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SBA COVID-19 Program Paid $4.5 Billion More Than Recipients Entitled To, Inspector General Finds

  • U.S. Small Business Administration investigation finds that EIDL Advance grant program overpaid sole proprietors and independent contractors by $4.5 billion
  • Program was designed to quickly provide aid to struggling businesses, but had few anti-fraud protections
  • Overpayments occurred when self-employed applicants claimed to have employees but did not provide any Employer Identification Numbers to support the assertion

Summary by Dirk Langeveld

The U.S. Small Business Administration overpaid sole proprietors and independent contractors by about $4.5 billion in an early COVID-19 pandemic relief program, according to an investigation by the SBA’s Office of Inspector General.

The investigation focused on the Economic Injury Disaster Loan Advance program, a $20 billion initiative that ran from March 29, 2020, until funds were exhausted on July 10, 2020. The program offered eligible recipients grants of $1,000 per employee, up to $10,000.

The bulk of the excess payments occurred due to sole proprietors claiming to have employees but not providing any Employer Identification Numbers to back up the assertion. A total of 542,987 applicants should have had their awards capped at $1,000 for a cumulative total of $543 million, but instead received $4 billion – an overpayment of about $3.5 billion.

A total of 161,197 independent contractors also received grants exceeding $1,000 despite not providing EINs, resulting in a disbursement of $1.1 billion instead of $161 million.

  • EIDL Advance received nearly 5.8 million applications in the two weeks it was open
  • Some self-employed applicants made implausible statements, such as having 1 million employees, but applications were not flagged
  • Early COVID-19 relief programs from the SBA were often designed to rapidly deliver funds to struggling businesses, and as a result had poor anti-fraud protections
  • The report recommends that the SBA work to reclaim this money, and to recommend potentially fraudulent cases for criminal prosecution

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