SBA Failed to Provide Sufficient Fraud Data in COVID Loan Program Referrals, per GAO

A newly released government report has found that the Small Business Administration (SBA) failed to supply adequate or accurate data in most of its referrals of suspected fraud within its pandemic relief loan programs, significantly hampering the ability of investigators to pursue cases. The Government Accountability Office (GAO) reported that nearly two-thirds of the fraud referrals sent to SBA’s Office of Inspector General (OIG) during the pandemic were not actionable due to missing or incorrect information.

The SBA used a four-part process to detect and refer likely fraud in its COVID-19 Economic Injury Disaster Loan (COVID-EIDL) and Paycheck Protection Program (PPP). This process included initial screenings, data analytics, manual reviews, and finally, referrals to the OIG. However, GAO found that these procedures were not in place until more than half of the programs’ funds had already been distributed. Specifically, $210 billion of the $385 billion in EIDL funding and $525 billion of the $800 billion in PPP funds had already been approved before the fraud controls were fully implemented.

Weaknesses in SBA’s fraud control process had previously been identified by multiple oversight bodies, including GAO, the OIG, and SBA’s financial auditors. One example involved loans approved for potentially ineligible applicants flagged in the Treasury’s Do Not Pay database. The SBA agreed to review such cases but did not fully address the recommendations to reevaluate all flagged loans. The GAO report also underscores that out of nearly 3 million suspected fraud referrals for the COVID-EIDL program, approximately 2 million could not be pursued due to issues like missing data, duplicate submissions, or errors.

Without adequate information in its referrals, the SBA OIG was limited in its ability to conduct full investigations or make referrals to the Department of Justice. This lack of a comprehensive and accurate referral process obstructed enforcement efforts aimed at recovering funds or prosecuting fraud cases. In response, GAO has recommended that the SBA collaborate with its OIG to develop a clear plan that outlines required data elements and procedures for future fraud referrals. SBA has agreed to the recommendation, but implementation remains pending.

Article by multiple RFHC contributors, based upon information from the U.S. Government Accountability Office press release GAO-25-107267

---