Taxable Income Notes

Taxable Income | Casualty Loss Example

Prizes are taxable income

Scholarships may be excluded

Gifts are not taxable

Inheritance is not taxable

Insurance proceeds are not taxable


Legal settlements are taxable

-unless due to injury or illness



No gain or loss on transfer of property

Alimony is taxable and deductible

Child support is not taxable


Government transfer of wealth

Need based payments is nontaxable

Unemployment is taxable


Social Security

0%, 50% and 85%


Collectible Assets

Gain on sale of capital is taxable

28% for items held over a year

Standard tax rate for less than a year


Personal Expenses

No tax deduction unless:

Medical expense

Local, state and foreign tax



Medical Expenses

Expenses – .075(AGI) = deduction


Local, state and foreign taxes

Can deduct either state and local income tax OR sales tax

Can deduct cost of filing taxes


Example on pg 536

Deducted local property tax


Charity can be deducted up to 50% of AGI

If property is donated:

Long term capital asset deduction is equal to FMV

If not a capital asset, deduction is the lesser of FMV or basis

Tax subsidies

Can excluded interest earned on EE savings bond

Can report qualified tuition expenses as above the line, limited to $4000

–          Not allowed anymore

Can above the line deduction interest on qualified education loans, up to $2500

American Opportunity credit is $2500 based on cost of 4 yr education

Lifetime learning credit is based on 20% tuition expense, up to $2000

CAN NOT claim deduction and credit on the same expenses

Can contribute up to $2000 per yr for tax exempt Coverdell savings acct

Can contribute to tax exempt qualified tuition programs sponsored by the govt


Losses on sales of personal assets

Personal losses is non-deductible


Casualty and theft losses

Lesser of tax basis or decrease in value

Reduced by $100

Reduced by insurance reimbursements



I lost $10,000 on damaged car

Casualty loss = 10,000

Insurance proceeds = (2,000)

Unreimbursed loss = 8,000

$100 floor =                 (100)

Deduction is $7,900


Hobby and gambling

Deduction for expenses is limited to revenue

Miscellaneous deductions subject to 2% limitation

Deduction – .02(AGI) = miscellaneous itemized deduction


Gambling is not classified as miscellaneous and therefore not subject to 2% rule

Losses can be deducted to the extent of gains


Home ownership

Beneficial to own a home










Home mortgage interest deduction

Deduction for mortgage is up to $1 million

Deduction for equity debt is up to $100,000


Example: Mortgage is $600,000

Second mortgage is $120,000

Interest payment is $55,000


Qualifying debt for deduction is: $600,000 and $100,000 = $700,000

($700,000 qualifying debt / $720,000 total debt) x $55,000 = deduction


Can only do this for primary residence and one other residence


Vacation Homes:

If rented out: can deduct expenses of maintaining up to revenue amount

Also allowed depreciation deduction based on the number of rental days

Aggregation of these is limited to gross rents – mortgage interest and prop taxes in rental period



Family uses vacation home on weekends and june and july. Rents it out during August and September


Rent revenue: $6,400

Mortgage interest and prop tax for august and September: $3,505

Maintenance expense for august and September: $3,760

Depreciation for August and September: $1,200


Gross rents:                                        6400

Interest and property tax deduction: (3505)

Equals:                                                 2895

Maintenance deduction:                      (2895)     limited to rents

Depreciation deduction:                      0

Net rental income:                                 0


Gain on sale of residence

Not income if house was used for 2 years of 5.

-exclusion only applies for one sale every 2 years

-limited to $250,000 or $500,000 for mfj



May apply for a 6 month extension for filing taxes

–          Does not extend time to pay taxes

Payments made late is charged an interest by the government

-federal short term rate + 3%



Govt has 45 days to refund excess or else pay interest

Same rate

Corporation overpayment rate depends on size of overpayment

$10,000 or less = short term + 2%

$10,000 or more = short term + .5%


Late filing and late payment penalty

5% of the balance due for each month

Have to pay 5% of balance due + interest

5% rate runs for 5 months and then drops to .5% for up to 45 months


Statute of limitations- just because govt cashes check or mails refund does not mean they certify its accuracy

IRS has 3 years to find mistakes

If an omission is greater than 25% of gross income, IRS has 6 years


Audit Process

DIF score determines which filings are examined


Correspondence exam is easy and over the phone or mail

Office exam is at IRS office conducted by auditor

Field exam is at the home by a revenue agent


Deficiency is difference in what was paid and what was supposed to be paid

Interest charge

Corporations may deduct deficiencies as expense


Taxpayer Bill of Rights- 1989

Bill of Rights 2- 1996

Bill of Rights 3 –

National taxpayer Advocate – aid taxpayers


Noncompliance penalties

People who challenge IRS on basis of legal grounds can be fined $5,000 for frivolous return

Negligence- no effort made to be correct – 20% of understatement fee

Civil fraud- attempt to cheat government- 75% fine on understatement

Criminal Fraud- tax evasion


Tax return preparer penalties

Must sign the tax returns

Include id number

Give clients copies of completed returns

Retain copies

$50 fine for not signing

Max penalty is $25,000

Penalty for messing up w/o excuse is greater of $1,000 or 50% of payment to prepare

If intentional it is $5,000 or greater of 50%




Contesting audit result


Us tax court if taxpayer refuses to pay deficiency

Us court of federal claims or us district court if paid but decides to sue

Jury = district court

May appeal to 13 u.s. circuit court of appeals

May appeal to supreme court

Small Tax case division: deficiency of 50k or less. $60 filing fee


IRS collection procedures

Taxpayer that cannot pay may request an installment agreement

-must accept if payment is under $10,000

-gives 3 years


If taxpayer cannot ever pay they can take an offer in compromise


Innocent spouse rule- protects joint filers

Must be spouse’s fault

Must have not known about incorrect filing

Inequitable to hold souse responsible




Taxable Income | Casualty Loss Example

Accounting Fraud

Accounting Fraud

Non cash assets


Two most common: equipment and inventory

Proprietary information least likely but has high costs


Graphs on pg 230 -233

Usually employees



Unconcealed larceny

Assets requisitions and transfers

Purchasing and receiving schemes

Fraudulent shipments




Can be borrowed

Or stolen


Fake sales



Requisitioning, purchasing and receiving should be segregated




Asset requisitions and transfers

Moving assets within a company

Transfer documents

During process of moving asset it is stolen


Purchasing and receiving schemes

Falsifying incoming shipments

Would say only 900 of 1000 items received


False shipments of inventory and other assets

Send product to person stealing or made up person

Acts like it is sold

Allows someone other than fraudster to remove items from storeroom

May be written off as uncollectible



Other schemes

Trick those in charge that old equipment is new equipment and steal new



Concealing inventory shrinkage

Shrinkage is a red flag


Altered inventory records

Forced reconciliation

Fake sales and acct receivables

Write off inventory

Physical padding- empty boxes


Audit tests on page 248






Act done with the intent to give some advantage inconsistent with official duty and the rights of others




