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Follow the Money: Tracking and Reporting Nonprofit COVID Relief Funding

Follow the Money

Was your organization among the thousands of nonprofits benefitting from the Paycheck Protection Program (PPP) during the COVID-19 pandemic? These pandemic relief loans were a lifeline helping many nonprofits retain staff and pay operating expenses. PPP loans are forgivable so long as your organization used funds in accordance with PPP program rules and you properly tracked your spending.

At the virtual Nonprofit Finance Leaders Forum, nonprofit accounting and tax experts, Brenda Kahler and Katy Brown of Armanino LLP, presented information about how to track the money for COVID funding and reporting — a topic that is top of mind for nonprofit finance leaders. Armanino is one of the nation’s top 25 largest accounting firms and maintains a large practice serving nonprofit organizations.

Brenda Kahler, ArmaninoBrenda Kahler is a Senior Manager at Armanino and leads their client engagement team nationally for the nonprofit vertical. She has 20+ years of accounting experience, primarily with nonprofits in Big 4 public accounting and in-house as a Controller. While at Armanino, she has participated in over 150 nonprofit implementations and assessments. Brenda has extensive knowledge of nonprofit accounting and compliance requirements, including US Single Audit and Form 990 requirements and is a frequent speaker at industry and technology events.

 

Katy Brown, ArmaninoKaty Brown is a Partner at Armanino and leads the firm’s Nonprofit Tax practice, a nationwide team of nonprofit tax experts who work exclusively with tax-exempt organizations of all types. She works with hundreds of nonprofit leaders throughout the country to make smart business decisions that protect their organizations’ tax-exempt status and to present transparent and accurate annual public information returns. She currently serves as a board member for the Armanino Foundation and for Family Paths in Oakland, CA.

 

Watch a replay of the Track the Money: COVID Funding & Reporting session

In their session, Brenda and Katy shared tips for maximizing Paycheck Protection Program forgiveness (both first and second draw) as well as suggestions for simplifying the forgiveness process using Sage Intacct.

Payroll Protection Program changes in the Economic Aid Act of 2020

Originally, most of the PPP loans needed to be used for payroll, however, the Economic Aid Act enacted in December 2020 provided guidance that expanded the expense categories eligible for forgiveness. Now, other types of overhead and normal operating expenses are eligible for forgiveness.

The Economic Aid Act also simplified the forgiveness process for loans under $150,000. Now it is a streamlined application with a much shorter process.

Finally, the Act allows the borrower to choose any Covered Period between 8 and 24 weeks. This helps organizations maximize the amount of forgiveness you can receive, because if you were not able to spend all of your PPP funds in the first 8 weeks, you can determine how long you need up to 24 weeks or any period in between. That can be really helpful when you’re trying to coordinate multiple types of COVID relief funding, including the Employee Retention Credit (ERC), a payroll tax credit.

How the revised rules impact first draw PPP forgiveness

Borrowers of first draw PPP loans had to submit their applications for loan forgiveness by the end of the Covered Period. For first-draw PPP loans, the covered period-end date was October 30, 2020. The deadline for application for forgiveness ends 10 months after the last day of the maximum covered period. You need to stay on top of the timing so you do not miss the opportunity to apply for PPP forgiveness based on your organization’s most advantageous covered period dates.

You must use 60% or more of the forgiveness amount for payroll costs. The remaining 40% (or less) can be used for rent or mortgage interest, utilities, covered supplier costs for perishable inventory, operations costs such as business software, worker protection costs (PPE, barriers, ventilation), and certain property damage costs not covered by insurance.

If your organization received a $10,000 EIDL Grant, it used to be that you had to deduct that amount from the amount of your PPP forgiveness. But the revised rules allow you to take both, which increases the amount of relief funding your organization can collect.

The chart below summarizes the changes and major provisions for existing first draw, not yet forgiven, PPP loans:

Forgiveness Rules

Additionally, many nonprofits took out new first draw loans in 2021. This chart highlights forgiveness rules for these new first draw loans:

New First Draw Loans

Second draw PPP loans

The forgiveness rules for second draw loans are unchanged from the first draw loans. However, the second draw loans had stricter eligibility requirements than first draw loans:

  • Must have incurred 25%+ decline in gross receipts in any 2020 quarter compared to 2019 or for the full year 2020 vs. 2019
  • 300 or fewer employees (not full-time employees) per physical location
  • Must have spent 100% of all first draw proceeds on qualified expenses at disbursement, however, you are not required to have filed for forgiveness of first draw loan yet

Difference Between First Draw and Second Draw Loans

How Sage Intacct can ease your PPP compliance burden

Sage Intacct can help with tracking and reporting for your PPP forgiveness. In Sage Intacct, you can create custom periods. Create a customer period from 8 to 24 weeks in length in order to run your financials over specified amounts of time. This helps you look for the most advantageous covered period to use for your PPP. Most organizations are going with a 24-week period because it makes it easier to meet the requirements. Set a custom period of 24 weeks and then shift it backward and forward week by week to find the best covered period that gives you the ability to maximize your expenditures.

If you are using the Sage Intacct Nonprofit Quickstart reporting package with the built-in categories, those categories map quite easily to the categories of eligible expenses. You might need to group together some existing categories to match the PPP categories. For example, operations costs in PPP covers a lot of different types of expenses.

For second draw PPP, you could use Sage Intacct to help with calculations of gross receipts decline. Create a financial report that has all of your quarters for 2019 and 2020, and then use the Difference column to be able to calculate which quarter(s) had a gross receipts decline of 25% or greater.

Conclusion

U.S. government financial relief programs, such as PPP, EIDL and ERC, helped many nonprofits weather the storm of uncertainty caused by the COVID-19 pandemic. Now, nonprofit finance teams are tasked with ensuring compliance with eligibility and forgiveness rules by tracking and reporting their spending of these funds. If you have Sage Intacct, you can save a lot of time by leveraging powerful tracking and reporting features to help maximize the benefits your organization receives. You’ll want to watch the complete presentation for more PPP advice and Sage Intacct tips. You can also watch five other on-demand sessions featuring nonprofit finance experts at the virtual Nonprofit Finance Leaders Forum.

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