The Federal Government Shutdown and Small Business Operations

Posted on October 10, 2013 by Genevievette E. Walker-Lightfoot

The Federal Government Shutdown and Its Effect on

Small Business Operations

We are now over a week into the federal government shutdown and many small businesses, including nonprofits, are starting to feel real pain regarding their corporate governance operations. The effects are starting to trickle down from the federal government level and many businesses are suffering from Congress’ decision not to fund the federal government in areas such as employment and federal contracting law and lending and finance operations, as well as other areas.

  • E-Verify Checks and I-9 paperwork

E-Verify is currently unavailable due to the shutdown. Federal law requires that
every employer and agricultural recruiter/referrer-for-a-fee hiring, or recruiting/referring for a fee, an individual for employment in the United States complete a Form I-9,
Employment Eligibility Verification Form. Form I-9 helps to verify an employer's identity and employment authorization. To minimize the burden on both employers and employees while E-Verify is unavailable due to the federal shutdown, the following policies have been implemented:

  • The ‘three-day rule’ for E-Verify cases is suspended for cases affected by the
    shutdown. E-Verify support services will provide additional guidance once E-Verify is operational again. This does NOT affect the Form I-9 requirement?employers must still complete the Form I-9 no later than the third business day after an employee starts work for pay.

 

  • The time period during which employees may resolve TNCs will be extended. Days the federal government is closed will not count towards the eight federal
    government workdays the employee has to go to SSA or contact DHS. E-Verify customer support services will provide additional time once it reopens.

 

  • For federal contractors complying with the federal contractor rule, please contact
    your contracting officer to inquire about extending deadlines.

 

  • Employers may not take any adverse action against an
    employee because of an E-Verify interim case status, including while the employee's case is in an extended interim case status due to a federal government shutdown     (consult the E-Verify User Manual for more information on interim case statuses).

Takeaway: For the duration of the shutdown, employers should continue to complete I-9 paperwork, consult with their federal contracting officer concerning compliance with the federal contractor rule and
refrain from taking adverse action against any employee who has an interim E-Verify interim case pending.

Source: https://e-verify.uscis.gov/emp/vislogin.aspx?JS=YES

  • Small Business Loans are Delayed

Small businesses primarily obtain loans from the Small Business Administration (SBA),
which typically approves about 250 loans per day totaling roughly $93 million. Loans that were already approved and in process will be unaffected, as will disaster loans, another type of SBA loan. However, other loans will be delayed until SBA employees return from being furloughed. Even if the federal government gets back to work
quickly, the SBA may still face a backlog regarding loans not made by a preferred lender that can unilaterally underwrite loans. Olney-based Sandy Spring (NASDAQ: SASR) has about $15 million in loan applications awaiting SBA approval. That includes applications from the bank's entire territory, which stretches from the Baltimore area to Northern Virginia. (Source: http://www.bizjournals.com/baltimore/news/2013/10/10/sba-loans-come-to-halt-with-federal.html) Various financing options are available in the meantime; however, business owners should proceed cautiously:

 

  • Conventional loans may be available to those who qualify. Work with your bank to identify these alternative sources of funding and your company's/organization's ability to meet the lending criteria.

 

  • Interim bank loans may also be available depending upon your bank's lending criteria. Banks may be able to refinance certain loans made during the shutdown into loans with SBA guarantees after the government reopens. This process can be more complex and expensive as two closing will be required and guarantee by the SBA is uncertain.

Takeaway: As a planning tool it might be good governance practice when seeking lending from financial institutions to always identify whether your organizations/business qualifies for conventional funding and whether alternative sources of funding are available.

 

 

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Why Small Businesses Should Implement Corporate Governance Policies

Posted on July 9, 2013 by Genevievette E. Walker-Lightfoot

Corporate governance refers to the set of internal policies, rules and procedures that a company regularly follows to ensure that it operates in a fair, equitable and appropriate manner for the benefit of management, stakeholders and the organization as a whole. The objective outcome of a corporate governance policy within a small business is to empower the company to set strategic goals, appoint leadership that can attain those goals, oversee management and report to key stakeholders on the periodic progress of the organization. But aside from goal setting and management, why do small businesses need strong corporate governance policies in place?

Investment Protection

Policies and procedures protect not only the principals of the business but also investors and other associated organizations. Sound corporate governance documentation of policies and procedures provide all key parties with a roadmap of expectations as to how the organization conducts its business. And should a roadblock arise, those same policies and procedures can provide all affected parties with a way forward, as well as a dispute resolution mechanism should approaches to the roadblock prove irreconcilable.

