Month: January 2026

Did You Know About These Tax Credits Available to New York Hospitality Employers?

As an employer in New York State, you may qualify for tax credits for employing tipped workers, youth employees, veterans, individuals with disabilities, and more. Below are five tax credits available to New York restaurant and hospitality employers, four of which are state-specific incentives.

FICA Tip Credit: The FICA Tip Credit is a federal tax incentive available to eligible food and beverage employers with tipped employees. The credit is equal to the employer’s share of Social Security and Medicare (FICA) taxes on certain tips received by employees. The FICA Tip Credit was recently expanded by the One Big Beautiful Big Act to include additional industries where tipping is customary, such as hair and beauty services.
New York Youth Jobs Program Tax Credit: Previously called the Urban Youth Jobs Program Tax Credit and the New York Youth Works Tax Credit Program, the New York Youth Jobs Program Tax Credit is a credit available to eligible employers who hire qualified employees between the ages of 16 and 24. The amount of the credit is up to $7,500 per certified youth. To participate in the program, employers must be certified by the NYS Department of Labor, applying no later than November 30 of the program year.
Hire a Veteran Credit: Employers in New York State who employ qualified veterans may be eligible for a tax credit. The credit is available to employers who employ qualified veterans for a 12-month period in a full-time or part-time position, with employment beginning between January 1, 2014 and January 1, 2028. The amount of the credit is equal to a percentage of the total wages paid to the veteran during the first twelve months of employment (20% for disabled veterans and15% for non-disabled veterans).
Credit for Employment of Persons with Disabilities: Employers who hire eligible individuals with disabilities may be eligible for a tax credit. To qualify, the employee must be certified by the NYS Education Department’s Adult Career and Continuing Education Services-Vocational Rehabilitation (ACCES-VR), or the Office of Children and Family Services’ NYS Commission for the Blind (NYSCB) as a person with a disability. An additional tax credit is available to qualified employers certified by DOL for employing individuals with developmental disabilities.

Empire State Apprenticeship Tax Credit: The Empire State Apprenticeship Tax Credit (ESATC) Program provides a tax credit to certified New York employers who employ qualified apprentices. To participate in the program, employers must submit an application and be certified by the NYS Department of Labor.

Partner With RBT

RBT CPAs’ restaurant and hospitality accounting experts can help you identify what tax credits you may be eligible for. Contact us today and find out how we can be Remarkably Better Together.

Choosing a CPA Firm for Your Audit: How to Read a Peer Review Report

Looking for a CPA firm to perform your audit? As part of the request for proposal process, you can request a copy of a CPA firm’s most recent peer review report. It’s important to know how to read these reports so that you can be sure you’re hiring the best firm for the job.

About Peer Reviews

The AICPA (American Institute of CPAs) requires every member CPA firm that performs audits, reviews, or compilations to undergo a peer review every three years. A peer review is an independent, external review of a CPA firm’s accounting and auditing practice that assesses a firm’s quality control system and adherence to professional standards.

Firms can receive one of three ratings: (1) pass, (2) pass with deficiencies, or (3) fail. Any firm that receives a rating other than “pass” is required to undergo a process called remediation, a point-by-point plan to correct any deficiencies identified during the review.

There are two types of peer reviews: system reviews and engagement reviews.

System reviews: A reviewer evaluates all elements of the CPA firm’s quality control system for performing accounting and auditing work, including a sample of the firm’s engagements. System reviews are required for member firms that perform audits, Yellow Book work (Generally Accepted Government Auditing Standards), or attestation services.

Engagement reviews: A reviewer evaluates a sample of the firm’s accounting work. Engagement reviews are conducted for firms that do not perform audits, but perform other accounting work, such as reviews and compilations.

Why are Peer Reviews Necessary?

Since financial statements are often used to make important management decisions, audits and accounting work must adhere to strict professional standards. Peer reviews ensure that CPA firms are operating within these professional standards. If deficiencies are identified, the remediation process holds CPA firms responsible for correcting these deficiencies. Peer reviews also increase public transparency, with many peer review reports publicly accessible on the AICPA’s Peer Review Public File Search.

