Key Findings on Fraud and Abuse from the COVID Select Committee’s Report

 

On December 4, the Select Subcommittee on the Coronavirus Pandemic of the House Committee on Oversight and Accountability approved a report titled “After Action Review of the COVID-19 Pandemic: the Lessons Learned and a Path Forward.” The 520-page report offers dozens of findings ranging from the origins of COVID-19 virus to the effectiveness of the public health and benefits response and beyond.

Expanded and entirely new benefit programs helped millions affected by COVID and related shutdowns, but the subcommittee also found that “Rampant fraud, waste, and abuse plagued the COVID-19 pandemic response.” The subcommittee reviewed improper payments involving several programs, and their key findings outlined below largely mirror themes Amy Simon and I found in our February 2024 report on improper unemployment benefits. Collectively, the findings should guide lawmakers as they consider reforms to current programs and the proper design of future emergency benefits. 

Ten Key Findings on Improper Payments from the Subcommittee Report

1. COVID-19, and the government’s response to it, caused significant harm to the labor market and millions of workers.
   
   • “The COVID-19 pandemic had a profound impact on the U.S. labor market. The rapid spread of the virus led to widespread lockdowns, social distancing measures, and a sudden halt in economic activity. As a result, unemployment rates in the U.S. surged to levels exceeding the 2007-09 Great Recession and not seen since the 1929-39 Great Depression.”
     
     
2. Especially the federal government massively expanded existing and new benefit programs to assist displaced workers.
   
   • The novel Paycheck Protection Program (PPP) had total funding of almost $814 billion, while the Economic Injury Disaster Loan (EIDL) program “disbursed over $400 billion.”
     
   • An array of existing and novel unemployment benefit programs provided “an estimated $872 billion” in total assistance.
     
     
3. Unprecedented amounts were lost to improper payments and fraud.
   
   • “At least 17 percent of all COVID-19 EIDL and PPP funds were disbursed to potentially fraudulent actors. This amounted to approximately $200 billion in fraudulent payments.”
     
   • The DOL Inspector General “found that at least $191 billion was wrongfully paid out to bad actors” who exploited unemployment benefit programs.
     
     
4. A key factor was the drive to get money out the door quickly.The federal Pandemic Unemployment Assistance (PUA) program proved especially vulnerable to abuse.
   
   • “These programs were implemented rapidly as Congress, governors, and state legislatures pushed for state workforce agencies to distribute funds efficiently.”
     
   • “The auditors largely attributed these deficiencies to SBA’s prioritization of the rapid implementation of CARES Act provisions over the establishment of effective internal controls.”
     
     
5. The federal Pandemic Unemployment Assistance (PUA) program proved especially vulnerable to abuse.
   
   • “In August 2023, DOL reported an improper payment rate of 35.9 percent for the PUA program.”
     
   • “During the first nine months of the program, claimants were not required to provide any documentation or evidence of earnings.”
     
   • “This absence of robust verification measures allowed criminals to exploit the system.
     
     
6. Even when discovered, key flaws remained unaddressed.
   
   • “In an October 2020 report, SBA IG highlighted deficiencies such as inadequate responses to fraud alerts and the issuance of duplicate loans. The IG issued ten recommendations, including the review of suspicious loans and the strengthening of verification controls. While SBA partially agreed with these recommendations and took some corrective actions, many of the concerns raised by both OIG and GAO were not immediately resolved.”
     
     
7. Self-certification of eligibility was a major problem.
   
   • “During the pandemic, many agencies allowed applicants to self-certify their eligibility for programs, which led to significant fraud and improper payments.”
     
   • “During the PUA’s first nine months of extended eligibility, claimants were able to self-certify their prior employment or self-employment without any documentation to receive funds.
     
     
8. Identity thieves exploited gaps in the system.
   
   • “Fraudsters exploited the federal government’s pandemic relief programs by using the SSNs of deceased people and federal prisoners to receive unemployment benefits.”
     
   • “Most of these losses could have been prevented if Congress and Federal agencies provided up-to-date technologies along with proper verification methods for oversight, something GAO has been specifically recommending for more than ten years.”
     
     
9. International criminal gangs were behind much of the abuse.
   
   • Transnational “criminal networks engaged in large-scale operations that submitted fraudulent claims, laundered illicit funds through financial systems, and transferred proceeds across borders.”
     
   • “It is estimated that at least half of the federal funds lost through the PPP and UI relief programs were stolen by international fraudsters.”
     
     
10. Some states proved especially vulnerable to abuse.
    
• California’s Employment Development Department “consistently missed critical deadlines and submitted incomplete reports….such failures impeded oversight efforts and exposed taxpayer funds to greater risk of fraud.”

Matt Weidinger is a Senior Fellow and Rowe Scholar at the American Enterprise Institute

https://www.aei.org/opportunity-social-mobility/ten-key-findings-on-fraud-and-abuse-from-the-covid-select-committees-report/