Archive for July, 2014

How Can Super Circular Reforms Work For Your Non-profit Organization?

Thursday, July 31st, 2014

When it comes to maintaining a high level of transparency and accountability, not-for-profit organizations face a lot of challenges. Not only does the community look to your organization to provide high-quality services and resources, the government expects your organization to utilize federal funding responsibly. The ability of not-for-profit organizations to secure federal assistance is critical, which is why industry leaders are seeking more clarity pertaining to a wide range of recent reforms made to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. These reforms are scheduled to take effect the Dec. 26, 2014. Here’s some insight into what you can expect moving forward.

Super Circular Reforms

Last December, the Office of Management and Budget (OMB) passed sweeping reforms to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, also known as the Super Circular or the Omni Circular. The goal for these reforms is to help the federal government streamline its guidance concerning administrative requirements while strengthening the oversight of federal funds. By ensuring compliance of these reforms, the OMB hopes to reduce financial waste, fraud and abuse.

Whether you’re the director of an organization that seeks federal grants and/or assistance, an accountant who serves such an organization, or a citizen who benefits from the organization’s government funding, the Super Circular is a big deal. The federal government awards more than $500 billion every year, and it is the OMB’s responsibility to ensure that every dollar spent is a good use of taxpayer funds.

What Do Super Circular Reforms Mean For You?

  • This newer guidance effectively consolidates eight federal circulars into one, which makes guidelines, cost principles, and audit requirements easily accessible. Having one “Super Circular” to thumb through – even though it tops 100 pages – is a welcome change to grant seekers, grant recipients and awarding agencies.
  • Now that the grant guidance is easily accessible and transparent, the OMB anticipates increased competition among agencies and organizations that are eligible for monetary assistance.

For example: If you have never applied for aid in the past, but you think your organization or government agency may be eligible for federal assistance, you can now easily find out. More agencies and organizations are expected to take advantage of the fact that these guidelines are easily accessible, which means there will be more people vying for government money.

A comprehensive list of federal assistance programs is available in the programs tab of the Catalog of Federal Domestic Assistance (CFDA) website. This site not only provides a list of programs and grants available, it provides key information about what is required to apply and qualify for federal assistance.

  • New provisions have established a higher threshold for an A-133 audit. The threshold for an A-133 audit is now $750,000 – which is higher from the previous threshold of $500,000. This means that not-for-profit organizations that bring in less than $750,000 annually are not required to complete an A-133 audit, which will provide some relief to about 5,000 non-federal organizations. This doesn’t mean the OMB will stop monitoring the federal aid that is distributed to these organizations, the OMB says 99.7 percent of aid awarded to organizations and agencies will still be subject to single audit oversight.

Please Note: If your fiscal year ends in December, the $750,000 single audit threshold won’t go into effect until your Dec. 15, 2015 audit. And if your fiscal year ends in June, it won’t go into effect until December 30, 2016.

  • The Super Circular significantly reforms how organizations and agencies will maintain their cost principles. Specifically, in its guidance, the OMB places a greater emphasis on internal controls. The Super Circular effectively defines what organizations and agencies can consider indirect costs, administrative salary direct costs, compensation, and costs associated with materials and supplies.

For example: While the salaries of your administrative and clerical staff may have been treated as indirect costs in the past, the OMB says that it may now be more appropriate to consider them as direct costs if the work performed is specifically outlined within the grant-funded project or initiative.

  • The deadline for organizations and government agencies to comply with the OMB’s reforms is Dec. 26, 2014.

Because the reform-laced Super Circular was written with the goal of helping organizations and agencies apply for aid, manage funds and prepare for audits, it is anticipated that the OMB will succeed in its efforts to increase competition among organizations and agencies that are eligible to receive aid. As a result, more insight and accountability will be demonstrated by recipients of federal assistance.

Super Circular Help

The OMB has repeatedly said that these reforms will make the process of obtaining federal funds easier and more transparent. If you have specific questions as to how the Super Circular will affect your organization or government agency, contact Rea & Associates. Our Ohio not-for-profit team can help you make sense of these revised regulations.

Author: Brent Ardit, CPA (Dublin office)

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Were You Overcharged By The Ohio BWC?

Wednesday, July 30th, 2014

Countless small businesses soon may find that they have money coming back to them. The Ohio Bureau of Workers’ Compensation (BWC) has decided to settle a class action lawsuit alleging that the BWC, over the course of many years, had a system of group rating in place that improperly overcharged many Ohio businesses. A lower trial court originally ruled in favor of the plaintiffs with possible damages exceeding $800 million. While the ruling was upheld on appeal, the appeals court sent the decision back to the initial court to better address the issue of damages.

Now the BWC has agreed to pay out $420 million to those affected by the state agency’s practice of overcharging for workers’ compensation premiums between the years of 2001 and 2008.

To fulfill its obligation under the settlement agreement, the BWC said it will create a fund that will be specifically used to pay: claims made by employers found to be participants in the class action lawsuit, attorney fees, court costs, and costs associated with administering the fund. According to the settlement agreement, any unclaimed money will be returned to the bureau.

Can You Make An Ohio BWC Claim?

In order to make a claim, you must have been a private, non-group rated employer at some point during 2001-2008 who:

  • Subscribed to the state workers’ compensation fund
  • Was not group-rated
  • Reported payroll and paid premiums in a manual classification for which the non-group effective base rate was “inflated” due to application of the group experience rating plan

Employers who were non-group rated for at least one policy year between 2001 and 2008 are eligible to claim a portion of the settlement.  Eligible employers should be receiving a notice that indicated their status as class members and how to make a claim.  A website where claim information can be submitting is currently under development.

Class members are required to submit their claims to Judge Robert McGonagle of the Cuyahoga County Court of Common Pleas. Claims must be postmarked no later than Sept. 22, 2014. More information on this ruling can be found here. More details are coming, so stay tuned!

If you’re entitled to a portion of the BWC settlement, make sure you understand your rights and know how to follow the transaction process. If you’d like more information about how to claim what’s yours, email Rea & Associates and ask for information about this process.

Author: Joseph Popp, JD, LLM (Dublin office)

 

Stay up-to-date on other recent business advice blog posts. Check these out:

Be On Guard For IRS Phone Scams

Is Your Business Running On Microsoft 2003 Servers? It’s Time To Update 

Why It’s Important To Have A Good Banker As Part of Your Business Advisory Team

 

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You Can’t Know Enough: The Importance of Knowing Your Fiduciary Responsibility

Friday, July 25th, 2014

You may find that the spotlight isn’t for you. But as the fiduciary of your company’s retirement plan, the spotlight is all on you. The Department of Labor (DOL) has placed a major emphasis on fiduciary responsibility in the past few years and continues to push the matter in its initiatives. So it’s important that you understand what you’re responsible for.

To meet your fiduciary responsibilities as a retirement plan sponsor, you need to understand the fiduciary standards of conduct as adopted by the Employee Retirement Income Security Act (ERISA). With these fiduciary responsibilities, there is also potential liability. Fiduciaries that don’t follow the basic standards of conduct may be personally liable to restore any losses to the plan. Pretty serious, right? To help ease your mind, here’s what you need to know.

Identifying Your Plan Fiduciaries

A plan’s fiduciaries will ordinarily include the named trustee in the document, investment advisors and all individuals exercising discretion in the administration of the plan. Under ERISA regulations, fiduciaries are responsible for:

  • Loyalty to the plan participants – acting in their exclusive best interest
  • Prudence – documenting expertise and a decision-making process
  • Following the plan documents
  • Diversifying plan assets
  • Paying only reasonable expenses for necessary services

Mitigating Your Risk As A Fiduciary

As a fiduciary of your business’s retirement plan, you should consider these items and answer these questions to ensure that you comply with ERISA regulations:

  • If participants in your plan make their own investment decisions, have you provided sufficient information for them to exercise control in making those decisions? Regulations under ERISA list the information and process required to be provided to participants in order to legally shift the responsibility for making investment decisions to the participants. Are you making the required participant fee and fund performance disclosures required annually by ERISA of all plans permitting participant investment direction?
  • How frequently do you deposit participants’ contributions in the plan, and have you made sure it complies with the law? Participant contributions, including loan repayments, are required to be remitted on a timely, consistent basis. Not remitting these funds in a timely manner is considered a misuse of plan assets, which is a prohibited transaction. Not meeting this requirement creates penalties for the plan sponsor.
  • If you’re hiring third-party service providers, including investment advisors, have you looked at several providers, given each potential provider the same information, and considered whether the fees are reasonable for the services provided? It’s required that you receive fee and service disclosures from all plan service providers, and you should also receive written acknowledgements from service providers serving in a fiduciary capacity. Here are some other items to consider relating to third-party service providers:

1. Have you documented your service provider hiring process?
2. Are you prepared to monitor your plan’s service providers, including investment fund performance?
3. Do you have a process in place to determine that the fees paid to service providers remain reasonable for the services provided?

  • Have you reviewed your plan document in light of current plan operations and made necessary updates? Have you provided participants with an updated summary plan description (SPD) or summary of material modifications (SMM)? Plans are required to operate according to the provisions stated in the plan document and these provisions must be communicated to participants. Changes are generally permitted, but again are required to be communicated to participants. If the plan is not operating in accordance with the written plan document, the plan could be disqualified, which would result in negative tax implications for you, the plan sponsor, and the participants.
  • Are individuals handling plan assets covered by a fidelity bond as required by ERISA?  Have you considered purchasing fiduciary insurance to mitigate the personal risk of loss to those employees you identified that are serving as plan fiduciaries? While a fidelity bond and fiduciary insurance are slightly different, both are a form of coverage to provide protection in regards to plans. The bond insures the assets of the plan in the event of employee misconduct and the fiduciary insurance provides personal protection to fiduciaries in the event of any claims for alleged errors, omissions, or breach of fiduciary duties.

Being a plan fiduciary comes with enormous responsibility. Don’t take your fiduciary responsibilities lightly. If you’re interested in learning more about what you’re responsible for as a retirement plan fiduciary, consider registering for a FREE seminar all about knowing your fiduciary responsibility. Rea & Associates has partnered with the Human Resources Association of Central Ohio (HRACO) to provide an all-day seminar dedicated to helping fiduciaries understand their responsibilities. The seminar will feature speakers from the Internal Revenue Service (IRS) and the DOL. It will be held on Tuesday, August 26 from 8:30 a.m. to 4:30 p.m. at BMI Federal Credit Union Event Center in Dublin, Ohio. More details, including a schedule, can be found here. Click here to register for this free event.

Fiduciary Responsibility Help

If you need assistance navigating the responsibilities of being a fiduciary, contact Rea & Associates or speak with one of our financial advisors.

Author: Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

Looking for more articles about fiduciary responsibility? Check out these articles!

What Are The Responsibilities of a Fiduciary?

How Can I Make My Benefit Plan Audit A Smoother Process?

Will You Be Ready For Retirement?

 

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Be On Guard For IRS Phone Scams

Thursday, July 17th, 2014

You get a call from a man who said he was from the IRS and was informing you that criminal activity was found after the IRS performed an audit on your past taxes. Then he asks if you had a criminal lawyer to represent you. And as you tried to get a word in edgewise, he told you not to interrupt him because the IRS and local authorities were recording your phone call. Pretty unnerving, right?

Well, unfortunately, this phone call actually took place with a client. And these types of phone calls are happening constantly. Back in April, the IRS issued a warning for consumers about phone scams targeting taxpayers. During the 2013 tax filing season numerous phone scams occurred, but the IRS has seen an increase in these scams since then. Because the IRS believes that these incidents will continue to plague taxpayers, it’s important to be vigilant for these kinds of calls.

The 4-1-1 On These IRS Phone Scams

  • Some taxpayers who received these calls were told they’re entitled to a big tax refund, or that they owe a lot of money to the IRS that needs to be paid immediately. Don’t be fooled. The IRS won’t contact you via phone about these matters. If you ever owe the IRS money, you’ll be sent a written notification via mail.
  • The IRS will never ask you for personal financial information over the phone, such as your credit or debit card information. If you’re asked for this information from someone claiming they’re from the IRS, don’t give it and report the incident immediately to the IRS.
  • Some IRS scammers use fake names/surnames (most of the time these names are common) and IRS badge numbers when they identify themselves.
  • It’s possible that a scammer knows and can tell you the last four digits of your Social Security number.
  • The phone number that a scammer calls you from could look like it’s from the IRS toll-free number.
  • If you take one of these scam calls, you may receive a bogus follow-up email to make it look like it is a legitimate inquiry from the IRS.
  • You may be threatened with jail time or driver’s license suspension from one of these scammers. They may then hang up on you and then call back pretending to be the police or DMV, further trying to prove their claim to you.

