How to Apply for the Canada Emergency Response Benefit

UPDATE - April 16: Effective immediately, you will now qualify for the CERB if you expect to receive $1,000 or less (before taxes) from employment and self-employment income for the 4-week qualifying period for which you're applying. The qualifying period dates are outlined in the chart below.

You may also want to repay or return the CERB if you’ve received the Benefit but realize you're no longer eligible for that period. For example, you might be returning to work earlier than expected or receive the money and later realize you did not qualify. The CERB repayment instructions are outlined here.  

4-week period cycle	Period dates
1	March 15, 2020 to April 11, 2020
2	April 12, 2020 to May 9, 2020
3	May 10, 2020 to June 6, 2020
4	June 7, 2020 to July 4, 2020
5	July 5, 2020 to August 1, 2020
6	August 2, 2020 to August 29, 2020
7	August 30, 2020 to September 26, 2020

On March 24, the Canadian government passed Bill C-13 to enact the Canada Emergency Response Benefit (CERB) to help individuals who are no longer earning income due to COVID-19. The program actually started receiving applicants on April 6, but questions remain to be answered.

Please find below information Young Associates has validated from government sources. We also discuss some of the questions we are receiving, for which we don’t believe clear, categorical answers yet exist. We hope to be able to update this tipsheet with additional information as it becomes available.

As always — independent research should be done if you are looking into applying for this benefit yourself.

This benefit is geared to individuals. We are directing this tipsheet to employers, too, who are receiving questions from laid-off staff members and from freelancers who have lost their gigs.

What is the CERB?

The Canada Emergency Response Benefit (“CERB”) is an income support payment payable to eligible workers for up to four (4) months within the period falling between March 15, 2020 and October 3, 2020 for workers who have ceased work and are not receiving income as a result of COVID-19. It will be paid out to qualifying individuals monthly at $2000/month for a maximum of 16 weeks. Individuals will be required to apply to the program each month to affirm their lack of income. 

The CERB pays slightly less than the maximum EI amount, giving out $500 per week ($2,000 per month).

If you’re eligible for EI (which has different qualifying requirements from CERB), you have to apply for EI first. Note that EI pays out 55% of your earnings. If that works out to more than $500 per week, EI is your best bet.

Otherwise, the CERB is best for you.

Eligibility

You are eligible for the CERB if you meet the following requirements:

• Resident of Canada with a valid Social Insurance Number

• Are at least 15 years old

• Who have stopped working for any of the following reasons:

  • You have been let go from your job or your hours have been reduced to zero

  • You are in quarantine or sick due to COVID-19

  • You are taking care of others because they are in quarantine or sick due to COVID-19

  • You are away from work to take care of children or other dependents whose care facility is closed due to COVID-19

  • You cannot quit your job voluntarily

• Earned at least $5,000 in 2019 or in the 12 months prior to the date of your application by any of the following means:

  • Employment; self-employment; maternity and parental benefits under the Employment Insurance program, and/or similar benefits paid in Quebec under the Quebec Parental Insurance Plan

• You are or expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period (March 15 - April 11). For subsequent benefit periods, you expect to have no employment income.

  • NOTE: it is unclear right now how the government intends earnings to be reported. There are two options. You might count earnings based on when you receive the money. That’s the normal basis for income tax reporting for individuals. Or, you might count earnings based on when you did the work (i.e. typically before you receive the money.) That’s the normal basis for business accounting.

How to Apply

There are two ways to apply:

• Online using CRA’s My Account

• By phone using an automated toll-free line at 1-800-959-2019.  Phone applicants will need to provide their social insurance number and postal code for security purposes.

Both services are available 21 hours/day, 7 days/week from 6AM to 3AM.

There is one application portal for both EI and CERB. You will be asked to answer a number of questions that direct you to one benefit or the other.

When applying, you will need to provide your personal contact information and Social Insurance Number, and confirm that you meet the eligibility requirements outlined above. The government’s current priority is to get this money to the people who need it, but they will be verifying eligibility at a future date when you may be asked to provide additional documentation.

In order to not overwhelm the system, please obey the following chart to determine when to apply. This schedule will not affect the payment schedule.

If you were born in the month of:	Apply for CERB on	Your best days to apply
January, February or March	Mondays	April 6, 13
April, May, or June	Tuesdays	April 7, 14
July, August, or September	Wednesdays	April 8, 15
October, November, or December	Thursdays	April 9, 16
Any month	Fridays, Saturdays and Sundays

How it will be paid out

The Benefit, in the amount of $2,000, will be paid in blocks of four weeks. This is equivalent to $500 per week. A maximum of 16 weeks of benefits can be paid.

