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Federal Market Intelligence for Small Business |
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Set-Aside Alert News Analysis:IG says SBA’s loose controls fostered massive fraud in 2020Former SBA leaders’ relaxing of internal controls contributed to $84B in potential fraud in COVID loans: IGThe Inspector General for the Small Business Administration confirmed that the SBA’s loosening of internal controls contributed to the $84 billion in potential fraud discovered in COVID emergency loans to small businesses in 2020. That is a 43% potential fraud rate. IG Hannibal “Mike” Ware testified to the House Small Business Committee on Jan. 12 on his recent report on SBA’s management and performance issues, which identified the possible fraud in the pandemic-related Economic Injury Disaster Loan (EIDL) distribution. The SBA delivered $197 billion in EIDL loans from March 2020 to December 2020. By October 2020, $78 billion already was flagged as possible fraud. Estimates of potential abuse later rose to $84 billion. The IG’s report said the SBA “relaxed internal controls to speed funds to affected businesses, significantly increasing the risk of program fraud.” Ware expanded on that concern at the Jan. 12 hearing, saying that “there were missed opportunities for SBA to recalibrate and implement corrective actions in a timely manner” that likely increased the amount of potential fraud. Ware noted that the new leadership of the SBA since January 2021 has moved with haste to address the problems and to carry out the IG’s recommendations to strengthen internal controls. “Unequivocally, the leadership at the SBA currently is definitely taking these recommendations seriously and is moving quickly to resolve them,” he said. Committee chair Nydia Velazquez, D-NY, said fraud likely increased while SBA was trying to process a huge volume of loans very quickly. GOP President Donald Trump and SBA Administrator Jovita Carranza were in charge at the time of the $84 billion in possible EIDL fraud. “Speed was imperative at the beginning of the pandemic, leading to fraud controls being removed. The current administration put guardrails back in place to prevent further fraud and abuse,” Velazquez said at the hearing. Several GOP lawmakers at the hearing suggested that the private sector should be in charge of such loan distributions in the future.
More information:
Hearing video: https://bit.ly/3noPKD1
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Washington Insider:
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