Inspection of Small Business Administration's Initial Disaster Assistance Response to the Coronavirus Pandemic

This report presents the results of our inspection to assess the Small Business Administration’s (SBA) initial disaster response to the Coronavirus Disease 2019 (COVID-19) pandemic.   A series of stimulus acts passed by Congress: deemed the COVID-19 pandemic a disaster, provided additional funding to provide Economic Injury Disaster Loans (EIDL) to small businesses nationwide impacted by the pandemic; provided additional funding of about $373 billion for EIDL; and provided $20 billion to stand up a new program for EIDL advance grants.   

We found that SBA, in its effort to provide billions of dollars of capital to small businesses quickly, “lowered the guardrails” or relaxed internal controls, which significantly increased the risk of program fraud.  The unprecedented demand for COVID-19 EIDLs and the equally unprecedented challenges SBA had in responding to this pandemic combined with lowered controls resulted in billions of dollars in potentially fraudulent loans and loans to potentially ineligible businesses.

Based on our analysis of SBA’s COVID-19 EIDL data, as of July 31, 2020, we found SBA approved $14.3 billion ($13.4 billion disbursed) in COVID-19 EIDLs to accounts that differed from the original bank accounts listed on the loan applications; $62.7 billion ($58.0 billion disbursed) in multiple (between 2 and 245) COVID-19 EIDLs to applicants using the same IP addresses, email addresses, bank accounts, or businesses listed at the same addresses; and approximately $1.1 billion in COVID-19 EIDLs and emergency advance grants to potentially ineligible businesses.

We made 10 recommendations for SBA to strengthen its controls to lower fraud risk and recover funds from ineligible businesses as it continues to respond to the ongoing pandemic.