October 14, 2021

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COVID relief fraud

How much fraud is tolerable? I’ve asked this question before, and if you answer it with a classic qualitative materiality threshold in mind, then no fraud is tolerable. One dollar of fraud is one dollar too many, the thinking goes, because long ago most of humanity decided that fraud is wrong and that people who engage in it should be punished. 

A world with zero tolerance for fraud isn’t very realistic, of course. That may be due, at least in part, to the fact that there’s a lot of opportunity to commit fraud. Not a day goes by that you don’t read about one scam or another in every walk of life. So it seems that we have a high tolerance for fraud because we have a high expectation for fraud. 

This especially seems to be the case with government programs, the Paycheck Protection Program (PPP) being a recent, obvious example. Part of the reason PPP fraud may have been so prevalent is that the rules were thrown together, changed a lot, and there was overwhelming demand. Lots of businesses legitimately needed emergency loans to keep afloat, so it’s plausible that concerns about abuse were dismissed out of hand.

Still! Even under unprecedented circumstances, it’s not ideal when a program—in this case, Emergency Economic Injury Disaster Loan Grants—basically gives out money to virtually anyone who puts virtually anything on the application: 

An emergency relief program hastily rolled out in the early days of the pandemic had such poor fraud protections that it improperly doled out nearly $4.5 billion to self-employed people who said they had additional workers — even those who made wildly implausible claims, like having one million employees.

And if you think that claiming that having a million employees is ridiculous—and it is—you’ll really love the next part:

The data showed that the agency approved and disbursed grant funds to 15 sole proprietorships that claimed to have a million employees but did not provide an EIN on the application. More than 40 claimed to have more than 100,000 employees but had no EIN, and nearly 350 claimed to have more than 500 employees without an EIN.

So that’s 405 sole proprietorships, claiming 19,175,000 employees (give or take), not a single EIN, and yep, they got the money. Easy. So easy in fact that a Bloomberg article cited YouTube videos with titles like “$10k SBA Loans & GRANTS Got The STREETS Going CRAZY!” as evidence that things had gotten a bit out of hand. 

So how much fraud should we tolerate? As we discussed above, it seems that most people will tolerate a lot of it. They come to expect it, and they especially expect it to happen within government programs with ostensibly endless pits of money. But when fraud is this easy, would anyone blame you for thinking that we’re implicitly encouraging people to commit fraud? That fraud, in the right circumstances, is fine. Not good, but fine, acceptable, and expected. Tolerable, in other words. 

I dunno. It sure is weird to think about. But then again, perhaps not. I think most people would like to see a bare minimum of fraud deterrence, if for no other reason, so we can all get on the same page about fraud being wrong.

People are still quitting crappy jobs

Back in the summer, we discussed the scores of people quitting their jobs. A record number of people—4 million—quit in April. According to the Bureau of Labor Statistics, that has now been surpassed by the number of people who quit in August, 4.3 million, around 2.9% of the workforce.

One thing I wrote about previously was the most interesting reason for all the job-leaving: “The job sucks,” and that still seems to be the case:

The phenomenon is being driven in part by workers who are less willing to endure inconvenient hours and poor compensation, who are quitting instead to find better opportunities. According to the report, there were 10.4 million job openings in the country at the end of August — down slightly from July’s record high, which was adjusted up to 11.1 million, but still a tremendously high number. This gives workers enormous leverage as they look for a better fit.

Maybe I’ve said it before, but It bears repeating: Good! Likewise, businesses that impose terrible things and crappy pay on their employees don’t deserve employees. And employers shouldn’t simply rely on pay increases and expect to keep or attract workers to crappy jobs. Something else I wrote back in June:

When someone throws money at you in those kinds of circumstances, it’s insulting. The attitude basically is: You can be bought. Sure, this job may be never-ending, thankless, and soul-crushing, but you’ll keep doing it if we pay you more.   

When I first raised the idea of accounting firms helping clients with hiring, you may have thought, “Well, things will probably get back to normal before too long.” Nope! And for everyone’s sake, we should hope that there’s no going back. That means employers will need to figure out how to go forward, and many accounting firms have an opportunity to help them.

Fresh from Gusto

  • Guideline makes it easy to offer a 401(k). They also seamlessly integrate with Gusto, which means even less admin work for you, year round. Open a Guideline 401(k) by Dec. 31, 2021, and pay no employer fees your first month. Learn more.
  • Form 944, explained by Nayo Carter-Gray.
  • Tips for Giving and Receiving Feedback


November webinar schedule coming soon! Watch this space.

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Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.
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