Originally published June 27, 2023 10:00 pm PDT
In a stark revelation made by the U.S. Small Business Administration’s (SBA) Office of Inspector General (OIG), it is estimated that over $200 billion of COVID-19 Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) funds were disbursed to potentially fraudulent actors.
This amounts to “at least 17 percent of all COVID-19 EIDL and PPP funds,” as stated in the recent OIG White Paper report.
The OIG reviewed SBA’s pandemic assistance loan programs, aimed at offering financial relief to small business owners and entrepreneurs impacted by the COVID-19 crisis.
Under the programs, the SBA disbursed approximately $1.2 trillion.
The report, however, highlighted significant weaknesses in the SBA’s internal controls, stating that in the rush to disburse funds, “the agency weakened or removed the controls necessary to prevent fraudsters from easily gaining access to these programs.”
The allure of “easy money” in this “pay and chase” environment led to an “overwhelming number of fraudsters” exploiting these programs, which were initially intended to help deserving, eligible American small businesses.
OIG found that “multiple schemes used by fraudsters to steal from the American taxpayer and exploit programs meant to help those in need,” indicating that the loans identified as potentially fraudulent in the review should be subject to investigation.
Although measures were recommended and implemented to strengthen internal controls and reduce the impact of the fraudulent activities, the report revealed that it may take years to fully investigate and mitigate the extent of this fraud due to the volume of investigative leads.
“OIG is working on tens of thousands of investigative leads on alleged fraud, waste, and abuse of taxpayer resources,” the report stated.
However, not all is lost.
“OIG’s oversight and investigative work has resulted in 1,011 indictments, 803 arrests, and 529 convictions related to COVID-19 EIDL and PPP fraud as of May 2023,” says the report.
The OIG, collaborating with the SBA, U.S. Secret Service, other federal agencies, and financial institutions, has managed to seize or return nearly $30 billion in COVID-19 EIDL and PPP funds.
The OIG report also highlighted that “we continue to identify fraud schemes, and we anticipate the overall potential fraud estimate could fluctuate.”
It stated that updates to the report might be issued periodically, reflecting the evolving situation.
In response to the report, the SBA has provided formal comments, which are included in Appendix 2 of the report.
The OIG looks forward to “continuing to partner with SBA to combat fraud within these programs.”
Read the inspector general’s full white paper here:
