The US Treasury sent $1.4 billion (€1.2bn) worth of stimulus cheques to more than one million dead Americans, a congressional watchdog found, raising further questions about the US government’s response to the Covid-19 pandemic.
In a 403-page report, the Government Accountability Office (GAO), Congress’s main watchdog, also warned of the risk of fraud in the government’s enhanced unemployment benefits and its flagship Paycheck Protection Program, which provides small US businesses with money to keep their employees on payroll.
The watchdog said the treasury mistakenly sent deceased Americans cheques because only the Internal Revenue Service had access to the social security administration’s full set of death records. Treasury and its Bureau of Fiscal Service, which had been distributing the stimulus payments, did not.
Separately, it criticised the Centers for Disease Control’s early response to testing. It said “accuracy and reliability issues” surrounding the first Covid-19 test that the CDC authorised for use in February had “resulted in significant delays in testing nationwide during the critical early weeks of the outbreak”.
The report comes as Congress prepares to consider a follow-up stimulus package to the $3 trillion approved since the start of the crisis. Earlier this spring, House Democrats passed their own follow-up bill – the $3.4 trillion Heroes Act. However, Republicans have said the legislation is a non-starter. Instead, the White House and Republican congressional leaders are discussing a package that could include stimulus cheques to Americans who return to work as enhanced unemployment benefits are phased out.
In its report, the GAO offered particular criticism of the Small Business Administration, which is implementing the paycheck payment scheme alongside the Treasury. It painted the agency as one of the few that was reluctant to comply with its investigation, providing the watchdog mainly with information that was already publicly available and taking weeks to respond to its requests.
“We found that the Small Business Administration processed over $512 billion in guaranteed small business loans, but isn’t ready to address fraud risks and hasn’t said how it plans to oversee the loans,” GAO stated.
It warned there was a high risk for fraud both in the paycheck payment programme and in the government’s enhanced unemployment benefits, which have provided a supplemental $600 a week to Americans who are out of work during the pandemic. The watchdog highlighted that “no mechanism currently exists” to find workers who might be collecting unemployment benefits and wages through the paycheck payment scheme at the same time.
Designed as a rescue fund for small businesses and their employees, the watchdog alleged the programme’s “limited safeguards and lack of timely and complete guidance and oversight planning” had “increased the likelihood that borrowers may misuse or improperly receive loan proceeds”.
The Small Business Administration, it noted, had also not provided details for how it planned to conduct oversight for paycheck payment loans of $2 million or more, or how it would address potential fraud in the four million loans totalling $2 million or less.
GAO’s report was mandated as part of legislation passed in March, the $2 trillion Cares Act, $643 billion of which has been spent, the watchdog said. – Copyright The Financial Times Limited 2020