Horizons Spring/Summer 2019

RubinBrown's Spring/Summer 2019 issue of Horizons covers the Next Decade and features articles covering Cyber Security in the Next Decade and how various industries foresee changes in 2020 and beyond.

Spring/Summer 2019 A publication by RubinBrown LLP

FEATURING Next Decade

u Cyber Security in the Next Decade

u How Various Industries Foresee Changes in 2020 and Beyond

Featuring

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RubinBrown News

Chairman & Managing Partner John F. Herber, Jr., CPA, CGMA

Cyber Security in the Next Decade

Chicago Managing Partner Christopher J. Langley, CPA

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Timely Reminders

Denver Managing Partner Ben Barnes, CPA, CGMA

Industry Updates

Kansas City Managing Partner Todd R. Pleimann, CPA, CGMA

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MANUFACTURING & DISTRIBUTION Next Decade: AI & Robots Accelerated change will occur as AI, robots and lack of jobs alters the industry. 25

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CONSTRUCTION

PUBLIC SECTOR

Las Vegas Managing Partner Glenn L. Goodnough, CPA, CFE

Next Decade Trends in Construction

What will the Next Decade Bring for the Public Sector Industry New technologies are allowing cities to interact with their citizens more frequently and efficiently.

Technology advancements are coming to the job site, including software, drones and more.

Nashville Managing Partner Bryan Keller, CPA, CGMA

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HEALTHCARE

GAMING

REAL ESTATE

St. Louis Managing Partner Frederick R. Kostecki, CPA, CGMA

Opportunity Zones Have Potential to Bring Growth, but Pose Lingering Questions Opportunity zones, enacted with the Tax Law & Jobs Act, are an industry-wide interest.

Healthcare Industry Adapts to Reduce Costs & Provide Quality Care Trends will continue toward value-based care and more transparency in patient costs.

Rapid Gains in Sports Betting In the coming years, sports betting will continue develop and grow into new applications.

Editor – Dawn M. Keizer Associate Editor – Ashley Elder Art Director – Jen Chapman Designer – Brendan Coleman

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NOT-FOR-PROFIT

A Sunny Forecast for Not-For-Profits Fundraising is top-of-mind for nonprofit organizations as giving trends and donors change.

Horizons , a publication by 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. Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.

www.RubinBrown.com

Readers should not act upon information presented without individual professional consultation.

Predictions for 2020

A quick Google search of predictions for the next decade generated a list of amusing stories about the proliferation of robots, 3D printing, text by thought and electric cars. It’s fascinating to think about where we will be ten years from now in 2029. Here at RubinBrown, we’re keeping our eye on the future and adapting to the changing environment, relentlessly pursuing innovation, and tempering it all with sound and time-tested strategies so that we can continue to build value for you — our devoted clients. The accounting profession will most certainly evolve. We’re all examining the effects that data analytics, artificial intelligence (AI) and blockchain technology will have on the way we do business. As our firms become more automated and data driven, we’re also changing the way we recruit talent — focusing not just on CPAs, but technology professionals as well. This issue of Horizons provides key insights and predictions for how business will evolve within the industries we serve. From AI and automation to economic recessions and globalization, there is no doubt that the world will be very different than it is today. Throughout the 2020s, we will continue to provide you the highest level of service as well as serve as your most trusted business advisor.

John F. Herber, Jr., CPA, CGMA Chairman & Managing Partner

Thank you for your loyalty to RubinBrown.

Pleasant reading,

From A I and automation to economic recessions and globalization, there is no doubt that the world will be very different than it is today.

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RUBINBROWN NEWS

RubinBrown Combines with Bradshaw Smith; Bolstering Services to Gaming Industry RubinBrown is expanding in the Las Vegas market. Las Vegas-based Bradshaw Smith will join with RubinBrown effective June 1, 2019. The addition of the Bradshaw Smith team members will allow RubinBrown to grow to become the second largest accounting firm in Las Vegas, as well as augment its flourishing gaming practice. Bradshaw Smith has 25 total team members, six of which are partners. RubinBrown’s current Las Vegas office is comprised of 74 team members, including 11 partners. Glenn Goodnough will lead the newly combined office. RubinBrown first entered the Las Vegas market in 2017 when it combined with Stewart Archibald & Barney (SAB).  Steven J. Brown , partner and chairman of the firm’s Tax Services Group, was instrumental in RubinBrown’s entrance into the Las Vegas market after years of working alongside SAB partners to advocate for the accounting profession at the American Institute of CPAs. “Our firm’s values were closely aligned and since the combination the firm has grown substantially, particularly in the gaming sector,” he said.  RubinBrown is well known throughout the gaming industry in part because of its popular RubinBrown’s Gaming Stats, which provides a comprehensive review of the U.S. gaming industry, including financial data from more than 1,000 gaming operators.

Since 1976, Bradshaw Smith has served clients with a full suite of tax, accounting and consulting services.  The firm specializes in and has gained substantial industry knowledge in gaming, real estate, construction, broadcasting, non-profit, medical and manufacturing, among others.  In recent years, the firm has grown substantially in the gaming industry, serving a number of commercial casinos in Las Vegas and other parts of the country.

