PPP Fraud Investigations – What to Know

Is your business being investigated for PPP fraud? If so, you’re likely feeling a range of emotions right now. Fear, uncertainty, and doubt are probably at the top of the list, but you shouldn’t lose hope yet. There is still a chance to weather the storm and come out the other side unscathed.

Many businesses, large and small, have already been caught in the crosshairs of PPP loan fraud investigations, and the Biden administration has promised to prosecute anyone found guilty of PPP loan fraud or any other form of pandemic-related fraud.

So, what can you do to protect your business? The answer—hire a forensic accountant.

Read on to learn more about forensic accounting and how it can help you in the event of a PPP fraud investigation.

What is PPP Fraud?

Before we get into how forensic accounting can help defend against allegations of fraud in this instance, let’s take a step back and understand PPP fraud. Paycheck Protection Program (PPP) fraud occurs when businesses falsify information on their PPP loan applications in order to receive more money than they are entitled to. Here the company applies for and/or gets a PPP loan under false pretenses.

In some cases, businesses were found to have made false statements about their employee headcount or payroll expenses to secure a larger loan amount. Others have been caught using the loan funds for purposes other than those allowed by the PPP guidelines.

The Paycheck Protection Program was a lifeline for many businesses during the COVID-19 pandemic. It was implemented in April 2020 as part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The program provided forgivable loans to small businesses to help keep their employees on the payroll and maintain their operations during the pandemic.

However, because of the high demand for PPP loans, many businesses were forced to rush through the application process. This left room for error and, in some cases, outright fraud.

What Happens During a PPP Loan Fraud Investigation?

If your business is being investigated for PPP loan fraud, you need to know what to expect. The purpose of the investigation is to gather information and evidence to determine whether or not your business violated one or more of the requirements outlined in the PPP guidelines.

The investigators will likely review your PPP loan application, supporting documentation, and bank records. They may also interview you and your employees to better understand your business’ finances and how the PPP loan was used.

Possible violations that could trigger a PPP fraud investigation include:

Making false statements on your PPP loan application
Using the loan funds for purposes other than those allowed by the PPP guidelines
Falsifying your employee headcount or payroll expenses
Failing to maintain proper documentation
Applying for the PPP loan from multiple lenders
Tendering a false certification for loan forgiveness

The first step in any PPP fraud investigation is to send a target letter to the business under investigation. This letter will outline the specific allegations against your business and give you a chance to respond.

If the investigators find evidence of fraud, they will likely refer the case to the Department of Justice for prosecution. Depending on the severity of the fraud, you could be facing severe penalties, including jail time.

What Are Forensic Accounting Services?

Now that we’ve covered what constitutes PPP fraud and what the federal government is doing about it, it’s time to turn our attention to forensic accounting’s place in PPP-related matters.

Forensic accounting is the use of accounting, auditing, and investigative skills to detect and investigate fraud. Forensic accountants are often brought in to help with fraud investigations because of their ability to sift through financial data and uncover irregularities.

You can use our forensic accounting services to investigate different types of fraud, including PPP fraud. Our accountants can comb through financial records to look for any red flags or discrepancies. They will also interview employees and other witnesses to get a complete picture of what happened.

In the case of PPP fraud, forensic accountants can help businesses under investigation by the government. By reviewing financial records, loan applications, and providing expert testimony, forensic accountants can help enterprises build a strong defense against PPP fraud charges.

How to Respond to a PPP Loan Fraud Investigation

Is your business being investigated for PPP loan fraud? You need to take immediate action to protect your rights. Don’t try to go through an investigation alone. The stakes are too high, and the penalties too severe.

Start by seeking out experienced legal counsel. An attorney can help you understand the allegations against your business and develop a defense strategy.

Also, hire a forensic accountant to review your financial records and provide expert testimony. A forensic accountant can be an invaluable asset during PPP fraud investigations. They can help you understand the financial data and build a strong defense against the charges.

Other steps you can take to protect your business during a PPP fraud investigation include:

Cooperate with the investigators
Do not destroy any evidence or documents
Do not make any statements to the investigators without your attorney present
Keep a close eye on your bank account and assets
Digitize all personal and business financial records
Create a working environment where your employees feel at ease to report any suspicions about PPP fraud to management

What Cg Team Can Do to Help

Cg Tax, Audit & Advisory is uniquely positioned to help business owners under investigation for PPP fraud. With over three decades of experience helping businesses and estates, we have the knowledge and expertise to guide you through this difficult time.

Our forensic accountants based in New Jersey are experts in detecting, analyzing, and investigating fraud. We will work with you to review your financial records and develop a strong defense against the PPP charges.

Why wait till your business is under investigation? Take proactive steps now by hiring the best forensic accounting firm in NJ—Cg Team. We will help you review your financial records and take steps to protect your business from PPP fraud charges.