SBN Staff

In the current economic environment, many businesses are finding financing difficult to come by. But with the proper preparation, gaining funding for your business is not impossible, says David Shaffer, director, Audit & Accounting, Government Contracting Industry group leader at Kreischer Miller.

“Getting your business in order and presenting a strong case to your banker can improve your chances of getting financing,” says Shaffer. “It’s not as easy as it once was, but even in difficult economic times, banks and other organizations are still providing financing to businesses.”

Smart Business spoke with Shaffer about how to position your business to succeed when seeking financing.

What does a business need to have ready prior to looking for financing?

Whether you are a new business or have 50 years of history, anyone looking to provide financing is going to want to see the plan of how the business is going to repay the loan.  Most lenders do not want to have to liquidate the collateral to collect the loan; they want to set up reasonable terms and conditions so the business can repay the loan, over time, and the lender can make a reasonable profit.

In most cases, this means providing the lender with a monthly budget of the business’s income, balance sheet and sometimes cash flow for 12 months, and an annual budget for at least two years from that point. The lender will use these statements to create financial covenants, so management must be comfortable that they can meet, or preferably exceed, the budgets.

Lenders are also going to review management’s history and the business’s history of repaying debt. If there have been any issues with historical debt, this should be discussed with the lender up front, prior to the bank discovering it on its own.

If you are an existing business, three years of historical financial information should also be provided. Audited financials are best, but in most cases, reviewed financials will be sufficient. If the company does not have audited or reviewed financial statements, compiled or internal financial statements should be provided, but if this is the case, be prepared for more due diligence from the lender. If there have been historical losses or other items that might give a lender concern, discuss the issues with the proposed lender prior to sending.

If this is the first time through the process, owners should consider having their CFO/controller involved, or involve their CPA or legal counsel who is familiar with typical terms and conditions of business loans. But even if you have done this before, no matter how experienced you are, make sure that you have an experienced attorney who has knowledge of these loans review all documents prior to signing.

How long does the process typically take from start to finish?

Most banks need 45 to 60 days from the initial meeting to the time of funding a loan. If the loan is more complex, it may take longer.

What collateral will a lender typically request?

Most banks will request that all business assets collateralize their loan (assuming they are the only lender) and, in most cases, will require the business owners to personally guarantee the loan. If the loan is very risky, they might also request liens on specific owner assets such as stock portfolios, personal home, and/or cash surrender value of life insurance.

What interest rate can businesses expect in the current environment?

Banks and other lenders determine their interest rates based upon the perceived risk of the loan. Most business loans that are not high risk have variable interest rates ranging from prime minus .5 percent to prime plus 1 percent. Fixed rate loans will vary depending on the length of the loan and the collateral.

Other than banks and personal savings/assets, where else can a business seek funding?

President Obama recently signed the Jumpstart Our Business Startups Act, and one aspect of that, called crowdfunding, provides up to $1 million of loans for businesses. Transactions must be administered by a broker or a funding portal that is registered and complies with the Securities and Exchange Commission requirements.

The Small Business Administration and other government-guaranteed loans also provide funding alternatives to businesses. The SBA can provide loans up to $5.5 million. Such loans require a lot of documentation from a business, but their rates are very competitive. In most cases, a bank will still need to be involved to underwrite the loan, and many banks have specific lenders specializing is SBA loans.

Some companies also consider joint ventures. However, this is quite risky because it requires a strong leader to bring together a group of businesses so that each member of the group understands the risks and responsibilities involved. It also requires the involvement of an experienced attorney who can write a joint venture agreement that everyone understands and is willing to sign. Joint ventures are often used to complete a specific project for a customer when one company does not have all the skill sets to complete the contract on its own, so will go out and find a ‘partner’ with those necessary skill sets to propose on the project.

Venture capitalist/private equity is also viable, especially if the business is promising and can grow quickly with the proper funding. Typically, these companies will get an ownership in the business. Some firms have been willing to lend money to a company, but it is typically at a much higher interest rate than a bank may charge.  The advantage of venture capital/private equity, however, is that the business now has the network of contacts of the venture capitalist or private equity provider at its disposal.


David Shaffer is director, Audit & Accounting, Government Contracting Industry Group leader, at Kreischer Miller. Reach him at (215) 441-4600 or

Insights Accounting & Consulting is brought to you by Kreischer Miller

When starting a business, owners usually think, not surprisingly, that relationships with their partners will be eternally copacetic. Unfortunately, issues among owners arise and resolution of these issues can be both time-consuming and expensive. A bit of planning at the outset, however, can prevent heartache later.

“Because of unforeseen circumstances which may arise and circumstances which business owners may foresee but choose not to address, I advise clients, at the outset of the formation of their business, that it is crucial for them to enter into a comprehensive agreement with the other owners,” says Craig M. Chernoff, a member at Semanoff Ormsby Greenberg & Torchia, LLC.

“There are many areas to be considered in these agreements and each business is unique,” he says. “It is crucial that business owners consult with their attorneys to sort through these issues and determine the best way to handle them.”

Smart Business spoke with Chernoff about the importance of agreements among business owners.

What is the role of agreements among business owners?

These agreements — primarily shareholder, operating, partnership and similar agreements — address and govern a multitude of situations by setting forth the rights and obligations of business owners across a broad spectrum of areas.

What issues might owners address with these agreements?

These issues can be broken down into four categories as discussed below. How each issue is handled may vary from business to business, and there is no one ‘right’ way or answer. So, consulting with your attorney is vital to ensure that each issue is handled in the best way to suit your business.

