Day: July 26, 2024

What Is Audit Readiness and Why Is It Important?

Audit readiness is crucial for all organizations, particularly for Public Housing Authorities (PHAs).

Essentially, it refers to the level of preparedness of an organization to engage in an audit process. This involves having all necessary documents and records organized, up-to-date, and easily accessible for auditors.

Owing to their responsibility of managing public funds and ensuring safe, decent, and affordable housing, PHAs are subject to stringent audits. Adequate audit readiness ensures that PHAs have accurate financial statements, comply with program requirements, and can demonstrate accountability and transparency in their operations.

The process of achieving audit readiness includes maintaining accurate financial records, implementing effective internal controls, and ensuring compliance with housing regulations and laws. Additionally, it involves regular internal audits, identifying potential areas of risk, and taking corrective actions. It also requires training staff on audit procedures and expectations to foster an audit-ready culture within the organization.

For a more detailed discussion on audit preparation, see Preparing for a Financial Audit: A Guide for PHAs.

However, if a PHA is not audit-ready, numerous problems can arise, which can significantly impact a PHA’s effectiveness and reputation. Below are some potential implications:

Financial Discrepancies: Without proper record-keeping and internal controls, financial discrepancies may arise. This includes misallocation of funds, inaccurate financial reporting, and potential fraud. These discrepancies can result in financial loss, legal implications, and loss of public trust.
Non-compliance: Audits for PHAs not only assess financial statements but also compliance with housing laws and regulations. Lack of audit readiness may reveal non-compliance with these laws, leading to penalties and possible loss of funding.
Operational Inefficiencies: Poor audit readiness often reflects internal operational inefficiencies. This can lead to mismanagement, poor decision-making, and the inability to achieve organizational objectives.
Damaged Reputation: A poor audit report can significantly damage a PHA’s reputation. This can result in a loss of public confidence and trust, making it harder for the authority to fulfill its mission.
Increased Audit Costs: Not being prepared for an audit can lead to delays and prolonged audit engagements. This increases the cost of the audit and can strain a PHA’s resources.

Audit readiness is not an option but a necessity. It is a continuous process that requires commitment and diligence to help promote financial accuracy, operational efficiency, and organizational integrity. More importantly, it enables PHAs to retain public trust and continue serving communities by providing safe and affordable housing to those who need it the most.

Whether your PHA is looking for help becoming audit-ready or for an audit or accounting, tax, and advisory services, you can count on RBT CPAs. Let us know if you need more information, so we can show you how we can be Remarkably Better Together.

RBT CPAs never offshores work outside of the U.S. so you always know who is handling your financial information.

Tax Credits that May Be of Interest to Your Brewery

Especially when it comes to taxes, you should always take credit where credit is due!

Following are highlights of numerous tax credits that may be available to your business, related to employees, research and development, your product, whether your business is part of a farm operation, and more. Becoming familiar with what’s available can help you ensure you’re tracking and documenting the right information so you can take credit where credit is due.

Alcoholic Beverage Production Credit

Registered distributors who produce beer, cider, wine, or liquor in New York are eligible if during the tax year, they produce 60 million or fewer gallons of beer; 60 million or fewer gallons of cider; 20 million or fewer gallons of wine; or 800,000 or fewer gallons of liquor. Each year, the tax credit for the first 500,000 gallons produced in the state equals $.14/gallon of beer or cider; $.30/gallon of wine; $2.54/gallon of liquor with an ABV of 2% to 24%; or $6.44/gallon of liquor with an ABV over 24%. For amounts over 500,000 gallons, the credit equals $.045/gallon for up to 15 million gallons of beer, cider, and wine and up to 300,000 gallons of liquor. Recordkeeping and forms required to claim the credit are here.

Employing Employees in Certain Protected Classes In New York

You may receive tax credits when you employ a veteran, a person with disabilities, youth between the ages of 16 and 24, and people recovering from substance use disorder. Federal tax credits are also available when you hire individuals from certain targeted groups under the Work Opportunity Tax Credit.

Federal Fuel Tax Credit

Through 2024, farms and breweries may qualify if they use fuel for off-highway purposes, such as running equipment and machinery. The IRS has identified this as one of its “dirty dozen” or among the most abused tax breaks so extra care must be made when claiming the credit.

