Disclosures July August 2010

Disclosures
July August 2010 | Vol. 23 No. 4 | www.vscpa.com
Getting in the Financial Planning
PLUS:
New Fun with Fund Balances Portfolio Diversification Sarbanes-Oxley: Friend or Foe?
Ive got aN uNeasy feelINg about thIs clIeNt sItuatIoN

Based on an actual conversation between a Senior Partner at a CPA firm and a CAMICO Risk Management Specialist. cPa: So, my staff member recently noticed some irregularities in the trial balance provided by my clients bookkeeper. When I brought this to my clients attention, he reacted very negatively asking how we could have missed this before, implying it was somehow our fault. I didnt know what to say Im sure weve met professional standards and our workpapers should support that. What can I do? caMIco: This surprises many CPAs, but after 24 years of providing professional liability insurance, CAMICO has found that following professional standards alone may unfortunately not be enough to avoid a claim. cPa: Really!? I thought following the rules would keep me safe. caMIco: That would seem logical, but in addition to meeting professional standards, juries expect CPAs to look out for irregularities and advise and warn clients of risks. So, if something looks unusual, investigate it, document it and communicate it. Do you have an engagement letter for this client? cPa: Yes, the on-call CAMICO Risk Management Specialist helped us tailor the wording to clearly spell out what services we were providing and what was not included it says our firm is not responsible for detecting fraud and other irregularities and the client signed it. caMIco: Great! With the client acknowledging the terms of your services, you have an excellent first line of defense. Now lets focus on your next steps, so you can help your client with their issue without putting yourself at further risk. cPa: Thank you. Its good to be able to talk with an expert about this it gives me real peace of mind.
p r ov i D i N g p r o F e S S i o N A L L i A B i L i T Y i N S u r A N c e To c pA s F o r N e A r LY A q uA r T e r c e N T u rY
cAm i co pr oFe S S i oNAL LiAB i LiTY i N S u rAN ce i S S p oN S or e D BY:
w w w. c A m i c o . c o m
ATLANTA N ew Yor k SAN FrAN ci S co BAY Ar eA cALL 800.652.1772 or e mAi L i N qu i rY@cAm i co.com
Contents
Disclosures
Virginia Society of CPAs 4309 Cox Road Glen Allen, VA 23060
Phone: (804) 270-5344
July August 2010

Features
Getting in the Financial Planning Game: CPAs and the Personal Financial Planning Market
Articles
4 Todays CPA
Set your career in motion
Toll-free nationwide: (800) 733-8272 Toll-free CPE hotline: (800) 341-8189 Fax: (804) 273-1741 E-mail: vscpa@vscpa.com Website: www.vscpa.com TDD access through Va. Relay Center: (800) 828-1140 (voice) (800) 828-1120 (TDD) Editorial Staff: Jill Edmonds Managing Editor disclosures@vscpa.com Jenny Hansen Contributing Editor jhansen@vscpa.com Tina Lambert, CAE Vice President, Member & Public Relations tlambert@vscpa.com Editorial Task Force: Joan D. Aaron, CPA William C. Barrett III, CPA/ABV Beth A. Berk, CPA James D. Cole, CPA Cheri G. David, CPA, CVA James P. Davis Jr., CPA William C. Foote, CPA/ABV, CVA Heather L. Judson, CPA Clare K. Levison, CPA Gabriele Lingenfelter, CPA Haven S. Pope, CPA, MBA, CFE George D. Strudgeon, CPA Philip H. Umansky, CPA, Ph.D. Deadlines: Articles and advertising for future issues are due by 5 p.m. on the following dates: Nov./Dec. Jan./Feb. Mar./Apr. July/Aug. Sept./Oct. Nov./Dec. 10 11 11 11 11 11 Aug. Oct. Dec. Apr. June Aug. 16 15 15 15 15 15
During a tough economy, individuals are increasingly looking for financial planning resources. CPAs can help and are well positioned to take advantage of this market. By David S. Murphy, CPA, CFP, Ph.D., and Philip H. Umansky, CPA, Ph.D.
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Leaders Edge
Poor performers
Sarbanes-Oxley
Friend or foe?
Sections
2 27 Line Items Self-Assessment Exam VSCPA Leaders Summit VSCPA News Member News Classifieds
New Fun with Fund Balances: Implementing GASB Statement 54

For the first time since GASB Statement 34, GASB has issued a new standard that is certain to affect the financial statements of every local government in Virginia. By Paul A. Copley, CPA, Ph.D., and M. Loretta Manktelow, MBA, MST
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Portfolio Diversification: Where It Goes Wrong

Diversification is one of the fundamental ideas in investing. However, the way most portfolios are currently constructed violates the very basic premises of modern portfolio theory. By John Davenport
Advertisers Index
Accounting Practice Sales inside back cover AON Insurance page 16 Audimation Services, Inc. page 26 Beth A. Berk page 17 CAMICO inside front cover Keiter, Stephens & Shreaves back cover Robert Half page 15 VSCPA Insurance Service Center page 11
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Disclosures is published bimonthly as a service to members of the Virginia Society of CPAs. Statements of fact and opinion are made by the authors alone and do not imply an opinion on the part of the officers, members or editorial staff.
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Contents Disclosures July/August
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Taking sides: VSCPA speaks up on federal issues

he Virginia General Assembly session may be over, but issues that affect CPAs continue to crop up on Capitol Hill. The VSCPA strives to protect CPAs interests in the Commonwealth and beyond; here are a few ways weve spoken up on the federal level in 2010: Sarbanes-Oxley Section 404: The transparency and accuracy of financial reporting is essential for ethical accounting. Thats why in March the VSCPA expressed strong support for Section 404(b) of the Sarbanes-Oxley Act by urging Sen. Mark Warner (D) to oppose any attempt to amend that section during the Senate Banking Committee debate of the Restoring American Financial Stability Act of 2010. An additional letter on this subject was sent to Sen. Jim Webb (D) in April. Aiding and abetting violations: In April, the VSCPA sent letters to Sens. Warner and Webb voicing opposition to any amendment to the Restoring American Financial Stability Act of 2010 that would permit a private right of action for aiding and abetting violations under the Securities and Exchange Act of 1934. Such an amendment would expand liability in class action suits to potentially include CPAs, lawyers and other professionals who work with publicly traded companies, which could have extremely adverse effects on CPAs due to astronomical lawsuit damages. Thanks to the professions opposition, the Senate removed the amendment and passed the bill on May 20. Solicitation of services: On April 12, the VSCPA responded to an Internal Revenue Service (IRS) regulation draft on permissible disclosures or uses without consent of the taxpayer, stating that further guidance and clarification is needed for CPAs on what type of solicitation is and is not appropriate within legal and ethical guidelines. U.S. comptroller general: The U.S. comptroller general is usually a CPA and the VSCPA thinks that should be a requirement. In March, the Society joined the American Institute of CPAs and other societies in urging Virginias U.S. senators and representatives to sign on as cosponsors of HR 4410, which would require that the comptroller general position be filled by a licensed CPA. At press time, the bill was in the House Committee on Oversight and Government Reform. Extend PTIN comment deadline: The deadline for comments on the IRSs proposed Preparer Tax Identification Number (PTIN) regulations fell during tax season, leaving many CPAs unable to comment. The VSCPA requested a 30-day deadline extension. For an in-depth look at the VSCPAs positions on these issues, check out the full letters at www.vscpa.com.
The VSCPAs Centennial: A winning year!

e always knew our 100th anniversary was special, and now we have the kudos to prove it. In May, the VSCPA won a Commonwealth Award of Excellence, for its Centennial Celebration in the extended events and observances category of the 2010 Virginia Public Relations Awards, a statewide awards competition sponsored by the Richmond Chapter of the Public Relations Society of America. The VSCPA celebrated its Centennial anniversary in 2009, marking 100 years of an organized CPA profession and statewide organization uniting and representing CPAs across the Commonwealth. We hope you celebrated with us in some way whether it was attending the annual meeting on the cruise to Bermuda, participating in the CPA Day of Service or simply reading the special commemorative issue of Disclosures. Resources from the Centennial are still available for your enjoyment at www.vscpa.com/Centennial.
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Dont miss out on the MAP

he PCPS/TSCPA National Management of an Accounting Practice (MAP) Survey only comes around every other year, so make sure your firm is in the loop for 2010! One of the largest CPA firm practice management benchmarking projects in existence, the National MAP Survey allows participants to compare their firms with others in the state as well as nationwide, and use criteria such as billing rates, compensation and much more. Significant improvements have been made since the 2008 survey, including: A 40 percent reduction in the number of questions! (Time is no longer an excuse.) A free summary report to all participants A shift in completion time to earlier in the year New questions pertinent to the profession in 2010 All participants will receive a free summary, and VSCPA members participating will also receive a report of Virginias results. To receive customized survey data, firms must be members of PCPS. Hurry deadline to participate is August 13. Visit http://map. pcps.org to participate now.
Bye, bye free iFile

For 10 years, Virginia has offered free income tax filing, but that comes to an end with new legislation signed by Gov. Bob McDonnell on April 11. Approximately 300,000 Virginians are projected to use the free service this year, but next year online filing options will be similar to those offered by the federal government free for taxpayers whose incomes fall under a certain threshold.
How will you serve?

Sign up now for CPA Day of Service
neighborhood cleanup? A foodbank? A shelter? Whatever you decide, its your choice when you join hundreds of your peers for the 2010 CPA Day of Service on September 24, 2010! Last year more than 600 participants around the state united on the first-ever Day of Service to give back at more than 55 locations statewide. From large firms to sole practitioners, VSCPA chapters to student groups, VSCPA members were excited to join a common goal for one day and demonstrate the pride CPAs take in serving communities. Getting started is easy. Heres how: 1. Decide how you or your firm, company, department, etc. would like to participate. You can volunteer during the day or after work whatever works for your schedule. 2. Let us know your plans by logging on to www.vscpa.com/ DayofService. All VSCPA member participants will receive a snazzy free T-shirt to wear that day, so make your plans early! To receive T-shirts for your group, you must sign up by August 13. 3. Questions? Visit www.vscpa.com/DayofService for details, volunteer suggestions and pictures of the great time members had at last years event. Still more questions? No problem. Contact VSCPA Community Relations Coordinator Tracey Zink at tzink@vscpa.com or (804) 612-9427.
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TodaysCPA
Full speed ahead

