Weaknesses in Treasury's CARES Act Loan Monitoring (SIGPR-A-22-002-2)

Record facts

Summary

An audit report, Report Number SIGPR-A-22-002-2, issued May 31, 2023 by the Office of the Special Inspector General for Pandemic Recovery, on the Department of the Treasury's monitoring of CARES Act loans to passenger air carriers, repair station operators, ticket agents, cargo air carriers and businesses critical to national security. It states that Treasury made 35 loans totaling $2.7 billion, with $974 million outstanding as of April 1, 2023. The report finds that Treasury did not monitor loans under Section 4003(b)(1)-(3) in a timely way for Calendar Year 2021 Quarters 1, 2, and 3 and had no monitoring policy until May 2022. It also finds, from a sample of 17 of the 35 borrowers, that monitoring levels vary widely among loan requirements without a supporting risk assessment. It makes three recommendations and includes appendices on scope, an alert memorandum and loan requirements.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

SIGPR-A-22-002-2 
 
 
 
 
 
 
 
Weaknesses in Treasury’s 
CARES Act Loan Monitoring 
 
Report Number SIGPR-A-22-002-2 
May 31, 2023 
 
Office of the Special Inspector General for  
Pandemic Recovery 
Office of Audits 

 
SIGPR-A-22-002-2 
i 
 
Executive Summary 
 
Weaknesses in Treasury’s CARES Act Loan Monitoring 
Report Number SIGPR-A-22-002-2 
May 31, 2023 
 
Why We Performed This Audit 
 
Our audit was focused on the Department of the Treasury’s (Treasury) CARES Act loans 
to passenger air carriers, repair station operators, ticket agents, cargo air carriers, and 
businesses critical to maintaining national security. Specifically, we looked at how 
Treasury monitored borrowers’ compliance with the requirements of the CARES Act and 
the terms and conditions of the borrowers’ loan agreements. 
 
Our objectives were to: 
1. Determine if Treasury had a sufficient policy in place to guide its monitoring; and  
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. 
 
What We Found 
 
We found that Treasury did not conduct timely monitoring of loans made under Section 
4003(b)(1)-(3) of the CARES Act for Calendar Year 2021 Quarters 1, 2, and 3. Although 
the first quarter covered by Treasury’s monitoring program was Calendar Year 2020 
Quarter 4, Treasury did not create a policy to guide the monitoring program until May 
2022. Without timely monitoring, Treasury cannot detect and appropriately respond to 
loan borrowers’ lack of compliance with loan requirements or jeopardized ability to repay 
the loans. 
 
We also found that though Treasury has a program to monitor borrowers’ compliance, the 
level of monitoring varies widely among loan requirements. We did not find evidence of a 
risk assessment that would show the likelihood or impact of non-compliance for each 
requirement. Such an analysis could have led Treasury to increase its monitoring in any 
high-risk or medium-risk areas. For requirements with weaker monitoring, Treasury may 
not catch areas of non-compliance. 
 
What We Recommended 
 
We recommend that Treasury: 
 
1. Update its monitoring policy to add deadlines to avoid significant monitoring 
delays; 
2. Ensure that it has an effective policy in place to monitor any future emergency loan 
programs in a timely manner; and 
3. Conduct a risk assessment of loan requirements to determine whether any areas 
of monitoring should increase for future quarterly reviews. 

