Main Street Monday – OIG Cites $278.6 Million in Potentially Ineligible RRF Recipients

July 10, 2023

Delaney Sexton
Contributing Editor

Main Street Monday – OIG Cites $278.6 Million in Potentially Ineligible RRF Recipients

Recently, the SBA Inspector General examined SBA’s process of reviewing Restaurant Revitalization Fund applications with signs of potential fraud. The OIG’s report focuses on 2,172 applications with unverified information that SBA has not addressed. SBA agreed to review all the awards and recover potentially fraudulent disbursements.

The SBA used the Government Accountability Office’s framework to establish a risk-based approval process for the Restaurant Revitalization Fund. Whenever applications went through their point-of-sale vendor partners, the SBA considered the applications at a lower risk level because they depended on their partners to conduct the appropriate checks and validations on the information borrowers supplied. Later during the implementation of the program, a partner informed the SBA that almost 4,000 accepted RRF applications included unsupported gross sales. Over 1,000 applications were flagged as showing strong indications of fraud.

The 3,790 applications totaled $557 million, but SBA officials took action and prevented $278.4 million from being disbursed to 1,618 applicants. Almost 90% of the potentially fraudulent awards were stopped.

Now, two years have passed since the SBA’s point-of-sale partner notified the SBA about the unsupported applicants, and the other 2,172 disbursed awards worth $278. 6 million have not been reviewed or recovered. Those awards still include 110 disbursements marked as potentially fraudulent. Plans to conduct post-award audits do not include 665 awards in the sample.

Specifically reviewing the 1,056 fraudulent RRF awards, the accounts listed a business name the same as the owner’s first and last names and had unusual email domains. Some of the email domains had high fraud scores on independent third-party databases. Several also had merchant accounts sharing assets with unrelated individuals.

Most of the awards were stopped, but there are $20.7 million in potentially fraudulent disbursements. None of the 110 awards completed the required annual reporting submissions or certifications that the money was used on eligible expenses. The Inspector General reported that SBA has not taken any further action besides referring the awards to the OIG Hotline.

Based on this information, the Inspector General recommends that SBA prioritize and complete the review of 2,172 awards flagged as having unsupported gross sales and take administrative actions to recover improper payments.

OIG Report