RubinBrown News

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RubinBrown Honored by Clayton Chamber of Commerce RubinBrown was proudly awarded the Excellence in Service Award from the Clayton Chamber of Commerce. In addition to receiving this prestigious award, the firm also celebrated 60 years in Clayton. In 1958, RubinBrown, which at the time had only three team members, moved from downtown St. Louis to 7730 Carondelet. Just a few years later, the firm expanded into a larger space at 230 South Bemiston. It was here RubinBrown experienced substantial growth over the next 40 years. Then in 2002, the flourishing firm expanded and moved to the soaring Shaw Park Plaza. Today, RubinBrown is St. Louis’ largest local accounting firm and the nation’s 42 nd largest firm.

RubinBrown Founder, Harvey Brown, stands with award and proclamation from the Chamber.

RubinBrown’s 700 inspired team members work from offices in Chicago, Denver, Kansas City, Las Vegas, Nashville and St. Louis, including a satellite office in St. Louis’ CORTEX Innovation District. Since RubinBrown was founded in 1952, the firm’s team members establish best practices within specific industry segments and work to serve the community both inside and outside the workplace. RubinBrown’s mission is to help clients build and protect value, while at all times honoring the responsibility to serve the public interest. RubinBrown Founder, Harvey Brown , is still involved in the business and comes into the office in Clayton often. “We have grown tremendously over the last six decades and we are very appreciative of the continuous support and partnership with the Clayton business community,” said Brown.

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RubinBrown Serves as Presenting Sponsor at the St. Louis Arcus Awards

RubinBrown was proud to serve as the presenting sponsor of the Arcus Awards, which was held in St. Louis on February 28. This spectacular event is attended by nearly 1,000 business leaders and is informally known as the “Academy Awards of St. Louis Business.” This is the sixth year in a row that RubinBrown has served as sponsor. The awards recognize businesses who are making a difference in St. Louis in areas of innovation, technology, workforce development, inclusivity and much more.

RubinBrown Presenting Sponsor of the Denver 40 Under 40 Event

This year, RubinBrown served as the presenting sponsor of the Denver Business Journal’s 40 Under 40. This renowned program celebrates 40 of the most talented leaders in the Denver market. The event was high energy, fun and truly inspiring. John Herber , Managing Partner, and Rhonda Sparlin , State & Local Tax Partner, had the pleasure of announcing all the winners and presenting the awards.

RubinBrown Managing Partner, John Herber and Rhonda Sparlin, Partner, present awards to winners.

RubinBrown Honored as Best Places to Work Finalist

For the third year in a row, RubinBrown was honored as a finalist for the St. Louis Business Journal’s Best Places to Work. Team members represented the firm at the awards breakfast on March 7.

Although RubinBrown was not selected as a winner in the “Big” category (250 -999 local employees), it is an honor to be recognized along with other highly reputable employers in our category.

RubinBrown News

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* New talent as of April 1, 2019

Tony Nitti Tax Services Group Denver

Tim Anderson Tax Services Group St. Louis

NEW TALENT PARTNER NEW TALENT MANAGER

Sean McKessy Assurance Services Group St. Louis

Kirstin Lambrecht Tax Services Group Las Vegas

Matthew Billman Tax Services Group Denver

Jenny DeCicco Entrepreneurial Services Group Kansas City

Don Mapes Business Advisory Services Denver

Tim McCormack Business Advisory Services Denver

Peter DiPietro Tax Services Group Nashville

Kara Hernandez Tax Services Group Kansas City

Jody Parks Tax Services Group St. Louis

Aaron Wilcox Assurance Services Group Las Vegas

Richard Hickey Tax Services Group Denver

Amanda Hill Entrepreneurial Services Group St. Louis

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FEATURE

Cyber Security in the Next Decade The Prepared Will Survive, The Vigilant Will Thrive

by Rob Rudloff, CISSP-ISSMP

Cyber security in the next decade will bring new threats, increased regulation, a convergence of privacy and security, a talent shortage and a landscape littered with organizations that fail, organizations that prepare and survive, and organizations that are vigilant and thrive.

