Jim Ulvog

Continued struggles in recovery of job market.

Lots of companies are looking for new staff but can’t find enough workers. Image courtesy of Adobe Stock.

(Article cross-posted from Nonprofit Update to help accountants understand pressures our clients are facing.)

Spending by consumers is growing while the number of new jobs is not as strong as expected and employers are having a hard time finding enough staff.

5/7/21 – Wall Street Journal – U.S. Employers Added 266,000 Jobs in April as Hiring Slowed – Expectation among economic forecasters was employers would add 1 million new jobs in April. Actual results were a mere 266,000.

This follows a downward revision to the March data.

Leisure and hospitality (that means entertainment, hotels, and motels) saw most of the growth in April. In more detail, there are 331K new jobs in those sectors which offset a net decline of 65K in all other sectors.

Article repeats the comment seen in many of other articles that employers are having a hard time attracting new staff.

Disciplinary actions from California Board of Accountancy for late 2020.

….what you do not want to have happen to your license. Image courtesy of Adobe Stock.

Update #92 newsletter from California Board of Accountancy dated winter 2021 lists 14 disciplinary actions summarized below. This tally excludes one listed action which is ending probation for a CPA and another separately listed case for the corporation owned by an individual who is also disciplined.

All these actions are effective at various times during November and December 2020.

My tally of these cases:

He is risen! He is risen indeed!

Image courtesy of Adobe Stock.

He is risen!

He is risen indeed!

Easter is the high point of the year for Christians.  On this day our Savior rose from the tomb after having suffered a brutal death at the hands of the Roman government, urged on by the religious leadership.

What’s the big deal?

On Good Friday, the death of Jesus paid in full the penalty for my sins, yours sins, and the sins of every person who ever lived or ever will live.

On Easter Sunday, His glorious resurrection proves his sacrifice was accepted by God the Father.

In rising from death, Jesus proved he had ultimate power over death, hell, and the devil.

By that sacrifice, our sins are forgiven, and we will enter heaven for eternity, not because of what we do or how nice we are, but solely because of His sacrifice on the cross.

A few selections of the wonderful and so comforting hymn Jesus Christ is Risen Today to help you celebrate. Go ahead, crank up the volume. First up is an organ only version:

For a beautiful processional:

King’s College Choir, Cambridge

The lyrics:

Acme to replace Boeing as prime contractor on Space Launch System.

This blog does not discuss politics. Since I do discuss space exploration, I will cover an announcement from the new Biden administration that Boeing will be replaced as the prime contractor on the Space Launch System.

SLS will be the most powerful rocket ever built for NASA. It will lift astronauts to space so they may explore the solar system.

(Article cross-posted from Nonprofit Update because of the educational value of studying litigation involving Acme. Also cross-posted just because.)

Acme

The new prime contractor is Acme. You may have seen the products on television in the past.

The story has not received much publicity, so I’ll try to draw attention to this major change in federal policy.

New claims for unemployment in week ending 3/13/21 are roughly same as last several months.

The number of new claims for unemployment for week ending 3/13/21 increased 45,000 after decling 29,000 the prior week. Those weekly changes are in the range of what has happened over the last six months. In other words, not a lot of improvement with plenty of ups and downs in the weekly new-claims tally.

Since 8/29/20, the new weekly claims ranged from a low of 711K to high of 965K. average since then is 812K. That means weekly new claims have been bad news for seven months in a row.

For context consider before the economic shutdown the new claims averaged about 220K per week, so after all these months of improvements we are still running about four times the previous norm.

Why this ongoing discussion?

If we’re going to understand what is happening in the economy we need to dive deeper into the numbers. For those of us who are CPAs providing audits and reviews, it helps us to have a deeper understanding of the overall economy.

Ponder the following graphs and you can make your own assessment.

News report

Behold the creativity of cheaters.

Need to fabricate an excuse to bail on your meeting? There’s an app for that. Image courtesy of Adobe Stock.

I am continually amazed at the creativity of cheaters. A few examples in the news recently:

  • Restaurant offering receipts with menu items relabeled as office supplies
  • Generate disruptions to get out of a zoom meeting
  • Fake Covid test results

I mentioned these for the laughter value and more importantly for the educational value.

The stories are amusing. If you work in the finance area or are leading an organization, having an awareness of these schemes might help you recognize one if presented to you.

Your entertainment and anti-fraud training for the day:

Disciplinary actions from California Board of Accountancy for the middle of 2020.

Image courtesy of Adobe Stock.

Update #91 newsletter from the California Board of Accountancy, dated Fall 2020, lists 33 disciplinary actions. The effective dates run from May 2020 through August 2020. Yeah, I’m just getting around to writing about the newsletter that arrived last November.

A few general observations before diving into a summary of the causes and levels of discipline.

