• Procurement in state and local governments has evolved into a strategic function that safeguards compliance, mitigates risk, and enhances public trust.

• Best practices include modernizing systems, expanding vendor diversity, prioritizing value over cost, and strengthening workforce development.

• CFOs and procurement officers must embrace strategy, innovation, and transparency to deliver sustainable, long-term value to taxpayers.

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In today’s complex fiscal environment, procurement in state and local governments must serve not only as a mechanism for acquiring goods and services but also as a strategic function that safeguards compliance, mitigates risk, promotes access, and delivers value to taxpayers. This article discusses what CFOs and procurement officers need to consider related to best practices, risk, and the evolving role of technology in state and local government procurement. For years, the procurement officer was seen as the organization’s gatekeeper, but their role is much more important than that — they are an organization’s risk manager, compliance protector, and strategic enabler.

Best Practices in Procurement for State and Local Governments

Procurement today is expected to balance regulatory compliance, fiscal discipline, access, and innovation. The following best practices reflect the most current standards across jurisdictions: 

• Strengthen Strategic Procurement Planning
• Modernize and Digitize Procurement Processes
• Uphold Regulatory and Grant Compliance
• Expand Vendor Diversity and Local Economic Development
• Focus on Value, Not Just Lowest Price
• Strengthen Risk Management and Contractor Oversight
• Prioritize Sustainability and Resiliency
• Enhance Transparency and Public Trust
• Invest in Workforce Development
• Adapt to Emergency and Cooperative Purchasing Needs

The following sections provide insight into how state and local governments can effectively implement these best practices.

Strengthen Strategic Procurement Planning

By strengthening strategic procurement planning, governments can align activities with broader organizational goals. This consists of:

• Centralizing or standardizing procurement policies across departments, where possible.
• Developing multi-year procurement plans aligned with budget forecasts, strategic initiatives, and grant cycles.
• Using category management (grouping similar goods/services) to leverage buying power and manage vendor performance across agencies.

Example: A city establishes a centralized IT procurement team to reduce redundant purchases across departments and better negotiate volume discounts.

Modernize and Digitize Procurement Processes

Modernizing and digitizing procurement processes streamlines operations and enhances efficiency. This consists of:

• Adopting eProcurement platforms for solicitation, bidding, contracting, and vendor communication.
• Using contract management systems to automate renewals, monitor performance, and enforce compliance.
• Verifying systems can handle hybrid work environments and providing real-time reporting on procurement activity.

Example: A county implements an eProcurement platform to manage RFPs, vendor scoring, and award transparency.

Uphold Regulatory and Grant Compliance

Upholding regulatory and grant compliance safeguards against legal pitfalls and improves  funding opportunities. This consists of:

• Training procurement staff regularly on Uniform Guidance (2 CFR 200) and other federal and state-specific requirements.
• Documenting full and open competition processes meticulously, especially when using federal grant funding.
• Preparing procurement files to withstand audits or public information requests (e.g., bids, scoring, award justifications).

Note: Federal programs often have strict procurement and documentation standards that are actively audited (e.g., EPA’s Greenhouse Gas Reduction Fund, FEMA Disaster Recovery Funds).

Expand Vendor Diversity and Local Economic Development

Expanding vendor diversity fosters local economic development and promotes access. This consists of:

• Implementing or strengthening small, minority-owned, and women-owned business engagement programs.
• Increasing the pool of potential vendors to allow broader participation.
• Using targeted outreach, training, and pre-bid meetings for underrepresented businesses.

Example: A city revises its scoring criteria for evaluating RFPs to award points based on vendor diversity criteria.

Focus on Value, Not Just Lowest Price

When appropriate, focusing on value rather than just the lowest price provides quality and long-term benefits. This consists of:

• Using best value procurement (BVP) approaches rather than defaulting to lowest bidder, which means prioritizing the overall value of a product or service and considering factors beyond just price. It involves evaluating different options based on criteria like quality, knowledge and experience, performance, and total cost of ownership, rather than solely on the lowest bid. This approach aims to increase the benefits and decrease risks associated with a procurement decision, establishing a long-term, sustainable outcome. 
• Evaluating proposals based on total cost of ownership, vendor qualifications, risk, and long-term value.
• Implementing weighted evaluation criteria with clear documentation.

Example: A school district awards an IT managed services contract after evaluating a host of factors, including service quality, scalability, and risk mitigation plans – not just cost. 

Key Principles of Best Value Procurement (BVP)

BVP is a procurement method that focuses on achieving the best overall value for a project or purchase, rather than simply selecting the lowest bid. The approach emphasizes quality, performance, and cost-effectiveness, taking into account factors such as:

1. Quality and Performance – evaluating the quality and performance of goods or services offered by vendors to make sure they meet the required standards and specifications.
2. Cost-Effectiveness – considering the total cost of ownership, including initial costs, maintenance, operation, and disposal costs, rather than just the upfront price.
3. Vendor Experience and Capability – assessing the experience, knowledge, and capability of vendors, including their history and reliability to deliver the project successfully. 
4. Risk Management – identifying and mitigating potential risks associated with the procurement process and the vendor’s ability to manage those risks effectively.
5. Innovation and Value-Added Services – encouraging vendors to offer innovative solutions and additional services that can enhance the value of the procurement.

BVP aims to make sure the procurement process results in the best possible outcome for the organization, balancing cost with quality and performance.

Strengthen Risk Management and Contractor Oversight

Strengthening risk management and contractor oversight can mitigate potential issues and enhance project success. This consists of:

• Conducting pre-award risk assessments on vendors (especially new or small firms).
• Building performance milestones and liquidated damages clauses into contracts, where appropriate.
• Increasing vendor monitoring for large projects (e.g., construction, IT systems).

Note: Many governments are now tying payment schedules to verified deliverables instead of time periods.

Prioritize Sustainability and Resiliency

Prioritizing sustainability and resiliency address environmental concerns and prepares for future challenges. This consists of:

• Including sustainability criteria in procurements, where practical.
• Sourcing vendors with green certifications (e.g., Energy Star, LEED).
• Considering supply chain resiliency and utilizing vendors with varied sourcing and continuity plans.

Example: A city requires fleet vehicle purchases that meet minimum hybrid or EV standards.

Enhance Transparency and Public Trust

Enhancing transparency builds public trust and accountability. This consists of:

• Publicly posting online the procurement opportunities, bid tabulations, and award decisions.
• Establish clear conflict-of-interest disclosures for procurement officials and evaluators.
• Respond proactively to public records requests.

Example: A state posts all RFP responses and scoring matrices within 10 days of contract awards.

Invest in Workforce Development

Investing in workforce development equips staff with the skills needed for evolving procurement demands. This consists of:

• Requiring continuing education and certifications (e.g., Certified Public Procurement Officer (CPPO), National Institute of Government Purchasing – Certified Purchasing Professional (NIGP-CPP)).
• Creating succession plans for procurement leadership and technical staff.
• Training on new risks like cybersecurity clauses, AI tools, and federal compliance changes.

