Semiannual Report to Congress, April 1, 2021 – September 30, 2021 — SBA Office of Inspector General
Summary
The SBA Office of Inspector General's Semiannual Report to Congress covers April 1, 2021 – September 30, 2021, and opens with a message from Inspector General Hannibal "Mike" Ware dated November 30, 2021. The report states that during the period OIG issued 7 reports with 38 recommendations, its investigations resulted in 153 indictments and 105 convictions, and its work achieved monetary recoveries and savings of more than $4 billion. Ware states that OIG collaboration with SBA and the U.S. Secret Service resulted in seizure of more than $995 million stolen from the EIDL program. Report 21-15 found SBA referred more than 845,000 COVID-19 EIDL applications to OIG for suspected identity theft while still disbursing $6.2 billion in loan funds and $468 million in advance grants.
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“Semiannual Report to Congress, April 1, 2021 – September 30, 2021 — SBA Office of Inspector General.”
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Semiannual Report to Congress
April 1, 2021 – September 30, 2021
U.S. Small Business Administration | Office of Inspector General
Message from the Inspector General
November 30, 2021
I am honored to submit our Semiannual Report to Congress for the second
half of fiscal year 2021. Every 6 months, we report to Congress our
independent oversight of the U.S. Small Business Administration (SBA) as
required by law.
Nearly 2 years after the start of the Coronavirus Disease 2019 (COVID-19)
pandemic economic crisis, the SBA Office of Inspector General (OIG)
continues to provide independent and objective oversight. We assist SBA in
fulfilling its mission for the benefit of all Americans, delivering products and
services of the highest quality, ensuring accuracy, timeliness, fairness, and
usefulness to all.
Hannibal “Mike” Ware
Inspector General
Pandemic Response Oversight
Since March 2020, our goal has been to set a More than 300
standard of excellence in overseeing SBA pandemic response for
America’s small businesses. Independence and objectivity are critical in fraudsters have
looking after the taxpayer funds allocated by the Coronavirus Aid, Relief, been brought to
and Economic Security (CARES) Act and subsequent Congressional
economic stimulus funds and mandates. justice and some
We identified SBA’s economic relief programs as susceptible to significant $1 billion seized or
fraud risks and vulnerabilities as a top management challenge for SBA. recovered to make
SBA has expended more than a trillion dollars in lending authority and
taxpayers whole.
entrepreneurial assistance in the wake of the pandemic. When SBA
expedited relief to those in need, the agency relaxed internal controls,
increasing the risk of program fraud and abuse.
Leveraging supplemental resources provided by Congress, to date, we have published 16 reports on
pandemic oversight. We have issued dozens of recommendations for corrective action aimed at
strengthening internal controls so eligible small businesses receive the economic aid promised by
Congress, not fraudsters or other unscrupulous borrowers abusing taxpayer resources.
Working in concert with our law enforcement partners over the past year, more than 300 fraudsters
have been brought to justice and nearly $1 billion seized or recovered to make taxpayers whole.
Specifically, OIG’s oversight and investigative work since the pandemic resulted in 319 indictments and
145 convictions, to include PPP or EIDL by October 2021, with associated amounts totaling more than
$460 million. Additionally, OIG collaboration with SBA and the U.S. Secret Service has resulted in the
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seizure of more than $995 million stolen by fraudsters from the EIDL program. We also played a key
role in assisting financial institutions in the return of another $3.1 billion to SBA’s EIDL program.
We have also received more than 280,000 Hotline complaints related to SBA programs since March
2020.
Although we continue to evaluate and recommend corrections for the most critical risks facing SBA,
oversight of pandemic relief funds and combating fraud in these programs will be a top priority for
years to come.
Our Work this Period
During the 6-month period from April to
September 2021, OIG issued 7 reports with 38
recommendations to improve SBA operations
and reduce fraud and unnecessary losses in
agency programs. In addition, OIG investigations
resulted in 153 indictments and 105 convictions.
Overall, OIG’s investigations and audit work
achieved monetary recoveries and savings of
more than $4 billion during this semiannual period.
We also kept watch over government contractors for business ethics, integrity, honesty, and
competency, ensuring taxpayer dollars are well spent.
OIG Staff Dedication and Success
I am proud that our OIG staff members are engaged change agents who set the standard for oversight
excellence in support of American small businesses and entrepreneurs. We carry out our duties and
responsibilities with integrity, never losing sight of the vision, committed to protecting the interests of
all American taxpayers in promoting positive change within SBA and across government.
