eNews October 10, 2019

In the News

October 10, 2019


Amendments to Washington Law Change Specifics for Performance and Payment Bonds

—Christie Citranglo, editorial associate

Legislation in Washington was passed recently, amending rules for small contractors’ performance and payment bonds on public projects. Senate Bill 5418 (SB 5418) will not change the procedure on how to make these bond claims, but the maximum amount for which small business can obtain a waiver for these bonds will increase from $35,000 to $50,000.

Given the change, public contracts worth up to $50,000 will be more accessible to small contractors than before. This strengthens the ability for smaller businesses to obtain work on public projects. SB 5418 makes it easier for smaller contractors who may not have the history or the financial strength for a surety to issue a bond on their behalf to secure the job, said Jason Alexander, a partner with Sussman Shank LLP.

“There’s some pros and cons to it, and I think the pros outweigh the cons,” Alexander said. “Yes, there’s more opportunity for the smaller contractors to obtain work. The smaller con is those jobs will no longer have payment bonds issued on them. So, there may be increased risk to downstream players in receiving payment.”

Payment and performance bonds play a critical role in securing payments for contractors and creditors in the construction industry. Payment bonds are not only required to protect the owners or projects, but they also protect links in the project down the supply and labor chain, such as subcontractors (subs) and suppliers. The risk increases for suppliers and subs to go unpaid when payment bonds are not required on the projects.

“A payment bond is basically a guarantee to all involved subs and suppliers that says ‘if the general contractor doesn’t pay you, and you’re entitled to payment—i.e., you have a breach—then a surety will make sure you get paid,’” Alexander said. “And what a performance bond does is it’s basically a surety guaranteeing to the owner that his, her or its project will be built for the amount of money set forth in the contract.”

In addition to changes in payment and performance bond thresholds, SB 5418 amended legalities around the work roster and the public bidding process. The change, Alexander said, generally occurs when cities have public projects under $500,000. Instead of going through a full public bidding process, the public body can now contact every contractor that has been requested to be on the small work’s roster. Alexander said this promotes efficiency, cuts costs and speeds up the construction process.

“This new law provides an opportunity for the small contractors to obtain the award for these projects when they otherwise would not have been able to,” Alexander said.

Credit Congress

Registration is NOW OPEN!

The National Association of Credit Management will hold its 124th Credit Congress & Exposition at Caesars Palace in Las Vegas, Nevada, from June 14-17, 2020. This is a one of a kind opportunity for you and more than a thousand business credit and financial management professionals to gather and share experiences, learn from experts and one another and remember why what you do matters!

Please visit creditcongress.nacm.org for more information and to register. We will continue to update the site with additional information on sessions, speakers, exhibitors and much more. 

Please visit creditcongress.nacm.org for more information and to register. We will continue to update the site with additional information on sessions, speakers, exhibitors and much more.

Checks Still Popular in Credit Departments, Despite Fraud

—Andrew Michaels, editorial associate

Fraudsters don’t always require the latest tech to steal hundreds of thousands of dollars from companies. Sometimes, it’s easiest to revert to one of the simplest methods of payment: checks. In a time when checks still play a prominent role in the credit department, experts are using recent incidents of fraud to push companies and their credit managers to learn the telltale signs of imposters.

Last year, PYMNTS and Mastercard partnered to analyze the state of business-to-business (B2B) payments, including common payment methods today and how innovation will outline its future. According to the 2018 findings, 32% of the hundreds of accounts payable (AP), accounts receivable (AR), payroll and treasury management company executives surveyed “use checks more often than any other method for receiving payments,” followed by 34% who “do the same when sending payments.” Regular ACH payments were ranked second at 18%, dropping to single-digit percentages with electronic bank transfers, wire, cash, same-day ACH and less common practices.

Payment methods with new technology paled in comparison to check payments in regards to ease, convenience and acceptance from most suppliers. However, the majority of respondents agreed check payments lacked better fraud protection and data security. Instead, more respondents said companies should use cash if they want to pay with paper.

A recent example of check fraud was reported in Oklahoma in September when a woman was sentenced to more than two years in a federal prison for bank fraud and subscribing to a false tax return, according to the U.S. Department of Justice. The press release states the woman “created fraudulent ‘draft checks’ which she mixed in with legitimate business expense ‘draft checks’ in order to trick her supervisor into signing them.” The checks totaled nearly $400,000.

In another PYMNTS article, TransCard CEO Greg Bloh explained why checks meet the three requirements companies look for in a payment method: “move money from one entity to another, allow data and documents to travel along with the payments, and enable the workflow around it.”