Increasing Threats Cyber criminals have a multi-billion dollar per year business based on convincing people to send them money, personally identifiable information and intellectual property. The fraudulent activity will continue to adapt to technology, morphing attacks from email to text and social media, attacking smart phones in greater numbers and infiltrating the Internet of things. Fraud isn’t new, the scenarios aren’t new, but every new technology development will be analyzed and the attacks changed to take advantage of faster, broader, more invasive communications and the criminals will continue to take advantage of the unprepared. Criminals will steal, block, disrupt, misdirect and subvert anything left unprotected. We may change the words from ransomware to cyber kidnapping or wire fraud to cyber theft, but the theft of information, money and intellectual property remain the targets. Predicting new threats only gets us so far – if the end goal is still information and money – there are ways to prepare your organization to survive, and for those willing to invest the resources in ongoing vigilance, there are ways to thrive despite increasing threats. Increased Regulation & Convergence The implementation of the General Data Protection Regulation (GDPR) in the European Union (EU) was quickly followed by other countries employing similar rules, along with individual states in the U.S. including Oregon, North Carolina, Virginia, Washington, Colorado and California. Combined with state-level rules like the New York Cyber Security Regulation, increased rigor in the credit card (PCI DSS) requirements, greater focus on healthcare security rules (HIPAA Security Rule) and new breach reporting requirements designed to improve consumer protections across the United States – privacy, security and breach reporting are converging. Right now, it still requires a matrix to map all the requirements to account for the citizens of each state, data subjects present in the in-scope areas, the different breach response requirements, and decision points based on how an organization operates and what kind of information you collect, create, process, transmit and store. During the next decade, it is expected that additional state level legislation will be consolidated in federal government regulations addressing the handling, protection and reporting of personally identifiable information. Looking through the existing and upcoming rules – the focus is on requesting permission (e.g., opt-in) to collect personal information, limiting the collection of personal information to what is needed, only keeping the information necessary and then destroying the information when no longer needed or upon request.

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Plus, organizations will need to protect that information while in possession. Addressing the requirements means combining business and technical processes to understand what information is collected, how it is collected, where it lives, where it is stored, who has access, how it is transmitted and how it is destroyed. The best approach is mapping out the data flow from collection/creation through destruction – cataloging the why, where, who and how. It is then important to perform an analysis as to how the data is protected, how you can determine if data has been compromised as well as the processes required for notifications under the appropriate laws and regulations. The most important aspect to remember is that this is not only a technology issue, it is a strategic business issue. Prepared organizations will understand the sensitivity of data in their environment, outline the processes for responding to a breach and make sure insurance is in place to assist with the costs of a breach. Vigilant organizations will map the data, plan a response, test the plan and develop relationships with specialists who can assist when needed. Cyber security talent is expected to be in high demand for the foreseeable future. A recent Ponemon poll reported that 68% of respondents believe staffing is an issue, 67% do not have the time to address known security issues and 71% indicated communications with senior management continue to get in the way of staffing and support. Universities, colleges and technical schools are trying to address the shortages, but often generate people who lack hands- on experience to perform the work. To be fair, cyber security skills run the breadth of technology from developers to operational administrators and often require detailed Skilled Security Professionals’ Talent Shortage

knowledge of security practices and underlying technology.

Many of the specialty skills in cyber security are still primarily learned on the job, by diving into the technology and investing personal time in the effort. No school or program is going to create a ready-made cyber security specialist. Experience is still a critical factor in managing a successful cyber security program. Over the next decade, the trend is expected to continue. More basic-skilled individuals will move into the workplace, but it could be 10-15 years before they gain enough experience with product companies and service organizations to have a significant impact. While cyber security requires many different skills, if you are limited in resources, you can focus on those who have a broad understanding of security, comprehend the long-term plan and are capable of communicating clearly with management. Hiring an ethical hacker to lead your security program may sound like a good idea, but typical ethical hackers are technical specialists, quickly bored by day-to-day routines and may not fit the management culture needed for effective communications. Rather, it is advisable to hire a solid generalist with good communication skills and selectively outsource and co-source technical requirements. If your organization does not need a full-time security specialist, consider engaging firms providing virtual Chief Information Security Officers (vCISO) services to advise senior leadership on strategy and planning. Prepared organizations will have a basic understanding of security services and relationships in place with security service providers who can be called upon as needed. Vigilant organizations will integrate co-source or outsource services into the security program so they are prepared for new threats as they emerge.

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Preparing for the Next Decade of Cyber Preparing an organization to address cyber over the next decade will require an investment of time, focus and resources appropriate to the risks facing the organization.

User Training Users are either weak points in the cyber armor protecting an environment or are the distributed early-warning firewall system for an organization. The difference is the vigilance of users – do they know to watch for threats and are they trained in how to spot the threats? Users can be the greatest weakness or greatest strength. Training should be regular, varied in method and medium and utilize a combination of delivery methods. Prepared organizations will provide users annual training and ad-hoc training as new threats are identified. Vigilant organizations will develop annual training programs with monthly to quarterly updates, regular email phishing testing and use gamification techniques to engage users in the cyber security defensive process. Technical Assessments Technical assessments need to be customized to your environment and address critical technology supporting the organization. The data flow analysis can be used to help identify some of the critical technology components – whether on premise or in the cloud. Remember, security responsibilities when using a cloud solution – security responsibilities cannot be fully outsourced. Prepared organizations will focus on critical technologies in the environment and how to protect sensitive information. Vigilant organizations will build on that by performing quarterly vulnerability scans,

