(Washington) More than US$200 billion may have been stolen from two major aid initiatives during the COVID-19 pandemic, according to new estimates from a survey of US federally funded programs to help small businesses to survive the worst public health crisis in over a hundred years.
Figures released Tuesday by the inspector general of the United States government agency for administering small businesses, the US Small Business Administration (SBA), are well above the bureau’s previous projections and underscore how programs “Paycheck Protection” and “COVID-19 Economic Injury Disaster Loan” loan and financing programs were vulnerable to fraudsters, especially at the start of the coronavirus pandemic.
The Inspector General’s report states that “at least 17% of all funds were disbursed to potentially fraudulent actors”.
The fraud estimate for the COVID-19 Economic Injury Disaster Loan program is over $136 billion, which is 33% of the total money spent on the program, according to the report. The fraud estimate for “Paycheck Protection” is $64 billion, the inspector general said.
The SBA inspector general had previously estimated fraud in these programs at $86 billion and $20 billion, respectively.
In comments attached to the report, a senior SBA official disputed the new numbers.
Bailey DeVries, acting associate administrator of the SBA, said “the inspector general’s approach contains serious flaws that significantly overstate the fraud and unintentionally mislead the public.”
The Associated Press reported on June 13 that scammers potentially stole about $280 billion in COVID-19 emergency aid and another $123 billion was wasted or mis-spent.
The bulk of the potential losses come from the two SBA programs and another intended to provide benefits to workers suddenly out of work due to the economic dislocation caused by the pandemic. All three initiatives were launched under the Trump administration and President Joe Biden inherited them. Combined, the loss estimated by AP represents 10% of the $4.2 trillion the US government has disbursed in pandemic relief aid so far.
A century of work
SBA Inspector General Hannibal “Mike” Ware said in a statement Tuesday that the report “uses investigative records, past (Inspector General’s) reports and state-of-the-art data analysis to identify multiple fraud schemes used to potentially steal over $200 billion from US taxpayers and exploit programs intended to help those in need”.
Mr. Ware, in an interview with The Associated Press earlier this month, said these latest fraud figures will not be the last released by his office.
“We will continue to assess the fraud until we have completed investigations into these things,” he said.
It could be long. Mr. Ware’s office must investigate more than 90,000 actionable leads, representing nearly a century of work.
Han Nguyen, a spokesperson for the SBA, said in a statement Tuesday that it is “critical to clarify that 86% of likely fraud in the programs occurred in the first nine months of these programs when, as (the Inspector General) has often noted, the rush to release funds led to reckless decisions to remove anti-fraud safeguards”.
Fraud in pandemic unemployment relief programs totals $76 billion, according to congressional testimony from Labor Department Inspector General Larry Turner. This is a conservative estimate. According to his testimony, an additional 115 billion mistakenly went to people who should not have benefited.
The Biden administration has implemented tougher rules to stem pandemic fraud, including the use of the “Do Not Pay” database. Mr Biden also recently proposed a $1.6 billion plan to boost law enforcement efforts to prosecute fraudsters.