Note: Workforce shortages are a significant risk and developing internal capacity is critical.

Adapt to Emergency and Cooperative Purchasing Needs

Adapting to emergency and cooperative purchasing needs allows for responsiveness and collaboration in times of crisis. This consists of:

• Creating pre-approved emergency procurement policies for disasters (e.g., waiving competitive bids temporarily with documentation).
• Leveraging cooperative purchasing agreements (e.g., Sourcewell, NASPO ValuePoint) to expedite access to competitively bid contracts.

Example: After a disaster, a county uses pre-existing cooperative contracts to quickly procure generators and emergency equipment.

Key Challenges Driving These Best Practices

1. Federal grant funding expansion with strict compliance.
2. Public pressure for transparency following high-profile procurement fraud or mismanagement cases.
3. Cybersecurity and data privacy risks in vendor selection, inflation, and supply chain instability complicating procurement timelines and budgets.
4. Sustainability goals expand the strategic role of procurement.

Modern procurement is no longer a back-office function—it is a critical component of risk management, public accountability, and strategic execution. CFOs and procurement officers must actively engage in policy design, system upgrades, and workforce development to make sure procurement delivers both value and integrity.

How MGO Can Help

At MGO, we understand the growing complexities facing state and local government procurement leaders. Our SLG team provides tailored services that help your organization modernize its procurement processes, strengthen compliance, expand vendor diversity, and mitigate risk. From strategic planning and technology implementation to workforce training and audit readiness, we work with governments to align procurement practices with broader organizational goals. With MGO’s guidance, procurement can become not just a purchasing function, but a driver of trust, accountability, and long-term value for the communities you serve. Contact us to learn more.

Written by Lee Klumpp. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com

The post Enhancing Procurement Practices: Strategic Considerations and Best Practices for State and Local Governments appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Tariff-driven business model changes may affect P.L. 86-272 protections and trigger throwback exposure.

• Throwback and throw-out rules can tax income in original states when destination states don’t impose income tax.

• Reshoring strategies tied to tariffs should be reviewed through a tax lens to manage nexus and apportionment exposure.

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Tariff uncertainty continues to challenge manufacturers and distributors. In response, many businesses are making fast, sometimes reactive decisions: shifting fulfillment strategies, diversifying suppliers, and reworking customer contracts. While these steps are often necessary to protect margin, they can have unexpected ripple effects — particularly when it comes to state income tax exposure.

As operations evolve, companies may unknowingly trigger state-level tax rules — including throwback and throw-out provisions — that can increase tax burdens in their home states. These rules are rarely top of mind during operational planning, but, in today’s climate, they should be.

What You Think You Know: Public Law 86-272 Protections

Public Law 86-272 (P.L. 86-272) has long been a helpful shield. It protects companies from state income taxes when their only activity in each state is asking for orders for tangible personal property, and when orders are approved and fulfilled from outside that state.

But P.L. 86-272 isn’t a blanket exemption — and it doesn’t prevent other states from taxing that same income through alternative mechanisms. That’s where throwback and throw-out rules come in.

In response to evolving e-commerce practices and the Multistate Tax Commission (MTC’s) revised Statement of Information on P.L. 86-272, several states have taken steps to limit the scope of this federal protection:

• California: Issued Technical Advice Memorandum 2022-01, aligning closely with the MTC’s guidance. The memorandum specifies that certain internet-based activities, such as post-sale help via electronic chat or email, may exceed the protections of P.L. 86-272.

• New York: Released draft regulations incorporating the MTC’s examples, showing that interactive internet activities could lose P.L. 86-272 immunity. The regulations are currently in draft form and subject to change.

• New Jersey: Announced a policy change to evaluate P.L. 86-272 protection on an entity-by-entity basis within combined groups, potentially altering the tax obligations of group members.

• Minnesota: Circulated a draft revenue notice in April 2023 proposing adoption of the MTC’s revised guidance, signaling a move towards stricter interpretations.

Businesses using these states should closely examine their internet-based activities to assess potential tax implications under the updated interpretations of P.L. 86-272.

Throwback and Throw-Out Rules: Why They Matter

In states that enforce these rules, untaxed sales into other states can be “thrown back” to the state of origin. Here’s how:

• Throwback rules require that if you’re not taxed on a sale in the destination state (for example, due to P.L. 86-272), the income from that sale must be reported in the state where the goods were shipped from.

• Throw-out rules remove untaxed sales from the apportionment formula, which can artificially inflate your tax burden in the states where you do pay.

These rules can significantly shift your tax liability — especially if you’re shipping into multiple states where you have no nexus but generate substantial sales volume.

In a recent engagement for a new client, we found that the location of the client’s warehouse was the largest factor in planning when potential throwback was considered. If the client relocated operations from a throwback state to a non-throwback state, the impact on the sales factor in the apportionment formula was neutralized. Setting up operations in a state with throwback led to an inflated sales factor in the apportionment formula and an unexpected state tax liability.

Having conversations before transactions is extremely valuable as proper planning can lead to potential tax savings.

Why Tariff Responses Are Quietly Changing Your Tax Profile

Tariffs aren’t just a global trade issue, they’re reshaping day-to-day decisions inside U.S. companies. For many manufacturers and distributors, the last year has been a series of rapid adjustments: rethinking where goods come from, how they’re delivered, and how quickly orders get to customers.

You may have shifted fulfillment closer to major markets to cut lead times. Maybe you’ve swapped offshore suppliers to sidestep new tariffs. Some companies have moved toward direct-to-consumer models, while others have quietly changed how customer orders are approved or supported.

Individually, these decisions may feel operational. But taken together, they have a real impact on how income is sourced and taxed across states. They can shift your exposure under throwback or throw-out rules — especially if your sales are increasing in states where you don’t currently have income tax obligations.

In short, what begins as a supply chain fix can evolve into a state tax issue — often without anyone realizing it until filing time.

Reshoring and Tax Considerations Go Hand in Hand

For many companies, reshoring has become a practical response to ongoing tariff uncertainty. Bringing operations back to the U.S. can reduce exposure to trade risk and improve supply chain control — but it also reshapes how and where your business is taxed at the state level.

Operational changes like relocation or restructuring can result in:

• Nexus creation in new states

• A shift in which sales are protected by P.L. 86-272

• Adjustments to your apportionment formula

• New reporting obligations, credits, or incentive opportunities

While every business has unique goals, involving tax professionals early in reshoring or fulfillment planning can help find potential exposure or compliance gaps — without delaying execution.

For example, when companies shift operations to avoid tariffs by opening new distribution hubs or adjusting shipping routes, the tax impact extends beyond coordination. These changes may influence how income is apportioned and whether certain sales fall under throwback or throw-out rules.

