Insight Magazine - Winter 2014

TOWN & COUNTRY

3 Cities Rising From the Ashes

Plus, Why Your Soft Skills Are Letting You Down A New Model for Women’s Mentoring Medical Marijuana Lights Up Make the ‘Most Ethical Company’ List How to Lead the Nonprofit World ...and more

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42 Town & Country

Explore the highs and lows of state initiatives, Illinois agribusiness, and cities working to triumph over bankruptcy.

lead stories

3410 Top Trends for a Successful Illinois

In the coming year, business and civic leaders will be focusing on key areas for innovation and investment to drive growth in Illinois. Here are the 10 biggies.

38Farm Country

Rural America is trading in its pitchfork for the concrete jungle, or so the numbers say. But, then again, numbers can be deceiving.

42A Tale of Three Cities

This is the story of Central Falls, Rhode Island; Stockton, California; and Detroit, Michigan. And indeed, they have seen the worst of times.

trending topics

18Diversity

Mentoring in the Round

Women of different generations and levels mentor each other best in—no surprise here—small group settings. ICPAS creates mentoring circles with a life of their own.

22Nonprofits Follow the Nonprofit Leader

Three strategies to engage donors, boost donations and reach the top of your game.

26Ethics 5 Ways to be Super Ethical

What does it take to make one of those much-touted “Most Ethical Company” lists?

30Leadership Do Your Soft Skills Suck?

Without a handle on the softer side of leadership, your success will be pretty short-lived.

32Current Affairs Illinois Lights Up

Interest is high in the state’s new medical cannabis industry. Will it be a hit for CPAs?

the regulars

4Today’s CPA The Place to Be

ICPAS President & CEO Todd Shapiro tells you why Illinois is an attractive place to grow your business.

6Seen Heard

Sound bytes, sound advice and practical business tips.

10Forensics Insider The Economies of Fraud

Brad Sargent, CPA/CFF, CFE, CFS, Cr.FA, FABFA takes a look at why companies are reluctant to litigate.

12Tax Decoded Tough Tasks for Nonprofits

Keith Staats, JD discusses the challenges facing NFPs seeking sales and property tax exemptions.

14PFP Advisor Think Healthy

Mark J. Gilbert, CPA/PFS explains how to successfully plan for a client’s healthcare costs in retirement.

16Capitol Report Springfield or Chicago?

ICPAS VP of Government Relations Marty Green, Esq. considers Illinois’ true seat of government.

@IllinoisCPA

48Hype.It

The Secret of My Success

Sarah Herrmann hands off her column to Kierra Smith for a first-hand account of a young professional’s rise.

INSIGHT MAGAZINE

Publisher/President & CEO Todd Shapiro

Editor-in-Chief Judy Giannetto

Art & Layout Design Judy Giannetto

Production Design Rosa Garcia

Assistant Editor Derrick Lilly

Photography Jay Rubinic, Derrick Lilly, Brett Henrikson

National Sales & Advertising Natalie DeSoto

YGS Group, 3650 West Market Street, York, PA 17404

P: 800.501.9571 x127 F: 717.825.2171

E: natalie.desoto@theygsgroup.com

Circulation Carl Siska

Editorial Offices: 550 W. Jackson Boulevard, Suite 900,Chicago, IL 60661

ICPAS OFFICERS

Chairperson, Daniel F. Rahill, CPA, JD, LL.M. FGMK, LLC

Vice Chairperson, Edward J. Hannon, CPA, JD Quarles & Brady LLP

Secretary, Scott D. Steffens, CPA Grant Thornton LLP

Treasurer, Mary Lou Pier, CPA Pier & Associates, Ltd.

Immediate Past Chairperson, William P. Graf, CPA

Deloitte & Touche LLP

ICPAS BOARD OF DIRECTORS

Linda S. Abernethy, CPA, McGladrey LLP

Jared J. Bourgeois, CPA, Mesirow Financial Consulting, LLC

Rosaria Cammarata, CPA, CME Group, Inc.

Rose G. Doherty, CPA, Legacy Professionals LLP

Eileen M. Felson, CPA, CFF, PricewaterhouseCoopers LLP

Gary S. Hart, CPA, MBA, Gary Hart & Associates, Ltd.

Lisa A. Hartkopf, CPA, Ernst & Young

Margaret M. Hunn, CPA, CFE, CFF, CITP, Rozovics Group, P.C.

David V. Kalet, CPA, MBA, BP Products North America, Inc.

Thomas B. Murtagh, CPA, JD, Wolf & Company LLP

Marcus D. Odom, PhD, CFE, CPA (inactive), Southern Illinois University

Floyd D. Perkins, CPA, Ungaretti & Harris

Kelly Richmond Pope, Ph.D., CPA, DePaul University

Mark F. Schultz, CPA, Dugan & Lopatka CPAs, P.C.

INSIGHTis the official magazine of the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA. Its purpose is to serve as the primary news and information vehicle for some 24,000 CPA members and professional affiliates. Statements or articles of opinion appearing in INSIGHTare not necessarily the views of the Illinois CPA Society. The materials and information contained within INSIGHTare offered as information only and not as practice, financial, accounting, legal or other professional advice. Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication. It is INSIGHT’s policy not to knowingly accept advertising that discriminates on the basis of race, religion, sex, age or origin. The Illinois CPA Society reserves the right to reject paid advertising that does not meet INSIGHT’s qualifications or that may detract from its professional and ethical standards. The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within INSIGHT, and makes no representation or warranties about the products or services they may provide or their accuracy or claims. The Illinois CPA Society does not guarantee delivery dates for INSIGHT. The Society disclaims all warranties, express or implied, and assumes no responsibility whatsoever for damages incurred as a result of delays in delivering INSIGHT. INSIGHT(ISSN-1053-8542) is published four times a year, in Spring, Summer, Fall, Winter, by the Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA, 312.993.0407 or 800.993.0407, fax: 312.993.7713. Copyright © 2014. No part of the contents may be reproduced by any means without the written consent of INSIGHT. Permission requests may be sent to: Publications Specialist, at the address above. Periodicals postage paid at Chicago, IL and at additional mailing offices. POSTMASTER: Send address changes to: INSIGHT, Illinois CPA Society, 550 W. Jackson, Suite 900, Chicago, IL 60661, USA.

Join Dan Rahill, Chair of the ICPAS Board of Directors, and Todd Shapiro, ICPAS President & CEO for a fresh perspective on today’s hottest professional issues, as well as the trends shaping tomorrow’s horizon.

Engage in casual conversation with the Society’s leadership and your peers as you connect with a powerful professional community. all

CPE: 1 Credit Hour Cost: FREE Complimentary breakfast included. To

today’sCPA

Todd on Twitter@Todd_ICPAS}

{Watch Todd’s CEO Video Serieson YouTube}

The Place to Be

A FEW MONTHS AGO, I WAS AT A NORTHSHORE CHAPTER MEETING WHEN A MEMBER ASKED ME HOW WE ENCOURAGE YOUNG PROFESSIONALS TO MOVE TO THE STATE. I REPLIED THAT ILLINOIS HAS BECOME A MUCH SOUGHT-AFTER DESTINATION FOR YOUNG PROS, AND FOR A VARIETY OF REASONS.

I think there was some surprise, given all the negativity in the news. But fact and hype are often two very different things.

In my travels throughout the state, people regularly ask about Illinois' economic climate and its impact on the accounting profession. It’s true that Illinois has suffered economically over the past few years, but the accounting profession has weathered the storm and, in fact, is leading the comeback. All one needs to do is drive through the north and west sides of Chicago to see young professionals dominating the landscape. You can see some of the same enthusiasm among young professionals in Peoria, as well as other parts of the state. But facts speak louder than words.

In September, Illinois saw the largest unemployment rate decrease in the nation versus a year ago. Illinois also trailed only Texas in month-over-month employment versus August, 2014. The biggest gains came in professional and business services, with accounting services contributing to part of the increase. This is borne out in my discussions with firms of all sizes throughout the state. The number one issue facing them is finding enough quality staff. Competition for new college graduates is fierce, driving up starting salaries across compa-

Showing Our Support

In September, the Illinois CPA Society signed a Statement of Support for the Employer Support of the Guard and Reserve (ESGR). Our very own Marty Green, Esq., VP of Government Relations, is a colonel in the Air National Guard. We were honored to sign the Statement of Support and to encourage other employers to do the same.

For information visit: www.esgr.mil

nies and firms. Turnover is, again, becoming a significant factor in many of the larger firms, with individuals leaving to go not to smaller firms and companies, but to other large firms for more money.

The Illinois market's increasing competitiveness also is borne out by large firms from outside of Illinois merging with smaller firms within the state. Most recently, Missouri-based BKD merged with Wolf & Co., and Wisconsin-based Wipfli merged with LCV, organically opening and building up an Oak Brook office. Similarly, Michigan-based Plante Moran merged with Blackman Kallick. And the strength of having an Illinois address was never more visible than when Wisconsin-based Baker Tilly Virchow Krause moved its headquarters to Chicago.

Yes, Illinois, and in particular Chicago, is becoming quite the place to be, and your Illinois CPA Society will be there for people moving to and beginning their accounting careers in our great state.

Finally, as we close out 2014 and head into 2015, I wish each of you a year of unprecedented success—success that your Illinois CPA Society will continue to support and assist. We are, after all, your partners in ensuring a thriving future.

Watch My Latest Video!

Leadership touches just about every facet of your life, from coaching soccer to navigating a ski slope. You can take those seemingly random experiences and readily apply them to the business world. In my latest video, I use my own experiences to illustrate this concept in action and explore how leadership impacts the changing CPA landscape. Watch my video at: youtube.com/illinoiscpasociety

{Follow

despite the doom & gloom of some reports, illinois remains an attractive place to grow your business.

INSIGHTS & SOCIETY NEWS FROM ICPAS PRESIDENT & CEO TODD SHAPIRO

SEEN HEARD

NEWS BYTES, SOUND ADVICE AND PRACTICAL BUSINESS TIPS

63%

U.S. companies that say corporate social responsibility is “the right thing to do.”

[Grant Thornton]

NEED TO KNOW

4 LEVELS OF MENTOR

Is your CPA firm mentoring program alive and well?

Referencing an increasing number of inquiries into the effectiveness of mentoring programs, ever-popular CPA leadership consultant Rita Keller is hopeful that there’s renewed interest in, and a commitment to, nurturing, guiding and inspiring others. Here are the four levels of mentors firm leaders need to know about:

n The Guide: Think the “buddy system” at its finest.

n The Coach: You’re the teacher now; this is about showing someone how things are actually done.

n The Mentor: Now’s the time to share your wise career development advice and relay success stories and pitfalls.

n The Sponsor: Put your reputation on the line; get your protégé that promotion.

Read more in “Mentoring in the Round” on page 18.

How Satisfied Are Your Millionaire Clients?

According to a Spectrem Group study, 70% of millionaires work with a financial advisor in some capacity, and more than half consider it to be “extremely important” to do so. But are they satisfied with the service?

Mind the Q:

10 Annoying Buzzwords & Phrases

Today's workplaces are awash with buzzwords and clichés. A recent Accountemps survey of HR managers reveals the most overused and annoying ones flying around the office:

(1) "Out of pocket"

(2) "Deep dive"

(3) "Forward-thinking"

(4) "Employee engagement" (5) "LOL"

The Spectrem study reveals that, while only 13% of millionaires rely on their advisors to make all or most of their investment decisions, they still find that working with an advisor provides them with a wider range of investment opportunities (64%), improves their investment returns (62%) and gives them peace of mind (57%).

So how are their advisors doing? Well, 74% of respondents say they are satisfied with their advisor overall. And, most reassuringly, 90% say they will continue to use their primary advisor, while 62% say they’re likely to recommend their primary advisor to someone they know.

FINRA wants investors to know that "Q" stands for caution. A fifth letter "Q" at the end of a stock’s symbol denotes that the company has filed for bankruptcy and investors should avoid these shares.

WHETHER YOU ARE LOOKING TO ELEVATE YOUR BUSINESS OR TAKE THE NEXT STEP IN YOUR CAREER, WE CAN HELP.

As the experts in financial recruiting and staffing, Accounting Principals and Parker + Lynch know the Chicagoland area inside and out. We have an intimate understanding of the local job market, salary trends and business climate, which helps us connect great talent to great companies better than anyone else in the industry.

To learn more, visit us online or call your local office.

FORMERLY JACKSON WABASHFORMERLY GARELLI WONG

$413,200+

Individual income level at which taxpayers are placed in the top tax rate of 39.6% for 2015.

TRENDSPOTTER

Tech Tops Money List

Technology companies raised a record $24.8 billion during Q3 2014, with 18 technology companies from six countries completing IPOs, a 50% increase in volume over last year, says PricewaterhouseCoopers (PwC).

PwC’s Global Technology Industry leader Raman Chitkara explains that these record IPO proceeds “reflect the continued economic recovery and underlying optimism prevailing around the world. While the final quarter of the year...started with rising market volatility, investor faith in the future of the technology sector remains strong, meeting and even exceeding historical norms.”

Of course, Alibaba’s sector-dominating $21.8 billion IPO may have helped a little.

