Many state Department of Transportation (DOT) government contractors have taken advantage of the Paycheck Protection Program (PPP) in response to the COVID-19 pandemic. However, there may be some long-term revenue-generating challenges that come from taking a PPP loan that many may not be aware of.
Government contractors that base their billings and proposals on overhead rates could see a significant reduction in revenue if their PPP loan is forgiven, a consideration they’ll have to make before they decide to have the loan forgiven or to just repay it.
The Federal Acquisition Regulations (FAR) 31.201-5 says that the applicable portion of any income rebate allowance, or other credit relating to any allowable cost received by the contractor, will be credited to the government as either a cost reduction or by a cash refund. Government agencies may take the position that this applies to forgiven PPP loans and require a credit to overhead.
In GSG’s latest podcast, John Mahaffey, Director of Audit and Accounting Services, provides key insights into what state DOT government contractors should know about the credit provision and the potential pitfalls resulting from taking a PPP loan.
For more information, contact us.Categories: Audit & Accounting, COVID-19 Resources, Government Contractors