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Tag: VSCPA

Professional Services 2023: STEPHANIE R. PETERS

Peters has led the state’s professional association for CPAs since 1997, representing more than 13,000 members who work in private and public sectors, including educational institutions.

In April, the VSCPA announced its investment in the Center for Audit Quality’s Accounting+ program, a national campaign to attract a new generation of diverse students into the industry’s talent pipeline. Many firms have had to raise salaries in recent years to attract and retain young accountants amid industrywide labor shortages.

Peters has served on the LGBTQ+ committee for the American Institute of Certified Public Accountants since 2021. She serves on the executive committee for the Virginia Council on Economic Education and has served on its board since 2013.

Peters earned her master’s degree in public administration from Virginia Commonwealth University and has a bachelor’s degree in history from the University of Virginia. She is a graduate of the U.S. Chamber of Commerce Institute for Organization Management and Lead Virginia.

Va. Board of Accountancy elects next chair

Wendy P. Lewis, a partner in KPMG LLP’s audit practice, will become chair of the Virginia Board of Accountancy on July 1.

Lewis is currently the board’s vice chair; her term as chair will end on June 30, 2024.

“I’m honored to step into the role of chair. … As the first Black woman to serve as chair since VBOA became an independent agency in 2001, I am excited about the important work of opening doors to the CPA profession for people from a variety of backgrounds, as well as leading the board through the overall transformation and evolution of the accounting profession,” Lewis said in a statement.

She is a member of the Virginia Society of CPAs and the American Institute of Certified Public Accountants and a past local chapter president of the National Association of Black Accountants, now NABA Inc.

“I look forward to working with Wendy in her role as chair of the Virginia Board of Accountancy,” VSCPA President and CEO Stephanie Peters said in a statement. “Wendy has been an active member and volunteer with the VSCPA, particularly in our student and DEI initiatives, and I know she has leadership qualities that will serve her and the CPA profession well. She is passionate about inspiring the next generation of CPAs and I know she will keep that at the forefront during her time as chair.”

Lewis has been with KPMG since 1997, when she started as an associate. She completed a three-year rotation in KPMG’s national office in New York, providing technical accounting, financial reporting and risk management assistance to the firm’s local offices.

Lewis has been a member of KPMG’s African Ancestry Business Resource Group since its inception in 2006 and serves as partner champion for the local board in Richmond, a role she also has held for KPMG’s Washington, D.C., and Tysons offices.

Lewis leads KPMG’s recruiting efforts for Hampton University, Virginia State University and Virginia Union University, from which she has a bachelor’s degree in accounting. She serves on the boards of the Howard University Middle School of Mathematics and Science and the Richmond Public Schools Education Foundation.

Established in 1910, the VBOA regulates certified public accountants in the state, handling exams, licensing, consumer protection enforcement, professional education audits and peer review oversight.

Falling short

In the accounting field, the books are out of balance. Demand for the profession’s services is rising, which is one for the assets column, but on the debit side of the ledger, the number of people willing and able to provide those services is dropping so alarmingly that some firms are being forced to turn away clients.

Rectifying that imbalance is not going to be easy or perhaps even possible any time soon, and even in the long term, some creative accounting is going to be necessary to turn the situation around.

The profession’s numbers are being crunched from both ends, both nationwide and in Virginia.

The American Institute of Certified Public Accountants (AICPA) reports that 75% of the country’s CPAs reached retirement age in 2020, which, concurrent with the pandemic, helps explain a Bureau of Labor Statistics finding that 300,000 accountants and auditors — about 17% of the workforce — left the field between 2020 and 2022. Of those who left, about 35% to 40% were CPAs.  That’s a substantial loss, considering that the number of accountants and auditors in the United States was about 1.5 million last year.

At the entry level of the profession, the numbers are correspondingly negative. In 2020, the AICPA reported 2.8% fewer accounting graduates at the bachelor’s degree level and 8.4% fewer at the master’s degree level. An August 2022 Deloitte poll found that four out of five hiring managers at public accounting firms and 69% at private firms reported that talent retention was a challenge. Workplace data provider Revelio Labs Inc. backs up those figures. For the first 11 months of 2022, there were 177,880 job postings in the accounting and auditing fields, and almost 64,500 of those openings were unfilled as of Nov. 30, 2022, Revelio Labs reports. In 2021, there were 141,340 openings in the industry.

“It’s a war,” declares Fran Randall, a partner and Richmond market leader for Forvis, one of the nation’s top 10 accounting firms. “Everyone is fighting for the same talent.”

Stephanie Peters, CEO and president of the Virginia Society of CPAs (VSCPA), seconds that assessment. The state has about 28,000 licensed CPAs, she says, but “even to maintain [those numbers] will be an effort.”

How did this happen?

The gap between supply and demand in the accountancy field can be traced to several bedrock issues.

Virginia has 28,000 licensed CPAs, but maintaining that level “will be an effort,” given industry trends, says Virginia Society of CPAs President and CEO Stephanie Peters. Photo by Courtesy photos
Virginia has 28,000 licensed CPAs, but maintaining that level “will be an effort,” given industry trends, says Virginia Society of CPAs President and CEO Stephanie Peters. Courtesy photo

First, the pool of available college graduates overall is shallower than it used to be, meaning that many professions, not just the accountancy field, face personnel shortages. The National Student Clearinghouse Research Center reported 662,000 fewer U.S. undergraduate students in spring 2022 than the previous year, a drop of 4.7%. And that shortfall “is just the appetizer round,” says George Forsythe, a managing partner in Richmond accounting firm WellsColeman. The downward demographics, he says, means that “the shortage of people is only going to get worse.”

“Every profession is experiencing this, but we [in the accountancy field] are getting more than our fair share,” agrees Gary Thomson, head of Richmond-based accounting and professional services consultancy Thomson Consulting and a former VSCPA chairman. “This is an acute situation.” 

Why the situation has become so acute comes down to issues of time and money, plus the less quantifiable problem of image.

Earning a CPA license requires 150 credit hours — 30 credits more than the normal 120-hour requirement for a bachelor’s degree. Those extra hours add up to about a fifth year of college — along with all the sacrifice, study and tuition costs that commitment represents. The 16-hour CPA exam also is notoriously difficult. Typically demanding 300 to 400 hours of study, the exam has a first-time pass rate of only about 50%.

Yet all the extra work is not commensurately rewarded. The average salary for a CPA is just $62,410, according to the CPA Accounting Institute for Success, but financial analysts typically earn $95,570 a year and financial managers make an average of $131,710, according to the Bureau of Labor Statistics.

“That value proposition of that extended learning experience” is a big problem, says Royce D. Burnett, chair of Old Dominion University’s School of Accountancy, which has about 400 undergraduate accounting students and 20 to 25 students in its graduate program.

Universities need to reevaluate how many credit hours and which courses should be required for accounting students, says Margaret Cowell, an associate professor at Virginia Tech. Courtesy photo

Finally, there’s the existential problem of the field’s decidedly unglamorous image. People picture an accountant “sitting alone behind a desk all day doing grunt work,” as Peters puts it. And when tax season rolls around, many accountants traditionally are swamped, with no time for their personal lives.

“Our profession has been known for its rough deadline schedule of 70-, 80-hour-plus weeks,” Thomson says. “That was expected when I came along, but you can’t reliably expect that anymore. We have to modify our expectations. Sometimes different is difficult, but that is not a negative.”

‘A seismic shift’

“The pandemic was a time to have space to think about changes we should make,” says Virginia Tech’s Margaret Cowell, an associate professor of urban affairs and planning who specializes in economic development and labor force issues. “Change usually takes a long time, but this was a seismic shift.”

The result of that shift was the realization that accounting had “to provide a more flexible model. We have to go beyond the balance sheet to come up with more creative options,” she says. “Young people are demanding something different.”

That “different” starts with how accountants are educated.

“We have to create an environment that … [accounting students] can embrace,” Burnett says. Accepting online learning was a start. That was unheard of 10 years ago, Cowell says, but now it’s par for the course.

“If someone is smart and capable, we are interested,” says WellsColeman Managing Partner George Forsythe, left, who hired Brett Shea, a trained accountant who had been working as an arborist. Photo by Rick DeBerry
“If someone is smart and capable, we are interested,” says WellsColeman Managing Partner George Forsythe, left, who hired Brett Shea, a trained accountant who had been working as an arborist. Photo by Rick DeBerry

However, the Virginia Tech professor believes that remote learning is just the beginning of what may be necessary to reverse falling enrollment. She expects that educational institutions will need to face much more difficult questions, such as, “Do we need to require so many credits? Are all the courses essential? [And] what can we convey in half the credit hours?”

Additionally, schools will need to be vigilant in assessing whether their curricula have kept pace with modern accounting needs. Today’s CPA performs “less data entry and more analytics,” says Thomson, and Burnett admits that schools have not exactly been “Johnny to the gate” on technology.

Also overripe for change is the compensation earned by accountants and auditors, who are likely to be very familiar with what other professionals are earning.

“Salaries across the board are increasing,” says Peters, especially in fields with major labor shortages.

WellsColeman is typical in having had to increase pay “dramatically” to attract and retain employees, Forsythe notes. Some firms help employees cover the time and cost of the additional educational hours needed to pass the CPA exam, too.

For example, KPMG, one of the nation’s largest accounting firms, is offering employees
two months’ salary to study for the test, which will be cut in half next year to eight hours and updated to better reflect current technology.

Compensation has become much more than a matter of numbers, though. The willingness of workers of any age to put in marathon hours has virtually evaporated, and firms have instituted much more liberal leave policies, such as flexible personal days off, as long as the work gets done. 

Firms also are expanding the amount and type of benefits offered to employees. At Keiter, a Henrico County CPA firm with more than 100 accountants, the leave package for new parents has been broadened to include employees who need to care for extended family members, says Managing Partner Gary Wallace.

Greg Wallig, managing principal of Grant Thornton LLP’s Metro D.C.-Arlington office, says that health and wellness perks and support for continuing education also are extremely important to his firm’s employees.

Culture, rarely spoken of 20 years ago, matters greatly too.

“People are interested in what is the company’s vision,” Wallace says. “What are its values?” Firms such as Forvis, which formed last year from the merger of Dixon Hughes Goodman LLP and BKD CPAs & Advisors, stress their commitment to their own people and not just to their clients.

“It’s not just trickle-down,” Randall says of boss-employee interactions. “It goes both ways.”

Short- and long-term solutions

Faced with a dribbling pipeline of potential hires, accounting firms have had to become much more proactive about increasing their outreach.

“We have to blow our own horn,” says Peters. “We have to show that accounting is a dynamic profession, not just sitting behind your desk doing grunt work anymore.”

One way many practices are trying to do that is by dramatically expanding their campus outreach, far beyond just offering internships. Keiter, for instance, now has two full-time recruiting coordinators available to coach students and listen to any concerns they might have about a career in accounting. Forvis does too.

“We have intentionally increased our presence on college campuses,” Randall says, “and are actively involved with professors, organizations and students directly.”

At the same time, recruiting minorities has taken on increased urgency. The most recent AICPA Trends Report found that only 7% of accountancy graduates identified as Black, 9% as Asian and 13% as Hispanic. To improve those numbers, ODU held a weeklong National Association of Black Accountants seminar on its campus last summer, while companies such as Grant Thornton have become a regular presence on historically Black college and university campuses. 

Beyond these efforts, companies’ leaders have been forced to adopt more open minds about who might make a good fit for their firms. Experienced workers can be particularly hard to come by, and companies such as Keiter now are happy to rehire former employees.

“We’ve been mindful to keep in touch with folks who left the firm,” Wallace says, “and [we] had good success in getting them back.”

WellsColeman is similarly open to less-than-conventional hires these days. The firm recently added to its payroll 30-year-old Brett Shea. He had been working as an arborist for five years, despite having an accounting degree. “Twenty years ago, people would be like, ‘You’re crazy,’” Forsythe says of Shea’s hiring, “but if someone is smart and capable, we are interested.”

