ONEIDA — One year after the Civil War ended, residents of Oneida established the Oneida Savings Bank (OSB). Chartered in New York state, the corporation was structured as a mutual savings bank, whereby the depositors were the bank’s owners. Serving clients in Oneida and Madison counties, OSB collected deposits, paid interest, and financed residential mortgages […]
ONEIDA — One year after the Civil War ended, residents of Oneida established the Oneida Savings Bank (OSB). Chartered in New York state, the corporation was structured as a mutual savings bank, whereby the depositors were the bank’s owners.
Serving clients in Oneida and Madison counties, OSB collected deposits, paid interest, and financed residential mortgages for 113 years, when the banking world suddenly turned upside down.
Determined to wring rampant inflation out of the economy, then Federal Reserve chairman, Paul Volcker, slowed the rate of money supply. Between 1979 and 1981, he also raised the federal-funds rate from 11 percent to 20 percent. The prime interest rate hit 21.5 percent in June 1982. “The recession was a … [double-whammy],” says Eric E. (Rick) Stickels, the current president and COO of Oneida Savings Bank who joined the bank in 1982. “The industry was already grappling with deregulation, which was enacted in 1980. The recession of 1981, coupled with deregulation, forced 1,617 financial institutions, of which 747 were savings-and-loan associations, to close or seek FDIC assistance between 1980 and 1994.”
In July 1982, Congress enacted additional, deregulation legislation authorizing banks to offer money-market accounts, removed restrictions on real-estate lending, and relaxed the loans-to-one-borrower limits. Not surprisingly, there was a rapid expansion of real-estate lending, just at a time the real-estate market was collapsing. Where once the savings-and-loan banks represented a stable sector, it now faced competition from commercial banks as well as other S&Ls pressured to find additional income. Saddled with 30-year residential mortgages issued at low interest rates, some S&Ls rushed to finance high-risk developments such as casinos, fast-food franchises, ski resorts, junk bonds, arbitrage schemes, and a variety of derivative instruments.
“When I joined the bank in 1983,” says Michael R. Kallet, president and CEO of Oneida Financial Corp. (NASDAQ: ONFC), the stock-holding company for OSB, “we were still a sleepy, little bank. OSB had just offered checking accounts and adjustable-rate mortgages, but it was difficult to compete. There’s no doubt that the bank took its lumps in the 1980s and 1990s.” Kallet was appointed CEO of the bank in 1989, and Stickels assumed responsibility for operations and finance.
Growth strategy
During the 1990s, the team of Kallet and Stickels crafted a strategy to grow the bank and diversify its revenue streams. In 1998, they took step one by establishing a mutual-holding company, which, in turn, created a stock-savings bank subsidiary to hold all the assets and liabilities. The parent company owned a majority of the subsidiary and was authorized to sell shares in order to raise capital. “After 12 years of growth and success, we decided to take step two,” continues Kallet. “In 2010, we shed the mutual structure and created Oneida Financial Corp., a Maryland stock-holding corporation. Our second offering raised $31 million in new capital, of which we have deployed $5 million to date.”
“The funds raised since 1998 have been used largely for acquisitions,” notes Stickels. “We entered the insurance business in 2000 with the purchase of Bailey & Haskell Associates, Inc. Oneida Financial concluded its eighth insurance-agency acquisition in 2012, buying McMahon, Fenaroli, and White, Inc. (d/b/a Schenectady Insuring Agency or SIA). Our merger-and-acquisition activity [since demutualization] also included two banks — the State Bank of Chittenango and the National Bank of Vernon. In 2006, we acquired the Benefit Consulting Group, LLC. (BCG) located in [North] Syracuse. BCG, formed in 1983 as Retirement Income Services, focuses on 401(k)-plan analysis, design, and administration; personal financial services; business financial services; human-resources consulting; and health insurance and employee benefits. Altogether, the bank has invested nearly $36 million in acquisitions over the past 13 years.”
In 2008, Oneida Savings Bank created Workplace Health Solutions, a company specializing in offering employers access to networks of independent medical examiners in New York state. The goal is to partner with those providers who commit to timely appointments, give objective feedback on their diagnoses, and offer treatment recommendations to return injured workers to the workplace as quickly as medically appropriate. “Our growth is not confined just to acquisitions,” says Kallet. “We create companies where we see the need for a new product or service.”