 
SIGPR-A-22-002-2 
ii 
 
Table of Contents 
 
Introduction .............................................................................................................. 1 
 
Results 
Finding 1 – Treasury lacked a formal policy to guide the monitoring program, which led 
to delays in quarterly reviews. ................................................................. 3 
Finding 2 – Treasury’s monitoring is not sufficient to detect instances of non-compliance 
with all loan requirements. ....................................................................... 4 
 
Conclusion ................................................................................................................ 8 
Recommendations ..................................................................................................... 8 
Agency Comments ..................................................................................................... 8 
SIGPR Response ....................................................................................................... 8 
 
Appendix 
Appendix A – Scope and Methodology .............................................................. A-1 
Appendix B – Alert Memorandum ....................................................................... B-1 
Appendix C – Description of Loan Requirements ............................................. C-1 
Appendix D – Agency Comments ....................................................................... D-1 
Appendix E – Report Distribution ....................................................................... E-1 
 
 

 
SIGPR-A-22-002-2 
1 
 
Introduction 
 
We performed an audit of Department of the Treasury’s (Treasury) monitoring of CARES 
Act loans to passenger air carriers, repair station operators, ticket agents, cargo air 
carriers, and businesses critical to maintaining national security. 
 
Purpose 
 
We performed this audit as an offshoot to the Special Inspector General for Pandemic 
Recovery’s (SIGPR) overall audit of CARES Act loans to passenger air carriers, repair 
station operators, ticket agents, cargo air carriers, and businesses critical to maintaining 
national security (SIGPR-A-22-001). Splitting off the monitoring portion to another audit 
allowed for a smaller scope. 
 
Objectives 
 
Our objectives were to: 
1. Determine if Treasury had a sufficient policy in place to guide its monitoring; and 
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. 
 
See Appendix A – Scope and Methodology for additional details. 
 
Background 
 
The Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) was signed 
into law on March 27, 2020. The CARES Act authorized 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.1 To help stabilize the airline 
industry and businesses critical to maintaining national security, the CARES Act 
appropriated $46 billion. For these businesses, Treasury made 35 loans totaling $2.7 
billion. As of April 1, 2023, $974 million is outstanding. 
 
Treasury monitors borrowers’ compliance through a multi-pronged approach. In 
Salesforce, the borrowers answer questions related to loan requirements on a quarterly 
basis.2 Additionally, Treasury reconciles principal and interest payments as they are 
collected by its administrative agent. The administrative agent also monitors and collects 
collateral certificates provided by borrowers and will alert Treasury to any breach in 
obligation on the part of the borrower. Treasury’s Asset Management also conducts 
monitoring. This office is responsible for communicating with the borrowers on a regular 
basis. They review U.S. Securities and Exchange Commission reports for publicly traded 
 
1 Pub. L 116-136 § 4003 
2 Salesforce is a customer relationship management software platform. 

 
SIGPR-A-22-002-2 
2 
 
companies and conduct analysis to keep Treasury management apprised of the current 
finances of the borrowers. 
 
A Treasury official stated to SIGPR that the goal of Treasury’s monitoring program is to 
ensure borrowers comply with loan agreements and the CARES Act. Treasury also uses 
monitoring to determine whether borrowers are engaging in activities that would prevent 
them from successfully repaying the loans. 
 
On May 24, 2022, SIGPR issued an alert memorandum to Treasury.3 SIGPR alerted 
Treasury that its monitoring of borrowers’ compliance with CARES Act and loan 
requirements was delayed for Calendar Year 2021 Quarters 1, 2, and 3. SIGPR 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. SIGPR 
recommended Treasury create and finalize a monitoring policy and a plan of action to 
ensure that monitoring is done in a timely manner. On May 17, 2022, Treasury agreed 
with the recommendations. 
 
The alert memorandum can be found in Appendix B. 
 
 
3 Alert Memorandum: Delays in the Quarterly Monitoring of Borrowers’ Compliance with Loan Requirements 
(SIGPR-22-001-1). May 24, 2022. 

 
SIGPR-A-22-002-2 
3 
 
Results 
 
Treasury did not have a sufficient policy in place to guide the monitoring of its Section 
4003(b)(1)-(3) loans, which caused delays in Calendar Year 2021 monitoring in 
Salesforce. Though policies were created later, the policies do not include provisions to 
ensure that monitoring activities are completed timely. Furthermore, while Treasury has 
a program to monitor the borrowers’ compliance with loan requirements, the level of 
monitoring varies widely among loan requirements, and there is no risk assessment to 
support the different levels of monitoring. 
 
