News provided by:

Week of September 23, 2016

DOL Fiduciary Rule's Unintended Consequence: Higher Fees for Investors

( Investment News ) September 16, 2016 – As broker-dealers adjust to the new Department of Labor fiduciary rule by instituting uniform commissions on a wide swath of investments, investors could be faced with higher prices on some investment products. LPL Financial, the nation's largest independent broker-dealer, is instituting new uniform pricing rules for alternative investments such an nontraded real estate investment trusts that could actually increase the initial price for some investments on its platform.

Mentoring in the Cloud at Cardinal Health

( Chief Learning Officer ) September 7, 2016 – One of the biggest challenges associated with mentoring programs is keeping executives and employees invested. People may be excited about participating initially, but excessive paperwork, lack of marketing and unclear expectations can cause excitement to wane and programs to languish. Cardinal Health is no exception. The Fortune 500 health care services company headquartered in Dublin, Ohio, has 37,000 employees, and many formal and informal mentoring programs, but they never thrived, said Susan Moss, senior consultant for talent management in the leadership development group. When she was hired in 2013, one of her first mandates was to breathe new life into the mentoring culture.

U.S. Treasury Targets Foreign Tax Credit Use Amid EU’s Probes

( Bloomberg ) September15, 2016 – The U.S. Treasury Department took fresh steps on Thursday to curb tax avoidance by multinational corporations, announcing new curbs on a loophole through which companies artificially use credits for foreign taxes they pay to improperly lower their U.S. tax bills. In a notice that took direct aim at the European Union’s push to have its member states collect more taxes from U.S. companies’ overseas units, Treasury officials said they’re writing new rules that would restrict how corporations can use credits on their foreign tax payments to reduce their U.S. tax bills. The official notice puts corporate tax planners on notice that officials will challenge any strategies that violate their intended rules. The measure will focus on tax-planning strategies in which companies separate foreign tax payments from the underlying income that they’re based on.

Apple Tax Ruling Must be Overturned, says U.S. Business Group

( The Guardian ) September 16, 2016 – U.S. businesses have warned European leaders they risk a “grievous self-inflicted wound” unless they overturn Brussels’ demand that Apple pay the Irish government €13bn (£11.4bn). In an open letter to the leaders of the 28 European Union countries, the Business Roundtable group defended Apple over its tax dispute with the European commission. The U.S. tech giant was ordered to pay €13bn to Ireland last month, after Brussels ruled that the tax breaks it was given between 1991 and 2015 amounted to unlawful state aid. But the group of U.S. chief executives, who between them run companies with $7tn of revenue and 16 million employees, said the decision “must not be allowed to stand.”

Politics May Hinder Efforts to Get More Docs into Alternative Payment Models under MACRA

( Modern HealthCare ) September 15, 2016 – To get more doctors to embrace value-based payments, the CMS wants to team up with states to launch multi-payer efforts that could qualify as alternative payment models under the Medicare Access and CHIP Reauthorization Act. But some state officials may see the initiative as too closely linked to the Affordable Care Act.

As Companies Crack the Diversity Code, Leadership Teams Still Lag

( Workforce ) September 8, 2016 – Like several Silicon Valley counterparts, tech giant Intel last year went public with its lack of employee diversity. The company is openly sharing its efforts to correct the problem. In an interview with NPR, Intel CEO Brian Krzanich discussed his company’s diversity initiatives and concluded that the “pipeline problem,” or the idea that there aren’t enough qualified diverse candidates, is overhyped, saying, “If the pipeline was such a big problem, I would have come back as a failure.”

Robots, Robots Everywhere

( CFO ) September 15, 2016 – In fairly short order, robots have begun taking over in the corporate world. Don’t be alarmed. This is nothing like the feared “singularity,” that prophesied (if dubious) moment when machines become smarter than humans and then, to prove it, commence wiping us out. But robots are indeed infiltrating finance departments, some other functions, and operational areas in a number of industries. For the most part, robots are being deployed to automate repeatable, standardized, or logical tasks historically handled by people. In finance and accounting, think procure-to-pay, order-to-cash, and record-to-report processes. Enterprise-wide, the number of potential use cases seems almost limitless, although most of the potential is so far untapped.

Tuning Into the Voices in Your Practice

( Progressive Accountant ) September 20, 2016 – We live in a world where voice recognition and voice activation are greatly appreciated. No matter what the size of your firm, voices play an important role in the well-being of your organization. Many practitioners are convinced that they know what is being said about their firm, and run their practice accordingly. But, it is important to hear what actually is being communicated, both internally, and to the outside world. Post busy season seems to be the most practical time to process what is being discussed and not discussed. Here are several areas where you need to be listening, in order to drive the communication process.

FASB Proposes Additional Revenue Recognition Corrections

( Journal of Accountancy ) September 19, 2016 – FASB’s efforts to clarify its new revenue recognition standard continued Monday when the board proposed technical corrections and changes to the standard. The proposal covers four issues that have arisen out of the standard FASB and the International Accounting Standards Board issued in a convergence project in May 2014. As a result of questions raised with the boards’ joint transition resource group, the boards delayed the standard’s effective date and also issued clarifications to it.

AICPA Proposes Criteria for Cybersecurity Risk Management

( AICPA ) September 19, 2016 – In an important step toward helping businesses and organizations report on their cybersecurity risk management efforts, the American Institute of CPAs’ Assurance Services Executive Committee is exposing two sets of criteria for public comment. The first exposure draft, Proposed Description Criteria for Management’s Description of an Entity’s Cybersecurity Risk Management Program, is intended for use by management in designing and describing its cybersecurity risk management program and by public accounting firms to report on management’s description. The second, Proposed Revision of Trust Services Criteria for Security, Availability, Processing Integrity, Confidentiality, and Privacy, outlines revised AICPA trust services criteria for use by public accounting firms that provide advisory or attestation services to evaluate the controls within an entity’s cyber risk management program, or SOC 2® engagements. Management also may use the trust services criteria to evaluate the suitability of design and operating effectiveness of controls.

DOL Fiduciary Rule's Unintended Consequence: Higher Fees for Investors

( Investment News ) September 16, 2016 –As broker-dealers adjust to the new Department of Labor fiduciary rule by instituting uniform commissions on a wide swath of investments, investors could be faced with higher prices on some investment products.

LPL Financial, the nation's largest independent broker-dealer, is instituting new uniform pricing rules for alternative investments such an nontraded real estate investment trusts that could actually increase the initial price for some investments on its platform.

