COVID-

19: Department of Education operational guidance

Read this if you work for a not-for-profit organization. 

Our annual not-for-profit Recharge event provides attendees with an opportunity to hear about hot button issues in the not-for-profit industry. We polled registrants from across the country to see where they are focusing their attention in the current landscape. 

Employee retention

Overwhelmingly, employee retention is a number one concern for organizations, with 78% of respondents saying they were strongly focused on it in 2022. Not surprisingly, financial stability (67%), cybersecurity (50%) and concerns about access to government funding (43%) were of common concern among respondents.

 
Remarkably, employee retention in 2022 weighed more heavily on respondents than concerns around the remote workplace in 2021. While over 57% of respondents were concerned about the remote workforce in 2021, employee retention did not even make it into the top four concerns for organizations. This shift is consistent with what we are seeing in our client base, as organizations embraced hybrid and remote working arrangements and are well into codification of and adherence to the policies in place. Organizations reported taking significant efforts toward employee retention, most commonly looking at increasing salaries and allowing hybrid and flexible work arrangements as methods to help retain employees.

Financial stability

The concern around financial stability is slowly starting to decline. While financial stability was a top concern for 83% of organizations in 2021, that percentage dropped to 67% of respondents listing it as a top concern in 2022, While multiple factors certainly contribute to these results (availability of COVID relief funds, for example), the decline is significant, especially in this time of inflationary growth and demands on the labor market. This decline may be reflective of the continued transition away from short-term emergency response and toward a more future-oriented mindset. 

Other concerns

Both cybersecurity and government funding concerns held relatively steady in 2022 compared to 2021, with 45% of respondents concerned with cybersecurity and government funding in 2021, compared to 50% and 43% in 2022, respectively. 

Participants also reflected on the perceived top concerns for their board members, with employee retention and recruitment and overall financial stability leading in top importance. These mirrored concerns are of no surprise, but speak to the continued need for regular and reliable reporting to boards to allow for continued rapid response by those charged with governance.

If you have any questions about your specific concerns or situation, please don’t hesitate to contact our not-for-profit team. We’re here to help.

Read this if you are an organization that received federal funding subject to the Uniform Guidance. 

We are excited to announce the OMB released the 2021 Compliance Supplement late last week. This long-awaited release is effective for audits of fiscal years beginning after June 30, 2020 and supersedes the 2020 supplement and subsequent addendum. We are continuing to evaluate the changes to the supplement, but a few things to note from our early look:

• There will be an addendum to this supplement, to address certain COVID-related relief funding with changing regulations that were not in place in time for this supplement. 
• Good news for higher education: Part 4 of the supplement related to the Higher Education Emergency Relief Funds (within assistance listing 84.425, section 2) is not expected to be amended by the addendum.
• The supplement is making the formal shift away from the “Catalog of Federal Domestic Assistance” (or CFDA) language to the term “Assistance Listing” in describing the number used for each program.
• To evaluate the changes in the supplement from the prior year, consider checking out the Matrix of Compliance Requirements in Part 2 and Appendix V.

The timing for the release of the anticipated addendum has not yet been confirmed, but your audit teams are excited to get started with the new supplement. If you have any questions or need help making sense of it all, contact our Single Audit team. We’re here to help.

Read this if you work at a not-for-profit (NFP) organization.

At our recent not-for-profit CPE Recharge event (you can access presentations from the event here), we asked participants to identify their top three concerns. Overwhelmingly, 83% of respondents identified financial stability as their number one concern, with the remote workforce coming in second at 57%, and cybersecurity and government funding tied for third place as top concerns at the organization.

Remarkably, these responses were consistent across NFP industry groups, including higher education institutions, social services agencies, and healthcare organizations. While remote workforce and cybersecurity concerns go hand-in-hand and are top of mind for not-for-profit leadership as organizations navigate a return to work, the renewed focus on financial stability highlights a change in focus for not-for-profit organizations.

The burden of financial stress for NFPs is not new, as this concern certainly pre-dates the pandemic, but by the end of the first quarter of 2020, many organizations had shifted away from the long-term financial stability planning to an emergency response—more immediate concerns included revenue generating and cost cutting. This shift back toward a discussion of long-term financial stability is a positive sign as organizations (and their finance departments) are beginning to pivot away from the short-time reactive response, to proactive planning for the future.