How to Read a Peer Review Report

Any firm you are considering hiring for an audit should have a system review report. As mentioned above, a firm can receive one of three ratings on its peer review: “pass”, “pass with deficiencies,” or “fail.” Here’s what those results mean.

Pass: A rating of “pass” indicates that the firm’s quality control system is appropriately designed and compliant with professional standards.

Pass with Deficiencies: A rating of “pass with deficiencies” signifies that, except for the specific deficiencies described, the firm’s quality control system is appropriately designed and compliant with professional standards.

Fail: When a system review report receives a rating of “fail,” the reviewer has determined that as a result of significant deficiencies, the firm’s quality control system was not suitably designed or compliant with professional standards.

What to Look for in a Peer Review Report

Verify that the report is recent (within the last three years).
Make sure the auditor has experience in GAS and/or single audits. This information can be found under the “Required Selections and Considerations” section of the report.
Ideally, you want your auditor’s peer review report to have a rating of “pass.”
If the rating is “pass with deficiencies” or “fail,” are the deficiencies related to GAS or single audits? If the answer is yes, you’ll want to go with another auditor.

Choosing an Auditor You Can Trust

When it comes to hiring a CPA firm, reputation matters. Peer reviews are important not only for monitoring the quality of service and compliance of accounting firms, but also for protecting the public interest. RBT CPAs has participated in the peer review program for over 30 years, only ever receiving “pass” reports. When you work with RBT, you can be confident you are working with highly experienced accounting professionals, with a reputation for integrity and excellence. Give us a call today to learn more about our accounting, tax, audit, and advisory services—and find out how we can be Remarkably Better Together.

What Makes a Union Tax-Exempt? Key Characteristics of 501(c)(5) Organizations

A 501(c) organization is a nonprofit organization recognized under the U.S. Internal Revenue Code as exempt from federal income tax. There are many kinds of 501(c)s, the most widely-known of which are 501(c)(3)s—or charitable organizations. Unions, however, fall specifically under the category of 501(c)(5)s. Below are the distinguishing characteristics of 501(c)(5) organizations that enable unions to qualify as tax-exempt entities.

What is Section 501(c)(5)?

Section 501(c)(5) of the Internal Revenue Code provides a federal income tax exemption for labor, agricultural, or horticultural organizations. As labor organizations, unions fall under this definition for tax purposes.

Exemption Requirements

To qualify as a 501(c)(5), an organization must meet the following requirements:

The organization’s net earnings may not benefit any one member.
The organization’s primary purpose must be to better the working conditions of workers engaged in labor, agriculture, or horticulture, improve the grade of their products, or develop greater efficiency within its members’ occupations.

In general, an organization is not considered a 501(c)(5) organization if its primary activity is to receive, hold, invest, disburse, or otherwise manage funds associated with savings or investment plans.

Lobbying and Political Activities

Unlike 501(c)(3) organizations, which face greater restrictions regarding their participation in political and legislative activities, 501(c)5 organizations are permitted to achieve their exempt purposes through lobbying for pertinent legislation. 501(c)(5)s that engage in lobbying may be required either to notify members of the percentage of dues allocated to lobbying activities or to pay a proxy tax.

Direct or indirect participation or intervention in political campaigns—either in support of or in opposition to a candidate for public office—is not permitted as part of a 501(c)(5) organization’s exempt purpose. However, the organization can participate in certain political activities as long as it is not the group’s primary activity. Any expenditures related to political activities, however, may be subject to tax.

Reminder about Unrelated Business Income Tax

Though unions are generally exempt from paying income tax under Section 501(c)5, they may still be subject to tax for income classified as “unrelated business income.” Unrelated business income (UBI) is income from a trade or business that is regularly carried on and not substantially related to the exempt purpose of the organization. For more information about Unrelated Business Income Tax (UBIT), please refer to last month’s thought leadership article.

