Who CARES? We Do — PART III: Accounting for Paycheck Protection Program Proceeds

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  • 7/28/2020
  • Webinar
  • Hosting Speaking

There has been understandable confusion about how to account for forgivable loan proceeds under the Paycheck Protection Program (PPP). At first blush, the accounting may seem cut and dry, however, as with much of the PPP loan program, the details make it much more complicated.

This on-demand webinar is designed to answer questions about how nonprofits should properly account for PPP funds. We will briefly discuss the proper accounting and then address questions you have about the program, and how it impacts federal funding programs, grants, and contributions. In addition, we will provide a brief update on other federal programs that can provide cash flow and liquidity to nonprofits after PPP funds are fully expended.

Event materials

Presentation slides: Who CARES? We Do — PART III: Accounting for Paycheck Protection Program Proceeds
Recording: Who CARES? We Do — PART III: Accounting for Paycheck Protection Program Proceeds

Who should attend

This session is designed for nonprofit finance personnel.

Speakers:

Questions and Answers:

Any updates on calculating full-time equivalents (FTE)?

Unfortunately, no. There haven't been updates since late June. The current forgiveness application is from June and has some unanswered questions on the FTE quotient reduction test.

What is the status of talks dealing with automatic paycheck protection program (PPP) forgiveness for amounts under $150K?

There is a proposal, but no passage.

Can organizations apply for forgiveness yet? Our bank keeps saying that they are not ready.

The vast majority of financial institutions are not accepting applications. However, I did just hear today that one bank on the east coast was opening their portal. Continue to check back with your bank.

How should we manage the discrepancy of FTE calculations and the reduction in payroll forgiveness for staff that are funded through federal, state, county and city funding?

Great question. One way is to include all employees on the PPP Schedule A worksheet. For the compensation column, include the wages you are asking for forgiveness on so that you are not double-dipping. This way, all employees are in the FTE calculation and you are not double-dipping.

How do you calculate your rent repayment if your loan was mid-month May through mid-month July?

Assuming the rent agreement was in place on 2/15, any payments for rent paid in the covered period are allowable for forgiveness. For the last month of the covered payment, any costs incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period, are allowed. You will need to prorate the last month.

My loan documents say that I must use the proceeds for an eight-week period. The law was changed to a possible 24 week period after we received our loan. Are we eligible to use the 24-week forgiveness period instead?

An organization with a loan that originated before June 5th does have the option of either the eight-week or 24-week period. If the loan was after June 5th, only the 24-week period is available.

We have paid some staff full hours even though they have only been able to work 3/4 time. What hours do I count for the forgiveness calculation?

If you paid them for full hours, you would include full hours in your FTE reduction quotient calculation.

Our bank indicated that Main Street was targeted to 'for-profit' companies, not nonprofits. Can you clarify?

The Main Street program is available to certain nonprofit organizations. It is important for nonprofits to review the criteria to determine whether they are eligible. Please remember Main Street is not a grant program — it is a loan program.

For 990 filing purposes, should PPP funds be listed as other income? Should PPP funds also be listed in total liabilities?

If PPP funds are forgiven, the amounts would be reflected as a contribution to the organization. For a full explanation, please see the recording.

How should we show our employee count is back to its original levels if we apply for forgiveness before the end of the 24 weeks?

No guidance has been given. Note: the FTE reduction restoration you are referring to is for entities that had FTE reductions between 2/15 and 4/26. If the reduction occurred after 4/26, there is not a safe-harbor for FTE restoration right now.

Will you need to close out your original PPP loan to apply for any potential future next round?

Since this is a proposal and no legislation has passed, we are not certain on the specific requirements for additional PPP funding.

Do we need to have the same FTE levels at week 24 as we had in week eight? We met the June 30 FTE levels but have had to lay off staff since that time.

Right now there are three FTE safe harbors:

  • Unable to operate at the same level because of COVID-19 guidance
  • FTE reductions occurred between 2/15 and 4/26 and FTE levels were restored by 12/31 or by date of forgiveness application submission
  • No FTE reductions occurred during the covered period. If reduction occurs after 4/26, you may face an FTE reduction quotient

Are expenses are on an accrual basis or cash basis? We received our loan on April 15th and our first payroll was on April 17th. Can I count that payroll for payroll expenses?

