This is the second in a three-part series on how the cannabis industry can potentially benefit from a blockchain and cryptoasset payment system.  

In part one of this series, we discussed in detail the challenges associated with processing customer payments for cannabis businesses. In this second post, we delve into the weaknesses and risks of existing payment options and how blockchain and cryptocurrency can assist.

Banking and Financing Challenges

Even though Governor Murphy signed the adult-use cannabis reform bill into law on Feb. 22, which is welcome news for New Jersey, the federal illegality of cannabis still poses problems in sourcing banking and financing solutions. Absent the benefit of business banking, cannabis operations take on immense risk handling and safeguarding proceeds in a cash-based payment system. Yet many financial institutions are not willing to accept the risk of servicing these clients, and those that are willing charge fees commensurate with the additional risk and compliance burden. 

Financing has presented similar challenges for cannabis companies in weighing the pros and cons of their options. Traditional business loans are generally unavailable due to banks’ concern with Federal Deposit Insurance Corporation (FDIC) insurability. Similarly, there are concerns that taking an interest in collateral for loans issued to cannabis businesses could be subject to forfeiture due to the federal illegality. There are providers that have emerged willing to service small business loans for cannabis companies, however these tend to be short-term financing options with higher-than-market interest rates.

Tracking and Reporting Challenges

Cannabis businesses must also deal with complexities related to business-to-business (B2B) transactions.

• Supply chain concerns. A state’s regulations largely dictate what the supply chain will look like. Points in the chain include cultivation, extraction of active compounds from the plants, manufacturing other cannabis products, testing the product for adherence to various regulations, B2B and business-to-customer (B2C) transportation and finally, wholesale and retail sales. Operators’ roles in the space largely depend upon the type of licenses offered by their state and the type of license(s) they obtained. Licensees that own all levels of the supply chain are known as “vertically integrated” businesses.  
• Tracking and reporting. For vertically integrated businesses, software can help create a “seed-to-sale” experience. Tracking and reporting requirements will vary by state. There are services on the market that are equipped to handle reporting, tracking and transacting through various points in the supply chain. However, businesses that are not vertically integrated may face challenges related to incompatible software. Consequently, they may incur more data input and processing time and risk errors in the process when transacting B2B.  
• Payment terms and trade credit. Under traditional circumstances, the standard use of payment terms and trade credit aids in administrative functions and allows businesses to better manage their cash flow. These practices are generally not available to cannabis operations. While a few commercial solutions exist, we may see more service providers emerge to service the industry by providing outsourced B2B management.  

How Blockchain and Cryptocurrency Can Assist

Bitcoin is still largely at the center of attention and discussion when it comes to cryptocurrencies, but the sector has matured immensely in recent years. In order to understand crypto’s potential as a solution for cannabis companies, we should first discuss the categoric makeup of the industry:

• Decentralized cryptocurrencies, including Bitcoin, are not issued or governed by any single entity or small group of organizations. They are commonly associated with price volatility and speculation, as well as significant tax, accounting and reporting uncertainty. 
• Stablecoins were developed in response to the aforementioned price volatility commonly associated with Bitcoin. Stablecoins are cryptocurrencies, but with two major differences: Stablecoins are issued, governed and managed by either a single entity or small group of organizations; and they are connected, tethered or pegged to an underlying asset, with a large percentage of these stablecoins being connected to the U.S. dollar. Lower price volatility, which will enable more products and services to be offered, illustrates the business case for stablecoin-based products. Yet with complexity in implementation and uncertainty surrounding the role of various blockchain-based technologies in the future business landscape, it might be a while before we see crypto-based payment systems in the majority of organizations.

Accounting for cryptocurrencies continues to be an ongoing issue for even the largest and most sophisticated organizations. Stablecoins, in theory, are to be used as a currency alternative, but under current U.S. regulation are still treated as property. In other words, whenever a stablecoin changes ownership, there is a taxable event. This complicates the accounting, recordkeeping and tax compliance processes, but also creates a bevy of opportunities for forward-thinking practitioners and organizations.

Looking out at the regulatory landscape, there are distinct updates that might resolve some of these hurdles to wider adoption:

• The Biden administration’s selection of Gary Gensler to head up the Securities and Exchange Commission (SEC) should be viewed as a positive step forward for blockchain and crypto regulation. This is not to say amenable legislation is guaranteed, but it is always preferable to have regulations proposed and enacted by individuals who are knowledgeable about the subject matter. 
• The Office of the Comptroller of the Currency (OCC) issued two recent updates that should be of interest to both practitioners and cannabis entrepreneurs. The September 2020 update clarified that federally chartered banking institutions could hold on deposit, reserve dollars for privately issued stablecoins. This enables stablecoin issuers to fully access the services and support of the commercial banking system and clarifies what specific products and services those same banking institutions can offer stablecoin issuers. The January 2021 update is potentially even more significant. It says that, going forward, federally chartered banking institutions under the jurisdiction of the OCC will be able to join permissionless blockchains (referred to as independent node verification networks) and validate transactions.

These updates are important since it means the banks will have full transparency and accountability with regard to stablecoin transactions on their books. In addition, those same institutions will also be able to buy, sell and process transactions that are taking place in the form of stablecoins backed by the U.S. dollar. Translating these updates into non-technical language means that federally chartered U.S. banking institutions can join blockchains and process transactions that are taking place via dollar-backed stablecoins. 

“Accountants are fun.” That’s how Dr. Adrian L. Mayse, CPA, chair and associate professor in the Department of Accounting at Howard University and fellow member of the National Association of Black Accountants (NABA), starts out his book, When I Grow Up I Want to Be … An Accountant.

How true that sentiment is. After all, it’s a creative and colorful children’s book that encourages students — especially minority children — and their families to discover the world of accounting.

As I leafed through the book’s vibrant illustrations, I imagined myself encircled by a group of first or second grade students, sharing with them the enthusiasm that I felt when I embarked on my CPA journey. When I Grow Up I Want to Be … An Accountant reveals to children that accountants work almost everywhere — sports, movies, the arts, even schools — and anyone can be an accountant, no matter your race or gender. “Accountants look like me. They look like you,” the book encourages. One page even includes space to place a photo so the reader can see themselves as an accountant.

I applaud Dr. Mayse for addressing the challenges associated with attracting minorities into the CPA profession. Even though accounting has been consistently ranked as one of the leading majors for students, minority students are still not considering it a viable option, tending to opt for other majors or professions where they see more diversity.