Tax professionals can support this process by:

• Modeling apportionment changes: Projecting how operational shifts affect sales factor weighting

• Evaluating throwback exposure: Estimating tax impacts from untaxed destination-state sales

• Finding new nexus points: Highlighting where physical or economic presence may trigger new filings

These insights help companies anticipate tax consequences tied to operational agility (without crossing into trade policy or legal advice). It’s about making sure strategic decisions don’t lead to unintended risk at the state level.

What You Can Do

Protecting your company from unexpected throwback exposure doesn’t require slowing down — it just takes coordination. Here are three practical steps to take now:

1. Evaluate protected sales: Identify where you’re relying on P.L. 86-272 and whether the destination states impose income tax.

2. Map shipping and fulfillment models: Understand where goods originate and whether origin states apply throwback rules.

3. Review apportionment exposure: Determine how throw-out rules or untaxed sales may affect your overall income distribution.

Tax May Not Be the Driver — But It’s in the Passenger Seat

You’re adapting to economic pressure with speed and creativity. But every supply chain move or sourcing shift may have tax implications your business didn’t see coming.

P.L. 86-272 may protect your business in some states, but it doesn’t stop others from taxing that income using throwback or throw-out rules. And when tariff-driven decisions lead to reshoring, the tax impact becomes even more layered.

Understanding how these state rules apply can keep your strategy intact and your risk exposure in check.

Where Tax Strategy Meets Business Agility

MGO is a national tax, audit, and consulting firm serving growth-minded organizations across manufacturing, distribution, and consumer sectors. Our State and Local Tax (SALT) team works with companies navigating complex operational shifts, helping you align your tax strategy with business agility.

From throwback analysis to nexus reviews, we bring practical insight that supports fast-moving decisions and long-term resilience. Talk to us today about how to keep your operations moving — and your tax strategy aligned.

The post How Tariff Changes Could Affect Your State Tax Profile appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• The new tax bill introduces a graded holding period for QSBS, with gain exclusions based on how long shares are held.

• The fixed gain exclusion under Section 1202 increases from $10 million to $15 million for qualifying shares issued after July 4, 2025.

• The asset cap for calculating the 10X adjusted basis exclusion rises from $50 million to $75 million, expanding potential gain exclusions for shareholders.

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The One Big Beautiful Bill Act, signed into law July 4, 2025, makes three significant changes to Section 1202. These changes affect the five-year holding period required and the amounts of gain exclusion under the law.

Here are answers to frequently asked questions about these changes:

How was the holding period requirement revised?

Under prior law — and for qualified small business stock (QSBS) shares prior to the Act taxpayers must hold QSBS shares for five years from the date of issue for any gain exclusion which is 100%.

For QSBS shares issued after the date of the new law, there is a so-called “graded” holding period. Thus, if you hold shares for three years from the date of issue, the gain exclusion is 50%. If four years from the date of issue, the gain exclusion is 75%. If shares are held for five years, which is consistent with prior law, the gain exclusion is the longstanding 100%.

This change affects both the holding period and the amount of gain excluded depending on the applicable holding period achieved.

Has the gain exclusion increased under the new law?

Yes, Section 1202 gain exclusion is based upon the greater of (a) $10 million (the “fixed” amount) or (b) 10 times adjusted basis in the qualifying QSBS shares (the “10X” amount). The new law makes changes to both elements of this gain exclusion calculation.

What is the change to the $10 million exclusion?

For qualifying shares issued after the enactment date of the new law, the “fixed” gain exclusion amount is now $15 million. Further, this $15 million amount is indexed for inflation for years beginning after 2026.

What is the change to the 10X adjusted basis gain exclusion?

The 10X exclusion provision involves the fair market value of the QSBS corporation’s assets at the time it issues qualifying shares. If the assets at this date are valued at, hypothetically, $27 million, then the 10X adjusted basis element yields an aggregate gain exclusion of $270 million for all shareholders.

Existing law was based on an asset cap of $50 million. The new law increases that cap to $75 million. Thus, hypothetically, if a corporation had an asset valuation upon conversion after the passage of the new law of $69 million, the aggregate gain exclusion for shareholders would be $690 million. This example reflects an increase in total gain exclusion by $190M over the prior maximum exclusion of $500M.

Like the $15 million element of gain exclusion, this asset provision is also indexed for inflation for years after 2026.

What New Section 1202 Changes Mean for You

These increases in gain exclusion expand the number of eligible entities that may consider a 1202 conversion. The increases also offer a significant expansion of the basic gain exclusion and continued adjustment upwards due to inflation indexing.

These are positive changes for development stage enterprises, the capital allocation flowing to them, and the entrepreneurs and investors involved in such businesses.

How MGO Can Help

Understanding the new Section 1202 rules is key to accessing available tax benefits — especially as you plan for growth, fundraising, or a future exit. Our tax professionals can help you assess eligibility under the revised law, develop documentation strategies, and prepare for investor reviews, audits, or transactions. Contact us today to learn how we can support your goals.

The post New Tax Act Changes to Qualified Small Business Stock Under Section 1202 appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• A financial statement audit evaluates whether a company’s financials are fairly presented in accordance with applicable accounting standards. An integrated audit also includes an assessment of internal controls over financial reporting.

• Common audit mistakes include late or missing provided-by-client (“PBC”) requested submissions, insufficient or unreliable documentation that hinders effective risk assessment, weak internal and IT controls, and errors in applying accounting standards.

• Preparing early, understanding the internal control environment, and training staff can help your company provide relevant and reliable information, which is critical for assessing audit risk and demonstrating compliance with applicable laws and regulations.

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Financial statement audits are a critical checkpoint for companies, stakeholders, and investors. While the process has its limitations, the goal of an audit is to provide reasonable assurance that the company’s financial statements are free of material misstatement (whether due to error or fraud).

However, the audit process is only as effective as the broader environment supporting it — including timely and reliable financial information, a well-resourced accounting function, effective oversight by the board or audit committee, and a clear understanding of the entity’s operations and the regulatory landscape of its industry.

Many organizations approach audit season underprepared or unaware of the common pitfalls and complex or nontraditional transactions that can delay the process, increase costs, or raise compliance concerns.

In this article, we explain the financial statement audit process, common mistakes we see companies make during external audits, and best practices that lay the foundation for a smoother audit experience.

Understanding Financial Audits

During a financial statement audit, an independent registered public accounting firm follows generally accepted auditing standards (GAAS) and assesses your company’s financial records, transactions, and reporting processes. Independent auditors gather and evaluate relevant and reliable evidence to determine whether the financial statements are presented fairly — following generally accepted accounting principles (GAAP), international financial reporting standards (IFRS), or another applicable financial reporting framework.

The process typically follows these phases:

1. Audit planning and risk assessment: External auditors work closely with company management to understand the operations of the business, identify significant risk areas, and develop an audit strategy that is unique to the organization.

