“Success” is, as we know, a relative term – it comes in all sizes and forms. Certainly one measure of success is the act of completing an engagement or project – yet that is expected. But what about the unexpected outcomes achieved by leveraging specialized knowledge or sheer persistence? For Tait Weller, that is the “extra mile.”
Achieving Success for a Mutual Fund Client - the Big Picture
The financial services sector is arguably one of the most regulated industries in the world. As such, there is little room for an “out-of-the-box” audit approach and therefore it is harder to point to direct success – Tait Weller doesn’t impact e.g. a fund’s performance, capital inflows or capital outflows. However, Tait Weller can certainly point to indirect success under the heading of “going the extra mile”:
The place is Silicon Valley, Mecca for technology entrepreneurs and eager investors alike. The time is the late 1990s, during the halcyon, pre-dotcom bubble days. In that setting, one of our partners received a request for proposal from a mutual fund startup company headed by a leading technology expert and commentator, a regular on CNBC and CNN and widely quoted in publications such as Smart Money, Fortune and Forbes.
Tait Weller was the only non-“Big-Four” accounting firm to be included in the RFP process. Our partner flew out to meet with the management team, which in typical startup fashion took place in the portfolio manager’s garage. Seated on garden furniture around a picnic table, our partner didn’t just dive into the RFP response, and his first question was not about the fund.
Rather, he asked about the organizational structure of the management company. His first concern was with the principals; that they would be able to maximize their income potential while minimizing their tax liabilities upon the advisor becoming profitable.
As a result, Tait Weller was engaged as the fund’s auditor, and our first task was to help switch the fund company from a C-Corporation to an S-Corporation to avoid double taxation. S-Corp income flows through to the shareholders, especially important when considering that the company was to quickly grow to over eight billion dollars in assets under management.
One simple question earned Tait Weller a new, long-term client (now going on 15 years) by saving it millions of dollars in taxes. More importantly, the question is indicative of Tait Weller’s focus on the big picture – be knowledgeable about the trees but go the extra mile to understand the forest.
Achieving Success for Non-Profit Clients - the “Extra Mile”
Tait Weller has a number of non-profit clients who receive funding from the U.S. government through grants from departments such as US Agency for International Development (USAID) and the Department of State. With such grants comes a reimbursement for indirect costs – those expenses that are not directly related to the grant purpose or activity, but are necessary to keep the organization running, such as salaries for support staff, the percentage of rent and utilities attributable to them, etc. As experienced grant managers know, not allocating these costs correctly results in a lower indirect cost rate, lower reimbursement and potential damage to the organization’s ability to deliver on the very purpose of the grant.
“Success” example 1: One of the partners reviewed the indirect cost rate for a new client and discovered it was unnecessarily low. Although there are strict guidelines for calculating the indirect cost rate – for example, they must be allowable, reasonable and allocable – the rate is ultimately negotiable provided sufficient supporting documentation can be provided. In this case, the partner discovered a different way to design the allocation plan within the cost recovery standards. When submitted, USAID approved the new rate and the client was reimbursed at a significantly higher percentage.
“Success” example 2: As often is the case, a non-profit client may receive grants from multiple federal sources or a mix of federal and foundation sources. One such client received a large grant from a private foundation in addition to a number of federal awards. While a fortunate occasion, the unfortunate consequence was that direct program costs increased and the indirect rate lowered correspondingly. One of the partners was able to develop a new methodology for constructing the rate and, because of his relationship and experience with federal grant makers, was able to negotiate on the client’s behalf to have the new methodology accepted – and the original indirect cost reimbursement maintained.
“Success” example 3: a client had an approved plan for their indirect cost rate, which allowed them to recover indirect costs on sub-grants to its affiliates. Normally, under cost principles, an organization may only include the first $25,000 of a sub-grant in its “pool” of costs and must exclude the balance without recovering indirect costs on it. However, Tait Weller had previously developed and presented a methodology to the Department of State (DOS) that showed that the relationship between the organization and its affiliates was based on intense monitoring rather than a strict pass-through. The Department of State had been in agreement for many years, but with each subsequent personnel change the methodology was called into question. In all cases, the engagement partner accompanied the client or participated in conference calls with DOS representatives to clarify the nature of the organization’s relationship with its affiliates, and in all cases DOS accepted the indirect cost proposal. That’s Tait Weller’s “extra mile.”