Financial Management |
By Christopher S. Maynard, CPA, Klatzkin
Throughout the COVID-19 pandemic, many independent schools have made changes that balance compliance with government orders and students' educational needs. In doing this, school leaders remain concerned about their institutions' financial stability, and many are seeking new funding sources heading into 2021. One piece of good news is the Consolidated Appropriations Act, 2021, which expanded the Paycheck Protection Program (PPP), including both first-draw and second-draw loan programs.
The rules governing eligibility have been modified to ensure access to organizations with the greatest need. To qualify, an applicant must have received and used the initial PPP loan, has 300 or fewer employees and experienced a 25% reduction in gross receipts when compared against the same prior year calendar quarter. Below is a summary of how to calculate reductions for independent schools in a variety of situations.
Gross receipts should include any amounts received as contributions, gifts, grants, member dues and assessments. Also total sales from any relevant business activities, the sales of assets and all amounts received from rents, dividends and royalties. It is important to note that gross receipts do not include taxes collected and paid to government agencies, such as sales tax.
Applicants must submit documentation that substantiates the reduction, including copies of quarterly financial statements, annual IRS tax filings and bank statements that show deposits from relevant quarters. If an applicant’s financial statements are not audited, they are required to sign and date the first page of the statement and initial at the bottom of all other pages attesting to their accuracy. This information should be included with the loan application.
The following calculation method should be used by independent schools when determining the maximum loan amount.
The opportunity to receive a second PPP loan represents a financial boost that many independent schools cannot afford to miss. There are several complex calculations and rules to follow when determining if a school qualifies. For this reason, it is important to work with a qualified advisor to guide you through the process.
Round 2 PPP Loans: Highlights for Independent Schools (Jan 2021)
Regulatory Update: SBA Details Revenue Reduction Calculations for PPP Loans (Jan 2021)
Regulatory Update: PPP Applications for Smaller Loans Open Friday (Jan 2021)
COVID-19-Related Employee Retention Credits FAQ (Jan 2021)
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