The coronavirus (COVID-19) pandemic has seriously disrupted and threatened the lives of all Americans, causing nationwide shutdowns, curtail businesses, affecting daily routines, and suspending entertainment and recreational activities. It caused many to shelter in place in fear, anxiety, and unprecedented uncertainty, as well as to avoid large gatherings and close contact with others. COVID-19 brought the world’s economy to a grinding halt and has taken millions of lives. While in some respects, the end of the crisis may finally be in sight, for most of the world, the past 14 months have been the worst in memory.

Effects on the Not-for-Profit Community

Economic stress presents formidable hardships, risks, and uncertainties for most, and in the not-for-profit community, management personnel, board members, and volunteer officers have been confronted with their share of the challenges from COVID-19. Consequently, both large and small organizations have endured severe financial distress, in some cases putting their very viability at risk. Moreover, the Tax Cuts and Jobs Act of 2018 removed tax deductibility as an incentive for contributions for smaller donors, who no longer itemize deductions. However, this adverse development was partially offset in 2020 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which allows up to $300 in charitable donations to be taken on a joint return in addition to the standard deduction. This amount increases to $600 for 2021.

The pandemic has forced many organizations to forego large, traditional fundraising events in 2020 and early 2021 and scramble to find creative new ways to obtain donations, generate program service fees, and collect aging pledges receivable in order to retain sufficient cash flow just to keep their doors open, to keep their employees and volunteers productive, and to meet their financial obligations.

Because of the scarcity of available resources experienced by donors in periods of economic stress, during such times cash—and sometimes even in-kind (noncash)—donations have trended downwards. Diminished contributions, coupled with reduced collectability of pledges receivables and access to credit, and increased demand for accountability to—and restrictions by—donors, made conducting program activities and funding administrative operating expenses more difficult. Nevertheless, due to the economic hardships in other areas of the economy, the demand for not-for-profit program services escalated for many organizations. Other effects of the economic crisis have been and are still being felt in both planned and unplanned staff turnover.

Staff who have endured personal financial hardships due to the COVID-19 pandemic may have been tempted to seek opportunities to “dip into the cookie jar.” Accordingly, it has become more important to watch for signs of such trouble among trusted employees and volunteer staff and maintain effective fraud detection and prevention controls in such stressful times.

In addition to all its other serious effects, the COVID-19 pandemic has caused wide-ranging and troublesome financial reporting and disclosure issues to arise, including the proper accounting for forgiveness of government-guaranteed Paycheck Protection Program (PPP) loans made under the CARES Act to help pay salaries or paid medical leave and insurance benefits, education and training, and debts. Most of these issues have to do with the valuation of impaired assets and the measurement of risks and uncertainties associated with the outbreak. They have affected almost all financial statements issued in 2020 and likely will continue for an uncertain period thereafter. For more detail on accounting and disclosure issues arising from the pandemic, see this author’s “Financial Reporting and Auditing Implications of the COVID-19 Pandemic: Some Practical Guidance” (The CPA Journal, May 2020, pp. 26–33,

Looking Forward

This combination of competing pressures and uncertainties poses serious challenges for effective annual and long-term budgeting. It has become simultaneously more important and more difficult to make and achieve reliable revenue estimates and to plan and control expenditures.

A good budget is a plan based on a best estimate; it should be thoughtfully prepared using the best information available about future events, conditions, and performance. But sometimes unpredictable changes in circumstances are so significant as to make a budget virtually meaningless. Whenever this happens, if possible, a budget should be revisited with the same forward-looking energy and rigor as went into its original development. Periodically revising the budget, adjusting it to equal actual performance results, is a wasted effort that leaves the budget just as meaningless as if one had done nothing―useless for planning or control, its only purposes. The COVID-19 pandemic is an example of such a momentous event that cannot be dealt with effectively without revisiting an organization’s budget periodically to drive the necessary financial decisions and actions.

The dramatic and pervasive effects of the COVID-19 pandemic emphasize the importance of remaining vigilant and sensitive to developing economic trends. Medium- and long-term capital development plans and investment goals, risk tolerance, and investment strategies, along with day-to-day and medium-term cash management practices, must be re-examined continually, adjusted, and monitored closely for rapidly changing trends, uncertainties, and other developments, such as changing legal and accounting requirements, including those related to endowment funds.

Here is a hope that the memory of 2020 will soon fade for everyone who struggled through and survived it.


Howard B. Levy, CPA, is an independent technical consultant with more than 50 years’ auditing experience and a member of The CPA Journal Editorial Advisory Board. This article is based on excerpts from the author’s recently published book, The Volunteer Treasurer’s Handbook: Financial Management Building Blocks for Not-for-Profit Organizations.