How COVID-19 Changed Nonprofit Accounting [Industry Experts Weigh In]
To paraphrase the immortal lyrics of the Grateful Dead, “what a long strange trip this COVID-19 pandemic has been.” Though we’ve been living in the pandemic for a little over a year, for many of us, it feels like much longer. In the nonprofit industry, every organization has been impacted. Nonprofit finance teams had to work from home during mandatory state, local or federal shutdowns. Some saw revenues decline and had to replace funding. Others struggled to make the same funds stretch to meet greater needs in the community.
Now that it has been over a year and some parts of the world are starting to reopen and reassess, we wanted to learn more about the lasting lessons that nonprofit finance leaders will take away from this pandemic era. So, we asked members of the Sage Intacct Nonprofit Advisory Council, “How has COVID-19 changed nonprofit accounting?” This is what they told us.
California Rural Legal Assistance, Inc. (CRLA) provides free legal services for California’s low-income individuals and communities. These services are usually related to employment, housing, public benefits, and/or education related legal matters. Last year, people needed a lot of help to understand their rights during the COVID-19 crisis. There was much work to do, and thanks to their prior adoption of four critical cloud-based systems, the finance team at CRLA was able to continue their work without missing a beat.
“COVID-19 was the trigger for organizations to commit to investing in cloud-based technology. As a proponent of technology solutions and one that has implemented new cloud-based technology infrastructures for all organizations I have supported over my 16+ years, COVID-19 wasn’t a trigger for me. CRLA implemented our planned cloud-based financial infrastructure solution on September 1, 2019 — about six months prior to our country shutting down, thus requiring us to move our 50+ year old civil legal service non-profit law firm to a remote environment with the rest of the country. The difference? We were ready to meet our financial and accounting duties, whereas others who had not intentionally invested in technology were not.
These applications allowed us to effectively continue operations and move the organization forward. The four cloud-based technology solutions we used are as follows:
- Our employee reimbursement and corporate credit card management system, Expensify, provided an approval workflows and direct deposits for approved employee expense reimbursements into the employee’s personal bank account within 24 to 48 hours of final approval.
- Our accounts payable (AP) management system, Bill.com, supported an approval workflow, check processing, and secure ACH connections with approved vendors to safeguard the organization’s assets (cash) against cyber threats that increased substantially as organizations were finding their footing in the transition to remote work.
- Our fixed asset management system, AssetEdge, moved us out of an excel spreadsheet to an integrated application to manage additions, disposals, and depreciation with ease.
- Finally, our core financial management application, Sage Intacct, anchored our infrastructure and integrates all three cloud-based applications mentioned above.
We went from thousands of documents being processed in Oakland, after being mailed from our 17 offices across California, to 99.9% of our transactions and workflows being virtual. For us, COVID didn’t change how we performed our nonprofit accounting duties; rather, it highlighted the importance of this technology investment. Most importantly, it put the finance and accounting team in a better position to support more of our client communities experiencing the impact COVID was having on their personal lives. It made us a stronger and more effective social justice organization serving the rural poor at the heart of our mission.”
World Learning delivers international education exchange and development programs around the globe. With students and volunteers all over the planet, the organization had to adapt quickly and make changes to ensure safety. Fortunately, the finance team had deployed cloud-based, paperless solutions before the pandemic that empowered a rapid transition to remote finance operations. Today, the organization continues to deliver interactive educational exchanges between people in virtual formats.
“As COVID spread over the past year and employees started working from home, it became more apparent that a cloud-based accounting system is no longer a luxury, but a must for any non-profit. Those of us with properly configured electronic workflows, cloud-based document storage capabilities and electronic timesheet systems gained significant competitive advantage as we transitioned to work-from-home overnight. And with so many COVID related relief packages issued by various federal, state, and foreign governments, the role of the finance and accounting team in applying, reporting, and complying with loans and grants became even more important. We also had our first remote audit conducted during COVID lockdown, which surprisingly finished earlier, and under-budget compared to prior years.”
