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An updated guide to COVID-19 documentation for nonprofits

Nov 02, 2021

As grant-funded entities transitioned to full operations after scaling back due to the COVID-19 pandemic, many have taken the opportunity to evaluate their documentation practices.

Throughout 2020 and 2021, many federal programs continued to provide funding for programs and services, allowing entities to respond to the emergency needs of the individuals and families in their communities. This offered some reduction to the stress associated with bringing in funding to pay salaries, wages, benefits, rent, program expenses and other expenses.

While federal funders continued to provide support throughout the COVID-19 response, one message was consistent: Do not forget to document. Organizations are now understanding the importance of clear documentation as they plan for or work on their year-end audit.  

We are reminded of the documentation requirements when recalling our Uniform Guidance training or the communications sent from the federal agencies that fund our programs. Or we remember the factors of cost allowability: Is the cost necessary, reasonable and — specifically — adequately documented? Having supporting documentation is not new, so what is different now?

As a result of the recent changes to their operating environments, many entities were forced to make some substantial changes to procedures, from how participant need is determined to how authorizations are obtained.

What should you document?

As you move into updated and new operations and embrace continuous improvement, it is important to reflect on and evaluate the following:

  • If you implemented operating changes to your process for determining participant eligibility, you should document the updated process. Consider whether changes were made to how critical services are identified, prioritized and delivered.
  • Did you make operating changes to accommodate hybrid working environments or flexible schedules? Are these changes reflected in your entity’s policies and procedures? If you transitioned employees to a remote work environment, determine how your entity’s policies and procedures accommodate this transition and also provide for other extraordinary circumstances. It may be necessary to add or modify policies for telecommuting or alternative work arrangements.
  • If staff are continuing to provide services and engage participants on a modified, remote or virtual basis, direct staff to document this service delivery and engagement.
  • For those directly impacted by a loss of operations due to the COVID-19 pandemic, prepare detailed documentation supporting the impact to the entity, staff and community. This will be helpful when working with your auditor to explain and support why certain procedures were followed or changes made. It is necessary to have documentation to support expenses incurred and charged to federal grants that the entity would not normally incur or charge.

There is no standard answer when determining how much documentation is adequate. Today’s new environment may require more detail than in the past, so be generous with this documentation. Further, the extent of the detail and the type of documentation needed are also driven by what is required by funders, such as Uniform Guidance, and what is required by an entity’s adopted policies and procedures.

Your policies and procedures weigh heavily in determining allowability of cost because they state what your entity can or cannot do and, therefore, what is or is not allowable.

Other steps to take

There are many steps to take as you make continuous improvements, so include the following steps, too:

  • Evaluate policies and procedures to determine whether you should update them to accommodate current or expected operating changes. Consider your entity’s workforce and how it’s serving participants to determine whether existing policies do or do not reflect your entity’s needs.
  • Evaluate the documentation gathered since the beginning of the COVID-19 pandemic to determine whether it is complete and adequately supports what has occurred and decisions made. Are all receipts, invoices, approvals, procurement documents, and more filed and retained?
  • Determine whether exceptions were made to existing policies and procedures. If so, document the reason for the exception and have it approved and signed off on by management or the board.

There is no all-inclusive checklist that will help each entity determine whether everything is properly supported by the correct amount of documentation. However, there is one general question to ask when it comes to documentation: Is the entity prepared for an audit or monitoring visit? Or, what was identified during the last audit or monitoring event? This answer will help determine what needs to be updated.

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Katherine Eilers, CPA
Senior Manager
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