Shea values the stability and financial prospects of the accounting profession. In a time of economic uncertainty and widespread layoffs in the tech field, accountancy is widely regarded as recession-resistant.

Like other millennial workers, Shea was impressed by WellsColeman’s connection to the community. The company serves many local clients, and that, he says, makes him feel that he is a part of something.

His employers managed to hit another millennial sweet spot with Shea by making it clear that WellsColeman cares about its staff. “George [Forsythe] is transparent about the steps that he takes so that we all stay happy,” he says.

In the meantime, while hires like Shea remain rare, the accountancy field is making up staffing shortfalls by increasing hiring of part-time, freelance and seasonal workers.

Outsourcing and offshoring also has “risen with a speed like I’ve never seen before,” Thomson says, with much work ending up being sent to part-time accountants in other countries, a development that not all domestic clients find desirable. Those overseas accountants are considerably less costly than U.S.-based contractors, who often cost accounting firms more per hour than in-house staff, although their costs are offset by not receiving benefits.

Thomson says that many people are working on the problem of how to attract more workers to the accounting profession, and that “there’s a lot of activity, not just talk” about the problem.

“Getting a CPA [certification] is a no-brainer,” Peters says. “It is going to pay off.”

Belabored shortages

Faced with a shortage of drivers, Trevor Dunlap had to find a new way to recruit interested candidates for his Chesapeake-based trucking and warehousing companies, Givens Transportation Inc. and Givens Inc.

“It’s very challenging to find qualified people and then be able to retain them,” he says, “and the wages we’re paying are substantially higher than before the pandemic.”

The solution: He plucked drivers from his current workforce. Dunlap created an in-house warehouse-to-truck driver program, which included paying for the candidates’ commercial driver’s license training, pairing them up with an experienced driver and getting them on the road.

So far, it’s worked. Givens has cut its 15% vacancy in half. Dunlap also raised entry-level wages by about 20% from pre-pandemic wages and even higher for mechanic positions, which are especially difficult to fill. 

Like leaders of many other workplaces across Virginia and the nation, Dunlap, president of both companies, is trying to solve the puzzle of recruiting employees to fill gaps in his workforce while retaining the ones he has. 

Labor shortages and higher labor costs are both on the minds of accountants who responded to the Virginia Society of Certified Public Accountants’ latest annual survey of current economic conditions and expectations, conducted in partnership with Virginia Business.

The COVID-19 health crisis has, if not completely subsided, at least eased considerably, but the pandemic’s impact is still causing economic ripples, including the nation’s widespread labor shortage.

Bob McNab, chair of the economics department at Old Dominion University’s Strome College of Business and director of the Dragas Center for Economic Analysis and Policy, says looking ahead to 2023, several of the challenges from the pandemic era will continue. Chief among them: labor shortages, inflation and the possibility of recession.

About 79% of VSCPA survey respondents said labor shortages are having a significant or moderate impact on their businesses. Eighty percent of survey respondents expect labor shortages to continue into 2023, and 83% of survey respondents identified labor costs having a significant or moderate impact on their companies in 2022. 

The statewide survey, completed by CPAs in private industry and public sectors, including government and education, confirms that Virginia businesspeople are facing many of the same concerns as their counterparts across the country. 

About 60% of survey respondents had a pessimistic view of the U.S. economy, though just 36% had a pessimistic view of Virginia’s economy.  

“I kind of thought it would be starting to trend a little more optimistically,” says VSCPA President and CEO Stephanie Peters. “It’s a time where it’s hard to predict what might happen. We are in this time of uncertainty, unable to predict whether all of these global events are going to play out.”

Smaller labor pool

Multiple industries — including hospitality, health care, accounting and construction — are facing dire labor shortages that started during the pandemic and have continued beyond it. 

“Virginia has not recovered all the people in the workforce that were there prior to the pandemic,” McNab says. 

In January 2020, there were approximately 4.48 million people in the civilian labor force in Virginia, and in August 2022, there were 4.35 million, according to McNab. 

“We have fewer people in the labor force, and those who are in the labor force are essentially employed at the same rate they were prior to the pandemic,” he says. “You have jobs almost completely recovered and a smaller pool of labor or labor force out there looking for work or working, and that means there’s not a lot of people out there who are actually unemployed.”

For the accounting industry, the labor shortage is not a new issue. Wallig says the industry needs to do a better job of advertising the potential in the profession and educating earlier, such as at the high school level.

It’s been such an issue that VSCPA formed a special task force to offer best practices and advice to its 13,000 members, as well as a white paper. Greg Wallig, managing principal for accounting giant Grant Thornton LLP’s Arlington office, is on the task force and sees the problem in his own office. 

The industry has a pipeline problem, which is even more critical because the demand for accounting services is only rising. One area that’s harder to hire for is auditing, Wallig says.

“There has been an assumption over the years that ‘in the future, accounting will become automated,’” Wallig says. “Certainly, automation and use of systems has increasingly become part of the profession, but the needs have also grown in complexity. Consider trends like global supply chain, outsourcing, tax law changes, environmental reporting and the like. Accounting skill sets, which include accuracy and integrity in how data is reported, are in higher demand than ever, and the job is becoming more and more complex.”

It’s a matter of increasing demand and not enough supply.

“Finding individuals with those qualifications in sufficient numbers is difficult,” he says. “Having people who know how to audit those systems — [there are] not enough people who know how to do that. If you can’t find people for a necessary job, one way is to pay more [and] those costs get translated to higher fees for clients.” 

It’s a dilemma many businesses face: Higher costs have to be covered somehow. Often, they mean higher costs for customers, which amplifies the effect of inflation.

Earlier in the year, inflation hit a 40-year high, and although the Federal Reserve Bank has raised interest rates to battle the rise, prices have continued to spike through the early fall. 

Grant Thornton is making a significant effort to retain its employees, including additional midyear raises for the past two years to keep up with demands in the marketplace. 

