Category: News

Alexander Thompson Arnold CPAs Announces Team Member Achievements

AICPA Governmental Audit Quality Center Summary of OMB Proposed Guidance

Released January 31, 2013

The federal government spends more than $600 billion annually in the form of grants and cooperative agreements. The U.S. Office of Management and Budget (OMB) and the federal agencies have been talking for some time about how grant policies can be reformed to increase the efficiency and effectiveness of federal programs, as well as to eliminate unnecessary and duplicative requirements and focus in on areas that emphasize achieving better outcomes at a lower cost. OMB’s issuance of the Proposed Guidance is the culmination of the information gathering process that began when OMB issued the Advance Notice on this topic area in early 2012.

The Proposed Guidance document is over 200 pages long and the GAQC will be analyzing it in much greater detail over the next several weeks. In the meantime, the following describes some of the key areas of change covered in the Proposed Guidance:

Single Audit Threshold for Audit Proposed to Increase to $750,000. Entities that expend less than $750,000 in federal awards would not be required to undergo a single audit. This would represent an increase from the current $500,000 threshold for single audits which was established in 2003. The Proposed Guidance states that any entity that falls below the $750,000 threshold must make records available for review or audit by appropriate officials of the Federal agency, pass-through entity, and the Government Accountability Office.

Changes to teh Major Program Determination Process – Type A/B Threshold. The OMB is proposing to “tinker” with several key provisions of the major program determination process. For example, the minimum threshold for the Type A/B program determination would be revised from $300,000 to $500,000.

Changes to the Major Program Determination Process – High-Risk Type A Programs. The criteria for Type A programs to qualify as high-risk are being revised such that for a Type A program to be designated as high-risk it must have, in the most recent period, failed to receive an unqualified opinion; had a material weakness in internal control; or had questioned costs exceeding five percent of the program’s expenditures.

Changes to the Major Program Determination Process – Type B Programs. The criteria for Type A programs to qualify as high-risk are being revised such that for a Type A program to be designated as high-risk it must have, in the most recent period, failed to receive an unqualified opinion; had a material weakness in internal control; or had questioned costs exceeding five percent of the program’s expenditures.

Percentage of Coverage Changes. The percentage of coverage required in a single audit is proposed to be reduced from the current 50% (normal) and 25% (low-risk auditees) to 40% (normal) and 20% (low-risk auditees).

Criteria for Low-Risk Auditee Status. The criteria for low-risk auditee status has been revised. For example, it would now more clearly include data collection form submission within required timeframes as a criteria and adds a criteria that the auditor did not report a substantial doubt about the auditee’s ability to continue as a going concern. It also removes the previous options for waivers in this area.

Reduction in Types of Compliance Requirements to be Tested. The Federal Register notice indicates that OMB is also proposing that the number of types of compliance requirements to be tested in a single audit be reduced from the current 14 types of compliance requirements to 6 types of compliance requirements. Those requirements include: (1) Activities Allowed or Unallowed and Allowable Costs/Costs Principles (the Proposed Guidance does note that this requirement could include some testing of Period of Availability and Matching); (2) Cash Management; (3) Eligibility; (4) Reporting; (5) Subrecipient Monitoring; and (6) Special Tests & Provisions. The proposal would permit the federal agencies to request that certain of the deleted types of compliance requirements be added to the Special Tests & Provisions requirement for programs where they could be considered essential to the oversight of the program. The Federal Register notice states that this change is not reflected in the draft proposal but would be implemented through the first OMB Compliance Supplement to be issued after the proposed change becomes final.

Findings.More detail will be required to be reported in auditor findings. However, the questioned cost threshold for reporting will be increased from $10,000 to $25,000.

Streamlining of Related Circulars and Guidance. The proposal streamlines eight existing OMB Circulars into one document including Circular A-133 and the various Cost Principles. Additionally, the Proposed Guidance would consolidate the cost principles into a single document with limited variations by type of entity. OMB states that the Proposed Guidance will supersede the following OMB Circulars:

• A-21, Cost Principles for Educational Institutions
• A-87, Cost Principles for State, Local, and Indian Tribal Governments
• A-89, Federal Domestic Assistance Program Information
• A-102, Awards and Cooperative Agreements with State and Local Governments
• A-110, Uniform Administrative Requirements for Awards and Other Agreements with Institutions of Higher Education, Hospitals and Other Nonprofit Organizations
• A-122, Cost Principles for Non-Profit Organizations
• A-133, Audits of States, Local Governments and Non-Profit Organizations
• It will also supersede those sections of A-50, Audit Follow-Up, related to Single Audits

Indirect Costs and Time and Effort Reporting. A number of changes are being proposed in these complex areas that the GAQC will be analyzing over the upcoming weeks to determine any impact on auditors performing single audits.

Administrative Requirements. A number of changes are being proposed in this area as well. The GAQC will be analyzing this area within the Proposed Guidance over the upcoming weeks to determine any impact on auditors performing single audits.

The ATA Team will keep you informed as more information is available on this Proposed Guidance. If you have questions, please let us know.