Kallet stresses that the goal is not just to acquire and grow. “We need to find a good fit that will help us to leverage our assets and create synergies. The companies we target should be free to focus on selling, while our back office [of IT, marketing, and audit] supports their efforts. In the case of Bailey & Haskell and BCG, both were vendors to the bank, and we were comfortable that we could integrate the different cultures into the bank.”
The demutualization strategy has wrought significant changes at OSB. “When Mike and I joined the bank back in 1982-1983, we had 35 employees. Today, [Oneida Financial (OFC)] has 365,” says Stickels. “In 1982, the bank’s assets were $130 million. When we … [initiated] demutualization in 1998, our assets were $220 million. At the end of 2013, OSB posted more than $750 million in assets. OFC’s consolidated [annual] revenues [Dec. 31, 2013] were approximately $58 million and our income exceeded $6 million, with most of the growth coming from our non-banking subsidiaries. (Subsidiary income rose 13.6 percent in 2013.) OSB has expanded to 11 full-service offices, and our equity exceeds $90 million, all while remaining well capitalized. At the time of our secondary IPO in July 2010, shares sold for $8.” Today, Oneida Financial shares trade above $12 (the stock was trading at $12.35 as of late morning, Jan. 21.)
The next step
The day after the SIA deal closed on Dec. 31, 2012, Kallet and Stickels implemented the next step in the strategic plan: they created a new corporation — Oneida Wealth Management, Inc. “Our major concern is client services,” posits Donald J. Abernethy, Oneida Wealth’s president. “We needed to bring … a common vision … to all Oneida Financial companies offering wealth-management services: life insurance, wealth management, the broker-dealer functions, pensions, financial planning, and trust services. A perfect example of the benefits of this approach is our new, centralized [software] platform that integrates our pension, administration, and trust departments so that we can see all of our clients’ needs and respond. The name ‘Oneida Wealth’ also lets us create a single brand as we expand into new markets, such as Albany and Long Island.”
Abernethy continues, “[In short,] our mission is to implement what we call the Premier Advantage, a trade-marked name for providing a comprehensive portfolio of services to help our clients manage their personal and business needs while reducing their risk. The old model of utilizing multiple services and advisers is confusing and often costly because of overlapping expenses and gaps in coverage. With our new platform, all of our programs mesh seamlessly.”
Abernethy joined Retirement Income Services as a partner in 2003, following a stint at First Albany Securities. A 1994 graduate of Siena College, he holds multiple licenses and is a registered principal broker. Oneida Wealth Management also includes Chasity Jaynes, the company’s vice president and COO. Jaynes was the assistant vice president in charge of transition at Cadaret, Grant & Co., Inc. in Syracuse before joining BCG in 2005. She and Abernethy sit on the Oneida Wealth Management board of directors.
New location
The growth of Oneida Financial’s Syracuse–based insurance and financial services business has forced the company to seek new quarters. “We just announced that we are moving [our 110 employees] from the current North Syracuse [town of Clay] location to a building just two blocks from the Syracuse Inner Harbor,” says Kallet. (COR Development is currently planning to build a hotel, apartments, retail space, and other amenities in the Inner Harbor.) “By late 2014, we hope to occupy 28,000 square feet in the old Nabisco plant located at 706-716 N. Clinton St. Andy Breuer (Hueber-Breuer Construction Company, Inc.) and Josh Podkaminer (Emhoff Associates) are developing the former bakery into office space for medical and financial tenants.” Abernethy adds that the staff will initially occupy 20,000 feet, which provides room to grow.
Oneida Financial’s success has been built on a model that closely controls the process. “Ours is a more expensive model than other financial-services companies that outsource many of their functions,” asserts Kallet. “We like to keep as much in-house as we can. We’re convinced that we provide better service … This means a big investment in our technology. [For example,] we were the first bank north of metro New York [City] to offer online banking. As our mobile usage increased, we deployed new software in 2012 to keep up with the changing habits of our customers.”
Even with the investments in technology, it still comes down to the quality of the staff, according to Oneida Financial’s leader.
“Our ultimate success is based on our people,” Kallet opines. “[Oneida Financial] … has a team of long-term employees with talent. We nurture them and invest heavily in their education. We teach them that change is a constant, and they must be facile in responding to it.”
Oneida Financial’s success is also attributable to its management team which includes Kallet and Stickels; Pierre Morrisseau as the CEO and John F. Catanzarita as the COO of Bailey Haskell/BCG; Abernethy at Oneida Wealth Management; and Deresa Durkee as a senior vice president and CFO, and Russell Brewer as a senior vice president and chief lending officer at Oneida Savings Bank.