  • Dispositions of interests upon certain triggering events: What happens with an owner’s interest when that owner dies, becomes disabled, is terminated, becomes bankrupt or divorces? Typically, owners enter into relationships based on various personal and business factors. When a ‘triggering event’ occurs, owners generally do not want to be forced into a new relationship (for example, they do not want to be in business with their partner’s spouse). Typically, agreements provide the business and the remaining owners an option to purchase the interest of the owner affected by the triggering event. The more difficult question is valuation, and how it is to be paid so as not to cripple the business. Other considerations include obtaining insurance to fund the buyout and purchase price discounts depending on the type of triggering event.

  • Transfers of interests in the business: What happens when a business owner wants to transfer his or her interests in the business? For example, Trey (75 percent) and Mike (25 percent) own Piper Pipe, Inc. Jon offers to buy Trey’s 75 percent interest in Piper for $10,000,000. If there is no agreement, Trey may sell his interest to Jon, and Jon and Mike would be co-owners of Piper. Because business owners want to control who they are in business with, agreements may provide that an owner may not transfer an interest without first offering to the business or to the other owners on the same terms and conditions as offered by the potential purchaser. If Trey and Mike had an agreement, Trey would offer Piper and/or Mike his interest for $10,000,000. Piper and/or Mike may accept or reject the offer. If they reject, Trey would be free to sell his interest to Jon. Agreements may provide for ‘tag along’ and ‘drag along’ rights. ‘Tag along’ rights allow an owner with the right to ‘tag along’ in a sale by the other owner (favoring minority owners), and ‘drag along’ rights allow an owner to ‘drag along’ the other owners in a sale (favoring majority owners). If there are ‘tag along’ rights, Mike may choose to include his interest in the sale to Jon. If there are ‘drag along’ rights, Trey may be able to force Mike to sell his interests to Jon.

  • Management and voting rights in the business: Agreements may provide owners with certain management and voting rights. Depending on the business, one person (or a group) may run the day-to-day operations or have the right to do whatever they want with the business. Owners may vary voting requirements for certain business actions. For example, appointing officers may require a majority, but approving a merger may require unanimity. Owners may also provide a mechanism to break deadlocks, including mediation, arbitration, ‘shoot out’ provisions or even the business’s dissolution.

  • Miscellaneous: Anything may be provided for in agreements among owners, if such provisions are not contrary to applicable law. Examples are anti-dilution provisions; restrictive covenants; requirements when additional capital is needed; escrow and voting right provisions upon the sale of an interest; contribution and indemnity obligations; and truncated arbitration or other dispute resolution mechanisms.

What steps should be taken when owners are considering agreements?

When an owner wants to start a business or prepare an agreement for an existing business, the owner should meet with their attorney to discuss which issues are applicable and how to address those that are. It is often prudent to include financial and insurance advisers who may have greater insight into the inner-workings of the business, particularly with regard to valuation of the business.

What is the most common error an owner can make?

The biggest error is not having an agreement or using an ‘off-the-shelf’ agreement. Too often, people tell their attorney, ‘We never got around to signing an agreement, but now my partner and I are not getting along and we cannot amicably resolve our differences. What can we do?’ There are solutions, but resolution of these issues is less time consuming and expensive if there is an agreement in place beforehand.

Craig M. Chernoff is a member at Semanoff Ormsby Greenberg & Torchia, LLC. Reach him at (215) 887-4835 or

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

Goodwill of North Georgia isn’t your average nonprofit organization.

It is older than most corporations in the North Georgia area and among the fastest-growing Goodwill organizations in the country.

Between 2000 and 2012, the organization grew from 558 employees serving 491,000 donors at 25 locations to 2,425 employees serving more than 2 million donors at 124 locations. Goodwill helped find employment opportunities for 844 people in 2000 to more than 10,000 in 2012. And its revenue increased from $18 million to $113 million in that same time period, a 527 percent increase in a little more than a decade.

To better understand the organization that has been serving the community for so long, Smart Business partnered with Goodwill of North Georgia to learn about and evaluate its services and business model.

A strategic approach

Goodwill of North Georgia's mission is to put people to work, and this mission is interwoven into everything it does. The framework begins with a strategic planning process that outlines its goals for the following five years. It’s this planning process that predicts its growth, determines its efficiencies, defines its processes and provides the proper services to partner with employers to provide the job opportunities to those it serves.

Goodwill of North Georgia is the first donated-goods business in the world to hold the International Organization for Standardization 9001, 14001 and 18001 registrations. ISO 9001 is a standard that provides a set of requirements for quality management systems. ISO 14001 is an environmental management system that helps Goodwill of North Georgia reduce its impact on the environment. And ISO 18001 specifies requirements for implementing an occupational health and safety management system. These registrations confirm the high quality and dedication of the organization.

Business overview

All Goodwills throughout the world are members of Goodwill Industries International Inc., which comprises 165 Goodwill organizations in North America and 14 Goodwill affiliate organizations around the world. Individual Goodwills are given the freedom to design the services and programs to meet the unique needs of their local communities.

Goodwill of North Georgia has chosen to focus on driving revenue through its donation centers and stores so it can put more people to work through job training, job placement and job creation. Among all Goodwills, Goodwill of North Georgia ranks fifth in total revenue, fourth in donated goods retail revenue and fifth in the number of people it has helped find jobs, illustrating this focus has been successful.

In its donor services segment, the organization collects donated clothing and household items and sells them in its retail stores. Goodwill of North Georgia operates 41 stores and more than 60 donation centers. In fiscal year 2012, it processed 1.7 million donations and served more than 4.8 million customers while continuing to grow by adding 14 new locations and 156 new positions.

