| Dean Dorton Allen Ford

February 22, 2012

Payroll Tax Updates

Filed under: Colleges & Universities, Construction, Consulting, Energy & Natural Resources, Equine, Financial Institutions, Firm, Healthcare, Natural Resources, Not for Profit, Real Estate, Tax, Technology — Tags: accounting, Accounting Firm, CPA, DDAF, Dean Dorton Allen Ford, Kentucky accounting firm, KY accounting, Lexington CPA, Louisville CPA, payroll tax cut, recapture tax, social security tax, Tax — Dean Dorton Allen Ford @ 3:18 pm

On February 17th, Congress passed an extension to the Social Security payroll tax cut. The extension will keep the employee portion of the Social Security tax at 4.2% through December 31, 2012. The employer portion of the Social Security tax will remain at 6.2%.

Social Security tax applies to the first $110,100 of wages earned in 2012. The employees Social Security tax rate is scheduled to revert back to 6.2% on January 1, 2013.

Employers who use computer software to prepare their payroll should watch for updates from their software providers.

In addition, the additional 2% recapture tax relating to wages in excess of $ 18,350 paid during January and February 2012 was repealed.

For more information please contact Missy DeArk (mdeark@ddafcpa.com).

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February 17, 2012

Doctors Avoid Deep Cuts in Reimbursement

Filed under: Healthcare — Tags: accounting, Accounting Firm, CPA, DDAF, Dean Dorton Allen Ford, Healthcare, Kentucky accounting firm, KY accounting, KY Healthcare, Lexington CPA, Louisville CPA, payroll tax cuts — Dean Dorton Allen Ford @ 5:03 pm

Today, as reported by both the Wall Street Journal and The New York Times, Congress passed a deal that extends payroll-tax-cuts to the end of the year, continues unemployment benefits and avoids deep cuts in Medicare reimbursement to physicians.

President Obama has stated that he will sign the bill as soon as it was passed by Congress.

Both the House and Senate approved the provision of delaying a 27.4% cut in Medicare physician payment rates scheduled to take place March 1 and freezing payment rates at their current level until December 31, 2012.

So, the good news with this legislation is that Medicare payments will not be cut by 27.4%. The bad news is that current payment rates are froze at their current levels.

The current estimate of the cost of the temporary fix is about $20 billion. Surprisingly, some of the cost is coming from the health law. Specifically, in the legislation there’s an extension of a phasing-down of Medicaid payments to hospitals that treat a large share of lower-income patients. Under the legislation, these reductions would be extended for another year.

The physician payment cuts are part of the Sustainable Growth Rate (SGR) formula in Medicare. One big question is why the legislation did not make a permanent fix to the SGR. Also, some are calling the legislation passed today a “10-month Band-Aid”. There have been some Democrats and Republicans who favor taking the war savings from the military efforts in Iraq and Afghanistan and use them to repeal the SGR.

Once more information becomes available, DDAF will provide more details.

For more information please contact Jeff Presser (jpresser@ddafhealthcare.com).

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February 13, 2012

American Jobs Act of 2011 – Where Does It Stand?

Filed under: Construction — Tags: accounting, Accounting Firm, American Jobs Act, Architects and Engineers, Construction, CPA, DDAF, Dean Dorton Allen Ford, Kentucky accounting firm, KY accounting, Lexington CPA, Louisville CPA, payroll tax cut, tax incentives, temporary payroll tax cut — Dean Dorton Allen Ford @ 10:57 am

In September 2011, the President addressed a joint session of Congress to announce his latest plan to stabilize the U.S. economy and return Americans to work. This was the basis for his legislative proposal entitled the American Jobs Act. The proposal focused on job creation as opposed to debt reduction, and proposed to inject $447 billion into the economy in the form of spending on projects, such as schools and infrastructure refurbishment and extending payroll tax holidays. To partially offset its costs, the Jobs Act also included revenue provisions, such as tax increases and user fees, totaling an estimated $467 billion. The President was also counting on the Joint Select Committee on Deficit Reduction to find additional spending cuts in addition to their mandated $1.2 trillion in deficit reductions.

