Audit Report - Oig 24 036 Coronavirus Disease 2019 Pandemic Relief Programs Audit Of Treasury S
Summary
Department of the Treasury Office of Inspector General Audit Report OIG-24-036, Audit of Treasury's Soundness of Investment Decisions for Participation in the Emergency Capital Investment Program, dated September 24, 2024 and addressed to Jessica Milano, Chief Program Officer, Office of Capital Access. The Results in Brief states that Treasury accurately allocated investments under ECIP in accordance with the Consolidated Appropriations Act, 2021 and ECIP policies and procedures, and incorporated internal controls. It states that Treasury received 212 ECIP applications by the September 1, 2021 deadline, that the OIG reviewed a sample of 52, and that the report makes no recommendations. It also states that the Act authorized Treasury to provide up to $9 billion in capital through ECIP.
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
- Issuer
- Inspector general and oversight reports
- Document type
- Audit Report
- Case
- Oig 24 036 Coronavirus Disease 2019 Pandemic Relief Programs Audit Of Treasury S
Cite this document
“Audit Report - Oig 24 036 Coronavirus Disease 2019 Pandemic Relief Programs Audit Of Treasury S.”
Original at oig.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/oig-24-036-coronavirus-disease-2019-pandemic-relief-programs-audit-of-treasury-s/
, SHA-256 8feb9881d5efa0ca14ccff0814ce4558e5c4497a091138f8592aee3be51ac998.Full text
Audit Report
OIG-24-036
CORONAVIRUS DISEASE 2019 PANDEMIC RELIEF
PROGRAMS
Audit of Treasury’s Soundness of Investment
Decisions for Participation in the Emergency
Capital Investment Program
September 24, 2024
Office of Inspector General
Department of the Treasury
This Page Intentionally Left Blank
Contents
Audit Report
Results in Brief .............................................................................................. 3
Background ................................................................................................... 4
Audit Results ................................................................................................. 9
Next Steps .................................................................................................. 15
Appendices
Appendix 1: Objectives, Scope, and Methodology............................................ 16
Appendix 2: Management Response ............................................................... 20
Appendix 3: Major Contributors to This Report ................................................ 22
Appendix 4: Report Distribution ..................................................................... 23
Abbreviations
BHC Bank Holding Company
CAA, 2021 Consolidated Appropriations Act, 2021
CDFI Community Development Financial Institution
COVID-19 Coronavirus Disease 2019
DAS Deputy Assistant Secretary
ECIP Emergency Capital Investment Program
GAO Government Accountability Office
Green Book Standards for Internal Control in the Federal Government
IC Investment Committee
MDI Minority Depository Institution
NCUA National Credit Union Administration
OIG Office of Inspector General
PAL Preliminary Approval Letter
Secretary Secretary of the Treasury
SLHC Savings and Loans Holding Companies
SOP standard operating procedures
Treasury Department of the Treasury
i
This Page Intentionally Left Blank
September 24, 2024
Jessica Milano
Chief Program Officer
Office of Capital Access
This report presents the results of our audit of the Department
of the Treasury’s (Treasury) soundness of investment decisions
for participation in the Emergency Capital Investment Program
(ECIP). Title V, Subtitle B, Community Development Investment,
within Division N of the Consolidated Appropriations Act, 2021
(CAA, 2021) 1 authorized the establishment of the Emergency
Capital Investment Fund within Treasury to provide up to $9
billion of emergency capital investments to low- and
moderate -income community financial institutions that support
small and minority -owned businesses and consumers
responding to the economic impact of the Coronavirus Disease
2019 (COVID-19). Furthermore, Treasury’s Office of Inspector
General (OIG) is required to submit a report no less than twice a
year to Congress 2 and Treasury on the oversight provided for
the programs established under Subtitle B, including any
recommendations for improvement. In accordance with this
mandate, we conducted this audit.
Our audit objective was to determine if Treasury accurately
allocated investments under the Emergency Capital Investment
Program, to comply with applicable laws, regulations, and
policies and procedures. The scope of our audit included, but
was not limited to, a review of ECIP applications, eligibility and
participation requirements, allocation methodologies and
calculations, and determination decisions, including investment
1
Public Law 116-260, Consolidated Appropriations Act, 2021 (December 27, 2020).
