SIGPR-A-22-003-14 — Independent Review: Ovation Travel Group Validation Memo (Dec. 2022)

Record facts

Summary

Report Number SIGPR-A-22-003-14, dated December 2, 2022, is an independent review by the Special Inspector General for Pandemic Recovery (SIGPR) of the Treasury Validation Memo for Ovation Travel Group, Inc., a ticket agent that received a $20 million loan under Section 4003 of the CARES Act. The report states that Ovation applied on April 19, 2020 for a $10 million loan, that the $20 million amount was finalized on October 15, 2020, and that Ovation paid the balance in full in January 2021. SIGPR reports material deficiencies: no supervisory review signature, unchecked boxes, a blank Ticket Agents Only section, and an unexplained gap between 263 employees in the application and 727 on IRS Form 941. It concludes Treasury did not complete the memo in accordance with its Underwriting Guide and the application should not have advanced. Appendices cover methodology and distribution.

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SIGPR-A-22-003-14 
   
 
 
 
 
Independent Review of 4003(b) Loan Recipient’s  
Validation Memo – Ovation Travel Group, Inc. 
 
Report Number: SIGPR-A-22-003-14 
December 2, 2022 
 
 
 
 

 
SIGPR-A-22-003-14 
i 
  
December 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 – Ovation Travel Group, Inc. 
 
This report presents the results of our review of the Validation Memo associated with 
Ovation Travel Group, Inc.’s (Ovation) application submission to the Department of the 
Treasury (Treasury). Ovation received a $20 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 19, 2020, Ovation, a ticket agent, applied for a loan under Application Number 
LA-2004160285. 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.  
Our review identified material deficiencies within the Validation Memo. Therefore, based 
on our review, Treasury did not complete the Validation Memo in accordance with its 
Underwriting Guide and the loan application should not have advanced to the next step 
in the loan process. 
Please address questions regarding this report to Michael Sinclair at (202) 923-8021 or 
Michael.Sinclair@sigpr.gov. 
 
 

 
SIGPR-A-22-003-14 
1 
  
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 $250,000.  
 
Background 
On April 19, 2020, Ovation applied for a $10 million loan under Section 4003 of the 
CARES Act. Treasury and Ovation finalized the loan amount of $20 million on 
October 15, 2020. Based on its loan amount, Ovation is classified as a Tier 3 
borrower. In January 2021, Ovation paid the balance of its loan in full. 
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, ticket agents 
had to provide the percentage of 2019 revenue earned from air ticketing, packaged 
travel products, or other travel services. 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.  
 
 
 
 
 

 
SIGPR-A-22-003-14 
2 
  
 
Results in Brief 
Our review identified the following material deficiencies within the Validation Memo: 
• There was no supervisory review signature. 
• There is a large discrepancy between the number of employees on the IRS 
Form 941 versus what the company reported to Treasury. Ovation’s application 
indicates there are 263 worldwide employees while the IRS Form 941 shows 
727. There is no explanation for the discrepancy. 
• Several boxes in the Validation Memo were not checked by the reviewer. 
• The entire Ticket Agents Only section was left blank. 
Based on our review, because of the significance of the deficiencies listed above, 
Treasury did not complete the Validation Memo in accordance with its Underwriting 
Guide. Therefore, the loan application should not have advanced to the next step in the 
process. Had we performed an examination, other matters might have come to our 
attention.  
 
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  
Kevin Gallagher 
Audit Manager 
 
 

 
SIGPR-A-22-003-14 
A-1 
 
Appendix A – Objective, Scope and Methodology 
 
We have reviewed Ovation’s submission of loan documents under Application Number 
LA-2004160285. Treasury was responsible for obtaining Ovation’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 
Ovation was completed according to Treasury’s Underwriting Guide and other 
applicable criteria, and fairly presents the supporting documentation provided by 
Ovation 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 Ovation’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-22-003-14 
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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