Corrupted: Digging Into the Data

Over the past few months, the Project On Government Oversight (POGO) has analyzed available data on the government’s COVID-19 relief spending and has seen indicators that it didn’t help those in need to the extent lawmakers intended. But with the government spending trillions of dollars at record speed without sufficient oversight and reporting mechanisms in place, it’s been hard to see the full picture.

We knew that a disappointing number of Paycheck Protection Program (PPP) loans were scooped up by fraudsters and well-connected companies that didn’t need the help. We knew that businesses owned by members of minority groups were less likely to get business loans, and that jobless Americans had a hard time getting expanded unemployment benefits. But it’s been incredibly challenging to sift through available data to determine exactly how the relief funds were allocated. Until now.

This week POGO launched the latest version of our COVID-19 relief spending tracker, which will make it easier to determine where more than $1 trillion in government spending really went.

Did the Government Help Those Who Most Needed It?

In an earlier issue of Corrupted, we noted how people of color and other underserved communities were disproportionately left behind in the COVID-19 relief effort.

In a mid-May survey, only 12% of Black and Latinx business owners said they received the federal assistance they applied for, and a study found that banks were less likely to recommend government-backed loans to Black business owners. Meanwhile, big banks were giving their favorite clients the “concierge treatment” when they applied for PPP loans.

Our tracker helps bring that picture more clearly into focus.

The tracker features a scatter plot that, among other things, compares the amount of total spending per capita allocated to each state to the percentage of minority residents in those states. Setting aside the outliers (South Dakota and Washington, DC), the states with the highest percentages of minority residents weren’t among the areas that saw the most total spending per resident. This, even thoughCongress directed one of the biggest programs—the PPP—to prioritize businesses owned by people of color, women, and veterans.

We realize that the broad overview in this scatter plot only skims the surface. But it certainly raises questions about how effective agencies were in delivering relief funds to particular types of recipients as instructed by Congress. Further review, perhaps by an inspector general or relevant congressional committee, is warranted.

To dive a little deeper, we took a look at the counties surrounding Washington, DC.

Prince George’s County, Maryland, has one of the highest percentages of minority residents in the region—87%. The county saw just $2,900 in total relief spending per capita, and $1,600 per capita in PPP loans.

By contrast, in nearby Arlington County, Virginia, with a 38.2% minority population, the federal government spent $6,100 in total relief spending per capita and issued $2,900 per capita in PPP loans. In the city of Alexandria, Virginia, which has a minority population of 48.2%, the federal government spent $5,000 in total per capita and issued $3,700 per capita in PPP loans.

Myriad factors could account for this discrepancy. Perhaps there are more businesses in Arlington and Alexandria than in Prince George’s County, and residents of the DC suburbs don’t necessarily work in the same counties in which they live. The Virginia counties could also be home to a disproportionate number of major federal contractors (which are considered too “critical” to fail) as compared to Maryland.

But a quick look at the unemployment data in the COVID-19 spending tracker leads one to wonder—did the federal government do enough to help minority businesses weather the pandemic? And did the funds meant to keep people employed effectively do so?

In April, just after Congress passed its major COVID-19 relief bill, Prince George’s County had a 9.7% unemployment rate. It had a 9.8% unemployment rate in July, the last month in which businesses could apply for PPP loans. Across the Potomac, the majority-white counties saw jobless rates decrease: In Arlington County, the unemployment rate dropped from 7% in April to 5.6% in July, and in Alexandria unemployment fell from 9.9% in April to 7.7% in July. The table below shows a fuller picture of the counties surrounding DC.

Here again, we don’t want to draw any hasty conclusions. This is just one example. But we believe it’s worth further scrutiny by Congress and other oversight bodies, as well as statisticians and social scientists. Congress will need to pass a new relief bill—lawmakers are currently negotiating the next installment—and they need to determine which programs best serve those most in need.

A Quick Glance at COVID-19 Contract Spending

As we noted above, contracts could have contributed to particularly high spending in certain areas, so we thought we’d take a look at that data. The COVID-19 spending tracker shows that through the end of September 2020 the government had awarded $26.6 billion in contracts for pandemic-related products and to boost sectors impacted by the pandemic. According to our calculations, just 18% of that total spending went to businesses owned by women or people of color. This may simply reflect the percentage of bids from contractors owned by women or minorities, but as we noted in an earlier installment of Corrupted, the federal government doled out millions in pandemic contracts without using the competitive bidding process and awarded several contracts to close White House allies.

We realize that officials were scrambling in the early months to get enough medical supplies to address the rampant virus. Indeed, judging from the available data on transactions, the largest recipients are predominantly vendors of personal protective equipment, ventilators, other medical supplies, and companies involved in the development of COVID-19 vaccines.

But there were a few large contracts that caught our attention. And while contracts are a tiny slice of the spending we have data for (less than 2%), they have been a big cause for concern when it comes to potential waste and corruption.

The government awarded at least $770 million to RER Solutions to provide data analysis and loan recommendation services to the Small Business Administration. Congress launched an investigation into alleged poor performance and possible misconduct involving RER Solutions’ contract work.

General Electric received more than $700 million to manufacture aircraft engines, even as the Pentagon faced scrutiny for its focus on boosting the defense sector.

The Trump administration eventually canceled its $647 million ventilator deal with Royal Philips amid accusations that the government overpaid by as much as $500 million.

We also noticed that Phlow Corp., a company founded this year, has been awarded about $360 million in contracts to manufacture pharmaceutical ingredients. Phlow CEO Dr. Eric Edwards co-founded Kaléo, Inc., a pharma firm that drew public scorn for raising the price of its opioid overdose drug by more than 600%. The price increase prompted a Senate investigation, and the company drew additional attention from Senator Chuck Grassley in 2017 for seemingly gouging consumers on its allergic reaction auto-injector device.

Looking Ahead

Think of POGO’s COVID-19 spending tracker as a hunch generator. As we’ve shown, lots of interesting, possibly newsworthy, finds await you in the tracker, which we hope to update regularly.

We hope that congressional investigators and policy teams take a hard look at this data as they draft additional COVID-19 relief legislation. The first round of funding was issued quickly, so some missteps are understandable, but we’re now armed with more data that reveals who benefited most from federal relief spending and who is still in desperate need of help. Lawmakers must learn from their mistakes and fund the programs that lift up those most affected by the pandemic and economic downturn.

The federal government also justreleased the names of more than 10 million businesses that received PPP loans of $150,000 or less and other emergency loans, so investigators in and outside of the government must begin to analyze this new data. We will update our tracker with the new information. Yet the government is still not collecting data from loan recipients on whether they spent the money to keep people on their payrolls. This data could help us better understand why areas like Prince George’s County appear to have benefited less from the government’s relief programs.