At McKinney & Co., an architectural and engineering firm in Ashland, Treasurer Melanie Randall sings a similar tune. It’s been hard to find enough engineers and architects to fill openings, an issue that started before the pandemic but has worsened. 

With just 17 employees, McKinney is small, and the impact of five unfilled positions hits hard. As a result, projects take longer to complete. Pay rates may have been the issue a few years ago, Randall says, but now candidates want more work-life balance, or to work remotely, which is harder to accommodate due to the nature of their projects. 

“The idea that we’re going to return to where we were in January/February 2020 is somewhat misguided,” McNab says. “People’s expectations of work/life balance are dramatically different.” 

To chip away at the problem, McKinney is incentivizing its employees to recommend new hires, using employment and recruiting agencies, and cross-training current workers in disciplines other than their own. For example, a structural engineer may be able to help the electrical engineering department, and Randall’s company has discussed acquiring a smaller firm that already has the workers McKinney needs.

Smaller companies aren’t the only ones suffering. Newport News Shipbuilding, the state’s largest industrial employer with about 25,000 workers, has been trying to fill 5,000 slots to keep up with a backlog of $31.8 million in projects.

Newport News Shipbuilding, a division of Huntington Ingalls Industries Inc., the nation’s largest military shipbuilder, has expanded its outreach nationally, says Xavier Beale, vice president of human resources and trades at NNS. Because the shipyard needs people with particular skills, it is working with regional workforce councils and vocational and technical schools.

Another pipeline for workers the company recently identified is in Puerto Rico. The first cohort of 20 workers is being brought in from the unincorporated U.S. territory and are being provided with baseline training and connected with an employee resource group to help them adapt to the Hampton Roads area.

Location matters, even if that’s a little less relevant when it comes to remote workers, says Jermaine Johnson, PNC Financial Services Group Inc.’s regional president for the Greater Washington, D.C., and Virginia area. He notes the different dynamics of hiring remotely. In some cases, it’s more advantageous, allowing employers to recruit from virtually anywhere. But it can also be difficult, because there’s more competition for remote workers.

Some employers in Virginia are finding more creative solutions to recruiting and retaining workers.

Kayla Kody, vice president of Richmond Ford car dealership, pushed for a four-day work week to give the dealership group’s employees a chance to recharge before coming back to work. 

“​​We did it because all of these roles and jobs of today in general take a lot out of you — constant incoming emails, phone calls,” she says. “I just felt like it was something that might be a good fit for our employees, so they could take a true rest in between all the things that they do.”

Kody also suspected a shortened work week would also lead to increased productivity. After analyzing the data, her hunch proved correct. She says they look at metrics such as closing rates, customer satisfaction, inquiries, appointments, etc. and she has seen increases across the board. Now, having tested out the four-day week model with her six-person guest experience team since January, she’s expanding it to 20 people in sales and possibly to other teams, as well as promoting the four-day week on LinkedIn job announcements.

Even so, Kody and other employers still face a tough labor market that favors workers.

“It’s still an employee’s market, from a point of view that there are a lot of job opportunities out there for employees,” says Chris Chmura, CEO and chief economist of Richmond-based Chmura Economics and Analytics. “They are looking at all their options: Stay where I am or move on?” 

Supply chain clogs

Labor isn’t the only economic challenge facing businesses. About 54% of respondents to VSCPA’s economic outlook survey reported that supply chain disruptions are having a moderate or significant impact on their companies. 

For Justin Greene, chief financial officer of Liberty Live Church, which has campuses all over Hampton Roads, it means waiting up to a year to receive orders of production equipment such as cameras, lighting equipment, video switchers and similar gear that once was available off the shelf.

The church also has plans to build a 25,000-square-foot campus in Smithfield, but costs on that 18-month project have gone up by 20% to 25%. That leaves him with a couple of options, either delaying construction to see if costs come down, or stretching it to two years to spread out the costs.

At Givens Transportation, supply shortages mean that Dunlap isn’t able to buy more trucks to grow his fleet or replace old vehicles, which in turn leads to higher maintenance costs.

“You have significantly more money in the system chasing relatively scarce goods,” says McNab, who conducts an annual analysis of Hampton Roads’ economy. “As a result, when you combine increasing scarcity with increasing demand, you get higher inflation.” 

And that is leading to what could be an even bigger challenge for Virginia businesses: recession. In the VSCPA survey, 59% of respondents said they think the U.S. is heading toward a recession in 2023. That’s bolstered by the opinions of many other economists and business experts. In October, a survey conducted by KPMG reported that 91% of CEOs from the nation’s largest companies believe there will be a recession next year.

The nation entered recession in 2020 during the initial months of COVID-19, McNab says, although federal stimulus funding helped the economy recover quickly. “That injection in 2020 [and] 2021, more than likely staved off a significant recession, if not outright depression,” he says. 

Marc Andersen, a senior partner with Ernst & Young in Great Falls, notes that Virginia’s experience mirrors what’s happening everywhere. But Virginia has an advantage, in part because it has a “very business-friendly environment,” he says.  

“I know there is an intent by the governor and folks in Virginia to remain highly business-friendly,” he says. “As long as that climate continues, we will continue to see growth.” 

 

 

Read the 2023 VSCPA survey results and member interviews.

 

Youngkin signs bill to conform tax code

This year’s tax season may be a little less complicated for businesses that were granted Paycheck Protection Program loans and Rebuild Virginia grants during the pandemic.

A bill that Gov. Glenn Youngkin signed into law Wednesday will ensure that the aid granted through those programs won’t be treated as taxable income.

Because Virginia state and federal tax guidelines don’t align and there are pandemic-specific financial issues to consider when filing returns, business taxes can be more complicated this year, bringing new questions and challenges.

Virginia is a static conformity (or fixed date) state for tax purposes, which means it is one of about 20 states that freeze conformity of state tax rules with federal tax code as of a particular date. The legislation that updated Virginia’s tax law to conform with the latest federal tax code was signed into law by Youngkin Wednesday.

