Per diem rate for transportation employees increased $1 per day, effective Nov. 1, 2003, to $41 for travel within the continental United States. For taxpayers using the rates in the Internal Revenue Service’s Rev. Proc. 2002-63, the new rates did not take effect until Jan. 1, 2004. For more information, see Rev. Proc. 2003-80 at www.irs.gov/pub/irs-drop/rp-03-80.pdf
U.S. Small Business Administration has proposed legislation to authorize at least $3 billion in lending for the 7(a) loan program this fiscal year. If approved by Congress, the bill would allow SBA to increase lending authority by more than 30 percent. The proposal also would increase the lending cap of $750,000 per loan to $2 million.
Internal Revenue Service launched a new section on IRS.gov containing information about abusive schemes involving employee retirement plans. The Treasury Department recently targeted a scheme involving indirect contributions to Roth IRAs and one involving S corporation employee stock ownership plans. Information on abusive ESOP schemes is available in the Retirement Plans section of IRS.gov under “EP Abusive Tax Transactions.”
Clean-fuel vehicle deduction has been extended to the 2003 and 2004 model year Honda Insight and the 2004 model Honda Civic Hybrid. Taxpayers who purchase these automobiles may claim a tax deduction of up to $2,000 for vehicles placed in service before Dec. 31, 2003, or up to $1,500 for vehicles placed into service during 2004.
The tiniest leak can sink the mightiest ship if no one ever attends to it. And all it takes is a small trickle of problems within internal accounting controls to build over time into a flood of financial woes that can swamp a trucking company.
Recent high-profile corporate scandals have shone the light on what can happen when management, boards of directors and audit committees either fail to oversee the accountants properly or interfere improperly in what they do. The juicy details aside, these scandals boil down to a failure of internal controls on numerous levels. The catastrophes may have been slow in coming, but they were inevitable. A bad internal control system is like a slow-motion train wreck.
A privately owned trucking company may not have to worry about national headlines and plummeting stock value, but poor internal controls can wreck profits, damage relationships with lenders and undermine confidence in management. So it’s important for you to root out leaks within your ship. One new tool is a document offered by the American Institute of Certified Public Accountants – “Internal Control: A Tool for the Audit Committee.” The document includes an introduction on the basics of internal control and a nine-page checklist to help you assess your company’s systems and risks.
For example, in small companies it’s not always feasible to have different people handle accounts payable and bank statement reconciliation, and there’s a risk of embezzlement. But companies can minimize the risk by taking several steps, such as requiring that all checks be hand signed by an officer of the company.
Smaller companies are notorious for weak controls. One possible reason is the illusion that since the owners are involved day to day, nothing could occur without being noticed. But unless the owner personally handles everything that involves the potential for embezzlement, fraud or theft, a supposedly trusted employee or manager can rob even a small company of hundreds of thousands of dollars over time.
The value of internal controls goes beyond catching intentional fraud or embezzlement, however. Weak controls can allow waste and unprofitable operations to continue unchecked – situations that can be just as damaging as premeditated theft. A company executive must ensure that managers are trained to safeguard the company’s assets and that they are given appropriate resources to do it.
Bigger companies – especially those growing rapidly or spread out geographically – are most susceptible right at the times of rapid expansion. Those firms may have layers of managers, employees and controls that can be effective, but those same systems can also provide a false sense of security if they are not rigorously followed. To be effective, internal control takes consistent discipline and must be continuously evaluated, maintained and upgraded as conditions change. That’s one reason many companies obtain annual audits of their financial statements. Should an auditor notice a weakness, he is required to report the condition to management as part of the audit. Then, corrective measures can be taken to plug the leak.
Concerned about your internal controls? Beyond the resources provided below, you can obtain a full audit or talk with your CPA or Certified Fraud Examiner about obtaining a limited study of your internal controls every few years. And review internal controls yourself each year. Don’t let tiny links sink your company.
“Internal Control: A Tool for the Audit Committee” from the American Institute of CPAs’ “Audit Committee Toolbook” is available online at this site.
See also “Installing adequate controls,” Chapter 10 of Commercial Carrier University manual How to Manage Cash Flow at this site.
Another resource is “Enemies within: asset misappropriation comes in many forms” by Joseph Wells from the December 2001 issue of Journal of Accountancy, available online at this site.