Tuesday, January 31, 2006

Top Ten Technologies for 2006.

CPA Firm Technology Blog recently posted the top ten technologies for 2006 as provided by the AICPA IT section. Information Security led the list with new items including Assurance and Compliance Applications, IT Governance, Spyware Detection and Removal and Privacy Management.

Accounting Springs to Life in Iraq

The U.S. Agency for International Development recently provided a seven-week intensive training program in international accounting standards to 558 Iraqi accountants with an exam on worldwide accounting standards at the end. The goal was to show sufficient improvement in the accounting infrastructure to allow Iraq to participate in the World Trade Organization. Additionally, the Journal of the College of Administration and Economy, a journal which sounds to be academic in nature (perhaps similar to the Accounting Review) will resume publication with an emphasis on functions of a market economy, tests of accounting theories, statistical analysis of financial issues and research on decision-making.

AEI: Don't Expect Big Initiatives in the State of the Union

Administration spokesman Scott McClellan told the conservatively-oriented American Enterprise Institute not to expect drastic initiatives in President Bush's State of the Union address this evening. Bush is expected to push for expanded Health Savings Accounts and wants to continue on the path towards making tax cuts permanent, but will not bring forth anything nearly as dramatic as last year's Social Security reform. In a somewhat related development, President Bush has chosen Edward Lazear to be his top economic advisor.

At a time where most political analysts see the President as politically shaky, caution on the tax front is probably prudent. Nevertheless, tax reform and Social Security reform cannot be put off indefinitely.

Hedge Funds--For Pensions??

Peter Gilbert, chief investment officer of Pennsylvania's State Employee' Retirement System, has been bringing in Wall Street whiz kids and pumped 23% of system assets into hedge fund. To those that would think that risky investments like hedge funds are counter-intuitive for a pension, essentially the ultimate security investment, Gilbert counters that Pennsylvania is both underfunded and has a poor employee/retiree ratio. Even annual returns of 8.5%, quite gaudy in these days of relatively low inflation, leaves the PSERS $1 billion short in assets to cover future expenses. Moreover, other states, including Idaho, are following Gilbert's lead.

This story is another example of the basket case that is defined benefit pension plans. There is potential for monumental disaster here with taxpayers throughout the country having to bail out the Keystone State retirees. Even if Gilbert's plan works reasonably well, PSERS is at best treading water (and doing so with limited chances to continue indefinitely)--promises made by past politicans just were not realistic.

Monday, January 30, 2006

Accounting Programs Get CFO Seal of Approval

A recent survey by Accountemps provided good news for college accounting programs through the country. 71% of chief financial officers believed that graduating accounting majors were as prepared or better prepared than comparable graduates ten years ago, with 19% saying that the graduates were much better prepared. Special commendation was given for new courses in information technology, ethics, foresnic accounting and internal auditing.

Saturday, January 28, 2006

Some good ideas for personal tax savings

Generally, sites such as Tax Guru, Taxable Tax and Roth CPA are the websites where one would expect good tax savings ideas, but Free Money Finance is running a nice series on tax savings right now. Included are recent posts such as: "Tax Savings for Education," "Free Tax Filing Availability Shrinks, Savings Still Possible" and "Tax Implications of Medical Expenses."

Posting plans

From now until April, I hope to post 7-8 times per week with (I hope) a minimum of five posts per week. Posting on personal finance issues will probably become less frequent, but I plan to continue limited personal finance posting.

Wednesday, January 25, 2006

Baucus: Time to Update International Tax Law

Ranking Senate Finance Committee member Max Baucus (D-MT) has proposed a seven-point program to adjust the tax code to make U.S.-based businesses better able to compete internationally. Baucus is prepared to offer bills regarding: transfer pricing rules, cost recovery periods for business assets, tax law on oversea tax havens, a new federal agency to encourage investment in education, energy, savings and trade, possible tax incentives for American students studying science or engineering, reworking trade rules and making the savers tax credit permanent. Baucus was less enthusiastic about President Bush's plan to expand health savings accounts, pointing out that low-income Americans may not be able to afford contributing to an HSA.

