A4 EZ SU THE WASHINGTON POST.TUESDAY, FEBRUARY 22 , 2022
every $12,000 in coronavirus
stimulus spending, an analysis of
the data shows.
Sean Moulton, a senior policy
analyst at the Project on Govern-
ment Oversight, an ethics watch-
dog, said the effects are all essen-
tially coming down on inspectors
general. “We gave them money, we
gave them a certain amount of
capacity increases, but not nearly
enough.”
Moulton said he recalled nu-
merous conversations with the in-
spectors general, whom he
praised as “active” in their work.
But he also said they acknowl-
edged “in these meetings that they
have to focus on the larger
awards” and not the scores of
smaller loans, grants, checks and
other benefits that taken together
could amount to substantial
fraud. “You just know that means
these smaller awards are getting
almost a free pass,” he said.
One of the newer federal watch-
dogs, a collection of inspectors
general known as the Pandemic
Response Accountability Com-
mittee (PRAC), immediately set
about after spring 2020 to create a
public-facing hub for tracking
coronavirus stimulus spending. It
stood up in a matter of weeks a
transparency portal that mim-
icked the tools created to docu-
ment spending authorized in the
aftermath of the Great Recession.
Nearly two years later, however,
the stimulus data is voluminous
yet vexing for the public and the
government alike. The spending
portal does not offer a detailed
real-time view of the way cities,
states, schools, hospitals and oth-
ers actually have deployed the
broad swaths of the cash they
received. In education, for in-
stance, federal records show more
than $81 billion set aside for
school districts in response to the
pandemic.
Yet the information is 90 days
old in some cases and offers no
insight as to what those communi-
ties actually did once they ob-
tained the grants.
The trouble dates to the earliest
days of the pandemic, when inde-own authorities. Last month, the
leader of the entity, known as the
Special Inspector General for Pan-
demic Recovery, raised another
concern when it informed Con-
gress that it could run out of mon-
ey as soon as this summer, poten-
tially threatening to shut down its
efforts to oversee more than
$22 billion in outstanding loans.
“The COVID-19 pandemic is
not over, and Congress’s unprec-
edented investment in the Ameri-
can economy has been prey to
unprecedented levels of crime
and fraud,” warned Brian D. Mil-
ler, the special inspector general,
in a January report to lawmakers.‘Rubber meets the road’
But the most potent challenge
facing federal watchdogs may still
be on the horizon, as Washington
begins to grapple with the deci-
sions that allowed it to disburse
trillions in aid with such haste in
the first place. After all, the loans
the government made must be
forgiven or repaid, meaning the
worst might be yet to come.
“It’s hard to chase the money
after it’s gone out the door,” said
Glenn Fine, a nonresident fellow
in the governance studies pro-
gram at the Brookings Institution
who previously served as an in-
spector general at the Justice De-
partment. “It will be a long-term
challenge to recover the fraudu-
lent money, and that’s not going to
go away.”
Under the Trump administra-
tion, the SBA mounted in a matter
of weeks two primary initiatives:
the Paycheck Protection Program
(PPP), which helped companies
maintain their payrolls, and a
souped-up version of the Eco-
nomic Injury Disaster Loan
(EIDL), which expanded existing
federal offerings to help business-
es weather hardship.
Facing a hemorrhaging econo-
my, the SBA moved at lightning
speed to implement the efforts. In
just one 14-day period early in the
pandemic, it dispatched 1.7 mil-
lion PPP loans totaling more than
$343 billion, federal officials said
in a review published in January.
That burst amounted to
14 years’ worth of lending activity
for the agency. But the SBA doled
out the money without properly
verifying applicants and checking
them in some cases against long-
standing federal blacklists for
fraud, investigators would discov-
er in a series of blistering reports
and audits soon to come. “Manag-
ing COVID-19 stimulus is the
greatest overall challenge facing
SBA currently,” Ware, the inspec-
tor general, warned in October
2020.
With PPP, for instance, a report
last January from the SBA inspec-
tor general found that roughly
55,000 PPP loans worth more
than $7 billion had gone to “poten-
tially ineligible businesses.” That
ultimately “placed taxpayer funds
at risk of financial loss and de-
layed the amount of critical pro-
gram capital available for eligible
businesses” at the time.
