 30 Apr 2012 18:33:23 +0000

McKonly & Asbury recognizes the critical importance that the nonprofit sector plays in our community. Always striving to be a valued resource to keep you on the forefront of emerging nonprofit accounting and tax matters, we are excited to invite you to join us on Monday, June 4th for a Nonprofit Seminar!

Hosted by McKonly & Asbury, this seminar will provide timely, relevant topics to nonprofit organizations and will be held at the Giant Community Center in the Giant Food Store located at 3301 Trindle Road, Camp Hill, PA. Registration and breakfast will begin at 8:30am and the seminar will run from 9:00am until 12:00pm. The cost to attend is $25 and CPE credits will be available.

A glimpse of the morning’s speakers and topics are as follows:

Victoria Radabaugh Lindstrom, President of Suasion, LLC
Marketing Isn’t Really An Expense! – Sure, we categorize any costs associated with marketing a nonprofit organization in an expense account of some sort. However, when done right, marketing should be an investment of resources that yields real results. So what can you expect to get out of this investment? And how do you invest for the maximum return? We’ll discuss the best way to approach marketing, how to get the most out of your marketing dollars, and which tools you should consider, including the latest trend, Social Media.

Gary Dubas, Partner with McKonly & Asbury
Tax Issues Facing Nonprofit Organizations – We will cover a number of areas regarding tax reporting requirements of nonprofit organizations. Topics covered will include changes to the Form 990, emerging issues regarding unrelated business income, and tax matters regarding contributions.

Jim Shellenberger, Senior Manager with McKonly & Asbury
Hot Topics in Nonprofit Accounting and Auditing – This session will include a number of hot topics that impact nonprofit organizations including changes to the nonprofit reporting model, changes to yellow book and A-133 auditing standards, and a lease accounting standard update. We will also present 10 tips for year end closing and audit preparation, performing risk assessments, and segregation of duties in the accounting department.

To register for this event, please contact us at events@macpas.com or by calling (717) 972-5822.

Positive Conditions Persist for Architecture Billings Index

Mon, 30 Apr 2012 17:59:00 GMT

The commercial sector continues to lead the Architecture Billings Index (ABI) which has remained in positive territory for the fifth consecutive month. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI score was 50.4, following a mark of 51.0 in February. This score reflects a slight increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 56.6, down from mark of 63.4 the previous month.

“We are starting to hear more about improving conditions in the marketplace, with a greater sense of optimism that there will be greater demand for design services,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “But that is not across the board and there are still a number of architecture firms struggling so progress is likely to be measured in inches rather than miles for the next few months.”

Key March ABI highlights:

Regional averages: Midwest (54.1), Northeast (53.9), South (50.1), West (46.6)
Sector index breakdown: commercial / industrial (56.0), multi-family residential (51.9), institutional (47.7), mixed practice (47.2)
Project inquiries index: 56.6

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

To learn more about the ABI, please visit www.aia.org or contact the construction professionals of McKonly and Asbury, LLP.

Value Stream Mapping and its Importance to Workflow Part 2

Thu, 26 Apr 2012 16:33:00 GMT

In Part 1 of this two part series on Value Stream Mapping, we discussed the importance of understanding the current value stream in order to make recommendations and implement LEAN concept changes for the future state. Part 2 of this series will discuss the future state map and the transition of your current process to your future state process.

Now that the current state map is completed, it is time to analyze that map in order to make recommendations as to how to LEAN the job process for better efficiency and utilization of people, equipment, and materials. Designing this future state map starts with designing a LEAN flow.

Individual Efficiency vs. System Efficiency

The concept of a LEAN Value Stream is to focus on individual efficiency versus system efficiency. More specifically, how fast a product should be produced in order to meet customer demand. Many times companies are mistaken when they take an approach of reviewing an individual process and making changes to that process without reviewing the impact on the system and process flow as a whole. More often than not, these individual process changes will increase and not reduce lead time, waiting, wasted production, or over production, as defined by the Eight Deadly Wastes.

Calculate Takt Time

In order to design a LEAN Flow, the first thing that must be done is to determine the Takt Time for production of one product from the current state. Takt Time is defined as the rate of assembling one product based on sales rate. The equation for Takt Time is:

Effective Working Time per Shift
Customer Requirement per Shift

Once we understand the Takt time under the current state, then measurement of time efficiency can be achieved when the future state map is implemented.

Begin to diagram your LEAN Flow
When developing a LEAN flow, always keep in focus the future state. When designing this LEAN flow the current state map becomes the basis for your work plan. The current state map is your “Blue Print”. When analyzing the current state map to develop your LEAN flow, use as much material and information flow documentation that can be obtained. This information source is vital to understanding the complete flow of materials in order to determine if product is being over produced or materials are being over ordered. Begin by drawing your changes for LEAN flow on the current state map. This can be best done by using a clear plastic overlay to the current state map in order to see LEAN flow ideas versus current state operations. When performing this step, identification of equipment moves, combining of equipment, or removal of equipment and processes is recommended.

Batch and Push Processing versus Continuous Flow or Pull Processing

When diagramming your LEAN flow, always keep in mind the key concept of LEAN, meeting customer demand. This is the difference between a batch or “Push” system versus a continuous flow or “Pull” system. The difference between a push and pull system is that a push system is individual functions operating separately from each other. Another words, in a process that has three distinct functions, process C cannot be completed until process B is completed and same from process B with process A. In a continuous flow or “Pull” system, the flow of product is based upon movement of one entire piece across that process line “Make One, Move One”. This concept allows for reductions in part movement and employee processes in order to move a product to its end result.

Part of this process is to determine if your LEAN flow will be built to shipping or a supermarket. The concept of supermarket is based on the Pull system. In a supermarket, materials are pulled from inventory based upon customer demand. The customer process goes to supermarket and withdraws what it needs when it needs it. The supplying process then produces to replenish what was withdrawn. The purpose for this process is to control production between flows in order to not overproduce product. It controls production at the supplying process without trying to schedule production on the shop floor. When producing to shipping, production is based upon a push approach, as you are pushing product to meet customer demand for shipped product.

Developing Your Future State

Now that you have analyzed your current state and developed a LEAN flow from this analysis, it is now time to develop the future state. When developing your future state map some questions to remember are:

What is the Takt time of your current state versus future state?
Will the process be built to shipping or to a supermarket?
Where can continuous flow be used?
Where will supermarket pull systems be utilized?
At what single point in the production chain does production get triggered?
What process improvements will be necessary (i.e. uptime, changeover, training)?

Once you have answers to these questions, begin to draw your future state map based upon your LEAN flow concepts designed and analyzed above.

Implementing the Future State

Now that you have outlined your future state map, the hard part begins – implementation. The first rule to implementing this future state map is to not wait. Begin the implementation process as soon as possible. If process efficiencies have been identified, delaying implementation is lost cash flow. Also, immediately moving to implement the new future state will allow for implementation when the process is fresh with everyone involved.

While immediate implementation may seem easy, there will be many roadblocks along the way. Developing a plan to “manage the exceptions” will be as important as the implementation itself. Here are a few key concepts to remember:

Tie implementation to a business objective.
Break your future state into “loops”.
Make a value stream plan: What to do by when.
Relate the future state map to your layout
Conduct value stream reviews by walking the flow.

In conclusion, there are many benefits to value stream mapping. More specifically, those benefits are:

Helps to visualize more than the single process level.
Links the material and information flows.
Provides a common language.
Provides a blueprint for implementation.
More useful than quantitative tools .
Ties together LEAN concepts and techniques.

There are many benefits to LEAN. These benefits can reap significant cost savings for manufacturers. The value stream mapping process is just one of many concepts in the tool box of LEAN. To learn more about LEAN, please contact the LEAN Accountants of McKonly and Asbury, LLP. Another resouce of information is MANTEC. MANTEC can be contacted at www.mantec.org.