Hannibal “Mike” Ware
SBA Inspector General
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Table of Contents
Pandemic Response Oversight .................................................................................................................................1
Audits, Inspections, and Evaluations ......................................................................................................................1
Serious Concerns About SBA’s Control Environment and the Tracking of Performance Results in the
Shuttered Venue Operators Grant Program (Report 21-13)..............................................................................1
SBA’s Handling of Identity Theft in the COVID-19 Economic Injury Disaster Loan Program (Report 21-15)
..............................................................................................................................................................................2
Evaluation of SBA’s Coronavirus Reconstitution Plan (Report 21-18) .............................................................2
The Small Business Administration's Implementation of Recommended Controls and the Economic Aid Act
(Report 21-19).......................................................................................................................................................3
Notable Investigations ..............................................................................................................................................3
Oregon Man Pled Guilty to Stealing CARES Act Funds ...................................................................................3
Two California Brothers and their Wives Found Guilty of Submitting Fraudulent Loan Applications .........4
Georgia Man Sentenced to Fraudulently Obtaining an SBA-guaranteed Paycheck Protection Program
(PPP) Loan ...........................................................................................................................................................4
Small Business Access to Capital .............................................................................................................................5
Disaster Assistance Program ...................................................................................................................................6
Investigations ............................................................................................................................................................6
Federal Employee Pled Guilty to Disaster Fraud ..............................................................................................6
Contracting and Counseling Programs ....................................................................................................................7
Audits, Inspections, and Evaluations ......................................................................................................................7
Audit of SBA's Oversight of Women's Business Centers' Compliance with Cooperative Agreement
Financial Requirements (Report 21-14)..............................................................................................................7
Investigations ............................................................................................................................................................8
Five Individuals convicted in Ohio Service-Disabled Veteran Contracting Scheme ........................................8
Florida man convicted in Virginia Woman-Owned Small Business Contracting Scheme ...............................8
Agency Management.................................................................................................................................................9
Audits, Inspections, and Evaluations ......................................................................................................................9
Performance Audit of the U.S. Small Business Administration’s Fiscal Year 2020 Compliance with the
Payment Integrity Information Act of 2019 (Report 21-16) ...............................................................................9
Weaknesses Identified During the FY 2020 Federal Information Security Modernization Act Review
(Report 21-17).......................................................................................................................................................9
Other Significant OIG Activities ............................................................................................................................ 11
Background Investigations Ensure Integrity ........................................................................................................ 11
Debarment and Other Administrative Enforcement Actions ............................................................................... 11
Stakeholder Presentations on PPP and EIDL Fraud ............................................................................................ 11
Reviews of Proposed Agency Regulations, Operating Procedures, and Other Initiatives Lead to Improved
Program Controls ................................................................................................................................................... 11
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Approval of Small Business Development Center Surveys................................................................................... 11
Record-setting Numbers ......................................................................................................................................... 12
Organizational Overview ........................................................................................................................................ 13
U.S. Small Business Administration ..................................................................................................................... 13
Office of Inspector General ..................................................................................................................................... 13
Appendixes .............................................................................................................................................................. 16
Appendix A. Reporting Period Statistical Highlights ........................................................................................... 16
Summary of OIG Dollar Accomplishments in dollars ($)................................................................................. 16
Efficiency and Effectiveness Activities Related to Audit, Other Reports, and Follow-up Activities ............. 16
Indictments, Convictions, and Case Actions .................................................................................................... 16
SBA Personnel Actions Taken as a Result of Investigation ............................................................................ 16
Program Actions Taken During the Reporting Period as a Result of OIG Action .......................................... 17
Agency Legislative and Regulatory Proposals Reviewed ................................................................................. 17
Appendix B. Full-Year Statistical Highlights, FY 2021 ........................................................................................ 18
Summary of OIG Dollar Accomplishments....................................................................................................... 18
Efficiency and Effectiveness Activities Related to Audit, Other Reports, and Follow-up Activities ............. 18
Indictments, Convictions, and Case Actions .................................................................................................... 18
SBA Personnel Actions Taken as a Result of Investigations ........................................................................... 18
Program Actions Taken During the Fiscal Year as a Result of OIG Action ................................................... 19
Agency Legislative and Regulatory Proposals Reviewed ................................................................................. 19
Appendix C. Reports, Recommendations, and Management Decisions ............................................................... 20
Reports Issued.................................................................................................................................................... 20
Agency Management.......................................................................................................................................... 20
Credit/Capital Programs ................................................................................................................................... 20
Disaster Assistance ............................................................................................................................................ 20
Contracting and Counseling Programs ............................................................................................................. 20
Reports with Questioned Costs ......................................................................................................................... 21
Reports with Recommendations that Funds Be Put to Better Use ................................................................. 21
Reports from Prior Periods with Overdue Management Decisions ................................................................. 21
Reports from Prior Periods with Open Recommendations as of September 30, 2021 .................................... 22
Significant Recommendations from Prior Reporting Periods without Final Action as of September 30, 2021
............................................................................................................................................................................ 23
Significant Recommendations from this Reporting Period .............................................................................. 32
Significant Management Decisions – OIG Disagreement ..................................................................................... 35
Significant Revised Management Decisions .......................................................................................................... 35
Federal Financial Management Improvement Act ............................................................................................... 36
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Instances of Interference ........................................................................................................................................ 36
Appendix D. Investigations Reporting Statistics .................................................................................................. 37
Investigative Reports Issued ............................................................................................................................. 37
Persons Referred for Prosecution ...................................................................................................................... 37
Pandemic-Related Investigative Statistics ....................................................................................................... 37
Whistleblower Retaliation Cases ...................................................................................................................... 37
Investigations Involving a Senior Government Employee Where Misconduct Was Substantiated .............. 37
Investigations Involving a Senior Government Employee That Is Closed and Not Disclosed to the Public . 37
Appendix E. Legal Actions Summary .................................................................................................................... 38
April 1, 2021 – September 30, 2021 .................................................................................................................. 38
Appendix F. Cosponsored and Other Activities ..................................................................................................... 42
Appendix G. External Peer Reviews ...................................................................................................................... 43
Audits Division................................................................................................................................................... 43
Investigations Division ...................................................................................................................................... 43
Appendix H. Office of Inspector General Reporting Requirements ...................................................................... 44
Reporting Requirements in the Inspector General Act of 1978, As Amended ..................................................... 44
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Summary of OIG Oversight Work
Pandemic Response Oversight
To support businesses affected by the Coronavirus Disease 2019 (COVID-19) pandemic, in FY 2021,
Congress tasked SBA with lending $470 billion in COVID-19 Economic Injury Disaster Loans (EIDLs) and
$20 billion in COVID-19 emergency grants. In FY 2021, Congress appropriated additional funds for new
disaster assistance programs: $35 billion for targeted and supplemental EIDL advances, $16.25 billion for
the Shuttered Venue Operators Grants program, and $28.6 billion for restaurant revitalization.
In addition, the Coronavirus Aid, Relief, and Economic Security (CARES) Act also provided $349 billion for
the creation of the Paycheck Protection Program (PPP) under Section 7(a) of the Small Business Act.
Congress added an additional $310 billion to the PPP on April 24, 2020, through the Paycheck Protection
Program and Health Care Enhancement Act.