The facilities services segment of the organization cleans about 5 million square feet of space each day in the North Georgia area and generates more than $15 million in revenue a year. About 80 percent of employees in this segment have disabilities, and Goodwill gives these individuals an opportunity to obtain employment. This business provides top-notch facility management services to federal, state and local governments and the commercial real estate market and has been doing so for more than 30 years.

Goodwill of North Georgia’s career services segment serves not only individuals looking for work but also employers looking for talent. It helped put more than 10,000 people to work at an average wage of $9.86 per hour in fiscal 2012. Proving its dedication to its mission of putting people to work, the organization steadily increases the number of people it puts to work annually and is on track to put another 12,000 people to work by 2014.

Like any shrewd business, Goodwill operates its programs and services with an outcome in mind. The important outcome is how many people are now employed in the community; it does it by tailoring its services to meet the needs of employers within the community.

Business partnerships

Goodwill of North Georgia is committed to working with businesses of all types and sizes on a variety of projects. The organization is the go-to employee source for many businesses, and because of its stellar reputation and success in the community, it receives word of many job openings before they are posted publicly.

Goodwill of North Georgia has become known for the shared value it provides for both the community and businesses. These businesses receive workers who are fully trained and ready to work, and the workers receive a job that enables them to provide for their families and the greater community.

Besides hiring Goodwill of North Georgia’s program participants, companies throughout the area provide on-the-job training or utilize the organization’s training and employment resources. And Goodwill of North Georgia is open to other business partnerships that promote its goal of developing and strengthening its community.

Building cash reserves

Goodwill of North Georgia runs its business with a focus on building cash reserves of at least 30 percent of its annual revenue.

This strategy enables the organization to adroitly plan for anything that would be disruptive to the business. It has also made Goodwill of North Georgia one of the few nonprofits that was able to grow and expand during the recession.

Its business model also allows Goodwill of North Georgia to continue growing — as people outgrow the use of their items, they donate them. And at the same time, they need items, so they visit the organization’s stores to purchase them.

One of the misconceptions of nonprofits is they are not focused on operating cost-effectively and efficiently. This could not be further from the truth with Goodwill of North Georgia. The organization is focused on generating revenue and using it in a way that makes it a good steward of generous donations. It constantly looks for ways to reduce costs and live up to the highest standards of quality.

Maximizing efficiency through decentralization

Goodwill of North Georgia is one of the few Goodwill organizations in the country that is decentralized. The organization analyzed its internal processes to find ways to be even more efficient. Now it takes in donations at all of its individual locations and processes all donations to sell within 24 hours.

The organization greatly attributes its growth to this keen business strategy. It allows it to be more efficient because it is processing donations and getting them out for sale more quickly. It also saves on the costs of transporting the goods from various stores to a separate location and back again and on staffing for a separate location.

This process is more efficient and environmentally friendly. Shoppers at Goodwill of North Georgia’s stores are essentially buying their neighbors’ clothes, and the money and goods stay in the community.

Goodwill of North Georgia applies the decentralization philosophy to its career centers, as well. Instead of one central career center, Goodwill of North Georgia has many centers spread across its territory, making it more convenient for those who use the services and therefore enabling it to put more people to work.

Business processes drive results

Goodwills around the world are known for their donation centers and retail stores. However, not everyone knows the power of those donations and what goes on behind the scenes.

Goodwill’s stores are stocked with the items people donate. The proceeds from these sales support the operation of the organization’s career centers and other programs, which fulfills its mission of putting people to work.

Donations add up. For every nine shirts or blouses donated, Goodwill is able to provide one hour of resume preparation. For every chair donated, Goodwill is able to provide 12 minutes of career counseling. Donations have a huge impact on the organization and the communities Goodwill serves.

Because of this, Goodwill of North Georgia continually evaluates its stores to ensure they are operating as efficiently and effectively as possible. As times change, it quickly adapts and responds to ensure it is still meeting the needs of its community. The organization takes good business practices that work well in its best-performing stores and implements them in its other stores. This standardizes the stores so they all have the same processes and makes it easier for both employees, who can easily relocate from one store to another, and shoppers, who can visit different locations and expect the same great quality and service.

Goodwill of North Georgia makes donating easy and convenient in other ways, as well. It has an area of its website ( where individuals, businesses or organizations can choose to donate money. If the donor desires, these contributions can go to a specific program. If the donor does not specify a use for the money, the board of directors selects a program.

And donations don’t have to be tangible — Goodwill of North Georgia also has volunteers who help the organization as placement call specialists, computer support assistants, class instructors, job fair support staff and more.

What happens to donated goods?

Goodwill of North Georgia accepts a wide variety of goods, including:

  • Bicycles
  • Books
  • CDs
  • Clothing
  • Computers
  • Dishes
  • DVDs
  • Pots and pans
  • Stereos
  • TVs
  • Video games and systems

Goodwill of North Georgia is grateful for all of its donations and does not waste them. Items that aren’t up to the organization’s quality standards or cannot be sold within three weeks are offered for sale to the secondary/salvage market.

Great business practices equal great opportunities

Goodwill of North Georgia provides job training opportunities for a wide demographic across 45 counties, including youth, veterans, people with disabilities and people with limited education, although its career centers are open to anyone.

Goodwill of North Georgia has eight career centers that are free and open to the public. The centers offer weekly listings of local job opportunities often not found online or in the newspaper, computers with Internet access and resume writing software, phones and fax machines to arrange appointments and communicate with employers, a resource library with materials to help job seekers prepare for and secure employment and other resources such as coaching and interview tips. These services are critical to the community as many job seekers need the extra help in securing a job.