But there is some good news. Mentoring programs — an effort that I’m a big believer in — are tremendously successful in nurturing the next generation of accounting graduates. Seventy-eight percent of black accounting professionals said that their career had benefited from a fruitful mentoring relationship in their current work environment in a recent Howard University survey.

Mayse ends the book by urging students to “Keep studying and learning.” A simple message that even we seasoned professionals should take to heart. The book also includes a foreword from Frank K. Ross, CPA, MBA, one of the founders and the first president of NABA and the current director for the Center for Accounting Education at Howard University.

The COVID-19 pandemic subjugated the world in just a few months. This novel coronavirus altered the lives of people around the world and brought on many challenges for students and professors alike. Faculty who conducted traditional in-person classes were forced to change to asynchronous learning using a learning management system (LMS) such as Canvas or Blackboard (BB) or synchronous learning using a video technology such as Zoom. Regardless of their choice, faculty had to learn to deliver course content in a totally different way.

As COVID-19 started to spread rapidly across New Jersey, colleges started to close last March. Upon returning from spring break, I used Zoom to welcome back the students saying, we will get through this class together. Most importantly, I also prioritized their health over school by emphasizing patience and understanding of each other. I told the students to call, text or email if they had any questions.

Here are some strategies that helped me during the early days of the pandemic and could assist CPAs and others who are teaching classes now:

• Provide detailed chapter outlines.
• Reintroduce all the support associated with the course material.
• Use Zoom or other video conferencing software for office hours.
• Create a discussion board on Blackboard where students can post questions.
• Require students to read emails at least once a day.

Lessons Learned

Using Zoom was different then standing in a classroom. I could not see if students were engaged or if they were even viewing their monitors, so I created poll questions that were built into the Zoom program. To keep it interesting, I created a magic word, where students needed to listen and then upload the magic word. Both activities helped monitor student attendance and engagement.

With virtual teaching, it’s important to make sure students are engaged and learning the course content. However, I am confident that one day we will return to the classroom.

This is the first in a three-part series describing the impact of blockchain and cryptoasset payment systems on the cannabis industry.

To date, 17 states and territories have legalized adult-use cannabis including New Jersey, whose residents voted in favor of legalization via a ballot initiative in the November 2020 election. Yet, due to the classification of cannabis as a Schedule 1 controlled substance under the Controlled Substances Act (CSA), a disparity exists between federal and state law which precludes cannabis companies from typical operations, including ease of banking and payment processing solutions. That said, any business or industry requires a fully functioning payment infrastructure to grow efficiently and successfully. Despite more political acceptance and a large growth potential for this market in New Jersey, cannabis organizations continue to be hamstrung by the slowly evolving payments landscape. 

Challenges Exist

Cash is a leading form of payment in the cannabis sector. Accepting cash is an option for these enterprises, but it presents a security issue, may limit customer sales and provides a logistical headache particularly when considering the banking limitations imposed on the industry. Cash may be convenient on a retail basis, but when it comes to business-to-business (B2B) transactions, the feasibility of a cash-basis environment quickly diminishes. Resorting to paper checks may be a solution, however these businesses must hurdle federal banks’ hesitation to service cannabis businesses. 

Similarly, opening a credit card may not be possible for a cannabis business or its employees for day-to-day purchases. This simply exacerbates many of the existing issues with B2B payments and deprives cannabis organizations of the benefits associated with digital solutions. 

The cannabis industry also faces an additional hurdle: the inability to accurately and consistently provide trade credit. Granting credit to suppliers and wholesalers is a common industry practice. An influx of U.S. medicinal market advocates emerged in the 1990s, culminating in the passage of the Compassionate Use Act of 1996 in California. Since then, 41 states and territories have enacted a legal medicinal market, most of which are highly regulated with extreme barriers to entry. Therefore, those with the benefit of early access to the market are at an immense advantage. 

Payment Options and Risks

There are several non-cash solutions that have entered the marketplace to serve the payment processing needs of cannabis businesses, but none of them are a perfect solution and each has its own risks. These include the following:

• Debit card payments should be able to integrate with the company’s point of sale (POS) system to rule out the risk of error in the sale process. The organization will also need to source a bank willing to service their needs, although this challenge exists regardless of payment processing solutions.
• ACH payments use third-party solutions to facilitate customer payments, which incurs fees on the organizational side. Similar to debit card payments, these solutions should be able to integrate with the POS to rule out risk of error in the sales process, which raises compliance and regulatory ambiguity. 
• Cashless ATM payments and credit cards via third party are other options. While some businesses have assumed the risk of accepting credit or cashless ATM transactions as a form of payment, perhaps using a third-party to process the payments as a perceived workaround, this is a risk to the business. If found to be acting out of compliance, merchants may refuse revenues the business has earned but which have not yet been deposited, and providers may refuse services in the future. State regulators may also probe into any non-compliance, which could risk the company’s license to operate.  

Framed in this context, typical operational and accounting challenges are exacerbated for cannabis businesses. But hope is on the horizon. With companies like Microsoft and EY backing blockchain and cryptocurrency solutions for payment processing and B2B payments, we know they are not a mere conceptual idea or fringe item. The potential for blockchain and cryptoassets to form the basis of a payment system is a realistic solution for practitioners and entrepreneurs to consider. 

Read part two in this series: How Blockchain and Cryptoasset Banking Developments Could Enhance the Cannabis Marketplace

New Jersey Senate Resolution No. 183, which proposes the constitutional amendment to legalize cannabis for personal, non-medical use by adults, has ambiguous language relating specifically to cannabis only being subject to the Sales and Use Tax Act or any other subsequent law of similar effect. This speculation was validated upon the passage of S21 on Dec. 17 which, as of the date of this writing, was passed in the Senate and Assembly and is sitting on Governor Murphy’s desk pending additional changes that he has requested of lawmakers. Regarding the taxation of cannabis purchases, S21 provides the imposition of several consumption-based taxes, such as the following:

• Sales Tax — The standard New Jersey sales tax rate will apply to the sale of cannabis but will not apply to the points in the supply chain that are subject to the local cannabis transfer and user tax, discussed below. The bill provides that at least 70 percent of tax revenues from retail sales shall be appropriated to investments in impact zones, or municipalities that have been most adversely affected by criminal cannabis enterprises (e.g., law enforcement activity, unemployment, poverty or any combination thereof).
• Local cannabis transfer tax and user tax — This optional tax will be imposed on a municipality-by-municipality basis and can take place at various points in the supply chain including cultivator to cultivator, establishment to establishment, retailer to consumer, or any combination thereof. The municipality has the discretion to set the rate, but it may not exceed 2 percent at the cultivation, manufacturer and retailer levels, and 1 percent at the wholesaler level. If enacted at each point in the supply chain, it can be discerned that this may amount to an additional 7-percent tax.
• Social justice excise tax — The Cannabis Regulatory Commission has the authority to exercise a social justice excise tax, which will apply to sales at the cultivation level to adult-use sales only. While this tax will take the place of the sales tax at the cultivation level, the amount of excise fee to be charged is determined based on an inverse relationship to the price of the product; meaning as the cost of cannabis goes down, the tax goes up. Unlike the sales, transfer and user taxes, these funds are to be exclusively earmarked for investing in social equity programs.
• Stamp fee — As part of the Cannabis Regulatory Commission’s responsibility to develop and maintain a system for tracking the product from seed to sale, the Legislature has called for the use of stamps to affix to the product. The stamps will be available for purchase to those at the various points in the supply chain — cultivators, manufacturers, wholesalers, distributors, retailers and delivery services — and could, in effect, be viewed as a tax. While the bill does not provide the price of the stamps, it states that the price “shall be reasonable and commensurate with the cost of producing the stamp.”

The language in S21 provides that New Jersey cannabis sales are not only subject to the standard sales and use tax, and that it is the intention to enact “other subsequent law of similar effect.” It is also clear that the goal of the Legislature is to ensure revenues generated from these sales will primarily be invested into communities that have been adversely affected by the historic prohibition on cannabis. 

On Dec. 21, 2020, Congress passed the latest COVID-19 relief bill which was subsequently signed into law by President Trump on Dec. 27, 2020. There are several components of the bill including economic impact payments of $600 for eligible individuals (barring an increase to $2,000 per individual as requested by President Trump) and an extension of the Pandemic Unemployment Assistance (PUA) supplement in the amount of $300 per week. However, many business leaders have been eagerly awaiting the clarification surrounding PPP loan forgiveness and news of an additional round of PPP funding available to some businesses.

First, for existing PPP borrowers, the new bill creates a simplified loan forgiveness application process for loans of $150,000 or less. The application will be one page in length and will request:

• The number of employees the borrower was able to retain as a result of the loan
• The amount of the loan spent on payroll costs
• The total amount of the loan

No additional schedules will be required to be submitted (although borrowers must retain records for four years in the event of a Small Business Administration (SBA) audit).

Another big gift that the new bill bears is the tax deductibility of business expenses paid with forgiven PPP loans. This reverses the IRS’ position (Rev. Rul 2020-27, November 2020) that a taxpayer could not deduct eligible expenses in its 2020 tax year if, at the end of the tax year, the taxpayer had reasonable expectations of loan forgiveness.

Secondly, a new round of PPP loans (creatively called PPP2) will be funded with the new bill. PPP2 funds are available to the following first-time qualified borrowers:

• Businesses with 500 or fewer employees
• Sole proprietors, independent contractors, self-employed and not for profits — including churches and some 501(c)(6) business leagues

PPP2 funds are also available to borrowers who have previously received PPP loans provided they:

• Have 300 or fewer employees, and
• Have already or will use the full amount of their first PPP loan, and
• Can demonstrate a 25-percent decline in gross revenue in any 2020 quarter compared with the same quarter in 2019

The PPP2 loan amounts will be 2.5 times average monthly payroll costs, to a maximum of $2 million. Certain hotels and restaurants can apply for up to 3.5 times their average monthly payroll costs. The costs eligible for loan forgiveness with the PPP2 are the same as before — payroll, rent, covered mortgage interest and utilities — but this time add:

• Personal protective equipment (PPE)
• Expenditures to suppliers that are essential to the business’ ongoing operations
• Software and cloud computing services
• Accounting services

The year 2020 was like no other, and as this year comes to an end, it is important that we all take stock of where we are and try to get a better handle on where we might be going. Setting aside the health, societal and economic effects of the COVID-19 pandemic — difficult as that may be — there was quite a bit of activity and development in the blockchain and cryptoasset sectors that is worth noting.

Let’s take a look at several of the big-picture trends and directions that CPAs should be keeping an eye on as the calendar flips to 2021:

Stablecoins are the new bitcoin. Even as bitcoin fluctuates and trades above its previous all-time high set in 2017, the stablecoin sector of the cryptocurrency space continues to grow and accelerate. In addition to being worth tens of billions of dollars on its own, stablecoins are also at the center of the very same efforts that drive headlines at organizations like Visa. It could be argued that stablecoins are now the driving force behind further investment and development versus simply watching bitcoin prices.

This is not even touching on the rise of central bank digital currencies (CBDC) under development across the globe and, in some cases, already in the marketplace. Not only are cryptocurrencies evolving, but so are the players involved.

Institutions are driving the trends. Cryptocurrencies may have originated as a method by which individuals could access a financial payments infrastructure and as part of a system that was disconnected from incumbent players, but that narrative has turned around completely. At the end of 2020, the institutions that have launched blockchain and/or crypto projects include J.P. Morgan, PayPal, Visa, Mastercard, BlackRock and Fidelity. It is still too early to tell what the influence of these large incumbents will be, but it certainly has increased the attention of investors and regulators.

Although not exactly capturing the idealized vision of early bitcoin developers, large institutions — with the people and capital brought to the conversation — are going to play a critical role moving forward.

Regulation is catching up. Dozens of blockchain- and cryptoasset-related bills were put forward for debate in 2020. While none were passed, this increased focus — on top of actions by regulators such as the SEC and IRS — seems to indicate that regulations are on the way. These are not normally greeted with cheers, but to continue encouraging wider adoption and utilization it seems reasonable that more clear-cut rules will be necessary.

In December, the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act was introduced for debate in Congress, which, according to some market participants, could lead to unnecessary costs, complexity and obstacles to further development. Regardless of the specific legislation or individuals involved, regulation and compliance are playing an increasingly larger role in these sectors.

As the calendar flips to 2021, be sure to join and remain engaged with the NJCPA Emerging Technologies Interest Group and subscribe to the NJCPA Tech Talk Podcast  to keep up to date on everything technology related.

