In the early days of the epidemic, the Emergency Relief Program has spent about $ 4.5 billion on self-employed people who claim to have more workers because of such poor fraud protection: for one million workers who make unreliable claims.
In the months following the closure of most of the economy, the $ 20 billion program, called the Early Disaster Loan Development Program, provided immediate funding for small businesses of up to $ 10,000. However, Hannibal Ware, Inspector General of Small Business Administration, wrote in a report on Thursday that hundreds of thousands of donations were not available for “incorrect or unreasonable information.”
The report, which described how the agency was able to crack down on fraudulent applications by cracking down on fraud, was the latest black eye on the SBA, which has been on the government’s response lines. The agency also runs a $ 800 billion bank protection program, but lenders and borrowers often struggle to comply with confusing and changing rules. Fraud was a problem there — tens of billions of dollars could have been misappropriated.
The loan grants were created by Congress in March 2020 as part of the first coronavirus assistance package. Intended to make quick money for affected companies, the program provided financial assistance to businesses that applied for loans – and allowed applicants to keep the loans even if their loans were rejected.
In the 14 weeks before the program ran out, about 5.8 million applicants received $ 1,000 each, according to the census.
Self-employed owners and independent contractors were required to collect a maximum of $ 1,000 – but many large checks were collected.
More than 700,000 single business owners have received significant financial support by requesting additional staff. While single owners may have employees, such arrangements are not uncommon. Employees are required to have an employer’s serial number from the Internal Revenue Service.
But SBC has bypassed explicit protection – it does not want sole proprietors who require their employees to enter their employer account number, but rather allows them to use their social security numbers.
Although some of the costs may be the result of an applicant’s error, most of the suspicious applications in the Superintendent’s General Report have raised their claims – more than 380,000 applicants say they have enough staff to earn the full $ 10,000.
Some claims were completely baseless. Hundreds of applicants received the most financial support from more than 500 employees, making them generally unfit for small business programs. It claims to have fifteen million employees – this image could be merged with Amazon and Walmart.
The Small Business Administration said in a report that “before approving and issuing grants, it did not ask for more information from these sole proprietors to verify the number of employees mentioned in their grants.”
According to his calculations, of those $ 5.2 billion, only $ 704 million was eligible.
Previous monitoring reports have highlighted serious problems in the protection of the financial disaster risk loan scheme. In July 2020, Mr. Warre’s office warned of “widespread fraud” because of the security measures not available in the program, and Bloomberg’s article described how easy it was to defraud the system last year. “$ 10k SBA Loans & GRANTS Got The Streets Going CRAZY!” He mentioned how to distribute videos on YouTube.
The agency said in a statement that the loan policy had been introduced during the Trump administration, and that the Biden administration had identified a risk credit group and made improvements in risk management.
Maryland Democrat Sen. Benjamin El Cardin, who led the relief effort, said the agency had taken the program seriously.
“When Congress passed CARES legislation, our goal was to provide SBA with $ 10,000 EIDL Advance grants for all businesses,” he said. Not only has the Trump administration subsidized $ 1,000 per employee, but it has also failed to implement its own policy.
In a written response to the report, James E. Rivera, head of the department that administered the program, said the agency was required by CARES law to accept self-certification. He also said that the absence of an employee identification number on the application form does not prove that the applicant did not have one.
Mr. Warre criticized those responses.
“SARES law does not undermine the taxpayer’s trust in the agency’s ability to identify and prevent fraud in order to obtain the applicant’s self-certification,” he wrote.
Mr Ware called on the government to recover $ 4.5 billion in arrears. The agency recommended that it seek evidence from potential applicants, ask them to return it if they did not, and refer suspected cases of fraud to the Superintendent’s Criminal Investigation Department, which works with foreign agencies, such as the Federal Bureau of Investigation. .
In response, Mr Rivera said the agency would continue to evaluate foreign aid and “prepare the appropriate plan to address the issues identified by the applicant.”
One option is the Treasury Department’s Compensation Program, which includes tax refunds and other federal payments to resolve debt.
The Department of Justice has recovered more than $ 600 million and prosecuted hundreds of cases involving fraudulent claims in the government’s $ 1 trillion small business epidemic relief program.
But that slippery slope is lost on false claims. The Trump administration has been criticized by the PPP for “refusing to implement basic controls.” And the council’s Election Subcommittee on the $ 84 billion suspected fraud in the EDL program.
Mr. Ware told a council committee in April that the bureau had opened more than 400 cases involving various assistance programs.
“Fraud investigations will take decades,” he said.