Fraud and Corruption Hit Global Fund

One of the biggest global funds has been hit hard with corruption, the Associated Press is reporting. The Global Fund to Fight AIDS, Tuberculosis and Malaria, a development fund with approved funding of $21.7 billion is now suspected of grave misappropriation of funds. The fund is demanding recovery of $34 million from its grant recipients in four African countries. The fund contributes to 145 countries in total and has been quick to address the allegations, bringing attention to their immediate action taken to recover misspent funds. The fund’s inspector general, John Parsons, is assuring donors that the fund is serious about uncovering corruption. It was the inspector general’s newly reinforced team that uncovered the corruption in their subrecipients. Parsons says “The distinguishing feature of the Global Fund is that it is very open when it uncovers corruption. That is its comparative advantage.”

The crux of the problem? Subrecipients and the fund’s trust that they would/could police themselves. Continue reading »

Increased Oversight of Brokers

The Securities and Exchange Commission issued a report on Saturday issuing their opinion that investment advisers and stockbrokers should be subject to the same fiduciary standard of conduct. Fiduciary duty can be defined as a legal or ethical relationship of confidence or trust regarding the management of money or property between two or more parties. This means that someone with fiduciary responsibility is held to conduct that puts the investor’s best interest first. The report notes that the lay investor is largely unaware that there is a distinction and differing level of responsibility between the two positions.

Investment advisers MUST adhere to a higher standard of conduct in order to be registered. Certified financial planners must also adhere to this code of conduct. Stock brokers who are not registered or certified as financial planners are not held to this same standard of fiduciary responsibility AND they work on commission. In addition, you may have unwittingly signed away your right to sue if you didn’t read the fine print of your broker agreement. The SEC is recommending that this lower level of fiduciary responsibility be abolished and that brokers should be held to the same standard. Currently, brokers are not held to putting the investor’s best interest first when making recommendations. The suitability of a particular investment may be lower on the list of concerns for a non-fiduciary broker. Continue reading »

Webinar 2/9/11: Surviving Your Pay on Display – Executive Compensation and Subcontractor Award Reporting

Government contracting rules and requirements are constantly changing, but Aronson’s experts want to help you stay on top! The new FAR Clause 52.204-10: “Reporting Executive Compensation and First-Tier Subcontractor Award” represents a significant change in the type of information that is publicly available and how it should be collected. Join Aronson for a webinar on February 9th that will help you understand and comply with the new reporting requirements. Our government contracting specialists will address:

Executive Compensation

• Contractors/subcontractors affected
• Executives impacted
• Compensation reported
• Subcontract notifications required
• Public disclosure of pay ramifications

Subcontract Award

• Subcontracts affected
• Information collected
• Due dates and reporting method
• Impact on SubK and Teaming Agreements
• Public disclosure of competitive data

A must-attend event for all C-level executives, Controllers, Contract and Subcontract Administrators and Human Resources. RSVP for this free and convenient seminar to ensure that your firm will be prepared to meet this challenging requirement!

WEBINAR February 9, 2011. 11AM Free!

Valuation NewsFlash: Gift and estate planning opportunities for business owners from Congress

With the passage of the new 2010 Tax Relief Act, Congress just made it easier for business owners intending to make a substantial wealth transfer.  Given the current political environment, this is the prime time to take advantage of this opportunity, because the law might get changed without much advance notice.

The 2010 Tax Relief Act has increased the lifetime gift exemption cap to $5M from $1M, but just for 2011 and 2012. In the past, business owners structuring a major wealth transfer to their children often ran into the problem of not having enough lifetime gift exemption… and business owners were generally reluctant to pay gift tax on such a transfer. The increased lifetime exemption cap provides business owners with a great (albeit temporary) opportunity to reduce the size of their estates.

Also of note… Although restrictions on the use of common valuation discounts in valuing business interests have been proposed recently by legislators, the 2010 Tax Relief Act contains no such provisions.

As always, a properly executed estate planning strategy involving transfers of business ownership interests will require an objective and well-supported valuation analysis. For information about how Aronson’s Forensic & Valuation Services Group can provide assistance in this area, please contact Stuart Rosenberg or Bill Foote at 301.231.6200.

How Safe Are Money Markets?

The mutual-fund industry on Monday presented a plan to backstop money market funds, acknowledging that the funds could pose major risks during a market panic even thought they aim to keep their values steady.  Read more about the recommendation at Wall Street Journal.