Goodwill of North Georgia also offers training programs at these centers, including programs for single mothers, noncustodial parents and other niche groups, and also offers certification programs, such as programs for forklift operators and apartment maintenance technicians. Workers who have attended these training programs have impressed many employers with their knowledge, perseverance and professionalism.

Talented, passionate staff and volunteers who provide guidance, coaching and strategies on job hunting operate these centers.

These services are particularly important because of the current economic climate. Many workers, especially skilled and semiskilled workers who have been affected by the loss of jobs or reduced hours, need the career assistance Goodwill of North Georgia provides.

In response, Goodwill of North Georgia ramped up its training offerings, working through weekends and holidays to solidify its mission of putting people to work.

Focus on the future

Goodwill of North Georgia ensures its employees are cognizant of its mission — putting people to work. The mission is posted and visible in its stores and career centers and is communicated during meetings and visits by executives. This communication ensures employees feel connected to the organization and are reminded of the importance of their work.

The organization also engages its employees in its strategic planning process. Goodwill of North Georgia has a volunteer board of directors, executive staff and more than 100 other managers engaged in some level of strategic planning.

Also, when a new store opens, Goodwill of North Georgia President Ray Bishop personally meets with its employees to discuss the organization’s planning process and why the stores exist. Employees are encouraged to read and understand the 5-year Strategic Plan and then ask questions.

This method of engagement is a main reason the organization has been so successful. A thoroughly followed, reviewed and communicated plan is critical to an organization’s success, and Goodwill of North Georgia’s method of creating and utilizing its plan is on par with some of the top businesses in the world.


Goodwill of North Georgia is effectively and efficiently run and well positioned for the years ahead. The community-based organization owes its success to a dedicated strategic planning process and commitment to excellence and execution at all levels of the organization.

Its current plan calls for it to double its size and revenue from 2010 to 2014, and it is on target to do so. The organization plans to open five new stores a year and each new store will employ about 40 people. It also plans to add one career center per year. Each career center increases the number of people the organization serves by an average of 3,000 and the individuals it puts to work by an average of 650.

The bottom line: Goodwill of North Georgia’s services and programs put people to work. It is an experienced and capable organization that operates with an effective business model, uses its resources well and focuses on bettering the North Georgia community.

HOW TO REACH: Goodwill of North Georgia, 235 Peachtree St. NE, Atlanta, GA 30303. Phone: (404) 420-9900. Website:

Certificates of insurance play an important function in doing business. Companies need a certificate to get work. A contractor needs one to get onto a jobsite. A trucker needs one to be able to pull up to deliver a load of cargo. A real estate company needs a certificate of insurance to go to settlement to buy a new building.

“It is the lifeblood of industry from an insurance standpoint,” says Joyce Shefsky, vice president, client services at ECBM. “There are so many issues involved with certificates, it can be a time-consuming and difficult process to get them issued and accepted.”

For example, a bank or general contractor will thoroughly examine a certificate of insurance to make sure everything is in compliance with the contract requirements, she says. If it isn’t, the insured could be held in breach of contract, or business could be delayed while the certificates are amended.

Smart Business spoke with Shefsky about the role that certificates of insurance play in doing business and how to properly use them.

What is a certificate of insurance and what should be included on it?

A certificate of insurance is evidence that certain insurance coverage is in existence as of the date the certificate is issued. It shows the insurance carrier providing coverage, the effective and expiration dates, policy numbers and limits of insurance.

Certificates of insurance are usually issued in conjunction with a contractual relationship between a third party and the named insured on the insurance policy. The contract typically stipulates the coverage and limits required.

It should include:

  • Current policy information (limits of insurance, policy term, etc.)

  • Name of the insurance carrier and the NAIC number

  • Signature of agent

  • Correct name and mailing address of certificate holder

If additional insured status or waiver of subrogation is required, a copy of the endorsement to the policy should be included.

Certificates of insurances are very critical to the construction industry, although other industries depend on them, as well. Often, it is the last thing businesses deal with, and it can be very costly if the insurance requested is not what the named insured has purchased. For example, a company will bid on a construction contract and not bother looking at any of the insurance requirements. Then, when it gets a job, all of a sudden it has to purchase more coverage, and its profit decreases or it is held in breach of contract.

When employers receive certificates of insurance, how should they review them?

The contractually required insurance, amounts, types of coverage and endorsements should be compared to the certificate provided. A procedure also should be in place to verify receipt of renewal certificates when the policies expire. In addition, a system to manage storage of the certificates is crucial; at the time of a loss, it is critical that the insurance certificate be available.

When requested to provide a certificate:

  • Verify that your current coverage meets or exceeds the required insurance; this must include all endorsements requested.

  • Always have your insurance consultant review the insurance requirements prior to signing a contract.

  • Realize that adding additional insured status means you are sharing your limits with the additional insured, and you may want to consider purchasing higher limits to protect yourself.

What incorrect assumptions do employers make about certificates of insurance?

Some business owners mistakenly assume that certificates of insurance are binding. They might wrongly believe that just because a certificate has been issued to them that they are covered for any loss. Finally, all additional insured endorsements are not the same. Each is issued for a specific purpose, and the preparer of the contract must be specific as to the form of additional insured required.

How do subcontractors and policy renewals play into certificates of insurance?

When you hire a subcontractor to do work for you, request that a certificate of insurance be provided prior to the start of work. It is very important that the contractual agreement contain all of the indemnity and insurance requirements that are required in your contract with the owner or general contractor.

For policy renewals, a system needs to be in place to follow up for renewal certificates. The certificates need to be reviewed for compliance with your contract.

How have states taken legislative and/or regulatory action to address issues pertaining to certificates of insurance?

