If you’ve received a Paycheck Protection Program (PPP) loan from the Small Business Administration (SBA), you likely are aware that all loans over $2 million will be subject to a full audit from the SBA and will have to provide a good-faith certification, as suggested in the SBA’s FAQ #46 on May 13, 2020.
As you plan for the upcoming PPP audit, you’ll need to be able to document how the funds have been used and gather the evidence.
When preparing for this audit, Windham Brannon’s Forensic and Litigation Support team can help your company in a few ways. We are prepared to assist with your financial analysis by detailing where the funds were needed and ultimately spent. If necessary, we can perform funds-tracing analysis, which will be important to show how the loan funds were used for qualifying categories such as payroll, rent, and other acceptable expenses according to the PPP loan terms.
Borrowers will need to retain all documentation in its files for six years after the date the loan is forgiven or repaid in full. Since document retention will be required until at least 2026 or 2027, borrowers should secure its documents by storing digital copies offsite in the event of a fire or flood.
Document Checklist for PPP Loan Audits
As you collect your evidence for how you’ve used the funds, consider retaining these documents:
- Copy of PPP loan application with headcount and compensation of employees
- Any internal documents and strategic plans detailing the necessity of the loan and plan for the use of PPP funds
- Financial records, including bank statements, payroll records, and cash disbursements journal
- Mortgage statements, lease agreements, and utility statements
- Any available records detailing the company’s access to capital (if applicable)
- Records showing company’s current business activities and liquidity
- Support that the company acted in good faith by legal counsel for the necessity certification
If you apply for loan forgiveness and are determined to be ineligible or face allegations of fraud, we can also assist you. The Department of Justice (DOJ) has already begun investigating small business owners alleged of misusing PPP funds. One of the ways the DOJ has been targeting companies is through possible whistleblowers. During these times, companies should monitor for any whistleblower complaints within your company either through hotlines, company email, or its messaging system. If someone makes a complaint against your company’s use of the funds, you’ll want to immediately contact your legal counsel to investigate. Our team of Forensic and Litigation Support professionals are highly experienced in dealing with internal investigations, responding to subpoenas, and analyzing financial information for government inquiries.