For example, Carey Watermark Investors 2 Inc., a nontraded REIT managed by W.P. Carey, has an upfront commission of 2% on its T shares, according to its prospectus. Under LPL's new pricing policy for alts, the upfront commission to the broker on T shares, the only nontraded REIT share class that will be allowed on LPL's platform in the future, will be 3%. To remain on the platform, Carey would have to increase the upfront commission, and thus the price, on the REIT an additional percentage point.

W.P. Carey is a leading manager of nontraded REITs that LPL currently sells on its platform of products. LPL Financial last month informed product sponsors it was creating rigid guidelines for nontraded REITs, business development companies and closed-end funds, along with hedge funds and private equity investments.

Recent industry rules, including the new pricing rules for illiquid investments by the Financial Industry Regulatory Authority Inc., were intended to bring fee and pricing transparency to illiquid investments and, in part, to push prices down on products such as nontraded REITs.

The new fiduciary, however, rule is having unintended consequences for the industry, executives said. The brokerage industry is considering uniform commissions as a way to hedge against opening the door to potential liabilities.

“The DOL strips out the flexibility or impact of market conditions,” said John Rooney, managing principal of Commonwealth Financial Network, which is considering similar changes in pricing to those implemented by LPL. “It ties advisers' and broker-dealers' hands.”

Mr. Rooney was quick to note that an industry move to standardize commissions could have a potential harmful impact on investors in mutual funds as well as alternatives. If a firm were to implement a standard commission of 3% on mutual funds, that means the price of short-term bond funds would actually double, from the typical commission of 1.5% today, he said.

“How do you charge 3% on a bond fund?” he asked.

LPL has made no secret of its move to create uniform prices for its platform. At its annual meeting last month, LPL CEO Mark Casady said the company was standardizing commissions for mutual funds across all accounts at the firm. The broad intent is to make sure that the commission a broker receives for selling an investment product is not driving the broker's choice of that product.

In a memo to product sponsors last month, LPL outlined the changes to its alternative investments.

“Prior to the DOL's effective date of April 10, 2017, in an effort to standardize compensation on LPL's general brokerage platform, LPL intends to restrict future sales to a single share class for products,” according to the memo. “The surviving share classes will be a 'T' share equivalent with specified parameters.”

The upfront adviser commission for nontraded REITs and BDCs will be 3% at the point of sale; the adviser will receive an annual trailing commission of 1% to be capped at 4%; and LPL Financial will receive 1.5% as revenue sharing.

That compensation is in line with the commission structure for nontraded REIT and BDC “A” shares, which typically pay 7% to the broker and between 1% and 2% to the broker-dealer. The sponsor's broker-dealer, known as the dealer manager in industry parlance, can then pay itself the remainder up to 10% of the total transactions, according to Finra rules.

FS Investment Corp. IV, a nontraded business development company, has a hard cap of fees and commissions of 8.95%. The cap on commissions for nontraded REITs and BDCs at LPL will be 8.5%, but that doesn't include the 1.5% fee normally charged by the dealer manager.

The difference between “T” and “A” shares is that more investor money is invested by the manager immediately.

As it moves to standardize commissions on investment products, LPL is looking at numerous factors, including product complexity, and then considering the product individually and in comparison with its universe, said Robert Pettman, executive vice president of investment and planning solutions at LPL. “You have to find right balance, and there will always be outliers that could be lower or higher.”

Mentoring in the Cloud at Cardinal Health

( Chief Learning Officer ) By Sarah Fister Gale, September 7, 2016 – One of the biggest challenges associated with mentoring programs is keeping executives and employees invested. People may be excited about participating initially, but excessive paperwork, lack of marketing and unclear expectations can cause excitement to wane and programs to languish.

Cardinal Health is no exception. The Fortune 500 health care services company headquartered in Dublin, Ohio, has 37,000 employees, and many formal and informal mentoring programs, but they never thrived, said Susan Moss, senior consultant for talent management in the leadership development group. When she was hired in 2013, one of her first mandates was to breathe new life into the mentoring culture.

Moss wanted a formal program to enable employees to connect across different departments and geographies. That’s one of the key benefits of formal versus informal mentoring programs, she said. “Informal mentoring is based on your network and who you already know. We wanted a program that helped people build new networks.”

Five Minutes and You’re In

The company already had a web-based mentoring software system, but Moss said it was cumbersome and too complicated. So she replaced it with MentorcliQ, a cloud-based mentoring system that uses algorithms to match mentors and mentees, and provides tools to track and manage those relationships. Moss said she liked the ease-of-use of the system, and the fact that employees could enroll in the program in a matter of minutes via their computer or mobile device.

But good software is only the first step to make a mentoring program work. To drive program awareness and drum up interest in participating, Moss customized the program to be minimally invasive. Once mentors and mentees are connected, they set their own agendas using the system to schedule meetings and send alerts. She also set a timeline of six months for mentoring relationships, with the option to renew for another six months. She said the predefined timeline made the program more intentional and gave participants a sense of what they are committing to. “They know how long they will be in the relationship and they know what is expected of them in that time.”

To ensure relationships play out as intended, mentors and mentees are asked to complete a short monthly survey via email about whether they are meeting as planned and achieving pre-established goals. Along with setting goals and periodic check-ins, the system asks participants to provide a wrap-up at the end of six months summarizing whether they met their goals and whether they want to renew. “We wanted to provide enough structure so that people have the support and tools they need to be successful, then get out of their way,” Moss explained.

Once the system was in place in 2014, the team set up a pilot program inviting potential mentors and mentees to participate based on suggestions from the HR team. Early pairings went well, so Moss’ team began marketing and promoting the program through a variety of channels, including posters and cafeteria table tents, articles on the website, mentor spotlight stories in company newsletters, and presentations at company meetings. Most participation comes from word of mouth, she said. “People love it and they talk about it, so the growth has been phenomenal.”

You’ve Got a Match

The criteria for mentors is they have to have been with Cardinal for at least a year, and agree that if they are chosen they will participate. They do not need to be at a senior level in the organization, and Moss noted there are several mentoring relationships in which younger staff and individual contributors mentor senior leaders.

To sign up, mentors complete a short training course about mentoring and how to use the MentorcliQ program, then they fill out a profile highlighting their areas of expertise and what they think they have to offer a mentee. They also complete a Big Five personality profile that measures their level of extraversion, agreeableness, conscientiousness, emotional stability and openness to experience.