Often, insurance agents are asked to amend the Acord certificate form. It is copyright infringement to change the wording on the form. The wording that is printed on the form cannot be amended. There is legislation in most states forbidding an insurance agent to amend coverage by issuing a certificate. The policy must be endorsed for coverage to apply.

No business owner wants to be held in breach of contract because of a problem with the certificate of insurance. It also can slow business down — a job may not start, cargo may not get off a truck or a building owner cannot go to settlement. Therefore, take the time to ensure that everything is in order and properly reviewed to keep your business moving.

Joyce Shefsky is a vice president, client services at ECBM. Reach her at (610) 664-8299, ext. 1205, or

Insights Risk Management is brought to you by ECBM Insurance Brokers and Consultants

On July 30, 2012, the National Labor Relations Board (“NLRB”) reached a decision ruling that Banner Health Systems non-union employer’s system of advising its employees to refrain from discussing ongoing internal investigation matters with fellow co-workers violated Section (a)(1) of the National Labor Relations Act. Prior to the Banner Health System decision, businesses had a certain level of discretion in implementing confidentiality requests. However, the freedom to make such requests may no longer be exclusively in the hands of management and may even no longer be permitted without special justification. Companies should take notice.

Courts and administrative agencies are cracking down on blanket employer requests for silence without adequate justification during investigations and the NLRB confirmed this standard in Banner Health System d/b/a Banner Estrella Medical Center, 358 NLRB No. 93 (2012) (“Banner”). The Banner decision came after a technician working for a hospital voiced concern to the hospital’s human resources consultant about certain practices he did not feel comfortable following and believed could cause a patient to become sick. After complaining to human resources, he was instructed to not discuss the matter with any of his co-workers while the hospital conducted its investigation. The same human resources consultant would routinely make identical confidentiality requests to other employees who made complaints that were subject to an investigation.

Given the recent Banner decision, corporate response plans must be sensitive to the level of confidentiality involved in internal investigation matters and specify the proper protocol for disclosing information within an organization.

Smart Business spoke with Andrea Gonzalez, senior manager at Cendrowski Corporate Advisors LLC, about the Banner decision and the potential trickle-down effect it could have on business confidentiality processes during investigations.

What should an organization learn from this decision regarding confidentiality issues in internal investigation matters?

Companies will need to have established protocol ready in the event an internal investigation is launched and the protocol will need to address the issue of confidentiality. There may be a valid justification for confidentiality between co-workers in an internal investigation. However, in order to withstand a challenge, such as the one in Banner, companies will need to be able to readily articulate these justifications. Blanket requests are likely to fail, but well-planned and established processes will not only survive any challenges but continue to allow for effective internal investigations consistent with management’s plan. Each corporate response plan needs to take confidentiality issues into account, be planned in advance and be individualized to the present issues so that it is not found to be overly broad or too burdensome.

How can an organization justify a confidentiality request and likely succeed if challenged?

In Banner, the NLRB discussed the appropriate criteria for determining whether an organization has met the burden of justifying its approach. Despite the hospital’s argument that the confidentiality was necessary for protecting the investigation, the Court stated the hospital needed to show (1) it was necessary for the protection of the witnesses; (2) evidence could potentially be destroyed; (3) testimony could be fabricated; or (4) there was a need to prevent a cover-up. The hospital was unable to do so.

Management should keep these factors in mind during the planning phase of their response plans and protocol should reflect this idea. Retroactive planning after an internal investigation has been launched should also be avoided.

In the event of a challenge to the confidentiality request, what is the best course of action?

One of the most important aspects of combating a challenge to a confidentiality request is an organization’s effort to document its basis for each confidentiality request. An individual file should be maintained with detailed and updated information regarding the investigation. A company should also consider engaging counsel to maintain privilege and identify additional information needed to support or contradict its position. A company may never have perfect information, but a well-maintained file is instrumental in its analysis of a challenge and the manner in which it should proceed.

How can an organization ensure their plan for confidentiality requests is implemented properly?

An organization should monitor guidelines or protocols in place and ensure any blanket policies have been removed. From the moment an investigation begins, the organization should continue to revisit their confidentiality requests and evaluate the facts of the current investigation. A check list of all questions and open items should be kept and findings should be reviewed for accuracy and completeness. The communications protocol to personnel involved in the investigation should also be presented to all parties in a clear and concise manner.

How can an organization gain confidence in established confidentially request guidelines and policies?

Organizations can engage a third party to perform a detailed independent review of an ongoing investigation to evaluate whether the established policies and procedures are being adhered to by individuals conducting the investigation. The third party can also assess whether the confidentiality requests would withstand a challenge under Banner.

The feedback provided by the third party would enable the organization to adjust their guidelines and policies to help ensure future confidentiality requests succeed if challenged.


Andrea Gonzalez is a senior manager at Cendrowski Corporate Advisors LLC. Reach her at (866) 717-1607 or

Insights Accounting is brought to you by Cendrowski Corporate Advisors LLC

Business leaders are usually pleased if they are asked to serve on a business’s board of directors.

They should be. Being asked to serve on a board of directors is a recognition that a business leader has achieved success and that he or she has valuable insights into how a business can be profitable. Nonetheless, business leaders should recognize that serving on a corporation’s board carries with it very real responsibilities and risks, says Tim Miller,  a partner at Novack and Macey LLP.

“If a board member fails to take the responsibilities of board membership seriously, and instead treats board memberships as an ‘honor’ without responsibilities, or as a chance to periodically play a round of golf with colleagues, it can lead to serious repercussions,” says Miller.

Smart Business spoke with Miller about how to protect yourself should you agree to serve on a board.