You can count payroll for payroll expenses if you choose not to use the alternative payroll covered period.

Eligible payroll costs are:

  • Paid during the covered period or
  • Incurred during the covered period or alternative covered period and paid on or before the next regular payroll date, even if the payroll date is beyond the covered period or alternative covered period

“Paid” is defined as the date that checks are distributed/borrower originates an ACH credit transaction. “Incurred” is defined as the date that an employee’s pay is earned.

Does the 1% interest need to be accrued at 06/30 year-end?

Yes, PPP interest should be accrued. When forgiveness is obtained, the original principal and accrued interest will be reduced and gain recognized (assuming ASC 470 being followed).

What do I need to consider when making the decision to apply for forgiveness based on an 8 or 24 week period? Is there a different application for the different periods?

As of today, the application is the same. The organization should consider not only how the funds were spent, but the FTE and salary/wage reductions to ensure the full amount of forgiveness may be attained.

What is the impact on loan forgiveness if FTEs are reduced during the loan period but return to original levels when you apply for forgiveness?

It depends. The current application FTE safe harbor 2 applies to FTE reductions between 2/15 and 4/26 — as long as reductions are restored to 2/15 levels on or before the earlier of the date the borrower submits its forgiveness application or 12/31/2020 (comparison for the safe harbor is to the FTEs during the 2/15 payroll period) the safe harbor applies.

Reductions after 4/26 will be subject to the FTE reduction quotient per the present application.

Does the forgiveness application have to be filed at the 8 or 24 week point? Can you apply early for forgiveness (e.g. on the 12th week)?

It appears that you can apply for forgiveness before your covered period is complete. It is unknown how some of the calculations will work in an application submitted before the covered period, especially if a full application is being completed.

I had an employee who retired (as planned) on April 30. The position is not being replaced (and was never intended to be). We received the PPP funds at 10 p.m. on April 30. What does that do to our FTE calculations?

The organization should look to the safe harbors. FTE reductions that meet the safe harbors do not reduce a borrower's loan forgiveness.

Are you confident that we can include payroll paid at the beginning of the covered period, as well as costs incurred at the end of the covered period but not paid until the next payroll cycle?

This is how the application is currently written.

Is the review period 60 days for lender plus 90 days for SBA? Or are they concurrent time frames?

Great question. The lender will have up to 60 days to respond to the forgiveness application and the SBA will have 90 days for their review.

Can you have a reduction in employee number once you've expended the full loan amount (but still within the 24 week covered period)?

Yes

How do you do the math if you have employees with reduced wages of more than 25%?

Salary or hourly wage reduction test is done by an employee. Here are the steps:

  1. Determine if pay was reduced by 25% or more.
  2. Determine that safe harbor test does not apply to the employee.
  3. A. Multiply the average annual salary/hourly wage between 1/1/2020 and 3/31/2020 by 0.75
    B. Subtract the average annual salary/hourly wage during the covered period or alternative covered period from the result above.
    C. Multiply the difference by: 
    • For salary workers: the number of weeks in the covered period (either 8 or 24) then divide this result by 52. The is the amount of reduction for that salaries worker.
    • For hourly workers: the average number of hours worked per week between 1/1/2020 and 3/31/2020. Then multiply this result by the number of weeks in the covered period (8 or 24). This is the amount of the reduction for that hourly worker. 

    If you apply before the end of the 24 week period, how does the FTE reduction requirement apply? If you reinstate staff by December 31 (of at the end of the 24 week period), how will that affect your early application?

    We are awaiting guidance for how the FTE calculation will work when the application is submitted before the end of the covered period or alternative payroll covered period (APCP).

    Regarding restarting staff by 12/31 — this relates to FTE reduction safe harbor 2, which is for reductions that occurred after 2/15 and before 4/26. This safe harbor specifically states the earlier of 12/31 or the date the application is submitted.