Of the 10 stayed revocations for attestation failures, all but one had an attestation ban. General pattern is an audit failure will lead to a ban on attest services. The summary of the case does not give an indication why one CPA didn’t draw a ban.

Usually these are bans from performing any audits, reviews, compilations, or attestation engagements. Some of them were just bans from audits. Pattern seems to be the ban is for the duration of probation and then after that a firm may request permission to again perform attest work.

Imagine if you will, that attest work is a significant portion of your work and you cannot perform any of those for three years.

One big firm listed in this edition is PriceWaterhouseCoopers, who drew a stayed suspension with 18 months probation because of discipline by the SEC. They also earned a $300,000 fine and up to $26,000 reimbursement of costs for investigation and monitoring. An additional consequence is distributing a copy of the order to every employee who is in the state of California.

Of the seven disciplinary actions because of enforcement actions by federal agencies, six are from the SEC and one from PCAOB.

The attestation failures usually include three or four or more specific violations. For example, the actions may because there was not appropriate documentation, the opinion was not supported by workpapers, and there were violations of GAAS and violations of GAAP.  Those are overlapping issues but a major audit failure will likely cause a violation in all of those areas. Of grim note for two of the attest failures is one of the listed charges includes creating documentation after release of the audit report. You can make your guess as to what an allegation of that nature includes but could have been creating documentation after workpapers had been called in for review.

Here is a tally of the 33 cases:

2020 giving trends for churches and religious charities based on ECFA survey.

Image courtesy of Adobe Stock.

Finding data on prior year contribution trends early enough in the year to have analytical value in a review or audit has long been a challenge. Usable data for 2020 is now available in March. This is current enough to allow leaders in churches and ministries analyze the 2020 financial results in time for it to be actionable.

Throughout the pandemic the Evangelical Council for Financial Accountability (ECFA) has been conducting quarterly surveys of its members. Lots of data has been gathered and processed.

On 3/4/21, ECFA published the results of their survey of full year 2020 revenue and expense trends compared to 2019. They have graciously made the results of the survey available for free. You can find it on this page of Feature Surveys. Click on the “Free Download” button beneath the Remarkable Resilience survey report dated March 2021.

The survey is based on responses from 559 churches and 730 religious nonprofits. That is a total of 1,289 responses. ECFA has lots of subsectors for its membership. For those sectors with 20 or more responses, the survey aggregates and reports results.

Who would benefit from looking at this survey? Two groups.

First, finance teams and senior leadership of churches and religious nonprofits to see financial results for 2020 of a large group of their peers. This provides an incredible opportunity to see how other organizations are doing.

Second, CPAs performing reviews or audits of churches religious not-for-profit organizations can easily find industrywide information to use as a benchmark. As mentioned earlier, financial information is usually published long after most of the reviews and audits have been released. It is rare I can find anything that is actually usable.

High-level results from the ECFA survey are summarized into three broad categories:

Total number of people drawing state and federal unemployment is declining slowly.

Image courtesy of Adobe Stock.

The number of people with continuing claims for unemployment in the regular state programs and Pandemic Emergency Unemployment compensation programs is volatile, showing large swings from week to week. However, the total does not seem to dropping very fast.

Since the week of 9/19/20, I have been pulling that data off the weekly press release from the Department of Labor. Current weekly report is: Unemployment insurance weekly claims.

The weekly data since then, excluding one week I missed, is:

New claims for unemployment increase again for week ending 2/13/21.

The number of new claims for unemployment for week ending 2/13/21 increased 13,000 after 36,000 increase the prior week. (Previous week numbers were revised upward by 55,000.)

This follows a two-week decline of 153K (1/16 and 1/23). Prior week of 1/9 saw a 181K increase.

New claims in state programs for the last three weeks:

OCC settles with former general counsel of Wells Fargo.

Photo from Wells Fargo’s museum in San Diego by James Ulvog.

On 1/12/21, former general counsel James Strother of Wells Fargo signed a Consent Order with the Office of the Comptroller of the Currency.

He agreed to pay the U.S. Government $3.5 million for his role in the sales practice fiasco. Payment is due within 10 days via wire transfer.

Large rise new claims for unemployment for week ending 1/9/21.

The number of new claims for unemployment for week ending 1/9/21 increased to 965,000, a deterioration of 181,000 from the prior week.  That is the highest number of new state claims since 8/22/20.

Since 8/29/20, the new weekly claims have been in the 700Ks or 800Ks.

Keep in mind that before the shutdown of the economy the new claims averaged about 220K per week, so we are now running more than four times the previous norm.

The number of continuing claims for unemployment has been slowly dropping but increased for the week ending 1/2/21.

