Nonprofits with big COVID-19 roles now come under close scrutiny

At St. Paul-based African Economic Development Solutions, an organization that primarily helps businesses run by immigrant entrepreneurs, the past year was unlike any other in the organization’s 13-year history with purpose. non-profit.

“It was crazy business,” said founder and CEO Gene Gelgelu.

He said the association’s lending, granting and advisory work has quadrupled and has supported around 1,400 entities through its various programs. In addition to its work to mitigate the effects of business disruption related to COVID-19, the organization has also focused on the recovery of those affected by civil unrest after the murder of George Floyd in 2020.

All this support has done something else: it has pushed the organization into a category where it is subject to more stringent audits.

Because it has managed over $ 750,000 in federal awards, African Economic Development Solutions is in the middle of what is called a one-time audit. This means more control over how the money was used, compliance testing on various grants, and a lot more paperwork.

The rush for federal money that many nonprofits have received to help provide services during the COVID-19 pandemic has hit some in the new financial arena. For these nonprofits, this is the first time they have had to meet more stringent audit requirements than they normally face.

“It’s not something we budgeted for. We haven’t budgeted. No one paid for it, ”Gelgelu said last week as he reviewed the external auditor’s latest investigation. “So we have to try to find the resources. “

African Economic Development Solutions President and CEO Gene Gelgelu met with Business Development Specialist and Housing Program Director Jato Chabsi on Tuesday.

Patience Zalanga for MPR News

Billions of federal dollars have arrived in Minnesota as part of the COVID-19 response, with more in the works for 2022 and beyond. State and local government agencies have relied in part on nonprofits to make sure dollars are going where they are needed most – from housing to employment supports to grants. survival skills and more.

Kate Barr, president of a nonprofit support organization called Propel Nonprofits, said dozens of small organizations accustomed to simple balance sheet audits will undergo their first comprehensive review this year after crossing the $ 750,000 threshold. She wouldn’t be surprised if it affected 100 nonprofits.

“It’s pretty detailed in terms of the level of checking and double checking and triple checking,” Barr said. “And it’s also an additional cost because it’s an additional cost that you pay to your auditor. “

Barr said it doesn’t end there.

“Minnesota nonprofits, as part of their charity application to the attorney general, must have an audited financial statement if they have revenues over $ 750,000,” Barr said. “And a number of organizations have been kicked out of that number over the past year for everything from special philanthropy to donor generosity to federal money.”

To be clear, nonprofits that have obtained money from the payroll protection program to keep their staff employed will not have this on their account.

Minnesota accountants are also keeping an eye. Elizabeth Barchenger, director of insurance at Mahoney CPAs and Advisors, recently wrote about this for the state CPA association.

Barchenger said the situation could pose problems for some organizations that had not planned ahead – and expense, given that these types of audits can cost two to three times as much as standard financial reviews.

“A lot of accounting firms specifically avoid dealing with one-time audits because it’s such a complicated thing,” Barchenger said. “Their accounting firm may not be able to help them – someone with whom they have a long-term relationship – may not be able to help them with this specific new thing.”

It is still unclear to what extent these audits will be enforced or whether the federal government will be lenient. Barchenger’s ears are glued to the ground.

“The parts of government that are responsible for this are expecting a lot of setbacks, and a lot of people have missed this too,” she said. “And honestly, with the pandemic funding, you probably heard it, it came out quickly; it came out a bit sloppy. Advice on this has continued to change.

Gelgelu, the founder of a non-profit organization in St. Paul, said he agrees with transparency and believes he has the information he needs. It’s been a learning curve, he said. But at least now he knows what to expect for what will sure be a busy 2022.

“I don’t mind doing that. I’m more about the funding source and the timing, ”Gelgelu said. “You know, it takes a long time to do a single audit. “

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