Foster Employee Recruitment and Retention

Employees are your most valuable asset. Strong internal corporate governance policies are not only attractive to current employees but also a strong incentive for top candidates to join your organization. Moreover, after investing in your employees' training, retention of that investment is critical. Sound corporate governance practices can ensure that performance and executive compensation systems retain and reward the organization's top performers and future leadership. Additionally, a corporate governance system can avoid and reduce internal conflict, demarcate executive duties from administrative ones and improve employee morale and trust in the organization's leadership.

Future Company Growth

Even a private company needs to have a sound corporate governance program, so as to remain attractive to potential investors and business partners. A small private company may one day decide to go public or may remain private but want to attract new investors and principals. Either way, a sound corporate governance program can make the way forward for growth smoother with formalized policies and procedures instituted early in the life cycle of the business. A culture of defined expectations readies the organization for growth, whether it remains private or expands into the public sector.

Ethics Are Highly Valued in Today's Business Environment

Whether a small or large company, recent current events show that ethics, the foundation of corporate governance, are highly sought after by the consumer. A 2002 Hill and Knowlton study found that 79% of Americans take the ethical business practices of a company into consideration when debating a product purchase. (Cuizon, Gwendolyn. "What Is Corporate Social Responsibility") Ethical business practices and internal expectations can only increase the reputational and financial value of your organization.

Manage Legal Compliance of the Organization

Today's regulatory environment requires businesses, both big and growing, to stay on top of regulatory requirements. Regulations such as Sarbanes-Oxley and the Dodd-Frank Wall Street Reform Act necessitate that smaller businesses and organizations be aware of the regulatory requirements and hurdles that define today's business environment. Accounting practices and consumer protection compliance apply to most if not all businesses in some way and it is important that your organization be aware of how these regulations apply to how it conducts business.

Large corporations often opt into corporate governance structures for different reasons than that of a small business. However, the result is hugely the same; transparency, structure and equitable business practices. For a small business that aspires to growth and profitability, these reasons can only propel it towards future success.

What's the takeaway? Small businesses, whether priming for IPOs, looking for new investors, employees and business partners or solely looking to provide their organization with formalized policies and procedures, should devote the appropriate time and attention to their company's corporate governance structure. The benefit to your organization's leadership strength, employee morale and reputational risk profile and business stature among its peers will be immeasurable.

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OCC Semiannual Risk Perspective, Spring 2013: Strategic Risk, Revenue Growth, Cyber-Threats, Expanding Reliance on Technology and Changing Regulatory Requirements

Posted on June 18, 2013 by Genevievette E. Walker-Lightfoot

The Office of the Comptroller of the Currency (OCC) charters, regulates and supervises national banks and federal savings associations (banks) and supervises the federal branches and agencies of foreign banks. The OCC supervises these banks to ensure they operate in a safe and sound manner and comply with applicable laws and regulations, including those requiring fair treatment of consumers and fair access to credit and financial products.

The OCC's Semiannual Risk Perspective addresses key issues facing banks. The OCC publishes the report twice a year, drawing upon midyear and end-year data. The spring 2013 report reflects data as of December 31, 2012. The report presents data in four main areas: the operating environment; the condition and performance of the banking system; funding, liquidity and interest rate risk; and regulatory actions.

Key Risk Themes

¡× Strategic risk continues to increase and remains high for many banks as management searches for ways to generate acceptable returns

Sound corporate and risk governance processes are central to planning, prioritizing and allocating resources efficiently in the current operating environment.
? New products and services may present unfamiliar risks for which some banks may lack the requisite expertise, management information systems and appropriate risk controls.

¡× Revenue growth challenges from a slow economy continue to pressure profitability and increase the risk that banks may reach for yield

? The low interest rate environment also affects fiduciary and other asset management business lines in which revenues can significantly contribute to noninterest income. Continued risk aversion on the part of customers dampens asset management revenues and increases demand for fixed-income instruments, which in the current environment are subject to extension risk and declines in value.

¡× Increasingly sophisticated cyber-threats, expanding reliance on technology and changing regulatory requirements are heightening operational risk

Cyber-threats continue to increase in sophistication and require heightened awareness and appropriate resources to identify and mitigate the associated risks.
? The pace of new regulatory requirements can challenge the change-management capabilities of some banks and can lead to increased operational and compliance risks if banks do not adequately invest in control processes, systems or staff.
? Large and mid-size banks with extensive mortgage servicing operations have been making progress in remediating standards and practices, but the financial and reputational costs remain high.
? The consequences of business process engineering for lower operating costs may fall disproportionately on compliance, audit, risk management, operations or internal control mechanisms and may adversely affect a bank's ability to identify, measure and control risks.

Source: OCC Semiannual Risk Perspective, Spring 2013
http://www.occ.gov/publications/publications-by-type/other-publications-reports/semiannual-risk-perspective/semiannual-risk-perspective-spring-2013.pdf

 

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