At Hearing, Watchdogs Decry Trump Administration’s Refusal to Implement Fraud Controls for Small Business Loans
Washington, D.C. (March 25, 2021) — Today, the Select Subcommittee on the Coronavirus Crisis, chaired by Rep. James E. Clyburn, held a hearing to examine the fraud risks in small business pandemic relief programs, including nearly $84 billion in potential fraud in the Small Business Administration’s (SBA) Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP).
During the hearing, Chairman Clyburn highlighted how the Trump Administration’s poor implementation of these programs led to massive fraud, and the steps the Biden-Harris Administration is taking to combat this fraud:
“The Paycheck Protection Program and the Economic Injury Disaster Loan program have been essential lifelines for millions of small businesses harmed by the coronavirus pandemic. More than $1 trillion has been disbursed by these programs, with good reason given the scale of the crisis. With so many tax dollars expended, it is vital that we ensure that the money is being used for its intended purposes and not diverted to fraud.”
“Unfortunately, the Trump Administration failed to take basic steps to prevent fraud when it implemented these programs last year. Thanks to the work of this committee and our oversight partners, we now know that this failure led to nearly $84 billion in potential fraud … . Fortunately, the Biden-Harris Administration is taking the risk of fraud seriously and investing in oversight.”
The hearing followed the release of a staff memo providing new evidence of the Trump Administration’s mismanagement of the PPP and EIDL program.
At the hearing, SBA Inspector General Hannibal “Mike” Ware testified that the risk of fraud in the EIDL program “was not taken as seriously” by SBA when it implemented the program under the previous Administration. He explained that his office “notified SBA upfront that…this is the time where we have to strengthen our controls,” but SBA failed to implement crucial anti-fraud controls “that should have gone in place up front.”
Mr. Ware was joined by Michael Horowitz, the Inspector General for the Department of Justice and Chair of the Pandemic Response Accountability Committee (PRAC), and William Shear, the Director of Financial Markets and Community Investment at GAO. All three witnesses agreed that effectively detecting and preventing fraud in pandemic relief programs requires a coordinated, whole-of-government approach.
The witnesses provided the following additional testimony:
The Trump Administration Ignored Early Warnings and Failed to Take Simple Steps to Prevent Fraud
The Biden Administration is Working with Federal Watchdogs to Enhance Oversight
The American Rescue Plan Enhances Oversight Efforts