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Pressure Building for PPP Audits

Published on June 17, 2020


Small business owners have faced extraordinary challenges and pressures in 2020 due to COVID-19, which include destruction of consumer demand, supply chain disruption, interrupted cash flows, employee layoffs, exhaustion of liquidity, and overall economic contraction. Fortunately this past March, Congress passed the CARES Act, the Paycheck Protection Program (PPP), and most recently the Paycheck Protection Program Flexibility Act (PPPFA), to provide businesses with liquidity to retain employees and meet ongoing payrolls, cover rents, utilities and other non-payroll expenses. In other words, funding for a business owner to survive and live to fight another day.

Business owners were required to determine eligibility based on previous payrolls and bankers were incentivized to originate loans quickly under relaxed underwriting standards, while concurrently studying the confusing and innumerable nuances of the rules, regulations, forgiveness provisions, and reporting requirements. 

Ultimately, money started flowing to 4.6 million businesses as bankers, CPA’s, and business advisors were unknowingly entering an educational journey resembling nailing jello to a wall. One of the continuing uncertainties centers around the auditing of loans under $2 million distributed to small businesses, sole proprietors, and gig economy workers. 

According to an article on June 17, 2020 by Ryan Tracy in the Wall Street Journal, pressure is building on the Trump Administration, Treasury, and the Small Business Administration (SBA) to release the names of the (PPP) borrowers in receipt of the $512 billion in order for the Government Accountability Office (GAO), Congress, and taxpayers to determine the fairness, equality, and the effectiveness of the program.

The capacity for a business owner or CEO to foresee this possible business threat is critical as pressure for disclosure builds and the threat of a (PPP) audit increases. There are resources online to assist according to Micah Solomon, Small Business Strategy, Forbes, on June 4, 2020, “Nav has created a Self-employed PPP Forgiveness Calculator and a PPP Forgiveness Calculator for businesses with employees, along with detailed content to help them understand the process.”

In addition to online resources, now is the time for small to medium size business owners to consider retaining a CFO on a fractional, interim, or project basis to conduct an internal pre-audit to review (PPP) loan expenses, payroll and non-payroll, and loan forgiveness compliance. This proactive step will not only deliver alpha (added value and Return on Investment), but also create confidence and peace of mind for a CEO to better lead and grow the business moving forward.

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