The Benefit is taxable although tax will not be deducted at source. You will be expected to report the Benefit as income when you file your income tax for the 2020 tax year.

Benefits will start within 10 days of you submitting an application. There is no waiting period.

Payments will be made through direct deposit or by cheque. You will be paid more quickly if you choose direct deposit through your CRA My Account. Your payments will be retroactive to your eligibility date.

Open questions

Because this is a new program, and because it has been rolled out rapidly, we are aware of unresolved questions. Be careful of what you hear, even from CRA’s phone services! You can trust info that the government has put in writing.

Does the government want us to report earnings based on when we did the work or when we got the money?

Will the 14 day period of no income be calculated based on the date when you receive your pay, or the date when the work was completed? We have seen posts from individuals who appear to have received conflicting advice from CRA.

Will there be any consideration for workers who are still working, but on a much-reduced schedule? We have heard discussion of support for individuals working fewer than a certain number of hours per week.

Will there be any consideration for categories of workers who may not meet the CERB eligibility criteria, but who still need assistance?

---

This tip sheet was created by Heather Young CPB and the Young Associates team based on the best information available to us as of the date of posting.

Young Associates works for nonprofit organizations. We do not do personal income tax.

Although every effort has been made to provide complete and accurate information, Young Associates makes no warranties, express or implied, or representations as to the accuracy of content in this tip sheet. Young Associates assumes no liability or responsibility for any error or omissions in the information contained in the tip sheet. 

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.

Sources: 

https://www.canada.ca/en/services/benefits/ei/cerb-application.html

https://mathewsdinsdale.com/federal-government-provides-new-details-related-to-75-wage-subsidy-and-canada-emergency-response-benefit-cerb-in-response-to-covid19/

https://www.canada.ca/en/revenue-agency/services/benefits/apply-for-cerb-with-cra.html

https://payroll.ca/Late-Breaking-Payroll-News

https://www.canada.ca/en/services/benefits/ei/cerb-application/questions.html

Payroll Tips on Accessing the 10% Temporary Wage Subsidy for Employers

UPDATE: As of April 8, you can find information about the 10% wage subsidy on this Government of Canada webpage.

On March 18, the federal government announced a wage subsidy. The details of that program are now much clearer. This tip sheet will help you claim the amount to which your organization is entitled.

Need help? Contact us at payroll@youngassociates.ca. 

For those who’d rather DIY, here’s how. 

Who qualifies?

Charities, nonprofits and small businesses. If you are a small business owner, you will find the eligibility details here. 

You must have a payroll account (as of March 18), and you must be paying employees.

How much can I get?

Here’s the government’s language:

“The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.”

Many small organizations will not reach this maximum.

How do I calculate this?

1. Make a list of your employees, and their gross pay for this pay period. 

2. Total the gross pay. 

3. Calculate 10% of this amount.

Say your organization employs the following three people, and they’re paid bi-weekly. The subsidy for one pay period would be calculated as follows:

Employee	Annual Gross Salary	Gross Salary This Pay Period
Sarah	65,000	2,500.00
Raj	48,500	1,865.38
Alice	42,500	1,634.62
Total Gross Pay		6,000.00
10% Federal Wage Subsidy		600.00

To calculate your subsidy for the three months of the program, make a list of paydays that fall between March 18 and June 20. Multiply the per-pay-period amount by the number of pay cycles.

This organization would claim a subsidy for the following pay periods:

Mar 20, Apr 3, Apr 17, May 1, May 15, May 29 and June 12

Read on - there’s a risk of over-calculation! We will cover that below.

How do I claim it?

Reduce your source deductions remittance by the amount of the subsidy.

If you make your remittance on the 15th of the following month, you will accrue the month’s payroll liabilities exactly as you normally would. When you make your remittance, you will reduce it by the amount of the subsidy.

If you use a payroll service, likely your remittance amount is withdrawn with each pay cycle. Your payroll service provider will manage the subsidy for you. They should be able to confirm how this will work for your organization.

Be careful - there’s a risk of over-deducting! We will cover that below.

How are my employees affected by this?

They aren’t. The subsidy goes to the employer. The intent is to give employers more resources in the hopes that this will stabilize organizations and their ability to retain staff during this crisis.

You will calculate your employees’ net pay exactly as you usually do. Their remuneration does not change, and their net pay does not change.

What if I haven’t started to claim it yet?

