SBA updates anti-fraud control measures in pandemic relief programs
Through a report, the administration highlighted that the highest percentage of fraud occurred in the first nine months of the health emergency.
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The U.S. Small Business Administration (SBA) recently released a report detailing its analysis of the anti-fraud protocols implemented by the Biden-Harris Administration in the agency's four largest pandemic programs.
Under the title “Protecting the Integrity of the Pandemic Relief Emergency Programs: SBA’s Actions to Prevent, Detect and Address Fraud,” the report reveals the actions the Administration took to address fraudulent actions in pre-existing relief programs.
In addition, through the report, SBA seeks to improve fraud controls in new programs, as well as support interagency efforts to bring fraudsters to justice.
Isabel Casillas Guzmán, administrator of the SBA, said in a press release:
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.
About the Report
Highlighting how 86% of fraud in small business pandemic relief programs occurred in the first nine months of the health emergency, the report also offers a more comprehensive picture estimating the full impact of fraud across all four largest SBA's pandemic relief programs, including the Paycheck Protection Program (PPP), and the COVID-19 Economic Injury Disaster Loan Program (COVID-EIDL).
The report becomes the most comprehensive analysis available of early fraud prevention measures, as well as a guide to the new controls implemented by the Biden-Harris Administration to prevent and detect fraud, and its overall impact on pandemic relief programs.
“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,” added Casillas Guzmán.
SBA indicates that thanks to the new anti-fraud measures implemented in 2021, in PPP and COVID-EIDL, which are explained in detail in the report, more fraud attempts were prevented and helped identify the ones that had already occurred.
Under the Biden Administration, @SBAgov has implemented robust measures to enhance and strengthen pandemic relief integrity.— Isabel Guzman (@SBAIsabel) June 29, 2023
SBA highlights the following results:
- 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.
- 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.
- 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).
“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,” underscored the SBA’s administrator.
Recommendations Against Fraud
SBA also called on Congress to assemble President Biden's comprehensive anti-fraud proposal released in March, which includes a request to provide at least $100 million in mandatory funding to the SBA's Office of Inspector General (OIG) to comply the mission established by recent legislation extending the statute of limitations for PPP and COVID-EIDL fraud.
“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. Releasing the results of this report is necessary to fully inform past, present and future efforts for addressing fraud,” said Peggy Delinois Hamilton, special counsel for Enterprise Risk.
The report also outlines recommendations for mitigating fraud through aid program design, including:
- 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.
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