Accounting for PPP Loans
How your PPP and other SBA loans appear in your CDP will depend on how your organization is accounting for the loan. Typically, PPP loans are recorded as a liability when they are received. When the loan is forgiven, the amount received will then be recorded as revenue and the liability reduced. This is the most common approach to accounting for PPP loans, but there may be differences in how specific audits present these loans. If you have audited statements, you should follow your audit when entering data into the CDP. The notes section of your audit will usually include a description of how the PPP loan was handled in your statements. Below are some articles with further details on accounting options for nonprofits.
https://www.blueandco.com/nonprofit-ppp-loan-forgiveness/
https://www.nonprofitaccountingbasics.org/federal-awards/accounting-paycheck-protection-program-ppp-loan-forgiveness
https://www.journalofaccountancy.com/news/2020/jul/ppp-loans-and-coronavirus-tips-for-not-for-profits.html
Where to enter amounts in the CDP
If your PPP loan is classified in your end of year statements as a liability, record that amount in Long-Term/Non-Current Loans in the balance sheet. The PPP loan can be considered a non-current loan because the payback period is more than one year in the future. If the payback period is less than one year, enter it as Loans-Current. From the SBA website: "Loans issued prior to June 5, 2020, have a maturity of two years. Loans issued after June 5, 2020, have a maturity of five years. "
Alternatively, if your organization considers this liability a conditional contribution it is also acceptable to enter your PPP loan in Long-Term/Non-Current Liabilities not Included Above.
Using a non-current liability line means that working capital and other balance sheet metrics that are calculating using current assets and liabilities will not be affected by liabilities associated with your PPP loan.
If any amount of your PPP loan is classified as Operating Revenue in your audited financial statements, enter that amount in the Federal Contributions line.
We also suggest adding a note in the optional Funder Report Narrative sections to clarify how your PPP loans have been tracked in your Funder reports. How to utilize funder report narratives.