    Can being unable to operate at same level of business activity be state-mandated? Or only a federal requirement?

    Potentially. Additional guidance will be helpful.

    Here is the specific safe harbor: “If you were unable to operate between February 15, 2020, and the end of the covered period at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.”

    You may be able to apply the federal guidance indirectly (state guidance followed federal guidance).

    Wouldn’t almost every nonprofit be able to say they are "unable to operate at same level of business activity" assuming that no employee took more than a 25% reduction in pay? It seems almost too good to be true as the advantage of using the EZ form is not needing to do the FTE calculation.

    You have to certify your assertions on the application. Also, there may be more guidance on exactly what the statement means in the future. Documentation should be maintained to provide evidence of how the statement applies. It is unknown what documentation should be collected.

    If the original loan application was based on only payroll expenses, can we change and use nonpayroll costs as long as they remain less than 40%?

    Yes

    Banks have 60 days to review forgiveness and SBA has 90 days to review. Does that mean most organizations won't know how much is forgiven until 150 days after the forgiveness application is filed?

    Yes, potentially

    Is it possible that Congress will authorize the SBA to forgive all PPP loans without the borrower submitting a formal loan forgiveness application?

    Yes, this is possible. There are several bills introduced right now to make the forgiveness process for loans under $150K a one page assertion and not a calculation application.

    We had a preschool, which comprised about 30% of our overall church payroll. We had to close the school because we couldn’t afford to comply with all of the COVID-19 regulations. Does the reduction in our headcount related to the preschool qualify under the safe harbor?

    This potentially can qualify. Here is the rule:

    If you were unable to operate between February 15, 2020, and the end of the covered period at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.

    How do you do the math for employees making over $100,000. Does that apply to forgiveness or was that just for the original PPP application?

    Yes, compensation is limited to $100,000 for employees during the covered period. The costs are limited to an annualized amount of $100,000. For an eight week period this is $15,385; for a 24 week period this is $46,154.

    The salary/hourly wage reduction test does not apply to individuals making $100,000 or more on an annualized basis in 2019. They still are included in the FTE reduction quotient test.

    What if a nonprofit has unit rate contracts that are not directly cost reimbursable? Should the agency get a rate for a unit of service to pay salaries, but not specifically a cost reimbursable contract?

    Talk to the funder to see their thoughts on double-dipping.

    What are the penalties for loss of FTE in forgiveness of the loan portion?

    They are subject to the FTE reduction quotient and it reduces overall forgiveness. The numerator is average weekly FTEs during the covered period or alternative payroll covered period (APCP) and denominator is the FTE reference period.

    If you receive PPP, can you still give your employees a year-end bonus?

    It appears that you can.

    Can you expand on what expenses can be included in business utility expenses?

    Electricity, gas, water, transportation, telephone, internet access.

    Do you have to wait to apply for forgiveness until the end of the 24 week period if at any time you may have furloughs or layoffs by the end of the covered period?

    More guidance is needed right now. The current application makes it clear that you can apply before the end of the covered period or alternative payroll covered period (APCP), but how some of the reduction calculations work is uncertain.

    If we could apply for forgiveness before the 24 weeks, does that mean our covered period ends when we believe we have spent all the funds? That is confusing and not clear.

    Unsure for the FTE reduction quotient test. For the salary/hourly wage reduction test, the covered period will go the full 24 weeks.

    If employee goes on disability are we penalized for the drop of wages or number of employees?

    FTE reductions will not reduce a borrower’s loan forgiveness in the following situations as long as the position is not filled by a new employee:

    • Borrowers who made a good-faith, written offer to rehire workers that declined
    • Employees who were terminated for cause
    • Employees who voluntarily resigned
    • Employees who voluntarily requested and received a reduction in their hours
    • Borrowers who cannot find qualified employees for unfilled positions
    • Borrowers cannot restore its operations to comparable levels of business activity due to social distancing, sanitation requirements, or customer safety needs established by Secretary of Health and Human Services, Director of Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning 3/1/2020 and ending 12/31/2020

    Is it true that the 8 or 24-week period begins on either the day you received the proceeds of the loan or the end of the payroll period that includes the day the loan proceeds were received?