“The COVID-19 pandemic was one of the most difficult times for Virginians since the Great Depression,” Youngkin said in a statement. “The federal government and the General Assembly came together to offer aid programs designed to keep businesses open and workers employed. While the worst parts of the COVID-19 pandemic are in the rearview mirror, many businesses are still struggling from the effects of unnecessary, forced economic shutdowns. This bill ensures programs designed to aid businesses don’t transform into tax liabilities that hinder Virginia’s economic recovery.” 

Emily Walker, vice president of advocacy for the Virginia Society of Certified Public Accountants, said the legislation is notable because Virginia did not fully conform for 2020.  “The way they did it for 2021 makes it easier on the accounting side,” Walker said. “It creates a really significant tax benefit for any business that was a recipient of those funding sources.” 

The conformity change is effective immediately. 

Normally, if a business takes a loan, it can deduct any business expenses paid with that loan from its taxable income. However, if the loan is forgiven or converted to a grant, that amount becomes part of the business’ taxable income, Walker explained. Forgiven PPP loans were unique because the federal government does not consider the forgiveness as taxable income, provided the funds were used correctly. 

VSCPA has advocated for state and federal tax conformity as much as possible to make for simpler filing. 

“We supported this bill and also advocated for [the General Assembly] to pass it as quick as possible,” Walker said. Tax season opened Jan. 24. 

Youngkin’s signing of the bill came about three weeks earlier than last year when then-Gov. Ralph Northam signed the tax conformity bill on the same day as the tax-filing deadline for businesses.

“Anybody that had a business tax return to file had to extend or choose to file with the rules not being finalized, meaning it’s a gamble,” said George Forsythe, managing partner of WellsColeman, and VSCPA chair-elect.

He has hundreds of returns waiting to be completed and is able to get moving on them now that the governor signed the conformity legislation.

“Selfishly, we want conformity because we can’t complete our work until the rules are known,” Forsythe said. 

The bill will save Virginia individual and business taxpayers $201 million in taxes, according to Youngkin’s office.

DHG to merge with BKD, forming top 10 accounting firm

The fifth-largest accounting firm operating in Virginia, Dixon Hughes Goodman LLP, is merging with Springfield, Missouri-based BKD CPAs & Advisors to form a combined top 10 accounting firm with $1.4 billion in revenue, the two firms announced Thursday.

The “merger of equals” will be effective June 1, a company spokesperson said. The new firm will have more than 5,400 employees across 68 markets in 27 states, the United Kingdom and the Cayman Islands.

BKD CEO Tom Watson will serve as CEO of the new organization and DHG CEO Matt Snow will serve as the firm’s chair. The combined firm will operate under a new name that will be announced at a later date.

“For years, both BKD and DHG have built strong reputations as high-value, professional client service firms,” Watson said in a statement. “We’ve established complementary geographic footprints and strong capabilities in a range of critical service sectors. Together, as one organization, we will deepen our bench strength even further, allowing us to continue to serve our existing client base while also providing the resources necessary to serve an ever-increasing upstream client base.”

Charlotte, North Carolina-based DHG has 298 employees in Virginia, including about 150 certified public accountants. Of DHG’s nearly 300 Virginia workers, 80 are based in Richmond, 37 are in Norfolk and 181 are in Tysons, according to a company spokesperson. DHG has about 2,000 total employees across 13 states and the United Kingdom and ranks in the top 20 professional service firms in the country.

BKD, which does not have a presence in the commonwealth, has about 3,300 employees and ranks in the top 10 professional services firms in the country.

DHG has strong roots in Virginia. Dixon Hughes PLLC merged in 2011 with Hampton Roads accounting firm Goodman & Co. LLP, creating a firm with 1,700 people in 30 offices in 11 states — Alabama, Florida, Georgia, Maryland, North Carolina, South Carolina, Ohio, Tennessee, Texas, Virginia, West Virginia — and Washington, D.C. In 2005, the firm’s name was shortened to DHG. In 2016, DHG merged with Stegman & Co. in Maryland and Parke, Guptill & Co. in California.

At the time of the 2011 merger, Goodman had 202 employees in Hampton Roads, including 85 CPAs at offices in Virginia Beach, Norfolk and Newport News, according to The Virginian-Pilot. Goodman’s total workforce was 568 at the time, including 252 CPAs at offices in Virginia, Maryland and Washington. Goodman’s roots date back to 1932, when it was founded in Norfolk and became larger as it merged with four local firms in 1969 and decades later expanded into Northern Virginia.

Former DHG Mid-Atlantic region leader Gary Thomson said the merger was not surprising. “The firm [DHG] is merging with, BKD, has been a friend … for a long time,” said Thomson, now managing partner of Richmond-based Thomson Consulting, a CPA consultancy. “Mergers like this are always interesting, and the dynamics of this firm — now $1.4 billion, a top 10 firm — certainly moves the needle.”

The merger, he said, also creates an opportunity for small to midsize accounting firms because some clients may look at the merger and decide they don’t may not want to be represented by that large a firm. “I think it’s kind of win-win, depending on your perspective and what kind of client you’re looking for,” said Thomson, a former chair of the Virginia Society of CPAs (VSCPA).

The accounting industry is changing, Thomson noted. While some midsize firms are doubling down on their desire to remain smaller and independent, he sees the DHG BKM merger as doubling down on an opportunity “to really go upstream and serve clients of all sizes.”

The strength that comes from combining resources is something the leaders of the two firms emphasized in their remarks about the merger.

“I couldn’t be more thrilled to join forces with BKD,” Snow, DHG’s CEO, said in a statement. “The scale of our combined firms, our collective talent and similar cultures will translate to tremendous benefits for our clients and team members. Both of our firms have an overlapping industry focus in health care, financial services and private equity, coupled with other industry sectors where each legacy firm is individually strong. As one organization, we will be able to bring our capabilities to a broader range of clients, providing more innovative, client-centric services to the market.”

A spokesperson from DHG did not comment on the possibility of layoffs, but said she expects the integration process to take 18 to 24 months to complete.

