As destructive as the COVID-19 crisis has been to the U.S. construction business, including a record 975,000 jobs lost in April 2020 alone, according to the Associated General Contractors of America (AGC), it likely would have been worse had Uncle Sam not stepped in with emergency relief measures like the Paycheck Protection Program (PPP).
With the construction unemployment rate swelling to 16.6 percent in April 2020 from 4.7 percent in April 2019, programs such the CARES (Coronavirus Aid, Relief and Economic Security) Act, of which PPP is part, and the Families First Coronavirus Response Act (FFCRA), are providing a financial lifeline for construction industry firms as the pandemic continues to affect their business, their communities and the economy as a whole. Indeed, AGC reported in May that about 80 percent of the more than 800 industry firms it surveyed reported having applied for PPP loans — and most were approved for funding.
By accepting government relief, construction industry firms also must be ready to accept the tracking and reporting responsibilities that accompany it. To fulfill those responsibilities, they’ll need a variety of accounting, audit and reporting capabilities — essentially, enterprise resource planning (ERP) tools that give them a good handle on data across their enterprise. And because the coronavirus and its aftermath likely will linger for the foreseeable future, there’s a strong likelihood that construction industry companies will be navigating these kinds of relief programs, and their compliance requirements, well into the future. To do so effectively, they’ll need more than basic spreadsheets.
Here, then, are six best practices to help firms support their case for pandemic relief — and to answer the compliance bell when it rings:
- Gain a firm grasp of the compliance requirements associated with whichever government relief program your firm is engaged with, then identify specifically which type of data and information you’ll need to track and report. While there’s still no clear picture of how oversight and enforcement of specific aspects of PPP and other relief programs will be handled, we do know the U.S. government has allocated some $1 billion to the inspector general offices at more than two-dozen federal agencies to ensure program funds are used for lawful purposes, according to the accounting, tax and business advisory firm CohnReznick. Construction industry firms need to become conversant in the language of the programs from which they are seeking or already have received relief. Their firm’s ability to maximize the financial benefits of these programs, and to stay on the right side of the compliance line, could well depend on it.
- Use integrated ERP tools to gain company-wide visibility and a single source of truth across the firm. As long as the pandemic and related government relief programs linger, construction industry firms that have an ERP system with tracking, reporting and documenting capabilities will be in a strong position not only to secure the relief they seek, but also to provide the documentation that the overseers of these programs require. Having a single system that provides visibility into finances, human resources and day-to-day operations within and across projects, with the ability to accurately track, view and report key HR and accounting data, will enable firms to meet their compliance requirements with minimal headaches. System features such as dashboards that enable a firm to readily see trends within and across projects, in real time, can prove invaluable in the compliance effort. An integrated ERP system also gives a firm greater agility to adapt on the fly to fluid policies, changing requirements and unstable project scopes. On the other hand, using outdated and disparate ERP tools could make managing the compliance process extremely time-consuming and difficult.
- Sequester the data and information that the relief program requires you to track and report. Under the CARES Act, firms can earn fully refundable tax credits equal to 50 percent of qualified wages and health benefits (up to a cap) paid to employees between March 12 and Dec. 31, 2020. To have their PPP loans fully forgiven, firms must be able to show their lender the funds were used for payroll, interest on mortgages, rent and utilities, with at least 75 percent going toward for payroll. And under the FFCRA, firms, in order to claim a tax credit for the sick leave they pay out from April 1 through Dec. 31, 2020, must be able to document not only how much each employee works, on average, but also the sick leave expenses they incur for each employee. These kinds of requirements put a premium on accounting capabilities that enable a firm to isolate pay rate schedules, employee leave and other key data on a project-specific and cross-project basis.
- Stay on top of your data and reporting responsibilities. Identify a cross-departmental team (with representatives from finance, HR, operations, etc.) that will be responsible for coordinating and executing relief program compliance, including tracking and reporting. Conduct periodic audits to ensure the data you’re collecting is accurate and can be efficiently reported when the time comes.
- Stay on top of program requirements. The requirements and policies around programs like PPP can be fluid and subject to change as policymakers respond to prevailing conditions. Not only do firms need to keep abreast of these changes, they need to be able to quickly internalize them.
- Be ready to mobilize on new programs and new opportunities. As the damage from the coronavirus outbreak continues to mount, it’s reasonable to expect Uncle Sam to roll out additional relief programs in the months ahead. Relevant to the construction industry, for example, the U.S. government, which has already allocated some $100 billion to the Public Health and Social Services Emergency Fund (PHSSEF) for, among other things, construction of facilities to support pandemic response, likely will issue further details on that program in the months ahead.
The aforementioned ERP capabilities and practices would make segregating and managing project data related to these programs a much simpler exercise for construction industry firms. And when the crisis eventually winds down, the same capabilities and practices should prove invaluable in helping construction industry companies adapt to the new business normal.
Lucas Hayden is director of product marketing for Unanet A/E powered by Clearview.