Partner with RBT CPAs

For all matters accounting, tax, audit, and business consulting-related, please don’t hesitate to reach out to our team at RBT CPAs. Our experts are here to assist and advise you. Contact us today and find out how we can be Remarkably Better Together.

Bonus Depreciation for Qualified Production Property: New Deduction Under the OBBBA

Since the passage of the One Big Beautiful Bill Act (OBBBA) in July of 2025, RBT has been covering its impacts on the real estate industry. Among the most notable provisions of the new tax law is the restoration of 100% bonus depreciation—a change that benefits businesses across various industries. The OBBBA also extends 100% bonus depreciation to a new category of property known as “qualified production property.” So, what are the rules regarding qualified production property, and what are the implications of this new incentive for the real estate industry? Let’s get into it.

Qualified production property (QPP), according to section 168(n) of the One Big Beautiful Bill Act, is defined as that portion of any nonresidential real property which:

Is used by the taxpayer as an integral part of a qualified production activity
Is placed in service in the U.S. or any possession of the U.S.
The original use of which commences with the taxpayer
The construction of which begins after January 19, 2025 and before January 1, 2029
Is designated by the taxpayer in the election
Is placed in service before January 1, 2031

“Qualified production activity” is defined as the manufacturing, production, or refining of a qualified product resulting in a “substantial transformation” of the property comprising the product. Note that taxpayers are required to make an affirmative election to claim the QPP deduction (unlike bonus depreciation, which is typically applied automatically for qualified property).

Certain types of property are excluded from the definition of qualified production property and are therefore ineligible for the new deduction. Ineligible property includes:

Leased property
Any portion of nonresidential real property which is used for offices, administrative services, lodging, parking, sales activities, research activities, software development or engineering activities, or other functions unrelated to the manufacturing, production, or refining of tangible personal property.

In general, the deduction applies to new construction. However, the provision includes a special rule for acquired qualified production property, which provides an exception to the “original use” requirement if certain conditions are met (see Section 168(n) for these conditions).

Also note that QPP must be used as part of a qualified production activity for at least 10 years after it is placed in service to remain eligible for the deduction. If the property is disposed of or ceases to be used as an integral part of a qualified production activity during this time, any depreciation previously claimed is subject to recapture.

Key Takeaways for the Real Estate Industry

Eligible taxpayers can now immediately deduct 100% of the cost of qualified production property, instead of following the typical 39-year depreciation schedule for nonresidential real property, which may significantly increase cash flow.
Taxpayers must maintain qualified use for the property for at least 10 years to benefit from the deduction.
To claim the deduction, taxpayers must make an affirmative election for each tax year. This election is irrevocable.
Further guidance is expected from the IRS and the Treasury regarding the application of the QPP rule.
Real estate investors and developers should consult with a tax professional for help interpreting the various provisions of the rule and to discuss eligibility for the QPP deduction.

Questions?

RBT CPAs’ real estate accounting team is here to answer your questions regarding the new tax rules and to support all of your other tax, accounting, audit, and advisory needs. Give us a call today and find out how we can be Remarkably Better Together.

Are Your Internal Controls Up to Par?

Internal controls are systems and procedures put into place within an organization to safeguard assets, prevent fraud, ensure accuracy and compliance, and support operational efficiency. A strong system of internal controls is essential for your practice to thrive and remain financially healthy. This article highlights important internal control strategies and the areas of your practice for which we recommend you implement these controls.

Internal Control Strategies

Segregation of duties: Segregation of duties is a fundamental internal control that applies across many areas of an organization’s operations. This strategy involves dividing key responsibilities within a business process among multiple employees so that no single individual has too much control over any one process. By separating these functions, you can significantly reduce the risk of fraud, misuse of resources, and unintentional errors within your practice.
Authorization processes: Authorization processes ensure that financial transactions are sent through the proper channels for approval.
Reviews and reconciliations: Regular reviews of transactions help to detect errors and misuse of funds. Account reconciliations—or comparisons between two sets of records—are a critical internal control strategy that can be utilized within multiple operational areas.
Clear procedures for recordkeeping and documentation: Establishing guidelines for documentation of your practice’s policies, processes, and transactions promotes consistency, cohesion, and clear expectations within your practice.
Physical controls: Physical controls over your practice’s tangible assets are also key for secure operations. Physical controls include locked storage for inventory, safes for cash and sensitive documents, and security cameras.

