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Inspectors general warn that Trump administration is blocking scrutiny of coronavirus rescue programs

As uproar over small-business disclosures intensifies, watchdogs tell Congress the White House is trying to shield how money is being spent

Treasury Secretary Steven Mnuchin speaks at a Senate Small Business and Entrepreneurship Committee hearing Wednesday. (Pool photo by Al Drago/AP)

The Trump administration’s intensifying efforts to block oversight of its coronavirus-related rescue programs are raising new alarms with government watchdogs and lawmakers from both parties amid concerns about the anonymity of companies receiving unprecedented levels of taxpayer funds.

Government watchdogs warned members of Congress last week that previously unknown Trump administration legal decisions could substantially block their ability to oversee more than $1 trillion in spending related to the coronavirus pandemic.

In a letter to four congressional committee chairs Thursday, two officials in charge of a new government watchdog entity revealed that the Trump administration had issued legal rulings curtailing independent oversight of Cares Act funding.

The letter surfaced amid growing bipartisan frustration over the administration’s decision not to disclose how it is spending hundreds of billions in aid for businesses. On Monday, Treasury Secretary Steven Mnuchin appeared to bow to that pressure, saying he would work with Congress on new oversight measures. But some Democrats have said the White House is not taking disclosure requests seriously enough.

“They seem to be saying one thing while doing exactly the opposite,” said Rep. Carolyn B. Maloney (D-N.Y.), chairwoman of the House Oversight Committee. “If the Trump administration is committed to full cooperation and transparency with taxpayer dollars, it is unclear why it is manufacturing legal loopholes to avoid responding to legitimate oversight requests.”

According to the previously undisclosed letter, Treasury Department attorneys concluded that the administration is not required to provide the watchdogs with information about the beneficiaries of programs created by the Cares Act’s “Division A.” That section includes some of the most controversial and expensive programs in the coronavirus response efforts, including the administration’s massive bailout for small businesses and nearly $500 billion in loans for corporations.

Mnuchin surprised many lawmakers last week when he announced he would not allow the names of Paycheck Protection Program recipients to become public after the Trump administration had said for months that the data would eventually be disclosed.

Treasury Secretary Steven Mnuchin said June 10 that disclosing amounts or recipients of the taxpayer-backed coronavirus loans was "confidential information." (Video: C-SPAN)

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The letter from the inspectors general and Mnuchin’s insistence that the PPP data will not be released come after the White House has repeatedly rebuffed efforts to scrutinize where the taxpayer funding is going.

In their letter, the inspectors general leading the Pandemic Response Accountability Committee (PRAC), an independent panel created to oversee implementation of the Cares Act, expressed concern about the administration’s legal opinions and their impact on oversight.

“If this interpretation of the CARES Act were correct, it would raise questions about PRAC’s authority to conduct oversight of Division A funds,” Michael E. Horowitz and Robert Westbrooks, the acting chair and executive director of the PRAC, said in a letter obtained by The Washington Post. “This would present potentially significant transparency and oversight issues because Division A of the CARES Act includes over $1 trillion in funding.”

The Treasury Department did not comment on the legal rulings but said the administration was being fully transparent. In a statement, department spokeswoman Monica Crowley said Cares Act spending would be subject to “comprehensive oversight,” including multiple inspectors general, a new congressional panel and the independent Government Accountability Office. The Treasury Department is also briefing congressional lawmakers and updating the government-wide reporting site

“The Pandemic Response Accountability Committee’s scope under the CARES Act covers other programs that are not already reviewed by these overlapping oversight bodies,” Crowley said. “Further duplication of these oversight functions by the PRAC would not increase transparency or oversight. Treasury is fully complying with all of the substantial oversight, transparency, and reporting requirements of the CARES Act.”

The new obstacles to the watchdogs’ efforts surface as the administration faces a bipartisan backlash on Capitol Hill over its decision not to disclose which businesses are receiving funding under the PPP, the bailout program for small businesses.

The rulings could limit the watchdogs’ ability to review massive new federal programs, government transparency experts say. If not addressed in new legislation by Congress, the opinions could curtail the watchdogs’ ability to collect information about who is receiving the funding, they say.

It is unclear whether the law gives the administration the ability to withhold the information.

“This is a devastating blow to oversight,” said Danielle Brian, executive director of the nonprofit Project on Government Oversight, which tracks government transparency. “It is a contorted analysis of the law and clearly counter to what Congress intended.”

Trump administration won’t say who got $511 billion in taxpayer-backed coronavirus loans

A key congressional Republican also expressed concern about the Treasury Department’s interpretation of the law and its impact on transparency. “American taxpayers have a right to know how their money is being spent,” said Blair Taylor, a spokeswoman for Senate Appropriations Committee Chairman Richard C. Shelby (R-Ala.). “Neither the letter nor the spirit of the law limit the accountability committee’s purview in that regard. Chairman Shelby is supportive of clarifying that in subsequent legislation, if necessary.”