2. Internal control evaluation: The auditor assesses the design and operating effectiveness of internal controls over financial reporting, often through walkthroughs and targeted testing of key controls. The results of this evaluation directly inform the auditor’s risk assessment and the nature, timing, and extent of substantive audit procedures. In an integrated audit, this process also includes gathering information to develop an opinion on the effectiveness of internal controls. Auditors pay particular attention to information technology general controls (ITGCs), which are foundational to the reliability of automated processes and system-generated reports. If the auditors identify material weaknesses, they may need to disclose them in the financial statement footnotes or the auditor’s report (depending on the severity and context).

3. Substantive testing: The auditor gathers evidence by examining transactions, account balances, and disclosures through sampling, confirmations, and recalculations. Strong internal controls impact the audit team’s risk assessment and may allow the team to reduce the amount of substantive testing required.

4. Conclusion and reporting: The auditor drafts the opinion letter, communicating findings to management and those charged with governance.

10 Common Types of Mistakes Made in Public Audits

Despite best intentions, many organizations encounter issues during the annual audit that delay timelines, increase costs, or raise red flags. Here’s a look at some common mistakes and why they matter:

1. Inadequate Documentation of Internal Controls

Many companies fail to maintain sufficient documentation around their internal control procedures. This lack of documentation makes it difficult for auditors to understand and — if necessary — test the design, implementation, and effectiveness of key controls. As a result, auditors may need to perform additional walkthroughs or expand their substantive testing — potentially increasing audit costs and timelines.

For publicly traded companies, this issue can have additional implications under Section 404 of the Sarbanes-Oxley Act (SOX). Section 404(a) requires management to assess and report on the effectiveness of internal control over financial reporting (ICFR). Section 404(b) requires the independent auditor to attest to and report on management’s assessment for accelerated filers.

If the auditors deem internal controls ineffective, management must disclose material weaknesses in its annual filing with the SEC. This can affect investor confidence, internal resource allocation, and external perceptions of the company’s governance. These findings may also place added pressure on the accounting team to remediate deficiencies under tight deadlines while still managing the financial close and reporting cycle.

2. Late or Incomplete Audit PBC Requests

Prior to audit fieldwork, the audit team sends a “provided by client” (PBC) list to management outlining the documents and financial data auditors need. Submitting incomplete or delayed items stalls fieldwork and may increase audit fees.

3. Improper Revenue Recognition

Misapplying Accounting Standards Codification (“ASC”) 606 or lacking support for revenue transactions — including cutoff periods around year-end — is a recurring audit issue. Companies often struggle to identify and document performance obligations in their contracts with customers and allocate the transaction price appropriately among those obligations.

These issues are especially common in arrangements involving bundled products or services, where the timing and pattern of revenue recognition may differ by deliverable. Inadequate documentation or inconsistent application of these principles can lead to audit adjustments or the need for expanded testing.

4. Weak IT General Controls

Deficiencies in ITGCs — such as user access management, change management, physical security of IT systems, intrusion detection, and system backup and recovery processes — can compromise the integrity of financial reporting systems and result in control deficiencies or audit findings. Increasingly, cybersecurity risk is also a critical area of concern, particularly as companies face heightened exposure to data breaches and unauthorized access.

In cases where companies outsource key processes or use cloud-based platforms that affect financial reporting, it’s important to obtain and evaluate SOC 1 Type 2 reports from service providers. These reports help assess whether the third party’s control environment supports reliable financial reporting. Failing to obtain or properly review these reports can result in audit scope limitations or the need for additional procedures.

5. Errors in Lease Accounting

ASC Topic 842  introduced significant changes to lease accounting — increasing complexity in how companies identify, measure, and disclose lease arrangements. Common mistakes include misclassifying leases, failing to identify embedded leases in service or supply agreements, and incorrectly applying accounting treatment for lease modifications and remeasurement events.

Errors can also arise in calculating the right-of-use asset and lease liability, selecting the appropriate discount rate, and preparing the required footnote disclosures. These issues can lead to material misstatements and require substantial audit follow-up — especially when a company maintains a large or decentralized lease portfolio.

6. Inaccurate or Unsupported Estimates

Many key areas in financial reporting rely on management’s judgment, especially when it comes to technical estimates such as goodwill impairment, valuation of long-lived assets, fair value of debt or equity instruments, and contingent liabilities. These estimates require a disciplined process of identifying the appropriate valuation method, documenting key assumptions, and evaluating both supporting and contradictory information.

Errors often arise when companies fail to update assumptions based on current market conditions, skip critical steps in the impairment testing process, or use inconsistent inputs across related estimates. A lack of documentation or transparency around the basis of these estimates raises audit concerns and can result in restatements or material weaknesses in internal controls over financial reporting.

7. Failure to Perform Timely Reconciliations

Account reconciliations help ensure accuracy and reliability in financial statements by comparing information in your financial records with third-party support — such as bank statements or loan documents. Delayed or inconsistent reconciliations of bank accounts, intercompany balances, and key general ledger accounts can indicate larger issues with the financial close process.

8. Insufficient Segregation of Duties

In smaller or rapidly growing companies, it’s common for individuals to handle multiple steps within a transaction cycle — such as initiating, approving, and recording transactions. This increases the risk of errors and intentional misstatements.

A lack of proper segregation of duties introduces risk at the process level and signals broader weaknesses in the company’s control environment (a key component of internal control frameworks). When auditors identify these gaps, they may reduce their reliance on controls and expand the scope of substantive testing — increasing the time and resources required for the audit and potentially causing delays.

Strengthening segregation of duties supports the integrity of financial reporting and reinforces a culture of accountability.

9. Poor Communication Between Financial Reporting and Operational Teams

A disconnect between accounting and other departments — including operations, legal, and procurement — can result in incomplete or misclassified transactions and missed disclosures. This issue is especially common in areas like inventory management, project accounting, and deferred revenue recognition.

It can also impact the identification and disclosure of related party transactions, legal contingencies, and other matters that require input from departments outside of finance. For example, if legal teams do not communicate the existence of pending or threatened litigation, the accounting team may fail to properly record or disclose a loss contingency — resulting in audit findings or misstatements. Clear, documented communication channels between departments are critical for complete and accurate financial reporting.

10. Lack of Readiness for New Accounting Standards

Companies often underestimate the effort required to adopt new standards — such as those related to segment disclosures (ASU 2023-07), income tax disclosures (ASU 2023-09), and business combinations (ASU 2023-05). Late-stage implementation leads to rushed adjustments and audit stress.

Fortunately, many of these issues are avoidable through proper preparation, communication, documentation, and adherence to regulations.

How to Prepare for a Smoother Audit Season

Here are a few best practices to reduce audit risks and improve efficiency in the financial statement reporting process:

• Start early: Preparing for the year-end audit should begin months in advance. Develop and assign internal timelines for PBC deliverables, reconciliations, and close procedures.

• Assess and document internal controls: Clearly document your control procedures. Perform regular controls testing throughout the year and update them to reflect changes in processes or personnel at year-end.

