Serious Concerns of Potential Fraud in Economic Injury Disaster Loan Program Pertaining to the Response to COVID-19
- Issuer
- Office of Inspector General
- Document type
- Complaint
- Date
- 2020-07-28
Summary
SBA Office of Inspector General Management Alert, Report Number 20-16, dated July 28, 2020, from the Inspector General to Administrator Jovita Carranza on potential fraud in the Economic Injury Disaster Loan (EIDL) and Advance grant programs. It reports complaints of more than 5,000 instances of suspected fraud from financial institutions, nine of which reported a combined $187.3 million in suspected fraudulent transactions, and 1,038 hotline complaints by June 26, 2020. The OIG states SBA approved 6,132 loans totaling $208.1 million and 20,692 advance grants totaling $47.8 million to potentially ineligible businesses, and at least 275 duplicate loans. It suggests SBA strengthen internal controls and create a process for lenders to report suspected fraud. SBA's response from Administrator Carranza states the alert does not account for internal controls already in place.
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
S B A I N S P E C T O R GENERAL MANAGEMENT ALERT
Serious Concerns of Potential Fraud in Economic
Injury Disaster Loan Program Pertaining to the
Response to COVID-19
REPORT NUMBER 20-16| JULY 28, 2020
Office of Inspector General
U.S. Small Business Administration
MEMORANDUM
Date: July 28, 2020
TO: Jovita Carranza
Administrator
FROM: Hannibal “Mike” Ware
Inspector General
SUBJECT: Serious Concerns of Potential Fraud in the Economic Injury Disaster Loan
Program Pertaining to the Response to COVID-19
The Office of Inspector General (OIG) is issuing this Management Alert to bring to your attention
serious concerns of potential fraud in the Economic Injury Disaster Loan and Advance grant
programs that require immediate attention and action.
OIG has been inundated with contacts to investigative field offices from financial institutions across
the nation and the complaint Hotline. We have received complaints of more than 5,000 instances of
suspected fraud from financial institutions receiving economic injury loan deposits. Nearly 3,800 of
those reported instances of suspected fraud came from only six financial institutions. An additional
1,220 reports of suspected fraudulent transactions have come in from other financial institutions.
Some institutions have reported dollar amounts rather than specific numbers of instances of
suspected fraud. Nine financial institutions have reported a combined total of $187.3 million in
suspected fraudulent transactions.
Additionally, we received 465 hotline complaints by May 19, 2020, and the numbers have
continued to rise. By June 26, 2020, the number of OIG hotline complaints related to economic
injury loans had increased to 1,038 complaints. Of these, 692 complaints were about potential fraud
or scams, including credit inquiries for individuals who had never applied for an economic injury
loan or grant.
Our preliminary review reveals strong indicators of widespread potential fraud in the program.
OIG’s ongoing evaluation of the Small Business Administration (SBA’s) initial disaster assistance
response to the Coronavirus Disease 2019 (COVID-19) pandemic also has revealed several systemic
issues. In light of the additional $222.8 billion in remaining lending authority as of July 15, 2020,
these issues need to be addressed immediately to reduce fraud risk and prevent further losses.
Additionally, we have found indications of deficiencies with internal controls related to disaster
assistance for the COVID-19 pandemic. Our review of SBA’s initial disaster assistance response has
identified $250 million in economic injury loans and advance grants given to potentially ineligible
recipients. We have also found approximately $45.6 million in potentially duplicate payments.
Swift management action could reduce or prevent additional losses to the taxpayer, because the
associated economic injury loan applications may still be unapproved or undisbursed. Management
should engage financial institutions immediately to identify disbursements that may have been
obtained fraudulently and recover disbursed funds.
409 3rd Street SW., Washington, DC 20416 • phone: 202-205-6586 • fax: 202-205-7382
Background
The President signed the Coronavirus Preparedness and Response Supplemental Appropriations
Act on March 6, 2020; the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March
27, 2020; and the Paycheck Protection Program and Health Care Enhancement Act on April 24,
2020. These laws authorized SBA’s Disaster Assistance Program to use available funds to issue
economic injury loans and begin a new program, Economic Injury Disaster Loan Advance to
respond to COVID-19 economic injuries.
Section 1110 of the CARES Act authorized SBA to issue a $10,000 advance within three days to
applicants for loans being requested under the Small Business Act (15 U.S.C. 636(b)(2)). The CARES
Act initially made $10 billion available for the advance grant program. The Paycheck Protection
Program and Health Care Enhancement Act increased available budget authority to $20 billion.
