Federal agencies lack controls to ensure that Americans aren’t collecting unemployment while also getting paid by companies utilizing Paycheck Protection Program (PPP) loans, the U.S. Government Accountability Office (GAO) said in a scathing report issued Thursday (June 25). The study, which analyzed $2.6 trillion in federal COVID-19 bailout spending, also found other shortcomings in the scramble to provide aid to small businesses and others hurt by the pandemic.
“In emergency situations, such as the COVID-19 pandemic, it is understandable, and appropriate for agencies to want to get funds out the door quickly,” the GAO wrote. “However, without the necessary safeguards in place, funds may not get to the intended places or be used for the intended purposes.”
The GAO noted that Congress created three new unemployment-insurance programs even as it provided businesses with up to $669 billion in PPP loans where “employers are generally required to retain or rehire employees for full loan forgiveness.” The agency said that created a situation where workers might keep their jobs or get them back but still illegally collect unemployment benefits.
The GAO recommended that the U.S. Department of Labor “immediately provide help to state unemployment agencies that specifically addresses PPP loans, and the risk of improper payments associated with these loans. DOL neither agreed nor disagreed with the recommendation, but noted it was planning forthcoming guidance.”
In another criticism, the GAO said the PPP program’s rushed rollout has led to “confusion and questions about the program and raised program integrity concerns.”
For example, the agency cited the need for greater clarity around “good faith necessity certifications” that the program calls for. To expedient distribution of funds, the government let lenders take borrowers’ word for things when ascertaining eligibility for PPP forgiveness loans.
However, the GAO said the program’s rules “provided minimal additional information to borrowers on the required good faith necessity certifications.” The agency said the U.S. Small Business Administration (SBA), which is overseeing the PPP program, only provided additional guidance 20 days after the initiative’s April 23 rollout.
The SBA wrote on its website at that time that companies that trade on stock exchanges, have access to capital markets and have sizable market values probably wouldn’t meet the PPP program’s good-faith requirements. That forced many large companies that had gotten PPP loans to give the money back.
According to FactSquared data cited by the SBA, approximately 70 publicly traded firms that had received $435 million in PPP funds had given the money back by June 1.
Moreover, the GAO reports that over 170,000 PPP loans for approximately $38.5 billion overall had been canceled as of the conclusion of May.