On Nov. 5, 2020, the NJCPA released a statement proposing the State of New Jersey decouple from Internal Revenue Code Section 280E for certain small businesses. Section 280E disallows legal cannabis businesses from taking ordinary and necessary business deductions as an offset to taxable income and is a costly compliance burden for regulated cannabis companies. The National Cannabis Industry Association estimates that cannabis businesses are typically subject to effective tax rates of 70 percent or higher after considering 280E disallowed deductions.

The NJCPA’s original proposal, which was issued in 2019, called for complete decoupling from 280E. This was a non-starter for legislators due to the state’s budgetary concerns. The current proposal calls for the enactment of a revenue threshold to determine eligibility for decoupling on a business-by-business basis. The suggested revenue threshold is $25 million. This stems from IRC §448, which was thrust into relevance upon ratification of the Tax Cuts and Jobs Act (TCJA) in 2017. The lower threshold also gives a leg up to small businesses looking to enter New Jersey’s cannabis marketplace which could otherwise become dominated by large, already-established companies.

Further, the Society has recommended that the state rely on the complete provisions of §448 for the purpose of making the “small business” determination. Of most notable value, §448 calls for related entities to aggregate their gross receipts for the purpose of the revenue threshold and precludes businesses that meet the definition of a tax shelter from obtaining the relevant tax benefit.

Keep up to date on the progress of the Society’s proposal and other cannabis-related news at njcpa.org/cannabis. And NJCPA members are invited to join the Cannabis Interest Group at njcpa.org/groups.

CPAs advising small business clients have a lot to discuss in light of COVID-19. Businesses that have reduced headcount, cut costs and implemented other strategic changes will want to evaluate their business model ahead of full business reopenings.

To help small business owners assess their options moving forward, here is a checklist that CPAs can use to discuss with them:

• Prepare a revised budget.
• Form an idea of when they can bring back their employees and service offerings and when additional investments in the business are warranted.
• Reach out to customers and vendors to assess any issues that may have cropped up over the last two months.
• Make sure you have a cash cushion or access to liquidity over the next few months. We are operating in a changed business landscape, and we should be cautious in how we deploy capital and resources moving forward.

Challenges Abound

Few small businesses in the U.S. have been unscathed by the pandemic. In our inaugural survey of 250 small businesses in the U.S. conducted in September in conjunction with Sapio Research, more than 80 percent lost revenue because of the pandemic at about 30 percent on average. To make up for this loss, they cut spending: 37 percent either furloughed or laid off staff. Sadly, 9 percent closed up shop for good and 5 percent plan to do so in the coming months.

In addition, more than 60 percent of those surveyed applied for a Paycheck Protection Program (PPP) loan of which 26 percent received one (including 41 percent of those in companies with 100 to 499 employees and just 17 percent of companies with less than 25 employees). These numbers imply that the Federal government could have done a much better job at communicating the rules, which changed and relaxed over time. Some small businesses didn’t apply because they weren’t sure if they’d even be allowed to reopen or whether they could meet the Federal government’s criteria. Others didn’t get funding because of capacity issues on the side of the lender. Some lenders were so overwhelmed they couldn't even answer small business questions related to lending and the application, while others felt that they were not being compensated appropriately and that they spent more on administering the loans than they made.

More than 60 percent of survey respondents recently attempted to renew a line of credit, of which half said they received stricter application criteria and/or an increase in interest rates or fees. In some cases, banks are denying them credit because they took out a PPP loan. In one anecdote, a bank told a client that if they were so concerned about the future of their business that they applied for a PPP loan, how could the bank feel confident to lend to them further?

While not advisable, more than 20 percent of those surveyed tapped into their personal savings; 8 percent borrowed from their retirement accounts; and 7 percent took out a personal loan. This is startling for a number of reasons. Tapping one’s retirement account is likely a measure of last resort for small business owners and demonstrates just how dire the situation is for many that they’d risk their own retirement for a business that could potentially fail. 

As the coronavirus pandemic rages on, many people are not able or open to connecting to do business in person. Take it from someone who thrives on planning live events, that’s okay. See it as an opportunity to master your virtual game.

CPAs need to continue finding innovative ways to virtually connect with colleagues, targets and clients. Consider some new-age virtual connection approaches to keep your contacts interested. Would a cooking demo, bingo, grilling 101, digital fortune telling or photography be of interest for your audience? While some of these may require calling in an outside expert or moderator, the end result of producing a memorable event and continuing to build upon meaningful relationships will be worth the investment. 

If your specific meeting purpose is more about delivering content or training, you’ll want to ensure your audience is provided with a valuable experience and walks away ready to sign up for your next session.

Focus on these key areas to boost your virtual presentation or training:

• Platform. As selecting the best venue is an important part of live event planning, make this an equal priority when deciding which virtual platform is most suitable to accommodating an impactful delivery. Will you need to share slides? Have two-way video functionality? Have attendees speak? Consider all of these factors before going too deep into agenda planning.
• Communication. Communicating before and after your event are equally important. Send a “save the date” early on. Create an informative invitation that covers meeting objectives, speakers/presenters, a high-level attendee summary and program length. A day-of confirmation reiterating how to log in is recommended since your attendees are likely participating in multiple virtual engagements daily. At the end of the event, send attendees a thank you message including a summary of any event polls or Q&A and offer a chance for them to submit feedback through an event survey. And keep the line of communication flowing with those who couldn’t attend by sharing presentation slides, thought leadership or Q&A if appropriate. 
• Audience engagement. You’ve decided on a platform and sent out the invitation, now what? How are you going to keep them attentive through a two-hour CPE session or overview of your tax report? Integrate simple, yet powerful, elements such as music upon log on, opening videos, ice breakers, polling questions or whiteboarding exercises. When planning your content sequence, make it a priority to gain your audience’s attention early on and keep their engagement level up.
• Visual. Keep your slides simple, and be mindful of font size and color. Attendees may differ in their sight, hearing or cognitive abilities. Make sure your speaker lifts their computer camera to eye level. When possible, position the speaker in front of natural light for a clear picture, and ensure backgrounds are minimal to reduce distractions.
• Audio. Using a headset or ear bud connection can ensure clear audio and that nearby noise is not heard by attendees. Mute all attendees except the speaker. Remember, leading a virtual meeting can bring unforeseen technological challenges or hiccups. That’s why having a rehearsal with speakers on your event platform a few days prior is so important.

It’s best to continue to build upon virtual event best practices and refine ways to hit the virtual bullseye. Why? Because mastering virtual events can have a significant impact on long-term growth, facilitating important connections and bringing prospects back for more.