Under the Coronavirus Preparedness and Response Act, Paycheck Protection Program and Health
Care Enhancement Act, and administrative actions taken by SBA, approximately $373 billion to
$374 billion is available for loans made through SBA’s economic injury loan program. 1
On July 11, 2020, SBA announced the $20 billion advance grant program has ended. The program
advanced eligible businesses $1,000 per employee, up to a maximum of $10,000, as an interim
source of funds while applicants waited for economic injury loan decisions. Applicants did not have
to be approved for a loan to receive an advance grant.
Our preliminary review and investigative findings have identified concerns with internal controls
and potentially rampant fraud in the program. OIG had already initiated a robust plan to oversee
SBA’s response to COVID-19. Our investigative staff has also begun dozens of investigations into
suspected fraud in the economic injury loan program.
Initial Investigative Findings
Since mid-June, OIG’s Investigations Division has had a major increase in reports of suspected fraud
from financial institutions and other law enforcement agencies, and we have launched numerous
investigations based on these reports. Nearly 440 financial institutions ranging from small, local
credit unions to major national institutions have contacted us to express serious concerns. Our law
enforcement partners report similar calls from financial institutions.
Financial institutions are in a unique position to help SBA confirm the validity of claims borrowers
make and help SBA reduce losses by cancelling loans or advances made to borrowers who
submitted fraudulent applications. At the time of our review, SBA did not have a process or
partnership in place with financial institutions to review instances of suspected fraud.
Examples of Suspicious Activities and Suspected Fraud
Examples of suspicious activity reported by financial institutions include:
• Accounts established using stolen identities
• Account holders unable to explain origins of deposits or identify business names on loans
1 On March 16, 2020, California, Connecticut, Maine, and Washington were the first states to be declared disaster areas
because of COVID-19. By March 21, 2020, all states and U.S. territories had been declared disaster areas. These actions
allowed SBA to use about $1.1 billion in its disaster loan credit subsidy account to support $7 billion-$8 billion in
Economic Injury Disaster Loans. The Paycheck Protection Program and Health Care Enhancement Act provided another
$50 billion to the disaster loan credit subsidy account to support approximately $366 billion in additional Economic
Injury Disaster Loans.
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• Account holders claiming to use the funds to open a business
• Account holders attempting to transfer funds into investment accounts
• Account holders attempting to transfer funds to foreign accounts
• Loan deposits being made into accounts with no other account activity that were
established remotely just before receiving the loan funds
• Economic injury loan funds made to agricultural businesses being deposited in accounts of
unrelated third parties located in different states than the business
• Account holders attempting to withdraw loan funds in cash or transfer the funds to other
newly established accounts
• Economic injury loans or advance grants being deposited into personal accounts--with no
evidence of business activity--of customers of the financial institution
In many instances, financial institutions have frozen funds and are trying to contact the appropriate
department in SBA to provide information about the borrower and resolve the frozen funds. Some
institutions have reported dollar amounts rather than specific numbers of instances of fraud. Nine
financial institutions have reported a combined total of $187.3 million in suspected fraudulent
transactions.
Examples of the transactions financial institutions suspect to be fraudulent include:
• A London-based international money transfer business claims to have identified $1.9
million in pending SBA deposits being made to accounts to be transferred internationally.
The financial institution is seeking to have SBA “blacklist” these account numbers to prevent
future deposits and is working to identify payouts already made.
• A banking service provider reports it has identified $73 million in SBA deposits from
approximately 3,000 transactions as being suspicious. The provider estimates it receives
300 deposits per day.
• A federal credit union reported to the Criminal Division of the Department of Justice that it
has received $15 million in SBA deposits in recent weeks. The credit union audited 60 of the
transactions and determined that 59 appeared to be fraudulent.
We are alarmed by these reports, but they are consistent with our investigations, which indicate
pervasive fraudulent activity. In response to the reports of suspicious activity, we issued an
advisory in coordination with the Financial Crimes Enforcement Network to financial institutions to
alert them to potential indicators of fraud in the economic injury loan program.
Fraud Schemes on Social Media
OIG’s Investigations Division, in conjunction with its investigative partners, has identified several
organized fraud rings that use social media to recruit applicants who split advance money with
ringleaders. Various romance scams and social media solicitations persuade people to provide
personally identifiable information to “get free money.” The information is then used to apply for
SBA economic injury loans and portions of the proceeds go to the ringleader.