Kallet, 62, says Oneida Financial has already put a succession plan in place for the company and for all department heads. “Rick [Stickels] will succeed me, although we have not chosen a date. We have worked together as a team for 30 years, and he is intimately involved in our strategy and execution to diversify and grow.”
Kallet, who started in the 1970s with the Bank of New York, says “[t]here has never been a better time to be a community bank. The public understands and appreciates our role as the economic engine of development in small communities. We understand the communities we serve and their needs, and we believe strongly in supporting them.” Looking back on three decades of radical change in the banking industry, Kallet says “I have never been more optimistic of the future. To me, challenges make us better.”
Kallet, a 1972 graduate of St. Lawrence University and a music major who went on to study at the Berklee College of Music in Boston, has orchestrated a major change at what was once a sleepy bank and is now the community’s economic powerhouse. His approach seems to have avoided improvisation, even though he enjoys jazz, instead following a carefully crafted score that has made his stockholders, employees, and the Oneida community smile.
SOLVAY — Solvay Bank has big plans for 2014 that include a new “smart branch” in DeWitt and several new technology components that will improve the customer experience, bank officials say. The bank will soon decide on a construction firm for its DeWitt branch project and expects to break ground within the next month, says
SOLVAY — Solvay Bank has big plans for 2014 that include a new “smart branch” in DeWitt and several new technology components that will improve the customer experience, bank officials say.
The bank will soon decide on a construction firm for its DeWitt branch project and expects to break ground within the next month, says Paul Mello, president and CEO of Solvay Bank.
He estimates it will take about four months to build the 2,400-square-foot branch at 6828 E. Genesee St. in DeWitt and another month to install equipment and prepare for a summer opening.
“Our goal is to increase our market share,” Mello says. “We do a lot of business in that market now,” he says of the DeWitt area.
Mello hopes the new branch will attract new customers as well as help the bank better serve existing customers in the area.
As a smart branch, the location will integrate new technology with the type of personalized service customer Solvay Bank’s customers expect, Mello contends.
Elements of the smart branch with its free-flowing floor plan include employees trained to perform a variety of job functions in order to improve efficiency as well as improved technology such as using tablets instead of desktop computers.
Other features of the new branch, which will employ five people, will include a conference room for loan closings, a community room, Wi-Fi, a “smart ATM” that makes check deposits immediately available, and a coffee bar. The bank will also provide commercial banking services and may add some other services such as insurance if demand warrants it, Mello says.
“It’ll have some traditional elements because people still want that,” he says of the DeWitt branch but will also be equipped for customers who prefer to use the latest technology.
Technology launches
Solvay Bank will launch two new apps later this year to benefit customers.
First to roll out in the spring is a remote check-capture app that will allow customers to snap a picture of checks and deposit them using the app on their smartphones. The app is a follow up to Solvay Bank’s 2013 launch of its mobile-banking app. That application was so well-received — the bank hit its one-year user goal within six months of launching — that interest in a remote check-capture app seems a given, Mello notes.
“There’s no need to go to the bank,” he says. “That’s the future of banking.”
Within the next month, Solvay Bank will unveil its redesigned online mortgage platform, which is easy to use and features online profiles and portals for each of the bank’s mortgage consultants.
Over the summer, Solvay Bank hopes to launch a mobile-banking app designed specifically for the iPad and other tablets with a system more tailored to those platforms, Mello says.
Finally, Solvay Bank is working on creating a virtual wallet along the lines of the PayPal and Google wallets that allows users to store information such their loyalty program cards and credit cards right on their phones.
“We think there is a huge potential down that road that this will replace your plastic cards,” Mello says. People want secure shopping transactions, he notes, but they also want easy transactions. The virtual wallet is a great tool to put all they need in one safe, secure location. “We think it has a lot of potential,” he says of the technology.
Mello declined to say how much Solvay Bank is investing in the new branch and technology, but says he expects all to combine and help yield another strong revenue year for the bank.
Solvay Bank generated record revenue of $22.3 million in 2013 and forecasts revenue of $23.4 million for this year. “We’re optimistic that 2014 will be a little better than 2013, and 2013 was a little better than 2012,” Mello says.
Between the new DeWitt branch and the new technology offerings, Solvay Bank customers will be able to do business with the bank with ease whether they prefer face-to-face interaction, over the phone, on their computers, or on their mobile devices, Mello contends. “We believe in choice,” he says.