What are some potential repercussions of failing to take seriously the responsibilities of being a board member?

A director could be sued for millions of dollars in damages. There are actions filed every day in this country in which stockholders allege that a director breached his or her duties and that this breach cost a company millions of dollars.

Ironically, such suits are filed even when a company is successful; sometimes these suits allege that the company should have been more successful. Even if such a case is meritless, it can cost a lot of time and money in attorneys’ fees to defeat it. In other cases, governmental entities can seek civil or criminal penalties against directors.

Don’t most corporations indemnify board members against losses from such suits?

Yes, most companies agree to indemnify board members against loss suffered by reason of serving as a board member. But if a board member is found to have not acted in good faith, he or she may lose the right to indemnification. And if a corporation becomes insolvent, its promise to indemnify its directors is not worth very much.

Even if a corporation is insolvent, doesn’t insurance protect board members?

Insurance may protect a corporate director. But insurance policies are usually written with exclusions that may leave a director uninsured against particular types of suits.

For example, many policies have an ‘insured v. insured’ exception.  If the stock of an insolvent corporation is sold, new management may decide to sue the directors who controlled the company when it became insolvent. In such a situation, the suit may not be insured. Moreover, penalties are usually not insured against.

All of this means that somebody who agrees to serve as a corporate director should try to do the job he or she has agreed to accept.

What duties does a board member have?

A director’s duties differ depending on the state where a business is incorporated, but usually directors are said to owe duties of care and loyalty.

What is the duty of care?

Just as it sounds, the duty of care requires directors to carefully act on behalf of the corporation. As the standard is usually formulated, the duty of care requires that the directors exercise the same degree of care that a prudent person would exercise in the management of his or her own business.

Among other things, this means that directors should attend board meetings, inform themselves of facts necessary to make decisions, exercise their judgment and make prudent decisions.

One of the more important aspects of the duty of care is that a director should make certain that he or she has adequate information to decide matters that come before the board. For example, if asked to approve of a corporation going into a new business, the director should make sure that he or she understands enough to make an informed decision about whether it is wise for the corporation to take such a significant step.

Frequently, rosy forecasts of future profits can distract from the need to be fully informed of risks before making a decision. A director may need to question management, test the assumptions underlying projections, consider what will happen if something goes wrong and ask how risks can be mitigated to make a reasoned decision.

In other words, a director should act as though the consequences of a decision is his or her responsibility — because it is.

What does the duty of loyalty involve?

The duty of loyalty requires that directors act in the best interests of the corporation — not their own best interests. Thus, for example, if a director learns of a business opportunity, he or she may need to refer it to the corporation and not exploit it for the director’s own benefit.

The duty of loyalty also means that, in situations in which matters are brought before the board and a director has a conflict of interest, he or she should recuse him or herself from the decision. For example, if the corporation is going to retain another business in which a director is interested, the director should disclose the conflict and should not vote on that matter. Indeed, the director should attempt to cause the minutes to reflect that he or she has not participated in a decision that could benefit him or her.

Does all of this mean that somebody should turn down a directorship if offered?

No. It means that those offered a directorship should think very carefully about what being a director means and should not accept the role unless they are willing to take it very seriously.

Tim Miller is a partner at Novack and Macey LLP. Reach him at (312) 419-6900 or

Insights Legal Affairs is brought to you by Novack and Macey LLP

Friday, 07 September 2012 10:35

What to look for in an advisor

When becoming a business owner, trustee or beneficiary of a trust, or executor of an estate, there comes a time when seeking out a professional advisor is necessary. But where do you even begin to find that right advisor with all the necessary attributes?

In most situations, for example becoming a trustee, executor or business owner, an advisory team is needed because the specialties of each advisor are unique. There are several common qualities to look for in any advisor that will be the perfect fit for your team.

Smart Business spoke with Joseph R. Ramey, CPA, a Senior Manager of Accounting Tax Services at Zinner & Co. LLP, about the qualities you should look for.

Technical Strengths and Credentials

These qualities are fairly straightforward, and typically an advisor will display their credentials and area(s) of specialty on their website. When evaluating their technical expertise, look at their speaking engagements and for articles written in the specialty areas that are important to your situation and background. For example, if you just became an executor of an estate, you want to find an attorney that not only focuses on estate and probate, but also speaks on the topic and has authored articles in that area. Lastly, it is also important to note any professional groups or boards in which they participate; this will help in understanding how current they are in what is going on in their specialty.


The best way to start looking for an advisor is by talking with your family and friends who may know or currently have trusted advisors. If your close circles of acquaintances are able to refer someone they work with, then you will have more comfort in knowing how that advisor will work with you as well. Another good referral source is your own current advisors from other professions. For example, if you are in need of an investment advisor, contact your accountant or attorney and see if they have a recommendation for you.


Sometimes the most important quality to evaluate and assess in an advisor is their personality. The most technically sound professional may not be the right fit because of differences in personalities. Always meet face-to-face with a potential advisor and evaluate how they speak with you and how you feel when you talk with them. If you walk away scratching your head trying to figure out what they were talking about, they may not be the right advisor for you.

At Zinner & Co., we maintain a vast network of professionals in various fields and are always able to recommend an advisor that will work best with you. Our Exclusive Service Provider Program (ESP) is a group of the "best of the best" advisors in their respected fields, which allows us to deliver a pre-screened list of quality referrals to our clients based on their specific needs.