Tri-County Mental Health Services (TCMHS) is a community behavioral health center. When COVID-19 arrived, TCMHS leadership had to figure out how to continue providing services but in ways that did not jeopardize the health and safety of employees or clients. Virtual services would involve different challenges and different cost structures. The finance team has been able to manage in such a way that costs decreased, and revenue increased.
“Being a healthcare nonprofit, Tri-County Mental Health Services was very fortunate to receive local foundation support, state funding support, and federal funding support during the pandemic. Our community and nation rallied around funding to support the subsequent mental health crisis that has been secondary to the pandemic.
There are several ways our services have been impacted due to COVID. Many of our consumers are in the high-risk category for COVID. Those consumers that are uninsured (over 50% of open cases) have the largest impact for poor health, unemployment, substance use and mental health issues. Thankfully, service delivery and billing rules for our Medicare, Medicaid, and State funded consumers was amended to allow payment for televideo and telephone services where it was previously not reimbursable. Due to the high-risk factors for many of our consumers, TCMHS has provided most of the services through remote options such as telephone or video. The positive impact has been that many of our consumers that have no transportation, or are high risk for COVID, have gained consistent access for medication service and therapy services through those means.
However, many of our other services types have seen a sharp decrease in the ability to provide those services due to a lack of a traditional in-person delivery of care option. It is difficult to replicate access for our consumers for our treatment groups and supported service groups, particularly for our substance use and treatment courts. It also puts our robust network of contract providers at risk for financial instability due to the sharp decrease in their ability to provide those groups.
Many of our consumers are unable to utilize and consistently navigate a video platform, either due to their mental health symptoms, or because they don’t have access to the internet. Our providers are trying to increase their efforts for outreach to consumers, but engagement without the group process is difficult.
The other impact to our community has been the alarming rate of newly unemployed. We have seen a steady increase in consumers accessing care, particularly for medication services, who no longer have health insurance, and their current provider will no longer provide those services without insurance. This will not only impact the cost and sustainability of the service, but also their ability to afford their prescriptions.
Additionally, TCMHS is participating in a statewide program called, Show me Hope, to outreach to our community members around the impact of COVID, to connect community members to needed resources. As we increase outreach to the community, we will connect with people that are in high need of services and resources.
From an accounting perspective, the service changes above actually increased our revenues during the pandemic because our no-show rate for consumers declined to almost zero. This allowed our providers to be more efficient in providing services. Our expenses declined as our travel and training costs sharply declined as well as our contract services expenses.
From an accounting workflow perspective, we moved as many of our vendors as possible to ACH payment. We had always pushed vendors to go this direction, but the pandemic removed the hesitancy that existed for some vendors. Our accounting staff was able to work almost 100% remote during the pandemic because of our cloud-based accounting solution. It was no longer a requirement to be in the office to keep the day-to-day functions operational. All approvals and reporting were completed electronically during this time as well. We plan to keep many of our electronic processes in place as we transition back to a more in-person workforce.
We do plan to bring a significant portion of our workforce back into the office. Although some functions can continue remotely, the benefit of peer interaction as well as a supported environment has proven essential to workforce contentment."
Deseret Mutual Benefit Administrators (DBMA) is a third-party administrator that manages the employee benefits for The Church of Jesus Christ of Latter-day Saints, along with other companies owned and operated by the Church. As a nonprofit, DBMA must allocate every cost and then bill each cost out to participating employers. They automated this process with the Dynamic Allocations module in their Sage Intacct nonprofit accounting software. During the COVID-19 pandemic, DBMA’s nonprofit accounting team concentrated on reducing expenses and making financial adjustments that would enable them to continue delivering all the employee benefits without having to raise benefits costs.
