Fall 2009 issue of Horizons

F A L L 2 0 0 9

A P u b l i c a t i o n b y R u b i n B r o w n L L P

Market Advantage: A Strategic Approach

INSIDE GAINING ADVANTAGE IN THE MARKET The RubinBrown Market Advantage Page 5 Leading the Market in Any Economy Page 7 Charitable Giving in a Down Economy Page 11 What Really Creates Market Advantage? Page 23 AND MORE

horizons

CONTENTS

ii 1

Welcome

In Loving Memory of Jeanne Doll 2–4 RubinBrown New Hires, Promotions Awards & Announcements 5–6 Chairman’s Corner: The RubinBrown Market Advantage 7–9 General Topics: Leading the Market in Any Economy 11–12 General Topics: Charitable Giving in a Down Economy 13–16 General Topics: Gaining Market Share through the Use of a SAS 70 17–18 General Topics: Six Degrees of Separation... Maximizing Accounting’s Value within Your Organization 19–20 General Topics: Job Market Outlook: Take Advantage of Exceptional Talent 21–22 General Topics: Retirement Plan Document Training Session 23–24 Guest Feature: Jack Smith, Collaborative Strategies Inc., What Really Creates Market Advantage?

Industry News

25–26 AUTOMOTIVE 27–30 CONTRACTORS 31–32 HOME BUILDERS 33–34 HOSPITALITY & GAMING 35–36 MANUFACTURING & DISTRIBUTION 37–40 Media & Entertainment 41–46 NOT-FOR-PROFIT 47–48 PROFESSIONAL SERVICES 49–52 PUBLIC SECTOR 53–55 REAL ESTATE

INFORMATION Graphic Design: Hughes

Horizons, a publication of RubinBrown LLP, is designed to provide general information regarding the subject matters covered. Although prepared by professionals, its contents should not be construed as the rendering of advice regarding specific situations. If accounting, legal or other expert assistance is needed, consult with your professional business advisor. Please call RubinBrown with any questions. Located in St. Louis and Kansas City, RubinBrown has become one of the largest accounting and business consulting firms in the Midwest.

Certno.XXX-XXX-XXXX

www.rubinbrown.com

John F. Herber Jr., CPA Managing Partner

Welcome Market Advantage. These two words are the lifeblood of a business working to grow in our current economic climate. Businesses that are in the marketplace daily looking for new relationships, products and services they can bring to their customers will achieve greatness once these challenging times have passed. Market advantage is a dynamic concept — one that often is hard to understand and even harder to implement, but with proper planning and external analysis, organizations can turn the current economic climate in their favor. Through outside perspectives we are challenged to continuously improve to provide greater value to our clients and ensure RubinBrown always performs at the highest level. In this issue we will explore many different ways to gain market advantage in any economy. We are introducing a new regular feature — Chairman’s Corner — from Jim Castellano, who first speaks to the RubinBrown market advantage. Guest author Jack Smith of Collaborative Strategies shares with us the importance of culture, leadership and relationships. As always, our talented and knowledgeable partners and managers provide in-depth articles in specific industries and practice areas. But to start, we honor the memory of Jeanne Doll, a valued partner who recently lost her battle with cancer. I invite you to read this issue and offer us your feedback. Our goals as an organization are centered on two driving forces: totally satisfied team members and totally satisfied clients. I hope to hear from you — john.herber@rubinbrown.com. Pleasant reading.

St. Louis office RubinBrown

One North Brentwood St. Louis, MO 63105

Kansas City office 10975 Grandview Drive Suite 600 Overland Park, KS 66210

In Loving Memory of Jeanne Doll

It is with deep sadness that we honor the memory of our partner, Jeanne Doll.

Jeanne was a well-respected member of her family, our firm and the community. In addition to her dedication and involvement as a partner in RubinBrown’s Benefit Plan Audit Services Group, she was a board member and treasurer for Angels’ Arms, which provides homes for foster children, keeping brothers and sisters together until a permanent home is found. Jeanne was involved with Angels’ Arms for several years, and her dedication to this group made a tremendous impact. Jeanne also served on the finance committee for Small Rain, a not-for-profit organization serving distressed children in Africa. Professionally, she was involved in the Women's Presidents Organization, the Employee Benefit Association and the Executive Women’s Golf Association. “Jeanne was the ultimate professional,” said Jim Castellano, chairman. “She built a very successful benefit plan audit practice for RubinBrown. It is just one legacy she leaves.” Jeanne’s commitment to her family, professional development and the community are clear indicators of the exemplary life she lived. If you spent time with Jeanne, you know that even though her voice was quiet, her energy and positive impact were contagious to those around her. Through her health struggles, she continued to serve her family, profession and the community. Her dedication, strength and courage were greatly admired by her peers. It is with pride that we remember her as a partner of RubinBrown.

Memorial contributions may be made to:

Angels' Arms 34 N. Brentwood Blvd. Suite No. 4, Clayton, MO 63105.

