Taxpayer Subsidized PPP Funds Went to Charities with Failing Grades
May 25, 2022
The Paycheck Protection Program (PPP) was a lifeline for so many charities that otherwise may not have had the ability to sustain themselves through the financial hardships brought on by the COVID-19 pandemic. Unfortunately, the public may have been better served had some of these charities been allowed to fail. While first and second draw PPP loans, many of which were later forgiven and converted into grants, required charities to meet certain requirements for financial need and projected qualified expenses, the financial efficiency with which charities operate was not a qualifying eligibility factor for PPP funding approval. What this means is that many highly inefficient charities with histories of very low program spending and "F" ratings from CharityWatch received taxpayer subsidized PPP funds that could have been better utilized by other, much more efficient nonprofits.
PPP funding was distributed in two, separate rounds, each with their own eligibility requirements. To qualify for first round funding, a charity had to meet basic criteria such as being in operation since at least February 15, 2020, having 500 or fewer employees, and attesting that it would incur qualified expenses for payroll, rent or mortgage, utilities, and other expenses eligible under the PPP. Qualifying for second round funding was more difficult, namely because charities were required to meet additional criteria such as demonstrating financial need by providing evidence of revenue declines in the current accounting period relative to the same accounting period the prior year.
The amounts of first and second round funding each charity received were largely based on the amount of qualified expenses it substantiated in its PPP application(s); i.e., a charity that could substantiate a higher amount of qualified expenses would be eligible to receive more PPP funding than a charity that could substantiate a lower amount.
Nonprofits Currently Rated "F" by CharityWatch that Received PPP Funding*
*NOTE:This chart represents a sampling of nonprofits that meet the following criteria: (1) received PPP funding and (2) are currently assigned an "F" rating by CharityWatch due to financial inefficiency. Data was compiled using each nonprofit's audited financial statements and/or ProPublica's "Tracking PPP" database. "F" ratings are based on CharityWatch's analysis as of May 16, 2022. Due to the timing of when updated financial data becomes available and the time-intensive nature of CharityWatch's in-depth analyses, this chart is not a comprehensive accounting of all such nonprofits that received PPP funding. More comprehensive data can be found on the ProPublica website and in the Analysts' Notes section of the charity rating profile pages of each charity on charitywatch.org.
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