Four ways to set your CPA career in motion
By Lauren Alexander, CPA
You may not realize it, but a mentor is an essential component of your professional network.
s a young professional in the wake of the inclement economic climate of the past year or so, you may be trying to determine your best strategy for getting ahead. Whether youre working for a public accounting firm, becoming a sole practitioner, considering a move to industry, practicing as a consultant or just looking to think strategically about your career in accounting, this article is for you. You may already be thinking: I barely had enough time today to pick up this issue of Disclosures when will I have time to plan my future in accounting? If youre like a lot of young CPAs, you spend a fair amount of time at work, especially during busy season, but dont despair. The following four tactics are relatively quick, but thoughtful ways to get ahead in your first few years of practice. Branch out Research and join an industry-specific professional organization in addition to joining accounting-focused professional organizations, such as the VSCPA,
American Institute of CPAs (AICPA) or Institute of Internal Auditors (IIA). These organizations missions are to connect like-minded professionals and distribute specific resources and information to their members. Such memberships are perfect for a CPA who wants to learn more about the industry in which he or she is working. For example, my firm specializes in forensic accounting and litigation consulting services, so I joined the American Bar Association (ABA). I have attended local committee meetings and the ABA annual conference, both of which provided an opportunity for me to learn more about the legal landscape as it pertains to forensic accounting, understand the perspective of my clients and, ultimately, position myself to market my firms services to prospective clients (attorneys). An added bonus: Most professional organizations provide a platform for serviceoriented professionals to contribute to the community. Even if you dont have time to volunteer year-round, try to select a program that allows you to contribute in bursts (when youre not working over-
Todays CPA Disclosures July/August
time during busy season) and one that allows you to turn up and down the flame on your participation as necessary. Zoom in Keep up-to-date on the happenings of the accounting world through Continuing Professional Education (CPE) courses, thumbing through the AICPAs Journal of Accountancy, VSCPAs Disclosures, visiting the Securities and Exchange Commission and Financial Accounting Standards Board websites or just reading The Wall Street Journal. You may still be celebrating successfully completing the Exam, but continuing to sharpen and refresh your technical skills will set you apart from other CPAs in your department or on your team. Most firms require employees to obtain CPE credits annually anyway, but dont think of it as a chore. There are hundreds of ways to get valuable CPE often online for low or no cost and learn something relevant to your practice (thats interesting too). These include self-study courses, webcasts, training events or conferences and are available through the professional organizations described above, the VSCPA, the Big 4 accounting firms, etc. Many webcasts can be completed for no cost in just an hour during your lunch break, and can arm you with the basics on an upcoming issue in accounting or the buzz about a new pronouncement. It may seem like a simple way to get ahead, but just exposing yourself to new or updated accounting standards or activity in the industry could lead to sharing a tip with a client or contributing a quick fact in a conversation with your boss. The following are several resources for learning about CPE opportunities: www.vscpa.com http://vscpa.acpen.com www.cpelink.com/?s=8ave3p7 http://cpe.cpacrossings.com/vscpa www.cpa2biz.com www.deloitte.com/us/dbriefs http://www.kpmginstitutes.com/ events
Look back In your first few years as a CPA, you may not have kept in touch with your alma mater, but its a relationship worth cultivating. Professors and organizations on campus, like Beta Alpha Psi, are often seeking young alumni to speak on job panels, share experiences with students about what its like to work as an accountant in the real world, or give a talk about a specific area of accounting or technical issue. Contact one of your professors or an organization on campus to see how you can contribute. These opportunities are threefold: They add valuable experience to your CV, for example, in public speaking; allow you to foster relationships on campus (build your personal network); and provide your firm exposure to upcoming graduates in accounting (a strong contact at your undergraduate or graduate accounting program could help you or your firm have access to the best new hires). Even if youre not directly involved with the recruiting function at your firm, most schools have young alumni boards and other satellite organizations designed to connect young alumni and promote networking. Your alma mater also has a stake in your success, as it hopes to see alumni develop and prosper, contribute to the school and provide mentoring relationships to even younger alumni, among other things. Many Virginia colleges and universities provide career services to alumni, such as making staff available to review rsums by e-mail or in person, and providing alumni access to job postings and networking events, such as career fairs. Make a connection You may not realize it, but a mentor is an essential component of your professional network. Mentors provide a wealth of experience and knowledge about your workplace, industry and even office politics. And mentors arent just important for individuals beginning their careers; a mentor can be there throughout your career to coach you through promotions, career moves and the occasional professional blunder. Many firms assign formal mentors on your first day of work, which can be helpful navigating those first few months at new job. However, finding the ideal mentor may not be obvious. If your formal
mentor assignment wasnt a match made in heaven or your firm does not offer a mentoring program, consider seeking out an alternative. Many universities and professional organizations such as the VSCPA offer mentorship programs. Before you begin your search, evaluate your own professional goals, so that you can seek a mentor who has chosen a similar path. Once you have found a mentor, foster the relationship by contacting your mentor on an ongoing basis to keep the relationship fresh. Remember that mentoring relationships involve trust and chemistry, neither of which occurs overnight. Especially at the beginning of the mentoring relationship, be clear about your intentions by sharing with your mentor specific long- and short-term goals. However, be conscious not to monopolize your mentors time. Instead, e-mail your mentor an occasional update, drop by with coffee or send your mentor an article he or she might find interesting. Finally, once you have an established mentor relationship, consider becoming a mentor yourself; sharing your own experiences and insight is not only rewarding, but motivates you to reassess your own goals. To conclude, there are a variety of ways to get ahead as a young professional I have only outlined a few in this article. But its worth noting that the most successful professionals in my workplace think strategically about getting ahead, and dont follow blindly down the career path.
Lauren Alexander, CPA, is a senior manager at Veris Consulting, Inc., a Virginia-based consulting firm that specializes in forensic accounting and litigation consulting services. She is a recent graduate from the University of Virginias McIntire School of Commerce. Contact her at lalexander@verisconsulting.com. To offer another recent graduate perspective, Beth Helle, a senior consultant at Veris Consulting, Inc., also contributed to this article.
Todays CPA Disclosures July/August
LeadersEdge
Dealing with poor performers Start with the enablers
By Brian Kush, CPA, CISA, CITP
wrong people doing the right things or the right people doing the wrong things, and sometimes even the right people underperform. Underperformance not only affects your customers and your bottom line; it can perpetuate if left unchecked. When poor or substandard performance is present, something must happen or else it will continue: change. The performance has to change or the performer has to change. In short, somebody needs to practice new behaviors, be fired or be moved. Beyond the individual poor performer, an organization that wants to ensure it has all the right people on the bus must ask some questions:
Labeling somebody a poor performer is often unfair and indicative of poor management or leadership.
n his book, Good to Great, author Jim Collins says a transformational company first got the right people on the bus (and the wrong people off the bus) and then figured out how to drive it. Think of all the biggest challenges your organization faces: Creating a great customer service experience Cutting costs Uncovering innovative ideas Aligning your organizations energy and actions with its mission and core values Now think about the most important resource needed to face those challenges: great employees a.k.a. the right people on the bus. But we dont always get the right people. Sometimes we have the
How are we, as an organization, enabling poor performance? If you want to lead an organization that attracts and cultivates poor performance from its employees, do all of the following: Ensure your star performers take up the slack for any poor performers. Do this by steadily increasing their workload. The poor performers survive, and if you are lucky, your star performers will burn out quickly from the extra work they are awarded. You receive bonus points if you can make sure that the star performers directly take up the slack for the poor performers and both parties know it. Label all of your poor performers as always poor. The best way to do this is not to their faces, but instead behind their backs to everyone else. Now that they have been labeled poor, everyone will be able to view all their work through that lens. That will motivate them to live down to that label. Hesitate in providing poor performers with the frank feedback they need. If they do not understand what is at stake or how much their performance is affecting everyone else, then they will undoubtedly continue it.
Leaders Edge is a six-part Disclosures column by Brian Kush, CPA, CISA, CITP, focusing on management, leadership and interpersonal skills essential for CPAs. Brian is a featured VSCPA speaker who travels the state offering in-house CPE courses. Want to learn more or book Brian for your firm or company? Contact VSCPA Customized Education Manager Lydia Sartori at lsartori@vscpa.com or (804) 612-9425.
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Leader s Edge Disclosures July/August
Labeling somebody a poor performer is often unfair and indicative of poor management or leadership. It is unfair because acceptable performance has not been defined, monitored and continuously evaluated. Have we defined poor performance or underperformance? If you have not defined it, and if you cannot describe it and provide examples, then it certainly is not clear to others. Here is one way to focus on this: Identify expectations that have been specifically provided, that an employee has agreed to and has not met. That is poor performance! Many times a manager does not clarify expectations from the start, so its much harder to identify poor performances because the agreement itself was poor or nonexistent. Expectation and performance agreements are so underrated, mostly because they are so rare. This is not about annual performance evaluations either. Poor performance becomes enabled when... Requests or demands are not made. Expectations and standards are not communicated. Mutually understood agreements are not made. Complaints are not provided after agreements are broken. And once poor performance is not just enabled, but it is allowed to THRIVE, leadership has failed.
Dealing with a specific poor performer is one thing, but uncovering why poor performance has been allowed to continue is another thing all together it is a cultural issue, and if left unchecked, it will permeate throughout your organization. How does this stop? How do we ensure we identify and confront poor performance? There is one word that describes a culture in which poor performance struggles to continue: honest. When an organization demands honest feedback and communication, then questions will be asked such as: What are the standards we demand? How have other team members, managers and the organization contributed to a specific instance of poor performance? How has mentoring and supervising (or lack thereof) contributed? What specifically was the reason that substandard performance occurred? Where is this persons growth in relation to where we know he or she should be? And finally, what must be done now to ensure this will not repeat? In Fierce Conversations, author Susan Scott details how individuals and organizations that are serious about setting and hitting goals master the courage to interrogate reality. Success can be averted easily when we do not say what we should and we avoid reality by not being honest. Generally, someone is performing at
unacceptable standards because of one of two issues: They do not have the aptitude to accomplish what their role requires. They do not have the desire to accomplish what their role requires. Other things come into play like supervision and support (resources, training, etc.). Assuming all those other things have been taken care of (a massive assumption), if reality is fiercely interrogated and honesty is demanded, then poor performance and the structure that allows for it will always be identified. That is the most difficult step to making necessary changes and getting the right people on the bus.
Brian Kush, CPA, CISA, CITP, is a leadership coach and president at Moxie Partners, and author of Auditing Leadership (Wiley, July 2009). Contact him at brian@moxiepartners.com or (571) 313-1735.
Establishing expectations
An employee is not performing up to standards. He or she is not doing what he or she should. Here is a common response: I should not have to tell them to do that. They should know. Guess what. Maybe they really do not know. Second, even if they do know, they dont understand what is at stake and they certainly never bought into what you feel should happen. It is easy to want to be right about what they should do. Instead, as a leader, ensure it is crystal clear what you expect them to do. Poor performance does not coexist very well with honest and clearly communicated and agreed-to expectations.
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Healthy complaints
How many times have you seen somebody make a healthy complaint about another persons performance? What is a healthy complaint? It is a complaint that is expected because a specific clear agreement was made between two parties and one person did not live up to their end of the agreement. It is not a surprise. It moves the person forward by helping them to see what should have happened and what MUST happen, or it moves them closer to being out . out to another role within the company, or out of the organization all together. When agreements are made and then broken, your trust may be damaged. However, if you want to work together to regain that trust, file a healthy complaint with the employee and work together to see how the behavior can be strengthened. Your relationship will grow. You both will grow. Courage is present.
Leader s Edge Disclosures July/August
Getting in the Financial Planning
By David S. Murphy, CPA, CFP, Ph.D., and Philip H. Umansky, CPA, Ph.D.
Financial Planning Disclosures July/August
ith the current economic downturn signaled by a major drop in the stock market in 2008, declining home values, high unemployment, rising health care costs, complex individual income tax law changes and Madofftype frauds, individuals are increasingly looking for financial planning resources. And CPAs can help. On the national and local level, the American Institute of CPAs (AICPA) and VSCPA respectively have done much to provide free financial literacy resources and programs to consumers. The AICPA has its 360 Degrees of Financial Literacy and Feed the Pig initiatives. The VSCPA has its Financial Fitness initiative, which includes free financial planning seminars and webinars, Speakers Bureau, Ask-aCPA E-mail Program, tax call-ins in Richmond and Roanoke, television interviews, e-newsletters and more. The VSCPA has also been very involved with promoting financial literacy in the Virginia secondary education system and general public awareness of the importance of financial fitness through the governors declaration each year of Virginia Financial Literacy Month. The more focused issue, however, is that while the CPA profession and the current economic environment have created both exposure and impetus for financial literacy and planning, how is the profession developing this market in terms of business opportunities? What is driving the market? There are several macro trends that show the market is expanding and that CPAs are well positioned to take advantage. In a 2010 Consumer Financial Literacy Survey of 2,028 adults in the United States, conducted by Harris Interactive, 34 percent of American adults gave themselves a grade of C, D or F on their knowledge of personal finance. This extrapolates to about 77 million persons in the United States. In the same survey, 78 percent of adults agreed or strongly agreed that they would benefit from the services of a financial professional. Though many questions in the survey indicated that Americans are underprepared in terms of financial planning, perhaps most concerning was that 56 percent of respondents said they do not have a budget and 33 percent save 0 percent of their household income for retirement. While persons who indicated such would not be prospective clients of CPA financial planners, there is some evidence that even those with some degree of financial sophistication may need help. In a survey of 206 MBA students (Murphy and Yetmar, 2009), participants were asked: 1.) if they thought preparing a personal financial plan was important; 2.) if they were interested in preparing w
Financial Planning Disclosures July/August 9
such a plan; 3.) if they had time to do so; and 4.) whether they felt that they had the necessary skills and knowledge to prepare a personal financial plan. While 76 percent of respondents indicated that they thought preparing a financial plan was important and 67 percent were interested in preparing a financial plan, only 40 percent felt they had the time to prepare a plan. Most surprisingly, only 33 percent felt they had the financial expertise to prepare a plan. Given that the participants average age was 29, they had 6 1/2 years of work experience and had an average income of $47,500 and obviously had a degree of
more risk averse over the last year, and 54 percent said the typical client is not very confident in the stock market. Seizing the market
Trust
Charles Coker, a sole practitioner CPA who operates in Northern Virginia, has seen a 20 to 25 percent increase in his number of personal financial planning clients over the last two years, many of whom come from his traditional base of personal income tax clients. A big part of my job is educating clients, Coker said. They do not have the time,
financial planning. Among the requirements to be a PFS, CPAs must work in the personal financial planning field for two years, and beginning after December 31, 2010, pass the PFS, CFP or Chartered Financial Consultant exam. Per the AICPAs PFS list, there are currently 110 PFSs in Virginia. CFP, the other major specialty designation related to financial planning, can be held by both CPAs and non-CPAs, and to some extent it is a competitor to the CPA/ PFS. There are far more CFPs than CPA/ PFSs, and CFPs can work in a number of different types of firms, from banks to wealth management firms.
Proper planning
Younger persons tend to have challenges with cash flow and credit management, while the older persons are more focused on retirement and many have been sold inappropriate investments. Charles Overbey
financial sophistication, as MBA students the latter statistic in terms of expertise is surprising. Charles Overbey, a Richmond-based CPA/Personal Financial Specialist (PFS) and Certified Financial Planner (CFP), sees some generational differences in terms of the need. Younger persons tend to have challenges with cash flow and credit management, while the older persons are more focused on retirement and many have been sold inappropriate investments, Overbey said. He agrees that skills, knowledge and time are factors that send clients to him. There is growing body of evidence that the typical American may not have the technical knowledge to perform financial planning. When 1,984 Baby Boomers were presented with a problem to compute the balance of a $200 investment that earns interest of 10 percent compounded annually ($242) after two years, only 18 percent of respondents could do it (Lusardi and Mitchell, 2008). CPAs who perform financial planning are seeing a degree of pessimism in their clients, which may make the CPA services even more important. In a 2010 AICPA survey of its Personal Financial Planning membership, 72.2 percent of the 421 CPA respondents indicated that their typical client has become
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and the CPA designation provides the trust factor. The trust factor is important. In 2006, Amplitude Research conducted a survey of 1,007 investors to determine who rated the highest as the most trusted financial advisor. CPAs were rated the highest, followed in order by CFPs and attorneys. Those financial advisors who sell financial products or services, such as stock brokers, insurance agents and real estate brokers, were further down the list. The trust associated with a CPA obviously stems from the independence and objectivity that are at the foundation of the core CPA functions of accounting, auditing, taxes and management consulting. However, the trust factor can easily be leveraged to personal financial planning and to the existing client base of medium- to high-net worth business owners, managers and tax clients. Compounded with the fact that most CPAs work on a fee-only basis and are not involved in selling financial products, the CPA has a natural competitive advantage in many respects.
Expertise
In 2007, Moss Adams, LLP, CPAs, in cosponsorship with the AICPA, surveyed CPA firms involved in personal financial planning to determine best practices. The study showed that at that time, the typical CPAs personal financial planning services were growing faster than the broader financial planning market and had higher operating margins than non-CPA peer financial advisors of the same size. The study identified four successful operating models: Solo practitioner: The CPA performs a number of traditional CPA services for clients including personal financial planning. Single entity: The CPA firm has a separate division within the firm that performs just personal financial planning. Stand-alone business: The CPA firm either partially or fully owns a subsidiary that does personal financial planning, to which referrals are made. Preferred referral partner: The partner can be an independent business to which the CPA refers potential financial planning clients, with the CPA either receiving or not receiving referral revenue. There are many nuances in each of the models identified, and they all can be successful though they have common and unique challenges. No matter the model used, the study identified four best practices: 1.) develop plans and goals; 2.) develop a process for monitoring performance of the financial planning business; 3.) formalize the compensation system; and 4.) devote time
In terms of expertise, currently the AICPA has a specialty designation, the Personal Financial Specialist (PFS), which is designed for CPAs who work in personal
and resources to marketing. The most common challenge is determining the type of client the CPA would accept in terms of either net assets, income or some other client acceptance criteria. James Shepherd, CPA/PFS, CFA, of Kuehl Shepherd, Kozlowski and Associates, has been doing personal financial planning for 28 years. He says, Developing a philosophy of which personal financial planning clients to take is important. This is reflected in the philosophy of many CPA firms, where they strive to serve those clients to which they can provide real valueadded services. For example, Cherry Bekaert & Holland indicates on its website that it works exclusively with a limited number of prominent families for whom it is able to add significant value and make a difference in their financial lives. Wesley Watkins, CPA/PFS, partner with the firm, says that while there is a lot of financial awareness, someone needs to bring it all together in a plan. Other common challenges include the compliance part of the business in terms of being registered investment advisors. The unique challenges associated with the solo practitioner mode were how to not become overworked, and the greater propensity for the client base to have lower income and less investable assets than other models. Challenges for the single-entity and standalone business models include ensuring that non-financial planning professionals market and refer potential clients to the financial planning side of the business, and that audit or tax clients who are referred receive the same high level of service they receive with traditional CPA services. The challenge with the preferred partner referral model is ensuring that the independent business did not steal the client by offering services such as tax compliance and planning, which the CPA had initially provided. John Napolitano, CPA/PFS, CFP , chairman and CEO of U.S. Wealth Management, based in Braintree, Mass., helps transition CPA firms into personal financial planning over a three- to five-year period. His clients see personal financial planning as a mechanism to move away from billable hours and charge based upon value, so firms can actually work fewer hours and make more profit. As mentioned previously, CFPs are the major competition for CPAs who want to get into financial planning, at least for potential
clients who do not already have an existing relationship with a CPA. In the study of MBA students, 75 percent of respondents said they would seek the services of a CFP, with 16 percent seeking a CPA/PFS and 4 percent seeking a non-PFS CPA. Obviously, CPAs can also hold the CFP certification and many in the financial planning field do. Conclusion The current economic environment may provide an excellent opportunity for CPAs to provide personal financial planning services for their clients. Because CPAs are rated very highly in the trust factor, and because of clients excellent results in other traditional CPA services, CPAs who hold a PFS or CFP have excellent opportunities. Transitioning into this service is not without risks and challenges, but many CPA firms have made the transition and are successful.
Lusardi, A., and O.S. Mitchell. (2008) How Much Do People Know about Economics and Finance? Ann Arbor, MI: University of Michigan Retirement Research Center Policy Brief. Murphy, D. and S. Yetmar. (2009) Personal Financial Planning Attitudes A Study. Forthcoming in Management Research News, issue to be selected.
David Murphy, CPA, CFP, CFS, Ph.D., is professor of accounting at Lynchburg College, where he also serves as the chair of the Accounting Department and as director of the financial planning track in the colleges MBA program. Before earning his doctorate in accounting and finance at Washington State University, he was in private practice in Seattle, Wash. Contact him at Murphy.D@lynchburg.edu. Phil Umansky, CPA, Ph.D., is associate professor of business at the Sydney Lewis School of Business at Virginia Union University and chairman of the Accounting and Finance Department. He is a CPA Ambassador, a regular contributor to the WTVR Virginia This Morning TV Show on money management topics, and a member of the VSCPA Editorial Task Force. Contact him at pumansky@vuu.edu.
11
FUND BALANCES:
new fun with
ImpLEmENtINg gASB StAtEmENt 54
12 Government Accounting Disclosures July/August
By Paul A. Copley CPA, Ph.D., and M. Loretta Manktelow MBA, MST
en years ago, the Governmental Accounting Standards Board (GASB) issued Statement 34, which dramatically changed state and local government reporting by requiring accrual basis, government-wide statements. For the first time since that noteworthy standard, GASB has issued a new standard that is certain to affect the financial statements of every local government in Virginia. In the paragraphs that follow, we review GASB Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions, which is required for fiscal years ending June 30, 2011. The new standard is GASBs response to credit market participants who sought greater information about the availability of reported fund balances. In particular, bond investors and rating agencies wish to understand the extent to which the financial resources of governmental funds are constrained and how binding those constraints are.
net resources of a governmental fund that the governing body has specified for particular use. To be classified as committed, the resources should have been designated through ordinance or resolution by the governments highest level of authority (e.g. city council or county board of supervisors). Committed resources differ from restricted in that the constraint is imposed by a government upon itself. Statement 54 also provides that amounts representing contractual obligations of a government should also be classified as committed fund balance. The statement offers no examples of such contractual obligations, but it seems reasonable that they would be of sufficient significance to involve the formal action of the governing board. For example, board approval of large construction contracts would typically represent commitment of the funds. Assigned fund balance represents the net resources of governmental funds that the government intends for a specific purpose. Assigned resources differ from committed in that they do not require a formal action by the governing body. Constraints imposed on assigned resources are more easily modified or removed. For governmental funds other than the General Fund, this is the category for all (positive) residual fund balances. The rationale is that the act of recording resources in special revenue, capital projects, debt service or permanent funds is evidence of the governments intent to use the resources for a specific purpose. w
13
For example, fund resources may be restricted by creditors, donors or granting agencies. Resources may also be formally committed by elected officials to specific activities. Alternatively, constraints may merely be nonbinding indications of managements intent to use resources for a particular purpose. Statement 54 establishes new fund balance classifications to reflect these varying levels of constraint.
GASB Statement 54 establishes five new fund balance categories while eliminating the previous categories of reserved and unreserved. The new standard affects only the equity section of the balance sheet of governmental funds. It does not change the reporting of net assets of proprietary and fiduciary funds or the government-wide Statement of Net Assets. The first step in applying Statement 54 is to identify those fund resources that are nonspendable. Inventories and prepaid items typically appear in governmental funds because they are current assets. However, these resources are nonspendable because they are used in operations rather than converted into cash. The principal (corpus) of a permanent fund that is required to be maintained would also be classified as nonspendable. The remaining resources (net of liabilities) of the fund include cash and items expected to be converted into cash in the next period. These spendable resources are further classified according to the nature of any
FUND BALANCE CLASSIFICAtIoNS
constraints imposed on their use, using a hierarchy of constraints. The hierarchy ranges from restricted for the most constrained to unassigned for the least. Restricted fund balance represents the net resources of a governmental fund that are subject to constraints imposed by external parties or law. Restrictions arising from external parties include debt covenants (such as a requirement for a sinking fund) or constraints imposed by legislation or federal and state agencies on the use of intergovernmental revenues. Restrictions may also result from legally enforceable requirements that resources be used only for specific purposes. For example, Virginia cities and counties may impose taxes on the sale of prepared food and beverages. If approved by the voters, the referendum commonly restricts the use of the tax proceeds (typically to capital projects). The (unexpended) resources derived from this tax would be displayed as restricted fund balance. The equity section of the governmentwide Statement of Net Assets in GASB 34 classifies net assets within three categories, including restricted net assets. With one exception, those resources classified as restricted net assets in the government-wide statements would also be classified as restricted fund balance in the fund basis statements. The exception is permanent fund principal. These resources are classified as restricted net assets under GASB 34 and nonspendable fund balance under GASB 54. Committed fund balance represents the
Government Accounting Disclosures July/August
Resources in the General Fund may also be assigned to a specific purpose if that is the intent of the government. Intent may be expressed through the governing body by means other than ordinance or resolution. Alternatively, committees or individuals may assign resources to specific activities. Assignment within the General Fund implies an intended use that is more limited than merely support of the general purposes of the government. Unassigned fund balance is the residual category for the General Fund. Within the General Fund, governments should not report
assigned fund balance amounts if the assignment for specific purpose results in a negative unassigned fund balance. Negative fund balances could occur if expenditures for a specific purpose exceed the resources available in the fund. However, Statement 54 does not permit the reporting of negative restricted, committed or assigned fund balances. If this occurs, the government should reduce any assigned fund balances (in that fund) by the amount of the negative balance.
NEgAtIvE BALANCES
The rationale is that if expenditures exceed restricted or committed resources, then funds have in effect been reallocated to the purpose used. If a deficit remains once all assigned fund balances are zero, the remaining negative amount should be reported as unassigned fund balance.
ENCUmBrANCES
Under past reporting practices, outstanding encumbrances at year-end were reported in the governmental funds as fund balance: reserve for encumbrances. Statement 54 requires that
Table 1: City Government Balance Sheet

