October 6, 2020
By Caity Roach
Hot Topic Tuesday — GAO Claims SBA is Obstructing Oversight of Relief Loans
Conflict between the Government Accountability Office (GAO) and the SBA surrounding oversight of COVID-19 relief loans continues to escalate. On October 1, 2020, the GAO Director of Financial Markets and Community Investment, William B. Shear testified before the House Subcommittee on Investigations, Oversight and Regulations. Shear reported that the SBA has still not fully implemented the GAO’s June recommendations or provided his office with sufficient data in order for them to conduct a thorough review.
“There was obstruction when we were trying to obtain low-level PPP data that went on for weeks, getting access to people to talk about how they were implementing PPP that went on for weeks, we still aren’t getting a lot of cooperation from SBA,” Shear told the subcommittee. “And yet they accuse us of not giving them credit for what oversight they have in place, when they provide very little information and don’t respond to what we’re asking. With EIDL, it is more extreme. We have asked a very long time ago for application-level EIDL data.”
Despite meeting with SBA to discuss these issues on multiple occasions, Shear told the subcommittee that the GAO is still waiting for more information about the implementation of loan reviews and oversight, the SBA’s plans for verifying loan eligibility, and demographic data that was required under the CARES Act.
Although he did not speak to the obstruction, SBA’s Inspector General, Hannibal “Mike” Ware acknowledged that the SBA had lowered their guardrails against fraud in order to move money into communities more quickly. “The challenge SBA always has, especially in the disaster lending program, is they have to balance — balance is the keyword here — the need of speeding aid to people in desperate need, but balancing against a proper control environment,” Ware told the subcommittee. “In this instance, SBA’s efforts to hurry capital into businesses were at the expense of controls that would have mitigated the risks of ineligible or fraudulent businesses obtaining PPP or EIDL loans.”
Nevertheless, Ware says the SBA has been applying controls after the fact and that investigation into fraud has been fast-tracked.