Mentees also fill out a profile about themselves and what they are looking for in a mentor. Some come in with a specific mentor in mind, others search the database for options, and others rely on the system’s algorithm to provide a list of potential matches based on profile compatibility. The process is often compared to a dating site, and that was intentional, said Andrew George, co-founder of MentorcliQ in Columbus, Ohio. “These are relationships, and it is important to have a sophisticated way to make the right connections so they have a high likelihood of success,” he said.

Karen Gleason, manager of specialty markets and programs for Cardinal in La Vergne, Tennessee, joined MentorcliQ in 2015 after reading about it in the company newsletter. Gleason had been looking for someone to help her with professional development, and her manager encouraged her to sign up. A few days later she got a list of potential mentors.

Each list of matches includes mentors’ bios, mentoring objectives and a percentage score showing how well they matched the mentee’s criteria. Gleason chose the second candidate on her list: Dusty Muck, a senior consultant in the ambulatory care division in the headquarters office. He was at the same level in the organization as Gleason, but in a different department. They were a 97 percent match.

She liked that he was a man, he had technical expertise, and he was in an area of the business she knew nothing about. “I wanted to step outside my comfort zone so Dusty was a good choice,” she said.

Muck had been with Cardinal for more than seven years and had good mentoring experiences in the past. When he read about the new program on the company intranet he said he jumped at the chance to share his knowledge. It also would help him develop his own leadership and talent management skills, which were among his personal development goals.

Making the First Move

Mentees are required to drive the relationship. They are expected to make first contact, to set goals for the relationship, and establish meeting agendas.

Gleason said she felt intimidated at first, but she and Muck quickly found their groove. They spent their first call getting to know each other; on the second call they set goals focused around her professional development, deciding to reconnect for 30 minutes every two weeks.

Gleason said there were times she felt too busy to meet, but if the company and Muck were willing to invest in her, she needed to make time. “Dusty helped me realize that investing time in my professional development is important to my career, and that it is something I need to prioritize,” she said.

Over the first few meetings, Gleason and Muck focused on her original development goals but that changed three weeks in when Gleason was informed that her position was being eliminated. She immediately called Muck, and the two of them strategized new goals to help build her resume, expand her network and learn more about other areas of the business. The strategy helped Gleason secure a more prominent role within 60 days, which she began in January. “Dusty challenged me to set stretch goals and challenge myself, and that helped me find this new job,” she said.

The mentorship ended in March, and they opted not to renew it due to time constraints, though Gleason and Muck still communicate regularly. “Anytime she needs me she knows she can call,” he said.

Satisfaction Guaranteed

Since they launched MentorcliQ in 2014, Cardinal employees have invested nearly 9,000 hours in the program, with almost 1,000 people participating in 2015 alone. Surveys show 97 percent of participants are happy with the experience, Moss said.

The system also tracks career moves among mentees, retention of key talent, and whether participants feel they have met their development goals.

For companies considering their own mentoring program, Moss said to set measurable goals that align with business objectives, and to hold mentors and mentees accountable for their participation. “People have to be committed for mentoring to work.”

U.S. Treasury Targets Foreign Tax Credit Use Amid EU’s Probes

( Bloomberg ) September 15, 2016 – The U.S. Treasury Department took fresh steps on Thursday to curb tax avoidance by multinational corporations, announcing new curbs on a loophole through which companies artificially use credits for foreign taxes they pay to improperly lower their U.S. tax bills.

In a notice that took direct aim at the European Union’s push to have its member states collect more taxes from U.S. companies’ overseas units, Treasury officials said they’re writing new rules that would restrict how corporations can use credits on their foreign tax payments to reduce their U.S. tax bills. The official notice puts corporate tax planners on notice that officials will challenge any strategies that violate their intended rules.

The measure will focus on tax-planning strategies in which companies separate foreign tax payments from the underlying income that they’re based on. That separation -- which Treasury’s notice described as a “splitter” arrangement -- allows companies to artificially inflate credits they use to cut their U.S. tax bills.

Officials with the Treasury and the Internal Revenue Service said it was possible that U.S. companies that find themselves subject to new tax bills as a result of EU investigations could use splitter arrangements to reduce their U.S. taxes. Last month, the European Commission found that Ireland must collect $14.5 billion in back taxes from Apple Inc. after determining that the iPhone maker received a special tax deal that violated so-called “state-aid” rules, which are aimed at fostering competition.

Appeals Planned

Apple and Ireland have both said they’ll appeal the finding. An Apple spokesman didn’t immediately respond to a request for comment. EU regulators, meanwhile, are conducting probes of the tax arrangements of other U.S. companies, including McDonald’s Corp. and Amazon.com Inc.

“The Treasury Department and the IRS are aware that, in anticipation of a large foreign-initiated adjustment that relates to a prior taxable year, a taxpayer may take steps to separate the additional payment of foreign income tax from the income to which it relates,” said the IRS notice about the proposed regulations. “Such foreign-initiated adjustments may arise under European Union (EU) state aid law, to the extent EU state aid payments result in creditable foreign taxes.”

Treasury’s Concern

In effect, the new rule would disallow corporations from using foreign tax credits unless the companies actually bring home to the U.S. -- or repatriate -- the overseas earnings on which they’ve paid the foreign taxes. Repatriation of overseas income triggers the 35 percent U.S. corporate tax rate, one of the highest in the world -- and companies can use foreign tax credits to reduce or eliminate it. Treasury officials are worried that without the new rule, companies could claim artificially inflated foreign tax credits tied to offshore money they haven’t brought home.

U.S. officials have grown increasingly concerned that more than $2 trillion in offshore earnings that U.S. multinationals haven’t yet repatriated is now fair game for European countries.

Mark J. Mazur, Treasury’s assistant secretary for tax policy, said the new regulation would close “another tax loophole that contributes to the erosion of our tax base.”

“Today’s action protects the U.S. tax base by ensuring that such credits are only available when corporations repatriate their foreign earnings,” Mazur said.

Dollar-for-Dollar Credit

Unlike other industrialized countries, the U.S. taxes its multinational companies on their global income -- but it allows them a dollar-for-dollar credit against the foreign taxes they’ve paid. The system is designed to prevent double taxation of profit.

In the case of Apple -- if the European regulators’ order is upheld -- the U.S. could stand to lose $14.5 billion in tax revenue if the company claims a credit for that new tax obligation.

Before the rule announced Thursday, a loophole in the tax code allowed U.S. multinationals to claim what Treasury called an “artificially inflated foreign tax credit” without repatriating the underlying foreign earnings. In other words, companies got U.S. tax-cutting credits for money they left in overseas subsidiaries, untaxed in the U.S.