Governmental Funds as of June 30, 2011 General Fund ASSETS Cash and cash equivalents Investments Taxes receivable(net) Accounts receivable Due from State Government Supplies Inventory TOTAL ASSETS LIABILITIES Accounts payable Deferred Revenues TOTAL LIABILITIES FUND BALANCE Nonspendable Supplies Inventory Permanent fund principal Restricted Bond sinking fund School lunch grant School construction Committed City jail construction Highway construction Rainy day funds Assigned School lunch program Capital additions Debt Service Other purposes Library acquisitions Unassigned TOTAL FUND BALANCE 25,000 4,201,707 $7,345,454 572,014 912,032 230,000 25,366 95,000 202,014 40,032 30,000 366 202,014 135,032 30,000 366 25,000 4,201,707 $9,084,866
Residual balances of funds other than the General Fund
Special Revenue Fund
Capital Projects Fund
Debt Service Fund
Permanent Fund
Total Governmental Funds
$6,433,214 3,287,992 2,872,611 679,215 1,085,184 23,747 $14,381,963
627,837
895,300
230,000
366 25,000
$8,186,717 3,312,992 2,872,611
14,177 243,264
693,392 1,328,448 23,747
642,014
1,138,564
230,000
25,366
$ 16,417,907
2,628,422 4,408,087 7,036,509
70,000
226,532
2,924,954 4,408,087
70,000
226,532
7,333,041
23,747 25,000
23,747 25,000
} }
Equals supplies inventory Corpus of permanent fund Restricted by debt covenant, grant agreement or law
200,000 370,000 302,000
200,000 370,000 302,000
120,000 450,000 3,000,000
120,000 450,000 3,000,000
Contractual commitments
Committed by City Council
Residual balance of the General Fund
Outstanding purchase orders of the General Fund
14
encumbered resources be reported within the restricted, committed or assigned categories in a manner consistent with the criteria for those classifications. Statement 54 provides no examples as guidance on how to classify encumbered amounts. At the very least, the existence of an encumbrance suggests that the government has an expressed intent to use resources for a particular purpose and therefore these resources should not be classified as unassigned. Encumbrance accounting may also be used in the case of contractual obligations, such as construction contracts. Statement 54 requires that resources obligated to contractual obligations be classified as committed.
under which the resources may be expended. Stabilization amounts that are available in emergencies or in periods of revenue shortfalls would not be classified as committed unless the emergency or shortfall condition is specified and of a magnitude to distinguish it from events that occur routinely. Stabilization funds not meeting these conditions are reported as unassigned fund balance in the General Fund.
SAmpLE BALANCE ShEEt
Restricted: The Debt Service Fund reflects a sinking fund balance of $ 200,000 that is required by bond covenant. The city received a grant from the state government that is restricted for use in a school lunch program. The unexpended portion ($370,000) of this grant is reported in a Special Revenue Fund. The Capital Projects Fund includes $302,000 of food and beverage tax revenues restricted by ballot referendum for new school construction. Committed: The Capital Projects Fund includes amounts committed by contractual obligation with contractors building a new city jail ($120,000) and highway improvements ($450,000).Additionally, the General Fund reflects a rainy day fund ($3,000,000) established by city council resolution with specific circumstances under which the funds may be expended. Assigned: The residual balances of the Special Revenue, Capital Projects, Debt Service and Permanent Funds are classified as assigned fund balance. Within the General Fund, outstanding encumbrances of $95,000 for capital w
StABILIzAtIoN (rAINy DAy) FUNDS
Statement 54 also provides guidance on the classification of budget stabilization or rainy day funds. Stabilization amounts that meet certain criteria are classified as committed or (less commonly) restricted, if imposed externally or by law. Stabilization funds are classified as committed if they are created by a resolution or ordinance that identifies the specific circumstances
Table 1 presents an example balance sheet for a city governments governmental funds using the fund balance classifications required by Statement 54. Note that fund balance (the shaded segment of the table) is no longer presented as reserved or unreserved and that encumbrances are not separately displayed. Explanations follow:
Nonspendable: The $23,747 in the General Fund equals the supplies balance reported within asset section of the balance sheet. Additionally, the city has a Permanent Fund in which the principal of $25,000 must be maintained.
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additions and $25,000 for library acquisitions are classified as assigned fund balance, reflecting managements intent to use the resources for a particular purpose. Unassigned: The $4,201,707 residual balance of the General Fund is reported as unassigned fund balance.
discontinue the use of a special revenue fund and report the funds remaining resources in the General Fund.
The fund balance reporting requirements of GASB Statement 54 go into effect for fiscal years ending in June 2011. However, Statement 54 requires governments to restate FUND DEFINItIoNS fund balances for all periods presented in a Statement 54 also modifies the existing comparative balance sheet. Governments that governmental fund definitions to ensure con- present two years comparative balance sheets sistency with the classifications of fund balances. will effectively need to identify fund balance For most of the funds, the revised definitions classifications as of June 2010. have little effect on current practice. The exIn the coming year, CPAs may find client ception is special revenue funds. Specifically, service opportunities by alerting local govthe standard requires that special revenue funds ernment clients to the standard, identifying be used only if a substantial portion of the re- implementation issues ahead of time and sugsources are provided by one or more restricted gesting actions that may ease the transition. or committed (not assigned) revenue sources. For example, the differences between the fund Although other resources may supplement a balance classifications are based on degree of special revenue fund, assignment of resources constraint. Since committed and assigned funds is not sufficient for the establishment of one. are both self-imposed, the distinction between Further, if the government expects that a these two categories is particularly ambiguous. substantial portion of the resources will no To distinguish between these categories, govlonger be derived from restricted and commit- ernments will need to note the level of authorted revenue sources, the government should ity that approved the designation of resources E-5929-0510 VA:E-5929-0510 VA 3/23/10 3:16 PM Page 1
CoNCLUSIoN
to a particular purpose. Some local governments may wish to report rainy day reserves. These governments should verify whether the reserves were created by formal action of the board and whether the conditions under which the government may draw on these resources are sufficiently detailed and unusual to warrant classification as committed fund balance. Finally, governments should examine their existing governmental funds to ensure they meet the fund definitions provided by Statement 54.The new standard is expected to limit the use of special revenue funds, and in some cases governments will be required to discontinue the use of special revenue funds and report those resources in the General Fund.
Paul A. Copley, CPA, Ph.D., and M. Loretta Manktelow, MBA, MST, are on the faculty of the School of Accounting at James Madison University. Contact Paul at copleypa@jmu.edu and Loretta at mankteml@jmu.edu.
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Government Accounting Disclosures July/August 17
Portfolio Diversification: Where It Goes Wrong

