A federal coronavirus small-business loan program has helped millions of companies stay afloat during the pandemic, but may have also sunk billions of dollars on “fraud, waste, and abuse,” House Democrats said Tuesday.
The conclusion from majority staff on the House coronavirus subcommittee came in a new report on the Paycheck Protection Program, a key piece of the more than $2 trillion bipartisan stimulus legislation signed into law by President Donald Trump earlier this year. Trump signed off on additional funding for the program in April, giving it a total of about $670 billion.
As the Covid-19 crisis rages on, Democratic lawmakers and the White House are at an impasse over the details of another relief bill that would replenish funds for small businesses that have struggled to survive under strict social distancing measures.
But the Democrats’ report Tuesday said that “a lack of oversight and accountability” may have diverted large chunks of the funding away from those who needed it.
The preliminary analysis of the program found that more than $1 billion went to companies that received multiple loans and that more than 600 loans totaling $96.3 million went to companies barred from dealing with the federal government. The report said $195 million also went to government contractors who had previously been flagged for “significant performance and integrity issues.”
An analysis of a government database of the loans also raised thousands of red flags — such as mismatched addresses — when compared with the information companies used to obtain the funds. The flags were connected to more than 11,000 borrowers and totaled $2.98 billion, according to the report.
Still, the report says that the 5.2 million loans approved as part of the program as of Aug. 8 have protected many small businesses from being forced to close their doors.
In announcing the investigation, the subcommittee sent letters to several big banks, noting that their probe is still ongoing and that they have concerns about whether the money was going to small businesses or to big companies and well-funded entities. The 10-page report from the subcommittee does not directly address that question.
The Treasury Department declined to comment. Treasury Secretary Steven Mnuchin is set to testify later Tuesday before the House coronavirus panel, led by Majority Whip James Clyburn, D-S.C.
The U.S. Small Business Administration referred CNBC to a separate report released earlier Tuesday by Republicans on the Covid-19 subcommittee, who declared the program a “resounding success.”
That report praises Trump’s “swift action” for providing crucial relief to business owners, while criticizing Democrats who “jeopardized paychecks for millions of small business employees by attaching conditions to additional funding” during negotiations.
— CNBC’s Ylan Mui contributed to this report.