Month: May 2022

Directions, Please! The Road to Recovery for School Bus Driver Shortages

Numerous forces are coming together with creative solutions to make sure yellow buses taking children to school do not become a lasting victim of the COVID pandemic.

Even before COVID, school districts across the nation were striving to curb a growing crisis resulting from a shortage of bus drivers working for districts or private busing companies. When COVID hit and schools went remote, thousands of private school bus companies had to hang their “closed for business” signs and thousands of school bus drivers were furloughed. Some found themselves better off financially on unemployment and with COVID rescue funds; others realized it was time to retire rather than risk exposure to the virus or getting vaccinated. Only a portion of private companies survived, which wasn’t even close to meeting the demand once in-person classes resumed.

During COVID, some districts kept their own drivers busy dropping off meals, school materials, and equipment. As for private companies, some districts continued minimum payments on contracts in the hopes of keeping them afloat; others simply stopped paying and became the target of breach of contract lawsuits.

While moving to remote learning during COVID provided a reprieve from dealing with the bus driver shortage, the issue escalated and returned with a vengeance as school districts tried to resume on-site learning. Private school bus companies began canceling routes and entire contracts literally days before (or slightly after) the start of the school year. The issue continues today with some schools periodically returning to remote learning – not because of COVID, but due to the driver shortage.

More than two million children in New York ride a yellow school bus each day, according to the New York Association for Pupil Transportation. Of the state’s 700+ school districts, over 60% use private busing companies – an industry hit hard by coronavirus. Students get to school late, get home late and miss extracurricular activities, while parents constantly adjust to changing schedules and bussing needs.

The US Department of Education (DOE) has been working with the Department of Transportation and the Federal Motor Carrier Safety Administration on possible solutions, including providing greater flexibility for bus driver licensing, using American Rescue Plan funds to address transportation issues, and hosting webinars to help districts understand how to use federal assistance to recruit, retain, and hire additional staff.

States are also taking action.

In New York, Governor Hochul introduced a variety of measures including expediting the process for obtaining a commercial driver’s license (CDL); increasing the capacity to administer road tests and written exams; and for school staff who hold a CDL, the state set up expedited testing allowing them to drive vans and buses temporarily. The governor also launched an outreach program to more than 550,000 CDL holders to help school districts recruit drivers across the state. More is coming with CDL tests to be conducted at third-party locations and the “under the hood” portion of the CDL test being temporarily eliminated.

While it may seem legal recourse in the form of breach of contract lawsuits may be the main “go-to” option for school districts, it doesn’t appear to be the norm. Instead, there seems to be recognition that this could potentially exasperate issues stemming from a national crisis that’s beyond anyone vendor’s control. A National School Transportation Association’s survey conducted in March indicates “54% of school bus contractor members have more than a 10% driver shortage” – a shortage expected to last well beyond 2022.

There are other factors at play as well.

COVID sparked “the Great Resignation,” with many leaving their jobs or the workforce altogether. Fuel prices and inflation are driving up the costs of everything, including the pay workers are looking to receive. Bus driving companies are facing competition from other industries and employers (i.e., distribution centers) that provide better pay and benefits.

So, what have school districts and bussing companies done and what are they continuing to do to help turn things around?

A variety of things:

Districts in at least 9 states asked for help from the National Guard.
One district raised bus driver pay by about 30%, offering $21.67 to $29 an hour. A complimentary media blitz more than quadrupled driver interviews in days. What’s more, aids and drivers are offered bonuses: $500 a quarter for 95% attendance and $2,000 for anyone who worked through the pandemic. (Source: School Transportation News)
A district invited teachers and administrators to drive for a fixed dollar payment per run. There were 77 applicants and 10 teachers who availed of the opportunity. The district offered the CDL training and benefited from not having to pay for additional benefits since the drivers were existing staff. (Source: School Transportation News)
A private bussing business contacted competitors to provide substitute drivers while it trained new drivers (which takes 4 to 6 weeks) to no avail. It was able to work with another vendor to provide a later bus arrival option in the morning, a later afternoon bus, and an early morning drop-off option. Interestingly, this business is not increasing pay or offering bonuses because that just puts other private bussing companies in the same predicament. Instead, they are aggressively recruiting via all media and at job fairs. (Source: CT Insider)
Some districts have temporarily returned to remote learning while their private bussing companies train new drivers.
In one district, high school students living more than 7 miles from school were no longer transported but were given public transit bus passes for use on the county system, which 3,100 students now use.
In Philadelphia, parents receive up to $300 a month for driving a child to and from school.
In another state, one county is voting on whether to engage a van service available through the National Association of Pupil Transportation Collaborative to drive smaller groups of children and minimize route cancellations.
This past February, the OHIO DOE issued its own Driver Shortage Playbook, reviewing potential federal funds that can help, as well as tactics like hiring a marketing agency for job postings, consolidating routes, reaching out to retirees, providing creative incentives, and more.

