A preliminary report from the Select Subcommittee on the Coronavirus Crisis on the Paycheck Protection Program (PPP) found the potential for billions of dollars which might have been diverted to fraud, waste and abuse.
That total includes more than $1 billion in loans to companies who received more than one PPP loan.
“Staff analysis identified 10,856 loans in which the borrower received multiple PPP loans, for a total of over $1 billion in outstanding loans,” the report stated. “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.”
In preparing the report, the Treasury Department and Small Business Administration (SBA) provided the subcommittee with detailed data on all the 5.2 million loans approved before the program ended Aug. 8.
Other high-level findings from the report includes more than 600 loans, totaling more than $96 million, which went to companies which are unable to do business with the federal 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,” the report stated.
An addition 350 loans worth $195 million were granted to government contractors who previously had been flagged by the federal government for performance or integrity issues.
The staff also compared PPP loans to a federal database used to identify red flags.
“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,” the report stated.
Finally, the report found that hundreds of approved loans were lacking key information, including missing names and addresses.
Rep. James E. Clyburn (D-S.C.), the chairman of the subcommittee, sent a letter to the SBA and Treasury Inspectors General requesting a review of the 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,” Clyburn wrote.
The report called on Treasury and SBA to take three actions to improve oversight of the program:
- Improve internal controls for loan forgiveness. Staff identified suspected fraud, waste and abuse simply by comparing PPP data with publicly available databases. The subcommittee called 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 borrowers. Because SBA’s and Treasury’s current audit plan only includes audits of loans of more than $2 million and “other loans as appropriate,” fraud experts have said criminals view the PPP as “fertile ground” for scams, the report stated. The subcommittee recommended 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 the 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, the report stated.