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.