The way most portfolios are constructed violates the very basic premises of modern portfolio theory.
By John Davenport
18
Diversification is one of the fundamental ideas in investing. However, the idea of diversification as we know it in the financial services industry is only a little over half a decade old. The concept of asset allocation, in which one builds a portfolio of different investments in order to maximize return and minimize risk, was originally proposed by Harry Markowitz in 1952 in his classic paper Portfolio Selection. Since that initial paper, asset allocation, which is formally known as Modern Portfolio Theory (MPT), has become the very backbone of portfolio construction in the financial services industry. The belief is that by combining assets that are not highly correlated to one another (meaning that they act differently than one another in response to market forces), one can help control risk. However, following years like 2008, public outcry arises, pronouncing that asset allocation and buy-and-hold portfolio strategies are dead. Its not hard to concede these arguments if you
similarly painful losses. As mentioned, the cry has grown louder with 2008 serving as proof that asset allocation does not work. I would argue, however, that it was not that asset allocation did not work, its that the way most portfolios are constructed violate the very basic premises of modern portfolio theory. In particular, most portfolios are constructed of highly correlated asset classes. Remember, one of the core tenets of modern portfolio theory is that the portfolio comprises assets that are not highly correlated to one another. If you look at Table 2, you will see that with respect to correlations, the assets that make up most portfolios provide little in the way of real diversification. As you will note, every one of the asset classes represented in Table 2 are positively correlated to the S&P 500. All domestic equity asset classes are more than 80 percent correlated to the S&P 500. International equities (as represented by the MSCI EAFE) are more than 60 percent correlated and bonds are still positively correlated at 24 percent. This means that all the elements of the portfolio are highly dependent on the S&P 500 experiencing positive returns to also perform well. Without becoming too academic, there are three basic flaws in the way that traditional portfolios are constructed that result in portfolios behaving as they did in 2008. The first flaw is the process of selecting and excluding various asset classes. The second element is the artificial constraints that are then placed on the included asset classes. The third element concerns the constraint to long-only investing in most portfolios.
look at how most portfolios are constructed. Looking at the major asset classes included in the typical portfolio, we see that nearly every one of the asset classes posted negative returns in 2008 (see Table 1). A similar phenomenon happened in 2001 and 2002, in which most asset classes posted negative returns. Given the negative returns in most of the major asset classes, client portfolios as a whole suffered
In Modern Portfolio Theory, portfolios should be constructed of a variety of non-correlating asset classes. However, when looking at the distribution of investments across asset classes in most retail portfolios, the vast majority of assets are concentrated in large cap, mid cap, small cap, international and aggregate bonds (ICI Factbook, 2007). According to the Investment Company Institute, at the close of 2007, approximately 40 percent of U.S. mutual fund assets were in domestic stock funds. Twenty-six percent of assets were in money market funds, while international equities and bond funds each represented 14 percent of U.S. mutual fund assets. Many in the industry would call those distributions a well-diversified portfolio. However, given their high correlations to one another, the resulting portfolios constructed using these basic asset allocations are then by default directionally dependent on the S&P for its returns. Essentially, these w
19
Asset class selection
portfolios are not as diversified as they may appear. The underlying problem with this generalized approach to asset allocation is the exclusion of numerous other viable asset classes (commodities, currencies, managed futures, structured notes, long/short equities, inflation-linked assets, etc.), which can increase the diversification of the portfolio. Many of these non-traditional asset classes offer much lower correlations to both the S&P 500 and the other traditional asset classes. Eliminating available asset classes forces the optimization process to create an optimal solution of only those things put into
Table 1: A typical portfolio
2000 S&P 500 Russell 2000 Russell Mid Cap MSCI EAFE BarCap US Agg Bond Russell 2000 Growth Russell 2000 Value Russell 1000 Value TR Russell 1000 Growth ML US HY Master II -9.1 -3.02 8.25 -14.17 11.63 -22.43 22.83 7.01 -22.42 -5.12 2001 -11.89 2.49 -5.62 -21.44 8.44 -9.23 14.03 -5.59 -20.42 4.48 2002 -22.1 -20.48 -16.18 -15.94 10.26 -30.26 -11.43 -15.52 -27.89 -1.89
the system. It is not constructing an efficient frontier based on all available investment choices. It is, rather, optimizing a portfolio of preferences.
The second issue that distorts the results of optimizing portfolios is the practice of applying artificial constraints to the asset classes that have been included in the optimizer. If you think through how portfolios are being constructed, you can begin to see the true limitations that are being placed on the ability to optimize the portfolio.
Artificial constraints
2003 28.68 47.25 40.06 38.59 4.1 48.54 46.03 30.03 29.75 28.15
2004 10.88 18.33 20.22 20.25 4.34 14.31 22.25 16.49 6.3 10.87
2005 4.91 4.55 12.65 13.54 2.43 4.15 4.71 7.05 5.26 2.74
2006 15.79 18.37 15.26 26.34 4.33 13.35 23.48 22.25 9.07 11.72
2007 5.49 -1.57 5.6 11.17 6.97 7.05 -9.78 -0.17 11.81 2.24
2008 -37 -33.79 -41.46 -43.38 5.24 -38.54 -28.92 -36.85 -38.44 -26.39
Table 2: Wheres the diversification?

1/1979-7/2009 S&P 500 Russell 1000 Growth Russell 1000 Value Russell Mid Cap Russell 2000 Growth Russell 2000 Value MSCI EAFE US Agg Bond Wilshire US REIT
S&P 500 Russell 1000 Growth Russell 1000 Value Russell Mid Cap Russell 2000 Growth Russell 2000 Value MSCI EAFE BarCap US Agg Bond Wilshire US REIT
1 0.96 0.95 0.94 0.81 0.80 0.63 0.24 0.55 1.00 0.83 0.91 0.86 0.74 0.60 0.21 0.48 1.00 0.91 0.72 0.84 0.61 0.26 0.63 1.00 0.91 0.91 0.62 0.24 0.65 1.00 0.87 0.56 0.11 0.56 1.00 0.56 0.19 0.75 1.00 0.18 0.44 1.00 0.19 1.00
Table 3: Unconstrained optimized portfolio
First, only a few asset classes are used for consideration in the optimizer. Then the optimizer is told to put limits on how much can be invested in any one of those select few asset classes. Again, this is more in line with creating portfolios of preference rather than process. As stated above, most asset allocation portfolios for U.S. investors will be largely biased to the domestic asset classes (which also biases the portfolio to the U.S. dollar but thats another discussion), with international investing relegated to a smaller, satellite allocation. However, researchers have demonstrated that when an unconstrained optimization is performed, even the most conservative of portfolios will allocate portions of the portfolio to the most risky asset classes (small cap and international equities). They also note that in an unconstrained optimization, large cap U.S. stocks are relegated to a supporting role. This is often the exact opposite of how client assets are deployed. The artificial constraints that are applied in the optimization process will essentially dictate the outcomes in line with the constraints, not along a true efficient frontier. This process essentially constructs portfolios along the lines of the investors or advisors preferences, not in accordance with a true mean-variance optimization. As an example, an unconstrained portfolio built to mimic the standard deviation (risk) of the S&P 500 would be constructed of small cap equities and bonds. Using historical returns and standard deviations, neither the S&P 500 nor the MSCI World Index lies on the efficient frontier so they are completely excluded from the unconstrained optimized portfolio (see Table 3). Most investors would simply be uncomfortable with a portfolio made up of only bonds and small caps. Common sense dictates that they further diversify the portfolio. However, most of the time investors will not include additional asset classes to solve for the efficient frontier; they will simply apply constraints to the existing asset classes, restricting allocations to those perceived as riskier. Following this logic, if the efficient frontier is constrained with a limit of 10 percent to small caps, the resulting portfolio is then forced to include large cap and international stocks asset classes that do not reside on our original efficient frontier. Further, this process of forcing large cap and international stocks into the portfolio
20
Practice Management Disclosures July/August Financial Planning
moves the efficient frontier down and to the right on the risk return spectrum, assuming more standard deviation (risk) for less return. However, in the eyes of many investors and advisors, this portfolio is more palatable because it seems more diversified. This process of applying constraints may result in portfolios that are more intuitively appealing, but they are by no means an optimal solution. Unfortunately, this process of portfolio construction is to force into the portfolio the existing set of asset classes, whether or not they offer a compelling risk/ return trade-off.
Table 4: Investing comparisons