Prepared organizations are going to create consistent, repeatable, processes to address cyber on an

ongoing basis. Vigilant organizations are going to take those processes to the next level, creating opportunities to expand business and operations to new areas as technology develops. The following are key areas your organization can address with budget and staffing levels appropriate to your needs. Risk Assessments Critical in any business, security risk assessments are a fundamental building block to a sustainable long-term security program. Risk assessments need to be performed annually and after any major business or technology change. The assessments do not have to be onerous or difficult, but they do need to be relevant to the organization. For instance, if you handle personally identifiable information, you need to understand your threats and compliance assessments and if you are a manufacturing company with proprietary data you need to protect that proprietary data. Every organization handles its own customers’, suppliers’, clients’ or employees’ confidential information – the key is to identify the information, where it is collected, processed, transmitted and stored in the environment and how the controls address risk. Prepared organizations will perform a risk assessment every few years, address the critical issues identified and seek outside support if a critical need is identified. Vigilant organizations will perform them at least annually, regularly seek third-party support for a fresh look and integrate the results into operational planning and improvement.

cyber security requires many different skills, if you are limited in the number of resources, you can focus on those who have a broad understanding of security

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annual penetration testing, technical security reviews after any major change and using the annual risk assessments to prioritize the technical testing efforts. Compliance Compliance requirements will continue to grow, become more prescriptive and expand in complexity as different jurisdictions implement new rules. The key to successfully addressing technical compliance requirements is to build a robust security program that addresses compliance and produces the necessary compliance evidence as a by-product of the security program. Recent history is littered with organizations who were in compliance with some standard or rule, but were breached anyway – because compliance was addressed by itself, instead of an integrated approach as part of their security program.

Prepared organizations will develop checklists and matrixes for compliance so they can assess or audit once and use the results to comply with many requirements. Vigilant organizations will integrate compliance into the security programs and generate the evidence necessary to demonstrate compliance as a by-product of their ongoing security program efforts. Disaster Recovery Planning & Business Continuity Ransomware, natural disasters and man-made crises over the past several years have made it clear that reliable backups, disaster recovery plans and business continuity plans are necessary. These plans need to be well designed, implemented properly and then tested and updated on a regular basis. New technology is constantly emerging to make these solutions more flexible, cloud-based or location independent, but they have to be tested before a disaster strikes. Prepared organizations will ensure critical data is addressed in the disaster recovery and business continuity plans. Vigilant organizations will build on that by regularly testing the plans, verifying backups can be recovered in a timely manner and making sure the plans are updated based on the annual risk assessments.

Trusted Relationships All businesses are a part of a larger supply chain receiving or providing products and services with business partners, vendors and service providers.

In order to leverage these relationships, establish trust with each other, develop processes to build on that trust and periodically make sure trust is still warranted.

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Utilizing Artificial Intelligence to Detect Payment Fraud Applications of artificial intelligence (AI) are proliferating across a spectrum of consumer products, augmenting our everyday lives in ways few thought possible. Simply defined, AI describes the development of computer systems capable of performing tasks that require human-like cognition. AI can be divided into either a rules-based system or a machine learning system. The former relies exclusively on rules defined by human experts whereas the latter relies heavily on models that are ‘trained’ on large collections of examples. In the case of payment fraud, a business could employ a rules-based AI application by flagging payments to P.O. boxes or addresses outside the countries in which the organization does business. The AI application would ‘monitor’ payment activity and then automatically route the information to the appropriate parties for review. A business could also utilize a machine learning system to mitigate potential payment fraud by building a system that relies on a clustering ‘model’ or algorithm to automatically cluster or group payment activity based on certain vendor traits (such as location, transaction volume, type of payment, etc.). This could automatically detect transactions that are outside the norm. It is not too much of a stretch to build trust in the rules-based system, especially if logic is built internally (without relying on cloud-based systems). However, it may be more difficult to truly trust a machine learning application as the logic is more complex. Further, the leadership of the enterprise may be comfortable that the complex system ‘works’ based on past examples, but this creates a ‘black box’ that may not be evident until the system fails. A system that ‘works’ in terms of detecting fraud does not necessarily address privacy concerns either – however, all is not lost. Current research in machine learning is focusing on reducing the reliance on large collections of examples and developing privacy-protecting analytic methods. Imagine if you could confidently encrypt (for example) your data before feeding it to a powerful cloud-based system that was purpose-built as an engine to mitigate fraud. The enterprise would get the horsepower without having to maintain the complexity of such a system. The even better news is that the encryption step is becoming much more approachable, allowing you to easily create a ‘key’ to lock and unlock your data stores, for example. No programming skills required. The promise of AI lies in the ability to deploy automation at scale regardless of whether it is a more simplistic rules-based system or a more advanced machine learning model. In our rules-based example of mitigating payments to questionable addresses, it is easy to conceive of an automated solution that continuously monitors the payment ledger for such disbursements and then flags and routes them to the appropriate people.