The Jobs Act contained much more than tax changes, although those both for and against the Act were highlighting the tax aspects. Some of the more discussed tax changes include payroll tax cuts and tax credits to encourage hiring, along with extending 100 percent bonus depreciation. These would be paid for by limiting deductions for higher income taxpayers and changing the taxation of carried interest.

Several provisions in the Jobs Act were passed when President Obama signed a law on November 21 repealing a 2005 law requiring governments to withhold 3 percent of payments over $10,000 to contractors. The Jobs Act proposed pushing the effective date back to the end of 2013. Now it has been repealed entirely. This legislation also included parts of the Jobs Act regarding tax incentives for hiring unemployed veterans.

The Jobs Act also included extending the 2 percent reduction from the usual 6.2 percent Social Security tax withheld on the first $106,800 of wages that was created by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and was set to expire on December 31, 2011. Allowing this to expire would have resulted in about a $1,000 annual increase in taxes for the average working family. The Temporary Payroll Tax Cut Continuation Act of 2011 passed in December 2011 temporarily extended the 2 percentage point payroll tax cut for employees through February 29, 2012.

The Temporary Payroll Tax Cut Continuation Act of 2011 also includes a new “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100). This additional recapture tax is an add-on to the income tax liability that the employee would otherwise pay for 2012 and is not subject to reduction by credits or deductions. The recapture tax would be payable in 2013 when the employee files his or her income tax return for the 2012 tax year. With the possibility of a full-year extension of the payroll tax cut being discussed for 2012, we will closely monitor the situation in case future legislation changes the recapture provision.

The President’s proposed Jobs Act also included payroll tax cuts for employers and proposed cutting the payroll tax in half for small businesses on their first $5 million in payroll and provides a full tax holiday on any increases in payroll for companies that hire new workers or increase wages over last year. No action has been taken on these provisions of the Jobs Act.

The purpose of the payroll tax cuts was to provide a significant boost to consumers and the economy and to give businesses an incentive to create new jobs. Many economists believe this boost is necessary. For more information, please contact Gary Roth at groth@ddafcpa.com, or Brian Perry at bperry@ddafcpa.com.

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Proposed Revenue Recognition Standard’s Effect on a Mining Company’s Financial Reporting

Filed under: Energy & Natural Resources — Tags: accounting, Accounting Firm, CPA, DDAF, Dean Dorton Allen Ford, Energy, Kentucky accounting firm, KY accounting, Lexington CPA, Louisville CPA, Natural Resources, proposed revenue recognition, title transfer — Dean Dorton Allen Ford @ 10:22 am

It’s obvious from reading over the literature regarding the recently updated proposed revenue recognition standard that this is going to have a major impact on how many industries recognize and disclose revenue activity, and mining companies are no exception. Here’s a brief summary of some observations regarding this standard from a mining company’s perspective:

There doesn’t appear to be a change in recognition of revenue based on title transfer.

The proposed standard applies to performance obligations that are settled over time (in excess of a year). While it’s quite possible that certain mining contracts have terms extending past one year, application of the standard to the typical contract appears to support the treatment of each shipment as a separate performance obligation which would not be subject to the onerous performance requirement (recognition of losses on performance obligations exceeding one year where the lowest costs of performance exceed the transaction price). This is primarily due to the fact that, if the mineral to be shipped under a contract to a customer was not shipped to that customer for any reason, the mineral could be sold to a different customer without significant modification. If a contract calls for a specialized type of product, this would potentially trigger the treatment of the entire contract as one large performance obligation, which would subject the contract to onerous performance requirement evaluation.

The proposed standard ramps up disclosure requirements regarding revenue recognition policies, including the disaggregation of revenues. Private companies are exempt from some of these disclosures, but not all. Public companies will see the majority of the change in this requirement.

One new feature that may be beneficial to companies is the ability to capitalize the costs incurred to acquire sales contracts. However, this capability is only relevant if a company has a proper system to track the costs that could be allocated to these contracts. If this isn’t possible, these costs would be expensed as incurred, as done in current practice.

Depending on the specifics of your company, this proposed standard may or may not have a very large impact on your reporting practices. However, diligent evaluation of the possible effects of this standard will be required to ensure that you’re compliant with any new reporting practices that may apply to your situation. If you have any specific questions regarding the potential impact of this standard on your business, please contact Bill Kohm (bkohm@ddafcpa.com) or Amanda Hall (ahall@ddafcpa.com).