Our respondents further reported that while financial stability is a top concern, 36% were not concerned and 46% were only somewhat concerned about their organization’s financial health:

We haven’t forgotten the 16% of respondents “very concerned” about their financial health—we are not all out of the woods yet and some industries were feeling economic tightening before the pandemic. Certain relief funding was only recently made available (we’re looking at you, Shuttered Venue Operating Grant), and there will undoubtedly be other programs over the coming year that organizations can use to bridge the funding gap in 2022. We continue to watch state and federal relief programs and our panel of COVID-19 relief program experts are here to help as you continue to navigate the requirements.

As we move away from the short-term emergency response toward more future-oriented planning, it is a good opportunity to learn the lessons from the NFPs that fared well in this time of crisis. While success and profitability have varied across the not-for-profit industry, we have found a few common themes in organizational financial success during the pandemic storm. Those organizations have:

• Explored new funding opportunities, including taking a thoughtful approach to relief programs 
• Considered cash flow strategies, like non-critical expense cuts and renegotiating contracts
• Communicated their value to donors, who responded in kind
• Evaluated new strategic partnerships 
• Expanded service delivery options and program offerings 
• Emergency preparedness plans in place and adequate strategic reserves

While the not-for-profit CFO dream antidote for long-term sustainability may come in the form of a healthy strategic reserve, many organizations without that flexibility continued to thrive throughout the pandemic, a result of dedicated staff members and a continued focus on overall mission. COVID-19 has changed the way NFP organizations do business, and the industry is now ready to look into the future. 

And we’ll be here, as will our Recharge event! If you have any questions about the various funding programs, including HEERF, provider relief funds, employee retention credit, or others, please contact the not-for-profit accounting team. We’re here to help.

Read this if you are in administration at a college or university.

Colleges and universities have been working around the clock to convert their in-person academic programming to online learning and to quickly disburse grant funding to students in line with broad eligibility requirements, all while adjusting to their own new work environments. In the search for funding in a time when many institutions are refunding student payments at unexpected and unprecedented levels, many institutions have found themselves ineligible for the Payroll Protection Program (PPP) offered under the CARES Act if the federal work study students were included in the employee count. In a welcome change, a recent interim final rule issued by the US Small Business Administration (SBA) has been released that will change the eligibility criteria for the emergency relief offered under the PPP. One of the most notable changes in the interim rule will allow colleges and universities to exclude federal work study students in determining their eligibility. 

Student workers have historically counted as employees under SBA programs. This temporary change would provide relief for many small institutions, whose federal work study programs would otherwise drive up their employment pool over the 500 employee threshold and exclude them from participation in the PPP. While federal work study positions fill important roles throughout many campus facilities, this interim final rule recognizes the primary function of a federal work study program is to provide financial aid for students attending school and is incidental to the role of the student on campus. As expected, as these positions are mostly federally funded, the interim final rule excludes these expenditures in determining the available loan amount under the PPP.

These changes are consistent with other areas of existing federal law, as noted in the interim final rule, these workers are already generally exempt from other federal employment requirements, like Federal Unemployment taxes. In order to allow for swift action, the interim final rule is effective immediately upon posting to the federal register.

We’re here to help.
For more information, or if you have questions about your specific situation, please contact the higher education consulting team.

As resources are released to help higher education institutions navigate the rapidly changing landscape, we will add important links and information to this blog post:

Industry resources:
US Department of Education (ED)

• COVID-19 information and resources for schools and school personnel
• FAQs related to COVID-19
• Guidance for interruptions of study related to COVID-19

Guidance for colleges:

• How might colleges benefit from the coronavirus stimulus package?
• Update from ED on CARES Act grants to students

Guidance on leases:
FASB and GASB news: Postponement of the lease accounting standards

We are here to help
Please contact the BerryDunn higher education team if you have any questions, or would like to discuss your specific situation.

Editor's note: Read this if you are a leader in higher education.

The Department of Education (ED) has released the first round of guidance to colleges and universities, with more detail to begin issuing much-needed emergency funding grants to students from the Higher Education Emergency Relief Fund (HEERF), provided as part of the CARES Act.