Illegal gratuities

Economic extortion

Conflicts of interest


Official – deals with govt

Commercial – business


Commercial is most often


Offering a payment can constitute a bribe, money doesn’t have to be exchanged


Does not have employer’s consent

Unreported gifts from vendors


Economic extortion – pay up or else

–          Ex. If you don’t pay you lose their business



Ph 257 -260 is graphs


Most corruption is conflict of interest


Employee tip is most common detection

Usually done by management





Kickback schemes

Collusion between vendors and employees

Employee makes sure inflated invoice gets paid to vendor

Employee gets kickback from vendor


Diverting business to vendor


Divert business to a vendor


Overbilling scheme

Employees with approval authority

False invoice can overstate cost of goods or have fake sales

Employee approves invoice

Gets kickback


Lacking approval authority

False purchase requisition

False vouchers

Forge signature

Fake invoice


Other kickback schemes


Slush Funds

Bribes are 2 sided transactions

Divert company funds into an account to pay for bribes



Monitor trends

Price thresholds

Monitor purchase levels

Right to audit clause on vendors

Written policies against gifts

-explains what is proper

-allows for termination if violated

Pg 266









Bid rigging schemes

Inside influence gives a vendor a contract

Can rig process

Usually occur in pre-solicitation phase



Before bids are officially sought


Need recognition scheme- employee is paid to convince company a project is needed

High requirements for inventory levels and even still requesting more

Write off surplus to scrap

No back up list of vendors



Specifications scheme- tailor contract to specifications

Elements, materials, dimensions and other relevant requirements

Restricts competition

Prequalification to eliminate competitors

-example: must have certain % of women ownership

Sole source or noncompetitive procurement- saying only one vendor can be used

Writing off of vague specifications- employee paid off to add amendments to raise price

Bid splitting- if value of bid is over a certain value it must have bidding, so they break the bid into smaller parts

Payoff to see specifications in advance


Solicitations Phase

Restrict the pool of competitors

Bid pooling – bidders conspire to split up contracts

Fictitious Suppliers – fake bids are used to justify high bids

Other- restricting time


Submission Phase

When bids are proffered to buyer

Abuse of sealed bid process

-bids are supposed to be confidential

-shows one supplier other bids so they can beat it



Unusual bidding patterns

Unusually high contract price

Pg 271



Something of Value

-must be given for bribes


Illegal Gratuities

Gift after the fact but not meant to influence


Economic Extortion

Opposite of a bribe


Conflict of interest

Purchasing schemes

Sale Schemes

Buying or selling at high or low price to someone with a hidden interest




-turnaround sales

Flip- resell at higher price




Writing off sales



Business diversions

Siphon off clients for own company

Resource diversions – use for development of own business

Financial Disclosures- related party transactions



Company ethics

Annual disclosure to reveal interests


Audit tests pg 280

Accounting Principles and Fraud


Who commits financial statement fraud

Senior management

Mid and low level employees

Organized criminals


Why do people commit financial statement fraud

Conceal true performance

Preserve person control

Maintain personal income/wealth


Why senior management will overstate business performance

Pg 289

May understate pg 289


How do people commit financial statement fraud

Playing the accounting system

Beating the accountint system

Going outside the accounting system

Pg 290


Conceptual framework for accounting pg 290-194


Responsibility for financial statements

Company’s ethic – code of conduct


Users of financial statements – pg 295

Types of financial statements 296


SOX  pg 297-300



Established by sox

Pg 301-309


Graphs on page 310-314



Fraudulent Financial Statement Schemes



Top management: ceo and cfo

Pg 323 is list of scandals

Treadway commission- definition of financial statement fraud



Types of fraud

Falsification, alteration or manipulation of records

Material omission or misrepresentation

Deliberate misapplication of accounting principles

Intentional omissions of disclosures or presenting inadequate documents


T types of misstatements

Intentional misstatements or omissions of amounts or disclosures

Misappropriation of assets


Harmful because:

Undermines the reliability, quality and transparency of reporting process

Jeopardizes the integrity and objectivity of the auditing profession

… for full list – go to page 326


Methods of financial statement fraud

Fictitious revenues

Timing differences

Improper asset valuations

Concealed liabilities and expenses

Improper disclosures


Fictitious revenue

Revenue is realizable when:

Evidence of arrangement exists

Delivery has occurred or service rendered

Seller’s price is determinable

Collection is reasonably assured


Change in assets to occur

Change can be measured

Revenue is substantiated with change in assets and liabilities

Contractual rights enforceable


Sales with conditions

-sale is booked despite not all terms being completed


Pressures to boost revenue


Red flags

Rapid growth or unusual level of profits

Recurring negative cash flows from operations

Many related party transactions

Unusual growth in the number of says’s sales in receivables

Pg 330


Timing differences


Matching revenues with expenses


Premature revenue recognition


Arrangement does not exist

No written or verbal record of agreement

Written Agreement is customary, but now its verbal

Conditional order

Contains right of return

With related party which is not disclosed

Pg 332


Delivery has not occurred or service not rendered

Shipment not made to standard location

Items of wrong specification shipped

No services provided

Mix of goods misstated

Pg 333


Sellers price to buyer is not fixed

Price is based on some future event

Service fee unpredictable

Option to exchange products in contract

Pg 333


Collection is not assured

Contingent on future event

No ability to pay

Pg 333



Long term contracts

Completed contract method or percent completed method


Channel stuffing

Trade loading

Sale of unusually large quantity of a product, buyer enticed by deep discounts

Concern over collectability


Recording expenses in wrong period

Pg 334


Red flags with timing differences

Unusual growth in gross margin

Complex transactions

Repeating negative cash flows

Pg 334


Concealed liabilities and expenses

Liability/expense omission –simply fail to report them. Simple and easy

Capitalized expenses – provide most benefit to company.  Increases income and assets. As assets  are depreciated, income in subsequent periods will be understated

Expensing what should be capitalization

Failure to disclose warranty  – fail to report proper expenses related to repairs for warranties




Red flags

Allowance for sales returns

Unusual growth in gross margin

Pg 339



Improper Disclosures

Liability omissions

Subsequent events

Management fraud

Related party transactions

Accounting changes

Pg 339-341


Red flags

Domination of management by one person

Ineffective BoD

Rapid growth


Improper Asset valuation

Inventory valuation- failing to write down

Accounts receivable – fake accounts, failure to write down

Business combos- goodwill pg 344

Fixed assets

-booking fake assets – making up assets and recording them

Misrepresenting asset valuation- should be recoded at cost

n  Govt related companies have incentive to understate

Improperly capitalizing inventory and startup costs – interest and finance charge, misclassify assets


