Fiduciary Responsibilities of the Nonprofit Board of Directors

The term fiduciary refers to a relationship in which one person has a responsibility of care for the assets or rights of another person. In a nonprofit organization the board of directors has this kind of responsibility for the assets of that organization. Nonprofit boards must make decisions on a regular basis that directly affect the organization’s key stakeholders, including donors, program participants/beneficiaries and the public.

The fiduciary responsibilities of a nonprofit’s board members include:

• Acting in the interest of the organization rather than in the interest of board members.
• Providing oversight to assure that the organization’s business is transacted legally.
• Making decisions to protect the assets of the nonprofit organization.

When it comes to nonprofit board responsibilities, as they relate to accounting issues, board members must ensure that they understand the facts and circumstances of major transactions, as well as the overall financial health of the organization. This is best accomplished if board members are actively engaged in the governance process. Board engagement involves participating in meetings with the organization’s CFO or controller and maintaining frequent communication with the organization’s management. Board members must be vigilant by asking targeted questions that are aimed at understanding the facts and circumstances surrounding a particular transaction or financial issue. This ensures that the transactions are properly reflected in the financial statements, and that related or conflicted parties do not receive any excess benefit.

Nonprofit board membership is about balancing a number of different roles and responsibilities. The most effective board members simultaneously apply financial measures and business judgment to all major decisions.

Sales Tax Exemption for Certain Energy Used in Processing/Agriculture

Certain types of energy used directly in processing/agriculture qualify for an Iowa sales tax exemption. In order to claim a sales tax refund, you can submit The IA 843 Claim for Refund annually to obtain a refund of tax already paid on these exempt purchases. Alternatively, and more efficiently, you can choose to claim a sales tax exemption at the time of purchase and eliminate the need to file a claim for refund later. The Iowa Department of Revenue urges you to explore the exemption certificate option. Please feel free to contact us with any questions.

To claim exemption at the time of purchase, simply complete the Iowa Sales Tax Exemption Certificate for Energy Used in Processing/Agriculture (Form 31-113) and give it to your supplier. You will need to supply your utility company with an updated form and documentation showing how the energy is used at least every three years.

When filling out the exemption certificate for your utility company, you will need to show what percent of your total energy consumption is for exempt purposes. Ideally, you would have separate meters for production and non-production use in order to determine the exempt and nonexempt energy percentages. If it is not practical or you do not have production and non-production uses metered separately, you will need to determine the percentage of total energy used for exempt purposes. Form 31-113 can assist you in determining this.

Additional guidance on determining exempt and nonexempt percentages can be found in the following publications: Iowa Sales and Use Tax on Manufacturing and Processing (78-530); Iowa Sales Tax on Food (78-516); Farmers Guide to Iowa Taxes (78-507). Your utility company may also be able to provide assistance, or you may seek the help of an energy consultant.

For further assistance, please contact one of the agribusiness specialists at Bergan Paulsen.

Get To Know MORE About Brian Coller

Brian Coller, Assurance Partner  | bcoller@berganpauslen.com | LinkedIn  

Bergan Paulsen Assurance Partner, Brian Coller, was recently honored to be recognized by the Corridor Business Journal as one of the 40 of the Corridor’s outstanding leaders under the age of 40.  We spent 15 minutes with him to pick his brain on leadership, family and the importance of communication skills!

1.  What are some of the more important leadership lessons you’ve learned in your career?
I believe it is extremely important to lead by example.  In order to lead effectively your actions must align with your words or your words become meaningless. 

2.  Why accounting?  What brought you to this career and what do you like most about it?
Accounting was a subject I enjoyed in high school and excelled at.  As I explored it further I knew it could provide me a great base for a career in business.  Ironically, what I like most about the career today isn’t the numbers, it’s the people!  Even though our profession is very numbers-driven, the true focus is how those numbers can be used to help people succeed.

3.  Why BP?  What differentiates this firm for you?
When I interviewed with BP, I liked the approach the partners took towards client service.  The focus always has been, and continues to be, on providing service that is in the best interest of our clients.  We are driven by what will help them achieve their goals both in the near and long term. 

The culture at BP is focused on taking the time to understand our clients and what they want to accomplish.   And, I believe, we have the best people available to help them meet those goals!

4.  What do you look for when you hire?
Communication skills and the ability to relate to clients are the most important things I look for.  Sometimes these are skills that people don’t relate to accountants, but they are critical to success in our business.

