Preparing for the Coming Onslaught of Government Investigations and Audits of COVID-19 Relief Funds and Contracting—Part II
This is the second in a series of articles concerning the audits and investigations related to the contracts and grants awarded, and relief funds provided, in response to the COVID-19 pandemic. This article first discusses the Defense Contract Audit Agency’s current direction, interests, and initiatives related to contractors’ receipt of COVID-19 relief funds and the impact an uncertain business environment may have on government contract pricing and costing forecasts. It then reviews audits and investigations involving Paycheck Protection Program loans.
The first article in this series discussed the enforcers and the likely categories of programs, contracts, and companies the government might investigate or audit related to COVID-19. This article first discusses the current direction, interests, and initiatives of the Defense Contract Audit Agency (“DCAA”) related to contractors’ receipt of COVID-19 relief funds and the impact an uncertain business environment may have on government contract pricing and costing forecasts.1 Then, this article explores audits and investigations involving Paycheck Protection Program loans.2
COVID-19 RELIEF FUNDS
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) funding opportunities come with unique government contract compliance requirements and financial reporting obligations. The funding is not “free” and may result in financial consequences to unwary contractors. DCAA knows this and will be conducting audits to test contractors’ compliance with unique relief fund requirements. Contractors unaware of these accounting and reporting requirements risk DCAA questioning or denying costs.
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PAYCHECK PROTECTION PROGRAM AUDITS ARE UPON US—BORROWERS PREPARE!
Having discussed above how the acceptance, use, and forgiveness of PPP loans can be viewed in the context of a DCAA audit, this article now focuses on audits and investigations involving PPP loans. Close scrutiny of PPP loans is not a prediction; it is reality. The Small Business Administration (“SBA”) has announced it will audit all PPP loans in excess of two million dollars following a lender’s submission of a borrower’s loan forgiveness application, and it reserves the right to “spot check” any PPP loan of a lesser amount at its discretion. The U.S. Department of Justice already has charged multiple individuals with PPP fraud. And this is just the beginning of what many think will be a tidal wave of enforcement activity involving PPP loans.
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“Preparing for the Coming Onslaught of Government Investigations and Audits of COVID-19 Relief Funds and Contracting—Part II,” by Merle M. DeLancey Jr., Craig Stetson*, and Jennifer A. Short was published in the July 2021 edition of Pratt’s Government Contracting Law Report (Vol. 7, No. 7), an A.S. Pratt Publication, LexisNexis. Reprinted with permission.
* Craig Stetson is a partner with Capital Edge Consulting where he focuses on assisting contractors interpret and apply the accounting and regulatory compliance requirements associated with federal government contracts.
1 This section was prepared by Merle M. DeLancey Jr. and Craig Stetson.
2 This section was prepared by Merle M. DeLancey Jr., Craig Stetson, and Jennifer A. Short.