While there are no easy answers, there are a variety of responses that together appear to be slowly getting the wheels on the buses turning.

As always, school districts should seek legal counsel when it comes to changes in policies, protocols, or contracts. If you need help evaluating financial or accounting impacts, RBT CPAs can help. Give us a call, today.

Are You Succeeding? Do the Math

All you have to do to run a successful construction business is turn a profit, right?

Well, that’s easier said than done, especially when you consider the many challenges confronting construction firms today. Inflation, soaring fuel prices, and unreliable supply chains are just a few of the bigger challenges that can impact profitability and ultimately success. Still, there are three key numbers that you should know, review, and update during the course of a project to help boost financial success: total costs, markup, and profits. Let’s take a closer look…

Total Costs

While it may be tempting to lowball bids in an effort to win business, it’s also a risky proposition. According to the 2022 Association of General Contractors (AGC) national survey, 84% of respondents’ costs are higher than anticipated. To be competitive and choose the right projects to bid on, it’s important to understand what it will cost to actually do the work and budget accordingly (or even charge more, which is what 62% of AGC survey respondents indicate they are doing).

To start, define each task or activity you’ll need to complete and then put a price on it. Be sure to include the price reflects labor, materials, and overhead. When you add those costs together, you’ll get the true cost of a job (that’s why this process is sometimes called job costing). By taking this approach, you can also easily identify and track project scope changes that impact costs.

Be aware of indirect costs, which typically apply across all of your jobs and include things like construction equipment, workers’ compensation insurance, and payroll service fees.

Finally, there’s overhead. In general, this includes rent/mortgage, office equipment, and supplies, licenses and fees, taxes, utilities, general insurance, and salaries.

It’s important to define all costs upfront and then track them regularly throughout each project’s duration. Unexpected costs and work come up on most projects. By adding them to your costs immediately and letting your client know about changes in scope and price, you help manage client expectations while making sure your costs are covered. Regularly meet with project managers and accounting staff to track costs and swiftly course-correct when needed.

Markup Percentage

Breaking even on a job pays the bills but nothing else. To succeed, you need to make above and beyond the cost of the project. By applying a markup percentage to the total cost, you can generate additional revenue to cover other additional costs or serve as a profit.

For example, let’s say your total cost estimate for a job is $10,000. You decide to mark it up by 20% or $2,000. You’ll charge your client $12,000. If you’ve kept your costs on track, your profit will equal the markup amount of $2,000. It’s important to note that realizing the full $2,000 in profits requires you to be sure all direct and indirect costs are reflected in the estimate; otherwise, a portion of the revenue will go towards those other costs.

To protect your revenue, you should carefully review contracts for language that limits markups on change orders. Project owners often include this language so contractors do not lowball a bid and later make up any shortfall by overcharging on change orders. Unfortunately, contracts that limit markup percentages can also prevent you from covering your costs, much less retaining revenue. At the very least, avoid contracts that limit you to cost or cost plus 10%.

Sales/Profit Margin

Net profit is the amount of sales revenue left after you’ve paid all applicable costs. For example, a 40% profit margin means 40 cents of every dollar in sales is profit. To calculate profit, use this formula: (Net Income / Revenue) × 100. In general, you should strive to earn a net profit of at least 8% — more is even better.

You should review profit margins regularly as it measures your ability to maintain and build a strong bottom line. You can use this knowledge to create a realistic profit margin goal, and then use your markup percentage to reach that goal.

Calculating total costs, markup percentage, and sales/profit margin is essential to defining and measuring construction company success.