    Kind of: the covered period begins on day you receive the proceeds. Alternative payroll covered period (APCP) begins on the first day of the next payroll cycle after the date you receive the loan.

    Do we have to officially apply for the change in terms with our lender to change to 24 weeks?

    No. If you had loan before 6/5, you can elect a 8 week CP or a 24 week CP. If you obtained loan after 6/5, you have a 24 week period.

    Is FTE calculation determined at the time we apply for loan forgiveness if it is submitted before the end of 24 weeks?

    Unsure right now. Awaiting guidance.

    If you apply for forgiveness more than the eight weeks but less than the 24, how do you assess the FTE count?

    This is unknown now and we are awaiting guidance how the FTE calculation would work.

    Is there a loan dollar limit to select EZ vs 3508 form? If the loan was $5 million and met other criteria, can EZ form be used?

    Yes, as long as you meet one of the three EZ criteria.

    If we reach 100% in payroll within a 12 week period, can we report on just that?

    Potentially yes. If there are FTE reductions, it is uncertain how those tests would work.

    Can you clarify how the economic injury disaster loan (EIDL) $10,000 fits into the Small Business Administration (SBA) loan forgiveness?

    You calculate forgiveness amount and subtract the $10,000 advance from the forgiveness amount.

    If you have an FTE reduction, do you have to wait until December 31, 2020 or can you use 24 weeks to certify that?

    You can use the 24 week period. If you submit early, it is unclear how the FTE calculation would work.

    We have 20+ staff who work only during the school year. We naturally reduce our FTEs in the summer. Could this affect our forgiveness?

    There is a FTE reference period for seasonal employers: in the case of seasonal employees, either the preceding periods or any consecutive 12-week period between 5/1/2019 and 9/15/2019.

    Can the payroll costs exceed 60%?

    Yes

    If our payroll cost is for a 10 week period, can I file at the end of the 19 weeks or do I have to wait until the end of the 24 week period?

    You can file before the 24 week period. As currently written, the application has some questions on how some of the calculations work. We still need more guidance.

    Doesn't treating the payroll forgiveness as paid or incurred result in more than 8 weeks being included (assuming we elect the eight week period)?

    Yes.

    The Treasury's rules are borrower favorable.

    Can payroll costs submitted for forgiveness be more than the minimum of 60%?

    Yes

    How do you account for salaries/wages paid by other grants on the forgiveness app in order to prevent double dipping?

    To prevent double dipping, the compensation amount on Schedule A Worksheet should be reduced for wages/salary covered by other grants.

    Has the SBA updated the forgiveness application or are they still the original issued forms?

    They've updated several times since the original release. Last update was 6/16.

    Do I have to wait until after August 10 or can I contact my lender for form 3508?

    Forms are available on the treasury website. That said, using the process your lender puts forth is recommended.

    If you apply for forgiveness before the end of 24 weeks, how can we prove that there are no reductions in FTEs or wages at the end of 24 weeks? Does this proof stop when the application is submitted, such as at week 15?

    We are waiting on more guidance.

    The current EZ form would seem to indicate that forgiveness could be maxed out at 60% of eligible payroll costs, is that true?

    No. Forgiveness has you take payroll costs and divide by 60%. This will create a number larger than payroll costs.

    Will the FTE requirement for forgiveness be reduced if your organization is closed due to government mandates and you are not able to rehire all your staff?

    Look to FTE Safe Harbor 1: If you were unable to operate between February 15, 2020, and the end of the covered period at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.

    Is there a time frame for when Congress is supposed to announce the consensus on the automatic forgiveness for loans less than $150K?

    It is not known if the provision will pass Congress. At this point in time, it is unknown whether there will be an automatic forgiveness provision for loans less than $150k.

    On the EZ form, line 7 asks to calculate payroll costs on line 1 divided by 60%. When you do this, the result is much larger than what Line 1 is; could you explain this?

