Association of Government Accountants
The Central Kentucky Chapter
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Association of Government Accountants
The Central Kentucky Chapter
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June 2003 - Volume XXIV, Issue 12 |
The President’s
Message
By Roy Hunter, President
I
would like to begin my first message by congratulating Cindy Upton and all
other Chapter Executive Committee (CEC) members for achieving gold status for
our Chapter. This is not an easy feat
for a small chapter under the new rules.
So feel free to pat yourselves on the back. Furthermore, I would like to thank all of those brave souls who
have volunteered for positions on the CEC this year. I look forward to the coming year and am counting on all of you
to make me look good.
If
anyone else would like to be on the CEC this year you are in luck. The position of programs director is still
available. The programs director is
responsible for getting speakers for our monthly membership meetings. So if this sounds appealing to you please contact
me or any other CEC member.
As most of you know, the Central Kentucky Chapter hosted the
Southeastern Regional PDC in Louisville last month. Though attendance was not as good as we had hoped, I was one of
the lucky people who did attend and I feel that I definitely got my moneys worth. The program was excellent and very relevant
to those of us working in the governmental audit/accounting world. On day one Bill Broadus brought us an
informative and sometimes entertaining look into the new Yellow Book revisions. Betty King informed us how to better analyze
government financial statements and then explained proposed changes to
reporting requirements.
Day two began with B. J. Bellamy explaining all of the ways that
hackers attack our computers and what we can do to stop them. Then, Russell Hinton, Georgia’s State
Auditor, brought forth a very insightful look into coming changes in single
audits. After lunch, Ed Ross and Jan
Sylvis, Controllers for Kentucky and Tennessee respectively, put on a joint
session with a look at the budget crises faced by many state governments today. And last but not least was our very own
Cindy Upton who led an excellent session on audit changes brought forth by the
AICPA and the US Government Accounting Office.
The sessions weren’t the only great thing about the PDC. On Monday night many of the attendees went
to Caesar’s Casino. We had a delicious
meal and then made “contributions” of varying sizes to the Indiana
economy. We had a blast! I would like to extend my thanks to the
speakers as well as all of those who worked so hard on the PDC.
The May Banquet
By Mary Montgomery, CGFM
Coordinator
Mr. Bob Crowl, AGA Regional Vice President spoke to the Central
Kentucky Chapter and guests on May 5, 2003 at the Capital Plaza Holiday Inn
Hotel. Mr. Crowl recognized the chapter president, Cindy Upton, for helping the
Central Kentucky Chapter attain over 14, 000 points during her tenure as
president. He also recognized the Chapter newsletter for having good technical
articles.
Mr. Crowl provided updates on regional news:
Mr. Crowl also provided some national news updates:
The scholarship committee met and reviewed the scholarship
applications. Cassie Keffer was awarded the Central Kentucky Chapter
Scholarship of $500. Rick Waddle, Treasurer, presented Ms. Keffer with the
check. Congratulations Ms. Keffer!
Cindy Upton recognized the Chapter officers for their hard work
in the past year. She also introduced the new chapter president, Roy Hunter.
Mandatory Auditor Rotation
By Tom Crouch, CPA, CIA,
CISA, and Attorney and Otis Singleton, CPA
Publicly traded companies are not required to change
periodically which CPA firm performs their annual financial audit. However, CPA firms are required to rotate
the audit partner assigned to an audit after five years. Should there be mandatory CPA firm rotation
instead of audit partner rotation?
Many publicly traded companies have used the same CPA firm for
their financial statement audit for decades.
The companies would only change the CPA firm performing their audit for
a good reason. The reason might be as
simple as a shift in the personnel by the CPA firm or the company. A more serious reason might be a strong
difference of opinion regarding the proper accounting for a financially
significant item. The CPA firm may
decide not to renew an engagement due to concerns about their potential legal
liability exposure related to a particular audit client. A publicly traded company dropped by their
CPA firm probably would be a high-risk client for the CPA firm accepting the
new company. In essence, the new client
would be a high-risk client because a CPA firm either dumped them or they were
“opinion shopping.”
Some
CPA firm partners suggest audit risk is higher during the first or second year
of an audit. More audit failures occur
when a CPA firm is new to an audit. The implication is that the root cause of
the CPA firm’s audit failure is the newness of the audit and lack of experience
by the CPA firm. The publicly traded
company may have switched CPA firms because the company is a high risk, instead
of the CPA firm being high risk.
Another possibility is the company may believe that changing auditors is
in the best long-term interests of the stakeholders. Under current regulations, which do not require rotation, new
audit engagements have higher audit risk; however, that would not be true if a
firm takes on a new client due to mandatory rotation. Along with mandatory
rotation, CPA firms should be required to disclose detailed client information,
including work papers to successor auditors so that the learning curve is not
as steep and audit risk is reduced (the predecessor auditor ordinarily
permits the successor to review working papers, but there are limitations on
this and the audit client may need to authorize access).
