WASHINGTON – Computer errors have led the government to duplicate loans to thousands of borrowers as part of the Trump administration’s agenda to save businesses from the economic ravages of the coronavirus pandemic.
While the Paycheck Protection Program has been the subject of fraud, the revelations in a new report from the Inspector General of the Small Business Administration speak more of a flawed – and costly – implementation.
Aging federal technology may have hampered the SBA’s inability to track and cross loans. Two years ago, the Government Accountability Office found that information systems across the federal government were very obsolete. Some SBA computer hardware was ten years old, according to this survey.
A series of malfunctions took place in the spring and summer of 2020, resulting in the inadvertent distribution of millions of taxpayer dollars in the form of duplicate loans. In total, SBA Inspector General Mike Ware found, banks authorized to issue PPP loans “have made more than one PPP disbursement to 4,260 borrowers, for a total of about $ 692 million and involving 8,731 PPP loans “.
Companies have been allowed to apply for PPP loans from several banks; it was the duty of the SBA to ensure that if a borrower applied to one bank, the applications before all other banks were withdrawn. If the SBA did not notify a bank that one of its potential borrowers had other pending applications, that borrower would have no obstacle in obtaining multiple loans.
At least 104 borrowers received three or more loans. One borrower received 17 federal government loans totaling $ 1.3 million. It was not clear who this beneficiary of 17 loans was or how the borrower managed to get so many loans while other potential borrowers struggled to win a single award through the Business Rescue Program.
An official in the SBA’s Inspector General’s office refused to disclose information about this borrower or whether the borrower was under investigation by the agency. The official confirmed to Yahoo News that the 17 loans were not separate franchises from a large corporate chain, in which case the loans would have been within program guidelines.
The SBA attempted to recover some of the duplicate loans but could not tell its Inspector General how successful it had been in recovering the funds.
The SBA declined to elaborate on the Inspector General’s findings. “We have nothing more,” spokeswoman Carol Wilkerson told Yahoo News in a text message.
The revelations of the widespread problems with the first round of PPP loans come as President Biden and Vice President Kamala Harris visit the country to tout the recently adopted $ 1.9 trillion US bailout. who has a business relief component clean, including a new $ 28.6 billion fund to help restaurants.
Congress is also is preparing to extend the PPP for another two months, giving companies more time to apply.
Logistical challenges that seem to have frustrated the previous administration could also affect the current one, although the SBA said the issues highlighted by the Inspector General have been resolved. The prospect of massive errors looms every time huge sums of money are disbursed, regardless of the president. The Obama administration’s Troubled Asset Relief Program, designed to save the US economy after the 2007-08 financial crisis, is the subject of a similar review.
Critics of the Trump administration have seized the new report as proof of the damage the 45th president managed to inflict on the federal government before stepping down in January. “This money was for small family businesses struggling to keep the lights on, not big business, scammers and cheaters,” said Kyle Herrig, head of the Accountable.US watch group. “But given the Trump administration’s insistence that banks and businesses be able to self-regulate, it’s no surprise that so much fraud and neglect has fallen through the cracks.”
Supporters of Trump’s small business relief efforts say the goal was to transfer billions of dollars to thousands of businesses at unprecedented speed, in the midst of a pandemic. Mistakes were inevitable, say these advocates, and are not evidence of abuse or incompetence.
The duplicate loans in question were made between April and August 2020, when the Trump administration first implemented the PPP program, which was originally awarded $ 349 billion by Congress in the Coronavirus Relief Bill.
On April 30, an SBA computer script intended to process large numbers of loans quickly failed. The malfunction prevented the system from verifying when a business had applied for a loan from multiple banks. When the computer script worked correctly, each PPP candidate was left with a single loan for the 5,460 participating banks to consider.
The error persisted for approximately 14 hours before SBA officials spotted and fixed the corresponding code. Because the SBA was facing a massive backlog of applications, officials decided not to go back and correct duplicate loan applications processed during that 14-hour period. This means that thousands of applicants were given one additional opportunity – or more additional opportunities in some cases, and 17 additional opportunities in one case – with funds others did not have.
There was another error, this one related to an SBA computer program known as E-Tran. This program was supposed to eliminate any duplicate loan applications by comparing tax ID numbers and other information submitted by businesses. For thousands of applicants, E-Tran did not detect that a company had submitted more than one application.
In total, the federal government granted 5.2 million P3 loans; the 8,731 duplicate loans are an outlier. Yet the ease with which some borrowers have seen their fortunes double stands in stark contrast to the experiences of many people of color who own businesses, who have said they are marginalized and do not have the same access to credit as homeowners. white business. PPP loan analysis saved such accusations.
The Biden administration is committed to correcting racial and other inequalities in small business outreach, but it will have to work with more or less the same tech infrastructure as Trump. (The SBA has committed to no longer use mass treatment programs.)
Ware’s investigation was conducted at the request of a Congressional coronavirus subcommittee. The chairman of that subcommittee, Representative James Clyburn, DS.C., said the new report was “further evidence of the poor implementation of the PPP by the Trump administration, which ignored the intention of the Congress by failing to get life-saving help for the smallest businesses most in need.
Cover thumbnail photo illustration: Yahoo News; photos: AP, Getty Images
Learn more about Yahoo News: