SIGPR-A-22-003-9 — Independent Review: Mesa Airlines Validation Memo (August 2022)

Record facts

Summary

Report SIGPR-A-22-003-9, dated August 2, 2022, from the Special Inspector General for Pandemic Recovery (SIGPR) to Treasury's Chief Recovery Officer, reviewing the Validation Memo Treasury completed for Mesa Airlines, Inc. The report states that Mesa applied on April 24, 2020 for a $1.004 billion loan under Section 4003 of the CARES Act and that Treasury finalized a loan amount of $195 million on October 30, 2020, making Mesa a Tier 2 borrower. It concludes that SIGPR is not aware of any material modifications that should be made to the Validation Memo to comply with Treasury's Underwriting Guide. It lists two discrepancies it considered inconsequential: no name listed for Supervisory Review, and a reviewer assertion about other CARES Act loans that conflicts with Mesa's Payroll Support Program loan totaling $95,144,443. Appendices cover scope, methodology and distribution.

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SIGPR-A-22-003-9 
   
 
 
 
 
Independent Review of 4003(b) Loan Recipient’s  
Validation Memo – Mesa Airlines, Inc. 
 
Report Number: SIGPR-A-22-003-9 
August 2, 2022 
 
 
 
 

 
SIGPR-A-22-003-9 
i 
  
August 2, 2022 
 
 
TO: 
Jacob D. Leibenluft 
Chief Recovery Officer 
U.S. Department of the Treasury 
 
 
FROM: 
Theodore R. Stehney 
Assistant Inspector General for Auditing 
Special Inspector General for Pandemic Recovery (SIGPR) 
 
SUBJECT: 
Independent Review of 4003(b) Loan Recipient’s  
Validation Memo – Mesa Airlines, Inc. 
 
This report presents the results of our review of the Validation Memo associated with 
Mesa Airlines, Inc.’s (Mesa) application submission to the Department of the Treasury 
(Treasury). Mesa received a $195 million loan under Section 4003, Division A, Title IV, 
Subtitle A of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the 
“CARES Act”).  
On April 24, 2020, Mesa applied for a loan under Application Number LA-2004220529. 
All applicants had to provide specific documentation along with their applications to be 
further considered to receive a loan, as outlined in Treasury’s Underwriting Guide. 
Treasury completed a Validation Memo once it received and reviewed an applicant’s 
document submissions. Once the Validation Memo was completed, Treasury forwarded 
the application to the next level of the underwriting process.  
Based on our review, we are not aware of any material modifications that should be 
made to the Validation Memo that Treasury completed for Mesa to comply with 
Treasury’s Underwriting Guide.   
Please address questions regarding this report to Michael Sinclair at (202) 923-8021 or 
Michael.Sinclair@sigpr.gov. 
 
 

 
SIGPR-A-22-003-9 
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Introduction  
Section 4003 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.  
The breakdown of available funding was as follows: 
1. Up to $25 billion for passenger air carriers; businesses certified to perform 
inspection, repair, replace or overhaul services; and ticket agents; 
2. Up to $4 billion for cargo air carriers; and 
3. Up to $17 billion for businesses critical to maintaining national security.  
Section 4003 loans were further categorized by the loan amount requested. The Air 
Carrier Loan Program is categorized into tiers as follows: Tier 1 loan amounts were 
$300 million or greater, Tier 2 loans were less than $300 million and greater than 
$20 million, and Tier 3 loans were up to $20 million and no less than $250 
thousand.  
 
Background 
On April 24, 2020, Mesa applied for a $1.004 billion loan under Section 4003 of the 
CARES Act. Treasury finalized the loan amount of $195 million on October 30, 
2020. Mesa Airlines, Inc. is a wholly owned subsidiary of Mesa Air Group, Inc. In 
March 2020, the company had approximately 3,540 employees. Based on its loan 
amount, Mesa is classified as a Tier 2 borrower.  
During the application period, applicants were required to submit documents 
through a Treasury web portal. For each applicant to move forward in the loan 
process, they had to provide a financial plan, IRS Form 941, and financial 
statements, among other documentation. Depending on the applicant’s type of 
business, additional documentation was also required. For instance, air carriers had 
to provide their Department of Transportation certification as such under Section 
40102(a) of Title 49, United States Code. All documentation provided was to be 
maintained by Treasury.  
Once the required documentation was compiled, Treasury verified and recorded it 
using a Validation Memo. A completed and signed Validation Memo allowed the 
applicant to move forward to the loan underwriting process.  
  