What Should You Do If You Get One Of These Calls?

So have you received one of these calls? If so, and you’re not sure the next step, here’s what you should do:

  • If you think you might owe taxes or there may be an issue with your taxes, call the IRS at 1.800.829.1040. Someone at the line can help you determine if you indeed have a payment due.
  • If you feel you received this call unexpectedly and know you have no IRS issues, call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

In light of these increasing incidents, be on the lookout and don’t fall prey to these scams. Hang up if you’re uncomfortable with the call. And know that the IRS would never ask for personal financial information over the phone or in an email. If you receive any suspicious emails, forward the email to phishing@irs.gov.

Ohio Tax Help

If you’re ever unsure about anything you received from the IRS, whether it be a letter, a phone call or email, contact Rea & Associates. Our team of Ohio tax professionals can help you determine if the inquiry is legitimate, and assist you with responding.

Author: Maribeth Wright, CPA (Cambridge office)

 

Looking for other articles on how to protect you and your business? Check out these articles:

How Can Heartbleed Affect You and Your Business’s Online Identity?

How Can I Protect My Business From A Data Security Breach?

Are You Secure? Cyber Security Targets Employee Benefit Accounts

 

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Is Your Business Running On Microsoft 2003 Servers? It’s Time To Update

Wednesday, July 16th, 2014

As a business owner, you have a lot to be concerned about. Ensuring that your business is bringing in revenue. Providing quality customer service. Retaining quality employees. The list goes on and on. Is maintaining and keeping your IT systems anywhere near the top of your list? If not, you might want to think again.

Microsoft To Stop Supporting Microsoft 2003 Servers

Back in April, Microsoft announced it was no longer supporting its Windows XP workstation software … this means that Microsoft is not providing any security patches or upgrades to computers using Windows XP software. Despite this news, many companies are still using the non-supported operating system. This leaves a huge hole in your operating system security. While many entities are planning to replace their XP workstations, we now find that Microsoft has some additional changes coming.

Microsoft recently announced that it has posted end of life for its Microsoft Server 2003 and Server 2003 R2 systems. These two server operating systems will no longer be supported after July 14, 2015. So if your business uses these systems, you have a little under a year to plan and implement a replacement strategy for these servers. The consequence for not replacing? Serious security issues.

In many industries the use of these operating systems on servers could lead to non-compliance issues.  When looking at your upgrade options, consider using virtualization software such as VMWare or Hyper V or server operating systems like Linux, UNIX, Windows Server 2008 and Windows Server 2012.

What You Can Do To Prepare For The Microsoft 2003 Server Expiration

It’s important you work with your application vendors to make sure that your current applications will transfer over and operate correctly on the replacement server operating system you decide upon. It is recommended that your entity do an analysis of critical business applications currently being used on Microsoft Windows 2003 and Windows 2003 R2 servers and determine the best replacement option as well as conversion process.

IT Audit Help

Not sure what server(s) your business is running on? Or are you unsure how this Microsoft server expiration will affect your business? Contact Rea & Associates. Our IT audit team can assess your business’s IT systems and help you determine how these changes will affect you moving forward. Don’t delay in updating your servers. It could be the difference between a safe IT environment and an unsecured one.

Author: Joe Welker, CISA (New Philadelphia office)

 

Looking for more information on how you can keep your business environment safe? Check out these blog posts:

8 Tips For Crafting A Strong Password

Do You Know Who Has Access To Your IT Network?

How Can I Protect My Business From A Data Security Breach?

 

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Why It’s Important To Have A Good Banker As Part of Your Business Advisory Team

Thursday, July 3rd, 2014

You want the best for your business, so it only makes sense that you surround yourself with like-minded individuals. As a business owner it’s important to get support from business advisors who have expertise in specific areas to help you make your business successful. Your CPA plays a critical role for you, but don’t forget about the others. It’s also important to cultivate relationships with a business attorney and business banker.

