With the race to submit Paycheck Protection Program (PPP) loan applications before the funds run out, some important questions remain unanswered.
- Single Audit Applicability: Will the loan proceeds under the PPP program be subject to a Single Audit? For those unfamiliar with a Single Audit, it is an organization-wide financial and compliance audit of a non-federal entity that expends $750,000 or more in federal financial assistance within one year. Federal financial assistance includes loans and loan guarantees, and since the PPP loans will be received and expended during the 2020 fiscal year, there is a concern that many more one-off Single Audits will be required with limited notice unless the U.S. Office of Management and Budget (OMB) exempts PPP loans from the Uniform Guidance. The administrative burden would be an unwelcome surprise to any PPP recipient who previously was not subject to a Single Audit. Beyond PPP loans, there are other provisions of the CARES Act where funding could be within the scope of a Single Audit.
- Impact on Other Funding Sources: GHJ is starting to hear certain government agencies indicating that if PPP funds are received and used for payroll that is typically reimbursed by a government contract, the recipient nonprofit agency will not be allowed to request reimbursement of those payroll costs under that government contract. Presumably those government agencies are referring to situations where the PPP loan is forgiven. Will previously funded payroll costs under certain government contracts have to be returned to the government agency once forgiveness occurs? Most nonprofits with government funding receive a mix of federal and non-federal funding. If forgiveness does come into play, how will the forgiven payroll costs be allocated?
Unfortunately, no one has the answers to these questions yet. However, the AICPA Governmental Audit Quality Center today issued a request to the OMB to provide clear, timely and easily accessible guidance regarding the impact of the COVID-19 outbreak and the subsequent passage of the 2020 Supplemental Appropriations Act and the CARES Act. Interested in seeing if any of your own questions have been raised with the OMB? The full letter is available here.