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February 7, 2012

Revenue Recognition – FASB and IASB Working Together to Streamline the Standards

Filed under: Energy & Natural Resources — Tags: accounting, Accounting Firm, CPA, DDAF, Dean Dorton Allen Ford, Energy, enhancing disclosures, FASB, IASB, Kentucky accounting firm, KY accounting, Lexington CPA, Louisville CPA, Natural Resources, recognize revenue, revenue recognition standards — Dean Dorton Allen Ford @ 3:38 pm

The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) are working together to improve revenue recognition standards by eliminating the differences in revenue recognition between industries and transactions and enhancing disclosures. The core principle of the new proposed standard is that an entity should recognize revenue to depict the transfer or promised (contracted) goods or services to customers in an amount reflecting the consideration the entity will receive in exchange for the goods or services. In order to achieve this recognition, five steps must be performed:

1. Identify the contract with a customer,

2. Identify separate performance obligations,

3. Determine the transaction price,

4. Allocate the transaction price to the separate performance obligations, and

5. Recognize revenue when (or as) the performance obligation is satisfied.

It’s important to note that a contract can be written, oral or implied, as long as it has commercial substance, it has been approved by the parties, each party’s rights are identifiable and the payment terms are identifiable. If both parties to the contract can walk away without compensating the other party prior to performance, the contract does not actually exist.

A performance obligation is defined as “a promise to transfer a good or service to a customer.” Performance obligations are only to be accounted for separately if they are distinct, which is determined to be a good or service the entity regularly sells separately or a good or service the customer can benefit from on its own.

Transaction price represents the amount of consideration the seller expects to be entitled to in exchange for promised goods or services, and does not include amounts collected on behalf of third parties or effects of customers’ credit risk.

The entity would then allocate consideration to each performance obligation based on standalone selling prices of goods or services at inception of the contract. If standalone prices aren’t known, they should be estimated. An exception allows for the allocation of consideration that is contingent solely on a particular performance obligation to be allocated entirely to that performance obligation.

Finally, revenue should be recognized when the performance obligation is satisfied. Satisfaction has occurred when the customer obtains control of the promised good or service, being able to direct the use of and obtain substantially all of the remaining benefits of the asset.

Additionally, under the proposed standard, bad debt expense should be netted against revenue for presentation purposes.

The revised proposal is out for comment until March 13, 2012, and indicates that the Boards expect adoption no earlier than for annual reporting periods beginning on or after January 1, 2015. The IASB allows for early adoption, but FASB does not.

Our next e-newsletter will discuss the implications of this proposed standard on mining companies.

If you have any questions about how this proposed standard will affect your company, please contact Amanda Hall (ahall@ddafcpa.com) or Morgan Daulton (mdaulton@ddafcpa.com) and we’ll gladly discuss your particular situation.

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January 27, 2012

Data Analysis Thoughts and Ideas

Filed under: Colleges & Universities — Tags: accounting, Accounting Firm, analysis procedures, College and University, CPA, data analysis, data analysis procedures, data analysis tools, DDAF, Dean Dorton Allen Ford, Kentucky accounting firm, KY accounting, Lexington CPA, Louisville CPA, performing analysis, Technology — Dean Dorton Allen Ford @ 1:10 pm

In today’s world, technology is an integral part of data analysis. Data analysis technology provides tools that allow users to sort through mounds of data in order to perform efficient and accurate analysis. These tools are especially useful in performing analysis within accounting departments of colleges and universities. Due to their size and complexity, colleges and universities have a very unique need for data analysis. Colleges and universities process thousands of transactions through their general ledger each month. Data analysis tools can combine data from different sources to allow user’s maximum analysis potential. Proper data analysis tools can assist management in identifying unusual variances, errors, and even fraud.

Below are example analysis procedures that we have found to be useful in our work with colleges and universities. This list is meant to be a series of suggestions to help you understand the capabilities of data analysis tools. Ultimately, the user is only limited by their imagination.

