The GSCPA House of Blogs
For the members. By the membersArchive for February, 2012
Nowhere to go but down
Written by: Bill Schneider
A few years ago I was receiving my annual evaluation and was disappointed in the overall rating. I thought I had done several things during the year to deserve a higher rating than I received, but I decided the best course of action was not to question the rating, but instead to question what it would take to receive a higher rating in the future. That’s when the Controller said “the is nothing you can do to receive a higher rating, all you can do is mess up and get an even lower rating.” After my initial disappointment to hear such a thing, I realized that attitude applies to a lot of critical areas in a Finance and Accounting group.
Probably the most obvious example is Payroll. No one in Payroll ever gets noticed when the deposits are made on time, the withholdings are paid to the right parties (especially the government), the W-2s are issued and the journal entries get the expenses to the right budget codes. But make a $10 mistake on someone’s pay and the calls don’t stop until it is resolved. The problem with payroll is that you are sometimes at the mercy of Congress and the IRS.
Take the recent example of the last minute changes to the social security tax withholding rates. The two month extension at the end of 2011 as enacted so late that many payroll systems were not able to update their tax tables in time for the first paychecks of the year. This meant that too much was withheld from the first paycheck and that had to be corrected by lowering the withholding rate below the statutory 4.2% for the second paycheck of the year. Volatility in paychecks is not a good thing and despite all of the proactive communication efforts, I am sure the calls about a mistake in withholdings came into every Payroll office across the country.
Now congress is at it again. As of this writing a compromise has been reached to extend the lower tax rate for the remainder of the year. No matter what your political leanings, the problem with these last minute changes is that they simply cannot be implemented in a timely basis by the payroll vendors and employers. So once again Payroll departments will be playing catch up with withholdings and spending extra time and money to tell everyone the paychecks are really right straight because Congress can’t get their act together in any kind of timely basis.
The surest way to get someone mad at you is to make them look bad through no fault of their own. When it comes Payroll departments, Congress has done a great job of that this year…And Congress wonders why people in business (not to mention everyone else if you believe the polls) have such a low opinion of them.
Lost In Florida during the Canopener
Written by: Donarene Steele
Last month, we spent several days at what is probably the nicest Florida State Park – Topsail Hill Preserve State Park which is located on the Gulf near Destin and is quite well-appointed. It offers more cable channels than we have at home. My husband was in heaven. Of course the batteries in the remote now need to be replaced due to all of the channel flipping that occurred during our stay. For you RVer’s, it is a state park with full hook ups – no joke!
We attended the Canopener Rally. What a blast. The Rally had so many social activities that it was Sunday before we were able to experience the hiking and nature trails located in the 22 acre Park. It is not uncommon for us to walk the trails of a state park for hours at a time – 7, 8 , 9 miles – give or take – with our beautiful greyhound Miky leading the way. So off we started with PB&J sandwiches, chips, apples and water in our nap sack. Starting late, we planned only a 4 mile hike – give or take.
Half way down Turpentine Trail we opted for a short 1 mile side trip to Campbell Lake down Catface Trail. (Who named these trails?) When we arrived at waterside we strolled around the Lake’s edge hoping to catch Campbell Lake Path rather than retracing our steps – that was the second misstate of the day. The first had been leaving the Hiking and Birding Trial Map tucked safely back in our home on wheels. Not to fear. After all we are experienced, I did a quick scan of the Map yesterday or the day before, we had food, water and plenty of daylight remained.
A quarter of a mile around the lake and we found ourselves a stone’s throw from Campbell Lake Path the shelter house and most importantly the restrooms. There was just one problem – the impassable wet lands the stone would pass over. One short attempt at a detour and we found it best to retrace our steps back around the Lake and up Catface Trail. No more than an additional 1.5 miles – give or take.
Back on the planned route toward Deer Track Trail Loop, we made one more side trip down to the beach before taking a short section of Morris Lake Trail to Morris Lake. What’s an extra 1 or 2 miles – give or take. There seemed to be plenty of daylight remaining and while not my beloved mountains of Georgia and North Carolina, the area has uncultivated beauty.
The third mistake of the day came when we missed Deer Track Trail Cut-Off and ended up on Salamander Pond Trail. Now, we might be lost in this 22 acre well-appointed State Park. But, there appeared to be plenty of daylight remaining, we are experienced and this Trail must go someplace. Right? So, we walk on with our beautiful greyhound leading the way. After all he knows as much as we do about where we are and how to get back to our home on wheels.
By the way, the GPS on your phone may not be at its best in the middle of a state park. Two to three miles later – give or take – we see highway 98, Wal-Mart and the Donut Hole – all on the other side of the barbwire fence and on the outside of the State Park. We could make our way through the fence, order a donut with coffee and call a taxi cab. But we are experienced and there is maybe an hour of daylight remaining – give or take. So, we walk on.
