Government programs are very susceptible to corruption. The various government programs created to deal with the covid-19 pandemic, such as the Paycheck Protection Program (PPP) are no exception to this kind of corruption and abuse.
Several people have already been arrested for abusing PPP loans which were designed to provide loans to small businesses to help them keep their employees on the payroll during the financial fallout from the coronavirus.
According to a press release from the Department of Justice Office of Public Affairs (DOJ OPA), “Little Rock Woman Accud with Covid Relief Fraud” on July 16, 2020, Ganell Tubbs of Little Rock was charged with allegations of fraudulently receiving nearly $ 2 million in PPP Loans. Tubbs allegedly used $ 8,000 to make a payment on his student loans. She also spent $ 6,000 on personal purchases. This is not what PPP is designed for.
Tubbs is not the only person to abuse PPP loans. In another DOJ OPA press release, “Arkansas Project Manager Accused in Oklahoma with Covid-Relief Fraud” dated June 4, 2020, Benjamin Hayford of Centerton was accused of having deposited fraudulent PPP loans in the amount of more than $ 8. millions of dollars.
Fortunately, these cases were detected quickly. The secretive nature of fraud makes it difficult to detect very quickly. Most often, it is caught long after the damage has already been done. A 2020 “Report to the Nations” from the Association of Certified Fraud Examiners (ACFE) estimates that the typical delay between the start of a fraud and its detection is 14 months.
In general, the abuse of public resources negatively affects service delivery by diverting resources from important services such as public education and public health. In the case of PPP, there are other struggling companies that could use those dollars to pay their workers.
How then to minimize the abuse of programs such as PPP or similar state-level programs such as the Ready for Business grant program and other programs that the state will create in the future?
PPP requires that companies that receive more than $ 2 million be fully audited, while those that receive less can be audited at random. It’s easy to say that all businesses need to be audited, but auditing can be costly. Even though all recipients are audited, this does not guarantee that all fraud in the programs will be detected. The ACFE 2020 report cited above reveals that internal and external audit accounts for only 19% of the initial detection of workplace fraud.
It is therefore necessary to encourage other means of detecting fraud.
According to the ACFE report, whistleblower denunciations account for 43% of the initial detection of workplace fraud. So, in addition to audits, it is important to encourage people to report fraud. According to the National Whistleblower Center, between 2007 and 2019, the IRS was able to recover $ 5.7 billion while awarding nearly $ 932 million through the IRS whistleblower reward program. The program rewards whistleblowers from 15 to 30 percent of the proceeds of tax evasion or tax underpayments.
Another way is to be very transparent by posting the contact details of recipients online, including their names, addresses, number of employees and the amount they receive. The idea is to allow residents to participate in the abuse detection process. If unscrupulous requesters use fake addresses, residents can help detect such abuse. It is encouraging on this front that the US Treasury has reversed its previous position of withholding the details of PPP beneficiaries. Likewise, the Arkansas Democrat-Gazette is to be commended for posting the list of Ready for Business grant recipients on its website.
The corruption is real. No government program is immune. What is also real is its negative impact. This negative impact is even greater in times of economic difficulty. To alleviate hardship and save taxpayer dollars, we need a concerted effort from government and citizens working together to recognize and report corruption.
The more the eyes scrutinize these programs, the higher the chances of catching fraud and therefore saving taxpayer money.
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Mavuto Kalulu is a policy analyst at the Arkansas Center for Research in Economics (ACRE) at the University of Central Arkansas at Conway and co-author of “Access Arkansas: County Web Transparency,” a report on the accessibility of fiscal, administrative resources. and political news in Arkansas. The opinions expressed are those of the author and do not necessarily reflect those of UCA.