Fraudulent COVID aid from the SBA estimated to be either $200B or $36B

The U.S. Small Business Administration disbursed up to $200 billion in potentially fraudulent COVID-19 Economic Injury Disaster Loans, EIDL Targeted Advances, Supplemental Targeted Advances and Paycheck Protection Program loans, meaning at least 17% of all COVID-19 EIDL and PPP funds may have been sent to scammers, according to a report released Tuesday by the SBA's Office of Inspector General.

However, that amount was disputed in a separate report by the SBA itself, which estimated the amount to be $36 billion. 

"Eighty-six percent of likely fraud in SBA's pandemic relief program originated in the first nine months of the pandemic," said the SBA's follow-up report. "The agency estimates $36 billion of $1.2 trillion in pandemic relief emergency program funds were obtained fraudulently. This amount is in contrast to recent overstated estimates that have not reflected all available data. The SBA's $36 billion estimate reflects disbursed loans, grants and awards that SBA, after a rigorous internal review, suspects as likely fraudulent and already has or expects to refer to law enforcement."

The SBA estimated that 86% of the fraudulently obtained loans originated in the first nine months of the first pandemic relief programs. It said its internal fraud reviews covered the entire portfolio of disbursed funding and relied on extensive data analytics and ongoing reviews.

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In contrast, the inspector general's report estimates a far higher amount of fraud, and cases continue to be uncovered not only of abuse of the SBA's hastily arranged COVID relief programs like the PPP and the EIDL, but also of expanded unemployment insurance benefits claims by fraudsters, many of them originating from abroad. The Office of Inspector General also used data analytics to help uncover fraud.

"Using investigative casework, prior OIG reporting and advanced data analytics, we identified multiple schemes used by fraudsters to steal from the American taxpayer and exploit programs meant to help those in need," said the inspector general's report. "We believe loans identified as potentially fraudulent as part of our review warrant investigation by OIG and its investigative partners."

It said its oversight and investigative work has resulted in 1,011 indictments, 803 arrests, and 529 convictions related to COVID-19 EIDL and PPP fraud as of May 2023. The inspector general's office worked with the SBA, the U.S. Secret Service, other federal agencies and financial institutions, resulting in nearly $30 billion in COVID-19 EIDL and PPP funds being seized or returned to SBA. The office said it's still working on tens of thousands of investigative leads on alleged fraud, waste and abuse of taxpayer resources. In addition, thousands of investigations are expected to go on for years to come because of congressional action to increase the statute of limitations to 10 years for COVID-19 EIDL and PPP fraud.

In its report, the SBA said it learned from its experience with the PPP and EIDL fraud in 2020, and achieved dramatically lower fraud rates in the two largest SBA relief programs it launched in 2021, the Shuttered Venue Operators Grant Program and the Restaurant Revitalization Fund (RRF). The SBA is estimating a likely fraud rate of 0.33% for the SVOG and 0.75% for the RRF.

The SBA said it supported the recovery of $30 billion from pandemic relief emergency programs in the wake of the inadequate fraud mitigation measures that were initially implemented in the first year of the program, thanks to law enforcement actions, seizures and voluntary repayments by borrowers and  returns by financial institutions.