The Office of Inspector General (OIG) is issuing this Evaluation Report to determine whether the U.S. Small Business Administration (SBA) made Paycheck Protection Program (PPP) loans in accordance with program size standards. This is a follow-up to our earlier report which identified 355 PPP loans that likely exceeded the maximum size standard and may have been erroneously approved. Based on updated data analysis, we identified that 79 of those 355 loans still appeared to exceed the maximum size standard. Our objective was to determine whether PPP loans were made in accordance with program size standards.
We reviewed 64 of the 79 loans identified as potentially exceeding size standards and determined SBA did not validate size standard eligibility requirements for 48 of them, totaling approximately $343 million. Of the 48 loans, 29 totaling $196.5 million were forgiven using memoranda unrelated to size standard requirements; and 19 totaling $146 million were forgiven without sufficient documentation to support loan review decisions. This occurred because SBA’s process changes allowed it to forgive loans flagged as potentially ineligible prior to conducting manual reviews to ensure borrowers met eligibility requirements. As a result, SBA did not have reasonable assurance that borrowers met size standard requirements, which increased the risk of improper payments and loss of taxpayer funds. Further, without properly evaluating compliance with size standard requirements for the 48 loans totaling about $343 million, SBA forgave PPP loans to potentially ineligible businesses.
Although SBA implemented controls designed to ensure borrowers met size standard eligibility requirements, the agency overrode these controls and did not always validate eligibility for borrowers flagged as potentially exceeding the size standard. We recommended SBA obtain the documentation necessary to fully assess borrower size standard eligibility for the 48 loans to ensure eligibility requirements were met and, if not, seek repayment of forgiveness amounts granted to ineligible borrowers. SBA management partially agreed with our recommendations.
