SBA Potentially Lost $200 Billion In Covid Pandemic Relief To Fraud And Abuse, Government Watchdog Finds

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The Small Business Administration may have lost more than $200 billion to fraud, waste and abuse during its push to help small businesses during the pandemic through programs like the Paycheck Protection Program, a government watchdog report published Tuesday found—the latest astronomical figure of misspending of federal Covid money.

Key Facts

During the implementation of programs such as the PPP and the Economic Injury Disaster Loans (EIDL) program, guardrails were weakened that would have prevented fraudsters from easily gaining access, the Office of the Inspector General of the SBA said in the report.

Because of the “allure of ‘easy money,’” an overwhelming number of fraudsters were drawn to the program and took “advantage of the economic crisis and [diverted] funding intended for deserving, eligible American small business owners,” the OIG report said.

The report also noted that as of May, OIG oversight has resulted in 1,011 indictments, 803 arrests and 529 convictions—all related to Covid-19 PPP and EIDL fraud.

Big Number

17%. That’s the percentage of the $1.2 trillion doled out by the SBA that may have been lost to fraud, waste and other abuses, according to the report.

Chief Critic

SBA spokesperson Han Nguyen blasted the findings, saying in a statement: “We strongly disagree with the OIG’s projected fraud total of $200 billion.” The SBA said its own analysis estimated $36 billion in its Covid relief funds were lost—of which up to $30 billion has been recouped. Some 86% of the fraudulent payments were sent in the first nine months of the pandemic, according to the SBA.

Key Background

Before Tuesday’s report was released, SBA Inspector General Hannibal “Mike” Ware, had been warning that relaxed internal controls could increase the risk of fraud within the SBA programs. In a 2021 interview with ABC News, Ware predicted that the amount of fraud from Covid relief programs would be “larger than any government program that came before it.” A recent Associated Press investigation put the numbers even higher, estimating that of the $4.2 trillion the U.S. government has so far disbursed in Covid relief aid across all federal programs, fraudsters potentially stole more than $280 billion. The AP also found another $123 billion was wasted or misspent.

Crucial Quote

“A decision was made at the outset of the pandemic: speed was the key,” Michael Horowitz, the chairman of the Pandemic Response Accountability Committee, a federal watchdog that tracked how much money was defrauded from the government during the pandemic, told ABC News in March 2022. “It was a bad choice. It was the wrong choice. It never should have happened.”

What To Watch For

Ware is scheduled to appear before Congress in July to discuss the findings of his report.

‘Unprecedented’ Fraud Penetrated Rollout Of COVID-19 Small Business Loans, Watchdog Warns (ABC)

The Great Grift: How Billions In COVID-19 Relief Aid Was Stolen Or Wasted (Associated Press)

CORRECTION (6/27): This story has been updated to note the inspector general’s report determined $200 billion was potentially—rather than certainly—lost, along with the SBA’s response to the report.

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