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With internal teams, companies conduct background investigations and reference checks, then build relationships over years of working together. Organizations need something a bit more formal to demonstrate measures are being taken to protect themselves and each other in the supply chain. It is critical for businesses to have third-party certifications and attestations like Service Organization Controls 2 (SOC 2) or SOC 2 for Supply Chain, certifications like ISO 27001, or industry specific certifications in healthcare, credit card processing and others. In order to show due care in selecting vendors, service providers and business partners need a repeatable process that shows relevant risks have been considered. It is expected that in the next few years due care will be emphasized repeatedly in lawsuits after major breaches are revealed – and those that failed to show due care will be penalized heavily. Prepared organizations will have informal, repeatable, processes to evaluate new third parties and initial agreements are put in place.

Vigilant organizations will develop vendor risk management programs based on the risk involved to evaluate new relationships, periodically address existing relationships and contingency plans for when a third party has some kind of security incident. In Conclusion The next decade will bring fascinating technology advancements, process improvements and an abundance of new ways for criminals to steal individuals’ money and information. The first step in preparing for these changes is to develop the ongoing processes needed for periodic updates, changes and improvements. Making frequent small changes is far easier and less costly than waiting for a major incident and then expending too many resources to recover from the incident. Take the time now and put the basic practices in place so you are at least a prepared organization. Then decide if your organization could really thrive by implementing the changes to become a vigilant organization.

CYBER SECURITY SERVICES GROUP

With the emergence of the cloud and growing engagement through mobile and social networks, IT and business processes need to adapt in order to meet new compliance requirements and general best practices. RubinBrown has a dedicated team specializing in cyber security services designed to meet each client’s requirements. For more information, visit www.RubinBrown.com/Cyber

Rob Rudloff, CISSP-ISSMP Partner Cyber Security Services Group 303.952.1220 rob.rudloff@rubinbrown.com

Audrey Katcher, CPA, CISA, CITP Partner Cyber Security Services Group 314.290.3420 audrey.katcher@rubinbrown.com

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2019 Ethics Seminar

Featuring ANDREW FASTOW former CFO at ENRON

FULFILLS THE 2-HOUR ETHICS CPE REQUIREMENT

Denver October 24, 2019 Wellshire Event Center

ANDREW FASTOW was the Chief Financial Officer of Enron from 1998 to 2001. In 2004, he pled guilty to two counts of securities fraud, and was sentenced to six years in federal prison. Fastow completed his sentence in 2011. Despite today’s more rigorous regulations, there continues to be “Enron-esque” failures of corporate governance and compliance. Enron’s former CFO will make observations about how the ambiguity and complexity of laws and regulations breeds opportunity for problematic decisions and will discuss what questions corporate directors, management, attorneys, fraud examiners and auditors should ask, in order to ensure that their companies not only follow the rules, but uphold the principles behind them. He will also discuss ways in which technology can be deployed to illuminate such problematic situations.

Kansas City October 29, 2019 1900 Building Las Vegas October 23, 2019 Bali Hai

St. Louis October 30, 2018 Saint Louis Art Museum

Registration will open in August. For more information, visit: www.RubinBrown.com/Ethics

INDUSTRY UPDATE CONSTRUCTION

Next Decade Trends in Construction by Tim McCarthy, CPA

S everal industries have seen advancements in information technology cause massive disruptions to industry segments over the past years. In many cases, smaller companies that invested in technology and were innovative surpassed larger competing companies that were glorified as industry leaders.

corporate revenue spent on IT, 1%, of all of the 19 industry groups surveyed.”

The use of technology provides a good opportunity for construction companies that want to gain a leg-up on their competition by becoming safer, more efficient and more effective in the execution of their work. With the efficiencies gained, this could potentially lead to margin expansion on contracts and an increased job capacity over time. For construction companies, margin expansion is either dictated by an increase in revenue on a job, a reduction in cost on the job or both. From a revenue perspective, the economic environment of the marketplace and the individual needs of the owners

Within the construction industry, most companies are still reluctant to invest in technology to aid in the construction process.

In a 2014 IT Key Metrics benchmarking survey performed by Gartner Benchmark Analytics, “the construction materials and resources industry group had the lowest percentage of

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for whom the work is performed drive the amount of revenue earned on a contract. Networking, reputation and key contacts within a market lead to additional work. For contractors willing to invest in technology, a reputational competitive advantage may be obtained within the marketplace that often times will lead to better and more frequent opportunities. However, once a company obtains a signed contract/change order, the key to success (assuming an appropriate initial bid) is a company’s ability to manage its costs appropriately through good execution, as the revenues are essentially fixed based on the terms of the contract. Costs on construction jobs can essentially be broken into four categories: Technology advancements can assist with staff time, material/equipment/subcractors and overhead, but the biggest area of focus with the use of technology should be in avoiding preventable mistakes. Preventable mistakes can consist of building things to the wrong specifications requiring re-work and leading to additional staff time, material/equipment costs, overhead costs and also liquidated damages on a job. Not to mention, a hit to a company’s reputation for not getting work done on time. Other preventable mistakes consist of employee injuries that result in workers’ compensation claims and a hit to a company’s safety record, which can affect a company’s ability to bid and obtain future work. Preventable mistakes pose the biggest threat to a contractor’s bottom line. When a particular job becomes unprofitable, ∙ Staff time ∙ Material/equipment/subcontractor ∙ Overhead ∙ Expenses incurred due to preventable mistakes

