  All companies must go through the process of applying the new standard and documenting their decision making process as well as adding significant disclosures for those decisions to their financial statements. In this series of insights, we illustrate the critical new concepts of each element of the standard with construction industry-specific scenarios so you can begin to assess the impact it will have on your business. Though the effective date for compliance may seem distant, business systems, processes and controls should be implemented on Jan. 1, 2018 to provide the necessary information for reporting and disclosure for private companies. Download this collection of insights as a supplement to our ASC 606 eBook The ASC 606 transition for construction contractors: Step 1 – Identifying the contract Collectability

Combining contracts

Contract modifications Step 2 – Identifying the performance obligations Promises in contracts with customers

Principal versus agent considerations Step 3 –Determining the transaction price Variable consideration

Noncash consideration

Significant financing component Step 4 – Allocating the transaction price Standalone selling price

Allocating variable consideration

Changes in the transaction price Step 5 – Recognizing revenue 
Step 6 – Disclosures Special considerations ASC 606 time-sensitive data: Uninstalled materials at fiscal year-end Tailored services to help you navigate the changes ASC 606 significantly impacts business operations for construction companies. We have developed a six-step methodology to help you through the complex process of assessing impact, developing a plan, and implementing that plan across your organization. Our construction industry specialists understand the revenue streams and various standards that apply to your accounting. We understand that not every organization needs assistance in every area of implementation and can provide you the type of support your organization needs. Connect with our ASC 606 specialists to understand the impact on your organization and the resources you will need to effectively implement the changes. Additional ASC 606 resources Essential ASC 606 Guide and Supplement for Construction Contractors On-demand video: Assess and implement ASC 606 for your construction company in six steps Educational recordings and presentation slides

Construction

ASC 606 Revenue Recognition

The ASC 606 transition for construction contractors

As the role of government board members becomes increasingly complex, our industry specialists are here to provide the resources you need to improve governance. As a state and local government board member, your role is evolving. Expectations and accountability are higher than they have ever been and substantial knowledge is required to perform your duties effectively. To help you navigate the changes and increased responsibilities of your role, Baker Tilly professionals have developed a series of insights to keep you up-to-date on the issues. Leveraging deep industry knowledge, these insights provide guidance for key concerns that board members face every day, allowing for informed decision-making. Podcasts Better understand the financial workings of your government by listening to these short, on-demand podcasts: Managing cyber threats: Developing a sustainable cybersecurity program to address your unique risks Understanding utility finances Are you ready for the changes? The new FLSA overtime exemption rule is here Benefits of a fraud risk assessment Financial ratios and benchmarks Fund balances and other financial policies Articles Gain insight into the following topics important to State and Local Government board members by reading these short articles: Securitization of deposits and investments Five easy internal controls your government should implement Fund balance levels: What works for your government? For more information on this topic, or to learn how Baker Tilly board governance specialists can help, contact our team.

As a state and local government board member, your role is evolving. Expectations and accountability are higher than they have ever been and substantial knowledge is required to perform your duties effectively. To help you navigate the changes and increased responsibilities of your role, Baker Tilly professionals have developed a series of insights to keep you up-to-date on the issues. 

