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SBA Hot Topic Tuesday — SBA Can Improve Loan Programs by Reducing Improper Payments at SBA Loan Operation Centers

November 5, 2019

By Caity Witucki
Contributing Editor, SBA Hot Topic Tuesday

SBA Hot Topic Tuesday — SBA Can Improve Loan Programs by Reducing Improper Payments at SBA Loan Operation Centers

During FY 2019, the SBA’s OIG identified material lender noncompliance in five of the eight loans reviewed, totaling approximately $8.7 million in questioned costs. According to the FY 2019 SBA Management Report Card, OCA staff completed purchase and quality control reviews on the eight loans, but they did not identify or fully address the material deficiencies noted in the subsequent OIG review. Therefore, the SBA OCA’s goal during FY 2020 is to conduct an evaluation to determine why material lender noncompliance was not identified or mitigated during purchase and quality control reviews and implement any necessary improvements to mitigate future risks.

SBA Improved Its Quality Control Program to Reduce Improper Payments

The FY 2019 preliminary improper payments evaluation results for 7(a) loan guaranty purchases indicate that the SBA did not meet their published reduction target for the third consecutive year. However, the dollar value of the estimated improper payments decreased. During FY 2020, the OCA plans to continue to develop corrective action plans to reduce improper payments.

Improvements Needed to Ensure Quality Deliverables and Mitigate Loss

In FY 2014, the OIG established its High Risk 7(a) Loan Review Program to evaluate lender noncompliance with SBA’s requirements. By September 2018, the OIG had reviewed 27 loans with purchase amounts totaling almost $23.2 million. The OIG also recommended recoveries on 11 loans, totaling $4 million.

During FY 2019, the OIG reviewed an additional 8 loans and found material lender noncompliance in 5, totaling approximately $8.7 million in questioned costs. OCA staff completed purchase and quality control reviews on all 8 of the loans. However, these reviews did not identify or fully address the material deficiencies noted in the subsequent OIG reviews.

In FY 2020, the OCA plans to evaluate its purchase and quality control reviews to determine why the reviews did not identify or mitigate the lenders’ noncompliance with SBA requirements.

Source: SBA OIG Report 20-01

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