Lenders made duplicate Paycheck Protection Program loans last year to more than 4,000 borrowers totaling about $692 million, the Small Business Administration’s inspector general has found.
The SBA said it is working to claw back any improper payments. Meanwhile, Congress is rushing to sign off on a two-month extension of the popular loan program as soon as this week.
Through Aug. 8, the SBA issued 8,731 loans to 4,260 borrowers with the same tax ID number or address as another borrower, the inspector general’s report found.
The redundant loans were paid because a script meant to detect duplication briefly stopped working last April, and there were errors in the electronic loan application system and borrowers applied for loans with more than one lender, according to SBA.
President Biden lamented the program’s lack of oversight Tuesday while touring a small business in Pennsylvania to tout the newly enacted $1.9 trillion COVID-19 relief package.
“We found out that only 40% of the people who, in fact, were small businesses got in on the deal,” Mr. Biden said at Smith Flooring Inc. in Chester, a Philadelphia suburb. “And you got very big businesses [getting] the lion’s share of that money.”
Mr. Biden recently announced changes to PPP designed to get money to smaller businesses that might have been edged out previously by corporations with better connections to major lenders.
Smith Flooring received a first round of PPP funding in April 2020 and a second round of funding this month during two weeks when Mr. Biden decreed that only companies with fewer than 20 employees could apply.
“You really made it work. And I think you should be aware that more help is on the way, for real,” Mr. Biden said.
The company plans to use the second round of funding to retain workers and upgrade technology.
Owner Kristin Smith thanked Mr. Biden for helping the small, minority-owned business.
“We’re grateful for the things that you’re doing,” she said.
The relief package includes an additional $7 billion in PPP funds, on top of $284 billion in new money Congress authorized in December, and expands eligibility to allow some additional nonprofit groups to apply.
Mr. Biden’s package did not extend the program.
But the House was poised on Tuesday to pass legislation to extend the deadline for applications from March 31 to May 31 and then allow the SBA another month to process pending applications.
Sen. Ben Cardin, the Maryland Democrat who heads the Senate Small Business Committee, said he would try to fast-track the legislation through the Senate.
The Senate also voted 81-17 on Tuesday to confirm Isabel Guzman as the new SBA administrator.
“SBA must continue to be a lifeline for small businesses in the months ahead, and I am confident that Isabel Guzman is the best person to lead the agency out of the pandemic and through the economic recovery to follow,” Mr. Cardin said.
The program, initially set up as part of the $2.2 trillion package Congress passed in March 2020, facilitates low-interest loans that are forgiven as long as the companies receiving the money use a certain percentage of the funds to make payroll.
The program has helped facilitate more than 7.5 million loans totaling more than $687 billion as of March 7 and saved or assisted an estimated 50 million jobs between April and August.
The SBA said its controls helped resolve 95% of the more than 40,000 duplicate loan numbers it identified last May and that it prevented more than 685,000 duplicate loans from occurring, but it didn’t provide documentation to back up those numbers, the IG report said.
The agency also blamed lenders for providing bad data and submitting the same application through multiple platforms.
In response, the SBA disallowed bulk or real-time loan processing and plans to take steps to recover any improper payments and prevent them from being forgiven, said Steve Kucharski, director of the SBA’s Office of Performance Systems Management.
The program fixes have not stopped prosecutions of people for PPP-related fraud.
An Ohio woman was sentenced Tuesday to two years in prison after pleading guilty in November 2020 to wire fraud and making false statements after she fraudulently tried to obtain $2.5 million worth of PPP loans.
Loans totaling more than $1 million were wired to her accounts before they were flagged and then were recalled or seized, according to the Justice Department.
When the SBA reopened the program in January with $284 billion in newly authorized funds, they implemented front-end compliance checks to cut down on fraud, said Lisa Simpson, vice president of firm services at the American Institute of CPAs.
“We support those reasonable steps to limit fraud and to protect taxpayer money,” Ms. Simpson testified to House lawmakers this month. “However these funding compliance checks have created significant challenges for small business borrowers to be able to access the SBA system and to get their loans through the system into the approval process.”
• David Sherfinski can be reached at dsherfinski@washingtontimes.com.
Please read our comment policy before commenting.