As much as 10 percent of the $4.2 trillion the U.S. government has disbursed in COVID-19 relief aid may have been lost to fraud and waste.
The U.S. government approved about $3.2 trillion in pandemic relief spending under President Donald Trump, and another $1.9 trillion under President Joe Biden. Of the about $5 trillion allocated for pandemic relief, about $1 trillion has yet to be paid out.
Those involved with tracking down the fraud say there was simply too little oversight and too few restrictions on who could apply for relief funds, making it all too easy for fraud to take place.
“Here was this sort of endless pot of money that anyone could access,” said Dan Fruchter, head of the fraud and white-collar crime unit with the office of the U.S. Attorney for the Eastern District of Washington. “Folks kind of fooled themselves into thinking that it was a socially acceptable thing to do, even though it wasn’t legal.”
The overall massive scale of the pandemic relief that went out also obscured multi-billion-dollar mistakes. While the IRS had a 99 percent success rate in handling an $837 billion stimulus check program, its 1 percent error rate amounts to about $8 billion going to “ineligible individuals.”
In the seven decades before the pandemic, the Small Business Administration (SBA) had distributed $67 billion in disaster loans. During the pandemic, the SBA ended up handling more than a trillion dollars across the COVID-19 Economic Injury Disaster Loan and PPP loans. As the SBA took on a much larger financial responsibility, it was tasked with rapidly processing loans.
To speed up the process, the SBA allowed potential borrowers to “self-certify” that their application details were true. The Coronavirus Aid, Relief, and Economic Security (CARES) Act also barred the SBA from looking at tax return transcripts that could have identified potentially fraudulent or unqualified applicants.
Clawing Back Relief Funds
Hundreds of people have been charged in connection with various pandemic fraud schemes.In August 2022, Biden signed legislation to increase the statute of limitations to 10 years from five on crimes involving Economic Injury Disaster and PPP loans.
Earlier this year, Department of Labor Inspector General Larry Turner testified (pdf) that he expects his department to be busy investigating pandemic-related fraud through at least September 2026 “when the statute of limitations for most pandemic-related violations will have expired.” Without extending his deadline, Turner warned that people who stole the benefits may escape justice.
In addition to providing more time to prosecute pandemic fraud, Republican lawmakers requested a return of unspent COVID relief funds during a recent debate over the debt limit increase. In total, Republicans reached an agreement with Democrats to rescind $30 billion in unspent COVID relief funds as part of the final deal to increase the debt limit earlier this month.