Headquartered at 1537 Milton Ave., Solvay Bank (www.solvaybank.com) is a full-service commercial bank with eight branches located in Solvay, Fairmount, Camillus, Liverpool, North Syracuse, Cicero, downtown Syracuse, and Westvale. The company employs 158 people and reported total assets of $663.7 million as of Oct. 31, when it announced its third-quarter results. The company also operates Solvay Bank Insurance Agency, Inc.
The FDIC ranks Solvay Bank at seventh in deposit market share in the Syracuse metro area with more than $577 million in deposits, or 5.3 percent of the market’s total deposits, as of June 30, 2013.
This year will be a breakout year for the U.S. economy as private-sector demand accelerates and fiscal drag eases, according to the Economic Advisory Committee of the American Bankers Association (ABA). The committee, which includes 13 chief economists from among the largest banks in North America, predicts inflation-adjusted GDP growth for 2014 will be 3.0
This year will be a breakout year for the U.S. economy as private-sector demand accelerates and fiscal drag eases, according to the Economic Advisory Committee of the American Bankers Association (ABA).
The committee, which includes 13 chief economists from among the largest banks in North America, predicts inflation-adjusted GDP growth for 2014 will be 3.0 percent, compared to a 2.3 percent annual average since the Great Recession ended in mid-2009 and the post-recession high of 2.8 percent in 2010.
“This will be the strongest economic growth since the expansion began in 2009, and the committee’s strongest forecast since 2005,” Christopher Low, chairman of the group and chief economist of First Horizon National Corp’s FTN Financial, said in a news release. “We expect faster growth in business investment and stronger job creation as the economy improves.”
The bank economists believe the nation’s housing market will continue to grow in 2014 as wages increase and the unemployment rate continues to fall. The group foresees the housing sector gaining strength as home sales recover from depressed levels. The committee forecasts that home prices nationwide will rise solidly and that residential investment will increase 12.3 percent in 2014. The stronger housing sector will in turn, boost consumer spending.
“When families get into new homes, they spend more on appliances, furniture, electronics and building materials,” Low said.
Consumers are also finding themselves on stronger financial footing this year and have regained confidence, according to the ABA’s Economic Advisory Committee. The group believes consumer spending will support economic growth over the year ahead. Automobile sales are also expected to stay strong.
“Some consumers remain cautious due to lingering high unemployment and slow wage growth,” Low said in the news release. “Many have not benefited from the resurgent stock market and personal income growth, and are carefully watching what they spend. But, tax rates will rise much less in 2014, and household balance sheets are healthier than they have been in years. The consumer is the key; if people loosen up their wallets and pocketbooks, economic growth will be even stronger.”
As the recovery improves, the committee believes underlying drivers of economic growth will broaden beyond housing and consumption. Business spending and exports should also be stronger in 2014.
The Economic Advisory Committee believes national fiscal policy will exert less drag on consumers and businesses over the course of next year. The impending passage of a two-year budget agreement without big tax increases or spending cuts is a big change from 2013’s fiscal austerity, reducing economic uncertainty, according to the release. The group forecasts a federal deficit of $560 billion in fiscal year 2014 (down from $680 billion in fiscal year 2013) and below $500 billion in fiscal year 2015. The committee says that higher tax receipts from a stronger economy will account for most of the improvement.
“This year’s bipartisan budget deal will be extremely beneficial to the economy,” Low said in the release. “For the first time since 2009, businesses and consumers can plan with much less worry about disruptive policy battles.”
After slowing in December, job growth will accelerate from nearly 180,000 jobs per month last year to more than 200,000 jobs monthly in 2014, according to the bank economists’ forecast.
“Faster job growth will pull the unemployment rate down to 6.4 percent by the fourth quarter,” Low said. “The Federal Reserve will continue to monitor the job market and taper asset purchases accordingly. In the meantime, watch for investors to shift focus from the Federal Reserve’s asset purchases to its guidance on rate policy.”
The committee expects the Federal Reserve to maintain a very accommodative policy stance, keeping the federal funds rate extremely low.
The bank economists forecast that consumer credit growth will pick up this year, and that delinquencies will remain at low levels both this year and next. In 2014 and 2015, loans to individuals are expected to rise about 7 percent and loans to businesses will grow 8 percent.