A mile or two later – give or take – darkness is near and we wonder if we should call 911. I am certain they could locate us using my observational skills, “the Donut Hole is behind us, a recently prescribed burn area to our right and we are within the 22 acres of the State Park.”. But, we are experienced and the Trail must lead someplace. Half-a-mile later – give or take – we come up on a neighborhood which appears completely deserted. It was like a scene out of the Twilight Zone. Confident that it borders Topsail Hill Preserve State Park, we walk on and on and on. As full darkness descends upon us, we enter our home on wheels safe secure and glad we had not chatted with a 911 operator. We are of course experienced. Undaunted by the day’s miles of hiking, my Husband returns to his cultivated world and promptly begins flipping through the available 175 TV cable channels – give or take.
Donarene Steele
Risk Appetite
Written by: Bill Schneider
My work on the COSO Internal Control Integrated Framework revision advisory committee has brought home the importance of a risk assessment in setting up internal controls. If you don’t know what your risks are, then how do you set up appropriate controls to manage those risks. I think many CPAs “get this” although a surprising number of companies still do not have formal or informal risk assessment processes. The next step, however, is less understood. That step is setting a risk appetite.
Dr. Larry Rittenberg, former Chairman of COSO and Frank Martens, a member of the PwC team working on the ICIF revision recently issued a paper through COSO on Understanding and Communicating Risk Appetite. The paper can be found at http://www.coso.org/documents/ERM-Understanding%20%20Communicating%20Risk%20Appetite-WEB_FINAL_r9.pdf . The paper does a great job explaining what risk appetite is and why it is important to actually decide, document and communicate the risk appetite level throughout the organization.
Just as is the case with not determining what your risks are, without determining your risk appetite, you may end up with too few controls and risks you never intended to accept. Just as importantly in today’s environment, without determining your risk appetite, you run the risk (pun intended) of having too many controls and incurring more cost than is necessary to manage an organization’s risk to an acceptable level.
Just as an auditor sets a materiality level in their audit to help determine the level and amount of audit work that is necessary, an organization must set a risk appetite that is agreed to by the governing body (Board of Directors) as well as management. In addition, it is extremely important to communicate this risk appetite throughout the organization. If you don’t do so, you may end up with employees not understanding what risks they should be taking, what risks need to be limited and what risks avoided all together.
In many ways setting a risk appetite goes hand-in-hand with setting the tone at the top. But just like saying one thing and doing another confuses employees (not to mention the children in your own family), telling people to manage risks without giving them any idea on what level to manage them too leaves employees bewildered at best or frozen by inaction for fear of doing the wrong thing at worst.
Communicating risk appetite may not be easy, but without it, a business is running on pure luck and that is no way to stack the odds in favor of success.
CGMA Launch
Written by: Bill Schneider
I had the great privilege to attend the Launch of the CGMA credential live from New York last week. After years of asking for a credential that shows the unique expertise of business and industry CPAS, it is finally here – the Chartered Global Management Accountant or CGMA. With me at the launch were numerous people who had worked tirelessly for this day from the first AICPA Chairman from Business and Industry – Olivia Kirtely to former chairman of the Business and Industry Executive Committee to members of the AICPA staff that have worked closely with CIMA to launch the AICPA- CIMA JV and the credential on this momentous day.
But launching the credential is only the first step. If we are going to truly make the CGMA something that is valued by business executives – a credential they look for in hiring and promotion decisions, then we have to work every day to show the value of the CGMA. The launch was a great first step. The panels in London and New York emphasized the many important aspects of what it means to be a CGMA in today’s ever changing, fast paced world and I want to highlight a few here.
First off, CGMAs must bring the same core values to their job that are the core of being a CPA. Ethics, Integrity and Objectivity are critical to the success of business and to your success at being a CGMA. As one panelist stated speaking for many, “if you don’t have ethics, we don’t need you in our business. A code of conduct is a cornerstone of any profession. It is one of the key differentiator for CGMAs from your average finance “professional.”
Another key focus for CGMAs is transforming data into information, information into intelligence, and intelligence into insight. It is no longer enough (was it ever) to crunch the data and put some numbers on a report and call it information. To truly add value to your business you need to go further and determine what the information means to the business and what actions the business should take as a result.
Successful businesses today cannot be run in silos – operations, HR, Finance, legal and so forth. Leaders have to integrate all of those perspectives and that is exactly what CGMAs are here to do. If we are to change the cycle of just focusing on short-term financial results, it is going to be up to CGMAs to lead the efforts in gathering and reporting on non-financial metrics that tell the whole story about how a business is performing – from information about employees to customers to intellectual property. This is where the future lies and CGMAs will lead the way.
I have and always will be proud to call myself a CPA. Now I will be equally as proud to call myself a CGMA.
Bill Schneider, CPA, CGMA