About two months later, Ware
and other watchdogs estimated
that the fuller range of potential
fraud across the PPP and SBA
economic stimulus programs
came closer to $80 billion, telling
lawmakers in written testimony
CONTINUED ON NEXT PAGEpendent auditors documented
significant data “gaps,” some re-
sulting from the Trump adminis-
tration and others from the way
the first major stimulus law,
known as the Cares Act, had been
written. Investigators at the time
recommended substantial chang-
es to the way the government
collected information, some of
which may have required action
from Congress.
By 2021, Biden’s top aides inten-
sified the work to improve the
oversight process, particularly af-
ter the passage of the American
Rescue Plan last March.
Yet the efforts failed to satisfy
lawmakers, federal watchdogs,
health professionals and ethics
experts, a dozen of whom said in
interviews that they have strug-
gled to answer the most basic
questions, including how much
money has been spent, and where,
in critical areas such as testing.
“There are huge voids, and
more comprehensive data is step
one for our ability to watchdog,”
said Lisa Gilbert, executive vice
president of Public Citizen, a gov-
ernment ethics nonprofit organi-
zation.
Michael Horowitz, the chair-
man of the PRAC, who also serves
as the inspector general for the
Justice Department, said the com-
mittee had worked diligently to
stand up its public portal and
retain an entire analytics team to
monitor the data. In some cases,
he said, the committee tapped its
own funds to help the government
build reporting tools that other-
wise did not exist, as was the case
with a previous $150 billion pro-
gram to help state and local gov-
ernments cover the costs of pan-
demic response.
However, Horowitz acknowl-
edged in an interview that the
data still might be “gibberish to
most people” and explained that
watchdogs have only so much
power. “That’s because the agen-
cies aren’t collecting data that
would help us provide even great-
er transparency,” he said. “If Con-
gress wanted us to do more, if the
administration wanted us to do
more, we would have to get the
funding to do it,” Horowitz later
added.
Elsewhere, federal oversight
bodies have been neglected or are
newly at risk of becoming defunct,
even before their missions are
complete. A congressional panel
chartered in 2020 to oversee the
Federal Reserve’s lending pro-
grams, for instance, never even
reached full strength after Demo-
crats and Republicans could not
agree on a chairperson.
The panel now consists solely of
two Republicans. At times, it has
struggled to obtain detailed data
from the government concerning
about $735 million in remaining
loans for cash-strapped compa-
nies whose survival matters to
national security, according to
Rep. French Hill (R-Ark.), one of
its members. “We’ve made strong
criticisms of those,” he said, “and
we will be making some strong
recommendations for future Con-
gresses.”
A second governmental body,
tasked to oversee some of the
Treasury Department’s loans,
spent months warring within the
Biden administration in an at-
tempt to expand the scope of itslion Americans in the latest round
last year, while other aid benefited
more than 6 million small busi-
nesses over the fuller course of the
pandemic, federal data show.
The scope of spending over the
two-year period touched virtually
every part of modern society and
rivaled anything Washington had
ever executed in the past. It also
sparked fears about fraud,
prompting lawmakers to set up a
slew of oversight efforts to ensure
their emergency measures did not
become a windfall for criminals.
Lawmakers poured resources
into the nation’s inspectors gener-
al, who oversee key federal agen-
cies involved in disbursing stimu-
lus money. They commissioned
two special panels on Capitol Hill
and created two additional feder-
al bodies within the executive
branch to oversee the aid. The
Justice Department set up a spe-
cial task force to investigate
wrongdoing. And with the pas-
sage of the $1.9 trillion American
Rescue Plan last year, Biden
tapped Sperling, a top economic
adviser, to serve as a federal traffic
enforcer of the law.
The efforts resulted in some
early successes. Federal law en-
forcement over the past two years
brought numerous cases against
fraudsters who improperly tried
to collect unemployment benefits,
for instance, while federal scruti-
ny has helped ensure the more
efficient delivery of tens of billions
of dollars in assistance. That in-
cluded money set aside to help
Americans pay their rents, which
had been slowed dramatically by
federal bureaucracy.
But the vigilance at times has
lagged. Congress has not always
held the vigorous hearings that
helped lawmakers spotlight mis-
spent sums during the financial
collapse in 2009. Democrats and
Republicans have earmarked only
about $478 million for oversight
over the course of five major res-
cue packages since March 2020,
according to a review of federal
data and figures provided by the
White House. That equates to $
in new oversight money for abouting unemployed Americans and
saving businesses from shuttering
for good. But the money remains
hard to track. There are lingering
questions as to whether it ben-
efited those who needed it the
most. And the aid continues to be
a ripe target for criminals nation-
wide, the full extent of which is
only beginning to come to light.