Results in Brief 
Based on our review, we are not aware of any material modifications that should be 
made to the Validation Memo Treasury completed for Mesa to comply with Treasury’s 
Underwriting Guide. However, we identified the following discrepancies in the 
completion of the Validation Memo that we considered inconsequential: 

 
SIGPR-A-22-003-9 
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(1) The Validation Memo contains Treasury Department names for a Reviewer and 
Lead Reviewer, but there was no name listed for Supervisory Review. 
 
(2) We noted that the Reviewer asserts that the Borrower did not receive, apply for, 
or expect to apply for loans provided or guaranteed pursuant to other programs 
under the CARES Act. However, according to Treasury’s Validation Memo 
processes and applicant provided information, Mesa did indicate that it had 
received, applied for, or expected to apply for loans provided or guaranteed 
pursuant to other programs under the CARES Act. Furthermore, the Validation 
Memo itself indicates that Mesa is a Payroll Support Program applicant. Lastly, 
the Treasury website confirms that Mesa applied for and received a Payroll 
Support Program loan on April 20, 2020, totaling $95,144,443.  
 
Compliance Statement 
We conducted our review in accordance with generally accepted government auditing 
standards for attestation engagements. Those standards require that we plan and perform 
the review to obtain limited assurance that the Validation Memo is fairly presented in all 
material respects and completed according to Treasury’s Underwriting Guide. A review is 
substantially less in scope than an examination, the objective of which is to obtain 
reasonable assurance and express an opinion on the subject matter. Accordingly, we do 
not express such an opinion. We believe that our review provides a reasonable basis for 
our conclusion.  
 
Audit Team 
This review was conducted by the individuals listed below: 
Michael Sinclair 
Audit Manager  
Emily Brown 
Management Analyst 
 
 

 
SIGPR-A-22-003-9 
A-1 
 
Appendix A – Objective, Scope and Methodology 
 
We have reviewed Mesa’s submission of loan documents under Application Number 
LA-2004220529. Treasury was responsible for obtaining Mesa’s loan documentation 
and completing the Validation Memo in accordance with its Underwriting Guide prior to 
moving the application further in the loan process. Our responsibility is to express a 
conclusion about whether any material modification should be made to the Validation 
Memo for it to be in accordance with Treasury’s Underwriting Guide and be fairly stated.  
The objective of this review is to evaluate whether Treasury’s Validation Memo for Mesa 
was completed according to Treasury’s Underwriting Guide and other applicable 
criteria, and fairly presents the supporting documentation provided by Mesa in all 
material respects. Treasury’s efforts culminated in the completion of the Validation 
Memo. Additionally, this review is an offshoot of the overall examination of the 4003(b) 
loan program.  
We primarily performed this review remotely due to the ongoing telework situation 
dictated by the pandemic. We therefore relied on mostly electronic records for our 
review.  
To accomplish the review objective, our fieldwork included, but was not limited to, the 
following procedures: 
• Reviewed Treasury’s Underwriting Guide and determined the documents 
required by all applicants;  
• Reviewed Mesa’s Validation Memo for completeness and accuracy; 
• Determined if the document submissions were complete and accurate;  
• Requested additional documentation from Treasury officials when needed; and 
• Held discussions with Treasury officials when applicable.  
The review was conducted in accordance with generally accepted government auditing 
standards for attestation engagements.  
 
 

 
SIGPR-A-22-003-9 
B-1 
 
Appendix B – Report 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 
Asst. Inspector General for Auditing – Special Inspector General for Pandemic 
Recovery 
Office of General Counsel – Special Inspector General for Pandemic Recovery

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