ViewPoints Construction Services Blog View the latest construction industry topics and news by visiting www.RubinBrown.com/ViewPointsBlog

preventable mistakes are often the reason for the poor performance. Many construction companies have experienced record years and tremendous growth since the recession years ago. However, some construction owners have a healthy fear of tumultuous times ahead, as it is not forgotten what a downturn in the economy can do to a business. The following are some cost saving and efficiency ideas and other ways a reasonable technology spend can be used to help companies. Accounting Software & Data Analytics Accounting software for contractors continues to improve by providing greater access to underlying data and providing more user-friendly reports. Management teams are able to analyze the performance of jobs/business in a much more timely and efficient manner than ever before. Data analytics are expected to advance towards real time information as accounting software continues to improve. Job Site Layout Job site layout can have a significant impact on labor productivity. Things as simple as placement of the master toolbox, workstations and restrooms can have a significant impact on labor costs over the course of time. Try to place these items in a relatively close, central location where employees do not have to walk significant distances each time they venture from their work area for the day. This could reduce down time and result in jobs being completed more timely.

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Many construction companies are utilizing technology for their crews to clock in/out, which has helped in tracking labor expense to appropriate jobs. In some cases, it has also helped companies better manage their crews to ensure timeliness and punctuality. Smart Tools & Tool Management Several tool manufacturers offer smart tools that allow contractors to track the location and even lock or disable the use of the tool remotely once it is outside of the assigned job location. This can all be done with the tool manufacturer’s smartphone application. The use of this technology could significantly reduce equipment costs due to lost or stolen tools. It would also deter job site employees from borrowing tools for personal use and decrease in the remaining useful life of the tools due to extended unauthorized use. Deviation Analysis There are now quality control tools that are available that can compare your project as built (in real time) against your design model. If there are deviations in the specifications or alignment, the tool can catch these mistakes early in the process in order to avoid significant rework. Geometric deviations early on in a project can be compounded later and lead to significant cost overruns. Building Information Modeling Building Information Modeling (BIM) is a digital 3D model-based process that allows architects, engineers and contractors (AEC) to collaborate on projects. BIM connects AEC professionals so they can effectively and efficiently design, build and operate buildings and infrastructure. Project owners have found that the use of BIM has led to greater cost predictability, improved completion schedules and fewer errors that require rework. BIM is a great tool to avoid preventable mistakes.

“For every dollar spent on prefab, approximately 13 % of the investment is expected to be returned as a quantifiable benefit to the project.”

Prefabrication Prefabrication allows for certain building elements to be constructed off-site, that would normally not be completed until later in the project schedule. The prefabricated elements are then installed on-site as larger components during the time that they typically would be constructed on-site with traditional construction methods. As a result of prefabricating the elements offsite, the timeline for completion is moved up, reducing the risk of missing target deadlines and incurring additional labor costs. Based on a study performed by Mortensen, “For every dollar spent on prefab, approximately 13% of the investment is expected to be returned as a quantifiable benefit to the project.” Depending on the type of project, there are significant opportunities for construction management teams to consider the use of prefabrication in order to reduce labor costs and material waste. GPS Tracking & Remote Clock-in/out GPS tracking can be used to help monitor construction equipment, which is typically the largest capital investment for most construction companies. GPS tracking can now provide real-time equipment location, state of equipment operation and engine diagnostics. This allows management teams to effectively and efficiently monitor the construction equipment, maximize use and reduce the risk of theft.

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Virtual Reality & Augmented Reality Virtual reality (VR) and augmented reality (AR) can be used in conjunction with BIM. The main benefit of VR, is to provide virtual walkthroughs to clients or targets in order to showcase their plans and get input before construction begins. While VR is common in the design phase, AR is common in the construction phase. The main benefit of AR is to overlap design details to already existing features in order to

see how the next phase of the construction plan fits with what has already been constructed to date. VR and AR are both great tools that will likely pay for themselves over time by avoiding preventable mistakes.

Drones Drones can be used to quickly and effectively map/survey a construction site to

Utilizing Drones in Construction Many companies have taken to the sky to reduce costs and manage their job sites remotely. They can now check in on field operations in real time to view the progress at the job site and share the progress with their clients.