Webinar Recap: Retaining Your Top Talent

McKonly & Asbury, LLP — Mon, 23 Apr 2012 15:22:12 +0000

We had another great webinar yesterday presented by Katie Nix (Human Resource Manager) and Suzanne Sentman (Human Resource Coordinator) of McKonly & Asbury on Retaining Your Top Talent! Thank you to everyone that attended and received CPE credit.

We reviewed some great tips and insight on hiring and keep great employees. We reviewed strategies such as; inclusion culture, buddy and mentor programs, special and unique benefits, and stay interviews.

Check out our Upcoming Events page for news and updates on our future seminars and webinars.

For more information on this topic contact Katie or Suzanne at info@macpas.com.

Watch a recording of the presentation below.

Click here to view the video on YouTube.

Link to video http://youtu.be/jnRzokkiDDQ

Small and Midsized Manufacturers Continue Growth and Expansion

Thu, 19 Apr 2012 17:33:00 GMT

Prime Advantage, the buying consortium for midsized manufacturers, announced the findings of its fourth annual Group CFO Survey, revealing financial projections and top concerns of its Member companies’ CFOs in 2012. CFOs continue to see solid signs of the economic recovery in U.S. manufacturing. While Member companies are planning more hiring, wage increases, and capital expenditures, the availability of skilled workers is a growing challenge.

Summary of Findings

Sixty-nine percent of executives are more optimistic about their companies’ financial prospects in 2012 (compared to 67% in 2011)
While more CFOs are optimistic about their own financial prospects, fewer respondents are more optimistic about the U.S. economy than in 2011, with 67% feeling better about 2012 than the prior year (compared to 74% in 2011)
Fifty-nine percent of manufacturers expect moderate to high growth from their key customers in 2012
Nearly 95% of CFOs plan to invest in manufacturing equipment and 63% in computer hardware this year
CFOs report that customers are less affected by tight credit, with 24% of respondents in 2012 stating customers are not affected by the cost or availability of credit (compared to 14% in 2011)
Health insurance premiums increased for most respondents, but at a lesser rate, with only 33% indicating an increase of more than 11% (down from 48% measured in 2010)
Top priorities in 2012 include cutting operational costs, developing new products and services, and long-term strategic planning (which rose 13 points from 2011).

Mixed Feelings on Financial Prospects and the U.S. Economy
CFOs are more optimistic about the financial prospects for their own companies now than in the last two years (the level of optimism is 79/100 in 2012, compared to 63/100 in 2011). Only 2% of respondents are less optimistic about 2012. This number is higher for Prime Advantage Members than the recent similar surveys, conducted by Duke/CFO Magazine (67/100) and Bank of America (50/100). The majority of CFOs report increases in their own new order pipelines, with 57% citing more new orders now than at this time in 2011. Manufacturing CFOs are also optimistic about the business prospects of their key customers this year, with 55% expecting to see their customers’ businesses grow moderately in 2012.

Respondents are slightly less optimistic about the overall U.S. economy, with 67% more optimistic and 12% less optimistic (compared to 74% and 3% respectively in 2011). However, nearly all manufacturing CFOs (98%) believe manufacturing will stay the same or continue to expand in 2012. These mixed sentiments are consistent with a recent GE Survey in which respondents were optimistic about their own companies and industries, and slightly less optimistic about the U.S. economy.

When asked to cite the top potential threats to U.S. economic growth, 90% of the CFOs were most concerned with the European fiscal situation (90%), followed by the U.S. budget deficit (69%) and the cost of healthcare reform (68%).

Top Priorities
CFOs will focus this year on cutting operational costs, developing new products and long-term strategic planning. The number of respondents citing long-term strategic planning increased strongly, increasing by 13 percentage points since 2011 and 26 percentage points since 2010. Last year’s top priority, the ability to quickly respond to market conditions, fell 24 percentage points. These results indicate that companies are employing proactive growth strategies rather than reactive strategies that reflected the prevailing uncertainty during and post-recession.

Employment
Manufacturing companies continue to struggle to fill open positions. Fifty-seven percent of respondents have unfilled positions (more than double last year’s result of 23%). The inability to find skilled workers locally is the main reason for this problem (as reported by 65% of respondents with open positions). Competition for talent and labor force immobility were cited as other top causes. As a short-term solution, companies have recognized that they cannot rely on the market to provide skilled workers and they are investing in retraining existing employees and providing training for existing employees. As a long-term solution, respondents emphasized promoting manufacturing as a strong career choice in local educational institutions. Respondents are also going to junior college or vocational schools and co-developing welding or electronic programs to help deliver skilled workers to the local marketplace.

Top Concerns: ability to maintain margins, customer demand, commodity prices
The ability to maintain margins, which was a top internal concern back in 2010, tops the list with 71% indicating it as the top internal concern. Attracting skilled workers (40%) and forecasting accurate results (38%) round out the top internal concerns. The cost of healthcare, which was the top concern last year tied for 3rd (38%) in 2012.

External concerns remained the same as prior years: customer demand (67%), price pressure from competitors (64%) and the cost of non-fuel commodities (40%). However, these concerns are not as concentrated as in past years. The cost of non-fuel commodities is down 33 percentage points and uncertainty about customer demand is down to 67% in 2012 from 82% in 2011.

“For the third straight year, our Member companies are optimistic and expecting strong growth and financial performance for their companies,” said Louise O’Sullivan, founder, president and CEO of Prime Advantage. “Our Members, and manufacturers in general, have performed well and the majority are back to pre-recession levels, which speaks to the health of their organizations. Our goal remains the same, which is to deliver cost reduction opportunities for these companies, reduce risk within their supply chains and position them with best-in-class supply partners that align with their growth strategies.”

The Prime Advantage Group CFO Survey was conducted in January and February using an online survey platform. Prime Advantage surveyed a cross section of finance executives from its Member companies consisting of industrial manufacturing firms from various sectors with annual revenues ranging between $10 million and $10 billion, of which the majority ranges between $20 million and $500 million.

Methodology: In February 2012, Prime Advantage surveyed financial executives from its Member companies whom represent US-based manufacturers in more than 25 different industries, including commercial foodservice, packaging, truck and trailer, material handling, food processing and construction. These small and mid-market companies range in annual revenues between $10 million and $4 billion, of which the majority ranges between $20 million and $500 million. The survey received a 21 percent response rate from 200 surveyed.

In the past ten years, Prime Advantage has paid more than $113 million in rebates and discounts to its manufacturing industry Members. To request a copy of the Prime Advantage 2012 CFO Outlook Survey visit: www.primeadvantage.com/cfooutlook/

To learn more about this survey and its results you can also contact the LEAN Accountants of McKonly and Asbury, LLP.

M&A Offices Closed Friday, April 20

McKonly & Asbury, LLP — Thu, 19 Apr 2012 12:33:59 +0000

McKonly & Asbury offices will be closed this Friday, April 20th as we celebrate the end of another successful tax season. M&A thanks all of our wonderful team members for their hard work and dedication this tax season. We know that our people are our greatest asset and that M&A’s success is a direct result of your efforts! We also thank our clients and friends in the community for your continued trust in us as your accountants and business advisors. Thank you!

4th Annual Business Seminar for Entrepreneurs on May 31

McKonly & Asbury, LLP — Wed, 18 Apr 2012 16:48:00 +0000

McKonly & Asbury’s Entrepreneurial Services Group invites you to join us for our 4th Annual Business Seminar for Entrepreneurs on May 31! Sponsored by Pavone and Paytime, this year’s seminar focuses on updates and matters affecting your business and you, as an entrepreneur.