CPA firms are generally opposed to mandatory auditor
rotation. However, the CPA firms that
audit public companies have just recently been required to rotate the audit
partner for an engagement once every 5 years. CPA firms do not want audits to
be shifted to other firms after 5 to 10 years.
There may even be some CPA firms that would like to violate the spirit of
the new rule by rotating the assigned audit partner after the fourth year and
bringing them back for the sixth through the tenth years. It is only natural for the CPA firms to view
their audit clients as customers that have been acquired and they wish to
retain these customers. The higher the
rate of customer retention, the smoother the staffing needs, the better trained
the audit staff for the engagements, and the more certain the CPA firm profit
level. What we are starting to see is a
shift from auditors providing a service to auditors becoming overseers or
regulators of businesses.
The Securities and Exchange Commission could require publicly
traded companies to disclose in their annual reports which CPA firms conducted
their annual financial audit during each of the last 30 years. Investors may be
able to make logical inferences from the disclosure. For example, if a company has had the same auditor for 30 years,
the investor may decide that the relationship between the company and the CPA
firm is too cozy. If a company has
changed auditors every 3 to 6 years, the company may be using aggressive
accounting practices, which may be causing conflict with their auditors. If such disclosures were required, the
information might indirectly push for more appropriate practices.
The younger accountants and auditors prefer mandatory auditor
rotation every five years. The more
seasoned accountants and auditors prefer mandatory auditor rotation at least
every ten years. The correct answer
probably is somewhere between these numbers.
As noted earlier, many accountants and auditors believe that
auditor rotation should be mandated.
Even though the companies and the CPA firms may oppose mandatory auditor
rotation, a majority of accountants and auditors probably believe that most
investors are best served by periodic rotation of auditors. The publicly traded companies should be
required to rotate CPA firms once every seven years.
Copyright
© 2003 by Tom Crouch and Otis Singleton - This article may be forwarded via
e-mail or fax. Also, the article may be
reprinted or posted on a web site, so long as the copyright is shown. All other rights are reserved.
By An anonymous member
Kentucky
isn’t the only state with a budget problem. At the 2003 Southeastern Regional
Professional Development Conference in Louisville, KY, Jan Sylvis, the Chief of
Accounts for the State of Tennessee, and Ed Ross, Controller for the
Commonwealth of Kentucky, presented information on the budget crises facing
states across America. Economic troubles, rising unemployment, nervous
investors, and lower than expected revenues are some causes of the budget
crises in many states. States are spending money carefully to ensure that
valuable public services are available when needed.
According to Mr. Ross, Kentucky’s four main spending areas are
K-12 and postsecondary education (59%), Medicaid (11%), criminal justice (9%),
and the rest of government (21%). For fiscal year 2002, K-12 education was
spared any budget cuts, postsecondary education was cut 2%, Medicaid was cut 2%
(meaning 2% will be provided by other revenue sources), and most other state
agencies were cut 5%. The consequences of these budget cuts are increased
tuition costs at state colleges and universities, higher health insurance costs
and lower or no wage increases for state employees, and delayed funding for
some programs.
Ms. Sylvis presented some of the ways states are addressing the
budget shortfalls, including:
Hiring freezes,
Early retirement incentives,
Reducing the number of state employees,
Instituting spending caps,
Reducing funding to higher education;
Delaying capital projects,
Delaying highway construction,
Cutting select programs completely,
Expending the rainy day fund,
Renegotiating contracts,
Tax amnesty,
Increasing taxes,
Enhancing revenue collection enforcement, and
Selling assets.
Many states are depleting one-time cash pools, such as tax
amnesty programs and rainy day funds. This leaves governors and legislators with
the options of more long-term solutions such as raising taxes and additional
government spending cuts. In the coming
years, harder choices and more sacrifices will have to be made concerning tax
increases and cutting programs and spending.
Our Members
Dan
Flaherty recently accepted a position with the Kentucky Department of
Agriculture’s Division of Food Distribution.
Dan’s primary responsibility is to monitor and coordinate the Kentucky
School Lunch Program. The position
promises to provide greater rewards as well as new challenges! Dan's new office is at 107 Corporate Drive,
room #123, and he can be reached at 502 573-0282 ext. 278 or via email at: dan.flaherty@kyagr.com. Good luck with your new job Dan!
