The money was supposed to be used to help small and medium-sized businesses survive during the pandemic.
Washington - Over $200 billion may have been stolen from two major COVID-19 relief initiatives, according to new estimates from a federal internal watchdog investigating federal programs that helped small businesses survive the worst public health crisis in over 100 years.
The figures released on Tuesday by the inspector general of the US Small Business Administration (SBA) far exceed previous agency projections and expose the vulnerability of the Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loan (COVID-EIDL) programs, especially in the early stages of the coronavirus pandemic.
According to the inspector general's report, "at least 17% of all COVID-EIDL and PPP funds were disbursed to potentially fraudulent recipients."
The estimated fraud for the COVID-19 Economic Injury Disaster Loan program exceeded $136 billion, representing 33% of the total investment in the program, according to the report. Meanwhile, the estimated fraud for the Paycheck Protection Program is $65 billion, according to the inspector general.
In attached comments to the report, a senior SBA official questioned the new figures. Bailey DeVries, acting associate administrator for capital access at the SBA, said the inspector general's approach "contains serious flaws that significantly overstate fraud and inadvertently mislead the public to believe that our joint work did not have a significant impact on protecting against fraud.
The SBA inspector general had previously estimated COVID-EIDL fraud at $86 billion and PPP fraud at $20 billion.
On June 13, The Associated Press reported that fraudsters and scammers had looted around $280 billion of COVID emergency aid, while another $123 billion was wasted or misspent. The bulk of the potential losses belong to the two SBA programs and another initiative to provide unemployment subsidies to workers suddenly left jobless amid the economic chaos caused by the pandemic.
All three initiatives were launched during the Trump administration and inherited by his successor. In total, the losses estimated by the AP represent 10% of the $4.2 trillion in federal COVID assistance disbursed so far.
The federal government has now reported possible fraud of $276 billion, a figure that aligns with AP's analysis.
Gene Sperling, a White House official in charge of pandemic aid spending, said in an interview on Tuesday that 86% of the fraud, or possible fraud, in emergency credit programs occurred during the first nine months of the pandemic, when Trump was president.
"$200 billion is a very large number, but again this should be remembered as possible fraud," Sperling said. "We believe the defrauded or highly likely defrauded amount is much lower, far below $100 billion, maybe around $40 billion."
"But," he added, "it's unacceptably high.
SBA Inspector General Hannibal Ware said in a statement on Tuesday that the report "uses investigative social assistance, previous (inspector general's office) reports, and innovative data analysis to identify several fraud schemes used to potentially steal over $200 billion from US taxpayers and exploit programs aimed at helping those in need."
Earlier this month, Ware told The Associated Press that the latest fraud figures will not be the last to be released by his office.
"We will continue to estimate the amount of fraud until we have concluded investigations," he said.
That could take time. His office has a backlog of more than 90,000 actionable leads on pandemic assistance fraud, which means work for nearly a century.
The SBA issued its own report on Tuesday detailing the measures it has implemented to combat fraud. Agency Administrator Isabella Casillas Guzman said in a statement that the report details "effective measures that have been implemented to combat fraud and hold wrongdoers accountable.
The SBA previously told the AP that the federal government has not developed an accepted system for assessing fraud in federal programs. Previous analyses, the agency noted, have flagged "potential fraud" or "fraud indicators" in a way that conveys those figures as a true estimate of fraud when they are not. Regarding the COVID-EIDL program, the agency said its "work estimate" uncovered potential fraud worth $28 billion.
Fraud in pandemic unemployment assistance programs remains at $76 billion, according to testimony from Department of Labor Inspector General Larry Turner before Congress. This is a conservative estimate. Another $115 billion was sent accidentally to people who were not supposed to receive these benefits, according to his testimony.
The Biden administration has implemented stricter measures to curb pandemic-related fraud, including the use of a database of individuals who should not receive payments. Biden also recently proposed a $1.6 billion plan to increase law enforcement efforts to go after pandemic assistance fraudsters.
Bob Westbrooks, former executive director of the Pandemic Response Accountability Commission, said in an interview that the $200 billion figure is "unacceptable, unprecedented, and immeasurable." Westbrooks published the book "Left Holding the Bag: A Watchdog's Account of How Washington Fumbled Its COVID Test" last week.
"The rapid distribution of funds and the integrity of the programs are not mutually exclusive," Westbrooks said on Tuesday. "The government can walk and chew gum at the same time. They should have put in place basic fraud controls to verify individuals' identities and ensure that aid was reaching the right hands.