Musk is onto something: Protecting and improving the government’s massive grant and loan portfolios

When Elon Musk, the newly appointed co-chair of the Department of Government Efficiency, tweeted a link to a recent Government Accountability Office report on federal IT legacy systems, he joined a crucial conversation about government modernization. The GAO report revealed that federal agencies continue to rely on IT systems that range from 8 to 51 years old, collectively costing taxpayers approximately $337 million annually to operate and maintain. These outdated systems not only increase security vulnerabilities but also hinder the effective administration of essential government programs, including the nearly $3 trillion in federal loans and grants distributed annually.

The reliance on antiquated technology to manage massive financial portfolios and critical government services is increasingly untenable. Legacy systems — some written in languages like COBOL that date back to the 1950s — often struggle to handle the scale and complexity of modern demands. These systems are expensive to maintain, difficult to upgrade and prone to security vulnerabilities due to unsupported hardware and software.

For example, during the COVID-19 pandemic, the Small Business Administration faced unprecedented challenges distributing over $800 billion in loans through the Paycheck Protection Program. While the agency ultimately rose to the occasion and delivered, it took out of the box thinking and war-time effort to pull off delivery.

The Trump administration would do well to prioritize the adoption of new technology and to ensure these programs not only reach intended recipients efficiently but are also protected from fraud, which drains between $250 billion and $500 billion from federal coffers annually, according to GAO. Old technology or lack of platforms, in general, have created this massive fraud problem. Sophisticated fraud schemes, sometimes orchestrated by organized crime syndicates or foreign actors, exploit gaps in legacy systems. These weaknesses include insufficient cross-referencing of applicant data and inadequate identity verification processes.

Loan and grant-making agencies face a difficult balance: They need to distribute funds to a large number of individuals and businesses in need, yet without adequate safeguards, they risk unknowingly processing fraudulent claims. Swift distribution is essential, but the lack of sufficient verification mechanisms can lead to significant errors and misuse. In this high-stakes environment, adopting solutions that enhance efficiency while embedding fraud prevention measures is paramount.

Efforts to address these issues at SBA included deploying multi-layered fraud frameworks that combine real-time data analysis, identity verification, and post-application screening. SBA now has integrated tools such as the Treasury’s Do Not Pay list and enhanced identity verification checks to filter out fraudulent applications before disbursing funds. This multi-tiered approach helped redirect resources to legitimate recipients and prevented millions of taxpayer dollars from fraud. SBA’s systems are modeled off of large scale commercial banking platforms that protect some of the largest financial institutions in the U.S. SBA’s fraud platform implementation is an example of modern fintech engineering operating at scale within government. 

Modern solutions available from commercial providers today can transform federal loan and grant programs by making processes faster and more secure. By integrating user-friendly tools and efficient workflows, agencies can serve both applicants and administrators more effectively. During the PPP loan forgiveness phase, the SBA implemented a direct borrower portal, enabling small businesses to interact with the agency directly, reducing the reliance on third-party lenders. This self-service model, combined with features like real-time tracking, automated notifications and secure document submission, not only eased administrative burdens but also improved transparency and speed for borrowers. Commercial-first thinking was celebrated by the beneficiaries of these programs — with the agency receiving a flood of tweets celebrating their accomplishments.

For internal operations, technology that centralizes case handling and automates fraud alerts allows agencies to better allocate resources and process applications at scale. Embedding fraud detection at each step of the process, from application to disbursement, helps agencies focus on genuine cases while minimizing delays and protecting program integrity.

The COVID-19 pandemic demonstrated the need for scalable, modular solutions that federal agencies can deploy quickly to meet surges in demand. The SBA’s rapid implementation of a system for processing and forgiving PPP loans, completed in just three months, exemplifies the value of flexible infrastructure. This commercial system allowed the SBA to manage millions of applications and provided ongoing support for additional rounds of PPP funding, ensuring continuity of service without interruptions. 

Efforts to modernize federal loan and grant programs are part of a broader shift toward innovative fraud detection and prevention in the public sector. As fraud tactics become more sophisticated, federal agencies will need to adopt new technologies inspired by best practices in the commercial financial and banking sectors. Multi-layered fraud prevention models and adaptable, scalable solutions can help agencies protect taxpayer dollars while delivering support more effectively. This approach supports both the immediate needs of applicants and the long-term goal of sustainable, secure financial assistance. It’s been shown to work in the private sector and it can certainly work in the public sector. 

The federal government’s reliance on outdated IT systems poses significant risks to the efficiency and integrity of its programs. Modernizing these systems is not just an operational necessity; it is a cornerstone of effective governance in the 21st century. By adopting commercially available solutions, federal agencies can ensure that the programs they administer meet the needs of the American people while safeguarding taxpayer dollars. As Musk’s tweet suggests, the time for modernization is now — before the costs of inaction become insurmountable.

Bill Webner is CEO of Allocore (www.allocore.com). Allocore powers the leading government loans, grants, and fraud prevention programs with a unified platform built for efficiency and security. With trillions in loans and grants processed and billions in fraud prevented, Allocore brings the precision of commercial banking technology to the public sector.