The seminar will be held on Thursday, May 31, 2012 at the Giant Community Center in the Giant Food Store located at 3301 Trindle Rd., Camp Hill, PA. Registration and breakfast will begin at 7:30am and the seminar will run from 8:00am until 12:00pm. There is no charge for this seminar, and CPE credits are available.

Topics and speakers will include:

Asset Protection: Keeping Your Assets Safe – Kurt Trimarchi, Partner & Dan Matarrese, Tax Manager, McKonly & Asbury
Will Private Company “GAAP” Become a Reality? – Janice Snyder, Principal, McKonly & Asbury
IT Fraud/Controls: Is Your Company Protected? – Dave Hammarberg, Director of IT and Consulting Senior Manager & Samuel BowerCraft, Senior Manager, McKonly & Asbury
Branding, Social and Digital Media – A Primer – Pavone
Payroll Update and Hot Topics for 2012 – Paytime
Legal Update in Today’s Economy – Todd Shill, Partner, Rhoads & Sinon LLP

It’s sure to be another great seminar that you won’t want to miss! To register, please contact us at events@macpas.com or by calling (717) 972-5822.

Internal Audit Insight

Mon, 16 Apr 2012 19:02:56 GMT

The IIA defines insight as an “end product or result from internal audit’s assurance and consulting work. Insight can involve ‘connecting the dots’ (i.e. identifying the entity-level root causes of control concerns, emerging risks, or significant opportunities to improve the entity’s governance process) to deliver value-added results to key internal audit stakeholders.”

The Institute of Internal Auditors Research Foundation (IIARF) surveyed and interviewed board members, audit committee members, executive management, and internal auditors on insight.

The results noted insight is important to stakeholders with 90% of survey respondents noting that internal audit should deliver insight. Unfortunately, only 72% of respondents agreed that internal audit functions provide insight identifying a gap between expectations and performance.

Respondents noted that internal auditors have significant finance and accounting experience but sometimes lack the operational experience to fully understand business strategies and challenges and provide insight. Also, respondents desired internal audit focus more on helping improve the business than catching mistakes.

A strong relationship was noted between certifications and insight delivery. Chief Audit Executives (CAEs) with more than 50 percent of their department holding certifications were more likely to agree that their internal audit team delivered insight.

Key Factors Enabling Insight Delivery

Respondents noted the following top five factors that help enable insight delivery:

Control Environment
Stakeholder Expectations
Reporting Relationship
Competent CAE
Significant Industry/Organization Knowledge

In addition, survey selections and write-in responses note the following factors are critical to internal audit providing insight:

Tone at the top
An internal audit team with skill and business/industry background
Independence of the internal audit function
Clearly communicated expectations from stakeholders and the CAE
Clear and constructive communication of issues identified and associated recommendations.

Activities Facilitating Insight Delivery

In addition, the following activities support insight delivery:

Senior level auditors and subject matter experts
Internal audit viewpoints in assessments and results reporting
Significant consultative time in the annual audit plan
Utilizing data analysis in assessments and results reporting
Including insight delivery in performance expectations and evaluations

In contrast, the factors noted below can hinder insight deliver:

Disconnect between board expectations and executive expectations.
- Board members value assurance on internal controls and risk management
- Executives value new information, a new way to approach an issue, or a useful recommendation.
- Focus on auditors’ financial background versus business experience
- Lack of leadership and communication skills
- Focusing more on generating findings than collaborating on business solutions.

What steps can you take to improve insight delivery in your internal audit function?

Meet with key stakeholders regularly and discuss expectations.
Align the internal audit mission to focus on agreed expectations.
Refocus your internal audit approach to agree with the audit mission
- Policies and Procedures
- Staffing
- Use of Technology and Tools
- Success metrics
- Ensure proper reporting relationships and sufficient organizational independence is in place
- Assess your leadership skills and communication style

Reference the full article at http://www.theiia.org/bookstore/product/insight-delivering-value-to-stakeholders-1587.cfm for more details on the survey results.

Register Today for McKonly & Asbury’s Free “Fraud Engagement from A to Z” Webinar

McKonly & Asbury, LLP — Mon, 16 Apr 2012 18:55:06 +0000

Join us for the first webinar in our summer webinar series entitled “Fraud Engagement from A to Z”. Presenters Dave Hammarberg, Director of IT and Consulting Senior Manager, and Samuel BowerCraft, Senior Manager, of McKonly & Asbury will take you on a step-by-step detailed walk through of an actual fraud engagement.

This free, hour-long webinar will take place on Thursday, May 17th at 2:00 p.m. EST, and CPE credit is available.

Reserve your webinar seat now by clicking here:
https://www1.gotomeeting.com/register/771424880

After registering, you will receive a confirmation email containing information about joining the webinar.

For more information, please contact us at info@macpas.com.

Associated Builders and Contractors (ABC) Economic Outlook Presentation

Mon, 16 Apr 2012 14:42:00 GMT

On February 15, 2012 Associated Builders and Contractors (ABC) hosted an economic forecast breakfast with their national economist Anirban Basu. Mr. Basu presented his view of the construction industry for 2012 and forward. The information provided by Mr. Basu was very informative and insightful. To view the presentation please click here.

To learn more about this economic outlook for the construction industry, please contact Associated Builders and Contractors at www.abc.org or the construction professionals of McKonly and Asbury, LLP.

Internal Audit Insight

McKonly & Asbury, LLP — Mon, 16 Apr 2012 13:39:43 +0000

The Institute of Internal Auditors Research Foundation (IIARF) surveyed and interviewed board members, audit committee members, executive management, and internal auditors on insight.

Key Factors Enabling Insight Delivery

Respondents noted the following top five factors that help enable insight delivery:

Control Environment
Stakeholder Expectations
Reporting Relationship
Competent CAE
Significant Industry/Organization Knowledge

In addition, survey selections and write-in responses note the following factors are critical to internal audit providing insight:

Tone at the top
An internal audit team with skill and business/industry background
Independence of the internal audit function
Clearly communicated expectations from stakeholders and the CAE
Clear and constructive communication of issues identified and associated recommendations.

Activities Facilitating Insight Delivery

In addition, the following activities support insight delivery:

Senior level auditors and subject matter experts
Internal audit viewpoints in assessments and results reporting
Significant consultative time in the annual audit plan
Utilizing data analysis in assessments and results reporting
Including insight delivery in performance expectations and evaluations

In contrast, the factors noted below can hinder insight deliver:

Disconnect between board expectations and executive expectations.
- Board members value assurance on internal controls and risk management
- Executives value new information, a new way to approach an issue, or a useful recommendation.
- Focus on auditors’ financial background versus business experience
- Lack of leadership and communication skills
- Focusing more on generating findings than collaborating on business solutions.

What steps can you take to improve insight delivery in your internal audit function?

Meet with key stakeholders regularly and discuss expectations.
Align the internal audit mission to focus on agreed expectations.
Refocus your internal audit approach to agree with the audit mission
- Policies and Procedures
- Staffing
- Use of Technology and Tools
- Success metrics
- Ensure proper reporting relationships and sufficient organizational independence is in place
- Assess your leadership skills and communication style

Reference the full article at http://www.theiia.org/bookstore/product/insight-delivering-value-to-stakeholders-1587.cfm for more details on the survey results.

PHFA Announces 2012 Multifamily Housing Awards

Fri, 13 Apr 2012 14:44:31 GMT

The board of the Pennsylvania Housing Finance Agency approved $11.8 million in funding and $28.5 million in tax credits for the construction of affordable multifamily housing developments located throughout Pennsylvania.
In total, PHFA announced funding for 32 developments statewide. This funding will be used to leverage local, state, federal and private financial resources needed to complete the financing plans for these construction initiatives.

These multifamily developments create affording housing opportunities for families and seniors across Pennsylvania, and they promote vital economic activity in rural and urban communities. When completed, the new developments will provide an additional 1,579 housing units for Pennsylvania residents.

