A government watchdog said the Small Business Administration (SBA) handed out $684 million worth of Paycheck Protection Program (PPP) loans during the COVID-19 pandemic to scores of nonprofit organizations that may not have been eligible to receive the money.
The SBA’s Office of Inspector General (OIG) released a report Monday that 179 nonprofits may have been too large to qualify for the loans, which were designed for groups with fewer than 500 employees or were relatively small compared to others in their field. The report said one group in particular, the YMCA of the Rockies, received more than $3.5 million in PPP loans that it should not have received because it had more than 500 employees at the time it applied.
"We recommend SBA review the 179 PPP loans, totaling approximately $684 million, to ensure eligibility requirements were met and seek remedy or repayment for all loans deemed ineligible, and seek remedy or repayment of the PPP loan we reviewed for YMCA totaling $3.5 million," the OIG said.
Investigators examined another PPP loan worth $3.8 million to Planned Parenthood of Illinois, but determined that this group qualified for the loan. A third loan worth more than $6 million to Goodwill of Southwestern Pennsylvania should not have been made, but said Goodwill later became eligible for compliance when PPP loan guidance was changed.
The federal government made more than $800 billion worth of loans to companies and nonprofits during the pandemic so they could continue to make payroll after government officials imposed restrictions on a broad range of economic activity. Most loans were forgiven, with the OIG stating that of the $35 billion in PPP loans made by SBA, 98% were discharged.
While the OIG asked SBA to review all 179 questionable loans, SBA said it would review just 27. OIG indicated it would push for a full review. "In accordance with our audit follow-up policy, we will attempt to reach agreement with management on this unresolved recommendation," the OIG report said.
PPP loans are under increasing scrutiny as both Republicans and Democrats have acknowledged the program was vulnerable to fraud. This month, Sen. Dick Durbin, D-Ill., said he thought a lot of PPP funding was "wasted and stolen," and said someone appears to have received loans under his son’s name for the Durbin Construction Co.
"There’s no Durbin Construction Co.," Durbin said. "Somebody had stolen his identify and secured [a] $140,000 loan."
Last week, police in Illinois arrested more than a dozen people who allegedly tried to use PPP loans to bond out of jail. Federal agencies have identified 25 people who were facing felony charges while applying for PPP loans for fake businesses.