SBA Inspector General Reports ‘Widespread’ Fraud in Economic Injury Disaster Loan Program

On July 28, 2020 the Office of the Inspector General for the U.S. Small Business Administration issued a memo reporting findings of "widespread potential fraud" in the agency’s flagship Economic Injury Disaster Loan (EDIL) program (separate from the Paycheck Protection Program) for coronavirus relief. SBA Inspector General Hannibal "Mike" Ware said more than 5,000 cases of suspected fraud have already been identified by financial institutions while monitoring customer account activity, with nine financial institutions reporting a total of $187.3 million in potentially fraudulent transactions. The Inspector General also reported that the SBA had already approved over $250 million (6,132 in disaster loans and 20,692 in grants) for businesses possibly ineligible for funds and potentially $45.6 million in duplicate payments.

"SBA should take immediate action to reduce or eliminate fraud risks by strengthening existing controls and implementing internal controls to address potential fraud," stated Ware. "Strong controls will ensure the Economic Injury Disaster Loan program can effectively and efficiently help eligible disaster victims who have suffered real economic injury because of the COVID-19 pandemic."

In response, SBA Administrator Jovita Carranza stated “that SBA has developed and implemented a comprehensive, rigorous, end-to-end infrastructure to reduce the risk of fraud in the EIDL COVID program” and that the concerns raised in the report were “unexpected”.  She said the agency would not be able to provide a more detailed response at this time because the OIG did not provide enough specifics regarding the complaints it has been receiving.


 

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