Broward Professional Alliance Weblog

Employees are currently facing the most serious economic hardship of their lifetime. After years of easy credit and treating ourselves to lifestyles that were better than we could afford, Americans are facing significant financial pressures. When faced with this type of dire situation, and given the opportunity, many will steal from their employer to provide their needs.

The driving force behind almost all employee theft is “pressure”. This is usually a result of financial pressures from living beyond ones means and creating huge personal debts. This can be a result of high medical bills or personal financial losses or a vice – gambling, drugs, alcohol, or extra marital affairs. With today’s serious economic situation, the financial pressures on many of our employees are so strong and so real that they force employees to do many things that they would not ordinarily do.

Even though financial pressures might lead an employee to steal from his or her employer, the theft can only occur if the employee has the “opportunity” to steal. This perceived opportunity to steal without being caught must be present in order for most employees to act on the pressures they are feeling.

Many factors can provide an employee the opportunity to steal but the primary one is the lack of effective internal controls or “checks and balances” in the company’s accounting procedures.

The ways employees can steal are only limited by their imagination and the opportunities present. Payroll fraud – padded hours, fictitious employees or unauthorized pay rates or bonuses – is very easy for many payroll department employees. Charging personal expenses on credit cards, obtaining false refunds, selling inventory on eBay or writing unauthorized checks are other common methods of employee theft.

An Association of Certified Fraud Examiners 2007 study of employee theft across the United States showed that 60% of employee thefts totaled more than $100,000. It also noted that 73% of employee thefts result from employees having financial difficulties and another 17% were a direct result of divorce or family problems. These types of family issues multiply as families are stressed by financial problems.

There are many “red flags” that an employer can watch for as indication that there may be a problem.

Warning signs of potential theft include:

· Extreme changes in lifestyle such as a flashy new car, expensive clothes or jewelry, a new motorcycle or a new boat.

· Unusual employee behavior changes such as being more irritable or seeming nervous all the time; being unable to look people in the eyes or increased drinking, drug abuse or gambling.

· Complaints from customers about an employee or about problems with their accounts.

· Missing or incomplete documentation such as bank reconciliations not being performed.

· An employee that never takes time off, works excessive overtime or is overly protective of their work.

· An employee that has an unusually close association with a supplier or customer.

· Employees with divorce or family problems or other troubling life circumstances.

The list is endless but you must be careful – these are just indicators and are not proof of fraudulent activity. If a red flag occurs, you must thoroughly investigate before any allegations can be made.

Eliminating, or at least decreasing, the opportunity to steal is the best and most inexpensive method to deter employee theft. You accomplish this by having a good system of internal controls over your cash receipts, accounts receivable, payroll and cash disbursements functions. It is far cheaper to prevent fraud than it is to suffer a loss.

Small business owners often believe that they are too small to have a reasonable set of checks and balances over their transactions. That is simply not the case – even the smallest of businesses can institute a good system of controls at very little cost. Such simple procedures as the owner looking at the detailed support for all checks, signing all checks and receiving the monthly bank statement direct from the bank can be very effective deterrents to employee theft.

A “must do” for an employer who catches an employee stealing is to prosecute that employee – otherwise you just turn him/her back into the community to be hired by another business and steal again. The failure to prosecute also shows your employees that they can steal from you without fear of the public humiliation and embarrassment to their family.

What should you do if you suspect employee theft or fraud? Contact an experienced forensic accountant to investigate the allegations, document the theft and prepare a report to provide to your insurance company or the authorities. Most law enforcement authorities do not have the budget to investigate all employee thefts so businesses often use an experienced forensic accountant, such as a Certified Fraud Examiner, to do the investigation for law enforcement in order to get the theft prosecuted.

A final thought about the cost of employee theft – if your business has a 20% profit margin on your revenue stream and an employee steals $50,000 from you, you must provide an additional $250,000 of revenue to offset the $50,000 theft.