Don’t panic! You have until the end of 2020 to claim the subsidy.  In fact, you can claim it as part of your 2020 filing and have the credit transferred to 2021.

What if my organization is currently closed?

You can only claim the subsidy for amounts people are earning now, between March 18 and June 20. You cannot claim the subsidy on what you would have been paying - just on what you actually are paying during the three months of the subsidy.

Risk of claiming too much subsidy

Let’s look more closely at the $1,375 maximum per person. Remember, that’s $1,375 of subsidy for a three-month period. That equates to someone earning an annual salary of $55,000. 

You need to monitor your claims per person.

In the example above, Sarah’s annual pay exceeds $55,000. You can only claim $1,375 for her. (If you took 10% of her gross pay for three months, you’d be claiming $1,625.)

Risk of reducing your remittance by the wrong amount

You cannot touch EI or CPP! You must remit the full amount of EI and CPP with every pay period. (That’s the employee deductions plus the matching employer contributions.)

The subsidy can only be used to reduce income tax payable. 

If your income tax remittances are lower than your subsidy, that’s ok — CRA has provided a method of handling this. You can reduce your tax payable down to zero for the three months to June 20 — and then continue to reduce future source deduction remittances until you have claimed the entire subsidy due to you.

Record Keeping

To ensure that you are meeting CRA record retention requirements please ensure that you are keeping detailed records of amounts paid, subsidy calculations and remittances.

How Young Associates can assist

If you’re finding this overwhelming, we can assist! Our expert payroll department would be happy to work with you to guarantee that you claim the full amount of your federal wage subsidy entitlement. 

We’d be happy to do a short consult to review the rules, make some calculations and get you started — or to work with you on your payroll for the next three months to ensure your remittances are accurate.

We’d also be happy to give you a quote for full-service bookkeeping. 

We work on the basis of fixed price agreements, so you’ll know going in how much our work will cost — and we always offer a money-back guarantee: if you’re not completely delighted with our service, we will, at your option, either refund the price, or accept a portion of said price that reflects your level of satisfaction. 

Contact us: payroll@youngassociates.ca

---

This tip sheet was created by Alicia McGuire PCP and the Young Associates team based on the best information available to us as of the date of posting. We are happy to receive your comments at payroll@youngassociates.ca. 

Although every effort has been made to provide complete and accurate information, Young Associates makes no warranties, express or implied, or representations as to the accuracy of content in this tip sheet. Young Associates assumes no liability or responsibility for any error or omissions in the information contained in the tip sheet. 

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.

Tips for Working Remotely: Accounting Processes & Documentation

So… you and your team are now working from home, but your filing cabinet is still at the office. That poses a challenge for sure. We can’t fix that, but we can make some practical go-forward suggestions about adapting your accounting system to the “new normal.”

Need help? Contact us at info@youngassociates.ca. 

For those who’d rather DIY, here’s how. 

Online Banking

If you haven’t yet set up online access to your bank account, don’t delay!

Through online access, depending on your bank and your authorization structure, you can view your account, initiate transactions (including online payments) and retrieve past statements. Bear in mind that appropriate authorization is still required. More on that in our tip sheet on adopting online payments.

Consider giving your bookkeeper online, view-only access so that you retain control of your banking activities, while your bookkeeper can manage your records efficiently. 

If you’re using cloud accounting, make sure you’ve got the bank feed set up. It downloads transactions directly to your cloud accounting app, expediting processing and reconciliation.

Online Accounts

The first one that springs to mind – we’re a bookkeeping firm, after all – is the Canada Revenue Agency. Now’s the time to set up My Account for your personal taxes, and My Business Account for your company (small business, nonprofit or charity).

Consider asking your bookkeeper to set up Represent A Client with CRA so that they can check your account balances, file HST and T3010s, respond to notices and receive statements.

CRA gives you handy access to all of your tax-related documentation, going back years.

Utilities, credit cards, major retailers, associations and other suppliers with whom you have an ongoing relationship may offer online access to your account, allowing you to make online payments  (being mindful of authorizations) and to retrieve invoice and statement copies.

Email

Now’s the time to sign up for emailed invoices and statements from your bank, your credit card company, “big box” suppliers (major retailers, utilities, etc.). Many of these organizations are actively encouraging customers to move to digital, and you’ll find a sign-up on their website.

Even smaller suppliers have gone digital – or are scrambling to make that happen now. 

What about you? Are you invoicing your customers, members, sponsors, registrants online?

They are having the same challenges you are, dealing with snail mail. Now’s the time to get your paperwork right to their desktop.

