Protecting the Integrity of the Pandemic Relief Programs

In response to the historic threat posed to small businesses by the COVID-19 pandemic, the U.S. Small Business Administration delivered an unprecedented $1.2 trillion in emergency grants and loans over two years. That funding contributed to a historic economic recovery of 21 million lost private sector jobs plus the attainment of 4 million more private sector jobs than ever existed before the pandemic.

The surge of funding also invited unprecedented fraud attacks against the agency, which was left vulnerable by missteps that weakened agency defenses in the early months of the pandemic. This report:

1. Estimates fraud levels in each of the four major SBA relief programs, 86% of which originated in the first nine months of the pandemic.
2. Describes SBA’s actions under the Biden-Harris Administration to rebuild and strengthen anti-fraud controls within the Paycheck Protection Program (PPP) and the COVID-19 Economic Injury Disaster Loan (EIDL), both of which started in 2020 and continued into 2021. Those actions include the initiation of SBA pre-approval screening for PPP, tax transcript verification for COVID-EIDL, and Treasury Do Not Pay list validation for both.
3. Details how SBA learned from the mistakes of the 2020 implementation of PPP and COVID-EIDL to design the two major relief programs that launched in 2021 — SVOG and RRF — which both achieved estimated fraud rates of well below 1%.
4. Supports President Biden’s proposal for $1.6 billion in mandatory funding for law enforcement in pursuit of government-wide pandemic fraud — and provides additional policy recommendations to minimize fraud in future small business emergency relief programs.