Evaluation of SBA’s Eligibility and Forgiveness Reviews of Paycheck Protection Program Loans Made to Borrowers with Treasury’s Do Not Pay Data Matches

This report is a follow up to SBA OIG Report Number 21-06, Paycheck Protection Program (PPP) Loan Recipients on the Department of Treasury’s (Treasury) Do Not Pay (DNP) List, which reported SBA did not use Department of Treasury (Treasury) DNP data to screen borrowers for eligibility prior to approving loans originated before August 8, 2020 (PPP round one). In this report, we assess SBA actions to address potentially ineligible loans identified in report 21-06 and its implementation of controls to review DNP data for PPP loans originated after August 8, 2020 (PPP round two).SBA implemented a review plan to address 25,634 potentially ineligible PPP loans originated prior to August 8, 2020, and review DNP data sources pre-award for loans originated after August 8, 2020; however, inadequate policies and procedures exposed the program to avoidable risks. OIG found SBA’s review plan only included reviewing loans with submitted forgiveness applications where all funds had been disbursed and used. As a result, during PPP round one, lenders approved and disbursed 1,799 loans totaling over $89 million with known DNP matches that were not subject to manual review.OIG also found SBA’s manual loan reviews did not always sufficiently ensure borrowers’ eligibility. We statistically sampled 176 of 25,634 loans with DNP matches and concluded that SBA appropriately resolved 84 and inappropriately cleared the remaining 92 by either using pre-decisional memos that did not address the DNP hold codes, or the loan files did not contain sufficient documentation to support SBA’s review decisions. By projection, we estimate that lenders disbursed, and SBA forgave, 12,234 of 25,634 loans (or 48 percent) totaling over $1.4 billion without verifying the borrowers’ eligibility, which further exposed the program to financial losses and improper payments. In addition, SBA did not use all Treasury’s DNP restricted data sources for reviewing applicants during the first 2 months of pre-award reviews of DNP data for second round PPP loans. SBA identified 2,777 potentially ineligible applicants, totaling approximately $22.4 million. By comparison, our reassessment of applications using all Treasury’s minimally required DNP data sources identified 59,893 additional potentially ineligible loans, totaling about $1.9 billion. OIG recommends SBA implement or enhance policies and procedures to ensure compliance with program requirements and federal standards for identifying/preventing improper payments and seek remedy or repayment of ineligible loans.