AICPA raises PPP concerns with SBA (Journal of Accountancy)
Summary
Journal of Accountancy, February 4, 2021 (Jeff Drew): the AICPA sent SBA a letter, signed by president and CEO Barry Melancon, urging it to address problems small businesses face in applying for PPP loans. The letter cites "very significant operational changes" that are "not fully understood" and says it addresses four areas of concern. The first is first- and second-draw applications denied acceptance in SBA's E-Tran system. The letter says added validation checks meant to counter fraudulent applicants are causing tens of thousands of legitimate applications to be denied, and gives the example of owners wrongly told they have a criminal record. It asks that businesses be told that initial acceptance in E-Tran could take more than a week.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
Advertisement - news - MANAGEMENT ACCOUNTING AICPA raises PPP concerns with SBA By Jeff Drew February 4, 2021 Please note: This item is from our archives and was published in 2021. It is provided for historical reference. The content may be out of date and links may no longer function. The AICPA sent a letter Wednesday urging the US Small Business Administration (SBA) to address problems small businesses are encountering when trying to apply for Paycheck Protection Program (PPP) forgivable loans. The letter, which is signed by AICPA President and CEO Barry Melancon, CPA, CGMA, refers to “a number of very significant operational changes to the PPP by the SBA which are not fully understood, as well as some process and system issues which need to be addressed in order to effectively provide critical relief to eligible organizations.” Some of the issues could be addressed by more communication from Treasury and the SBA, which oversee the PPP, the letter said. Other items will require SBA system and process improvements related to the E-Tran and PPP Loan Processing system, according to the letter. The letter addresses four areas of concern, as follows. Challenges with first- and second-draw PPP applications being denied acceptance in the SBA’s E-Tran system Additional validation checks put in place to counter potential fraudulent applicants are causing tens of thousands of legitimate applications to be denied acceptance by the SBA, the AICPA letter said, adding that “Lenders and loan applicants do not understand the process to resolve these declines, creating great anxiety and confusion for small business owners.” The letter describes some system/software issues that are causing declined applications, giving the example of many instances in which the small business owner is being incorrectly informed that they have a criminal record. Even after redoing this certification, borrowers may then still be declined on the same application due to another incorrect validation rule (for instance, an Applicant Tax ID issue). The AICPA requests that the SBA provide more information on the validation process and correct some of these system issues as an urgent priority. In addition, to reduce anxiety and confusion, small businesses would benefit greatly by being more clearly informed that their initial acceptance in the SBA E-Tran system could take more than a week via broad communications about the program. Because these validation checks are new, many applicants do not understand the potential change in the timeline for funding, particularly if their application encounters processing errors, the letter said. Advertisement SBA processing and resolution delays for applications successfully submitted into the E-Tran system The SBA E-Tran system is flagging 20% to 30% of all first- and second-draw PPP applications for additional review based on validation checks, the AICPA letter said, noting that there are more than 40 different “error codes” related to these additional information requests. The letter outlines the following example: “One of the new requirements for second-draw sole proprietor applications is to use an EIN number instead of their SSN, even though many used their SSN with their original PPP application. This new requirement is causing the application to be declined, since one of the acceptance validation checks is to confirm the same number as the original PPP application. The overall top reason for decline is discrepancy with Applicant Tax ID, and the steps to correct this issue do not seem to be working in most cases. For instance, the system appears to report errors even in cases where the borrower used the same EIN on both applications and can demonstrate this fact to the lender.” The process for resolving the “error codes” is unclear and small business owners are being surprised by them, the letter said. The AICPA requests that the SBA provide further clarity and, even more importantly, communicate publicly that nearly one-third of all applications are receiving these requests for further review, which could delay processing by a week or more. SBA capping of first- and second-draw PPP loan amount SBA’s loan processing system has put in place a loan eligibility amount cap of $35,000 per employee for both first- and second-draw applications, the AICPA letter says, adding that the cap results in the SBA E-Tran system reducing the approved loan amounts. The AICPA asks the SBA to provide clear guidance related to these PPP loan caps because small businesses are confused when their loan amount is reduced with no explanation. Broad communication on available funding, overall processing and timing The letter recommends broader communication from the SBA confirming that there is sufficient funding to support all first- and second-draw PPP loan requests. The SBA also is urged to provide clear communication that processing time could be one to two weeks due to the increased validation checks and reviews. Despite the system issues, the SBA approved nearly 900,000 loans totaling $72.7 billion from Jan. 11 through Jan. 31, leaving almost $212 billion available. Applications for PPP loans close March 31, 2021. AICPA experts discuss the latest on the PPP and other small business aid programs during a virtual town hall held most weeks on Thursday at 3 p.m. ET, including on Feb. 4. The webcasts, which provide CPE credit, are free to AICPA members and $39.99 for nonmembers. Go to the AICPA Town Hall Series webpage for more information and to register. Advertisement The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus. Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal , created by the AICPA, CPA.com, and fintech partner Biz2Credit. For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA ’s coronavirus resources page or subscribe to our email alerts for breaking PPP news. — Jeff Drew ( Jeff.Drew@aicpa-cima.com ) is a JofA senior editor. Features New checklist helps CPAs manage AI cyber risks New checklist helps CPAs manage AI cyber risks Using an Excel agent to clean, validate, and reconcile data Using an Excel agent to clean, validate, and reconcile data Going concern: What CPAs in audit and finance should know Going concern: What CPAs in audit and finance should know Liquidation accounting: When a going concern dissolves Liquidation accounting: When a going concern dissolves SPONSORED REPORT Get your clients ready for tax season Help clients avoid surprises with year-end planning strategies for managing taxable income, maximizing deductions, and adjusting to OBBBA changes affecting individuals and businesses. From The Tax Adviser September 30, 2026 Navigating the QSBS rules in pass-through structures September 30, 2026 Sec. 338(h)(10) elections in business acquisitions August 31, 2026 What today’s clients expect from their CPA and how firms are responding August 31, 2026 2026 tax software survey MAGAZINE October 2026 October 2026 September 2026 September 2026 August 2026 August 2026 July 2026 July 2026 June 2026 June 2026 May 2026 May 2026 April 2026 April 2026 March 2026 March 2026 February 2026 February 2026 January 2026 January 2026 December 2025 December 2025 November 2025 November 2025 view all View All
File and source
- File
- e09-r11.html
- Size
- 256,057 bytes
- SHA-256
- e6d42e22369a79d99dd35cb2e592a3769b345fd64e63af3a6f7853d1b3a71ad2
- Our copy
- e09-r11.html
- Original
- www.journalofaccountancy.com