Time and Effort Documentation for Federal Grants

There is frequently confusion amongst nonprofit organizations as to what record –keeping is required for payroll charges to federal grants. For most nonprofits the requirements are spelled out in OMB Circular A-122 (2 CFR 230), Attachment B, paragraph 8 in a section on compensation for personal services. It defines the rules for all types of “pay” including: salaries, wages, director and executive committee member fees, incentive awards, fringe benefits, pension plan costs, allowances for off-site pay, incentive pay, location allowances, hardship pay, and cost of living differentials.

As with any charge to a federal grant payroll charges must meet the general tests of allowability in that it must be a necessary and reasonable charge allocable to the award. The charge must also be consistently treated with all other payroll charges, consistent with organizational policies, incurred in accordance with GAAP and not charged elsewhere to another award or function by the organization. Fringe benefits associated with payroll charges (such as the employers portion of social security, insurances, contributions to retirement programs, compensated absences such as vacation, holiday and sick leave and so forth) are also allowable provided the tests noted above are met.

The documentation of payroll time charges that is required includes the following elements: Continue reading »

IRS Compliance Audits of 403(b) Plans

On November 3, 2010, the IRS issued its Employee Plans 2011 Priority Agenda as part of its ongoing effort to increase 403(b) compliance by providing guidance, education, and compliance enforcement through plan audits.

Common issues that the IRS is finding during these plan audits include:

• Universal availability violations – previously excluded employees may not be excluded under current provisions.
• Catch-up contributions – the lifetime catch up limit is set at $15,000. Many audits are uncovering excess catch up contributions above and beyond this limit.
• Early withdrawal and hardship distributions – the audits have uncovered violations of withdrawal limits and deferral hold periods because of withdrawals taken directly from the plan vendor.
• Loans – the audits have uncovered violations of the amounts and numbers of loans due in part to multiple vendor plans.

For more on the compliance audits see plansponsor.com.

To help prepare for an IRS audit of your 403(b) plan, there are some helpful resources available such as:

• MetLife’s whitepaper on what to expect in an IRS audit.
• The IRS has a checklist for 403(b) plans that can help in your annual review of compliance of your organization’s plan.

The Pressure of Lean Accounting Departments

In these times of doing more with less, CFO and controllers are trying to figure out that means for their department’s workload.  Adding staff is often not an option.  How do you get all of the work done with fewer people? If you don’t happen to have a wizard on staff and your fairy godmother isn’t answering her phone, there may be some practical ways to help address the problem. The Journal of Accountancy offers seven  suggestions for accounting departments running lean.  To see their suggestions, read the article entitled, Make Your Accounting Department More Efficient.

How to Account for Debt Securities (Everything You Are Dying to Know But Were Afraid to Ask)

U.S. Treasury bills are short term obligations sold at a price less than their face value. Treasury notes and bonds are long term obligations that make semi-annual coupon interest payments. What is the proper way to record activity on these investments?

On a non-interest bearing note, such as a treasury bill, the difference between the face value and the purchase price is interest income. A discount is recorded when the amount paid is less than the face value and a premium when the amount paid is more than the face value (FASB Codification 835-30-25-5). At the time of purchase, a note with no periodic interest payments is valued at the present value of the future principal payments (face value).  The present value calculation for notes paying periodic interest includes adding the present value of the future interest payments and the present value of the future principal payments.  Treasury bills, because purchased at discount are effectively sold at their present value. Continue reading »

Reconceptualizing Contributions

In these trying times with Federal debt increasing daily with no end in sight, President Obama has appointed a committee to research and recommend changes to the tax code that would increase tax revenues. One such change being discussed is to eliminate the tax deduction for charitable gifts and replace it with a special tax credit at a rate of 15%. The tax credit would differ from a traditional tax credit, as it would be paid directly to the charity that received the donation rather than the person making the donation. To illustrate, when a person wants to contribute $100, they would make a donation of $85 the IRS would contribute a check to the charity for remaining $15. This tax credit would allow lower and middle class earners who don’t itemize deductions to donate smaller amounts with the same benefit to their charities.

However, upper middle class and high earners are the main users of the charitable contribution tax deduction and these brackets would be impacted greatly by the proposed change. Charitable high earners historically have been able to make charitable donations to reduce taxable income. The idea of eliminating the deduction is also unsettling to many charities who survive off of big donations from wealthy philanthropists. The reduction of donation revenues to many charities when many are struggling in this weakened economy will affect many people.

The expectation is that the donor base would widen but the amounts per donor would decrease. It remains to be seen if this would increase or decrease overall contributions. Perhaps the committee will continue to brainstorm for ideas.

For more information: http://philanthropy.com/article/Deficit-Plan-Would-Eliminate/125420/