Joseph R. Ramey, CPA, is a Senior Manager of Accounting Tax Services at Zinner & Co. LLP. Reach him at (216) 831-0733 or

Saturday, 01 September 2012 10:38

Getting refocused for financial success

The road to financial success is paved with good intentions. We all know intellectually and appreciate how Albert Einstein defined insanity as “doing the same thing over and over again and expecting different results.” We create goals and objectives, but habits and attitudes get in the way.

Think back when you were a child and you were about to go to your first day of school. How did you feel? You may have been filled with angst and fear as to what would actually transpire. So there may be fear of the unknown that comes with new experiences. How we kept our room, did our school work, kept track of records and information all set the stage for our adult financial planning habits. Even your annual April income tax pilgrimage of collecting your financial data reminds you of those acquired habits of dealing with financial matters. This tax preparation scenario may exacerbate your sense of frustration and angst by adding the dimension of fear of missing the deadline.

So what is all of this preliminary conversation leading to? What does this have to do with September? It appears that our lives are in sync with the school calendar. Summer has been a time to vacation away from responsibility, so September is charged with a get-back-to-work mentality. Rather than dread this, embrace this time of year. Incorporate a new habit of fiscal responsibility into your life now without applying pressure to your daily routine. Understand that there are obstacles that are physically, behaviorally and inherently in the way, but you can choose a financial partner/coach to make the journey an integrated life-planning experience.

Meet with a bona fide wealth manager. Who is that and what is the process? Wealth management is an investment advisory discipline that incorporates financial planning, investment-portfolio management and a number of aggregated financial services. High-net-worth individuals, small business owners and families who desire the assistance of a credentialed financial advisory specialist call upon wealth managers to coordinate estate planning, legal resources, tax professionals and investment management. Ideally, you are looking for an all-inclusive and objective wealth management company.

Financial planner, broker, wealth advisor … they all sound the same. How do you choose?

Look for an individual or firm that agrees to work in a fiduciary capacity. A fiduciary agrees not to put his interests before the duty to serve you. The fiduciary duty is the ultimate standard of care, and a fiduciary agrees to eliminate potential conflicts of interest in the relationship. This standard is in opposition to the suitability standard used generally in the brokerage and financial services industry. Suitability obligation by members of the broker/dealer community dictates the representative has to reasonably believe that any recommendations made to you are suitable to you in regard to your financial situation. The representative’s loyalty is to his or her firm, and that person is not obligated to disclose conflicts of interest.

Uncover how the professional is compensated. When it comes to compensation, there are basically two groups: fee-only and all others. Innovative firms have introduced an annual flat fee retainer working agreement in response to the age-old ambiguity that has prevailed in the financial industry relative to how advisors are paid. These new pioneering wealth management companies have eliminated from their vocabulary all of the jargon about percentage of assets under management (AUM) charges and commissions charged on implementation. The retainer is achieved by determining the client’s desired scope of services, complexity of personal and/or business situations, and other qualitative and quantitative data. Transparency and disclosure are at the root of their relationship with you.

Be prepared for that visit with your wealth manager. Begin to identify and accumulate two types of data — quantitative and qualitative. The quantitative data can be easier to retrieve, such as assets, liabilities, cash flow, employee benefit statements, estate documents, buy-sell agreements and the like. You may experience some angst if your personal filing system is not quite up to date.

The qualitative data resides in our intellect and our hearts. What is your personal purpose, passion and legacy goals? You as a client also bear a responsibility in the life planning process — particularly if you long for a future that looks very different from your current reality. Like all strategic goals, the more time you have to take risks and plan, the better your odds are of achieving long-term success.

The wealth management process is really a life-planning passage. Answers to these qualitative questions will help identify the drivers in your financial life-plan. Wealth management and life planning are much more than just dollars and cents. Typically, people expect dollars and cents to dominate conversations they have with a wealth advisor, but when it comes to life planning, topics of discussion extend to matters far more personal than money, addressing your deepest life dreams and goals — and how to make them a reality through sound financial planning.

The life-planning experience takes you to new dimensions of goal accomplishment. We have focused so much on goal-setting; the life-planning process focuses on goal accomplishment.

Robert A. Valente, CFP®, AEP®, is CEO and Managing Member of RAV Financial Services LLC. He can be reached at

Insights Wealth Management is brought to you by RAV Financial Services LLC.

Sunday, 30 September 2012 20:28

Succession shopping

Lisë Stewart founded Galliard Group to support family-owned businesses in the many decisions that can make or break the future of a company. One significant area of decision-making for family-owned businesses is succession planning.

When considering how to handle the future of the company, many family-owned businesses don’t realize the number of options that are available. From transitioning to the next generation in the family, to bringing in a leader from the outside or deciding to sell the business, the decisions are very personal and require careful thought and planning.

That is where Stewart, founder of Galliard Group, lends a helping hand. Galliard Group provides consulting, training and support materials for family-owned businesses. Conversations in the succession planning process can be difficult, as most experienced family-owned business members will report. The process is challenging on several different levels.

“Owners who are currently running the business often really enjoy what it is they are doing and don’t necessarily want to leave, but they feel like they need to make room for the next generation of ownership,” Stewart says. “Others really want to get out of the business because they’re tired and they’ve been doing this a long time, but they realize they’ve never groomed a successor and they don’t know what to do with the business.

“Sometimes they think that their children may want to take it over, but they’re concerned that their children don’t really have the skills, background, or maybe the passion to do a great job. How do you tell your children that? So it’s a very difficult situation.”

These businesses need to understand their options. The sooner the business members start the planning process, the better.

“We try to convince our business owners to develop their exit strategy right when they start the business,” Stewart says. “Think about what the future needs to be and what your plans are. A lot of people don’t realize that it could take five years or more to really develop and implement a successful succession plan.

