The Small Business Administration's (SBA) Office of Inspector General (OIG) is issuing this management advisory to bring attention to concerns regarding SBA’s decision to end active collections on delinquent COVID-19 Economic Injury Disaster Loans (EIDL) with an outstanding balance of $100,000 or less.First, SBA’s decision to cease collections risks violating the Debt Collection Improvement Act of 1996, which prohibits ending collections on fraudulent, false, or misrepresented claims, because SBA OIG and other oversight agencies are continuing to work on identifying COVID-19 EIDL fraud that may not have been identified by the agency. It is also unclear whether SBA plans to end active collections on loans for borrowers who received multiple COVID-19 EIDLs of $100,000 or less that, when combined, exceed $100,000.Second, SBA based its decision to end active collections on a cost-benefit analysis that used a dissimilar loan program and a private-sector loan servicing model to estimate proceeds from collections and collection costs. The cost-benefit analysis did not include periodic comparisons of costs incurred and amounts collected as federal regulations require.Finally, SBA does not appear to have fully evaluated its consultant’s recommendation to sell a portion of the COVID-19 EIDL portfolio to maximize the return to taxpayers.SBA management agreed with recommendations 3, contingently agreed to recommendation 2 based on the outcome of recommendation 1, partially agreed with recommendations 1 and 4, and disagreed with recommendation 5.
Open Recommendations
| Recommendation Number | Significant Recommendation | Recommended Questioned Costs | Recommended Funds for Better Use | Additional Details | |
|---|---|---|---|---|---|
| 1 | Yes | $0 | $0 | ||
| To address concerns in the COVID-19 EIDL program, we recommend the Administrator direct the Associate Administrator for the Office of Capital Access to perform a comprehensive cost-benefit analysis, consistent with federal regulations, to include periodic comparisons of costs incurred and amounts collected on the portfolio of COVID-19 EIDLs of $100,000 or less to assess whether collection costs exceed recovery amounts. | |||||
| 2 | Yes | $0 | $0 | ||
| To address concerns in the COVID-19 EIDL program, we recommend the Administrator direct the Associate Administrator for the Office of Capital Access to reevaluate and amend as appropriate the April 27, 2022 decision to end active collections contingent on the outcome of the more comprehensive cost-benefit analysis. | |||||
| 3 | Yes | $0 | $0 | ||
| To address concerns in the COVID-19 EIDL program, we recommend the Administrator direct the Associate Administrator for the Office of Capital Access to ensure SBA does not end active collections pursuant to the April 27, 2022 decision on any COVID-19 EIDL of $100,000 or less made to borrowers who received multiple COVID-19 EIDLs that, when combined, exceed $100,000. | |||||
| 4 | Yes | $0 | $0 | ||
| To address concerns in the COVID-19 EIDL program, we recommend the Administrator direct the Associate Administrator for the Office of Capital Access to ensure SBA does not end active collections on any COVID-19 EIDL that appears to be fraudulent, false, or misrepresented, including loans identified as such by OIG or other federal oversight entities, without 1) reviewing the loan application for fraud and 2) attempting active collection, at a minimum, regardless of the outcome of a comprehensive cost-benefit analysis. | |||||
| 5 | Yes | $0 | $0 | ||
| To maximize the return to taxpayers, we recommend the Administrator direct the Associate Administrator for the Office of Capital Access to evaluate the COVID-19 EIDL portfolio, in collaboration with Treasury, to determine if selling the portfolio, including delinquent loans of $100,000 or less, is in the best interest of the government. | |||||