Telephone Tax Scams Continue

A nationwide phone scam that took off at the end of last year isn’t slowing down, says the IRS and Treasury Inspector General for Tax Administration (TIGTA). By August, over 90,000 complaints had been received, and it’s believed that more than 1,100 victims have lost around $5 million. The IRS shares warning signs, explaining that it never:

n Asks for credit card, debit card, or prepaid card info over the phone.

n Insists that taxpayers use a specific payment method.

n Requests immediate payment over the phone.

n Takes enforcement action immediately following a phone conversation.

n Initiates contact with taxpayers via email or other electronic communications to request personal or financial information.

3.5% Expected accounting & finance salary increase for 2015.

[Robert Half]

Mid-Market Firms in the Mix

The M&A market for mid-sized, privately held companies is ripe for action. In a recent poll by Deloitte, 43.8% of respondents said they expect the market to be “improving” or “very aggressive” in the next 12 months. What’s more, 46.4% say they’re confident their companies are prepared to entertain an offer immediately if that hypothetical “perfect buyer” comes along. Deloitte notes that the upswing in company valuations, share prices and cash-on-hand is also giving many sellers more options to extract value from their companies outside of an outright sale.

The Economies of Fraud

BELIEVE IT OR NOT, IT’S BEEN MORE THAN SIX YEARS SINCE LEHMAN BROTHERS FILED FOR BANKRUPTCY, MARKING THE “OFFICIAL” START OF THE RECESSION. IT’S BEEN A

As financial experts, we accountants have enjoyed a front-row seat to both capital infusions and cost-cutting measures. Today’s post-recession economy is far leaner. Employment, profits and transactions are showing steady improvements, but it’s easy to see that the numbers don’t provide the complete picture (heresy for a CPA to say, I know).

In the forensic accounting world, the recession marked two important changes: Lawsuit filings dropped off dramatically starting in late 2008, and internal investigations came to a virtual halt. Faced with draconian budget cuts, general counsels in every industry had to weigh the cost benefit of pursuing a dispute or investigating an allegation of wrongdoing. The public perception that forensics was booming as the economy collapsed is simply not the reality. So, now that the sailing is a bit smoother, forensics must be a hot career choice, right?

While it’s true that some forensic practices are rehiring, I don’t expect to see headcounts anywhere near pre-recession levels in the near future. The perceived demand is certainly there and, in fact, I’m inundated with resumes. But actual demand remains lower than it was in 2008, and is rising at a very slow pace. The reality is that business entities are still holding back from investigations and litigation.

Businesses enjoying profitability thanks to cost cuts across the board are loath to spend on any “luxury” items, such as consultants. H. Richard Hagen, an attorney and CPA of more than 15 years, is president and CFO of D’Orazio Capital Management Inc., a privately held family investment holding company that manages various companies in the manufacturing, transportation and energy industries. Hagen speaks for the decision-makers in industry when he says, “Even though prof-

its are rising and returning to near pre-2008 levels, business leaders remain cautiously optimistic about the continued growth curve. One might say we act very similarly to children who lived during The Great Depression who have never been able to forget that economic disaster and operate under the belief, however unwarranted, that the sky might just fall again.

“Operating a business under what may most accurately be described as a ‘caution flag’ causes CFOs to constantly guard against costs that are not absolutely necessary to maintain the business, including forensic accounting fees and the costs of hiring experts,” he goes on. “As businesses have more and more years of growth and prosperity under their belts, I believe the corporate purse strings will loosen and there will be room, financially speaking, to spend money on such things again.”

The Great Depression survivor mentality is a dead-on comparison to that of today’s CEOs, CFOs and presidents. Sadly, I’ve been a firsthand witness to C-suites that view proactive investigation and legal counsel as luxuries, failing to invest in them until their entities have sustained a fatal blow. Often in situations where retaining counsel is necessary, businesses attempt to save dollars by internally handling their own litigation support. In a large, multinational entity that’s familiar with complex litigation and the rules of evidence, prepared-byclient (PBC) analyses can be very helpful to the legal team. Keep in mind, however, that PBCs lack any independence and the client acting as his own expert is living dangerously. Small to midsized entities that follow this path risk evidence being spoiled, essentially ruining their own cause. The trusted tech advisor (“my IT guy”) can single-handedly destroy an investigation while trying to preserve evidence/data.

businesses see their profits return, yet still hesitate to litigate.

BRAD SARGENT, CPA/CFF, CFE, CFS, CR.FA, FABFA, THE SARGENT CONSULTING GROUP

LONG, TOUGH RECOVERY SINCE THEN, AND WHILE ECONOMIC INDICATORS ARE TRENDING UPWARDS, IT’S STILL A WORK IN PROGRESS.

To no surprise, attorneys view the reluctance to hire forensic experts from a different perspective. John C. Sciaccotta is a Chicago litigation partner at Taft, Stettinius & Hollister LLP. He has concentrated on complex civil litigation and arbitration matters for nearly 30 years, and explains that, “I think clients are reluctant to engage forensic accountants to inquire and peel back the onion for sometimes ‘articulated’ financial reasons. Many times psychologically, they wish not to know the true story behind financial irregularity. It almost creates a guilt complex that they were failing at the switch and would rather sweep it under the rug and simply ignore it.”

What accountant wouldn’t want to know the facts, you ask. But, before you dismiss Sciaccotta’s opinion, know that I fully agree with him. I have written in this column about clients who simply ignore the facts and refuse to acknowledge the extent of the damage. Does this describe management at your entity?

At the end of the day, decisions to invest are predicated on need and trust. If a trusted advisor, such as an accountant, recommends that an attorney have the additional assistance of a consultant, the client will weigh his/her decision for or against heavily. Even when the decision is in the consultant’s favor, the future is far from guaranteed. In my most compelling cases, I’ve seen clients at the onset approve investigations and be truly determined to find the facts, only to pull the plug once a trusted employee or relative is identified as culpable. This has nothing to do with economics.

I have often compared my job to that of a cardiac surgeon. A patient seeing symptoms of cardiac issues may submit to a thorough physical exam by their GP, who then refers them to a specialist. Can you imagine that patient then deciding not to see the specialist because it might be too much of a financial investment?

In spite of continued economic growth, consultants, such as forensic accountants, are still perceived as discretionary dollars out of operating expenses. Stakeholders can be blinded by the cost of the cure, failing to see the cost of the ailment.

About Brad Sargent

Bradis the managing member of The Sargent Consulting Group, LLC, which specializes in forensic accounting and financial investiga-

tions. He is a frequent lecturer and chair emeritus of the American Board of Forensic Accounting, and serves on the American Bar Association, Section of Litigation, Expert Witness Committee and Criminal Justice Section, White Collar Crime Committee. He is a member of the Association of Certified Fraud Examiners, the Association of Certified Fraud Specialists and the Association of Insolvency

and Restructuring Advisors. A member of the Illinois CPA Society since 2002, Brad has served on the Committee Structure & Volunteerism Task Force, the Fraud Conference Task Force (which he chaired from 2009-2010 and 2012-2013) and the Strategic Planning Committee (which he chaired from 20112013). Share questions and comments with Brad at bsargent@scgforensics.com.

tax decoded

KEITH STAATS, JD, GRANT THORNTON STATEAND LOCAL TAX (SALT) PRACTICE

Tough Tasks for Nonprofits

qualifying for sales & property tax exemptions isn’t easy for illinois’ NFPs.

SO, YOU’RE A NEW NONPROFIT BOARD MEMBER. DON’T BE SURPRISED IF THE FIRST QUESTION YOU’RE ASKED IS, “SHOULD WE BE EXEMPT FROM ILLINOIS SALES AND PROPERTY TAXES?” ASTUTE AS YOU ARE, YOU ANSWER, AS IS THE CASE WITH ALL THINGS TAX, “IT DEPENDS.”

The Illinois Retailers’ Occupation Tax and the corresponding Use Tax authorize an exemption from sales and use taxes on purchases made by entities organized and operated for “exclusively charitable” purposes. As authorized under the Illinois Constitution, the Property Tax Code also provides an exemption from property taxes for organizations that are “exclusively charitable.” The Illinois Department of Revenue (IDOR) ultimately determines who qualifies.

Applications for sales tax exemption are sent directly to IDOR. Applications for property tax exemptions, however, must be submitted to the local county Board of Review, which submits its own recommendations to IDOR. In many instances, local taxing bodies also must be notified of the request for property tax exemption and have the right to intervene and express their opinion.

If an applicant is denied an exemption, he/she has the right to request an administrative hearing to challenge the denial. If the applicant’s challenge receives an adverse hearing decision, he/she may appeal to the Circuit Court. Circuit Court appeals against adverse decisions concerning property tax exemptions are heard in the county in which the property is located. An appeal against a sales tax exemption denial is heard either in Chicago or Springfield.

The big question for anyone applying for a charitable exemption is what defines “exclusively charitable”? Being organized as a nonprofit and maintaining 501(c)(3) status isn’t enough to meet Illinois’ strict standards. In fact, applicants have a lot to prove in order to earn an exemption, and should be prepared to present certain basic information, including a copy of the organization’s charter and bylaws, a statement of the organization’s purposes, and a statement of income and expenditures for the organization’s last fiscal year.

In addition, applicants should provide a narrative that addresses the following distinctive characteristics of a charitable institution, as outlined by the Illinois Supreme Court. IDOR and the courts apply these characteristics when evaluating sales and property tax exemption requests. Specifically, the organization must,

n Have no capital, capital stock, or shareholders;

n Earn no profits or dividends, but rather derive its funds mainly from public and private charity and hold them in trust for the objectives/purposes expressed by its charter;

n Dispense charity to all who need it and apply for it;

n Not provide gain or profit in a private sense to any persons connected with it;

n Not appear to place any obstacles of any character in the way of those who need and would avail themselves of the charitable benefits it dispenses; and,

n Make charity the primary purpose of the property’s use.

In other words, the standards are strict, and the burden of establishing entitlement to a tax exemption rests on the person seeking it through clear and convincing evidence.

A review of several cases and administrative hearing decisions from the past two years illustrates the fact that taxation is often the rule and exemption the exception.

Meridian Village Association v. Hamer

In early 2014, an Illinois Appellate Court upheld IDOR’s denial of a property tax exemption sought by a senior housing facility. The Court concluded that the applicant was unsuccessful in establishing that its funds came from public and private charity, placed obstacles in the way of those seeking charity and didn’t show that the primary use of the property was for charity. This case illustrates the difficulty faced by senior

housing facilities in qualifying for sales and property tax exemptions.

Web Innovations v. Department of Revenue

An Illinois Appellate Court upheld the denial of sales and property tax exemptions requested by a nonprofit company that recycled and refurbished electronic equipment. The Court reaffirmed the Department’s hearing decision that even though the company’s activities may have had a positive impact on the environment and society in general, it received payment for the items it recycled and was not able to establish that it provided gifts to the public by not charging fees. The Court also concluded that the company didn’t show sufficient evidence that it waived fees for those who could not afford them, and didn’t establish that its activities lessened the burden on government.

Administrative Hearing Decision ST13-12

In this hearing, the Department denied a sales tax exemption to a nursing home, specifically ruling that the applicant did not receive its funds primarily from charitable contributions because they came from “resident revenue” in the form of Medicare, Medicaid and supplemental insurance. The hearing officer also concluded that the applicant didn’t demonstrate that its charitable services benefited “an indefinite number of people” because the charitable acts consisted mainly of waiving Medicare and Medicaid co-payments.

Administrative Hearing Decision ST13-16

A nonprofit that addresses changing the lives of homeless people through the activity of running was denied a sales tax exemption when the hearing officer noted that the total salaries and related expenses of the organization equaled 58 percent of its total revenue. The offer therefore was unable to conclude that the organization didn’t provide gain or profit in a private sense to any person connected with it. The hearing officer also concluded that the organization didn’t dispense charity to all who needed it and applied for it, because there was no evidence that persons physically unable to run could, and did, participate.

Administrative Hearing

Decision PT14-04

Local theater group Wheaton Drama Inc. was denied a property tax exemption when

the hearing officer concluded that the study and promotion of theatrical arts is not recognized as inherently charitable. The hearing officer determined that the organization is a membership organization, which a member joins not because of a desire to assist in dispensing charity, but because of a mutual interest in theater. In reaching this conclusion, the hearing officer cited Illinois cases that maintain that fraternal and social organizations do not qualify for exempt status because they operate primarily for the benefit of a limited class of persons who are members, even though they may also dispense charity.

Administrative Hearing

Decision ST13-21

Closing with an example of success, a hearing officer concluded that an organization operating a no-kill animal shelter did qualify for a sales tax exemption. The organization provides food and shelter to farm and domestic animals, conducts programs to help prevent animal abuse, and encourages spaying and neutering pets. The organization doesn’t charge for any services, receiving all income from donations.

These cases and administrative hearing decisions make it clear that sales and property tax exemptions are strictly construed. Exemption denial surely awaits nonprofits unaware of the requirements and detailed evidence needed to sway IDOR in their favor.