St. Louis University High School 4970 Oakland Ave. St. Louis, MO 63110.

1 u fall 2009 issue

RubinBrown New Hires & Promotions

Promoted to Partner

NEW MANAGERS

Amy Broadwater, CPA, has been promoted to partner in the Real Estate Services and Tax Consulting Services Group. She consults for real estate clients who develop or invest in affordable housing tax credits, historical rehabilitation and new markets tax credit projects. She also specializes in real estate

Shawn Becker has joined RubinBrown as a manager in its Wealth Management Services Group. He is responsible for reviewing and preparing tax returns for trusts, estates and charitable trusts and consults on tax issues in the trust area. He specializes in tax trust, cash flow, estate, income tax and retirement

partnerships and works with corporate and individual taxation pertaining to the real estate industry. Broadwater has more than 11 years experience serving clients in the real estate industry, previously working as a supervisor for a national firm. She was a speaker at the Governor’s Conference on Housing in 2005 and 2007 and serves as an instructor for RubinBrown’s in-house team member training courses. Broadwater holds a bachelor’s degree in accounting from Grove College and a master’s degree in accountancy in tax concentration from Truman State University.

planning, as well as risk management counseling. Becker has more than 10 years experience in tax, previously serving as a tax advisor for AG Edwards (now Wachovia) and for Conseco Financing Corp. He is a member of the Missouri Bar and American Bar Associations and holds a bachelor’s degree in finance from Missouri State University in Springfield. He also holds a Master of Laws and Juris Doctor from the University of Missouri-Kansas City School of Law.

RubinBrown has added Christopher Coleman, CPA, CCIFP, as a manager in the Tax Consulting Services Group. He has more than seven years experience in tax consulting and provides services to contractors, manufacturers and distributors, financial institutions and family-

RubinBrown has promoted ThomasZetlmeisl, CPA, CFE, CFF, to partner in its Corporate Finance and Forensic Services Group. He performs financial analysis, creates damage calculations, writes reports and assists with deposition and trial preparation. He also has extensive financial modeling and data mining

owned businesses. Coleman handles audit, succession planning, risk-based audit planning, tax planning and tax return preparation. Before joining RubinBrown, he served as a tax supervisor for Padgett, Stratemann & Co. LLP for five years. He regularly speaks at financial conferences about trends in public accounting and law and holds bachelor and master’s degrees in accounting from St. Louis University.

experience and is certified as a financial forensics expert. Zetlmeisl has 11 years experience in litigation consulting and working on forensic accounting analysis and investigations. He serves as a Benefit4Kids committee member of the St. John’s Mercy Foundation and holds a bachelor’s degree in business administration, with an emphasis in accounting and finance, from Washington University in St. Louis, where he graduated magna cum laude.

Wayne Isaacs, JD, CPA, CEBS, has joined RubinBrown as the manager in charge of the Benefits Services Group. He provides benefit plan consulting, analysis and design services and prepares prototype retirement plan documents. He also offers retirement plan record-keeping services, specializing

in retirement plan administration. Isaacs brings more than 25 years experience to RubinBrown, previously serving as senior legal counsel and vice president of compliance for Fidelity Investments. He also was assistant vice president of employee benefits for Society Bank. Isaacs holds a bachelor’s degree in accounting from the University of Kentucky-Lexington and a Juris Doctor from the University of Louisville School of Law in Louisville, Ky.

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Promoted to Manager

Karis Schwent has been named a manager in the Benefits Services Group. She handles plan design, administration and testing, and compliance and employee education for qualifiedplans. She specializes inemployee benefits and qualified plans and consults on 401(k)s and other defined contribution

Bob Dumstorff, CPA, has been promoted to manager in the Assurance Services Group. He is responsible for audit services to real estate entities, low-income housing and tax credits, and mortgager cost certifications. Specializing in new and historic housing markets and rehabilitation, Dumstorff also

plans. Schwent previously worked as a pension specialist at Towers Perrin and a plan administrator for Bank of America. She holds a bachelor’s degree in finance and economics from Rockhurst University in Kansas City.

works with the Real Estate Services Group. He holds an associate degree in general studies from Kaskaskia College in Centralia and a bachelor’s degree in accounting from Southern Illinois University at Edwardsville.

RubinBrown has promoted Ken Van Bree, CPA, to manager in the Assurance Services Group, where he provides operational and plan audits. He also works with clients in the Contractor Services Group. Previously, he served as a service associate for Edward Jones. Van Bree

RubinBrown has promoted Jason Mannello, CFA, to manager in its Corporate Finance and Forensic Services Group. He provides litigation consulting and support, business valuation,andeconomicandspecialtyfinance consulting to clients in a range of industries. Mannello focuses on economic and tax

volunteers with the SITE Improvement Association’s Young Executives committee, the Associated General Contractors’ Construction Leadership Council and the RubinBrown Outreach Volunteer Program. He holds a bachelor’s degree in accounting fromMaryville University in St. Louis.

impact analysis, tax incentives and valuation services for entire businesses and intangible assets. He previously worked as a research analyst for Bank of America and as a research assistant at the University of Missouri - St.Louis. As a valuation expert, he has been a speaker on the topic at Washington University-St. Louis and the Center for Emerging Technologies. He holds bachelor and master’s degrees in economics from the University of Missouri- St. Louis.