    The application has you take the lowest of three buckets. This number gives you one of the buckets. It limits overall forgiveness to make sure that no less than 60% of the forgivable amount is payroll related.

    How many days from the end of eight weeks do you have to file your 3508 with your bank?

    10 months from the end of the covered period.

    How should part-time seasonal employees be calculated when calculating FTE's and Safe Harbor?

    FTE Reference Period: Borrow has the choice:

    • Between 2/15/2019 and 6/30/2019
    • Between 1/1/2020 and 2/15/2020
    • In the case of seasonal employees, either the preceding periods or any consecutive 12-week period between 5/1/2019 and 9/15/2019

    Can we use PPP proceeds to fund our annual pension contribution requirement?

    Pension contributions that are incurred and paid in your forgiveness period are allowed.

    If a nonprofit exhausts PPP funds shortly after the eight week period and well before the 24 week period, can you apply for forgiveness once the portal for forgiveness applications is opened and utilize the period that funds were exhausted for the wage test and FTE test, and hence ultimate grant revenue recognition.

    Yes, if your loan was originated prior to June 5.

    My non-profit, a community college foundation, has not yet applied for PPP funding. Is August 8 the final deadline for the program? If so, will the next stimulus funding package include an option for new applicants beyond August 8? We didn't need PPP in April, but we might this fiscal year.

    8/8 is the deadline. It is uncertain if the next stimulus funding package will include an option for new PPP applicants.

    Can a nonprofit organization apply for more than one PPP? Especially if they are under the cap of $150,000 for the first PPP?

    TBD. The new bill has not yet been passed and is still subject to change.

    If we elect to record as a contribution, would it be restricted?

    As you would have to fulfill conditions, which includes spending the funds, you could elect to record it as unrestricted, if that is the option your nonprofit has selected for all restricted contributions received and expended in the same year. If you normally record this as restricted revenue and then a release, the PPP funds would follow the same procedure.

    Can you recognize a portion of the PPP as income? We are a 6/30 year-end and used most of the funds by June 30, 2020.

    Yes, if barriers are met — if forgiveness is expected and incurred eligible costs.

    If treated as a loan when are the payments due? Will a payment schedule be provided? Also if applying for forgiveness, when is that done.

    The longest period of deferment is ten months after the covered period. Once this period has passed, loan servicing must occur.

    Can you explain again why the imputed interest is not needed?

    The 1% rate is considered a market rate as it is widely available.

    If you record as a refundable advance and earn the income after you meet the conditions, what happens if forgiveness is denied in a subsequent fiscal year?

    If you record before year-end, it was based on judgment and the best available information. If the forgiveness is denied, you would have to record the debt again. I would not see this as a restatement.

    How do we account for the EIDL advance? Even if the PPP loan is forgiven, my understanding is that we still have to pay back the EIDL amount to the lender.

    The EIDL advance (up to $10k) is a grant that does not need to be repaid. It will reduce the PPP forgiveness by the amount of the grant.

    Isn't forgiveness of debt after the balance sheet date considered a type 1 subsequent event, the effect of which can be recorded as of the balance sheet date?

    If forgiveness is granted, that would support the barriers being met and you could book what was incurred for fiscal year 2020.

    I would think most nonprofits would be hard pressed to recognize any forgiveness until SBA sends formal approval. Could you suggest a footnote disclosure?

    Recording revenue prior to formal forgiveness is a hard position. The assumption in taking this position is that the formal legal release is not a barrier. Rather, spending the funds, keeping your FTEs, etc., would make your legal release an administrative matter that would be automatic. We're monitoring this approach and know the forgiveness process could still change.

    If we have an EIDL advance, should the PPP journal entry be split between forgiven revenue and loan payable (in the amount of the EIDL)?

    Yes

    Under ASC 958-605 the accounting is subjective and then flexible regarding recognition. Also the extent of forgiveness is subjective. It seems accounting is allowing flexibility to accommodate the reporter's objective.

    Standard setters have left this open to interpretation.

    Our bank that provided the loan says that they cannot accept the forgiveness loan application at this time and that they are still waiting for SBA parameters.

    Yes, we are hearing that as well.