Red flags pg  347detection of financial statement schemes

Pg 347-356

-has entire step by step process


Financial statement analysis

Vertical – analyze relationship between items on a financial statement

Horizontal – measuring percentage change over periods




Reduce pressure to commit fraud

Reduce opportunity

Reduce rationalization pg 363



Interviewing Witnesses


Guest speakers


Ben franklin was first inspector

Accounting Fraud


Federal agents

No 1811 status

Mail fraud, identity theft, illegal content


Federal Statute

Title 18 usc section 1341


Elements: Devising or intended devising of scheme

Intent to defraud

Use mail carrier to fraud


Punishment: fine or up to 20 yrs


Chain letters

Foreign lotteries

Merchandise schemes

Investment schemes

Work at home schemes



Types of mail fraud: Business

Government look a like mail

–          Need to order to be in compliance

Solicitations disguised as invoice

–          Yellow pages advertisements

–          Disguised to look like a real company

Manipulations of mailings by mass mailer

Victims: car dealership




Actions taken

Criminal prosecution presented to us attorney office

Civil action presented to usao




-law enforcement, AG’s office, BBB


–          Complaints

–          Database searches

Case must:

-meet fraud elements

Be in jurisdiction

Meet prosecution guidelines


Identity theft

9-10 million victims a yr

50 billion dollar hit to economy per yr


Theft is acquiring info

Fraud is using the info


Sources of theft

Wallet, checks, credit card = 14%

Family members 14%

Credit card transactions 13%

Mail theft 4%

Phishing, viruses, key logs 55%


Mike wagner

First job was selling windows

Loan to take equity out of house to pay for windows

-if house is worth 100,000 they’d say after windows it would be worth 150,000

-mortgage fraud


steve warshak

3 phases

1 is no problem

2 is condition but not full on problem

3 is disease and need treatment


Joined in 2002 and in charge of the books


High revenue came from continuity. Charges from credit cards that was not from initial trial.

-“wanted to make sure customer never ran out”

– to remain effective


Sent card that said it was an auto renew


Have to fully disclose process before credit card info is obtained. Cannot tell customers they are going to be auto-renewed at the end.


Double dinging- splitting sales transaction into 2


Charge back ratio


Charge back / total sale transactions


They broke sales down to create higher transaction numbers to lower ratio


1% is acceptable


Chargeback is a dispute of credit card transaction


2002 = 30 mil sales

2003 = 85 mil sales

2004 = 185 mil sales

.1% complained to BBB


Raided in 2005


100 mil dollar fraud = 25 yrs


Villa Hills Civic Club Fraud


–          Property worth 2 mil

–          27k savings in bank

–          7k in operating account

Theft started months within Steve Sparks taking charge


5 member board, secretary and treasurer

Steve convinced president that contacting treasurer was too hard, so he got a stamp with everyone’s signature


Non-payments kept happening. Phones, cable…


Place is always packed, but losing money????


Property was about to be sold for non payment of taxes

–          Steve was on vacation


Feb 7th, 2007- police call about club finances


Had 76 dollars in bank!


Tried to deposit check at wrong bank. Teller noticed he was acting weird. So he ran out and left town.


Poor record keeping made it hard to track what happened


Had mother write 75k check to trick company into thinking money was in account


300k + missing


He and his wife faced threats


50k loan taken against property

No payment for 3 yrs

-forgery involved on loan


Club has not worked on rebuilding and becoming trusted again


Court date on march 20th


Check tampering


-fake bank statements

Payroll fraud


10 rules for being expert witness:



Qualified through training or education

–          Seminars


Certified in a field


Have resume and questions together

Follow policy


Photo arrays

Officer investigating cannot present lineup


Document everything




Knowing facts


Practice testimony


Familiarize with science

-show how you think


First impression

Eye contact


Knowing role


Tv is big influence


Accounting methods being protected is essential for protecting the public and for CPA firms.



Tyco Fraud

Dennis Kozlowski wiki

Tyco International Ltd Fraud – Dennis Kozlowski

The rise and fall of Dennis Kozlowski has been well chronicled. Once recognized as one of the top Chief Executive Officer in North America his reputation is now forever tarnished as he awaits parole in a New York state prison. Living as a man that once enjoyed the comforts of $6,000 shower curtains and other outlandish luxuries, Kozlowski was known for living an extravagant lifestyle. Could the very thing that drove Dennis Kozlowski to success in business be the same trait that caused his downfall and ultimately his imprisonment? Kozlowski used the same no holds barred approach in business as he did in his personal excess. In the end greed would be his undoing. Through the examining of his humble upbringing, to his rise and success in Tyco International Ltd, to the multi-million dollar fraud and his eventual trial and incarceration, the events of Dennis Kozlowski’s rise and fall will be made clear and be an example for the world to study and learn from.

Dennis Kozlowski:

Dennis Kozlowski grew up in a lower middle class neighborhood in Newark, NJ. His father, a second generation Polish-American, was an investigator while his mother was a school crossing guard. Leo, his father, also had something of a side career in politics aiding the Republican Party by delivering the Newark Polish vote. This gift of persuasion was passed down from father to son. As many fraudsters are described, Dennis is most often described as easygoing, comical, and was elected class politician in high school.

Dennis worked his way through college as an average accounting student. His first few years out of school are unaccounted for but his first job out of school was as an auditor for SCM Corporation in New York City.

Tyco International Ltd:

Tyco International Ltd. is a global manufacturing company located in Switzerland and having their American headquarters in Princeton, New Jersey. Founded in 1960 by Arthur J. Gandua, the company saw massive growth in the 1970’s from its early roots that focused on governmental research. The growth came from their increased diversification in company holdings that came from the acquisition of Simplex Technology, Armin Plastics, The Ludlow Corporation, and Grinnell Fire Protection Systems.  This early success due to acquisitions led to the company establishing itself throughout the 1970’s and 1980’s, leading up to the 1990’s.

In 1992 Dennis Kozlowski was named Chief Executive Officer of Tyco International Ltd and aggressively continued the acquisition business practice that gave them their early success. As many as over one thousand companies were acquired by the company over a decade’s period, from 1991 – 2001.

Following the departure of Dennis Kozlowski, Edward D. Breen was named Chief Executive Officer and instantly removed those that had worked closely with Mister. Kozlowski .

Kozlowski at Tyco International Ltd:

Dennis went to work for Tyco International Ltd in 1975 under Chief Executive Officer Joseph Gaziano. Gaziano and Kozlowski were very similar in both business and personal excess. Gaziano favored growing Tyco International Ltd through acquisitions, mostly hostile, and used his position to afford himself a jet, helicopter, and multiple luxury apartments. It was during Gaziano’s time as chief executive officer that Kozlowski committed himself to working his way up the ladder at Tyco International Ltd. “Gaz” was a seminal influence on Kozlowski, who admired and to some extent emulated the older man’s daring and defiant individuality (BW). Gaziano passed away from cancer of the heart in 1982.