The members of the 2014 ABA Economic Advisory Committee are:
· Committee Chairman Christopher Low, chief economist, First Horizon National Corp’s FTN Financial, New York;
· Scott A. Anderson, SVP and chief economist, Bank of the West, San Francisco, Calif.;
· Scott J. Brown, SVP and chief economist, Raymond James & Associates, Inc., St. Petersburg, Fla.;
· Robert A. Dye, SVP and chief economist, Comerica Bank, Dallas;
· Ethan S. Harris, co-head of global economics research, Bank of America Merrill Lynch, New York;
· Stuart G. Hoffman, chief economist, PNC Financial Services Group, Pittsburgh;
· Peter Hooper, managing director and chief economist, Deutsche Bank Securities Inc., New York;
· Nathaniel Karp, EVP and chief economist, BBVA Compass, Houston;
· Bruce C. Kasman, chief economist, JP Morgan Chase & Company, New York;
· Gregory L. Miller, SVP and chief economist, SunTrust Banks, Inc., Atlanta;
· George Mokrzan, SVP and director of economics, Huntington National Bank, Columbus, Ohio;
· Richard F. Moody, SVP and chief economist, Regions Financial Corporation, Birmingham, Ala.; and
· Carl R. Tannenbaum, SVP and chief economist, Northern Trust Corporation, Chicago
The American Bankers Association says it is the voice for the nation’s $14 trillion banking industry and its two million employees.
NORWICH — NBT Bancorp Inc. (NASDAQ: NBTB) reported that its net income rose to $17.9 million, or 41 cents a share, in the fourth quarter, from $13.1 million, or 39 cents, in the year-ago period. The Norwich–based banking company boosted loan growth, improved its credit quality, and benefited from increased assets following a major acquisition
NORWICH — NBT Bancorp Inc. (NASDAQ: NBTB) reported that its net income rose to $17.9 million, or 41 cents a share, in the fourth quarter, from $13.1 million, or 39 cents, in the year-ago period.
The Norwich–based banking company boosted loan growth, improved its credit quality, and benefited from increased assets following a major acquisition completed last year.
For the full 2013 year, NBT earned $61.7 million, up from $54.6 million in 2012. The banking company’s 2013 results included the impact of the acquisition of Alliance Financial Corp., a $1.4 billion financial holding company headquartered in Syracuse, last March, including about $12.4 million in merger-related expenses. NBT’s teported earnings per share for the year totaled $1.46, down from $1.62 in 2012.
NBT said it generated organic loan growth of 5.3 percent in 2013, consumer loan growth of 4.8 percent, and commercial loan growth of 5.5 percent. Its net charge-offs to average loans rate was 0.44 percent for 2013, down from 0.55 percent in 2012.
NBT Bancorp had total assets of $7.7 billion as of Dec. 31. The company primarily operates through NBT Bank, N.A., a full-service community bank with two geographic divisions, and through two financial services companies. NBT has 157 branches, including 125 NBT Bank offices in upstate New York, northwestern Vermont, western Massachusetts, and southern New Hampshire.
NBT’s Pennstar Bank division operates from 32 Pennstar Bank offices in northeastern Pennsylvania. EPIC Advisors, Inc., based in Rochester, is a 401(k) plan recordkeeping firm. Mang Insurance Agency, LLC, based in Norwich, is an insurance agency.
Editor’s note: The Investment Q&A feature appears regularly in the Banking & Wealth Management special reports of The Central New York Business Journal, spotlighting area investment professionals and their views on the financial markets and investments. In this issue, Ted Sarenski provides his outlook. Theodore (Ted) J. Sarenski, CPA, CFP, president and CEO of Blue
Editor’s note: The Investment Q&A feature appears regularly in the Banking & Wealth Management special reports of The Central New York Business Journal, spotlighting area investment professionals and their views on the financial markets and investments. In this issue, Ted Sarenski provides his outlook.
Theodore (Ted) J. Sarenski, CPA, CFP, president and CEO of Blue Ocean Strategic Capital, LLC in Syracuse
CNYBJ: What is your view on where the financial markets are headed in the coming months?
Sarenski: We have had a shaky start to the financial markets this calendar year. Often we look at markets and ask what will happen this year when in reality they are a continuum with no beginning or end. I believe U.S. markets are looking strong for the months ahead based on the Federal Reserve’s moves recently to reduce the bond buying they started on 2008, the reduction in the unemployment rate, the gaining strength of the dollar, and the passing recently of a budget by the folks in Washington.
