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 (). 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 that offers many tools to help organizations understand the CARES Act resources and how they may be utilized.
Delayed Effective Dates for Several New Accounting Standards
The 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.
- 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.
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 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 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 at 206-605-3113 for more information.