The Feds Sent More than 1 Million Coronavirus Stimulus Payments to Dead People, GAO Says

As much as $1.4 billion might have been paid to deceased Americans. The IRS says that money must be returned.

More than 1 million stimulus payments totaling nearly $1.4 billion were sent to deceased Americans during the federal government's unprecedented emergency spending in response to the COVID-19 pandemic.

That's just one of the major findings in a new Government Accountability Office (GAO) report reviewing the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the $2.3 trillion stimulus package passed by Congress in late March. In addition to mailing checks to some dead people, the GAO found that federal agencies—like the Small Business Administration, which was tasked with processing more than $600 billion in payments to businesses forced to close by the pandemic—struggled to handle the massive surge in spending. That's caused confusion and left government auditors unable to do important oversight work.

"Consistent with the urgency of responding to serious and widespread health issues and economic disruptions, agencies have given priority to moving swiftly where possible to distribute funds and implement new programs," the GAO concluded. "As tradeoffs were made, however, agencies have made only limited progress so far in achieving transparency and accountability goals."

A major element of the CARES Act was the direct payments of up to $1,200 sent to every American. As of May 31, the Treasury Department had issued more than 160 million payments worth $269.3 billion via paper checks, prepaid debit cards, and direct deposits to bank accounts.

To distribute the money, the Treasury Department used 2019 tax return records, but it did not use "third-party data, such as the death records maintained by the Social Security Administration (SSA), to detect and prevent erroneous and fraudulent tax refund claims," the GAO found. As a result, individuals who may have died since filing their 2019 tax returns received direct payments through the CARES Act.

Mostly, that's because of the complexities of the federal bureaucracy. The GAO report states that the IRS has full legal access to the Social Security death list, but the Treasury Department's Bureau of Fiscal Service (BFS), which handled the distribution of the CARES Act payments, does not. Congress should allow the BFS to have access to that data if another round of stimulus payments are sent, the GAO suggests.

Officials from the IRS told the GAO that they raised that potential problem to Congress even before the CARES Act was passed. After the bill was passed, IRS attorneys determined that the agency did not have the legal authority to withhold payments from deceased individuals.

Officially, the IRS says that any payment made to a dead person must be returned, but the GAO notes that "the IRS does not currently plan to take additional steps to notify ineligible recipients on how to return payments."

The small business loans distributed as part of the CARES Act stimulus are another situation where the government's rush to get money out the door may have led to mistakes. The Paycheck Protection Program backed more than 4.6 million loans totaling over $500 billion, but the GAO found that many borrowers were not given proper guidance on how the loans would operate, including what rules would make a business eligible for loan forgiveness once the pandemic had passed.

"Because of the number of loans approved, the speed with which they were processed, and the limited safeguards, there is a significant risk that some fraudulent or inflated applications were approved," the GAO concludes.

The Treasury Department is refusing to disclose vital information about loan recipients, which will only make accountability measures more difficult to implement.

Fast-tracking the direct payments and other aspects of the coronavirus response  might have caused money to be wasted, but other reports indicate that the stimulus package accomplished its goal. Stuffing billions of dollars into the economy caused the poverty rate to fall even as millions of Americans were kept out of work by COVID-19 outbreaks, according to a report from the University of Chicago. Meanwhile, Commerce Department data shows that personal income rose by about 10 percent during April.

Still, the full cost of the CARES Act stimulus will be felt for years to come. That one-time infusion of cash has caused the expected budget deficit for 2020 to quadruple from about $1 trillion to nearly $4 trillion.