Europe is stabilizing and should not be a drag on markets. The emerging-market countries did not have a great 2013 and it appears they will not be robust in 2014 either. Many investors had moved fixed-income investments to foreign markets because of the very low interest rates domestically over the past few years. The 10-year U.S. treasury is approaching 3 percent, which will cause fixed-income investors to bring some of their funds back to the U.S. and hurt the emerging-market economies. The U.S. Treasury is still the safest place in the world to have investments.
CNYBJ: Provide specific recommendations for investments that clients should be making right now.
Sarenski: Clients should be cutting back on emerging-market investments — on both the fixed-income and equity sides. Large multi-national U.S. based companies should continue to fare well in the New Year. Small U.S. manufacturing companies will be stronger as technology and rising wages overseas are starting to bring back many manufacturing jobs that had been sent overseas in the last 10 years. I do not believe we will have the kind of year in the U.S. that we had in 2013 [when the S&P 500 gained more than 30 percent], yet there are indications the U.S. markets will maintain and grow in 2014. Fixed-income is still not paying rates investors would like to see, so I would remain overweighted in equities and underweighted in fixed-income.
CNYBJ: What do you see as the greatest risks investors need to be aware of and seek to avoid in the coming months?
Sarenski: The greatest risk investors’ face in the next few months, in my opinion, is themselves. Markets never go up in a straight line. With such a powerful market in 2013, it is normal to see a pullback in the markets at the beginning of this year. Investors need not panic. Watch the factors, I mentioned in response to the first question. And, if those fundamentals to a good market appear to be changing for the worse, then the investor needs to be concerned and possibly reduce equity exposure in the near term.
“No one’s ever achieved financial fitness with a January resolution that’s abandoned by February.” Suze Orman I believe that almost all studies regarding individuals making New Year’s resolutions arrive at the same conclusion. That is, most of them are broken during the month of January or may die a slow death over the remainder of
“No one’s ever achieved financial fitness with a January resolution that’s abandoned by February.” Suze Orman
I believe that almost all studies regarding individuals making New Year’s resolutions arrive at the same conclusion. That is, most of them are broken during the month of January or may die a slow death over the remainder of the year. The celebration, pomp and circumstance of each New Year brings boundless enthusiasm to individuals around the globe. As Americans, I happen to think we do it best.
However, 2014 presents tax-exempt organizations across many, if not all, service sectors with significant challenges that must be turned into opportunities.
Therefore, I have personally resolved that, no later than June 1, 2014, I will do the following.
I will engage our tax-exempt clients and you, my readers, with the specific objective of developing a strategic action plan to best position your organization for success, outstanding outcomes, and fiscal viability for 2014-16.
In January, Congress passed the Omnibus Budget Reconciliation Bill and Gov. Andrew Cuomo released the NYS 2014/15 fiscal year budget. These two documents provide most tax-exempt organizations with the rules, requirements, and revenues that establish how the business “game” for tax-exempts will be played for the near future.
In the continuing giving spirit of Thanksgiving and Christmas, I offer you the following 10 “gifts of information” for you and your organization to consider in developing your individual strategic positioning plan.
1. Doing more for your constituents with less government funding.
§ As of Jan. 1, 2014, New York state had about 6 million Medicaid-eligible citizens.
§ Demand for services will continue to increase. Fundamental transformation of tax-exempt service delivery will continue.
2. Continuation of the dramatic shift in favor of paying nonprofits for service outcomes and quality versus the “previous model” of fees for services rendered.
§ The concept of Pay for Performance (P4P) will continue to spread throughout the health- and human-services sector.
§ Physicians and hospitals have been dealing with P4P for a number of years.
§ P4P is likely to become a standard reimbursement methodology.
3. Gov. Cuomo’s budget makes it quite clear that 2 percent is the maximum magic number for purposes of additional government funding.
§ We all know that 2 percent does not adequately cover cost increases occurring in many areas (example: health insurance). Therefore, further cost reductions and efficiencies must be identified.
§ An effective and flexible Salary Administration Program will be a fundamental requirement for success.
4. If your organization provides services to Medicaid-eligible individuals, pay particular close attention to the requirements of Executive Order No. 38 covering both executive compensation and caps on administrative costs.
§ In 2015, administrative costs for Medicaid providers must be below 15 percent.
§ Be sure to calculate this percentage in accordance with published regulations.