About Keith Staats

Keith is a director in Grant Thornton’s State and Local Tax (SALT) Practice in Chicago, and has been involved in tax planning, consulting and dispute resolution in all areas of state and local tax. He has served as General Counsel of the Illinois Department of Revenue (IDOR), was involved in the development of Illinois tax policy, reviewed and evaluated all tax-related legislation proposed by the Illinois General Assembly, contributed to the drafting of all tax legislation proposed by the Governor, and was a member of the IDOR Informal Conference Board. He has represented taxpayers before both the Informal Conference Board and the Board of Appeals. Keith is a professional affiliate member of the Illinois CPA Society, and is a member of the American Bar Association, the Illinois State Bar Association, the Chicago Bar Association and the Board of Directors of the Civic Federation of Chicago. Got questions or feedback for Keith? Reach him at keith.staats@us.gt.com.

MARK J. GILBERT, CPA/PFS, REASON FINANCIAL ADVISORS, INC.

Think Healthy

here’s how to successfully plan for a client’s healthcare costs in retirement.

Nevertheless, planners do have some tools for forecasting healthcare costs at their disposal. For years, Fidelity Investments has developed and annually updated a Retiree Health Care Cost Estimate, which projects average costs for a couple, both retiring at age 65, over an average life expectancy (82 male, 85 female). In 2014, Fidelity estimated this total cost at $220,000, assuming traditional Medicare coverage for both spouses and excluding long-term care. The good news is that this estimate is down from its all-time high of $250,000 set in 2010, thanks to better drug coverage under Medicare, improved cost-containment efforts among consumers and slow economic growth rates. The bad news is that only 10 percent of pre-retirees surveyed by Fidelity said they expected to spend $200,000 or more on healthcare costs in retirement, while 79 percent said they expected to spend less.

On the software front, HealthView Services’ HealthWealthLink is designed to project costs of care for a specific client based on responses to a personalized questionnaire. The software even determines a projected life expectancy for the client, and allows modeling of different health scenarios and/or levels of care.

Ultimately, though, you have to sit your clients down, review the results of these tools and determine their desire to over-fund, fully fund, or partially fund the anticipated level of costs.

As I mentioned, the Fidelity survey estimate excludes any projected costs of long-term care. These types of costs are generally incurred when an individual needs help performing one or more “activities of daily living,” such as dressing, eating/ feeding and ambulating (walking). Assistance could be provided by a visiting healthcare professional, or it could be delivered in a nursing or assisted living facility. Because the range of such

costs varies from paying an hourly wage to paying several thousands of dollars for round-the-clock care, planning becomes extremely difficult.

In my experience, the uncertainty of long-term care can weigh so heavily on a client’s mind that they choose to ignore planning for it altogether. This is really the wrong approach. I find it more helpful to recommend planning for some tangible level of cost, recognizing that some planning is better than none at all.

Meeting the healthcare-in-retirement challenge requires a multi-pronged approach. First and foremost is Medicare. Most U.S. residents aged 65 and older quality for the governmentsponsored program, which includes Part A (hospital insurance), Part B (medical insurance) and Part D (prescription drug coverage). Part C (Medicare Advantage) is a private plan alternative to Medicare, which also provides A, B and D coverage. Medicare enrollees will pay monthly premiums for Medicare A, B and D, as well as coinsurance and other out-of-pocket costs for care. Benefits are paid to providers according to what is “reasonable and necessary” for the diagnosis and treatment of a person’s illness, injury or condition.

Of course, Medicare benefits won’t cover all healthcare costs in retirement. As a result, private insurers have developed “Medigap” insurance policies designed to pay providers for qualified costs beyond Medicare reimbursements. These supplement plans—known as F, G, K, L, M and N—vary in cost and the standardized benefits they provide.

Additionally, insurers have developed long-term care policies to pay for costs not otherwise covered by Medicare. Most policies require a need for assistance in carrying out at least two activities of daily living in order to pay benefits.

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Finally, as challenging as it is, saving while young, able and working is critical to meeting healthcare costs in retirement. While many people still believe their Social Security benefits can cover some portion of their costs, that amount is shrinking. HealthView Services developed a Retirement Health Care Cost Index that measures the percentage of Social Security benefits needed to pay the retirement health costs of a healthy couple receiving the average Social Security benefit at full retirement age. This percentage is expected to rise from 69 percent in 2015 to 98 percent by 2024, and then jump to 127 percent in 2034.

Another option for many is simply to work longer. Fidelity found that for each year of retirement prior to age 65, healthcare costs increase $17,000 a year for the typical couple, while the cost decreases by $10,000 a year for each year beyond 65 that the typical couple defers retirement.

In short, we as trusted advisors can and should help clients facing retirement by educating them about the potential tools and solutions

CPA Endowment Fund of Illinois

available to meet the challenging and harsh reality of rising healthcare costs.

About Mark J. Gilbert

Mark is a principal in the financial planning and investment management firm of Reason Financial Advisors, Inc., with offices in Northbrook and Naperville, Ill. He has been a CPA and member of ICPAS since 1982, and was awarded the AICPA’s PFS designation in personal financial planning in 1999. He currently serves on the ICPAS Finance & Treasury Management Committee and the Committee Structure & Volunteerism Task Force. Mark is frequently called upon by the media, and has appeared on WBBM (Channel 2), WLS (Channel 7), WGN (Channel 9) and WDCB (90.9 FM), covering financial planning topics. He also has been quoted nationally in notable titles such as the Chicago Tribune, Wall Street Journal, Money and US News. Email Mark with questions and feedback at mgilbert@reasonfinancial.com.

Meet

“Despite being deployed in Kuwait and working over 50 hours a week, I have chosen to continue advancing my education through the online courses available to me every semester. When I return from my deployment, I will complete my degree in accounting. This education, combined with my military credits, will leave me CPA eligible. Thanks to this scholarship, I am one step closer to achieving my dream of becoming a CPA.”

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“My mom, who is legally blind, worked at a local nonprofit to support me and my brothers on a single income. She taught me that you can’t change the cards you are dealt, but with hard work you can rise above any obstacle. I worked hard throughout school because I knew I’d have to rely on scholarships in order to afford my higher education. I didn’t want to deny myself the opportunity of pursuing accounting, solely because I couldn’t afford a quality education.”

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Augustana College, May 2014 | Audit Assistant, Deloitte LLP Accounting Tuition Scholarship Recipient & Mary T. Washington Wylie Scholar

www.icpas.org/annualfund.htm

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capitol report

Springfield or Chicago?

where is illinois’ true seat of government?

I recently spoke with former Governor Jim Thompson at an event at the Governor’s Mansion in Springfield. Sitting in one of the mansion’s stately and historic rooms, Governor Thompson reflected on how he governed from the mansion during his 16 years in office. My former boss Governor Edgar also lived in the mansion, used it as a base of operations for his administration and frequently worked out of his mansion office. For generations, governors have used the mansion for meetings with members of their cabinets, bringing leaders together to forge agreements on legislation. Most importantly, the mansion is a centerpiece for the people of Illinois.

Illinois law (5 ILCS 190/1) does indeed designate Springfield as Illinois’ seat of government. Drafters of the Executive Article of the Illinois Constitution placed great importance on the capital city, requiring constitutional officers “to keep public records and maintain a residence” there.

In the meantime, Chicago’s James R. Thompson Center (known as the JRTC in state government terminology) was dedicated in 1985 as a modern office building to house state government operations. Over time, the footprint of state government has significantly expanded to the state’s largest city, and the implication might be that state government actually operates out of Chicago.

Each of the constitutional officers, legislative leaders and their respective staffs have offices in the JRTC. State agencies such as the Department of Financial and Professional Regulation, State Fire Marshal and the Department of Central Management Services also have offices located in the JRTC. The General Assembly occasionally holds hearings in the Bilandic Building, which is right across the street from the JRTC, and we frequently see

state officials holding high-profile press conferences from the JRTC. And with the exception of Lt. Gov Sheila Simon, who is from Southern Illinois, the remaining constitutional officers all live in the Chicagoland area.

Even with the migration of state government operations to Chicago, however, Springfield remains the capital city and headquarters for state government. Springfield’s Capitol Building includes the chambers for the House of Representatives and State Senate. There are legislative committee hearing rooms and office suites for legislative leaders, legislative support agencies and legislative staff. It is here that the legislative process occurs, with the General Assembly meeting en banc to conduct committee hearings on legislation, and the governor delivering the annual State of the State Address and Budget Address. The constitutional officers, minus the attorney general who has her own building, also maintain their main offices in the State Capitol Building. What’s more, the basement of the State Capitol Building has a system of vaults in which important documents and workpapers are stored, along with unclaimed property escheated to the state.

State agencies such as the Department of Revenue, the Illinois State Police and the Department of Natural Resources each maintain large office complexes in the capital city. The Department of Central Management Services maintains the state’s mainframe computer system here, and the Emergency Management Agency has its State Incident Response Center located in Springfield, allowing state agencies and state officials to gather in response to a disaster or significant event.

The historic Illinois Supreme Court building, which houses the court’s massive law library, official documents, support staff

MARTY GREEN, ESQ., ICPAS GOVERNMENT RELATIONS OFFICE

SINCE THE LEGISLATURE ISN’T IN SESSION, ICPAS MEMBERS OFTEN ASK ME, “WHAT’S GOING ON IN SPRINGFIELD?” HOWEVER, WITH SO MUCH HAPPENING IN CHICAGO, IT DOES MAKE YOU WONDER WHERE ONE CITY SITS IN RELATION TO THE OTHER, LEGISLATIVELY SPEAKING.

and chambers, also is located in Springfield, and it is here that the court meets en banc. As a side note, the Court met en banc in Chicago for the first time this past year, while the Illinois Supreme Court building underwent an extensive renovation and upgrade, which was completed early this fall.

There are other significant buildings in Springfield, including the State Archives Building, which houses and preserves our state’s treasured documents, the State Museum, which captures the rich history and antiquities of our state’s history, the magnificent State Library, and the Abraham Lincoln Presidential Library, which houses the state’s historic Lincoln documents and artifacts. Added to that, the historic State of Illinois mine rescue station continues to house mine rescue vehicles that are ready to respond should a coal mine disaster strike in one of Illinois’ 13 underground mines. The station still has its original railroad tracks dating back to when railcars were used to transport rescue equipment and personnel.

These examples illustrate that even when the General Assembly isn’t in session in Springfield, the capital city serves as the headquarters for state government operations, and important policy, public safety and regulatory functions continue as a course of business. This

is an important reason why the Illinois CPA Society maintains a fulltime office in the Capitol Complex in Springfield, in close proximity to crucial state services and regulatory agencies.

About Marty Green

Marty is the Illinois CPA Society’s Vice President of Government Relations, working with the CEO and Board of Directors to oversee and implement the Society’s legislative and regulatory activities. Marty also curates ICPAS’ Capitol Dispatch [www.icpas.org/CapitolDispatch.htm], a monthly digital digest of legislative news for Illinois CPAs. Marty is a practicing lawyer, member of the Illinois Bar and a colonel in the National Guard. He previously served as executive assistant attorney general for Illinois Attorneys General Lisa Madigan and Jim Ryan, and as director of the Governor’s Office of Citizens Assistance and assistant to the Governor for Public Affairs, both under Governor James Edgar. Marty holds a number of professional certifications and is admitted to practice before the state and federal courts. He is the past president of the Western Illinois University Alumni Council and is an adjunct professor for the Department of Health Sciences. Got questions or feedback for Marty? Reach him at greenm@icpas.org.

Mentoring in the Round

Women of different generations and levels mentor each other best in—no surprise here—small group settings. ICPAS creates mentoring circles with a life of their own.

By Kristine Blenkhorn Rodriguez

You might hear a one-on-one conversation on corporate structure among male executives on the golf course, on the treadmill at the athletic club and even in the men’s room. But the majority of women respond to community, says Parissa Behnia, Chicago chapter leader of Ellevate, a global professional women’s network. “So for mentoring, groups tend to work well for women, many times better than a oneon-one relationship.”

And while firm-driven mentoring is laudable, says Kim Rice, chair of the Illinois CPA Society (ICPAS) Women’s Executive Committee, mentoring outside of your firm opens up additional possibilities.

ICPAS steps in

In its survey of the top 50 accounting firms in Illinois, ICPAS discovered that while roughly 50 percent of new hires were women, female partnership held steady at about 17 percent. Year after year, for four to five years, the needle did not move.

“We tried to address the situation through one-on-one mentoring first,” Rice explains. “But one-on-one mentoring requires chemistry between the mentor and the mentee. Matching people through a formal system and hoping the bond would stick was not a successful formula.

“Next we tried mentoring’s version of speed dating. We held two events where each mentee had three minutes or so with a mentor. Meaningful connections happened but the concept didn’t really take off as a program per se. Three minutes is just not enough time to determine whether you’re going to connect with somebody. You need to spend some time—some real time—to be sure it’s the right connection. You need to have enough similarities to make it work—shared motivation, motivators, similar career path, etc.”

Despite the lackluster start, Rice felt confident that the need for women’s mentoring could be addressed. It was just a matter of hitting on the winning formula.

Circles make an entrance

Enter ICPAS member Paula Galbraith. As a member of the Chicago Bar Association (CBA), Galbraith had seen the CBA’s Alliance for Women Committee achieve high levels of success using “mentoring circles” as a model. She mentioned the concept to the ICPAS Women’s Executive Committee, and the circles were implemented roughly a year ago. ICPAS’ mentoring circles are meeting with similar success, with Galbraith as chair of the effort.