Common Period 2/1993-1/2009 Hennessee HF Market Neutral TR USD Hennessee HF Long/Short Equity TR USD S&P 500 TR Geometric Mean (%) 5.21 9.11 6.04 Standard Deviation (%) 3.96 8.68 15.81 Alpha (%) 4.7948 6.6373 0.0006
Table 5: A superior risk/return profile to the S&P 500
Most portfolios are constrained to longonly investments, which by default excludes the use of short sales within the portfolio. Despite the evidence that short sales can improve the risk/return profile of the optimal investment mix, strategies that employ short sales are allocated very little space within the vast majority of portfolios. This can impede the ultimate efficacy of a portfolio; limiting portfolios to long-only investments does not allow portfolios to take advantage of all available market information. In a traditional long-only investing approach, the investor only has two options: hold a security or not hold a security. Even in the face of compelling negative evidence (bad news), the only thing the long-only investor can do to take advantage of adverse news is to not hold the security (sell it). However, by removing the long-only constraint and allowing short sales, the investor can now also short a security in the face of negative news and has the opportunity to realize an absolute positive return on the trade even though the stock or security may decline in price. Again, the ability to employ shorting strategies allows investors to take advantage of all available information. The historical returns from the Ibbotson database also suggest that the inclusion of shorting strategies within a portfolio could improve the risk/return profile of an overall portfolio. Comparing the S&P 500 Index, which is a long-only index, to indices that do allow shorting of stocks in the large cap universe, we can see the ability of short sales to shift the risk profile of a portfolio. From February 1993 through January 2009, the S&P 500 Index posted an average annualized return of 6.04 percent with a standard deviation of 15.81. The market neutral index posted a 5.21 percent average
Long-only investing
annualized return over the same period with a standard deviation of 3.96. The long/short index delivered a return of 9.11 percent with a standard deviation of 8.68. Both indices delivered similar to better returns with a fraction of the risk (see Table 4). What happens to portfolios when these three constraints are removed from the optimization process? In Table 5, the available asset classes include shorting strategies and asset classes that present a better correlation profile to the broad market and bond asset classes. The new array of asset classes in addition to the domestic asset classes includes long/short equity strategies, commodities, managed futures and market neutral strategies. The resulting efficient frontier allows us to construct a portfolio of long/short, managed futures and the aggregate bond index that delivers a far superior return to the S&P 500 with a standard deviation more in line with the aggregate bond index. As Table 5 indicates, the domestic equity asset classes that have garnered the bulk of U.S. mutual fund assets in traditional portfolios do not reside on the efficient frontier and thus are excluded from the portfolio.
gies increase portfolio risk in spite of the evidence to the contrary. This is clearly seen in the portfolio construction behaviors that tend to rely more on intuition than science. In investing, we attempt to maximize return while minimizing risk. However, the processes by which most retail investor portfolios are constructed are counter to this basic premise. By highlighting these behavioral flaws in the portfolio construction process, perhaps investors can return to the true essence of modern portfolio theory and attempt to build truly diversified portfolios.
Many advisors have the perception that alternative investments and shorting strate-
Returning to diversification
John Davenport is director of research with the Actuarial Consulting Group in Midlothian. He is also an adjunct professor, teaching finance, investing and other business courses for several local colleges. Additionally, John is a doctoral student. Contact him at jdavenport@acgworldwide.com or www.linkedin.com/pub/johndavenport/5/744/593.
Financial Planning Disclosures July/August Practice Management Disclosures July/August
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Leveraging Sarbanes-Oxley to drive change and mitigate risk in small and medium-sized entities
Friend o
22 Sarbanes-Oxley Disclosures July/August
Sarbanes-Oxley:
or Foe?
I
By Heather Judson, CPA, CMA
s the Sarbanes-Oxley Act (SOX) a friend or foe to small and medium-sized companies (SMEs)? Often, those entities will answer foe. Status quo may generally be the policy followed by SMEs, which are those publicly traded companies with less than $75 million in market capitalization, as defined by the U.S. Securities and Exchange Commission. Typically, SMEs will either scramble to document their processes just prior to their financial audits or will rely on the external auditors to document their processes for them. Explaining the status quo For SMEs, SOX can seem to be an exercise in documenting what actually occurs. This may seem tedious and without merit. Each department knows what they do and may wonder why they need to write a narrative explaining their duties. Often the answer to this question is because the auditors asked for it. However, SMEs might do better to engage the various departments and show them how they can benefit from SOX. The first step to getting department managers on board
Sarbanes-Oxley Disclosures July/August
is to present top management with the benefits that may be had from utilizing SOX, such as driving change and mitigating risk. PCAOB direction The Public Company Accounting Oversight Board (PCAOB) instructs external auditors in Auditing Standard No.5 (AS5) to evaluate the extent to which he or she will use the work of others to reduce the work the auditor might otherwise perform himself or herself. Further, the PCAOB allows the external auditor to rely on the work of internal auditors, company personnel (in addition to internal auditors), and third parties working under the direction of management or the audit committee. This statement should pique top managements interest. Any documentation or procedures that are performed in house should save money on the overall audit. Top management should encourage external auditors to utilize any viable internal documentation. This alone should have management interested in performing SOX procedures in house. In AS5, the PCAOB directs the external auditor to ask him or herself What could go wrong? in determining likely sources w
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Table 1: Examples of risk

Strategic risks Higher-level risks mainly external to the company Change in interest rates Customer buying behavior change Substitutes enter the market Technological advances Trade embargos No business process improvement Operational risks Lower-level risks mainly internal to the company Fraud Workplace safety Product flaws Business disruption Damage to physical assets System failures Reporting risks Risks relating to the reliability of financial reporting Transactional errors Miscommunication Data entry or loading error Accounting error Inaccurate external report Missing transactions Compliance risks Risks relating to applicable laws and regulations Changing or new laws and regulations Inadequate staff training Miscommunication Human error
for potential misstatements in the financials. This is basically asking: What risks are present? Mitigating risk Enterprise Risk Management (ERM) has become the best practice for larger corporations. The Enterprise Risk Management Integrated Framework from the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, published in 2004, defines ERM as a process, effected by an entitys board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives. The article further stratifies the company into four categories susceptible to risk: strategic, operations, reporting and compliance. Strategic risks are those that affect the company at a high level and tend to be external to the company. Many strategic risks can be explored through the entity-level assessment performed in SOX. Operational risks are those that affect the company at a lower level in its day-to-day operations. Reporting risks are those risks that affect the reliability of financial reporting, and compliance risks affect compliance with applicable laws and regulations. Many of the operational, reporting and compliance risks can be examined and addressed in the various process documents created through SOX. See Table 1 for more information on risks. Best practices Various department heads should be encouraged to go through the SOX process of interviews, walkthroughs, gaps and management action plans. A company employee documenting processes with a critical eye and a sense of the big picture can help the various departments run smoother and with less error. Additionally, he or she can help the various departments work together to mitigate risk. Its important to understand best practices and potential risks before starting the SOX documentation process. Best practices are the current standard. When researching best practices, you are endeavoring to learn from the experience
and knowledge of others. You are looking for the best in the business. Dont discount the less than best. The stories of the less than successful will give you an idea of the risks that you might face. For instance, stories of employee theft can help you to understand the practices that lead to that risk materializing. Perhaps the company failed to segregate duties surrounding cash or failed to physically secure assets. Best practices research is usually inexpensive. The Internet is a wealth of information, and you can find information at the library. You can network and conduct research through professional organizations. Furthermore, once you identify organizations and people you should talk to, you can initiate informal chats on the subject matter. Interviews You can begin your organizations SOX documentation once you understand the best practices and key risks surrounding each process. The first step is to interview the manager of the process, who can explain everyones role in that area. Additionally, he or she will be able to provide you with a birds eye view of the process and its controls. Keep in mind you are following a transaction from its inception to all the stops it makes along the way prior to hitting the general ledger. The interview process should feel like an informal conversation rather than an interrogation. The interviewee should feel comfortable and relaxed. Stay in control of the conversation and keep the interviewee on topic. Make sure to use open-ended questions rather than leading questions. You want to know who, what, when, where, how and why. You dont want to ask yes or no questions. See Table 2 for question examples. Keep in mind that silence is a strong stimulus for conversation. Typically, your silence is an indicator that the other person should be talking. People tend to want to fill silence with conversation. Once the interviewee is responding to the openended questions, you can follow up with more direct questions to clarify details. When you understand the process from start to finish, make sure to repeat the process back to the interviewee. Make sure to mention all the key employees names. Repeating the information back
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to the interviewee ensures that there has been no miscommunication. Leave the interview with the possibility of follow-up questions. Document the interview in a narrative immediately following the interview while your memory is fresh. Narratives You can start the documentation process by dividing the process into subprocesses. For cash receipts, this might be: receive cash, deposit cash, petty cash, bank reconciliation and collections. Use titles rather than employee names throughout the narrative so that updates are easier. You want to identify key controls and gaps. In the 2008 Sarbanes-Oxley Section 404: A Guide for Management by Internal Controls Practitioners, the Internal Institute of Auditors (IIA) defines a key control as a control that, if it fails, means there is at least a reasonable likelihood that a material error in the financial statements would not be prevented or detected on a timely basis. In other words, a key control is one that is required to provide reasonable assurance that material errors will be prevented or timely detected. Each key control should have key information documented as well. The IIA guide further recommends documentation such as identifying who is performing the control, when the control is operating and at what frequency, how the control is performed, what evidence exists that the control was performed, and which reports are used in the operation of the control. Gaps are missing controls, and best practices research helps identify these controls. For example, a gap may be that the bank deposit is prepared by the same person who updates customer accounts, updates the general ledger and reconciles the bank statement. This would go against segregation of duties, which is one of the best practices surrounding cash receipts. The IIA guide recommends that a narrative enables a reasonably knowledgeable individual this person does not have to be an expert with experience in the area, but should have some knowledge of the company or its business to understand the process; and overall, enables a reasonable person to have a basis upon which to assess the design of the controls: Are the controls identified and documented sufficiently to either prevent
or detect a material misstatement? After completing the narrative process, the next step is to perform a walkthrough. Walkthroughs Sometimes what is perceived as standard operating procedure isnt what actually occurs. A walkthrough will get you down into learning and testing the details with the person who performs the day-today transactions. In AS5, the PCAOB explains that some types of tests, by their nature, produce greater evidence of the effectiveness of controls than other tests. The following tests that the auditor might perform are presented in order of the evidence that they ordinarily would produce, from least to most: inquiry, observation, inspection of relevant documentation, and re-performance of a control. A walkthrough starts by interviewing the employees who perform the duties in the narrative. The interview techniques described above should be utilized. However, as the person walks through the process, they should ask show me for each control along the way. For example, if the employee says that a check log is maintained, then the evidence of one days check log would be asked for. Furthermore, if the employee says that the controller matches the check log to the days deposit slip and initials the deposit, then the deposit slip related to the check log observed would be asked for. If the employee says he or she updates the accounting system and must use a password to log in, then re-performance would be utilized to see the control work. Through this process, it can be observed if the narrative documented by management matches the walkthrough. Sometimes there are additional controls management may not be aware of, forgot to mention or didnt realize were effective controls. Sometimes the controls communicated by management are not being performed correctly or at all. Also, through the best practices research, missing key controls can be documented based on what actually occurs. Walkthroughs are a great way to understand how standard operating procedure documentation and narratives match up to what actually occurs. By asking for the employee to show each control through documentation or re-perfor-
mance, the walkthrough can be documented and management can be updated accordingly. Operation improvement Additionally, employees should be asked questions in regards to process improvement: If someone wanted to commit fraud, how would they do it? If you were to improve this process, what would you do? Are there redundancies in this process? How would you make the process more efficient? Is there any training you wished you had to help you perform your job? What equipment, programs or assistance do you wish you had? Asking these types of questions can help pinpoint areas for improvement and may help management improve its w
Table 2: Question this

Leading questions Do you have a check log to record checks as they are received? Do you segregate duties surrounding cash receipts? Do you give numbered receipts to customers? Do you keep copies of the checks deposited? Open-ended questions Whats the first thing that happens when you receive mail with checks? Who opens the mail? Who updates customer accounts? Who makes bank deposits? Who performs the bank reconciliations? How do you process customer payments? What records do you maintain?
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operations. SOX process documentation can be leveraged by asking about process improvement even though this step might not be required. Suggestions to improve operations can be provided to management. Gaps and a MAP After the walkthrough is complete and documented, and the narrative has been updated for walkthrough findings, its time to bring management in to discuss the results. Management should be made aware of the identified control gaps in the processes. Once the gaps have been communicated to management, its up to management to communicate a management action plan (MAP) to remedy gaps. Additionally, they should give a timeframe for implementation of the MAP. The risk identified in the gap can be remediated in various ways. Management may take the position that the gap presents a risk that is not material to the financials and thus does not require any remediation. Management may transfer the risk through an insurance policy. Management may reduce or mitigate the risk through action. Changing mindsets SMEs tend to adopt the philosophy of only looking at processes to put out fires only if something is broken will they spend time to fix it. In contrast, Kaizen, the Japanese philosophy of continuous improvement, adopts the attitude of even if it isnt broken, it can be done better. This philosophy encourages businesses to make small improvements continuously day to day, and it can certainly be applied to SOX documentation. Leveraging SOX can help evaluate and improve the operations of any business continuously and over time.
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Virginia Society of Certified Public Accountants
Heather Judson, CPA, is a management accountant at a private medical manufacturing company. Contact her at hljadds@yahoo.com.
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VSCPA Self-Assessment Exam

