Gottheimer Leads Bipartisan Group Asking SBA, Treasury What Additional Resources They Need to Combat PPP Loan Fraud

Sep 30, 2020
Press

SBA OIG has not seen an increase in investigative staff in nearly two decades

SBA says more federal investment will be needed to fight fraud in decades to come

U.S. Congressman Josh Gottheimer (NJ-5) has led a bipartisan letter from 23 Members of Congress to the U.S. Small Business Administration (SBA) and U.S. Department of the Treasury asking what tools and resources SBA may need, that Congress could provide through appropriations and statutory authority, to be able to fully investigate PPP loan fraud.

The letter comes following a report published by the SBA Inspector General in July 2020 that stated there are “strong indicators of widespread potential fraud” within the EIDL program and PPP programs, two of the fiscal relief programs enacted and expanded by Congress to provide relief to small businesses as they face the economic crisis brought upon by the COVID-19 pandemic. 

“The SBA OIG had only 111 full-time equivalent employees, relatively unchanged over the past nineteen years. It is unrealistic to expect this limited workforce to be able to thoroughly investigate more than a small fraction of the possible fraud and negligence in the programs under their purview,” the Members wrote in the letter. “Therefore, we request that you provide, in writing as soon as possible, an accounting of what tools and resources the SBA OIG may still require to achieve their mission and that Congress may provide, including using both appropriations and statutory authority.”

The Members continued, “For Congressional oversight to be robust, it is vital that the OIG remains effective, and we are ready to work with you to ensure that resources are available.”

The letter was written to SBA Inspector General Hannibal Ware and Treasury Acting Inspector General Richard Delmar. 

In SBA’s response to the bipartisan letter, it’s clear that supplemental funding from the CARES Act is helping the agency investigate fraud, but the funding only lasts through 2024 — whereas the statute of limitations for fraud will last for decades and SBA will need to continue their oversight long past 2024. 

SBA Inspector General Ware stated that the increased funds provided through the CARES Act were followed by “increased staffing in both Auditing and Investigations Division.” 

He continued, “However, hundreds of billions of dollars in loans will perform in SBA’s portfolios for up to 30 years, and the statute of limitations for fraud associated with CARES Act lending and programs will allow for prosecutions for more than a decade into the future.”

The original bipartisan letter was signed by U.S. Representatives Josh Gottheimer (NJ-5), Suzanne Bonamici (OR-1), Julia Brownley (CA-26), Cheri Bustos (IL-17), Ed Case (HI-1), Salud O. Carbajal (CA-24), J. Luis Correa (CA-46), TJ Cox (CA-21), Sharice L. Davids (KS-3), Brian Fitzpatrick (PA-1), Marcy Kaptur (OH-9), Rick Larsen (WA-2), Barbara Lee (CA-13), Stephen F. Lynch (MA-8), Tom Malinowski (NJ-7), James P. McGovern (MA-2), Kweisi Mfume (MD-7), Joseph D. Morelle (NY-25), Chris Pappas (NH-1), Max Rose (NY-11), Abigail D. Spanberger (VA-7), Jackie Speier (CA-14), and Jennifer Wexton (VA-10).

A copy of the letter is available HERE, the text of which is provided below.

Hannibal “Mike” Ware                                                       Richard Delmar
Inspector General                                                                Acting Inspector General
Office of the Inspector General                                          Office of the Inspector General
U.S. Small Business Administration                                  U.S. Department of the Treasury
409 3rd Street SW                                                              1500 Pennsylvania Avenue NW     
Washington, DC 20416                                                      Washington, DC 20220

Dear Mr. Ware and Mr. Delmar,

We appreciate your continued partnership with lawmakers as Congress continues to help American workers and businesses weather the economic hardships brought upon by the novel Coronavirus (COVID-19) pandemic and the necessary public health actions taken to slow down the spread of the disease.

Through the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act, the Paycheck Protection Program (PPP) and Healthcare Enhancement Act, and, most recently, the Paycheck Protection Program Flexibility Act, Congress brought immediate aid to struggling small businesses. These laws allowed the Small Business Administration (SBA) to use funds from the Disaster Assistance Program to issue Economic Injury Disaster Loans (EIDL) and created the Economic Injury Disaster Loan Advance (EIDL Advance) program and the PPP. As of August 8th, 2020, these programs have provided $178 billion, $20 billion, and $525 billion, respectively, to thousands of small businesses in North Jersey and to millions more nationwide.

This relief has helped small businesses fund payroll, pay rent, and meet other obligations to stay in operation, and must continue with the intended purpose of helping struggling businesses weather the economic recession brought upon by the pandemic. The SBA’s Office of Inspector General (OIG) assists in oversight of these programs, providing independent analysis, working to identify and recommend ways to limit waste, fraud, and abuse, and enhance program efficiency and effectiveness. The SBA Inspector General Report Number 20-16, published on July 28th, 2020, stated that there are “strong indicators of widespread potential fraud” within the EIDL program. There have also been separate reports of fraud within the PPP. These fraudulent actors represent only a small percentage of small businesses that received the federal aid, but it is unacceptable for anyone to use this crisis as an opportunity to enrich themselves, defraud the taxpayer, and deny these funds from hard-working Americans.

Section 1107 of the CARES Act included $25 million for the SBA OIG, and the House of Representatives fulfilled the SBA OIG budget request in the FY2021 Financial Services and General Government appropriations bill. Still, in FY2019, the SBA OIG had only 111 full-time equivalent employees, relatively unchanged over the past nineteen years. It is unrealistic to expect this limited workforce to be able to thoroughly investigate more than a small fraction of the possible fraud and negligence in the programs under their purview. Therefore, we request that you provide, in writing as soon as possible, an accounting of what tools and resources the SBA OIG may still require to achieve their mission and that Congress may provide, including using both appropriations and statutory authority.

For Congressional oversight to be robust, it is vital that the OIG remains effective, and we are ready to work with you to ensure that resources are available. We urge you to utilize all tools available to assist our local communities, ensure that these programs are helping the small businesses as intended, and protect the American taxpayer.

Sincerely,

MEMBERS OF CONGRESS 

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