Rick Vigil, CPA, has been promoted to manager in the Assurance Services Group. He provides audit services to clients in the manufacturing and distribution industry and performs operational reviews and due diligence related to mergers and acquisitions. Vigil is skilled in the

Joe Pimmel, CPA, has been promoted to manager in the Assurance Services Group. He also serves clients in the Home Builders Services Group. He provides assurance and tax services, as well as business performance analysis for privately held companies of varying sizes. With more than

implementation of lean manufacturing and accounting and specializes in manufacturing and distribution companies that have international operations. He is a member of the Hispanic Chamber of Commerce and serves on the Young Professionals Committee of the Nurses for Newborns Foundation. Vigil holds bachelor and master’s degrees in accounting from Truman State University in Kirksville.

five years at RubinBrown, Pimmel spent three months at a Baker Tilly International independent member firm in Glasgow, Scotland, in 2007. He is a member of the U.S. Green Building Council’s St. Louis Chapter and the St. Louis chapters of the Construction Financial Management AssociationandHomeBuildersAssociation. He holds a bachelor’s degree in accounting and finance from the University of Indiana in Bloomington.

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Other Promotions, Awards and Announcements

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

ABACUS

Awards

The St. Louis Business Journal featured Jim Castellano, CPA, among top area business leaders and decision makers in its Most Influential St. Louisans issue. Castellano and the other honorees were featured in the February 20, 2009, issue of the newspaper and were recognized

Abacus Recruiting has promoted Eric Hahn to recruiting manager. Hahn has been with Abacus Recruiting for five years and has worked closely with many companies in the St. Louis area. In his new position, he focuses on identifying qualified professionals for organizations in the St. Louis metro area,

at a breakfast reception on March 13 at the Saint Louis University John Cook School of Business. This year’s list of honorees focused on leaders in industries most likely to benefit from the recently passed stimulus bill. Castellano serves as chairman of RubinBrown LLP and as chairman of Baker Tilly International.

specializing in the accounting, marketing, operations, engineering, human resources, risk management and IT sectors. Hahn holds a bachelor’s degree from the Culver Stockton College in Canton and a master’s degree in business administration from the University of Phoenix.

Steve Brown, CPA, was named one of the Top 40 Tax Advisors to Know During a Recession by CPA Magazine. The list invited every state society and national association of CPAs and accountants to nominate candidates, selecting the 40 elite based upon their experience, knowledge

ANNOUNCEMENTS

RubinBrown is the title sponsor for the Greater St. Louis Top 50 awards program, presented by the St. Louis RCGA. As a leader in the regional accounting scene, RubinBrown exemplifies a firm that is an asset to

and tax planning advice. Brown advised companies to stick with long-term business goals and not get distracted by the current economic climate, instead taking time to train and upgrade employees’ job performance. He was listed along with the other honorees in the magazine’s April 15 issue.

the local business community. Fifty winning companies are selected by the RCGA based on their significant contributions to the St. Louis region and how they have positively affected the future of our business community. Nominees’ economic impact is measured a number of ways, including employee growth, community enhancement, revenue growth, acquisitions and expansion/development of facilities. Many RubinBrown partners and team members will be in attendance at the annual awards dinner, which will be held at the Hyatt Regency St. Louis Riverfront on Wednesday, November 18, 2009. Conference May 2-5. The three-day event featured distinguished guest speakers, including Jim Turley, chairman and chief executive officer, Ernst & Young LLP, and Patrick Stokes, former chief executive officer, Anheuser-Busch. The conference was held at the Ritz- Carlton in Clayton and highlighted topics such as tax (international, U.S., and state and local), the future of auditing, effective international engagements, innovation and leadership. RubinBrown served as the host of Baker Tilly International’s North American Regional

The National Association of Black Accountants named Steven Harris, CPA, its 2009 Rising Star. The award recognizes a current or lifetime member of NABA who has accomplished a significant professional or community project and holds a prominent position within the

organization. Harris currently serves as president of the St. Louis chapter of NABA, recently attended NABA’s Central Region Student Conference in Detroit, Mich., as a panelist, and served as chair of the conference’s publications committee. More recently, Harris also was named to CPA Technology Advisor’s 40 Under 40 list, which recognizes the nation’s top 40 tax and accounting professionals under the age of 40. The publication also featured Harris in a practitioner profile.