The new Chief Executive Officer at Tyco International Ltd was John Fort III. Fort had a completely different corporate strategy than Gaziano. Gone was the corporate excess as Tyco International Ltd’s focus shifted to profitability. It was during this time that Kozlowski started his climb up the corporate ladder. As president of Grinnell Fire Protection, Kozlowski cut overhead, increased operating efficiencies, and reworked the salary structure to reward the managers with the highest profitability in their divisions. The irony of course is that Kozlowski was at his best as a manager while pinching pennies when in his personal life he will forever be known for absurd spending. This success at Grinnell paved the way for Kozlowski to be put on the Tyco International Ltd board in 1987.

In a somewhat unprecedented shift of power, Kozlowski supplanted Fort for control of Tyco International Ltd while maintaining the backing of the outgoing Chief Executive Officer. In 1992 Fort resigned and Kozlowski was announced as the new Chief Executive Officer for Tyco International Ltd. Fort resigned the Chief Executive Officer position but remained on the Tyco International Ltd board during Kozlowski’s time as Chief Executive Officer. The man who had started working at Tyco International Ltd as an accountant making $28 thousand per year was now running the company (60).

Kozlowski had a solid understanding of Tyco International Ltd’s biggest weakness. Over 80% of Tyco International Ltd’s revenues came from the volatile commercial construction industry. As a way to fix this Kozlowski set out to acquire a medical supply company, Kendall International. This was a complete reversal from the conservative management of Fort. Kozlowski summoned his inner Gaziano (acquisitions) and father (persuasion) to get the deal completed. The addition of Kendall alone caused Tyco International Ltd’s earnings to nearly double in 1995, to $214 million (BW).  During this time Kozlowski was awarded a generous raise and also elevated Mark Swartz to CFO.


With Tyco International Ltd generating record profits, an interesting dichotomy began to form. The corporate cost cutting initiatives, a key factor in Kozlowski’s climb to Chief Executive Officer, were still being encouraged to mid-level managers. While they were pinching pennies Kozlowski was changing the corporate culture back to the excess enjoyed when Gaziano was at the helm. Corporate offices were moved from Exeter N.H to Manhattan. It was the shift of Tyco International Ltd’s headquarters that appears to have prompted Kozlowski to begin lining his own pocket (BW). As a part of relocating the corporate headquarters the board approved a relocation plan to move employees from Exeter to Manhattan. Kozlowski setup a second, more generous, relocation plan outside the scope of what the board had approved. While this by itself seems to be a minor infraction, it was widely regarded as the first of many transgressions that would benefit Kozlowski, and those close to him, on the company dime.

Shortly after the relocation Kozlowski decided it was time for him to get a raise. Tyco International Ltd had acquired global security company ADT. Kozlowski appointed two officers from ADT to Tyco International Ltd’s compensation committee. As the committee only had four members Kozlowski decided it was time to rework compensation guidelines in Tyco International Ltd. As the Tyco International Ltd stock price continued to climb so did Kozlowski’s wealth. After the policy was re-written he earned the following: 1997 – $8.8 million, 1998 – $67 million, 1999 – $170 million.

Also during this time frame Kozlowski decided to relocate 40 more employees from Exeter to Boca Raton. Once again he established a relocation fund, with no board approval, which he would use from 1997 – 2001 as an interest free line of credit. Some of the items he purchased with funds from the relocation account include; a $29.8 million mansion in Boca Raton, $30.8 million to buy and furnish an apartment in New York City, $15 million for a classic yacht, $20 million in fine art, $43 million in personal contributions in his name, and a $2 million birthday party for his wife on the island of Sardinia held under the guise of being a shareholders meeting. Later Kozlowski would forgive over $100 million in relocation loans, essentially turning his interest free loan into a cash payment to himself and his conspirators.

Continuing the running tally of fraud charges, Kozlowski also initiated a payment of $20 million to Tyco International Ltd director Frank Walsh for his part in the CIT Group acquisition.

As a separate matter Kozlowski also sold shares of Tyco International Ltd stock without disclosing the sale to the SEC, which is a requirement of a Chief Executive Officer of a publicly traded company.

At this point it needs to be mentioned that the Tyco International Ltd fraud is very different from almost every other fraud case in the last twenty years. The main difference is that the company is still financially sound. Another difference is that all of the activity mentioned in the fraud case was reflected on the company’s books. There were no doctored financials or shredded documents. The fraud in question here is due to the lack of disclosure. Company loans, incentive plans, and bonuses are all items that require the approval of the board of directors. In the Tyco International Ltd case Kozlowski was operating without the approval of the board.


In January of 2002 the Tyco International Ltd board of directors was tipped off to the $20 million payment made to Frank Walsh for the “finders fee” on the CIT acquisition. This was the first knowledge the board had that Kozlowski was operating without their knowledge. This caused the board to launch an investigation which would ultimately unearth the other expense abuses purported by Kozlowski, Martz, and Belnick (chief legal officer).

The case would further unravel when another tip would lead the New York State Bank Department to investigate Mister Kozlowski’s art purchases. While investigating the art purchases they also found other suspicious activity in Kozlowski’s accounts. Upon further investigation they found money was being transferred from Kozlowski’s personal accounts and Tyco International Ltd’s accounts.


The Indictment:

            On June 2nd,2002 Dennis Kozlowski resigned as Tyco International Ltd Chief Executive Officer. The following day he was indicted on tax evasion. The indictment stated that he had bought $13million of art and had the invoices shipped to the Tyco International Ltd corporate offices in Exeter, New Hampshire. The art was actually displayed in one of Mister Kozlowski’s apartments in Manhattan. For good measure Kozlowski went as far as to have the shipping company send empty boxes to New Hampshire.

In addition to being indicted for tax fraud, Kozlowski, Swartz, and Belnick were all brought up on civil fraud charges by the SEC. The SEC suit was based on both Kozlowski and Martz giving themselves hundreds of millions of dollars in interest free loans that they used for personal gain. They later forgave a portion of these loans effectively stealing from Tyco International Ltd. Belnick was named in the suit for failing to disclose $14M in interest free loans that he used for housing purchases. The suit also alleged that all three men sold millions of dollars of Tyco International Ltd stock without disclosing the sale.

When the dust settled New York State had charged both Kozlowski and Swartz with conspiracy, corruption, grand larceny, and falsifying records. Belnick was only charged for falsifying records.


The main question at hand during the trial was if the board had approved of the interest free loans and large bonuses that had been taken by Kozlowski and Swartz. The board claimed they had no knowledge of the loans or bonuses while the defendants alleged everything had been approved. All three men plead not guilty to all charges.

The first trial focused on the lavish lifestyle enjoyed by Kozlowski and Swartz. Some of the details were the $2 million party thrown for Kozlowski’s wife, including a full size Michelangelo ice sculpture that urinated vodka, and the furnishings of Kozlowski’s New York apartment, all paid for by Tyco International Ltd. This event infamously became known as Tyco Roman Orgy. This trial ended in a mistrial as one of the jurors had received a letter pressing for a conviction. Belnick was acquitted of falsifying business records.

