SBA has not implemented a comprehensive anti-fraud program for PPPs: GAO report

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Despite allegations of billions of dollars in waste, fraud and abuse in the Small Business Administration’s paycheck protection program, the agency did not conduct a comprehensive risk assessment of the program, the Government Accountability Office said in a new report this week.

“According to SBA officials, given the rapid response required to run the program, they conducted an informal fraud risk assessment,” GAO said.

The GAO said this was no excuse for the the agency does not systematically tackle problems.

“We recognize the importance of providing timely emergency loan assistance to small businesses,” GAO said. “Performing a fraud risk assessment should not interfere with program delivery and can in fact facilitate program objectives by ensuring that taxpayer dollars and government services are used for intended purposes.

The PPP was rolled out quickly last year with the aim of providing small businesses with cash to stay in business amid the coronavirus crisis.

GAO’s new report assessed the federal government’s response to the pandemic in dozens of areas, ranging from health to education.

The PPP program is in its second phase; it was due to expire on March 31. However, President Biden signed a law this week extend the duration of the program until the end of May. The measure also gives the SBA until June 30 to process loans outstanding on May 31.

Credit unions and banks complained that the SBA was taking longer to approve loans in the second phase of the program, and the SBA said the delay was in part due to efforts to minimize fraud.

Indeed, GAO said the SBA implemented compliance checks on loan and borrower information before the loan was approved. It has been reported that the SBA has approved numerous PPP loans to borrowers on the federal government’s “Do Not Pay” list.

GAO has indicated that an independent auditor is unwilling to provide an opinion on ASB’s financial statements for fiscal year 20 due to issues with the PPP program. The auditor reported that there were more than two million PPP loans, worth $ 189 billion, which had been flagged as not in compliance with federal law. The auditor also said there were over 896,000 errors made by lenders that were not reviewed by the SBA.

The GAO reported that from May 2020 to the end of February, the Justice Department announced more than 100 cases of fraud associated with PPP loans and charged at least 170 people with crimes related to the fraud allegations.

Meanwhile, credit unions continue to provide PPP loans in the second phase of the program, according to statistics released by the SBA on March 29.

The SBA reported that during the current phase of the program, 836 credit unions with assets of less than $ 10 billion made 109,326 PPP loans, worth nearly $ 4.2 billion. The SBA also reported that eight credit unions with more than $ 10 billion in assets made 11,600 PPP loans, worth $ 360 million.

However, no credit union appears on the list of the 15 most active PPP lenders, according to the SBA.


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About Jessica Zavala

Jessica Zavala

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