4 u fall 2009 issue

Chairman’s Corner

The RubinBrown Market Advantage By James G. Castellano, CPA

“Chance favors the prepared mind.” Louis Pasteur

The creation of sustainable competitive advantage is a common overarching strategy for successful enterprises. Yet achievement of such advantage often proves elusive. Those who have successfully achieved a market advantage often did so because of their unwavering commitment to the process of strategic planning. David Aaker, author of “Developing Business Strategies,” says that a sustainable competitive advantage has three characteristics — • The advantage involves a key success factor, • The advantage is substantial enough to really make a difference, and • It is sustainable in the face of environmental changes and competitor actions. At RubinBrown, we have been following this simple discipline for many years in our quest to secure a sustainable competitive advantage. Our clients have defined our key success factors for us. They include superior quality and service of course. But going beyond the surface to truly understand the client’s perspective of qualityandservice iscritical.Wehave learned that superior quality and service mean thorough understanding of the industries in which our clients operate, deep technical expertise, close personal attention and continuity of the teams serving our clients, among other things.

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Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Understanding these key success factors from our clients’ perspectives led us many years ago to organize our firm into strategic business units designed to build our capabilities in specific industries and to develop deep expertise in selected service lines. Today, we have 10 major industry group business units and a number of deeply specialized service line business units providing services of value to our clients. These industry groups and service lineswork continuously to strengthen our capabilities. Clients should expect to be served by highly qualified professionals who understand the industry and provide value-added expertise and personal service at levels unmatched by our competitors. The total satisfaction of our clients is the standard we strive to achieve. The investment we have made to develop specialized expertise has proven substantial enough to make a difference. RubinBrown team members often are invited to present their qualifications to clients and prospective clients, and the industry and deep technical expertise of our team is noticeably unique. Their deep expertise enables us to add value and differentiate ourselves. To date the RubinBrown market advantage has proven sustainable, enabling us to grow to become one of the leading accounting and professional services firms in the nation. Rest assured, we will not rest on laurels but continuously strive for improvement. The process we employ for planning at RubinBrown and our burning desire to be the best will endure. In summary, the knowledge we bring to our client relationships, coupled with our commitment to the total satisfaction of our clients, enables RubinBrown to deliver unique value. Please continue to challenge us to improve, to continuously understand and meet your expectations. In fact, we encourage you to “Raise Your Expectations” of us. We invite you to explore our qualifications and experience our commitment to the total satisfaction of our clients. Thank you for your confidence in us.

Industry Group Business Units

Automotive Contractors Home Builders Hospitality and Gaming Manufacturing and Distribution Media and Entertainment Not-for-Profit Professional Services Public Sector Real Estate

Service Line Business Units

Assurance Services Corporate Finance and Forensic Internal Audit Tax Consulting

Questions? Contact:

James G. Castellano, CPA Chairman RubinBrown 314.290.3300 james.castellano@rubinbrown.com

6 u fall 2009 issue

GENERAL TOPICS

Leading the Market in Any Economy What is a market leader? According to the dictionary, a market leader is “the company or brand with the largest share of a market niche for a particular product.” That definition could be expanded to include the company or brand with the highest customer loyalty, perceived value and image in its definedmarket space. When a company becomes a true market leader, it has a competitive advantage over its competitors that will positively impact bottom-line profits. The challenge By Dan Raskas

is becoming a market leader and maintaining the position as the market leader. This article will focus on both obtaining market leadership and sustaining that position, as many of the strategies are the same. So what is the secret formula to obtain market leadership? What are the things a company should be doing when the economy is strong to gain a market leadership position? What should a company do when the economy is weak? The basic elements of obtaining and sustaining market leadership remain constant regardless of economic conditions. What will change is how a company executes on those elements that will determine the market leader. There are three key elements to obtaining and sustaining a market leadership position — customer focus, innovation, and sound strategy and execution. Each of these elements must be in sync and directly impacts and feeds the others.

Customer Focus

Innovation

market leadership

Strategy & Execution

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Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

time, the market and the customers do not know that they have a need until they see it and are made aware of the product or service. The product or service must be developed knowing that the market will respond positively, therefore creating high demand. If a company can become an innovator and consistently deliver products that customers want to market, obtaining and sustaining market leadership will be very achievable. Apple is a great example of a company that has been able to obtain and sustain a market leader position as a result of its ability to have a high level of customer focus and innovation. Innovation also can be a key to unlocking economic hurdles. When the economy is strong, consumers tend to seek out new and innovative products. When the economy is down, consumers may not seek out new products, but they are more likely to spend on new and innovative products than on products that have been around. If you study the cell phone industry, you can see there is a constant amount of product innovation that generates a continual consumer demand. Even in the current state of the economy, many next-generation phones are sold out before they arrive in stores. Customer focus and innovation alone cannot get a company into the market leader position or keep it in that spot. Those elements only help determine what it takes to get there. Once the customer is understood and innovative products are created, a company must organize itself strategically to deliver the products or services efficiently and effectively to market, and it must execute on that strategy. This area includes knowing which market to be in, where the customers are and how to deliver the products and services to them, how to produce the product or service in the most efficient and effective manner with the highest quality, and many other aspects. From a market condition perspective, there are many strategic decisions that occur in this area. If a company has a strong product or service and is looking to gain Sound Strategy and Execution

