nonprofit ppp loan forgiveness

As borrowers near the end of their 24-week covered period and prepare to apply for PPP forgiveness, many nonprofit organizations face the issue of double dipping, or being reimbursed for the same expense twice by government agencies. A surprise to many is that the PPP guidance does not actually address double-dipping.

Federal cost principles, detailed at 2 CFR, Subpart E, §200.400 through 200.475, provide guidance for determining allowable costs of federal award programs. These guidelines require that “costs be necessary and reasonable for performance of the federal award, allowable under the cost principles, and consistently applied to both federally-financed and other activities”. Since eligible costs paid with PPP loan funds can result in loan forgiveness, nonprofits cannot charge costs paid with PPP funds to other federal (and/or state/local) awards.

Furthermore, the forgiven loan amount may also result in a dollar-for-dollar reduction in other award revenue.

The most significant, relevant guidance to date is an internal memo issued by the Office of Management and Budget (OMB) in mid-June ‒ Memorandum M 20-26 (M 20-26). This memo advised federal agencies that:

  • “Awarding agencies may allow recipients to continue to charge salaries and benefits to active Federal awards consistent with the recipients’ policy of paying salaries (under unexpected or extraordinary circumstances) from all funding sources, Federal and non-Federal.”
  • “… payroll costs paid with Paycheck Protection Program (PPP) PPP loans … must not also be charged to Federal awards …”
  • Federal award “recipients must exhaust other available funding sources to sustain its workforce and implement necessary steps to save overall operational costs (such as rent renegotiations) during this pandemic period in order to preserve Federal funds for the ramp-up effort.”

In order to avoid the double dipping dilemma and maximize PPP forgiveness, it is best to check with your grant governing agency, whether it’d be the Department of Developmental Services (DDS), or Department of Education, as many agencies have issued directives to address PPP loans.

Should you questions or would like assistance in preparing or reviewing a PPP Loan application of PPP Loan Forgiveness, give us a call today!

O&S also offers extensive nonprofit accounting services specializing in organizations that receive funding from government and grantors.

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