The prosecutors for the second trial focused on a much simpler presentation. They left out the gaudy details of personal excess and focused the case on the question of authority to receive the payments. Also differing from the first trial, Kozlowski choose to testify. While he was on the stand prosecuting attorneys were able to seriously damage the case of the defense. Kozlowski had earlier stated a $25 million loan was forgiven as a part of his 1999 salary. The prosecuting attorneys then played footage of the compensation committees meeting from that year. The loan forgiveness was not mentioned anywhere in the footage. This was seen as one of the more damaging items to the defense. Subsequent interviews with jurors revealed that most thought Kozlowski damaged his case by taking the stand. Throughout the trial Kozlowski maintained his innocence; “I never, ever intended to commit any of the crimes (with which) I have been charged” (USA Today). Despite his claims that he had the approval of the board for all actions, Kozlowski was never able to supply evidence. In an interview in 2007 he explained the juror’s perception as, “I was a guy sitting in a courtroom making $100 million a year and I think a juror sitting there just would have to say, ‘All that money? He must have done something wrong.’ I think it’s as simple as that.” Whether he intended to defraud the company or not, or whether he felt he was a victim of jury confusion or contempt, he could not escape a guilty conviction.

In the end Kozlowski was convicted of the following: grand larceny (guilty on all twelve counts), conspiracy (guilty on one count), securities fraud (guilty on one count), and falsifying business records (guilty on 8/9 counts). The total verdict was guilty on 22 of 23 counts and a prison term of 8.33 to 30 years. Currently his earliest possible release date is January of 2014.

Other Information:

It should also be noted that Dennis Kozlowski had personal traits about him that contributed to the fraud committed, such as a seeming willingness to lie or exaggerate about anything related to him. In interviews Kozlowski would refer to his father a police officer, when in fact he was not, and he would mention on a fairly regular basis that he had a Master’s Degree in business administration (MBA) when he actually never completed the program. It is the willingness to tell small lies that lead to stories being formed that just build upon themselves and create an entirely new reality per say for an individual that allows the fraud like the one Dennis Kozlowski to be perpetrated and rationalized by the perpetrator.



            Dennis Kozlowski’s story is the story of a man who rose from an entry level accountant to the head of a multi-national conglomerate. Kozlowski started at Tyco International Ltd making $28 thousand a year in 1975 and reached a peak salary of $170 million in 1999. Having a $170 million board approved salary, Mister Kozlowski seemed to be on top of the business world and have near everything. Many commentators just cannot help but to ask, “What possible motivation did he have to steal when he already made so much money?” A common explanation comes from Harvard professor Abraham Zeleznik. Professor Zeleznkik suggested that Kozlowski was undone by a sense of entitlement: “by entitlement I mean an aspect of a narcissistic personality who comes to believe that he and the institution are one” and thus “that he can take what he wants when he wants it” (BW). The Tyco International Ltd/ Kozlowski fraud case serves as a constant reminder to all businessmen and women in positions of power to manage responsibly and never allow personal ambitions or desires to stand in the way of proper business practices.



Dennis Kozlowski wiki

Dennis Kozlowski wiki







Fraud Examination

Fraud Examination


Resolving allegations of fraud is the discipline of fraud examination

-requires obtaining documentary evidence, interviews, witnesses, writing reports, testifying


Auditing versus fraud examination

Fraud examination is : nonrecurring, specific, place blame, adversarial, proof, follows methodology – see page 4


Fraud examination needs to be handled in a legal manner and resolved in a timely manner


Predication – totality of circumstances to suggest fraud occurred


Fraud Theory Approach:

Analyze available data

Create a Hypothesis

Test the hypothesis

Refine and amend the hypothesis


3 tools used in fraud examinations

  1. Skilled in examining financial statements
  2.  Interview process
  3. Observation


Occupational fraud – use of one’s occupation for personal enrichment through misuse/misapplication of organization’s resources


Four Elements to be counted as fraud

  1. Material false statement
  2. Knowing the statement was false when saying it
  3. Reliance of the false statement by a victim
  4.  Damages resulting from statement


Larceny = stealing


Embezzle- to take and convert to one’s own use


Abuse: use equipment belonging to an organization

Surfing the web at work

Personal business at work

Extended breaks

Leaving work early







Edwin H Sutherland- coined term “white collar crime” theory of differential association- crime is learned.


Donald Cressey: fraud triangle

Fraud Triangle is Opportunity, Pressure, Rationalization

Takes all 3 elements


Nonshareable problems

  1. violation of obligations
  2. problems stemming from personal failure
  3. business reversals
  4. physical isolation
  5. status gaining
  6. employer-employee relations


Common fraud committers

Independent businessmen- convert deposits entrusted to them

Long-term violators- small amounts over time

Absconders- take money and run


Steve Albrecht

Listed occupational red flags as stated on page 21 and 22

Developed fraud scale- page 23


Hollinger clark study

Theft based on workplace conditions

Cost of thefts understated

Motivations of theft were: non-shareable financial problems, newer generations are less honest, all employees can be tempted to steal, job dissatisfaction

Concern over finances affects theft

New employees have less commitment to organization

More access in job means more theft

Hating your job leads to it

Controls: company policy, personnel selection, inventory, security and punishment


Cost of fraud

$600 billion annually







Fraud Tree states there are 3 categories of occupational fraud

  1. asset misappropriations : 85% of cases but least costly
  2. corruption –example is kickbacks
  3. fraudulent statements

44 has “essential terms”




Skimming- theft of cash from entity before its entry into accounting system

Also known as off-books frauds

No direct audit trail


People who receive money are in position to skim


Asset misappropriations is divided into cash schemes and non-cash schemes


52 -55 has graphs


Skimming detection usually comes from tips from employees or by accident



Skimming is either sales or receivables


Sales Skimming

Employee collects money for a sale but keeps the money and makes no record of the transaction


Cash register manipulation

After hours sales

Skimming by off-site employees (example is independent salesmen)

Poor collection procedures

Understated sales (ring sale but for less than what was collected while keeping the difference)

Check for currency substitutions

Theft in the mail- room, incoming checks/cash



Preventing and detecting sales skimming

Maintain oversight on where cash enters organization

Video cameras

Incentives for reporting employee

Cluster cash registers





Receivables skimming

More difficult than sales skimming

Payments are expected


Lapping- crediting one account from another customers account

Force balancing- says the payment was recorded but it was not, creates shortage in cash