State & Local Government

Board Governance Resource Center

Supply chain design is a critical component and important  differentiator in effective management of supply chains for  middle-market manufacturers. Jackie Hensgen (Director, Risk Internal  Audit and Cybersecurity Practice) and Dan Bolinson (Consultant, Middle  Market Advisory) hosted a webinar,  which provided step-by-step guidance on the execution, planning, and  design of an effective supply chain. The webinar also included an  overview of the SOC report on supply chains that likely will be  finalized by AICPA later this year. According to Bolinson, “Supply  chains are systems by which you communicate information, money, and  products, through your supplier networks, to your customers. This  includes the tools, processes, and people at all levels that are inside  this supply chain.” Manufacturers looking to put in place a new  supply chain or enhance an existing one need to first think through what  they want the supply chain to achieve, and then understand the  execution, planning and design capabilities needed to meet that goal.  Bolinson noted that each capability has several levels of  sophistication, which generally range from a passive, backward looking,  labor-intensive level to an automated, real-time level that can help  drive forecasting and value-added strategic services. Execution Regarding execution, Bolinson noted that in its most basic form, a supply chain has – Unclear metrics and reporting requirements Little automation Daily plans based on past experience and business rules Communication by file transfer, email, and phone. At its most sophisticated level, a supply chain includes – Real time reporting on individual and company metrics Extensive use of automation, such as robotic process automation Optimized adaptations to a plan Customer portals and shared data warehouses to provide effective insights, not just information Planning Likewise, with planning capabilities, Bolinson said that in its initial stages, planning capabilities include – Sales driving production, or production driving sales “What-if” planning that is siloed and time consuming Forecasting based on historical information Plans shared with partners only as deemed appropriated A highly evolved supply chain will feature – Planning in an integrated environment including sales, production and finance Models of various “what-if” scenarios that are widely socialized Machine learning models that help drive forecasting Input from partners leveraged into decision making Bolinson  noted that by having a model of the end-to-end supply chain,  manufacturers can start to understand how different customer  demand-shaping approaches affect their by-product management. He said,  “Once this model is in place, detailed scenario forecasts can be  generated for any range of what-if questions that the organization might  have. These scenario forecasts include both the operational  considerations, such as the impact on their bottlenecks and client  capacities, as well as the bottom-line financial impact.” Design In its simplest form, supply chain design features – Manufacturers monitoring asset capacity at a high level and then check how annual planning will affect that capacity No technology roadmap Primarily transactional relations with partners A fully integrated supply chain approach will feature – A supply chain Center of Excellence which maintains a strategic vision Clear strategic priorities related to supply chain capabilities as part of a capital plan Partners providing value-added strategic services with controls to manage risk Bolinson  said, “Great design flows out of great planning. It involves the  mapping of growth of the organization to operations, and what that means  related to asset capacity and your ability to provide services to your  customers.” How to get started  Bolinson said that in building the supply chain team, it is important  to have an executive champion, but that people at all levels of the  organization need to be leveraged to get the right perspectives and  skill sets involved. A company needs to assess properly its current  state and required future state to develop short-, medium-, and  long-term plans regarding service levels, lead times, or cost. SOC for supply chain The  AICPA is developing a SOC report for supply chain as part of its suite  of service offerings to provide system or entity level controls for an  organization. Hensgen said, “The purpose of this SOC supply chain report  is to provide users of the report with information about the system  used to produce, manufacture, distribute those goods, and the controls  within that system. And then address those risks associated with doing  business with them, and allow for companies to communicate that  information and understand those controls within the system.” She added  that this report, which is intended to be voluntary, “could be helpful  or the board of directors and senior management as they're evaluating  risk of doing business with a supply chain entity.” An “exposure draft”  of SOC for supply chain was released in January 2019 and is currently  being revised; AICPA will release the final report later in 2019. For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

Manufacturing & Distribution

Food & Beverage

Agribusiness

Cooperatives

Life Sciences

Assurance

How a sophisticated supply chain can reduce risk and create competitive advantage