2
The committees of Congress named under Subtitle B include the Committee on Financial Services
of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of
the Senate.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 1
amounts for ECIP applicants. Our audit scope period included
ECIP applications received by September 1, 2021. 3
To accomplish our audit objective, we:
• reviewed applicable Federal laws and regulations;
• reviewed ECIP guidance; program documentation; and
policies and procedures related to the review and
decisioning of ECIP applications;
• performed walkthroughs of ECIP’s application submission,
review, and approval/disapproval processes; and
• interviewed Treasury ECIP personnel responsible for
reviewing ECIP applications.
To assess the accuracy of allocated investments, we selected a
judgmental sample of 15 applicants from the 175 applicants
that were awarded. In addition, we reviewed 100 percent of the
37 applicants that were deemed ineligible and/or were not
awarded investments to assess whether Treasury correctly
evaluated them.
For this audit, we focused on Treasury’s process to review,
approve, and make investment decisions for ECIP applicants.
We plan to review ECIP’s closing 4 and funding, and compliance
and monitoring processes in future audits.
We conducted our fieldwork remotely from April 2024 to
September 2024. Appendix 1 contains a detailed description of
our audit objective, scope, and methodology.
3
Treasury established a deadline of September 1, 2021, to accept Emergency Capital Investment
Program applications.
4
In order to “close” and receive their funds, participants are required to execute the ECIP Legal
Agreements, including the Letter Agreement, Securities Purchase Agreement, and Exhibits and
Schedules. These legal agreements include covenants that ECIP participants agree to comply
with and refer in certain instances to other sources of requirements participants must follow,
such as the ECIP Interim Final Rule.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 2
Results in Brief
We determined that Treasury accurately allocated investments
under ECIP, in accordance with the CAA, 2021, and ECIP
policies and procedures. Furthermore, Treasury incorporated
internal controls throughout their application review and
decision-making process in accordance with the Government
Accountability Office’s (GAO) Standards for Internal Control in
the Federal Government (Green Book). A listing of the Green
Book components and principles of internal controls, significant
within the context of the audit objective, are detailed in
appendix 1.
Overall, Treasury received 212 ECIP applications from banks,
Bank Holding Companies (BHC), 5 Savings and Loans Holding
Companies (SLHC), 6 and credit unions by the established
September 1, 2021, deadline. From the 212 total applications,
we reviewed a sample of 52 and determined that Treasury
complied with the CAA, 2021, for investment decisions made
under ECIP. Specifically, Treasury established and followed a
12-step ECIP application review and decision-making process to
evaluate applicants and allocate ECIP investments. Accordingly,
we did not make any recommendations in this report.
As part of our reporting process, we provided ECIP management
an opportunity to comment on a draft of this report. In a written
response, Treasury management stated they are pleased that
the report confirms that Treasury accurately allocated
investments, appropriately incorporated internal controls, and
followed its established investment decision-making process.
Treasury’s management response, in its entirety, is included in
appendix 2 of this report.
5
A BHC is a corporate entity that controls one or several operating bank companies. To be
considered a bank holding company, a firm must: (1) hold at least 25 percent of the voting
shares in the bank; (2) control the election of a majority of the directors or trustees; or
(3) directly or indirectly influence the management or policies of the bank.
6
A SLHC includes any company that directly or indirectly controls either a savings association or
any other company that is an SLHC.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 3
Background
CAA, 2021
The CAA, 2021 authorized Treasury to establish the ECIP to
provide up to $9 billion in capital to low- and moderate- income
community financial institutions to, among other things, provide
loans, grants, and forbearance for small and minority-owned
businesses and consumers, located in areas that may have been
disproportionately impacted by the economic effects of the
COVID-19 pandemic. Of the $9 billion total available amount,
$4 billion was to be set aside to make (a) $2 billion available for
financial institutions with less than $500 million in assets, and
(b) $2 billion available for financial institutions with up to $2
billion in assets.
Treasury launched the ECIP Application Portal on
March 4, 2021, with an application deadline of
September 1, 2021. As of October 5, 2023, Treasury has made
over $8.57 billion of ECIP investments in 175 community
financial institutions across the country. ECIP funds are
intended to support the efforts of community financial
institutions to provide loans, grants, and other assistance to
small and minority-owned businesses and consumers, especially
in low-income and financially underserved communities that
struggled during the COVID-19 pandemic.
CAA, 2021 Requirements:
Only low- and moderate-income community financial institutions
are eligible to participate in ECIP. ECIP requires an institution
must either be a certified community development financial
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 4
institution (CDFI) 7 or a minority depository institution (MDI). 8 In
addition, eligible institutions must be: (1) an insured depository
institution that is not controlled by a BHC or SLHC that is also
an eligible institution; (2) a BHC; (3) a SLHC; or (4) a federally
insured credit union.