Stolen statements-

Fraudulent write-offs or discounts- write off as bad debt

Debiting wrong account-

Document destruction-


Preventing receivables

Supervisory approval for write offs

Trend analysis for overdue accounts

70 is audit tests for detection

72 has essential terms





Cash Larceny


Intentional taking away of an employer’s cash

Cash schemes can be broken into 2 groups

Fraudulent disbursement schemes

Cash receipt schemes


Detection methods

Internal audit


Internal control


Graphs on page78-81


Cash Larceny schemes


At the point of sale

From incoming receivables

From victim organization’s bank deposits

Theft from other registers

Death by a thousand cuts – slowly taking small amounts

Reversing transactions- false voids

Altering cash counts or register tapes

Destroying register tapes




Count cash at end of day


Larceny of receivables

Force balancing

Reversing entries

Destruction of records


Cash larceny from the deposit

When taking money to the bank

Post missing money as deposits in transit


Deposit Lapping- steal deposits from one day and replace with deposit from day 2

Deposits in transit



incoming revenues should be delivered to centralized dpt

two copies of deposit slip


Audit tests to detect cash  larceny on   91


Billing Schemes


Billing schemes- scheme in which payment is submitted for fictitious goods or services, inflated services, or invoices for personal purchases

Most common

Graphs on page 98-101


3 categories

  1. shell company scheme

–          submitting false invoices

–          self approval of invoices

–          rubber stamp supervisor

–          reliance on false documents

–          collusion: working together to commit fraud

–          Purchase of services other than goods

–          Pass through schemes- shell company sells goods at mark up

Preventing Shell: verify vendor list, expenses exceed budget, verify company

  1. non-accomplice vendor- intentionally double pay vendor, cash second check. overbilling
  2. personal purchase

-false invoicing

-falsifying documents

-altering existing purchase orders

– false purchase requisition

– personal purchases on company credit cards

-charge accounts

-returning merchandise for cash


Audit Tests for detecting billing schemes on   119


Check Tampering


Check Tampering- converting of an organization’s funds by forging or altering a drawn check or stealing a check

Graphs on   128 -131


Five principal methods of check tampering

  1. forged maker schemes
  2. Forged endorsement schemes
  3. Altered payee schemes
  4. Concealed check schemes
  5. Authorized maker schemes



Person who signs a check is the “maker”


Whom is the check made payable to






Forging signatures

Free-hand forgery

Photocopy forgery

Automatic check signing instruments


Miscoding fraudulent


Converting the check


Forged Endorsement Schemes

–          Intercepting of a check and signs a third party name

Theft of returned check

Stolen during delivery

Poor control of signed checks

Rerouting the delivery of checks


Preventing and detecting

Vendor does not get paid

Limit who can change vendor accounts

Altered Payee Schemes

Inserting a new Payee

Tacking On: adding letters and words to a payee

Erasable ink

Blank Checks

Converting altered check


Concealed check schemes

–          Authorized approves a check without paying attention


Authorized Maker Scheme

Boss asks for blank check/Intimidation

Poor Controls


Concealing Check Tampering

Reconcile bank statement

Re-alteration of checks

Falsify disbursements journal

Reissue intercepted check

Fake supporting documents

155 is audit tests


Payroll Schemes


Payroll Scheme- based on fake payment claim

Stats/graphs on   164- 167


Payroll Schemes

  1. Ghost employee
  2. Falsified hours
  3. Commission schemes


Ghost employee

Enter ghost to payroll

-fail to remove name of fired employee from payroll

-fake name that is similar to real employee

Collecting Timekeeping information

-documentation or time card for fake employee

Issuing paycheck

Direct deposit


Change delivery address



Separate hiring and payroll duties

Look for employees that lack social security number

Falsified Hours and Salary

-Manually prepared timecards and lie about hours

— forge supervisor signature

–collusion with supervisor

–rubber stamp

–poor custody procedures (who maintains time cards)

-Time Clocks and Automated systems

–Friend punches absent person in

–changing pay rate in system


Commission schemes

–          Fake sales

–          Altered sales: change price listed on sales doc

  180 for audit test


Register Disbursement Schemes


Register Disbursement Schemes- removal of money from cash register


Graphs on   212-215


False Refunds and False Voids


False Refunds

-fictitious refunds

– overstate refunds: overstate refund amount and skim from the difference

-credit card refund: fraudster makes returns on his own credit card


False Voids:

Small disbursements

Destroy records

222 audit tests




Fraud Examination

Fraud Examination


Accounting fraud examinations and investigations can prevent the misstatements of financial reports and allow CPA Firms to better aid their clients.

Accounting Ethics

accounting ethics

Ethical Reasoning: Implications for accounting


Integrity provides moral courage to resist temptation to standby as a company misstates their financial statements


Integrity: The basis of accounting

Integrity means a person acts on principle even against pressure

Principle- conviction that there is a right way to act


Should never let loyalty to a client to cloud judgment

Key to maintaining integrity and ethical perspective is to not start down slippery slope


Golden rule- do onto others…


What is ethics


Ethics is moral philosophy

-how people ought to act

Values are beliefs that guide our actions

Values are concerned with how a person behaves, ethics is how a moral person should behave


Moral point of view- being willing to not act in self interest to promote interests of stakeholders


Ethical relativism- morality is relative to one’s culture

-even if practices are different, fundamental principles often are not


6 pillars of character






– word about whistleblowing


-conscience- motivation deriving logically from principles that govern one’s actions






accounting ethics

accounting ethics





Principles of the AICPA Code


Public interest


Objectivity and independence

Due care- continued improvement in skill

Scope and nature of services-quality controls


Need to depend on moral principles to guide decision making


Teology- act is ok if any desirable result is obtained

Egoists- should maximize ones self-interest

Utilitarians- actions that provide greatest benefits

-bentham and mills

-act utilitarian and rule utilitarian

Deontology- focuses on the rights and intentions. Duty


Rights- justified claim

Justice – referenced with standard of rightness



Virtue ethics- focuses on the acts

Stresses the importance of developing good habits


Institute of Management Accountants





Accountants ethical decision process and professional judgement

Kohlberg stages of moral development



Individual is very self-centered

Stage 1 obedience to rules, avoidance of punishment

Stage 2 satisfying owns needs

Conventional level

Individual becomes aware of the interests of others.