“We have about 20 circles now,” says Rice, “most under 10 people to foster group interaction, and also some intimacy.”

The groups are given suggested discussion topics, such as negotiating pay and work/life balance, but each is free to determine its own agenda and meeting frequency.

Young professional Martrice Caldwell is a senior accountant at the YMCA of Metropolitan Chicago. She joined one of ICPAS’ mentoring circles a year ago, hoping to connect with other women in the field. “I honestly didn’t know what to expect. I think it’s turned out pretty well. My circle meets once a month, and,” she jokes, “we planned topics for the year in true accountant fashion—by ranking a list and then having one of the auditor members weigh the rankings.” The group utilizes a virtual drop box to share articles, presentations and podcasts in advance of meetings.

Caldwell says she sees even more value in the group as time elapses. “As people get to know you, they can really tailor their advice better,” she explains.

Olga Bernick, senior auditor at Kessler Orlean Silver & Co., PC, joined one of the mentoring circles for a different reason. “I had been a stay-at-home mom for six years, so I had a career gap. My peers had moved on to higher roles and I was having to reenter the workforce at my previous level.” Bernick felt she needed advice on how to fast track.

Her group is a bit less formal than Caldwell’s in their topic coverage. “We tend to discuss

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what comes up for each of us. Also, I get a different perspective on how other accounting firms handle similar issues.”

Wendy Kelly is one of the more senior members of her mentoring circle. “I joined to help people, but no doubt I’ve learned things along the way. There’s an element of just getting myself into a different situation where I have the opportunity to learn from new people.”

She sees the generation differences as key. “The older generation has more of a handle on face-to-face situations, and that’s what these circles are. So it’s a good opportunity for us to coach junior members on how to navigate these waters. So much of their interactions now are technology based,” she explains.

With the youngest member of her group serving as a principal in a firm and having 10 years’ experience under her belt, Kelly says topics tend to center around the issue of hiring during busy season rather than moving up the ranks. “We have a loose format but it works for us. We talk about the topics that are pressing to us at the moment and it seems there’s always someone who has good advice to offer.”

Galbraith stresses that the mentoring goes both ways. “I’ve seen senior members stumped by where a junior person on their firm team was coming from,” she explains. “They present the situation within (the) circle and the younger members clue them in. There really are generational differences sometimes in perception and approach. And we all need coaching on those.”

Sponsors in the driving seat

Mentoring isn’t the only thing women need in order to get ahead, says Behnia. They also need a sponsor to make their careers really take off. In fact, a Harvard Business Review report and article,

“Why Men Still Get More Promotions Than Women,” claims the reason most women don’t get ahead is because they are over-mentored and under-sponsored.

The difference lies in action versus conversation. Sponsorship involves actively advocating to get someone a job or promotion, mentioning their name in an appointments meeting, and helping that person advance. Sponsors need to be politically connected and sitting at the tables you are not, privy to hiring decisions in which you won’t have a say. Some of the savvier professional services firms are working on this challenge in myriad ways. It’s a mind shift and a culture change.

“Sponsorship is like the GPS in your car,” says Behnia. “It ensures you get to your destination and doggedly reroutes you if traffic gets in the way. Your sponsor helps you get where you want to go by paving a route, putting you in the right places at the right times.”

Mentoring is simply advising on how to put yourself out there and self-advocate, and it takes into account some of the pitfalls you may run into along the way, says Behnia. “GPS systems do not account for rain or the person driving like an idiot in front of you. That’s where mentoring comes in; it’s coaching to avoid and deal with some of the hassles you will encounter on your journey.”

That makes mentoring essential in preparing young female professionals for leadership roles. If you’ve not been properly mentored, chances are you’re not ready for the job when the right sponsor comes along, willing to promote you.

Necessity or nice to have?

“Many women will tell you we’re equal now,” says Rice, “that there’s not much need for woman-to-woman mentoring. I have to disagree. Things are different than when I came up through the ranks, but not different enough. When we account for half or more of the employees in a firm but only one-in-five partners is a woman, we still have a gap.”

The statistics are changing, albeit slowly. According to research from Catalyst, 11.5 percent of CFOs in the Fortune 500 are women. And the highest-paid female executive in the United States last year was a CFO—Safra Ada Catz, Oracle CFO and president, who earned $44.3 million, according to Find the Best research. Catz is #24 on the Forbes 2014 Power Women list.

While 1-in-10 CFOs being female isn’t equal representation, it’s a better scenario than just a decade ago. Women in developed countries such as the United Kingdom still experience a 24-percent wage gap compared to men, according to Catalyst’s Women in Accounting, which is better than Malaysia’s 51 percent, but far from ideal.

As the accounting profession faces the continued exit of Baby Boomers from the workforce, utilizing all talent will become an issue of increasing importance for firm leadership, industry or professional. “If mentoring circles can help us retain and diversify talent, then we’ve done our job,” says Rice. “The need for mentoring will continue into the foreseeable future. That much is sure.”

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“[M]entoring is still essential in preparing young female professionals for leadership roles. If you’ve not been properly mentored, chances are you’re not ready for the job.”

Follow the Nonprofit Leaders

Three strategies to engage donors, boost donations and reach the top of your game.

By Sheryl Nance Nash

We can be thankful for one thing above all else: American philanthropy is finally moving beyond recession levels, with Americans giving $335 billion to nonprofit organizations in 2013—a 4-percent increase from 2012, according to a 2014 survey conducted by Giving USA.

“Americans want to give, but they are not always inspired by nonprofit organizations that are doing the same things they always have,” says Robert Evans, president of Evans Consulting Group. “But within a year or two Americans will surpass the high watermark for giving set in 2007, just before the Great Recession. The economy is on an upswing and it’s actually a good time to be fundraising.”

That said, donors and consumers are more conservative in deciding where their contributions go. Certainly today, more than ever, strategy is what differentiates the nonprofit that thrives and the one that struggles.

With that in mind, here’s a look at three strategies launching some of Illinois’ nonprofits to the top of their game.

Find strength in partners

One word keeps coming up when experts talk about what successful nonprofits are doing: Collaboration.

“There was a time when nonprofits could work independently on their own programs, largely because any single nonprofit was the only one in its geographic area doing that work,” explains Laura Waller Miller, program manager for the Office of Gift Planning at the Ohio State University Foundation. “Today, however, nonprofits have proliferated to the point of making isolation ineffective. They must collaborate—not just programmatically, but on the funding side as well. That means coordinating efforts, sharing costs, sharing the population they serve, sharing donors. That may seem to be blasphemy for many nonprofits, but it’s critical for them to open up to this in the future,” she says.

Chicago Foundation for Women (CFW) is proving to be one of the savviest regional nonprofits in this area. Since 1985, the organization has given more than 3,000 grants totaling $24 million, and has earned a leading 5-star Charity Navigator rating for its efforts to improve the lives of women and their families. CFW does so by fundraising for organizations that strive to help women and girls with issues such as economic security, violence and healthcare.

What’s made CFW such a success? “We collaborate to ensure more resources are directed to the women and girls who need them most,”

says Sharonda Glover, CFW’s manager of communications. In 2012, for example, CFW formed a strategic alliance with the then 110-year-old Eleanor Foundation to maximize its efforts to combat economic insecurity amongst women. Through the alliance, CFW merged the former Eleanor Foundation’s programs, board members and assets with its own to create the Eleanor Network at CFW, which now supports an array of economic security strategies, from after-school programs for girls to grassroots advocacy campaigns with grandmothers.

In 2013, the Eleanor Network awarded 52 economic security grants of more than $1 million. At the same time, the organization saw fundraising growth of 27 percent from diversified sources.

Get your story out

You can do all manner of amazing things on par with CFW, but what if nobody knows you’re doing them? Much like the corporate world, reputation is everything, and nonprofits that don’t manage their public image will lose out.

Experts advise using a mix of strategies: Update social media regularly; blog about your initiatives; email newsletters and mail out a print newsletter or magazine. “The more donors hear meaningful information from you, the more connected they feel towards you,” says Catherine Chapman, a certified fundraising executive with philanthropic advising firm Fullanthropy.

Lack of recognition in the public eye isn’t an issue for Northbrook, Illinois’ North Suburban YMCA (NSYMCA), an organization that has fully embraced the power of PR.

“We have an active, super-fueled public relations initiative. The Y prolifically writes and distributes feature stories that cover the unique attributes of YMCA programs and the Y’s never-ending commitment to serving the community,” says Nancy Gerstein, a marketing consultant with the NSYMCA.

“Our marketing and public relations have been vital to the success of our agency, our program participation, and our face in the community. We’re fortunate in that we create lots of news—from the events we hold to the grants we receive, to the partners we work with, to our members whose lives the Y has touched. Our community recognizes the value of ‘their Y,’” adds Howard Schultz, NSYMCA executive director/CEO.

Beyond traditional PR lies ever-powerful social media. “Failure to embrace contemporary technology often means doom for many nonprofits,” says Evans. No doubt any organization not taking full advantage of social media is missing mega opportunities to engage with potential donors, maintain relationships, raise funds, and more.

The Y, for one, posts on Facebook and Twitter up to four times a day. Social media is used to notify members and program participants of class and program changes; alert followers to community concerns; link to local agencies, outside vendors and government institutions; repurpose press releases and link to articles in the press; post photos and videos of events, members and staff; and more.

See donors differently

These efforts are particularly significant when you consider that overall donor retention is less than 40 percent, says Larry Johnson, author of The Eight Principles of Sustainable Fundraising. It’s less expensive to retain a donor than it is to capture a new one, and savvy nonprofits are starting by treating donors as individuals rather than simply throwing money at retention efforts.

“Organizations need to think of donors as investors and treat them the same way that fund managers treat their top investors,” says Frank Jakosz, CPA, partner, Sikich LLP’s nonprofit accounting team.

Part of that includes respecting how donors want to communicate. “Give them choices for channels of communication. You might have acquired a donor through direct mail, but you retain them through social media, for example,” explains Bill Sayre, president of Merkle Response Management Group, a provider of response processing and fulfillment. “Ask donors what they want and listen to them. If you don’t, you’re not likely to keep them.”

It’s important, too, that not every communication is about an ask. “In the old days, nonprofits would send an annual birthday card and Christmas card thanking donors and inviting them to the next gala, where they again were asked for money. The new strategy is to communicate in ways that are meaningful to each person— stewarding relations before and after the gift in a way that allows for active engagement and influence,” says Miller.

“One of the biggest mistakes organizations make is to rely too heavily on special events and not take the time to really get to know their donors,” adds Charles McLimans, president and CEO of Loaves & Fishes Community Services, a Naperville, Ill. hunger relief and anti-poverty organization that provides groceries and essential support services to low-income families.

“One thing we’ve done very successfully is get to know our donors and fully engage them in our mission,” explains Barry Horek, CPA, immediate past chair of Loaves & Fishes’ board of directors.

Judging by its recognition as the United Way of Metropolitan Chicago’s Safety Net Impact Agency of the Year for 2014, its 30 years of existence, and its record-breaking year of serving nearly 20,000 residents from the western suburbs, Loaves & Fishes is doing a lot of things right.

“We reach out to our donors in a variety of ways, in one-on-one meetings, tours of our facilities, through events, and more,” Horek explains. “Simply, we make it easy for them to volunteer their time at Loaves & Fishes and invite them to serve with us. Our donors become engaged in our mission when they see firsthand the work we do and hear from those we serve.”

“One of the secrets to nonprofit success is having a clear mission and making sure volunteers, employees and the board of directors understand and believe in that mission,” says McLimans.

“When the plan is clear, the organization makes it plain who it is, what it does, where it’s going, and more,” adds Miller. “Clarity translates to influence, which leads to impact.”

Illinois CPA Society Dedicated Resources for

At the Illinois CPA Society, we place significant value on our members, and recognize what makes them unique. We know that financial professionals in the not-for-profit industry face challenges and opportunities that others do not, so we have created several benefits with our not-for-profit members in mind.

NOT-FOR-PROFIT MEMBER BENEFITS

Not-for-Profit Conference

•Annual event offered in Rosemont and Springfield that focuses on not-for-profit updates and challenges.

Not-for-Profit Advanced and Emerging Accounting and A-133 Issues Conference

•Annual conference combining important topics and updates to provide essential knowledge needed for the year ahead.

Not-for-Profit Roundtables

•Quarterly forum sponsored by the Not-for-Profit Committee that provides opportunities to network and share information.

Not-for-Profit Committee

•Mission: “To encourage excellence in the management of not-for-profit entities and in the performance of professional services for these not-for-profit organizations.”

Not-for-Profit Resources Webpage: www.icpas.org/nfp.htm

• News: Provides recent developments and news updates.

• Education: Find and register for upcoming programs.

• THE NETWORK: Informal guidance from ICPAS members.

• Hot Links: Quick access to frequently requested resources.

Questions or Comments?

Contact Gayle Floresca, CPA, Assistant Director, Professional Standards 312.993.0407 ext. 254, or visit:

www.icpas.org/nfp.htm

5 Ways to be Super Ethical

What does it take to make one of those much-touted “Most Ethical Company” lists?

