According to Bart Haag, CPA and Principal of Albin, Randall & Bennett, “Our firm’s involvement as an AutoCPA member allows us to tap into ideas, knowledge and resources from a national network of accounting firms specializing in auto dealerships. This allows us to stay on the cutting edge of auto industry trends.”

The AutoCPA Group is the first group of its kind formed voluntarily by CPA firms who wish to provide specialized industry consulting and quality service tailored to the needs of their dealer clients. Whether clients are single point operators or nation-wide mega dealers, AutoCPA Group members can provide their clients with a unique business perspective to dealership tax planning, accounting and auditing, and systems analysis.

Albin, Randall & Bennett has 35+ years of advising automobile dealers across New England on how to be more profitable. For more information about the firm’s auto dealership services, contact Bart Haag .

Take for example Omni National Bank’s (Omni) Community Redevelopment Lending Department.  Omni borrowed federal funds at low rates to make high-interest, short term loans though its Community Redevelopment Department “to borrowers with less than stellar credit and often no steady employment or formal education” according to the US Department of Justice.

The bank’s executives “were well aware that none of the foreclosed properties could be sold on the open market for the amount of the outstanding loans,” the Justice Department stated. A number of foreclosures were never disclosed on the books as required and some properties were resold up to five times at ever-increasing amounts. Many properties stood vacant or were inhabited by squatters.

Here are some of the practices that led to the bank’s collapse:

• Non-performing loans were kept current on paper by failing to disclose many exceptions to the policies and procedures.
• Loan proceeds escrowed for rehab were diverted.
• Additional loans for foreclosures were funded at increasing amounts.

Sufficient reserves were not created for questionable loans or properly recorded on the books. In some cases, foreclosed properties were sold within a month so they wouldn’t have to be recorded on monthly reports.

The practices contributed to more than 500 foreclosures and an additional 500 non-performing loans, which resulted in at least $7 million of losses.

What lesson can be learned from the Omni case?  Sound policies and procedures, internal controls, and monitoring can help detect and defer fraud.  Consider implementing the following steps in your credit union to reduce internal lending fraud:

Frequently communicate your policies and procedures. The first step to ensuring that your executives appropriately manage the loan portfolio is to establish an education process so that employees, regardless of their levels, are aware of the institution’s loan policies and procedures. You may want to implement formalized testing of your employees’ knowledge of how to apply the policies to hypothetical lending scenarios — from loan origination to servicing. Not only does training stress the importance of loan compliance, it can also uncover areas where employees’ overall understanding of policy could be improved.

Conduct frequent reviews to ensure compliance. To ensure that your employees are applying policies and procedures appropriately, your loan compliance department or internal audit department should conduct regular reviews of loan files to confirm that the appropriate documentation is included. Further, you should also document evidence that the loan is performing and that the loan is appropriately recorded on the statement of financial condition. In addition, you may want to conduct site visits to ensure that a property’s condition, appearance, etc. is consistent with the documentation included in the loan file.

Review your credit union’s credit concentration. On a regular basis, review loan balances by borrower to ensure that credit is not overly concentrated with one borrower or sector. This type of assessment should also include a review of credit concentration among borrowers that are related parties.

Monitor foreclosure rates over time.  For each loan type, implement reporting to monitor foreclosure rates by age of loan, location of property, name of borrower, etc. Pay particular attention to the rate of foreclosures compared to your peers. Benchmarking against others can uncover trends, both good and bad, which may require additional investigation.

Structure compensation appropriately. If designed and implemented appropriately, executive compensation provides rewards for performance that are consistent with sound practices. However, it is also important to consider any unintended consequences that can result from executive compensation. For example, if an executive’s pay includes rewards for maintaining a low level of foreclosures, the pressure to meet this goal may result in fraudulent activity.

Participate in fraud forums. Throughout the country, financial institutions gather formally and informally to share information about both internal and external fraud and abuse. Consider sending representatives to participate. From time to time, these meetings also include guest speakers from federal, state and local law enforcement agencies who discuss the threats facing financial institutions. It is important to establish a working relationship with law enforcement.

In addition to the steps listed above, pay close attention to profitability by loan product. If a particular product or sector is providing disproportionately high profits or losses, conduct an in-depth analysis to uncover the root causes. The professionals at Albin, Randall & Bennett can assist you with this analysis.