“We have seen all kinds of products rolled out to kill the check in corporate payments—prepaid cards, virtual cards—but stacked against them are those three components,” Bloh said in the article. “A lot of businesses can answer for one or two, but not all three.”

Yet, check fraud isn’t 100% avoidable. Yvonne Vigil, corporate credit manager at Brown Strauss in Colorado, said she experienced an incident with a customer who forged a signature on the back of a joint check.

“I’ve also had customers try to forge my signature on a lien waiver,” Vigil added. “We do not do counter sales. We sell cash sales on a limited basis at each one of our branches, never face-to-face.”

At ArcelorMittal USA, Credit Manager Frank Fallucca, CCE, said he insists customers pay by ACH or wire as the company moves away from checks to minimize fraud and gain faster access to funds.

“We’re very proactive with asking our current customers and our new customers that any form of payment should be by wire or ACH,” Fallucca said. “We’re also dealing with very large global companies, and we maintain presence in several parts of the world, so we don’t accept international checks.”


Soft-Skills, Ways to Conduct Effective Conversations

Strong soft skills—or a combination of people, communication and emotional intelligence skills—are a must for professional success. This new 3-module course will help you learn about these skills and provide advice about how to have effective face-to-face and phone conversations along with conversations with your sales department. Using his experience, Kevin Stinner, CCE, CCRA, shares his insights on:

  • Pros and cons of specific methods of conversation
  • The importance of body language and how to read others
  • How to use small talk effectively
  • How to maintain good communications with sales
  • A mock phone conversation to put Kevin’s advice to the test!

Visit the Credit Learning Center (CLC) or contact the NACM Education Department at This email address is being protected from spambots. You need JavaScript enabled to view it. or 410-740-5560 to learn more.

Visit the Credit Learning Center (CLC) or contact the NACM Education Department at This email address is being protected from spambots. You need JavaScript enabled to view it. or 410-740-5560 to learn more.

UK’s FRC Updates Audit Standards Following Collapses

—Michael Miller, managing editor

There are many factors that strain the global economy and economies of countries. No country is strained more than the U.K., which is at risk of having no deal in place once it leaves the European Union. The U.K.’s Oct. 31 deadline to reach a deal is fast approaching. But Brexit is not the only issue facing Britain. The sharp collapse of construction giant Carillion in early 2018—and more recently, travel company Thomas Cook—has placed individuals and government agencies under immense pressure to have plans in place to stop the worst from happening again and again.

The Financial Reporting Council (FRC) announced Sept. 30 it is strengthening the requirements of the Going Concern audit standard following the recent “well-publicised corporate failures where the auditor’s report failed to highlight concerns about the prospects of entities which collapsed shortly after.” FRC announced Oct. 1 it is investigating the audit by EY on Thomas Cook’s financial statements.

According to the FRC release, the revised standard requires:

  • Greater work on the part of the auditor to more robustly challenge management’s assessment of a going concern, thoroughly test the adequacy of the supporting evidence, evaluate the risk of management bias and make greater use of the viability statement;
  • Improved transparency with a new reporting requirement for the auditor of public interest entities, listed and large private companies to provide a clear, positive conclusion on whether management’s assessment is appropriate, and to set out the work they have done in this respect; and
  • A stand-back requirement to consider all of the evidence obtained, whether corroborative or contradictory, when the auditor draws their conclusions on a going concern.

“High-quality audits protect the public interest, meet the needs of users of financial statements and underpin investor confidence,” said Stephen Haddrill, who is leaving his post as FRC chief executive after being under fire due to these collapses.

Despite some of these heavy factors weighing on the economy, payment practices in the U.K. are improving. The latest FCIB Credit and Collections survey for the country shows average days beyond terms improved by half a day in August compared to the previous survey in March 2019. This is a huge improvement compared to the April 2018 survey when it was 21 days. However, there were more respondents reporting increasing payment delays, and more than a third said they faced no payment delays.

“Brexit worries have companies worried. The economy will be severely impacted if there is no orderly exit. Review financials carefully,” warned one respondent.

According to Dun & Bradstreet’s The Global Business Risk Report Q3 2019, “if the U.K. leaves the EU in a disorderly way, this is liable to cause significant regional and global supply chain disruptions, as well as curtailing reciprocal cross-border business investment between the EU and the U.K.”

BC App

Don’t miss NACM’s first app-only issue of Business Credit magazine coming October 15!

Everyone at an NACM member location can download the FREE Business Credit app. Find the app on the Apple App store or Google Play store.