On December 27, 2020, through the Consolidated Appropriations Act of 2021, the Economic Aid to Hard-
Hit Small Businesses, Nonprofits, and Venues Act extended the program through March 31, 2021. The
Economic Aid Act provided an additional $147.5 billion in program funding, which increased the total
program funding to $806.5 billion.
SBA’s need to quickly provide relief to small businesses led to reduced controls on pandemic-related
loans, substantially increasing the fraud risk. It was immediately clear that pandemic relief efforts had
drawn the attention of unscrupulous and greedy criminals.
Within weeks, complaints from lenders and allegations of widespread fraudulent activity overwhelmed
OIG’s Hotline. We launched hundreds of investigations and several audit engagements to root out the
fraud and abuse endangering these critical resources.
The following summarizes our pandemic oversight work this period.
Audits, Inspections, and Evaluations
Serious Concerns About SBA’s Control Environment and the Tracking
of Performance Results in the Shuttered Venue Operators Grant
Program (Report 21-13)
We reported that SBA should take immediate action to reduce or eliminate risks by
strengthening existing controls and implementing internal controls to address potential misuse of federal
funds. Strong controls will ensure the Shuttered Venue Operators Grant (SVOG) program can effectively
help eligible small business owners and entities that have suffered economic injury because of the
COVID-19 pandemic. To address serious concerns and potential deficiencies in internal controls of the
SVOG program, we suggested the Administrator reassess the audit risk plan to identify vulnerabilities,
commensurate with the expected volume of applications and average award amount, to strengthen
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U.S. Small Business Administration | Office of Inspector General
internal controls and reduce risk of misuse of federal funds. We suggested SBA clearly establish
2 CFR 200 criteria for the program to ensure compliance during the implementation and oversight
phases. We also suggested SBA implement required performance measures to determine the impact of
program funds and ensure sufficient resources are available to implement and oversee the SVOG
program.
Access this Management Alert on the SBA OIG Reports site.
SBA’s Handling of Identity Theft in the COVID-19 Economic Injury
Disaster Loan Program (Report 21-15)
We reported that SBA had referred more than 845,000 COVID-19 EIDL applications to
OIG for suspected identity theft, while still disbursing $6.2 billion in loan funds and $468 million in
advance grants to these applicants. Many of these loans had indications of potential fraud. We found SBA
officials were not tracking identity theft complaints at the time of our review, nor did they have a process
to cease collection actions, release the identity theft victim from the loan liability, or charge-off the loan
and related fees.
We recommended the Administrator direct the development of a process to maintain and track all
identity theft complaints and develop a process to provide status updates to each complainant alleging
identity theft. We also recommended SBA complete and formalize a process to restore identity theft
victims to their condition prior to the fraud. The process should include steps to stop the loan billing
statements, prevent delinquency collections, and release identity theft victims from loan liability and UCC
liens. This process should also remove any fraudulent loans and related Uniform Commercial Code filing
fees from financial records. Additionally, we recommended SBA Review over 150,000 returned billing
statements and resolve any that involve identity theft and then refer fraudulent loans to OIG. While
management stated they partially agreed with all the recommendations, management’s formal
comments stated they took actions to address each of them.
Access this Evaluation Report on the SBA OIG Reports site.
Evaluation of SBA’s Coronavirus Reconstitution Plan (Report 21-18)
OIG found that SBA established its May 2020 COVID-19 Reconstitution Plan in
accordance with applicable federal guidance. We identified issues with the
implementation of the reconstitution plan that should be addressed to help the agency
safeguard its employees from contracting and spreading COVID-19 in the workplace.
We found the agency did not follow occupancy procedures for advancing or reverting phases at its
Washington, DC headquarters. SBA also did not implement exposure tracking protocols to ensure it
consistently traced COVID-19 cases. We found the agency did not consistently notify its staff of presumed
or confirmed COVID-19 cases in the sampling we analyzed. SBA did not consistently contact potentially
exposed personnel and ensure employees completed 14-day quarantine periods before returning to the
workplace.
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In February 2021, SBA replaced the May 2020 COVID-19 reconstitution plan with the COVID-19
Workplace Safety Plan. We made one recommendation for SBA to enforce the requirements of its new
COVID-19 Workplace Safety Plan by consistently applying procedures for occupancy and exposure
tracking and to accurately record and maintain supporting documentation for all reported COVID-19
cases. SBA management agreed with our recommendation and planned actions to resolve the
recommendation.
Access this Evaluation Report on the SBA OIG Reports site.
The Small Business Administration's Implementation of
Recommended Controls and the Economic Aid Act (Report 21-19)
SBA implemented or initiated action on all the OIG recommendations to strengthen
internal controls related to the Paycheck Protection Program (PPP). The Economic Aid
Act continued assistance under the PPP for small businesses financially affected by the ongoing
coronavirus pandemic. We found SBA implemented the PPP in accordance with the Economic Aid Act
with two exceptions. SBA did not 1) require an assessment of affiliation for faith-based organizations
which contradicts its internal control procedures and 2) issue guidance regarding farm credit system
institutions to ensure requirements were met.
We recommended SBA assess affiliation for faith-based organizations to ensure only eligible faith-based
organizations receive the applicable PPP loans. We did not make any recommendations regarding the
farm credit system institution requirements and the $1 billion set aside because the PPP ended on May
31, 2021. SBA disagreed with the recommendation, stating it committed to not assessing or requiring
lenders to assess the reasonableness of the faith-based organization’s determination, which they believe
met the intent of Congress.
Access this Inspection Report on the SBA OIG Reports site.
Notable Investigations
Oregon Man Pled Guilty to Stealing CARES Act Funds
An Oregon man pled guilty to bank fraud, money laundering, and aggravated identity theft
for stealing CARES Act funding. The man submitted nine PPP loan applications, six of which
were accepted, securing over $3.4 million. He also applied for numerous EIDLs, funded for
an additional $160,000. The man then purchased real estate and invested in securities,
transferring more than $1.8 million of PPP loan funds to his E-Trade securities brokerage account. Agents
seized the man’s brokerage account, including 15,740 shares of Tesla Inc. Also, agents seized another
account containing more than $660,000 in securities and cash. The securities and cash-seized accounts
were valued at more than $11 million, not including the value of the 23 properties seized as fraud
proceeds.
