Peters Calls on Government Watchdog to Investigate Paycheck Protection Program for Small Business Loans

Reports Show Small Businesses in Michigan, Nationwide Struggle to get Much-Needed Funds

WASHINGTON, DC – U.S. Senator Gary Peters (D-MI), Ranking Member of the Senate Homeland Security and Governmental Affairs Committee, today called on the Government Accountability Office (GAO) to conduct a wide-ranging examination of the allocation of funds distributed as part of the Paycheck Protection Program (PPP). The Coronavirus Aid, Relief and Economic Security (CARES) Act provided $349 billion to the U.S. Small Business Administration to support small and medium-sized businesses struggling with the economic fallout of the ongoing global pandemic. But the program’s funds were quickly depleted, and it has been widely reported that many of the small and minority-owned businesses these funds were intended for did not receive this much-needed financial assistance.

“As small businesses in Michigan and across the country continue to face dire financial challenges, I am concerned that PPP loans may not have gone to those who need them most,” wrote Senator Peters. “Over 1 million Michigan residents, many of whom worked for small businesses, have filed for unemployment in the past month alone—the fourth highest in the nation. However, Michigan currently ranks 35th out of 50 states for processed PPP loans.  There is also evidence that a substantial amount of PPP loans have gone to large hotel and restaurant chains, rather than the struggling small and minority-owned businesses who may be forced to permanently close their doors without urgent assistance.”

The Paycheck Protection Program, established under the CARES Act, is a loan program intended to help small and medium-sized businesses cover operational costs during the Coronavirus pandemic. However, the PPP has been beset with implementation problems, including delayed and unclear guidance to both potential lenders and recipients.

Peters spearheaded efforts to include bipartisan oversight provisions in the CARES Act, including a mandate for GAO to conduct oversight and routine audits of the Coronavirus response and stimulus-related funds. As part of this oversight effort, Peters is asking GAO to review the PPP as part of their initial mandated report, due within 90 days of CARES Act enactment. In order to ensure transparency and accountability surrounding PPP loans, Peters has asked GAO to examine the policies used to determine how PPP loans were issued, the geographic distribution of recipients and loans, and an analysis of the size of businesses receiving loans from the economic relief package.

Text of the letter is copied below and available here:


April 21, 2020

 

The Honorable Gene L. Dodaro
Comptroller General of the United States
U.S. Government Accountability Office
441 G Street, NW
Washington, DC 20548

 

Dear Mr. Dodaro:

The Coronavirus Aid, Relief and Economic Security (CARES) Act provided $349 billion to the U.S. Small Business Administration (SBA) to establish the Paycheck Protection Program (PPP), a loan program intended to help small and medium-sized businesses cover costs and keep employees on the payroll during the novel coronavirus (COVID-19) pandemic. To date, lenders have processed over 1 million loans under the PPP, and Congress is moving quickly to provide additional funding for this critical program.

As small businesses in Michigan and across the country continue to face dire financial challenges, I am concerned that PPP loans may not have gone to those who need them most. Michigan has been particularly hard-hit by COVID-19, with the fifth most COVID-19 cases and third most deaths from COVID-19 in the country. Over 1 million Michigan residents, many of whom worked for small businesses, have filed for unemployment in the past month alone—the fourth highest in the nation. However, Michigan currently ranks 35th out of 50 states for processed PPP loans. There is also evidence that a substantial amount of PPP loans have gone to large hotel and restaurant chains, rather than the struggling small and minority-owned businesses who may be forced to permanently close their doors without urgent assistance.

The CARES Act directs the Government Accountability Office to conduct oversight of COVID-19 funds and response efforts, including bimonthly reports and monthly briefings to Congress. GAO’s first such report is due within 90 days of CARES Act enactment. As part of this ongoing oversight, I ask that you review the PPP, including funds provided under the CARES Act and any subsequent legislation, and specifically focus on the following:

  1. What policies, procedures, and criteria did SBA and lenders use when determining how, and to whom, to issue PPP loans? How are PPP recipients distributed geographically, including by state?

  2. Please include an analysis of the number of loans, the number of lenders, the number of applications, the number of recipients, and loan amounts for each geographic location.

  3. How have PPP loans been distributed to companies of different sizes? Please include an analysis of the number and percentage of PPP recipients who were deemed eligible through waivers of SBA’s affiliation rules.

  4. What internal controls does SBA have in place to ensure that lenders administer the PPP in compliance with all relevant laws, regulations, and guidance?

  5. What internal controls does SBA have in place to ensure that PPP loan recipients meet eligibility requirements for PPP loans and, where applicable, loan forgiveness? 

  6. To what extent do PPP recipients meet eligibility criteria established under the CARES Act, including that the loan request was “necessary … to support the ongoing operations of the Applicant”?

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