In addition:
• The Secretary of the Treasury (Secretary) must consult
with the appropriate Federal banking agency or the
National Credit Union Administration (NCUA), as
applicable, to determine whether the institution may
receive a capital investment.
• Applicants must provide the Secretary, and the
appropriate Federal banking agency or the NCUA, as
applicable, an investment lending plan (that meets
specific requirements 9).
• An eligible institution that the Secretary approves for
participation in the Program may issue to the Secretary,
7
A CDFI has a primary mission of promoting community development; serves an Investment Area
or Targeted Population; provides development services in conjunction with equity investments or
loans; maintains accountability to residents of its Investment Area or Targeted Population; and is
not an agency or instrumentality of the United States or of any State or political subdivision of a
State. CDFIs include banks, loan funds (provide financing and technical assistance), credit
unions, and venture capital funds (provide equity and debt-with-equity services).
8
An MDI is an institution that meets any of the following criteria: (A) as defined in section 308 of
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1463
note), a depository institution satisfies this definition if it is (1) a privately owned institution in
which 51 percent is owned by one or more socially and economically disadvantaged individuals;
(2) a publicly owned institution in which 51 percent of the stock is owned by one or more
socially and economically disadvantaged individuals; or (3) a mutual institution in which the
majority of the board of directors, account holders, and the community that it services is
predominantly minority; (B) an institution considered to be an MDI by the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors
of the Federal Reserve System, the National Credit Union Administration; or (C) an institution
listed in the Federal Deposit Insurance Corporation’s MDIs list published for the third or fourth
quarter of 2020 or the National Credit Union Administration’s MDIs list for the fourth quarter of
2020.
9
The lending plan: (1) demonstrates that not less than 30 percent of the lending of the applicant
over the past 2 fiscal years was made directly to low-and moderate-income borrowers;
(2) describes how the business strategy and operating goals of the applicant will address
community development needs in communities that may be disproportionately impacted by the
economic effects of COVID-19; (3) includes a plan to provide community outreach and
communication; and (4) includes details on how the applicant plans to expand or maintain
significant lending or investment activity in low- or moderate-income minority communities.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 5
and the Secretary may purchase from the institution,
preferred stock.
• If the Secretary determines that an institution cannot
feasibly issue preferred stock, the Secretary may
purchase from the institution a subordinated debt
instrument.
• An institution is ineligible if it is designated in Troubled
Condition 10 by the appropriate Federal banking agency or
the NCUA, or subject to a formal enforcement action with
its primary Federal regulator that addresses unsafe or
unsound lending practices.
• The Secretary may issue such regulations and other
guidance as may be necessary or appropriate to define
terms or carry out the authorities.
ECIP Application Review and Decision Process:
Treasury’s ECIP Standard Operating Procedures: Application
Review and Decisioning Process 11 was used during Treasury’s
evaluation process of applicants to determine eligibility and
investment allocations. ECIP’s standard operating procedures
(SOPs) served two primary purposes: (1) to standardize the
processes that Treasury ECIP personnel follow to review
applications and select applicants for investment; and (2) to
clearly document and allocate responsibilities among Treasury
ECIP personnel and define roles to implement these procedures.
The Application Review and Decision-Making Process consists
of a 12 -step process which includes the following:
1. Application Intake and Initial Checks - Receive and
conduct initial checks on applications to ensure that they
are complete and confirm that an applicant meets basic
eligibility criteria. Any applications deemed ineligible for
investment are removed from further processing unless
10
“Troubled Condition” is defined under 12 CFR Section 303.101(c) for an applicant whose
primary Federal regulator is the Federal Deposit Insurance Corporation, under 12 CFR Section
225.71 for an applicant whose primary regulator is the Federal Reserve Board, under 12 CFR
Section 5.51(c)(7), for an applicant whose primary Federal regulator is the Office of the
Comptroller of the Currency, and for an applicant whose primary regulator is the NCUA, the
meaning given to such term under 12 CFR Section 700.2.
11
ECIP Standard Operating Procedures: Application Review and Decisioning Process (February 1,
2023)
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 6
the determination is reversed based on additional
information provided or because of further analysis.
2. Regulator Feedback
a. Federal Regulator Feedback - Initiate consultation and
receive eligibility-related information from the Federal
Banking Regulators. 12
b. State Regulator Feedback - Ensure that the concerns
and views offered by the appropriate state regulators
are considered when assessing applicants for an
investment. Feedback from state regulators is optional.
Certain state regulators may inform ECIP that they do
not plan to provide feedback on applicants.
3. Financial Agent Review - Assign applications to the
Financial Agents 13 and receive their input with overall
criteria that will be used to evaluate an applicant.
4. Financial Analyst and Lending Plan Analyst Review -
Develop an Investment Committee (IC) 14 Memo for each
applicant by the Financial Analyst and the Lending Plan
Analyst in collaboration. The Lending Plan Evaluation
Form is used to evaluate an applicant and its Lending
Plan.
5. Investment Committee Review - The IC reviews the IC
Memo(s) and expresses a preliminary view on which
applicants should be approved, denied, or found ineligible.
6. Pool Analysis - Determine the investment amounts each
applicant should receive, as recommended by the IC,
12
The Federal Banking Regulators include the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the
National Credit Union Administration.
13
A Financial Agent is a commercial financial institution designated by Treasury to provide certain
types of financial services for the federal government in accordance with applicable federal law.
14
Investment Committee members: (1) Director, Office of Financial Markets; (2) Assistant Director,
Office of Financial Institutions Policy; (3) Director, CDFI Fund; (4) Director, Federal Programs,
Office of Financial Markets; and (5) Senior Adviser, Office of Domestic Finance.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 7
based on available funding and the legal and policy
objectives of the Program. 15
7. Preliminary Approval - Obtain approval from the Deputy
Assistant Secretary (DAS) 16 on the IC recommendations
in the Investment Approval Memo.
8. Withdrawal – Document and process an applicant's
request to withdraw from ECIP, if applicable.
9. Additional Information - Provide an applicant an
opportunity to submit additional information to support
decision-making by the Program, if needed.
10. Ineligibility or Not Selected - Notify any applicants that
ECIP has determined as ineligible or not selected for
investment. The notification provides applicants an
opportunity to request additional information on or
reconsideration of the determination.
11. Reconsideration - Provide applicants determined to be
ineligible or not selected for investment with an
opportunity to receive additional information on or to
request reconsideration of the determination. If an
applicant provides additional information that may result
in the DAS making a different determination, the
application is re-evaluated as needed, presented to ECIP’s
Director for reconsideration and the DAS for approval.
12. Reallocation - Reallocate any outstanding investment
balance to applicants in performance categories 1 and 2
depending on the maximum investment amount for which
each applicant is eligible and an estimate of the capital
available for reallocation.
15
The pool analysis accounts for Lending Plan Analysis scores as a factor informing the final
amount recommended for investment for each applicant by assigning each applicant to a
performance category reflecting overall scores relative to other applicants. Performance
categories range from 1 to 5, with categories 1 and 2 being the two highest-scoring categories.
16
Deputy Assistant Secretary for Community and Economic Development.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 8
Audit Results
We determined that Treasury accurately allocated investments
under ECIP, in accordance with the CAA, 2021, and ECIP
policies and procedures. Treasury received 212 ECIP
applications by the established September 1, 2021, deadline,
from banks, BHCs, SLHCs, and credit unions. Overall, we tested
52 ECIP applications, including 100 percent of the 37 applicants
that ECIP determined as ineligible, were not selected to
participate in the program, or declined to participate in the
program. Additionally, we selected a judgmental sample of 15
of the 175 applicants that received an investment in the CDFI,
MDI, and combined CDFI & MDI categories.
As a follow up to our Audit of Treasury’s Implementation of the
Emergency Capital Investment Program, 17 we determined
Treasury finalized policies and procedures and key
documentation to govern full program implementation and
ongoing administration of ECIP investments and designed
internal controls over the program. Although Treasury also
finalized SOPs for ECIP’s closing and funding process and
participant compliance oversight, we did not assess them. For
the scope of this audit, we limited our assessment to Treasury’s
Application Review and Decisioning Process SOPs to evaluate
and allocate investment amounts to applicants in accordance
with applicable Federal laws and policies and procedures. As we
had no findings in our review, we did not make any
recommendations in this report.
Treasury Accurately Allocated Investments Under the
Emergency Capital Investment Program in Accordance
With the CAA, 2021
The CAA, 2021 requires applicants to submit an investment
lending plan for review by Treasury, and the appropriate Federal
Banking Agency or NCUA. ECIP policies and procedures require
personnel to conduct a pool analysis to determine the
investment amount for each recommended applicant,
17
Treasury OIG, Audit of Treasury’s Implementation of the Emergency Capital Investment Program,
OIG-22-028 (March 8, 2022).