By Selena Chavis

Workplace ethics has become a popular buzzphrase in corporate America, and for good reason. In the wake of high-profile scandals in recent years, public tolerance for anything less than squeaky clean has simply vanished. More than ever, the C-suite is on alert to establish a culture of ethics as a foundation for success. In fact, companies across the board are competing for titles that place an ethical stamp of approval on their name.

Consider that independent research group Ethisphere Institute receives thousands of entries and nominations each year for its “World’s Most Ethical Company” list. In 2014, 144 companies across 41 industries were recognized for translating ethics policies into action and raising the bar for industry best practices—names such as Xerox Corporation, General Electric (GE), Microsoft and Kellogg Company included.

“Reputation is everything in this business,” says John Klisch, CPA, partner and SEC prac-

tice leader with Plante Moran in Chicago. “We all know how fast that can unravel.”

The word “ethics” comes from the Greek word “ethos,” meaning character. According to ICPAS Ethics Committee Chair George Heyman, CPA, MAS, MBA, an instructor with AuditSense, specializing in ethics and corelevel staff training, ethics is the study of how we make decisions, taking into consideration the complex relationships between people and the environment around them.

“The major trade-off ethically is the promotion of self-interest versus other people’s rights,” Heyman explains. “Clients prefer to have higher income when presenting financials to investors and banks, but then also want to show lower income when reporting to the IRS. What’s the best way to represent financials?” he asks.

Instilling a strong culture of ethical behavior in the workplace is inherently tied to the achievement of high-level performance and company staying power. A 2014 best practices report published by Ethisphere points to the value that ethics creates on a number of fronts, including:

n The ability to attract and retain talent;

n Influencing consumer decisions;

n Increasing profit margins;

n Improving risk management outlooks for shareholders; and

n Building stronger relationships within communities.

Without a strong ethics foundation all these pieces begin to fall apart, says Klisch, and the end result is time wasted cleaning up errors and messes, customer retention issues and hiring challenges. The solution is to build programs that align employee behavior and decisionmaking with the ethical values of a company’s leadership. And while an attractive concept in theory, getting all the pieces of the ethics puzzle to fit can be challenging; after all, businesses are communities of people who come from a variety of backgrounds and walks of life.

Experts in the field offer five tips to help companies on their quest for ethical greatness.

1. Take accountability from the top-down

“The top-down approach”—it’s a phrase that’s used so much in best-practice business strategy that it’s easy to skim over. According to Klisch, though, it’s the single most important ingredient when building a culture of ethics.

“If you don’t have buy-in from the top, you’re going to have people taking different pathways,” he stresses.

Heyman agrees, noting that, “The story of ethics in any business is told from the top-down.”

Offering an example, Heyman references a question he asks in one of his seminars: “What would happen if your company got a bill that was less than what it should be, and you knew the right amount?” He recalls a CFO jumping up and exclaiming, “They better pay the right amount!”

It’s all about the tone at the top in terms of modeling, decisionmaking and hiring. Ethisphere’s 2014 Ethics Communications Best Practices Report explains that, at GE, ethics is formally embodied in the company’s code of conduct and every employee is empowered to be the voice of integrity. Three principles are at the core of GE’s ethics culture:

n Common vision to do the right thing;

n Common objective to prevent, detect and respond to all compliance issues; and

n Common strategy to maintain a world-class compliance culture.

2. Make the message consistent

Klisch notes that consistent messaging is evident in Plante Moran’s “thick culture,” one that is recognized by employees, partners, competing firms and clients. Originally part of Blackman Kallick before the company merged with Plante Moran, Klisch recalls that, “It took almost no time at all to understand [Plante Moran’s] culture of ethics.”

The fact that Plante Moran has been named to FORTUNE’s “100 Best Companies to Work For in America” list for 16 consecutive years is a testament to the company’s dedication to do the right thing. “No matter what, the message is consistent,” Klisch explains. “We tell our people, ‘If you think something is wrong, go with your gut. It probably is wrong.’”

3. Encourage Skepticism

According to Heyman, a healthy dose of skepticism can go a long way in fostering a culture of ethics. “Being skeptical is about asking the right questions,” he explains. “In a company, I believe heroes are people who notice things. A good culture allows people to ask the right questions.”

Skepticism is a safeguard that helps to ensure an acceptable level of independence in auditing, and an acceptable level of

adherence to the rules in business, says Heyman. Offering an example, he points to a hypothetical situation involving a CFO who doesn’t have a skeptical attitude in dealing with his boss. When the CEO asks him to make certain journal entries, the CFO doesn’t question the action and is unaware that the entries are management overrides. Ultimately, the CFO is responsible for the illegal activity and goes to jail.

Klisch acknowledges that there’s a lot of pressure on accountants in particular, and doing the right thing is sometimes difficult. “When in a service business, clients are trying to reach earnings goals, and people are trying to get the answer they want,” he explains. “While there may be short-term gain, the price to be paid for unethical behavior is too high.”

If the corporate culture is a case of, “I want to go to bed and sleep well,” says Heyman, then skepticism should come as a natural byproduct.

4. Always reward ethical behavior

There should be a celebration whenever someone makes a difficult decision and it’s the right call, says Klisch. Plante Moran gives an annual Naslund Award, for example, not for client retention efforts, but for doing the right thing.

The benefits of rewarding ethical behavior are obvious, says Heyman, and it can come in many forms, whether public recognition, opportunities for promotion, or financial bonuses or prizes.

5. Don’t create a home for the ‘Fraud Diamond’

The Fraud Diamond, introduced by David Wolfe and Dana Hermanson, describes the four elements that lead to fraudulent behavior. They are:

n Pressure/Incentive: A desire or need to commit fraud.

n Rationalization: A conviction that fraudulent behavior is worth the risks.

n Capability: A certainty that you have the necessary traits and abilities to pull it off.

n Opportunity: Recognition of a weakness in the system that the right person could exploit.

Companies have to be aware of how employees and clients interpret their actions and how those actions influence fraudulent behavior. For example, if employees who demonstrate unethical behavior are promoted based on the high performance numbers they achieve, a clear message is being sent to the rest of the company—namely, that bad behavior is rewarded.

Klisch shares a quote from Plante Moran Managing Partner Gordon Krater: “Don’t let bad leaders hide behind good numbers.” The quest for ethics isn’t always the easiest course, but it has great potential to deliver in terms of long-term staying power. Put simply, says Klisch, “If you have a blue ribbon reputation, you will get more opportunities to bring in more business.”

Do Your Soft Skills Suck?

Without a handle on the softer side of leadership, your success will be pretty short-lived.

By Carolyn Tang Kmet

There are natural-born leaders and there are self-appointed leaders. Either one can navigate a team to greatness, just as long as they have the single most important, not-so-secret ingredient: Superlative soft skills.

These skills have nothing to do with technical expertise and everything to do with human relationships. Think empathy, communication, loyalty and motivation.

“Soft skills are what make it possible for a leader to connect with group members, and to motivate and elicit their best performance,” says June Chung, a group supervisor with the Social Security Administration. The way Chung sees it, soft skills are what keeps an organization “in harmony, focused and driven towards goals.”

In contrast, hard skills are associated with technical ability and functional mastery: Analytics, problem-solving, decision-making and strategic planning, for example. They’re used to enforce necessary corporate procedures through positional hierarchy and rank.

While leaders tend to be promoted based on their technical expertise, which usually is rooted in hard skills, “The higher someone progresses within an organization, the more important soft skills become because leaders spend more time dealing with people than

6 Tips for the Soft Skills-Challenged

they do executing tactics,” says Vickie Austin, business and career coach and founder of Wheaton, Ill.-based CHOICES Worldwide.

In the finance and accounting industry, the hard-versus-soft-skill distinction is amplified even further. “The nature of the work is about hard skills,” explains Tina Cantrill, president and principal consultant at Oxford & French Consulting Group Ltd., an organization specializing in building sustainable growth through high-performance environments. However, as Austin points out, leaders in the finance industry build teams as well as court and serve clients, both of which require soft skills. Partners in accounting firms are typically people who generate business through networking and referrals, and business development is all about building relationships.

To illustrate that point, here are three scenarios in which soft skills make all the difference between leadership success and failure.

Scenario 1: Your company was acquired and you’ve inherited new additions to your team. There is little interaction and a strong sense of resentment has emerged on all sides.

Dawn Armstrong, a Silicon Valley-based entrepreneur and author, believes that in most companies, soft skills represent the best, easiest and

Tina Cantrill, president and principal consultant at Oxford & French Consulting Group Ltd, offers these key tips to fine tune the softer side of your skills set.

1.Be vulnerable. Seek feedback from direct and indirect reports, and be prepared to listen and act on what you hear.

2. Get a mentor. Find someone who is a strong and trusted leader and observe them closely. What do they do? How do they do it? How do they communicate? What words do they use? How do people respond to them? Then model their behaviors.

3.Stop thinking of them as "soft” skills. Instead, see them as vital skills needed to create an environment where people can be extraordinary.

4.Coach your employees. A great way to learn something is to teach/coach it. Seeing the behavior in others reinforces it in you.

5.Include soft skills in your development plan. What gets documented gets done.

6. Do your homework. Read articles about the importance of these skills in creating a healthy culture. And quote them to others, as well as to yourself.

sometimes the only way to achieve a specific business objective.

“Soft skills are the grease that allow the necessary cogs of corporate procedure to move smoothly and steadily, while keeping working relationships intact and in good standing,” she explains.

This is especially true in today’s business climate, heady with the constant flux of mergers and acquisitions, strategic partnerships and global expansion. Soft skills are absolutely necessary to ensure a company’s continued forward momentum and a staff’s continued high performance.

“In both startups and global companies, a leader is likely to be working with small to medium cross-departmental and crosscultural groups made up of an array of personalities,” Armstrong explains. Which means clear, concise communication, availability of support, guidance and intelligent questioning are essential.

“People who know what is expected of them and feel supported in achieving their goals, including being allowed to make mistakes, will go to the ends of the earth to achieve (those) goals,” says Cantrill. Scenario 2: In every employee’s annual review, you clearly define specific goals, both technical and financial, yet performance is poor and your turnover rate soars. Some leaders focus on the hard deliverables so greatly that they neglect to form an actual relationship with their employees. It’s as simple as keeping a hardworking team’s morale up with gestures as small as bringing donuts to a weekly status meeting, or providing a private space to conduct personal calls if an employee experiences an unexpected family emergency during work hours. Such actions build trust and inspire loyalty, and will quickly travel through the company grapevine.

Why the soft skills hurdle? For some, says Chung, it’s the perception that such skills make a leader appear weak. “However, I think this ignores the fact that human beings naturally seek connections to others. We want to see a human side to our leaders, some way to associate ourselves with them,” she says. “I think good leaders recognize a need to connect with the people they work with.”

“Vulnerability and humility...manifest as intense self-assuredness and therefore an amazingly strong character, not weakness,” Cantrill adds. “For someone to feel confi-

dent enough to be vulnerable and humble amongst those he or she leads requires incredible personal strength and self-awareness. Leaders who exhibit vulnerability and humility engender trust, which in turn creates an environment where people feel able to focus on goals and to take risks to achieve them."

Balance is important, however. “If a leader shows too much leniency to people who may take advantage, then the leader risks not only missing important deliverable goals, but also losing the respect of more responsible colleagues,” Armstrong warns.

Finding that balance is particularly difficult for new leaders, who, Cantrill explains, tend to impose exacting standards on their people without creating an environment conducive to extraordinary performance. And then, when teams fail, they wonder what it is they did wrong.

In the absence of a strong mentor, new leaders tend to drive the “hard skills agenda” until they burn out or face a mutiny, she contends. Certainly, they excel in execution, but not in inspiring those around them to execute in concert. “They continue to play in the orchestra rather than conducting it," she says.

Scenario 3: It’s time to close the books for the year, but no one on your team is willing to work the extra hours you need.

Treatyour employees as resources, and they’ll treat their jobs as a means to an end. By taking an interest in your employees as individuals, you engender in them a sense of ownership and responsibility, and they’ll be more likely to put in the extra time when you need them to. The last thing you want is for one of your key people to be on vacation, walk out, or call in sick at the close of a financial period. Soft skills help to drive that dedication.

“Finance leaders will have the best chance of success if they foster teamwork and inspire their workers on a regular basis,” says Armstrong. “This will require having firm working guidelines, meeting regularly with the team, and consistently reinforcing appreciation and expectations.”

“Employees and clients both thrive on relationships where the leader or partner demonstrates an interest in them, a curiosity about what's important to them and an understanding of their needs,” Austin adds. “All of those behaviors, including the ability for a leader or partner to communicate 'I care,' are soft skills.”

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Illinois Lights Up

Interest is high in the state’s new medical cannabis industry. Will it be a hit for CPAs?

By Derrick Lilly

It’s just business. Investments to manage, payrolls to run, transactions and inventories to audit, regulations to follow, taxes to pay, and more. It’s everything a CPA seeking new business could ask for, except for the fact that it’s not just business as usual. It’s business with Illinois’ soon-tobe licensed and operating medical cannabis cultivators and dispensaries.