“The competition was intense for this affordable housing funding and we were pleased with the high quality of the 96 proposals we received this year,” said PHFA Executive Director and CEO Brian A. Hudson Sr.

“This funding, and the tax credits we award, are vital to the housing needs of the state’s residents because they are the main tools we have for directing the construction of critically needed affordable housing across Pennsylvania. These multifamily developments will benefit the local communities where they’re located because of the economic boost they’ll provide during construction, and then later when the residents move in.”

The 32 multifamily housing proposals that today are being awarded PHFA funding and tax credits are identified here.

About PHFA
The Pennsylvania Housing Finance Agency works to provide affordable homeownership and rental apartment options for older adults, low- and moderate-income families, and
people with special housing needs. Through its carefully managed mortgage programs and investments in multifamily housing developments, PHFA also promotes economic development across the state. Since its creation by the legislature in 1972, it has generated $10.5 billion of funding for more than 147,555 single-family home mortgage loans and 83,000 rental units, while saving the homes of more than 46,000 families from foreclosure. PHFA programs and operations are funded primarily by the sale of securities, not by public tax dollars. PHFA is governed by a 14-member board.

McKonly & Asbury is a leader in accounting for affordable housing developments in Pennsylvania. IRS and PHFA regulations require specialized knowledge when accounting for LIHTC developments whether it's performing a 10% Test or Development Cost Certification audit; or performing development stage audits and preparing partnership tax returns. The M&A Team has the audit and tax expertise and experience needed. For more information, please contact Elizabeth Brooks at ebrooks@macpas.com.

How to Measure and Manage Investment Risk

McKonly & Asbury, LLP — Thu, 12 Apr 2012 18:49:18 +0000

Risk – the possibility of losing money – is one of the most feared words in investing. Despite most people’s aversion to risk, the history of market manias shows that most people – even some of the most risk-averse – have the ability to abandon their fear of losses when asset prices soar for a long time and everybody else seems to have made a lot of money.

So what gives some people the ability to control their emotions and make cool and calm decisions? Two main reasons are that they know how to measure risk and how to manage it. And, to the extent that individual investors learn both, they increase their chances for making smart decisions that keep their portfolios on track toward meeting their goals.

Two Ways of Measuring Risk

Beta – Professionals have two common ways to measure risk. The first is beta, which is how closely a portfolio’s performance matches or varies from that of a benchmark index. The benchmark for large-company U.S.-traded stocks is the S&P 500 stock index, while a generational benchmark for bonds of medium-range maturity is the Barclays Aggregate Bond index. The performance of indexes is normally expressed as a percentage and reflects their total return, which is a combination of any interest or dividend payments and their change in price.

Beta is expressed as a number on an open-ended scale, and it can be a positive number, a negative number, or zero. A beta of 1.0 means that a stock or portfolio’s returns are identical in both size and direction to the benchmark, while a beta of -2.0 means that the portfolio’s returns are twice as large in the opposite direction of the index. For example, when the S&P 500 index return is 12%, a portfolio with a beta of 1.0 should also return 12%, while a stock with a beta of -2.0 should lose 24%. A beta of 0.0 means there is no patterned relationship between the two returns.

Standard deviation – A second way professionals measure investment risk is with standard deviation. Expressed as a percentage, it reflects a range of returns above and below an annual average rate of return for the stock or portfolio itself, without reference to a benchmark. It’s standard deviation that measures the way many define risk: volatility.

In statistics, when applied to investment returns, one standard deviation covers about two-thirds of all returns. So a portfolio that has an average rate of return of 9% and a standard deviation of 12% means that in six to seven years out of 10, the portfolio’s returns range between -3% and 21%. In general, a lower standard deviation is better, because it reflects less change of a negative return.

Techniques to Manage Risk

Individual investors can use several methods to help reduce the risk and volatility in their portfolios. These include:

Diversification. The fewer the number of securities you own in your portfolio, the greater the risk that one or more will produce losses that reduce your ability to generate positive compound returns. In a stock portfolio, that means owning stocks of at least 10 different companies from at least five different sectors (such as, but not limited to, technology, consumer staples, finance, energy, and basic materials).
Asset allocation. This refers to spreading your investments over the three classic asset classes (stocks, bonds, and cash) according to a formula that potentially matches the rate of return you need to meet your goals. The formula determines what percentage of your holdings should be from each asset class (e.g., 70% stocks, 25% bonds, and 5% cash). Because bonds and cash generate more steady (if smaller) average returns than stocks, the more of each included in your portfolio, the less volatile your overall returns should be.
Dollar cost averaging. This is a technique that puts price declines to your advantage. It involves making periodic purchases in the same dollar amount of the same securities, in good markets and bad. When you continue to buy shares when their prices fall, you buy more shares than when the prices are higher. This gives you more shares, which increases your dollar gains when prices start going back up. However, it neither guarantees a profit nor protects against loss in a prolonged declining market. Because dollar cost averaging involves continuous investment regardless of fluctuating price levels, investors should carefully consider their financial ability to continue investment through periods of low prices.
Portfolio rebalancing. This is a two-step process by which you restore your holdings to the proportions defined by your asset allocation strategy. The first step is to sell a portion of the investments in those asset classes where your holdings have grown to be larger than their prescribed percentage. The second step is to use the sale proceeds to buy more of the securities from those asset classes whose proportions have become too small.

If you need help aligning your investment strategy with your goals while adapting to changing market trends, or have any questions regarding this article, contact Donald Yost or Michael Howard, Partners with Anchor Financial Group, at anchor@anchorfinancialgroup.com.

Harrisburg Regional Chamber and CREDC to Host Business Transformation: Strategic Planning and Beyond Roundtable April 18th

Thu, 12 Apr 2012 17:06:00 GMT

In today’s business climate the need for change and taking control has become a large factor in a company’s overall success. Business Transformation is a program that is available to business owners to start them on the path to a better, more focused and accountable business structure. The term "Business Transformation" is de-fined as "The application of an individualized and continual system of strategy based business initiatives driv-ing a culture of improvement and profitable growth."

Basically, there is a review of where the company is today then a long term strategic plan is developed to hit the vision and mission of the company. Once this is in place, the strategic goals are put together into an action plan. A dashboard of metrics is developed to allow you to check your progress toward the goals.

The Goal is to develop a business transformation process that will provide a company with:

Assessments that are required to develop a strategic plan.

Assistance in plan development.

Professional Business Advisor (PBA) services to facilitate plan implementation

Come join the Harrisburg Regional Chamber and CREDC on April 18th at the Radisson Hotel Harrisburg from 11:30 Am to 1:00 PM to learn more about transforming your manufacturing business and position your company for success. The cost of the event is $20. To register visit www.harrisburgregionalchamber.org or call 717-232-4099.

McKonly & Asbury, LLP Construction Industry Professionals Receive CIT Designation

Mon, 09 Apr 2012 19:41:00 GMT

McKonly & Asbury, LLP is pleased to announce that Construction Industry Professionals, Michael Hoffner, Partner and David Blain, Principal have received their Construction Industry Technician (CIT) designation from Clemson Universities Center For The Improvement of Construction Management and Processes, Department of Construction Science and Management.

This multiple day course study and test was developed by the National Association of Women in Construction (NAWIC) Education Foundation's Certified Construction Associate (CCA) program. The program, which was first made available to the public in 1982, is designed to be an advanced program of multiple course studies. These courses cover the construction-related skills and knowledge needed by any person interested in moving into positions of adminstration and management in the construction industry.

In its effort to continue to focus on the goal of providing the most up-to-date eductional opportunites, the NAWIC Education Foundation (NEF) has developed the Construction Industry Technician (CIT) program. This program provides the user a detailed overview and fundamental core principals about the construction industry and its processes. Receipt of the CIT certification acknowledges the receipient's accomplishment of attaining a high professional level in the construction industry.