Key Areas to Implement Internal Controls with Examples

Financial management: Regular reconciliations between bank statements and your practice’s books and PIMS, double-checking invoices, separation of duties within financial processes (i.e., authorizations, recordkeeping, custody of assets, reconciliations).

Inventory and purchasing: Locked storage for inventory, physical inventory counts, formal cycle counting procedures and schedule, comparing actual inventory counts against records, vendor checks, authorization processes for purchases, dual signature policy for checks over a certain threshold, segregation of duties between employees making and approving purchases.

Client service: Transparent billing, standardized procedures.

Human resources and payroll: Authorization processes for salary changes, timecard approvals, segregation of duties between employees processing and approving payroll, reconciliation of payroll bank accounts, access controls for payroll software.

IT: Robust access controls for practice software, password policies, two-factor authentication, other cybersecurity measures.

How RBT Can Help

RBT CPAs’ veterinary accounting team is available to perform internal control reviews for your practice. We’ll assess the procedures you have in place, identify potential risks, and make recommendations for strengthening your internal control system. Contact RBT CPAs today to request a review of your practice’s internal controls—or for assistance with any of your other accounting, tax, audit, and advisory needs. Together, we can be remarkably better.

Estate Planning in the Digital Age: Considerations for Digital Assets

As individuals living in an increasingly online world, a great deal of our personal property today exists in digital form. “Digital assets” range from digital images and documents to online accounts and cryptocurrency. When it comes to estate planning, special considerations must be taken into account for digital assets. Since digital assets take many different forms, exist in various locations, and are typically protected by multiple layers of security, advanced planning is crucial to ensuring your assets are managed according to your wishes. Below are some factors to consider when planning for the future treatment of your digital assets.

What is a digital asset?

A digital asset is an item of value that is stored electronically and can be bought, sold, owned, transferred, or traded. Examples of digital assets include cryptocurrencies and NFTs (nonfungible tokens), online banking and investment accounts (the accounts themselves, not the funds), email accounts, digital photos and documents, videos, online content, intellectual property, websites, social media accounts, and more.

Creating a list of your digital assets

A digital asset inventory—a comprehensive list of all of your electronically stored assets—is critical for estate planning purposes. Creating a document listing all of your digital accounts will make it easier for you and your loved ones to keep track of what you own and where your assets are located, and will help to prevent property from being overlooked or forgotten. Make sure to update this list periodically to include any changes to your digital assets over time.

Ensuring the necessary parties will have access to your digital assets

It’s important to make sure your heirs and other necessary parties are able to access your digital assets after you pass. Most digital assets are protected by security mechanisms such as usernames and passwords, two-factor authentication, or security questions. These login credentials will need to be recorded and accessible to the designated parties when they require them. A password manager is one option for securely storing this sensitive information until it is needed. Digital assets may also be protected by privacy laws and terms-of-service agreements. Some account providers allow you to designate in advance what happens to your account after you pass. Otherwise, you may need to grant authority for others to access your digital assets and accounts via official legal documentation, which can be accomplished in coordination with an estate planning attorney. As part of your estate plan, make sure you specify the name or names of the people who you want to be able to access each account.

Partner with RBT CPAs

Transferring digital assets as a part of your estate plan requires additional layers of advance planning. RBT’s experts in our Trust, Estate, and Gift practice—in conjunction with your estate planning attorney—are here to help you navigate this process and ensure that your assets are managed according to your wishes when the time comes. Give RBT CPAs a call today and find out how we can be Remarkably Better Together.

