PPP Loan Forgiveness A Process to Optimize Results Presented by: - - PowerPoint PPT Presentation

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PPP Loan Forgiveness A Process to Optimize Results Presented by: - - PowerPoint PPT Presentation

Dec 14, 2022 411 likes •636 views

PPP Loan Forgiveness A Process to Optimize Results Presented by: George D. Shaw, CPA Kimberley A. Train, CPA, ABV May 1, 2020 DGC FIRM OVERVIEW At DGC, our professional curiosity drives everything we do how we work; how we advise;

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PPP Loan Forgiveness – A Process to Optimize Results

May 1, 2020 Presented by: George D. Shaw, CPA Kimberley A. Train, CPA, ABV

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A Whole New World for Partnership Audits: Overview

Regional firm with over 180 employees including 22 Partners, many with Big 4 experience Offices in Boston and Woburn Significant Partner and Principal involvement in engagements Clients include privately-held businesses, their owners, and high net worth individuals Tax, Assurance, IT Risk and Business Advisory including forensic accounting, cybersecurity, valuation, succession planning, and transaction advisory services Access to global network through membership in Moore Global Network Limited

DGC FIRM OVERVIEW

At DGC, our professional curiosity drives everything we do — how we work; how we advise; how we partner with and seek

  • ut value for our clients.

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WELCOME

George D. Shaw, CPA Partner gshaw@dgccpa.com 781-937-5125 Kimberley A. Train, CPA, ABV Partner ktrain@dgccpa.com 781-937-5112

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OVERVIEW

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CARES Act language and provisions Allowable uses for covered loans Eight-week covered period Dilutive adjustments to forgiveness Restorative adjustments to forgiveness Considerations before you request forgiveness Lender-specific requirements The impact of fraud on the process​ Objective: We will discuss the Paycheck Protection Program and

  • utline key elements essential to maximizing loan forgiveness.

Topics include:

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PAYCHECK PROTECTION PROGRAM

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The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was passed on March 27, 2020 $349 Billion in funds were allocated to the Paycheck Protection Program (“PPP”) Application process opened on April 3, 2020 Funds were exhausted 13 days later on April 16, 2020 The Paycheck Protection Program and Health Care Enhancement Act was passed on April 24, 2020

  • $310 Billion in additional funds with $60 Billion directed to small banks, small

credit unions and community financial institutions

The portal opened for applications on April 27, 2020 “Keeping American Workers Paid and Employed Act”

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RECENT DEVELOPMENTS ON QUALIFICATIONS

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Certification: “… ability to access other sources of liquidity sufficient to support their ongoing operations” to attest to eligibility to receive PPP funding Retain information and documentation supporting the need for liquidity to support ongoing operations and meet eligibility requirements If eligibility cannot be supported and borrower is concerned about certification, then funds should be returned by May 7, 2020 to be within “limited safe harbor” Public companies, venture capital and private equity firms are under scrutiny Treasury Secretary Mnuchin stated that SBA will audit small business loans above $2 million

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ALLOWABLE USES OF COVERED LOANS

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Payroll costs

  • Salary, wage, commission, or similar compensation
  • Payment of cash tip or equivalent
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment required for the provisions of the group health care benefits,

including insurance premiums

  • Payment of any retirement benefit
  • Payment of state or local tax assessed on the compensation of employees
  • Partner compensation is included in payroll costs
  • 1099s to file for separate PPP loan

Interest on mortgage obligations or other debts incurred before February 15, 2020 Rent under a leasing agreement that was incurred before February 15, 2020 Utilities for services that began before February 15, 2020

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EIGHT-WEEK PERIOD

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Issues include: State and local government restrictions Industry restrictions Cash vs. accrual Pay periods do not necessarily match eight-week period (see below) Begins as of date of first disbursement of loan funds

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75% 70% 60% 100% 0% 20% 40% 60% 80% 100% 120% Goal: 100% Forgiveness FTE Dilution Test Wage/Salary Dilution Test Restoration Test 25%

PERCENTAGE OF FORGIVENESS

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REQUESTED FORGIVENESS

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75% 0% 20% 40% 60% 80% 100% 120% Goal: 100% Forgiveness FTE Dilution Test Wage/Salary Dilution Test Restoration Test

Goal = 100% forgiveness Include only allowed costs At least 75% must be used for payroll costs

25%

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FULL-TIME EQUIVALENT TEST

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75% 70% 0% 20% 40% 60% 80% 100% 120% Goal: 100% Forgiveness FTE Dilution Test Wage/Salary Dilution Test Restoration Test 25%

Full-time equivalents (FTEs) Borrower’s choice (benchmark period)

  • February 15, 2019 – June 30, 2019
  • January 1, 2020 – February 29, 2020

Seasonal

  • Twelve-week periods (three options)
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WAGE/SALARY DILUTION TEST

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75% 70% 60% 0% 20% 40% 60% 80% 100% 120% Goal: 100% Forgiveness FTE Dilution Test Wage/Salary Dilution Test Restoration Test 25%

Less than $100K wages and salary (2019) Test for more than 25% reduction Measure covered period against Q1 2020

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RESTORATION TEST

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75% 70% 60% 100% 0% 20% 40% 60% 80% 100% 120% Goal: 100% Forgiveness FTE Dilution Test Wage/Salary Dilution Test Restoration Test 25%

Restore FTE Restore wages and salaries By June 30, 2020

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FRAUD RISKS

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Ghost employees Fabricated spending Fictitious documentation Improper certifications Related parties Email scams Risks associated with not knowing your customer

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GUIDELINES FOR FORGIVENESS

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Place funds in a separate bank account Re-confirm and document eligibility Make sure funds used only for eligible purposes Stay within the eight-week window Track use of funds and document, document, document! Utilize a robust, dynamic model to forecast and track funds Monitor SBA and Department of Treasury websites and/or speak with your CPA Timely application for forgiveness Documentation tips will be included in the appendix

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QUESTIONS?

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DGC’S PAYCHECK PROTECTION PROGRAM TEAM

George D. Shaw, CPA Partner gshaw@dgccpa.com 781-937-5125 Kimberley A. Train, CPA, ABV Partner ktrain@dgccpa.com 781-937-5112

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Jackie Reinhard, CPA Principal jreinhard@dgccpa.com 781-937-5721 Rick Strout, CPA Principal rstrout@dgccpa.com 781-937-5716

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APPENDIX

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PAYROLL: WHAT INFORMATION TO GATHER

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Federal payroll tax reports: 2019 IRS Form 941, Form 940, annual Forms W-3 or 944 Compensation payroll reports (1/1/2019 through 6/30/2020)

  • Gross wages by employee (payroll reports by pay period)
  • State and local employer taxes assessed (SUTA)

Group health care benefits, including insurance premiums paid by the

  • rganization under a group health plan
  • Employer costs only
  • Do not include employee withholdings for their portion of

contributions to the plan

Retirement plan benefits paid by the organization

  • Employer costs only
  • Do not include employee withholdings for their portion of

contributions to the plan

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OTHER COSTS: WHAT INFORMATION TO GATHER

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Other costs include: (1) Rent, (2) Mortgage Interest, (3) Utilities Provide copies of the following:

  • Cancelled checks (during the eight-week covered period)
  • Wire transmittals (during the eight-week covered period)
  • Invoices
  • Account transcripts
  • Mortgage in effect as of February 15, 2020
  • Rent agreements in effect as of February 15, 2020
  • Utilities provide copies of invoices and cancelled checks to demonstrate

service before February 15, 2020