To learn more about this designation, please contact the construction professionals of McKonly & Asbury, LLP.

Due April 15: Annual Unclaimed Property Report

McKonly & Asbury, LLP — Mon, 09 Apr 2012 15:24:21 +0000

Have you filed your report? April 15 is the deadline to file your annual PA Unclaimed Property Report under the Pennsylvania Abandoned and Unclaimed Property Act. Businesses, organizations, and government entities (“holders”) in possession of any financial asset with no activity or contact with the owner for a period of approximately 5 years are required to file annually and transfer abandoned property to the Treasury Department. Any holder who does not file by April 15 may be subject to interest and penalties. Filing is not required if there is no unclaimed property to report; however a negative report may be filed to help maintain an “active” reporting status.

Examples of unclaimed property include:

Wages/Payroll
Uncashed checks
Accounts receivable (credit balances)
Commissions
Refunds/Rebates
Gift Certificates/Gift Cards

A more comprehensive listing by industry can be found on Pennsylvania Treasury website: Property Types by Industry

The dormancy periods vary depending on the type of property, but most types of property have a dormancy period of 5 years. Wages and commissions are one of the exceptions with a dormancy period of only 2 years. The property dormancy matrix can be found on the Pennsylvania Treasury’s website.

The Treasury offers a Voluntary Disclosure Program for holders of unclaimed property that have never filed a report or may have overlooked certain property types in the past. Through this program, holders will become compliant while receiving a waiver of penalties and interest. Holders may be considered for the program if they meet the following criteria:

Voluntarily coming forward due to non-reporting or underreporting of unclaimed property.
Not under audit by the Pennsylvania Treasury related to unclaimed property reporting.
Not been granted voluntary compliance or participated in the Pennsylvania self-audit program in the past 10 years.

Additional information, including a FAQ about unclaimed property, is available at www.patreasury.gov.

The New Tangible Property Regulations – What You Need to Know

Carrie Booth, CPA — Thu, 05 Apr 2012 19:00:41 +0000

Determining whether and when a business must capitalize costs incurred in acquiring, maintaining, or improving tangible property has always been open to some level of judgment, based largely on the interpretation of past case law. This is an area that has been exposed to significant controversy due to inconsistent application of the law. However, on December 23, 2011, temporary regulations (T.D. 9564) were released by the IRS that are meant to simplify compliance with the Internal Revenue Code and the tax treatment of expenditures related to tangible property.

The new temporary regulations apply to expenditures made on or after January 1, 2012, and will affect virtually all taxpayers that purchase, lease, produce, or improve tangible property, such as buildings, machinery, vehicles, furniture, and equipment. They will have an impact on businesses of all sizes, large and small. Although the regulations are “temporary” they have the same binding effect as final regulations.

The regulations provide a general framework for assessing whether a capital expenditure is currently deductible as a repair and maintenance expense, or whether it is required to be capitalized and depreciated over the useful life of the asset. The following paragraphs summarize some of the most pertinent parts of the new regulations.

Tangible Property Improvements

One of the most applicable areas of the regulations are the provisions that relate to improvements of property, and the definition of unit of property for building property and non-building property. For a building, the unit of property consists of the building and its structural components. The unit of property for real and personal property, other than buildings, is defined to include all functionally interdependent components.

Once the unit of property is determined for a specific expenditure, a taxpayer must apply the standards set forth in the regulations to determine if the expenditure results in an improvement that needs to be capitalized. An amount paid for an improvement to a unit of property must be capitalized if the amount results in betterment, restoration, or adapts the unit of property to a new or different use. The regulations go on to further define what is meant by betterments, restoration, and adaptation to a new or different use.

Betterments ameliorate a material condition or defect at the time of acquisition or production; result in a material addition; or result in a material increase in the quality, capacity, efficiency, or strength of the unit of property.
Restoration results if any of the following conditions are met: repair of a unit of property to ordinarily efficient operating condition from a state of non-functional disrepair; rebuilding a unit of property to a “like new” condition after the end of its class life, or; replacement of a major component or substantial structural part of the unit of property.
Adaptation to a new or different use results in the property being converted from one functional use to another functional use.

There is a safe harbor rule in the regulations that states that amounts for certain routine maintenance costs for tangible property, other than buildings, can be deducted rather than capitalized. In order to be currently deductible, the routine maintenance costs must be for recurring activities that a taxpayer expects to perform more than once over the life of the asset, as a result of the use of the property, to keep the property in its ordinary efficient operating condition.

Materials and Supplies

The temporary regulations modify and expand the definition of materials and supplies. Materials and supplies are defined as tangible property, not inventory used or consumed in the taxpayer’s operations that is:

A component acquired to maintain, repair, or improve a unit of tangible property;
Fuel, lubricants, water, or similar items that are reasonably expected to be consumed in 12 months or less;
A unit of property that has an economic useful life of 12 months or less;
A unit of property with an acquisition or production cost less than $100.

Non-incidental materials and supplies are deductible when used or consumed, while incidental materials and supplies are deductible when purchased if no consumption records are maintained and no physical inventories are performed, so long as taxable income is clearly reflected.

De Minimus Rule

The regulations contain an exception to capitalization for certain acquisitions, up to a threshold, that meet specific guidelines. In order to be able to deduct the amount for tax purposes, the taxpayer must expense the purchase price for financial reporting purposes, have an applicable financial statement, and have a formal written capitalization policy. The deduction must be less than or equal to the greater of 0.1% of the gross receipts for the tax year for income tax purposes or 2% of the total depreciation expense for the tax year.

What’s Next?

On March 7, 2012, the IRS released two revenue procedures which explain the procedures for securing automatic consent to change to the accounting methods provided in the regulations discussed above. Taxpayers should review their capitalizations policies to determine their compliance with the regulations and assess whether an accounting method change is necessary.

PNC Bank’s Economic Division reports ISM Manufacturing Index Rises In March as Recovery Continues

Thu, 05 Apr 2012 14:20:00 GMT

The ISM Manufacturing Index rose by one point in March, to 53.4 percent; a level above 50 indicates expansion. This followed a drop in the index in February, from 54.1 percent to 52.4 percent. New orders fell slightly, but there were large increases in the employment and production components. Except for supplier deliveries and customers’ inventories, all of the components were above the 50 level that indicates expansion.

There was a large drop in the exports component, from 59.5 percent to 54.0 percent, although it remains in expansion. Weakness in Europe is likely behind this drop. Of the 18 industries covered, 15 reported expansion in March. The two contracting industries, computer and electronic products and chemical products, may be suffering because of recession in Europe.

The increase in the overall index was larger than expected, and indicates that manufacturing continues to lead the U.S. recovery. Still, the index is weaker than it was one year ago, so the expansion in manufacturing has slowed somewhat as production has caught up to stronger demand. Manufacturing employment is up by more than 400,000 since its trough in early 2010. Manufacturing job growth will continue this year as firms boost output, adding to overall payroll gains.

PNC expects net payroll employment growth of 200,000 when the March employment report is released on Friday April 6th, with private-sector job gains of 210,000 and government job losses of 10,000. The unemployment rate will hold steady at 8.3 percent. Household employment will increase, but the labor force will also expand as previously discouraged workers start to look for jobs again, a sign of improved confidence.

For more information on this economic data, please contact the Economic Division of PNC Bank or the LEAN Accountants of McKonly and Asbury, LLP.

McKonly & Asbury Announces Summer Webinar Series

McKonly & Asbury, LLP — Mon, 02 Apr 2012 19:38:17 +0000

McKonly & Asbury is proud to announce the kick off of our summer webinar series! If you’ve joined us for past webinars, thank you! If you haven’t, these free webinars cover topics important to you and your business!