The oversight bodies referenced by the Treasury Department, including the congressional commission and the GAO, have different mandates and are less likely to identify individual instances of fraud than the inspectors general curtailed by the department’s ruling, according to Brian. The administration has updated the government spending website with only a small fraction of Cares Act spending, Brian said.

In addition to the PPP and loans for corporations, Division A of the Cares Act includes billions for state and tribal governments and airline bailouts. The Trump administration has faced criticism over its allocation of money to tribal governments as well, with a group of Native American tribes suing.

Trump removes inspector general who was to oversee $2 trillion stimulus spending

The Trump administration has defended its handling of the bailout program. Mnuchin has said releasing the names of PPP recipients could compromise proprietary and sensitive business information. In the past, however, Trump administration officials had said they would be disclosing the information. And on Monday, Mnuchin said on Twitter he will be discussing adding “proper oversight” of the PPP, but it is unclear what he envisions.

President Trump has moved since the earliest days of the rescue package to curb oversight of the law. Almost immediately after signing the bill, Trump questioned the constitutionality of its requirement that a new special inspector general for pandemic recovery notify Congress immediately if the administration “unreasonably” withholds information requested by investigators.

In early April, Trump also ousted acting Pentagon inspector general Glenn Fine, who was chairman of the federal panel created by Congress to oversee the implementation of the stimulus package.

The $2 trillion Cares Act established the Pandemic Response Accountability Committee to serve as a special watchdog. The PRAC was granted subpoena power to monitor spending and issue reports and was to operate under the Council of the Inspectors General on Integrity and Efficiency, chaired by Horowitz, the inspector general at the Justice Department. Westbrooks serves as executive director of the PRAC. The White House’s Office of Management and Budget and the Treasury Department suggested alternative ways of conducting oversight, but the inspectors general rejected the idea, according to their letter.

“These alternatives do not address the full range of programs for which the PRAC is responsible, nor do they provide the breadth and depth of reporting needed for the PRAC to fully carry out the responsibilities required” under the law, Westbrooks and Horowitz wrote in their letters to the committee chairs.

Mnuchin’s claim at a hearing last week that the government would not be disclosing borrowers’ information marked an abrupt reversal from previous statements by the administration.

Loan applicants were warned on the government’s application form that it would “automatically release” business information “such as the names of the borrowers,” along with the loan amount and any collateral pledged to secure it. Officials at the Small Business Administration, which handles the day-to-day aspects of the PPP, have repeatedly promised in response to media questions and public document requests that the agency will release “individual loan data,” without providing firm dates. And as of Monday afternoon the SBA’s Freedom of Information Act website still carried a statement saying the agency would release “loan-specific data” to the public.

“The agency recognizes the need to balance the interests of transparency with the privacy and confidentiality issues release of loan information raises,” the SBA website reads. “In the near future, we will be able to turn our efforts to providing loan-specific data to the public, but hope that all understand the need for the Agency to focus its efforts on fulfilling the urgent needs of small businesses.”

Lawmakers from both parties have repeatedly criticized the lack of transparency. Sens. Marco Rubio (R-Fla.), the chairman of the Small Business and Entrepreneurship Committee, and Ben Cardin (D-Md.), the panel’s ranking Democrat, said in a June 3 letter that names of PPP loan recipients and the loan amounts should be made public, though they have differed on whether Congress should force the Trump administration’s hand.

Senate Republicans blocked Democratic-sponsored legislation that would have mandated the SBA provide daily and weekly updates to Congress and the public, along with a public database containing the names and addresses of the loan recipients, and the loan amounts. Last month, Rubio said the SBA should wait until it had processed the loans to worry about disclosure, although he was clear that it would be published eventually.

“It’s my view that we’re going to find out all of this information,” Rubio said. “And we’re going to know it in a timely fashion so we can do something about it.”

On Monday, Rubio press secretary Nick Iacovella said the senator “plans to work closely with SBA and Treasury to ensure enough data is disclosed about the program to determine its effectiveness and ensure there is adequate transparency without compromising borrowers’ information.”

In the meantime, interest in the program has waned dramatically, and Democrats are pressuring the administration to get more money to disadvantaged and rural employers as required by the Cares Act. On Monday, Rep. James E. Clyburn (D-S.C.), chairman of the House Select Subcommittee on the Coronavirus Crisis, and the six other Democrats on the committee wrote to leaders at the Treasury Department, the SBA and eight top banks asking that they do more to ensure funds go to “entities in underserved and rural markets,” including businesses owned by women, military veterans and economically disadvantaged groups.

Last month, the SBA’s inspector general warned that the agency had not properly reflected that emphasis of the law, and Cardin said last week that he will submit legislation requiring leftover PPP funds to be used that way. The Post is among 11 news organizations suing the SBA for access to records on loan recipients, the amounts of loans and other basic information the agency has previously released.

Recently, SBA Administrator Jovita Carranza has been encouraging disadvantaged businesses to apply. She issued a statement to lenders Monday asking that they “redouble your efforts to assist eligible borrowers in under-served and disadvantaged communities” before the program’s June 30 deadline.