1. Which of the following is not a trend that is driving the personal financial planning market? a. Many Americans believe they could benefit from the services of a personal financial planner. b. Many Americans believe they lack the time to develop a financial plan. c. Most Americans are very optimistic about their financial future. d. Many Americans believe they lack the financial expertise to develop a financial plan. 2. In a 2006 Amplitude Research Survey, the most trusted financial advisor is a: a. Certified Financial Planner b. Certified Public Accountant c. Chartered Financial Analyst d. Stock Broker 3. For those CPAs who wish to enter the personal financial planning market, what advice does the article provide in terms of which type of clients to accept for this service? a. CPAs who want to enter the financial planning market should accept any and all types of clients so as to get his/her foot in the door of the market. b. Only very wealthy clients should be accepted by CPAs. c. Only clients for which CPAs perform tax services should be accepted by CPAs. d. CPAs should develop a philosophy of which clients to serve, which may include acceptance criteria such as income or net worth. 4. GASB Statement 54 affects the fund basis statements of which of the following fund types? a. Governmental funds b. Proprietary funds c. Fiduciary funds d. All of the above 5. According to GASB Statement 54, which of the following is an example of a nonspendable fund balance? a. Resources such as supplies that are used in operations rather than converted to cash b. The corpus of a permanent fund that may not be spent c. Prepaid insurance d. All of the above 6. The residual (positive) fund balance classification of governmental funds, other than the General Fund, is: a. Unassigned fund balance b. Assigned fund balance c. Committed fund balance d. Restricted fund balance 7. The primary problem with many portfolios is: a. Asset classes are too highly correlated. b. Fees are too high. c. Passive management does not work. d. Investors include too many asset classes. 8. Non-traditional investments could potentially enhance investment portfolios because: a. They are cheaper options. b. They are more sophisticated than traditional investments. c. They have very little risk associated with them. d. They offer lower correlations to traditional asset classes. 9. The financial services industry has adopted what concept as the foundation of portfolio construction? a. Market timing b. Asset allocation c. Dynamic allocation d. Day trading 10. Which test offers the greatest amount of evidence when testing controls? a. Inspection b. Inquiry c. Re-performance d. Observation e. Confirmation 11. Which is not an appropriate response for management to mitigate an identified, unaddressed risk? a. Document that the risk is not material to the financials and thus does not require mitigation. b. Institute a new control to mitigate the risk. c. Transfer risk through an insurance policy. d. Institute a new process to mitigate the risk. e. Take no action. 12. Which is not a category of risk identified by the Committee of Sponsoring Organizations (COSO)? a. Market b. Strategic c. Reporting d. Compliance Take this test online at www.vscpa.com/ July2010DisclosuresExam. Complete the 12-question test at left and submit to the VSCPA for 1 CPE credit. A 75 percent or better pass rate is necessary to receive credit. Your exam will be graded no later than September 30, and you will receive either a certificate of completion via e-mail for your records or an e-mail notification that the 75 percent grade was not met. Submission deadline: August 31, 2010. Exams received after this date will not be graded and your money returned. Cost: $15 for VSCPA members/$30 for nonmembers.
Submission Instructions
You may submit this self-assessment exam and make the exam payment online at www.vscpa.com/July2010DisclosuresExam. You may also circle the letter next to your answer in each question and mail this paper exam to: CPE Team Virginia Society of CPAs 4309 Cox Road Glen Allen, VA 23060 Fax submissions are acceptable to (804) 273-1741. Name ___________________________ Address __________________________ ________________________________ E-mail Address ____________________ Date ____________________________
Method of Payment
Method of Payment _ Check (payable to the VSCPA) Credit card Credit card number ______________ Expiration date _________________ Signature _____________________ Date _________________________
Self-Study Disclosures July/August
27
VSCPANews
news news news news news news news new
I am the VSCPA: Leaders Summit celebrates individual members

he 2010 VSCPA Leaders Summit was all about VSCPA members. Held May 1314, 2010, at the Richmond Hilton Hotel & Spa in Short Pump, VSCPA volunteers and leaders from across the state gathered to discuss top trends affecting the CPA profession, best practices and how to ensure the VSCPA reaches its goals. This years conference theme, I am the VSCPA, highlighted the importance of each and every member and celebrated the diversity of the VSCPAs membership, from different practice niches, hobbies and areas of the state to genders, ages and races. The VSCPA held its 101st annual meeting on Friday, May 14. The agenda included a vote on two Bylaws changes, the installation of the 20102011 VSCPA and Educational Foundation Board of Directors and recognition of award winners.
Scenes from the Summit
20102011 VSCPA Board of Directors

Chair: Bradford R. Jones, CPA Chair-Elect: Damon L. DeSue, CPA Vice Chairs: Stephen M. Gay, CPA Lisa C. Germano, CPA John B. Montoro, CPA Tom E. Rosengarth, CPA At-Large Directors: Maria T. Bridges, CPA Nishon R. Evans, CPA Carl W. Hoecker, CPA R. Chapin Jones, CPA Clare K. Levison, CPA Roy D. Peters, CPA James M. Shepherd, CPA Barbara L. Smith, CPA Mark A. VanDeveer, CPA Colette Y. Wilson, CPA
VSCPA Board, left to right: Colette Wilson, Stephen Gay, Lisa Germano, Tom Rosengarth, Carl Hoecker, Brad Jones, R. Chapin Jones, Maria Bridges, Mark VanDeveer, Stephanie Peters, Damon DeSue, James Shepherd, Nishon Evans, Clare Levison, Barbara Smith, John Montoro. Not pictured: Roy Peters
20102011 VSCPA Educational Foundation Board of Directors

Chair: Sean R. OConnell, CPA Vice Chairs: L. Darlene Selz, CPA Bradley P. Nicklin, CPA Secretary/Treasurer: Stephanie R. Peters, CAE At-Large Directors: Richard J. Beason, CPA William H. Cole Jr., CPA Kristin L. Comer, CPA Thomas M. Crutchfield, CPA
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Martin A. Einhorn, CPA Gerald L. Hagen Jr., CPA Bradley S. Haun, CPA Teresa M. Jordan, CPA Gregory F. Lawson, CPA Andrew T. Martin, CPA Sarah E. Nutter, CPA George D. Scheulen, CPA Howard C. Seal, CPA Vugar T. Shahtakhtinskiy, CPA Randolph Shapiro, CPA Adrian U. Taylor, CPA Monique T. Valentine, CPA Douglas E. Ziegenfuss Sr., CPA
Foundation Board, left to right: Martin Einhorn, Sarah Nutter, Andrew Martin, Vugar Shahtakhtinskiy, Gerald Hagen, Stephanie Peters, Sean OConnell, Randolph Shapiro, Howard Seal, Bradley Nicklin, Monique Valentine, Gregory Lawson, Thomas Crutchfield. Not pictured: Richard Beason, William Cole, Kristin Comer, Teresa Jordan, George Scheulen, Adrian Taylor, Douglas Ziegenfuss
VSCPA News Disclosures July/August
ws news news news news news news news news news news news news
Chapter Circle of Excellence winners

The VSCPA Chapter Circle of Excellence program encourages local VSCPA chapters to achieve a certain standard of excellence by striving for 21 different benchmarks in activities that support VSCPA goals and member satisfaction. Chapters strive to meet objectives in membership, meeting attendance, community service and more. Six of the VSCPAs nine active chapters submitted data for the Circle of Excellence, and all six qualified for an award. Congratulations to the 20092010 Chapter Circle of Excellence winners: Gold Richmond Battlefield Silver Thomas Jefferson Bronze Roanoke Tidewater Northern
Scenes from the Summit
VSCPA honors 23 new life members

This year, the VSCPA recognized 23 CPAs as life members of the association. The prestigious Life Member Award recognizes those CPAs who have been members of the VSCPA for more than 40 continuous years. VSCPA life members have their annual membership dues waived for the remainder of their participation with the VSCPA, will continue to receive all benefits extended to members, including all services and publications, and are honored with a special lapel pin and framed certificate of recognition. The VSCPA congratulates the following new life members: Joseph R. Cobbe, CPA Truman R. Dorton, CPA Elwood L. Edwards, CPA Wayne R. Eggleston, CPA H. Stephen Forrest III, CPA Richard F. Gibbons, CPA Charles E. Greene, CPA Earnest A. Huband, CPA James C. Jones, CPA Luke J. Lalande, CPA Robert N. Lent, CPA Robert J. Neuland, CPA Larry A. Renner, CPA Carl D. Robinson, CPA Jack H. Robinson, CPA Ronald L. Salyer, CPA Barry E. Saunders, CPA Thomas N. Scates, CPA James N. Schneider, CPA R. Paul Sebra Charles J. Sher Jr., CPA E. Douglas Wright, CPA Edward M. Young, CPA
Earnest A. Huband, CPA, accepts his Life Member Award
Members vote on Bylaws changes

