May 24, 2022
SBA Hot Topic Tuesday – SBA is Compliant with 7(a) Guaranty Purchases
Improper payments occur when a lender submits for a guaranty purchase and is approved, but the Office of Inspector General later reviews the guaranty purchase and makes a determination that there was a mistake and the payment should not have been made.
SBA made improvements from fiscal year 2020 to fiscal year 2021 and lowered the rates of improper payments for 7(a) loan guaranty purchases, 7(a) loan guaranty approvals, and 504 CDC loan guaranty approvals. 7(a) loan guaranty approvals and 504 CDC loan guaranty approvals saw minor improvements, but 7(a) loan guaranty purchase improper payment rates dropped more than 2%.
There is a standard that SBA’s programs should not exceed an improper payment rate statutory compliance threshold of 10%, and SBA reported improper payment rate estimates of less than 10% for the above programs except the Disaster Direct Loan Program. For 7(a) loan guaranty purchases, 7(a) loan guaranty approvals, and 504 CDC loan guaranty approvals SBA is in compliance with payments to lenders.
In a recently released OIG report about SBA’s improper payment reporting, the OIG stated that the auditors found that SBA was compliant with half of the reporting requirements under the Payment Integrity Information Act of 2019.
• SBA was compliant because they published the payment integrity information in the FY 2021 Agency Financial Report.
• They were compliant with posting the Agency Financial Report on the agency’s website.
• SBA was compliant with publishing gross improper payments estimated for the four programs susceptible to significant improper payments.
The auditors criticized the SBA for the Disaster Direct Loan Program not being compliant with many of the requirements.
For all programs reported in the payment integrity section of the Agency Financial Report the auditors provided the following recommendations:
- Enhance existing procedures to design and implement internal and quality control processes to ensure the completeness and accuracy of their reporting.
- Provide training to staff involved in the payment integrity reporting process.
- Ensure that there are adequate quality control reviews over improper payment disclosures and the accompanying materials in the Agency Financial Report.
- Continue to provide training and collaborate with program office staff to assure timely and complete reconciliation of transactions used to estimate improper payments.
The SBA concurs with the recommendations made in the audit report.