5.  How would you summarize your leadership philosophy?
I believe in setting the example, and then providing expectations and support without micromanaging.

6.  What advice would you give someone getting out of school right now?
Be prepared to work hard and ask a lot of questions.  I believe the learning process never ends and if you commit to continued learning, you will be successful!  

Transportation Companies and Today's Economy

Uncertainty should not be used as an excuse not to plan.  Company management must still develop short-term and long-term strategic plans for their business.  These plans may need to be revised as events unfold, but having an initial structure in place to work off of is critical.  Opportunities exist during an economic slow-down to emerge better positioned and stronger than the competition.

Some things for transportation to consider when developing strategic plans include:

1.  Focus on the balance sheet

• Set benchmarks and financial goals to improve key financial ratios and measurements such as Debt to Equity and Working Capital.
• Manage accounts receivables – immediately address any billing or collection issues.
• Incorporate the capital expenditures budget into your balance sheet model.

2.  Keep fixed costs in check

• Prepare a budget and monitor regularly.
• Determine that no variable costs are buried in with fixed costs.
• Be prepared to take quick action to reduce and keep costs in line with revenue.

3.  Monitor variable costs  

• Address any fluctuations in cost per mile.
• Drill down cost per mile into manageable segments; labor, equipment, fuel, etc.

4.  Driver retention

• Outlook in to early 2013 indicate the driver shortage will remain near the 100k level.  HOS pressures come into play during 2013 and could push the shortage near 250k by the end of the year (source: www.TruckGauge.com).
• Assess driver recruitment, retention, and compensation policies.

5.  Keep succession in mind

• Identify key employees and individuals being developed to fill those key positions.
• Identify merger or acquisition opportunities.

6.  Review internal controls

• Ensure proper checks and balances are in place in the office and field to safeguard cash and other company assets.

For more information or to discuss strategic planning for your business, contact Bergan Paulsen.

Social Security Announces 1.7 Percent Benefit Increase for 2013

The Social Security Administration announced today that monthly benefits for 62 million Americans will increase 1.7 percent in 2013.

The 1.7 percent cost-of-living adjustment (COLA) will begin in January 2013 with benefits that more than 56 million Social Security beneficiaries receive.  Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2012.

Some other changes that take effect in January of each year are based on the increase in average wages.  Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $113,700 from $110,100.  Of the estimated 163 million workers who will pay Social Security taxes in 2013, nearly 10 million will pay higher taxes as a result of the increase in the taxable maximum.

To read the full press release, click here.

Other important 2013 Social Security information follow:

Tax Rate:	2012	2013
Employee	7.65%*	7.65%
Self-Employed	15.30%*	15.30%
NOTE:  The 7.65% tax rate is the combined rate for Social Security and Medicare.  The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below).  The Medicare portion (HI) is 1.45% on all earnings.
* The Temporary Payroll Tax Cut Continuation Act of 2011 reduced the Social Security payroll tax rate by 2% on the portion of the tax paid by the worker through the end of February 2012.  The Middle Class Tax Relief and Job Creation Act of 2012 extended the reduction through the end of 2012.  Under current law, this temporary reduction expires at the end of December 2012.
Maximum Taxable Earnings:	2012	2013
Social Security (OASDI only)	$110,100	$113,700
Medicare (HI only)	No Limit
Quarter of Coverage:	2012	2013
Earnings needed to earn one Social Security Credit	$1,130	$1,160
Retirement Earnings Test Exempt Amounts:	2012	2013
Under full retirement age NOTE: One dollar in benefits will be withheld for every $2 in earnings above the limit.	$14,640/yr. ($1,220/mo.)	$15,120/yr. ($1,260/mo.)
The year an individual reaches full retirement age NOTE: Applies only to earnings for months prior to attaining full retirement age. One dollar in benefits will be withheld for every $3 in earnings above the limit. There is no limit on earnings beginning the month an individual attains full retirement age.	$38,880/yr. ($3,240/mo.)	$40,080/yr. ($3,340/mo.)
Social Security Disability Thresholds:	2012	2013
Substantial Gainful Activity (SGA)      Non-Blind      Blind	$1,010/mo. $1,690/mo.	$1,040/mo. $1,740/mo.
Trial Work Period (TWP)	$720/mo.	$750/mo.
Maximum Social Security Benefit: Worker Retiring at Full Retirement Age:	2012	2013
	$2,513/mo.	$2,533/mo.
SSI Federal Payment Standard:	2012	2013
Individual	$698/mo.	$710/mo.
Couple	$1,048/mo.	$1,066/mo.
SSI Resources Limits:	2012	2013
Individual	$2,000	$2,000
Couple	$3,000	$3,000
SSI Student Exclusion:	2012	2013
Monthly limit	$1,700	$1,730
Annual limit	$6,840	$6,960
Estimated Average Monthly Social Security Benefits Payable in January 2013:	Before 1.7% COLA	After 1.7% COLA
All Retired Workers	$1,240	$1,261
Aged Couple, Both Receiving Benefits	$2,014	$2,048
Widowed Mother and Two Children	$2,549	$2,592
Aged Widow(er) Alone	$1,194	$1,214
Disabled Worker, Spouse and One or More Children	$1,887	$1,919
All Disabled Workers	$1,113	$1,1