Phillip Creswell Named Partner with Alexander Thompson Arnold CPAs

IRS Announces 2013 Mileage Rates

On November 21, 2012, the IRS announced the standard mileage rates for 2013. Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on January 1, 2013, the standard mileage rates are:

• For business use of an automobile increases to 56 1/2 cents per mile.
• For medical or moving expenses, it is 24 cents per mile.
• For services to charitable organizations, the rate is 14 cents per mile.

Instead of using the standard mileage rates, taxpayers can use their actual costs but must maintain adequate records and be able to substantiate their expenses.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

Please let us know if you have any questions.

Stephen Eldridge Appointed to the Tennessee State Board of Accountancy

Tennessee Governor Bill Haslam has appointed Stephen Eldridge, CPA, CISA, CITP, CGEIT, CRISC, to a three-year term as a member of the Tennessee State Board of Accountancy. Eldridge is a partner at Alexander Thompson Arnold CPAs.

The Tennessee State Board of Accountancy is part of the Department of Commerce and Insurance, which works to protect consumers while ensuring fair competition for industries and professionals who do business in Tennessee.

As a partner with ATA, Eldridge provides tax, accounting and auditing services with a special focus on healthcare, utility systems and the effectiveness of information systems. He has performed more than 60 SSAE 16/SAS 70 engagements throughout the Southeast and has earned the industry%u2019s highest certifications. To serve his clients better, he is active with the American Institute of Certified Public Accounts and the Tennessee Society of Certified Public Accountants, which includes serving on the TSCPA%u2019s legislative committee, as the past president, vice-president and secretary/treasurer of the West Tennessee chapter, and on the Educational Memorial Foundation.

A graduate of the Union University, Eldridge is dedicated to making a difference in his community. He currently serves on the Youth Town of Tennessee Board of Directors, Union University%u2019s McAfee School of Business Administration Advisory Board, Youth Life Board of Directors, First Tennessee Bank Advisory Board and the City of Jackson Industrial Development Board. He is also a graduate of Leadership Jackson, a Paul Harris Fellow and a past board member for the Jackson Rotary Club. He and his wife Lolly have two daughters and are members of Fellowship Bible Church in Jackson.

Alexander Thompson Arnold PLLC is a regional accounting firm that offers its clients the resources and expertise of a large firm and the personalized service of a small firm. The firm has 15 partners and approximately 130 staff members and offers a complete range of accounting, auditing, tax, and consulting services to a diverse portfolio of clients. Its offices are located in Dyersburg, Henderson, Jackson, Martin, McKenzie, Milan, Paris, Trenton and Union City, Tennessee and Murray, Kentucky. Each office reflects the community it serves and gives exceptional personal attention to its clients.

HEALTHCARE COST REPORTING REQUIRED ON W-2S

Beginning with the W-2s issued in January 2013 (i.e., W-2s issued for the 2012 calendar year), large employers must report to employees the cost of their employer-sponsored group health plan coverage on the employee’s W-2 in box 12. This reporting to the IRS is for informational purposes only and is intended to communicate the cost of health care coverage to employees.

This new requirement applies to all employers who issue 250 or more W-2s and who provide applicable employer-sponsored health plan coverage during the calendar year. This includes private sector employers, federal, state and local governmental entities, churches and other religious organizations. Employers who currently issue fewer than 250 W-2s should not be surprised if that number is lowered in the future.

If this applies to your business, you will probably have questions about reporting this properly. The team at ATA is more than happy to answer your questions and help you navigate this new requirement. Call us at any time.

South Carolina Taxpayer Info Hacked

So you can take steps to protect yourself and your business, you need to know that the South Carolina Department of Revenue computer systems have been hacked.  The hacker stole information including 3.6 million. Social Security numbers and nearly 400,000 credit and debit card numbers. Investigators are still trying to determine what other information might have been stolen and from what types of returns. Officials said they have beefed up data security and are continuing an investigation.

South Carolina is offering free credit monitoring and identity protection to all affected taxpayers. Anyone who filed a South Carolina tax return since 1998 can call 1-866-578-5422 to learn whether they are affected and, if so, enroll in the protection. On the web, taxpayers can go to protectmyid.com/scdor and use the authorization code scdor123. The service includes a free credit report; daily monitoring of all three major credit bureaus, with alerts of any suspicious activity; and $1 million in insurance against identity theft.

Click here to read the SCDOR press release about the cyber attack.

Identity Theft Information Links

Identity Theft Resource Center, Nonprofit Organization

Federal Trade Commission Identity Theft Web Site

Tennessee Department of Revenue Announces New Filing and Payment Requirements

The Tennessee Department of Revenue recently announced new filing and payment requirements that may effect you and your business.

The following requirements begin on January 1, 2013:

• For the purposes of Tennessee corporate income tax,all returns that are prepared using computer software must be filed electronically. We gladly provide this electronic filing service for you.
• The Department of Revenue is lowering the sales tax electronic filing threshold to $500. All sales tax taxpayers with an average tax liability of $500 or more must file their sales and use tax returns electronically. Again, we will file it for you.
• All related tax and estimated tax payments must be made by electronic funds transfer (EFT). Ideally, this should be set up in advance. We can set the EFT up for you; if you need help setting this up, please call us at your earliest convenience.

These new requirements will permit the State to process returns and payments in a more timely and efficient fashion at a cost savings to the state. If you have questions or need more information, please call us. We would be happy to talk with you at any time.