What GAO Discovered

The Small Enterprise Administration (SBA) rapidly applied the Paycheck Safety Program (PPP) in April 2020 to help small companies adversely affected by COVID-19. However SBA’s preliminary restricted program safeguards resulted in improper funds and fraud dangers. In June 2020 and March 2021, GAO really useful that SBA do extra to supervise PPP and establish and reply to fraud dangers. In response, SBA applied compliance checks for purposes submitted in 2021 and said it will conduct a fraud danger evaluation.

PPP loans are absolutely forgivable (shouldn’t have to be repaid) if debtors meet sure circumstances. As of Could 2021, SBA had made determinations on 3.3 million mortgage forgiveness purposes (see determine) however had not issued steering for key features of the forgiveness course of. Particularly:

  • SBA had not but finalized a course of on how lenders can declare the SBA assure if the mortgage just isn’t absolutely forgiven or once they have proof the enterprise ceased operations or declared chapter. With out such a course of, lenders’ capital will stay tied up, limiting their skill to make non-PPP loans to small companies.
  • SBA had not applied, nor sought exceptions to, a statutory requirement to buy loans previous to mortgage forgiveness upon submission of reviews by lenders regarding the quantity anticipated to be forgiven.

SBA Mortgage Forgiveness Determinations on PPP Loans Made Throughout Spherical 1, as of Could 17, 2021

SBA Loan Forgiveness Determinations on PPP Loans Made During Round 1, as of May 17, 2021

SBA has enhanced its oversight of PPP, reminiscent of by conducting in-depth opinions of chosen loans, nevertheless it has not documented sure mortgage evaluate steps or developed a course of to enhance communication with lenders.

  • SBA has not but finalized procedures for senior-level opinions of borrower eligibility and mortgage forgiveness choices, rising the chance of inconsistent or incorrect mortgage determinations.
  • Though SBA has developed instruments reminiscent of an online portal to speak with lenders, it has not developed a course of to make sure its responses to lenders are well timed. Some lenders responding to GAO’s survey mentioned SBA had not responded in a well timed method or in any respect to inquiries on mortgage forgiveness purposes, which has created confusion and uncertainty for lenders and debtors and made it troublesome for them to make administration choices.

Why GAO Did This Examine

Since March 2020, Congress has offered dedication authority of about $814 billion for PPP, which offers small companies with low-interest loans that SBA absolutely ensures.

The CARES Act features a provision for GAO to observe funds offered for the COVID-19 pandemic. This report examines (1) safeguards that SBA put in place in the course of the PPP mortgage approval course of, (2) the PPP mortgage forgiveness course of, together with processes for unforgiven loans, and (3) SBA’s oversight of PPP loans and lenders.

GAO reviewed SBA documentation; surveyed a generalizable pattern of PPP lenders; analyzed information on mortgage forgiveness purposes; in contrast SBA processes in opposition to federal steering on credit score applications; and interviewed employees from SBA, the Division of the Treasury, and 4 commerce associations representing lenders.

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