5/13/20 - A Message to Providers from Secretary Hou: Update: Paycheck Protection Program (PPP)

Wednesday, May 13, 2020

Dear Providers:

We wanted to provide updates (i) from the federal Small Business Administration (SBA) on the Paycheck Protection Program (PPP) certification requirements; (ii) as to how PPP will be implemented by IDHS; and (iii) a webinar opportunity from the Illinois Collaboration on Youth (ICOY) regarding the CARES Act.

I. Guidance Update Regarding Federal Good Faith Certification Requirements for PPP

Today, the SBA issued additional guidance specific to the good faith certification as to economic uncertainty for any PPP loan request. That guidance can be found in the SBA's Frequently Asked Questions document (question #46) and states the following (link here):

Question: How will SBA review borrowers' required good-faith certification concerning the necessity of their loan request?

Answer: When submitting a PPP application, all borrowers must certify in good faith that "[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA's review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA's determination concerning the certification regarding the necessity of the loan request will not affect SBA's loan guarantee.

II. IDHS Retention Payments and PPP

We have listened to the feedback received in regard to requests for a reconciliation process based on potential repayment obligations. Based on the above guidance stating that providers that have "received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith," we feel the potential repayment obligation is lessened. As such, IDHS will be moving forward with the PPP process previously laid out wherein any provider whose service delivery has been decreased or eliminated such that they are receiving retention payments, will have those retention payments reduced according to the PPP loan for which the organization has been approved in order to prevent duplicate payment for the same expense. Providers should work with their program staff on the dates of disbursement and any other information that has been requested.

To be responsive to providers who are not automatically covered by the federal guidance's safe harbor protections, IDHS remains committed to working with providers on a case-by-case basis such that if a provider, with a loan over $2 million, finds themselves in a situation where their PPP loan is subject to repayment based on the SBA's review of their certification of need due to economic uncertainty. It will be incumbent on the provider to communicate with IDHS as soon as the repayment decision has been made by SBA in order to make needed payments during the lapse period.

III. ICOY Webinar on CARES Act

The Illinois Collaboration on Youth (ICOY) will host its third webinar on the Coronavirus Aid, Relief, & Economic Security (CARES) Act, CARES Act Part III: Understanding the Impact of COVID-19 Federal Administrative Relief Efforts on Grants & Contracts this Friday, May 15, from 1:00pm to 2:00pm. On the webinar, Megan Angle from Porte Brown Accountants and Advisors will discuss a federal Office of Management and Budget (OMB) memo that was issued in March and how it can potentially affect an organization's grants and contracts. Registration for the webinar can be found by clicking this link.

Again, if you have questions about PPP, please feel free to reach out to IDHS via DHS.PPPQuestions@illinois.gov.


Grace B. Hou

Secretary, IDHS