Your CPA can make sure that you have systems to capture and report timely, reliable financial information and, if needed, even provide assurance regarding your financial statements. A good attorney can help safeguard your business assets and provide assistance in drafting agreements, contracts and other legal proceedings. A business banker can provide lines of credit or loans to help meet the cash flow needs of your business.

The Importance of Your Banking Relationship

Strong banking relationships are built over time through regular two-way communication. You should be well-versed in upcoming cash needs, such as expanding inventory or the increased needs of personnel cost, and communicate these to your banker. As you keep them informed of business decisions and trends, this helps to build a lender’s confidence in your ability to manage your business. A well-informed and communicative business owner may be given extra consideration when business financial issues arise.

Four Key Indicators That Help Bankers Evaluate Your Ability To Repay

Banking is a low-risk industry and they have one major concern when lending money: your repayment. They evaluate your ability to repay based on these four areas:

  1. Cash Flow – This is a key indicator of your ability to repay the original loan. If you have strong cash flow, the chances are high that you are able to repay your loan.
  2. Collateral – When a loan is originated, it’s never the goal for the loan to be foreclosed on and collateral seized, but it is required as security.
  3. Credit – Another key indicator is your credit history and track record of your past ability and willingness to fulfill prior financial obligations. If you have a good credit score, you’ll be given more favorable treatment in both the receipt of a loan and the amount of interest charged.
  4. Character – Your relationship with your banker allows them to consider your integrity.  It’s critical to let your actions meet or exceed the expectations your words establish on a regular basis.

A good business banker is your advocate – they’re in your corner. Like CPAs, business bankers are exposed to multiple businesses and industries and they can be a great sounding board for ideas and help you strategize on ways to reach your financial objectives.

Business Relationship Help

Need to round out your business advisory team? Contact Rea & Associates. We can provide accounting services and business consulting services to your business, but we can also connect you to other business professionals that can help you complete your business advisory team.

Author: Chris Roush, CPA (Millersburg office)

 

Looking for more information on how to strengthen your business? Check out these blog posts:

Building Bridges: The Power of Networking

How Can You Build And Develop Your Organization?

Do Your Business Metrics Need an Oil Change?

 

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Help Is Available For Small Manufacturers Impacted By Foreign Imports

Wednesday, July 2nd, 2014

America is the land of the free, and a place where we’re all supposed to have boundless opportunities. So if you’re the business owner of a small manufacturer, and you’re feeling financially and competitively pinched because of foreign imports, know that there is relief.

Trade Adjustment Assistance

The U.S. Department of Commerce’s Economic Development Administration developed and funds a program to help manufacturing companies become more competitive against foreign imports. The program, “Trade Adjustment Assistance for Firms,” provides up to $75,000 in matching funds to qualifying manufacturers to invest in projects identified during the plan development phase. Qualifying projects must be time-limited and performed by third parties who provide knowledge-based help covering the areas of marketing, industrial and systems engineering or financial and general management consulting.

Examples of “qualifying projects” include:

  • New product development marketing
  • Lean manufacturing implementations
  • Quality certifications (ISO, TS)
  • Enterprise resource planning (system selection, training)

“Non-qualifying” projects include:

  • Capital expenditures (e.g. equipment or software)
  • On-going business expenses (e.g. FTE salaries)
  • On-going business processes

Big Benefit Of Trade Adjustment Assistance for Firms Program

An added benefit of the program is a customized diagnostic survey and comprehensive action plan created for the business by the program’s personnel. There is no fee to apply to the program. Once eligibility for the program is confirmed, the plan development phase typically takes one to three months with the implementation phase able to run for up to five years. Any funds not expended after five years are lost.

Funding for this program was recently renewed so now is the time to invest 30 minutes of your time to speak with a program representative to see if you qualify.

Ohio Small Manufacturer Help

If you’re an Ohio Small Manufacturer that’s having trouble keeping up with foreign imports and competition, and needs assistance with strengthening your business’s bottom line, contact Rea & Associates. Our Ohio manufacturing service team can help you evaluate your business’s current financial state and determine what steps you need to take to get back in the game.

Author: Christopher E. Axene, CPA (Dublin office)

 

Looking for more Ohio manufacturing-related articles? Check these blog posts out:

How Can Manufacturers Deal With Competition?

How Can I Solve My Staffing Woes In The Manufacturing Industry?

How Do You Take Your Business to the Next Level?

 

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