Here is a glance at our upcoming summer webinars:

May 17 at 2 PM – Fraud Engagement from A to Z. Taking a step by step detailed walk though of an actual fraud engagement.

June 21 at 2 PM – Buy-Sell Agreements: Will Yours Work…or Add Fuel to the Fire? Learn the essential valuation criteria that should be in every buy-sell agreement.

July 19 at 2 PM – Federal Tax Webinar. Discussion of the new tangible property regulations; depreciation of fixed assets; how to apply the correct methods and lives, and avoid errors; and cost segregation.

August 23 at 2 PM – Financial Reporting Changes on the Horizon. Learn about the recent trends in financial reporting.

More details and registration information for the May webinar will be announced shortly, and keep watch in this blog for upcoming details for the other webinars as well! As always, we appreciate any feedback. If you have topics you’d like to see covered in future webinars, please feel free to email us at info@macpas.com.

Revenue Recognition Update and The Impact to the Construction Community

Mon, 02 Apr 2012 14:48:00 GMT

Late in 2011, the Financial Accounting Standards Board (FASB) re-issued an exposure draft of their proposed changes on how revenue will be recognized for all businesses going forward. The following is a summary of these proposed changes and the impact to construction and construction related companies.

The implementation timeframe of proposed changes to revenue recognition is targeted for between Q4 2012 and Q1 2013.
FASB reiterated that once the new exposure draft becomes final, all previously existing industry guidance will be eliminated – including existing guidance for the construction industry. Therefore, industry-specific guidance around how to account for claims, unapproved change orders, and even the methods of calculating percentage of completion will be eliminated.
FASB indicates that they are not eliminating percentage of completion accounting, but with the industry guidance that is going to be eliminated (as mentioned above), the prescribed methods for calculating percentage of completion accounting will be eliminated. This will allow construction entities to have opportunities to use other methods for calculating percentage of completion. However, this may lead to greater diversity of practice over time.
FASB reiterated that specific guidance has been written with the construction industry in mind. More specifically, this guidance will allow for most typical construction projects to be accounted for as a single performance obligation. The specific guidance as currently written in the new exposure draft is:
- A good or service is distinct if either of the following criteria is met:
  - The entity regularly sells the good or service seperately
  - The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer. Readily available resources are goods or services that are sold separately (by the entity or by another entity) or resources that the customer already has obtained (from the entity or from other transactions or events).
- Notwithstanding the requirements above, a good or service in a bundle of promised goods or services is not distinct and, therefore, the entity shall account for the bundle as a single performance obligation if both of the following criteria are met:
  - The goods or services in the bundle are highly interrelated and transferring them to the customer requires that the entity also provide a significant service of integrating the goods or services into the combined item(s) for which the customer has contracted.
  - The bundle of goods or services is significantly modified or customized to fulfill the contract.

These proposed changes are sure to have a significant impact on all construction companies and construction related entities. The potential changes in percentage of completion accounting will not only have an impact on prepared audit, reviewed and compilation reports for bonding purposes but could have potential impacts on tax. Obtaining the advice of a seasoned construction accounting and tax professional in advance will help to eliminate any potential surprises that this new guidance may have on your construction business.

To learn more about this new guidance and to contact an accounting professional seasoned in the construction industry, please contact the construction professionals of McKonly & Asbury, LLP.

Equipping the Organization & Stanton’s Law of Risk

Sam BowerCraft, MSIS, CISA — Thu, 29 Mar 2012 17:28:36 +0000

Risk: the word of the day, month, year, and probably century. Everything we do in life has something to do with avoiding risk, preparing for risk, or having someone else handle it for us. But in the course of our busy lives, it is easy to “take care of” a risk and forget to check on it later. In business, the risk you addressed yesterday can be back next year, or sooner, or somewhere else. Where has risk migrated in your organization that you aren’t aware of? And what will you do to prepare for it?

The financial crisis of 2008 has brought risk management to light in many new (and shocking) ways. The crisis showed how failure to manage risk by companies put their future in jeopardy (or ended it). Additionally, the impact on the rest of the country from their failure was substantial, and we are now paying for their risk management failure… in one way or another.

These impacts are varied and the source of a great deal of discussion, planning, and heartache. But while the outcomes from the crisis are ongoing, I think that for those who wish to avoid the same trap, it is vital we learn from the mistakes that were made. Otherwise, we are destined to repeat them.

What was the main cause of the fallout? What was not done that should have been done? How can we act to better (1) avoid the same trap or failure and (2) prepare to weather any consequences if a similar situation occurs?

A great deal of inquiry and evaluation has gone into the crisis, its beginnings, results, and impact. I recently had the fortune to hear Thomas Stanton speak on this matter. Mr. Stanton has a background in government and regulatory oversight that is formidable, and his discussion delved into the crisis and its many facets. One comment in particular that spoke to the nature of the crisis was what he called Stanton’s Law:

“Risk will migrate to the place where government is least equipped to deal with it.”

– Thomas Stanton

In essence Mr. Stanton is pointing out that risk (the exposure to danger) will flow to areas that are weakest in control or oversight. He also pointed out in his comments that the failure in oversight is usually the result of moving towards profitable ventures that are usually not as well supervised financial activities.

I think he is right. I have seen many companies doing many things: some good, some bad. But in all cases where I have seen frauds, problems with financial reporting, or operational issues, it has been the result of either:

(1) A failure to identify and evaluate the risk ahead of time (“We did not know that could happen!”) or

(2) A lack of diligence by those responsible for oversight (“We don’t think that is important.”).

These two issues are the same issues present in the 2008 crisis (in a much larger scale), or Enron.

For me, Stanton’s Law is a summation of key concepts:

The first: Risk is changing in your organization all the time, and it is moving toward places where the organization is less prepared.
The second: In order to mitigate changing risks, we must have a changing and vigilant approach to addressing risk; otherwise we may fail to move to address the changes in risk.

Regardless of what your organization makes, grows, produces, services or manages, the world is changing around it. That external change alters circumstances and changes risk inside the company. As an organization, being aware of these changes (actual and possible) that could occur can help you to prepare for risks now, before something happens that you are not prepared to deal with.

I leave you with a question:

What is your organization doing to prioritize risks inside and outside the organization?

Next Time: I will discuss “Governance: The Purpose” and we will dive into what governance means and why defining its purpose and direction helps the success of the organization.

To read more about Thomas Stanton and his work, visit these links:

Value Stream Mapping and its Importance to Workflow - Part 1

Thu, 29 Mar 2012 14:00:00 GMT

One of the more practical and easy to understand elements of LEAN is understanding the workflow of a shop or manufacturing process. When discussing LEAN, most people relate to workflow and workflow improvement because it can be easily seen and understood from a shop or manufacturing floor.

Part of improving workflow is understanding the "value stream". In LEAN terms, this is called "Value Stream Mapping". Value Stream Mapping is following a product's production path from beginning to end by drawing a visual representation of every process in the material and information flow. By understanding how the shop floor currently operates, improvements and recommendations can be made to develop a more efficient and effective future state. This leads to the design of a LEAN flow.

Let's start by discussing the Current State map. Taking a step back and understanding how the entire shop or manufacturing floor operates for a single process may be one of the most important things you can do to improve efficiency. Many of us tend to get caught up in the day-to-day operations of a process and not really take the time to step back and analyze how materials and information flows. The best way to gain this knowledge is through a simple process of just mapping the every movement and flow of materials and information to produce or manufacture one item. This should be accomplished by walking the flow from start to finish, drawing by hand the every movement of materials and information from door (in) to door (out).

