As if the rugged terrain of managing an NFP entity wasn’t difficult enough, then came along the Coronavirus. This created turmoil in the NFP world and in the world in general) and will certainly result in some organizations suffering deep budget cuts or even failing. The State of New Jersey for instance has announced a new budget deficit as a result of the pandemic that could reduce its spending across the board. The Financial Accounting Standards Board, the private body that sets accounting standards for NFP entities, has proposed some welcome relief for NFPs. It is postponing the implementation of the new lease accounting standard for private businesses and NFPs until fiscal years beginning after December 15, 2021. In effect, this gives these entities a year’s grace period for implementation.
Implementing this accounting standard would be a burden on many organizations as accounting staffs will be pressured to even maintain and close the books for these organizations. Many accountants could not even access source data for extended periods of time as offices were shuttered across the country. Adding another burden of adopting a new accounting standard let alone one as complex as this one would be beyond many organizations’ capabilities. In the meantime, many NFPs are either granting rent concessions for facilities they lease out or receiving rent concessions for properties they rent. The NFP financial statements should clearly disclose any material concessions granted and received, as well as the accounting treatment used.
On another front, the President signed a bipartisan bill expanding uses of the Payroll Protection Plan (PPP) loans. Previously, 75% of the funding had to be used for payroll purposes in order to have the loan balance forgiven. The new law lowers that threshold to 60%. This flexibility will also be a welcome relief to many NFPs struggling with utility bills and other operating expenses. The bill also lengthened the amount of time the funding could be used. When you couple these two developments with the surprising May 2020 jobs numbers, perhaps there is some more hope on the horizon! Stay tuned.
One thought on “Some Welcome Relief”
Welcome news indeed.