In September 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-07, Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, to provide additional guidance to nonprofit organizations on how to record and disclose in-kind contributions. The overall purpose of the update is to provide more transparency into how organizations are receiving and valuing in-kind contributions. The ASU is effective for annual periods beginning after June 30, 2021.

The ASU now requires nonprofit organizations to present in-kind contributions as a separate line item in the Statement of Activities and to provide additional disclosures in the footnotes covering the following areas:  

• A description of the organization’s policy for monetizing rather than utilizing in-kind contributions;
  
• A listing of in-kind contributions categorized by type with a description about whether each type was monetized or utilized during the reporting period;
  
• For in-kind contributions that were utilized during the reporting period, the nonprofit must include a description of the programs or activities in which those contributions were used; and
  
• A description of the valuation process utilized by the organization to determine the fair value of the in-kind contributions.
  

On August 13, 2020, the Office of Management and Budget (OMB) issued amendments to the Uniform Guidance. Nonprofits receiving funds from the U.S. government should review the amendments carefully and the impact these revisions may have on administrating U.S. government funds. Below are summaries of several of the amendments made.

• Use Exceptions (2 C.F.R. § 200.102). Recognizing that the Uniform Guidance is not a one-size-fits-all approach, this provision grants agencies the flexibility to make exceptions to the Uniform Guidance requirements. This provision now "strongly encourages Federal awarding agencies to add or remove requirements [in the Uniform Guidance] by applying a risk-based, data-driven framework to alleviate select compliance requirements and hold recipients accountable for good performance”.  
• Termination (2 C.F.R. 200.340). This provision now allows an agency to terminate federal awards when the program goals or agency priorities are no longer being met. 
• De Minimis Rate (2 C.F.R. § 200.414(f)). The use of the de minimis rate of 10 percent was expanded to include not just organizations that have never obtained a NICRA but also those organizations that may have had NICRAs in the past but whose rates may now be expired. This change also allows organizations who may have previously had a NICRA but did not want to continue with the exorbitant expense of establishing a new NICRA.
• Publication of NICRAs (2 C.F.R. § 200.414(h)). This provision requires that certain information relating to NICRAs be collected and displayed publicly. However, to avoid publishing proprietary information, OMB limits the type of information that should be published to the indirect negotiated rate, the distribution base, and the rate type.
• Domestic Preference for Purchasing (2 C.F.R. § 200.322). This new provision encourages recipients to "maximize use of goods, products, and materials produced in the United States". 
• Procurement Methods (2 C.F.R. § 200.320). This provision increased the micro-purchase threshold from $3,500 to $10,000 and the simplified acquisition threshold from $150,000 to $250,000. 
• Project Close-out (2 C.F.R. § 200.344). This provision revised the time period from 90 days to 120 days for recipients to submit closeout reports and liquidate all financial obligations. In addition, agencies are required to now report any failure on the part of a recipient organization to submit final closeout reports as a "failure to comply with the terms and conditions of the award".

Many nonprofits hold events, such as annual conferences and fundraising galas, throughout the year. However, because of COVID-19, many have had to cancel these revenue generating activities. For those organizations that entered into contracts with venues prior to COVID-19, trying to cancel the contract can be a time-consuming and headache-generating process. A recent survey conducted by ANAFP showed that many organizations, especially early-on in the pandemic, were able to exercise the force majeure clause and exit the contract without penalty. Other organizations reported having more difficulty because their jurisdiction had no stay-at-home order in place and therefore the force majeure clause was inapplicable. Thus, when exiting the contract, the nonprofit was required to pay a cancellation fee to the venue. Luckily, some organizations reported having purchased event cancellation insurance (including the rider for communicable disease coverage) prior to the start of the pandemic. These organizations reported needing to provide notice to the carrier once the organization was aware of a circumstance that may lead to a claim. In addition, organizations reported that, prior to making any refunds, processing cancellation charges, or any other claim-impacting decisions, it was necessary to first get the adjuster’s consent. In addition, having sound documentation, such as invoices, copies of checks, bank statements, and financial information from previous years' events, was necessary to support claim amounts. Thus, organizations looking to recover costs through event cancellation insurance in the future should 1) ensure any coverage includes a communicable disease rider, 2) work with the adjuster first before making any claim-impacting decisions, and 3) gather and keep track of all documentation that may support any claim that is filed. 

Many nonprofit organizations received lease concessions (i.e., lease abatements or deferrals) from landlords as a result of COVID-19. These organizations have two options to account for these concessions in the accounting system -- both options affect the straight-line rent calculation on the organization's deferred rent schedule.  A deferred rent schedule can be downloaded here. 

The two options are:

COVID-19 is vastly changing the way nonprofits do business, and it’s important for the accounting and finance departments in every nonprofit to adapt their processes to reflect this new reality.

Many nonprofits have switched to remote work. Given this, nonprofits should update their internal policy manuals to reflect the changes brought about by working remotely. For example, have there been changes to authority levels, the way duties are segregated among staff, or how the approval process works? If so, the organization’s policies should be updated to document the new process and the new internal control structure. And, as with any policy revision, the nonprofit should make sure to circulate these updated policies so that staff is aware of the changes. Communication is key in a remote work environment. 

Consider making improvements to the key systems used by the nonprofit. Automating functions as much as possible will prove helpful in a remote environment.  Consider switching to complete online banking and eliminating mail delivery. Ask funders to send checks to lockbox addresses or switch to ACH payments. For those donors that continue to mail checks, consider purchasing an electronic check deposit machine or using mobile deposit, if possible. 