The guidance clarifies a variety of questions about the portion of the funding to be used for emergency financial aid grants to students, most notably:

• These funds cannot be used to fund room and board refunds.
• These funds cannot be used to cover overdue student bills at the institution.
• Only students eligible to participate in Title IV programs may receive emergency financial aid grants. Students who have not filed a FAFSA but who are eligible to file a FAFSA may receive emergency financial aid grants.

A broader summary from NASFAA can be found here.

While not specifically addressed in this guidance, the HEERF has been provided a CFDA number which leads our team to believe there is a good likelihood these funds will be included in some fashion under the Uniform Guidance compliance audits. We urge schools to retain adequate documentation from their decision making process to allow for a compliance audit, should that be required. We anticipate additional guidance on the HEERF will be forthcoming as schools begin to award the grants to students.

Questions?
Please contact Renee Bishop, Sarah Belliveau, or Mark LaPrade. We’re here to help.

Not-for-profit board members need to wear many hats for the organization they serve. Every board member begins their term with a different set of skills, often chosen specifically for those unique abilities. As board members, we often assist the organization in raising money and as such, it is important for all members of the board to be fluent in the language of fundraising. Here are some basic definitions you need to know, and the differences between them.

Gifts with donor restriction

While many organizations can use all donations for their operating costs, many donors prefer to specify how―or when―they can use the donation. Gift restrictions come in several forms:

1.    Purpose-restricted gifts are, as their name implies, for a specific use. These can be in response to a request from your organization for that specific purpose or the donor can indicate its purpose when they make the gift. Consider how you solicit gifts from donors to be sure you don’t inadvertently apply restrictions. Not all gifts need to (or even should) be accepted by an organization, so take care in considering if specific restrictions are in line with your mission. 

2.    Time-restricted gifts can come with or without a restricted purpose. You can treat gifts for future periods as revenue today, though the funds would be considered restricted for use until the time restrictions have lapsed. These are often in the form of pledges of gifts for the future, but can also be actual donations provided today for use in coming years.

3.    Some donors prefer the earnings of their gift be available for use, while their actual donation be held in perpetuity. These are often in the form of endowments and specific restrictions may or may not be placed by the donor on the endowment’s earnings. Laws can differ from state-to-state for the treatment of those earnings, but your investment policy should govern the spending from these earnings.

The bottom line? Restricted-purpose gifts must be used for that restricted purpose.

Gifts without restriction are always welcome by organizations. The board has the ability to direct the spending of these gifts, and may designate funds for a future purpose, but unlike gifts with donor restrictions, the board does have the discretion to change their own designations.

Whether raising money or reviewing financial information, understanding fundraising language is key for board members to make the most out of donations. See A CPA’s guide to starting a capital campaign and Accounting 101 for development directors blogs for more information. Have questions or want to learn more? Please contact Emily Parker or Sarah Belliveau.

As 2018 is about to come to a close, organizations with fiscal year ends after December 15, 2018, are poised to start implementing the new not-for-profit reporting standard. Here are three areas to address before the close of the fiscal year to set your organization up for a smooth and successful transition, and keep in compliance:

1. Update and approve policies—organizations need to both change certain disclosures and add new ones. The policies in place at the end of the year will be pivotal in creating the framework within which to draft these new disclosures (for example, treatment of board designations, underwater endowments, and liquidity).
2. Functional expense reporting—if you have not historically reported expenses by natural and functional classification, develop the methodology for cost allocation. If you already have a framework in place, revisit it to determine if this still fits your organization. Finally, determine where you will present this information in the financial statements.
3. Internal investment costs—be sure you have a methodology to segregate the organization’s internal investment costs such as internal staff time (remember, this is the cost to generate the income, not account for it) and consider the overall disclosure.

While the implementation of the new reporting standard will not be without cost (both internal costs and audit costs), if your organization considers this an opportunity to better tell your story, the end result will be a much more useful financial narrative. Don’t forget to include the BerryDunn implementation whitepaper in your implementation strategy.

We at BerryDunn are helping organizations gain momentum with a personal touch, through our not-for-profit reporting checkup. This checkup includes initial recast of the prior financial statements to the new format, a personalized review of the checklist to identify opportunities for success, and consideration of the footnotes to be updated. Contact me and find out how you can join the list of organizations getting ahead of the new standard.