Number Crunchers to the Rescue

Most every Alabama business has a relationship with an accounting firm — to balance the books, prepare taxes, draw up the year-end financials.

Sometimes, however, the accountants play a much less routine role — solving an unexpected problem, facilitating a key business deal or just taking up the slack when an employee moves on.

We’ve gathered some of those special stories here.

Documenting finances for a major construction project

Barfield, Murphy, Shank & Smith, based in Birmingham, was brought onboard this past winter by the Boatright Companies to document finances and help Boatright obtain a bank loan for construction of a new railroad tie production plant in Clanton.

The bank had specifically requested that Boatright, a Birmingham railroad products and services company, employ an accounting team with the expertise of a top national firm. “We had worked with another accounting firm for many years, but the bank felt we’d outgrown them, ” says Steve Bookout, vice president and chief financial officer for Boatright.

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The timing was challenging because Boatright’s need came during the middle of tax season, a difficult period to start a new relationship with a busy national firm. Fortunately Barfield, Murphy, Shank & Smith, a member of the BDO Seidman Alliance, was able to take on the assignment. “Although there are only 100 of us here in Birmingham, we can pull in experts from BDO offices across the country, ” says Keith Barfield. “We’re able to offer our clients the comfort and affordability of working with a local firm combined with the capabilities of a national firm. It’s the best of both worlds.”

BDO draws on partner Barfield, Murphy, Shank & Smith’s capabilities for needs such as audits of the local operations of national clients, including Barnes & Noble. “It’s a reciprocal relationship that benefits everyone, ” Barfield says.

Directed by a BDO expert from the Nashville office, the Barfield, Murphy, Shank & Smith team collected and verified financial data from Boatright’s various operations for the loan documentation project. Because of the team’s work, Boatright was able to secure its loan and begin construction. “Boatright is a rapidly growing company, and we are thrilled to support their growth in whatever way they need us, ” Barfield says.

The new plant, expected to employ 25 to 50 workers, should expand Boatright’s production capacity to about 1.3 million cross ties per year, in turn boosting company revenues by $50 million. The company already operates a railroad tie plant in Montevallo.

“The new plant will be state of the art, ” Bookout says. “We’ve been pleased by Barfield, Murphy, Shank & Smith’s work and have established an ongoing relationship with them. Because of their alliance with BDO, we know they have access to any type accounting expertise we may need in the future.”

Documenting Disaster Losses 

Lynn Osborn (left) and Leighanne Faught of JamisonMoneyFarmer helped the City of Tuscaloosa document its tornado losses for FEMA. They're shown here at a damaged store on 15th Street. 

Photo by Caroline Summers

When tornadoes swept through Tuscaloosa last year, the city had to document its losses. The logical helper was JamisonMoneyFarmer (JMF), which has worked with the city since 1920 with a history that includes helping the city avoid financial disaster in the 1929 stock market crash.

But that close relationship — JMF is audit firm for the city — could have kept them out of the post-tornado loop.

“JMF was interested in assisting the city but we knew we had to be careful to maintain independence as we are the audit firm, ” says JMF Audit Manager Lynn Osborn.

Fortunately Thompson Consulting Services Inc., a disaster recovery consulting company based in Lake Mary, Fla., asked JMF to partner with them in helping the city document and report expenditures that qualified for FEMA Public Assistance Grant Program reimbursements. FEMA covers a percentage of municipal expenses related to major disasters including emergency protection, debris removal and repair or replacement of damaged public facilities.

The U.S. Government Accountability Office approved JMF’s participation in the Tuscaloosa grant process, even though JMF was the city audit firm. The federal agency based its decision on three factors — the severity of the disaster, the fact that JMF is large enough to create a project team that was independent of the audit group, and that Thompson would direct and supervise JMF efforts, says Leighanne Faught, JMF accounting and auditing head. “Our knowledge of the City, coupled with our experience in auditing grant compliance, provided Thompson with information to aid in determining areas of potential reimbursement. A primary skill set of auditors is to analyze data and investigate to ensure the data is complete and adequately supported, ” she says.

Five JMF staff members put in more than 1, 700 hours from May to December 2011 to carefully and thoroughly document more than $7.2 million in potentially reimbursable expenditures, including invoices and receipts associated with emergency protective measures. Seventy-five percent of costs deemed eligible will be reimbursed to the city by FEMA. JMF staff reviewed and reconciled 101, 925 hours of related overtime labor and 53, 225 equipment hours. Part of the supporting documentation included daily logs of emergency personnel, which detailed many of the disaster tragedies, not typical reading for an accounting team.

