Empowering Business Decisions and Improving Earnings Quality

- Delivered a standardized Chart of Accounts (CoA) within five months for the company’s book of record given the company and its investment companies were in different healthcare sub-industries: Benefits/Payment Processing; Financial Services; Clinics; and a Health care technology software app. The standardized CoA aimed to streamline the accounting process across businesses and to improve reporting function. It also aimed to resize the CoA to accommodate over 20,000 individual investor accounts with expectations for a $2B capital raise.

- Discussed with Client that a disconnect between the level of concern over source documents missing and the level of concern over $2M missing implies mismanagement and internal control challenges that need addressing because a company cannot expect to secure assets (like cash) and provide strong fiduciary stewardship without proper internal controls that secure transaction source documents for recordkeeping practices involving the company. 

- Reviewed financial statements to identify unchanged prepaid expenses for three years. Also identified accounts payable as a percentage of total assets to be more than 50% which when asked the question why the client was not paying its vendors, it was brought to my attention there was concern about employee fraud and abuse. Further examination of system setup raised questions about the set up itself. It was identified employees were misappropriating assets through employee reimbursements due to collusion between the finance manager and the ap clerk. It was also identified the outside auditor was reviewing their own year-end closing entries in the system with over 8% year-over-year increases in annual audit billings. 

- Corrected $1.3M in accounting errors affecting four entities, 3 years, and more than 75 investors' personal tax returns. Correcting these errors required restatement of the prior three years financials and more specifically, the investors’ capital stacks and related changes over the periods involved. A Regional Auditor worked as outside independent auditor to review, approve, and opine on the changes. The changes made allowed the company to attract $110M in funding. A clean audit opinion also absolved the company of civil and criminal wrongdoing in a Securities Exchange Commission (SEC), United States Customs and Immigration Services (USCIS), and Federal Bureau of Investigation (FBI) investigation of the company related to EB-5 funding. 

- Identified for client, SODA Stream International (NASDAQ: SODA) where, at the time, the SODA was communicating Advertising and Promotional (A&P) Spend in the United States as a percentage of total revenue as SODA was penetrating the U.S. carbonated beverage market. SODA only disclosed this U.S. A&P as a percentage of revenue verbally on the earnings call and, as a result, in print on the quarterly earnings call transcripts. A review of these percentages, related dollar amounts, and Earnings Per Share (EPS) impact in financial models, showed that sell-side analysts' quarterly projections for the next quarter were missing this U.S. A&P spend and, as a result, the client “Beat the Market” when SODA negatively surprised on the earnings call with lower EPS due to the U.S. A&P spend. The client had published this finding along with observations about useful life estimates as suspected earnings quality management in support of a short-sale investment thesis that yielded to client investors world-wide approximately 15% in the 3-months following the negative earnings surprise on the quarter in question. 

- Helped prepare the company’s financial statements after an employee absconded with company books and records. Made recommendations as to courses of action to correct and prepare for an upcoming M&A transaction where the company was a target. Recommendations included allocating resources to support both project work and daily work uninterrupted. The project team of five was able to record unrecorded transactions for previous five years for more than seven (7) active entities within five months while allowing the daily team of six to focus on daily operations and improving processes on a go-forward basis. Identified for management key balance sheet items given nature of operations for consideration such as: Prepaids, inventories, fixed assets, and intercompany balances. 

- Identified and recommended the correction of a critical model error whereby as loans were extended to customers, the company was required to hold more cash as collateral as opposed to the newly extended loans. The correction of the model error freed up cash requirements and allowed for the company to pursue more loan growth and other mission critical objectives. 

- Improved FP&A modeling for Global operations at 11 locations in four countries integrating Hyperion Financial Management (HFM) logic into Excel using Add-ins. This accelerated not only the Budgeting and Forecasting Process, but it also helped identify areas that still needed attention with month end close which the client was able to subsequently address. The automated 3-statement model allowed for more engaging and interactive discussions with key managers including sensitivity and scenario modeling. Monthly variance analysis was facilitated by the budgets and forecasts provided. Variance, sensitivity, and scenario analyses were all improved by the modeling work done. 

- Worked to identify flow of funds among entities and to identify intercompany balances that needed to be reconciled and balanced. Similarly, worked through the client's entity structure, source and use of leverage, and impact to shareholders groups. The leverage was sourced among a group of shareholders but used for the benefit of other shareholders with no consideration paid to the shareholders bearing the cost of the leverage. Once identified and communicated, the client was able to correct the source and use of leverage, eliminate the shareholder subsidy, and more accurately measure returns to both classes of shareholders.

 - Identified critical system set up errors related to the client's books and records that would have prevented timely conforming financial statements to be communicated without the risk of restatement. The client was able to stay private, address the critical system errors, avoid restatement, and avoid potential shareholder class action lawsuits.