In the past few years there have been numerous instances of lawsuits filed by individuals who travel around the country, looking for ATMs without the required notice and taking photos of the machine as evidence for their lawsuit, some reaching class action status. A number of these lawsuits have been dismissed because the credit union was able to show undisputed evidence that an unknown third party had removed its posted notice illegally. Some of the suits though, have been settled by credit unions.

Currently, there is a bill the House, H.R. 4367, which is an attempt to address these nuisance lawsuits. The bill would change the EFTA so that ATMs would only be required to display the disclosures on the ATM screen and would remove the requirement for physical fee notices on the machines themselves.

It is good practice to periodically check all ATMs to make sure the required physical disclosures are attached to the machines.

Albin, Randall & Bennett is proud to serve the credit union industry. For more information or to discuss the fee disclosure requirements, please contact Cheri or Holly.

The 2012 tax season started off on a fun note with our dealer group attending the 55^th annual New England International Auto Show premier night where we enjoyed socializing with industry leaders, fantastic food and drink displays and of course the opportunity to view the newest models of imported and domestic vehicles. For car lovers like us, it was a great way to kick off the season!

A tax season wouldn’t be the same at ARB without some friendly competition and a fantastic idea from our Wellness Committee. This year we split up the firm into three teams to compete in a pedometer challenge. The challenge kept the firm active and reminded us each day of the benefits to maintaining a healthy lifestyle during a very hectic time. Amazingly, we walked 21,404,150 steps or 10,702 miles. Congratulations to the PeDominators for walking right past the competition!

While the Wellness Committee is busy keeping our health in check, the ARB Fun Committee is busy finding ways to….well, have fun! From celebrating the opening day of the Red Sox season by wearing our Red Sox gear and enjoying a hot dog feast complete with Sea Dogs biscuits and Cracker Jacks, to an afternoon ice cream party, to providing a masseuse to “work the kinks out”, having a good time seems to be around each corner to motivate us through the season.

Last night we gathered at Bayside Bowl in Portland for our annual after tax season event. We were lucky to be joined by our 2012 tax season interns who helped us achieve yet another successful tax season. Finding great interns to join our team and help us achieve success during our busy time is a huge reward for ARB. The Recruiting Committee looks forward to connecting with students and professors again during the upcoming 2012 recruiting season!

Please contact us if you or anyone you know wants to join our team!

Focus on Planning and Communication

Wasted labor hours and lost equipment time drain productivity and profits. Contractors can minimize the effects of these factors by focusing on planning both before and during a project. Initial plans should incorporate the budget for the project, along with anticipated production rates, materials, and number of workers. Once work begins, it will be important to minimize the hours that crews are left waiting for materials and equipment to do their work. Plans for a project may need to be revised when supply bottlenecks and other issues arise that threaten to reduce productivity.

Regular communication between supervisors and workers regarding the work that must be accomplished on a project can help reduce down time. Crews should be aware at the start of every day what their goals are and what steps they need to take to achieve those goals.

Review and Measure After Each Project

Going over recently completed projects with foremen and project managers provides an opportunity to identify what worked well and what did not. An in-depth review of a project can provide information that can serve as a blueprint for future projects. If a project came in on time and within budget, the factors that contributed to the successful result can be discussed. For projects that lost money, it’s critical to identify the source of the problems. Review the estimate to determine if it was too low and look to see if labor or material costs spun out of control. Getting a handle on what went wrong will suggest steps that can be taken to prevent similar problems on future projects.

More effective use of labor and faster completion of projects can lead to lower costs and greater profitability. Time spent on project planning and communication, coupled with review and measurement of results upon completion, will be time well spent.

The Temporary Regulations also changed how the disposition of structural components of a building are treated for income tax purposes. Prior to the temporary regulations, if a dealer renovated an existing building, they were not allowed to write off the remaining basis of the structural component being renovated. In other words, you had to continue depreciating the asset over its original asset life, even though it did not exist any longer. Now dealers can write these structural components off once the renovation is completed. Even if you did not do a cost segregation study and cannot specifically identify the cost of these components, you can estimate the cost and do an allocation for the remaining basis of the component and write it off. Once again, that will most likely be a significant cash flow benefit for many dealers, especially those that did not do cost segregation studies on their original buildings.

That is not all though. Even if you did your renovation within the last 10 years you can take advantage of these new rules. You can file a Form 3115 and and go back and write off the components that were demolished or abandoned and claim a refund for any taxes you paid.

