SBA’s Handling of Potentially Fraudulent Paycheck Protection Program Loans

The Office of Inspector General (OIG) found that the Small Business Administration (SBA) did not have an organizational structure with clearly defined roles, responsibilities, and processes to manage and handle potentially fraudulent Paycheck Protection Program (PPP) loans across the program. In addition, the agency did not establish a centralized entity to design, lead, and manage fraud risk. This problem occurred because the agency did not establish a sufficient fraud risk framework at the start of and throughout PPP implementation. Management stated this was partly due to the speed of the delivery of PPP and the continuous and rapid discovery of different kinds of fraud schemes. Lenders also were not always clear on how to handle PPP fraud or recover funds obtained fraudulently from the PPP that remained in the borrower’s account. SBA did not provide lenders sufficient specific guidance to effectively identify, track, address, and resolve potentially fraudulent PPP loans. During our review, SBA established a Fraud Risk Management Board. To better mitigate fraud, we recommend SBA establish clearly defined and detailed roles, responsibilities, and processes and provide lenders formal guidance for managing and handling potentially fraudulent loans. SBA management generally agreed with the findings and agreed with both recommendations. Management plans to document the roles, responsibilities, and processes for all SBA offices responsible for managing and handling potentially fraudulent PPP loans. Management also plans to consolidate its existing guidance to lenders regarding fraud and provide new guidance as appropriate.