The IRS Responds to the "Frozen Refund" Controversy

IRS Commissioner Mark Everson responded today to the mounting criticism of the Questionable Refund Program of the Criminal Investigation Division by ordering a review of the program. Everson said that in the near future improved notification and better processing--to reduce the number of frozen refunds--could be expected. Although acknowledging flaws, the IRS restated that the program was reducing tax losses by half a billion annually and that considerably less than 1% of all individual tax returns were affected, with less than a quarter of 1% of all returns having refunds delayed by over a week.

I certainly am no fan of tax fraud or evasion and the program has had some impact on reducing tax losses. Nevertheless, the reforms announced today MUST effectively solve the notification problem and significantly reduce the length of wait for legitimate refunds which are frozen if the Questionable Refund Program is to have any political viability or credibility.

Tuesday, January 24, 2006

Breaux: Changes in Healthcare Tax Law Will Be Marginal, not Massive

Well-respected former Senator and taxwriter John Breaux (D-LA), now on the President's Tax Reform Panel, believes that in spite of Administration proposal for major changes in healthcare and Social Security, actual changes will be incremental rather than sweeping. Healthcare is presently seen as the biggest "tax expenditure" in the budget, with spending equivalent of over $140 billion. A particular concern of Breaux is the among of tax savings going to taxpayers with income exceeding $100,000; Breaux proposes a ceiling for healthcare tax deductibility of $5,000 for individuals and $11,500 for families. A supporting statement comes from the Heritage Institute's Glenn Hubbard, a former member of the Council of Economic Advisers under Bush. Hubbard says that the present law basically subsidizes prepaid healthcare.

USCoC: National Auditors Too Concentrated and Too Regulated

The United States Chamber of Commerce released a statement today claimed that the contraction of any other large CPA firms (now down to the Big Four) would undermine public confidence in the audit profession. Among proposals to bolster competition is to allow Big Four firms to bid on audits where they have recently provided services disqualifing under Sarbanes-Oxley, better access to legal liability insurance for auditors and incentives to encourage publicly-traded companies to use large but not "Big Four" auditors. The Chamber also criticized the treatment of Arthur Andersen after Enron, called for tort reform in the auditing industry and asked that implementation of PCAOB Standard 2, which instructs auditors on the implementation of Sarbanes-Oxley, be clarified or modified.

In my opinion, some but not all of the Chamber's comments are valid. Greater competition for audits probably would be beneficial to the profession and there is some evidence that large, non-"Big Four" firms are being engaged for an increased number of public company audits--along the same line, the PCAOB should be encouraged to continue its forums for smaller CPA firms and small public companies. In some states, tort reform is still a valid issue, although some improvement has already occurred on this front. There are also legitimate questions about the cost-benefit of some facets of implementing Sarbanes-Oxley. On the other side, something akin to Sarbanes-Oxley and the PCAOB probably is necessary to maintain confidence in the accounting profession and the concept of allow companies recently providing disqualifying services to bid on public company audits may damage the perception of auditor independence just when the auditing profession was making a comeback in public credibility.

Friday, January 20, 2006

Same-sex unions and tax ramifications

Joel Schoenmeyer, a Chicagoland attorney who does a very nice "Death and Taxes" blog (the fact that it was not in the "12 Blogs of Christmas" is a testament to the quality of tax blogging) mildly fisks a Andrew Sullivan article about estate planning for same-sex couples. Joel pointed out that incompetence, not discrimination against gays/lesbians/homosexuals, was the controlling factor in the judges' decision.

The post foreshadows more daunting times ahead. As an increasing number of states choose to accept same-sex marriage and civil unions (Possibly equivalent to common-law marriages? Help me, legal experts.) state tax writers and eventually the IRS will have to address a number of tax provisions traditionally (and presently) reserved for heterosexual marriage. I expect a lot of rancor here, I personally would like to occupy ground somewhere between James Dobson and Andrew Sullivan on gay/lesbian/homosexual issues but at times this seems difficult to do (the middle ground seems to be a no man's land) since both sides strongly display an "if you are not with us, you are against us" mentality.

On a lighter note, Tax Prof links to a Professor Bainbridge (http://www.professorbainbridge.com/2006/01/kennedy_shocker.html) spoof of a Supreme-Court oriented National Enquirer cover.

