SBA Hot Topic Tuesday — SBA OIG Releases White Paper on Prior Audits of Economic Stimulus Loans 

April 7, 2020

 By Caity Witucki
Contributing Editor, SBA Hot Topic Tuesday

SBA Hot Topic Tuesday — SBA OIG Releases White Paper on Prior Audits of Economic Stimulus Loans 

To ensure program integrity and mitigate the risk of financial loss for federally backed COVID-19 related loans, the Coronavirus Aid, Relief, and Economic Security (CARES) Act includes $25 million in appropriations for the SBA Office of Inspector General (OIG). In response to the additional funding, the SBA OIG has already begun outlining areas of potential risk and has made several recommendations to the SBA.

An SBA OIG White Paper released on April 3, 2020, details lessons learned and risks identified in prior audits of economic stimulus loans. The White Paper takes into consideration over 27 reports and 89 recommendations related to the  Supplemental Terrorist Activity Relief (STAR) Loan Program and America’s Recovery Capital (ARC) Loan Program.

“Our review of prior audits and reviews of economic stimulus loan programs identified areas of risk in SBA’s 7(a) loan program. Specifically, delays in promulgating regulations caused confusion among program participants about economic stimulus loan program requirements,” says the OIG. “In addition, we found SBA did not require program participants to submit documentation, which resulted in inappropriate or unsupported loan approvals.”

In response to the identified areas of risk, the OIG recommends that the SBA should:

• Issue clear requirements and ensure timely communication to lending partners
  
  
• Establish and monitor specific outcome-oriented performance measures
  
  
• Ensure public communication from SBA officials is appropriate and consistent with the established requirements
  
  
• Establish proper controls in the loan approval phase to ensure eligibility of participants and to mitigate the risk of loan default
  
  
• Establish a quality assurance plan to prevent and detect improper payments
  
  
• Oversee the program to ensure it is implemented as intended and that program goals and objectives are met
  
  
• Modify existing loan systems to track stimulus program data to support accurate program measurement and reporting

The SBA OIG plans on aggressively investigating allegations of fraud, waste, abuse, or mismanagement related to COVID-19 loans. Participating SBA lenders are encouraged to report mismanagement of federal funds to the SBA OIG hotline 1-800-767-0385 or submit a complaint online here. 

Sources:
SBA OIG White Paper
CARES Act