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Will Paycheck Protection Program Loans Be Subject to Uniform Guidance for Nonprofit Organizations?

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes many provisions that are applicable to nonprofit organizations.  One of the provisions is the Paycheck Protection Program (PPP) Loans which provides 100% Federally guaranteed loans to covered entities who meet certain criteria. A consideration for nonprofit organizations is whether the loans will be subject to the provisions of Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

A Uniform Guidance audit is required for all non-Federal entities that expend Federal awards of at least $750,000. Federal awards include both cash and non-cash awards. Non-cash awards include loans and loan guarantees. If a nonprofit organization receives a PPP it needs to consider whether these funds will require the organization to have a Uniform Guidance audit, or increase the scope of the Uniform Guidance audit if the organization already has one conducted.

The Office of Management and Budget (OMB) has not issued any specific guidance on the CARES Act funding yet, and the new funding is not anticipated to be included in the initial release of the 2020 Compliance Supplement. The OMB may issue an addendum later to provide audit requirements and guidance. However, the AICPAs’ Governmental Audit Quality Center (GAQC) has been informed by the Small Business Association (SBA) that the PPP loans will not be subject to an Uniform Guidance Audit since they are not direct loans from the SBA and therefore would not be included on the Schedule of Expenditures of Federal Awards (SEFA). Economic Injury Disaster Loans (EIDL) from the SBA would be subject to a Uniform Guidance audit and included on the SEFA since they are direct loans from the SBA.

However, PPP loans are subject to audit by the SBA. At this time, AAFCPAs advises organizations that have a PPP to track it in accordance the program requirements set forth in the PPP Interim Final Rules and the Borrower Application Form to ensure you have proper tracking of the activity and adequate basis for the required certification concerning the necessity of the loan request. This will aid in the submission of your application for loan forgiveness and help you obtain the necessary information if you have an SBA audit. Keep in mind if you have an EIDL loan, these loans and loan guarantees are generally considered to be Federal assistance and included on the SEFA during the period of time that the loan is outstanding.

If you have any questions, please contact: Matthew Hutt, CPA, CGMA at 774.512.4043, mhutt@nullaafcpa.com; Hui-Ting Grady, CPA, 774.512.4106, hgrady@nullaafcpa.com; or your AAFCPAs Partner.

About the Authors

Matthew Hutt CPA
Matt leads AAFCPAs’ Healthcare Division, providing assurance, tax and advisory solutions for Federally Qualified Health Centers (FQHCs), behavioral health providers, home care agencies and hospices, nursing homes, and senior care living centers. Matt advises healthcare providers on consolidation and coordination of care, including the integration of behavioral health into the primary care delivery system. He also provides consulting solutions for providers transitioning to new value-based reimbursement models, and data driven patient care, including: developing business process and controls for collecting and advantaging data to provide analysis on: provider activity, delivery of care, and analysis of efficiency & cost effectiveness. Matt is also highly-sought after for his knowledge on issues related to affordable housing developers with requirements related to the US Department of Housing and Urban Development, MassHousing, Low Income Housing Tax Credits, Historical Tax Credits and New Markets Tax Credits. 
Hui-Ting Grady
Hui-Ting has extensive experience providing assurance solutions to diverse nonprofit organizations, including: affordable housing development projects with HUD requirements, multi-service human & social services providers, and behavioral health agencies. She delivers audits in accordance with Uniform Guidance/Single Audit and Government Auditing Standards, as well as Uniform Financial Report (UFR) and other funding source regulations. Hui-Ting is a member of AAF’s Accounting and Assurance (A&A) Committee, and Revenue Recognition Task Force. She is dedicated to keeping the firm and clients apprised of regulatory changes and new pronouncements in a proactive and timely manner, as well as providing best practice recommendations for efficient and effective implementations of new accounting standards.