Michigan restaurants, hit hard by pandemic, want remaining federal COVID-19 funds released

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Michigan restaurants, hit hard by pandemic, want remaining federal COVID-19 funds released

A federal fund intended to boost restaurants that suffered heavy losses in the pandemic is under fire by industry officials after a recent report found that it’s sitting on $180 million in undispersed aid.

The $28.6 billion Restaurant Revitalization Fund was created last year as part of the American Rescue Plan Act to aid businesses facing staggering losses in the wake of COVID-19 pandemic. The fund opened to applicants in May 2021, with priority given to female-owned businesses, veterans, people of color, and economically or socially disadvantaged applicants during the first few weeks

A recent analysis by the Government Accountability Office (GAO) report found that $180 million remains in the fund, including $24 million set aside for litigation, and $56 million returned by applicants or their financial institutions.

The National Restaurant Association is calling on the U.S. Small Businesses Administration to award the remaining grant money to applicants who applied for assistance but did not receive grants.

According to the report, SBA officials said while they intend to award the remaining funds, they are “taking additional time to confirm that any new awards would comply with the terms of legal decisions regarding the priority groups.”

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In its letter, the restaurant association said “it would be consistent with the spirit of the law to utilize all unobligated funds to address the (funding) shortfall.”

“Now more than ever, every dollar appropriated by Congress for restaurant relief needs to be unlocked and put in the hands of operators struggling to keep their doors open,” Kennedy the association’s executive vice president for public affairs  wrote ENDNU.  “We urge the SBA to take every step to disburse all remaining funds in a fair and timely manner. “

Restaurants, they said, are still facing operating issues such as worker shortages, high food costs, and customer confidence uncertainty.

Patti Eisenbraun, co-owner of Brown Iron Brewhouse with locations in Royal Oak and Washington Township, believes even a portion of the undispersed funds could help restaurants. 

“If there are funds that are still available it would be so beneficial to restaurants,” particularly businesses that were awarded grants but never received the funds, Eisenbraun said.

Eisenbraun opened his Royal Oak location on March 1, 2020, weeks before the pandemic. 

“We didn’t qualify for any programs,” she said. “But we qualified for this (RRF) and then put to the side because we are women-owned and told specifically it was because of the lawsuit. “

What the GAO reported found

While SBA prevented more than 30,000 suspicious applications from receiving awards, the GAO identified systemic problems with the program:

  • SBA considered applications made through external vendors to be low-risk, but more than 4,000 recipients who applied were flagged for suspected fraud or ineligibility, including an alleged “fraudster” who received $8 million.
  • Grant recipients are to report on fund use, but nearly a third of the reports were overdue as of June 2022.
  • Though emphasized, the SBA has not assessed the effectiveness of its pre-award controls in detecting fraudulent or ineligible applications. “Assessing controls and addressing deficiencies would help SBA better ensure program integrity,” the report said.

The GAO outlined seven recommendations to the SBA administrators for straightening out problems going forward.

The SBA agreed or partially agreed with only two recommendations, the report said, including implementing a plan to address fraudulent or ineligible awards in a prompt and consistent manner.

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Shortly after the fund opened to applicants, it became mired in controversy. How the SBA dispersed the funds and for whom became an issue among restaurant owners.

The SBA came under fire when thousands of restaurant owners, including those in Michigan, received letters rescinding previously approved funds. Those funds were rescinded after three restaurants sued the SBA in federal court in Fort Worth, Texas, and Knoxville, Tennessee, over how it prioritized certain grant recipients.

Among the businesses in Michigan that applied to the fund, 42% received funding, the GAO’s July report said. 

Restaurants in Michigan and nationwide, hard hit by the pandemic and shut out of government aid, had hoped for another shot at receiving funds several months ago.

In April, legislation to replenish the fund passed the House of Representatives but failed to pass the Senate. The proposal would have pumped another $40 billion into the fund. 

Contact Detroit Free Press food writer Susan Selasky and send food and restaurant news to: sselasky@freepress.com. Follow @SusanMariecooks on Twitter.

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