Splitter Arrangements

In so-called splitter arrangements, companies change their ownership structures or find ways to pool their foreign earnings to “generate substantial amounts of foreign taxes deemed paid, without repatriating” the profit to which the foreign taxes relate.

The new regulation will “help curtail the use of aggressive tax planning tactics that take advantage of our broken international tax system,” according to a Treasury Department release.

President Barack Obama’s administration, members of Congress and Republican presidential nominee Donald Trump have all called for reducing taxes on companies’ offshore earnings as a way of prompting repatriation. But they haven’t agreed on a rate: Obama has suggested 14 percent; Trump, 10 percent; and House Republicans propose a top rate of 8.75 percent.

By tying the use of foreign tax credits to repatriation, Treasury and IRS officials signaled that they’re concerned about their improper use and their power to erode the domestic corporate tax base.

37 Percent

Some 7,190 corporations claimed over $109.6 billion in foreign tax credits in 2012, according to the most recently available IRS data. Those companies reduced the U.S. tax they owed on nearly $420 billion in foreign income. Overall, the credits allowed companies to slice about 37 percent off aggregate corporate income taxes that year.

U.S. companies try to minimize their U.S. taxes by gearing the size of their credits to the size of the anticipated domestic tax hits when they repatriate foreign income. Under U.S. rules, companies can combine income and credits from high-tax countries, like Japan and Germany, with those from low-tax countries, like Ireland and the Netherlands. While companies can’t claim refunds for unused foreign tax credits, they can apply the leftover to other tax years -- one year back, or 10 years forward.

‘Tax Distilleries’

Edward Kleinbard, a University of Southern California professor and a former chief of staff of the congressional Joint Committee on Taxation, called the corporate technicians who blend and refine such arrangements “tax distilleries” in a 2011 paper.

In 2007, foreign tax credits helped U.S. parent companies pay an average tax of just 3.3 percent on foreign income brought home, according to a 2012 paper by a pair of international tax specialists at the IRS and Congressional Budget Office.

The IRS has tried to crack down on splitters, also known as foreign tax credit generators, in recent years as they’ve proliferated in flavor and variety. Treasury cautioned that despite its plan for the new rule, which builds on a 2015 regulation, companies still have ways to misuse foreign tax credits to skirt U.S. tax bills. “Certain loopholes remain that allow such tax arrangements to occur,” the agency said.

Apple Tax Ruling Must be Overturned, says U.S. Business Group

( The Guardian ) September 16, 2016 – U.S. businesses have warned European leaders they risk a “grievous self-inflicted wound” unless they overturn Brussels’ demand that Apple pay the Irish government €13bn (£11.4bn).

In an open letter to the leaders of the 28 European Union countries, the Business Roundtable group defended Apple over its tax dispute with the European commission.

The U.S. tech giant was ordered to pay €13bn to Ireland last month, after Brussels ruled that the tax breaks it was given between 1991 and 2015 amounted to unlawful state aid.

But the group of U.S. chief executives, who between them run companies with $7tn of revenue and 16 million employees, said the decision “must not be allowed to stand.”

“The precedent set by this decision, if upheld, would increase uncertainty significantly with a consequent adverse effect on foreign investment in Europe, making this decision a grievous self-inflicted wound for the European Union and its citizens.”

It said that non-EU countries would interpret the ruling – if left unchallenged – as a signal that companies could have their assets seized by states “seeking extra revenue or seeking to punish a successful foreign competitor.”

Business Roundtable said the 185 chief executives who it counts as members were particularly aggrieved by the retrospective nature of the ruling on a tax deal reached in 1991.

“Commercial success is uncertain for any business endeavor but companies should have complete confidence that sovereign countries are committed to honoring their laws and have the authority to do so,” they wrote.

“The retroactive nature of the EC decision means that business can never have certainty even on its past tax liability unless or until the EC chooses to decide accordingly.”

Apple chief executive, Tim Cook, has previously labeled the multi-billion pound demand “total political crap” and warned that it could affect investment in the EU.

The letter from Business Roundtable, which was also sent to senior politicians including the German finance minister, Wolfgang Schäuble, the European Union president, Donald Tusk, and the U.S. secretary of state, John Kerry, echoed the threat.

It said the commission’s actions “promote tax uncertainty – and unless overturned they will disrupt trade and investment, with the most direct consequences to be borne directly by EU countries and their citizens.”

The letter called on member states to “put an end to the use of state aid investigations that will hamper economic growth by undermining cross-border investment.”

The group has previously lashed out against what it perceives as Europe’s “new and dangerous form of protectionism” amid tax investigations into American firms such as Starbucks, McDonald’s and Amazon.

The commission’s ruling against Apple was based on its objection to an agreement allowing Apple to pay a maximum tax rate of just 1%. In 2014, the tech firm paid tax at 0.005%. The usual rate of corporation tax in Ireland is 12.5%.

The commission said Ireland’s tax arrangements with Apple between 1991 and 2015 had allowed the US company to attribute sales to a “head office” that only existed on paper and could not have generated such profits.

The result was that Apple avoided tax on almost all the profit generated from its multibillion-euro sales of iPhones and other products across the EU’s single market. It booked the profits in Ireland rather than the country in which the product was sold.

Politics May Hinder Efforts to Get More Docs into Alternative Payment Models under MACRA

( Modern HealthCare ) September 15, 2016 – To get more doctors to embrace value-based payments, the CMS wants to team up with states to launch multi-payer efforts that could qualify as alternative payment models under the Medicare Access and CHIP Reauthorization Act (MACRA). But some state officials may see the initiative as too closely linked to the Affordable Care Act.

Last week, the CMS issued a request for information (PDF) from states on what they would need to implement APMs. Responses to the document are due Oct. 28.

The information will inform the next iteration of CMS' State Innovation Models (SIM) initiative, which provides financial and technical support to develop and test multi-payer healthcare payment and service delivery models aimed at delivering better quality of care at a lower cost, not only for Medicare, Medicaid and Children's Health Insurance Program (CHIP) beneficiaries, but for all residents of participating states.

Since 2013, SIM has supported efforts in over 38 states, territories and the District of Columbia.

Given the financial incentive and the fact that states are actively trying to reduce healthcare spending, they will likely be interested in this new opportunity, said Trish Riley, executive director of the National Academy for State Health Policy.

In the RFI, the CMS asked for ways to enhance the role of Medicare in multi-payer models. That's an attractive proposition for states, given the amount of Medicare beneficiaries and the fact that federal statutes make it difficult to tie the program to local efforts, Riley said.

