A group of AASHTO and ACEC members, including several CPAs who do extensive amounts of FAR audit work, worked to develop a set of Questions and Answers (QAs) regarding PPP loan forgiveness.
Putting aside the question of whether the FAR credits clause should even apply to PPP loans ACEC continues to advocate that it should not apply — we do believe FHWA is trying to do this the right way
The results of the discussions are captured in the attached document, which presents a set of recommended best practices for use by state DOT auditors, A/E firms, and CPA auditors regarding the treatment of loan forgiveness granted through the operation of the Paycheck Protection Program (PPP), as authorized by the CARES Act view publisher site and administered through the Small Business Administration (SBA). Although these recommendations do not have the effect of law or regulation, they are encouraged for use to promote fairness and consistency, with the understanding that some flexibility in application is necessary to accommodate the unique contracting policies and procedures of each state DOT, as well as the professional judgment of auditors.
The working group released this document to the FHWA for comment, and FHWA advised that, generally, the content is consistent with FHWA guidance.
We understand there may be some states that will demand a return of the entire PPP loan, regardless of whether it was allocated to a DOT project
Accordingly, the working group is circulating the QAs to the AASHTO Audit Committee members and to ACEC state organizations, as the document was developed by our working group and is intended to provide additional guidance to supplement the FHWA memo issued on March 24.
There is a great deal of attention on infrastructure this week in Washington, but ACEC’s focus also remains on the PPP/FAR credits clause issue. ACEC met with FHWA officials earlier this week to gain a better understanding of the agencys intent and next steps as they work to apply their new guidance on the FAR provision to firms with PPP loans.
Its clear that FHWA is trying to do this the right way and limit the impact to firms as much as possible. As noted last week, FHWA confirmed that the guidance would only apply the FAR credits clause to contracts that include federal funds which has logic as there is a clear nexus between the PPP assistance and federal dollars in contract payments. FHWA indicated that they will develop a QA document to provide more detailed guidance on implementation, and invited ACEC to organize a working group of CPAs and selected State DOT representatives to help with drafting the guidance. Matt Reiffer and Dan Purvine will be connecting with some Member Organizations as they identify the right DOTs to partner with in this effort.
There are concerns however: Some State DOTs are making it clear that they will impose their own requirements on firms for state-funded engineering contracts forcing firms to provide the agencies with discounts in their rates in return for the federal assistance they received under the PPP program. Finally, if this regulatory approach were to continue unchanged where both the feds and the states are demanding rebates for forgiven PPP loans there doesnt appear to be an agency at this time that will manage this process to ensure that firms credit back only the amount of the PPP loan that overlapped contract payments on federal-aid projects.
As stated above, the challenge remains if the DOTs are permitted to impose their own requirements relative to a federal assistance program outside of the FHWA rules. This, coupled with the clear difficulties state and federal agencies will have in managing implementation fairly, may help to bolster our arguments in favor of a waiver of the credits clause or some other workable solution.
