COVID Relief Loans: Will your Nonprofit NEED a Single Audit?
May 11, 2020
After weeks of awaiting official guidance, the SBA has provided instruction via the AICPA Government Audit Quality Center (GAQC) regarding whether nonprofits receiving COVID-19 relief loans will be subject to a Single Audit under Uniform Guidance.
The Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDLs) have been a financial lifeline for countless businesses during the pandemic, including both for-profit and nonprofit organizations. However, as businesses begin receiving funds, uncertainties around accounting for the loans and planning for future reporting obligations are emerging. This is especially true for nonprofits concerned about the Single Audit, which is a particularly rigorous audit for any government or nonprofit entity that expends $750,000 or more in federal funds in a single year.
On May 5, the AICPA GAQC announced the new SBA guidance which clarifies that nonprofits receiving PPP loans will not be subject to Single Audit, but that nonprofits receiving loans through the EIDL program will be. The distinction is based on how the two loans are distributed. Because the PPP loans are provided through local financial institutions, they are not considered federal financial assistance. However, loans from the EIDL program are disbursed directly from the SBA and are therefore regarded as federal financial assistance and are subject to Single Audit.
Nonprofits that receive an EIDL loan should include the total loan amount when calculating whether a Single Audit is required. If the amount of the EIDL loan in combination with other federal funds exceeds $750,000 in their fiscal year, the nonprofit must complete a Single Audit. However, this new guidance confirms that nonprofits will not need to include any PPP loan amounts in this calculation.
Aprio Can Help
Aprio is continuously monitoring new guidance from the SBA and AICPA, as well as the Treasury and the IRS, to ensure we have the latest information when advising our clients. If you have a nonprofit business and you are concerned about your obligation to complete a Single Audit after receiving a loan through the PPP or EIDL programs, you can contact Aprio Partner Justin Elanjian for more information.
Although PPP loans will not impact a nonprofit’s subjectivity to a Single Audit, these loans do pose other complex issues for companies who receive the funds, especially in regards to PPP Loan Forgiveness. For a consultation on the documentation of need and the requirements to maximize PPP Loan Forgiveness, reach out!
Disclaimer for services provided relative to SBA programs and the CARES Act
Aprio’s goal is to provide the most up to date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.
The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.
Due to the evolving nature of the situation and the lack of final published rules, Aprio cannot guarantee that additional changes or updates won’t be needed or forthcoming and the original advice given by Aprio may be affected by the evolving nature of the situation.
You need to evaluate and draw your own conclusions and determine your Company’s best approach relative to participation within these programs based on your Company’s specific circumstances, cash flow forecast and business strategy.
In situations where resources are provided by third parties, those services should be covered under a separate agreement directly with that service provider. Aprio is not responsible for the actions of any other third party.
Aprio encourages you to contact your legal counsel to address the legal implications of the impact of the CARES Act and specifically your participation in any of the SBA progr
About the Author
Justin Elanjian, CPA, is the Partner-in-Charge of Aprio’s Paycheck Protection Program (PPP) & Employee Retention Credit (ERC) Services. As a national PPP expert, prominent speaker and strategic business advisor, Justin helps both lenders and borrowers navigate the complexities of the PPP. He also helps his clients realize benefits from other stimulus package programs, such as the ERC, and is committed to strengthening his clients’ balance sheets and helping them achieve what’s next. Justin also leads a team of more than 50 professionals who share his passion for helping businesses maximize the federal COVID relief programs.