Alert Memorandum: Delays in Quarterly Monitoring of CARES Act Borrower Compliance (SIGPR-A-22-002-1)

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SIGPR-A-22-002-1 
  
 
 
 
 
 
Alert Memorandum: 
Delays in the Quarterly  
Monitoring of Borrowers’ 
Compliance with 
Loan Requirements  
 
Report Number SIGPR-A-22-002-1 
May 24, 2022 
 
 
 
 
 
 
 
 
 
 
 
Office of the Special Inspector General for  
Pandemic Recovery 
Office of Audits 

 
SIGPR-A-22-002-1 
1 
 
Office of the Special Inspector General for Pandemic Recovery 
 
 
May 24, 2022 
 
 
TO: 
Jacob D. Leibenluft 
Chief Recovery Officer 
U.S. Department of the Treasury 
 
 
 
FROM: 
Theodore R. Stehney 
Assistant Inspector General for Auditing 
 
SUBJECT: 
Alert Memorandum: Delays in the Quarterly Monitoring of 
Borrowers’ Compliance with Loan Requirements  
SIGPR-A-22-002-1 
 
 
The purpose of this memorandum is to notify you of specific concerns we identified during 
our ongoing Audit of the Department of the Treasury’s (Treasury) Monitoring of Direct 
Loan Program Borrowers’ Compliance with the CARES Act and Loan Agreements (A-22-
002). 
 
Treasury has not conducted timely monitoring of loans made under Section 4003(b)(1)-
(3), Division A, Title IV, Subtitle A of the Coronavirus Aid, Relief, and Economic Security 
Act (CARES Act) for Calendar Year 2021 Quarters 1, 2, and 3. We found no evidence of 
Treasury’s monitoring between July 2021 and March 7, 2022, when SIGPR first 
questioned the lack of monitoring in an email to Treasury officials. Without timely 
monitoring, Treasury may be delayed in detecting and responding to borrowers’ lack of 
compliance with loan requirements or jeopardized ability to repay their loans.  
 
Background 
 
Section 4003, Division A, Title IV, Subtitle A of the CARES Act authorizes the Treasury 
to make loans, loan guarantees, and other investments to provide liquidity to eligible 
businesses related to losses incurred as a result of the coronavirus pandemic. Sections 
4003(b)(1)-(3) appropriated $46 billion to help stabilize the airline industry and businesses 
critical to maintaining national security. SIGPR is tasked to provide oversight of CARES 
Act programs. As of May 1, 2022, $1.0 billion in loans is outstanding. 
 
At the entrance conference on December 1, 2021, Treasury’s Acting Deputy Compliance 
Officer informed SIGPR that the goal of its monitoring program is to ensure recipients 
comply with loan agreements and the CARES Act. The Acting Deputy Compliance Officer 
added that Treasury also uses monitoring to determine whether borrowers are getting 
into trouble that may prevent them from paying back the loan to Treasury. 
 

 
SIGPR-A-22-002-1 
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Office of the Special Inspector General for Pandemic Recovery 
Office of Management and Budget Circular A-129 states that it is the responsibility of 
departments and agencies to manage credit programs “to protect the Government’s 
assets and to minimize losses in relation to social benefits provided.” It further states that 
agencies shall design and administer Federal credit programs “in a manner that most 
effectively and efficiently achieves policy goals while minimizing taxpayer risk.” To 
achieve this goal, agencies shall, among other activities: 
 
Operate each credit program under a robust management and oversight structure, 
with clear and accountable lines of authority and responsibilities for administering 
programs and independent risk management functions; monitoring programs in 
terms of programmatic goals and performance within acceptable risk thresholds; 
and taking action to improve or maintain efficiency and effectiveness. 
 
Agencies should also mitigate risk by “making sure that lenders and servicers 
participating in Federal credit programs meet all applicable financial and programmatic 
requirements.” 
 
According to the Government Accountability Office’s Standards for Internal Control in the 
Federal Government: 
 
Management designs control activities in response to the entity’s objectives and 
risks to achieve an effective internal control system. Control activities are the 
policies, procedures, techniques, and mechanisms that enforce management’s 
directives to achieve the entity’s objectives and address related risks. 
 
The objectives of the Audit of the Department of the Treasury’s Monitoring of Direct Loan 
Program Borrowers’ Compliance with the CARES Act and Loan Agreements 
(A-22-002) are to: 
 
1. Determine if Treasury had a sufficient policy in place to guide its monitoring.  
2. Determine if Treasury monitored borrowers’ compliance with the requirements of 
the CARES Act and the terms and conditions of the borrowers’ loan agreements 
and followed up to resolve any issues that they detected. 
 
The audit team has reviewed monitoring information in Salesforce for a sample of 
borrowers for Calendar Year 2020 Quarter 4 and Calendar Year 2021 Quarters 1, 2, and 
3. The audit team met with Treasury officials responsible for developing a policy to guide 
the monitoring program. 

 
SIGPR-A-22-002-1 
3 
 
Office of the Special Inspector General for Pandemic Recovery 
Specific Concerns  
 
During our audit fieldwork, we identified specific concerns that warrant your immediate 
attention. These concerns are described below and will be further explored as we 
continue with audit fieldwork. 
 
Delays in Treasury’s quarterly monitoring of borrowers’ compliance with loan 
requirements. 
 
Treasury has not conducted timely monitoring of loans made under Section 4003(b)(1)-
(3) of the CARES Act for Calendar Year 2021 Quarters 1, 2, and 3. As described above 
in the Background section, Office of Management and Budget Circular A-129 and the 
Government Accountability Office’s Standards for Internal Control in the Federal 
Government place on Treasury the responsibility of designing control activities and 
monitoring programs in terms of programmatic goals and performance within acceptable 
risk thresholds. Treasury’s lack of a monitoring policy could be the cause of the delayed 
monitoring. If Treasury is not reviewing borrowers’ answers timely, Treasury may be 
delayed in detecting and responding to borrowers’ lack of compliance with loan 
requirements or jeopardized ability to repay their loans. 
 