“There is no question that the
immense fraud that took place at
the crush of the pandemic in 2020,
particularly in small-business
loans and unemployment insur-
ance, is the largest oversight chal-
lenge the Biden administration
inherited,” said Gene Sperling, the
president’s chief coordinator for
stimulus spending, stressing that
the administration is taking “sig-
nificant steps to strengthen anti-
fraud controls.”
Nowhere was the promise and
peril more evident than at the
Small Business Administration.
The normally lumbering agency
moved at lightning speed to dis-
burse roughly $1 trillion to cash-
strapped firms, hoping to stanch
the bleeding at a time when many
companies were laying off work-
ers in droves.
But its approach, particularly
during the Trump administration,
also carried a steep cost, as the
SBA did not put in place a wide
array of policies that might have
prevented significant waste, fraud
and abuse.
The troubles are laid bare in
stinging federal oversight reports
issued over the past year. Across
the SBA’s two key emergency ini-
tiatives, investigators have ques-
tioned nearly every aspect of its
spending, flagging billions of dol-
lars in suspect loans and grants,
overpayments to those who
should not have received them
and in some cases outright fraud.
One effort meant to help busi-
nesses in economic distress may
even be rife with identity theft, as
watchdogs said they had received
more than 845,000 applications
for aid that are now suspected of
having come from individuals us-
ing stolen identities, some of
which were funded anyway.
Meanwhile, the calls to the
SBA’s tip line for criminal activity
spiked by more than 37,000 per-
cent over an 18-month period ear-
lier in the outbreak. The agency’s
top watchdog issued numerous
warnings about its management
of more recent stimulus programs
adopted under President Biden,
including multibillion-dollar
funding for restaurants and per-
formance spaces.
And only last month, the SBA
received another blow when a
panel of pandemic watchdogs
highlighted more than five dozen
criminal cases that might have
been prevented if only the SBA
had been more diligent earlier in
the pandemic.
The troubles may represent just
the tip of the iceberg, according to
federal officials and outside ex-
perts, who together warn the U.S.
government could face years of
expensive and intricate sleuthing
work. The agency’s own inspector
general, Hannibal “Mike” Ware,
long has cautioned that the SBA is
staring down a daunting future,
telling Congress in January that it
is still “realizing the true scope of
fraud” that occurred under its
watch.
“Managing COVID-19 stimulus
lending is the greatest overall
challenge facing SBA,” he stressed
in written testimony, “and it may
likely continue to be for many
years as the agency grapples with
fraud in the programs.”
The SBA declined to make its
officials available for an interview
or answer specific questions. Han
Nguyen, an agency spokesman,
stressed in a statement that the
Biden administration has been
“working since its outset to ad-
dress fraud concerns we inherit-
ed” from the Trump administra-
tion “and to ensure the sound
administration of pandemic relief
programs.” A spokesman for the
SBA inspector general declined to
comment.
‘There are huge voids’
The troubles now plaguing the
U.S. government reflect the cru-
cial question facing policymakers
at the start of the pandemic:
Should they act fast to save the
economy from collapse or slow
down in the face of a crisis to
safeguard every dollar from po-
tential misuse?
Amid the tumult of spring
2020 , the federal government opt-
ed for haste, embarking on a blitz
to blunt the immediate physical
and financial toll of the pandemic.
Federal leaders stood up massive
programs to float easy loans to
businesses, pump hospitals full of
funds, sustain local government
finances, purchase protective
equipment and send checks to
Americans, all at a time when
about 1 million workers were los-
ing their jobs each day.
Those coronavirus stimulus
checks reached more than 175 mil-
FRAUD FROM A
Washington tries to tighten scrutiny of e mergency aid
MICHELLE GUSTAFSON FOR THE WASHINGTON POSTEVAN VUCCI/ASSOCIATED PRESSABOVE: A corner store
is temporarily closed in
Philadelphia in April
2020 during the early
days of the pandemic.
BELOW: President
Biden signs a relief law
last year. With him is
Small Business
Administration chief
Isabel Guzman. The
agency’s inspector
general told Congress in
January that the SBA is
still “realizing the true
scope of fraud” that
occurred under its
watch.