General Ledger

Identification of manual journal entries for detailed analysis
Analysis of the number of transactions being entered into individual accounts to determine consistent use
Search for unusual patterns between individuals initiating transactions and posting transactions
Analyze monthly fluctuations of account balances

Receivables

Recalculate the aging of receivables
Analyze trends in receivables, receipts, and aging
Search for invalid student accounts (duplicate) included in the receivable balance
Analyze all manual entries to accounts receivable
Analyze cash receipts not paired with a receivable
Search for missing student information

Fixed Assets

Identify fully depreciated items and assets valued above replacement costs
Identify items that were not properly capitalized according to the capitalization policy
Compare assets useful lives by category
Extract assets with useful lives or deprecation rates beyond established norms
Compare capital expenditures to budget
Identify capital projects with large unexpended dollars

Accounts Payable

Compare voucher or invoices posted against purchase order amounts
Identify vendors paid more than 12 times in one year
Identify vendor concentrations
Search for inconsistent purchase prices of identical items between departments
Analyze all manual entries to accounts payable
Identify invoices being applied to multiple purchase order authorization
Analyze disbursements by department by month for unusual trends
Search for duplicate purchase orders, invoices, and amounts
Identify invoices with similar descriptions
Analyze trends among the individuals preparing purchase orders and approving purchase orders
Find invoices without purchase orders
Compare recurring monthly expenses to paid invoices
Look for lost discounts not taken
Analyze scheduled receipt date versus actual receipt date

Procurement Cards

Search for purchases made on the weekend
Summarize by vendor
Search for round dollar amounts
Identify purchases close to dollar limits

A-133

Analyze factors impacting student eligibility
Compare actual assistance received to approved amounts
Search for incomplete data
Extract transactions of assets funded by federal grants to ensure compliance with grant requirements
Sort contracts database by contract or cost type to test compliance with government contract terms
Test whether grant revenue disbursements are properly used

Other

Compare addresses between databases (payroll, vendors, students)
Selecting samples
Calculate financial ratios
Create custom balance sheets, P&L Statements, etc.
Compare summaries by major accounts

As previously stated, the procedures listed above are examples of procedures that can be performed using data analysis. This list is intended to serve as a starting point for users as they plan procedures to match their specific needs.

Dean Dorton Allen Ford, PLLC has expertise in data analysis procedures. We have resources available to assist you in your data analysis needs, whether that be coaching staff in the use of data analysis tools, brainstorming procedures, or actually performing the analysis. Please contact Hunter Stout (hstout@ddafcpa.com) or Justin Hubbard (jhubbard@ddafcpa.com) if you would like additional information.

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January 26, 2012

Physician Integration Issues

Filed under: Healthcare — Tags: accounting, Accounting Firm, Dean Dorton Allen Ford, develop physician integration strategy, four steps for improvement, Healthcare, healthcare consulting, hospital owned physician practice, Kentucky accounting firm, KY accounting, Lexington CPA, Lexington healthcare consulting, Louisville CPA, Louisville healthcare consulting, managing financial results, physician integration strategy — Dean Dorton Allen Ford @ 4:50 pm

Physician Integration Issues

At a recent HFMA Seminar, representatives from Dean Dorton Allen Ford, PLLC’s Healthcare group gave a presentation entitled Managing Financial Results in a Hospital Owned Physician Practice. At the conclusion of the presentation we discussed four steps that a hospital should take to improve their management of the practices they have acquired. These steps were: to develop a physician integration strategy, develop a “group” practice, develop a reasonable compensation system and improve Board communication. Over the next few weeks an e-newsletter will be sent out discussing each of these initiatives.

Develop a Physician Integration Strategy

The volume of potential physician practices to integrate into a hospital has been increasing and will only continue to increase as physicians seek a safe harbor from the changes in the health care industry. It is easy to find physicians to integrate, however just because they are available, does not mean they are a viable candidate for integration.

To give the hospital the best chance of success with the practices integrated – both financially and operationally, a strategy should be developed for physician integrations. The strategy, if developed correctly, will give you a guideline as physician integration opportunities are presented. It will allow you to distinguish what practices you should and should not integrate. Your strategy should also dictate the resources you will need to adequately communicate physician practice results to the Board.