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Two California Brothers and their Wives Found Guilty of Submitting
Fraudulent Loan Applications
Two California brothers, their wives and associates were each found guilty of 1 count of
conspiracy to commit bank fraud and wire fraud, 11 counts of wire fraud, 8 counts of bank
fraud, and 1 count of conspiracy to commit money laundering. One brother was also found guilty of two
counts of aggravated identity theft, while his brother was found guilty of one count of aggravated
identity theft. All were found guilty of submitting fraudulent loan applications to obtain COVID-19 relief
funds used as down payments on luxury homes in Tarzana, Glendale, and Palm Desert and to purchase
jewelry other high-end items. The total loss was more than $18 million in COVID-19 relief funds.
Georgia Man Sentenced to Fraudulently Obtaining an SBA-guaranteed
Paycheck Protection Program (PPP) Loan
A Georgia man was sentenced in U.S. District Court for the Northern District of Georgia for
his role in a conspiracy to fraudulently obtain an SBA-guaranteed Paycheck Protection
Program (PPP) loan and a Ponzi scheme that defrauded more than 20 investors over the
course of at least 7 years. The man pled guilty to multiple counts of conspiracy to commit wire fraud (18
U.S.C. §1349), wire fraud (18 U.S.C. §1343), bank fraud (18 U.S.C. §1344), and false statements to a
federally insured bank (18 U.S.C. §1014). He was sentenced to 210 months of imprisonment, 5 years of
supervised release, restitution of $4,465,865.55, and a special assessment of $600.
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Small Business Access to Capital
SBA provides small businesses with capital and financial assistance through several key programs. SBA
has a financial assistance portfolio of guaranteed and direct loans that totaled about $854 billion as of
June 30, 2021. Over the years, OIG has worked closely with the agency to identify potential points of risk
and improve SBA’s oversight and controls to ensure eligible participants most in need of assistance
benefit from these programs.
The Section 7(a) Loan Program is SBA’s principal vehicle for providing small businesses with access to
credit that cannot be obtained elsewhere. Proceeds from a 7(a) loan may be used to establish a new
business or to assist in acquiring, operating, or expanding an existing business. This program relies on
numerous outside parties (such as borrowers, loan agents, and lenders) to complete loan transactions.
SBA has centralized many loan approval and servicing functions and reduced the number of staff
performing these functions, placing more responsibility on and giving greater independence to lenders.
Past OIG reviews have reported on these trends, and OIG continues to identify weaknesses in SBA’s
lender and loan agent oversight processes.
Criminals use a wide array of techniques to fraudulently get—or induce others to obtain—SBA-
guaranteed loans. The techniques include submitting fraudulent documents, making fictitious asset
claims, manipulating listed property values, using loan proceeds contrary to the terms of the loans, and
failing to disclose debts or previous criminal records. Consequently, there is a greater chance of financial
loss to the agency and its lenders. OIG dedicates a significant portion of its resources to identifying
wrongdoers and, whenever possible, recovering taxpayer funds.
During this semiannual period, our audit and investigative work in this program area was focused on PPP
and other pandemic relief programs. Consequently, we have included those reports and investigations in
the Pandemic Response Oversight section.
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U.S. Small Business Administration | Office of Inspector General
Disaster Assistance Program
Disaster assistance has been part of the agency since its inception in 1953. Through its Office of Disaster
Assistance, SBA provides long-term, low-interest financial assistance to businesses of all sizes, private
nonprofit organizations, homeowners, and renters following a declared disaster. Each year, SBA approves
hundreds of millions of dollars in disaster assistance loans.
The Disaster Assistance Loan Program is the only form of SBA assistance not limited to small businesses.
The program’s disaster assistance loans are the primary form of federal assistance for repairing and
rebuilding nonfarm, private sector losses following a declared disaster.
The program includes four categories of loans for disaster-related losses:
• Home disaster loans
• Business disaster loans (includes PPP loans)
• Economic injury disaster loans (includes pandemic relief loans)
• Military reservist economic injury loans
During this semiannual period, our audit work in this program area focused on COVID-19 EIDLs and other
pandemic relief programs. Consequently, we have included those reports in the Pandemic Response
Oversight section.
Investigations
Federal Employee Pled Guilty to Disaster Fraud
A Federal employee received over $30,000 in disaster funds for damage caused by
Hurricane Harvey to their residence. The individual claimed that they were the victim of
identity theft and had no knowledge of the loan despite numerous contacts with SBA
during the loan process. The employee pled guilty to one count of false statements and was sentenced to
36 months of probation. The employee was ordered to pay $33,279 in restitution.
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Contracting and Counseling Programs
Each year, the federal government spends hundreds of billions of dollars in federal contracts to purchase
goods and services. SBA has worked to maximize opportunities for small businesses to receive these
contract awards. As mandated in the Small Business Act, the government-wide goal is to award at least
23 percent of contract dollars to small businesses.
SBA has specific programs that focus on strengthening particular types of small businesses, like those
owned by service-disabled veterans and women, as well as small businesses that are disadvantaged or
located in historically underused business zones (HUBZones).
The HUBZone program helps small businesses stimulate their economically challenged local economies.
Similarly, to help small, disadvantaged businesses gain access to federal and private procurement
markets, SBA’s Section 8(a) Business Development Program offers a broad range of business
development support, such as mentoring, procurement assistance, business counseling, training,
financial assistance, and other management and technical assistance.
SBA also aids existing and prospective small businesses through a variety of counseling and training
services offered by partner organizations. Among these partners are Small Business Development
Centers, the SCORE mentoring network, Women’s Business Centers, and Veterans Business Outreach
Centers.
Additionally, SBA designed the Boots to Business program, providing transitioning service members
interested in exploring business ownership or other self-employment opportunities with technical
assistance and access to resources. These programs require effective and efficient management,
outreach, and service delivery.
Audits, Inspections, and Evaluations
Audit of SBA's Oversight of Women's Business Centers' Compliance
with Cooperative Agreement Financial Requirements (Report 21-14)
SBA’s Women’s Business Center (WBC) program assists women in starting and growing
small businesses and provides long-term training and counseling to women business
owners, including those who are socially and economically disadvantaged.
SBA did not provide effective oversight over the WBC program. SBA program officials did not detect that
WBCs in our sample: (1) failed to take corrective action to remedy accounting deficiencies identified
during mandated programmatic and financial reviews and examinations; (2) made improper budget
transfers and maintained general ledgers that did not support expenses; (3) used federal funds for
unsupported, unallowable and unallocated costs; (4) reported unsupported matching funds and program
income earned, and 5) failed to submit accurate financial reports. Program officials detected significant
noncompliance that warranted removal of two WBCs from the program but did not take action.
Additionally, program officials’ methodology for evaluating applicant risk was flawed, and resulted in
inadequate oversight of the sample WBCs’ use of federal funds.
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As a result of weaknesses in SBA’s internal controls and limited oversight of the WBCs, program officials
did not detect $801,056 in unallowable, unallocated, and unsupported costs, matching funds, and
program income earned. We made 10 recommendations to improve SBA’s oversight and management
of the WBC cooperative agreements. SBA management concurred with all 10 recommendations.
Access this Audit Report on the SBA OIG Reports site.
Investigations
Five Individuals convicted in Ohio Service-Disabled Veteran Contracting
Scheme
A group of five individuals from Ohio conspired to defraud SBA, the U.S. Navy, Air Force,
Department of Defense, and the Department of Veteran’s Affairs by paying bribes and
fraudulently obtaining over $15 million in government set-aside contracts to which they were not
entitled. One individual devised a scheme to recruit 8(a) Business Development Program and Small
Disadvantaged Veteran-Owned small businesses to bid on contracts and then pass them on to an
ineligible company. The ineligible company was providing funding to the eligible company that was not
disclosed to the government. Without the funding, the smaller companies would not have had the
financial stability to complete the government contracts. In addition, one U.S. Navy employee accepted a
series of bribes and kickbacks including cash, meals, a hunting trip, and a vehicle.
The U.S. Navy employee was sentenced to 1 year probation and a $5,000 fine. Two individuals were
sentenced to 2 years of probation and a $10,000 fine. The president of the ineligible company was
sentenced to 3 years of probation and ordered to pay a $15,000 fine. A fifth individual was sentenced to
1 year of probation and ordered to pay a $5,000 fine.
Florida man convicted in Virginia Woman-Owned Small Business
Contracting Scheme
A Florida man was found guilty by jury trial in the District Court for the Eastern District of
Virginia (Alexandria) on one count of 18 U.S.C. § 1349, conspiracy to commit wire fraud,
and five counts of 18 U.S.C. § 1343, wire fraud. The Florida man misrepresented his SBA status as a
Woman-Owned Small Business to NASA prime contractors and in Small Disadvantaged Business’s
Representations and Certifications on SDB’s System for Award Management profile. As a result of the
misrepresentation, the man received two subcontracts worth over $6.4 million from two NASA prime
contractors.
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Agency Management
OIG is responsible for ensuring that agency management appropriately safeguards SBA from fraud,
waste, and abuse, and that SBA activities directly further agency goals. As part of this work, OIG
coordinates with the offices of the Chief Financial Officer, the Chief Information Officer, and the Chief
Operating Officer to review financial reporting and performance management, human resources,
procurements and grants, space and facilities, and maintenance of SBA’s information systems and
related security controls.
Audits, Inspections, and Evaluations
Performance Audit of the U.S. Small Business Administration’s Fiscal
Year 2020 Compliance with the Payment Integrity Information Act of
2019 (Report 21-16)
This report presents the results of the required audit of the SBA's compliance with the
Payment Integrity Information Act of 2019. We contracted with the independent certified public
accounting firm KPMG LLP to conduct a performance audit, as required by the Act. The objectives of the
engagement were to review the payment integrity section of SBA’s Fiscal Year 2020 Agency Financial
Report to determine whether the agency was in compliance with the Act. KPMG also evaluated the
agency’s accuracy and completeness of reporting and performance in preventing and reducing improper
payments.
The independent auditors’ report presents KPMG’s findings on the agency’s improper payment reporting
required under the Act. KPMG reported that SBA was compliant with four of the six reporting
requirements in the Act. However, SBA was not compliant with the Act because the Disaster Direct Loan
Program reported an improper payments rate that exceeded the 10 percent threshold for compliance
and did not demonstrate improvements as evidenced by not meeting its planned FY 2020 improper
payments target reduction. KPMG also found the agency needs to improve the completeness and
accuracy of improper payment reporting. The agency also needs to improve controls to prevent and
reduce improper payments.
Access this Auditors’ Report on the SBA OIG Reports site.
Weaknesses Identified During the FY 2020 Federal Information
Security Modernization Act Review (Report 21-17)
OIG is required by the Federal Information Security Management Act to assess SBA’s
information security program every year. In FY 2020, SBA had an unprecedented
volume of loan and grant applications because of the CARES Act and other related pandemic legislation.
As a result, the agency experienced new information security challenges.
We tested a subset of systems in eight areas, called “domains,” and evaluated them using guidance for
FISMA metrics. Inspectors General are required to assess the effectiveness of information security
programs on a maturity model spectrum.
Semiannual Report to Congress, Fall 2021 | 9
U.S. Small Business Administration | Office of Inspector General
We rated SBA’s overall program of information security as not effective because SBA only achieved a
maturity level rating of “managed and measurable” in one of the eight domains. We made 10
recommendations in 5 of the domains: 3 recommendations in risk management, 3 recommendations for
configuration management, 2 for identity and access management, 1 recommendation for security
training, and 1 for information security continuous monitoring. SBA management agreed with the
recommendations.