Customer Focus

In order to both obtain and sustain market leadership, everything about the product or service that is being sold must be anchored around the customer. What is perceived as value to the customer must be understood by the company and then communicated back to the customer in a way that fully demonstrates the value provided by the product or service. While this process may sound simple, it can be very complicated. In order to accomplish total customer focus, a company must fully understand who its customers are and constantly monitor the conditions of the market, which will impact customer needs. As those needs change, the company must adapt either the message to the customer or the actual product or service being provided. In addition, the level of customer service provided to the customers must be perceived as superior to any competitor. As the market conditions change, different actions may be required to either change or sustain the market position. A company that produces compact fluorescent light bulbs initially communicated the customer value as being the environmentally friendly product or “green” bulb. It enjoyed a market leader position as the market was becoming very environmentally conscious. When the economy declined and the consumer was faced with paying $6 for a green bulb versus $1 for a regular bulb, it was hard to see the value. In order to maintain a strong market position, the value message was modified to more prominently highlight the fact that green bulbs save money, as much as $36 over the life of a 60-watt bulb, due to the reduced energy usage, which is what makes them environmentally friendly.

Innovation

Innovation is another important component in obtaining and sustaining market leadership. Innovation feeds off of customer focus. One of the customer focus concepts is to understand the needs of the customer. This concept is critical in delivering innovative products and services to the market. Most of the

8 u fall 2009 issue

be required as a result of the changes in market conditions, and altered its strategy from an organic growth to an acquisition strategy. The company was able to expand both domestically and internationally, achieving its growth goals and becoming a market leader. By focusing on the three elements — customer focus, innovation, and sound strategy and execution — a company can obtain and sustain a market leader position. As discussed, these three elements cannot be viewed independently from one another but must be viewed collectively. Based on the examples above, if a company remains focused on these three elements, it will enjoy a market leadership position regardless of economic conditions.

market share, it has many choices. The company can look at its competitors and target an acquisition. It can build capacity. It can grow internationally through acquisition or joint venture relationships. The market conditions will help determine the right alternative as well as if expansion is even the right decision. Here is an example of how market conditions impact all three components — customer focus, innovation, and strategy and execution. This service provider was not a market leader but was gaining market share and had developed an organic growth strategy to more than double the size of the organization and grow to $1billion over a five-year period. During the first year the market conditions changed, causing the organization to evaluate all three components. From a customer perspective, the company had a good reputation and was held in high regard by its customers. It was not known on a national or international basis but only in select markets for select services. It had a good track record of offering innovative services to its customer base and also was in a strong financial position. It evaluated its customers, anticipated what was going to take place with competitors in the market — some of which had market leadership positions, determined what existing and new innovative services would

Questions? Contact:

Dan Raskas Partner Corporate Finance and Forensic Services Group 314.678.3530 dan.raskas@rubinbrown.com

9 u fall 2009 issue

CPAs. Business Partners. Navigators. You don’t need us to tell you how it is out there. We’re all just trying to keep an even keel. But, maybe that’s why honest, objective advice is more valuable than ever. From maintaining a favorable credit position to minimizing risk, we can help you address the issues of the day that matter most so you can be in a position to build a stronger bottom line. Expect the kind of counsel you trust so much, you won’t want to make a move without looking to us first.

www.rubinbrown.com

GENERAL TOPICS

Charitable Giving in a Down Economy Charitable giving during a down economy? It’s tough. Cash donations that have been consistent in the past may not be possible this year. However, there are other ways to contribute to charitable organizations without using cash: 1. Volunteering time to a charity. Many non-profits may need help with registration at a 5k run/ walk or can use assistance with office duties. In addition to the positive feelings that result from giving, there also may be an opportunity to qualify for tax-deductible expenses. The Internal Revenue Service will allow volunteers at nonprofits to deduct expenses related to car and transportation, travel, uniforms and other out- of-pocket expenses from their taxable incomes (these are subject to limitations, so a tax advisor should be consulted). 2. Services also can be donated to a charitable organization. These services can range from writing calligraphy on invitations for a formal ball that supports a non-profit or using knowledge or background to assist at a silent auction or trivia night. While the value of the services cannot be taken as a tax deduction, volunteers may qualify for the expenses listed above. 3. Those who have lost money in stocks can sell the stocks, give the proceeds to a preferred charity and get two tax benefits in return — netting the capital loss against other capital gains for the current tax year and including the donation as a By Maggie Glenney, CPA

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Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

cash contribution on an individual tax return. 4. Although the tax deductions vary, vehicles can be donated to a non-profit. There are different tax forms that need to be completed and rules to be followed if a vehicle is donated, so, again, a tax advisor should be consulted. 5. Individuals actually can create a fixed income stream for themselves by establishing and transferring funds to a charitable gift annuity or charitable remainder trust. The annuity or trust provides an income stream for a period of time. After this period or upon death, the non-profit receives the assets that produced the income. 6. Another option is to give a bequest to a charity and even direct its specific purpose. For those who would still like tomake cash contributions this year, but on a tighter budget, there are additional options: 7. During the holidays, donations to the gift recipient’s favorite charity can be given in the name of the recipient instead of a gift.