How to Get Started with a Current State Map

Step 1 - To start a Current State map, the first item of business is to obtain customer information and delivery schedules. The whole concept of LEAN is based upon meeting customer demand and how to achieve this. In order to meet that demand, the first thing that will need to be done is to understand what that demand is and how quickly the production cycle must work to meet that demand.

Step 2 - The next step is to perform a quick walk through of the production floor to identify the main processes (in order).

As you begin the process of documenting the Current State map, some of the information to consider gathering from the shop floor should be:

Number of product variations
Cycle time ( from 1 piece to the next)
Changeover time
Process reliability
Number of operations
Scrap rate
Production batch sizes
Working time (minus breaks)
Pack size
Others

By gathering this information through your walk through process, valuable information can be obtained as to inefficiencies from the shop floor processes.

Step 3 - The next step in the process is to begin the actually documentation of the Current State map. This workflow documentation can be completed through use of data boxes and inventory icons and triangles that can be obtained from LEAN document sources or through internal development.

Step 4 - Once the Current State map is outlined, the next step is to obtain supplier information to determine how and when supplies are purchased, inventoried, and ultimately used for production. Idle supplies and raw inventory is considered non-utilized cash that could be freed up for other processes or functions. Understanding how supplies are ordered and utilized will help to free up this idle cash flow.

Step 5 - The next step is to determine basic information flow. More specifically, how do processes know what to make next. Avoiding overproduction is a key element of LEAN. Overproduction will tie up cash flow as well as over utilize production for inventory that is not necessary compared to a product or line that may be under producing for a client.

These steps will allow for production managers and machine operators to identify where materials are being pushed. The intent of Value Stream Mapping is to eliminate the push of materials and move to a pull system for materials and production. A pull system is dictated by client demand. A push system is dictated by how much the facility can actually produce. A push system is not client driven but company driven, meaning that client demands are typically not met.

For more information on LEAN Operations, please contact the LEAN Accountants of McKonly and Asbury, LLP. Another source of LEAN information is MANTEC. Please visit their website at www.MANTEC.org.

An Update on Private Company Financial Reporting

Mike Hoffner, CPA — Mon, 26 Mar 2012 20:45:39 +0000

Over the past decade, financial accounting and reporting standards have become more complex and detailed in response to the needs of the public marketplace. During that time, nonpublic entities have become subject to a variety of new rules and disclosure requirements which have resulted in greater cost and effort being required to prepare financial statements that are in accordance with US Generally Accepted Accounting Principles (GAAP). Many preparers and users of nonpublic financial statements have expressed concern relative to the need for, and usefulness of, such information. In response to this concern, there has been a growing momentum towards creating a set of standards focused on the needs of private companies, and eliminating the need to comply with certain requirements that are necessary for public companies.

There is still uncertainty as to the ultimate outcome of the recommendations of the Blue-Ribbon Panel on Standard Setting for Private Companies, which were released in its Report to the Board of Trustees of the Financial Accounting Foundation (FAF) in January of 2011. However, despite the ongoing uncertainty, there has been further movement and discussion in recent weeks on this important topic.

In FASB Chairman Leslie Seidman’s “2012 Chairman’s Outlook on the FASB” webcast on March 12, 2012, the chairman discussed the initiatives of the FASB and FAF in this area and indicated further discussion would take place at a FAF trustees meeting in May, and a plan of action might come out of this discussion. At issue is FAF’s proposal to create a Private Company Standards Improvement Council that would recommend exceptions for private companies to existing GAAP, and those recommendations would be subject to FASB approval. The AICPA has been very vocal in its opinion that the ultimate decisions on private company GAAP should lie with an independent board, and not be merely recommendations that would be subject to FASB approval.

In conjunction with the continued discussions on who would ultimately be responsible for private company standard setting, the FASB also announced a new project whereby it will reexamine the definition of a “nonpublic entity”. The goal of the project is to define what constitutes a private company in order to distinguish between different types of entities for standard-setting purposes, and to give clarity on determining which companies are to be included in the scope of the Private Company Decision-Making Framework. The FASB expects to begin deliberations on this topic in the second quarter of this year.

Preparers and users of financial statements of nonpublic companies should have more clarity in late May as to the direction private company standard setting may take. In the meantime, if you have any questions, please reach out to Michael Hoffner, Partner at McKonly & Asbury by emailing mhoffner@macpas.com.

Contract Litigation Insurance - A Confidence Booster

Mon, 26 Mar 2012 14:06:00 GMT

Litigation you might say holds no certainty but uncertainty. From the strategies of your opponent, to the ultimate outcome, the process of litigation is laden with events and decisions over which the participants may have little or no control, and as such it cannot be accurately predicted. Even the costs and amount of attorney fees to be expended cannot be estimated with certainty. This is the nature of litigation. In some cases, a litigant may even be on the hook for its opponent’s attorney fees if he loses. When a party is faced with the possibility of paying the attorney fees of the other side, the decision to commence litigation or to defend a lawsuit rather than settling is daunting, possibly to the point of total surrender. Because attorney fees could exceed the amount of the original claim itself, this possibility can be paralyzing.

Of course you don’t have to worry about any of this if your attorney has assessed your case as a “slam dunk” or a “guaranteed winner”. Unfortunately, like unicorns and the tooth fairy, such things do not exist in the real world. Business owners, along with the assistance of wise counsel, must make a realistic assessment of their litigation exposure and risk of loss: a sober, unvarnished review of the strengths, and yes, the weaknesses too. Studies support this prudent approach, as statistics developed by the Bureau of Justice Statistics have shown that 33% of plaintiffs and 66% of defendants end up on the losing end of their contract disputes at trial. Although Pennsylvania law generally requires that each party in ligation pay their own attorney fees, it is becoming increasingly common for parties to shift the risk of attorney fee costs to the other side by including an attorney fee provision in their contracts.

Now it is possible to insure against the possibility of paying one’s opponent’s attorney fees in breach of contract lawsuits by purchasing Contract Litigation insurance. This relatively new insurance product may provide just the leverage and confidence necessary to initiate litigation to pursue claims or to defend against dubious claims rather than capitulating under the risk of paying your opponent’s attorney fees in the event the court sides with your adversary.

To learn more about Contract Litigation Insurance and its benefits, please contact Tom Williams of Reager & Adler, PC. Tom can be contacted at twilliams@reageradlerpc.com. To learn more about other trends impacting the construction community contact your construction professionals at McKonly & Asbury, LLP.

Webinar Recap: Lean Operations/Overhead for Small to Mid-Sized Companies

McKonly & Asbury, LLP — Fri, 23 Mar 2012 19:51:40 +0000

We had another great webinar yesterday presented by Greg Lowe with McKonly & Asbury on Lean Operations/Overhead for Small to Mid-Sized Companies! Thank you to everyone that attended and received CPE credit.

We reviewed some great tips and insight on some core concepts of making your business LEAN, how to increase Net Income, and how to reduce Direct, Labor, and Overhead costs. Some specific areas that we looked into reducing costs were:

Rent
Insurance
Marketing
Utilities
Data/Telecommunications
Research and Development
Sales and Use Tax
Interest/Fees

Check out our Upcoming Events page for news and updates on our future seminars and webinars.

For more information on this topic contact Greg Lowe at glowe@macpas.com.

President Announces New Efforts to Support Manufacturing Innovation

Thu, 22 Mar 2012 17:18:00 GMT

The Obama Administration recently announced a new proposal for a National Network for Manufacturing Innovation that could strengthen and ensure the long-term competitiveness and job-creating power of U.S. manufacturing. The proposal would build a network of up to 15 Institutes for Manufacturing Innovation around the country, serving as regional hubs of manufacturing excellence that will help to make our manufacturers more competitive and encourage investment in the United States. The President’s Budget proposes a $1 billion investment to create this new National Network for Manufacturing Innovation.

