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Companies ineligible to receive funding through the Paycheck Protection Program (PPP) received more than $96 million in loans during the coronavirus pandemic, according to a new congressional report.
Members of the House Select Subcommittee on the Coronavirus Crisis released initial findings from an ongoing investigation into the program's implementation on Tuesday. Their report outlined several prevailing issues, including the allocation of funds to ineligible companies, which "suggest a high risk for fraud, waste, and abuse" within the PPP's application and distribution procedures.
The investigation identified more than 600 loans totaling $96.3 million administered through the program that were issued to companies prohibited from engaging in government business, according to Tuesday's report. Companies "debarred or suspended from doing business with the federal government" do not qualify for PPP loans, it explained.
Congress established the PPP as an element of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a bipartisan stimulus package meant to offset economic consequences of the pandemic for individuals and companies. The program was specifically designed to support small businesses by offering forgivable loans, guaranteed by the Small Business Administration (SBA), to those that meet certain criteria.
Loans issued to ineligible businesses only accounted for a fraction of those Tuesday's congressional report flagged as problematic. It noted that an additional $1 billion in PPP funds went to companies that received multiple loans, despite the program's regulations against issuing more than one loan per recipient. Congressional staff determined more than 10,850 loans fell into this category, and just 65 were audited by SBA officials.
Congressional staff found that SBA authorized distribution of another 353 loans to government contractors with previously reported "performance or integrity issues." Those loans amounted to roughly $195 million, the report stated. Finally, members of the Select Subcommittee identified $2.98 billion in loans issued to borrowers whose applications included suspicious inconsistencies, like mismatched property addresses.
In light of the report's preliminary findings, the Select Subcommittee urged the SBA and U.S. Treasury Department to revise oversight procedures related to PPP loan forgiveness and auditing. It also advised the agencies to "cooperate with oversight from Congress, Inspectors General, and other Watchdogs" moving forward.
Rep. James E. Clyburn, who chairs the Select Subcommittee on the Coronavirus Crisis, requested a formal review of the SBA's approach to managing loans through the PPP on Tuesday. Clyburn issued the request in a letter addressed to inspectors general at the SBA and Treasury, which referenced the congressional report's data.
"The Subcommittee's analysis shows that PPP helped millions of small businesses and non-profit organizations stay afloat during the coronavirus crisis, but a lack of oversight and accountability from SBA and Treasury may have led to billions of dollars being diverted to fraud, waste, and abuse, rather than reaching
small businesses truly in need," he wrote.
Clyburn encouraged the federal agencies to "examine the categories of loans identified" in Tuesday's report, as well as other other loans that indicate possible fraud, in addition to reevaluating management of the program.
Newsweek reached out to the SBA for comment. This story will be updated with any response.
This story has been updated with additional information and background.