Thursday, January 19, 2006

Senate Finance Committee: What to do (with Taxes) in 2006?

As the Senate Finance Committee returns to action, the priorities in 2006 appear to mirror those of the prior year: reconciliation and extension of expiring provisions, addressing the impact of the AMT on upper middle income (and in some cases, middle income) taxpayers and whether more substantial tax reform should occur. General consensus (with some opponents) appears to favor an AMT "patch" to reduce the impact of this tax on upper middle income taxpayers, while the dividend and capital gain tax rate reduction extensions continue to be controversial.

Wednesday, January 18, 2006

Tom Allen Appointed 2006 Chair of FASAB

The Federal Auditing Standards Advisory Board recently appointed Tom Allen its chairman for 2006. Mr. Allen previously served as Chairman of GASB for nine years (1996-2004) and currently is on the accounting faculty at Weber State University. Before that, Mr. Allen had been State Auditor for Utah and the Chairman of the AICPA Members in Government Committee.

PCAOB Continues Small Business Conferences, Sets 2006 Dates and Places

The Private Companies Accounting Oversight Board (www.pcaobus.org) announced that they would continue Small Business Conferences, where small accounting firms can get CPE and learn about the impact of PCAOB rules on smaller businesses. There are eight conferences scheduled in 2006, with half of them having a seperate program available for executives of small publicly-traded companies. There is no admission charge, but preregistration is required. The series of conferences starts next Monday and Tuesday in Santa Monica, CA; other stops include Fort Lauderdale at the end of February, San Antonio in early May, Seattle at the start of summer, Boston in early September, Philadelphia in mid-October, New York City early in November and finally Chicago in early December.

Tuesday, January 17, 2006

Christopher Cox Surprises with Disclosure Expectations

Pundits expecting the new SEC chairman to cozy up to big business have been surprised as he levied tough penalties on corporate wrongdoers and resisted efforts to water down reforms in hedge funds, mutual funds and stock options. Additonally, Cox has won points within the SEC for his efforts to achieve consensus. Another surprise is in store, one year from now, large publicly-traded corporations will be required to report in understandable form all compensation (cash and otherwise) paid to top executives. A possible sticking point--how will retirement and severance packages be calculated?

BW's Gleckman: Common-Sense Simplification

Howard Gleckman reviews the history of the itemized deduction (Pease) and exemption (PEP) phase-outs, starting with Bush 41s fatal acceptance of a tax hike in 1990. The Pease and PEP provisions were viewed as ways of hiding the tax increase. In 2001, Congress relooked at these phase-outs in tax cut legislation and decided to gradually eliminate the phase-outs but only through 2010. Given this less than glorious history, Gleckman understandably recommends the full repeal of the Pease and PEP phase-outs and a corresponding hike in high-income tax rates.

Gleckman's premise makes a lot of sense. I would add two additional points: [1] while eliminating errors from the 1990s, get rid of the 1993 provision which taxes 85% of Social Security for those with incomes above about $50,000 (thus hitting middle-income retirees). The related 50% provision can perhaps be justified under the premise that most Social Security recipients had half of their funding provided by their employer; there is no reason other than a revenue grab for the 85% rate. [2] look for ways to slow down entitlement spending to make up for at least some of the lost revenue.

Tax Compliance: A "Hidden" Cost of Collecting Revenue

The Tax Foundation released a report indicating that in 2005 tax preparation and compliance cost $265 billion (about 6 billion hours of time) which is about 2/9ths of the revenue received. In ten years, the cost will approach $500 trillion (closer to $400 inflation-adjusted). By comparison, the cost exceeds the annual revenue of Wal-Mart and time spent exceeded combined productive hours for the aircraft, auto, computer manufacturing and steel industries.

Monday, January 16, 2006

Best of blogs--Start of 2006

This very sporadic feature is back:

Accounting Observer--"A Digital Carrot From the SEC" discusses the SEC's latest attempt to encourage the use of XBRL. [12]

CPA Trendlines--Six Steps to Get Your Business to the Next Level--Rich Tedford emphasizes the following for enterpenuers: working on the business not in it; implementing systems; implementing a marketing plan; marketing to present clients; tracking marketing efforts and following up on present and prospective clients. [9]

CPA Tech Blog--"Amazon and Refundplease.com"--Blogger Brian gets an unexpected $50 in the mail. [11]

Provident 360--"Computer Audit Assisted Techniques"--A primer on techniques, including such things as continuous auditing, integrated test facility and generalized audit software program, that allow a better than one using the traditional "around the computer" approach. [3]

Consumerism Commentary--"Your Secret Bankruptcy Score"--Flexo indicates that this has been in existence for about 20 years and provides a formula that estimates the score. Experian is considering making scores available soon (probably for fee). [13]

Free Money Finance--"Three Keys to Choosing the Best Tax Pro"--Money Central is cited here: the tax man should ask good questions, understand your level of risk aversion and be a proactive teacher emphaisizing legal opportunities to save on taxes without sacrificing income. [16]

Roth CPA Updates--"This Week in Tax Crime"--A look at tax fraud cases ranging from Richard Hatch of "Survivor" fame to the KPMG tax shelter case. [13]

Tax and Business Law Commentary--"Notes on Federal Spending"--Effective use of statistics to indicate that entitlements, not discretionary domestic spending, is the primary nonmilitary source of deficits. [13]

Tax Prof--"Martin Luther King, Jr. and Tax"--A look at the use of state tax departments in several states to discourage Dr. King's efforts at obtaining civil rights. [16]

Friday, January 13, 2006

"Advisory Board" Lists Hot Topics for 2006

The Advisory Board, a well-connected group of practitioners and consultants, peg personnel development and retention, mergers and acquisitions within CPA firms and growing use of technology as the key issues for 2006. Included in these issues will be subissues such as employee and management compensation, a push to implement merit pay (in part based on practice growth) and increased importance of document management systems. Merger forecasters expect an active M&A season, especially among small and mid-sized firms, with acquisition prices reaching double gross fees in some cases.

Following up on the QRP

See also "Has an IRS Anti-Fraud Program Run Amok?" from Wednesday.

In the wake of Nina Olson's criticism of the Questionable Refund Project (QRP), additional voices have joined the discussion. Former Senator Bob Kerrey (D-NE), a member of the IRS Reorganization Committee during the 1990s, criticized the apparent tendency of the QRP to target low-income taxpayers. Present Senate Finance Committee chair Charles Grassley (R-IA) was disturbed about the secrecy and lack of due process. David Keating of the conservative-leaning National Taxpayers Union, expressed concern about the slow processing of frozen returns, citing a median time of eight months to issuance of refunds. Obviously, this would be particularly hard on taxpayers with lower incomes. Meanwhile, the Criminal Investigation Division of the IRS defended the program, saying that Ms. Olson had overstated the problem and that the program had saved $5 billion in tax revenue.

It would seem at the very minimum that a better process for notifying taxpayers of deferred returns should exist. Moreover, justified refunds delayed by the QRP by more than 45 days should earn interest based on present IRS procedures.

Thursday, January 12, 2006

Fraud on the Bayou?

Note: Thanks to www.agacgfm.org for providing the link to GovExec

The Department of Homeland Security reports that 330 cases of possible fraud have been opened, 77 indictments handed down (65 since the end of October) and 11 convictions of fraud have occurred in the wake of Hurricane Katrina. Part of the strategy to fight fraud has from a Hurricane Audit Task Force bringing together auditors from a number of different Federal agencies. About 5,000 Federal contracts amounting to $8.3 billion are under special scrutiny. One of the sources of concern is the number of contracts with limited or no (single-s0urce) competition with about 550 contracts falling into the limited or no competition category.

Two important stories from the SEC

In the first story, the troubling exodus of experienced SEC leaders continues as Finance Director Alan Beller departs for the private sector. Among Mr. Beller's contributions were leadership on facilitating deregulation of foreign business issues, increased disclosure of executive compensation, greater Internet delivery of proxy materials and the start of the interactive (XBRL) reporting initative.

The second story is more sanguine, interested companies have until February 1o to volunteer for participation in an XBRL (interactive reports) study where participants receive expedited reviews to companies which allow XBRL documents to be posted as exhibits. The SEC has special interest in banking, insurance and commercial/industrial enterprises.

