CLIENT NEWS

Builders Win National Quality Awards

Our clients, Mungo Homes of Irmo, S.C. and Mercedes Homes of Melbourne, Florida have been named winners of the 2008 National Housing Quality Awards.

Modeled after the Malcolm Baldrige National Quality Award, the NHQ Awards provide the home building industry’s highest recognition for quality achievement and operational excellence.

Now in their 15th year, the awards are open to all U.S. residential construction and independent contractor companies.

Entries are judged by a panel of experts who evaluate the importance of quality in the company’s construction, strategic planning, leadership and performance management, trade relationships, customer satisfaction, human resources and business results.

In order to win the award, candidates have to implement and document sophisticated operating processes to improve performance.

For more information on the National Housing Quality Program, click here (nahbrc.org/quality), or e-mail quality@nahbrc.org.

Congratulations!

South Carolina’s Fastest Growing Companies

Two of our clients, VC3 and Builders Wholesale Carpet have been named to the S.C. Fastest-Growing Companies 2007 List.  The list, which is sponsored by the S.C. Camber of Commerce, ranks the fastest-growing companies in the state.  Companies must be in operation for at least two years with revenues of at least $3 million in the most recent reported year.

VC3 is celebrating its 13th year of providing high quality information technology services with offices in SC, NC, and GA. Headquartered in Columbia, SC, VC3 employs over 90 people whose skills include computer and advanced networking technology, voice over IP, security, disaster recovery, web design, and custom application development. VC3 delivers IT solutions and services to both the commercial and public sectors. For more information on VC3 visit www.VC3.com, or call (800) 787-1160.

Builders Wholesale Carpet is a full-service carpet and floor covering company catering entirely to the residential builder. They make sure that all aspects of their business are set up so that the builder closes on time and provides clients with flooring they will enjoy for years to come.

Congratulations to these clients!

NEWS FROM BP&S

TECHNICAL ISSUES

Most Common IT Control Deficiencies
Submitted by Aaron Blackmor 

Over the past six months, as part of our efforts to comply with new auditing standards, we have taken a fresh look at controls over client information technology (“IT”) functions.  Following is a brief discussion of some of the more common deficiencies we have noted. 

Weak or Nonexistent Policies and Procedures

We usually begin with a review of a client’s written policies and procedures to determine the general, company-level attitude towards IT and to uncover any obvious weaknesses. 

Unfortunately, not all written policies and procedures address the IT department, or sometimes we do not find a written set of policies at all.  In either case, we recommend that the client begin the important process of organizing what they think is most important within their information infrastructure and that they establish written guidelines for the operations of those functions. 

Weak Pa$$word Policy

Most companies use the first initial and last name of their employees as their username, so the password is the only real restriction to the company’s financial and other important data. Ineffective passwords such as ‘password’, the user’s first name, the user’s username, ‘123456’, etc., open the company up to inappropriate access or possible theft of proprietary information. 

General rules we look for include passwords being changed every ninety days, a minimum length of six characters and at least one number and capital letter. We also like to see the importance of strong passwords and safeguarding one’s password spelled out in the company policy or employee handbook, as this creates accountability among employees who share their passwords or leave them written down in plain sight. 

Poorly Defined IT Change Management

When companies have the ability to access the source code of any of their applications, we like to know that inappropriate changes can’t be made to the code without proper authorization, testing, and approval. This protects the company from changes that could put their information at risk, including changes that haven’t been thoroughly debugged or changes that are made with malicious intent. 

Here, we generally want to see a chain of command among programmers, as well as segregation of duties within the programming department. It is also beneficial if there is some kind of logging or alerting mechanism through which system changes get reviewed for appropriateness. Though each of these controls is not always feasible, the more we find, the better we feel about the controls over source code alterations. 

Lax Restrictions on Physical Access

Without proper physical restriction to a company’s key IT assets, logical access restriction (password protection) is basically moot. Typically, justification for lax physical security is, “We’ve never had an incident before.” This may provide some reassurance for company management, but for satisfying internal control requirements, “trust” is not a control.  

A clarifying note: here we are referring to separating physical access to IT facilities vs. the rest of the company facilities. Most companies lock their doors or require some kind of swipe access to get in the building, but often they do not have a separate access restriction to their servers, mainframes, and other IT components (if they are an IT-dependent organization). 

Business standard mileage rate for 2008 increases—other rates decrease
Rev Proc 2007-70, 2007-50 IRB, IR 2007-192

The IRS has announced that the optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) is 50.5¢ for business travel after 2007. That's 2¢ more than the 48.5¢ allowance for 2007 business travel. However, the rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction is 19¢ per mile, down 1¢ from the 2007 allowance of 20¢ per mile.

Simplified deduction method. The mileage allowance deduction replaces separate deductions for lease payments (or depreciation if the car is purchased), maintenance, repairs, tires, gas, oil, insurance and license and registration fees. The taxpayer may, however, claim separate deductions for parking fees and tolls connected to business driving. 

The standard mileage rate may not be used for a purchased auto if:

• it was previously depreciated using a method other than straight-line for its estimated useful life;

• a Code Sec. 179 expensing deduction was claimed for the auto;

• the taxpayer depreciated it using MACRS under Code Sec. 168 ; or

• the vehicle is used for hire, such as a taxicab. 

Also, the standard mileage rate can't be used to compute the deductible expenses of five or more autos owned or leased by a taxpayer and used simultaneously (such as in fleet operations). 

A taxpayer who uses the mileage allowance method for an auto he owns may switch in a later year to deducting the business connected portion of actual expenses, so long as he depreciates it from that point on using straight line depreciation over the auto's remaining life.

A taxpayer may use the mileage allowance method for a leased auto only if he uses that method (or a fixed and variable rate (FAVR) allowance method) for the entire lease period (including renewals). If the lease period began before '98, this rule applies only for the post-'97 portion of the lease period (including renewals). 

Other business mileage rate rules. For 2008, the depreciation component of the mileage rate is 21¢ per mile (19¢ per mile for 2007, 17¢ per mile for 2006 and 2005, 16¢ per mile for 2004 and 2003). The depreciation component reduces the basis of the auto for gain or loss purposes. (Rev Proc 2007-70, Sec. 5.05)

Advantages of using standard mileage rate. For those taxpayers eligible to use it, the standard mileage rate offers the following advantages:

• Mileage rate users need not keep a record of actual expenses, or retain receipts where required. A record of the time, place, business purpose and number of miles traveled suffices.

• If an auto's business expenses are deducted via the mileage rate, it is not subject to the Code Sec. 280F dollar caps, or the special rules that apply if qualified business use does not exceed 50% of total use.

• The mileage rate method may yield bigger deductions than the actual expense method for a thrifty, high-mileage model.

Disadvantages of mileage rate method. The mileage rate method may produce a smaller deduction than would be obtained by claiming actual business-connected operating expenses plus depreciation (or lease payments). Also, use of the mileage rate method prevents the taxpayer from claiming regular MACRS deductions (subject to the luxury auto dollar caps) for the auto in later years.

Other applications of mileage allowance method. Employers that require employees to supply their own autos may reimburse them at a rate that doesn't exceed 50.5¢ per mile for employment-connected business mileage during 2008 (48.5¢ per mile for 2007), whether the autos are owned or leased. The reimbursement is treated as a tax-free accountable-plan reimbursement if the employee substantiates the time, place, business purpose, and mileage of each trip. 

In addition, for 2008, the rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction is 19¢ per mile (20¢ per mile for 2007). The mileage rate for driving an auto for charitable use during 2008 will remain unchanged at 14¢ per mile (a statutory rate that's not adjusted for inflation).
 

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