The unprecedented Coronavirus Aid, Relief, and Economic Security (CARES) Act provides up to $2 trillion in relief funds for businesses and individuals across the country. Similar to the CARES Act, in 2008, when Congress enacted the Emergency Economic Stimulus Act, it established a special inspector general’s office to oversee the Troubled Asset Relief Program (SIGTARP). In the years that have followed, and continuing until the present day, SIGTARP investigated companies, individuals, and financial institutions and has recovered over $11 billion for the government.
The CARES Act includes the role of Special Inspector General for Pandemic Recovery (SIGPR) who will be responsible for investigating fraud related to the CARES Act. Given the current crisis situation there may be a temptation to think that the normal rules no longer apply, but the history of investigations by SIGTARP over the last decade plus indicate the SIGPR will aggressively pursue recoveries for the government of false claims and fraudulent activity.
A 2019 study regarding in-house fraud investigation teams by the Association of Certified Fraud Examiners (ACFE) found that only 58% of organizations believe they have inadequate levels of anti-fraud staffing and resources. Cost-cutting measures due to the Coronavirus could further diminish the resources available to monitor and mitigate fraud. Organizations that receive funds through the CARES Act must remain focused on their internal control procedures and documentation.
Organizations should be diligent in documentation of their decision making process when applying for relief, loans, applying for forgiveness of loans or making other claims under the CARES Act. Many certifications of the accuracy of information and eligibility will be necessary from owners and management. A “Monday Morning Quarterback” may question an organization’s “play calling” and decision making in retrospect. However, proper documentation of adequate consideration of facts and circumstances at the time of an application or claim may prove valuable in defense of any questions regarding potential irregularities after the fact.
If you need the experience of Schneider Downs Business Advisors during this challenging time, please contact shareholders Tom Pratt at [email protected] or Joel Rosenthal at [email protected].
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.