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Another scheme has companies advertising their ability to secure SBA money for clients to start
businesses, then using respondents’ information to apply for SBA economic injury loans. Online
videos on social media are readily available to instruct potential applicants how to answer certain
questions to falsely obtain economic injury loan money.
During initial investigation into some of the theft complaints, OIG’s criminal investigators have
found that some IP addresses used to apply for SBA assistance using stolen identities were also
used in applications for numerous other economic injury loans.
SBA’s Initial COVID-19 Disaster Assistance Response
Our ongoing evaluation has revealed SBA had approved more than $250 million in COVID-19
economic injury loans and advance grants to potentially ineligible businesses as of June 19, 2020.
We also found that as of June 6, 2020, SBA had made duplicate economic injury loans to nearly 300
businesses.
Loans and Advance Grants to Ineligible Businesses
We found SBA issued 6,132 economic injury loans and 20,692 advance grants to potentially
ineligible businesses.
Under the CARES Act, applicants must have been in business on January 31, 2020, to be eligible for
economic injury loans or advance grants. We cross-referenced a database of Employer
Identification Number registrations between January 1, 2020, and June 15, 2020, and matched them
to data in SBA’s contractor’s database approved as of June 19, 2020.
To determine whether SBA was properly lending to businesses that existed on January 31, 2020, we
extracted all loan applications from companies whose identification numbers were registered
before January 31. We also removed all sole proprietorships.
The remaining 68,257 loan applicants had registered their businesses after January 31 and were
consequently ineligible for economic injury loans or grants. However, SBA approved 6,132 loans
totaling $208.1 million to the ineligible businesses. An additional 20,692 applicants received
advance grants totaling $47.8 million.
Duplicate Loans
We also found that SBA paid out hundreds of duplicate loan disbursements to businesses. In total,
SBA has approved, or approved and paid, at least 275 loans more than one time. To date,
approximately $35 million of the $45.6 million in approved duplicate loans has been disbursed. We
verified the duplicate approved loans were made to the same businesses at the same address. 2
The majority of the duplicate loans were approved twice. However, of the 275 duplicates, we found
one business was approved four times and received four loans; six businesses were each approved
for three loans. The remaining 268 businesses were each approved for two loans.
We believe the duplicate payments or loan approvals were made to applicants who applied more
than once for assistance. SBA processed the multiple applications submitted because the agency
does not have effective controls in place to determine if the applicants had previously applied for
and received financial help.
2 We based this finding on partial information exported from the SBA Capital Access Finance System. As of July 15, 2020,
OIG was not certain if the system had complete and total economic injury loan information. We may need to revise the
number of duplicate loans after analyzing a full information export from the system.
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Conclusion
SBA should take immediate action to reduce or eliminate fraud risks by strengthening existing
controls and implementing internal controls to address potential fraud. Strong controls will ensure
the Economic Injury Disaster Loan program can effectively and efficiently help eligible disaster
victims who have suffered real economic injury because of the COVID-19 pandemic.
Our preliminary review of findings indicates the need for a reassessment of controls to ensure only
eligible recipients receive advance grants and to prevent any erroneous duplication of loans.
Suggested Actions for SBA
To address serious problems and deficiencies in internal controls of the economic injury loan
program for COVID-19 pandemic relief, we suggest the Administrator:
1. Assess vulnerabilities for the purpose of strengthening or implementing internal controls to
address notices of potential fraud.
2. Create an effective process and method for lenders to report suspected fraud to the Office of
Disaster Assistance and to recover funds.
Analysis of agency comments
SBA leadership provided formal comments to this Management Alert, included in their entirety
in Appendix I. SBA management’s response informs OIG of the internal controls SBA has in place or
has recently instituted. However, OIG’s alert provides information about potential fraud and raises
awareness of preliminary review findings, despite the controls initially in effect.
We agree the actions taken by management on July 16 and July 22 are responsive to
OIG’s suggested actions in the alert. OIG is fully aware of these actions and understands these steps
were taken in response to OIG briefings in recent weeks of senior leaders on the concerns cited in
this alert.
SBA’s response also requested more discussions with OIG about internal controls necessary to
address the suggested actions. OIG has been in daily contact with program officials about specific
instances of potential fraud, which included providing contact information for financial institutions
to assist SBA in reviewing potentially fraudulent economic injury loans and advances. OIG
responsively met again with SBA leadership on July 27, 2020 to address SBA’s concerns and
provide further clarification. We will certainly continue to hold meaningful and cooperative
discussions with SBA management to share information and reports of findings.