But because SIM, which is overseen by the Center for Medicare & Medicaid Innovation, is a product of the Affordable Care Act, politics may cause some states to pass on the opportunity, according to Marci Nielsen, CEO of the Patient-Centered Primary Care Collaborative, a national coalition of health care providers.

“State officials would say there's too much financial risk at stake for our state, but the real reason is political ideology,” Nielsen said. “They aren't interested in any type of partnership with the federal government that insinuates support for the Affordable Care Act.”

There's also little evidence that alternative pay models improve quality and cut costs, according to Kip Sullivan, a health policy expert and member of the Physicians for a National Health Program, a not-for-profit that advocates for universal, comprehensive health coverage through a single-payer plan.

Last week, the CMS released an evaluation of some of the longest-running SIM efforts and the report concluded that it was too early to determine whether the SIM initiatives have changed provider behavior or improved care coordination, care quality and population health.

That finding, coupled with reports that accountable care organizations and medical home demonstrations fail to cut costs provides little incentive for states to respond to the RFI, Sullivan argued.

It's also unclear whether physicians are interested in participating in any new APMs. MACRA already requires physicians to participate in the new Merit-based Incentive Payment System (MIPS) if they do not have a substantial amount of their revenue at risk under a qualifying APM. Thus far, the vast majority of physicians say they do not.

A CMS report released last week found states are having trouble getting providers to buy into payment reform because they are fatigued by the multiple, concurrent delivery and payment reform initiatives.

But the CMS' recent concession that allows providers to pick their pace to comply with MACRA gives providers more time to consider joining an APM that may launch in their state, according to Josh Seidman, senior vice president at Avalere Health.

A key strategy to getting providers to switch to a new APM will be ensuring reporting requirements are less burdensome than those under MIPS, Nielsen said.

As Companies Crack the Diversity Code, Leadership Teams Still Lag

( Workforce ) By Peter Gomez, Susan Medina, September 8, 2016 – Like several Silicon Valley counterparts, tech giant Intel last year went public with its lack of employee diversity. The company is openly sharing its efforts to correct the problem. In an interview with NPR, Intel CEO Brian Krzanich discussed his company’s diversity initiatives and concluded that the “pipeline problem,” or the idea that there aren’t enough qualified diverse candidates, is overhyped, saying, “If the pipeline was such a big problem, I would have come back as a failure.”

It’s true the pipeline problem is somewhat improving — at least at the entry level — for companies like Intel that have the budget to invest in targeted recruitment programs. As more companies formalize diversity initiatives, partner with educational institutions and community organizations, and train their hiring managers on the effects of unconscious bias, they will be able to bring in more diverse talent in their junior and mid-level ranks. For example, Apple reported a 50 percent increase in the number of African-Americans hired in 2015 compared to 2014, and a 66 percent increase in Hispanics.

But this improvement is not producing greater diversity representation in the C-suite. In 2014, only 4 percent of Fortune 500 CEOs were minorities, and only 5 percent were women. Move down the corporate ladder into the executive ranks and the percentages do not improve. According to Diversity Inc, Hispanics make up less than 4 percent of senior management in U.S. companies. African-Americans make up less than 3 percent, and Catalyst reports that women of color are virtually absent at the senior-level and above in S&P 500 companies.

Why aren’t minority employees making it to leadership levels? There are a number of reasons:

• Problems with retention and sponsorship. When employers build diversity and inclusion initiatives, they often recruit diverse entry-level talent and assume their work is done. But if these employees don’t see a clear career path, or if they see a leadership team consisting of mostly white men, they are unlikely to stay for a sustained period of time.

Companies should focus on making all levels of the organization more diverse — from the entry level to senior leadership ranks. As baby boomers retire from the C-suite, companies have more opportunities to do just that. The leadership team, specifically the CEO, must be personally invested in diversity. Without buy-in at the top, associated programs will not be taken seriously across the organization.

If minority employees are not organically rising through the ranks of the company and their white counterparts are, it’s likely they are not being given the opportunity to create the relationships that so often lead to recognition and promotions. Mentorship programs, in which a senior employee mentors junior diverse talent, can be effective.

• Failing to focus on inclusion. Far too many organizations forget about the inclusion component of diversity and inclusion programs. If companies want their young, diverse talent to become the next generation of leaders, they need to create a culture that truly embraces diverse opinions, perspectives, and lifestyles.

There are number of ways to achieve this. For instance, create diversity committees with representatives from all company levels, commit to working with diverse vendors and partners, and make diversity goals a transparent part of the overall strategic plan. Companies also can focus on flexible work schedules, accommodations for religious holidays, childcare subsidies, and diversity-friendly dress codes. All of these efforts contribute to a consistent company message: We value and appreciate diversity.

• A lack of data and accountability. Like any corporate program, diversity and inclusion initiatives must be evaluated against agreed-upon benchmarks. Doing so will allow companies to demonstrate and share results, and make adjustments for better outcomes.

Diversity and inclusion programs should have clear goals, ideally based on existing employee diversity figures and the demographic make-up of the talent pool in the company’s industry and region. Companies also should identify metrics they will track to measure success. According to a Forbes Insights study, the most popular metrics for monitoring a diversity program’s success are employee productivity, employee morale, and employee turnover.

Finally, there must be a system of accountability. Sodexo ties executive bonuses to diversity goals to ensure they remain a priority, and other companies like Intel are following suit.

Building diversity at the leadership level isn’t impossible, but it does take intentional, long-term strategies and a concerted effort from the entire company: rank-and-file staff, HR and leadership. By focusing on retention, inclusion and the appropriate metrics, companies with ambitious diversity goals can cultivate their next generation of leaders.

Robots, Robots Everywhere

( CFO ) September 15, 2016 – In fairly short order, robots have begun taking over in the corporate world. Don’t be alarmed. This is nothing like the feared “singularity,” that prophesied (if dubious) moment when machines become smarter than humans and then, to prove it, commence wiping us out.

But robots are indeed infiltrating finance departments, some other functions, and operational areas in a number of industries. For the most part, robots are being deployed to automate repeatable, standardized, or logical tasks historically handled by people. In finance and accounting, think procure-to-pay, order-to-cash, and record-to-report processes. Enterprise-wide, the number of potential use cases seems almost limitless, although most of the potential is so far untapped.

Collectively, these technologies are referred to as “robotic process automation” (RPA), although they aren’t enabled by electromechanical machines that have arms and legs. They are virtual robots; in other words, software that is programmed to mimic the keystrokes humans make in completing a process. (At least, that’s a definition of what might be called “basic RPA”; many experts include more advanced technologies, discussed below, under a bigger RPA umbrella.)