Event Highlights: Power of the Purse

Members of the Bergan Paulsen team attended Power of the Purse: A Financial Seminar for Women presented by the Women’s Philanthropy Council of the University of Northern Iowa and the University of Northern Iowa Foundation late last month.
  

The event was full of great information – including that shared by Partner, Heather Gunderson during the panel discussion – and we wanted to share it with you.  So, we asked our team to share one piece of information.

Erin Bockoven - I was “reminded” of the importance in finding financial professionals you are comfortable with, trust and feel like have your best interests in mind.  I know we (at Bergan Paulsen) do that, but it’s good to know that there are many professionals in other financial roles that also work toward that goal.

Heather Gunderson - I went to a great online banking class.  It was a good reminder of how to be safe when you are banking on the internet – starting with creating a password that is easy to remember but hard for hackers to figure out. 

Liz Koenigsfeld –  I was surprised to find out how little I knew about the different types of Life, Long Term Care, and Disability insurance policies and how they affect me and my future. The speaker was very knowledgeable and allowed us to ask any question that came to mind.  After this session, I feel empowered to find out more about how to take care of my loved ones (and help them take care of me) in the future. 

Liz Lloyd - I learned that I need a will - well someday if I have children, family, etc.  Since this event, I’ve added this to my 18-month-goal list.  To clarify – the will is an 18-month-goal, not the children!
Also, after attending Power of the Purse, I purchased a binder and went through all my important documents and organized them to be readily available if, heaven forbid, something should happen to me.

Becky Miller – A few things that resonated with me are:

• Being named an Executor of an Estate should be viewed as a “nomination.”  Any person named an executor in a will has the right to refuse to serve in that capacity.
• 22% of the US population does not have a will.

If you attended the event and have other additional comments to share, we’d love to hear them.  Additionally, free to contact any Bergan Paulsen member to discuss questions you might have.  Our CPAs have a wide network of professionals they can reach out to in order to connect you with the financial professional for your specific needs. 

Harvest Capital Gains in 2012 to Maximize Favorable Tax Rates

Traditionally, many investors look to harvest capital losses at the end of a year to offset capital gains, but 2012 may be an exception to this strategy. Unless Congress enacts new legislation, numerous tax increases will take place beginning in 2013.

The top two federal marginal tax rates are scheduled to increase from 33% and 35% to 36% and 39.6%, respectively. Additionally, the maximum long-term capital gains rate would increase from 15% to 20%. Further, some high-income investors may be subject to a 3.8% Medicare surcharge on unearned income due to a provision in the healthcare law. Short-term capital gains and other investment income could be subject to a combined tax rate of 43.4% in 2013.

One strategy for 2012 would be to accelerate income by realizing long-term capital gains. The income will be subject to a maximum federal capital gains tax rate of 15% in 2012. The same gain could be subject to a tax rate of 23.8% in 2013 if the Medicare surtax is included.

A simplified example illustrates the possible savings. Assume you sell a capital asset that you have held for five years and realize a gain of $50,000. The additional federal tax in 2012, as a result of the sale, is $7,500 (15% of the $50,000 gain). The same sale in 2013 could result in additional federal tax of $11,900 (20% capital gain and 3.8% Medicare surtax).

If you decide to realize some long-term gains in 2012 and new legislation is enacted to extend the lower tax rates, you may be able to realize other losses before year-end to offset the gains realized.

