COVID-19: What Should Nonprofits be Thinking About?

The coronavirus will impact nonprofits in different ways as each organization serves the population through varied programs. In the weeks and months ahead, many nonprofits will continue to face challenges that are somewhat unique to the nature of their organizations. This article will highlight some areas that nonprofits should consider as they chart the best path forward.

Fundraising events

The operating budget of a nonprofit is often heavily reliant on fundraising events or gifts from donors to support specific programs and activities. In the instance of a planned event that has been cancelled, the nonprofit should consider contacting donors with an ask to convert paid sponsorships, ticket sales or gifts to unrestricted donations, rather than refunds.

Donors that do opt to convert to an unrestricted donation will need to be provided proper written documentation to support the gift. The communication to the donor should include:

  • The date the funds were originally received by the nonprofit
  • A statement that no goods or services were provided in exchange for the donation (if that was the case)
  • The amount of the cash gift, or a description (but not the value) of a non cash gift
  • A statement that the organization is a 501(c)(3) organization

For fundraising events still in the early stages of development and planning, the nonprofit may want to consider adapting to a virtual fundraising event. If it is determined that the program or event can be hosted virtually, there are a variety of online fundraising and auction platforms available, and many are currently being made available free of charge to assist the nonprofit community.

Donor restricted grants and gifts

Grants from foundations or gifts from donors often are restricted to a specific purpose, making these resources unavailable to support ongoing general operations. If you have a long standing relationship with a foundation or donor, they may be willing to remove restrictions either temporarily or for the long term. This release from restriction would provide immediate access to funds that often are already on hand. From an accounting perspective, it will be important to obtain written documentation from the donor acknowledging the change in allowable use of funds or any modifications to the terms of the initial grant or gift.

Managing contracts

Whether related to specific events or ongoing operations, many nonprofits rely heavily on third-party organizations. As you pilot the challenges within your own organization you may also need to assess the implications of any disruptions in service from your third party business partners. Consider the following as you evaluate contracts:

  • Contact third-party partners to determine how their operations and services may be modified in the near term or in the upcoming months.
  • Do existing contracts contain a Force Majeure or similar clause that may provide relief in the current situation or an option to delay or postpone services?
  • If special event insurance was purchased, what specific protection does the coverage offer?
  • Is there a modification that would minimize the burden on both parties?

Philanthropic and government relief

Over the past weeks, several federal assistance programs have been put in place in an attempt to ease the financial burden many organizations are facing as a result of the Coronavirus. Traditional government programs have been expanded or modified to provide easily accessible relief to the nonprofit community. Small Business Administration loans, not traditionally available to nonprofits, are now accessible by many nonprofit organizations. In addition, payroll tax credits are offered as a form of relief, rather than income tax credits historically offered in disaster situations. It should be noted that certain relief programs are mutually exclusive and a detailed analysis should be conducted to determine which program will best benefit your organization.

Throughout the country, philanthropic organizations are setting up funds to support organizations and communities that have been impacted by the coronavirus. The National Council of Nonprofits has created links to state-specific resources for nonprofits, which you can find here.

If you have any questions regarding your organization or the steps you are taking to minimize the impact of the current economic situation, do not hesitate to contact your BNN advisor at 800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

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