As many organizations reach the end of the covered period for their Paycheck Protection Program (PPP) loans and contemplate the loan forgiveness process, it’s crucial to identify usage of payroll and non-payroll expenses in the PPP forgiveness application. Businesses should begin to research a forgiveness strategy to avoid double-dipping with other federal and non-federal grant programs.
Nearly all grants awarded by federal agencies are subject to the Uniform Guidance’s overall requirements, which include prohibitions on charging the same cost to multiple programs, or “double-dipping.” State, local, and other types of grants generally prohibit similar items, all with one basic principle—grantees cannot request reimbursement for the same cost from multiple grant programs. The same is true for costs used in PPP loan forgiveness applications—even for those costs that are over payroll caps or where the ultimate forgiveness amount is reduced due to reductions in average FTEs or reductions in employee pay that affect the PPP loan forgiveness calculation. Applying for PPP loan forgiveness using costs charged to programs will likely result in questioned costs or disallowance of costs submitted for reimbursement, or adjustment of the PPP loan forgiveness by the Small Business Administration (SBA).
The PPP loan forgiveness application process requires the inclusion of all cash compensation paid to employees during the covered period, even if only a portion of the compensation is considered for forgiveness. Compensation that exceeds $100,000 for any employee annually is excluded from the forgiveness application calculations.
The PPP loan forgiveness application also requires information on total average FTEs during the covered period and various comparison periods. The application also considered average wages/salaries paid to each employee during the covered period and the first quarter of 2020. Any reductions in average pay, or average FTEs, may result in reductions to the forgiven amount.
These calculations and the loan forgiveness process have the potential to be complicated. Once multiple funding sources enter the equation, it becomes crucial that organizations understand the PPP rules, the application of the rules to their unique circumstances, and the interplay between the PPP and other funding sources. Organizations wishing to optimize PPP loan forgiveness while remaining compliant with other funding source requirements may face a challenge.
A new process like this can often become confusing, so it helps to engage with a team of professionals to get everything squared away properly. If your organization is having trouble understanding the PPP loan forgiveness process, reach out to a CRI advisor for more information.