09 Jul

Overhead Rate Effects of PPP Loan Forgiveness

Having reached the official end of our overhead audit busy season, it seems like a good time to provide an update on the overhead rate impacts of Paycheck Protection Program (PPP) loans and related loan forgiveness.

If you’ve been following my posts on this issue, hopefully you read the post published in early May, which noted that it is possible that any loan forgiveness received under a PPP loan will result in a credit to a firm’s overhead rate to the extent the loan proceeds were used to pay allowable overhead expenses, through the application of FAR 31.201-5 Credits, and that the Department of Defense (DOD) has already taken that position.

On June 18, the OMB issued memorandum M20-26, which notes in relation to PPP loan proceeds, “payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not also be charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”  This position is consistent with DOD’s interpretation, and generally, with FAR 31.201-5.  It’s important to note, however, that the actual application of any credits for forgiven PPP loan proceeds would differ for A/E firms who are primarily doing work with state and local agencies, as compared to federal government contractors.

Because this is a complex subject which affects many of you, I will be presenting a new 1-hour webinar on the issue, on July 29 at 2:00 PM Eastern time.  We will record the webinar, so if you are unable to attend the live webinar, you will be able to register for the recorded version.  For any participants in either the live or recorded version of the July 29 webinar, I will also present an update webinar at no additional cost on September 30 (that webinar will be recorded as well).  For both live events, participants are encouraged to submit questions in advance, and we will devote substantial time to Q&A.

Click here for more information on the webinars.

I will continue to post updates on this and other topics as we learn more – please check the blog on our website for any new information.  If you have any questions, please email me at dan@aeclarity.com.

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Dan Purvine is the President of A/E Clarity Consulting and Training, a firm that specializes in helping A/E firms to navigate the complex rules and regulations applicable to state, federal, and local agency contracts. Dan brings to this role over 14 years of experience in the A/E industry as the Vice President of Finance and Accounting for a large engineering firm. Dan has been providing A/E industry training through A/E Clarity since 2012 and has trained thousands of people in architecture and engineering firms, CPA firms and public agencies. Dan is the former chair of the American Council of Engineering Companies (ACEC) National Audit Subcommittee and continues to work closely with FHWA and AASHTO in his consulting role with ACEC to achieve uniform application of FAR Part 31 and the AASHTO Audit Guide, and to better address the needs of A/E firms nationwide. He has been heavily involved in the development of the AASHTO Audit Guide and the National Compensation Matrix, and works closely with the AASHTO Audit Guide Taskforce to continually improve the Guide as a tool for A/E firms, State DOTs, and CPAs. Dan works closely with state ACEC organizations and many state DOTs on issues related to FAR compliance, audits, and reimbursement of A/E firm costs. A/E Clarity provides training and consulting services and through a related CPA firm, D. L. Purvine, CPA, PLLC, Dan and his team perform overhead audits for clients nationwide. Dan also served as the 2015-16 Chair of the North Carolina Association of CPAs and is a former member of the AICPA Council.