Any reasonably current accounting software has an email button close to the print button. Clicking it will open a dialog box that lets you send invoices and statements directly. Most apps retain email addresses, and allow you to memorize standard messages.

Snail Mail and Digitization

As of this writing, Canada Post deliveries are uninterrupted, so you will have to consider how to deal with hard-copy items that arrive at your workplace.

Now’s the time to close the filing cabinet forever, convert those hard copies to digital images, and store them online. It’s the way of the future; you won’t regret it.

No kidding: in the Young Associates office, and our tech-savvy clients’ offices, snail mail goes straight from the scanner to the shredder. 

Make sure your system is backed up! Indeed, redundant backups are essential to secure management of your documents.

Scanning

Make sure you’ve got the right tools for the job. Now’s the time to acquire an affordable scanner, or a printer with built-in scanning.

In a networked environment, you should be able to make the printer send the scanned image to the folder you identify – so you can set up your digital filing cabinet starting now.

Cloud-based Transaction Capture and Documentation

The next wave of accounting document management is AI-powered apps that read a scanned image, extract accounting details (supplier name, date, amount, HST, etc.) and seamlessly integrate to your accounting software. This doesn’t eliminate the human element: your bookkeeper still needs to review the coding before pushing the entry into your accounting software. 

Besides improving bookkeeping efficiency, these apps can act as your digital filing cabinet, sorting invoices by supplier and date, and pushing invoice images into your accounting software, so that documentation is attached to each entry.

To take advantage of these apps, you need cloud-based accounting software. Document capture front-runners include (logos are linked to company sites):

How Young Associates can assist

A consultation with us may make all the difference to your comfort level and confidence that your accounting system is up to the challenge of the pandemic. 

We can help you set up online banking and other accounts, advise on process and best practices, and advise on cloud computing and related apps.

We’d also be happy to give you a quote for full-service bookkeeping. 

We work on the basis of fixed price agreements, so you’ll know upfront how much our work will cost – and we always offer a money-back guarantee: if you’re not completely delighted with our service, we will, at your option, either refund the price, or accept a portion of said price that reflects your level of satisfaction. 

Contact us: info@youngassociates.ca 

---

This tip sheet was created by Heather Young CPB and the Young Associates team based on the best information available to us as of the date of posting.

Although every effort has been made to provide complete and accurate information, Young Associates makes no warranties, express or implied, or representations as to the accuracy of content in this tip sheet. Young Associates assumes no liability or responsibility for any error or omissions in the information contained in the tip sheet. 

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.

Tips for Working Remotely: Increase Efficiency, Adopt Digital Payments

When you and your staff and board members should be staying safe at home, the last thing you want is to be dodging germs on the streets to get cheques signed. That goes for your courier company’s staff too!

It’s time to move your payments to the cloud.

Need help? Contact us at info@youngassociates.ca

For those who’d rather DIY, here’s how. 

Authorization, control

Working remotely does not mean compromising proper accounting controls.

For small businesses, the owner may be the sole authority. Larger commercial concerns and nonprofit organizations typically require multiple authorizations on payments to control spending and ensure adherence to budgets.

You may find great comfort in those two signature lines on a cheque, and the in-person requirement for getting someone’s signature. But, that’s far from the only way to do it.

Banks and other third-party payment processors have designed protocols to support remote authorization by multiple parties, where each signer approves independently of the others. 

Organizations can implement their own internal protocols to ensure that the designated staff or board members approve payments. For instance, an invoice can be scanned and circulated by email, with the bookkeeper instructed to pay only after the appropriate people have given their okay. 

Alternately, you can investigate options for gathering digital signatures.

Getting started right away

Using options like Interac, credit card payment and supplier payment portals, you can immediately convert some of your payables stream to online payment. The table below provides some options.

Dealing with your cheques

Make sure your cheques are safe. Cheque fraud is on the rise. Blank cheques should always be kept out of sight, in a locked place. 

Do not ask signers to pre-sign cheques. This negates the value of the authorization process! If you’ve already disobeyed this important rule, you must be doubly sure that your blank cheques are secure.

Service providers

How to choose the right avenue(s) for you? This list will get you started. You may find it useful to canvass your bookkeeper, CPA, and tech-savvy colleagues to learn what they use. You may use multiple service providers, depending on your needs.

This list is not intended to be exhaustive. There are other options for you. Any of the providers below will work for small businesses, nonprofits and charities.

This is a quick overview only. All of these options offer more features than indicated in this summary. Review websites carefully for additional detail.

