Lessons Learned from a Difficult Year

Move Forward by Looking Forward

When the pandemic took hold, organizations needed actionable information for crisis decision-making. CPAs were called on to provide real-time financial information as well as projections and forecasts. Successful nonprofits had CPAs who were able to use available financial data as a stepping-off point to guide their organizations through uncertainty with the best information possible.

CPAs working with nonprofits must understand how useful this was and continue to provide forward-looking information based on solid, accurate, and timely results. This is an important shift for CPAs: to succeed, CPAs must embrace both past financial performance and future forecasts. In addition, information must be provided near, or at, real-time.

Foster Important Relationships

Part of the federal government’s response to the pandemic-induced economic crisis was a series of loan programs administered through the Small Business Administration and offered through local banks. CPAs who successfully navigated the crisis had strong relationships with bankers and a thorough understanding of government programs. Government programs are complex, so a team effort was needed to help organization leaders weigh the pros and cons of the federal relief effort. Cooperation between CPAs in management, the board, and the auditor were a best practice for solid decision making.

Not-for-profits benefit when there are strong bonds between CPAs in management, the board, and the audit firm. These relationships can grow without impacting independence or blurring roles and responsibilities. However, fostering cooperation needs to be done prior to crises so the power of these relationships can be applied immediately if or when needed. 

Learn How to Get Government Money 

With regard to the government support for businesses and nonprofits, some CPAs struggled to meet various program requirements, as well as the additional audit work associated with receiving government funding. Those who had previously never received direct government funding or were under the audit threshold were surprised by the audit requirements.

It can be a headache, but understand that there is opportunity here. Government funding in the form of grants or contracts can provide critical funding diversity for nonprofits. CPAs in not-for-profits should decide if this is the time to develop the skills and competencies necessary to add the government as a funding stream. Government funding requirements are complex, but they can be mastered. CPAs should work with their development teams to identify potential government funding sources and complete a cost/benefit analysis.

Encourage Windfall Management

Not-for-profits were distraught when the pandemic eliminated face-to-face services and development efforts. At the same time, many also experienced a surge in giving. The surge provided some organizations with excess funds … and no plan to use them. This led to serious discussions on how best to use the windfall, and CPAs played an important role. Moving forward, CPAs in the nonprofit world should have a windfall plan. Failing that, CPAs can provide clear data and information to support decision-making. The value-add is primarily in providing unbiased, data-driven analysis of alternatives and impacts. 

Not-for-profit CPAs should encourage the development of this plan. It should prioritize expenditures aligned with the strategic plan and current forecasts. CPAs can help ensure that the plan effectively balances the short- and long-term needs of the organization.

Prepare for Alternative Work Environments 

The pandemic created a huge surge in work-from-home situations. This strained the technology reach and internal controls for many nonprofits. In addition, the pandemic showed how fragile the sector’s practice of minimal staffing can be in the finance and operations functions. The loss of one or two key personnel halted business processes and left many scrambling to complete basic functions. It became nearly impossible to make decisions.

CPAs working with nonprofits need to add levels of flexibility and backup. Today, the best solutions may be automation and outsourcing. Shifting transactional work out of the organization allows internal staff to focus on analysis and advisory efforts. This will spread efforts across organizations and improve the value-add of internal financial staff.

The Next Crisis: Closer Than You Think

CPAs working with nonprofits should use the pandemic as a wake-up call. Organizations must be ready for the next crisis. We don’t know what it will be, but it will come. CPAs working in nonprofits must learn from the pandemic and prepare their organizations for the next time.  

Michael F. Cade, CPA, CGMA, is a nonprofit leadership adviser and executive coach for MFCCoach LLC in Morrisville and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at mfccoach@yahoo.com.