New Qualified Production Property Rule Expands Tax Saving Opportunities for Manufacturers

Among the many wins for U.S. manufacturers as a result of the passage of the One Big Beautiful Bill Act (OBBBA) in July 2025 is the creation of a new temporary deduction for certain property used in production and manufacturing. Section 168(n) of the One Big Beautiful Bill Act introduces a new class of property known as “qualified production property,” for which manufacturers can now claim a full immediate deduction. This article highlights the key components of the qualified production property provision and what it means for domestic manufacturers.

What is considered qualified production property (QPP)?

The One Big Beautiful Bill Act defines qualified production property as the portion of any nonresidential real property which meets the following criteria:

The property is used by the taxpayer as an integral part of a qualified production activity.
The property is placed in service in the U.S. or any possession of the U.S.
The original use of the property commences with the taxpayer.
The construction of the property begins after January 19, 2025 and before January 1, 2029.
The property is designated by the taxpayer in the election.
The property is placed in service before January 1, 2031.

Certain types of property are excluded from the definition of qualified production property, including:

Leased property
Any portion of nonresidential real property which is used for offices, administrative services, lodging, parking, sales activities, research activities, software development or engineering activities, or other functions unrelated to the manufacturing, production, or refining of tangible personal property.

What is a qualified production activity?

A “qualified production activity” is defined as the manufacturing, production, or refining of a qualified product resulting in a substantial transformation of the property comprising the product.

Other Things to Note:

Election required: Businesses are required to make an affirmative election to claim the QPP deduction (unlike bonus depreciation, which is typically applied automatically for qualified property). This election is irrevocable.
Special rule for acquired QPP: The deduction generally applies to new construction; however, the provision includes a special rule for acquired qualified production property, which provides an exception to the “original use” requirement if certain conditions are met (see Section 168(n) for these conditions).
Recapture provision: QPP must be used as part of a qualified production activity for at least 10 years after it is placed in service to remain eligible for the deduction. If the property is disposed of or ceases to be used as an integral part of a qualified production activity during this time, any depreciation previously claimed is subject to recapture.

What is the benefit for manufacturers?

Eligible companies can now immediately deduct 100% of the cost of qualified production property, instead of following the typical 39-year depreciation schedule for nonresidential real property. This may significantly increase cash flow for manufacturers constructing or acquiring QPP.

Next Steps

Further guidance from the IRS and the Treasury regarding the qualified production property deduction is forthcoming. In the meantime, we recommend consulting with a tax professional who can help you interpret the QPP tax rule and assess your eligibility for the deduction. RBT CPAs’ manufacturing accounting team is here to support you as you navigate the new rules and tax incentives under the OBBBA. Call RBT today and find out how we can be Remarkably Better Together.

New York State’s Pass-through Entity Tax: An Overview and How to Opt In

For New York-based construction companies structured as partnerships or S corporations, 2026 offers another opportunity to opt in to New York State’s Pass-Through Entity Tax (PTET). This article will cover what the PTET is, the potential benefits of opting in, and how to make an election for 2026.

Firstly, what is a pass-through entity?

A pass-through entity is a business entity in which income “passes through” to the business owner(s) and is therefore taxed at individual federal income tax rates, rather than at the entity level. Examples of pass-through entities include partnerships, limited liability companies (LLCs), and S corporations.

What is the NYS Pass-through Entity Tax (PTET)?

The NYS PTET is an optional entity-level tax that partnerships and S corporations in New York State can elect to pay as a workaround for the federal limit on state and local tax (SALT) deductions.

What are the benefits of opting in to the PTET?

By enabling partnerships and S corporations to be taxed at the entity level rather than at the individual level, the PTET provides a workaround for the federal limit on state and local tax (SALT) deductions. Since the PTET is a deductible business expense for federal purposes, partnerships and S corporations that pay the PTET are allowed a tax deduction against their ordinary business income without regard to the SALT limit, thus lowering overall federal tax liability. Partners, members, or shareholders of an eligible partnership or S corporation may also be eligible for a PTET credit on their New York State income tax returns. Additionally, for members of partnerships, the PTET may be used as a tool for reducing self-employment taxes.

How do you opt in for the PTET?

You can make your election online via the New York Department of Taxation and Finance through your entity’s Business Online Services account. Only an authorized person can make the election on behalf of your business—your accountant or tax professional cannot make the election for you. For partnerships, an authorized person includes any member, partner, owner, or other individual with authority to bind the entity and sign returns. For S corporations, an authorized person includes any officer, manager, or shareholder authorized to make the election.

When do you have to make the election by?

The deadline for making the election is March 15 of the current tax year. Eligible entities can opt in any time from January 1 to March 15. PTET elections must be made annually, so if you are opting in for 2026, you will need to make your election via your Business Online Services account by March 15—even if you have previously opted in for prior years.

When are payments due?

Entities that opt in to the PTET must make quarterly estimated payments via the DTF’s online application by March 15, June 15, September 15, and December 15.

Consult with Your RBT CPAs Accountant

A number of factors come into play when deciding whether the PTET can benefit your business. Your RBT CPAs accountant can help you determine whether opting in to the PTET for 2026 is the right choice for you. Give us a call today and find out how we can be Remarkably Better Together.

Updated Guidance for “No Tax on Tips and Overtime” Reporting: 2025 Penalty Relief and More

The IRS has recently issued new guidance related to the reporting requirements for overtime wages and tips. Here is what employers need to know to stay compliant with the new regulations.

As a reminder, below is a brief summary of the new deductions for tips and overtime pay.

Tip Deduction

Deduction of up to $25,000 per year per person for qualified tips.
Applies to tax years 2025-2028.
Available to individuals in qualifying tipped occupations.
Limited to tips voluntarily paid by customers, including tips shared through pooling arrangements.
Begins to phase out when the taxpayer’s modified adjusted gross income (MAGI) exceeds $150,000.

Overtime Deduction

Deduction of up to $12,500 per year per person for qualified overtime compensation.
Applies to tax years 2025-2028.
“Qualified overtime compensation” is defined as the “half” portion of overtime pay required under the Fair Labor Standards Act (1.5 times an employee’s regular pay for all hours worked over 40 in a workweek). Anything beyond the half (i.e., double time or more) is not eligible for the deduction.
Begins to phase out for taxpayers with a modified adjusted gross income (MAGI) above $150,000.

Most Recent Reporting Guidance for 2025-2026

W-2s and 1099s for 2025 will not be updated to account for the changes under the One Big Beautiful Bill Act. Employers should continue using the current W-2 and 1099 forms for 2025 returns.
Per IRS Notice 2025-62, the IRS is providing penalty relief for tip and overtime information reporting for tax year 2025. This means that employers will not be penalized for failing to provide a separate accounting of cash tips or qualified overtime compensation for 2025.
While not legally required, employers are encouraged to provide employees with a separate accounting of cash tips (and occupation codes) and overtime compensation earned in 2025, so that employees can claim these deductions. Tip amounts can be provided to employees through an online portal, additional written statements, or other secure methods, while overtime compensation amounts can be provided in Box 14 of the employee’s W-2.
Beginning in 2026, employers will be required to file information returns and provide employees with separate accountings of cash tips (as well as the occupation of the recipient) and qualified overtime pay. Employers should monitor IRS guidance for new or revised forms and reporting procedures for 2026.
Employers should coordinate with payroll providers and ensure payroll systems are set up to track tips and qualified overtime compensation for each employee for tax year 2026.

A Reminder About Tip Credits

New York State’s tip credit allows hospitality employers in New York to pay tipped workers a rate that’s lower than minimum wage by including tips or a portion of them in wage calculations, as long as the employee’s combined wages plus tips equal at least the full minimum wage for their region. The FICA tip credit is a federal tax credit that allows eligible employers in industries where tipping is customary to reclaim a portion of FICA taxes paid on employee tips.

Contact RBT CPAs for Advice

Our experts at RBT CPAs are here to help breweries, distilleries, and distributors succeed by keeping you updated on the latest tax law updates and employer obligations. Give RBT CPAs a call today to make sure you’re prepared for the upcoming changes. Together, we can be remarkably better.

