WASHINGTON, D.C. – Today, Congressman Roger Williams (TX-25), Chairman of the House Committee on Small Business, released a staff report on the Committee’s year and a half long investigation into fraud in the U.S. Small Business Administration’s (SBA) COVID Lending Programs. Chairman Williams issued the following statement.

“The unacceptable amounts of fraud in the pandemic loan programs raises serious concerns about the role SBA should play moving forward,” said Chairman Williams. “Failing to implement basic guardrails resulted in approximately $200 billion in fraud. To make matters worse, we uncovered that the Biden-Harris SBA was more focused on blaming private industry for this fraud than looking internally at their subpar policies and procedures where the majority occurred. Small businesses deserve an SBA that works in their best interest, and we remain committed to holding them accountable.”

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Read the full Staff Report here.

Read the story here.

Background:

For 18 months, the House Committee on Small Business has been investigating fraud in the SBA’s COVID lending programs established in response to the COVID-19 Pandemic. These programs include the Paycheck Protection Program (PPP), COVID-19 Economic Injury Disaster Loan and Advance Program (COVID EIDL), the Restaurant Revitalization Fund (RRF), and the Shuttered Venue Operators Grant Program (SVOG). In total, it is likely that $200 billion was issued to fraudulent recipients in these programs.

The SBA’s most poorly administered program was the COVID EIDL program, which lent approximately $136 billion to fraudulent recipients, making up approximately 30 percent of all loans issued in this program. The driving factor of fraud in these programs initially was self-certification, but controls weaknesses at the SBA and multiple management issues resulted in the SBA being unable to accurately identify, track, and prevent fraud.

Conversely, the PPP Program was the largest of these programs, issuing around $800 billion in forgivable loans to small businesses. Despite the fact that the PPP program had multiple issues, resulting in frequent reports of high-profile frauds, it faced less fraud than the COVID EIDL program. Around $64 billion in this program went to fraudulent recipients, a quarter of the fraud rate found in the COVID EIDL program.

Based on the Committee’s review, numerous structural and programmatic changes would be needed for the COVID lending programs to become fraud resistant. Should the nation find itself in a similar emergency in the future, lawmakers should prohibit self-certification, demand robust and proven lending controls, and increase oversight of government contractors and partners. Additionally, the SBA’s preoccupation with optics resulted in it taking actions that not only increased fraud risk but wasted taxpayer dollars.

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