What distinguishes the robots is that “they can work 24/7, they are very accurate, they do exactly what you tell them to do, and they don’t complain,” says David Wright, Deloitte’s finance robotic process lead in the United Kingdom. In other words, they don’t have human flaws. And with the use of RPA expanding exponentially, the potential workforce implications — depending on who you talk to, anything from reductions on a scale that could wreak havoc on the global economy to a broad transference of head count to more strategic, value-add positions — are a matter of some debate.

While RPA is largely based on technological capabilities that have been around for some time (like screen scraping, work flow, and rules engines), it didn’t begin penetrating companies in a significant way until recently. “This has really started to accelerate just in the past 18 months,” says Cliff Justice, principal, innovative and enterprise solutions, for KPMG. “But it’s already in at least the pilot stage in maybe half of the Fortune 500 companies.”

Virtually all RPA observers expect the trend to continue surging. RPA vendors, not surprisingly, agree. “We are at the very beginning of a major disruption in the accounting world that will be as big for the profession as Excel was,” says Steve Palomino, director of financial transformation at Redwood Software. “Robotics will become an industry standard.”

Although RPA is in its early stages, acknowledges Dinesh Venugopal, president for digital and strategic customers at Indian business process outsourcing (BPO) firm Mphasis, “customers with BPO-like processes that are coming up for re-bid are all asking about it.”

Value Proposition

RPA software is not complex compared with other enterprise technologies. Nor is it particularly expensive, despite its relative newness. “In the past couple of years we’ve seen quite an uptake in companies wanting not big, transformative process reform, but very tactical reform to get a rapid ROI with a very low-risk solution,” says Craig Le Clair, a vice president and principal analyst at Forrester Research.

“I term it a non-invasive solution,” he continues. “You don’t have to do any data-integration projects or have a lot of cross-department meetings. [The technology] really is just about understanding the specific clicks that a human is making and substituting a software routine, a bot, to eliminate a lot of non-value-added steps.”

Similarly, Wright says he tells clients that “this isn’t rocket science. Seeing a demo is like being in a finance shared services center, looking over somebody’s shoulder and seeing keystrokes being made and transactions being executed.”

Midsize companies generally haven’t yet made much use of the technology, but they could, according to Mihir Shukla, CEO of RPA vendor Automation Anywhere. “It’s simple and cost-effective, and they will see the same ROI as an enterprise customer on a smaller scale,” he says.

How much ROI are we talking about? Enough that the practice of saving on costs by off-shoring business processes may quickly become obsolete. An offshore, full-time employee averages about 35% of the cost of an onshore FTE, according to a Deloitte analysis. But a robot would typically be less than a third of the cost of the offshore FTE, or about 10% of the onshore employee’s cost.

Venugopal says Mphasis is quoting prices for RPA that will save customers from 25% to 40% on outsourced processes. But traditional BPO providers like Mphasis are in a tough spot, notes Le Clair. “Their [method] over the years has been to substitute labor for technology, because labor is what they have an abundance of,” the Forrester analyst says. “But while a number of partnerships have been announced between the BPO firms and the RPA product companies, more than half of the implementations are being done by companies on shore within their own data centers.”

Use Cases

So far, financial services has embraced RPA more than any other industry, followed by health care, utilities, and telecommunications — what Forrester calls the “hubs,” says Le Clair. The common denominators among those industries are a large volume of “swivel-chair work” (i.e., data entry and switching among various applications), the use of centralized shared services, and heavy regulation.

But the research firm is also seeing growth in what it calls “the edges”: manufacturing, supply chain, warehousing, and even oil. “We believe that in the next three to four years, the hubs and the edges will come together, disrupting the way modern enterprises work,” Le Clair says.

In financial services, think of all the processes required to, for example, approve and fund a home mortgage, from processing the application to the background check, credit check, property assessment, and approval. “Imagine how fast these processes have to happen and how accurate they must be for the new online mortgage companies that are processing applications within 24 hours,” says Shukla.

For finance and accounting at financial services and other types of companies, in addition to the processes mentioned above (order-to-cash, procure-to-pay, and record-to-report), RPA is being used for accounts payable, vendor statement reporting, and travel-and-expense processing, among other tasks, notes Le Clair.

Drilling down to more-specific uses, one common application of RPA for accountants is journal reconciliations, says Palomino of Redwood Software. Others include unapplied cash, where money in a bank account hasn’t yet been tracked to a specific customer payment; intercompany transactions, or those between company divisions or subsidiaries; and creating consolidated reports, which typically involves manual processes for pulling information together, and reformatting and distributing it.

But the tasks companies have deployed RPA for so far merely scratch the surface of its potential, according to Le Clair. “There’s greater usage of RPA, but I would say it has a low penetration today,” he says. “There are thousands and thousands of processes that could benefit.” Forrester plots technologies in terms of their maturity; there are five phases, and RPA is still in the first phase, called the creation phase.

It’s worth noting that you don’t need dedicated technologies to accomplish the various tasks that RPA addresses. “Similar to spreadsheets, robotic software tends to be both use-case-agnostic and application-agnostic,” says Wright. “You can use spreadsheets for financial transactions, monitoring the recruitment pipeline, or planning a wedding. In the same way, you can use [RPA] across numerous functions.”

Getting Smarter

As promising as basic RPA is, the most interesting business applications for robotic technologies increasingly will be more sophisticated. These applications will apply machine learning, artificial intelligence, cognitive computing, or some combination of them.

Among the most advanced RPA-related tools with cognitive capabilities currently on the market, and certainly the best known, is IBM’s Watson. It’s not an RPA program itself, but rather a platform on which smart RPA capabilities can be built. The big key is the technology’s ability to sort enormous amounts of data — including unstructured data such as emails, which are typically text-heavy. By some estimates, unstructured data, which historically resisted deep searching and analysis, accounts for as much as 80% of all data in the world.

“If you’ve built bots on Watson, now you’ll be able to infer, reason, and interpret natural language, and the context of that language, and really automate more decisions that in non-intelligent bots would get escalated to humans,” says KPMG’s Justice. “Watson will gather the evidence available and make a probabilistic determination.” Notably, procurement organizations are using Watson to help search for alternative, lower-cost vendors.

Such technology can greatly improve invoice processing, for example. Often, an invoice must be read for context. It might have data in the wrong field, or lack information needed to determine whether it meets contract requirements or procurement rules. It might require a three-way match, verifying with the business, the vendor, and the procurement organization that the correct products or services were delivered. A cognitive technology based on machine learning and AI can do all that.