GASB Takes Statement 45 to National Public Radio

GASB Chairman Robert Attmore was interviewed by NPR yesterday about new GASB Statement 45, which addresses postretirement benefits other than pensions. An audio transcript of the interview is available at the link included in the title above.

Wednesday, January 11, 2006

Has an IRS Anti-Fraud Program Run Amok?

IRS Taxpayer Advocate Nina Olson has sharply criticized the Questionable Refund Project (QRP) as failing to protect taxpayers' rights as well as for taking too long to reach resolutions and being overly weighted toward low-income taxpayers. The QRP was designed by the Criminal Investigation branch of the IRS to reduce tax fraud through what appears to be a mathematical model. The biggest problem with the QRP is that it appears that taxpayer refunds are frozen without notice to the taxpayer. Olson believes that about 120,000 refunds were frozen in 2005 and perhaps as many as 2 million over the last five years. Elizabeth Atkinson of the Community Tax Law Project asserts that the program seems to target low-income taxpayers.

While fighting tax fraud is a legitimate goal of the IRS and it is possible that the QRP is an appropriate model, the Internal Revenue Service must investigate and in likelihood reform the program. At minimum, taxpayers deserve notice that their refund is being held up and a form of due process to quickly address situations where the model falsely or overvigorously withholds the refund. The possibility of low-income taxpayers being targeted, though less clear-cut, is also troubling; on top of the problems with aiding Hurricane Katrina victims late last summer, another indication that the government is not helping those with limited resources is not good for the social fabric of the country.

Tuesday, January 10, 2006

IRS Kicks Off Tax Filing Season

The IRS recently announced shipping out almost 18 million tax packages and anticipates receiving about 135 million returns--they hope that an increased number of these will be e-filed. In addition to the AMT Assistant mentioned earlier this month in a post, new features for this tax season include access to free tax preparation software for taxpayers with earnings below about $50,000; a section (EITC 1040) where taxpayers can see new tax law developments and frequently asked questions and information about IRS Hurricane Aid (Katrina, Rita and Wilma). Two dates to keep in mind for calendar-year taxpayers: January 16 for estimated tax payers is the final due date for estimated payments and April 17 is the due date for the return (also remember that this year, there is an automatic extension to mid-October).

Monday, January 09, 2006

Senate Tax Bill Charitable Provision Creates Controversy

(Post #300) The Senate's last-minute tax bill from December (S. 2020) has provoked debate within the charitable community. A provision allows nonitemizers to deduct cash contributions in excess of $420 for married filing jointly (MFJ) taxpayers and $210 for single taxpayers; the same provision allows cash and noncash contributions with the same floors for itemizers for the 2006 and 2007 tax years. Indicative of the 50 or so organizations which wrote criticizing the measure was Kelly Browning of the American Institute for Cancer Research who said that the measure was bad tax policy and had only a limited window for comment (eight days) before being included. Others of the group complained that the reduced deduction for itemizers might discourage charitable giving. Independent Sector, an umbrella group for nonprofits favoring the provision, acknowledged the negative of the floor for itemizers but argued in effect that with Chairman Grassley wanting a revenue-neutral result, that providing nonitemizers with some deductibility for charitable contributions was worth the cost of some damage to itemizers.

I am of mixed emotions here, I personally am better off with full itemizer deductibility but can see a vertical equity argument for the Senate provision. The most valid argument in my mind is Browning's complaint about limited due process; why not take the provision out at this point and reoffer it in a 2006 bill?

A Death Knell for Defined Benefit Retirement Plans?

Announcements last week by Verizon and IBM that they would be going strictly to 401[k] plans instead of traditional defined-benefit plans drew attention from the financial world. John Holz of the Pension Rights Center angrily denounced the move[s] as a hidden pay cut but IBM's stock price went up, leading analysts to conclude that Wall Street approved on the act, in part because of the estimated $2-3 billion in cost savings. In general, employees 50 and over are at greatest risk of losing, while savvy younger employees may come out ahead. The announcements continued a trend since 2001 of either eliminating defined-benefit pension plans or making new employees after a set date use defined contribution plans.