Provider	Cost	Accounting Integrations	Commitment / Getting Started	Notes
	Monthly fee includes transaction package; per item fee thereafter	Plugs into Quickbooks and Xero accounting software so you can transmit your payables directly to the app for payment.	You can subscribe month by month. Signing officers must complete authorization procedures.	Young Associates’ choice. Canadian owned. Sleek, intuitive user interface with online chat support. Offers authorization tiers (e.g. up to $500 1 signer only). No need to collect banking info if vendor is set up with Plooto, or vendor can accept email. Pays CRA. Does not pay many “big box” vendors (yet). International payments. Also receives payments.
	Monthly fee plus per item fee	Plugs into Adagio, Connected, Quickbooks, Sage and other accounting apps so you can transmit your payables directly to the app for payment.	Apply for a TelPay ID on their website. Signing officers must complete authorization procedures.	Canadian owned. Founded in 1985; a pioneer in payment processing. Canada’s largest biller list. For other vendors, no need to collect banking info; vendor can be notified by email. Besides supplier payments, it provides payroll direct deposit, government remittances, international payments, transfers funds. Receives payments too.
	Monthly fee for “Pro” package. 2.9% of amounts received. Per item fee.	No integration. Payments via PayPal need to be keyed into your accounting app.	Monthly commitment for “Pro” package.	PayPal’s promotion is geared mostly to receiving payments. Your vendors may already accept payment this way. You will need a method of payment (credit, debit, from your bank account, or using your PayPal balance). You may find PayPal useful for paying international artists: they can send you a PayPal invoice. Note that the recipient pays a % of the transaction.
	Per item fee	No integration. Payments via Interac need to be keyed into your accounting app.	Anyone with a Canadian bank account and an email address can send Interac e-transfers.	Interac is a Canadian interbank network. Your institution probably belongs, and right now you can probably send one-off payments to suppliers able to receive e-transfers.
Bank and credit union platforms	See your bank for details	Banks are typically cautious about linking to third party apps. Check your bank for details. Payment entries may need to be re-keyed into your accounting app.	You need to have an account. See your bank for further details on how to get started.	Features vary by institution
Credit cards	Fees vary by card. Some cards offer benefits such as travel points or cashback.	For initiating payments, no integration to your accounting software. (You may be able to set up a feed to bookkeep completed transactions.)	You need to apply for a card. The company will determine how much credit to extend.	Having a credit card expands your resources – but at a cost. Interest on unpaid balances may be high. Nonprofits and charities may find it difficult to secure a company card.
Supplier online payment portals	Most suppliers are happy to receive your payment at no charge to you.	No integration. Online payments need to be keyed into your accounting app.	Many suppliers are encouraging customers to pay online	You will need a method of payment such as a credit card, debit card, Interac or PayPal.
Supplier pre-authorized payments	Most suppliers are happy to receive your payment at no charge to you.	No integration. Payments need to be keyed into your accounting app.	You authorize the supplier to withdraw directly from your bank account. You can withdraw authorization at your discretion.	You may already be using this method. Landlords, utilities, credit card companies and other monthly billers actively seek pre-authorized payment.

How Young Associates can assist

A consultation with us may make all the difference to your comfort level and confidence that your accounting system is up to the challenge of the pandemic. 

We can respond to your concerns around security, authorization, risk management, privacy and accounting process, and help identify the best online payment options for you.

We’d also be happy to give you a quote for full-service bookkeeping. 

We work on the basis of fixed price agreements, so you’ll know upfront how much our work will cost – and we always offer a money-back guarantee: if you’re not completely delighted with our service, we will, at your option, either refund the price, or accept a portion of said price that reflects your level of satisfaction. 

Contact us: info@youngassociates.ca

---

This tip sheet was created by Heather Young CPB and the Young Associates team based on the best information available to us as of the date of posting.

Although every effort has been made to provide complete and accurate information, Young Associates makes no warranties, express or implied, or representations as to the accuracy of content in this tip sheet. Young Associates assumes no liability or responsibility for any error or omissions in the information contained in the tip sheet. 

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.

Evaluating COVID-19 Impact: Approaches to Quantification

The ability to measure the impact of COVID-19 will be essential to managers in the nonprofit sector. In order to make the case for government funding, donor support and member retention – and as the basis for crisis management and recovery planning – managers need insight into the financial consequence of the pandemic. This tip sheet offers ideas, grounded in accounting principle, for developing financial measurements of COVID-19’s impact appropriate to your circumstances.

Need help? Contact us at info@youngassociates.ca. 