What can you do? Set a “tone at the top” management example, communicate expectations to employees, create a culture of honesty and integrity, and keep your eyes open to changes in your employees’ lifestyles. If a problem is suspected contact a professional as soon as possible.

By Sheri F. Schultz, CPA/ABV/CFF

Partner, Fiske & Company, CPAs and Consultants

Filed by admin at 10:38 am under BPA News

As with any group of individuals, the Broward Professional Alliance (BPA)is a social bunch. We e-mail each other, send a text message or two, there are even a few of us that have pages on MySpace and Facebook. Well, here around the Think Tank, the conversation lately has turned to why don’t we all get “Linked In” (by the way, LinkedIn is an online service designed to help professionals find and connect with one another) and become part of the Social Networking craze. In case you haven’t heard, Online Social Networking is the latest craze in the business world.

These online water coolers are designed to create networks of friends and business colleagues based on referrals from other friends and colleagues. They connect people based on who those people know rather than who they are. Think of it as accessing not only your phone book, but also those of your neighbors.

Some social networks are, indeed, purely social. But many are now offering more business utility (members use the network to find and fill jobs, locate consultants and sub-contractors,and identify people with like business interests). Today, more and more businesses - both big and small -are bringing the technology in-house to facilitate knowledge sharing. And this trend highlights a significant shift in the way companies and entrepreneurs are thinking about social networks.

Social networks are sprouting up all over the Internet these days. In the last few months alone, organizations as dissimilar as a professional sports franchise on the west coast, a university on the east coast and the company that made “just do it” famous, have gotten their own social websites up and running. Even Senator Barack Obama unveiled My.BarackObama.com, a social network created for his presidential campaign.

So, like Mr. Obama, is social networking right for you and/or your company? As always, we invite you to share your thoughts and opinions on this captivating topic by e-mailing thinktank@thebrowardprofessionalalliance.com.

Filed by admin at 2:52 pm under BPA News

To end the year, this month’s Think Tank poses the question, “Can different generations co-exist effectively in the same workplace?”

As a third generation or the so-called Gen Y enters an already challenging workforce, the stage for conflict is set. In the office, what often seems like a knockdown, drag-out fight of the generations may actually be nothing more than just a good oldfashioned misunderstanding of intentions.

Studies have shown that the majority of generational conflicts arise from value differences. They also say by understanding these generational values and how they develop can help businesses and organizations better manage and perform across generational boundaries. Sounds like common sense, right? It has been said that Gen Y is like Gen X on fast-forward, full of self-esteem with no fear of the future. And why should they,
having grown up during the boom years and never experiencing a recession; they think the future will be just like the past. Though Baby Boomers might not recognize these traits, it seems that Generation Y has a bit of the Boomer mentality.
Baby Boomers have voiced concern about the younger generation’s apparent disdain for authority, (have the Boomers so quickly forgotten about the late 60s and early 70s). They scoff at Gen Y’s work ethics and their desire to organize work around their life, as opposed to the boomer’s philosophy of doing the exact opposite (even though secretly many boomers would follow Gen Y’s philosophy -if only they could).

But Gen Y doesn’t exactly come empty-handed into the workplace. They bring expert-level computer skills and entrepreneurial drive, but they also expect to be compensated for such drive and skill. They’re coming out of college with high (some would say unrealistic) expectations for job responsibility and advancement. But in a tight job market, they’re competing against the Baby Boomers for the same jobs and advancement.
Even though Gen Y is discovering that in business there are no free rides, they continue to keep their expectations and dreams high, even though it may take longer to get the ideal job in their industry of choice. They’re programmed to seek jobs that offer the opportunity to learn and grow.

So where does the blame for all this lie? “Much of the problem with Generation Y is not Generation Y. It is their Baby Boomer parents. It isn’t Gen Y’s fault that they have been born into small families at prosperous times. If they were indulged, Baby Boomers only need look in the mirror.

