Hot Topic Tuesday — OIG Flash Report on the Paycheck Protection Program

May 12, 2020

 By Caity Witucki
Contributing Editor, Hot Topic Tuesday

Hot Topic Tuesday — OIG Flash Report on the Paycheck Protection Program

On May 8, 2020, the SBA Office of Inspector General (OIG) released the results from a comparative analysis of the Paycheck Protection Program (PPP). The review, which compares recent guidance from the SBA to Section 1102 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, identified inconsistencies between SBA guidance and the law. 

The CARES Act states that the Administrator should issue guidance to ensure that the processing and disbursement of PPP loans prioritize small businesses in underserved markets and businesses owned by socially and economically disadvantaged individuals. However, the Inspector General found that the SBA has not provided guidance to lenders about prioritizing borrowers in these situations.

Additionally, the CARES Act does not possess restrictions on the portion of a PPP loan that must be used for payroll. However, SBA added a requirement that at least 75 percent of the loan proceeds must be used on payroll in order to receive full forgiveness. 

The Inspector General also found that the SBA did not issue guidance on the deferment process for PPP loans or register loans in a timely manner as required by the CARES Act.

Based on this ongoing study, the SBA Inspector General made a series of recommendations on SBA’s current rules, regulations, policies, and procedures including the following:

  • Issue guidance requiring the lenders to prioritize borrowers in underserved markets.

  • Include optional demographic information on forms for loans that have already been disbursed.

  • Evaluate the potential negative impact of the specified percentage of loan proceeds eligible for forgiveness.

  • Issue guidance to lenders on the deferment process for PPP loans.

  • Register PPP loans by TIN.

Read the full OIG report for a detailed comparison between key provisions in Section 1102 of the CARES Act and the SBA’s public guidance.