The VSCPA Board of Directors recommended Bylaws changes to sections of the Fellow and Associate membership categories. The changes were approved at the VSCPAs annual meeting and were sent via ballot to the entire membership in June. Stay tuned results will be communicated on www.vscpa.com and in VSCPA e-newsletters and a future issue of Disclosures.
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VSCPANews
Meet your 20102011 Chair: Brad Jones, CPA
Celebrated career
A general services partner at PBGH, Jones supervises tax and audit work, and performs business valuations and general business consulting, as well as mergers and acquisitions. He works principally with private companies and nonprofits. Jones has been active in the VSCPA since he began his CPA career. He served as president of the VSCPA Battlefield Chapter in 20022003 and has served on both the VSCPA Board of Directors and the CPA PAC of Virginia Board of Trustees since 2005. He has volunteered for various VSCPA committees and task forces, including the Speakers Bureau, Financial Fitness Task Force and CPA Ambassador Program. He was named a Super CPA by Virginia Business magazine in 2008, and a host of designations after his name illustrate his diverse expertise: CCM, CVA, CFF.
If Brad Jones, CPA, had a motto, it would be this: Were CPAs first. There needs to be an objective voice involved in any discussion, whether its a business or public policy discussion, Jones says. All the participants need that objective entity to put some reason and rationality around the whole thing, and I think thats the role of the CPA. Dont tell me what I need to hear. Tell me what it is. Thats the essence of the accounting profession. Every day, CPAs render opinions based on sets of rules and objective criteria. They are trained to be objective and impartial. Whether the cause it business or the issues, Im a CPA first, he says. Im not going to distort things to advance my position because Ive got to stay true to my profession. Its this very philosophy that makes him such a strong choice to lead the VSCPA as 20102011 chair of the VSCPA Board of Directors and represent the CPA profession in Virginia. Alma matters With an inkling he might like to be a CPA one day, just like his father, Jones chose to attend James Madison University for its strong business school. Accounting is so fundamental to business, he said. Its a good background to do just about anything you want to do. Jones put his accounting degree to work right away, beginning a career at PBGH in Harrisonburg only a few days after his graduation in December 1987. I started working during tax season, he recalls. That was fun. Eight months later, he moved to the firms Fredericksburg office, where he has been ever since. Next step: CPA license. If youre going to be in the accounting profession, then you certainly need to have the top certification for the profession, he said. That would be the case no matter what profession someone goes into. Jones was licensed in Virginia in 1990.
Calling all leaders In addition to supporting the VSCPAs top five strategies and maintaining an intense focus on increasing the VSCPAs membership during his term as chair, Jones has some important agenda items of his own. Back to his focus on CPAs impartiality, Jones plans to promote CPAs as top candidates for leadership. CPAs are the people Id like to have sitting at the head of the table, he says. CPAs need to be leaders because were CPAs first. As an extension, Jones has a passion for leadership development. Leadership is in very short supply, he says. As the current leadership of organizations is going to need people to step up and take over those positions, were looking for potential supply, and were looking to the young people. On a national level, with so many major political issues being debated in Washington, there is a real opportunity for CPAs to get involved and provide that objectivity both policymakers and the public crave, according to Jones. Without an objective viewpoint, the conversation just kind of breaks down, he says. Regardless of where we are or what were doing, we need to promote that. He would like to see a greater representation of CPAs working in government among VSCPA members. Likewise, he would like to see the VSCPA reach out to those CPAs working in government to provide even more support. Jones also considers Virginia a leader. I think Virginia is a unique state, he says, citing its geography and long history of national leadership. The Virginia Society has already demonstrated its ability to lead, too, he says, from financial literacy to mobility and so on. Jones would like to see the VSCPA take leadership on more national issues, in addition to its state advocacy activities. Id like us to begin to participate in more national conversations, he says. Were in a unique position to do so. And, again, were CPAs first.
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Outside of the office When Jones is not working, he spends time with his wife, Natalia, and two children: Nakita (15) and Brianna (3). He also enjoys exploring his community. Although Jones was born in Missouri, he moved to Virginia when he was 6 months old, and he takes great pride in both his community and the Commonwealth. Even Jones community involvement reflects a strong affinity to that very objectivity that attracted him to the CPA profession. Among the organizations hes involved in, Jones has volunteered for the past 20 years for the Court Appointed Special Advocate Association (CASA), an organization that appoints advocates to provide objective opinions to the court on abused and neglected childrens living situations to help ensure their safety. Even outside of office walls, hes a CPA first.
UPCOMING VSCPA CPE
For more information, or to register for VSCPA CPE, visit www.vscpa.com or call (800) 341-8189. Conferences 11th Annual VSCPA Business Valuation, Fraud & Litigation Services Conference September 2324, Richmond CPA Center 40th Annual Virginia Accounting & Auditing Conference September 2728, Hotel Roanoke & Conference Center Seminars How to Conduct a Review Under the AICPA Practice-Monitoring Program August 30, Richmond CPA Center NEW! Stock Analysis and Portfolio Management September 28, Richmond CPA Center NEW! Surviving and Growing Your Company in Difficult Times: Essential Skills for the Finance Team September 29, Richmond CPA Center International vs. U.S. Accounting: A One Day Look at IFRS September 29, Waterford at Fair Oaks, Fairfax Surgent McCoys Multi-State Tax Update September 29, Waterford at Fair Oaks, Fairfax NEW! Learn to Do a Nexus Study to Build Your State and Local Tax Practice September 30, Waterford at Fair Oaks, Fairfax
Webcasts/Webinars
Our technology partners, ACPEN, CPE Link and CPA Crossings, are constantly adding webcasts/webinars to present the freshest content to Virginia CPAs. With the wide variety of topics, dates, times and program lengths, these online sessions are a very popular way to satisfy your CPE requirements. Easily search and register for webcasts/ webinars by visiting the sites below: ACPEN: http://vscpa.acpen.com CPE Link: www.cpelink. com/?s=8ave3p7 CPA Crossings: http://cpe. cpacrossings.com/vscpa
Detecting Misstatements: Integrating SAS 99 and the Risk Assessment Standards September 30, Waterford at Fair Oaks, Fairfax NEW! 2010 Leadership Update: Leading the Finance Team Into the Future, September 30, Richmond CPA Center Ethics 2010 Your License Depends On It! September 23, Richmond CPA Center September 28, Hotel Roanoke & Conference Center
NEW! VSCPA Variety CPE Cluster The following courses will be held at the Richmond CPA Center:
July 19 Effective Communication for CPAs Forensic Accounting: Fraudulent Reporting and Concealed Assets July 20 From the Board Down: Management and Governance Issues for Nonprofits Raising and Managing Assets for Nonprofits Talent Management: Winning the War for Talent Innovative Thinking July 21 How to Avoid the 7 Deadly Sins of Investing Strategic Planning That Works
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VSCPANews
Rising stars to watch: VSCPAs Top 5 Under 35

n the next decade, the CPA profession will be looking to current young professionals to lead the charge. Good thing there are some outstanding rising stars who are ready to shine. This year, the VSCPA launched a new award, Top 5 Under 35, to recognize young professionals who show particular promise. Nominees excelled in one or more of the following categories: professional achievement, VSCPA or local VSCPA chapter accomplishment, community contribution or dedication to the CPA profession. In its inaugural year, this award elicited a remarkable response, and members of the volunteer selection panel said they were overwhelmed with the amount of highly qualified, impressive nominees. Although the competition was stiff, five top-notch young CPAs were selected as the first recipients of the Top 5 Under 35 award. They were honored at the 2010 Leaders Summit on May 14. Check out what these rising stars are up to, and continue to watch as they complete the trajectory from rising to risen star over the next few years. Alan Hostetler, CPA Auditor, Thomas C. Stott, CPA, PC Leading the VSCPA Thomas Jefferson Chapter opened a new chapter in Alan Hostetlers career. Currently serving as chapter president, Hostetler began his first term on the board of his local chapter in 2006. Hes devoted his time and talents to the chapter ever since. In fact, he recruited a full slate of officers for the current membership year, clocking in several hours on chapter business in 2009. Hes spent hours revitalizing our chapter and keeping it going, said Thomas C. Stott, CPA, the managing partner at Hostetlers firm, Thomas C. Stott, CPA, PC, in Charlottesville. Leading the chapter has presented ample opportunity for Hostetler to fine tune his leadership skills, which have translated to his work at the firm, where he specializes in auditing as well as in business and individual taxation. A 2001 graduate of Eastern Mennonite University, Hostetler has nine years of experience in nonprofit auditing and informational return reporting and has been recognized for his outstanding work in the field: He was selected as a Virginia Business Super CPA in both 2006 and 2007. Ironically, this top-notch CPA was almost not a CPA at all. I started out thinking about going into engineering, but calculus scared me away from that, Hostetler laughs. The more I started looking into career planning, the variety of things you could do within the accounting profession and the job availability at the time were really attractive. When hes not working, Hostetler is outdoors. He belongs to a hiking group and leads hikes in the Charlottesville area. Hes also into vegetable gardening, traveling, local music and local activities. His advice to other aspiring CPAs? Study hard. Dont ever assume that you know enough. Learn from the people around you. Dont ever pass up opportunities to learn something new. Clare Levison, CPA Analyst, Alliant Techsystems, Inc. I dont think many kids grow up thinking I want to become an accountant, Clare Levison said. When I was a little girl, I wanted to be a grocery store clerk. I wanted to run the cash register. Turns out Levison is monitoring the cash flow for her company, but at a much higher level than she anticipated as a child. A 1998 graduate of Radford University, Levison has more than 10 years of experience in organizational finance, including budgeting, pricing and program analysis. She has been offering her expertise to Alliant Techsystems in Radford (where, incidentally, her husband also works) for more than a decade. I think a lot of younger people these days tend to job hop, Levison said. Im pretty proud of myself that Ive stayed here. Theres a lot of value that comes along with getting to know people and with them getting to know you. Levison is also a published writer on various financial topics. She authored the cover feature for the September/October 2009 issue of Disclosures magazine and also writes a biweekly personal finance column for The Roanoke Times. One regular reader commented on her column, saying I just wanted to take a minute to thank and commend you for your intelligent and clearly expressed ideas on the big subject of personal financial management. Add to her already impressive rsum a history of experience on a variety of VSCPA task forces and a term on the 20102011 VSCPA Board of Directors. Levison has a lot to be proud of. On top of that list is getting her CPA license. I graduated in 1998 and got my license in 2007, she explains. I was already married and had two children. Im proud of the fact that I got my license while I was doing all of those other things. I didnt let those things become excuses for me not to get my license and advance my career. When Levison is not working or writing, she spends time with her husband, Troy, and two daughters: Brenna (11) and Elise (6).
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Ryan Losi, CPA, Partner, Piascik & Associates, PC Piascik & Associates, located in Glen Allen, is one of the top CPA firms in the country serving professional athletes. The firm also does a great deal of international business. So, according to firms founding partner Steve Piascik, CPA, Ryan Losi was a perfect fit for the firm. A 1997 graduate of Virginia Commonwealth University, Losi has served for the past six years as a partner in the Virginia Leaders in Export Trade, or VALET, program, which is an award-winning program that assists companies throughout Virginia in expanding their international business. Prior to joining Piascik & Associates, he also served on Pricewaterhouse Coopers National I-Team, managing large-scale international tax projects for Fortune 100 companies. In May 2007, he was selected as a charter member and chairman of one of 10 task forces for then Governor Tim Kaines VITAL (Virginia International Trade Alliance) program where his focus was to develop a marketing campaign to help attract international business to the Commonwealth. I will always be in public accounting, Losi said. I enjoy the interaction with clients and I enjoy the teaching and mentoring of staff and managers in a way that is interesting. As executive vice president and director of business development for the firm, Losi enjoys putting his creativity to good use, leading the marketing team on branding and web efforts. Many of the things I do I create, he explained. Deliverables, topics, presentations on how the firm is projected to the marketplace. I enjoy not only the creative side of tax and financial planning, but also how to communicate that information to the audience creatively. Losi also speaks regularly about 20 times a year and teaches international accounting at the Executive MBA program at Virginia Commonwealth University. I really am thankful for many key people in my life, Losi says. In particular, there are some specific college professors, some colleagues and employers. My spouse. Many different people who helped shape how I see things and the decisions Ive made over time that have allowed me to have a lot of blessing in my life, maybe earlier than I might have otherwise. I want them to know that I recognize that and I appreciate that. When Losi isnt working, he enjoys spending time with this wife, Lizzy, and three children: Virginia Grace (6), Abigail Elizabeth (3) and Robert Woodland (1). He also enjoys fishing with his family, playing basketball on Sunday nights, reading about U.S. history and culture, and being active in the Richmond / Glen Allen community.
Andrew Martin, CPA Vice President/Manager, Corbin & Company, PC To Andrew Martin, nurturing his profession is as important as nurturing his own career. I think its important to support the CPA community, he said. We all owe our livelihood to the CPA credential. You can get more accomplished as a group than any single person can on their own, so I think its important to support a unified organization that represents the profession. He began supporting the profession locally by joining the board of the VSCPA Tidewater Chapter in 2005, eventually serving as president in 20082009. He currently serves on the VSCPA Educational Foundation Board of Directors, assisting with the Foundations top goal attracting future CPAs. A 2001 graduate of The College of William and Mary, Martin has been selected as a Virginia Business Super CPA from 2005 through 2009. He has worked for Corbin & Company, PC, in Chesapeake for nearly six years, specializing in attestation engagements, tax preparation, business and tax consulting, and litigation support engagements. I always knew I had a business intution, Martin said. I was always good with money and numbers, so I took a principles of accounting class in college. The next step after graduation? Getting his CPA license. Especially in practicing local accounting, your CPA really gives you the credibility that you need to go out there and attract and retain clients. Martins firm is a family affair. I share an office wall with my wife, who is also a CPA, he chuckles. The name on the firm is that of his father-in-law, Patrick Corbin, CPA. To Martin, client trust isnt inherited. Its hard-earned. When I came into the firm, clients had been with him for 25 to 30 years, Martin said. Now they feel comfortable calling me directly instead of asking for someone else. Corbin has been impressed with Martins work, not only at the firm, but also with the VSCPA: Mr. Martin has worked to make the Tidewater Chapter an educational source for its members by assisting with the chapters three annual continuing education days each year, he said. Likewise, Mr. Martin has assisted in organizing young CPA social events to integrate new/ young CPAs into the chapter. He has done all of this work for the chapter while not even reaching his 30th birthday. When Martin isnt working, he enjoys running, golfing, traveling and spending time with his wife, Holly. They are expecting their first child at press time.
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VSCPANews
Niki White, CPA Manager, Yount, Hyde & Barbour, PC
Some CPAs were, in fact, certain of their career choice at a young age. I decided when I was 10 years old and never changed my mind, Niki White said. Whites father is a logger in Pennsylvania, where she grew up. The year I turned 10, I organized his shoebox, White said. I organized his finances. I liked the detail of it. Whites upbringing in a self-employed household also gave her a strong appreciation for small, community-focused businesses, which is who she serves now. How I was raised really shaped my life and determined how I do business. A 2001 Penn State grad, White completed six six-month internships to gain a broad perspective of her profession: international manufacturing, construction, behavioral health management, consulting, public accounting and banking. I wanted to make sure I knew what I was doing, she said. White is currently a manager at Yount, Hyde & Barbour, PC. She was the youngest member to serve on the VSCPA Richmond Chapter Board of Directors, on which she just finished her term as president. She has also served on the VSCPA Educational Foundation Board of Directors, and is a four-time Virginia Business Super CPA. Im really proud of the fact that as a 22-year-old, I moved into an aging profession and was able to establish myself as a contributor to society and the profession. I was able to add value at the local, state and national level. She has been published in Disclosures magazine and is an enthusiastic mentor for other young CPAs. When White isnt working, she enjoys spending time with her husband, Rob, and two children: Mitchell (4) and Mason (2) in their new home in Montpelier. She and her husband enjoy car shows, and own a few antique cars of their own: a 37 Chevy truck, 66 Chevelle and 51 Ford Deluxe. White also enjoys photography and reading anything that has absolutely no purpose or educational value whatsoever. She looks forward to joining the board of Prevent Child Abuse Virginia in July.
Model volunteer: Outstanding Member of the Year

The VSCPA also established the Outstanding Member of the Year award this year. This award recognizes a CPA member who has provided outstanding service to the profession through participation in VSCPA activities, civic engagement and charitable activities that further a positive image of accounting and the CPA profession. The first-ever recipient of this award, Dian Calderone, CPA, was announced at the Leaders Summit on May 14. Dian Calderone, CPA Partner, Hunt & Calderone, PC How does an advertising, layout and design major in college become chair of the Virginia Board of Accountancy (BOA) and VSCPA Outstanding Member of the Year? First a twist of fate, and then years of hard work and dedication. Dian Calderone married an army officer at age 20 and moved Europe. Overwhelmed with the social responsibilities of being an officers wife, she went to civilian personnel and asked to work. I convinced them I could do anything, she laughs. They called about a week later and said there was an accounting position. I talked my way into this job. Calderone did the accounting for a large portion of base business. I learned it from a hands-on standpoint before I went back to school, she said. A former POW taught me from the very basics all the way through the financial statements and working with auditors, and I became fascinated with it. Fast forward 28 years, and Calderone is now a partner in her own firm, Hunt & Calderone, PC, in Newport News. She also just finished a term as chair of the BOA and has served the BOA previously as chair of the Enforcement Committee. Serving on the Board really gives you insight into the statutes and regulations and how they work, Calderone said. Its a real experience in understanding the regulatory process for CPAs and what it does for our profession. Of all the boards Ive served on, this is the most professional group of individuals that I have ever served with. Throughout her career, Calderone has worked in public accounting, taught at Christopher Newport University as an adjunct faculty member and served on the boards of many organizations, including the National Association of Accountants, Virginia Peninsula Chamber of Commerce, Foodbank of the Virginia Peninsula and United Way of the Virginia Peninsula among others. She
Share your news!