So, if you’re a Baby Boomer or belong to the Y Generation, you really have more in common then you might think. Let us know what you think. Can we all just get along in the workplace? As always, we invite you to share your thoughts and opinions at thinktank@thebrowardprofessionalalliance.com.

Filed by admin at 2:35 pm under BPA News

No, naked shorts are not the latest trend in teen fashions but rather a disturbing practice taking place every second in the investment world.

A regular short sale is a stock trade in which sellers borrow actual shares (not dollars) from their rightful owners (for a fee) and sell them in the open market based on their belief that the stock price will be lower in the future. If the stock price in fact decreases, the initial sellers will be able to purchase the same at a lower price (”cover their positions”) and return the same number of borrowed shares pocketing the difference between what they sold the borrowed shares and what they bought new shares at. However, if the borrower’s bet that the stock price will fall is incorrect and the price in fact rises, they will have to purchase new shares in the market at a higher price and return the shares to their rightful owner while taking a loss due to the price difference.

The government has taken steps to prevent gross manipulation of stock prices that benefit short sellers (especially the naked kind). Key rules for short sales include:
1. The shares sold in a short sale must be delivered to the buyer in no more than 3 days (called the T+3 rule) or it causes and is registered as a “failure to deliver”.
2. In order to make a short sale legal, the seller must have first borrowed the shares from someone or must demonstrate that he can get access to these shares before the T+3 time expires.
3. A recently eliminated rule stated that a short sale cannot occur unless the last trade of the stock showed an increase in price (by any fraction). This regulation prevented short sellers from driving a stock to the ground. There is talk that this rule may be re-implemented.

So what is this “naked” business that has been highly publicized in the media lately? Well, naked short sellers (no this is not a reference to their dressing habits) sell shares of stock that they have not borrowed, they have no intention of borrowing, and worst of all may not even exist. It’s performed routinely (and legally) by market-makers to reduce market volatility, but it is illegal when done to blatantly manipulate a company’s stock price. Only when someone intends to drive down the stock price is naked shorting breaking the law. Due to this ambiguity, naked short selling rules and laws are lightly enforced. Loopholes in the regulations, instant access to information allows for anonymous rumor dissemination at the speed of light, and antiquated transaction clearing systems create an environment where illegal naked short selling thrives on a daily basis.

There are many cases being fought in the courts regarding naked short selling and how it has destroyed entire companies. Although naked shorts typically target small, little known companies, they seem to be moving into the mainstream into the likes of Fanie Mae and Freddie Mac.

In July of this year, the SEC implemented an order requiring short sellers of 19 of the largest financial institutions to actually acquire the borrowed shares before the trade is executed versus the regular rule that they must only “identify” shares that they could borrow in order to execute the short sale.

How effective was the new rule on short sales on these 19 companies that form the backbone of the US financial system been? We venture to say that it was not very effective since more bailouts (AIG), buyouts (Merrill), and bankruptcies (Lehman) continue to occur with surprising ease. The Federal Regulators have gone a step further to protect the financial industry by temporarily banning all types of short selling (not only naked) in nearly 800 financial companies (from brokerage houses to commercial banks) in order to try and stabilize/reduce the panic and volatility being seen in the market. This move by the regulators is also being implemented in similar fashion in other world markets such as in the U.K.

It is too early to say what long-term effect these bans will have on the market in general, especially when short selling (especially of the naked type) is only one of the many external and internal forces driving the collapse of some of the financial industry giants in our economy.

Filed by admin at 4:59 pm under BPA News

Earlier this year, the Florida Department of Transportation issued a Request for Qualifications for a concessionaire to lease the Alligator Alley portion of I-75 in Broward and Collier Counties. Under the Federal Highway Administration’s continued ownership of the road and through the oversight of the Florida Department of Transportation, the concessionaire/lessee will operate, maintain, and collect the tolls for a period proposed to be 50 to 75 years.