The American Institute of CPAs’ (AICPA) 2019 Trends report shows important insight: When students first start down the path of becoming an accounting professional, there’s pretty strong representation from people across many races. In fact, 44 percent of students enrolled in bachelor’s degree programs and 42 percent enrolled in master’s degrees programs are non-white. Yet, as we examine the different professional milestones in the accounting industry, a gap appears — and widens quickly. Only 30 percent of new graduate hires at CPA firms, 16 percent of all CPAs and nine percent of partners are non-white.

What Can Help

Increasing the number of diverse accounting professionals with Ph.D.s — individuals committed to teaching at colleges and universities — is one strategy that can have a major impact on what the profession looks like in the future. It gives minority students access to someone who has practiced in the field and understands the business community, who can help them make business world connections essential to landing the right job, and who can instill the importance of pursuing a CPA before they even enter the business world. These practical insights and experiences — beyond the lessons learned in the classroom — are invaluable to students just starting on their career path.

Dr. Helen Brown-Liburd, an auditing and accounting information systems professor at Rutgers University, has seen this first-hand. Since earning her Ph.D. in accounting from the University of Wisconsin-Madison, she has counseled and advised students of all races and backgrounds on career decisions and plans. According to Dr. Brown-Liburd, it’s not unusual for students who take her freshman-level course to reconnect two or three years later, preparing to enter the job market. These young professionals are desperately seeking guidance and insights about job opportunities and employers from people who look like them. And there just aren’t enough diverse professors in academia today to properly guide them.

In the last 15 years, the accounting field has made strides to increase diversity among faculty in colleges and universities across the country. In 1994, there were about 100 minority accounting professors with Ph.D.s. Today, there are about 388 professors with Ph.D.s representing African Americans, Latinx and Native Americans.

Getting a Ph.D.

While the prospects of getting a Ph.D. may seem daunting, many candidates are surprised by the requirements, support and benefits that go along with a Ph.D. program. These include the following:

• Most universities do not charge tuition and do provide stipends to business doctoral students. The level of stipends can vary between $15,000 and $40,000 per year.
• A master’s degree is not required to enter a business doctoral program.
• Accounting professionals have access to several organizations, including The PhD Project, that provide support during each phase of advanced degree pursuit.
• Academic salaries can be very attractive. View the latest AACSB salary data here.
• Experience and maturity gained in the corporate world is highly valued.

Minority accounting professionals can help continue this momentum by committing to return to the classroom to pursue a Ph.D., and, subsequently, support the next generation’s educational and professional pursuits. Of course, this is a big life decision and it needs to be taken seriously.

Just when you thought it was safe to proceed with applying for Paycheck Protection Program (PPP) loan forgiveness, the Small Business Administration (SBA) — which had been quiet since early August — changed the rules again. Specifically, the SBA issued another Interim Final Rule (IFR), effective as of Aug. 25, defining who is an owner-employee of a C corporation or S corporation, and whether certain non-payroll costs involving transactions with related parties are eligible for forgiveness.

These two areas have been of great concern to borrowers and their advisors, and we had hoped that guidance would be forthcoming sooner — especially since some borrowers may have already applied for forgiveness. Moreover, the new guidance may place some borrowers in jeopardy of not realizing full forgiveness of the loan since funds may have been used to pay for expenses now deemed to be ineligible for forgiveness. Finally, the new IFR has some internal inconsistency (discussed below).

Owner-Employee Determination

Previous guidance limited the amount of owner-employee compensation that can be included in payroll costs for determining the amount of PPP loan forgiveness. Unfortunately, that guidance never defined who is an owner-employee. The loan application defined owner to mean:

• a general partner;
• any limited partner owning 20 percent or more of the equity of a partnership; or
• any owner of 20 percent or more of a corporation or LLC. 

However, it was never clear if those definitions were applicable in the loan forgiveness computation.

The new guidance specifies that owner-employees with less than a 5-percent ownership stake in a C corporation or S corporation are exempt from the owner-employee compensation rules. The guidance says that such owner-employees have “no meaningful ability to influence decisions over how loan proceeds are allocated.”

Observation: The IFR is silent as to partners and members of LLCs. It would be inappropriate, given the guidance issued for corporations, to assume that the higher limits in the loan application should be used here. Until additional guidance is issued, ANY partner or member who is actively involved in the business of the partnership or LLC should be considered an owner-employee for purposes of the loan forgiveness calculation.

Nonpayroll Costs of Tenants, Subtenants or Home-Based Businesses

Certain costs incurred or paid during the covered period — rent, mortgage interest, utilities — are eligible for inclusion as forgivable expenses. The new guidance clarifies that, to the extent such costs are attributable to the occupancy of space by tenants or subtenants, a PPP borrower may not include them in its forgiveness application.

Even more limiting, a borrower who works out of his or her home may include only the share of covered expenses that were deductible on their 2019 tax return. A new business may use the amount expected to be deducted on their 2020 return.

Rent or Mortgage Payments to a Related Party

This has been a question of great concern to borrowers since the program was enacted over five months ago. Until now, the SBA and Treasury have been remarkably silent on the subject. 

Under the IFR, rent payments to a related party are eligible for loan forgiveness only if the lease and mortgage were entered into prior to Feb. 15, 2020, and only to the extent that the payment doesn’t exceed the amount of mortgage interest owed on the space being rented during the covered period. Furthermore, borrowers must provide lenders with mortgage interest documentation along with the loan forgiveness application.

Even more draconian, the IFR says that mortgage interest owed to a related party is not eligible for forgiveness on the theory that “PPP loans are intended to help businesses cover certain non-payroll obligations that are owed to third parties, not payments to a business’s owner that occur because of how the business is structured.”

The term “related party” is not defined in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) or any previous SBA guidance. The IFR defines related party for this purpose as “[a]ny ownership in common between the business and the property owner…” This is clearly a much stricter standard than the ownership relationship for owner-employees of C and S corporations in the same IFR.

And, while the IFR mentions only real property, since PPP allows forgiveness for both rent and mortgage interest for real and personal property, it is reasonable to assume that these new limitations apply to both.

Observation: While commentators have been quick to criticize the related-party guidance, it is not clear that it will be reversed. Therefore, borrowers who have already submitted loan forgiveness applications should review them to see if they should be revised. Other affected borrowers may wish to use the 24-week covered period to ensure that they have sufficient payroll costs to offset a shortfall in nonpayroll costs in achieving 100-percent forgiveness.