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 9
considering the available funding and the evaluation of the
applicant’s investment lending plan.
We obtained and reviewed application packages for a sample
size of applicants approved to participate in ECIP. Application
packages included (1) the application; (2) regulator
documentation; (3) approval documentation; (4) Financial Agent
review spreadsheet; (5) Lending Plan review spreadsheet; and
(6) other supporting documentation to make
approval/disapproval decisions. We reviewed Treasury’s pool
analysis workbook and determined Treasury ECIP personnel
considered the Lending Plan analysis scores before
recommending the investment amount. We confirmed the pool
analysis also considered (1) the set-aside amounts required
under the CAA, 2021; (2) broad geographic coverage; and
(3) broad demographic coverage. Additionally, we confirmed the
required ECIP personnel and the ECIP Director approved the IC
Memo, and the DAS for Community and Economic Development
approved the investment decision for each batch of applicants.
Finally, after DAS approval, we confirmed the ECIP team sent
Preliminary Approval Letters (PAL) to approved applicants.
Treasury ECIP Personnel Determined the Eligibility of
Applicants in Accordance With the CAA, 2021
The CAA, 2021 requires that only low- and moderate-income
community financial institutions are eligible to participate in the
program. Additionally, Treasury was permitted to establish
additional criteria for participants to further the goals of the
program. To be eligible for ECIP, an institution must either be a
CDFI or an MDI. In addition, eligible institutions must be: (1) an
insured depository institution that is not controlled by a BHC or
SLHC that is also an eligible institution; (2) a BHC; (3) a SLHC;
or (4) a federally insured credit union.
If a BHC or SLHC was not a CDFI or designated as an MDI at
the time of application, it was ineligible to participate in ECIP.
However, if an ineligible BHC or SLHC had a subsidiary
depository institution that was a CDFI or designated as an MDI
and was insured by the Federal Deposit Insurance Corporation,
that subsidiary was eligible to apply to ECIP.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 10
The CAA, 2021 further states that an applicant must provide
Treasury, and the appropriate Federal banking agency or NCUA,
an investment lending plan that includes the lending plan
requirements. Low- and moderate-income community financial
institutions receiving capital investments under ECIP shall
provide community outreach and communication, where
appropriate. The CAA, 2021 states that an institution is
ineligible to participate in ECIP if it is designated in Troubled
Condition by the appropriate Federal banking agency or NCUA.
Of the 37 applicants 18 we tested that did not receive an
investment, 8 were deemed ineligible as they were not financial
institutions. Of the remaining 29 applicants that did not receive
an investment, we noted the following reasons in ECIP’s
database management system:
• applicant(s) requested to withdraw from ECIP
participation.
• applicant(s) were determined to be ineligible because they
were in Troubled Condition;
• applicant(s) were denied because it was determined that
they may not have the capacity to make annual dividend
or interest payments;
• applicant(s) were denied due to a subsidiary of each
applicant being in Troubled Condition;
• applicant(s) were on the “Do Not Pay” list; 19
• applicant(s) received an offer of an award but did not
meet the conditions to close and receive funding;
• applicant(s) no longer maintained a credit union charter;
and
18
One additional applicant was deemed ineligible at the start of the review process; however, the
applicant provided additional information and was later deemed eligible and awarded.
19
Do Not Pay, operated by Treasury’s Bureau of the Fiscal Service is available to agencies at no
cost to check many data sources at one time to verify a recipient’s eligibility for a federal
payment.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 11
• applicant(s) were determined to not have CDFI or MDI
status.
Treasury Personnel Used ECIP’s Application Review
and Decision-Making Procedures to Evaluate
Applicants
Treasury ECIP personnel used their ECIP Application Review and
Decisioning Flowchart and ECIP Application Review and
Decisioning Process SOPs to document and evaluate ECIP
applications.
We tested our sample of 52 applicants and ensured ECIP
personnel accurately made decisions in accordance with CAA,
2021 and procedures outlined in Treasury’s ECIP Application
Review and Decisioning Process SOPs. We reviewed
applications received in ECIP’s database management system 20
and confirmed that ECIP personnel performed application intake
and initial checks to determine whether applicants met the
requirements of low- and moderate-income community financial
institutions. Application intake and initial reviews included (1) a
personal identifiable information check; (2) an eligibility
verification; (3) a completeness check; (4) a limits check; 21 and
(5) a duplicate and affiliates check. 22
Following ECIP’s intake checks, we reviewed regulator feedback
and determined that ECIP personnel consulted with the
appropriate regulators regarding eligibility. State regulators were
provided the opportunity to include feedback and concerns
about applicants participating in ECIP; however, state regulator
feedback was optional.
20
Treasury uses ECIP’s database management system for processes including, but not limited to,
application submissions, repository of applicant information, application reviews, and approvals
and disapprovals.
21
The limits check confirms that the total assets reported on an ECIP application match the total
assets of the Applicant in its latest quarterly call report. The Federal Financial Institutions
Examination Council defines a call report as a quarterly report of a financial institution’s condition
and income that is used for multiple purposes, including assessing the financial health and risk
profile of the institution.
22
Duplicate and affiliates checks identify any duplicate applications or any applications from
affiliates of the applicant.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 12
For the Financial Agent, Financial Analyst, and Lending Plan
Analyst Review process, we determined ECIP personnel used
Financial Agents to conduct evaluations of an applicant’s ability
to make annual dividend and interest payments and the
applicant’s ability to execute their lending plan. Financial
Analysts conducted evaluations and scored the applicants based
on (1) the financial condition of the applicant; (2) the applicant’s
ability to pay interest and dividends; and (3) factors relating to
the capacity of the applicant to execute the lending plan.
Lending Plan Analysts scored the applicants based on: (1) the
applicant’s capacity to execute on their lending plan; and (2) the
responsiveness of the lending plan to community needs.
Both the Lending Plan Analyst and Financial Analyst evaluations
were used to draft the IC Memo 23 for each applicant. For our
sample, we reviewed the application packages, relevant
evaluations, and IC Memos and determined that ECIP personnel
appropriately documented their review as outlined in the ECIP
SOPs. Additionally, we reviewed IC meeting minutes, which
documented the review and voting process for the IC to
recommend applicant approval or denial.
We confirmed that ECIP personnel incorporated the required set
asides in the CAA, 2021 into the pool analysis workbook. ECIP
personnel used the pool analysis workbook to determine the
investment amounts for each applicant recommended in the IC
Memos. The Lending Plan Analysis scores were also used as a
factor in determining investment amounts for each
recommended applicant.
For our sample, we reviewed and confirmed that the DAS’
decisions were recorded in ECIP’s database management
system. The DAS either approved or denied applicants based on
recommendations in the Investment Approval Memo provided
by ECIP personnel. Approved applicants received preliminary
approval letters with next steps, while denied and ineligible
applicants received decision letters with instructions on how to
request a reconsideration and submit additional information to
ECIP for review.
23
The IC Memo documented the recommendation on whether to invest in an applicant; and, if so,
the recommended maximum investment amount.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 13
For applicants that requested reconsideration and sent additional
information, we determined ECIP followed the SOPs and
documented applicant requests, submission, and outcome of
reconsideration decisions. Within our sample, there was one
applicant that requested reconsideration and was later deemed
eligible after providing additional information. For applicants
approved for reconsideration, ECIP personnel developed a memo
recommending reconsideration, including reversals of denial
determinations and recommended investment amounts.
Treasury also allowed applicants to withdraw from ECIP. Within
our sample, we noted a total of 11 applicants that withdrew
from the program and confirmed the applicant withdrawal
status in ECIP’s database management system. Based on the
applicants that withdrew and applicants that accepted a lower
investment than they were originally offered, ECIP conducted a
process to reallocate funds to applicants that were in
performance categories 1 and 2. As part of the review process,
we reviewed the reallocation approval memos showing the
approved additional investment amounts and the DAS’
signature. Lastly, we confirmed the updated PAL was sent to
each applicant approved for an increased investment amount.
Treasury Established Adequate Controls for ECIP’s
Application Review and Decision-Making Process
We tested and identified the design of internal controls by
(1) reviewing the GAO Green Book and ECIP policies and
procedures; (2) conducting walkthroughs; (3) conducting
interviews; and (4) reviewing documentation provided by ECIP
personnel. We identified and confirmed controls were in place
via documentation provided by ECIP personnel, walkthroughs,
and interviews with ECIP personnel. We determined Treasury
ECIP incorporated internal controls throughout their application
review and decisioning process. Additionally, we assessed
ECIPs Application Review and Decisioning Risk & Control Matrix
and determined participants were adequately screened during
application intake and initial checks.