Access this Audit Report on the SBA OIG Reports site.
10 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Other Significant OIG Activities
Background Investigations Ensure Integrity
During this reporting period, OIG initiated 64 background investigations and issued 3 security clearances
for OIG employees and contractors. OIG adjudicated 20 background investigative reports.
Debarment and Other Administrative Enforcement Actions
OIG promotes program integrity by making present responsibility referrals to SBA and other agencies.
Present responsibility means the business ethics, integrity, honesty, and competence of persons who
participate in SBA programs or otherwise do business with the government. During this reporting period,
OIG sent 19 present responsibility referrals to SBA.
Present responsibility referrals can result in suspensions, debarments, and similar administrative
enforcement actions. These actions protect taxpayer funds from program participants who are not a
good risk for the government.
A typical OIG referral contains a summary of allegations and criminal, civil, administrative or other
evidence supporting the recommendation. Most OIG administrative referrals involve SBA’s loan and
contract programs. OIG ensures that a suspension and debarment official reviews all appropriate
allegations arising in other contexts, such as the investigation of False Claims Act cases.
Stakeholder Presentations on PPP and EIDL Fraud
During this reporting period, SBA OIG conducted 36 presentations to internal and external stakeholders
to raise awareness of fraud, waste, and abuse related to SBA programs. More than 1250 participants
attended these events.
Reviews of Proposed Agency Regulations, Operating Procedures, and
Other Initiatives Lead to Improved Program Controls
OIG reviews changes SBA proposes to make to its program directives, such as regulations, internal
operating procedures, agency policy notices, and SBA forms completed by the public. OIG often identifies
material weaknesses in the proposals and works with the agency to promote more effective controls to
deter waste, fraud, and abuse. During the reporting period, OIG reviewed 64 proposed revisions of these
program directives and submitted comments designed to improve 12 of these initiatives.
Approval of Small Business Development Center Surveys
Section 21(a)(7) of the Small Business Act states that until Small Business Development Center
information disclosure regulations are issued, the Inspector General must approve any related client
survey, as well as the use of any survey information. OIG must also include this approval in the twice-
yearly semiannual report. SBA did not submit any surveys OIG review during this reporting period.
Semiannual Report to Congress, Fall 2021 | 11
U.S. Small Business Administration | Office of Inspector General
OIG Hotline
OIG’s Hotline handles allegations of waste, fraud, abuse, or serious mismanagement within SBA or its
programs from employees, contractors, and the public.
Record-setting Numbers
Hotline work has changed dramatically because of the COVID-
19 pandemic, overwhelming the system and the staff.
During this semiannual period, the OIG Hotline received more
than 64,000 complaints of loan fraud and abuse, identity theft,
and problems with SBA’s customer service.
In total, from March 2020 to September 2021, the Hotline
received more than 280,000 complaints related to loan fraud.
Contrast that figure against the 742 complaints received in all
of 2019 and the picture that emerges is one of an
overwhelming surge. OIG’s Hotline team has been diligently
working through an enormous backlog of tens of thousands of
complaints.
OIG follow-up of Hotline complaints may result in corrective
actions, audits, or administrative, civil, or criminal
investigations. Our Hotline staff monitors the progress of
matters referred to SBA program offices for action to ensure
the agency has promptly followed up, adequately resolved
allegations, and documented any corrective actions.
12 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Organizational Overview
U.S. Small Business Administration
The mission of the SBA under the Small Business Act, as amended, is to maintain and strengthen the
nation’s economy by enabling the establishment and vitality of small businesses and assisting in the
economic recovery of communities after disasters. The agency’s strategic plan for FYs 2018–22 has four
key goals:
1. Support small business revenue and job growth.
2. Build healthy entrepreneurial ecosystems and create business friendly environments.
3. Restore small businesses and communities after disasters.
4. Strengthen SBA’s ability to serve small businesses.
SBA is organized around the areas of financial, contracting, entrepreneurial development, and disaster
assistance. The agency also represents small businesses through an independent advocate and an
ombudsman.
SBA headquarters is in Washington, DC. The agency has staff in 10 regional offices, 68 district offices and
corresponding branch offices, and 4 disaster field offices. SBA also has 6 government contracting area
offices and maintains a network of resource partners in all 50 states, the District of Columbia, Puerto
Rico, American Samoa, the U.S. Virgin Islands, and Guam.
Office of Inspector General
OIG’s mission is to provide independent, objective, and timely oversight to improve the integrity,
accountability, and performance of SBA and its programs for the benefit of all Americans.
Our vision is to be valued and engaged change agents who set the standard for oversight excellence in
support of America’s small businesses.
We seek to demonstrate our values of integrity, commitment, and excellence as we deliver products and
services of the highest quality defined by accuracy, timeliness, fairness, and usefulness. Our strategic plan
for FYs 2022-27 has four goals:
Semiannual Report to Congress, Fall 2021 | 13
U.S. Small Business Administration | Office of Inspector General
In addition to the Office of Counsel
to the Inspector General, three
divisions assist in carrying out the
statutory responsibilities of the OIG:
the Audits Division, Investigations
Division, and the Management and
Operations Division.
The Office of Counsel provides legal
and ethics advice to all OIG
components; protects the OIG’s
interests in litigation arising out of or
affecting OIG operations; assists with
the prosecution of criminal, civil, and
administrative enforcement matters;
processes subpoenas; responds to
Freedom of Information and Privacy
Act requests, and reviews and
comments on proposed policies,
regulations, legislation, and
procedures.
The Audits Division performs and oversees audits and reviews to promote the economical, efficient, and
effective administration of SBA programs and operations. Key areas of emphasis are SBA loan, disaster
assistance, business development, and government contracting programs, as well as mandatory and
other statutory audit requirements involving information technology security, financial reporting, and
other SBA program areas. The balance of the engagements is discretionary and focuses on high-risk
activities and identified management issues.