News report

Article at Wall Street Journal on 1/14/21 reports US Unemployment Claims Rise as Pandemic Weighs on Economy. Article link indicates the consensus is the increasing virus count combined with increasing restrictions on businesses caused the jump in new unemployment claims.

Article says there are other economic indicators suggesting the economy is slowing down again. Stats such as small business optimism, new home sales, existing home sales, household income, and household spending point towards a slowdown.

Following graphs show the devastation from the economic shutdown.

New claims

New claims for unemployment by week since the start of 2020:

Small decline in new claims and continuing claims for unemployment for week ending 12/26/20.

The number of new claims for unemployment for week ending 12/26/20 declined for a secone weeks in a row. New claims are 787K, a 19K drop for the week.

This two week drop follows two weeks of increases, which totaled 176K.

Since 8/9/20, the new weekly claims have been in the 700Ks or 800Ks.

For contrast, remember that before the government induced shutdown of the economy the new claims averaged about 220K per week so we are still running three or four times the previous norm.

The number of continuing claims for unemployment is continuing to drop. Large part of the drop is people going back to work. Some portion, likely a lot, of the drop in state-level continuing claims has been offset by rising number of people on the federal program.

When a person exhausts the state level coverage, they become eligible for the extended federal benefits, called the Pandemic Emergency Unemployment Compensation program.

Article at Wall Street Journal on 12/31/20 reports US Unemployment Claims Fell Modestly Last Week.  Article explains the new claims for state programs is a proxy for layoffs. Good observation.

At least one flaming hypocrite in public leadership has enough shame to retire from public life. But just so you know, it is our fault, not hers.

Image courtesy of Adobe Stock.

NoteThis discussion is cross posted from my other blog, Nonprofit Update because it provides a live-action illustration of rationalization. Auditors study the concept of rationalization because that is a factor we consider when thinking through fraud risk assessment during an audit. Part 1 of this series is cross posted here. Exercise for CPAs is to read these two posts, then identify multiple points where the rationalization thought process transforms inappropriate actions into acceptable behavior. 

At least one person on the constantly growing list of flaming hypocrites in public leadership has a sense of shame. Or, at least enough shame to realize she should retire. Eventually. Someday.

After two days of publicity about her non-Thanksgiving non-celebration trip to spend the Thanksgiving weekend with family she doesn’t live with, Dr. Deborah Birx made the announcement.

12/22/20 – National Review – Dr. Birx Announces She Will Retire after Holiday Travel Controversy and CBS news – Birx says she plans to retire, citing strain on family.

After two full days of controversy, Dr. Birx announced she will retire shortly after assisting in the transition to a new administration. Presumably, that means sometime in late January or early February. Or maybe March. Or maybe June.

Recall from yesterday the day after Thanksgiving she traveled from her home in D.C. to one of her vacation homes in Delaware for a 50 hour stay with her daughter, son-in-law, and two grandchildren, all of whom live in a different home she owns in Potomac.

When challenged about whether traveling to another state with people from a different household during the Thanksgiving weekend was appropriate given her very public advice not to travel at all over the weekend and not to be with anyone from a different household, she provided a splendiferous rationalization.

The parade of alleged leaders who ignore their own Covid recommendations keeps growing.

Rationalization can blind our views and limit perspective. Image courtesy of Adobe Stock.

NoteThis discussion is cross posted from my other blog, Nonprofit Update because it provides a live-action illustration of rationalization. Auditors study the concept of rationalization because that is a factor we consider when thinking through fraud risk assessment during an audit. Part 2 of this series is cross posted here. Exercise for CPAs is to read these two posts, then identify multiple points where the rationalization thought process transforms inappropriate actions into acceptable behavior. 

It is taking more and more time to keep up with the political and public health leaders who don’t bother to comply with the recommendations they give us.

This time it is Dr. Deborah Birx who blew off the travel restrictions and gathering size limits at Thanksgiving. Oh, pardon me. It doesn’t count as a Thanksgiving trip since she traveled to her destination the day after Thanksgiving.

Saddest part of this example of hypocrisy is it took place after a large volume of other supposed leaders drew massive criticism for ignoring the rules. It isn’t as if every political and public health leader hasn’t been given notice their behavior is being observed.

Scariest part is her rationalization that there was absolutely nothing wrong with the trip.

Last point in this discussion is the wish that every American had the same freedom she has exercised. Specifically, the freedom to make our own decisions on what is best for our family given our circumstances.

12/20/20 – Associated Press – Birx travels, family visits highlight pandemic safety perils – The day after Thanksgiving, Dr Deborah Birx, coordinator for the official White House coronavirus response team, traveled from her D.C. home to her vacation home in Delaware. Joining her in Delaware were her husband, daughter, son-in-law, and two grandchildren. While in Delaware they ate meals together for two days.