SBA overpaid $ 4.5 billion in COVID loan advances

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COVID emergency relief program unduly paid $ 4.5 billion to self-employed workers – a reflection of the Small Business Administration’s (SBA) inability to detect fraud, SBA Inspector General Hannibal Ware wrote in a report released Thursday.

Why is this important: The SBA has previously been criticized for issues of fraud in its paycheck protection program.

Details: The results show that the SBA, which has been at the forefront of the government’s response to the pandemic, has failed to take action to identify requests containing “false or illogical information,” Ware said.

  • Its $ 20 billion economic disaster loan advance program provided small businesses with immediate grants of up to $ 10,000 in the months following the outbreak.
  • Sole proprietors and independent contractors who worked only for themselves were only supposed to receive a maximum grant of $ 1,000, but over 700,000 managed to secure larger grants by calling for additional workers.
  • As it turns out, the SBA did not require sole proprietors claiming employees to enter their employer identification number. Instead, they used their social security numbers.

To note: Some of the claims were clearly implausible. Hundreds of applicants claimed they employed more than 500 workers, but that would generally make them ineligible to apply for the program.

  • Fifteen claims claimed they had a million workers.
  • But the SBA “never requested additional information from these sole proprietors to verify the number of employees listed on their grant applications before approving and disbursing grants,” Ware wrote.

What to watch: Ware said the government should try to recoup the $ 4.5 billion it overpaid by seeking reimbursement from applicants unable to prove their employee claims.

  • Suspected cases of fraud should be referred to the Inspector General’s Criminal Investigation Division, he added.

Go further: Scammers stole more than $ 130 million in coronavirus-related schemes


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