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COVID-19

Top Accounting Issues for Nonprofits

By | Accounting, COVID-19, Nonprofit | No Comments

As we move into the last quarter of 2020, it’s time to take another look at several accounting issues facing nonprofit organizations this year. Many issues pertaining to the coronavirus relief package signed into law in March 2020, and similar pandemic-related responses may change how nonprofits account for activities and expenses this year.

Financial Relief for Nonprofits

In March 2020, President Trump signed into law the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act (H.R. 748). The act provided relief to businesses and nonprofits through the United States impacted by the coronavirus pandemic.

The CARES Act provided many resources including the Paycheck Protection Program. AICPA has provided a resource center that offers many tools to help organizations understand the CARES Act resources and how they may be utilized.

Other good resources to help you with your accounting needs related to the CARES Act include IRS and FASB guidelines.

Delayed Effective Dates for Several New Accounting Standards

The AICPA Auditing Board has delayed the adoption of several new standards due to the disruption created by the coronavirus pandemic. The standards listed below have been delayed one year to allow time for audit firms to focus on implementing the new model and to make effective changes.

Standards delayed one year include:

  • SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, as amended by SASs No. 137, 138, and 140.
  • SAS No. 135, Omnibus Statement on Auditing Standards — 2019.
  • SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, as amended by SASs No. 138 and 140.
  • SAS No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports.
  • SAS No. 138, Amendments to the Description of the Concept of Materiality.
  • SAS No. 139, Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes From SAS No. 134.
  • SAS No. 140, Amendments to AU-C Sections 725, 730, 930, 935, and 940 to Incorporate Auditor Reporting Changes From SAS Nos. 134 and 137.

SAS No 141 has been delayed until December 15, 2021.

FASB Votes to Extend Deadline for Revenue Recognition

Another change: FASB voted to extend by one year the effective date of its revenue recognition standard to all nonpublic entities. This pertains only to those entities which have not yet issued their financial statements.

Other Considerations Unique to This Year

There are several other conditions unique to 2020 that accounting and financial professionals must take into consideration.

Remote auditing may be necessary, so it is important to prepare now for a virtual audit. This includes adding or enhancing existing financial and accounting systems to allow for external auditing professionals to access accounts and documents.

Internal controls may be impacted due to staffing restrictions. You may need to adjust internal controls to l staff present in a physical office location.

Fraud risks are heightened. The FBI warns that there is an increase in scamming activity this year due to the coronavirus pandemic. For example, fraudulent unemployment claims are on the rise, and phone and email phishing scams have also increased. Vigilance and additional awareness training for your staff may help prevent cyberattacks and crimes.

Board and Finance Committee meetings may need to be held using virtual technology. Use an encrypted file-sharing service or protect sensitive documents with passwords (do not send passwords via email but relay them over the telephone to the intended recipient.)

Because the financial situation for your nonprofit may be uneven this year, continue to adjust budgets and revenue projects as necessary to adapt to the continually evolving situation.

The global pandemic has created many changes worldwide, including changes to the world of finance and accounting. Stay on top of the most recent FASB, IRS, and AICPA recommendations, deadline extensions, and updates through the Welter Consulting blog.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Reimagine, Reinvigorate: Nonprofit COVID-19 Challenges and Response

By | COVID-19, Nonprofit | No Comments

We are now several months into the ongoing coronavirus pandemic, with no end in sight, despite the optimistic statements of politicians and health authorities promising a vaccine on the horizon. No one knows whether vaccines and treatments in the development pipeline will work or mitigate the virus’ reach. In the meantime, local communities need philanthropic support like never before.

Unfortunately, the old model that treats nonprofits as “gap fillers” between the public sector and the private marketplace is outdated. In some underserved communities, nonprofits aren’t gap fillers but lifelines. Nothing has made this as crystal clear as the response to the pandemic where the distance between the haves and the have-nots is growing.

Nonprofits stand on the brink of a new era. As we look forward to a post-pandemic world, we must still deal with the realities of existing within the pandemic. To continue supporting the work we love and the communities we cherish, we must think beyond the “nonprofit box.”

The Current Situation: Post-Crisis, Pre-Resolution

One of the biggest challenges nonprofits face is sustaining the response. At the start of the crisis, the immediate reaction saw nonprofits scrambling to provide food, shelter, and care for communities nationwide. Nonprofits such as food banks experienced lines stretching for blocks as people queued for food to feed their families. Others helped their communities complete government forms for the Paycheck Protection Program and other relief acts.

