Will the SBA EIDL Loan Be Audited? | How to Prepare for an SBA EIDL Loan Audit

Will the EIDL Loan Be Audited? Both Yes and No answers to this question have good arguments. We will discuss both in this video.

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DISCLAIMER

This video is intended for education purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Freedomtax Accounting and Multiservices Inc. is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience. Freedomtax Accounting and Multiservices Inc. or its members cannot be held liable for any use or misuse of this content.

LINK TO VIDEO ON EIDL LOAN AGREEMENT TERMS AND CONDITIONS - https://youtu.be/IqnlvOkKzWQ

WILL THE SBA EIDL LOAN BE AUDITED?

In response to the COVID-19 pandemic, the SBA has been providing loans to for-profit and nonprofit entities. The Paycheck Protection Program (PPP) loans, administered under the 7(a) guaranty loan program, are being provided through local financial institutions. The Economic Injury Disaster Loans (EIDLs) are disbursed directly from SBA. Many nonprofits have also received these loans and were unsure if they will be considered federal financial assistance and therefore subject to a Single Audit under Uniform Guidance.

On May 5, the AICPA Government Audit Quality Center (GAQC) informed us that they were advised by SBA regarding whether the PPP and EIDL loan programs are subject to Single Audit, and they were instructed as follows:

Not subject to single audit: SBA PPP loans provided to nonprofits are not subject to Single Audit.

Subject to single audit: Loans provided to nonprofits under the EIDL program are direct loans from SBA; as a result, they are considered federal financial assistance and are subject to Single Audit.

Therefore, nonprofit entities that did not receive any federal financial assistance or expend greater than $750,000 in their fiscal year are not subject to a Single Audit and do not need to include their PPP loan when determining if they will need a Single Audit.

However, nonprofits that received an EIDL loan would have to include the total loan amount received in determining if a Single Audit is required. If the total federal financial assistance including the EIDL program is greater than $750,000 in their fiscal year, they will be subject to a Single Audit.

Here are some of the conditions of the EIDL loan agreement:

Maintain “current and proper” records for the most recent five years until three years after your loan maturity or after the loan has been paid in full, whichever comes first. Records include:
Financial and operating statements
Insurance policies
Tax returns and related filings
Records of earnings or dividends distributed
Records of compensation to owners or shareholders
Allow the SBA to inspect or audit all books and records
Allow the SBA to inspect or appraise any business assets
Provide financial statements to the SBA within three months of the end of your fiscal year
Pay for a review of financial statements by an independent public accountant, if requested by the SBA
Allow all Federal, State, and municipal governments to provide the SBA with relevant documents if requested by the SBA

How do I maintain good EIDL Loan records?
An accurate and up-to-date set of books will allow the SBA (and you!) to get a clear look at the financial health of your business, using financial documents such as your balance sheet and income statement.

You’ll need to track and categorize all your business expenses. Receipts and invoices should be digitally filed and recorded. It can take some time, but it’s well worth the effort to be able to see where your money is going and ensure you’ll be able to get the most of your eligible deductions come tax season.

Видео Will the SBA EIDL Loan Be Audited? | How to Prepare for an SBA EIDL Loan Audit канала Freedomtax Accounting