PPP Audits: What You Need to Know

By Owen Yin on May 20, 2020

If you received a PPP loan, you might be audited by the SBA.

Since the first round of funding was depleted so quickly, and many large businesses were approved for loans they didn’t need, the SBA is stepping up efforts to make sure every loan is going to the right business, for the right amount, for the right purpose.

The audit will be an independent review to verify the business’s eligibility and ensure the proper guidance is being followed. Audits help ensure that public funds are being used appropriately.

Who will get audited?

Any business that receives a PPP loan may be audited. As part of the loan conditions, you allowed the lender to share tax information with the SBA for loan compliance and SBA loan reviews.

On April 28, Treasury Secretary Steven Mnuchin stated that any business receiving more than $2 million in PPP loans would be fully audited, and spot checks would be made for smaller loans.

What are some things that the SBA may verify?

The auditing process will likely be overseen by the SBA’s Office of Inspector General (OIG), an independent and objective oversight office. The OIG will want to ensure that the certifications you made when applying for the PPP were accurate and made in good faith.

In the forgiveness process, the auditor will attempt to confirm that the claimed expenses were indeed made, by examining your payroll records and expense documentation.

In short, the auditor will be looking for proof that your application was accurate and truthful. Your business/PPP loan could be audited after getting approved, or during the forgiveness portion of the process.

How do I make sure I’m calculating my PPP loan amount correctly?

To calculate your PPP loan amount properly, we recommend reading our guide on How to Calculate Your PPP Loan Amount, then running your numbers through our PPP Loan Calculator.

There are three PPP rules to be mindful of when calculating your loan amount:

  • Independent contractor payments can’t be included in your payroll costs

  • Owner draws can’t be included in payroll costs

  • Individual compensation has to be capped at $100,000 per employee

The most common PPP mistakes tend to involve forgetting one of those three rules.

Your lender should be verifying your claimed amount based on the documentation you provide, but the Treasury has indicated that the borrower (that’s you) will mainly bear the consequences for inaccurate information, especially if it was provided intentionally.

How do I make sure that I’m using my PPP funds correctly?

As long as you’re spending the PPP funds on payroll, employee benefits, utilities, rent, and mortgage interest, you should be fine.

And if you want the funds to be forgiven, at least 75% of the funds must be spent on payroll and employee benefits, and the remaining 25% on utilities, rent, and mortgage interest.

If you spend the funds on anything other than the defined categories, you could be subject to additional liability or even fraud.

Further reading: PPP Loan Forgiveness: The Complete Guide

How long should I keep my documents?

You must retain your supporting documents for six years after the loan is fully forgiven or fully repaid.


This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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