The Small Business Administration last year hurried about $3.7 billion in pandemic relief to companies that were likely ineligible for those funds, according to a new audit.
The SBA’s inspector general, Hannibal Ware, said there was an “unprecedented amount of fraud” in the way the agency handled relief funds, and some of the money went to self-employed people whose claims of having more employees were “flawed or illogical.”
In 2020, the agency’s Economic Injury Disaster Loan program gave out about $210 billion in grants and loans in a rush by the Trump administration to help small companies that the pandemic forced to close for the time being.
However, the audit found that the SBA didn’t check businesses’ information against the Treasury Department’s Do Not Pay system, as required by law.
“The severity of this is pretty shocking,” said Greg Reibman, president of the Charles River Regional Chamber, which presents Newton, Needham, Watertown and Wellesley companies. “It’s really unfortunate because that money could have gone to small businesses that really did need it and were qualified to receive it.”
An agency official on Thursday said, “We agree with the SBA Office of Inspector General that the Trump Administration should have applied this risk management tool (the Do Not Pay system), and therefore, the SBA has done just that under the Biden-Harris Administration.”
The SBA said it is looking at funds given to businesses that are considered ineligible.
But the inspector general acknowledged that the agency has made some progress addressing the problems.
“We are even retiring some issues we identified last year within major challenge areas because the agency has made such significant progress that the problem has either been resolved or no longer rises to the level of systemic challenge,” Ware said.
Even with last year’s flaws, Reibman said, a lot of money went to deserving companies.
“A lot of money went to the right place,” he said. “There are businesses that wouldn’t be open today without it.”