Time marches on and there is no rest for the weary as nonprofit organizations continue to navigate these extraordinary times. To help with these efforts, we have listed several topics that every organization should consider. If you would like to explore any of these areas in detail, we invite you to reach out to us and we will help in any way we can.
Watch our latest recorded webinar
It was a privilege to present nonprofit updates in the accounting industry with several colleagues from our Nonprofit Services Group. If you were unable to attend, feel free to watch the recorded webinar HERE to learn about the latest accounting pronouncements, changes in tax law, and new options in how you can engage your independent auditors to expand their services beyond the traditional audit.
The outbreak of the COVID-19 global pandemic has allowed several nonprofit organizations to benefit from different types of federal financial aid. These include the Paycheck Protection Program (PPP), Economy Injury Disaster Relief (EIDL) and the Main Street Lending program advances and loans, the Higher Education Emergency Relief Fund (HEERF), the Employee Retention Credit (ERC), the Families First Coronavirus Response Act (FFCRA), paid sick and child care leave and related federal tax credits, shuttered venue relief, special relief for hospitals and health care providers, and the ability to defer certain federal payroll deposits interest-free.
These are wonderful programs and we’ve seen them be effective in their desired mission to provide critical support during a difficult time. For a nonprofit to receive these financial benefits, it is essential that the organization meets the program’s compliance requirements and continues to be diligent in complying with those requirements.
Organizations should involve auditors, bankers, and essential board members in discussions around managing and abiding by the various requirements of pandemic-related federal financial aid. Nonprofits should be aware of any federal program rules (which frequently change) and should be sure to document the organization’s compliance with those requirements.
To ensure compliance, nonprofits need to make sure the same cost is not covered by two separate sources of stimulus funding and that the cost and stimulus aid are accounted for appropriately. Also, organizations should consider whether the funding is a loan or revenue and investigate potential debt covenant implications.
Lastly, nonprofits should be mindful of maintaining appropriate controls to process funding and compliance with the specific requirements related to federal assistance, such as an OMB Uniform Guidance compliance audit. These are good conversations to have internally, and externally, with your independent auditors.
Can ERC help your organization?
One federal program that especially deserves your attention is the Employee Retention Credit (ERC). If an organization qualifies, the program can provide a favorable amount of funding to the nonprofit. To qualify, an organization has to have had operations that were fully, or partially, suspended due to a COVID -19 government order or had a decrease in gross receipts that were less than 80% in 2021 (50% in 2020) of gross receipts in the same quarter of the calendar year 2019.
Initially, organizations that received a PPP loan were ineligible for the ERC tax credit. Under the Consolidated Appropriations Act (CAA) of December 2020, organizations that received PPP loans are now eligible for the credit if they qualify under the above criteria. For calendar year 2020, the maximum amount of ERC that the employer could claim on each employee was $5,000 per year. For 2021, the maximum amount of ERC that the employer can claim on each employee is $7,000 per quarter, which is $28,000 per employee, if all four quarters qualify. The ERC is a refundable credit.
If you would like to schedule a consultation with our team of ERC experts to explore your organization’s eligibility, please contact us at firstname.lastname@example.org or fill out the form here. If you take advantage of this program, be sure to discuss the various accounting treatment options with your independent CPA.
Moving into a post-COVID mindset
Successful vaccines are here, but with evolving variants and disappointing overall public acceptance of the vaccine, COVID-19 seems likely to stay longer than hoped. What has changed for many nonprofits is that the uncertainty surrounding the impact of the pandemic on operations has lessened considerably with the experience of operating in this environment for 17 months and counting. Although the road ahead still has plenty of obstacles, many organizations are now back to spending significant time planning for the future to ensure they are set up for long-term success.
Regardless of an organization’s circumstances, we recommend that long-term strategic planning for sustained growth include focusing on improving the infrastructure of the organization. These include enhancing and evaluating cybersecurity and bolstering technology capabilities that allow for operations in a pandemic environment, investing in employees, and strategically adding to your team. Some organizations have found themselves with a surplus of funds and may want to consider strategic board-designated reserves or endowments to make long-term use of short-term gains.
COVID-19 has proven to be a learning experience for many organizations. One of those lessons is accepting that uncertainty is simply the norm for the foreseeable future.
For more information, or to see how Windes might be of assistance, please contact Mike Barloewen at email@example.com or 844.4WINDES (844.494.6337).