Everyone at an NACM member location can download the FREE Business Credit app. Find the app on the Apple App store or Google Play store.

Watch for exclusive app-only special offers!

The Raw Data Analytics LLC Case May Change the Unclaimed Property Landscape and Liability for the Holder Community

—Keane Unclaimed Property Team

Unclaimed property compliance has been on the rise since the early 2000s. Many companies are aware of state unclaimed property laws, programs and annual filing requirements. State auditors, third-party audit firms and amnesty programs such as voluntary disclosure agreement (“VDA”) have also contributed to the increase in compliance. VDA programs allow companies to become compliant with minimal risk of penalties and interest for late filings.

Many unclaimed property statutes allow states the ability to assess penalties, fines and/or interest for late unclaimed property filings. However, most states utilize a “best practice” approach along with those programs to minimize the enforcement of penalties and interest (P&I). Despite this, the recent decision in the Raw Data Analytics LLC case indicates that statutory language used in many states gives them not just an ability to assess interest, but it could provide a mandate to holders to report and remit such interest prospectively when the past-due property is reported. This is in sharp contrast to the current landscape wherein only a few states actively enforce penalties and interest during annual reporting (e.g., California, Texas, Montana) and certain other states use audits to assess and enforce P&I on a case-by-case basis.

This recent New York State Supreme Court decision could drastically change the economic landscape of the assessment of unclaimed property liability for holders. In February of 2015, Raw Data Analytics LLC (“Relator”) filed a False Claims Act (“FCA”) lawsuit against JP Morgan Chase & Co., (“Defendant”) under the guise of a qui tam action. Raw Data Analytics alleged that JP Morgan Chase & Co.’s unclaimed property reports were fraudulent insofar as the reports failed to include an assessment of interest, and payment to the Office of the State Comptroller (“OSC”) for late unclaimed property. In order to have filed reports inclusive of the interest assessment argued by the Relator to be required to avoid a fraudulent report, JP Morgan Chase & Co. would have been required to self-calculate the interest amount on all late property. Self-assessment of P&I has not been an unclaimed property practice and the states that enforce P&I, calculate the amount due after they receive the report.

Based on perceived current practice, JP Morgan Chase & Co. submitted a motion for dismissal on Aug. 12, 2016. The motion was converted to a Motion for Summary Judgment, which was denied on Aug. 30, 2019. The Court’s opinion stated that New York’s Abandoned Property Law (APL) is unambiguous in its requirement that the interest payments are required without any further action or notice from the state.

Only a few states actively charge holders interest, fines and/or penalties for out-of-compliance unclaimed property filings. Many states, such as New York, have statutes addressing interest, fines or penalties for late or incomplete unclaimed property reporting but have not historically pursued holders for such interest or penalties. States often retain the discretion to waive or decrease the statutorily defined interest, fines and penalties. Specifically, concerning interest, holders currently do not self-assess and calculate possible interest due on the past due property. Nor do they remit the self-assessed interest amount with the escheatment report.

The outcome of this litigation will have a significant impact on the future of unclaimed property either way. Therefore, holders and the unclaimed property community will be paying close attention. We will continue to track the developments and provide updates; however, the best approach to unclaimed property is compliance and escheatment reduction. A proactive outreach program will help alleviate liability and reduce exposure.

Reprinted with permission. To view the original article, go to www.keaneunclaimedproperty.com/blog/Raw-Data-Analytics-JP-Morgan-Chase.

Reprinted with permission. To view the original article, go to www.keaneunclaimedproperty.com/blog/Raw-Data-Analytics-JP-Morgan-Chase.

Keane is the country’s leading provider of comprehensive unclaimed property solutions. We provide a full suite of professional services including annual compliance reporting, specialized consulting services and customized owner location and communication programs. We help clients mitigate risks, reduce costs, protect customers and ensure compliance. Learn more at www.KeaneUP.com.


Construction Credit Is Complicated

What's required to maintain and enforce lien and bond rights is complicated, especially when selling in multiple states. Some vendors give away basic lien and bond information for free. That can be helpful, but be warned that there are no shortcuts to fully understanding the complexities of a state's lien and bond statutes.

The STS Lien Navigator digs deeper to provide the answers that will help guide you through the entire process. It's that depth and attention to detail you may not know about that makes the difference. The STS answer line is also available with your Navigator subscription.

For the easiest, most cost-effective professional answer to your construction credit questions, get the help you need with the Lien Navigator.

For more information, call Chris Ring at 410-302-0767 or visit www.nacmsts.com.

For more information, call Chris Ring at 410-302-0767 or visit www.nacmsts.com.