For those who’d rather DIY, here’s how. 

Headline

Well-managed budget-to-actuals reporting should cover you. 

We hope the additional detail and supporting arguments will be helpful for internal discussion.

What did happen, what might have happened

You will be able to report certain items with clarity because they will be recorded in your books. Your accounting records capture what happened: what dollars were received and what amounts were paid out. It’s important to ensure your books will yield helpful reports; see our companion tip sheet on Effective Bookkeeping Practices. 

For many organizations – notably arts and culture, where programming was effectively shut down in the second week of March – the critical impact is around what might have been. Management needs to take a fair and reasonable approach to estimating impacts that cannot be measured objectively.

“Fair” and “Reasonable”

These terms have a specific meaning in accounting. Understanding them can guide your approach to measuring the impact of COVID-19.

Your audit report probably states that the appended statements “present fairly, in all material respects…” If statements are presented fairly, they faithfully represent the organization’s financial position, are supported by sufficient evidence, and are free of bias.

An item is “reasonable” if a knowledgeable and independent observer would agree that it is rational and appropriate within the circumstances. Accountants perform “reasonability tests” where they evaluate the relationship between financial statement elements. For instance, your auditor tests the reasonability of your GST/HST returns by comparing the taxes you reported to your taxable revenues and expenses.

A funder might evaluate the reasonableness of your COVID-19 impact report by looking at your organization’s capacity. If you cancelled 10 performances in a 1200 seat venue and your average ticket price is $75, the box office impact cannot reasonably exceed $900,000.

Documenting impact

Keep your paperwork and make good notes! Confirm verbal discussions with an email, to create a written record of process and decisions. Take detailed minutes of board and committee deliberations.

Documents such as contracts, correspondence about cancellations, correspondence instructing staff to cancel spending plans, ticketing reports showing refunds, emails with sponsors and donors will help to substantiate the consequences of COVID-19. 

Documentation can demonstrate that you were following the plan for the year, and it can capture the actions you took in response to the pandemic.

Revenues and expenses arising from the pandemic

You may incur COVID-related costs (e.g. setting up staff home offices, extra travel or IT expense) and perhaps COVID-related revenues (e.g. federal wage subsidy, special donations). Code them to an account or class that will be part of your COVID impact report. (See our companion tip sheet on Effective Bookkeeping Practices.)

Budget to actuals variance

Your annual operating budget amounts to a policy document for your organization: management and board agree to execute the planned activities; to spend no more than the budgeted amount; and to target the agreed revenues. The budget can be seen as a pro forma income statement: it is your forecast of the company’s operating results at year-end.

As such, the board-approved budget may provide a reasonable yardstick for evaluating impact. 

To quantify impact, management would:

• Update the budget for any confirmed changes that were in place before COVID-19 struck (so that you are measuring impact on the most up to date plan)

  • Your original budget may or may not be affected by COVID-19, but it may have been affected by other, unrelated planning changes.

• Eliminate the effects of items arising specifically because of the pandemic (e.g. federal wage subsidy, special fundraising appeals, infrastructure costs for remote work, cancellation penalties). 

With these items considered, the difference between budget and actuals could serve as a reasonable measurement of impact.

Year over year variance

The going concern concept states that unless there is strong evidence to the contrary, or unless the organization itself has decided to fold, a company will continue to operate for the foreseeable future. Mandate-driven organizations tend to follow much the same pattern year over year in terms of program and service delivery, scale of organization and financial capacity.

As such, the difference between past financial results under normal circumstances and the results you achieve during the pandemic may offer a fair and reasonable perspective on COVID-19’s impact.

Direct and indirect revenues and expenses

This will be critical for project reporting, but has some bearing as well on the understanding of your overall operations.

A revenue or expense item is “direct” when it arises from a project, program, event, or activity. Other revenues and expenses may be impacted by that project, program, event or activity, but in a tangential or indirect way. 

For instance, a museum incurs costs directly related to new exhibits (e.g. exhibit design and installation, artifact loans, marketing). It may also receive direct revenues (e.g. sponsorship, ticketed admissions). But every exhibit depends on the museum’s general infrastructure. Indirect costs of exhibitions might include cleaning and maintenance, the security system, and the ticketing system. Indirect revenues might include operating grants and memberships.

The museum must consider the overall impact of being shut down because of COVID-19. But, if management also cancelled a new exhibition, and needs to communicate the impact to project funders, it would be reasonable to consider reporting collateral impact of the cancellation on, say, membership sales and individual donations.