“We believe that as a national firm, we will create opportunities for our people that we couldn’t have imagined a few years ago.  It is too early in the process to really be able to speak to internal structure or job elimination. We will approach the integration with a people-first approach and seek to have the best interest of our team members as our priority as we make decisions about the future,” said Alice Grey Harrison, spokesperson for DHG. “When the merger is complete, we will have a significantly larger national presence that will allow us to quickly pivot to several strategic expansion markets and expand our global reach.”

VSCPA President and CEO Stephanie Peters said, “I look forward to having a top 10 firm in Virginia — another one,” noting that the Big Four accounting firms and many other large firms also have a presence in the commonwealth. “There’s a lot of action going on as far as mergers these days, so that’s not at all surprising. I certainly look forward to the new firm.”

When asked about the possibility of any post-merger layoffs, Peters said, “There’s so much demand right now for people in the profession that it wouldn’t be something I would think would be of concern. I would think it would create more opportunities for them to have greater resources, greater access, to be able to do what they do better.”

Assistant Editor Katherine Schulte contributed to this story.

Virginia Society of CPAs’ 2022 Virginia Economic Expectations Survey interviews

HAMPTON ROADS

Richard E. Groover, CPA

Shareholder | Wall, Einhorn & Chernitzer PC Norfolk

What local industries/sectors do you think have potential for growth?

Continued growth around the Port of Virginia and green energy. … Entrepreneurs and local leaders have made substantial investments to tee up this area as part of a wind turbine corridor for future developments on the East Coast. If that vision comes to fruition, then the impact on our area could be once in a lifetime. 

What’s the biggest challenge to doing business n your area?

Attracting and retaining young talent. 

How is your area recovering economically from  the pandemic?

Everything here is coming back strong. We lost quite a few local restaurants and bars, but the leisure sector as a whole is humming, and new development plans are back in the pipeline. 

What are the top factors that have had the biggest impact on attracting business to your region?

Ease of transportation into and out of our market is a huge draw. We have one of the deepest and busiest ports on the East Coast and great connections by rail and highway to the rest of the U.S. We encounter a number of European and Asian companies opening offices in the area to service their U.S. customers. It is always exciting to watch them grow and develop. Additionally, the military presence here remains a huge draw for supporting organizations in the area, particularly in the government contracting sector.

 What are the top obstacles to your region’s economic success?

Regional cooperation has been our Achilles’ heel for many years; fortunately, I believe a lot of business leaders are working to change that with the 757 initiative. Availability of employees is also a struggle; in our firm, we have adapted to some fully remote hires for various positions due to the staffing shortage in our local market.  

 

 

Forsythe photo by Rick DeBerry
Forsythe photo by Rick DeBerry

CENTRAL VIRGINIA 

George D. Forsythe, CPA

Managing Partner | WellsColeman | Richmond

What local industries/sectors do you think have potential for growth?

The health care industry continues to thrive and grow, given increasing demand placed by COVID. Optimistically, I believe the local hospitality and events sectors are poised for growth. Given the reduction in travel and in-person events, coupled with the shelter fatigue that many people are feeling, this sector is prepared to explode.

What’s the biggest challenge to doing business in your area?

The obvious challenge to doing business in our area is the pandemic. With numbers on the rise, and uncertainty in our future, it is very challenging to conduct business. Additionally, access to available and quality personnel has further impacted the region economically. There is an abundance of jobs available and a scarcity of individuals who can and will appropriately fill these roles.

How is your area recovering economically from the pandemic?

The Richmond region was recovering nicely, albeit [on] a long road, from the pandemic until the delta variant began its momentum. … In times of uncertainty, human nature is to conserve resources versus expend them. This pandemic uncertainty, including health requirements, available staffing and supply chains, will continue to impair our recovery.


What are the top factors that have had the biggest impact on attracting business to your region?

Our high-quality colleges and universities providing access to top-tier talent, as well as access to financial resources, including available investment capital and incentives offered by local government.

What are the top obstacles to your region’s economic success?

The biggest obstacle facing the Richmond region’s economic success is the unknown future of the coronavirus pandemic. … The second, and more rooted, obstacle facing our region is the suboptimal collaboration among our local government, business and community leaders. 

 

 

Stepka photo by Don Petersen
Stepka photo by Don Petersen

SOUTHWEST VIRGINIA

Andrea Hupp Stepka

Partner | Foti, Flynn, Lowen & Co. | Roanoke

What do you love about living and working in your region?

I moved here in summer of 1995, right after graduation from Virginia Tech. I love the mountains and the greenways. I am an avid runner, so the outdoor life here in Roanoke is amazing.

How is the economy faring in your part of the state right now?

Small businesses are having trouble finding good help, suppliers are limited everywhere … [and] prices are higher everywhere as well.

What local industries/sectors do you think have potential for growth?  

Technology/software and knowledge-based industries

What’s the biggest challenge to doing business in your area?

Right now, the answer has to be COVID, right? It’s a huge challenge for workers to be face to face, and thus we as a CPA firm have had to embrace the remote aspects of working with our clients.

How is your area recovering economically from the pandemic?

Overall, I think we are doing fine. … Our clients have weathered the storm, and for the most part seem to be coming out on the other side. We haven’t seen many businesses having to close, most likely due to the [Employee Retention Credits] and loans from the government.

What are the top factors that have had the biggest impact on attracting business to your region?

Roanoke is a beautiful place to live. The mountains and scenery are a big attraction. The cost of living is very competitive as well. We have a high quality of living here, with a good mix of industries ranging from the small mom-and-pop to large businesses.

What are the top obstacles to your region’s economic success?

There are some disparities in income levels in Roanoke and we have a growing population of people in poverty.

 

Milburn photo by Norm Shafer
Milburn photo by Norm Shafer

SHENANDOAH VALLEY

Thomas L. Milburn, CPA

Principal | Yount, Hyde and Barbour (YHB) | Winchester

How is the economy faring in your part of the state?

Spring and summer showed a strong recovery. Pent-up demand led to tourism, shopping and dining again. The valley offers outdoor activities along with farm markets, vineyards and breweries that capitalized on people traveling closer to home or getting out of cities. Our industrial sector is doing well, with I-81 contributing to our role as a distribution/manufacturing hub in a world of mail order.