The President also announced that the Administration will take immediate steps to launch a pilot institute for manufacturing innovation. The pilot institute will be funded from $45 million of existing resources from the Departments of Defense, Energy, and Commerce and the National Science Foundation, and will be selected from a competitive application process.

The Institutes will bring together industry, universities and community colleges, federal agencies, and our states to accelerate innovation by investing in industrially-relevant manufacturing technologies with broad applications to bridge the gap between basic research and product development, provide shared assets to help companies – particularly small manufacturers – access cutting-edge capabilities and equipment, and create an unparalleled environment to educate and train students and workers in advanced manufacturing skills. Each Institute will serve as a regional hub of manufacturing excellence, providing the innovation infrastructure to support regional manufacturing hubs and ensuring that our manufacturing sector is a key pillar in an economy that is built to last. This model has been successfully deployed in other countries and represents a gap in the U.S. manufacturing innovation infrastructure that the President’s proposal will address.

The Institutes will each have a well-defined technology focus to address industrially-relevant manufacturing challenges on a large scale and to provide the capabilities and facilities required to reduce the cost and risk of commercializing new technologies. While the Institutes would be competitively selected, several areas of innovation illustrate the opportunities that this proposal could help to realize:

Developing lightweight materials, such as low-cost carbon fiber composites (CFC's), that will improve fuel efficiency, performance, and corrosion resistance of the next generation of automobiles, aircraft, ships and trains.
Refining standards, materials, and equipment for “3-D printing”(also known as additive manufacturing) to enable low-cost, small batch production using digital designs that can be transmitted from designers located anywhere.
Creating a smart manufacturing infrastructure and approaches that lets operators make real-time use of “big data” flows from fully-instrumented plants in order to improve productivity, optimize supply chains, and improve energy, water, and materials use.

The new National Network for Manufacturing Innovation will work to leverage new investment from industry, state and local government, and the research community. This initiative will be a collaboration between Commerce’s National Institute of Standards and Technology, the National Science Foundation, the Department of Defense, and the Department of Energy.

For more information on this proposal, please contact the LEAN Accountants of McKonly & Asbury, LLP.

Save The Date - Spring 2012 Construction Seminar - Friday, May 18th

Tue, 20 Mar 2012 18:21:00 GMT

McKonly & Asbury, LLP along with Murray Risk Management and Insurance, Woolford Law and Fulton Bank will be hosting the Spring 2012 Construction Conference on Friday morning, May 18th at the Sheraton Harrisburg/Hershey. This morning program will feature timely subject matter impacting the construction community. Registration and and breakfast will begin at 7:30 AM with the seminar running from 8:00 AM to 11:30 AM. CPE credits will be available. The cost of registration is $35.

To register for this event, please contact the events staff of McKonly & Asbury, LLP at events@macpas.com or by calling 717-972-5822. More details regarding topics and speakers will be announced shortly on Contractors Center Point. Stop back to www.contractorscenterpoint for more details.

Register Today for McKonly & Asbury’s Free “Retaining Your Top Talent” Webinar

McKonly & Asbury, LLP — Mon, 19 Mar 2012 17:07:15 +0000

Join us for our April webinar entitled “Retaining Your Top Talent” with presenters Katie Nix, Human Resource Manager and Suzanne Sentman, Human Resource Coordinator of McKonly & Asbury.

Hiring top talent continues to be a challenge for many companies. What is even more challenging is retaining the talent you recruited. In this webinar, we will cover ways to keep your talent from walking out the door.

This free, hour-long webinar will take place on Thursday, April 19th at 2:00 p.m. EST, and CPE credit is available.

Reserve your webinar seat now by clicking here:
https://www1.gotomeeting.com/register/305104713

After registering, you will receive a confirmation email containing information about joining the webinar.

For more information, please contact us at info@macpas.com.

SBA Surety Bond Guarantee Program - Can It Benefit Your Construction Company

Mon, 19 Mar 2012 13:35:00 GMT

The SBA (Small Business Administration) has a very efficient, little known program to helps small and emerging contractors get surety bonds up to $2,000,000. After gathering and signing some initial paperwork – the system is web based and the program is handled by your surety professional. In the paragraphs that follow is an outline of the program, eligibility requirements and the paperwork required.

At its core the SBA Surety Bond Guarantee Program is set up like reinsurance and participates with many insurance companies across the country. XYZ Excavating needs a bond and has trouble in the standard market do to a variety of reasons including lack of working capital to not enough net worth. They go to their local surety professional and he/she recommends them for the SBA program. The insurance company at that point can take more risk because the SBA will guarantee up to 90% of that bond in case there is a loss. In a $1,000,000 claim situation the surety is only $100,000 at risk. They and the SBA underwriters (less strict underwriting guidelines) approve the bond and the local insurance company issues the bond on THEIR paper. The owner or GC does not know that the SBA is guaranteeing the bond. It’s all behind the scenes. As stated earlier, the maximum bond amount at this point is $2,000,000.

For most general building contractors revenues that are less than $33,500,000 will qualify for the program and specialty trade contractors that are $14,000,000 and under are also eligible. If a bond of over $1,000,000 is requested a CPA reviewed statement is required. From $501,000 to $1,000,000 a CPA compilation will be needed and under $500,000.00, high quality internal statements will be needed.

At initial request the contractor will need the following:

Current WIP (Work In Progress) Schedule with start and end dates of each job
Personal Financial Statement
Bank Line of Credit Term Sheet
Contractors Questionnaire (provided by surety professional)
Most recent 3 years Financial Statements
Internal 6 month numbers (if applicable)
Copies of Tax returns on all affiliates/subsidiaries – first 4 pages will suffice

To learn more about this program, contact Greg Marco, Surety Bond Executive with McConkey Insurance and Benefits. Greg can be reached at gmarco@ekmcconkey.com or contact the construction professionals of McKonly & Asbury, LLP.

Fifth Annual TRENDS Symposium – May 16, 2012

McKonly & Asbury, LLP — Sun, 18 Mar 2012 22:00:36 +0000

Join us on Wednesday, May 16, 2012 for our Fifth Annual TRENDS Symposium! Sponsored by McKonly & Asbury, this symposium will take place at the Radisson Penn Harris Hotel & Convention Center at 1150 Camp Hill Bypass in Camp Hill, PA. Registration and breakfast starts at 8:00am. The program will run from 8:30am until 3:30pm. The cost to attend is $60, which includes a continental breakfast, lunch, and 6 CPE credits.

Focusing on accounting and audit issues for the insurance industry, we have an exciting array of topics and speakers planned! The following provides the agenda for the day.

Session Agenda

*Time*	*Topic*	*Speaker*
8:00AM – 8:30AM	Registration and Continental Breakfast
8:30AM – 8:40AM	Welcome	Samuel BowerCraft, McKonly & Asbury
8:40AM – 9:15AM	Legislative Update	Senator Patricia Vance
9:15AM – 10:00AM	Professional Ethics	Michael Hoffner, McKonly & Asbury
10:00AM – 10:15AM	Morning Break
10:15AM – 11:10AM	SSAE16 – Third Party Reliance: SOC	Samuel BowerCraft, McKonly & Asbury
11:10AM – 12:00PM	ORSA/Insurance Update	James Gkonos, Saul Ewing
12:00PM – 1:00PM	Lunch
1:00PM – 1:50PM	Actuarial Update	Jane Taylor, Huggins Actuarial
1:50PM – 2:00PM	Afternoon Break
2:00PM – 3:10PM	Risk Focused Financial Examination Panel (lessons learned)	Elaine Nissley, McKonly & Asbury; Annette Szady, PA Insurance Department; Bill Reinenberg, Capital BlueCross
3:10PM – 3:30PM	Closing	Samuel BowerCraft, McKonly & Asbury

To register, please email us at events@macpas.com or call (717) 972-5822.