Stage 3: fairness to others

Stage 4: law and order

Postconventional level

Stage 5: social contract

Stage 6: universal ethical principles




Ethical Domain of accounting and auditing

Client organization

Accounting firm

Regulatory bodies

General public


Rest’s Four Component model of morality

Moral sensitivity- requires individual interpret a situation as moral

Moral Judgment- what ideally ought to be done to resolve an ethical dilemma is called

prescriptive reasoning

Moral Motivation- reflects one’s willingness to place ethical values over nonethical ones

Moral Character- better able to withstand pressures


3 characteristics of skepticism

Questioning mind, suspension of judgment, search for knowledge


10 step model for decision making

Frame the ethical issue

Gather all the facts

Identify the stakeholders and obligations

Identify relevant accounting ethics standards

Identify operational issues

Identify the accounting and auditing issues

List all the alternatives

Compare and weight alternatives

Decide on a course of action

Reflect on your decision




Corporate governance- includes internal controls that ensure proper business


Stakeholder perspective

Stakeholder management requires diff perspectives be considered


5 ethical issues in business

Honesty and fairness

Conflicts of interest








4 pillars of corporate governance






Agency Theory

Align behavior of managers with the desires of the owners



Stakeholder Theory

Managers must tend to stakeholders desires


Independent directors enhance governance accountability

Separate meetings between audit committee and external auditors


External auditors rely on support from the audit committee to resolve differences


Internal controls as a monitoring device

Control environment

Risk assessment

Control activities

Information and communication systems



Values are the foundation of ethical decision making



AICPA Code of Prof Conduct


Can nonaudit services impair independence

The need for management to report on internal controls

Importance of techniques to prevent/detect fraud


Metcalf (moss) report investigated accounting profession

Establish a self-regulatory organization of firms that audit public companies

Limit types of management services to those relating directly to accounting


Opinion shopping- when a client seeks accountants with views that matches what they desire


Treadway Committee- study and report on the factors that lead to fraudulent reporting

Tone at the top sets the ethical tone


State board is a high authority’


PCAOB establishes standards for public

AICPA is for private companies


Independence in fact- defined as the state of mind that permits performance of an attest service without being affected by influences that compromise professional judgment


Sec and independence

Proscribing certain financial interests with the audit client

Restricting non audit services with audit client

Subjecting all auditor


Auditor cannot function as a manager

Cannot audit their own work

Cannot advocate for client


Due care says that if you cannot do the work you suggest it to someone else that can

Auditing firms cannot do taxes too


audit responsibilities and accounting fraud


Audit is an examination of the financial statements


Content of audit report

Intro paragraph

–          Identifies the financial statement being examined

–          Clarifies management’s responsibilities for the statements

–          States the auditor’s responsibility to express an opinion


Financial statements are prepared under the direction of the controller that reports to cfo


Scope Paragraph- defines auditors responsibilities

-auditor followed gaas

Audit provided reasonable assurance the statement is free of material misstatement

-auditor assessed accounting principles used to evaluate statement presentation

– audit provided a reasonable basis for the opinion


Audit opinions

Unqualified opinion means the financial statements are fine

Qualified means there is an issue with fairness


If a company changes accounting practice:

Practice must be generally accepted

Conforms to GAAP

Justification for change is reasonable


Averse Opinion- not in conformity with GAAP

Opinion paragraph- disclaimer

Disclaimer – issued when they cannot form an opinion

Happens rarely, like when a company does not take inventory


GAAP is established by FASB

GAAS is established by AICPA and PCAOB


GAAS requirements

General standards related to auditors

Adequate technical training

Independence in mental attitude

Due care in the performance of the audit and preparation in the report


Standards of fieldwork

Establish criteria for judging whether the audit has met quality requirements

  1. Adequately plan the audit work and supervise assistants to detect misstatements
  2. Obtain sufficient understanding of an entity and internal control
  3. Gather sufficient competent evidential matter through audit procedures

Standards of reporting

Determination of whether statements conform to GAAP

Identification of situations where principles are not consistent between periods

Discussion in the report of any situation id’ed in the footnotes where disclosures are not adequate


Audit Procedures


Limitations of the audit report

Reasonable assurance


Present fairly



Capital lease criteria (requires 1)

Transfer of ownership to the lessee at the end of the lease term

Bargain purchase option for the lesee

Lease life of 75%+ of the economic life of the leased asset

PV = 90%+ of the fair value of the leased asset


Expectations gap


Errors-unintentional misstatements or omissions


Illegal acts


Fraud triangle

Incentives, rationalization, opportunity




Sloan Challenges Santorum

santorum sloan

700 WLW radio talk show host Scott Sloan put the pressure on Republican presidential candidate Rick Santorum today as the Ohio primary draws near. Super Tuesday is next week on March 6th, and Ohio is by far the most competitive state of the bunch, with the winners mostly predicted in the other states already.


Radio Host Challenges Santorum

Trying to out compete Mitt Romney after losing both contests this week in Michigan and Arizona, former Senator Rick Santorum took to the radio air waves to send his message. After calling in near 15 minutes late than the scheduled time, and  leaving voters and Scott Sloan waiting, perhaps their minds have drifted to  other candidates like Ron Paul, who is running on the values of freedom and prosperity.


The economy is by far the largest issue in most American’s minds at the moment, but for the past several weeks big news have been made out of Rick Santorum’s stance on birth control. Santorum has been popular amongst social conservatives, despite  his record of endorsing candidates to the contrary, and the birth control issue has put a lot  of focus on his social views.


After Senator Rick Santorum and Scott Sloan were going back and forth on the birth control stance, an issue that has already angered large numbers of women, the phone lines went dead. Adding to the controversy, Rick Santorum did not call back.


Sloan challenged that Senator Santorum originally brought the issue to the front of the election stage to drive out the far right voters and to bring in money from those support groups, but Mister Santorum held strong saying his primary concern is on the economy.


Despite blasting Rick Santorum for focusing on such an issue instead of issues the tri-state of Ohio, Kentucky and Indiana, Sloan’s primary audience, he went on to say that it is  not his job to try to get a certain candidate elected or not,  but rather to ask the tough questions about housing, jobs, gas prices and the overall economy, while not  letting basically petty social issues that gets people mad get in the way.


He was also quick to dismiss the notion that the media is to blame for the rise of social issue discussions on the campaign trail, instead focusing on how Santorum has handled his message and veered off from the economic’s  issues that most Americans and Cincinnati business deal leaders care about  more.


santorum sloan

santorum sloan

Ohio Primary March 6th wiki

Ohio Primary Marh 6th wiki

On March 6th voters in Ohio will be going to voting stations across the state to cast their ballots in support of several ballot provisions, as well as casting a vote for primary candidates for the national and state level elections.


Super Tuesday Ohio Results

In many people’s minds will be the Republican primary contests that features top Republicans duking it out for their bid to face incumbent President Barack Obama in November. Ron Paul has surged this election season and has had several strong showings in the previous states, focusing his efforts on total delegate accumulation to maximize his exposure and support at the Republican National Convention. Then there is Mitt Romney who lost to John McCain in the selecting process in 2008, who eventually lost to now President Obama, and the surging Rick Santorum. Newt Gingrich also remains in the contest, but has lost most of his support and his struggling to stay competitive.


Last week both Rick Santorum and Mitt Romney made stops in the state to campaign and try to convince voters that they are the candidate for them. Ohio has a strong history in the Republican selection process, as no Republican President has ever won without having won the state of Ohio. Because of this fact, it is wise for them to utilize digital printing and other media resources to get their name out there.