8.Individuals at least 70 ½ years in age can make a direct contribution from their IRA to a non-profit up to $100,000 if filing single, $200,000 if filing jointly. This contribution is called a qualified charitable distribution. The amount of the QCD is limited to the amount of the distribution that would otherwise be included in income. Currently, this opportunity is only available for the 2009 tax year.

Questions? Contact:

Bob Jordan, CPA Partner-in-Charge Family Office Services Group 314.290.3221 bob.jordan@rubinbrown.com Maggie Glenney, CPA Manager Family Office Services Group 314.290.3283 maggie.glenney@rubinbrown.com

12 u fall 2009 issue

GENERAL TOPICS

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Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Gaining Market Share through the Use of a SAS 70 Completing a control assurance report (SAS 70) can differentiate you from your peers and provide a competitive advantage in the marketplace. Statement on Auditing Standards No. 70, Service Organizations, prescribes the guidance for an independent auditor to examine and report on a service organization’s internal controls. The SAS 70 report was designed to enable user auditors to obtain an understanding of the controls over activities, processes and functions performed at a service organization that are part of a user organization's overall internal control environment. This examination results in a report with limited distribution to the organizations using the service organization’s services and their financial statement auditors. The report provides the following information: • Auditor’s opinion • Comprehensive description of systems, processes, and the controls and control environment at the service organization What is a SAS 70? By Audrey Katcher, CPA, CISA

• Auditor’s tests of the controls and the results of those tests • Definition of the controls for the client to perform in support of the overall achievement of control objectives (user control considerations) • Other information provided by the service organization (such as information about disaster recovery processes and other definitions/terms) Organizations that process information for others, host applications/technology for others or perform other types of outsourcing may need a SAS 70. Such entities often include: • Application/Internet Service Providers, IT hosting entities • Fund administrators • Insurance claims third-party administrators • Trust departments of banks SAS 70 Terminology Key definitions per the AICPA Audit Guide for Service Organizations include: User organization: The entity that has engaged a service organization and whose financial statements are being audited. User auditor: The auditor who reports on the financial statements of the user organization. Service organization: The entity (or segment of an entity) that provides services to a user organization that are part of the user organization's information system. Service auditor: The auditor who reports on controls of a service organization that may be relevant to a user organization's internal control as it relates to an audit of financial statements. Who typically has a SAS 70?

14 u fall 2009 issue

• Payroll service providers • Outsourced document processors or report processors • Call centers/collection agencies • Reward card processers • Cost recovery providers (telecom, payment, other billing)

This article speaks to a company having a SAS 70; what about using a SAS 70? For the user organization, the benefits include: • Cost and Time — With a SAS 70 report, user organizations may be able to eliminate the costs and time associated with sending their internal auditors or other compliance representatives to the service organization to perform audit procedures. • External Audit Fees — With sound internal controls at the service organization, external auditors may be able to rely on the controls and reduce the amount of testing in support of the financial statement audit. • Controls Assurance — User organizations that obtain a SAS 70 report from their service provider receive valuable information on the design and operating effectiveness of internal controls. RubinBrown would be happy to provide further insights related to SAS 70 coverage and usage. For example, ensure that the SAS 70: • Covers your actual data, servers and processes.

Benefits of a SAS 70

The SAS 70 provides many benefits, which may include:

• Competitive Differentiation — An unqualified SAS 70 opinion, vissued by a PCAOB-registered accounting firm, differentiates the organization from its peers by demonstrating effective controls while also building trust with clients. • Process Improvements—Having a SAS 70 auditor from a PCAOB-registered accounting firm with SAS 70 experience across many organizations leads to identification of opportunities to improve and streamline operational processes and internal controls. • Time Savings — With a SAS 70 report, service

• Is for the appropriate time period. • Includes testing and is not limited to inquiry procedures.