Finding 1 – Treasury lacked a formal policy to guide the monitoring program, which 
led to delays in quarterly reviews. 
 
Treasury did not conduct timely monitoring in Salesforce for loans made under Section 
4003(b)(1)-(3) of the CARES Act for Calendar Year 2021 Quarters 1, 2, and 3. Until May 
2022, Treasury had not yet created a policy to guide the monitoring program. Without 
timely monitoring, Treasury cannot detect and appropriately respond to loan borrowers’ 
lack of compliance with loan requirements or jeopardized ability to repay the loans. Of the 
$2.7 billion that Treasury loaned, $974 million remains outstanding as of April 1, 2023. 
 
Treasury uses the Salesforce platform to monitor borrowers’ compliance with loan 
requirements. Every quarter, 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. 
 
We found that Treasury’s monitoring in Salesforce was significantly delayed for Calendar 
Year 2021 Quarters 1, 2, and 3. Specifically, we found no evidence of Treasury’s 
monitoring in Salesforce between July 2021 and March 7, 2022. Treasury’s monitoring of 
Calendar Year 2021 in Salesforce occurred in March 2022 and April 2022, which is a year 
after Quarter 1 ended and nine months after borrowers submitted the answers. In the 
meantime, borrowers had submitted answers for Calendar Year 2021 Quarters 2 and 3, 
and Treasury did not begin to review these answers until April 2022.  
 
On May 24, 2022, SIGPR issued an alert memorandum titled Delays in the Quarterly 
Monitoring of Borrowers’ Compliance with Loan Requirements. The memorandum stated 
that Treasury had not conducted monitoring timely. SIGPR recommended that Treasury 
create and finalize a policy to guide the monitoring program, and that Treasury create and 
implement a plan of action to complete monitoring timely moving forward. Treasury 
agreed with our recommendations. The alert memorandum and Treasury’s response in 
their entirety can be found in Appendix B of this report. 
 
As of May 3, 2022, the date SIGPR provided Treasury a draft of the alert memorandum, 
Treasury was still in the process of drafting a policy for the monitoring program. Beginning 

 
SIGPR-A-22-002-2 
4 
 
in May 2022 Treasury began issuing a series of policies and procedures starting on May 
16 with the issuance of 4003 Aviation Program Interim Compliance Testing Process 
Overview. On July 15, 2022, Treasury issued Award Management Policy for Financial 
Assistance Recovery Programs. On August 8, 2022, Treasury issued a pre-decisional 
draft of Compliance Testing Procedures. On January 24, 2023, Treasury issued Data 
Validation, Compliance Testing, and Noncompliance Remediation Procedures. While 
these policies document Treasury’s approach to compliance testing, including personnel 
roles and responsibilities, they do not provide timeframes for completion of compliance 
testing activities. Therefore, these policies do not hold Treasury accountable for 
completing monitoring activities timely, putting Treasury at continued risk of falling behind 
again.  
 
At a meeting with SIGPR officials on December 1, 2021, Treasury’s Acting Deputy 
Compliance Officer stated that Treasury established a monitoring program to ensure 
borrowers comply with loan agreements and the CARES Act, and to determine whether 
borrowers are engaging in activities that may prevent them from paying back the loan to 
Treasury. However, if the monitoring program is not effective, Treasury may not detect 
and appropriately respond to potential instances of borrower non-compliance or 
jeopardized ability to pay back the loan.   
 
Office of Management and Budget (OMB) 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.” 
 
According to the Government Accountability Office’s (GAO) 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. 
 
Furthermore, “management evaluates and documents internal control issues” and 
“should remediate identified internal control deficiencies on a timely basis.” 
 
The policies guiding Treasury’s monitoring program do not include provisions to ensure 
that monitoring activities are completed timely. Therefore, Treasury could fall behind on 
monitoring again. Such delays weaken Treasury’s ability to detect and appropriately 
respond to borrowers’ noncompliance with loan requirements or jeopardized ability to 
repay the loans. 
 