It should be no surprise to most readers that defined benefit plans are on the way out--they add an element of risk to corporate finance and complicate accounting with little direct gain. The IBM and Verizon announcements make it all the more likely that only large companies with VERY strong unions will have defined benefits plans ten years or so from now. As a concurrent Forbes article points out (http://www.forbes.com/home/work/2006/01/06/ibm-pension-plans-cz_nw_0109ibm.html), a major effects of these changes is a greater emphasis for retirees and near-retirees to take charge of their finances, sometimes in painful belt-tightening ways. Increasingly, personal financial planning will become important not only for upper-middle income and wealthy Americans, but for the large number of middle-income Americans as well.

An additional interesting question is a political one--in effect, the Bush personal retirement plan would move from Social Security's blend of defined contribution and defined benefit features to one more closely aligned with a pure defined contribution. Although the trend in business (and even education through TIAA-CREF) is defined contribution, political fears created by the business movement toward defined contribution may increase pressure to limit changes to Social Security.

Carnivals Multiply

As usual, Monday brings a host of personal finance-related carnivals. My article last week about health insurance and retirees is referenced in the Carnival of Personal Finance (see link in title above). Other Carnivals of significance include the Carnival of the Capitalists (http://www.socialcustomer.com/2006/01/carnival_of_the.html), Carnival of Debt Reduction (http://www.pfadvice.com/2006/01/08/carnival-of-debt-reduction-17/) and Carnival of Investing (http://www.freemoneyfinance.com/2006/carnival_of_inv.html).

Thursday, January 05, 2006

SEC Sets Forth Criteria for Monetary Penalties on Stock Issuers

The Securities and Exchange Commission announced yesterday a set of criteria to be used in determining the nature of sanctions against stock issuers which violate SEC rules. The SEC stated that a 1990 law nicknamed the "Remedies Act", along with Sarbanes-Oxley, were two major sources of criteria. Listed as primary issues were: direct benefit to the corporation of the violation and the extent to which a penalty would help OR injure shareholders who were victimized by the violation. A number of secondary issues included the following: the importance of deterring a specific practice, the level of injury to victims, breadth of violation complicity, intent of violators, difficulty in detecting the violation, presence or absence of remedial steps once the violation is found and willingness of management to cooperate in the investigation of the violation.

The steps listed appear reasonable and will hopefully provide a consistent approach to sanctioning violations. Most importantly, the policy itself will act as a deterrent toward security violations.

IRS Introduces AMT Assistant Electronic Worksheet

This week, the IRS introduced the AMT Assistant, which allows a taxpayer to determine whether they may be subject to the Alternative Minimum Tax. While I hope that Congress passes an AMT "patch" for the 2005 tax season early in 2006, the IRS initiative is potentially quite helpful--extremely so if you are a taxpayer with AGI of $60,000 or more (probably less than this if MFS or Single) and planning to file with pen[cil] and paper. Even if you are using a paid preparer or tax software, the AMT Assistant may be worth your while as a way of checking whether Form 6251 should be filed.

Wednesday, January 04, 2006

Treasury/IRS Issue Final Regs on Roth IRAs

Final regulations are now available on Sections 401(k) and 401 (m) related to Roth IRAs and related to the 2001 tax cut. These regulations allow certain employee withholdings to be treated similarly to Roth IRAs: no tax deduction when the contribution is made but earnings and distributions to be tax-exempt.

Implementation Guide Available for GASB 44

The Governmental Accounting Standards Board has published a 120 question guide to newly implemented GASB Statement 44, which updates and expands statistical reporting requirements for state and local governments. Over 160 illustrations demonstrate such issues as identifing major own-source revenues, calculating debt ratios, identifying demographic, economic and capital asset information and determining net assets and changes in net assets--often for a 10 year trend period.

Mellody Hobson Knows Finance--Does She Also Know Forecasting?

ABC personal finance guru Mellody Hobson makes several predictions for 2006. She believes that the year ahead will be good for jobs, but not so good for housing, stocks and inflation. Among the supporting evidence cited was a reduction in people applying for mortgages, shortages of skilled people in finance and health care, sizable increases in stock prices in the last two years, especially in midcap stocks (her view was more like a technical profit-taking correction than a major drop) and increases in prices of common household purchases such as bleach and beer.

