U.S. Small Business Administration Releases Report on Anti-Fraud Control Measures in Pandemic Relief Programs

WASHINGTON, June 27, 2023 (GLOBE NEWSWIRE) -- The U.S. Small Business Administration (SBA) today released a report detailing analysis of anti-fraud protocols put in place by the Biden-Harris Administration in SBA’s four largest pandemic programs. The report “Protecting the Integrity of the Pandemic Relief Emergency Programs: SBA’s Actions to Prevent, Detect and Address Fraud” highlights the actions the agency deployed to restore fraud measures in pre-existing relief programs, enhance fraud controls in new programs, as well as support cross-agency efforts to bring fraudsters to justice. The report also details the most comprehensive analysis yet estimating the total impact of fraud, across SBA’s four largest pandemic relief programs, including the Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loan Program (COVID-EIDL). The report is the most thorough analysis available of the initial fraud prevention measures, new controls put in place by the Biden-Harris Administration to prevent and detect fraud, and the overall impact of fraud on the pandemic relief programs.

“Pandemic relief programs, including those supported by President Biden’s American Rescue Plan, have driven a historic economic recovery, including saving millions of businesses and creating over 13 million jobs since 2021,” said SBA Administrator Isabella Casillas Guzman. “SBA’s COVID relief programs were large-scale and significant undertakings; and the agency has analyzed, evaluated and taken action to incorporate the latest methods and technologies along the way. With this report, SBA is detailing the effective measures added to fight fraud and hold bad actors responsible, as well as recommendations of best practices to ensure future emergency small business programs are optimized from the start.”

“The findings in this report, coupled with the SBA Office of Inspector General and other law enforcement’s commitment to fighting fraud, is a major step forward,” said 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.”

The new anti-fraud measures deployed in 2021 in PPP and COVID-EIDL, which are explained in detail in the report, impeded further fraud attempts significantly and helped identify fraud that had already occurred. They include the reinstatement of checking applications against Do Not Pay databases, the checking of tax transcripts to validate application information in the COVID-EIDL programs, and the establishment of a new Fraud Risk Management Board.

As a result, in large part, of these measures, the SBA:

• Blocked over 21.3 million applications. Using several tools, including first-of-its-kind artificial intelligence, the SBA blocked 21.3 million applications for pandemic relief, representing $511 billion of funds retained across all four of SBA’s largest pandemic programs. These included duplicate applications, ineligible applications, and attempted fraud.
• Eighty-six percent of likely fraud in SBA’s pandemic relief program originated in the first nine months of the pandemic. The agency estimates $36 billion of $1.2 trillion in pandemic relief emergency program funds were obtained fraudulently. This amount is in contrast to recent overstated estimates that have not reflected all available data. The SBA’s $36 billion estimate reflects disbursed loans, grants, and awards that SBA, after a rigorous internal review, suspects as likely fraudulent and already has or expects to refer to law enforcement. The agency estimates that 86 percent of the fraudulently obtained loans originated in the first nine months of the first pandemic relief programs. The internal fraud reviews covered the entire portfolio of disbursed funding, relying on extensive data analytics and ongoing human-led reviews that will total four million once complete.

• Achieved record-low fraud rates for new relief programs. Taking learnings from PPP and COVID-EIDL, the SBA team achieved dramatically lower fraud rates in the two largest SBA relief programs designed and launched in 2021, the Shuttered Venue Operators Grant Program (SVOG) and the Restaurant Revitalization Fund (RRF). SBA estimates a likely fraud rate of one-third of one percent (0.33%) for SVOG, and three-fourths of one percent (0.75%) for RRF.
• Supported the recovery of $30 billion from pandemic relief emergency programs. In the wake of inadequate fraud mitigation measures implemented in 2020, the SBA has supported the recovery of $30 billion as a result of law enforcement actions, seizures, and voluntary repayments by borrowers and financial institution returns.

 Anti-Fraud RecommendationsTo follow through on the SBA’s work to identify awards, grants, and loans suspected of fraud, the report points to the importance of Congress meeting President Biden’s sweeping anti-fraud proposal published in March, which includes a request to provide at least $100 million in mandatory funding to SBA’s Office of Inspector General (OIG) to fulfill the mission laid out by recent legislation extending the statute of limitations for PPP and COVID-EIDL fraud. Looking ahead to potential future national emergencies, the report also outlines recommendations to mitigate fraud through the design of relief programs. They include: 

• Expand government data-sharing. As outlined in President Biden’s Pandemic Anti-Fraud Proposal, increasing access to government datasets, and expanding validation services would further SBA’s ability to prevent fraud on the front end. Grant SBA digital, real-time access to government payroll data, as well as tax identification data, so that SBA can more quickly verify applicant information.
• Build now to save later. Establish the statutory framework in advance of an emergency, so that SBA personnel and procedures can move quickly and with a full range of controls in the event of a crisis.
• Prevent fraud rather than chase it. Center expectations on up-front fraud control measures rather than on recovery efforts after funds are distributed so that the post-disbursement stage can better focus on applicant performance and ongoing monitoring.

 For more information, please visit https://www.sba.gov/document/report-protecting-integrity-pandemic-relief-programs to read the full report. ###About the U.S. Small Business Administration
The U.S. Small Business Administration helps power the American dream of business ownership. As the only go-to resource and voice for small businesses backed by the strength of the federal government, the SBA empowers entrepreneurs and small business owners with the resources and support they need to start, grow, expand their businesses, or recover from a declared disaster. It delivers services through an extensive network of SBA field offices and partnerships with public and private organizations. To learn more, visit www.sba.gov. 

Release Date: June 27, 2023               Contact: [email protected], www.sba.gov/news
Release Number: 23-41                        Follow us on Twitter, Facebook, Blogs & Instagram

Kirk McElwain
U.S. Small Business Administration
202-205-6175
[email protected]