Finding 2 – Treasury’s monitoring is not sufficient to detect instances of non-
compliance with all loan requirements. 
 
Though Treasury has a program to monitor borrowers’ compliance, the level of monitoring 
varies widely among loan requirements. According to the GAO’s Standards for Internal 

 
SIGPR-A-22-002-2 
5 
 
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. We did 
not find evidence of a risk assessment that would show the likelihood or impact of non-
compliance for each requirement. Such an analysis could have led Treasury to increase 
its monitoring in any high-risk or medium-risk areas. For requirements with weaker 
monitoring, Treasury may not catch areas of non-compliance. 
 
To test Treasury’s monitoring of borrowers’ compliance with loan requirements, we 
sampled 17 of the 35 borrowers and examined Treasury’s monitoring activities for 
Calendar Year 2021 Quarter 2. We tested the following requirements and evaluated 
Treasury’s monitoring, as follows: 
 
Figure 1 – Requirements Tested and Assessed Levels of Monitoring 
 
Loan Requirement Category 
Assessed Level of Monitoring 
Interest and Principal 
High 
Executive Compensation 
Medium 
Collateral Coverage Ratio4 
Medium 
Dividends and Buybacks 
Low 
Maintaining Assets 
Low 
Collateral 
Low 
Lobbying 
Very Low 
Insurance 
Very Low 
Obligations, Restricted Payments, and Junior Debts None 
 
Figure 2 – SIGPR’s Definitions for its Assessed Levels of Monitoring 
 
High 
No additional controls are needed to have reasonable assurance of 
compliance. 
Medium 
Good controls, but certain controls do not apply to all borrowers or 
certain documentation is missing. 
Low 
If a borrower self-certifies compliance without any documentation, the 
business rules in Salesforce will not flag this answer, and we did not see 
any evidence of additional monitoring. 
Very Low 
Treasury’s question to borrowers in Salesforce does not include the key 
words of the requirement, or the answers and lack of supporting 
documentation make the question meaningless. 
None 
Treasury told us that Treasury and the administrative agent do not 
monitor this requirement. 
 
See Appendix C for the details of each loan requirement. 
 
 
4 The collateral coverage ratio can be calculated by dividing the appraised value of the loan collateral by 
the outstanding balance of the loan. 

 
SIGPR-A-22-002-2 
6 
 
We assessed Treasury’s monitoring of interest and principal payments to be at a high 
level. Though no interest or principal payments are due yet, Treasury successfully 
monitors principal and interest payments through its administrative agent’s reporting. The 
cash journal and accrued income reports show principal and interest payments, as well 
as the total principal and accrued interest that each borrower still owes. 
 
We assessed Treasury’s monitoring of executive compensation to be at a medium level. 
On a quarterly basis, borrowers self-certify compliance with limits on certain 
compensation in Salesforce. Additionally, Treasury requested payroll information from 
certain borrowers. Treasury also engaged outside experts to provide interpretations 
regarding the requirements and certain borrowers' compliance. We concluded that 
Treasury's monitoring of this requirement was thorough for certain, but not all, borrowers. 
 
We assessed Treasury’s monitoring of collateral coverage ratio to be at a medium level. 
Each quarter, applicable borrowers must certify in Salesforce whether they have 
maintained a collateral coverage ratio above 1.6. Treasury also requires those borrowers 
to provide proof of the ratio, which usually includes an appraisal of the collateral, a 
calculation of the ratio, and a certificate. However, one or more of these documents were 
missing from some borrowers in our testing sample. 
 
We assessed Treasury’s monitoring of dividends, buybacks, maintaining assets, and 
collateral to all be at a low level. Borrowers are prompted to certify their compliance with 
these requirements in Salesforce quarterly and are not required to provide any supporting 
documentation if borrowers certify they are in compliance. 
 