Legalized by the state, illegal to the Fed, there’s a fine and often hazy line to walk when seeking success in the cannabis business. But when Illinois became the twentieth state in the “Cannabis Union,” it planted the seeds for a new niche for CPAs to serve. The question is, will Jolly Green fill the pockets of savvy CPAs eager to blaze the trail into a new market, or will it send their practices up in smoke?

The Law

The Compassionate Use of Medical Cannabis Pilot Program Act signed into law by Governor Quinn became effective on January 1, 2014, creating a four-year pilot program allowing sick and

dying patients suffering from debilitating medical conditions to use highly controlled doses of medical cannabis. The Act also allows for up to 22 cannabis-growing operations and 60 licensed retail outlets spread across the state, 13 of which will be within Chicago city limits.

“It’s a very strict statute and there are strict regulations for these operations to follow. The Illinois Department of Public Health will regulate patients and patient cards; the Illinois Department of Agriculture will permit and regulate the cultivation centers; and the Illinois Department of Financial and Professional Regulation (IDFPR) will register, license and regulate the dispensaries,” explains Bridget Carlson, deputy director of the IDFPR’s Medical Cannabis Program.

Additionally, the Illinois Department of Revenue will regulate taxation of this budding industry, which is subject to surcharges on income derived from medical cannabis cultivation centers, medical cannabis dispensaries, and other related properties. The Act also instates a 7-percent Privilege Tax on medical cannabis cultivation activities in addition to all other Illinois state and local occupation and privilege taxes.

“First and foremost,” though, the law “is about the patients. They’ve been waiting for this Act to pass so that they can finally get off some of the prescription drugs they’re on. That’s why the state wants to roll this out in a very safe, very secure, very patient-friendly way,” says Carlson.

The Act allows up to 82 new medical cannabis businesses to be formed and put into operation in Illinois—82 businesses that will create jobs, generate revenues, occupy real estate, and more.

The Biz

When Illinois began accepting applications for dispensaries and grow centers, more than 360 arrived—“higher than anticipated,” according to Bob Morgan, statewide project coordinator for the Illinois Medical Cannabis Pilot Program, who was quoted in the Chicago Tribune.

Interest in Illinois’ medical cannabis industry is ablaze. When the National Cannabis Industry Association held its first ever Midwest Cannabusiness Symposium in Chicago, attendance was sold out, with more than 200 business professionals, cannabis cultivators and entrepreneurs attending to hear 16 experts speak on everything from the workings of Illinois’ cannabis law to best practices for succeeding in this unique industry. And when the first annual Chicago Cannabis Conference came to town, thousands of people descended upon Navy Pier to get their fill of medical, health, safety and industry information.

Illinois attorney Bradley Vallerius, JD, who focuses on cannabis issues, estimates that the state’s new cultivation centers and dispensaries alone will create more than 1,000 new jobs between them.

“The economic impact will be huge. It’s a primary industry—it creates three ancillary jobs for every direct job,” says Jim Marty, CPA, ABV, MS, owner of CPA and consulting firm Jim Marty and Associates, LLC. Looking at the impact of marijuana businesses in his home state of Colorado, Marty points to rents for warehouse space that have gone through the roof, the creation of an estimated 15,000 jobs, and the $37 million in sales tax the state has collected this year as precursors for what could come for Illinois.

“Once legalization happens, as soon as you start issuing licenses, and as soon as people start getting plants in the ground, there’s an immediate need for security, lawyers, accountants, landlords and leases, payroll and W2s, and it only takes a second for all of this to happen,” says Marty. “It’s very exciting. The medical marijuana industry could be $1 billion or more in Illinois. This is an accountant’s dream. There’s so much work to do.”

The Hit

Before CPAs get too excited about the prospects this industry undoubtedly will offer, Marty Green, Esq., the Illinois CPA Society’s VP of Government Relations, urges caution. “CPAs should recognize that there is a conflict with federal law. Cannabis remains a Schedule 1 drug.” Due diligence is therefore essential.

“There are risks; you need to assess those risks, but I don’t see anything in our codes of conduct or professional ethics as being prohibitive,” says Jim Marty, whose practice has been serving cannabis businesses since 2009. This is the fastest-growing segment of his practice, and includes 120 dispensary clients from several states, including Illinois.

Citing his partner Hank Levy, CPA, with whom he formed Bridge West LLC, a business and tax consulting firm that serves the legalized marijuana industry, Jim Marty points out that while medical marijuana has been legal in California since 1996, a CPA has yet to be sanctioned for helping the industry. In fact, he and Levy believe it’s in state and local governments’ best interests to have CPAs involved in this industry.

“The IRS and various state and local governments across the country are rolling out complex taxes and regulations for this industry. Implementation will be impossible without the participation of CPAs,” he says.

In fact, Carlson points out that Illinois’ Administrative Rules supporting the medical cannabis program require dispensaries to engage in, and submit to the Department, annual audits compiled and certified by an auditor or CPA.

“As long as CPAs are following all of the Department’s regulations, they have nothing to fear from the Department,” says Carlson. “The Department is truly interested in transparency and making sure these medical marijuana businesses are reporting what they should. As this program rolls out, we hope that it is done consciously and ethically, and to the extent that a CPA is working with these businesses, we hope only good can come out of that.”

Offering some “safe harbor” guidance, Jim Marty suggests CPAs avoid blurring the lines of involvement. “CPAs should not accept any ownership or invest in a marijuana business, and they should not participate in the profits of a marijuana business,” he says. “But CPAs are perfectly capable of and able to assist these businesses with tax and regulatory rules, including audits and reviewing financial statements as required, and consulting services that focus on operational, financial and tax compliance.”

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It’s just around the corner.

TOP TRENDS FOR A SUCCESSFUL ILLINOIS 10

In the coming year, business and civic leaders will be focusing on key areas for innovation and investment to drive growth in Illinois. Here are the 10 biggies. By Clare

Fitzgerald

When it comes to seemingly ubiquitous “best” lists, Illinois typically hasn’t been a top 10 contender. On CNBC’s 2014 “Top States for Business” list, for example, Illinois ranked a relatively paltry 27th. And in 2013, Forbes ranked Illinois 38th on its annual list of best states for business.

Although the value of “best” lists is debatable, these rankings suggest that Illinois certainly has some room for improvement.

Fortunately, the state’s business and civic leaders are watching trends and working to attract investors, build a stronger workforce, lobby for regulatory changes and create the momentum needed to drive economic growth and move Illinois higher up in the rankings.

At the Illinois CPA Society’s 2014 Midwest Accounting & Finance Showcase, one of the country’s leading state CPA shows, Theresa E. Mintle, president and CEO of the Chicagoland Chamber of Commerce, delivered a keynote address in which she outlined 10 broad trends the Chamber has identified as crucial to the state’s success. In the panel discussion that followed, Jim Kane, CEO of Kane & Co; Lou Longo, partner in Plante Moran’s International Business Services practice; John Roa, founder and CEO of AKTA; and Shelley Stern Grach, director of civic engagement at Microsoft, joined Mintle to discuss trends and generate ideas for driving growth. A specific theme emerged: Despite challenges, leaders in the public and private sector see great potential for Illinois, and opportunities for its prosperous future.

Here, then, are the top 10 trends that promise to positively impact Illinois in the near future.

1. Small businesses are the economy

According to Mintle, two-thirds of the Chicagoland Chamber of Commerce’s members have fewer than 100 employees, and small businesses make up 98 percent of businesses across the state.

“Small businesses reach every sector,” she says. “Their success is hugely significant for the Illinois economy and is a huge priority for the Chamber.”

According to the U.S. Small Business Administration, small businesses make up 64 percent of net new private-sector jobs. Supporting small businesses in Illinois therefore will be key in creating more jobs and spurring economic growth. Which is why the Chicagoland Chamber is rolling out new surveys to learn more about small business concerns and develop resources suited to their needs.

2. STEM defines job potential

With growing evidence suggesting that science, technology, engineering and mathematics (STEM) skills are becoming increasingly critical to employability, Illinois educators and business and government leaders are coming together to ensure that the state’s workers are adequately prepared for the jobs of the future.

According to a 2014 Brookings Institution report, Still Searching: Job Vacancies and STEM Skills, STEM job openings are advertised more than twice as long as non-STEM vacancies. Despite high salaries associated with STEM positions, companies across the country struggle to fill professional, craft and blue-collar posts that require STEM expertise. The Brookings report explains that STEM openings requiring a Ph.D. or professional degree are advertised an average of 50 days, compared to 33 days for non-STEM vacancies. Even STEM jobs that don’t require a Bachelor’s degree take longer to fill.

The Bureau of Labor Statistics projects that employment in occupations related to STEM will grow to more than 9 million by 2022. Filling Illinois’ share of STEM jobs will mean narrowing the opportunity divide between those who have access to technology and STEM training and those who don’t.

“To succeed in today’s world you have to have STEM skills. Those who don’t have access to devices and core training don’t have the skills, and they see less economic development,” explains Shelley Stern Grach, director of civic engagement at Microsoft in Chicago. “The growing opportunity divide also is impeding positive economic development in Illinois.”

To help close the gap, Microsoft offers free online digital literacy programs and leads initiatives such as YouthSpark, a program designed to empower young people through opportunities for education, employment and entrepreneurship. One of its programs, DigiGirlz, gives high school girls the opportunity to learn about careers in technology, connect with Microsoft employees, and participate in hands-on computer and technology workshops.

“Continued investment in STEM is critical to the future and vitality of the state,” says Mintle. “We need to get people into good jobs that pay well.”

3. Looking beyond the Silicon Prairie

Illinois’ technology ecosystem has grown significantly in recent years. According to the Bureau of Labor Statistics, in 2013 Illinois ranked third in high-tech establishments among the 10 most populous states.

Mintle points to tech incubator 1871, a Chicago-based community of designers, coders and entrepreneurs run by the Chicagoland Entrepreneurial Center, as an example of Chicago’s emergence as a tech hub in the Midwest.

From a startup perspective, says John Roa, founder and CEO of AKTA, a Chicago-based digital design consultancy, key factors for continued technology growth in Illinois will boil down to drawing more sophisticated investors who understand early stage venture investing; creating and retaining top strategic, design and engineering talent; and increasing civic exposure, action and investing.

In addition to the continued push to establish the state as a strong tech player, Mintle says the Chicagoland Chamber also is focusing on encouraging small businesses to invest in technology.

“Smaller businesses in particular are often concerned about the cost of technology and not always sure about the investment,” she says. “But small businesses that invest in technology grow in value and add more jobs than those that don’t.”

4. Broad acceptance of sustainability

According to a July 2014 McKinsey Global Survey on sustainability’s strategic worth, 43 percent of more than 3,300 executives seek to align sustainability with their overall business goals, mission or values—up from 30 percent in 2012.

As sustainable business practices continue to gain traction and become a more integral part of corporate strategy, Illinois organizations also are incorporating environmental and social considerations into their business models. But as Mintle explains, the sustainability concept goes far beyond installing energy-efficient light bulbs and water-saving faucets. She sees positive progress in Illinois and highlights the increased use of sustainable building materials, efforts to maintain the strength of the state’s food and agribusiness economy, clean water initiatives and ethanol production.

5. Life sciences as anchor institutions

The Chicagoland Chamber sees life sciences as enormously important to the success of the state. However, “The life science industry doesn’t often get looked at in as comprehensive a way as it should,” Mintle admits, noting that the pharmaceutical, healthcare and insurance industries in particular are significant economic drivers in Illinois.

The Chicago metro area ranked 13th in a 2014 report on life science clusters from professional services firm Jones Lang LaSalle, and the state’s reputation in healthcare has been especially strong. As Mintle notes, Illinois boasts several award-winning hospitals and eight top medical schools. And according to a 2014 report from the Illinois Hospital Association, the state’s hospitals and health systems have an annual statewide economic impact of $83.4 billion.

Given this, Mintle says the push to establish life sciences as anchor institutions in Illinois will continue. “If we put the pieces together right,” she says, “we can see significant and ongoing growth in Illinois.”

6. Manufacturing’s big comeback

Manufacturing traditionally has been a strong sector for Illinois. Currently, says Mintle, we’re seeing a manufacturing resurgence driven by metals, clean technology and digital production.

“A great example of manufacturing growth in Illinois is the new world-class Digital Lab for Manufacturing that UI Labs is bringing to Chicago,” she explains. “This manufacturing lab is being created to reduce development and deployment costs, while creating billions of dollars in value for the industrial marketplace and spurring long-term economic growth and job creation.”

Business and civic leaders are counting on advanced manufacturing projects like the Digital Lab to attract talent and investment, and to cement the state’s reputation as a manufacturing and research hub.

7. Gains in direct foreign investment

According to the Illinois Department of Commerce and Economic Opportunity’s Office of Trade and Investment, Illinois has the fifth largest economy in the nation and the 19th largest economy in the world—enticing numbers for foreign investors.

Mintle says many inbound trade delegations continue to explore opportunities in Illinois. “Our strategic location, well-developed

transportation infrastructure, technologically advanced economy and highly skilled workforce make us a very appealing state for foreign investment,” she contends, noting that Illinois ranks first among Midwest states as a destination for foreign investment.