    Is it 60+90 days (150 total) to hear on forgiveness?

    Yes

    We receive funding from government contracts (not relating to SBA funds) for staff time. We are not using the PPP loans for those individuals. Is this acceptable or are we not allowed to receive any other funding from the government?

    That is correct. You are not allowed to use PPP funds for staff already paid for with other government contracts.

    When will the forgiveness application open? My bank keeps telling me that the forgiveness application is not yet open.

    This is still unknown. We are monitoring, but I have not seen a bank accepting applications.

    Do the 60-day bank review and the 90-day SBA review for forgiveness run concurrently?

    The bank's 60-day review occurs first and they issue a decision to SBA, then then SBA has 90 days.

    Is the SBA 90 day review from when we submit the forgiveness application to our bank or from when the bank makes their determination?

    The bank first has 60 days to issue a decision to the SBA and then the SBA has 90 days after that.

    Can interest on a bank loan that is not a mortgage, be paid with PPP loan proceeds?

    Yes, interest paid on other debt obligations in place prior to 2/15 are allowed costs. It is uncertain if this is a forgivable expense, which is different than an allowable expense.

    For the purpose of forgiveness, if you use the 24 week period for payroll costs starting with the first payroll after your loan date, does the 24 weeks end as measured from the loan date?

    Your covered period would end 24 weeks from the first day of your payroll period.

    Where can documentation on the full list of safe harbors and conditions be found?

    The safe harbors are found in the SBA guidance.

    Would you please elaborate on the double dipping of federal funds and grants?

    See OMB Memo M-20-26 which states “Under this flexibility, payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”

    Can we utilize the funds 100% for payroll?

    Yes

    Has it been documented by the SBA that government grant funds to reimburse cannot be applied against forgiveness?

    It has been documented by OMB memo M-20-26 which states “Under this flexibility, payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”

    Is interest on loans a forgivable expense under PPP? What type of interest is included?

    Mortgage interest is a forgivable expense. Other debt obligation interest expense backed by personal property is most likely forgivable. Other debt obligation interest expense, not backed by personal property is an allowable expense, but it's not clear if it's a forgivable expense.

    Does the double-dipping limitation also apply to non-governmental grants?

    It is necessary to look at the grant agreement. The grantor may indicate their grant funds may not be used to pay for costs paid by other sources. It is important to speak with the funder. Many organizations are releasing or changing restrictions.

    Is the alternative covered period the first day of your pay period and then 24 weeks from that date (and not your original loan disbursement date)?

    Yes, that is correct.

    Can payroll costs exceed 60% and go up to 100%?

    Yes, 60% is the minimum.

    Would grant revenue recognized from PPP forgiveness be counted towards the federal award dollars single audit threshold?

    No, PPP funds are not subject to the single audit.

    Regarding government grants' funded costs, does the "no double dipping" rule apply to only federal grants or state and local grants as well? What about pass-through federal grants?

    OMB Memo M-20-26 states “Under this flexibility, payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”

    Pass through federal grants would be counted in this as well. The memo also indicates that recipients should exhaust other available funding sources to preserve federal funds. We interpret this to mean that state and local grants used to fund employees could not also be applied to PPP.

    We receive a number of U.S. government grants; given the extended 24 week forgiveness window, would you advise a more conservative basis for applying payroll costs (e.g. extend the original forgiveness and reduce all those potential U.S. government charges to the PPP funds)?

    Yes, the 24 week period would likely work better to reduce the governmental funded employees off.

    Is PPP subject to the cost principles of the Uniform Guidance? Is there definitive guidance regarding the double dipping on charging costs to both PPP and cost reimbursement federal awards? I understand there is an OMB memo on this topic, but this seems to be an open issue.

    Definitive guidance from OMB M-20-26 indicates “Under this flexibility, payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”

    PPP is not subject to single audit.

    What CFDA number applies to the loan?

    PPP's CFDA # is 59.073, however this is not subject to single audit.

    What government funders are considered for "double dipping?" Are private foundations included as well?

