The U.S. Small Business Administration (SBA) inspector general’s report emphasizes the susceptibility of the Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loan (EIDL) programs to fraudsters, particularly during the early stages of the pandemic.
New estimates from a federal watchdog reveal that over $200 billion may have been stolen from two major COVID-19 relief initiatives
According to the report, approximately 17 percent of all COVID-EIDL and PPP funds were disbursed to potentially fraudulent actors. The estimated fraud amount for the COVID-19 EIDL program exceeds $136 billion, representing 33 percent of the total funds spent. For the Paycheck Protection Program, the estimated fraud amount is $64 billion. However, a senior SBA official expressed disagreement with these figures, claiming that the methodology used to estimate fraud was flawed.
Earlier projections from the SBA inspector general had estimated fraud at $86 billion for the COVID-19 disaster loan program and $20 billion for the Paycheck Protection Program. The Associated Press had previously reported potential losses of about $280 billion in COVID-19 emergency aid, with an additional $123 billion wasted or misspent. These losses primarily stemmed from the SBA programs and an unemployment benefits initiative.
The SBA inspector general, Hannibal “Mike” Ware, stated that the report employed investigative casework, previous inspector general reports, and advanced data analysis to identify multiple fraud schemes responsible for potentially stealing over $200 billion. Ware emphasized that the report’s findings are not final, as the investigations into pandemic relief fraud are ongoing.
The SBA has a significant backlog of over 90,000 actionable leads related to pandemic relief fraud
The agency also clarified that previous analyses pointing to potential fraud indicators should not be treated as true fraud estimates. Han Nguyen, an SBA spokesperson, noted that most of the likely fraud in the PPP and COVID-EIDL programs occurred during the initial nine months, attributed to the haste in distributing funds.
Congressional testimony from Labor Department Inspector General Larry Turner indicated $76 billion in fraud within pandemic unemployment assistance programs, with an additional $115 billion mistakenly disbursed to ineligible recipients.
To combat pandemic fraud, the Biden administration has implemented stricter rules and proposed a $1.6 billion plan to bolster law enforcement efforts. Gene Sperling, the White House American Rescue Plan coordinator, acknowledged the shortcomings of the programs and stressed the need for improved program integrity and distribution of relief funds.
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