Small Business Administration Distributed Over $3.6 Billion to Potentially Ineligible Recipients

According to a report from the Inspector General of the Small Business Administration to SBA Administrator Isabella Guzman, an estimated $3.6 billion of Economic Injury Disaster Loans (EIDL) were disbursed to potentially ineligible recipients.

The report found that $3.1 billion of the total was in the form of COVID-19 EIDL loans, while another $550 million was in the form of emergency EIDL grants.

The SBA offers a number of programs to assist small businesses, including EIDL, which is used to provide small businesses experiencing difficult times low interest loans from the federal government. However, lax oversight has led to rampant fraud across multiple programs, with the New York Times reporting that up to 15% of its Paycheck Protection Program loans were fraudulent.

Why did the SBA give out so many loans to potentially ineligible recipients? Notably, they didn’t bother to use the US Treasury’s Do Not Pay Working System, a database that helps federal agencies verify eligibility and identify and prevent fraud, waste, and abuse.

The Inspector General used this system to conduct oversight on the 75,180 loans that were made to potentially ineligible recipients, and found that 26,736 loans, or 35%, were already flagged as potential fraud risks in previous IG reports. In other words, the SBA is continuing to ignore already identified sources of fraud.

SBA fraud has run rampant since the start of the pandemic. The law firm Arnold and Porter has a fraud tracker that shows hundreds of charges in the last two years. However, as fraud continues to increase, the SBA refuses to reform its practices to prevent it.

This leaves taxpayers with the bill.

The #WasteOfTheDay is presented by the forensic auditors at OpenTheBooks.com.