Treasury incorporated control checkpoints throughout the
application review and decision-making process. ECIP’s
flowchart and policies and procedures show 19 control points
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 14
with details for each control point listed and explained in ECIPs
Application Review and Decisioning Risk & Control Matrix. The
matrix identifies each control with a control reference that
correlates to ECIPs Application Review and Decisioning SOPs
and Flowchart. The matrix also lists the risks, control
objectives, control activity, and control owner to explain the
process details.
Lastly, the audit team tested internal controls deemed
significant to the audit objective for ECIP and noted no
deficiencies. We determined that ECIP complied with the
requirements in the GAO Green Book and OMB A-123 when
reviewing and approving or disapproving ECIP applicants.
Next Steps
Funding and Post-Funding Compliance Review for ECIP
Investments
During this audit, Treasury provided ECIP SOPs titled Closing &
Funding Process and Participant Compliance Oversight. We plan
to review ECIP’s closing and funding, and compliance and
monitoring processes in future audits.
******
We appreciate the courtesies and cooperation provided to our
staff during the audit. If you wish to discuss the report, you
may contact me at (202) 270-2766 or Kevin Guishard, Audit
Manager, at (202) 270-7040. Major contributors to this report
are listed in appendix 3. A distribution list for this report is
provided as appendix 4.
/s/
Daniel F. Gerges
Audit Director, State and Local Fiscal Recovery, RESTORE, and
CDFI Programs
Appendices
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 15
Appendix 1: Objectives, Scope, and Methodology
Our objective was to determine if the Department of the
Treasury (Treasury) accurately allocated investments under the
Emergency Capital Investment Program (ECIP), to comply with
applicable laws, regulations and policies and procedures.
The scope of our audit included, but was not limited to, a
review of ECIP applications, eligibility and participation
requirements, allocation methodologies and calculations, and
determination decisions, including investment amounts for ECIP
applicants. Our audit scope period included ECIP applications
received by September 1, 2021.
To accomplish our objective, we performed the following
procedures during our audit fieldwork, conducted remotely from
April 2024 to September 2024.
• Reviewed applicable Federal laws, regulations, and guidance,
including:
o Public Law 116-260, Title V, Subtitle B in Division N
of Consolidated Appropriations Act, 2021, (CAA,
2021), December 27, 2020;
o Public Law 118-5, Fiscal Responsibility Act of 2023,
June 3, 2023;
o Government Accountability Office’s (GAO) Standards
for Internal Control in the Federal Government (Green
Book) GAO-14-704G; September 2014;
o GAO’s Assessing Data Reliability, December 2019;
and
o Office of Management and Budget Circular A-123,
Management’s Responsibility for Enterprise Risk
Management and Internal Control, July 15, 2016.
• Reviewed GAO’s Green Book to identify the components and
principles of internal control that were significant in the
context of the audit objective. Specifically, we evaluated the
Control Environment, Risk Assessment, Control Activities,
Information and Communication, and Monitoring internal
control components; and assessed policies, procedures, and
guidance against the following principles:
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 16
Appendix 1: Objectives, Scope, and Methodology
o Principle 2: The oversight body should oversee the
entity's internal control system;
o Principle 3: Management should establish an
organizational structure, assign responsibility, and
delegate authority to achieve the entity’s objectives;
o Principle 7: Management should identify, analyze, and
respond to risks related to achieving the defined
objectives;
o Principle 8: Management should consider the potential
for fraud when identifying, analyzing, and responding
to risks;
o Principle 10: Management should design control
activities to achieve objectives and respond to risks;
o Principle 11: Management should design the entity’s
information system and related control activities to
achieve objectives and respond to risks;
o Principle 12: Management should implement control
activities through policies;
o Principle 13: Management should use quality
information to achieve the entity’s objectives;
o Principle 14: Management should internally
communicate the necessary quality information to
achieve the entity’s objectives;
o Principle 15: Management should externally
communicate the necessary quality information to
achieve the entity’s objectives;
o Principle 16: Management should establish and
operate monitoring activities to monitor the internal
control system and evaluate the results;
o Principle 17: Management should remediate identified
internal control deficiencies on a timely basis.
• Reviewed Treasury guidance, policies and procedures
relevant to our audit objective, including:
o ECIP Standard Operating Procedures: Application
Review and Decisioning Process;
o ECIP Standard Operating Procedures: Closing &
Funding Process;
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 17
Appendix 1: Objectives, Scope, and Methodology
o ECIP Standard Operating Procedures: Participant
Compliance Oversight;
o ECIP - Application Review and Decision Map
Flowchart;
o ECIP - Credit Scoring Methodology Memo;
o ECIP - Application Review and Decisioning Risk &
Control Matrix;
o ECIP - Participant Compliance Oversight Policy.