Alligator Alley is a 78 mile section of Interstate 75 in South Florida connecting the southwestern and southeastern coastal areas of Florida. It was originally constructed during the late 1960s as a two-lane, controlled access toll road and was known in the original bond documents as “Everglades Parkway.” During the late 1970s and early 1980s, the Florida Department of Transportation (FDOT) completed construction of the Interstate 75 corridor on the west coast between Tampa and Naples. From 1986 to 1992, Alligator Alley was also widened to four-lanes and made a limited-access, tolled, interstate facility (I-75), now part of the Florida Intrastate Highway System (FIHS). As of June 30, 2007, there are $43.1 million in outstanding bonds relative to this portion of I-75. Currently along The Alley, there are 23 waterway/canal crossings, 8 boat ramp facilities, 2 hiker/hunter access facilities, 35 wildlife crossings, and a new rest area that is under construction.

Recently, FDOT announced that it was soliciting bids to lease The Alley. The initial meeting for prospective concessionaires was held in late April in Orlando as opposed to Broward or Collier Counties, where Alligator Alley is located. The proposal put forth by FDOT would be for the lessee to pay up-front rent and provide a share in toll revenues generated at the two toll facilities at the ends of The Alley. FDOT believes that this P3 arrangement along The Alley will provide a new funding source to support transportation projects, which is needed based on the current state of the economy in Florida. FDOT has stated publically that Broward and Collier Counties would benefit from this lease agreement in that funds generated would be targeted back to Broward and Collier Counties.

This lease arrangement is provided for through the State of Florida’s new Public Private Partnership (P3) statute, Chapter 334.30, Florida Statutes, which opens with the following: “The Legislature finds and declares that there is a public need for the rapid construction of safe and efficient transportation facilities for the purpose of traveling within the state, and that it is in the public’s interest to provide for the construction of additional safe, convenient, and economical transportation facilities.” This statute then sets forth the process and considerations that need to be reviewed and contemplated when FDOT seeks to move forward with a new P3 arrangement.

Approximately 24,300 westbound round trips occur on The Alley on a given day, with current tolls set at $2.50 for a 2 axel vehicle or $2.00 for a 2 axel SunPass user, with trucks accounting for 11% of the users, which, when the toll rate is broken down on a per mile basis, costs a cash user $0.032/mile and a SunPass user $0.026/mile. FDOT forecasts that tolls along this important stretch of roadway may increase in excess of $10.00 each way during the course of this lease.

The question that needs to be asked is: should a roadway built with public funds be turned over to a concessionaire as opposed to being operated by the public agency that currently oversees it. The next question that needs to be asked is: why is this process moving as quickly as it is, with little advanced notice to the public and other agencies that oversee transportation planning. An additional question that should be considered is: are there state funds/reserves that could be used for this idea as opposed to contracting with a private firm.

This is the first portion of an existing public roadway that FDOT is seeking to privatize. One can only think that more will occur in the future.

Do you think this a good idea?

DANIEL J. STERMER
Lewis B. Freeman & Partners, Inc.
6600 NW 16th Street, Suite 11
Plantation, Florida 33313
t: 954-321-3388
f: 954-321-3390
c: 954-205-9195
e: dstermer@lbfmiami.com
www.lbfmiami.com

Filed by admin at 3:51 pm under BPA News

All,

Here is a website that will allow you to look up bank ratings from an independent service.

You can click on the link for “Consumers and Corporations” then click on “Look up Bank Star Ratings” and plug in the name of any financial institution. If you are not sure of the state where the bank is headquartered, leave that field blank and just type in the name.

As examples, you can look up Community Bank of Broward by typing our name into the field asking for the institution name and Florida for the state we are headquartered in.

There’s a lot of good information regarding banking so have fun!

Regards,

Jay Jacob
Community Bank of Broward
Vice President
Commercial Loan Officer
2400 N. Commerce Parkway
Suite 200
Weston, FL 33326
(954) 377-0917 Office
(954) 559-5458 Cell
(954) 888-9075 Fax
www.communitybankofbroward.com

Filed by admin at 9:40 am under BPA News