Reduce costs and increase efficiency by utilizing drones for:

∙ Land surveying: Gives you great overview of the property and the surrounding areas which decreases the costs of surveying and helps contractors in estimating jobs. You can view and consider any challenges or savings your estimators can incorporate into the bid based on the information obtained. ∙ Inspection costs: Efficiencies gained on inspections as the drone can reach hard-to- get-to areas quickly. This can save time for your workforce and result in cost savings. ∙ Monitoring: Assists in monitoring workers on job sites especially pertaining to safety protocol and how hard people are or are not working. Additionally, enables multi- job site monitoring in real time. ∙ Savings on insurance: Some insurance companies offer a discount if you utilize drones to monitor your job site. ∙ Adding photos and videos to your sales group. Many people are visual and this can separate your company’s proposal from the other bidders coming to the table. ∙ Providing client updates and support for completion estimates. This provides a visual look at the project during development and billing process. You will need to take time to do the analysis to determine whether to use internal or external drone operators. Some items you should consider are the upfront costs of the equipment (hardware and software) and liability and control. Either direction will provide an additional tool for your business to utilize with immediate benefits managing job sites. Promote your business and keep existing clients informed by:

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ensure that a job is being constructed to the proper specifications, as well as analyze the progress of a project. By using drones, construction companies are able to get the job done faster than with traditional methods which reduces the amount of time in the field and in turn the amount of labor hours incurred. Robots As a shortage of skilled labor continues in the construction industry, robots may become more common, albeit current use is fairly limited. As breakthroughs in robotics technology continue and full automation of tasks becomes possible, the application of robots in the construction industry will grow as well.

In the not too distant future, robotics could help fill the skilled labor gap and allow projects to be completed in a faster and safer manner, all while reducing job costs over time. Construction management teams should consider the proper application of technology and data analytics and weigh the cost of implementing the new initiatives versus the overall benefit. Some of the ideas may provide more savings than others to various contractors. However, management teams need to be considering these items in order to stay ahead of their competition and try to improve their bottom line.

CONSTRUCTION SERVICES GROUP

RubinBrown provides services to general contractors, specialty subcontractors and related companies in the construction industry. For more information, visit www.RubinBrown.com/Construction .

Ken Van Bree, CPA, CGMA Partner-In-Charge Construction Services Group 314.290.3429 ken.van.bree@rubinbrown.com

Mark Jansen, CPA, CGMA Partner Construction Services Group 314.290.3208 mark.jansen@rubinbrown.com

Matt Beerbower, CPA Partner Construction Services Group 303.952.1252 matt.beerbower@rubinbrown.com

Tim McCarhy, CPA Manager Construction Services Group 314.290.3473 tim.mccarthy@rubinbrown.com

Chris Coleman, CPA, CCIFP Partner Construction Services Group 314.290.3263 chris.coleman@rubinbrown.com

Next Decade Trends in Construction

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INDUSTRY UPDATE HEALTHCARE

Healthcare Industry Adapts to Reduce Costs & Provide Quality Care by Tom Zetlmeisl, CPA, CFE, CFF, CGMA & Zach Goers, CPA

L ooking ahead to the next decade in healthcare, one thing is certain – it will be a decade of change. There have been fundamental shifts in how healthcare is delivered in the United States with new care delivery models and patients demanding (and receiving), more transparency with respect to the cost of care. There is a tension between reducing costs and providing quality services to patients. This trend towards value-based care has been a particular point of emphasis for the industry since the passing of the Affordable Care Act in 2010.

Increased Patient Care Options There has been a significant increase in the number of outpatient providers delivering care in the U.S. Broadly speaking, these ambulatory care providers include numerous types of out- patient care facilities, including but not limited to urgent care, retail clinics, specialty care clinics, work-based provider clinics and even telehealth providers. Each of these care settings allow patients to receive the treatment they need, when they need it and at a location convenient to them.

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Innovation & Use of Technology Today, healthcare companies are

These options generally are less expensive for patients as they can avoid the cost of an inpatient stay. The advent of telehealth now gives patients the option to speak with a doctor from the comfort of their own homes. By simply communicating through a phone call and video messaging, the patient can speak with a doctor about treatment options. Work-based provider clinics are quickly becoming popular in the United States as well. According to a survey report published by Mercer in 2018, one-third of employers with 5,000+ employees offered on-site healthcare clinics to employees in 2017, while 16% of companies with employees up to 5,000 offered the same services. A decade ago, only 17% of employers with 5,000+ employees and 14% of all other employers offered the same services. Most notably in 2018, Amazon announced its plans to begin providing employees with an employer-based healthcare clinic at its Seattle headquarters. Amazon has even taken it a step further and has entered into a joint venture agreement with Berkshire Hathaway and JPMorgan Chase & Company to create an independent company to provide less expensive healthcare services for each of the companies’ employees.

finding new ways to incorporate innovative technology into the services they provide to make them more patient focused and cost effective. Two of the new modern technological developments healthcare companies are using to accomplish this are the use of 3-dimensional (3D) printing and extensive data analytics. 3D printing has revolutionized the healthcare industry by producing prosthetic limbs more cost effectively, allowing doctors to create replicas of patient’s internal organs when preparing for operations and has opened up opportunities to provide patients more efficient ways to receive treatments and medications. Healthcare providers have also begun to integrate extensive data analytics into their practices through both descriptive and predictive analytics. Descriptive analytics help doctors use data collected for either an individual patient or a population of people to provide more accurate diagnoses and treatment options. Predictive analytics help doctors recognize future patient ailments, such as chronic diseases before the patient displays symptoms.

