DCAA Issues New Guidance On PPP
Due to COVID-19, many DOD contractors applied for and received funding from the Payroll Protection Program (PPP). While these funds enabled employers to support those on their payroll and stay operational, the government had been silent regarding forgiveness, repayment and credits —and how they apply to government funded contracts (and grants).
Recently, the DCAA provided greater clarity to their auditors in the form of FAQs. We’ve compiled the key points and highlighted the areas we feel are most important to our clients. While DCAA’s focus is on DOD contractors, we believe these rules have been well thought out and will also be true for NIH, DOE and NSF grantors
FAQs for DCAA Auditors on PPP loans, loans forgiveness and subsequent credits as impacts the incurred cost submission (ICS).
- FAR 31.201-1 and FAR 31.201-5 apply to the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Families First Coronavirus Response Act (FFCRA).
- Forgiven PPP loan amounts allocable to contract costs, as well as reimbursements, tax credit etc. for any Covid 19 Paid Leave costs, should reduce the government billing.
- The forgiven PPP loan credit will apply to contract costs in the same manner in which the PPP loan funds were originally spent. Forgiven loan amounts used on commercial efforts would not create a refund for the Government.
- Presentation of credits and refunds to the Government in the ICS depends on each contractor’s cost accounting structure and practices.
- Until forgiven, PPP loans should be on the balance sheet. Costs paid for by these loans are normal contract costs.
- The CO and contractor should work together to determine how COVID-19 leave costs under Section 3610 should be charged to contracts or charged through indirect cost pools. Approval of reimbursement of Section 3610 paid leave is at the discretion of the contracting officer. There should be an agreement with the ACO and, if authorized, the Section 3610 leave costs should be charged to a newly created cost category, ODC Covid-19.
- Do not request Section 3610 reimbursement for employees who received unemployment benefits under CARES Act Sections 2101 through 2116.
- Per 48 CFR 9903.302-2(a), cost accounting practices to account for COVID 19 leave costs are not considered changes in cost accounting practices.
The bottom line: It REALLY matters which costs you identify for forgiveness!
If you need advice regarding your PPP loan or incurred cost submission, feel free to reach out to our DOD contract accounting experts. We’re here to help.
Ed Jameson, CPA, Managing Member
With over 40 years of experience as a government funding award accounting specialist, Ed is a recognized national expert in the field. In addition to helping hundreds of clients navigate FAR Part 31 compliance. he has been an active speaker and panel moderator at Tech Connect's National SRIR/STTR conferences since 2011. presents at the DOD's Mentor Protégé Summit and presents regularly for several state and local organizations.