Aug 11, 2017

Just in time for back to school shopping, Maryland apparel retailers are beginning a week of tax-free sales. The second Sunday of August to the following Saturday is designated as Shop Maryland Tax-Free Week each year. That means qualifying apparel and footwear $100 or less, per item, are exempt from the state sales tax. Accessory items are generally not included; however, new for 2017, the first $40 of a backpack/bookbag purchase is also tax-exempt. The Shop Maryland Tax-Free Week for 2017 is Sunday, August 13 – Saturday, August 19. Full List of Tax-Exempt Items For more information, visit the Maryland Comptroller’s Tax-Free Week site. Questions? Contact your Hertzbach Tax Advisor at 410-363-3200 or 800-899-3633. We look forward to speaking with...

Aug 7, 2017

When thinking about the ways financial experts can uncover fraud, data analysis and other forensic accounting techniques may come to mind. But qualified experts also know how to use everyday managerial accounting practices to ferret out fraud. Budgets Budgets can provide insight into how management expects a company to perform in the near future. As such, budgets might highlight unusual transactions and other developments that fall outside of management’s expectations and warrant further investigation. Budgets can also play a role in fraud deterrence. Creating budgets typically requires input from people across the organization. Such interdepartmental communication and information sharing provides an informal fraud “screen” that makes it harder for perpetrators to manipulate the financial results. Would-be thieves may be deterred by the idea that managers and co-workers in other departments are paying attention to what they’re doing. Variance analysis After a budget has been finalized, management may review it and investigate differences between actual and budgeted performance to find the causes. For example, if actual wages significantly exceeded budgeted wages, the difference could be due to wage increases, productivity declines, greater downtime, unexpected demand for the company’s goods or services, or a combination of these possibilities. It could also signal phantom employees on the payroll, however. When it comes to fraud detection, experts pay particular attention to variances related to inventory and purchase pricing. For example, variances between the actual and budgeted pricing for supplies could suggest the existence of: Kickbacks, where the perpetrator takes a cut from a vendor that inflates its prices, or Fictitious vendors, where the payments go to the perpetrator and no inventory is received in exchange, requiring the organization to spend more money to restock inventory. If a scheme involves the purchase of subpar materials or fewer units than ordered, it could show up in spoilage or other inventory-related variances. Conversely, the absence of variances when they would be expected can be cause for concern. For example, an organization may have run into an unanticipated price jump for a critical component, which would understandably lead to a purchase price variance. If no such variance is found, it could be a sign of financial reporting fraud. Contribution margin The term...

Jul 27, 2017

Data breaches can come from many sources including ransom-ware, employee mistakes and disgruntled and/or former employee actions.  Long-term care operators have a specific added burden of securing records for an extended period. Additionally, this type of information remains valid and useful for a very long period since it is unlikely to change. Following a data breach, Federal HIPAA penalties, class-action lawsuits and settlements are an increasing concern for healthcare providers. For example, Anthem, Inc., the largest U.S. health insurance company, recently settled litigation over hacking in 2015 that compromised about 79 million people’s personal information for $115 million.  Even if a provider has committed no wrongdoing, bad publicity can cause major financial implications. As data breeches continue to proliferate, there is guidance on how to act quickly and stop/report cyber security related-incidents within your facility. The Department of Health and Human Services Office for Civil Rights provided this guidance in a recently published checklist. If you have any questions about the content in this blog, we encourage you to reach out to us at...

Jul 24, 2017

The amended Federal Rules of Civil Procedure (FRCP) took effect in December 2015. What effect did the amendments have on cases involving the discovery of electronically stored information (ESI)? The answer may be found in a recent study published by Kroll Ontrack, a data recovery and e-discovery consulting firm. The conclusions drawn can help you anticipate pretrial challenges and how courts might handle them. Unearthing the main issues Kroll’s study reviewed 57 significant state and federal cases and revealed four common ESI-related issues: Disputes over production, including methods of production, proportionality and scope of discovery (56% of the cases studied), Preservation, spoliation and options for sanctions (32%), Procedural concerns, such as search or predictive coding — also known as technology assisted review (TAR) — protocols (8%), and Cost considerations, including cost shifting and taxation of costs (4%). The FRCP amendments emphasize both relevance and proportionality — and the study found that the 2016 court opinions focused on the same issues. Digging deeper into the cases The study came to some important conclusions. For example, it found that the opinions addressing proportionality demonstrate that the amendments haven’t changed the discovery burden. In other words, both the requesting and responding parties must explain why a discovery request should or shouldn’t be granted. The opinions also reflect the greater attention paid to preservation practices under the amended FRCP 37. The cases considered 1) reasonable steps to preserve, 2) intent to deprive another party of relevant ESI, and 3) the inherent power of the court to impose sanctions. One case noted that the court had the power to grant sanctions even if FRCP 37 hadn’t applied. Cases involving procedural issues largely dealt with search protocols and predictive coding. Although courts acknowledged that predictive coding is frequently the most effective and efficient search option, they refrained from requiring parties to use it. Instead, courts found that the responsible party is usually best positioned to determine how to search for and produce responsive ESI. When courts addressed cost-centered issues, they seemed willing to require parties to pay for their own discovery in some circumstances. For example, the plaintiff in one case was given access to emails (at the plaintiff’s expense)...

Jul 12, 2017

The Florida Supreme Court recently ruled that a law putting a cap on damages in medical malpractice cases is unconstitutional. This cap was a controversial change that the Florida Legislature made in 2003. In 2008, a lawsuit stemmed from a complaint by a patient who was awarded $4 million in non-economic damages, which was then reduced to $2 million due to the cap. This triggered the latest ruling by the Florida Supreme Court. Justices argued that the caps on non-economic (or pain and suffering) damages “arbitrarily reduce damage awards for plaintiffs who suffer the most drastic injuries.” The reasoning behind the change made in 2003 was due to what appeared to be a crisis of high malpractice insurance premiums. The justices argued that there is no evidence that such a crisis exists. If you have any questions about the topics discussed in this blog, we encourage you to reach out to us...