What local industries/sectors do you think have potential for growth?

Based on the quality of life and comparatively low cost of living, the valley has been an attractive location for retirees but more recently has become a destination for people migrating from cities to work remotely. Housing and professional services for those groups have potential for growth, such as health care and assisted living, along with wealth management, accounting, legal and other services.

What’s the biggest challenge to doing business in your area?

One major challenge to doing business across industry sectors is obtaining and retaining talent. … Affordable housing is an issue for younger professionals and retail/hospitality workers.

How is your area recovering economically from the pandemic?

With COVID uncertainty creeping back, indications are the valley economy isn’t full speed ahead. While businesses spent stimulus on employees, cash reserves remain as employers decide on spending and investment. It’s worth noting the uneven impact of the pandemic. While businesses have cash, the appetite for further unemployment benefits for hourly and gig workers seems low if the pandemic lingers.

What are the top obstacles to your region’s economic success?

First, affordable housing remains a priority. Second, the lack of high-speed internet in large areas of the valley for work and education was exacerbated by the pandemic. 

 

 

Williamson photo by Stephen Gosling
Williamson photo by Stephen Gosling

NORTHERN VIRGINIA

Christine B. Williamson, CPA, PMP

Government contracting industry audit & advisory lead partner | CohnReznick LLP | Tysons

How is the economy faring in your part of the state?

Over the decades, many have commented that NoVa is “in a bubble,” meaning it fares well during turbulent economic times. This phrase continues to ring true in the pandemic and as we get back to the new normal. With the federal government, Amazon, Micron and data storage facilities, these sectors fuel the bubble effect here in Northern Virginia.

What local industries/sectors do you think have potential for growth?

The industries are endless here in NoVa, but I think the technology and medical sectors have the greatest potential for growth.

What’s the biggest challenge to doing business in your area?

My expertise is servicing companies who work for the federal government via government contracts. There is a talent war for many business sectors, including CPA firms. I’d say talent is the biggest challenge, regardless of the business type. We all struggle to find enough people to do the work, causing companies to go outside the area to look for talent.

How is your area recovering economically from the pandemic?

The Northern Virginia area is no different than other regions, as the business world has pivoted out of the pandemic by modifying how to do business, be creative, think strategic and figure out new ways to sell the same services. I hear many businesses say we are revisiting our business culture and purpose, which helps them through the recovery process.

What are the top factors that have had the biggest impact on attracting business to your region?

Location, location and location! And our vibrant technology sector.

What are the top obstacles to your region’s economic success?

Cost of living and traffic.

 

Read more: Virginia Society of CPAs’ 2022 Virginia Economic Expectations Survey results and post-pandemic work models

Virginia Society of CPAs’ 2022 Virginia Economic Expectations Survey results

 

Read more: Virginia Society of CPAs’ 2022 Virginia Economic Expectations Survey interviews and post-pandemic work models

Remote possibilities

Before the coronavirus pandemic, LaToya Jordan regularly missed small moments in her children’s lives — like seeing her young son getting off the bus each day. She commuted to downtown Richmond or to a client site and arrived home after her children.

The state agency where she works allowed telecommuting one day a week, and her schedule was flexible, but 90% of her work week was spent in the office. After the pandemic, though, her work schedule changed dramatically, and more than 18 months later, she still isn’t fully back in the office.

Jordan, the deputy auditor for human capital and operations for the Virginia Auditor of Public Accounts, was working from home about four days each week as of late September.

Like so many other workplaces across Virginia and the nation, her agency shifted fully to remote work when the pandemic began in March 2020 and has not fully transitioned back to working onsite. And there’s a good chance it will never return to its pre-pandemic model.

“I think what we’re transitioning to is going to be more of a hybrid situation,” Jordan says. “We appreciate that we have the technology to support us being able to work primarily remotely, but we also realize the benefit of in-person collaborating as well.”

“I think we will continue to have way more flexibility than we did before the pandemic,” she says.

(L to R) Hantzmon Wiebel LLP employees Edward J. Schmitz, Jennifer S. Lehman, Leslie Lloyd and Rebecca Burtram participate in a video meeting in Charlottesville. Photo by Norm Shafer
(L to R) Hantzmon Wiebel LLP employees Edward J. Schmitz, Jennifer S. Lehman, Leslie Lloyd and Rebecca Burtram participate in a video meeting in Charlottesville. Photo by Norm Shafer

‘The future of work will be flexible’

Flexibility will be the name of the game when looking ahead to post-pandemic work environments. It’s what many workers say they want moving forward.

In the Virginia Society of Certified Public Accountants’ latest annual survey of current economic conditions and expectations, conducted in partnership with Virginia Business, 78% of respondents said that work flexibility is the top trait displayed by businesses that are recovering well from the pandemic.

Forty percent of survey respondents expect to work a hybrid schedule during the next six months and 53% expect they will be working remotely for the next six months. Looking out a year, 37% say they expect a mix of hybrid, still mostly remote, and about 30% say hybrid, but mostly onsite.

The survey, completed by Virginia CPAs in public accounting, private industry, government and education, confirms that not knowing what the future holds is one of the key cruxes companies are facing in planning for doing business in the post-pandemic world.

“I think one of my lessons learned is, you can’t be too set in your ways or set in your plans,” says VSCPA President and CEO Stephanie Peters. “You have to have this ability to plan what you can but know that there’s going to be disruption, and that’s just happening so much more quickly as we’ve seen over the past 12 to 18 months.”

This summer, as it appeared that the world might be getting back to normal, the highly contagious delta variant of COVID-19 spurred a resurgence in coronavirus cases, halting or delaying post-Labor Day plans that many businesses had for returning to the office.

Hantzmon Wiebel LLP, a Charlottesville accounting and financial advisory firm with about 100 employees, had to use an “emergency remote access plan” and turn on a dime in March 2020 to make sure everyone had the ability to work from home. “We ended up going down to less than 20 to 25% of people in the building during the height of the pandemic,” says Jennifer Lehman, the firm’s CEO. “We implemented technology like crazy.”