Always start using good data that’s regularly gathered, clearly displayed, and accurately analyzed. If you need help with your finances or processes, RBT CPAs is here to help. Contact our experts today!

What Can an Investment Recovery Program Do For You?

If you’re looking around your operations and thinking maybe it’s time for a garage sale, think again. Your company may benefit from an investment recovery program.

An investment recovery program enables you to recoup some of the initial investment you made in materials or equipment that are obsolete, extra, or no longer needed. You can use it to sell, trade, or donate anything from spare parts, returned investment, raw materials, and piles of scrape to obsolete equipment, furniture, and machinery.

Not only can it help keep your facilities clutter free and make better use of your business’ facilities, but an investment recovery program can boost your profits.

According to the Investment Recovery Association, a trade group for managers of idle and surplus assets, 70% up to 90% of every dollar that comes from investment recovery directly contributes to a company’s bottom line as profit. In fact, most association members save an average of $8 million a year and some save as much as $150 million (of course, most members are Fortune 1000 companies, but even recouping a portion of the savings they realize is worth it.)

Before you start hanging the garage sale signs, it’s important to note that inventory recovery is a serious business.

Your goal should be to get back as much of your capital investment as possible, rather than getting whatever you can for idle assets. To do this, you’ll need a formal investment recovery program that becomes a regular, ongoing part of your operations.

Start by finding a certified investment recovery manager or appraiser who knows or can find out the fair market value of what you are selling and knows the best channels for making those sales. Experienced investment recovery specialists know how to use a variety of strategies to recover a portion of the cost of an asset. These include returning an item to the manufacturer or distributor, selling it, or trading it for something else. Potential customers can be found:

Inside your company. While your Maintenance Department may be done with a forklift purchased for a special project years ago, your Inventory team may be able to put it to good use today.
Among your employees. Especially when it comes to office equipment and supplies like cabinets, computers, desks, and tools, employees may be interested in getting a deal and taking them off your hands. Not only do you benefit from the money, but you build good will among your employees.
Charity. Nonprofit organizations always welcome donations – especially in the form of equipment and furniture. Build your business’ reputation as a good corporate citizen while getting a charitable tax write-off by donating equipment, furniture, and supplies you no longer need or use.
On online auction sites. There are sites dedicated to selling just about anything (they can also be a great place to turn if you’re looking to make purchases).

Is investment recovery worth the time and effort?

According to the Investment Recovery Association, it would take $20 in sales to achieve the same net effect on profit for every dollar generated by investment recoupment. So, yes, it’s worth it.

To learn more about how investment recovery could affect your accounting processes or taxes, RBT CPAs is always here to help — give us a call.

DOL Audit Fights Cyberterrorism

Of the many responsibilities Employee Retirement and Income Security Act (ERISA) plan sponsors, fiduciaries, and recordkeepers must uphold, one of the most challenging relates to cybersecurity to protect plan assets and plan participants’ information. The US Department of Labor (DOL) upped the ante associated with cybersecurity last year when it issued first-of-a-kind new guidance in April and, within several weeks, started auditing for compliance.

With cyber threats and attacks on the rise, in April of 2021 the DOL issued a three-part guidance package (Cybersecurity Program Best Practices; Tips For Hiring a Service Provider; and Online Security Tips) and specified plan fiduciaries are obligated to mitigate cybersecurity risks within their own operations, vendors’ operations and prospective vendors’. To reinforce this guidance, the DOL began requesting information and documents to audit compliance.

According to the Employee Benefits Security Administration, as of 2018, there were an estimated 34 million defined benefit plan participants in private plans and 106 million plan participants in defined contribution plans with estimated American retirement assets exceeding $9 trillion. That’s an attractive target for cyber criminals and threats. The American Society of Pension Professionals and Actuaries indicates that while the April 2022 guidance was the first related to cybersecurity, it complements regulations on electronic records and disclosures to plan participants and beneficiaries about protecting personally identifiable information.

The DOL wasted no time reinforcing cybersecurity is one of its top priories. Within two months of issuing the guidance, it began requesting documents and information about plan cybersecurity policies and practices as part of retirement plan audits.

