Many private foundations and other grantmaking organizations have shifted operationally since the COVID-19 pandemic started in order to respond to grantees in need. Common responses have included:

  • Remove restrictions and conditions from grants
  • Waive reporting requirements
  • Open the application process outside of typical grant cycles

However, the current situation has caused barriers in physically getting funds to grantees. Many organizations have traditionally written checks (typically requiring more than one signature) that have been mailed to grantees along with hard copies of award letters and grant agreements. However, time is of the essence when depositing funds into grantees’ bank accounts and switching from checks to electronic payments is an option that can get funds to grantees much faster.

Moving to an Electronic System

Rochelle Witharana, Chief Financial Officer at The California Wellness Foundation, and her team have implemented for checks and electronic payments over the past months as one facet of their rapid response to grantees.

“We had been planning on implementing the system for vendor payments first, but as a response to COVID-19, we accelerated the implementation and focused on electronic grant payments so that we could transmit funds to our grantees as quickly as possible,” Rochelle stated. “ allows us flexibility to process electronic payments or checks while working remotely while still keeping our controls in place.”

Best Practices for Payment Processing

There are a number of options for organizations to consider in terms of payment processing vendors. Although every organization has different needs and processes in place, below are the top-10 factors to consider when deciding what vendor may be best for an organization:

  1. Is there an ability for the payment processing system to synchronize with current accounting and/or grants-management system?
  2. Do actual approvals of documents take place outside of the payment processing system or within the system? If approvals take place within the system is there an audit trail that includes signoffs, dates and supporting documentation?
  3. Does the system allow for different review flows/rules to be set up for different types of transactions (i.e., grants vs. vendor bills or under and over specified thresholds)?
  4. Does the payment processor allow the vendor or grantee to create an account and independently enter banking information so that an organization does not need to host/retain banking information?
  5. What level of detail is available for financial reporting purposes (i.e., detail to support internal financials and bank reconciliations) if payments are done in batches?
  6. Does the payment processor process both electronic payments and checks if paper checks are still necessary in some cases?
  7. Are automatic notifications sent to the recipient after funds are transferred and if a check is processed, what backup does the processor include?
  8. Does the system allow a second level of approval of an individual who has not approved the batch in the payment processing system to approve the withdrawal from the bank account?
  9. Does the system allow a verification of bank account information with a secondary contact at the grantee organization and for test deposits?
  10. How much training and implementation support is provided from the vendor?

Balancing sound internal controls with operating efficiency and effectiveness is key. Essential in designing new processes and procedures is not to lose sight of important elements of internal control, such as separation of duties, access controls, physical custody of assets, etc.

If you have any questions about the above, please reach out to GHJ’s COVID-19 Response Team or GHJ’s Nonprofit Practice. We are here to assist organizations to succeed in these very challenging times.

Amy Eybsen WEBSITE Standing

Amy Eybsen

Amy Eybsen, CPA, has more than 10 years of public accounting experience and is a managing director within GHJ’s Audit and Assurance Practice. Amy provides accounting, auditing and consulting services to a wide variety of companies and organizations that span multiple industries within the greater…Learn More