AGA Seeking Director of Finance and
Administration
AGA, the premiere educational
association for government accountability professionals, seeks hands-on
director of finance and administration to manage all budget/financial
operations related to $3.4 million budget (finance reports, cash management,
taxes, audits, payroll), insurance/pension plans, contracts, and building and
IT services. Supervises accounting assistant. Liaises with Finance & Budget
Committee. The ideal candidate has 5+ years as a financial manager in
non-profit membership association with Great Plains/iMIS experience, accounting
or business degree. CPA preferred. Ability to tackle challenges, organize
projects and produce results. Work w/great team in Del Ray, Alex. AGA offers a
competitive salary and benefits – medical/dental, pension, flextime, and
tuition reimbursement. Send resume and salary requirements to:
lthatcher@agacgfm.org or fax to 703.548.9367. WWW.AGACGFM.ORG
A final farewell from Cindy
By
Cindy Upton, Past President
The Central Kentucky Chapter hosted
the Southeastern Regional Professional Development Conference (PDC) on May 12
and 13 at the Galt House in Louisville.
Despite tight travel and training budgets, we were able to provide an
excellent program, 16 hours of governmental continuing professional education,
good meals, and great fun. And,
regardless of the term "regional" in the title of the PDC, all who
attended (except one) were from Kentucky.
The PDC featured speakers from Kentucky, Tennessee, Georgia, and
Virginia. All were rated highly by the
participants.
For those of you who were unable to
attend the PDC, rest assured that your Chapter will once again have the annual
Governmental Accounting and Auditing Update in October. We look forward to seeing you there.
This
column is my final installment as president of the Central Kentucky
Chapter. It has been my pleasure to
serve you. Join me in welcoming Roy
Hunter as our new president. As always,
feel free to contact any member of the Chapter Executive Committee if you have
questions or suggestions.
The AGA Chapter
Newsletter Awards
AGA
is pleased to recognize the recipients of the 2002-2003 Chapter Newsletter
Awards.
Awards for Printed Newsletters
GROUP
A
Christina M. Lilly, CGFM,
and Newsletter Editor
Leroy A. Chester,
Newsletter Editor
GROUP B
First Place: AGA Cleveland Chapter - Donna M. Wolfe,
Newsletter Editor
Honorable Mention: AGA
Trenton Chapter - Michael W. Henry, Newsletter Editor
GROUP C:
No Print Entries
GROUP D
First Place: AGA Ft. Worth Chapter - Glen Meyer,
Newsletter Editor
Honorable Mention: AGA
Orange County Chapter - Barbara A. Jalbert, Newsletter Editor
Floris Pittler, CGFM, Newsletter Editor
GROUP A
First Place: AGA
Sacramento Chapter - Kiran Rai, Newsletter Editor
Honorable Mention: AGA Nashville Chapter - William A. Hancock
Jr., Newsletter Editor
First Place: AGA Dallas
Chapter -
A. Raylene Mason, CGFM,
and Newsletter Editor
Honorable Mention: AGA
Austin Chapter - Susan Phillips, Newsletter Editor
Donna Hopson, Newsletter
Editor
GROUP C
First Place: AGA
Seattle Chapter
Erin M. Cassady,
Newsletter Editor
Honorable Mention: AGA Southern Wisconsin Chapter - Mary B. Williams, Newsletter Editor
GROUP D
First Place: AGA Detroit
Chapter Terri L. St. Antoine, Newsletter Editor
Honorable Mention: AGA Quad Cities Chapter - Kevin
Stevens, CGFM, and Newsletter Editor
GROUP E
First Place: AGA
Roanoke Chapter - Frances B. Vaught, CGFM, and Chapter President
Of
the Central Kentucky Chapter
For
the month ended April 30, 2003
By
Rick Waddle, Treasurer
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Central Account |
Education
Account |
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Beginning Bank Balance
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$5,394.32 |
Beginning Bank
Balance |
$500.00 |
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Revenue: |
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Revenue: |
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Dues for Dec., Jan., & Feb. |
89.60 |
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PDC
Registration Fees |
$2,250.00 |
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Interest |
4.29 |
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Total Revenue |
93.89 |
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Expenses: |
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Expenses: |
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Total Expenses |
0.00 |
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Ending Bank Balance |
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$5,488.21 |
Ending Bank
Balance |
$2,750.00 |
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Chapter Executive Committee
Office CEC Officers E-mail Address Phone President Roy Hunter (502) 564-8100 President-Elect Lee Ann Watters (502) 695-1040 Past President Cindy Upton (502) 564-7750 Secretary Phil Nally (502) 573-0050 Treasurer Rick Waddle (502) 564-7750 Program Coordinator ? (502) 564-8100 Early Careers Director Sharon Parrish (502) 564-6910 Education & Training Coordinator Cindy Upton (502) 695-1040 Newsletter Editor Jennifer Harper (502) 573-0050 Historian Don Fields (502) 573-0050 Community Service Rex Gregory (502) 564-7334 Attendance Coordinator Linda Sagraves (502) 564-7334 Membership Coordinator Amy Small (502) 573-0050 CGFM Coordinator Mary Hudson (502) 564-2532 Website Development Coordinator Dan Flaherty (502) 564-8890 (502) 291-3889 Central Kentucky AGA Website
