A rushed emergency aid program for small businesses devastated by the pandemic erroneously sent nearly $3.7 billion to recipients who were not allowed to receive federal funds, according to a government audit released Tuesday.
The finding adds to a mountain of evidence describing what the Inspector General of the Small Business Administration, Hannibal Ware, called an “unprecedented amount of fraud” in the agency’s pandemic relief efforts. In October, the office of Mr. Were the agency for inappropriately handing out billions in emergency aid to self-employed workers who made “flawed or illogical” claims that they had additional employees on their payroll.
The Economic Injury Disaster Loan program distributed more than $210 billion in loans and grants last year. The program was quickly organized by the Trump administration as millions of businesses had to temporarily close due to the coronavirus and was designed to send money quickly to help businesses keep their accounts.
But the agency failed to conduct a legally required check of the applicants’ identifiers against the Treasury Department’s Do Not Pay system, according to Tuesday’s report from Mr Ware’s office.
The Do Not Pay system was established in 2011 to reduce improper payments to people who are dead, convicted of tax fraud, or banned from receiving federal contracts, among other red flags. Mr Ware found 117,135 applicants receiving grants and 75,180 recipients receiving loans despite agreements in the system indicating a “high probability” that the payments were inappropriate.
Isabella Casillas Guzman, who became the agency’s administrator in March, said at a House hearing this month that she had tightened the agency’s fraud controls over its Covid-19 aid programs. “The crash barriers didn’t exist” last year, under the previous administration, she said.
Responding to Mr Ware’s report, the Small Business Administration said it began checking Do Not Pay data on April 6, 2021 — more than a year after the disaster loan program began. The agency also said it would review loans and grants previously provided to recipients identified as ineligible.
“We agree with the SBA Office of Inspector General that the Trump administration should have adopted this risk management tool, which is why the SBA has done just that under the Biden-Harris administration,” said Han Nguyen, a spokesman. from the desk, Tuesday. .