Personally, I hope that the stock market can at least hold its own this year, but the other three predictions look pretty much on target at this point.

Tuesday, January 03, 2006

"Tax Prof" Top Tax Stories of 2005

Although listed as a top ten story list, the list (counting honorable mentions) is closer to 20. Some of the items included (such as the Hatch tax evasion story) will have fairly wide appeal; others primarily will be of interest to tax lawyers and/or academics. Item number ten is the growth in tax blogs, including a list of tax bloggers. This list includes many of the blogs listed at right, but also lists a number of other blogs--you may wish to see if any of the other blogs are of interest to you.

Monday, January 02, 2006

Welcome to 2006

(1) Thanks to Brian Tankersley of CPA Firm Technology Blog for his summary of the "12 Blogs of Christmas" from last December. This summary is linked in the title of this blog.

(2) My bridge tournament was successful; I did receive enough points to reach Life Master status. Thanks to my most worthy wife and to her parents for their substantial contributions to my bridge success.

(3) It appeared that the biggest story of the end of year was the plea bargain of Enron executive Richard Causey. A USA Today reporter might have earned the "most annoying quote of the year" award for saying that Causey's concession may have moved the case from being about financial reporting to about the honesty of top executives Lay and Skilling and that testimony about Causey's role would have bored the jury. In my opinion, TOUGH!--the financial markets (and probably our political leadership as well) would be better served if the American populace was more knowledgable about accounting procedures and standards (and, for that matter, economic theory). The Enron trial very likely would be brought to light much of the present state of accounting theory and practice--and if changes are needed, those changes in all likelihood would have been spotlighted during the trial. I therefore hope that the accounting procedures used at Enron have not been taken out of the trial.

Happy 75th for FEI

Although technically not coming until the end of the year, FEI (now Financial Executives International) will celebrate its diamond anniversary this year. The organization now has about 15,000 members and 86 chapters and its website has been one of my best references for accounting and financial news. The story referenced in the title of this post gives a history of the organization.

Charles Grassley: Meet Michelle Leder

In the wake of the resignation of American Red Cross CEO Marsha Evans over "communication and coordination" issues, Senate Finance Committee chair Charles Grassley (R-IA) has called for information on spending by the ARC on Katrina and South Asian tsunami relief efforts. He also asked for details on Ms. Evans severance package and compensation of ARC executives, including Ms. Evans.

The obvious person to scrutinize the ARC-Marsha Evans severance package would be Michelle Leder, author of the top-notch Footnoted.org blog (see "The Ninth Blog of Christmas" or the links at the right of the page). In her "My Big Fat Deal" category, Ms. Leder has pulled severance package information out of dozens if not hundreds of corporate annual and SEC reports and undoubtedly would do a fine job on the ARC package as well.

Health Care after 55: Are You Ready? Are Insurors Ready for You?

The McKinsey Quarterly (as quoted by Forbes) reports that health insurance companies, while doing a good job of marketing prescription drug benefits and Medicare Advantage benefits, have done considerably less well at providing seniors with insurance for out-of-pocket costs caused by reduced employer health insurance benefits and increasing medical costs. Although less sizable than the prescription/Medicare Advantage market, the out-of-pocket market is still sizable and less susceptible to government caprice. McKinsey research shows that pre-retirees are already thinking about post-retirement healthcare costs and many would like a plan in place well before retirement. By not developing products (along the lines of Medigap insurance) and corresponding marketing and distribution activities, health insurors risk losing this potentially lucrative market to financial services businesses. To illustrate the significance of post-retirement medical costs, McKinsey indicates that two-thirds of "boomers" believe that employer health plans will cover them in retirement; in practice, 30% of Americans are covered and rising costs may cause employers to drop post-retirement benefits, reducing that percentage even farther. Furthermore, Medicare will cover only about 80% of medical expenses and a catastrophic illness, even if covered by Medicare, can cost $30,000-$50,000 out-of-pocket, more than even a vigorous user of Medical Savings Accounts is likely to accumulate if the MSA is started by someone 55 or older.

The last three paragraphs of this article are quite unsettling and a good "wake-up call" regarding the future medical costs for those of us who are middle aged and do not have a guarantee of post-retirement benefits from our employer.

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