“The other thing I think is important to note is that succession is not just about finding one person to take over and run your business. A succession plan is a plan to continue the long-term viability and success of the business. That often means that you need far more than one person to take over — you need a strong leadership team.”

More often than not, family-owned businesses will have to look outside the family to get the right kind of talent to help grow the company.

“We really encourage family-owned businesses to place people into jobs based on their talent and skill, not on their blood line,” Stewart says. “You have to look at the job and what needs to be done to this company to meet a strategic goal. Get people into jobs that have the talent or the ability to learn skills that are key to that job being effective. Base your organizational development on key competencies as opposed to relationships.”

Family businesses often struggle to weigh the needs of the business with the needs of the family. It is important to be honest in discussions about the future, especially for families that do not plan to pass leadership to the next generation.

“We have a saying at Galliard Group, which is, ‘Deal with the emotional issues before emotions become the issue,’” she says. “If you believe your son or daughter or the next generation of potential owners don’t really have the skills … have a really honest conversation around what sort of skills you need in order to bring this strategic plan to life and if you don’t have it, what are the options.”

Depending on the needs and desires of the business owner(s), there are several paths to take.

“One might be that you form an advisory board of people who have knowledge necessary to help grow the company and they can serve as mentors and coaches for the next generation,” Stewart says. “The second thing you can do is bring in an interim leader. They come in in a leadership role, but they are hired with the knowledge that they’ve got to be able to coach the next generation of ownership. There really are quite a lot of options that family owners can generate if they are not sure that the right leader is in the family.”

How to reach: Galliard Group, (320) 762-1371 or

The Supreme Court ruled in June that health care reform is constitutional and upheld the Patient Protection Affordable Care Act (PPACA) in its entirety. As a result, health care reform will continue to be implemented as planned and provisions that are already in effect will continue, says Jessica Galardini, president and COO of JRG Advisors, the management company of ChamberChoice.

“The individual mandate requiring individuals to purchase health insurance or pay a penalty is the major component of the law. Because the court upheld that mandate, it did not need to decide whether other provisions of the law are constitutional,” says Galardini.

Smart Business spoke with Galardini about the impact of the PPACA on employers and the benefits that they offer to employees.

What does this ruling mean for employers?

All aspects of the law already implemented will remain in effect. These include the ability for adult children to remain on their parents’ coverage until age 26, no exclusions for children with pre-existing conditions and certain preventive services without cost sharing for nongrandfathered plans. A grandfathered plan is one that has been in existence continuously since before the act was passed and is not required to comply with select provisions of PPACA as long as it meets certain other requirements.

Provisions of the law not yet in effect will be implemented as planned. Although much attention has been paid to the big changes slated for 2014, there are numerous smaller requirements that employers need to be aware of and prepare for now.

For example, insurers have already started issuing rebates to employers with fully insured health plans who qualify due to medical loss ratio (MLR) rules. The MLR rules require insurance companies to spend a certain percentage of premium dollars on medical care and health care quality improvement rather than on administrative costs.

Rebates can be issued in the form of a premium credit, lump sum payment or premium ‘holiday’ during which premium is not required. Any portion of a rebate that is a plan asset must be used for the exclusive benefit of the plan’s participants and beneficiaries, for example, reducing participants’ premium payments.

What other changes do employers need to be aware of regarding benefits?

Effective September 23 of this year, insurers must provide a summary of benefits and coverage (SBC) to participants and beneficiaries. The SBC is to be a concise document with stringent criteria as to the number of pages and print font that provides information about the health benefits in a simple and easy-to-understand format. The SBC will need to be distributed to employees during open enrollment, with any material modifications to the plan throughout the year being communicated at least 60 days in advance.

Additionally, beginning with the 2012 tax year, employers that issue 250 or more W-2 forms must report the aggregate cost of employer-sponsored group health insurance on employees’ W-2 Forms. The cost must be reported beginning with the 2012 W-2 Forms, which are due in January 2013.

What changes are looming for 2013?

Changes scheduled for 2013 include limiting pretax contributions toward flexible spending accounts (FSAs) to $2,500. This limit will be indexed for cost-of-living adjustments for 2014 and later years.

Employers will also be required to provide all employees with written notice about health insurance exchanges and the consequences if an employee decides to forego employer-sponsored coverage and purchase a qualified health plan through an exchange.

Finally, employers will be required to withhold an additional 0.9 percent Medicare tax on an employee’s wages in excess of $200,000, or $250,000 for married couples filing jointly.

What is happening in 2014?

By all accounts, 2014 will be the most significant year. Annual dollar limits for health services will be eliminated, as will medical underwriting and exclusions for pre-existing conditions. Additionally, insurance exchanges will be enacted for individuals and small employers with fewer than 50 employees. This is a key component of health care reform law. Individuals will be required to have health insurance or pay a tax for not having it.

Businesses with 50 or more full-time employees must provide health insurance for employees or pay a tax for not doing so.   And for states that choose not to set up their own exchanges, the federal government will do it for them. To date, Pennsylvania has not passed legislation authorizing its own exchange.

Although the Supreme Court upheld the health care reform law, the future remains somewhat uncertain. Opponents will continue to challenge the law and debate its constitutionality through the November 2012 elections, and the strength of the economy and the response of private insurance companies with innovative products and funding solutions will also impact private and public options for individuals and employers.

What is certain is that health care benefits, funding and delivery are changing.  Employer and employee decisions are far more complex and require educated consideration.  Work with your advisor to learn more about your options and to understand exactly what is required of your company to remain compliant with the law.

Jessica Galardini is president and COO of JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7231 or

Insights Employee Benefits is brought to you by ChamberChoice