• Invest in training: Your accounting and finance teams should stay current on new standards and audit requirements to reduce the risk of misapplication.

• Leverage technology thoughtfully: Use financial close and compliance tools to streamline workflows, manage documentation, and maintain audit trails.

• Conduct a pre-audit walkthrough: Reviewing key areas of risk, estimates, and controls ahead of time enables your company to address issues before auditors arrive.

• Foster collaboration: Create open channels of communication between auditors, internal accounting functions, IT, operational departments, and the audit committee to minimize misalignment. Collaboration between external auditors and the internal audit team can also be beneficial. However, under the Public Company Accounting Oversight Board’s new QC 1000 standards, internal auditors are considered “other participants” in the audit, which may affect how their work is evaluated and used. Companies should understand the implications of this designation and ensure internal audit activities are properly documented and aligned with audit objectives.

Be Proactive to Prevent Audit Mistakes Before They Happen

A successful audit is more than a compliance milestone. It’s a sign of sound corporate governance. By recognizing common mistakes and addressing them proactively, you can support more accurate and timely financial statements, reduce audit fatigue in your team, and build trust with stakeholders and regulators.

How MGO Can Help

Our Audit and Assurance team supports public companies through every stage of the audit lifecycle — from preparing internal controls documentation to navigating complex accounting standards and responding to auditor inquiries. Our professionals bring deep industry experience to help clients identify risks and streamline financial reporting processes. If you’re approaching audit season or facing challenges with audit readiness, reach out for guidance tailored to your specific needs.

The post 10 Common Public Audit Mistakes That Could Delay Your Timeline appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Beginning in 2025, domestic R&D expenses under Section 174 will once again be immediately deductible, offering potential cash flow benefits.

• Companies that previously amortized R&D costs may be able to file Form 3115 and adjust past filings to recapture deductions.

• With IRS scrutiny rising and state tax rules varying, proactive planning and clear documentation are critical to maximizing benefits and minimizing risk.

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The return of immediate research and development (R&D) expenses under Section 174 is one of the most consequential shifts in the 2025 tax landscape — yet many mid-market companies have not updated their plans to reflect the change. From documentation of risk to transition-year amendments, these are the most common questions we’re hearing from finance and tax leaders:

What exactly is changing with Section 174 in 2025?

Beginning in tax year 2025, domestic R&D expenditures will once again be immediately deductible in the year incurred. This change reverses the five-year amortization requirement introduced under the Tax Cuts and Jobs Act (TCJA). However, current IRS guidance shows that amortization will still apply to certain foreign R&D expenses unless more legislative or regulatory relief is provided. Businesses should evaluate both domestic and international R&D classifications in preparation for the shift.

Will this improve our 2025 cash flow position?

It may — provided the new expensing rules are properly integrated into your financial and tax forecasting. Immediate expensing of domestic R&D reduces taxable income in the same year the costs are incurred, lowering overall tax liability. Companies that have not yet adjusted their estimated tax payments or quarterly modeling may be overstating liabilities and missing near-term cash flow efficiencies.

Can we amend our 2022–2024 returns based on this update?

In some cases, yes. Companies that previously amortized Section 174 expenses may be eligible to file Form 3115 to change their accounting method and apply a Section 481(a) adjustment. This could allow for partial or full deduction of deferred R&D costs in 2025. However, the benefits and eligibility vary depending on your current method, the types of R&D involved (domestic versus foreign), and whether returns were previously extended, filed, or audited. A review of your filing history and applicable IRS guidance is necessary before proceeding.

Currently, there is uncertainty as to whether Form 3115 will be required to change the method from capitalization to expensing of these costs. The IRS needs to provide guidance in this area and whether or not small businesses that have average annual gross receipts of under $31 million that have not filed their 2024 tax return yet will need to capitalize their R&D costs on the 2024 tax return and then file an amended return to expense these costs.

Should we still separate costs that qualify for the R&D tax credit?

Yes — and this distinction is critical. While Section 174 requires capitalization (or expensing, beginning in 2025) of all R&D costs, the R&D tax credit under Section 41 applies to a narrower subset of those costs. Documentation should clearly delineate which expenditures qualify for credit versus which are deducted under Section 174. Maintaining separate records supports credit claims and mitigates examination risk.

Will this affect our state tax filings?

It may. Some states conform to federal Section 174 treatment automatically, while others decouple and apply their own rules. This can create differences in how R&D is deducted at the state level. For companies working in multiple states, it’s important to review each jurisdiction’s treatment of R&D expenses and track how decoupling may affect apportionment, deductions, and compliance requirements.

What are CFOs and tax leads overlooking most frequently?

In our recent tax reform webinar polling, we asked CFOs and tax leaders how Section 174 has impacted their company’s R&D and tax planning. Their responses:

• 17% said Section 174 changes had a significant impact

• 24% said they made some adjustments

• Over 50% indicated the impact was minimal or unclear

This suggests a gap between policy changes and planning execution. Many companies have not yet updated forecasts or examined whether transition-year filings could improve cash position. As a result, opportunities to unlock deductions or perfect quarterly payments may be unrealized.

What actions should we be taking now? 

Section 174 expensing should be addressed proactively during 2024 planning and Q3-Q4 reviews. Start by reviewing how R&D is treated in your current financial models and incorporate the updated expense rules into your 2025–2026 forecasts. If you amortized expenses in prior years, evaluate whether filing a method change (Form 3115) could allow you to recapture deductions, depending on what guidance is issued by the IRS from a procedural standpoint.

It’s also essential to keep clear and contemporaneous documentation — especially if you’re claiming R&D credit or have international R&D exposure. The IRS has increased scrutiny around improper claims and substantiation. Additionally, continue checking IRS guidance related to foreign R&D and coordinate any tax position changes with your broader strategy and compliance obligations.

Strategic Considerations

Section 174 expensing brings welcome relief for businesses investing in innovation, but it also introduces complexity — especially for companies with multi-year R&D planning or global footprints. By updating forecasts, assessing historical filings, and aligning documentation now, CFOs and tax leaders can better prepare for the 2025 transition and minimize risk. Early action supports stronger compliance, cash management, and credit positioning in an evolving regulatory environment.

How MGO Can Help

Our tax professionals have deep experience navigating the complexities of Section 174 and R&D credits. Whether you need help modeling the impact of immediate expensing, evaluating a method change, or separating costs for credit eligibility, we can guide you through every step. Contact us today to align your R&D strategy with the latest tax reforms and uncover potential savings.

The post Answers to Your FAQs About Section 174 R&D Expensing appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Aligning international tax strategy with global supply chain planning helps reduce tax exposure, capture incentives, and increase operational agility.

• Ignoring exit taxes, transfer pricing, or cross-border compliance risks can create multi-year tax liabilities, penalties, and restructuring costs.

• Involving tax leaders early in global supply chain restructuring leads to smarter decisions, improved timelines, and long-term business scalability.

