September 27, 2022
SBA Hot Topic Tuesday – OIG Finds 179 PPP Loans to Nonprofits Might be Ineligible
“The U.S. Small Business Administration Office of Inspector General conducted this review to assess Paycheck Protection Program eligibility for nonprofit organizations. Based on data analysis, we identified 179 PPP loans, totaling approximately $684 million, made to potentially ineligible nonprofits that may have exceeded SBA’s requirements for business size, known as size standards, at the time of application,” reads an SBA OIG report released yesterday. The report goes into more detail on PPP loans made to three large nonprofits: Planned Parenthood of Illinois, Goodwill of Southwestern Pennsylvania, and YMCA of the Rockies.
In March 2021, the American Rescue Plan Act increased the size standards for nonprofit organizations to no more than 500 employees at each singular physical location. Any nonprofits that were awarded a PPP loan prior to March 11, 2021 and applied for forgiveness on or after that same date would be eligible for forgiveness as long as they complied with all other rules and standards.
Of all the PPP loans noted in the report, 62 were submitted for forgiveness before March 11, 2021, and 117 were submitted on or after that date. The OIG recommended that the SBA review all of the loans for compliance and seek remedy or repayment for any ineligible PPP loans. As of the date of this report, this recommendation remains unresolved.
During their review of the three aforementioned nonprofits, the OIG found that the Planned Parenthood of Illinois was eligible for the PPP loan, and the Goodwill of Southwestern Pennsylvania was later eligible for forgiveness due to the size standard adjustments.
The YMCA of the Rockies did not meet eligibility requirements because they applied for forgiveness before March 11, 2021. In addition, the YMCA stated that they had 321.5 employees on payroll, but this number was determined with a full-time equivalent calculation. They actually had 745 employees on their payroll at the time. The SBA agreed to review the PPP loan and complete a final action by January 31, 2023.