Billions paid in fraudulent pandemic aid, watchdog finds

Fraud or improper payments accounted for more than $90 billion of the government’s emergency pandemic aid for the unemployed and small businesses, according to a report from a federal watchdog.

Almost $87 billion will have been paid in improper or fraudulent supplemental unemployment insurance claims by the time the program expires in September, according to the report from the Pandemic Response Accountability Committee on Wednesday. That’s an increase from $63 billion in fraudulent payments reported in February, according to data from the Department of Labor’s Office of Inspector General.

The report also found that the Small Business Administration approved 57,500 Paycheck Protection Program loans worth $3.6 billion to businesses who had been flagged by the government as entities that shouldn’t receive payments.

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The report also said that the SBA Inspector General found “no evidence” that businesses in under-served and vulnerable areas received the forgivable loans, a key priority that Democrats included in the March stimulus legislation.

The report underscores just how much the government has struggled to distribute roughly $5 trillion of coronavirus aid to the proper recipients, even after some programs have been operating for more than a year over the course of two presidential administrations.

The Internal Revenue Service also sent approximately 2.2 million stimulus payments totaling nearly $3.5 billion to deceased individuals, a glitch that was fixed in the system for subsequent rounds of payments, the report said. However, only about 59,500 payments totaling more than $72 million, roughly 2%, have been voluntarily returned as of Oct. 1, 2020.

The total fraud figures could be far higher than those detailed by the Pandemic Response Accountability Committee. An academic study by researchers at the University of Texas at Austin and released earlier this month suggested that about 15% of the 11.8 million PPP loans made -- totaling $76 billion — had at least one signifier of fraud.

Much of the misdirected aid may never be recovered. A select House subcommittee charged with overseeing the pandemic response found in a March report that less than 1% of the $84 billion in stimulus-related fraud identified had been recovered by the Department of Justice as a result of criminal and civil investigations.