Nonprofit Accounting Topics to Watch

By September 13, 2022Accounting, Nonprofit

One of our goals is to ensure that our clients are always up to date on the most important nonprofit accounting topics. To that end, we bring you this update on trends of note. Additional information will be shared on similar topics as it becomes available.

Financial Impacts of COVID-19

Although much of the nation has returned to “business as usual,” the effects of the global COVID-19 pandemic are still being felt throughout much of the accounting and financial world.

Financial managers, auditors, accountants, and others leading finance and accounting at nonprofits must be aware of the following.

  1. Paycheck Protection Program (PPP)

In March 2020, the government passed the CARES Act, which set aside $2 trillion in funding. This was followed by the American Rescue Plan Act in March 2021 with $1.9 trillion in funding.

Under the aegis of these programs come many sub-programs, such as the Paycheck Protection Program. Many nonprofits availed themselves of this program which enabled them to tap into the SBA’s loan program for forgivable loans. These loans could be used to cover payroll, mortgages, rent, and utilities—in other words, necessary expenses to keep a business or nonprofit afloat.

Additionally, the American Rescue Plan Act of 2021 enabled many large NFPs to apply for PPP loans for the first time. This act provided additional or extended employment-related funding and benefits, as well as provided additional federal funding for numerous nonprofit programs (e.g., childcare, arts and humanities, food assistance, and homeless prevention).

  1. Charitable Giving Threshold Changed

Also, under the CARES Act came added incentives for charitable giving. The Act raised the limitations on deductible charitable contributions of cash by individuals who itemize. It also included a $300 above-the-line deduction to individuals who do not itemize and raised the cap for deductible charitable contributions of cash by corporation. These changes were intended to increase charitable gifts to assist nonprofits.

  1. Extended Family Leave

Also, as part of the pandemic response, the Families First Coronavirus Response Act was signed into law on March 18, 2022. It temporarily expanded the Family and Medical Leave Act, permitting certain employees to take up to 12 weeks of leave for specified reasons relating to COVID-19.

  1. Grants for Venues Forced to Close

Many nonprofit organizations such as galleries, performing art venues, and similar artistic services were forced to close during the pandemic to ensure patron safety. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act was enacted in December 2020 and provided grants to venues temporarily closed due to the pandemic. Included in this act was $15 billion in grants for museums, zoos, aquariums, and performing arts organizations who meet the criteria outlined in the grant. Entities who qualified for this grant were able to apply for 45% of their gross earned revenue (up to $10 million).

Did Your Organization Avail Itself of These Opportunities?

If your organization took advantage of these opportunities to make it through the pandemic, it is important to note how to account for such finances, whether funds need to be repaid, and so on.

Here are several resources.

About 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.