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

Submitting OIG:

Small Business Administration OIG

Report Description:

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.

Date Issued:

Thursday, February 22, 2024

Agency Reviewed / Investigated:

Small Business Administration

Submitting OIG-Specific Report Number:

24-06

Location(s):

Agency-Wide

Type of Report:

Inspection / Evaluation

Special Projects:

Pandemic

Questioned Costs:

$1,428,399,071

Funds for Better Use:

Number of Recommendations:

Report updated under NDAA 5274:

View Document:

Attachment	Size
SBA-OIG-Report-24-06.pdf	1.24 MB

Recommendation Number	Recommendation Status	Significant Recommendation
1	Open	Yes
Review the 1,799 PPP loans totaling over $89 million that matched a DNP data source to ensure eligibility requirements were met and seek remedy or repayment of all loans deemed ineligible.
2	Open	Yes
Review the 49 PPP loans totaling approximately $3.5 million and the 43 loans totaling approximately $7.2 million to ensure borrowers met eligibility requirements and seek remedy or repayment of loans deemed ineligible.
3	Open	Yes
Review PPP loans in which the DNP hold codes were cleared to 1) identify those cleared using pre-decisional memos and 2) those cleared without sufficient evidence to support the reviewer’s loan decision and seek remedy or repayment of loans deemed ineligible.
4	Open	Yes
Develop and implement controls, such as supervisory reviews, to ensure PPP loans and loans for future stimulus programs with DNP matches receive manual reviews, as required. The reviews should ensure that pre-decisional memos are not used to clear DNP hold codes and that loan files contain relevant and appropriate documentary evidence to support the loan review decisions.
5	Open	Yes
Develop and implement clear guidance requiring responsible officials to maintain documentary evidence used to support loan decisions in the loan files.
6	Open	Yes
Review the 59,893 PPP applications that matched a DNP data source to ensure borrowers met eligibility requirements and seek remedy or repayment of loans deemed ineligible.
7	Open	Yes
Review the additional 47,940 PPP loans totaling over $1.7 billion, identified through the DNP data match, to ensure borrowers met the eligibility requirements and seek remedy or repayment of loans deemed ineligible.

Recommendation Number

Recommendation Status

Significant Recommendation

Additional Details

Open

Yes

Review the 1,799 PPP loans totaling over $89 million that matched a DNP data source to ensure eligibility requirements were met and seek remedy or repayment of all loans deemed ineligible.

Open

Yes

Review the 49 PPP loans totaling approximately $3.5 million and the 43 loans totaling approximately $7.2 million to ensure borrowers met eligibility requirements and seek remedy or repayment of loans deemed ineligible.

Open

Yes