The Office of Inspector General (OIG) is issuing this management advisory to express concerns regarding the U.S. Small Business Administration’s (SBA) decision to end collections on purchased Paycheck Protection Program (PPP) loans with an outstanding balance of $100,000 or less. In anticipation of a significant number of delinquent PPP loans that lenders will submit for guaranty purchase, we began reviewing SBA’s process for approving PPP guaranty purchases. During our review, we identified concerns with SBA’s decision to end collections on these loans and found that expedited management action is needed to determine whether it is cost effective to pursue collections on these loans. Management attention is needed to ensure effective stewardship of billions of dollars in potential funds owed to taxpayers. Ending collections could incentivize ineligible borrowers to obtain loans valued at $100,000 or less in similar future loan programs. However, continuing to pursue collections will help ensure accountability from delinquent borrowers. We recommend the SBA Administrator stay the April 27, 2022 decision to end collections on purchased PPP loans with an outstanding balance of $100,000 or less until a comprehensive cost benefit analysis is conducted. We recommend the agency explore alternative means of collections for PPP loans with an outstanding balance of $100,000 or less. We also recommend conducting an initial and periodic cost benefit analysis on PPP purchase guarantees with comprehensive estimates to sufficiently assess whether the cost of collecting loans of $100,000 or less is more than the recovery amount and pursue collections based on results of the analysis. Management disagreed with recommendations 1 and 2 and agreed with recommendation 3.
Friday, September 30, 2022
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