GAO Report: Fraud in RRF Program

July 26, 2022

At the height of COVID, restaurants, bars, and other food service businesses suffered great losses in both revenue and employment, and these losses look like they may continue.

In an attempt to help these critically important small businesses, in March 2021, Congress set aside $28.6 billion for the U.S. Small Business Administration (SBA) to create and oversee distributions from a Restaurant Revitalization Fund (RRF).

SBA began accepting applications and awarding funds from the RRF in May 2021, but halted its processing only two months later, with nearly all the appropriations disbursed.

In 60 days, SBA doled out $28.6 billion to just over 100,000 businesses, or 40 percent of the RRF applicants, with the average award around $126,000. 43 percent of those applicants earned $500,000 or less in 2019, and 72 percent of recipients were owned by women, veterans, or members of social and economically disadvantaged groups.

While this appeared to be expeditious work for small businesses desperately in need, and SBA did implement measures to prevent and detect fraud, including identifying nearly 30,000 suspicious applications, a recent report from the Government Accountability Office (GAO) identified systematic weaknesses in these mechanisms.

For example, SBA considered applications made through external vendors to be low-risk, but over 4,000 recipients who applied through such a channel have been flagged for suspected fraud or ineligibility, including an alleged fraudster who received $8 million.

To this point, the GAO report recommends SBA assess its fraud controls and address the deficiencies of these controls.

NSBA always supports opportunities for small businesses to benefit from federal resources, especially our restaurant, bar, and other food service members. NSBA also supports common sense mechanisms to prevent and detect fraud in these important programs so they may continue to be available to our members.

Read GAO’s full report here.