Opinion | How to respond to pandemic relief fraud
The case is the largest such scheme yet uncovered – and that’s just the tip of the iceberg. A Labor Department watchdog report released last week estimated that scammers may have stolen $45.6 billion in unemployment insurance during the pandemic. Add to that tens of billions of dollars that may have been scammed out of the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan Program (EIDL), among others.
To be clear, the presence of fraud does not mean that the programs failed. But these cases offer important lessons for how governments should manage aid and credit programs going forward.
As the Covid-19 pandemic began, lawmakers and officials rushed to provide more than $5 trillion in aid to citizens and businesses. From the start, they understood that delivering relief supplies on the scale and speed required would lead to opportunism and theft. They also rightly believed that this was an acceptable price to keep businesses and households afloat during an unprecedented crisis.
In order to reach most people without bureaucracy and delays, the assistance programs were broad in scope and did not have strict documentation and verification requirements. While Congress established some guard rails, including reporting requirements for larger payouts, the Trump administration defied that oversight. Authorities instead rely on ex-post enforcement — a costly and inefficient approach.
The Biden administration has wisely expanded investigation and prosecution resources, and the President recently signed legislation to extend the statute of limitations for PPP and EIDL fraud from five to ten years. still Officials are already acknowledging that they may never get to smaller-scale cases: although the government has indicted more than 1,500 people so far, millions of other potentially fraudulent transactions await investigation.
As Post columnist Catherine Rampell argued last month, the saga underscores the importance of modernizing the country’s archaic, fragmented technology infrastructure. Better systems could help authorities verify application data with information from payroll taxes and other documentation, allowing officials to detect fraudulent activity earlier. Additionally, new ID verification technology could reduce the possibility of identity theft, while machine learning algorithms could quickly spot suspicious patterns in data.
Another issue – particularly in national programs where huge amounts of money are involved – is that oversight should not be ex post. The Cares Act established the Pandemic Response Accountability Committee, a body of inspectors to oversee pandemic response, in his honor. The committee has made efforts to share data with the public, though some of its tools are difficult to navigate. But watchdogs need funding to match the programs they audit. Dedicating a small but steady percentage of spending to these offices could help reduce waste in the long run.
Spending on Covid-19 relief efforts has been a godsend for struggling businesses and families. Unfortunately, it’s also been a boon to scammers looking for an easy payday. The right answer would be to recognize the importance of these programs during a national emergency — and begin building a more flexible, responsive, and resilient system for the future.