Auditor: Loan plan at high risk of fraud

WASHINGTON — Emergency loans made to small businesses during the coronavirus pandemic have been added to a list of government programs considered at high risk of waste, fraud or mismanagement.

The most common of those emergency loans, PPP loans, are provided at a low interest rate and are fully forgivable under conditions that include spending a certain percentage on payroll costs.

The loans were created by Congress and have proved exceedingly popular as shops, restaurants and other small businesses try to survive the pandemic.

The Government Accountability Office said Tuesday that millions of small businesses benefited from those loans, but the speed with which the relief programs were set up limited safeguards necessary to identify risks, “including susceptibility to improper payments and potential fraud.”

The Small Business Administration made or guaranteed more than 14.7 million loans and grants totaling about $744 billion between March and December. Congress approved an additional $304 billion in emergency loans in December.

The GAO said in the report that, as of January, it continues to experience delays in obtaining key information about the loans, including detailed oversight plans and documentation for estimating improper payments.

“There’s no doubt they’ve had a positive impact. However, the management of these programs needs to be dramatically improved,” U.S. Comptroller General Gene Dodaro told reporters in previewing the report.

Government auditors release a high-risk list near the beginning of every new Congress. The list is designed to increase attention on the shortfalls cited by the GAO, and to prompt action that can often save taxpayer dollars and improve government operations.

Auditors also added the government’s efforts to prevent drug misuse to the high-risk list. The GAO had warned as the pandemic began that it would be doing so. At the time, it noted that the pandemic could fuel the conditions that contribute to drug misuse, such as unemployment.