But once the initial crisis is over, there are two areas of concern:

  1. Continuation: how will nonprofits continue if they have depleted their resources already? Many nonprofits have emptied their budgets to support their communities. Others have seen volunteers fade away as they heeded stay-at-home orders and haven’t yet returned to help. How will nonprofits continue their efforts if they do not have the resources they need?
  2. Support for the volunteers and front-line response workers: what mental health and social support resources are available to workers and volunteers suffering from caregiver fatigue? The emotional and psychological toll cannot be underestimated. Our front line volunteers and workers have seen and heard heart-rending stories over the past several months. Do we have resources to help them stay mentally and emotionally healthy?

Continuation: Thinking Outside the Nonprofit Box

The key to sustained response and continued work in the community is to think outside the “nonprofit box.” The “nonprofit box” is like a mental box people in nonprofits build to contain all the resources they believe are available to them. For instance, a nonprofit animal shelter may think of other animal shelters when their kennels overflow and adoptions are prohibited due to stay at home orders. There are still animals to feed and care for until the public can return to adopt a pet, or volunteers can return to help care for them.

But what about setting up an animal fostering program? Many people are stuck at home and lonely. They may be eager to foster a dog or cat. And, fostering often leads to adoptions since people grow to love the pets they’re fostering. Fostering takes some of the shelter’s burdens and helps people in the local community feel less lonely when social distancing means staying home more.

Instead of partnering with local shelters to get the word out, perhaps the animal shelter can partner with local senior citizen resource centers, community centers, and faith-based organizations to spread the word about the fostering program. This is “out of the nonprofit box” thinking—considering alternative solutions to a problem.

Another area where an alternative solution may indeed be outside the nonprofit world is among food banks. Food banks usually don’t deliver. However, companies like Grub Hub are already set up to deliver food to homes. Why not contact local for-profit delivery companies and see if they are willing to deliver food or meals to families in need? If they’re already in Neighborhood A delivering a paid order, it’s not a big stretch to ask them to drop off a bag of groceries down the same neighborhood block.

To sustain the response to the increased need in our communities, we must consider partnering with others. Some organizations have deep, trusted roots in underserved communities we need to reach. Perhaps nonprofits can partner with such organizations to deliver much-needed services to the people instead of requiring the people to come to them.

Caring for the Caregivers

Unfortunately, the mental health system in the United States was already inadequate before the pandemic. Resources were already fragile for the people who could afford mental health services. Now, with the stresses added by the pandemic, it is stretched almost to the breaking point. Again, nonprofits must come up with their solutions to care for their employees and volunteers.

One solution is simple: listening. Sometimes, people just need to vent—schedule time to speak with your team by phone. Let them share their stories. Often by sharing, the stress of the situation is reduced.

A New Nonprofit Paradigm

As the coronavirus response continues, nonprofits have the opportunity to reimagine their future. If we no longer fill the gap between the public and private sectors, what role do we wish to serve? What role can we fill? How will our services apply in the future?

There’s no one answer that’s right for all nonprofits but now is the time to consider these questions. We have an opportunity like never before to help people and to reinvent the entire nonprofit industry. It’s time to reimagine, reinvent, and reinvigorate the nonprofit world.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Four COVID-19 Employment Laws to Help Your Nonprofit

By | COVID-19, Nonprofit | No Comments

As many small and mid-sized businesses and nonprofits struggle to keep their doors open during the coronavirus pandemic, legislators scrambled to pass bills designed to offer some relief for cash-strapped organizations and workers. Nonprofits should review each of these acts in full with their human resources director to comply with employment laws and ensure that their organization remains in full compliance with the law.

The COVID-19 CARES Act

The four employment laws listed below were amended or launched as part of the 2020 COVID-19 response. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Trump on March 27, 2020. It provides various tax credits, loans, and other economic assistance to small businesses, including nonprofit organizations.

Employers must read the complete documentation provided by the government very carefully to see if they qualify for a particular relief act.

Emergency Paid Sick Leave Act and Extended FMLA

The U.S. Department of Labor issued the Emergency Paid Sick Leave Act and extended the Family Medical Leave Act. The act requires employers with fewer than 500 employees to provide paid sick leave and paid family medical leave. This allows workers to stay home, with pay, if they are ill, and to care for a family member who may also be sick. Since workers are asked to stay at home if they are sick or caring for someone with COVID-19, this act takes the financial burden off of workers that force many to keep working despite ill health.

Paycheck Protection Program

The Paycheck Protection Program, managed by the Small Business Administration, provides small businesses with a loan to continue to fund their payroll. The program, part of the CARES Act, helps small businesses keep employees on their books to avoid increasing the number of people filing for unemployment benefits.

The SBA will forgive loans if all employees are kept on the books for eight weeks, and the money is used solely for payroll, utilities, rent, and mortgage interest.

To apply for a loan, owners may go to any SBA 7 location, an approved federally insured depository institution or credit union, or a Farm Credit System institution participating in it.