There are no defined “perfect” strategies since every organization is different. In general, the strategy related to physician integrations should blend into the hospitals overall strategy. Key considerations should include the key specialties needed in your community and the primary care mix in your service area, including the age and anticipated length of practice time remaining by physicians serving your hospital. Before full integration is pursued the strategy should consider all options to strengthen relationships with physicians, which may not include integration into the hospital.

The strategy should consider the group responsible for physician integrations. This group of hospital employees should be instrumental in developing the integration strategy, but also involved in the implementation of the strategy and the operations of the practices once they are integrated.

One other point to define in the integration strategy is the management structure of the physicians. The structure needs to be clearly defined so that the positions necessary to manage the physician practices are in place. When determining the administrative structure, smaller details such as billing, human resources and staffing should also be discussed.

Developing a strategy at times is overwhelming and often seems unnecessary. However, without a strategy in place, many hospitals are integrating physician practices as quickly as they can and subsequently are bearing the costs of poor operating results.

For more information please contact David Bundy (dbundy@ddafcpa.com).

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The Relevance of an Audit Committee for Not-For-Profit Organizations

Filed under: Not for Profit — Tags: accountability, accounting, Accounting Firm, audit committee, board of directors, CPA, DDAF, Dean Dorton Allen Ford, external auditors, Kentucky accounting firm, KY accounting, Lexington CPA, Louisville CPA, NFP, Not for Profit — Dean Dorton Allen Ford @ 1:15 pm

Not-for-Profit (NFP) organizations represent an ever increasing share of the U.S. economy. Currently, there are over 1.6 million NFP organizations registered with the IRS in the United States and the number of NFPs continues to grow every year. Due to this growth, NFP organizations are being examined more closely – as evidenced by the IRS Form 990’s questions and inquiry regarding governing boards.

Today’s NFP organizations depend on their board of directors for governing the organization, reviewing the performance of executive officers, ensuring the availability of adequate financial resources, approving budgets, accounting for the organization’s performance and providing financial guidance. The board of directors is vital in creating accountability for a NFP organization as financial mismanagement or fraud could destroy its reputation and ability to fundraise. In recent years many boards have become aware of the ever increasing need for accountability and some have responded by creating an audit committee.

The formation of an audit committee generally increases the lines of communication between external auditors and the board of directors. The audit committee of a board of directors has two main goals. The first goal is to assist with the oversight, establishment, and adherence to accounting and internal control policies and the timely filing of financial reports in accordance with the appropriate regulations. The second goal is to facilitate communication among the board, management, internal auditors, and external auditors. The audit committee should meet with the external auditors at least twice a year – once before the audit begins to discuss the auditor’s audit plan and once after the audit is completed to review its results. By keeping the lines of communication open, the board of directors will better understand the audit process and maximize the benefits of financial statement audits.

If you have any questions about this article or would like to know more about Dean Dorton Allen Ford’s NFP assurance practice, please contact us.

Melanie Wales

mwales@ddafcpa.com

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Succeeding in State DOT Audits

Filed under: Construction — Tags: AASHTO, accounting, Accounting Firm, Architects and Engineers, CPA, DDAF, DOT, INDOT, Kentucky accounting firm, KY accounting, Lexington CPA, Louisville CPA, Transportation — Dean Dorton Allen Ford @ 12:59 pm

Since 2009, AASHTO, the FHWA, the ACEC, State DOTs, and public accounting firms have worked together to revise the AASHTO Uniform Audit and Accounting Guide (the Audit Guide) which assists engineering companies and public accounting firms in interpreting the Federal Acquisition Regulation (FAR). These revisions have been one of the most significant changes in the industry and have put more responsibility on engineering firms to ensure that their external auditors are qualified to perform audits of their Statements of Direct Labor, Fringe Benefits, and General Overhead (the Overhead Statement).

The Audit Guide requires engineering firms to ensure that their auditors are knowledgeable and experienced with the architecture and engineering industry, Generally Accepted Government Audit Standards (GAGAS), the Cost Principles of FAR Part 31, Cost Accounting Standards, related laws and regulations, and the Audit Guide.