It is common for Treasury to rely exclusively on self-certification from borrowers in 
Salesforce. While the Salesforce platform allows Treasury to require borrowers to submit 
supporting documentation, Treasury makes little use of this feature. For Calendar Year 
2021 Quarter 2, the borrowers in our sample averaged just three uploaded attachments 
in Salesforce despite answering 26 review questions. 
 
We assessed Treasury’s monitoring of lobbying and insurance to both be at a very low 
level. The Salesforce question that Treasury officials told us covers the lobbying 
requirement does not explicitly address lobbying. To address the insurance requirement, 
Treasury asks borrowers to submit a copy of their collateral insurance. However, we 
found no evidence that borrowers uploaded this documentation in Calendar Year 2021 
Quarter 2; all borrowers indicated that this item was not applicable. Treasury informed us 
that the administrative agent does not monitor insurance other than collateral insurance. 
The loan requirements state that borrowers must maintain insurance typical for their 
industries in types and amounts to protect against loss or damage. Treasury’s monitoring 
does not adequately determine compliance with these requirements. 
 
Finally, Treasury does not monitor whether borrowers have paid obligations, including tax 
liabilities, that if not paid could result in material adverse effects. Likewise, Treasury does 
not monitor whether the borrower made restricted payments or prepaid junior debt. 
 

 
SIGPR-A-22-002-2 
7 
 
Weak monitoring may not detect instances of non-compliance with requirements in the 
CARES Act and loan agreements. For many of the requirements we tested, Salesforce 
shows that borrowers received a passing grade for their responses. However, given the 
lack of supporting documentation, we do not see evidence that borrowers actually met 
the requirements. 
 
A risk assessment would assist Treasury in determining which requirements to monitor 
and what evidence should be reviewed in assessing compliance. We asked Treasury to 
provide evidence that such an assessment was used to inform the monitoring program. 
Treasury’s response stated that early in the implementation of the loan program, Treasury 
reviewed the statutory requirements, loan agreements, and other available information to 
make a risk‐based decision about how to design their compliance testing framework. 
However, the documents Treasury provided in response to our request did not show a 
risk assessment; there was no analysis of the likelihood or impact of noncompliance for 
each requirement. Furthermore, there was no analysis or reasoning for what 
requirements were to be tested and to what extent. Treasury only assessed higher risk 
for a borrower if its answers in Salesforce were flagged as potential indicators of non-
compliance. 
 
As stated in Finding 1, GAO’s Standards for Internal Control in the Federal Government 
states that “[m]anagement designs control activities in response to the entity’s objectives 
and risks to achieve an effective internal control system.” Also from Finding 1, OMB 
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.” 
 
We found that Treasury monitors borrowers’ compliance through various methods. The 
main methods include self-certifying answers in Salesforce, payment data and 
certifications collected through Treasury’s administrative agent, and financial monitoring 
by Treasury’s Asset Management. This monitoring is supposed to ensure that the 
requirements of the loan agreements are followed by every borrower; however, it is not 
sufficient. There are gaps in their monitoring that make it impossible to ensure the 
borrowers are following the loan agreements. 

 
SIGPR-A-22-002-2 
8 
 
Conclusion 
 
Treasury did not have a sufficient policy in place to guide the monitoring of its Section 
4003(b)(1)-(3) loans, which caused delays in Calendar Year 2021 monitoring. Though 
policies were created later, the policies do not include provisions to ensure that monitoring 
activities are completed timely. Adding deadlines to policies and preparing for future loan 
programs would put Treasury in position to effectively monitor current and future loan 
programs. Treasury has a program to monitor the borrowers’ compliance with loan 
requirements. However, the level of monitoring varies widely among loan requirements. 
Conducting a risk assessment could support decisions to increase monitoring of certain 
requirements to better detect instances of non-compliance. 
 