According to the Society for Human Resource Management (SHRM), the DOL asks for “all documents relating to any cybersecurity or information security programs that apply to the data of the Plan, whether those programs are applied by the sponsor of the Plan or by any service provider of the Plan.” This may include policies, procedures, and guidelines for access controls and identity management; processes for business continuity, disaster recovery and incident response; third-party providers’ management; cybersecurity training; data encryption; documents and communications about past incidents; service providers’ documents and communications regarding cybersecurity capabilities and procedures and how plan data is used, and more.

Bloomberg Tax created a cybersecurity audit checklist for plan fiduciaries based on the DOL guidance, and an action plan to promote compliance. It suggests fiduciaries should get informed about cybersecurity governance; get expert support when needed; identify data flow and storage; and assess fiduciary conduct to date.

Going forward, many sources indicate that while the immediate focus is on retirement plan assets and participants, fiduciaries and plan sponsors may want to prepare to uphold the same guidance for their health and welfare plans.

If you’re unsure about anything related to compliance with the guidance or audits, it’s always a good idea to consult your benefits legal counsel. For assistance with benefit plan accounting, taxes, and audits, you can trust RBT CPAs – a leading provider in the Hudson Valley for over 55 years.

AIM for More Local Funding

Thanks to New York’s Aid and Incentives for Municipalities (AIM) program, since 2006 New York state has provided AIM funds to cities, towns, and villages for use as they deemed fit – for anything from water and sewer to police and fire services. In part, AIM was designed to provide extra support to fiscally challenged local governments. Over time, it has done a lot more.

Often referred to as revenue sharing, in 2019-20, the Great Recession hit, and AIM funding partially shifted from the state’s general fund to local sales tax collections. The Comptroller’s Office took over responsibility for doling out these shifted funds.

For the 2022 State Fiscal Year (SFY), as the 2023 Executive Budget Impact Report notes, “Currently, 846 towns and 479 villages receive a total of $59.1 million in AIM-Related payments funded through local sales tax collections. The Executive Budget ends this practice and resumes State General Fund support for these towns and villages through the traditional AIM program, allowing county governments to retain a greater amount of local sales tax revenue annually.”

For information about 2022 AIM funds by municipality, click here. The NYS Office of Comptroller website has numerous resources with additional information, including how to account for AIM funds. Of course, if you need any accounting or tax assistance or advice related to AIM or other funding, RBT CPAs is always here to help — just give us a call.

The Benefits of Having a Business in New York

A growing number of manufacturers (and other businesses) are realizing there are a lot of perks of doing business in New York.

A few decades ago, most large companies’ manufacturing operations relocated offshore to reduce costs and remain competitive. The COVID pandemic highlighted one of the biggest risks of this move – not being able to get products, supplies, and inventory when and where they are needed. Regionalization shortens the supply chain, puts products closer to customers, and lowers shipping and potentially production costs. So, reshoring – or bringing manufacturing or parts of it back to the US – is the next big trend. Even the White House is doing its part to help manufacturing thrive on American soil.

While you would think up-and-coming cities in other parts of the country with lower costs of living would be attractive to these operations, don’t count New York out.

Overall, employers in New York are experiencing the lowest taxes in decades and have a lot to look forward to thanks to the $150 billion in upcoming infrastructure investments in state-of-the-art business and transportation systems. The state boasts one of the country’s largest higher education systems and a plethora of workforce development programs. It’s a leader in low-cost clean energy and protecting the environment. Plus, there’s something for everyone from the arts, sports, fine dining, and culture to a variety of outdoor activities and spaces.

While the entire country is striving to rebound from the Great Resignation and a beyond-tight talent pool, New York State’s Workforce Development Initiative is investing $175 million to meet current and future staffing needs. Funds are available to build regional talent pipelines, expand workplace learning, address short-term and long-term staffing needs, and more.

New York’s Department of Labor and State University of New York (SUNY) system collaborate on apprenticeship programs and positions in advanced manufacturing. Businesses are benefitting from university research and development (R&D) resources and universities are benefitting from providing students with hands-on experience, with more than 70 Empire State Department of Science, Technology and Innovation (NYSTAR) funded facilities and tools.

In the state, there are 10 regional economic development councils (REDCs) charged with developing strategic plans for growth and investments in their respective region. The councils are made up of public-private partnerships, with experts and stakeholders from business, academia, local government, and other organizations.