Comment: The SBA and Treasury have been issuing guidance or making public pronouncements throughout the PPP program, often changing previously issued guidance to the detriment of PPP borrowers. This IFR goes beyond changing the rules in midstream as it is likely too late for many borrowers to change the way they use loan funds.

This article was reprinted with permission of Friedman LLP and originally published on Friedmanllp.com.

As business becomes more global and regulated, the amount and complexity of knowledge required of accountants continues to increase. A growing emphasis is being placed on advisory and assurance services, which represents yet another level of complexity involving critical thinking, analytics and problem solving. It’s helpful for accounting students to become aware of the essentials in our profession so they can see that there is a method to this madness of detail. In academia, the notion of “threshold concepts” has gained popularity. These are the key ideas central to mastery of any subject, the understanding essential to all further growth.

Here are the threshold concepts for accounting:

1. Balance Sheet. Liabilities + equity = assets. The balance sheet must always be “in balance” — if assets increase, then either liabilities or equity must also increase. This is an amazingly simple idea. Yet, insight into any business often starts here.
2. We Are a Rules-Driven Profession. Accountants are governed by laws, rules, policies and procedures established by both government and industry organizations. There are three main organizations in the U.S. that establish and coordinate these rules and standards: the Financial Accounting Standards Board (FASB), the Internal Revenue Service (IRS) and the Securities and Exchange Commission (SEC).
3. Financial Statements. A complete set of financial statements includes an income statement, a statement of changes in equity, a balance sheet, a statement of cash flows and the notes to financial statements. The graduate accountant need not be an expert but should be conversant with each of these.
4. The Accounting Cycle. Financial information is prepared in a process called the accounting cycle. Various best practices, information systems and rules are employed in managing this process to identify key data, report and analyze documents, record accounting transactions and prepare financial statements.
5. Proper Measurement of Assets and Liabilities. Accounting for the true value of assets and liabilities involves judgment. Assets and liabilities are originally listed at the price paid (i.e., historical cost) and this value is often adjusted over time. These modifications are especially important for intangible assets like goodwill, exchange rate fluctuations if priced in foreign currency, or depreciation, the periodic write-off of fixed assets.
6. Other Essential Financial and Non-Financial Information. A sustainable business creates stakeholder value through the prudent management of interrelated forms of capital (financial, manufacturing, intellectual, human, social and natural). Some of this value is quantifiable, while for others it is intangible.
7. Legal Entities. Businesses must choose a legal structure to define the rights and responsibilities of business ownership, degree of control, legal liability and tax treatment. The four basic organizational legal structures are sole proprietorship, partnership, corporation and limited liability company. 
8. Governance, Risk and Compliance (GRC). Accounting graduates need at least basic knowledge of governance, risk management, compliance and internal controls. These interrelated areas of focus involve conformance to ethical and other established standards with a special focus on effective management of risks. The Committee of Sponsoring Organizations (COSO) developed a framework for risk management that is widely used in business.
9. Raising Money. Growing a business requires investment. There are three ways to finance a business (debt, equity and retained earnings) and each have pros and cons.
10. Information Systems. For accounting graduates, there is a need for a digital and data-driven mindset along with the use of analytics and data visualization to effectively convey information. This requires a solid knowledge of technology, data analytics and automation.
11. Setting Strategy. The purpose of a strategy is to help organizations set goals and plan for contingencies that could affect goal achievement. A sound strategy should be a living document that accounts for current market conditions, competitive environment, regulatory environment, and financial constraints and resources.
12. Ethics, Integrity and Professionalism. We cannot legislate ethics. In a healthy accounting culture, accounting professionals foster trust. In business, trust is the cornerstone of all relationships with customers, suppliers, employees, shareholders and the community.

If accounting graduates develop a firm foundation in the above concepts, they have a great chance to succeed in that first job. And once that critical threshold is crossed, mastery is just a matter of time. 

The idea of a public blockchain might not sound like something terribly relevant for commercial clients or audit engagements. And would an organization ever want to be affiliated with a public blockchain where — as the name suggests — data linked to the organization is on a public ledger? Even with encryption and security at the heart of every blockchain, such a situation can give even the most prepared organization cause for pause. But though a public blockchain that is permissioned might sound like a paradox or an abstract idea, if one digs deeper, the applications for different iterations of public blockchains become clearer.

A public-permissioned blockchain might operate something like the following: Information published by the organization, which may include both financial and non-financial data, needs to be viewable and available to the wider public. That said, the organization would like to maintain control of the creation, reviewing and updating of the information that is published and subsequently widely available to the marketplace. In other words, the organization needs the data to be accessible to anyone who is interested in reviewing it, while simultaneously maintaining custody and control over that data. 

Accountants can, and should, play an important role as assurance provider by having limited or focused access to pertinent information, as well as testing the controls over how this data is managed.

Examples of organizations that might find such an arrangement useful and beneficial to the business include, but are not limited, to hospitals and other health care providers, colleges and universities, nonprofit organizations and governmental agencies. The nonprofit sector is the third-largest segment of the workforce in the United States, only behind manufacturing and retail. In addition, the charitable and nonprofit sector contributed over $1 trillion to the U.S. economy in 2019 — a tremendous potential market for blockchain implementation.    

Public blockchains, in and of themselves, might not be particularly well suited for every business, but that does not mean that public blockchains have no role to play. It might be easy to dismiss the business applications of a public blockchain simply due to its name, but there is a broad appeal for different types of public blockchains. Those practitioners and firms willing to continuously educate themselves and their clients on the possibilities of public blockchains will benefit now and going forward.

Accounting professionals looking for more information on blockchain, cryptoassets and robotic process automation should check out NJCPA's Emerging Technologies Conference webcast on Oct. 27. 

Since Bitcoin’s beginning in 2009, its value (1 BTC) relative to the U.S. dollar (USD) has fluctuated from near zero to $19,650 in December of 2017. Today, the price stands at 1 BTC to $9,237 USD, and the trading range over the last 365 days has been between $11,540 and $5,342. But though buying and selling Bitcoin is a speculative endeavor, it was the first application developed utilizing blockchain technology, which will continue to be the foundational platform for the development of digital transaction processing. Blockchain’s benefits, including security, accuracy, transparency, timeliness, cost savings and traceability, ensure a long future.