The true impact of cancelled activities is the sum of the direct items and the reasonable share of indirect items.

Core and project

Classically, arts organizations are project-driven. It is often the case that the core infrastructure is lean, and the bulk of staffing and other resources are directly attached to artistic projects. The following analysis may work for other types of organizations with similar characteristics.

A useful measure of financial stress is to separate revenues and expenses directly associated with your organization’s core (overhead / administration) from those directly associated with its projects. There are three possibilities:

• Core revenues cover core expenses, and project revenues cover project expenses

• Project revenues are insufficient to cover project expenses, and the organization must generate sufficient core revenues to cover both the core and a portion of the projects.

• Core revenues are insufficient to cover core expenses, and the organization relies on projects to cover a portion of the core

For organizations reliant on project revenues to secure core operations, project cancellations could be devastating to the organization’s ability to cope with the pandemic. 

Evaluating where your organization falls may help you understand the impact of COVID-19. Successful strategizing depends on a clear articulation of the challenge to be addressed.

How Young Associates can assist

A consultation with us may make all the difference to your comfort level and confidence that your accounting system is up to the challenge of the pandemic. 

We can help you develop processes to calculate the impact of COVID-19 on your operations, and support a thorough and effective analysis of your financial situation.

We’d also be happy to give you a quote for full-service bookkeeping. 

We work on the basis of fixed price agreements, so you’ll know going in how much our work will cost — and we always offer a money-back guarantee: if you’re not completely delighted with our service, we will, at your option, either refund the price, or accept a portion of said price that reflects your level of satisfaction. 

Contact us: info@youngassociates.ca

---

This tip sheet was created by Heather Young CPB and the Young Associates team based on the best information available as of the date of posting.

The contents of this tip sheet comprise Young Associates’ views. They do not constitute legal or other professional advice. You should consult your professional advisor for advice relevant to your situation.

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.

Evaluating COVID-19 Impact: Effective Bookkeeping Practices

Your accounting system is your primary tool for capturing and reporting the financial dimension of everything that happens within your organization. This tip sheet will help you consider changes to the structure of your books to enable clear and accurate reporting on the impact of COVID-19. Our view, grounded in accounting principle, is that the permanent account categories should be minimally altered, and that you can achieve your temporary reporting needs through alternatives like “classes” (explained below).

Note that we use QuickBooks as the basis for illustrations; that’s where the term “class” comes from. We endeavour to explain in a way that will work for other accounting apps too.

Need help? Contact us at info@youngassociates.ca. 

For those who’d rather DIY, here’s how. 

The audiences for your accounting reports

It’s useful to think of writing for an audience – or, more commonly, multiple audiences. The readers of your financial statements (staff, board, third parties) make decisions: developing internal strategy, passing a budget revision, awarding a grant, renewing a membership, etc. What information might each stakeholder require, and at what level of detail?

Review the existing account categories in your books. Are they sufficient for the array of COVID-19 related reporting you anticipate? 

It is likely you will need some additional categorization. The following tips will help you achieve your COVID-19 reporting needs efficiently.

Our recommendations

Minimize changes to your chart of accounts.

Utilize reporting by class and other bookkeeping subdivisions to produce COVID-19 impact reports.

Good housekeeping

Skilled bookkeepers think about short- and long-term reporting requirements, bearing in mind the importance of year over year comparability. They have an eye to the relevance of accounting information, and its usefulness in providing feedback (e.g. on the impact of change) and in supporting forecasts of future activity.

We know that COVID-19 reporting will be required in the short-term. No one knows yet what the long-term ramifications may be. We favour a conservative approach to adding account categories.

A good rule of thumb is to add categories that will contain at least 0.5% of your expenses. Thus, for a company with a budget of $1,000,000, the smallest expense lines would contain at least $5,000. Same applies to revenues.

Account categories and financial statements

The account is the basic unit of categorization in your books. When your bookkeeper produces a balance sheet and operating statement (also known as income statement or P&L) from your books, you’re seeing the account categories. One account = one line on the financial statements.

Suggestions for new COVID-19 related accounts

Revenues: The federal wage subsidy may merit its own account, as a unique revenue source, or you might bookkeep it to an existing “Federal – Other” account. Consider any new sources of revenue that might arise from your pandemic response.

Expenses: Same concept. A new category of spending may merit its own account.

Contra accounts:  A contra account has the opposite balance to the normal account. For instance, an organization issuing COVID-related refunds might add a contra-revenue account to capture the refunds. That way, the statements would show 100% of the initial revenue and 100% of the refund, thereby clearly demonstrating the impact of COVID-19.

