December 20, 2020

Caity Roach
Editor

C-Suite Wednesday — OIG Issues Recommendations For the Next Round of PPP

Last weekend, the President signed the $900 billion coronavirus economic aid bill which passed in both the House of Representatives (359-53) and the Senate (92-6) on December 21, 2020. The legislation, the Consolidated Appropriations Act of 2021, includes over $300 billion in coronavirus aid for small businesses. In response to the recently passed legislation, the SBA OIG has issued a memorandum on key recommendations for new PPP loans based on lessons learned from prior SBA COVID-19 relief efforts. 

The SBA OIG has made the following recommendations for PPP:

  • Assess vulnerabilities in internal controls to address ineligible loans and potential fraud. At minimum, the SBA OIG recommends that the SBA should require lenders to validate that:

    • The loan amount does not exceed the maximum amount per employee.
    • The business was established before the mandated date. Which, the OIG notes may require coordination with the Department of Treasury to verify the dates the business applied for and received a Taxpayer Identification Number.

    •  The applicant does not exceed the maximum number of employees or other applicable size standards.

  • Work with Treasury to develop a technical solution to enable use of Treasury’s “Do Not Pay” portal to determine loan applicant eligibility and prevent improper payments before the release of any federal funds.

  • Update the PPP borrower application to include a field for the North American Industry Classification System (NAICS) code for the business category and the business description to prevent potentially eligible loan approvals.

  • Revise the application to include the demographic information for borrowers. 

In addition, the SBA OIG has recommended numerous changes to the EIDL program intended to reduce ineligible loans, internal mismanagement, and fraud. For EIDL loans, the OIG recommends that SBA staff obtain photo ID from the borrower, verify tax returns, eliminate batch approvals, require two people to approve each loan, and require human contact with applicants who submit multiple applications from the same IP address.

Although the SBA has not yet responded to the OIG’s recommendations, the Consolidated Appropriations Act of 2021 requires the SBA to develop rules and regulations pertaining to the next round of PPP and EIDL funding within 10 days of the bill’s enactment (January 6, 2020).

Sources: 

OIG Memorandum

the Consolidated Appropriations Act of 2021