Now, enter a new category of cryptocurrency that pegs its value to a collateralized reserve asset —Stablecoin. In essence, it has all the benefits of a blockchain-based currency, but its value can be pegged to the U.S. dollar! If you conduct international financial activities, the reserve asset could be the applicable countries’ fiat currency. This effectively allows parties to hedge foreign currency risk simultaneously with the execution of each transaction. Stablecoin reserve assets could be established based on commodities with volatile prices. Gold, copper or oil Stablecoins would allow trading partners to hedge price risk as transactions are conducted.

Emerging Applications

A hypothetical development of a blockchain-based Stablecoin could involve the following: An entrepreneur creates a new company, Masvis, Inc. Their business plan is to meld the convenience of a bank’s debit card with the affinity rewards programs offered by hundreds of participating businesses that focus on small, recurring transactions. Advantages to participating businesses will be the significant reduction of paying intermediary (credit card) fees and simplifying the administration of customer loyalty programs. Consumers will no longer need to carry inconvenient loyalty cards or use individual apps for completing everyday transactions. Masvis can take a fractional percentage of transactions while attracting a large base of banking customers who seek to simplify their lives.

JP Morgan, meanwhile, has become the first U.S. bank to launch a digital token (JPM Coin) backed by fiat currency. This closed system allows payment and receipt of digital tokens between existing institutional clients. While tokens must be collateralized with U.S. dollars held in a JP Morgan account, users of this Stablecoin currency receive many of the benefits inherent in a blockchain-based system. These include the following:

• Reduced transaction fees
• Instantaneous transaction execution
• A more secure environment for executing transactions
• Better traceability

It seems inevitable that as JPM Coin is further developed, it will become more widely used by additional customers and across additional banking activities. And as Stablecoin continues to evolve, a paraphrase from Leon Trotsky’s prediction for the Mensheviks during the Russian Revolution is applicable — one day Bitcoin may be relegated to the dustbin of antiquated technologies. But for now, it’s intriguing us.

Last month, I hosted an IssuesWatch Live webcast on the short- and long-term impact of the coronavirus pandemic on the nation’s and New Jersey’s economies. The response to this broadcast was overwhelming, with many members asking us to report more on economic news (you can watch a recording of the broadcast at here).

During the webcast, I interviewed two prominent economists: Daniel Bachman from Deloitte, who addressed national economics, and Jim Hughes from Rutgers University, who spoke on New Jersey’s economy. Jim recently passed along to me a report that he and his colleagues released, Coronavirus Economic Pivot: Precipitous Fall to Recovery Crawl?, which focuses on both New Jersey and the nation. Here are a few highlights from this insightful report:

• The “Great Coronavirus-Driven Contraction,” which began in February, was our nation’s first deliberately induced recession.
• The “Cruelest Month” — April 2020 — has little or no historic parallel and saw a loss of 20.7 million jobs. The overall job loss from February through April wiped out 97 percent of the employment gains from the preceding 10 years!
• As parts of the economy began reopening in May, slightly more than 10 percent of the lost jobs were recovered.
• If the timeframe of the full employment recovery from the Great Recession is repeated for the aftermath of the Great Contraction, New Jersey would not fully recover its job losses until January 2029. That’s sobering! However, a mid-decade recovery of all job losses is certainly a possibility.

You can read the full report here.

Later this month I’m going to be hosting another IssuesWatch broadcast that I think you’ll find insightful and useful. It’s going to cover the dire impact of the coronavirus pandemic on the New Jersey’s fiscal condition and the budget hole of up to $10 billion that it’s caused. I’ll be interviewing Senator Steve Oroho, who is one of the most knowledgeable legislators on fiscal issues, and NJ Spotlight reporter John Reitmeyer, who is one of the most knowledgeable journalists on the issue. The broadcast will air on July 8, July 13 and July 17 and is free for NJCPA members.

The leap from being a college accounting student to a productive member of the workforce is a significant one; in fact, for most of us it is the moment we have been training for our whole lives. With this jump often comes a mixture of emotions such as the fear of the unknown and excitement for a new chapter of life (and of course a bigger paycheck!). Here are some basic tips I’ve learned to help make this leap’s landing as smooth as possible:

Ask Questions

Do not be afraid to ask questions. By asking questions, you show your managers that you care about increasing your knowledge base and better developing your skillset. Questions help to create conversations and discussions, which in turn allow you to learn from those with more experience and knowledge to share. If you ask a question and still feel lost after the response you received, ask for more clarification — we have all been there!

Communicate

Communicate, communicate, communicate! There is no greater skill than that of communication — especially as someone who is new to the workforce. Although it may sometimes feel uncomfortable, you will find that the majority of challenges or dilemmas you face could most likely have been avoided if there was more communication. By creating a habit of communicating realistic timelines and project updates, you are setting you and your team up for success.

Embrace Your New Environment/Workplace

Experience and appreciate all that your new workplace has to offer! Get to know your new colleagues, eat lunch in the kitchen, and go to firm/work sponsored events. The more you enjoy the work you do and the company you work for, the more productive a team member you will become.

Enjoy this new and exciting journey you are beginning and welcome all of the lessons and growing pains it has to offer. Before you know it, you will be the person new members of your team come to for direction and guidance.

Soft skills refer to non-specialized qualities that enable professionals to lead and work well with others. They’re a lot harder to measure than technical abilities, and a list of all of them can get very long. That being said, different situations call for different soft skills. These are four that CPAs and other accounting professionals need to rely on during this particularly challenging time in history:

1. Communication

With many people working from home, communication by and within organizations is more important than ever. Computer programs like Slack and Skype have become indispensable for facilitating collaboration between employers and employees. CPAs can also take advantage of these technologies to communicate with clients, given that many businesses are currently struggling with their finances.

Overseeing daily operations from a distance can be extremely challenging from a leader’s standpoint. You can’t physically supervise your employees, which might lead to a dip in productivity. Each person’s working environment is also out of the manager’s control, and there are far more distractions at home than in an office. It’s your job to keep communication lines open to keep employees and other stakeholders informed on all aspects of the business and to stay connected with each other. Host regular video or call conferences for your team to update each other on your work progress or even informal check-ups to maintain engagement.

2. Empathy

Empathy is your ability to put yourself in someone else’s shoes. That isn’t particularly difficult given that we’re all waiting out the same pandemic. However, people react differently to a crisis. Your employees might be experiencing varying levels of anxiety, which is understandable during these unprecedented times.