Recommendations 
 
We recommend that Treasury: 
 
1. Update its monitoring policy to add deadlines to avoid significant monitoring 
delays; 
2. Ensure that it has an effective policy in place to monitor any future emergency loan 
programs in a timely manner; and 
3. Conduct a risk assessment of loan requirements to determine whether any areas 
of monitoring should increase for future quarterly reviews. 
 
Agency Comments 
 
Treasury generally agreed with the findings and the intent of the recommendations. 
However, for Finding 1, Treasury’s response stated that the monitoring delay was a 
decision made to prioritize other work given resource constraints. Treasury’s 
management response is included in its entirety in Appendix D. 
 
SIGPR Response 
 
In its response to the Draft Report, Treasury states that it did not complete its monitoring 
in Salesforce between July 2021 and March 7, 2022 because a risk-based decision was 
made to pause these reviews due to resource constraints. SIGPR previously requested 
documentation from Treasury to support this assertion. The documentation Treasury 
provided does not provide adequate information to warrant a revision of the finding. 
Specifically, it does not provide a detailed justification for the pause, include a timeframe 
for the pause, show formal approval of the decision, or mention how Treasury will mitigate 
the risks of delaying monitoring. 
 
Furthermore, SIGPR interviewed Treasury officials about the monitoring program multiple 
times during that period, and those officials did not mention that monitoring activities had 
been paused. Treasury officials acknowledged the monitoring delays only after SIGPR 
discovered a lack of activity in Salesforce and brought it to the attention of Treasury 
officials on March 7, 2022. Treasury stated that “[o]nce those processes were in place 

 
SIGPR-A-22-002-2 
9 
 
and Treasury’s resource constraints had eased, our monitoring personnel reviewed the 
previously submitted data and cleared the backlog.” However, this did not occur until after 
SIGPR discovered the 9 months of inactivity. 
 
Treasury’s response also states that the delays only impacted Salesforce monitoring and 
that other monitoring activities conducted by Treasury’s administrative agent and Asset 
Management group continued during that period. However, the majority of the loan 
requirements SIGPR tested were not monitored outside of Salesforce. Therefore, while 
Salesforce monitoring was paused, Treasury was not systematically monitoring these 
requirements. 
 
Audit Team 
 
This audit was managed and conducted by the individuals listed below: 
 
 
Timothy Keeler 
Audit Manager 
Dana Fitzpatrick 
Auditor-In-Charge 
Connor Steggerda 
Management Analyst 
 

 
SIGPR-A-22-002-2 
A-1 
 
Appendix A – Scope and Methodology 
 
Scope and Methodology 
 
We conducted this performance audit between February 2022 and March 2023 in 
accordance with generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, appropriate evidence to 
provide a reasonable basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 
 
We assessed how Treasury monitored borrowers’ compliance with the requirements of 
the CARES Act and the terms and conditions of the loan agreements for CARES Act 
loans to passenger air carriers, repair station operators, ticket agents, cargo air carriers, 
and businesses critical to maintaining national security. Specifically, our audit focused on 
Calendar Year 2021 Quarter 2. However, upon discovering delays in Treasury’s 
monitoring of these borrowers for that quarter in Salesforce, we also examined Calendar 
Year 2020 Quarter 4 and Calendar Year 2021 Quarters 1 and 3 to determine the extent 
of the delays. 
 
To accomplish our objectives, we: 
 
• 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; 
• Interviewed Treasury officials responsible for the monitoring program; 
• Interviewed Treasury officials responsible for developing a policy to guide the 
monitoring program; 
• Reviewed policies created by Treasury to guide the monitoring program; and 
• Reviewed relevant CARES Act requirements, loan requirements, GAO guidance, 
and OMB guidance. 
 
Internal Control  
 
We assessed internal control and compliance with laws and regulations necessary to 
satisfy the audit objectives. In particular, we assessed internal control significant to our 
objectives. However, because our audit was limited in scope, it may not have disclosed 
all internal control deficiencies that may have existed at the time of this audit. Any 
internal control deficiencies we found are discussed in the Results section of this report. 

