Washington, D.C. September 1, 2020—Today, the Select Subcommittee on the Coronavirus Crisis released a preliminary staff report on the Paycheck Protection Program (PPP) showing that billions of dollars in PPP loans may have been diverted to fraud, waste, and abuse. Based on this report, Rep. James E. Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, sent a letter to the Small Business Administration (SBA) and Treasury Department Inspectors General requesting a review of the Administration’s management of PPP.
“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,” the Chairman wrote.
Congress established PPP on a bipartisan basis in the CARES Act in March 2020 to provide $349 billion in forgivable loans to eligible small businesses and non-profit organizations to cover payroll, rent, and utility payments to help them survive the coronavirus crisis. In April 2020, Congress appropriated an additional $321 billion for the program.
In June, the Government Accountability Office warned “there is a significant risk that some fraudulent or inflated applications were approved” in PPP and, “the limited safeguards and lack of timely and complete guidance and oversight planning have increased the likelihood that borrowers may misuse or improperly receive loan proceeds.”
Today’s report provides a preliminary analysis of PPP loan-level data by Select Subcommittee staff as part of the Subcommittee’s ongoing investigation of the Administration’s implementation of PPP. This analysis resulted in the following findings:
- Over $1 Billion in Loans Went to Companies That Received Multiple Loans. Staff analysis identified 10,856 loans in which the borrower received multiple PPP loans, for a total of over $1 billion in outstanding loans. Of the 10,856 loans identified, only 65 would be subject to additional scrutiny based on the Administration’s stated plans to audit loans over $2 million. PPP rules prohibit companies from receiving multiple loans.
- More Than 600 Loans Totaling Over $96 Million Went to Companies Excluded From Doing Business With the Government. Staff identified 613 PPP loans, amounting to $96.3 million, provided to borrowers that are ineligible to receive PPP funds because they have been debarred or suspended from doing business with the federal government.
- More Than 350 Loans Worth $195 Million Went to Government Contractors With Significant Performance and Integrity Issues. Staff found that SBA approved 353 PPP loans, amounting to approximately $195 million, to government contractors previously flagged by the federal government for performance or integrity issues.
- Federal Database Raises Red Flags for $2.98 Billion in Loans to More Than 11,000 PPP Borrowers. Select Subcommittee staff compared the federal government’s System for Award Management (SAM) database against the information companies used to obtain PPP loans to identify red flags, such as mismatched addresses. These flags implicated more than 11,000 borrowers and $2.98 billion in PPP loans.
- SBA and Treasury Approved Hundreds of Loan Applications Missing Key Identifying Information About the Borrower. These PPP loan applications were approved despite incomplete or missing identifying information on the loan applications, including missing names and addresses.
The report calls on Treasury and SBA to take the following actions to improve oversight of the program:
- Improve Internal Controls for Loan Forgiveness. Select Subcommittee staff identified suspected fraud, waste, and abuse simply by comparing PPP data with publicly available databases. The Select Subcommittee calls on the SBA to develop effective controls to identify and escalate potentially suspicious activity such as duplicate borrower addresses or DUNS numbers and to prevent debarred or suspended government contractors from receiving PPP loans.
- Improve the Audit Plan for PPP Borrowers. Because SBA’s and Treasury’s current audit plan only includes audits of loans over $2 million and “other loans as appropriate,” fraud experts have said criminals view the PPP as “fertile ground” for scams. The Select Subcommittee recommends that SBA and Treasury develop a more robust, risk-based audit plan that identifies and escalates areas of concern, such as the issues identified in this preliminary report.
- Cooperate With Oversight From Congress, Inspectors General, and Other Watchdogs. SBA and Treasury must fully cooperate with inspectors general, congressional oversight, and the Government Accountability Office.
Click here to read today’s report.
Click here to read Chairman Clyburn’s letter the SBA Inspector General and Treasury Inspector General.