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In today’s dynamic global business environment, aligning your organization’s international tax planning with supply chain planning strategy isn’t just a best practice — it’s essential. From shifting trade relationships and tariffs to increased scrutiny from global tax authorities, your company’s ability to make tax-informed supply chain decisions can directly impact cash flow, risk profile, and competitive positioning.

Here’s how your tax and operations leaders can collaborate to build a globally agile structure, and why international tax strategy must be at the core.

Why International Tax Strategy Must Drive Global Supply Chain Decisions

Mid-market organizations are rethinking their operational footprint — reshoring, nearshoring, or diversifying supplier bases. But without a clear international tax lens, these shifts can trigger unintended consequences: exit taxes, loss of treaty benefits, or transfer pricing risks.

A tax-aligned supply chain strategy allows you to:

• Forecast and manage global tax liabilities

• Capture incentives and avoid inefficiencies

• Make faster, more informed decisions across jurisdictions

Integrate International Tax Early in the Planning Process

Waiting until after operations moves are underway can leave your business with a fragmented tax structure that requires costly remediation. This is especially critical for mid-market companies operating across the U.S., EMEA (Europe, the Middle East, and Africa), or APAC (Asia-Pacific) regions, where cross-border structuring can create unexpected tax burdens. Tax should be involved from the outset — modeling scenarios across jurisdictions, projecting costs, and identifying risk exposure.

For example:

• Moving production from China to Mexico might avoid certain tariffs — but could expose your business to exit taxes in China or permanent establishment risk in Mexico.

• Relocating intellectual property (IP) from Ireland to the U.S. might trigger a deemed disposal event under local exit tax regimes.

Technology platforms and predictive models can help tax teams simulate these impacts before major decisions are finalized.

Strengthening Transfer Pricing and Global Compliance

Global tax authorities are tightening enforcement — especially around transfer pricing and cross-border restructurings. If your tax structure no longer reflects your actual operations, you may face:

• Double taxation

• Disallowed deductions

• Penalties and disputes

Update your transfer pricing documentation to reflect the new supply chain model. Intercompany agreements, economic analyses (including IP valuation), and jurisdictional reporting must all align with your post-transition structure.

Unlock Incentives Through Coordinated Strategy

Supply chain shifts aren’t just about avoiding risk — they’re also an opportunity to capture new value. Jurisdictions including the U.S., Canada, Mexico, and certain European Union countries offer targeted tax incentives for reshoring, green investment, R&D, or job creation.

If these incentives aren’t launched early in planning, your business could miss out. Tax should coordinate with operations and finance teams to explore:

• U.S. federal and state credits for manufacturing investment

• R&D credits tied to newly localized functions

• Foreign tax credits or deferrals available in new jurisdictions

Create a Globally Scalable Tax Playbook

Reactive tax planning doesn’t scale. As your organization enters new markets, integrates M&A targets, or adds new suppliers, your international tax model must be flexible and supported by a clear global tax governance framework.

A forward-looking playbook helps you:

• Align tax structure with business decisions

• Build global tax governance into location changes, IP moves, and new legal entities

• Reduce friction during rapid growth or operational transformation

The Path Forward: Strategy, Agility, and Risk Reduction

International supply chain restructuring can unlock efficiency, improve margins, and reduce geopolitical exposure — but only if tax is at the table from the start.

Organizations that treat tax as a strategic partner rather than a compliance function are better positioned to navigate volatility and create long-term value.

How MGO Can Help

At MGO, we help companies navigate the complexities of global tax strategies and cross-border operations. From international structuring and transfer pricing to tax technology and incentive optimization, we serve clients across manufacturing, life sciences, technology, and more.

We work closely with CFOs and tax executives to align tax planning with business transformation — supporting global agility, regulatory compliance, and strategic growth. Let’s talk about how your international tax strategy can support your global operations.

The post How to Align Your Global Supply Chain and International Tax Strategy appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Key Takeaways: 

• For decades, P.L. 86-272 protected activities like door-to-door sales and attending trade shows from taxation outside a company’s home state. 

• With more business conducted online, states want to expand the list of unprotected activities to include offering digital tools like chatbots and online portals. 

• Legal challenges are slowing down new regulations, but we expect enforcement efforts to continue to evolve. 

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Public Law 86-272 (P.L. 86-272) has played a defining role in shaping the boundaries of state income taxation since its passage in 1959. This federal statute prohibits U.S. states from imposing a net income tax on businesses with in-state activities limited strictly to the solicitation of orders for sales of tangible personal property, provided those orders are sent outside the state for approval and fulfillment. 

Historically, this law shielded out-of-state sellers with minimal physical presence in other states from income tax obligations. A classic example is a door-to-door salesperson who travels into a state to solicit orders but does not maintain an office, inventory, or engage in other business operations locally. 

Over time, the Multistate Tax Commission (MTC) published a widely-referenced list of protected activities — which included limited engagements such as attending trade shows for fewer than seven days or carrying product samples without taking orders on the spot. 

However, commerce has evolved since the 1950s. Business models today often blur the lines between physical presence and digital engagement. And in this increasingly digital marketplace, states are re-evaluating what it means to “solicit orders” and what activities should fall outside the protections of P.L. 86-272. 

Online Activities and Expanding Interpretations 

Modern business interactions rarely resemble the sales strategies in place when P.L. 86-272 was enacted. E-commerce sites allow for real-time order processing, customer service through chatbots, product recommendations powered by algorithms, and interactive tools that go far beyond simple solicitation. Recognizing these changes, tax authorities have begun to update their interpretations of unprotected activities to include many actions a company can perform digitally without a single employee stepping foot in the state. 

In 2021, the MTC approved revisions to P.L. 86-272 — including a new section on activities conducted via the internet. This section states:  

“As a general rule, when a business interacts with a customer via the business’s website or app, the business engages in a business activity within the customer’s state.” 

It also provided eight examples of internet-based activities that, if not de minimis, are unprotected. Some examples include using chatbots to provide post-sale assistance, placing “cookies” on customers’ computers, and allowing users to submit credit card applications or job applications through the website. 

A few states have indicated they will follow the 2021 statement but have not yet issued updated state regulations. Only a few states have issued formal guidance on unprotected internet activities. 

However, these interpretations are controversial. Taxpayers and business advocacy groups argue that states are stretching P.L. 86-272 beyond its original scope. States, on the other hand, maintain that the law must adapt to reflect a marketplace that no longer relies on door-to-door sales or mailed catalogs. 

A Patchwork of State Responses 

States are moving forward at different paces. Several efforts to formally incorporate expanded definitions of unprotected internet activities into regulation or statute have encountered legal and procedural obstacles. 

For example, New York finalized its regulations, which broadly interpreted unprotected digital activities in December 2023. These regulations were quickly challenged in court. Recently, a New York lower court upheld the validity of the regulations while limiting its enforcement to the period following their publication in December 2023. 