Consider the following examples:

Example 1: You are a Chrysler dealer and you are required to put the “Chrysler arch” on the front of your building. The cost of the arch is $200,000. Your CPA might treat this as 39-year property, which means you will get very little depreciation each year, about $5,000. Instead, you should be depreciating that upgrade like you do a sign. In other words, you should treat it as 5-year property. In 2011 that would have meant you could have expensed 100% of the cost. What does that mean for you? Assume you have a combined federal and state income tax rate of 40% and that your floorplan lending rate is 4.50%. The present value tax benefit to you of treating this asset as 5-year property instead of 39-year property is $40,000. Most dealers I know would gladly put an additional $40,000 of cash in their pocket for no additional effort.

Example 2: You are a Toyota dealer and you are required to put new siding on your building to match the manufacturer’s image color. The cost of the new siding is $350,000. Again, your CPA might treat this as 39-year property, which would result in about $9,000 of depreciation per year. Instead, you could have treated this as maintenance, similar to painting your building. What is the benefit to you? Assuming again that you have a 40% combined tax rate and that your floorplan rate is 4.50%, the present value tax benefit is almost $70,000. Again, not a bad benefit!

Example 3: You are a Honda dealer and are required to substantially renovate your existing facility that is 10 years old. You spend $2,000,000 on the renovation. As part of the renovation you demolish or abandon $900,000 of the original building. Under the old rules you would have been required to continue depreciating the costs of these structural components over the remaining 39 years. Your deprecition deduction would have been $23,000 per year. Under the new rules you can write off the entire $900,000. What is the net present value of this benefit? Approximately $180,000!

Care should be taken when applying these new rules, as the facts and circumstances of each situation dictate the income tax treatment. You should work with a qualified Albin, Randall & Bennett dealership professional to determine the proper treatment for your situation. Please do not hesitate to contact Bart Haag at (207) 772-1981 to discuss the opportunities that await you.

Consumers ranked credit unions higher than banks in a variety of areas. First and foremost, consumers appreciate the loyalty they receive from a credit union.  Among young and older generations alike, more consumers appreciate their credit union because they feel it provides exceptional service with a more personal experience when compared with banks.  This foundation has helped many credit unions throughout this tough economic time.  Overall, 90% of consumers surveyed stated they were satisfied with their credit union and 84% said they would not switch to another institution according to the survey.  Banks continue to struggle with winning customer trust and loyalty and are viewed as putting institutional interests ahead of the consumer.

Consumers also feel their credit unions have the most competitive fees in the industry.  Through various pricing strategies, credit unions can overcome obstacles they face from bigger banks with their fees. 

In comparison to the industry, credit unions continue to provide a safe haven for members and exceptional services.  With few problems and complaints from customers, heightened overall satisfaction, and high recommendation rates, credit unions seem to be the focal point in the financial industry.  If credit unions stick to their roots, they can only look to improve themselves in the foreseeable future.

Albin, Randall & Bennett is proud to serve the credit union industry. Contact Cheri Walker or Holly Ferguson to discuss strategies for remaining competitive while maintaining lower fees.

The State of Maine is a key example of how manufacturing is an important component of the economy. Since Maine first became a state it has supported itself through manufacturing. Maine’s identity has come from being a natural resource based economy, which has strengthened its manufacturing sector. Maine has always been notorious for its production of lumber, shipbuilding, shoe making, and textile manufacturing. 

Today Maine continues to be identified as a manufacturing state with manufacturers ranging from traditional shipbuilding and paper manufacturing to aerospace, bioscience, food, and plastics/composites, just to name a few. As a matter of fact Maine is the second largest paper producing state by volume in the United States. Maine also has some of the last American made shoe manufacturers. While some may question the future of the American manufacturing industry, manufacturing is alive and continues to have a valuable presence in Maine.

The manufacturing industry makes a vital contribution to Maine’s economy by employing a large workforce. Despite Maine’s high unemployment rate, Maine manufacturers continue to seek qualified workers to fill open positions.  As the industry has adapted to technological changes, the jobs have become more high tech requiring a skilled workforce. The jobs are available, but the challenge is finding the workers with the appropriate skills.

As people continue to question the survival of the American manufacturing industry, I have no doubt that Maine’s economic foundation will continue to be manufacturing. Maine has all the right assets to continue to prosper through manufacturing; our hardworking people, educational institutions to train the next generation of workers, our natural resources, and a strong reputation for product quality. Through hard work and innovation Maine’s manufacturing will continue to be celebrated for generations to come.

Albin, Randall & Bennett is proud to be part of Maine’s manufacturing tradition.  Please contact Holly Ferguson to discuss how your company can be more financially successful and tax efficient.