OIG is an independent office within SBA that provides objective oversight of the agency’s programs
and operations. OIG will not compromise its independence or the objectivity necessary to carry out
its mission. The alert raises awareness of the need for the immediate action to ensure the integrity
of the program.
Disclaimer
We prepared this management alert to bring to SBA’s attention serious issues with the Economic
Injury Disaster Loan and Advance Grant programs that we have identified during our ongoing
review of SBA initial disaster assistance response to the Coronavirus pandemic. Our ongoing review
is being conducted in accordance with the Council of Inspectors General for Integrity and
Efficiency’s (CIGIE) Quality Standards for Inspection and Evaluation. We prepared this management
alert in alignment with OIG’s quality control standards and the CIGIE Quality Standards for federal
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Offices of Inspector General, which require that we conduct our work with integrity, objectivity, and
independence.
If you have any questions, please contact me or Andrea Deadwyler, Assistant Inspector General for
Audits, at (202) 205-6586.
cc: William Manger, Chief of Staff and Associate Administrator,
Office of Capital Access
Brittany Biles, General Counsel
James E. Rivera, Associate Administrator, Office of Disaster Assistance
Martin Conrey, Attorney Advisor, Legislation and Appropriations
Tami Perriello, Chief Financial Officer
Tonia Butler, Director, Office of Internal Controls
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Appendix I: Management’s Comments
SBA’s Response to the Alert
U.S. SMALL BUSINESS ADMINISTRATION
WASHINGTON, D.C. 20416
OFFICE OF THE ADMINISTRATOR
July 23, 2020
The Honorable Hannibal “Mike” Ware
Inspector General
U.S. Small Business Administration
409 3rd Street, SW
Washington, DC 20416
Dear Inspector General Ware:
I write in response to the Office of Inspector General’s (“OIG”) July 15, 2020 Draft
Management Alert, titled “Serious Problems and Deficiencies in Internal Controls Over
Economic Injury Disaster Loan Program Pertaining to the Response to COVID-19” (“Draft
Management Alert”).
The Small Business Administration (“SBA”) is proud of its role in providing economic relief
to small businesses impacted by COVID-19. Economic Injury Disaster Loans and Advances
(“EIDL Program”) are a critical part of that relief. As of July 22, 2020, SBA has approved
over 2.8 million loans for a total of $160 billion, and over 5.7 million Advances for a total of
$20 billion.
In administering EIDL, SBA strives to serve small businesses as efficiently and effectively as
possible. SBA takes very seriously its stewardship of taxpayer funds. SBA is committed to
mitigating risks of waste, fraud, and abuse in the EIDL Program. Working with a
government contractor that is a leader in the financial services industry, SBA has deployed
sophisticated technology to create a robust set of internal controls for the EIDL Program.
These internal controls have rejected $9 billion in Advances and prevented the processing
of another $8.8 billion in duplicate Advances. The internal controls have rejected $17.7
billion in loans and prevented the processing of another $78 billion in duplicate loans.
Because of the EIDL Program’s robust internal controls, the concerns raised by OIG in the
Draft Management Alert were unexpected. SBA desired to better understand the concerns
raised in the Draft Management Alert, so that the agency could prepare a tailored response.
In our response, SBA wanted to directly address the substance of the purported complaints
referenced in the Draft Management Alert and explain how the internal controls that SBA
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already has in place would deal with those purported complaints. SBA also sought to better
understand the alleged complaints referenced in the Draft Management Alert so that SBA
could implement enhanced internal controls designed to combat the specific concerns
presented by the alleged complaints. In a letter from Office of Disaster Assistance (“ODA”)
Associate Administrator James Rivera, SBA asked for specific information about the
underlying allegations in the Draft Management Alert. OIG, however, denied that request.
Moreover, OIG was unwilling even to provide summaries of the alleged complaints or
detailed descriptions of the concerns purportedly reflected in the complaints.
Without this additional information from OIG about the complaints on which the Draft
Management Alert purportedly is based, SBA cannot speak to the substance of the
purported complaints referenced in the Draft Management Alert or describe specific
actions SBA will take to address the purported complaints. Rather, in the sections that
follow, SBA will inform OIG about the robust internal controls already in place in the EIDL
program and discuss enhancements in internal controls that SBA is making in response to
the concerns reflected in the Draft Management Alert.