Healthcare providers are buffeted by risks that can threaten an institution’s bottom line; expose it to government sanctions; or simply create a workplace environment that is difficult for employees. Establishing or enhancing a provider’s internal audit functionality can help mitigate many of the risks, and this was the subject of a May 1, 2019, Baker Tilly webinar. Baker Tilly partner Deb Bowes (Healthcare Practice) provided a broad overview of the risks that providers deal with every day – Scrutiny by governmental regulators Pressure from patients and payers to reduce costs and improve quality Physicians transitioning from being independent practitioners to provider employees HIPAA violations Cybersecurity and the overall reliance on technology in healthcare settings Uncertain effect of mergers and acquisitions What is internal audit? How can internal audit help address these risks? According to the Institute of Internal Auditors, internal audit “is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.” Mark Laccetti (Risk, Internal Audit and Cybersecurity Practice partner) noted how the focus of the internal audit has evolved over time. Previously, an organization’s internal audit group acted as a kind of “gotcha police,” but this approach “created alienation between the internal audit department and the operating units,” making it harder for internal audit to be an effective adviser to the organization. Now, internal audit provides a strategic, proactive role, helping to mitigate risk and fraud, while making sure that an organization stays in compliance, Laccetti said. Three options for internal audit Laccetti explained that there are three options for resourcing internal audit – traditional, co-sourced and shared services. Under a traditional internal audit function, all employees of that department are employees of the healthcare provider and the provider has complete control over the audit process. One of the biggest challenges keeping this function totally in-house is making sure audit employees are appropriately trained. Employees will have to stay current on cybersecurity defenses, new regulations, and new code sets or related coding changes, among other things. Providers who co-source the internal audit function can leverage the unique skill sets of an outside organization, and offload some audit functions. One of the co-sourcing challenges is that the provider has a reduced opportunity to develop audit knowledge and skills in-house, and also has to expend resources finding and keeping a good partner. The shared services internal audit option allows a provider to instantly leverage a network of internal audit professionals and specialty expertise for comprehensive, effective risk coverage. This is the most expensive type of internal audit, however, and it eliminates significant investments related to people (recruiting, training, career development), methodology, technology and knowledge. How do you decide? While more than half of webinar attendees noted that that they were already using a traditional internal audit approach, almost 25 percent said they had no current internal audit function. If an organization does not understand all the possible risks it faces or is not staffed properly to effectively manage the internal audit function, Laccetti said the shared service function is probably the best approach if an organization is looking to get something established quickly. The organization can learn what it needs to do to structure its own internal audit function even as the outside provider is executing essential audits. Risk assessment Laccetti said “providers have a finite amount of resources so they have to spend those resources in the best place to mitigate risk.” If a provider performs an internal audit risk assessment, it has to “define the objectives. What's the scope? Who's responsible? What are the roles and responsibilities? And then who are we reporting to? Is there someone in senior management? Is it the audit committee? Is it some other board committee? Know where all that stands. And what this does is it helps to increase the confidence in our risk assessment.” Risk assessment has a lifecycle, from the identification and assessment of risks, to prioritizing them, to reporting results to relevant stakeholders. Laccetti said, “In identifying the risk, you want to cast as wide a net as possible [including] in-person interviews, small groups gathering together discussing risks, through surveys, or a combination of all of these.” Ultimately, he said, “you really want the people who own the risks, the operational folks, to weigh into that risk-gathering process.” Laccetti stressed, “No risk exists in isolation. There has to be some understanding of how potentially risks could link together, which is the best approach to pull in together your internal audit plan or your risk mitigation plan.” Prioritization risks After gathering all the information on the impact and likelihood of certain risks, the provider has to prioritize. Laccetti suggested that the internal audit team take the first crack at prioritizing risks. Then “they can go back to the stakeholders and get some buy-in to the risk assessment and prioritization process, because, clearly, we want to make sure that the key stakeholders are on board with where the risk mitigation resources are being spent and how those risk mitigation strategies are being prioritized.” Reporting risks Reporting is the conclusion of a provider’s risk assessment. Laccetti said, “You've outlined, `Here's the risk universe. Here's how we've assessed the risk. Here's how we prioritize the risk. And here's how we're ultimately going to mitigate those risks,’ whether it's some form of internal audit that's going to be performed or whether there's some type of compliance function that covers those risks.” The risk with the highest likelihood and impact on the organization should receive the most focus as part of any risk mitigation strategy. Conclusion Internal audit works in synch with an organization’s system of internal controls and governance functions to mitigate risk. It is a helpful ally for improving controls, improving compliance, and improving the financial operations of a healthcare organization. The full recording of this webinar is available here. Baker Tilly will be hosting future webinars on the internal audit function within healthcare organizations. For more information on this topic, or to learn how Baker Tilly healthcare specialists can help, contact our team.

The ASC 606 transition for construction contractors

Board Governance Resource Center

How a sophisticated supply chain can reduce risk and create competitive advantage

Strategies for using internal audit to help healthcare organizations manage risk

The ASC 606 transition for construction contractors

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