The Investigations Division manages a program to detect and deter illegal and improper activities
involving SBA’s programs, operations, and personnel. The criminal investigations staff carries out a full
range of traditional law enforcement functions. Within the division, the Hotline reviews allegations of
waste, fraud, abuse, and severe mismanagement within SBA or its programs made by employees,
contractors, and the public. A preliminary review of all complaints is conducted to determine the
appropriate course of action. As part of the review process, Hotline staff may coordinate reviews of
allegations within OIG, SBA program offices, or other government agencies. The Security Operations Staff
within the division conducts required employee and contractor background investigations to achieve a
high level of integrity in the agency's workforce. It makes adjudications on OIG employees and
contractors for issuance of PIV cards pursuant to HSPD-12 background investigations requirements.
The Management and Operations Division provides business support (e. g., budget and financial
management, human resources, IT, data analytics, and procurement) for various OIG functions and
activities.
14 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
OIG’s headquarters is in Washington, DC. Its field staff are located in Atlanta, Georgia; Chicago, Illinois;
Dallas-Fort Worth, Texas; Detroit, Michigan; Denver, Colorado; Herndon, Virginia; Houston, Texas; Los
Angeles, California; Miami, Florida; New York, New York; Philadelphia, Pennsylvania; Federal Way,
Washington; and Washington, D.C.
Semiannual Report to Congress, Fall 2021 | 15
U.S. Small Business Administration | Office of Inspector General
Appendixes
Appendix A. Reporting Period Statistical Highlights
Summary of OIG Dollar Accomplishments in dollars ($)
Dollar Accomplishments as a Result of Investigations and Related Activities
Potential Investigative Recoveries and Fines $83,207,583
Other Recoveries (e.g., administrative seizures with partner law $4,095,000,000
enforcement agencies)
Asset Forfeitures Attributed to OIG Investigations $12,412,119
Loans/Contracts Not Approved or Canceled as a Result of Investigations $4,550,359
Investigations Subtotal $4,195,170,061
Dollar Accomplishments as a Result of Audit Activities
Disallowed Costs Agreed to by Management $785,961
Recommendations that Funds Be Put to Better Use Agreed to by $0
Management
Audit Subtotal $785,961
Total OIG Dollar Accomplishments $4,195,956,022
Efficiency and Effectiveness Activities Related to Audit, Other Reports, and Follow-
up Activities
Reports Issued 7
Recommendations Issued 38
Dollar Value of Costs Questioned $785,961
Dollar Value of Recommendations that Funds Be Put to Better Use $0
Recommendations with Management Decisions 47
Recommendations without a Management Decision 15
Collections as a Result of Questioned Costs $855,116
Indictments, Convictions, and Case Actions
Indictments from OIG Cases 153
Convictions from OIG Cases 105
Cases Opened 171
Cases Closed 67
SBA Personnel Actions Taken as a Result of Investigation
Dismissals 0
Resignations and Retirements 0
Suspensions 0
Reprimands 0
16 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Program Actions Taken During the Reporting Period as a Result of OIG Action
Present Responsibility Referrals to the Agency 19
Pending at the Agency as of September 30, 2021 43
Suspensions Issued by the Agency 0
Proposed Debarments Issued by the Agency 8
Final Debarments Issued by the Agency 8
Proposed Debarments Declined by the Agency 0
Administrative Agreements Entered by the Agency in Lieu of Debarment 0
Present Responsibility Actions by Other Agencies 0
Agency Legislative and Regulatory Proposals Reviewed
Legislation, Regulations, Standard Operating Procedures, and Other Issuances Reviewed 64
Comments Provided by OIG to Improve Legislation, Regulations, Standard Operating Procedures,
and Other Issuances 12
Semiannual Report to Congress, Fall 2021 | 17
U.S. Small Business Administration | Office of Inspector General
Appendix B. Full-Year Statistical Highlights, FY 2021
Summary of OIG Dollar Accomplishments
Dollar Accomplishments as a Result of Investigations and Related
Activities
Potential Investigative Recoveries and Fines $137,039,230
Other Recoveries (e.g., administrative seizures with partner law
enforcement agencies) $4,095,000,000
Asset Forfeitures Attributed to OIG Investigations $23,514,962
Loans and Contracts Not Approved or Canceled as a Result of
Investigations $25,054,068
Investigations Subtotal $185,608,260
Dollar Accomplishments as a Result of Audit Activities
Disallowed Costs Agreed to by Management $785,961
Recommendations that Funds Be Put to Better Use Agreed to by
Management $0
Audit Subtotal $785,961
Total OIG Dollar Accomplishments $4,281,394,221
Efficiency and Effectiveness Activities Related to Audit, Other Reports,
and Follow-up Activities
Reports Issued 19
Recommendations Issued 119
Dollar Value of Costs Questioned $22,502,924
Dollar Value of Recommendations that Funds Be Put to Better Use $0
Recommendations with Management Decisions 108
Recommendations without Management Decisions 15
Collections as a Result of Questioned Costs $855,116
Indictments, Convictions, and Case Actions
Indictments from OIG Cases 272
Convictions from OIG Cases 137
Cases Opened 398
Cases Closed 206
SBA Personnel Actions Taken as a Result of Investigations
Dismissals 0
Resignations and Retirements 0
Suspensions 0
Reprimands 0
18 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Program Actions Taken During the Fiscal Year as a Result of OIG Action
Present Responsibility Referrals to the Agency 19
Pending at the Agency as of September 30, 2020 43