“DMBA has been impacted in a number of ways by COVID-19. Like most organizations, we began working remotely in March of 2020. This caused us to adjust our policies around transportation, travel, meals, and other expenditures. We were able to save money in some areas and then apply that savings to other important initiatives that would have required additional funding from our customers. We hope that this will save our customers money in the long run, because many of them were impacted financially during the pandemic. We administer a health benefits plan for our customers, which saw significant decrease in benefits paid due to a variety of factors, including healthier participants. This allowed us to waive health premiums in January 2021 to help our participants financially.”
The Koret Foundation is committed to strengthening the Bay Area and supporting the Jewish community in the U.S. and Israel through strategic grantmaking to outstanding organizations. Under the leadership of CFO, Marlena Wong, the Koret Foundation finance team moved to the cloud prior to the pandemic, automating and integrating key financial systems. Today, they are even able to work with their auditors remotely.
“Fortunately, we laid the foundation for digital transformation when I started at Koret Foundation about five years ago. We wanted all our systems to talk to one another. To that end, we implemented Sage Intacct cloud accounting software, and integrated it with Nexonia for expense and time reporting, and with our banks. By the time we went under shelter-in-place orders for COVID-19, we were also live with our new grant management system, Fluxx, and started building an API between it and Sage Intacct.
Those grantmaking foundations that had not transitioned to the cloud prior to the pandemic, would have had to go into the office to process checks. During the shutdown, that would have meant delays in critical funding for their grantees. We could process everything online and used ACH to make grant payments twice a month. Thanks to our automation we were able to process over $40 million in grant payments last year, with a total staff of nine.
Our consultants and auditors at Armanino were even able to conduct our audit remotely. They said, 'You have everything, and Sage Intacct made it so easy for us to audit you.' This year, we got our draft audit financials ready a month ahead. Challenging times like the pandemic have the potential to either break everyone down or lift everyone up. And I think for us, because we had so many digital systems in place, it lessened the impact on our staff.”
Archdiocese of Cincinnati serves nearly half a million Catholics living in western and southwestern Ohio. The Archdiocese runs schools, hospitals, parishes, social service agencies and other ministries. COVID-19 impacted each and every aspect of the ministry in some way. In the accounting department, being mostly paperless and using cloud-based Sage Intacct made a big difference.
“COVID didn’t actually change non-profit accounting. What COVID did was change the way we go about doing the accounting. COVID also dictated changes to many of the processes that we account for. COVID acted as an accelerant. It forced us to try things we might not have considered before. We were lucky in the fact that we had installed Sage Intacct in 2017. Well before the pandemic hit, we upgraded hardware, software, and processes. Prior to our conversion, EVERYTHING was manual — paper files, paper-based approval systems, paper reports, etc. Using Sage Intacct, we were able to go mostly paperless well before the pandemic.
When the governor shut down the state in March 2020, we took our laptops, scanners, and printers home and didn’t miss a beat. Weekly staff meetings as well as board and committee meetings were maintained using ZOOM. Some of our staff did need to continue coming to the office, but for reduced hours and only to complete tasks that could not be handled remotely. Our audit was done 100% remote. Our auditors never set foot on the premises.
Fundraisers were held as remote events. For years, our parishes had been moving to online giving platforms. In our Archdiocese, we saw virtually every parish adopt this platform in a very short time frame. Those that had only been thinking about it, saw it as a necessity. As a result, overall giving did not decline to the extent we thought it might.”
We hope you’ve enjoyed hearing how these six nonprofit finance leaders managed over the last year and how they plan to lead their organizations forward after the pandemic. Most of our Nonprofit Advisory Council members expressed how important technology and automation have been in helping them pivot quickly during this challenging time, so their organizations can continue delivering on their missions. The digital transformation investment these organizations made in nonprofit accounting technology have already paid off and will continue to position them well for the future. To see why having access to the right data and the right technology benefits nonprofit accounting teams, download our eBook, The Nonprofit Finance Team Survival Guide.
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