The Chicagoland Chamber promotes such interest by hosting international events and economic partnerships with other global cities, and by connecting members with international companies and resources. For example, the Chamber recently partnered with the Consulate General of Brazil to host the U.S.-Brazil Business Forum & Cultural Exchange to explore expansion and trade opportunities, and to heighten awareness in Brazil of Chicago’s technology and innovation communities.

The Chamber also works close-ly with economic development organization World Business Chicago. Last summer, the two groups cohosted a delegation of business and government officials from eight major Chinese cities during a trade and investment forum designed to build business relationships and cooperation between Chicago and China.

8. Maximizing export growth

Although Illinois is the largest exporting state in the Midwest, Mintle says there’s a lot more room for growth, and helping small and mediumsized businesses to capture export opportunities therefore presents an enormous opportunity.

Business and civic leaders are teaming up through programs like Metro Chicago Exports, a 2014 regional collaboration among county board presidents in Cook, DuPage, Kane, Kendall, Lake, McHenry and Will Counties; Chicago Mayor Rahm Emanuel; JPMorgan Chase; the Brookings Institution; founders of the Global Cities Initiative; and World Business Chicago. Metro Chicago Exports’ mission is to help businesses reach international markets by building a pipeline of export-ready firms, strengthening the export ecosystem and reducing the initial business costs required to reach new markets. As such, says Mintle, the tools and education offered by programs such as this will give Illinois’ small businesses what they need to competitively break into global markets.

9. Demand for fiscal reform

Illinois ranked 31st in the Tax Foundation’s 2013 rankings of state business tax climates. Compared to neighboring states, it ranked better than Wisconsin at 43rd, but worse than Indiana at 10th. Tax reform is therefore a top issue for the Chicagoland Chamber, as is pension reform. Mintle contends that Illinois’ underfunded pension system is the single biggest factor prohibiting the state from building momentum in the trend areas identified.

According to a 2014 report by the Fiscal Futures Project at the University of Illinois’ Institute of Government and Public Affairs, although pension reforms passed at the end of 2013 are expected to save just over $1 billion a year, the pension revisions don’t solve

the structural budget gap problem, which is projected to worsen over the next 10 years from a $1 billion deficit in 2014 to a $14 billion deficit in 2025.

“Illinois needs to have its fiscal house in order to be successful,” says Mintle, adding that the Chicagoland Chamber will continue to advocate for modernization of the Illinois tax code, as well as a pension plan that works for the future.

10. Speeding innovation

Mintle says the impact of strident innovation and clever startups can be seen throughout Illinois, and points to patent output and research and development as examples. The University of Illinois, for instance, ranked 11th on the National Academy of Inventors’ 2013 list of the top 100 worldwide universities granted U.S. utility patents. The state of Illinois also has hundreds of research and development facilities, including national labs such as Argonne and Fermilab. And according to the National Science Foundation’s most recent study of academic research and development spending, in 2012 academic institutions throughout Illinois invested a total of $2.36 billion in R&D, putting the state in eighth place nationally for academic R&D spending.

Business, academic and civic leaders are rallying around discovery and innovation as keys to Illinois’ success. In the past several years, we’ve seen organizations like the Illinois Innovation Council, the Chicago Innovation Exchange at the University of Chicago and Chicago Innovation Mentors established to encourage, support and advance innovative ideas and businesses. Chicago Ideas Week, an annual gathering of global thought leaders focused on cultivating new ideas, also has gained momentum and attracted high-profile participants since its launch in 2010.

According to Roa, whose firm was ranked on Inc.’s 2014 list of the 500 fastest-growing private companies in the United States, visionaries and entrepreneurs will continue to be attracted to Illinois if the state creates incentives, fosters its ecosystem and proves it can successfully invest in good ideas.

Proving itself in each of these 10 trend areas will be crucial if Illinois is to see continued growth and find long-term success as a leading state for business. Our panelists agree that public-private partnerships are making progress, and that the state is generating momentum and heading in the right direction. As Mintle notes, in a recent Chicagoland Chamber member survey, 62 percent of respondents expressed optimism about the region’s economy, and 60 percent plan to add new employees over the next year.

“There is tremendous passion and commitment among those who live and work in Illinois,” says Stern Grach. “And there’s an awareness that we need to be firing on all cylinders to succeed.”

Springfield

Rockford

Chicago

FARM COUNTRY

can be deceiving.

By Derrick Lilly

For the first time, the U.S. Department of Agriculture’s (USDA) 2013 Rural America at a Glance reports a net population decline and stagnant job growth across rural America. What’s even more grim is the fact that this follows a multi-year slowdown in the number of people seeking opportunities and homesteads in non-metro areas, which themselves are giving way to suburbanization and urban sprawl.

Not only is rural America shrinking, but it’s aging rapidly as well. The average age of principal farm operators has been climbing for over 30 years, and is now pegged at 58.3 years, or 17 years older than the average American worker, according to National Geographic.

Added to the glum picture are recent mainstream media headlines that would have us believe America’s farms are troubled and/or dying, and that farm states, like Illinois, have much to lose if the lure of big city life steals away the next generation of farmers and ranchers.

So what’s really happening down on the farm?

By the Numbers

Since 1840, the USDA’s Census of Agriculture has accounted for all U.S. farms and ranches and their operators; it tells us the story of how American agriculture is changing.

After peaking in 1935 at 6.8 million, the number of farms collapsed as we moved through the 1970s, before settling into a slowmoving decline that’s left approximately 2.1 million farms in operation today. During this same period, total farmland fell from more than 1.5 billion acres to 914 million, or approximately 64 percent of the country’s land area to less than 40 percent.

According to the most recent Census statistics, farms and farmland declined approximately 5 percent and 1 percent from 2007 to 2012, while the average age of farm operators jumped by nearly eight years. These numbers might imply the sky is falling, but John Anderson, deputy chief economist at the American Farm Bureau, argues otherwise.

“Don’t be deceived by those numbers,” he states adamantly. “A lot of people see the Census results and think things must be bad if we’re losing farmers and losing land, but that’s really not true. What we’re seeing here is the continuation of trends that have been going on for a long time, mainly driven by structural changes and increasing efficiency. The truth is that the agriculture sector has done better over the last six or eight years than it has in a generation.”

Consider the economic data collected for the most recent 2012 Census and it’s hard to argue otherwise. Agriculture and agriculture-related industries contributed a whopping $775.8 billion or 4.8 percent to the U.S. GDP, and employed more than 21 million American workers (15 percent of the U.S. workforce at the time).

Further, the USDA says American farmers alone injected $370 billion into the economy during 2013, producing products that ultimately employ, feed, power and clothe countless Americans and others around the world.

In short, agriculture’s socioeconomic importance to the country is substantial.

Growing Global

So where, then, is the future of farming really going? Well, it’s going global—along with just about every other sector. Exports of American-made food and fiber products pushed into record-set-

ting territory at nearly $150 billion in 2013, and should end 2014 only slightly lower due to softer commodity prices on record harvests. Considering that a recent MarketWatch article suggests we’ll need to feed 10 billion people by 2050, U.S. agribusinesses should continue to reap the rewards of growing export demands.

“It’s not just about growing populations, though; we’re seeing incomes grow in countries like China and India where very large populations historically have been very poor, so the first thing they do is improve their diets,” Anderson explains. “I expect very strong global demand for U.S. agricultural products over the next 20 years. Our growth potential is tremendous. I don’t think there’s another sector in the economy whose outlook is more favorable.”

In a recent The Ag Agenda article, Bob Stallman, president of the American Farm Bureau, writes that exports are “primed for growth.” As catalysts, he cites that successful free-trade negotiations supporting The Trans Pacific Partnership and The Transatlantic Trade and Investment Partnership would open up trade between the United States and Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, as well as the European Union.

“Expanding exports creates great opportunities for the United States,” Anderson adds. “We have a tremendous amount of arable land; we have the most sophisticated agriculture production systems in the world; and, we have natural transportation advantages, from our inland shipping channels to ports and railways. When you put all of our agriculture production assets together, the United States is in a great position.”

But then again, how will American farmers and ranchers keep up with demand when their numbers continue to age and dwindle?

Teaming With Tech

“While the aging and declining trends are factual, there are a variety of reasons behind them. One is that the advancements in agriculture have certainly made it possible for farmers to farm longer and more efficiently,” says Dr. Andrew Baker, director, School of Agriculture at Western Illinois University.

“I remember when most of the machinery had no cabs and the labor and environmental conditions would weigh on your health.

About 80 percent of the state’s total land area is devoted to agriculture.

Illinois’ 27 million acres of farms generated $17.187 billion in sales. Illinois ranked 2nd in the nation for grain, oilseed, & dry bean/pea sales.

Source: 2012 USDA Census of Agriculture for Illinois

But today’s tractors have climate-controlled cabs, farmers can harvest longer with little to no fatigue, the equipment has night lighting, and precision GPS guidance systems operate the tractors safely while the farmer can manage other business matters from their smartphones, while riding along in the cab,” Baker explains. "I don’t think very many people driving down I-80 realize that the combine they see in the field is probably being self-driven through GPS guidance.”

The point here is that hard-labor farm jobs are far fewer today, and the agricultural industry is really at the forefront of utilizing technology. It’s not uncommon for today’s farmers to be in their fields collecting data on crop and insect thresholds on iPads in order to determine if and when they should spray to control specific weeds and pests. Hardware and software analyzes soil fertility and tells the planter being towed behind the GPS-driven tractor how many seeds to spread in the richer and thinner soil. Soon, drones will be common sights as they monitor plant health and grazing land from above.

“Due to technological advances and the adoption of new techniques, farms have simply become fewer, but larger and more efficient,” Anderson explains.

That said, there is a land-based concern: Conserving our natural resources.

National Soils

EPA requirements continue to push agricultural companies to better utilize resources. Illinois-based ADM, or The Archer Daniels Midland Company, for example, is a global food-processing and commodities-trading corporation that uses substantial amounts of water. EPA requirements dictate that water must not be released back into the environment at a higher temperature than it was taken. ADM has therefore found ways to use the same water for growing plants and fish, allowing it to cool and use less water to create multiple products. By the same token, ethanol production, a staple in Illinois agriculture, yields Distillers Grains as a byproduct. These grains are used or sold as livestock feed, so again we get two products from one. Measures like this help, but certainly there’s more that can be done.

“The more people on this Earth, the more ground they take away from agriculture. We’ve learned how to be more productive with an acre of farmland than we ever have before, but we need to do a better job of protecting our agricultural lands from urban sprawl. We don’t have a lot of state regulation that supports that,” says Baker. “We can outsource a lot of things, like tech jobs, but we can’t outsource soil, climate or natural resources. We have to embrace the fact that there are only so many acres of productive soil in the world.

“The prairie soils in Illinois are immensely productive; it’s a natural resource that cannot be regenerated quickly,” Baker continues. “Eventually we are going to get to the point where the government, just as it created National Parks, will recognize the need for ‘National Soils’ to sustain for ourselves.”

As for sustaining agribusiness and overcoming the age issue, well, there’s a lot happening there, too.

Sustaining Generations

The high cost of entry has always been a major hurdle for young people trying to establish their own farms. Machinery costs alone are dream killers. A new tractor can cost anywhere from $40,000

to $200,000. And those huge combine harvesters? You’ll need $400,000 or more. Startup costs are vast, and volatile commodity prices make matters even riskier. It’s one of the reasons that farming so often remains a family affair, with children, grandchildren or inlaws taking over the operation and growing it to hedge risks and support expanding families.

But a generation of farm kids who have gone off to school and decided to do something else with their futures has created more opportunities in agriculture for those with no family connections to a farm or farming.

“As farmers get older, they’re naturally going to look for younger persons to take over their operations,” Baker explains. “They are going to figure out ways to spark interest within the family to continue the operation, or they’re going to turn to other methods to attract the people they need.”

“We have a large cohort of Baby Boomers that are progressing into old age, but that’s present throughout the economy. We have an aging workforce of accountants as well, but that doesn’t mean we don’t have young people filing back into these professions,” Anderson stresses. “More young people are going back into agriculture because the environment has made it an attractive career choice again.”

Independent analyst Jesse Colombo is quoted throughout the media with predictions that farming may be one of the most profitable professions over the next decade or two. If current farm revenue trends continue, prime agricultural regions could become what he calls “New Manhattans” as far as wealth is concerned. As such, he’s an advocate for agribusiness education, saying, “When I speak to universities and students, I tell them they should all be studying agriculture.”

“The trend is that agribusiness is sexy again,” says Baker. “Students see that this major has an end-result, meaning there’s employment waiting at the end of their degree program. Not many degrees offer that now.”

Baker points to the growing interest in his agribusiness department’s career fair as a promising sign. “The number of companies attending our annual career fair has been increasing. This year’s was the largest we’ve ever had in my 15 years here, with 46 different companies coming out,” he explains, adding that far more companies are offering internships as well.

On the national level, one of the American Farm Bureau’s largest initiatives is its Young Farmers & Ranchers Program. With affiliates in its state farm bureaus around the country, Anderson describes the initiative as an influential leadership development program, specifically aimed at preparing young people (18-35 year olds) to be successful agriculture professionals and representatives.

