The Small Business Administration (SBA) has issued a report which concludes $200 billion of the $1.2 trillion it spent during the pandemic was the result of fraud.
The federal government squandered more than $200 billion in potential fraud in its aggressive rush to prop up small businesses as the COVID-19 pandemic threatened to shatter the U.S. economy, according to a report published Tuesday by the inspector general of the Small Business Administration…
The report focuses on two programs created at the advent of the pandemic to support small businesses, both under the SBA’s purview: the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL).
According to the report, there was a higher potential fraud in the EIDL program, which was a low-interest disaster loan that would later require repayment. The inspector general’s office estimated there was $136 billion of potential fraud in the EIDL program, representing 33% of the total funds dispersed to businesses.
For PPP, which gave money to businesses that would later be forgiven — similar to a grant — the estimate of potential fraud was lower: around $64 billion, representing 8% of the total funds sent out.
The report represents the most comprehensive estimate of fraud within the SBA programs. Previously the SBA’s IG had estimated the total fraud at closer to $100 billion. Meanwhile, the SBA itself is disputing the amount. It says its own internal investigation showed total fraud was much lower, in the range of $36 billion.
Whatever the case, the SBA spending was only about a quarter of what the government spent in total during the pandemic. Two weeks ago the Associated Press gave its best estimate of the total amount of money spent on fraud and came up with just over $400 billion.
An Associated Press analysis found that fraudsters potentially stole more than $280 billion in COVID-19 relief funding; another $123 billion was wasted or misspent. Combined, the loss represents 10% of the $4.2 trillion the U.S. government has so far disbursed in COVID relief aid.
The excuse given for all of this fraud is that the government was in a desperate rush to get the money out the door before the economy collapsed. But IG Michael Horowitz who chairs the Pandemic Response Accountability Committee says that excuse doesn’t add up. There were ways the government could have quickly reduced the amount of fraud, it just failed to do it.
“It’s a false narrative that has been set out, that there are only two choices,” Horowitz said. “One choice is, get the money out right away. And that the only other choice was to spend weeks and months trying to figure out who was entitled to it.”
In less than a few days, a week at most, Horowitz said, SBA might have discovered thousands of ineligible applicants.
“24 hours? 48 hours? Would that really have upended the program?” Horowitz said. “I don’t think it would have. And it was data sitting there. It didn’t get checked.”
Horowitz told the AP a final tally on all of the fraud was probably still two years away. But as the AP puts it, because of the underlying amount of money involved ($5 trillion) it’s certain to be the biggest grift in US history.
The effort to punish those responsible is ongoing. More than 2,200 people have been charged with fraud and about $30 billion has been reclaimed. Here’s the AP video report on their best estimate of the total fraud. The analogy used in this clip is shoplifting from a grocery store, i.e. loading up a cart and just walking out with everything without paying. This makes me think the pandemic relief money essentially turned the entire country into San Francisco, a place where brazen theft is routine.