Safeguarding Your District’s Assets Through Internal Controls

Like all other organizations, school districts require a strong system of internal controls to protect their financial operations. Internal financial controls help to safeguard a district’s assets, preventing abuse, waste, and corruption. This article highlights the financial areas for which school districts should establish internal controls and provides examples of controls for each. Please note that these examples are not exhaustive.

According to the Office of the New York State Comptroller, school districts should implement internal controls for each of the following key financial areas.

Cash Receipts: Cash—which encompasses money, checks, and money orders—is the most vulnerable to theft.

Control Examples:

- Centralize cash collections in the office of the CFO or treasurer to reduce the number of locations and people handling cash.
- Assign separate cash drawers for each employee handling cash.
- Segregate duties between employees with custody of cash, employees authorizing transactions, and those reporting transactions.

Cash Disbursements: Fraud is even more common in the area of cash disbursements than in the area of cash receipts.

Control Examples:

- Keep blank checks in a secure location.
- Segregate duties between the employee who prepares and signs checks and the person who audits and approves claims.
- Limit the authority to sign checks to a minimal number of employees.

Bank Accounts: Steps must be taken to ensure that your district’s bank account information is protected, especially in today’s digital environment.

Control Examples:

- Reconcile bank accounts monthly.
- Limit access to account information.
- Segregate duties between the employee performing bank reconciliations, employees with custody of cash, and those recording or authorizing transactions.

Billed Receivables: When school districts collect funds for services they provide, those charges and accounts must be accurately recorded and tracked.

Control Examples:

- Create a written policy stating the frequency of billings, billing rates, collection periods, and other guidelines for collections.
- Post payments received to individual accounts as soon as possible.
- Reconcile the receivable control account balance to the sum of individual accounts.

Procurement: Internal controls over procurement procedures help to prevent unauthorized and nonessential purchases, evaluate cost-effectiveness, and ensure requirements for fair and open competition are followed.

Control Examples:

- Establish clear approval processes for purchases.
- Verify the availability of budget appropriation prior to approval.
- Segregate duties within the approval process.
- Establish policies governing credit card usage.

Payroll: Controls over payroll and benefits ensure that employees are paid the correct amount and help to prevent payroll fraud.

Control Examples:

- Establish salary authorization procedures.
- Reconcile the payroll bank account monthly.
- Segregate payroll authorizations from payroll preparation and processing.
- Limit access to digital payroll files and applications.

Classifying Employees vs. Independent Contractors: School districts should have procedures in place for determining whether someone is an employee or an independent contractor.

Control Examples:

- Formally create all new employee positions, with approval from the appropriate civil service agency if required.
- Only add individuals to payroll when a vacant civil service position exists or has been requested through the proper channels.

Equipment and Consumables: This category includes large equipment such as snow plows and certain office equipment, as well as portable items like laptops and cameras. Consumables include items such as gasoline, cafeteria food items, and printer paper.

Control Examples:

- Maintain inventory records and conduct yearly physical inventory counts.
- Label equipment as property of the school district or with serial numbers.
- Store consumables in locked areas.
- Periodically reconcile fuel purchases vs. usage.

Information Technology: Financial processes today are inextricably linked with information technology. A secure IT system is necessary to protect your district’s financial information and resources.

Control Examples:

- Establish a centralized IT administration for overseeing computer and network operations.
- Require approval for all new hardware and software from IT administration.
- Adopt a comprehensive IT security plan.
- Establish a two-factor authentication system for users to sign into the network and certain applications.

Outsourced Services

Control Examples:

- Create written agreements stating the contractual responsibilities of both the service provider and the school district.
- Review the service provider’s audit reports and internal control procedures.

Protect Your School District with RBT on Your Team

RBT CPAs’ experts are here to assist in making sure your district’s assets are protected from risk. Among our other services, RBT’s Education team can evaluate your school district’s system of internal financial controls for quality and effectiveness. Call us with your questions or for more information, and find out how we can be Remarkably Better Together.