Nonprofit Impacts and Opportunities Amid COVID-19

By: Jennifer Babcock, CPA

Cordell, Neher & Company, PLLC

COVID-19 is challenging organizations in unprecedented ways. By looking at the following numbers, we can see just how fragile the current environment is for nonprofit organizations.

• Stay in place orders are affecting everyone, but not equally. Many locations are stranded in a state of uncertainty as local and state leaders decide what is best for their community.
• According to an industry report by the Charities Aid Foundation of America, 96.5% of nonprofit respondents reported negative impacts
  • 67.9% noted a drop in contributions
  • 63% blamed travel restrictions for disrupting contact with clients and donors
  • 48.6% struggle with staffing, 37.6% with operations
  • 34% reported an increase in costs, 31.1% have disrupted supply chains
• In another survey, 88% of individual respondents said their house of worship closed due to coronavirus
• And an industry assessment claims 42% of association executives expect financial losses from canceled events to be less than $100K, 35% between $100k-$500K, and 9% more than $1M

Whether your organization is civic-social, religious, or member association, the conversation around sustainability has evolved into a question of survivability as the coronavirus pandemic threatens nonprofit operations and access to funding. The glaring difference between those who can and those who cannot is their relationship with technology and support of financial advocates. While social distancing threatens the services of most nonprofits, it does not necessarily spell disaster.

At Cordell, Neher & Company, PLLC, we strive to protect your bottom line so your mission can thrive. Now is not the time to wait and see. Professional associations and nonprofits should perform risk assessments or cash flow projections to determine the best way to provide services. The professionals in our office can help you gain an understanding of your current position and what you need to do for the duration.

Nonprofits must access federal relief programs to offset operational interruption. To navigate the complexities and take advantage of every ounce of aid, we recommend working with a CPA who understands your unique situation.

• The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides significant funding for governments, businesses, hospitals, schools, and social support programs, among many other things. The items below are just a sample of the provisions available to nonprofits. We can help you determine eligibility on the full breadth of the Act.
  • The Paycheck Protection Program (PPP) is an emergency loan program that provides loans of up to $10 million for eligible nonprofits and small businesses. Charitable nonprofits (501c3) with 500 or fewer employees (counting each individual – full time or part time and not FTEs) are eligible. Nonprofits that are eligible for payments under Title XIX of the Social Security Act (Medicaid) are required to count employees of affiliated nonprofits toward the 500-employee cap, depending on the degree of control of the parent organization.
  • Eligible nonprofits and other applicants with 500 or fewer employees can receive checks for $10,000 within three days through the Economic Injury Disaster Loan (EIDL).
  • For tax-exempt organizations, the entity’s whole operations must be taken into account when determining eligibility for Employee Retention Payroll Tax Credit. This refundable payroll tax credit of up to $5,000 for each employee on the payroll when certain conditions are met is only available to employers who are not taking advantage of the PPP.

In addition to federal aid, individuals and companies are incentivized to give more in 2020 through the CARES Act with new above-the-line deductions, lifted caps on annual contributions, and raised annual limits.

Additionally, many organizations have business interruption insurance that protects them against certain losses. While the covered losses usually include things like theft, fire, natural disaster, or cyber-attacks, entities should check with their carriers on whether the recent actions by government authorities to shelter-in-place would cause a trigger point for losses to be covered.

It is also important to note that the IRS has extended the tax filing deadline for nonprofits. Organizations are allowed to file Form 990 by July 15 and can do so without filing an extension, according to the National Council of Nonprofits. This extension will affect the excise taxes that associations pay on certain executive compensation and allow nonprofits to focus on what truly matters to their mission.

As we work with nonprofit organizations, the number one question is how to survive. We are ready to help you mitigate these challenges and keep you informed of the state of the industry. The professionals in our office can help you review your operations and planning during this difficult time and make suggestions for stability and even growth. Give our office a call at (509) 663-1661 today to discuss your options.