And cognitive bots get smarter over time. They can monitor how humans interact with the system, and as more data on those actions is collected, the machine gains confidence that it can process exceptions or handle other issues, notes Justice. Credit card fraud detection is a perfect example of machine learning that’s in common use, with bots getting smarter and smarter at detecting when cards are being used suspiciously, says Venugopal.

Three years ago, companies’ online chat bots weren’t very impressive. “Now they’re being built on programs like Amazon’s Alexa, which is still very new but has a deep, machine learning capability,” Justice says.

Call centers are also perfect candidates for improvements based on machine learning. A company starts by encoding standard operating procedures, and then today’s technologies track voice interaction with customers and convert it to machine language.

Also, the platforms behind personal digital assistants Siri (Apple) and Cortana (Microsoft) have been open-sourced, allowing the development of advanced RPA capabilities based on speech-recognition technology.

Advanced RPA could even play a major role in closing the books. According to a Forrester report, at financial services firm UBS, 2,000 people are involved in the closing process. The company told Forrester that it believes it can fully automate the process within five years.

These advancements are not as much of a technological miracle as they may seem. The key is developing the curated knowledge base that such tools will draw from. “The algorithms are fairly well known, and they’re going to become commoditized,” says Le Clair. “What you need are domain experts to develop the right model for how humans interact with the machine so it can take advantage of human knowledge. We’re just at the point where we’re starting to see the knowledge bases and domain expertise needed to take this to the next level of being very real and practical.”

At the same time, there is a danger, according to a Forrester report released in June, that company leaders will get too caught up in the automation whirlwind and overautomate, thereby degrading the customer experience. “Those who think that ‘everyone is automating everything, so we should drive as much cost out of our business as possible’ will drive customers away,” the report said.

Down with People?

“A common denominator of RPA approaches is decoupling routine service delivery from labor arbitrage,” says Tom Reuner, research vice president, intelligent automation, at HfS Research. Translation: in an RPA-centric business environment, companies won’t have to think anymore about whether to offshore back-office processes to take advantage of cheaper labor. That’s because labor needs will be drastically reduced, and running a bot will cost the same — that is, not very much — everywhere.

And it’s not only offshore jobs that will go away. Forrester estimates that RPA and machine learning will cause the number of U.S. “cubicle workers” to decrease by 16%, or 12 million workers, by 2025. KPMG suggests the worldwide total could be as much as 100 million jobs.

However, Forrester said, the 16% of U.S. workers displaced will be partially offset by the creation of new jobs as a result of these technologies, equivalent to 9% of the current total cubicle jobs, for a net decrease of 7%. “Not transformative, but still a fair number,” says Le Clair.

But Wright suggests that there are alternatives to the “now we can cut heads” point of view. “Rather than remove people, some organizations will keep the headcount they have but take in a lot of extra work,” he says. For example, he told of a company that was providing a certain reporting service to one unit in the business. When robots came along, the company decided it would now be cost effective to provide the service to the entire business.

Shukla of Automation Anywhere offered an even rosier outlook for back-office workers. “The workforce will change and skills requirements will shift,” he says. “Our customers tell us they’re seeing sighs of relief from employees, who hate the mundane tasks they have had to do over and over. Imagine human employees metaphorically working next to software bots. When the humans have something that must be done repeatedly, they hand it off to a bot.”

A new digital workforce that makes the finance department more productive and handles tasks staffers would rather not? It sounds like an idea most finance departments would heartily embrace.

Building a Digital Army

There may be as many as 2,000 startup companies trying to marry robotic process automation with machine learning and artificial intelligence in a bid to fundamentally change the way we work.

But currently, a much smaller cadre of companies is dominating the field, including those providing basic RPA and those developing more advanced approaches. The lines between those categories are significantly blurred, but consider the following players to be worth investigating:

• Arago
• Nice Systems
• Automation Anywhere
• OpenSpan/Pegasystems
• Blue Prism
• Tata Consultancy
• IBM
• UiPath
• IPsoft
• Wipro
• Kryon Systems
• WorkFusion

Tuning Into the Voices in Your Practice

( Progressive Accountant ) Ira S. Rosenbloom, September 20, 2016 – We live in a world where voice recognition and voice activation are greatly appreciated. No matter what the size of your firm, voices play an important role in the well-being of your organization. Many practitioners are convinced that they know what is being said about their firm, and run their practice accordingly. But, it is important to hear what actually is being communicated, both internally, and to the outside world.

Post busy season seems to be the most practical time to process what is being discussed and not discussed. Here are several areas where you need to be listening, in order to drive the communication process:

1. Reception and Rapport – First impressions are often lasting ones. The dialogue that your receptionist and support staff creates with outside callers/inquirers will set the stage for the caliber of communication that will be reflected in your practice. The nature and quality of dialogue and level of satisfaction needs to be assessed, front and center. Too many accounting firms presume that their communication is solid because complaints are few. The fact of the matter is that you learn a great deal from complaints.

We live in a society where many client service functions have been outsourced and dehumanized, but when it comes to professional services, people want relationships and respect. Clients typically want to feel that the right arm and left arm are linked, and that they are in a stage of mutual awareness and concern. Listening and coaching the members of your organization will allow you to improve your service model, and establish a firm personality that will be endearing and effective.

2. Client Chatter – Clients who pay their bills in a timely manner are always welcome in CPA firms. Paying on time, referring other clients, and reaching out for additional help or advice are qualities that place these particular clients in the "Hall of Fame." Inspiring a client to turn to your firm for additional work requires a comfort level, on their behalf, to engage you in conversation, and an awareness and perception that some good can come from turning to your firm.

Helping clients facilitate positive conversation about your firm is easiest when they perceive you as good listeners, and feel there is a mutual bond. Your "A" and "B" clients must be approached with consistency and holistic dialogue. Develop a regimen for client conversation and create an impact by delving into what keeps them up at night and how they measure success.

The more you probe, the more you should be listening. The more you listen, the more your clients will feel comfortable and, as a result, the constructive chatter will begin to flow.

3. Leadership Language – Owners and leaders should certainly be united around quality and client advocacy, but they also need to be in agreement on the value that each client brings to the table. Leaders should express support for each other and reserve criticism for private venues. A successful firm will foster formal dialogue, group meetings and forums, informal conversations, and mentoring and buddy programs. Listening to what is being said in your firm is just as valuable as what is being discussed outside your firm.

However, facilitating remarks that usually are not forthcoming is even more valuable, and can help create the kind of comfort necessary for people to express what is on their minds. Internal arguments can be very healthy, if conducted with tact and respect.