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Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

organizations may be able to eliminate the multiple audit requests from clients and their auditors, reducing time with auditors. • Enhanced Company Reputation — The SAS 70 report helps ensure the organization’s clients and their auditors are provided a clear overview of the environment upon which they rely. 1 Meet with an experienced, PCAOB-registered accounting firm. 2 Understand my client’s needs and timeline. 3 Have a “gap analysis” performed. 4 Allow time for remediation. 5 Schedule the SAS 70. A SAS 70 report, issued by an independent accounting firm, will differentiate a service organization from its competitors by identifying and evaluating the design and operating effectiveness of internal controls. A report, with an unqualified opinion, will build trust with the service organization’s customers. Completely satisfied customers will tell other businesses about their satisfaction with the service organization. How do I prepare for a SAS 70? Competitive Advantage The SAS 70 guidance is not based on a checklist of pre-determined controls to test but rather is based on the AICPA’s standards of fieldwork, quality control and reporting. Therefore, the choice of an auditor for your SAS 70 is critical. As a PCAOB-registered accounting firm, RubinBrown has an experienced team that has led and performed many SAS 70 examinations. RubinBrown’s SAS 70 team will ensure wise and timely use of resources and will provide accurate guidance on the subject of financial and information technology controls. RubinBrown Guidance

Questions? Contact:

Audrey Katcher, CPA, CISA Partner Internal Audit Services Group 314.290.3420 audrey.katcher@rubinbrown.com

Is there an option other than SAS 70? Clients often request a SAS 70 as part of their vendor due diligence. Depending on the requirements the client needs to meet, other options may be viable in lieu of a SAS 70. Those options are: • An Agreed Upon Procedures engagement. This engagement will provide client(s) tailored controls feedback related to, for example, specified service level agreement/contract compliance areas. • A SysTrust engagement. A SysTrust engagement is based on these pre-defined principles and criteria: security, online privacy, availability, confidentiality and processing integrity.

16 u fall 2009 issue

GENERAL TOPICS

Six Degrees of Separation... Maximizing Accounting’s Value within Your Organization “Theory of Six Degrees of Separation — If a person is one step away from each person they know and two steps away from each person who is known by one of the people they know, then everyone is at most six steps away from any other person on earth.” — Wikipedia This concept can apply to accounting functions in any organization. All actions create transactions captured by accounting — a new product idea, an unhappy customer and even a sick employee. So, if accounting is one step away from a transaction and two steps away from an action, then accounting is at most six steps away from any action within an organization. What an incredible wealth of information! The challenge By Kristin Parshay

becomes how to capture that information to provide timely, relevant and accurate reporting to support business decisions and create maximum stakeholder value. Our answer to this challenge is to think lean. In summary, lean can be defined as the relentless pursuit of maximum value through the elimination of waste. Lean theory classifies waste into eight categories: 1. Waiting: delays in creation or delivery of a product or service 2. Over-production: processing too soon or more than required 3. Rework: correction of errors or mistakes 4. Motion: movement of people without adding value 5. Processing: processing more than required when a simpler approach would have met customer requirements 6. Intellect: employees not leveraged to their potential 7. Inventory: having excess inventory 8. Transportation: moving items more than required Accounting’s role in the elimination of waste is two- fold; first, within the operations of the accounting function and, second, through the behaviors created from the use of financial information. Opportunities for eliminating waste from accounting operations include (1) re-balancing closing practices so corporate accounting is not waiting to finalize closing until accounts payable closes or (2) mistake-proofing transaction posting to eliminate the re-class of expenses because they were not posted to the correct account the first time. Wasteful behaviors caused by financial reporting can be changed by providing profit and loss statements that consider inventory as a waste if customer demand did not warrant its production or analyzing organizational spending based on the justification for the value it created instead of whether the spending was budgeted.

Addressing waste in both accounting operations and reporting marks an accounting function’s transition to

17 u fall 2009 issue

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Organizations operate through a series of decisions. The accounting function in any organization is at most six steps away from any action that takes place within it. By eliminating waste within accounting operations, no function is better positioned to provide accurate, relevant and timely information to decision-makers to create and sustain maximum stakeholder value.

a lean accounting environment. Summarized below is a practical approach to this transition and some of the benefits created as an accounting function steps through the process. While the most value is derived through the implementation of all steps, this evolution does not occur overnight and can be applied in differing degrees, depending on the organization’s culture for change and the industry in which it operates. • Application of lean to accounting operations: eliminating waste within accounting operations such as the financial closing, accounts payable, accounts receivable and payroll. A few of the benefits realized include reduced operational expenses, increased cash flow and increased capacity within the accounting function. • Identification of organizational value streams: analyzing the flow of materials and information to bring a product or service to customers (internal and external). A cross-functional exercise that breaks down an organization’s silos to understand business processes from cradle to grave, ultimately highlighting value-added and non-value added activities. • Implementation of value stream accounting: identification and application of revenue and expenses by value stream. Allows the organization to directly connect value-added and non-value added activities to financial performance. • Plain English management reporting: designed from value stream exercises to align reporting with lean theories of waste. Reporting is easily understood by internal stakeholders outside of accounting, providing information that drives the right organizational behavior. • Lean external reporting: combines external reporting practices with internal management reporting based on value streams. Lean external reporting removes the need to maintain dual reporting and provides external stakeholders with the benefits of plain English management reporting.

