The COVID-19 pandemic prompted swift economic relief efforts, but recent reports reveal these programs were plagued by significant fraud and mismanagement. A comprehensive investigation by the U.S. House Select Subcommittee on the Coronavirus Pandemic highlights the extent of waste and abuse in initiatives like the Paycheck Protection Program (PPP) and expanded unemployment insurance.
In March 2020, the CARES Act established the PPP, allocating $2.2 trillion to support small businesses. However, the program’s rapid rollout and reliance on self-verification made it vulnerable to exploitation. The subcommittee’s final 2024 report estimates that at least $64 billion was lost to fraudulent claims. Common fraudulent activities included inflated payroll figures, misrepresented employee counts, misuse of loan funds, multiple applications, and identity theft. One notable case involved a California individual who fabricated a business with 100 employees, securing $27 million in loans for personal expenses.
The Economic Injury Disaster Loan program also faced challenges, with criminals obtaining approximately $5.4 billion using questionable Social Security numbers. The Small Business Administration (SBA) was criticized for inadequate oversight, lacking guidance for lenders and sufficient internal controls to detect and prevent fraud.
Expanded unemployment insurance programs were similarly affected. By April 2020, unemployment claims surged to 58 million. The Department of Labor reported an improper payment rate of 35.9% for the Pandemic Unemployment Assistance program as of August 2023. Contributing factors included insufficient documentation requirements and overwhelmed state workforce agencies unable to verify claims effectively.
Organized crime networks, including international actors, exploited these vulnerabilities. Hackers linked to foreign entities, such as the Chinese Communist Party and Nigerian officials, orchestrated schemes resulting in the theft of millions in pandemic relief funds.
The subcommittee’s report attributes these failures to lapses in coordination among federal and state agencies, inadequate oversight resources, poor data sharing, and delayed enforcement actions. To restore public trust in health interventions and financial assistance programs, the report recommends that President Donald Trump direct the Department of Government Efficiency (DOGE) to evaluate and reform the operations of federal relief agencies. Implementing robust financial controls is essential to prevent similar waste, fraud, and abuse in future crises.
