Can we use a Paycheck Protection Program loan to pay salaries of staff who are now being paid through a budget line for salaries in a contract with a governmental agency?
I don’t think anyone can give you a firm answer to that question today. In a webinar on the Families First and CARES Acts presented by the National Council of Nonprofits yesterday (April 7, 2020), the presenter said that this question had been raised with the Small Business Association, the provider of the PPP loans, but that they were unable to get an answer.
I would not use a PPP loan today to pay the salaries of people whose positions are already funded by a governmental contract. You will ultimately have to assure the governmental agency that you spent its money for the salaries you included in the budget. You will also have to show the SBA that you spent the money you received in the loan for compensation of the same employees. It will be hard to certify to both agencies that you used the money from each for the same purpose. They probably wouldn’t like your double dipping.
That doesn’t mean you shouldn’t apply for the PPP loan. You may be able to get a reallocation of your governmental program budget to use some of the salary line to expand the program in other ways and then actually use the PPP loan for those salaries. You can use the funds for other salaries or could also consider hiring new employees with the PPP loan and use the 25% that doesn’t have to be spent on salaries for other permitted overhead costs. You might be lucky to have the SBA say the loan can be used for already funded salaries, although I wouldn’t count on it.
The PPP program is intended both to provide salaries for the employees of nonprofits and small business, and also to help sustain the entities themselves. You should think creatively about how to use the PPP loan for both purposes.