Pressure Mounts on SBA to Forgive Loans and Prevent Fraud | World business

The Treasury Department and the Small Business Administration have yet to forgive any of the 5.2 million coronavirus emergency loans issued to small businesses and must do more to combat fraud, government watchdogs told Congress on Monday. Thursday.

Small businesses that received funds from the Paycheck Protection Program, as well as their banks, have been frustrated by the difficulty of applying for loan forgiveness despite rules saying that if the funds are spent primarily on payroll, it will not be necessary to refund them. The SBA announced last week that it had received only 96,000 loan applications, less than 2% of the total number of loans, and has not processed any applications so far.

Treasury and SBA officials have said they plan to begin considering the applications shortly. SBA officials say they opened the waiver system on August 10, two days after the program closed. The agency has 90 days to consider each request after receiving approval from the bank, in accordance with the CARES Act.

The agencies must also do much more to prevent fraud, according to two watchdogs who testified at a House hearing Thursday. The SBA Inspector General’s office has received tens of thousands of fraud leads, and federal officials have launched hundreds of investigations into allegations of people creating bogus businesses and stealing identities to fraudulently obtain SBA funds.

The Justice Department has already charged 57 people with attempting to steal a total of $ 175 million and warned that abuse of the program is likely much more widespread.

Officials from the IG and GAO office told members of Congress that the SBA could do a lot more up front to prevent fraud from happening in the first place.

The Government Accountability Office warned SBA and Treasury officials in a June report that tighter controls were needed on loan programs, particularly as PPP relied on business owners and their banks to self-certify their eligibility for the loan. Program.

The SBA inspector general’s office issued an additional report in July warning that $ 250 million in disaster relief funds from the agency’s disaster economic damage loan program went to businesses that started after 1 January, which should have rendered them ineligible. Another $ 45 million in duplicate loans were issued, according to the inspector general.

SBA Director Jovita Carranza did not immediately comment through a spokesperson.

The agency has not yet put in place proper controls to identify and respond to potential PPP and EIDL fraud, William Shear, GAO’s director of financial markets and community investment, testified, saying the delays mean “it will be a long time until we find out. how much fraud there has been in the program. “

“There was a push to get loans, but as time goes on it becomes much more concerning that the fraud framework is not in place,” Shear told the House Subcommittee on Small Business Investigations, Oversight and Regulations. .

Treasury and SBA officials have said they will audit APP loans for more than $ 2 million and consider reviewing other loans as well. Hannibal “Mike” Ware, the SBA inspector general, testified that investigators had identified borrowers who had created established accounts with stolen identities. In other cases, borrowers had received deposits in personal bank accounts with no evidence of business activity.

He said the SBA needed to be in contact with regulators with investigators as new schemes are discovered to prevent the theft of additional funds.

“I think they’ve responded quite a bit to that,” Ware said.

Members on both sides expressed concern about the amount of money from the programs being lost due to waste and abuse.

“We need to make sure that the loans are going to the intended businesses and that the loans are being used correctly,” said Rep. Ross Spano, R-Fla.

Representative Judy Chu, D-California, chair of the subcommittee, said she was surprised by the revelations.

“I am amazed that these terrible acts took place when legitimate and deserving companies could use the aid,” she said.

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