Governance Isn’t Cancelled
Schools have been cancelled. Sporting events have been cancelled. Dine-in meals at restaurants, if available at all, have been greatly altered. In a time when everything seems to be cancelled or disrupted, how do we, as board members of nonprofits, ensure the missions of our organizations stay strong and steady? On top of the difficult operational realities caused by the COVID-19 pandemic, nonprofit boards are now also seeking to respond in relevant and effective ways to George Floyd’s death and the questions of racism and racial equity it rightly exposes. When our nonprofits and staff need us most, we have a significant governing role to play:
- in shaping our organization’s public response to injustice,
- in guiding financial management,
- in caring for our staff and organizational culture,
- in investing in technology and infrastructure to accommodate new workplace realities, and
- in developing contingency plans for immediate business model challenges and the new post-COVID-19 world that will follow.
Governing certainly isn’t cancelled
In California, a month after the shelter-in-place order by the governor, the staff and board of a nonprofit where I serve as a board member held ad hoc meetings to discuss the impact of COVID-19 on the organization. Overnight, our key financial strategies were refocused on survival rather than growth. Leadership reluctantly began to discuss and consider significant downsizing and possible furloughs. We found ourselves discussing how to most effectively collect outstanding receivables and whether to redirect organizational capacity towards seeking emergency funding. As Board members, we were called upon to review and approve our organization’s application to the Paycheck Protection Program, while steering staff to begin seeking legal and accounting guidance on hoped-for loan forgiveness. Governing wasn’t cancelled. Rather more, board members were critically engaged with the staff to develop flexible and resilient solutions to sustain us.
Looking at cost savings and revenue generating options
With such uncertainty about the impact of the pandemic and when it will end, board members and staff are partnering closely to examine many possible solutions. The most obvious and immediate of the cost cutting measures contemplated involved staffing. While none of the board members want to see the staff furloughed, staff salaries are the largest single grouping of expenses and needed to be considered. To counteract the drop off in our usual revenue sources, could staff focus be redirected to fundraising? If our financial reality demands it, what is the most equitable way to institute furloughs? Could we at least structure temporary layoffs in ways that left medical benefits in place for all staff? Did we consider the effect of furloughs and other cost cutting measures on our organization’s diversity, equity, and inclusion priorities?
Board members were now critically involved in assisting with these tough decisions. Top management more closely monitored and evaluated performance and output. In addition to the financial results of potential furloughs, there are likely to be challenges to morale that management and the board need to face. How board and leadership communicate about these difficult decisions sets the tone for how furloughs would affect the culture. Extensive conversations to help guide the staff on a realistic recovery plan and how to communicate the plan were key. Somehow, we needed to hold on to some hope about what the organization would look like post-pandemic in terms of both culture and finances.
Restructuring existing costs
With social distancing in place, live events that had been painstakingly planned for months were suddenly scrapped. Traditionally, live events were the organization’s key revenue generator for the year. They were also the source of significant expenses for venues, catering, and entertainment. With COVID-19 impacting organizations globally, our nonprofit is not the only one facing significant losses of revenue. Deposits for our cancelled live events were not automatically refunded. The board worked with the staff on how to ask for full refunds or future credit from those places that were not willing to return our money. In addition to cancelled events and the recovery of related costs, the staff and board evaluated other existing costs, such as the infrastructure and technology, to see if savings were possible or if more would need to be invested to meet unplanned needs.
While it is not feasible to reduce office space under an existing lease, the board guided staff to consider renegotiating the lease or redirecting typical office expense to build a stronger information technology infrastructure. New workplace realities required secure and reliable internet for our employees sheltering-in-place. Unfortunately, there was no guarantee all of our staff already had a reliable home connection. We explored whether the organization could subsidize a portion of internet cost or even purchase hotspots for employee use. These changes required board consultation and consent for major amendments to the organization’s employee handbook and policies.
Redesigning growth
The silver lining of going through COVID-19 in 2020, versus the historic Spanish Flu pandemic in 1918, is that technology has allowed society to make adjustments. Video conferencing is now the new normal. Online chat and video capabilities have been hugely important for human connection between the board members and staff. Frequent check-ins with staff have led to honest discussions on redesigning the 2021 work plan and exploring alternate revenue streams. Campaigning online and participating in events such as #GivingTuesdayNow made a worldwide impact without breaking any social distancing rules. Board members were asked to utilize their networks to highlight the nonprofits they support. Leading up to the day, the staff assisted board members in drafting emails to ask for donations. Every social media outlet seemed to be inundated with a plea to give. Like governing, giving was not cancelled.
What if contributions do not come in as strong as we hoped? Board members and staff have begun talking about existing assets and reserves that could help sustain our nonprofit. What does the investment portfolio look like? The board had to compare the risk of holding onto underwater investments versus immediately selling them. Did the hope of later recovery outweigh concerns over potential additional losses? What was the best way to maximize investment income in such a volatile market? I have been on a handful of calls where management and the board weighed the pros and cons of utilizing board-designated funds. While it did not seem ideal to be dipping into reserves, we had to remind ourselves that these funds were thoughtfully designed to alleviate emergency issues just like this.
The board role deepens amidst crisis
Through this challenging and unconventional time, the passion of committed board members and their desire to help carries through. Taking a strategic look at cost savings and restructuring efforts, helping the staff broaden their thinking around revenue generation, redesigning growth and maximizing investments strategies are all ways the board can strengthen the organization’s long-term sustainability. Honest discussions build trust and create opportunity among the staff and board, uniting us all with the promise of recovery. Governance isn’t cancelled at all. Neither is hope.
How we can help
For more resources on pandemic related finance and accounting issues, please visit CLA’s COVID-19 Response Page.
Lili has practiced public accounting since 2005. She assists in the preparation of financial statements and performs on-site audits for not-for-profit organizations and higher education institutions. Along with providing accounting services, Lili conducts a wide variety of audits, including federal compliance audits and assists in preparation of financial statements under FASB Basis of Accounting. She also has experience assessing, observing, and testing the internal control environment and grant compliance.
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