Fall 2010 issue of Horizons

Are Not-For-Profits Becoming More Entrepreneurial? RubinBrown’s 2010 Not-For-Profit Economic Climate Survey indicated that many not-for-profits were facing increased demand for services while revenues were flat or declining. As most organizations had already made significant cuts to their budgets, the survey revealed that many are looking for and budgeting new sources of revenue, especially funds that will enable them to achieve their mission and address social issues. Specifically, 38 percent of the survey’s respondents cited “social entrepreneurship” as a source of that additional income. What Is Social Entrepreneurship? There is not one commonly accepted definition for the term “social entrepreneurship.” One definition is the use of “market opportunities and innovative strategies to create social benefit.” The YouthBridge Community Foundation defines social entrepreneurship as “using entrepreneurial skills to craft innovative processes, approaches and solutions to help resolve social issues.” A business entrepreneur typically measures performance in profit and return while a social entrepreneur focuses on creating social capital. The main aim of social entrepreneurship is to further social and environmental goals and increase organizations’ capacity. Many not-for-profits have found that social entrepreneur programs have reinvigorated their membership ranks, increased volunteerism and inspired new generations to think differently about their opportunities to create change. Identifying and solving social problems requires a committed organization with a vision and determination to persist in the face of challenges. A number of local organizations have successfully established social entrepreneurship programs. If your organization is interested in exploring this avenue and requires assistance, resources are available. For example, the Youthbridge Community Foundation and Washington University’s Skandalaris Center for Entrepreneurial Studies have teamed up to offer a seminar series as well as the Youthbridge Social Entrepreneurship and Innovation Competition (SEIC) for organizations interested in social enterprise. For more information on these programs, please see our e-focus article on our website at www.rubinbrown.com. Please call us if we can assist you and your not-for-profit organization.

Correspondence & Field Examinations There are several reasons a correspondence or field examination occurs. These range from a random selection to disclosures in Form 990 to unfavorable media publicity. If the IRS believes there are just one or two issues to address, they will perform a correspondence examination which they conduct by letter and/or telephone call. A field examination is conducted at the entity’s (or their representative’s) office. Audits of less complex organizations will normally be completed by one revenue agent. An audit of large, complex organizations will often be performed under the Team Examination Program, where several revenue agents with different specializations participate in various phases of the audit. During the examination, the revenue agent will make requests for information based on his/her review of the return and publicly available information on the organization. The information requested will vary from organization to organization but, based on the checklist mentioned above, may well include: • A copy of your mission statement • Whether the Articles of Incorporation and Bylaws set forth the composition, duties, qualifications and voting rights of the governing body and officers • The number of board meetings held during the year • The percentage of the board members attending each meeting • A description of how compensation is determined for officers, directors and key employees, whether compensation levels are approved in advance, and whether the compensation determinations are contemporaneously documented • Who effectively controls the organization? Is it a single person, a select few, or a large group?

www.rubinbrown.com

50