Consultants hired to check Covid-19 rescue loans for fraud

The British Business Bank has hired professionals from RSM and KPMG to examine the recipients of its emergency loans amid the Covid-19 lockdown. The consultancies will now look to uncover cases of fraud, or where firms which did not meet the strict criteria of the British Business Bank received funds.

The British Business Bank is a state-owned economic development bank established by the UK Government. Its aim is to increase the supply of credit to small and medium enterprises (SMEs) as well as providing business advice services. It is structured as a public limited company and is owned by the Department for Business, Energy and Industrial Strategy. So far, the BBBs emergency lending programmes have delivered close to £52 billion to more than 1.2 million businesses.

Due to the rapid nature of the application process for businesses jeopardised by Covid-19, the BBB is now undertaking a system of retrospective checking, to ensure that its services have not been taken advantage of by fraudsters, and that firms were not wrongly handed support through taxpayer-backed emergency schemes after the crisis struck. The organisation is reportedly spending more than £1.1 million on auditors to weed out any lenders which have broken the rules over the distribution of Covid-19 rescue loans.

As reported by The Daily Telegraph, the programmes being examined include the Coronavirus Business Interruption Loan Scheme, which saw the Government agree to foot 80% of a bank's loss if a borrower defaults; and Bounce Bank loans, which are 100% guaranteed. Firms had to meet a scheme's criteria to get the cash, relating to their size, or financial resilience, while banks which lent money without sticking to these regulations were threatened with the loss of any compensation paid out for their losses.

However, with banks coming under heavy pressure to get money out as quickly as possible in a bid to offset a national economic collapse, something which could see executives criticised if it emerges this led to the misappropriation of tax payers’ money. As a result, the BBB has appointed auditors from professional services firms KPMG and RSM to review loans handed out by Barclays, Lloyds, HSBC and Natwest, as well as smaller players.

According to the Telegraph, Big Four firm KPMG is receiving £680,000 to provide audit advisory services to the BBB’s lending schemes. Meanwhile, RSM has also won two audit contracts from the bank, bringing in a total of £450,673 in fees as a result. The news comes months after the BBB previously faced scrutiny for its big spending on consulting work.

In June, it was revealed that the BBB had paid out £20 million in consulting fees, as it scrambled to speed up state lending to struggling companies. KPMG, and its fellow Big Four cohorts PwC and Deloitte, were found to have won a plethora of contracts with the BBB to this end. PwC, for example, received £5.7 million for work on the Future Fund, a separate programme that will match up to £250 million of taxpayer money with private investment in start-ups.