§ For executive compensation, determine whether or not you need to file a waiver application.
5. The federal government and the Cuomo Administration believe there is more than enough capacity in New York state to provide health and human services.
§ There is an assumption, in some ways flawed, that fewer and bigger tax-exempts will inevitably lead to more efficiency.
§ Read David Lapiana’s column on “Merging Wisely” — http://www.ssireview.org/articles/entry/merging_wisely
§ Expect that the “Walmarting of the tax-exempt sector” will proceed at an increased pace.
6. If you are considering a merger, acquisition, or strategic affiliation, make sure that you speak with your audit firm.
§ Accounting rules for nonprofit mergers and acquisitions were changed recently.
§ Ask your audit firm to describe the challenges associated with the requirements of FASB No. 164.
7. New dollars for purposes of funding new-service initiatives or transformation of current delivery models will be largely determined based on the success of grant applications from collaborations and joint ventures of multiple service providers.
§ Become familiar with the Vital Access Provider program and the Balancing Incentives program, among others.
§ Private and community foundations may offer an expanded opportunity for grants on the strength of the stock market’s performance.
8. Pay attention to the demographic changes that are affecting service demands.
§ On average, 10,000 Americans are retiring each day for the next 15 years.
§ The Baby Boom generation and its shift to retirement with inadequate retirement funds will have a dramatic impact on service demands and payment sources.
§ Consider the number of New Yorkers who, after retirement, move to the South for a lower or no-tax state of residence.
9. By 2020, less than six years away, those nonprofit organizations that will remain autonomous with local decision-making authority will have to continue to develop a significant private-sector fundraising effort. These development efforts will require annual success from both special events and planned gifts.
§ Given the industry environment described herein, make a basic assumption of less money from government.
§ Replacing declining government revenue with private-sector funding and/or cost efficiencies will be key.
§ Identifying new opportunities for revenue sources in this changing environment should always be a primary focus area.
§ Don’t wait until it’s too late to consider partnerships, collaborations, or mergers for purposes of continuing your mission.
10. As a “bean-counter,” I would be remiss if I did not give recognition to the ongoing “efforts” of the accounting profession in making your lives more difficult and complicated.
The New York State Society of CPAs recently conducted its Nonprofit Annual Update training. The topics were as follows:
§ Developing a measure of operations
§ Corporate affiliations
§ What you need to know about IT-cloud computing, payment card industry, identity theft, and mobile options.
§ Accounting for contributions versus exchange transactions
§ Demystifying Executive Order 38
§ Addressing and implementing an effective enterprise risk management (ERM) process
§ Attachments to Federal Form 990 that cause the most headaches
I am hopeful that you will be successful in accomplishing both your individual and organizational resolutions for 2014.
Gerald J. Archibald, CPA, is a partner in charge of the management advisory services at The Bonadio Group. Contact him at garchibald@bonadio.com
Our Democratic officials are all reading from the same hymnal. Another State of the Union address; another call for the federal funding of universal pre-kindergarten. New York Governor Andrew Cuomo has chimed in with his call for phasing in pre-k. The mayor of Syracuse has added her voice, and the Big Apple’s new mayor rode
Our Democratic officials are all reading from the same hymnal.
Another State of the Union address; another call for the federal funding of universal pre-kindergarten. New York Governor Andrew Cuomo has chimed in with his call for phasing in pre-k. The mayor of Syracuse has added her voice, and the Big Apple’s new mayor rode to victory on the need to immediately implement pre-k.
They tell us that pre-k will level the playing field for low-income children so that they can catch up to middle-class kids by the time they reach kindergarten. Early intervention will mitigate some of the disadvantages of poverty.
Surely, the collective call for universal pre-k is based on its success. After all, we have had the Head Start program since 1965, which currently covers 900,000 children for an annual cost of more than $7 billion, or $8,000 per child. President Obama wants to double the federal expenditure and encourage the states to join him in making pre-k universal.
The most comprehensive study of Head Start, sponsored by the Department of Health and Human Services, followed 4,667 3- and 4-year-olds in a national sample covering 23 states. The study examined cognitive development, social-emotional development, health status and access to health, and parenting practices. While the children showed positive development in the program, the improvements did not carry into kindergarten or elementary grades. The only significant positive effect was an improvement in children’s attention as reported by the parents. Unfortunately, independent assessors and teachers saw no improvement.