Questions? Contact:

Cathy Behnen, CPA, CIA Partner Internal Audit Services Group 314.290.3204 cathy.behnen@rubinbrown.com Kristin Parshay Manager Internal Audit Services Group 314.363.9039 kristin.parshay@rubinbrown.com

18 u fall 2009 issue

GENERAL TOPICS

Job Market Outlook: Take Advantage of Exceptional Talent Is your company in “hold back” mode? Are you watching expenses and making due with the staff that you have? This theme is common among companies riding out our current economic condition. Are you trying to survive today or are you planning to be one of the dominant companies in your industry tomorrow? In this particular recession, companies can compare the hiring market to the real estate market. The real estate market is a “buyers market,” especially considering the recent increase in foreclosures. There is an abundance of quality homes on the market with tremendous upside or return on investment. The same thing could be said about the hiring market. With the recent restructurings and downsizings, there is an abundance of quality talent in the job market; some that offer tremendous upside or a high level of ROI. So, as with the real estate market, the current economic environment may just be a “buyers market” or “hiring market" for employers. By Tamara Vazquez and Eric Hahn

In any economy, an organization’s most valuable asset

19 u fall 2009 issue

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

5. Hire people with potential. Look for candidates who show a progression in their career. Hire the people who should be running the company in the next three years. 6. Hire A players instead of B players (especially if the company is in a high growth mode). B players focus on getting activities done; A players focus on achieving results. (A players’ salaries are usually 10-20 percent higher, but they deliver 300-500 percent greater results.) Consider hiring contract employees. Hiring business professionals on a temporary basis is a great way to complete a project that could not be completed otherwise. Contract employees can work for a month or for several years depending on the company’s needs, without incurring employment costs such as payroll tax, insurance and benefits. Now is the time to take advantage of hiring exceptional talent, both temporary and permanent. Abacus Recruiting is a division of RubinBrown LLP, St. Louis’ largest accounting firm. Abacus Recruiting specializes in accounting, financial, marketing, human resources and business management recruiting. Abacus is a trusted advisor with its clients in finding exceptional talent.

is its PEOPLE. This asset is even more important in uncertain times, when survival may depend on strong leadership and maintaining high levels of customer service. With outstanding performers now in the job market, companies have access to professionals who would not have been available one year ago. Even though managers are closely watching budgets, it makes sense to hire professionals who can help enhance a company’s depth of skills and expertise now and in the future. • Leadership: Strong company leadership leads to satisfied customers and employees. • Customer Service: Now is the time to focus on customer service. This differentiates companies from the competition. • Technology: Keeping technology up-to-date will provide quick and accurate response time to customers and attract quality professionals to the company. 1. Define desired results for a role before recruiting for it. Having a well-written job description with clear expectations of results is critical to success. 2. Identify skills and knowledge needed to produce the result. If the candidate is missing any of the mandatory requirements in this list, he/she would not be a candidate for the position. Aim for this standard to produce exceptional hires. 3. Do not hire the best candidate; hire the candidate who is 100 percent qualified. A candidate is either 100 percent qualified or not. There is no middle ground. 4. Look for specific proof of skills needed to deliver the desired outcome. Use a “proof-based” approach. Look for examples of how the candidate has demonstrated each specific skill. After all, Missouri is the “Show Me State.” Hiring the best people can protect a company from the competition by enhancing the following: Hiring right is a key skill in finding the best talent.

Questions? Contact:

Tamara Vazquez President ABACUS Executive Recruiting 314.878.5522 tamara@abacusrecruiting.com Eric Hahn Recruiting Manager ABACUS Executive Recruiting 314.878.5522 eric@abacusrecruiting.com

20 u fall 2009 issue

GENERAL TOPICS

Retirement Plan Document

executed document and related amendments should be filed by the employer with the Internal Revenue Service based on a five-year cycle to obtain a determination letter that the form and content meet all the requirements. 2. Prototype — This document is submitted by a prototype plan sponsor to the IRS for its review and approval; the IRS will issue an opinion letter indicating that it meets all the requirements. There are two components: a basic plan document, which includes the substantive provisions, and a corresponding adoption agreement that an employer uses to elect the relevant plan design provisions for its plan. The adoption agreement enables the employer to check a box and choose the applicable feature it wants for its plan from a variety of available options. A prototype plan sponsor can maintain one basic plan document and have multiple adoption agreements (i.e., 401(k) plan, profit sharing plan, money purchase pension plan, etc.). 3. Volume submitter — This specimen or sample plan document is submitted by a volume submitter plan sponsor to the IRS for its review and approval. The IRS will issue an advisory letter

Training Session

By Wayne A. Isaacs, JD, CPA, CEBS

Background

An employer sponsoring a qualified retirement plan must ensure that the plan continues to maintain its tax-qualified status by keeping the plan document current and in compliance with required laws and regulations. There are three types of plan documents that an employer may use to comply: 1. Individually designed — This customized document is normally drafted by an attorney based on the employer’s plan design specifications. The

21 u fall 2009 issue