Also at issue this upcoming primary election is the Ohio state representative candidates. In district 27, for example, you see a Democratic challenger Nathan Wissman as he prepares to square off against the primary winner between Peter Stautberg and Tom Brinkman Junior. In the 32nd district, Republican Ron Mosby is preparing to face off against incumbent Dale Mallory.


With the state having such a rich history in deciding election contests, a lot of time have been spent on campaigning in these states and the state wide House of Representatives election contests are a clear sign of how the state is willing to swing in the general November election. Yard signs are filling up people’s property and across public land, literature is being handed out, digital printing services and graphic services are being used, and volunteers are in full stride as each candidate pleads their case to the Ohio voters before the upcoming primary election.


Ohio Primary March 6th wiki

Ohio Primary March 6th wiki

Asheville Post Offices Closing

Asheville Post Offices Closing

The United States Postal Service has been in financial problems for decades now, as technology has changed the way we communicate, customer services problems have plagued the entity and prices continue to rise. With Fedex, USPS and local delivery carriers such as Red Express Delivery, Inc always eating into the postal service’s market and revenue, the entity is set for more losses again this year.


When will post offices close?


Despite these record losses and the lessening viability of the United States Postal Service, there are some around the country that still support the organization. In Asheville protestors gathered, including a Ben Franklin actor, to express their support and challenge the cutting back and closing of postal office locations, including one that is set to close in Asheville later this year.

Will the post office go out of business?

Joanne Guess, the president of the local chapter of the American Postal Workers Union, one of the entities responsible for the losses the postal service posts each year, likened the closing down of a postal office as the slash and burning of hardworking people in America. Him and other supporters seek to keep the in the red organization going longer by taking such actions as the repeal of the 2006 law, the Postal Accountability and Enhancement Act of 2006. Part of the act required the postal service to actually set aside money for employee benefits in advance versus searching for it when the time came to pay out. The annual cost of such procedures is $5.5 billion.


The United States Postal Service would not be saved by repealing that act though, this year the service is expected to post record losses of an estimated $14.1 billion.  $5.5 billion saved over one year and spread out over more time would not negate the loss, and still leave the service with over $8 billion in losses.


Postal officer managers got together  last year and announced a plan to close near 3,700  post offices, including the one in Asheville. The plan has since been delayed until later this year, along with the plan to also shut down 252 processing centers.


Along with announced office closures, the  postal service have announced price increases for stamps, with speculation going around that it could go up from $0.45 to $0.50 per stamp. Only a government entity sees price increases as a way to increase demand, as basic economics shows that demand decreases with increased prices.


Continuing through the year, it is expected that the plight of the postal service will continue to make headlines, as the organization is near a tipping point of being unsustainable, if it have not reached that point yet. Postal services, like all industries need to continue to adapt to compete. 24 hour delivery services, customer service and competitive prices will drive consumers one way or the other.


A $14.1 billion loss is no number to be taken lightly, and it is clear the United States Postal Service has a long way to go to stay afloat and adjust to today’s times.



Asheville Post Offices Closing

Asheville Post Offices Closing


Cincinnati Employee Benefits

Worker's Leave Costs Cincinnati $110 million

All companies and government agencies offer some form of time off plans. Whether it ranges from partial pay, to full pay for certain lengths of times, vacation or sick leave or any other alteration, time off for workers have become a staple of the workplace in America. The city of Cincinnati has now been reported to offer perhaps too much in benefits for their employees, as the city’s liabilities related to the expense has soared.


Worker’s Leave Costs Cincinnati $110 million


Worker’s time off has cost the city $110 million that relates to sick leave, vacation time and other forms of leave. While a cost is expected to be incurred, this high level of money, especially in times where governments consistently ask for more money or forms or revenue to generate money, is viewed as excessive.


A detailed report was given to the Cincinnati council members in regards to these Cincinnati  business deals that have allowed one in every three city workers to have more than six work weeks off in 2011. This high level of absenteeism and paid leave cost the city over $110 million.

Some have been quick to point out that the $110 million is not exactly too “bad” of a number, as it includes some standard level or pay outs to employees in it that will be used in parts of this year. They argue that when that number is subtracted from the $110 million sum, than the liability will actually be less.


Councilwoman Roxanne Qualls was quick to respond and stated that such expenditures and generous packages is something that the city in quickly becoming unable to afford.


Police and fire departments make up a large portion of this excessive liability due to union contracts that grant the workers above market level benefits, at the cost of fiscal stability to the city.  Out of the nearly $22 million in comp time, over $20 million of it alone went to the police department. And out of the $6.7 million of birthday, holiday or personal leave, the fire department made up $5.2 million of it.


Despite these outrageous levels of packages offered, voters took away the government’s ability to limit these excessive pay outs in last November’s election with the Ohio Issue 2 vote.


The Budget and Finance Committee is set to review the report tomorrow and determine what steps, if any are to be taken to address this large fiscal responsibility the city owes to its workers.







Worker's Leave Costs Cincinnati $110 million

Worker's Leave Costs Cincinnati $110 million


Sarkozy Announces Re-election Bid

Sarkozy Announces Re-election Bid

France’s conservative president, Nicholas Sarkozy announced today that he will be seeing re-election. After winning a close election against Socialist Party Candidate, Royal in 2007, Sarkozy became the 23rd President of France. His initial campaign was set as a pro-American relationship and closer ties to the world allies while maintaining a high standard of living for the French population.


Sarkozy Re-election

Since Sarkozy took power however, the global economic situation has worsened due to the recession and financial crisis. President Sarkozy made clear that he would be basing his re-election on the economy and jobs for the French people.


For months the French and European media kept asking themselves and the administration whether Sarkozy would indeed seek re-election, but when asked bluntly on television today on the chances of him running again he just as bluntly stated that he is indeed a candidate for French President.


Unemployment in the nation is at a 12 year high, however Sarkozy has met harsh back lash from the Socialist and opposition parties in the government when proposing economic policies to better France. Pushing towards a more free and open market that encourages more productivity and a less of a focus on government involvement and benefits, some elements of the population have fought back. Accustomed to their way of life, change, although beneficial does not always come easy. Simple proposals such as working 40 hour weeks instead of 35 hours, like most of the industrialized world does was dismissed, among other proposals.

Sarkozy is seeking to give power back to the people and as his leaked campaign slogan states, give them  “A Strong France.” His populist campaign will not come easy though. Socialist Party candidate François Hollande will be running a tough campaign against him to place blame for the economic times, despite the fact that it was socialistic policies that led to the financial crisis in the first place.


Europe, including France is currently faced with a large debt crisis that had led to many of the nations, including France, to be downgraded and many banks to be downgraded as well. The election will show what direction the nation of France seeks to go, as they seek to stay in the deficit spending system that got them in the debt crisis they are in, or push for a more people focused and responsible government.

Perhaps France and Europe should follow sound investment techniques and practices portfolio monitoring and work on improving their finances as the upcoming election approaches.

Sarkozy Announces Re-election Bid

Sarkozy Announces Re-election Bid