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Budget deficit to hit record $3.3T due to virus, recession
The federal budget deficit is projected to hit a record $3.3 trillion as huge government expenditures to fight the coronavirus and to prop up the economy have added more than $2 trillion to the federal ledger.
LOS ANGELES - Billions of dollars in loans intended to help small businesses amid the COVID-19 pandemic may have been diverted to fraud, waste, and abuse, according to a preliminary staff report released Thursday by the House Select Subcommittee on the Coronavirus Crisis on the Paycheck Protection Program (PPP).
The investigation found that more than $1 billion in loans went to companies that received more than one. According to the findings, 10,856 loans were identified in which the borrower received multiple PPP loans, but only 65 would be “subject to additional scrutiny based on the Administration’s stated plans to audit loans over $2 million.”
The rules of the PPP, which was part of the $2 trillion CARES Act, prohibited companies from receiving multiple loans.
Congressional investigators also found more than 600 loans totaling over $96 million went to companies excluded from doing business with the government.
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In addition, staff found that the Small Business Administration approved 353 PPP loans to government contractors previously flagged by the federal government for performance or integrity issues.
Select subcommittee staff compared the government’s System for Award Management (SAM) database against information companies used to obtain PPP loans in order to identify any red flags. The comparison implicated more than 11,000 borrowers and $2.98 billion in PPP loans.
The report also stated that the SBA and U.S. Treasury approved hundreds of loan applications missing key identifying information, including omitted names and addresses.
Rep. James E. Clyburn, D-S.C., chairman of the Select Subcommittee on the Coronavirus Crisis, sent a letter to the SBA and Treasury Department Inspectors General requesting a review of the administration’s management of the 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,” Clyburn wrote.
According to the report, the findings “show urgent need for more oversight and accountability.”
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Fox TV Stations reached out to the SBA for comment.
"We worked around the clock and launched the program in record time, under one week, because Americans needed immediate economic relief. Any program of this scope and size will encounter issues, and we have moved quickly to respond as they arise," a spokesperson for SBA wrote. "The loan forgiveness process currently underway seeks to address data inaccuracies and other matters. In addition, all loans are undergoing an automated review and all loans over $2 million will undergo a manual review."
SBA noted that any loan may be selected for a manual eligibility or forgiveness review. "Treasury and SBA are committed to rooting out fraudulent activity so abusers of this important program can be held appropriately accountable," SBA said.
In June, the Government Accountability Office warned “there is a significant risk that some fraudulent or inflated applications were approved” for the 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.”
The GAO report called on the U.S. Treasury and the SBA to take actions to improve oversight, including improving internal controls for loan forgiveness, improving the audit plan for PPP borrowers, and cooperating with oversight from Congress and other officials.
Congress established the PPP as part of the CARES Act in March 2020, which would provide $349 billion in forgivable loans to small businesses and non-profit organizations to cover payments associated with the coronavirus pandemic and keep businesses afloat.
In April 2020, Congress appropriated an additional $321 billion for the program. In May, the first round of loans were distributed to small business owners.
Loan eligibility and amounts are determined based on factors such as net profits, whether an applicant is self-employed, and whether an organization operates a nonprofit, with loan amounts themselves being forgiven if necessary employee retention criteria are met, according to the SBA.
Read SBA's full statement: "The Paycheck Protection Program is about jobs for American workers. PPP is supporting an estimated 51 million jobs, representing 80 percent of small business payroll in all 50 states and six territories. We worked around the clock and launched the program in record time, under one week, because Americans needed immediate economic relief. Any program of this scope and size will encounter issues, and we have moved quickly to respond as they arise. The loan forgiveness process currently underway seeks to address data inaccuracies and other matters. In addition, all loans are undergoing an automated review and all loans over $2 million will undergo a manual review. Furthermore, any loan may be selected for a manual eligibility or forgiveness review. Treasury and SBA are committed to rooting out fraudulent activity so abusers of this important program can be held appropriately accountable. Throughout PPP, we have worked tirelessly and closely with Congress on a bipartisan basis and with lenders of all sizes to provide critical relief to America’s small business owners, employees, and their families. We look forward to continuing those relationships."