SBA Emergency EIDL Grants to Sole Proprietors and Independent Contractors

The Office of Inspector General examined Emergency EIDL grants to sole proprietors and independent contractors from March 29, 2020, until the funds were exhausted just 14 weeks later on July 10. We set out to determine whether the agency complied with its internal policy that set Emergency EIDL grants at $1,000 per employee up to the Coronavirus Aid, Relief, and Economic Security (CARES) Act mandated maximum amount of $10,000.

Using SBA’s data, we found SBA provided $4.5 billion more in Emergency EIDL grants to sole proprietors and independent contractors than they were entitled to receive based on established policy. We determined that 542,897 sole proprietors, who received a grant of more than a $1,000, applied for the Emergency EIDL grants without an Employer Identification Numbers (EIN) and claimed more than one employee on their applications.

The absence of an EIN indicates the sole proprietor applicants should have claimed no employees and were entitled to a maximum of $543 million ($1,000 per applicant). However, SBA approved and disbursed a total of $4 billion in Emergency EIDL grant funds to these sole proprietors, an over disbursement of $3.5 billon.

We also found 161,197 independent contractors, who received a grant of more than $1,000, also applied but did not provide an EIN and claimed more than 1 employee on their COVID-19 EIDL application. 

Consequently, the independent contractors were entitled to a maximum of $161 million ($1,000 per applicant). However, SBA disbursed $1.1 billion to the independent contractors, resulting in grant over disbursement of about $1 billion.

We recommended that SBA remedy $4.5 billion in funds disbursed in excess of its policy allowance to sole proprietors and independent contractors. SBA disagreed with the prior Administration’s policy determination, which is the criteria used to premise our findings. Despite management’s disagreement, the agency is taking corrective actions to implement our recommendation.