Treasury uses the Salesforce platform to monitor borrowers’ compliance with loan 
requirements. Quarterly, borrowers answer questions about their use of loan proceeds, 
executive compensation, equity, dividends, and other areas of compliance. Borrowers 
can also upload financial statements and other supporting documentation. Business rules 
that Treasury created in Salesforce can flag certain answers as potential indicators of 
non-compliance. Treasury staff can then identify whether the borrower provided an 
explanation, review the explanation, and then determine a course of action. 
 
Treasury’s deadline for borrowers to submit answers to monitoring questions in 
Salesforce for Calendar Year 2020 Quarter 4 was April 25, 2021. At a meeting with SIGPR 
in June 2021, Treasury officials stated they would complete monitoring testing for 
Calendar Year 2020 Quarter 4 in July 2021, three months after borrower submissions 
were due. In Salesforce, it is unclear if that goal was met, as it appears some work has 
been done in April 2022. Additionally, Treasury’s monitoring has been significantly 
delayed beyond this three-month timeframe and backed up for the subsequent quarters. 
 
We found no evidence of Treasury’s monitoring between July 2021 and March 7, 2022, 
when SIGPR first questioned the lack of monitoring in an email to Treasury officials. 
Treasury informed us that as of April 1, 2022, its Calendar Year 2021 Quarter 1 monitoring 
was ongoing and that it had not yet started its Calendar Year 2021 Quarters 2 and 3 
monitoring. At a meeting on April 25, 2022, Treasury officials informed us that Treasury 
had completed its Calendar Year 2021 Quarter 2 monitoring and was close to completing 
its Calendar Year 2021 Quarter 3 monitoring.  
 
Treasury’s deadline for borrowers to submit answers to monitoring questions in 
Salesforce for Calendar Year 2021 Quarter 1 was June 30, 2021. Had Treasury followed 

 
SIGPR-A-22-002-1 
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Office of the Special Inspector General for Pandemic Recovery 
the same timeline as it stated to SIGPR in the June 2021 meeting, it would have finished 
its monitoring review by October 2021. However, based on the information made 
available to us, Treasury’s monitoring of Calendar Year 2021 occurred in March 2022 and 
April 2022, which is a year after Quarter 1 ended and 9 months after borrowers submitted 
the answers. In the meantime, borrowers have submitted answers for Calendar Year 
2021 Quarters 2 and 3, and Treasury did not begin to review these answers until April 
2022. If Treasury is not reviewing this information timely, Treasury may be delayed in 
detecting and responding to borrowers’ lack of compliance with loan requirements or 
jeopardized ability to repay their loans. 
 
At a meeting on April 25, 2022, over 2 years since the CARES Act was passed, Treasury 
officials informed us that Treasury was still in the process of drafting a policy for the 
monitoring program. Treasury needs a formal policy that includes requirements, 
responsibilities, and timelines to ensure that monitoring is completed timely and 
effectively. 
 
Conclusion 
 
Treasury has not conducted timely monitoring of loans made under Section 4003(b)(1)-
(3) of the CARES Act for Calendar Year 2021 Quarters 1, 2, and 3. Additionally, Treasury 
does not have a policy to guide its monitoring of borrowers’ compliance with requirements 
for these loans.  
 
Recommendations 
 
The Special Inspector General for Pandemic Recovery recommends that Treasury take 
immediate action to: 
 
1. Create and finalize a policy to guide the monitoring program for loans made under 
Sections 4003(b)(1)-(3) of the CARES Act to ensure that monitoring is conducted 
timely. 
2. Create and implement a plan of action to complete monitoring timely moving 
forward and provide that plan to SIGPR. 
 
Agency Comments to the Draft Alert Memorandum 
 
Treasury’s Chief Recovery Officer agreed with our recommendations. Treasury’s written 
comments are included as Appendix B. 
 
Compliance Statement 
 
In accordance with generally accepted government auditing standards (GAGAS), during 
an audit, the auditors may provide interim reports of significant matters to appropriate 
entity and oversight officials. Such communication alerts officials to matters needing 
immediate attention and allows them to take corrective action before the final report is 
completed.  

 
SIGPR-A-22-002-1 
5 
 
Office of the Special Inspector General for Pandemic Recovery 
 
The related ongoing audit, when completed, will comply with GAGAS. The associated 
performance audit report that will be issued in the future will incorporate the issues 
discussed in this alert memorandum. 
 
Audit Team 
 
This audit was managed and conducted by the individuals listed below: 
 
 
Timothy Keeler 
Audit Manager 
Dana Fitzpatrick 
Auditor-In-Charge 
 

 
SIGPR-A-22-002-1 
A-1 
 
Office of the Special Inspector General for Pandemic Recovery 
Appendix A - Memorandum Distribution 
 
Chief Recovery Officer – U.S. Department of the Treasury 
 
Office of General Counsel – U.S. Department of the Treasury 
 
Inspector General – Special Inspector General for Pandemic Recovery 
 
Office of General Counsel – Special Inspector General for Pandemic Recovery 

 
SIGPR-A-22-002-1 
B-1 
 
Office of the Special Inspector General for Pandemic Recovery 
Appendix B – Agency Comments 
 
 
 

 
SIGPR-A-22-002-1 
B-2 
 
Office of the Special Inspector General for Pandemic Recovery 
Appendix B – Agency Comments 
 
 

 
SIGPR-A-22-002-1 
B-3 
 
Office of the Special Inspector General for Pandemic Recovery 
Appendix B – Agency Comments

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