Due to broken processes, nearly 2 million potentially fraudulent pandemic-era small business assistance applications still require investigation.
“The Small Business Administration made or guaranteed more than $1 trillion in loans and grants to over 10 million small businesses during the pandemic,” according to the Government Accountability Office.
However, the SBA’s inspector general was “unable to fully investigate nearly 2 million of 3 million” “likely fraudulent” small business pandemic loan or grant applications because the administration didn’t provide all of the needed information, according to a government report.
Small Business Administration pandemic loans and grants were part of a series of rapid responses from the federal government to bolster the U.S. economy in an uncertain time. The SBA developed a four-step process to counter abuse of its pandemic programs, but it wasn’t able to implement it right away. Before it was able to get its risk management process off the ground, it had already disbursed over half of its COVID-19 Economic Injury Disaster Loan funds and more than 65% of its Paycheck Protection Plan funding ($210 billion and $525 billion, respectively).
But the process was flawed beyond its lagging implementation. For example, an audit by the SBA’s inspector general revealed that the administration had awarded funds to some “potentially ineligible entities” listed in the Treasury’s Do Not Pay databases. As previously mentioned, the Government Accountability Office also identified issues with the administration’s referral of likely fraudulent cases to its Office of Inspector General – namely, that about 2 million of nearly 3 million referrals were missing information or provided inaccurate information.
“Without an effective referral process, the SBA OIG is not able to fully investigate instances of likely fraud and make follow-on referrals to, for example, the Department of Justice for prosecution, as necessary,” the Government Accountability Office wrote in its report.
The office recommended the administration and its inspector general’s office work together to revise the SBA’s referral process and ensure it provides everything the inspector needs to complete a review of the referred applications.
