The U.S. Small Business Administration (SBA) has shared detailed insights into the anti-fraud controls implemented during the pandemic relief programs. The report, titled “Protecting the Integrity of the Pandemic Relief Emergency Programs: SBA’s Actions to Prevent, Detect and Address Fraud,” highlights the measures taken by the Biden-Harris Administration to safeguard against fraud and hold wrongdoers accountable.
The report examines fraud prevention efforts across SBA’s four largest pandemic relief initiatives, including the Paycheck Protection Program (PPP) and the COVID-19 Economic Injury Disaster Loan Program (COVID-19-EIDL). It reveals that 86% of the fraud discovered in these relief programs occurred during the first nine months of the pandemic.
“SBA’s COVID relief programs were large-scale and significant undertakings,” said SBA Administrator Isabella Casillas Guzman, who emphasized the impact of President Biden’s American Rescue Plan in saving businesses and creating over 13 million jobs since 2021. “With this report, SBA is detailing the effective measures added to fight fraud and hold bad actors responsible,” she added.
The report divulges various anti-fraud measures in 2021 for PPP and COVID-EIDL. They include reinstating checks against Do Not Pay databases, validating tax transcripts for COVID-EIDL applications, and establishing a new Fraud Risk Management Board. Thanks to these initiatives, the SBA blocked over 21.3 million applications, preventing the potential fraudulent allocation of $511 billion across all four of the SBA’s major pandemic programs.
In contrast to previous overstated estimates, the SBA determined that around $36 billion out of the $1.2 trillion in pandemic relief funds were fraudulently obtained. The agency has achieved record-low fraud rates for new relief programs designed and launched in 2021, such as the Shuttered Venue Operators Grant Program (SVOG) and the Restaurant Revitalization Fund (RRF). The SVOG experienced a fraud rate of 0.33%, while the RRF had a rate of 0.75%.
Through law enforcement actions, seizures, and voluntary repayments by borrowers and financial institution returns, the SBA has managed to recover $30 billion from the emergency pandemic relief programs. These recovery efforts underscore the importance of a proactive approach in combating fraud, a sentiment echoed by Special Counsel for Enterprise Risk Peggy Delinois Hamilton. “Releasing the results of this report is necessary to fully inform past, present, and future efforts for addressing fraud,” she said.
Moving forward, the report recommended strategies to mitigate fraud, emphasizing the need for more robust up-front fraud control measures. Key recommendations include expanding government data sharing, establishing statutory frameworks before an emergency, and centering on preventing fraud rather than chasing it after funds are distributed.
Small Business Deals
To further consolidate its anti-fraud work, the SBA highlighted President Biden’s anti-fraud proposal published in March, which includes a request to allocate at least $100 million in mandatory funding to SBA’s Office of Inspector General (OIG) to extend the statute of limitations for PPP and COVID-EIDL fraud.
The findings of this report are an important step for small businesses navigating the complex landscape of pandemic relief. The SBA’s actions and recommendations serve as a potent reminder of the importance of constant vigilance in ensuring the integrity of emergency relief programs, protecting the interests of business owners and safeguarding taxpayer funds.