20 Healthcare Industry Adapts to Reduce Costs & Provide Quality Care

The use of both descriptive and predictive analytics allow doctors to search for more effective treatment plans for their patients that will not only cure or contain a patient’s ailment, but will also save the healthcare provider time and money that would have been wasted on the additional time spent searching for a viable treatment. Over the next decade, there will be great change in healthcare with providers and payors innovating to provide better care at reduced cost. There is no easy way for providers to accomplish this, however it is clear that to achieve this goal, it will be critical to continue addressing the shift in patient care preferences and also to maximize use of existing and emerging technologies.

healthcare companies are finding new ways to incorporate innovative technology into the services they provide to make them more patient focused and cost effective

HEALTHCARE SERVICES GROUP

RubinBrown’s Healthcare Services Group provides a broad array of services to a diverse group of clients in the healthcare industry including hospitals, physician practices, multi-site medical groups and not-for-profit health organizations. For more information, visit www.RubinBrown.com/Healthcare .

Tom Zetlmeisl, CPA, CFE, CFF, CGMA Partner-In-Charge Healthcare Services Group 314.290.3395 thomas.zetlmeisl@rubinbrown.com

Eric Westby, CPA, CGMA Partner Healthcare Services Group 314.290.3339 eric.westby@rubinbrown.com

Kristin Bettorf, CPA Partner Healthcare Services Group 314.290.3416 kristin.bettorf@rubinbrown.com

Zach Goers, CPA Business Advisory Consultant Healthcare Services Group 314.678.3555 zach.goers@rubinbrown.com

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INDUSTRY UPDATE NOT-FOR-PROFIT

A Sunny Forecast for Not-For-Profits by Amy Altholz, CPA, CGMA

F orecasting the future is difficult. There’s no doubt that the need for essential services provided by not-for-profit organizations will continue to grow as will the corresponding challenge of securing the necessary funding to meet these needs. However, how organizations overcome fundraising challenges may look dramatically different in the next decade. Some of the more significant changes are anticipated in the area of fundraising as organizations react to the ever-changing giving environment and donor bases. The following are some changes one might expect to see in the not-for-profit industry in the next decade.

Fundraising strategies may look different in the future. In recent years, there has been a continued rise in organizations’ use of social media and online giving. Although organizations continue to acknowledge that face-to-face interaction is the most valuable and effective way to build long-term relationships, this has historically been reserved for major gift efforts due to the necessary time and effort. In the future, not-for-profits may increasingly use new technologies to identify prospects for giving at various gift levels and then use that data to more efficiently drive face-to- face visits and increases in donor support.

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Not-for-profits will proactively, versus reactively, embrace innovative fundraising ideas. Building on the success of previous viral campaigns such as the ALS’s Ice Bucket Challenge and the significant rise in Go Fund Me campaigns after recent national disasters, not-for-profit organizations will become better at leveraging media awareness to proactively respond to newsworthy events in a manner that maximizes the organization’s impact. Competition will now exist from “short-term” organizations that are created, and then disbanded, after addressing a specific community need or challenge. As donors, particularly younger donors, become increasingly motivated to see results and want to donate to “fix” a perceived need, the traditional legacy model of not-for-profit organizations may not be as sustainable without modifications in how the organization approaches its fundraising efforts. Recurring giving and the means to effectively facilitate these programs, will be crucial. This can be achieved through the use of donor- advised funds or community foundations or internally through well-developed and well- managed programs. Modern philanthropists are increasingly attracted to the concept of managing their charitable giving as they would manage their investment portfolio – strategically, portfolio-based and with the aid of an advisor. Advancements in technology will allow organizations to send even more targeted, personalized messages and marketing to potential donors. With the introduction of new search features, artificial intelligence and voice capabilities, organizations will have the ability to make data-driven, tailored solicitations to prospective donors. These new technologies could also assist organizations in identifying and reaching individuals that could benefit from the services offered by the organization.

Fundraising events may no longer be just the traditional galas, golf tournaments and trivia nights. Not-for-profit organizations have already begun to take advantage of tools like Facebook and Google Ads to promote events to targeted audiences, but this more global medium may allow organizations to expand their reach regionally, nationally and potentially internationally to allow for potentially more profitable, less expensive “virtual” events. Not-for-profit organizations will see increased volunteerism from both Gen Z as well as the now retired Baby Boomers. In the future, “giving back” to the community will continue to mean more than just writing a check. Not-for-profit organizations will benefit from more expansive volunteer programs that allow them to capitalize on the energy and expertise of community members. Large gifts will continue to be of high importance to not-for-profit organizations. Organizations’ development teams will continue to devote time and efforts to

secure these larger gifts, whether for annual giving or for endowment and capital campaigns. Planned giving programs will also be of continued importance and emphasis.

Transparency and impact will remain paramount and not-for-profit organizations will invest increased resources to articulate the measurable outcomes achieved by their great programs to their funders – whether private donors, corporations, foundations or government agencies.

In the future, “giving back” to the community will continue to mean more than just writing a check.

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