The loan also applies to faith-based organizations and nonprofits. For more information related to applying for a loan as a faith-based organization, visit the SBA Q & A.

SOCER Tax Deferral

If your organization is having difficulty paying Social Security taxes, the CARES act allows for the SOCER Tax Deferral. Employers may defer payment of their portion of the Social Security Tax until 2021 and 2022. According to the IRS, 50% of the deferred amount is due by December 31, 2021, and the remaining deferred balance is due on December 31, 2022.

For complete details, please see the IRS information on the SOCER Tax Deferral.

Employee Retention Credit

Another part of the CARES Act is the Employee Retention Credit. It is a tax credit given to eligible employers. The refundable tax credit is equal to 50 percent of qualified wages. This program has precise rules about eligibility and qualified wages, so read the IRS documentation carefully to understand the full ramifications of the credit. When the employer’s credit exceeds the available tax liability, the IRS recommends that form 7200 be used to request the additional credit.

Will the CARES Act Continue?

The CARES Act will likely continue to be in place for most of 2020 as the government seeks relief for small and medium-sized businesses. The situation continues to evolve, so watch this blog as well as local business news for any possible changes.

Welter Consulting

If you’d like some help with nonprofit planning, contact Welter Consulting. Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Preparing to Reopen: What You Can Do Now to Re-Establish Your Nonprofit

By | COVID-19, Nonprofit | No Comments

Up until March of 2020, most nonprofits probably felt they had everything in control. Sure, some were struggling, which is natural in any field of endeavor. Most established nonprofits had their budgets in place, their marketing and fundraising campaigns thought out for the year and their grant application deadlines on the calendar. After a robust economic upsurge, donation projects seemed optimistic.

And then, the COVID-19 pandemic. Plans were scrapped. Calendars, revised. Staff learned how to telecommute, and nonprofits learned how to do more with even less than they had before. And somewhere in this mix is the lurking thought: can we survive this?

Organizations everywhere are discovering ways to weather the COVID-19 storm. As your organization continues to operate and looks forward to reopening, it’s time to focus on ways to re-establish your organization once the green light is given by the authorities to resume business as usual (albeit with a mask and plenty of hand sanitizer.)

3 Steps to Organize Your Nonprofit for Re-Opening

  1. Prepare your action plan: What steps will you need to take before, during, and after reopening? If you’ve been keeping in close contact with your leadership team during the pandemic, you’ll already have plenty of ideas for prioritizing the organization’s needs during the reopening. Consider convening a conference call or video call now with your organization’s leadership team to talk through a vision of what the organization will look like during and after reopening. Consider adding the following questions to the meeting agenda:
    • How will you prioritize programs and services?
    • When will you resume in-person events and activities?
    • Will specific precautions be needed if you resume in-person activities?
    • Do you need to review insurance plans to make sure they cover problems due to COVID-19?
    • Will you continue to allow telecommuting after the pandemic ends?
    • What is the organization’s current financial status?
    • Do you need to change fundraising activities, programs, or plans?
    • These are just a few questions to spark the discussion. Give thought to all areas of the organization, including programs and services, grants and fundraising, marketing, human resources, accounting, and finance. What will each need? What changes are necessary for a smooth reopening and the continuation of operations after opening day?
  2. Work with your grant professional: Grant professionals may need additional support right now as they scramble to address shifting deadlines and application processes. Ensure that they have the information they need to accurately and thoroughly complete grant applications. If you have cloud-based systems, you will find it easier to access materials remotely. They may also be the point person to access emergency federal, state, and foundation funds and should be given full support to do so if necessary, for your organization.
  3. Constituent outreach: Planning for reopening is not just about how your organization will handle its business matters. Staff should reach out to constituents and check in with them to assess what they need now and in the future. Their needs may have changed from the services you offered pre-pandemic. A phone call provides a more personal touch than an email or mass mailing. Invite constituents to ask questions and share concerns. Be sure to provide staff with a list of alternative service providers if your organization cannot serve everyone right now. A list of local resources, similar resources, or whatever you feel may be helpful to your constituents should be shared among the staff making outreach phone calls so that they have useful information on hand when they begin making calls.

Remain Responsive and Flexible

Everyone hopes for a swift reopening. The likelihood is that some areas of the country may face stops and starts as sections reopen, causing them to deal with a resurgence of the disease, and to issue new stay-at-home orders until the next wave of the pandemic passes.

Remain flexible and responsive to the changing conditions in your city and community. Keep your team’s focus on how they can achieve the organization’s mission, and you’ll find others respond creatively to any new challenges that arise.

Welter Consulting

If you’d like some help with nonprofit planning, contact Welter Consulting. Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.