Governance and Fraud Prevention in Federal Relief Programs: Insights from the Paycheck Protection Program

Abstract

This study examines the systemic vulnerabilities and governance deficiencies that facilitated widespread fraud within the Paycheck Protection Program (PPP), a central element of the U.S. government's economic response to the COVID-19 pandemic. Established under Section 1106 of the CARES Act, the PPP disbursed $349 billion in its initial phase to support small businesses. However, the program’s rapid implementation and limited upfront controls created substantial opportunities for abuse, resulting in an estimated $64 billion in fraudulent claims, as reported by the U.S. Small Business Administration Inspector General. This research addresses two principal questions: (1) How did such extensive fraud materialize so quickly, and (2) What structural and regulatory reforms are required to prevent similar failures in future emergency aid programs? We use a qualitative case analysis of publicly prosecuted PPP fraud cases, together with Office of Inspector General findings, and we apply the fraud triangle and the expanded fraud diamond frameworks to examine how opportunity, pressure, rationalization, and capability interacted within an urgent, high-stakes policy environment to enable large-scale fraud. Based on this analysis, we offer governance recommendations for future federal relief programs.