The EIDL Program Has Robust Internal Controls.
For both EIDL Advances and EIDL loans, SBA has imposed rigorous system rules and
controls to mitigate the risk of fraud. Despite the lowered guardrails required by Congress
with respect to fraud prevention (e.g., applicant self-certification of eligibility), and
contrary to OIG’s assertions, SBA’s efforts have in fact saved taxpayers billions of dollars.
The means of requesting the Advance and applying for a loan is through the online Rapid
Intake Application Form. The form is customer-friendly and designed to support high-
volume submission of data, but at the same time can easily gather complete application
information on submissions that are made multiple times for the same business (i.e.,
duplicates) as well as withholding any real-time feedback to those attempting to learn
system rules to exploit potential system vulnerabilities. The system has successfully
captured information for more than 12 million applications to date.
The automated Advance processing system, operating separate and apart from the Loan
processing system (although information is shared with the Loan system), has been
implemented with numerous internal and external checks designed to quickly evaluate the
veracity of application information submitted in the Advance decision process, including:
• Duplicate application check – Applications are evaluated to determine if a prior
application has been submitted from the same business. If an application is deemed to
be a duplicate, it is not approved for an Advance. Duplicates are identified by matching
tax ID numbers (EIN or SSN), matching bank account information (routing and account
numbers), or through a combination of data elements (including business name,
addresses, phone numbers, ownership information and other data points) that indicate
that the application matches a business with a previously submitted application. More
than 2.5 million applications representing $78 billion in potential loan volume and $8.8
billion in Advances have not been approved based on the duplicate identification logic.
• Business owner identity check – Information about business owners provided on
the application form is validated through a commercial third-party service used by
many financial institutions to ensure that the identity information provided by the
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applicant is valid and consistent. Validated data elements include owner name, date of
birth, SSN, and address. In addition, this service performs other checks including OFAC
list matching and monitors potential fraud indicators including network application
velocity checks. Applications that fail owner identity checks are not approved for an
Advance. Business owner identity validation failures have resulted in over 200,000
Advance requests and nearly $820 million in Advances not being approved.
• Bank account verification checks – In addition to the duplicate and identity
validation controls, the Advance processing system also performs bank account
verification checks to ensure the validity of the bank account information provided and
to associate the bank account with the business making the application. These checks
are performed through a combination of internal and third-party data validation steps.
These checks along with the identity validation controls outlined above have resulted in
2.5 million Advance applications, for $9 billion in volume, being affirmatively rejected
for an Advance. A breakout of post-duplicate, non-approval reasons and volumes is
provided below:
• Additional Checks – In addition to the system checks already described, two
additional control points are built into the Advance disbursement process. First, a
separate disbursement file duplicate check is performed to ensure that multiple
Advance disbursements are not processed for the same EIN or bank account number. In
addition, prior to disbursement file submission to Treasury, these same checks are
performed a second time by the SBA Denver Finance Team. Denver Finance also
performs additional checks based on known or suspected fraudulent application
information gathered from other SBA or Treasury programs.
The internal controls are just as strong from the loan perspective. The Loan processing
system is an automated decision engine that works in concert with the Loan Officers from
the Office of Disaster Assistance Processing and Disbursement Center to perform functions
relating to Loan eligibility, potential fraud identification, and approval/denial. Picking up
key information from the Advance side, the Loan processing system pulls credit bureau
data, evaluates credit information and potential fraud flags and buckets applications into
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certain review categories. All Loan decisions are ultimately made by people—namely, Loan
Officers—who review the rule-driven recommendations of the system. They examine the
application information submitted, perform other manual data gathering and review tasks,
and contact the applicant for information clarification or further documentation in
ultimately making their decision whether to approve or decline a loan application.
More specifically, with respect to the system rules, the Loan processing system runs
extensive rule sets per the SBA EIDL COVID-19 Program parameters with respect to loan
sizing and system decision recommendations which include credit criteria, business and
owner eligibility criteria, as well as suspicious activity and potential fraud indicators. There
are more than 70 rules related to loan qualification criteria. When identified, potential
fraud indicators are flagged for Loan Officer application file review. In addition to the
owner identity and bank account validation steps previously described, suspicious activity
and potential fraud indicators are obtained from various sources including credit report
information, profiles of electronic devices interacting with the system, as well as phone
number and email validation services. When present, these indicators are displayed in the
system to Loan Officers who review them, evaluate the data and gather follow-up
information and documentation prior to making their loan decision.