Nonprofits should also keep a close eye on cash flow and monitor unrestricted funding. If cash flow becomes problematic, consider sending out special asks to donors or renegotiating payment terms with key vendors.  Organizations in more dire situations may wish to seek loans or lines of credit with the bank.

Lastly, nonprofits should take another look at their annual budget and actuals to-date. If it’s clear that revenues will be less than originally budgeted, run a few scenarios to see how the organization can function with only 75% or 50% of the originally budgeted revenue amount. What cuts will need to be made to meet these lower revenue thresholds?  

Prime Minister Boris Johnson of the United Kingdom announced a merger between the Department for International Development (DfID) and the Foreign and Commonwealth Office (FCO). Together, the new department will become the Foreign, Commonwealth and Development Office. Nonprofits funded by DfID should take note of the merger and work directly with their project officers to ascertain the impact this merger will have on their DfID funding. 

Organizations that receive funding from the U.S. Government and are subject to the single audit requirement should take note of the following changes enacted by the Office of Management and Budget (OMB):

-Organizations impacted by COVID-19 and that have fiscal year ends through September 30, 2019, are granted a six-month extension to submit the single audit.

-Organizations impacted by COVID-19 and that have fiscal year ends through December 31, 2019, are granted a three-month extension to submit the Single Audit.

-Organizations with 2020 fiscal year end dates will not receive an extension.

The COVID-19 pandemic has changed many aspects of our lives, and the way we conduct our nonprofit’s audit is no exception. As the world moves into a new era of social distancing, stay-at-home orders, and teleworking, having auditors present in the office is becoming an unnecessary step in the audit process as organizations attempt to limit the number of people gathering in the office.

Given this, many nonprofits are expected to start participating in virtual audits – ones that rely heavily on technology and no longer on paper documents and files.  To help you prepare for this transition, consider the following as you review and/or upgrade your office infrastructure:

1. Move your organization to a paperless environment. Save files and audit support documents electronically.  Consider using either a cloud-based storage solution or, if this is not possible, saving files on a network accessible to staff outside the office.
2. Look into using online payroll and timekeeping systems.  If your organization is still completing paper timesheets, consider upgrading to an online platform that will allow staff to complete these electronically and enable electronic time-off requests.  In addition, make sure managers are trained on the process for approving timesheets and time-off requests and the required deadlines.
   
3. Consider an accounting software that is cloud-based and allows access outside the office.  If your software is currently on your organization’s network, make sure staff have remote access to it.  
4. Think about moving your organization to an online bill payment system.  Not only will this allow your organization to move to ePayments and eliminate the need for check cutting, it will also help serve as an online file storage solution.  If your organization is already using an online bill payment system, consider giving your auditors read-only access to the system.  
5. Select a video conferencing software or VOIP system that can be deployed organization-wide.  These systems will become essential in the virtual audit process by helping prevent misunderstandings and, given the tendency for people to misinterpret emails, facilitate the right communication needed for a successful audit.
6. Look into using software that allows for electronic signatures.  This will help ensure documents are signed even if staff no longer have access to printers and scanning machines.
7. If staff are filling out paper expense reports and submitting receipts, consider transitioning to an online expense reporting system that allows staff to simply take and upload photos of receipts.  And, once deployed, provide the auditors with read-only access to the system so that they can easily review the receipts remotely.  

On June 16, 2020, the Small Business Administration (SBA) made additional changes to the Paycheck Protection Program(PPP). Some of these changes, which will benefit nonprofits, include a revised PPP loan forgiveness application, a new streamlined EZ PPP loan forgiveness application for certain applicants, and revisions to the third and sixth interim final rules.

The PPP loan forgiveness application now includes a walk-through calculation on determining the forgiveness amount taking into account any reduction of full-time equivalent employees if the borrower was unable to operate during the covered period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020, and December 31, 2020, by the Secretary of HHS, Director of the CDC, or OSHA, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirements related to COVID-19.

The amount of loan forgiveness can be up to the full principal amount of the loan plus accrued interest. In addition, payroll costs during the covered period are capped at $46,154 per employee (for those using the 24-week covered period) or $15,385 per employee (for those using the 8-week covered period) plus covered benefits for employees.  Compensation for owner-employee, self-employed, or general partner, however, will be limited to $20,833 or 2.5 months of the owner’s 2019 compensation if electing the 24-week covered period or $15,385 for those electing the 8-week covered period.

New EZ PPP Loan Forgiveness Application

Borrowers who meet any one of the following criteria can now use the new EZ PPP loan forgiveness application:

Good news for nonprofit organizations that received funds under the Paycheck Protection Program (PPP). Additional changes have been made to the PPP after the adoption of the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act). The Flexibility Act made the following changes when it was signed into law on June 5, 2020:

• Extended the coverage period for forgiveness from 8 weeks to 24 weeks from the loan disbursement date or December 31, 2020, whichever is earlier. Organizations that received a PPP loan prior to June 5, 2020, may elect to keep the original 8-week forgiveness period.
  
• Updated the employee headcount provision stating that the forgiveness amount won’t be reduced based on a reduction in full-time equivalent employee headcount for organizations that can document:
  

An inability to rehire individuals who were employees on February 15, 2020;

An inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or

An inability to return to the same level of business activity that the organization was operating at prior to February 15, 2020, due to compliance with certain COVID-19 measures related to social distancing, sanitation, or other worker or customer safety requirements.

• Revised the loan use requirements to require at least 60% of the loan to be used for payroll costs as opposed to the previous threshold of 75%. Organizations may now spend no more than 40% on non-payroll costs as opposed to the previous limit of 25%. However, the 60% is now a "cliff". Organizations must meet the 60% requirement for payroll costs or non of the loan may be forgiven.