Balance sheet accounts: New cash accounts, lines of credit and other loans require separate accounts. If you are creating a new fund related to COVID-19 (e.g. a relief fund) you may need a separate net assets account to segregate it properly.

Accounting by nature & by function

Accounting recognizes two broad approaches to revenue and expense information: by nature (what it is; also known as natural category) and by function (what it’s used for; for instance, events, projects, activities, programs, shows, etc.). 

Well-structured books maintain clarity on this point. Make sure that your COVID-19 additions are consistent with your organization’s established practice.

By nature – A gallery might have accounts for Artist Fees, Installation and Marketing

By function – Alternatively, the gallery might create a new expense account for each exhibition. The account would be named for the exhibition, and would capture all associated costs (artist fees, installation, marketing, etc.) in a blended account. We would never advocate for this! (Although we’ve seen it...) We would always recommend using classes - read on!

Additional categorization within accounting software

Accounting apps offer additional ways of aggregating financial detail which may track impact more effectively than new accounts.

Each software package has its own proprietary features – but conceptually many of these features are alike.  We’ll use QuickBooks as an example. 

Classes – Allow you to subdivide accounts by activity, program, event or show. A theatre company might have accounts for Actors, Sets, Advertising and Theatre Rent. These accounts would capture the total spent on each category, but wouldn’t help anyone understand what was spent on each show. By creating a class for each show, and then tagging each entry with a class, the bookkeeper can run a P&L by Class report to produce a statement for each show.

Projects (QuickBooks Online) or Jobs (QuickBooks Desktop) – Allow you to track items by funder. A project (or job) has only one revenue source. In the business world this would be a customer – and in the nonprofit world, a funder. By tagging each entry with a project, the bookkeeper can run a P&L by Customer report to produce a statement for each project.

Departments – Allow you to subdivide accounts by department. Everyone in (say) Marketing, Fundraising, Production and Admin needs office supplies, and each department incurs meeting, travel and other common expenses. By tagging each entry with a department, the bookkeeper can run a P&L by Department report so management can evaluate activity by department.

Locations – Allow you to subdivide accounts for different physical locations. An organization with two offices might run the same programs and have the same departments in both offices. By tagging each entry with a location, the bookkeeper can run a P&L by Location report to produce a statement for each location.

Before you jump in to change the structure of your books, pause for a moment and consider how these options might help you generate the COVID-19 impact reports you will need for your funders, members, donors and other parties – as well as for your own management decision-making.

Suggestions for new COVID-19 related classes

A general COVID-19 related class: Tag all pandemic-related revenues and expenses to this class. 

Sub-classes for projects: You might have a class called “New Play #1” which already contains development and pre-production costs. If New Play #1 has been cancelled, you might create a class called “COVID – New Play #1” to capture costs associated with the cancellation. QuickBooks can roll up the sub-class into the class report to give you a grand total for New Play #1.

Sub-classes for COVID: Alternately, you might attach sub-classes to your general COVID-19 class. Any impacts related to overhead would be booked to the general COVID-19 class. You would create sub-classes for each project, event or activity. QuickBooks can roll up the sub-classes into the class report to give you a grand total for COVID-19 impact.

Naming: Start each new class title with “COVID” to make it easy to identify and roll up class reports.

How Young Associates can assist

A consultation with us may make all the difference to your comfort level and confidence that your accounting system is up to the challenge of the pandemic. 

We can help you identify the stakeholders who will need reporting; prepare to meet their reporting needs; and advise on practical and appropriate changes to the structure of your books.

We’d also be happy to give you a quote for full-service bookkeeping. 

We work on the basis of fixed price agreements, so you’ll know upfront how much our work will cost – and we always offer a money-back guarantee: if you’re not completely delighted with our service, we will, at your option, either refund the price, or accept a portion of said price that reflects your level of satisfaction. 

Contact us: info@youngassociates.ca 

---

This tip sheet was created by Heather Young CPB and the Young Associates team based on the best information available as of the date of posting.

The contents of this tip sheet comprise Young Associates’ views. They do not constitute legal or other professional advice. You should consult your professional advisor for advice relevant to your situation.

Founded in 1993, Young Associates provides bookkeeping and financial management services in the charitable sector, with a focus on arts and culture. Young Associates also provides consulting services in the areas of data management, business planning and strategic planning. Heather Young published Finance for the Arts in Canada (2005, 2020), a textbook and self-study guide on accounting and financial management for not-for-profit arts organizations.