Moreover, within the client portal where applicants accept their loan amount, there is an
another identity validation check requiring applicants to correctly answer questions
relating to items (e.g., who is your mortgage servicer, what make of car did you register in
Georgia in 2012, etc.) that are not likely to be correctly answered by someone other than
the true identity holder.
The Loan Officer online interface also has a “related applications” feature that flags other
applications received in the program with common data elements including application
information (e.g., business, name, owner name, TIN, phone numbers, etc.), as well as device
information (e.g., IP address, device profile, etc.) to enable efficient cross reference with
other applications that may have previously been identified as invalid or fraudulent.
The data further supports our position that SBA is doing all it can to reduce the risk of
fraud on the loan side as well. First, despite OIG’s attempt to portray SBA’s loan review
process as one without a filter, approving everything coming through, in fact nearly 6
million loan applications representing about 50% of the loan applications submitted have
had one or more flags identified by the system necessitating an automatic, subsequent
manual reviewed by a Loan Officer during the underwriting process. The data presented in
the table below represents all of the flags identified (so that an application with more than
one flag is represented twice in the table).
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Second, the following table shows loan application and dollar approval rates associated
with applications flagged as “Advance ineligible” compared with those flagged as “Advance
eligible.” Loan approval rates for “Advance not approved” applications are about one third
of the rate of those with an Advance that was approved, indicating that the data validation
and potential fraud flags as well as other eligibility rules carry through and strongly
influence loan approval/decline decisions. The difference in loan dollar approval rates
between these groups shows that $17.7 billion in loan volume was not approved based on
system and process controls for the $59 billion in total loan dollars requested for the
Advance non-approved group.
The Draft Management Alert makes no mention of the internal controls described above.
Indeed, the Draft Management Alert appears to conclude that the EIDL Program’s internal
controls are deficient without considering what the internal controls actually are.
Rather than rely on purported complaints, OIG should be evaluating the internal controls
SBA has implemented and looking at the data that demonstrates how those internal
controls work to come to the right conclusion. The reality is that SBA has developed and
implemented a comprehensive, rigorous, end-to-end infrastructure to reduce the risk of
fraud in the EIDL COVID program.
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SBA Is Further Enhancing The EIDL Program’s Internal Controls.
As OIG is aware, on July 16, 2020, OIG advised ODA of reports from three large banking
institutions concerning a high amount of suspicious activity related to the EIDL program.
ODA’s internal fraud team immediately reached out to the banks and discussed in detail the
nature of the suspicious activity observed. We also provided guidance on how to report
suspicious fraud activity to ODA, including direct mailboxes for sharing information. The
ODA fraud team continues to review fraud referrals from multiple channels. To date, ODA
has resolved approximately 2,418 suspected fraud files, which include holds placed on
funds prior to disbursement. Additionally, ODA’s fraud team has referred 537 applications
to OIG for suspected fraud.
On July 22, 2020, SBA issued Information Notice 5000-20037 to depository financial
institutions and all SBA employees, in order to provide an overview of COVID-19 assistance
available under the EIDL program, including both Advances and direct loans, and to alert
depository financial institutions to the potential for suspicious activity related to COVID-19
EIDL funds deposited into business or personal accounts. This Notice provides examples of
suspicious activity and encourages depository financial institutions to examine certain
types of transactions more closely. SBA has provided points of contact for depository
financial institutions to report suspicious activity in the COVID-19 EIDL loan program.
Currently, SBA is issuing a task order for support to design and implement within ODA the
strategies and tools necessary to respond to reports from banks involving suspicious
activity in connection with deposits of the EIDL program, including Advances and direct
loans.
***
As the information in this response indicates, the Draft Management Alert does not account
for the robust internal controls already in place in the EIDL Program or the enhanced
internal controls that SBA is adding.
While SBA hopes this written response will inform OIG’s ongoing review of the EIDL
program, we reiterate our request in the Rivera letter that a meeting with OIG is necessary
before the Draft Management Alert is finalized. SBA wishes to engage with OIG to ensure
that the final Management Alert accurately reflects SBA’s strong commitment to
safeguarding taxpayer funds and appropriately characterizes SBA’s efforts to prevent
fraud, waste, and abuse in the EIDL Program. SBA proposes meeting with OIG on Monday,
July 27, 2020, but we are, of course, willing to meet at any time convenient for OIG before
the Draft Management Alert is finalized.
Sincerely,
Jovita Carranza
Administrator
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