A rushed emergency aid program for small businesses affected by the pandemic improperly sent nearly $3.7 billion to recipients prohibited from receiving federal funds, according to a government audit. The Small Business Administration’s Economic Injury Disaster Loan program distributed more than $210 billion in loans and grants last year in a hurried attempt by the Trump administration to help companies keep up on their bills as the coronavirus led to shut downs.
The agency failed to do a legally required check of applicants’ identifying details against the Treasury Department’s Do Not Pay system. This system was set up in 2011 to reduce improper payments to people who are dead, convicted of tax fraud or barred from receiving federal contracts, among other red flags. The SBA’s inspector general, Hannibal Ware, found 117,135 applicants who got grants and 75,180 recipients who got loans showed matches in the system indicating a “high likelihood” that the payments were improper. Isabella Casillas Guzman, who became the agency’s administrator in March, has said that she heightened the SBA’s fraud controls over its COVID-19 relief programs. It was only in April of 2021 that the SBA began checking Do Not Pay records before sending out funds.
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