 
SIGPR-A-22-002-2 
B-1 
 
Appendix B – Alert Memorandum 
 
 

 
SIGPR-A-22-002-2 
B-2 
 
Appendix B – Alert Memorandum 
 
 

 
SIGPR-A-22-002-2 
B-3 
 
Appendix B – Alert Memorandum 
 
 

 
SIGPR-A-22-002-2 
B-4 
 
Appendix B – Alert Memorandum 
 
 

 
SIGPR-A-22-002-2 
B-5 
 
Appendix B – Alert Memorandum 
 
 

 
SIGPR-A-22-002-2 
B-6 
 
Appendix B – Alert Memorandum 
 
 

 
SIGPR-A-22-002-2 
B-7 
 
Appendix B – Alert Memorandum 
 
 

 
SIGPR-A-22-002-2 
B-8 
 
Appendix B – Alert Memorandum 
 
 

 
SIGPR-A-22-002-2 
B-9 
 
Appendix B – Alert Memorandum 
 
 

 
SIGPR-A-22-002-2 
B-10 
 
Appendix B – Alert Memorandum 
 

 
SIGPR-A-22-002-2 
C-1 
 
Appendix C – Description of Loan Requirements 
 
During the audit, SIGPR tested Treasury’s monitoring of loan requirements. The loan 
requirements are summarized in the table below. Not all 35 loans necessarily contain 
each loan requirement. 
 
Requirement 
Category 
Loan Requirement 
Interest and 
Principal 
Borrowers are required to make principal and interest payments. 
Executive 
Compensation 
Borrowers must adhere to CARES Act limits on compensation and 
severance for employees and officers whose 2019 total 
compensation exceeded $425,000. 
Collateral 
Coverage Ratio 
Borrowers must maintain a collateral coverage ratio of at least 1.6. 
Dividends and 
Buybacks 
Borrowers cannot pay dividends or engage in buybacks until 12 
months after the loan is repaid. 
Maintaining 
Assets 
Borrowers must maintain all or substantially all of their assets. 
Collateral 
Borrowers must deliver an appraisal to the Administrative Agent if 
additional collateral is pledged 
Borrowers cannot create a lien upon their collateral. 
Borrowers cannot dispose of their collateral unless they follow the 
loan’s procedures for doing so. 
Lobbying 
Borrowers cannot use the CARES Act funds to pay for lobbying. 
Insurance 
Borrowers must maintain insurance typical for their industry in types 
and amounts to protect against loss or damage. 
Obligations, 
Restricted 
Payments, and 
Junior Debts 
Borrowers must pay their obligations, including tax liabilities, that if 
not paid, could result in Material Adverse Effect. 
Borrowers cannot make any restricted payments. 
Borrowers cannot prepay any junior debts. 
 
 

 
SIGPR-A-22-002-2 
D-1 
 
Appendix D – Agency Comments 
 

 
SIGPR-A-22-002-2 
D-2 
 
Appendix D – Agency Comments 
 
 
 

 
SIGPR-A-22-002-2 
D-3 
 
Appendix D – Agency Comments 
 

 
SIGPR-A-22-002-2 
E-1 
 
Appendix E – Report Distribution 
 
Chief Program 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 
Assistant Inspector General for Auditing – Special Inspector General for Pandemic 
Recovery 
Office of General Counsel – Special Inspector General for Pandemic Recovery

File and source

File

REPORT_SIGPR_weaknesses-treasurys-cares-act-loan-monitoring_2023-05-31.pdf

Size

8,926,692 bytes

SHA-256

4b9ecdca5bae2de75e3cae90bb5f98cf49f8f57141b78035b0d7e07889b30dae

Our copy

REPORT_SIGPR_weaknesses-treasurys-cares-act-loan-monitoring_2023-05-31.pdf

Original

www.oversight.gov