• Reviewed Treasury Office of Inspector General (OIG) and
GAO reports relevant to ECIP:
o Treasury OIG, Audit of Treasury’s Implementation of
the Emergency Capital Investment Program,
OIG-22-028; March 8, 2022;
o GAO, Community Development Financial Institutions,
Analysis of Annual and Emergency Assistance and
Treasury Efforts to Address Program Risks, GAO-23-
105952; December 21, 2022.
• We assessed the reliability of data by (1) reviewing existing
information about the data and the system that produced the
data, (2) interviewing agency personnel knowledgeable
about the data, and (3) performing electronic testing of
required data elements for accuracy and completeness. We
verified the universe of applications received in ECIP’s
database management system (by September 1, 2021), for
completeness and accuracy through the following:
(1) received access to the ECIP database management
system and reviewed the entire population of 212
applicants, (2) compared specific information such as
application number, applicant name, institution type,
requested investment amount; and (3) compared applicant
totals to the Applicant by Type Report received during the
Audit of Treasury’s Implementation of the Emergency Capital
Investment Program (OIG-22-028; March 8, 2022):
o Provided Treasury with GAO’s Data Reliability
Questionnaire from Appendix 1 of GAO’s Assessing
Data Reliability, which provides guidance on
identifying controls within the system under audit, and
reviewed Treasury’s responses.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 18
Appendix 1: Objectives, Scope, and Methodology
• We determined that the data was sufficiently reliable for the
purposes of this audit report. We tested 52 ECIP applications
received before September 1, 2021. 100 percent testing
was conducted on 37 applicants that were deemed
ineligible, were not selected in accordance with the CAA,
2021, or that declined to participate.
• We selected a judgmental sample of 15 applications from the
175 that were awarded using the quartile method.
Applications were chosen from the following categories:
o 5 certified community development financial
institutions;
o 5 minority depository institutions; and
o 5 certified community development financial
institution and minority depository institutions.
• We used the quartile sampling method to select a sample
from the 25th percent quartile, the 50th percent quartile, and
75th percent quartile. We also selected the smallest and
largest award amounts made to ECIP applicants.
• Conducted walkthroughs with Treasury ECIP personnel to
gain an understanding of the overall ECIP application review
and decisioning process, and planned activities for making
award allocation investments.
• Interviewed personnel responsible for ECIP’s application
review and decisioning process, including the:
o ECIP Program Manager;
o ECIP Investment Manager; and
o Legal Counsel.
We conducted this performance audit 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.
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 19
Appendix 2: Management Response
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 20
Appendix 2: Management Response
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 21
Appendix 3: Major Contributors to This Report
Kevin Guishard, Audit Manager
Alexis Satterwhite, Auditor-in-Charge
Clyburn Perry, III, Auditor
Charles Holmes, Auditor
Avery Williams, Referencer
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 22
Appendix 4: Report Distribution
Department of the Treasury
Secretary
Deputy Secretary
Chief Program Officer, Office of Capital Access
Deputy Assistant Secretary for Community and Economic
Development
Office of Strategic Planning and Performance Improvement
Office of the Deputy Chief Financial Officer, Risk and Control
Group
Deputy Assistant General Counsel
Office of Management and Budget
OIG Budget Examiner
U.S. Senate
Chairman and Ranking Member
Committee on Banking, Housing, and Urban Affairs
U.S. House of Representatives
Chairman and Ranking Member
Committee on Financial Services
Audit of Treasury’s Soundness of Investment Decisions for Participation in the
Emergency Capital Investment Program (OIG-24-036) 23
This Page Intentionally Left Blank
REPORT WASTE, FRAUD, AND ABUSE
Submit a complaint regarding Treasury OIG Treasury Programs and Operations
using our online form: https://oig.treasury.gov/report-fraud-waste-and-abuse
TREASURY OIG WEBSITE
Access Treasury OIG reports and other information online: https://oig.treasury.gov/
File and source
- File
- OIG-24-036-coronavirus-disease-2019-pandemic-relief-programs-audit-of-treasury-s.pdf
- Size
- 1,108,919 bytes
- SHA-256
- 8feb9881d5efa0ca14ccff0814ce4558e5c4497a091138f8592aee3be51ac998
- Original
- oig.treasury.gov