In California, enforcement of the Franchise Tax Board’s revised interpretation of PL 86-272 stalled following a lawsuit challenging the state’s guidance on procedural grounds. The state is expected to rework and reintroduce the effort in response. 

When New Jersey introduced proposed regulations incorporating parts of the MTC’s new guidelines on how PL 86-272 should apply to modern forms of business and customer interactions, opposition quickly followed. The same organization challenging California’s efforts issued a public statement objecting to New Jersey’s proposal and indicated litigation would follow if the rules were finalized. On June 16, 2025, New Jersey finalized its regulations despite the public comments in opposition. 

Clearly, there is tension between evolving interpretations and longstanding statutory protections. The outcome of these legal battles could shape state tax enforcement policies for years to come. 

How MGO Can Help 

For companies engaged in interstate sales and operating in the digital space, navigating the changing tax landscape can be challenging. Historically safe activities may now expose you to state income tax filing obligations if those activities fall outside the scope of PL 86-272 protections. In some cases, even simple customer interactions on a website could trigger nexus under newer interpretations. 

For that reason, it’s crucial to work closely with a state and local tax (SALT) advisor who closely monitors regulatory developments in all 50 states and regularly evaluates your business practices to assess exposure risks. 

Our dedicated SALT team can review how you interact with customers in each state, track where you offer digital tools like chatbots or application portals, and provide proactive guidance when expanding into new states or launching new platforms. 

Reach out to our team today to get clarity on the evolving boundaries of PL 86-272 and prepare for a more nuanced and potentially riskier state tax compliance landscape. 

The post The Future of Public Law 86-272 in the Digital Age appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Many estate plans are outdated, improperly executed, or non-existent.

• Trusts can protect family assets and support responsible inheritance.

• Open communication with heirs about roles and expectations can reduce future conflicts and confusion.

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According to a survey from LegalShield, nearly 60% of U.S. adults don’t have a will — even though 90% acknowledge they need one. Even among those with estate planning documents in place, 22% have never updated them. They may have missing or incorrect beneficiaries or improperly titled assets, diminishing the legal protection those documents were designed to protect from probate.

These numbers tell us that a significant number of families are unprepared to transfer wealth effectively or protect it for future generations. Many beneficiaries also mistakenly believe that what they inherit will be taxed as income — a common misconception that can add unnecessary confusion to the process.

For families looking to preserve wealth while empowering heirs to manage their inheritance responsibly, trusts can offer long-term benefits when implemented with care and updated regularly. In this article, we’ll examine several potential trust structures and provide guidance to help your family achieve its wealth preservation goals.

Why Trusts Matter for Generational Wealth

A well-structured trust can:

• Safeguard assets from creditors, lawsuits, and potential divorces

• Provide a framework for responsible access to funds

• Support heirs with varying levels of financial maturity

• Maintain family intentions across multiple generations

• Reduce the administrative burden on surviving family members

But the real value lies in thoughtful design and consistent maintenance. Setting up a trust isn’t a one-time activity; you must revisit and update it periodically to reflect changes in your growing family, financial circumstances, and state laws.

Here are a few different trust structures that can help you achieve your goals:

Dynasty Trusts

A dynasty trust can last multiple generations — potentially hundreds of years in some cases. These trusts keep inherited assets outside of each heir’s taxable estate, reducing exposure to estate taxes over time. They can also be structured to distribute income or principal according to specific rules, helping beneficiaries avoid overspending or becoming financially dependent on the trust.

These trusts help preserve the value of large estates across generations by shielding inherited assets from estate taxes, creditors, or future divorces. They also allow grantors to express family values through distribution requirements — like completing college or maintaining employment.

Because a dynasty trust can span decades, it’s crucial to choose a trustee (or succession of trustees) with clear oversight protocols.

Spendthrift Trusts

For families concerned about a beneficiary’s spending habits or personal stability, a spendthrift trust adds another layer of protection. These trusts restrict a beneficiary’s ability to access or assign their interest in the trust to others, preventing them from squandering the funds or using them as collateral for personal loans.

Spendthrift provisions can stand alone or be added to a broader irrevocable trust. They are especially helpful when a beneficiary struggles with addiction, financial discipline, or legal troubles.

This type of trust requires a trustee who can exercise discretion over distributions, so it’s usually best handled by a neutral third party rather than an heir.

Irrevocable Trusts

An irrevocable trust permanently transfers ownership of assets out of the grantor’s estate. Once established, the grantor no longer has control over the assets and changes generally require court approval or beneficiary consent.

Though less flexible than revocable living trusts, irrevocable trusts are often used to reduce estate tax exposure, protect assets from lawsuits or future claims, or facilitate Medicaid planning or other eligibility-based programs.

They can also hold life insurance policies, real estate, or business interests, helping families plan for liquidity and facilitate a smooth transition across generations.

Addressing Common Estate Planning Pitfalls

Even when a trust is in place, several issues can undermine its effectiveness:

• Improper titling of assets: Assets must be formally retitled into the name of the trust. A mismatch between legal documents and account ownership may derail the estate plan.

• Beneficiary adjustments: Make sure the beneficiary designations on accounts like life insurance and retirement are aligned with the beneficiary on the trust. Mismatches are common and can undermine your estate plan.

• Outdated documents: Wills and trusts prepared a decade ago most likely do not reflect your family’s current situation. Review and update the plan after life events like marriage, divorce, births, deaths, disability, or significant changes in assets.

• Lack of preparedness: Set to take place over the next two decades, the Baby Boomer generation’s “Great Wealth Transfer” will move an estimated $84 trillion to spouses, dependents, and charities. Most heirs have no idea how much they will inherit, or even where to find estate documents in the event of a parent’s death or incapacity. At a minimum, connect heirs with the estate attorney who has the documents.

• Lack of communication: In many cases, family conflicts arise not from a lack of resources but from a lack of communication. Parents who explain their estate decisions ahead of time, such as why they selected a particular child to be an executor or trustee or how real estate will be divided, help reduce confusion and resentment. Including a written letter of intent with estate documents provides additional context beyond the legal language.

• Naming multiple co-executors: Many parents name two or more adult children as co-executors or trustees to be “fair”. In reality, this creates gridlock when siblings can’t agree on next steps. If you believe putting one sibling in charge will breed conflict, consider naming an independent trustee — like a corporate trustee service — instead.

How MGO Can Help

Trusts can protect wealth, but the real protection comes from thoughtful planning, proactive communication, and timely updates.

At MGO, we work with families to assess current estate tax exposure and identify and design appropriate estate tax minimization structures to align with your ultimate goal. We also help facilitate family discussions and connect heirs with the right advisors to assist in smooth transitions of estates.

Whether you’re establishing a trust for the first time or reevaluating an outdated estate plan, our team can provide insight into trust strategies tailored to your family’s values, financial goals, and long-term objectives.