“It’s a priority that we spend a lot of time on and devote a lot of resources to. We have a long history of doing what we can to bring up and mentor the next generation of farmers and ranchers,” says Anderson. “The future of the sector looks great.”

“It’s a very dynamic place to be, with many, many opportunities. Heck, if you look at how many accounting graduates are going into the agriculture industry, I think it would really surprise you. John Deere and Caterpillar come to our institution looking for finance majors and accountants all the time,” says Baker. “From field to store, we’re all linked to agriculture somehow; it’s really the backbone of America.”

A Tale of Three Cities

Stockton, California Central Falls, Rhode Island

Detroit, Michigan

In our case, however, this is the tale of three cities—and, indeed, they have seen the worst of times.

With ongoing talk of city debt and the need for fiscal reform, the crises faced by cities large and small across the nation grow ever larger in relevance to us all. It seems that no city is immune to errors in financial judgment. In 2011, for example, tiny Central Falls, Rhode Island, with a population of only 19,000, filed bankruptcy. A year later, Stockton, California, with its 300,000 citizens, earned the unenviable distinction of being the largest American city to file for bankruptcy. And in 2013, the great Motor City, Detroit, came tumbling down, grabbing Stockton’s dubious title as it did.

Photo credit: Brett Henrikson

In the immortal words of Charles Dickens in A Tale of Two Cities, By Sheryl Nance Nash

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity."

It’s too easy to point fingers at the Great Recession. Sure, an ailing economy was bad news for individuals, businesses and government alike. But there's just so much blame to go around.

“These cities were over-extended and their public officials paid more attention to the political outcomes than they did the fiscal impacts,” says Anthony Figliola, VP of Empire Government Strategies, an economic development and lobbying firm in Uniondale, NY. “Detroit was the trifecta, dealing with over-spending, political corruption and out-of-control employee benefits. Stockton lost control of its finances because of overly generous public employee pension contracts and a heavy reliance on a dwindling tax base. Central Falls had systemic political corruption that led to over-spending. This was compounded by out-of-control public employee retirement pension benefits that they could not afford.”

Edward Hudgins, Ph.D., director of advocacy for The Atlas Society, believes these bankruptcies are the manifestation of policy failures that must be understood and addressed.

“Elected officials buy votes by promising more and more benefits to various interest groups and unsustainable wages and benefits for city employees on usually padded, unionized payrolls,” he explains. “This in turn requires higher taxes on productive enterprises and individuals. Add to this local regulations—licensing, zoning and others that limit business creation—and the result is enterprises and individuals moving out of the cities, creating a greater need for local welfare and assistance, meaning more government spending even as the tax bases shrink.”

There’s plenty to debate, but it’s tough and perhaps unfair to make generalizations when each city is so unique. Instead, they are worth individual consideration. What can we learn from their mistakes? Better yet, will they rise from the ashes and get it right the next time around?

CENTRAL FALLS, Rhode Island

For a small town with a mere 19,000 residents, Central Falls had big problems. When factories shuttered their doors, unemployment rose and the tax base shrank. Property taxes increased and the city workforce was cut drastically. Not only did it file bankruptcy, but Central Falls’ corrupt mayor was sentenced to prison as well.

“There were losses in manufacturing. First business went south then it went overseas. There was revenue loss and there were a lot of unsustainable contracts made with public service employees, especially pension obligations; they were very generous,” explains Timothy Howes, associate professor of finance at Johnson & Wales University in Providence, RI.

To work its way out of bankruptcy, Central Falls reduced the public employee payroll and retirees saw their pensions slashed. “The bondholders came first; pensioners lost benefits and will continue to do so. Hard decisions had to be made,” says Howes.

Out of the bankruptcy, however, came an urgency for change. There’s a new, young (under 30) crew of officials like Mayor James Diossa and planning director Steve Larrick, who are committed to doing things differently.

“It was time to start over,” says Mayor Diossa. “Since the bankruptcy residents are more involved.” For instance, they rallied around the city when it got creative and launched a crowdfunding campaign last year to raise money to clean up historic Jenks Park. The city got the $10,000-plus it needed to complete the job, which budgets otherwise wouldn’t have allowed.

Thinking outside the box is a prescription for what ails Central Falls. It still has challenges, though, like 9.4-percent unemployment. “We have to get our people back to work and attract the right businesses,” says Mayor Diossa, who believes in using social media to help bring people together. “We’ve learned how important it is to reach out to the community, to get buy-in.”

There are reasons to be hopeful. For example, a nearly $4 million federal grant has been awarded to the Central Falls School District for a “restorative justice” project to make schools safer. And, says Mayor Diossa, “We’re having more community events. It’s hard to find vacant stores. Five years from now I believe we will be a model city—clean, safe, new roads and infrastructure.”

In other words, he takes to heart Central Fall’s moniker, “The Comeback City.”

STOCKTON, California

They say trouble usually comes in threes. In the case of Stockton, there was the real estate collapse, a hefty jump in pension and retiree healthcare costs, and expensive city projects.

For a time in the late 90s and early 2000s, Stockton was benefiting from Silicon Valley’s ever-increasing real estate prices, which encouraged many to stomach the commute and take root in Stockton. Consequently, Stockton’s house prices rose, and when the bubble burst, the city had one of the nation’s highest foreclosure rates.

Stockton got a little ahead of itself during the good times— spending for a new sports arena, a minor league baseball stadium and a marina. Residents apparently are still peeved about a concert held at the arena in 2006, where Neil Diamond reportedly took home a $1 million paycheck for his performance.

By the time a judge declared Stockton eligible for Chapter 9 bankruptcy, the city had some $147 million in unfunded pension obligations and about $250 million in debt from various bonds, according to published reports.

Bankruptcy has been painful. The city has cut pensioners’ healthcare and negotiated new contracts with city employees, including critical fire and police services. The sales tax was raised, and the city renegotiated its debt with most creditors.

Photo credit: Brett Henrikson

What's more, “The police department was decimated and it still is. It’s having a hard time retaining the people it has. We lost around 100 police officers,” says Roger Phillips, a city hall reporter for the Stockton Record. “We had some crime issues already with gangs, but in 2012 we had a record 71 homicides,” he says.

A sales tax increase from 8.25 to 9 percent passed in 2013 will help in hiring approximately 120 police officers over the next three years. In part due to an emphasis on community policing, homicides dropped to 32 in 2013, but are already up to 45 this year, says Phillips. Stockton was recently in the headlines for a bank robbery that spilled out onto the streets, with police chasing robbers armed with AK-47-style weapons. “Everybody here is worried about crime, crime, crime,” says Phillips. “There aren’t enough cops; they have to prioritize. So, anything minor they get to it when they can, and if they can’t, they don’t.”

Despite the doom and gloom, there are rays of hope. “Recently unemployment in the county dropped below 10 percent for the first time in a long time,” says Phillips. What’s more, the city is moving forward with plans for an affordable housing project downtown, with construction expected to start soon. And Stockton was in the running for a plant to make battery-powered cars. Although it didn’t win the contract, being in the running was a victory in itself. “There are little signs, like some restaurants and businesses opening up downtown because of the tax incentives,” Phillips explains.

Elizabeth Stevens, editor of the Central Valley Business Journal, says Stockton is struggling, like a bad cold that won’t go away; but she sees slow improvement. “The port is doing well, with some new businesses locating there,” she says.

Mostly though, the business community and everybody else is ready for the next chapter in the Stockton story. Says Stevens, “We’ve learned lessons about how much you can count on one economic trend. People thought the housing boom would go on and on and made investments based on that. You have to be more cautious.”

DETROIT, Michigan

Detroit’s troubles aren’t solely the result of the decline of manufacturing and an automobile industry that saw workers leaving town to find jobs elsewhere, ushering on a huge hole in the tax base and city revenue. Detroit’s investigative reports found that elected officials and others charged with managing Detroit’s finances repeatedly failed to make the tough economic and political decisions that might have saved the city from financial ruin.

In addition to Detroit having the highest income and property taxes in Michigan, critics say the city failed to adjust its public workforce when the population shrank, and didn't take swift action for retiree healthcare and other benefits when those costs rose. According to the Detroit Free Press, the city ultimately ended

up with $18-$20 billion in debt, and unfunded pension and healthcare liabilities.

“Last but not least, the Kwame Kilpatrick Administration’s ‘2005 award-winning deal’ of pension obligation bonds swap turned into a financial disaster, as suggested by Detroit’s emergency manager when he reviewed the financial records. Overall, bankruptcy might have been avoided, if not for the decade-long borrowing binge,” says Robin West Smith, a Wayne State University adjunct professor in Urban Studies.

The downfall has been painful. “City employees have lost many promised benefits, including health insurance coverage during retirement,” says West Smith.

Detroit will have to fight hard to win back the hearts of residents. “People have no trust in their government. Residents were even mowing city-owned ball fields for their children. Leadership is what is needed most,” says Figliola.

And now Detroit finds itself in a state of repentance, and is working to recover its image and economy. The good news is, while the city won’t heal overnight, there are already signs of renewal.

“Many programs sponsored by the Michigan Economic Development Corporation have been a catalyst and provided a spark to the renaissance of Detroit’s entrepreneurship community. Detroit Innovate, Michigan Pre-Seed Fund 2.0 and New Economy Initiatives are also great examples of the programs that are designed to rebuild the city,” says Detroit resident Antonio Luck. “Detroit is becoming a top destination for savvy entrepreneurs because of these kinds of programs that support entrepreneurship, be it funding, services, mentorship or real estate.”

West Smith points to the fact that there's been more than $1 billion in real estate purchases and investment in a new hockey arena in downtown Detroit as hopeful signs. “Michigan Congressional Democrats have prepared a strategy to get more federal aid for Detroit through Community Development Block grants, and nonprofit organizations have pledged millions of dollars to assist with the bankruptcy. Much of these funds have been distributed to the midtown and downtown sections, while the Detroit Future City project is more focused on the neighborhood initiatives,” says West Smith.

There is a new mayor and a sense of optimism in the air. “To be exiting bankruptcy after a year is progress; most cities are in bankruptcy for a long time. The challenge will be executing the plan. People want to have their garbage picked up, clean parks, their 911 calls answered quickly, and well-equipped fire and police departments,” says Van Conway, CEO of Conway MacKenzie, a firm serving as a consultant in Detroit’s restructuring.

"I came to Detroit in 2006 on a scholarship for my MBA and fell in love with the city," says Luck. "Detroit has a lot of amenities that would be prohibitive in other major cities, such as affordable membership to yacht clubs, opera, golf. I believe many of the wheels have been set in motion. There's an energy pushing for change.”

Indeed, some are already calling Detroit the “Comeback Kid.” icpas.org/insight.htm

“With ongoing talk of city debt and the need for fiscal reform, the crises faced and mistakes made by cities large and small across the nation grow ever larger in relevance to us all.”

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MUST-READ-MUST-KNOW NEWS FOR YOUNG ACCOUNTING PROS

For this issue, I’m going to do something a little different. I’m handing off my column to Kierra Smith, recipient of the 2014 Women’s Executive Committee’s Advancing Women in Accounting Scholarship. She has an inspiring story to tell.

The Secret of My Success by Kierra Smith

You hear “CPA” and all sorts of images pop up in your mind. Pinstripe suits, perhaps, powerful leaders of the financial world, astute, educated professionals with a mind for regulations, legislation, highlevel financial calculation and analysis. The image that doesn’t readily pop up is a financially strapped student working multiple jobs, doing all they can to afford the tuition that will get them one step closer to their dream career.

For me, though, it was the latter that was closer to the truth.

I grew up in a single-income household. My mother, who is legally blind, raised me and my two older brothers. She worked for a local nonprofit in my hometown, supporting our entire family. She taught me that opportunities may not be handed to you and you may not like the cards that you are dealt, but you can rise above any obstacle and create your own opportunities. Throughout high school I worked harder than most because I knew I would have to rely on scholarships and grants to help pay my way through college. I didn’t want to deny myself the opportunity of a great education solely because I couldn’t afford it.

In college I double majored, competed in Varsity athletics, was involved in Greek Life, and completed work-study, community service and numerous internships. There were times when the burden of affording my education weighed heavily on me, making it difficult to focus on classes, or anything else for that matter.

When I committed to a major in accounting, things began to turn around. I became a student member of the Illinois CPA Society, and quickly found myself among a group of people who wanted to see me succeed. I was a recipient of the Advancing Women in Accounting Scholarship and I participated in the incredible Mary T. Washington Wylie Internship Preparation Program. This program offers diverse students practical training not typically found in the classroom. I received an internship offer after my participation in the program, and that internship turned into a full-time job. I can honestly say that by joining the Society, I have positively changed my life and my future forever.

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The financial support was meaningful, as every little bit helps when you’re paying your own way through college. I was able to afford my education without making sacrifices that would have hindered my experiential growth and personal development. However, in retrospect, what was even more valuable was the emotional support and confidence that I gained as a result. It was moving to know that other people believed in my abilities and were willing to invest in my future. One of the best gifts you can give another person is to believe in them. That single gift gives you the confidence and the stamina to keep on going, moving ever forward and ever upward.

Kierra Smith and Sarah Herrmann