Defenders of Head Start contend that the curriculum and teacher education need to be improved to produce a high-quality program. Independent studies by Peter Bernardy and a team from the University of North Carolina headed by Diane Early find very low correlations between curriculum quality and teacher education and cognitive and social-emotional outcomes in pre-school programs.
Any rational person running a cost-benefit ratio of the program would conclude it was ineffective and a waste of hundreds of billions of dollars. Based on this, one would either abandon the program or reconfigure it to produce the desired results. I wonder whether the promoters of universal pre-k ever considered a national demonstration program to prove that pre-school for everyone actually works?
Which leads me to conclude that politics is not necessarily a rational business. Too many politicians are measured by their inputs, not their outcomes. The all-too-common answer to solving problems is to express your concern verbally and then spend money. Otherwise, how do you explain doubling down on a failed program?
Pre-k has now attained the status of motherhood and apple pie. It cannot be questioned by mere reason. Whatever America does to cancel our inequality is worth the effort and cost.
Excelsior!
Norman Poltenson is publisher of The Central New York Business Journal. Contact him at npoltenson@cnybj.com
Have you ever wondered why Big Apple mayors rarely move up to other offices? We have seen why in the past few weeks. Think about it. How many mayors of New York City have become governor of the state? How many have gone onto Congress, as senators for instance? How many have become president of
Have you ever wondered why Big Apple mayors rarely move up to other offices? We have seen why in the past few weeks.
Think about it. How many mayors of New York City have become governor of the state? How many have gone onto Congress, as senators for instance? How many have become president of the country?
Diddly-squat. That is how many. And why is that? You might expect them to easily climb the political ladders of this state and country. After all, running a city the size of New York demands a lot of executive ability. And tons of political savvy. The mayor is responsible for a $75 billion budget. And many thousands of employees. And thorny negotiations galore. Great preparations for higher office.
So why do most of them drop off the political cliff when they leave office? I think we see why with the crowning of the new mayor.
Mayor Bill de Blasio has announced he wants to whack the city’s biggest earners with a half-billion dollars in new taxes. I’m your new mayor, watch your pockets. At first, he said the new tax grab was to find bucks to fund pre-K classes. (What better way to reward the teachers’ unions?) Then the governor said you don’t need to raise taxes. The state would pay for Pre-K. Even so, the mayor still wants to raise taxes on the 1 percent. Just to show them who’s boss.
Gov. Cuomo is trying to thwart the mayor. Give him credit. He realizes there is life outside the city. He senses the rest of the state may not be too crazy about whacking the rich with more taxes. After all, we are about the heaviest-taxed state. And we keep losing rich people. They flee to Florida and other no-tax or low-tax states. When they leave, the state loses the tax dollars they used to pay to Albany. The rest of us have to make up the difference.
I wrote about how the state legislature got too greedy. When it raised taxes on the likes of Rochester billionaire Tom Golisano, he fled to Florida. The state misses out on $16,000 per day he was paying in taxes. Take that, Golisano. We sure taught you a lesson for making a lot of money.
Back to the Big Apple. It has been losing rich people. Now the mayor makes a big show of going after those who remain. The more he taxes them, the more will leave. Hmmm. I don’t believe the people of Jamestown or Buffalo or Utica or Binghamton want to gouge their big earners. In that respect, they think differently than too many residents of New York City.
My point? The city is not like another state. It is like another country. So many of its residents don’t know Poughkeepsie from Watertown from Elmira. The upstate wilderness to them is Westchester County. Their knowledge of the state is limited to where the subways and taxis run. They figure the U.S. has, maybe, 10 other states. There’s Boston, Philly, D.C., and a few more.
A city politician run for state or national office? How about the Prime Minister of Botswana run. At least he probably knows where Syracuse is located.
The jousting that is going on between the governor and the new mayor boils down to this. The governor is saying to the mayor, “We have to consider the cities and towns and taxpayers and economies of the rest of the state.”
And the mayor is saying to the governor, “What do you mean state? You talkin’ about Jersey?”
Some pundits suggest there will be a showdown in Albany. I doubt it. De Blasio doesn’t know where it is.
From Tom…as in Morgan.
Tom Morgan writes about political, financial, and other subjects from his home near Oneonta, in addition to his radio shows and new TV show. For more information about him, visit his website at www.tomasinmorgan.com
SYRACUSE — Syracuse University (SU) announced today that it is expecting a record crowd of 35,446 for the much-awaited Duke vs. Syracuse basketball game at