In June 2020, Hantzmon Wiebel employees started edging back toward the office, but some requested permission to work mostly remotely on a permanent basis. Prior to the pandemic, the firm had been making plans to move to a smaller office, but it plans to downsize even more, with remote work remaining an option.

Companies large and small have been adapting to meet the needs and concerns of their employees, including child care needs and worries about potentially infecting their children who aren’t yet old enough to be vaccinated.

Grant Thornton LLP, a Chicago-based global accounting corporation with about 1,200 employees in Arlington, had a seamless transition to remote work amid the pandemic and has promised its 8,500 national employees that their work schedules will be flexible.

“Our work does assume that we’re mobile and moving to respond to our clients’ needs, and post-pandemic we’ve really continued that.” says Greg Wallig, managing principal for Grant Thornton’s Washington, D.C., region office in Arlington. “Our view is that the future of work will be flexible and so will we. Our employees are empowered to work in whatever way best suits the needs of the client, and if that’s remote and meets their comfort levels and the client’s satisfaction, we’re happy to support that.”

Since the pandemic began, Grant Thornton has taken measures to assist employees, including monthly internet subsidies, reimbursing for personal protective equipment, doubling the firm’s child care subsidies and subsidizing food-delivery service memberships. The firm also gave each employee a $1,000 stipend to help defray personal expenses.

“We sought really to help employees cover the additional costs that we imagined they were incurring based on the response to the pandemic,” Wallig says.

The measures have helped employee retention — Grant Thornton didn’t lose any more employees during the pandemic than it did in pre-pandemic times, Wallig notes.

“That’s really wonderful when you consider this pandemic working model has gone on 18 months now,” he says. “A year and a half is a long period of time, and I’m really thankful that the combination of both benefits that we offered our employees and just the atmosphere that we created … has continued to give people a sense of connection. They understand the job market is hot right now and there are opportunities out there, but they choose to stay with Grant Thornton because of the culture.”

Shifting work culture

Improving the remote work experience is something 41% of VSCPA survey respondents say their companies plan to do.

DXC Technology Co., an IT services company, is moving its corporate headquarters from Tysons to Ashburn in November and shrinking its footprint to reflect a virtual-first mentality. Employees can work from anywhere and will use the office as more of a communal space than an everyday work environment. What started as a multiyear plan was essentially accelerated overnight, says DXC Chief Operating Officer Chris Drumgoole.

DXC has “dramatically increased” its investment in technology, he says. “The office should really be more about a place to come together, collaborate [and] get together because human interaction is still really important and we think it’s there, but it doesn’t have to be every day, 9 to 5, to plug in.”

Technology is just one component of DXC’s changing work model, Drumgoole says. It’s really a cultural and procedural change enabled by technology.

Some companies say working remotely has built deeper ties among colleagues.

“I think the one thing that has kind of stood out to me over the past year and a half is the supporting nature of people,” says Jordan. “I think that because we’ve had to come together and make some decisions and make sure we’re collaborating to get the work done, it’s created stronger connections in some regards as well.”

Jordan has had her own challenges. One time she was in the middle of a meeting when her infant son was crying. Her older son did his best to soothe the baby, but ultimately, Jordan had to take over. She rocked the baby while participating in the meeting. The experience made her more compassionate as a leader, she says.

“While the pandemic has been challenging, I think that it’s also brought forth some benefit from a work-life balance perspective, as well.”

A greater emphasis on work-life balance is one of the factors that has contributed to what economists are calling “the Great Resignation,” an ongoing pandemic-era trend of people leaving their jobs in search of better working conditions and quality of life. In turn, such voluntary separations are contributing to severe labor shortages across virtually every industry.

To prevent turnover, it’s necessary that employees feel secure, says Vinod Agarwal, deputy director of the Dragas Center for Economic Analysis and Policy at Old Dominion University.

One of the forces contributing to the labor shortage is a reluctance to return to workplaces for fear of getting sick, he says. The risk has to be worth it, and that’s a decision made beyond what a person brings home in pay.

“The only way to solve this problem is having to pay high wages and thinking differently than we have been doing historically” he says. “Workers are not just workers; they are part of a family. We have to learn how to take care of them. Some [employers] are providing day care services [or] bonuses to employees. … It is not just higher wages; it is how we treat our employees. That is a lesson to be learned from the pandemic.”

Many workers are not going back to minimum wage positions they deem too risky, says Maggie Cowell, an associate professor of urban affairs and planning at Virginia Tech who specializes in economic development. But that leaves companies in a lurch, too.

About 85% of respondents to the VSCPA’s annual economic expectations survey reported that labor shortages pose a significant or moderate risk to their companies or industries. The same percentage of respondents, 85%, are concerned about rising labor costs.

Even after expanded unemployment benefits have ended, workers largely are not returning to jobs they previously held, she says, adding that “the length of time that we are watching this play out seems pretty pronounced.”

And when workers leave and find better pay or working conditions, it tends to have a “contagious” effect, inspiring their former co-workers to also resign, she adds. “Given the amount of [job] opportunities for people who are looking … you can’t blame them.”

According to a survey conducted by the National Federation of Independent Business in mid-September, 27% of small employers are currently experiencing significant staffing shortages and another 18% are experiencing moderate staffing shortages.

This has employers brainstorming ways to make their companies more appealing to potential hires.

DXC, which has 130,000 employees worldwide, including several hundred in Arlington and the Washington, D.C., region, is hoping to use its virtual-first mindset as a differentiator when recruiting.

Lehman, with Hantzmon Wiebel in Charlottesville, says her firm is considering hiring experienced candidates from out of state for remote work. Despite the pandemic and changes in work models, though, the core values at Lehman’s firm have not changed, she says.

“What’s really, really important during the pandemic is focusing on culture, focusing on your people, focusing on making sure that you were taking care of what was important before, which … for us … was our clients and our team members,” Lehman says, “… and I think that’s what made it so it was OK.”

Read more: Virginia Society of CPAs’ 2022 Virginia Economic Expectations Survey interviews and survey results

This article has been corrected.