SBA’s Administrative Process to Address Potentially Fraudulent Restaurant Revitalization Fund Awards

We inspected the U.S. Small Business Administration’s (SBA) administrative process used to review potentially fraudulent Restaurant Revitalization Fund (RRF) applications and recover funds. Program officials designed the RRF application validation and approval processes using the Government Accountability Office’s A Framework for Managing Fraud Risks in Federal Programs. However, 3,790 applications submitted through a point-of-sale partner were processed without verifying gross sales, a key control designed to prevent ineligible entities from receiving awards. As a result, SBA’s RRF application processing system approved almost all 3,790 applications for awards, totaling $557 million, despite not having gross sales verified. Once notified, SBA took quick action and prevented $278.4 million from being disbursed to 1,618 of the 3,790 applicants, including 946 of the 1,056 potentially fraudulent awards which had been reported to the OIG Hotline. However, SBA has not reviewed the remaining 2,172 awards, totaling $278.6 million, which included the remaining 110 potentially fraudulent awards reported to OIG, totaling $20.7 million. We made one recommendation to prioritize and complete the review of 2,172 RRF awards, which includes 110 RRF awards that were suspected of fraud and referred to the OIG Hotline. These awards were flagged for having unsupported gross sales. SBA should take appropriate administrative actions to recover improper payments. SBA agreed with the recommendation. SBA managers planned to review all 2,172 RRF awards during the post-award process and resolve the recommendation.