OIG Semi-Annual Report to Congress
Peggy E. Gustafson
I am pleased to present the U.S. Small Business Administration (SBA) Office of Inspector General’s (OIG) Fall 2012 Semiannual Report to Congress, which provides a summary of the OIG’s activities from April 1—September 30, 2012. As our statistics indicate, the OIG’s efforts to eliminate fraud, waste, and abuse in SBA programs during this period continue to significantly benefit taxpayers.
During this reporting period, the OIG issued 10 reports containing 31 recommendations for improving SBA operations and reducing fraud and unnecessary losses in the Agency’s programs. In addition, OIG investigations resulted in 33 indictments, 27 convictions, and 26 recommendations for suspension or debarment. Overall, the OIG achieved monetary recoveries and savings of $56,304,123 from recommendations that funds be put to better use agreed to by management; disallowed costs agreed to by management; court-ordered and other investigative recoveries, fines, and forfeitures; and loans or contracts not made as a result of investigations and name checks.
In achieving these results, the OIG dedicated its auditing and investigative resources toward the principal program areas of the SBA. A few noteworthy investigations and reviews detailed in this report are highlighted below.
Two Florida men were each sentenced for their role in a $100 million fraud. They were also ordered to forfeit over $10.9 million. Their scheme involved creating a company to obtain a $100 million small business set-aside language instruction contract with the Department of Defense, while creating the false appearance that the business was not affiliated with the winner of the previous contract.
The former pastor of a Louisiana church was sentenced to 10 years in prison and ordered to pay $963,900 in restitution to the SBA in connection with his guilty plea to mail fraud and theft of government funds. He had received SBA disaster loan funds to rebuild his church, which had been severely damaged by Hurricane Katrina. Instead, he used the money to purchase two luxury vehicles, two pieces of real estate, certificates of deposit, designer clothing, fine jewelry, and other personal items.
An audit of the SBA’s assessment of delegated lender underwriting found that the purchase review process was not effective in identifying whether lenders were negligent in determining the borrowers’ repayment ability. The OIG’s analysis indicated that improved reviews for repayment ability could result in a cost savings to the SBA of at least $43 million over the next two years.
Another audit determined that SBA’s National Disaster Loan Resolution Center did not transfer debts delinquent over 180 days to Treasury for cross servicing and offset as required. The audit found that $171.1 million of loans in liquidation status as of December 31, 2011, were delinquent over 180 days and should have been transferred to Treasury but were not. As a result, collection actions against the delinquent borrowers were not initiated.
I would like to thank the OIG’s employees for their outstanding efforts to promote economy, efficiency, effectiveness, and integrity in SBA programs and operations. We look forward to continuing to work with Administrator Mills and SBA’s management to address the issues and challenges facing the Agency.