I am writing this from Cape Town, South Africa. COVID-19 has been slow to arrive here, thankfully. However, its economic effects are starting to be felt. Similar to the U.S., schools, universities, restaurants, fitness centers and numerous other businesses are starting to close. But with an already struggling economy, underfunded healthcare systems and facilities, and an unemployment rate of nearly 30 percent, the impact on this country and its citizens will be far greater.
We are very fortunate in the U.S. to have such a strong nonprofit sector that can step in to assist those in need. However, our nonprofit organizations are already experiencing a negative impact on program service delivery and fundraising, as well as reduced productivity and increased costs.
Some suggestions for finance teams at nonprofit organizations, based on my own experience serving on a Board of a social service organization as well as strategies GHJ has implemented, are as follows:
- Have a plan. Review your organization’s existing business continuity plan and work with executive leadership and the Board to create a tailored pandemic response plan. The Chronicle of Philanthropy has a round-up of excellent resources for how to manage, lead and communicate at this time, including free templates for business continuity and disaster recovery plans.
- Communicate the plan, as appropriate, to staff, volunteers, clients and other stakeholders.
- Evaluate compensation and benefits for full-time and part-time employees. The Department of Labor Standards and Enforcement, the Employment Development Department (EDD) and CalOSHA now have FAQs addressing how COVID-19 affects California businesses. Specifically, the EDD has also issued guidance for employees on how they can replace wages lost due to coronavirus-related absences, through short-term disability or unemployment insurance. The EDD has also issued guidance for employers who may need to consider reduced work hours or potential closure or layoffs. The guidance also has links to other resources for businesses.
- Model various cash flow scenarios taking into account fundraising, donor cultivation and other outreach events that may need to be canceled or turned into a virtual event. Consider drawing in advance on your line of credit facility (if you have one) and make adjustments to the annual budget as necessary. If gaps are identified, discuss alternatives, such as creative fundraising strategies or drawing from reserves. If your organization is carrying government receivables, advocate for collection as soon as possible or request cash flow advances.
- Review insurance policies to determine what coverage is available for canceled special events and other business interruptions.
- Communicate and connect with funders. Communicate your plans, particularly changes to program costs or service delivery, with government funders as soon as possible. Document these communications and, where possible, obtain formal approval for such changes. Keep foundation funders updated on changes, too. With the S&P index now down almost 25 percent in 2020, foundation portfolios will be hit, but now is not the time to pull back on grants. Demonstrating need and an effective response to that need will be important to keep foundations funding your organization. Tax-exempt organizations should reach out to their local community foundations to see if they are eligible for any COVID-19 emergency funding. For example, The California Community Foundation has implemented “Pass it Along Fund” in which they will granting out funds to tax-exempt organizations that will focus on school closures, health clinics, homeless residents and individual assistance.
- Do not forget internal controls. Review existing technologies to determine what accounting processes and procedures, including supervision and review, may need to change to support a remote finance function. Maintain cybersecurity best practices because there will always be scammers who try to take advantage in a crisis.
- Remote work. Ensure that staff working remotely have tools for collaborating and communicating with one another, such as Zoom for video conferencing. Tech Soup offers remote working options that can be implemented relatively quickly and with little to no external IT support.
- Leverage your nonprofit community. Stay connected, for example, with organizations such as the California Association for Nonprofits for the latest on advocacy and policy efforts and the California Community Foundation for updates on its COVID-10 Los Angeles County Response Fund, as well as United Way where a pandemic relief fund has been created to address the needs of LA’s most vulnerable.