May 25, 2016

By Bob Coleman
Editor, C-Suite Wednesday

C-Suite Wednesday — SBA OIG Continues to Hammer the Agency on Improper SBA 7(a) and 504 Guaranty Payments

In its May 13, 2016 report, the SBA Inspector General says SBA continues to make mistakes on SBA 7(a) loan guaranty purchases by not identifying lender documentation errors.

“OIG continues to identify weaknesses with SBA’s 7(a) loan guaranty purchases and has found that SBA has understated its improper payment rates for the 7(a) loan guaranty purchases. During our assessment of early-defaulted loans under the High-Risk 7(a) Loan Review Program for FY 2015, we identified a $2 million improper payment that SBA did not detect. We also recommended an additional recovery of approximately $299,000 on another loan purchased within SBA’s FY 2015 improper payments review scope period.

“SBA needs to ensure that it applies its improved controls to the improper payments review. Specifically, even though SBA updated its loan review checklist to require a detailed analysis of creditworthiness (including repayment ability) on early defaulted 7(a) loans during FY 2015, it did not use this revised checklist during its FY 2015 improper payments review.

“SBA conducted a recapture audit to identify any funds improperly disbursed due to a lender’s or SBA’s non-compliance with 7(a) Loan Program requirements. SBA identified deficiencies on 17 of the 256 loans reviewed, resulting in improper payments of $2.08 million.

“Insufficient support for the reimbursement of lender expenses was the prevalent cause of the deficiencies.”

Read the report here

The Federal Register Notice for the SBA 504 loan refinance program is now posted in the Coleman Small Business Lending LinkedIn Group.