“City personnel seemed glad to work with a local firm, ” Osborn says. “We live and work in the area and tried to bring a sense of familiarity and calm to a very fluid and stressful time.  We had a unique perspective on the activities at City Hall in the aftermath of the storm.  Watching the poise of our mayor, Walt Maddox, our City Council, the Incident Command Team and the department heads for the entire City work together was an unforgettable experience and made us proud to be part of the Tuscaloosa community.” 

Bill Carr, of Carr Riggs & Ingram, helped a client work out a financial crisis caused by a balloon mortgage and a dropping property appraisal. 

Photo by Nick Stakelum

Untangling a commercial real estate loan

Carr Riggs & Ingram (CRI), with offices throughout the South, recently helped one of its Alabama-based clients reach a satisfactory solution to the client’s commercial property tangle. Bill Carr, with the firm’s Enterprise office, served as lead partner and Montgomery-office-based Phyllis Ingram, the client relationship partner. “Bill had the debt settlement negotiations and mediation skills critical to help solve our client’s problem, ” Ingram says.

The client, a commercial investor, had been embroiled in a year-long fight with a major bank that held the mortgage on an urban apartment complex with hundreds of units. CRI’s client had invested in the complex nearly 20 years ago as part of a limited partnership. Originally the investment was successful and the interest-only mortgage payments on the $6 million loan were made on a timely basis.

But the beleaguered economy and its onslaught of foreclosures have depressed property appraisals. A periodic appraisal of the apartment complex, required by the lender, came back at about half the original $9 million appraisal. The bank responded by refusing to renew the investors’ balloon mortgage and demanding payment in full of the original $6 million loan.

CRI’s client, who owned a 60 percent interest in the property, was the only investor with the capital to pay up and he had too many assets to walk away without serious financial repercussions. “But he had no interest in managing the apartment complex, which had been managed by the other investors, and didn’t want to have to commit a significant amount of his resources to the property, ” Ingram says.

Lawsuits were pending when the bank and CRI’s client finally agreed to mediation. CRI was brought in by their client to present critical accounting facts and figures. Bottom line  — Carr convinced the mediator, and the bank, that the 60-percent investor shouldn’t be responsible for 100 percent of the partnership’s debt.

Instead of owing the full loan amount of $6 million, the client only was required to pay 70 percent of the $1.5 million shortfall between the loan and the current $4.5 million appraisal. The bank took the property. “Our client was thrilled to have a resolution he could live with and peace of mind, ” Ingram says.

Commercial property foreclosures have become ever more common as appraisal values continue to sink, which is bringing accounting firms like CRI more debt negotiation business. “It’s a vicious circle. Banks have to limit their risk and comply with regulations, but that sometimes leads to property foreclosures that otherwise could have been avoided had investors been allowed to keep making payments in expectation that appraisal values would eventually return, ” Ingram says.

Providing Staffing Assistance to Clients

Birmingham-based Dent, Baker & Co. periodically is called in to assist when a client loses an essential accounting department staff member. Now, with the down economy, the firm also is getting calls from companies wanting to out-source a key accounting role. “A company may only really need a part-time rather than a full-time accounting employee, so it makes much more sense financially to outsource the function, ” says Michael Baker, a partner at Dent, Baker & Co.

Recently the controller of a local professional services company left on short notice and Dent, Baker & Co. was asked to jump in and staff the position while the company decided what to do. “We met with the client and made recommendations on how to temporarily reassign duties. We assumed many of the duties of the former controller and reassigned other tasks to individuals within their accounting department, ” Baker says.

Within days of the comptroller leaving, the professional services firm had a payroll due, so Dent, Baker & Co. focused on finding the commission and payroll documentation to prepare the necessary information for payroll. The accounting firm also got the payables entered and was able to run checks within a few days.

They met with the client to evaluate their traditional financial reports and how needed reports would be generated on a monthly schedule. “Some of the reports were redesigned to meet their needs. Others were eliminated simply because there was no user perceived value, ” Baker says. “People tend to get in ruts, so it’s a good idea to periodically ask why things are being done in a certain way.”

Because of the accounting firm members’ experience and expertise, they were able to successfully accomplish the duties of the former comptroller for fees at about 40 to 45 percent less than the cost of the comptroller’s total compensation package. “The office continued to run smoothly with our assistance, and the client realized they did not need to rehire, ” Baker says. “We have several individuals trained to handle the duties so there is no interruption for sickness or vacations.”

Kathy Hagood is a freelance writer for Business Alabama. She lives in Homewood.

By Kathy Hagood

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