Many nonprofits have been wondering whether funds received under these programs fall under the scope of Single Audit requirements. Organizations which expend, annually, at least $750,000 in federal funds, grants, and awards are subject to single audit under the Uniform Guidance. SBA staff announced that PPP loans made to Not For Profits will not be subject to Single Audit. Conversely, the EIDL program is classified as a direct loan program disbursed from the SBA, instead of your bank, defining these loans as federal financial assistance under Single Audit. In other words, EIDL funds do count towards the federal expenditure threshold and would be subject to single audit under the Uniform Guidance.
Many have wondered whether funding received through PPP can cover the same expenses covered by a grant, or by the EIDL. We do know that the SBA has said EIDL loans and PPP loans cannot cover the same expenses – no “double dipping” allowed.
Certain state agencies are indicating their funding will not cover costs paid for by PPP funds. We are doubtful the federal government intended to pay the same cost twice – but in the case of non-federal funds, we recommend you reach out directly to the funder to gain an understanding of how their funding interacts with PPP loan funds.
PPP certifications of need – safe harbor
When applying for the PPP loan, entities certified that the current economic uncertainty made the loan necessary to support the entity. There was little guidance available at the time of the first applications about what that meant. The SBA has now indicated that businesses which accepted PPP funds up to $2 million together with related entities are assumed to have made this certification in good faith.
Friday, the SBA released its loan application. This provided clarity in certain areas, but there are still some unanswered questions and we expect additional guidance and edits. It is important to use the funds for allowable purposes (more below), and to document how the funds are used during the 8 week period in order to have the maximum amount forgiven.
Payroll (compensation in excess of $100,000 annually excluded)
Payroll taxes (employee portion only)
Employee vacation, parental, family, medical and sick leave (except when a credit is allowed under the CARES act)
Employee benefits including group health and insurance premiums
Housing stipends or allowances paid as part of compensation
Retirement plan contributions (employer as employee portion is already included in gross payroll)
Rent on leases in place as of 2/15/2020
Interest on mortgages
Documentation to retain:
Payroll reports and payroll tax filings
Mortgage/debt/lease agreements (in place prior to 2/15/20)
Substantiation that additional pay to employees (if any) is reasonable and prudent
Filing Deadlines extended
Be aware also that various deadlines were recently extended including certain HUD filing deadlines.
Specifically for single audits:
Recipients subject to the Uniform Guidance that have experienced a loss of operational capacity and increased costs due to COVID-19 have 6 months beyond the normal due date.
Recipients subject to the Uniform Guidance receiving funds for coronavirus preparation and response under H.R. 6074 have 12 months beyond the normal due date.
The normal due date is the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period
And, as we have communicated in a past alert, 990s due dates for entities with years ending on or before January 31, 2020 have been postponed to July 15, 2020.