For example, you might have an employee with children at home. They’re probably having to homeschool their kids on top of their work responsibilities. The added stress can seep into the quality of their work. If that’s the case, extend your empathy by decreasing their workload or adjusting their schedule to best fit their needs. This means that your response is not going to be the same for everyone. Empathy is a combination of listening and accommodating employees’ unique situations.

3. Resilience

Economic experts predict that the country is entering a recession, and everyone will be affected. That could spell hard times for businesses, including accounting firms, with Marcus explaining that employment hours may be reduced, which can lead to lower pay. Unemployment and widespread layoffs are also some of the consequences of a company’s cost-cutting solutions, which will only get worse if a recession does happen.

It’s easy to think that businesses that need financial advice mean more clients for firms. But according to a small survey of influential CPAs cited by Nevada Today, one firm has had to adjust their client fees to accommodate struggling businesses. Firms are taking on more work while getting paid less. This trend will likely continue for the foreseeable future as businesses all over the country recover from the economic downturn.

4. Adaptability

Accountants have been quick to adjust to stricter regulations. For instance, most firms prioritized their employees’ safety by immediately implementing remote work. Internships were canceled, meetings were moved to the virtual space and services are now being offered online.

A recent interview with CPAs by Accounting Today showed how these new models are likely to continue in the future. Flexible work, automation, online learning to maintain technical skills and other emergent technologies will pave the way for the industry. The ability to adjust quickly to evolving conditions is a mark of a great leader. This crisis is no different. It just means you need to make decisions on the fly and find creative ways to solve new problems as they come.

Cryptocurrencies and blockchain have been discussed in thousands of venues and mediums, but a new entrant to the conversation — a central bank digital currency (CBDC) —  might have substantial implications for accounting, blockchain, and privacy/cybersecurity considerations. This would seem to represent the best of both worlds from a crypto accounting perspective. On the one hand, a CBDC brings to the table the encryption, traceability, and data integrity that lie at the core of every blockchain application. On the other hand, the support and back stopping of a governmental entity will help assuage concerns over price volatility as well as (hopefully) limiting criminal usage.

Setting aside those issues for now, let’s take a look at some of the specific accounting and reporting issues that might arise as development accelerates. These include the following:

1. Will the rise of CBDCs finally lead to authoritative guidance for blockchain and crypto accounting? The Public Company Accounting Oversight Board (PCAOB) has weighed in on May 20 with a (non-authoritative) document, which combined with previous documents and pronouncements, is accelerating the conversation. Launching and using CBDC will only accelerate these conversations, and the profession will benefit from it. Institutions and individuals are adopting crypto, in various forms, and the profession needs to have guidance and best practices to handle the accounting, reporting, and disclosure issues.
2. How are the privacy rights of individuals and businesses going to be protected? This might strike some practitioners as a non-accounting consideration, but with cybersecurity increasingly part of business strategy conversations, privacy issues should also receive robust analysis. If CBDCs are managed by a central government or centralized authority, this will inevitably lead to increased questions around consumer privacy and risk management best practices for the profession. Additionally, this will most likely lead to an expansion of the risk assessment processes connected to how data is managed. Hacks and breaches will happen, and practitioners need to continuously update toolkits and best practices to reflect new potential weak points.
3. Will the implementation of virtual currencies lead to two-tiered valuation issues? Odd as this might sound, practitioners are going to need to at least consider this question, both for U.S. clients and for clients located overseas. Sticking to the USD for simplicity, the value of a crypto dollar would, in theory, be equivalent to that of a physical currency. That said, that may not be true of every CBDC that is introduced, especially if other clauses, caveats, and trends emerge. Specifically, what happens if only some institutions or individuals are mandated to use a CBDC, for example, as foreign entities or specific people? Even the implication of ulterior motives could lead to a breakdown of valuation until CBDCs become the default option.

The idea of a central bank digital currency should not be thought of as radical, but rather a logical evolution of the wider blockchain and crypto dialogue. Ensuring that accounting standards, cybersecurity and privacy considerations remain in place amid the growth of cryptocurrencies is both a challenge and an opportunity for the profession. Blockchain and crypto are here to stay, and CPAs are in a good spot to deliver advice and value to clients, both large and small, moving forward.

The current COVID-19 pandemic has upset the work environment for most organizations — office work has shifted to remote form and in-person meetings are all made by appointments to virtually connect. This move to conduct business in the cloud requires sharing information with staff all over the place, and others in a convenient, efficient, and safe way. Behind the scenes working in the cloud or cloud computing requires platforms, applications, and portals.

What’s the best way to work in the cloud? Here are three ways:

• Platform as a Service (PaaS) connects applications and data bases with files. It is a cloud platform that houses services to develop applications and is accessed through a portal.
• Software as a Service (SaaS) allows your organization access to cloud-based applications over the internet. A cloud portal is the doorway to the cloud platform. Public portals are operated by subscribing to software which allows users to access the cloud platform. 
• Infrastructure as a Service (IaaS) gives access to networks, computers, and data storage. The host provider manages the hardware while you manage your own applications and operating systems.

Know the Risks

Although convenient and efficient, cloud computing has security risks. These risks include economic loss, personal suffering, and other problems upon a service breach. It is a challenge to design and operate cloud systems or adopt a software system in the cloud. Data collection, processing, storing, and the disposing of information policies needs to be updated with processes that apply to your cloud technology. Privacy needs and complicated laws affect organizations differently. However, a strong privacy program including written policies and awareness training, can help manage problems. 

That said, data privacy, and protection are not synonymous. Data privacy in the cloud is a legal matter disclosing what data you are collecting and what you plan on using it for. Data protection in the cloud is a technical matter about safeguarding data against unauthorized access. You cannot ensure data privacy unless you give users more control of the data you collect. If data is not protected, its privacy cannot be guaranteed.  On the other hand, data can be protected but may not necessarily be kept private.

In order to address the challenges of protecting data and privacy in the cloud, you can perform a privacy risk assessment. A privacy risk assessment figures out your organization’s level of acceptable risk and is like any other risk assessment which includes a process for identifying and evaluating risks. However, a privacy risk assessment is unique because there are no resources providing guidance when it comes to protecting privacy.  It is also hard to intermingle a privacy risk assessment with an organization’s general risk assessment.

A way to perform a privacy risk assessment is to informally involve users by questioning concerns they have about their data. Create transparent policies and do not gather more information than you need. Policies should address user concerns about how you are using and protecting their data. But keep in mind as legal requirements expand and new breaches occur, policies may need to be modified or added.