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Poor oversight riddled the emergency initiative, leading to $1.5 billion in questioned awards.
The federal program to provide assistance to venues forced to close during the COVID-19 pandemic was riddled with poor oversight, according to a new report, which allowed grant recipients in some cases to accept more money than they requested.
The Shuttered Venue Operators Grant program, which Congress first authorized in late 2020, allowed movie theaters, live performance venues, museums and zoos to receive grants of up to $10 million. The initiative was first funded with $15 billion and allowed businesses to cover specific expenses, such as payroll, rent, mortgages and utilities. In a report issued this week, the SBA inspector general said the program came with escalated risks due to it being “unprecedented in size and scope.”
The IG blasted the agency for its failure to recognize those risks and adjust its plans accordingly.
SBA allowed recipients to alter their proposed budgets for spend grants up until their final report on how they used the funds, meaning venues could “simply submit a budget to match how they already spent” the award. That was especially problematic because 15% of the nearly 12,000 grants were for amounts other than the recipients’ budgets. All told, SBA doled out $1.5 billion to venues that did not match what those awardees had been approved to spend. That included cases in which SBA both provided too much money and not enough. In one example, a movie theater was approved for a $5 million grant but received $6.4 million. The theater did not provide any information on how it spent the extra money.
“Grants awarded beyond what is requested or needed could lead to misuse or abuse of taxpayer funds,” the IG said. “Awarding grantees more than they have budgeted could also prevent other eligible and deserving venues from receiving needed assistance.”
SBA originally told Congress it would assess the risk associated with each grant and require the riskier proposals to receive their payments in installments. That system would allow the agency to ensure the funds were being spent appropriately before giving the venues more money. Instead, the IG said, SBA altered its plan and paid each grant in its entirety in a single disbursement.
“SBA’s decision to advance the full award for all grant recipients in a single payment limits its ability to detect misuse of [program] funds,'' the IG said. “Multiple disbursements would have allowed SBA to detect potential misuse before disbursing additional funds to recipients considered to present a high or moderate risk to the program.”
The auditors found in their review examples of grants that were calculated and awarded using unallowable revenue. SBA failed to recover excess funds, the IG said, even when such errors were brought to its attention. The agency also failed to provide a formal sign-off on the grants, making it unclear if anyone at SBA reviewed the award before it went out the door.
The IG implored SBA to learn lessons from the experience and apply them to future emergency situations, such as to use a risk-based approach for awarding funds and ensuring grant recipients update their budgets and justify their spending. The auditors also said SBA should go after the venues that received too much money and recover the funds.
SBA management said it had already made some adjustments to ensure grant amounts matched grantee requests, though it added some problems the IG identified were necessary risks the agency must take in emergency situations. It said it would not go after anyone to recover overpayments.