SBA in dispute with OIG on Covid fraud

Their fraud estimates differ by more than $160 billion

      It has been more than three years since Congress directed the Small Business Administration to distribute hundreds of billions of dollars in pandemic loans to small businesses.

      The PPP (Paycheck Protection Program) and the Covid EIDL (Economic Injury Disaster Loan) program kept millions of small firms afloat. But the limited controls in place in the initial months opened the doors to substantial fraud.

      Estimates of how much fraud occurred are now in dispute. The SBA is actively disagreeing with its own Inspector General’s assessments on whether it was a trickle or a flood.

      SBA Inspector General Hannibal “Mike” Ware reported on June 27 that the “potentially fraudulent” amount of SBA pandemic loans was $200 billion.

      “This means at least 17% of all COVID-19 EIDL and PPP funds were disbursed to potentially fraudulent actors,” his COVID-19 Pandemic EIDL and PPP Loan Fraud Landscape report stated. About $30 billion in fraudulent loans has been recovered.

     However, SBA officials are aggressively pushing back on the OIG’s estimates by releasing a report on the Biden Administration’s extensive efforts since January 2021 to measure, reduce and prosecute the PPP, EIDL and other pandemic fraud.

      In its report, Protecting the Integrity of Pandemic Relief Programs, the SBA estimates $36 billion in likely fraud in the pandemic-related loan fraud, with more than 80% of that occurring in 2020.

      Since 2021, the SBA has taken these actions:

• Investigated $400 billion worth of potentially fraudulent loans with more than 3.4 million human-led reviews.
• Blocked a total of 21.3 million applicants from accessing pandemic relief programs due to suspected fraud or ineligibility, representing $511 billion of funds retained.
• Assisted in 1,011 indictments, 803 arrests and 526 convictions related to COVID-EIDL and PPP fraud.
• Implemented a four-part anti-fraud control framework across all pandemic programs, which was applied retroactively to examine all PPP and Covid EIDL loans.
• Investigated procedures in 2020 allowed over 57,000 loans, worth $3.6 billion, to be disbursed to recipients in the Treasury’s Do Not Pay system. Those procedures were changed.

More information:
IG report: https://tinyurl.com/27p8k6jf
SBA Report of Protecting the Integrity of Pandemic Relief Programs: https://tinyurl.com/3dwc476n
SBA Report on Fraud Control Measures: https://tinyurl.com/3e6n6cjh
SBA Response to IG Report: https://tinyurl.com/33m5up7b

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