Every situation is unique, and we recommend discussing your personal needs with your advisors. If you would like to discuss what strategy is most appropriate for your situation, please contact Bergan Paulsen today.

The Revenue Cycle Pipeline

Physician reimbursement rates have been falling while the costs of running a practice continue to increase. Squeezed financially on several fronts, medical practitioners need to ensure they are not losing substantial amounts of revenue as a result of claims that are denied or underpaid. Many providers struggle to work through backlogs of aged and denied claims which often slows cash flow and causes increased Accounts Receivable (AR) days.  Partially paid, delayed or denied payments can significantly impact a practice’s bottom line.

Information and Communication
We understand that healthcare providers need meaningful metrics to address issues that may lie within their revenue cycle pipeline.  We recommend tracking and trending denials in order to understand where issues exist.  Are four or six common lab tests causing significantly more denials than others?  Once these issues are recognized, communicate with your staff what you’ve found and develop a plan for change.  Simple changes in process and workflow can often yield big results.

First Time’s the Charm
Insurers deny claims for a variety of reasons: invalid codes were entered on the claims form, the claims form lacked a signature, the patient information provided was incomplete or inaccurate, etc.  The good news is that many of these errors are caused by human-error and therefore can be prevented by proper training.

You can reduce coding errors through additional education on correct coding procedures.  Start by maintaining up-to-date coding reference materials, and consider holding regular coding education seminars for physicians and coding staff. Identify the most common coding errors (another item to track and trend!) in your practice and make every staff member aware of them. Finally, create a system in which every claim form is reviewed to ensure it has a signature and contains appropriate supporting documentation before it is submitted to insurers.

Appeal Denied Claims
It’s important to review every claim denial and not to be too quick in accepting an insurer’s denial or underpayment of your claims. Choose one trained member of your staff to run monthly collection reports and to audit all health insurer payments and denials to determine if reimbursements or adverse determinations are accurate. For every partially paid, delayed, or denied claim, have that staffer review the insurer’s reason(s) for its actions. Gather any documents that properly support your claim for full payment and immediately resubmit your claim. Maintaining a follow-up log can help you track your progress in securing the correct payments for your services and will help you identify which insurers are more likely (and which are least likely) to make the correct/more favorable reimbursements on appeal.

Within the revenue cycle, it has never been more critical to create meaningful data, develop efficient processes and review denied claims.  It is through these activities that healthcare leaders will be able to address the issues of the revenue cycle pipeline and to create a positive environment, both financially and operationally.

For more information, please contact a member of the Bergan Paulsen Healthcare team.

Tax Law Changes - Planning for 2012 & Beyond

As we approach the end of 2012, it is important to start thinking about year-end planning.  As we outlined in our another article, January 2013 will bring with it significant changes to current tax law as the “Bush tax cuts” expire and additional provisions from the Patient Protection and Affordable Care Act take effect.

Below we summarize changes, of particular interest to the construction and transportation industry: 

Income Tax Rates:

	Top Rates
	2012		2013
Ordinary Income	35%		39.6%
Long-Term Capital Gain	15%		20%
Qualified Dividends	15%		39.6%

   





Medicare surcharges:

• 3.8% surcharge on investment income (interest, dividends, capital gains, passive income, including partnerships and S-Corporations that a taxpayer doesn’t materially participate in).
• Applicable to taxpayers with adjusted gross income for 2013, exceeding $250,000 for married couples, and $200,000 for single individuals.
• The surcharge is over and above the top rates noted above, meaning the maximum tax rate for capital gains will be 23.8%, and for dividends will be 43.4%.
• 0.9% additional Medicare tax on compensation of more than $200,000 for an individual, or $250,000 for a married couple.  This tax is imposed on both wages and self-employment income.

Depreciation:

• Depreciation limits are scheduled to drop back significantly in 2013.  The Section 179 deduction limit is reduced from $139,000 in 2012 to $25,000; plus inflation adjustments for 2013.  Bonus depreciation, which allows for a 50% first year deduction for new equipment, will no longer be available for equipment placed in service January 1, 2013 and after.

The uncertainty as to whether there will be any legislative action to address the impending law changes makes tax planning for 2012 critical and more complex.  It is important to get an early review of your income tax situation in order to provide time to develop a strategy to minimize your tax exposure and prepare for the changes ahead.