Approved Disaster Assistance Loans Matching COVID‐19 EIDLs and PPP Loans with Fraud Hold Codes

The Office of Inspector General is issuing this evaluation report to determine whether the U.S. Small Business Administration (SBA) approved disaster loan applications with related Coronavirus Disease 2019 (COVID-19) Economic Injury Disaster Loans (EIDL) or Paycheck Protection Program (PPP) loans with fraud hold codes.

In October 2022, SBA established an informal review process to match disaster assistance loan applications to pandemic loans that had fraud hold codes based on taxpayer identification numbers. In August 2023, the agency began transitioning to a new system that uses fraud detection software to review each loan application and includes a check for pandemic program loans with fraud hold codes.

Even though SBA implemented controls to mitigate fraud risks in its disaster assistance loan program, the agency approved 188 loans totaling $8,127,613 that were flagged as potentially fraudulent. Agency officials took action to prevent one of these loans from being disbursed after we brought this to their attention.

We recommended SBA review and verify the 187 loans that matched to a related COVID-19 EIDL or PPP loan with a fraud hold code for legitimacy and eligibility. The agency agreed with our recommendation and intends to review these loans. Management’s proposed corrective actions satisfy the recommendation.