For example, existing businesses and businesses that are expanding within or relocating to the Hudson Valley have access to the Hudson Valley Economic Development Corporation (HVEDC), which strives to drive business innovation, attraction, and expansion throughout the region. The council offers regional and state collaboration; market, economic, workforce, and real estate data and statistics; site search consultations; business education; and training.

The state offers a broad variety of tax incentives and business credits to support business development, startups, expansions, relocations, process improvements, energy efficiencies, low-cost power, workforce development, and more. Manufacturers benefit from tax credits, including property tax credits and business incentives.

New and existing NY businesses receive tax credits for jobs, capital investments, and R&D through the Excelsior Tax Credit Program.

Businesses new to the empire state can receive a 5% cash refund on capital spending up to $350 million and 4% for spending above that during the first five years of operation. There are also numerous grants available for job creation or corporate infrastructure through Empire State Development.

Even the 2022 state budget includes tax breaks for businesses to comply with public health orders and keep their businesses safe; tax credits for hiring veterans, at-risk youth, people with disabilities, and apprentices; and tax credits for clean heating fuel, upgraded electric vehicles, and recharging.

For more information about doing business – or more specifically manufacturing – in New York, visit the Manufacturers Association of central and upstate New York; Manufacturing and technology enterprise center in the Hudson Valley for business consulting services related to technology and engineering; and the Business Incentives Guide, which focuses on New York City but includes state and federal resources for financing, taxes, energy, and workforce.

For more information about taxes, accounting, and finance, contact RBT CPAs – a professional, local resource supporting businesses in the Hudson Valley for more than 50 years.

Tips to Address Top Construction Challenges in 2022

“It was the best of times. It was the worst of times.” It was as if Charles Dickens was writing about the construction industry in 2022 when he penned these infamous words.

On one hand, the industry is looking at its single biggest cash infusion of all time. With the American Rescue Plan Act and Infrastructure Investment and Jobs Act, many construction projects will be kicking off in 2022. On the other hand, persistent labor shortages, supply chain bottlenecks, skyrocketing materials prices with no expectation of stabilizing anytime soon, fuel cost increases, inflation, and other challenges are plaguing the industry. So, what’s a construction firm to do? Start by focusing on the top one or two challenges.

The 2022 Association of General Contractors (AGC) Survey of providers in the Northeast and nationally shows the pandemic’s top impact on projects to be:

Costs are higher than anticipated.
Projects are taking longer than expected.

While those findings are probably no surprise, we hope some research we’ve done introduces you to one or two new ways to address cost and time challenges. It’s important to note that fixes for one challenge – time or cost – in many cases has a positive impact on the other; they are not mutually exclusive. With that in mind, here are some budget and scheduling tips:

Be smart when developing a budget. The 2022 AGC survey found 62% of respondents were putting higher prices in bids and contracts. So, consider including a 5% to 10%
Be realistic about scheduling. According to the 2022 AGC survey, 32% of respondents in the Northeast are putting longer completion times into their schedules. Create a master schedule, break it down into phases and then into tasks. Remember to include time for everything from paperwork to permits and inspections. Include a start and end date for each task and confirm you’ll have the equipment, materials, and staff to meet timelines. Consider what can occur concurrently and what needs to happen sequentially. Add 10% for unexpected issues and delays. Make sure your contract allows for time extension requests in certain circumstances.
Get to know the details and plan accordingly. Know your project specs inside and out. Verify property boundaries and determine where anything underground is – pipes, septic, water, gas, electric. Draw a site layout to show where everything will go, including material, equipment, trailer, break areas, employee entrances, etc., so you can identify and fix potential issues before a project gets under way. Make sure insurance is up to date.
Create a contingency plan. Expect and plan for the unexpected. Work with your team to identify potential risks and contingencies (i.e., plan for overtime if project is running behind; weather delays may warrant extra equipment and staff). Then, develop a risk management plan.
Make safety a non-negotiable priority. Accidents and potential safety hazards can hurt budgets and timelines, not to mention businesses and reputations. Make sure your team and subcontractors know your safety expectations. Review your safety plan. Reinforce its importance daily. Address issues before they escalate. Make sure everyone knows how to escalate an issue or concern.
Staff up. Some anticipate the labor shortage may pose even bigger challenges than what’s going on with supply chains and materials. So, focus on staffing and building relationships and backup relationships. Evaluate your benefits and pay. Decide whether it’s time to invest in upskilling. Reach out to community colleges and technical institutes to build a pipeline of potential talent.
Work as a team. Make sure you have a full lineup with all positions covered – from supervisors to safety managers, expeditors, and more. Officially kick-off each project. Have your team and subcontractors review, give input, and sign off on plans. Hold weekly team meetings and clarify your expectations about communicating potential delays or risks. Make sure you listen to what your team members have to say.
Manage your customer. Investing more time up front walking your customer through the ins and outs of the project can save you time and money later. Before starting a project, get your customer’s sign off on all materials and costs. Also make sure your customer understands how scope changes can impact time and costs. Set a cut-off date for customer changes and stick to it.
Manage your project every day. Monitor and track your timeline and budget with daily reports. Pay attention to the details. Watch for red flags.
Shop smart. If you’re a small organization competing against big ones, look to level the purchasing field with a group purchasing organization. Consider alternative materials that may also be less labor intensive. (For example, synthetic roofing materials may require less labor and equipment.) If possible, build material reserves.
Use technology. Software can help you streamline and better manage each part of the process, from project planning to payment tracking. Use construction management software for scheduling, organizing and storing documents, and more. Consider the role digital and other technologies can play in saving time and money. Drones, wearable sensors, self-driving vehicles, and more are predicted to have huge impacts on productivity and value.

On every project, it’s a good idea to consult with your legal and financial advisors to mitigate risks. RBT CPAs is proud to serve construction businesses throughout the Hudson Valley and beyond. For financial and tax advice, give us a call.

Do You Know About These Finance Resources Available through the State?

New York State’s Fiscal Stress Monitoring System helps counties, cities, towns, villages, and school districts check vital signs for fiscal health and, when appropriate, proactively take action to address and fix issues. Take a moment to get acquainted (or reacquainted) with the tools and resources the state offers to monitor, act (when appropriate), and maintain strong fiscal health.

The Fiscal Stress Monitoring System was created by New York State Comptroller Thomas P DiNapoli in 2012 and is a lot like an annual physical. During an annual physical, a doctor collects information about certain key health factors; tracks and compares that information year to year; and, using baseline data, either helps the individual fix any issues or refers him/her for more specialized care to manage a condition. The state’s Fiscal Stress Monitoring System works much the same way. It provides an early warning to local officials and residents to indicate when action is needed to manage potential risks to finances, property taxes, and essential services.

Based on financial factors, fiscal stress scores are assigned and reported publicly. Financial indicators include year-end fund balance, short-term cash-flow borrowing, cash position and operating deficit patterns.

Stress scores using data from Annual Financial Reports for fiscal years ending 2021 have started to be reported via a press release and lists posted on the comptroller’s website. (School district scores were released in January.) A second, separate analysis of environmental factors using US Census Bureau data provides insight into a local government’s or school district’s economic health and other challenges.

In addition to these reports, insights from the Office of the Comptroller can highlight points of focus for local municipalities. As noted in a recent press release, “The financial landscape for many local governments has improved with the infusion of federal aid and stronger economic activity,” DiNapoli said. “The relief funds are temporary, so it is critical that local communities make changes, including carefully managing debt and engaging in long-term planning, that help improve their financial outlook for years down the road.”

Beyond the fiscal stress report, the Office of the Comptroller provides:

A self-assessment tool – which can be especially helpful during budget planning processes – so local officials can determine stress scores using current and future financial assumptions.
Numerous live and on-demand webinars on a variety of topics from budgeting, financial planning, and procurement to capital planning, audits, taxes, and more.
Reference guides, research reports, and other resources.
A Financial Toolkit, which provides targeted information, tools, and training to address potential challenges and issues arising from the COVID-19 pandemic.
New York Open Book, a site that tracks state and local spending and makes public financial records, state contracts, and other commonly requested data.

If you prefer more personalized guidance on finance and accounting, remember, RBT CPAs is available to help. We’re one of the Hudson Valley’s leading accounting firms and we have extensive experience working with local governments and school districts. Give us a call.