    The memo for federal funding was OMB M-20-26 which indicated “Under this flexibility, payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”

    This applies to federal awards, but could certainly be interpreted to state and county governmental funding that is cost reimbursed as well. Another section of this memo indicates that recipients should exhaust other available funding sources first.

    What are the pros/cons of applying ASC 470 vs 958-605? Which is better?

    ASC 470 is more straightforward and more definitive in that you recognize the revenue when legally released. However, this pushes it to a different fiscal year in some instances, so then looking at 958-605 and reviewing the barriers could match up the revenue and expenses better.

    Our organization hires a bus service to bring our employees to work. Could this expense be included as part of the 40% of non-payroll costs?

    Payroll costs include salaries, wage and commissions, retirement, group health benefits, state or local tax assessed on compensation. An expense such as this does not appear to be a cost counted as payroll costs.

    Non-payroll costs generally have to be subject to an agreement prior to 2/15. Transportation is considered a utility expense, but it is uncertain exactly what transportation expense qualifies.

    Have there been any changes to the PPP affiliate language that can restrict which entities are eligible for the PPP funds?

    There have not been changes to the affiliated language.

    You mentioned no double dipping on salaries charged to a grant; what about administrative salaries that aren’t directly charged, but reflected in the overhead rate. How should we approach those?

    If administrative salaries are reflected in the overhead rate and reimbursed by federal grants, then only the portion not included in the overhead rate may be reimbursed.

    We have a PPP loan and have not used any of the funds. Can we pay the funds back without any penalty?

    If there is not a need for the funds, it is possible to repay the funding. There is no prepayment penalty associated with the funds. The question to consider is the certifications when the loan was obtained; you will want to be sure there are no concerns with those.

    Can you clarify what sort of interest qualifies?

    Mortgage interest is an allowable and forgivable expense. Other debt obligations are allowable, but it's not 100% clear if this is a forgivable expense. If it's secured by personal property, you have a better case that it's forgivable. Credit card interest expense does not qualify.

    What is the source that you are referencing for not allowing forgiveness if there is a state of federal funding source?

    OMB Memo M-20-26 which states “Under this flexibility, payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”

    It’s important to mention that for some smaller nonprofits, recognizing loans in contributions may bring up the requirement for a nonprofit to need an audit or review in WI (threshold is $300,000 or $500,000 of contributions).

    This is a significant consideration for nonprofit organizations.

    If we received the funds before 6/30 but would like to show it as grant after fiscal year end 6/30, do we record it as a liability at the time we received the funds?

    Yes.

    If we were to take the aggressive approach and record the revenue, does it have to be 100% of the loan or can in be split between fiscal years?

    It can be split if you have partially met conditions.

    Do you have to recognize it all in one year or can it be split over two fiscal years? Depending on when costs were incurred?

    It can be split over two years depending on when costs incurred, yes.

    Does double dipping only apply to federal government grants? What about grants from state government?

    Federal grants were addressed in OMB Memo M-20-26 which states “Under this flexibility, payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”

    This does only address federal awards, but we believe the same approach is logical for state government funded employees also. The memo indicates that recipients should "exhaust other available funding sources" to preserve federal funds.

    Are grants that are fee-for-service considered double dipping if we use the PPP loan to pay salaries from this grant?

    This is not explicit in OMB Memo M-20-26, however the memo does state that recipients should "exhaust other available funding sources to preserve Federal funds.” If the fee-for-service funding source can preserve the workforce it could be interpreted that the PPP is not needed. We have asked for clarification on what this means exactly.

    What was the time frame of forgiveness from the application date to the financial institution? From lender to SBA and then until when to decision of forgiveness?

    60 days for bank and 90 days for SBA.

    We receive funds from federal, state, and county sources. Some are based upon fee-for-service. Are all sources subject to double dipping prohibitions?

    This is not explicit in OMB Memo M-20-26, however, the memo does state that recipients should "exhaust other available funding sources to preserve Federal funds." If the fee-for-service funding source can preserve the workforce it could be interpreted that the PPP is not needed. We have asked for clarification on what this means exactly.

     

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