Venues that were forced to keep their doors shuttered during the pandemic are finally receiving much-needed financial relief. Recently, the Small Business Administration (SBA) began awarding the $16 billion Shuttered Venue Operators Grants (SVOG), providing qualified venues with grants up to $10 million.
The SVOG program was established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act, which is part of the Consolidated Appropriations Act of 2021, signed into law in December 2020. Qualified venues will receive a maximum initial grant of 45% of gross earned revenue for the 2019 calendar year. A single grant cannot exceed $10 million.
While these grants are providing relief to hard-hit live entertainment small businesses, nonprofits and venues, there are important stipulations recipients must consider when using the funds.
Important Issues To Consider for Grant Recipients
Usage Window
Grants may be used for any expenses incurred between March 1, 2020, and December 31, 2021.
Allowable Expenses
The grants must be used for specific expenses. Examples include payroll costs, rent and utility payments, and insurance payments. A complete list of acceptable, as well as denied, expenses is available on the SBA’s website. Grantees will be required to maintain documentation demonstrating their compliance with the eligibility and other requirements of the SVOG program. Cherry Bekaert can assist in determining your compliance with the grant requirements.
Single Audit Trigger
All entities who spend in excess of $750,000 in federal funding in a single year are required to complete a Single Audit. While Paycheck Protection Program (PPP) loans are not considered Federal financial assistance, Economic Injury Disaster (EIDL) loans are considered financial assistance. Therefore, an entity must add all EIDL funds to its SVOG award amount when determining if it has expended more than $750,000 in Federal financial assistance in one fiscal year.
Because federal Single Audits are compliance driven, it is important to ensure proper internal control processes for each grant requirement. Should you now require a Single Audit, Cherry Bekaert can provide guidance on best practices to ensure a smooth audit process. In addition, our Government Services team has extensive experience and certification to conduct the Single Audit. It is important to note that Single Audit expenses incurred are considered an allowable grant expense, and grant proceeds can be used to cover the audit expense.
SVOG & PPP
Entities may have both SVOG award(s) and PPP loan(s). Under the American Rescue Plan Act, entities that receive a first or second draw PPP loan on or after December 27, 2020, must deduct the PPP loan from the SVOG grant without regard to whether a portion of that PPP loan was forgiven or not. If the entity received a PPP loan prior to December 27, 2020, the PPP loan and/or its forgiveness status is not factored into an SVOG. Cherry Bekaert can provide assistance to help entities take advantage of both programs and ensure they are spending the funds to best benefit the entity.
ERC Eligibility
The Employee Retention Credit (ERC) was introduced as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to incentivize employers to retain employees during the pandemic by offering a refundable tax credit against employment taxes. As a result of the ERC expansion in late 2020, employers previously ineligible to claim the ERC, because they received loans under PPP, may now be eligible for ERC for 2020 or 2021 wages paid.
Your Guide Forward
Cherry Bekaert is ready to assist you in claiming the ERC. We have a proprietary technology platform that allows us to provide an audit-ready deliverable in which we document your status as an Eligible Employer, calculate the credit from your wage data, maximize the wages treated as Qualified Wages, and allocate PPP loan forgiveness proceeds across the eligible payroll quarters. Learn more about Cherry Bekaert’s Employee Retention Credit services.
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