The language of the firm's leadership should support a collaborative effort to meet priorities and nurture future leaders. Transparency, pertaining to achievements and goals, will generate a dialogue that can be easily monitored, and used for motivation and success. Compensation systems and goals programs typically establish the message and results that can produce a hearty conversation, among the leadership, and can provide a great deal of benefit to the firm.

4. Referral Rhythm – The perpetuity of an accounting firm, in large part, is driven by expanding and recurring client services. The rhythm of referrals needs to be bold, and in tune with your skills. The more passionate that a referral source is about your firm, the greater the likelihood of quality leads closing in your favor. Establishing an expectation for your referral sources, individually, and priming them with adequate information to feed you the right opportunities is key in establishing the right rhythm.

Compile a list of the 10 reasons to work with your firm by listening to your referral sources, and your clients. Focus groups and surveys will generate valuable market intelligence for you to capitalize on, and use in the future.

5. Employee Expressions - Loyal and committed employees are common in successful CPA firms, but turnover and underachieving employees are often issues. Understanding the learning preferences and communication process, of your employees, will allow you to optimize the potential for strong production and satisfaction. Engaging your employees in structured conversations, pertaining to their hot buttons and the challenges they confront, will channel important and much need information. Encouraging your staff to maintain logs with questions, thoughts, and reactions will store valuable knowledge that you can draw upon later to advance the progress of your personnel.

Human Resource consultants should be supporting your firm, as well, with effective evaluation forms and techniques, interview training and feedback programs. The better you understand your staff, the greater your ability to retain the best and brightest talent, which will enable you to provide stronger client service.

Numbers are the mainstay of an accounting firm, and the metrics are important management tools. The communication and "buzz" concerning your practice are leading indicators, and need to be mined just as diligently as the metrics. Your best clients, staff, and referral sources expect you to speak up if there is an issue. You must communicate that you expect the same from them, and that you are ready to hear them, loud and clear.

FASB Proposes Additional Revenue Recognition Corrections

(Journal of Accountancy) September 19, 2016 – FASB’s efforts to clarify its new revenue recognition standard continued Monday when the board proposed technical corrections and changes to the standard.

The proposal covers four issues that have arisen out of the standard FASB and the International Accounting Standards Board issued in a convergence project in May 2014. As a result of questions raised with the boards’ joint transition resource group, the boards delayed the standard’s effective date and also issued clarifications to it.

Although the clarifications were converged in some cases, the boards did not always agree on which issues needed to be clarified.

The exposure draft FASB issued Monday addresses four additional issues with respect to FASB Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts With Customers:

Loan guarantee fees. The proposed amendments would clarify that guarantee fees within the scope of ASC Topic 460, Guarantees, (other than product or service warranties) are not within the scope of Topic 606.

Contract asset versus receivable. The proposed amendments would provide a better link between the analysis in Example 38, Case B in Topic 606 and the receivables presentation guidance in Topic 606.

Refund liability. The proposed amendments would remove a reference to the term “contract liability” from a journal entry in Example 40 in Topic 606.

Advertising costs. The proposed amendments would reinstate the guidance on the accrual of advertising costs in Subtopic 340-20, Other Assets and Deferred Costs—Capitalized Advertising Costs.

Comments on the proposal can be submitted by Oct. 4 through FASB’s website.

AICPA Proposes Criteria for Cybersecurity Risk Management

( AICPA ) September 19, 2016 – In an important step toward helping businesses and organizations report on their cybersecurity risk management efforts, the American Institute of CPAs’ (AICPA) Assurance Services Executive Committee (ASEC) is exposing two sets of criteria for public comment.

The first exposure draft, Proposed Description Criteria for Management’s Description of an Entity’s Cybersecurity Risk Management Program, is intended for use by management in designing and describing its cybersecurity risk management program and by public accounting firms to report on management’s description. The second, Proposed Revision of Trust Services Criteria for Security, Availability, Processing Integrity, Confidentiality, and Privacy, outlines revised AICPA trust services criteria for use by public accounting firms that provide advisory or attestation services to evaluate the controls within an entity’s cyber risk management program, or SOC 2® engagements. Management also may use the trust services criteria to evaluate the suitability of design and operating effectiveness of controls.

“In response to growing market demand for information about the effectiveness of an entity’s cybersecurity risk management program, the auditing profession, through the AICPA, is developing a common foundation through the issuance of criteria and guidance,” said Susan S. Coffey, CPA, CGMA, AICPA executive vice president for public practice. “Our primary objective is to propose a reporting framework through which organizations can communicate useful information regarding their cybersecurity risk management programs to stakeholders.”

The development of a common set of criteria will pave the way for the introduction of a new engagement that CPAs can use to assist boards of directors, senior management, and other pertinent stakeholders as they evaluate the effectiveness of an entity’s cybersecurity risk management program. The AICPA, with the assistance of the Center for Audit Quality, has sought feedback on the proposed engagement, referred to as a cybersecurity examination, from key stakeholder groups throughout the process, and will continue to seek input as market needs evolve. Because of the profession’s commitment to continuous improvement, public service, and increasing investor confidence, the engagement will be voluntary, flexible, and comprehensive.

“The existence of multiple, disparate frameworks and programs for evaluating security programs and their effectiveness, as well as different stakeholders’ preferences for each, has created a chaotic environment that only increases the burden on organizations trying to communicate how they design, implement and maintain an effective cybersecurity risk management program,” according to Chris K. Halterman, chair of the ASEC’s Cybersecurity Working Group and an executive director, advisory services with Ernst & Young LLP. “The AICPA’s cybersecurity engagement will be a consistent, market-driven approach for CPAs to examine and report on an entity’s cybersecurity measures that addresses the information needs of a broad range of users.”

The exposure drafts are the CPA profession’s latest contribution to widespread efforts to help management and boards of directors address what has emerged as a risk for organizations of all sizes, and in all sectors. ASEC’s work is just one aspect of the profession’s multi-faceted approach to support CPAs in a leadership role and provide the resources they need to be successful in helping their companies and clients manage cybersecurity risk.

Comments on the cybersecurity attestation exposure drafts are due by Monday, December 5. Comments about the proposed Description Criteria should be sent to Mimi Blanco-Best at mblancobest@aicpa.org. Comments regarding the proposed revision of Trust Services Criteria can be directed to Erin Mackler at emackler@aicpa.org.

For additional information on the CPA profession’s cybersecurity efforts, visit the AICPA’s Cybersecurity Resource Center.