Contact us today to explore how we can support your family with your estate planning.

The post Trust Structures to Protect Your Family Wealth and Empower the Next Generation appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• CMMC is now required for DoD contractors handling FCI or CUI — non-compliance can result in contract loss and disqualification from future awards.

• Prime contractors are liable if subcontractors are non-compliant — your entire supply chain must meet CMMC standards to maintain eligibility.

• The window to achieve certification is closing fast — readiness can take 6–12 months, so starting now is critical to avoid lost revenue or missed opportunities.

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What Is CMMC and Why Does It Matter to My Business?

The Cybersecurity Maturity Model Certification (CMMC) is a Department of Defense (DoD) framework that requires contractors and subcontractors to implement specific cybersecurity practices and standards. If your business processes, stores, or transmits federal contract information (FCI) or controlled unclassified information (CUI), compliance is mandatory to continue working with the DoD.

Who Does CMMC Apply To?

CMMC applies to:

• Prime contractors

• Subcontractors

• IT and service providers that handle FCI or CUI

If you’re part of the estimated 300,000 organizations within the DoD supply chain — even indirectly — you’ll need to comply. And if you’re a prime contractor, you’re responsible for ensuring your subcontractors comply as well.

What Are the Levels of CMMC, and Which One Applies to Me?

CMMC is broken into three maturity levels. Most middle-market contractors will fall into Level 1 or 2:

• Level 1 – Foundational: Basic cybersecurity hygiene practices (for handling FCI)

• Level 2 – Advanced: Security requirements of full NIST SP 800-171 (for handling CUI)

• Level 3 – Expert: Protecting high value CUI, compliance with NIST SP 800-172

The level of certification required depends on the type of information your organization touches during contract performance.

What Happens if We Don’t Follow CMMC?

The risk is significant. Non-compliance may result in:

• Loss of current contracts

• Ineligibility for future DoD work

• Legal or reputational risk

• Disqualification due to a non-compliant subcontractor

CMMC will soon be a “gatekeeper” for DoD eligibility — no certification, no contract.

When Will CMMC Go Into Effect?

With the final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) issued, the DoD will officially begin implementing CMMC compliance on November 10, 2025. The program will phase in over three years: initial self-assessments for Levels 1 and 2 in year one, third-party reviews for Level 2 in year two, and Level 3 assessments in year three.

Now is the time to start readiness — waiting could mean lost revenue or missed opportunities.

How Do We Prepare for CMMC?

Here’s a quick roadmap:

1. Define your scope: Identify the systems, people, and processes that interact with FCI/CUI. This will guide which level of certification you should target (Level 1, 2, or 3).

2. Perform a gap analysis: Understand where you are and where you need to be.

3. Close compliance gaps: Implement missing controls, policies, processes, and documentation, including NIST 800-171 controls and a system security plan (SSP)

4. Train your team: Staff education is a requirement, especially around cyber hygiene. Support your subcontractors — you’re accountable for their compliance too.

5. Prepare for the assessment: Level 1 certification requires an annual self-assessment. Levels 2 and 3 require third-party assessments conducted every three years.

6. Receive certification

How Long Does CMMC Readiness Take?

The timeline varies depending on your current cybersecurity maturity. With focused support, many organizations can reduce the estimated 6-12 month timeline by 50% — especially at Levels 1 and 2.

Can MGO Help With CMMC Compliance?

Yes. MGO supports companies at every stage of the CMMC journey — with a clear focus on readiness, not attestation. Our services include:

• CMMC gap assessments

• Scope and level planning, including boundary definition and data flows

• Policy and documentation development

• Employee training

• Subcontractor support

• Remediation guidance

We help you prepare efficiently and confidently for certification without overbuilding your controls or delaying your timeline.

How MGO Can Help

We help government contractors and their supply chains get CMMC-ready quickly and efficiently. Our Cybersecurity team includes Registered Practitioners (RPs) with extensive experience in DoD compliance, technical accounting, and IT infrastructure.

We serve a wide range of industries affected by CMMC: technology, manufacturing, life sciences, professional services, and more. Whether you’re a small subcontractor or a large prime, we tailor our services to your environment.

Our end-to-end support helps you get prepared for attestation, keep long-term compliance, and protect your DoD revenue. Reach out to our team today to learn how we can support your CMMC compliance efforts.

The post How Your Government Contracting Firm Can Get CMMC-Ready Fast appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Bill Penczak: Mike, when we talk about MGO’s tax strategy for clients, credits come up a lot. Why are they such a focus? 

Michael Silvio: Because they’re often overlooked, and they can be game changers. Credits like R&D, cost segregation, 179D, and energy incentives can mean real money in clients’ pockets. We don’t just file tax returns; we look for ways to reduce taxable income through proactive planning. 

Bill: Let’s start with R&D credits. A lot of people think they’re only for high-tech companies. How do they apply more broadly? 

Mike: That’s a big misconception. We’ve helped manufacturers, food processors, even auto part designers claim R&D credits. The test is whether you’re solving technical problems or improving products and processes, not whether you wear a lab coat. One of my favorite examples: two guys who started an aftermarket auto parts business landed a contract with a major automaker. We found them more than $750,000 in R&D credits over three years, and that helped keep their business alive during the 2008 downturn. 

Bill: That’s powerful. What about 179D? Can you break that down? 

Mike: Sure. 179D is a deduction for the energy-efficient design of buildings and is available to developers, designers and builders that own these buildings. It is also available for the primary designers of government structures — think schools, libraries, hospitals. Most people assume you have to own the building, but if you’re the designer, you can also qualify. We had a design-build firm that had no idea this was even an option, and we helped them secure a $250,000 deduction they wouldn’t have otherwise seen. Keep in mind that under the “Big Beautiful Bill” this incentive sunsets as of June 20, 2026.  Construction must begin before this date to qualify for this incentive. 

Bill: And cost segregation. How does that fit in? 

Mike: Cost seg accelerates depreciation for real estate owners by identifying components that can be written off faster. We do that work, which is rare for a firm our size. That means we can act quickly when clients buy or renovate a property, and we often tie it into other credit strategies to create more value. 

Bill: Sounds like planning ahead is key. 

Mike: Exactly, always. I was just on a call with a client who’s running out of depreciation and facing big rental income. We didn’t just tell them to buy another building; we connected them with passive-loss investments that offset the income legally. It’s that kind of strategic, creative thinking that makes a difference. 

Bill: So, these aren’t just tax tricks — they’re real financial tools? 

Mike: 100%. And we tailor them to each client. No one-size-fits-all here. It’s about understanding the business and finding opportunities others might miss. 

Bill: Appreciate the insights, Mike. 

Mike: Always a pleasure, Bill. Let’s do it again. 

Want to see what tax credits might be hiding in your business? Let’s start a conversation. 

The post MGO Stories: Thinking Outside the (Tax Credit) Box appeared first on MGO CPA | Tax, Audit, and Consulting Services.