Federal R&D Tax Credit

Reduce your federal tax liability dollar for dollar to offset quarterly payroll taxes by up to $500,000 for qualifying research activities. For breweries and distilleries, the credit may be available for activities resulting in product changes; process changes to improve waste reduction and efficiencies; new sustainable practices; and more. Credits are based on money spent on employees’ time, contractor expenses, and supplies and equipment. See IRS Form 6765 for details.

FICA Tip Credit

If you have food and beverage service workers who customarily earn tips and you pay Social Security and Medicare taxes on those tips, you may be eligible to credit a portion of what you pay against your business income taxes. Recordkeeping requirements apply. A draft of IRS Form 8846 is also available, with additional information.

New York Tip Credit

If you employ food and beverage service workers who earn at least $30 a month in tips, a portion of those tips may be used to satisfy your minimum wage obligation. This applies to work hours producing tips or supporting tip-producing work that is not performed for more than 20% of an employee’s workweek. To take this credit, recordkeeping and reporting requirements apply.

If You Operate Your Brewery at a Farm

Farm Employer Overtime Credit

New for 2024, eligible farmers who pay a farm employee overtime, may be eligible for a tax credit.

Farm Workforce Retention Credit

If you are a farm employer or owner of a farm employer in New York and have an eligible farm employee employed for at least 500 hours, you may be eligible for an annual credit of $1,200.

Excelsior Job Program

If you have an agricultural operation in New York that is expanding and will result in at least five new jobs, you may be eligible for job tax credits, investment tax credits, R&D tax credits, property tax credits, and child care services tax credits. Click here for more information.

Investment Tax Credit

Eligible farms that place qualified property into service during a tax year may qualify to claim 20% of the cost. If you qualify for the investment tax credit and more than double your employee count as a result, you may also be eligible for the New York Employment Incentive Credit.

There are even credits if you purchase an automated external defibrillator, pay premiums for eligible long-term care insurance, pay school taxes, rehabilitate a historic building, rehabilitate a barn built before 1946, sponsor an apprenticeship program, and more.

If you need help identifying potential tax credits that may be available to your brewery, distillery, and/or distribution business, you can count on RBT CPAs. We can also help you ensure your recordkeeping practices will enable you to take full advantage of what’s available.

RBT CPAs has been a leading provider of accounting, audit, advisory, and tax services to Hudson Valley businesses, non-profit organizations, municipalities, and individuals for the past 55 years. Give us a call so you can see how we can be Remarkably Better Together.

RBT CPAs never offshores work outside of the U.S. so you always know who is handling your financial information.

Navigating Leadership Transitions in Unions: A Focus on the Treasurer Role

There are a lot of responsibilities that must be addressed as part of a union officer election. An important activity to keep on your radar is helping newly elected officers transition into their positions; this is especially important when there’s a newly elected treasurer.

Given a treasurer’s responsibility for a local’s financial well-being and compliance, preparing a transition plan in advance of an election puts you in the position to help a new treasurer acclimate quickly while maintaining member trust and loyalty.

To prepare for a potential transition in treasurers, explore resources your parent union may have available, including the union’s constitution (which typically defines duties), leadership handbooks, financial standards, and training focused on a treasurer’s responsibilities and financial guidance for union leaders.

Create a “toolkit” that you can share with a newly elected treasurer, so they quickly get up to speed on responsibilities, have an opportunity to ask questions, prepare to lead, and ensure compliance. In addition, consider whether the following actions can support the transition:

Plan ahead. The incumbent treasurer should update documentation regarding key processes, responsibilities, and relevant financial information, and prepare to hand off/transfer key items like bank accounts, checkbooks, and credit cards.
Knowledge transfer. A knowledge transfer process will allow time for the outgoing and incoming treasurers to discuss the union’s financial structure, internal controls, key responsibilities, and more. This is not just about handing over documents or providing a calendar of important deadlines and deliverables, but also sharing insights and experiences.
Training and support. The incoming treasurer may need training, in the form of courses, workshops, or mentorship from the outgoing treasurer or other experienced union leaders. Providing ongoing support to the new treasurer even after the transition period is essential to ensure they are positioned to succeed in their new role.
Communication. Open and transparent communication is key. Union members should be informed about the change in leadership and the transition plan. This communication fosters trust and ensures members that the union’s financial matters will remain in responsible hands.
Engage with auditors and advisors. The treasurer is typically the primary contact for the union’s auditors, accountants, bankers, and financial advisors. Early engagement with these individuals can help keep the union’s financial matters moving even during a transition.
Compliance with regulations. The treasurer is responsible for ensuring the union complies with all relevant financial regulations and reporting requirements. The transition plan should include a review of regulatory requirements and direction on where the new treasurer can turn for advice and direction.
Encourage teamwork. Lastly, a new treasurer should be encouraged to work closely with any staff that they oversee (like a bookkeeper), other union leaders, and any special committees they are assigned to. A strong team can provide support, share the workload, and contribute to effective decision-making.

A leadership transition is a significant event in the life of a union. Although the role of a treasurer comes with hefty responsibilities, with proper planning, effective knowledge transfer, and continuous support, a new treasurer can be put in the best position to help the union and its members succeed.

Whether your union is dealing with business as usual or handling a leadership transition, please know you can always count on RBT CPAs for accounting, audit, tax, and advisory services. Give us a call to see how we can be Remarkably Better Together.

RBT CPAs never offshores work outside of the U.S., so you always know who is handling your financial information.

Managing an Unassigned Fund Balance: An Overview

As part of a school district’s financial management, maintaining a reasonable unassigned fund balance provides a safety buffer for unforeseen expenses or revenue shortfalls. This is vital as it helps ensure adequate cash flow to cover the ongoing cost of operations. Managing these funds entails a strong understanding of their purpose, limits, and use.

To start, an unassigned fund balance is what remains after expenditures are paid. Unlike reserve funds that have specific purposes and requirements as set forth in law, an unassigned fund balance is not committed, assigned, or restricted in any way. This flexibility allows school administrators to use the funds where they are most needed, especially during periods of financial uncertainty.

The Governmental Accounting Standards Board (GASB) has set specific guidelines for maintaining and reporting fund balances into five classifications under GASB #54. It’s crucial for school districts to be aware of these guidelines and implement them effectively as they aim to ensure transparency, accountability, and fiscal responsibility in managing public funds.

One of the most important things to understand about unassigned fund balances is their purpose. They are not meant to be a source of ongoing funding for regular expenses. Instead, they are designed to meet unexpected or emergency costs, such as unforeseen repairs, unexpected increases in student enrollment, or sudden reductions in revenue.

Strategic planning and forecasting are vital tools in managing unassigned fund balances. School districts should have a clear understanding of their financial stability, including potential risks and opportunities, to ensure they maintain an appropriate fund balance level. This includes regular reviews of financial performance and adjusting the fund balance accordingly.

In New York, the maximum amount of unassigned fund balance at the end of the school year cannot be more than 4% of the following year’s budget. However, a 2019 report from the Office of the State Comptroller (OSC) indicated 60% of districts had unassigned fund balances higher than 4%.

While bills have been crafted to increase the 4% limit to 6% and to require greater transparency around unassigned fund balance, they haven’t made it past the initial stages.

For now, it’s important to be aware of the facts that having a healthy unassigned fund balance can be beneficial, but excessively large balances can draw public criticism for over-taxation or poor fiscal management and is against the law (Section 1318 of the Real Property Tax Law). It’s important to strike a balance by maintaining a fund balance size that is sufficient to handle unexpected costs but not excessively large to invite unnecessary scrutiny and undermine public trust.

In the presentation, “School District Fund Practices: The Law and the Reality,” these best practices were shared for school district officials:

Develop policies and procedures for fund balance and reserve funds.
Develop multiyear financial and capital plans.
Adopt budgets that reasonably reflect the district’s operating needs based on historical trends and other analyses.
If over 4%, develop a plan to reduce the unexpended surplus fund balance.

If you’d like to discuss or analyze your district’s unassigned fund balance, we’d be glad to help. You can always count on RBT CPAs for accounting, audit, tax, and advisory services. Give us a call to see how we can be Remarkably Better Together.

RBT CPAs never offshores work outside of the U.S., so you always know who is handling your financial information.