State DOTs normally base their selections for audits of engineering firms on a risk analysis of the firm. One of the key elements in their decision-making process is the qualifications and experience of the auditor providing assurance over the firm’s Overhead Statement. The allowability of costs often comes down to the documentation management has prepared, and the CPA has audited, to substantiate costs. From developing adequate policies and procedures to ensuring that daily expenses have proper documentation to justify the business rationale, documentation can have a significant impact on your overhead rate. Having an experienced, competent auditor standing by you, who understands the requirements of the Audit Guide, can mean the difference between profitability and significant portions of costs being deemed unallowable. It can also impact your future ability to perform work for State DOTs.

Breaking News from the Indiana Department of Transportation (INDOT)

In a recent communication from INDOT, they stated that before accepting a FAR audit report or examination-level attestation report, the home State DOT or other reviewing State DOT must determine whether the auditor has adequately complied with the minimum audit testing procedures discussed in the Audit Guide. Their intention is to review 100% of the overhead audits they received in 2011 for the engineering firm’s 2010 operating year and have found in a high proportion of the audit work papers reviewed to date that the CPA is not performing the minimum testing as recommended in the Audit Guide. INDOT has notified their consulting engineering partners that if the deficiencies in the audit are not corrected with the 2011 operating year audits, INDOT may be forced to limit the amount and/or types of contracts in which the consulting engineering firm can enter into with INDOT.

If your firm has experienced costs being deemed unallowable by State DOTs, or CPA work papers not meeting the minimum testing requirements of the Audit Guide, now is the time to find external auditors that can assist you in increasing profitability, getting the overhead rate your firm deserves and ensuring your future ability to perform work for State DOTs.

Dean Dorton Allen Ford has decades of experience in performing overhead audits and communicating with State DOTs. In past State DOT audits, the firm has been extremely successful in helping to provide positive outcomes for our clients. For more information, please contact Shawn Anderson at sanderson@ddafcpa.com, or Simon Keemer at skeemer@ddafcpa.com.

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January 19, 2012

Assessing Your Revenue Cycle Operations

Filed under: Consulting, Healthcare — Tags: accounting, Accounting Firm, accounts receivable, billing, DDAF, DDAF Healthcare, Dean Dorton Allen Ford, facility revenue cycle, Healthcare, healthcare consulting, healthcare facility, Kentucky accounting firm, Kentucky healthcare consulting, KY accounting, Lexington CPA, Louisville CPA, revenue cycle, revenue cycle operations, staffing, tailored work plan, Vail Valley Medical Center — Dean Dorton Allen Ford @ 12:23 pm

Assessing Your Revenue Cycle Operations

How Dean Dorton Allen Ford Can Help

The Healthcare Team at DDAF has developed a three-tiered approach to identify potential process gaps and opportunities within a facility’s revenue cycle. Our experience and expertise in the healthcare field enables us to:

Conduct a financial review of your healthcare facility. This review will focus on the organization’s key performance indicators, including: gross revenue, cash collections, Accounts Receivable, bad debt expense, contractual adjustments, and charity care for the past 12 months. Other key financial indicators and staffing will also be considered.

Document the current state of your revenue cycle operations. This phase will include observing and interviewing key stakeholders within the following functions: registration and admissions, insurance verification, scheduling, financial counseling, customer service, billing, account follow-up, denials management, and cash posting.

Provide Recommendations and Implementation of best practices. After a thorough review, the team at DDAF will be able to make recommendations that will improve the performance of your organization’s revenue cycle. Additionally, DDAF can customize a tailored work plan and implement redesigned processes that will lead to best of practice results.

“When Vail Valley Medical Center needed leadership and expertise for our Patient Accounting Department, we turned to Dean Dorton Allen Ford. They have been a fantastic asset to our organization and have exceeded expectations with their results-driven approach. In addition to restructuring and streamlining our back-end revenue cycle processes, Dean Dorton Allen Ford exhibited the flexibility to adapt to the nuances associated with our people, processes, and technology. Thanks in part to their leadership and expertise, Vail Valley Medical Center was able to increase cash collections, reduce days in A/R, and improve A/R aging.”

- Charlie Crevling, CFO, Vail Valley Medical Center, Vail, CO

For more information please contact Adam Shewmaker (ashewmaker@ddafhealthcare.com).

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