E-mail disclosures@vscpa.com if you have exciting news to share. The VSCPA prints news of members awards, appointments and promotions as well as new hire and job change announcements. Firm news, as well as mergers and acquisitions, is also welcome.
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has also served on numerous VSCPA task forces. Calderone has received several awards for her outstanding work, including honors from the Virginia Peninsula Chamber of Commerce, Virginia Business magazine and Christopher Newport University and now VSCPA Outstanding Member of the Year. The colleague who nominated her said Under Dians leadership, the Virginia Board of Accountancy has made significant improvements in efficiency and competency. Addressing the 2010 Leaders Summit crowd, Calderone credited her mother with instilling in her a genuine desire to give back. Volunteering has been a regular part of her life since she was a little girl. We have a responsibility, Calderone says. If you become involved and understand the process and make contributions, it will be better for all of us. When Calderone isnt working or volunteering, she enjoys spending time with her two children, a Virginia Tech grad and an accounting major at Clemson. She is also a huge Steelers fan and enjoys traveling and trying new, eclectic restaurants.
NewHires
Brown, Edwards & Company has hired Sandee Cheynet as the firm administrator.
Sandee Cheynet
Promotions
Thompson, Greenspon & Co. in Fairfax has promoted Catherine A. Saadat, CPA, to supervisor in the audit department.
Appointments & Awards

Brian Bender, CPA, an auditor at Reznick Group in Bethesda, Md., was appointed to the Board of Directors of Hero Dogs Inc., a nonprofit dedicated to placing service dogs with veterans who have become disabled while in the line of duty. Bridgewater College conferred an honorary doctor of laws degree upon James L. Keeler, CPA, of Moneta, at the Colleges April 6 Founders Day ceremony. Keeler, Bridgewater class of 1957, is a retired president and CEO of WLR Foods Inc. Kelli Purdy Meadows, CPA, partner at Meadows Urquhart Acree & Cook in Richmond, received the Christopher Newport University Distinguished Accounting Chair Award at the Universitys annual accounting banquet on April 20. Meadows graduated from Christopher Newport University in 1996. Nancy Miller, CPA, partner at Miller Foley Group in Fredericksburg, was recently appointed to the National Advisory Council on Government Auditing Standards. Northfield Ministries, a nonprofit dedicated to helping young women struggling with serious life challenges, has added Thomas M. Mishoe Jr., CPA, to its board of directors. Tom is the founder and president of FinOpStrat Advisors, LLC, in Richmond.
FirmNews
Bond Beebe, a CPA and advisory firm with offices in Bethesda, Maryland and Alexandria, sent a team of 30 firm volunteers to landscape the Samaritan Inns Lazarus House in the Columbia Heights neighborhood of Washington, D.C., on April 24 as a part of the Greater D.C. Cares Servathon 2010. On May 13, 2010, more than 150 employees from Reznick Group, an accounting firm with two metro-D.C. offices, taught Washington, D.C., elementary school students about saving, budgeting and other aspects of financial planning through Junior Achievements JA in a Day, a unique program that allows volunteers to teach all of the units of Junior Achievements (JA) seven elementary school programs in an intensive one-day experience. Reznick Group has participated in JA in a Day since 2007.
StaffNews
VSCPA Member Relations Specialist Courtney Neal and Director of Finance Beth Bickford, CPA, each celebrate one year with the VSCPA on July 6 and July 14, respectively. Technical Services Coordinator Darshae Dabney marks three years on July 9, and Member Relations Director Brenda Fogg marks five years on July 11. On July 26, Development & Academic Relations Director Molly Wash celebrates six years, while August 13 marks 12 years for Member Relations Coordinator Rocio Gibbs and Public Relations Specialist Shawnte Reynolds marks four years August 16.
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VSCPA 100% Member Firms

VSCPA 100% Member Firms show their commitment to their employees, the profession and the association. A 100% Member Firm is simply a Virginia CPA firm or company that has all of its CPAs enrolled as members in the VSCPA. Interested in becoming a 100% Member Firm? Contact the VSCPA Member Relations Team at membership@vscpa.com or (800) 733-8272. Thank you for your commitment, 100% Member Firms!
Beck & Company, CPAs, PC Bennett, Atkinson & Associates, PC BlackHeath Company, PLC Bowling, Franklin, & Co., LLP Cocke, Szpanka & Taylor, CPAs, PC Michael B. Cooke, CPA, PC Dalal & Company Didawick & Knopp, PC Duvall Wheeler, LLP Donald W. Coleman, CPA, Inc., PC Forrest & Markos Garland & Garland, CPAs, PC Garris and Company, PC Gregory & Associates, PLLC Roger L. Handy, PC Hantzmon Wiebel Harris, Harvey, Neal & Co., LLP Homes, Lowry, Horn & Johnson, Ltd. Honeycutt & McGuire CPAs Jones & Radman, PC Keiter, Stephens, Hurst, Gary & Shreaves, PC Kositzka, Wicks and Company Kuehl Shepherd Kozlowski & Associates, Inc. Larry D. Greene CPA PC Lent & Hawthorne, PC L.P. Martin & Company, PC McLeod & Company McPhillips Roberts & Deans PLC Miller Foley Group Mitchell, Wiggins & Company, LLP Murray, Jonson, White & Associates, Ltd., PC PBGH Rubin, Koehmstedt & Nadler, PLC Rutherford & Johnson, PC Spencer, Hager & Mosdell, PC Stephen Merritt CPA, PC Steve Guy & Associates, PC Strickland & Jones, PC Thompson, Greenspon & Co., PC Updegrove, Combs, McDaniel & Wilson, PLC Valderas & Fishel, PC Walker Consulting Group Wall, Einhorn & Chernitzer M. Lee Winder & Associates, PC David L. Zimmer CPA PC
The above list was compiled May 10, 2010. Check out www.vscpa.com for a complete, up-to-date list.
Classifieds
Office space
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Growth, sales & acquisitions

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See our available listings below! If interested contact Brannon Poe at poe@knology.net or call (888) 246-0974. RIChMOND $495,000: Established CPA practice in Richmond suburb. This is a great practice! Focus of practice has been towards small businesses offering accounting (compilations and reviews,) tax planning and compliance work. Great staff in place and excellent clients. The owner has prior national firm experience. The billing rates for the firm are generally high, with the average 1040 fee exceeding $450 each....resulting in strong cash-flow-to-owner. CPA looking to purchase practice with $500k to $1.5M in gross annual billings located in either the Northern or Central Virginia markets. Confidentiality, non-compete and structured closing a requirement for purchase. Please call (804) 908-6245 or email wmw@twinsabers.com. SALE/MERGER OPPORTUNITY Well-established and diversified small Northern VA CPA firm seeks sale/merger opportunities. Practice clientele includes reviews, compilations, write-up services and three nonprofit audits. The firm has a significant individual income tax practice as well as a variety of business tax returns. The firm enjoys a long-standing on-site and unqualified peer review history. The firm is that of a sole practitioner seeking retirement or semi-retirement over the next 2 years. Growth and referral opportunities are excellent. Reply in confidence to VSCPA CC # 74, 4309 Cox Road, Glen Allen, VA 23058-4620 or vscpa@vscpa.com. 36
Peer review
PEER REVIEW Fixed Fee. Former member of VSCPA Peer Review Committee. Please call Charles Coker, CPA at (703) 931-3290 x108 or email charles.coker@cpa-coker.com
Positions available
Northern Virginia CPA seeks to associate with energetic CPA who is interested in the eventual takeover of the practice. Strong technical skills in both reporting and tax a must. Ideal candidate will be individual who is committed to working in public accounting and has started their own practice. Respond with resume and cover letter to: CPA, PO Box 10712, Burke, VA 22009.
VSCPA and Educational Foundation Issue RFP for Audit Services
The VSCPA is seeking interested independent public accounting firms with a physical office in Virginia to perform the financial audits and tax services for the VSCPA, including the CPA PAC of Virginia and the VSCPA Educational Foundation. Issuance of other reports and letters such as a report under SAS 112 or 115 is expected as appropriate. All firms interested in receiving a copy of the Request for Proposal (RFP) should contact VSCPA Finance Director Beth Bickford, CPA, at bbickford@vscpa.com or (804) 612-9414, by September 3, 2010. RFPs will be mailed on September 15, 2010, to firms submitting an interest.
Classifieds Disclosures July/August
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Disclosures July August 2010

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July August 2010 | Vol. 23 No. 4 | www.vscpa.com

Getting in the Financial Planning

Ive got aN uNeasy feelINg about thIs clIeNt sItuatIoN

cAm i co pr oFe S S i oNAL LiAB i LiTY i N S u rAN ce i S S p oN S or e D BY:

July August 2010

New Fun with Fund Balances: Implementing GASB Statement 54

Portfolio Diversification: Where It Goes Wrong

The Warren Group

Contents Disclosures July/August

Taking sides: VSCPA speaks up on federal issues

The VSCPAs Centennial: A winning year!

Line Items Disclosures July/August

Dont miss out on the MAP

Bye, bye free iFile

How will you serve?

Line Items Disclosures July/August

Full speed ahead

Todays CPA Disclosures July/August

Todays CPA Disclosures July/August

Dealing with poor performers Start with the enablers

By Brian Kush, CPA, CISA, CITP

Leader s Edge Disclosures July/August

Getting in the Financial Planning

Financial Planning Disclosures July/August

Financial Planning Disclosures July/August

Financial Planning Disclosures July/August

By Paul A. Copley CPA, Ph.D., and M. Loretta Manktelow MBA, MST

FUND BALANCE CLASSIFICAtIoNS

Government Accounting Disclosures July/August

Table 1: City Government Balance Sheet

Special Revenue Fund

Capital Projects Fund

Debt Service Fund

Total Governmental Funds

$6,433,214 3,287,992 2,872,611 679,215 1,085,184 23,747 $14,381,963

$8,186,717 3,312,992 2,872,611

693,392 1,328,448 23,747

2,628,422 4,408,087 7,036,509

200,000 370,000 302,000

200,000 370,000 302,000

120,000 450,000 3,000,000

120,000 450,000 3,000,000

Committed by City Council

Residual balance of the General Fund

Outstanding purchase orders of the General Fund

Government Accounting Disclosures July/August

SAmpLE BALANCE ShEEt

StABILIzAtIoN (rAINy DAy) FUNDS

Top financial talent is always your best investment.

Alexandria Dulles Tysons Corner Richmond West Richmond Downtown Norfolk

1.800.803.8367 accountemps.com 1.800.474.4253 roberthalf.com 1.888.400.7474 roberthalfmr.com

Government Accounting Disclosures July/August

Dont get backed into a corner with a malpractice claim

Theres a way out with the AICPA-endorsed Premier Plan.

Government Accounting Disclosures July/August

Why leave your future to chance?

BETH A. BERK, CPA

Phone: 301-767-0670 Email: BethABerk@msn.com

Contingency & Retained Staffing Solutions

Portfolio Diversification: Where It Goes Wrong

Financial Planning Disclosures July/August

Asset class selection