Suspension Issued by the Agency 4
Proposed Debarments Issued by the Agency 8
Final Debarments Issued by the Agency 8
Proposed Debarments Declined by the Agency 0
Administrative Agreements Entered by the Agency in Lieu of Debarment 1
Present Responsibility Actions by Other Agencies 0
Agency Legislative and Regulatory Proposals Reviewed
Legislation, Regulations, Standard Operating Procedures, and Other
Issuances Reviewed 148
Comment Memoranda Provided by OIG to Improve Legislation,
Regulations, Standard Operating Procedures, and Other Issuances 13
Semiannual Report to Congress, Fall 2021 | 19
U.S. Small Business Administration | Office of Inspector General
Appendix C. Reports, Recommendations, and Management Decisions
Reports Issued
Agency Management
Title Report Issue Date Questioned Funds for
Number Costs Better Use
SBA’s FY 2020 Compliance with PIIA 21-16 5/12/2021 — —
FY 2020 Federal Information Security Modernization Act Review 21-17 7/6/2021 — —
Evaluation of SBA's Coronavirus Reconstitution Plan 21-18 7/12/2021 — —
Program Subtotal 3 — $0 $0
Credit/Capital Programs
Title Report Issue Date Questioned Funds for
Number Costs Better Use
The Small Business Administration's Implementation of 21-19 8/12/2021 — —
Recommended Controls and the Economic Aid Act
Program Subtotal 1 — $0 $0
Disaster Assistance
Title Report Issue Date Questioned Funds for
Number Costs Better Use
Serious Concerns About SBA’s Control Environment and the 21-13 4/7/2021 — —
Tracking of Performance Results in the Shuttered Venue
Operators Grant Program
SBA’s Handling of Identity Theft in the COVID-19 Economic 21-15 5/6/2021 — —
Injury Disaster Loan Program
Program Subtotal 2 — $0 $0
Contracting and Counseling Programs
Title Report Issue Date Questioned Funds for
Number Costs Better Use
Audit of SBA’s Oversight of Women’s Business Centers’ 21-14 5/4/2021 $785,961 —
Compliance with Cooperative Agreement Financial
Requirements
Program Subtotal 1 — $785,961 $0
20 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Reports with Questioned Costs
IG Act Reporting Requirement Reports Recommendations* Questioned Unsupported
Costs** Costs***
A. No management decision made by 1 1 $10,800,476 $10,800,476
March 31, 2021
B. Issued during this reporting period 1 3 $785,961 $406,141
Subtotal (Universe from which management 2 4 $785,961 $406,141
decisions could be made in this reporting
period)
C. Management decisions made during this 1 3 $785,961 $406,141
reporting period
(i) Disallowed costs 1 3 $785,961 $406,141
(ii) Costs not disallowed 0 0 $0 $0
D. No management decision made by 1 1 $10,800,476 $10,800,476
September 30, 2021
* Reports may have more than one recommendation.
** Questioned costs found to be improper.
*** Unsupported costs that may be proper but lack documentation. Unsupported costs are a subset of questioned costs.
Reports with Recommendations that Funds Be Put to Better Use
IG Act Reporting Requirement Reports Recommendations Recommended
Funds for Better
Use
A. No Management Decision Made by March 31, 2021 — — —
B. Issued During this Reporting Period — — —
Subtotal (Universe from which Management Decisions — — —
Could Be Made in this Reporting Period)
C. Management Decisions Made During this Reporting Period — — —
(I) Recommendations Agreed to by SBA Management — — —
(Ii) Recommendations Not Agreed to by SBA Management — — —
D. No Management Decision Made by — — —
September 30,2021
Reports from Prior Periods with Overdue Management Decisions
Report Report Title Issue Date Recommendation Reason for Delay Timetable for
Number Resolution
21-08 SBA’s Use of Vendors 2/3/2021 Ratify the over $10.8 million in SBA disagreed that 12/31/2021
Without a Contract payments in accordance with ratification of
the FAR and 48 C.F.R. § 1.602-3. unauthorized
commitments was
necessary.
Semiannual Report to Congress, Fall 2021 | 21
U.S. Small Business Administration | Office of Inspector General
Reports from Prior Periods with Open Recommendations as of September 30, 2021
Report Title Date Issued Number of Open Aggregate
Number Recommendations Potential Cost
Savings
17-19 Audit of SBA’s Microloan Program 9/28/2017 2 $137,199,806
18-03 Independent Auditor’s Report on the SBA’s FY 11/14/2017 1 —
2017 Financial Statements
18-13 Evaluation of SBA 7(a) Loans Made to Poultry 3/6/2018 1 —
Farmers
19-08 SBA’s HUBZone Certification Process 3/28/2019 1 —
19-15 OIG High-Risk 7(a) Loan Review Program 7/10/20191 1 $3,000,297
19-16 Office of Inspector General High-Risk 7(a) Loan 2 $2,059,132
8/14/2019
Review Program
19-17 Evaluation of SBA’s All Small Mentor-Protégé 2 —
9/17/2019
Program
20-03 Audit of SBA's Oversight of High-Risk Lenders 11/12/2019 6 $13,313,560
20-05 KPMG Management Letter Communicating 2 —
Matters Relatives to SBA's FY 2019 Financial 12/10/2019
Statement Audit
20-08 Audit of the SBA's Community Advantage Pilot 6 $51,472,944
3/18/2020
Program
20-17 Evaluation of Certify.SBA.Gov 7/30/2020 5 —
20-18 Office of Inspector General High Risk 7(a) Loan 1 $2,094,574
8/25/2020
Review Program
20-20 Audit of SBA’s Compliance with the Debt 10 —
9/30/2020
Collection Improvement Act, as Amended
21-02 Inspection of SBA’s Initial Disaster Assistance 6 —
10/28/2020
Response to the Coronavirus Pandemic
21-03 Evaluation of CARES Act Debt Relief to 7(a) 1 —
12/1/2020
Borrowers
21-04 Independent Auditors’ Report on SBA’s FY 28 —
12/18/2020
2020 Financial Statements
21-06 Paycheck Protection Program Loan Recipients 2 —
on the Department of Treasury’s Do Not Pay 1/11/2021
List
21-07 Inspection of SBA's Implementation of the 3 —
1/14/2021
Paycheck Protection Program
21-08 SBA’s Use of Vendors Without a Contract 2/3/2021 3 —
21-09 Duplicate Loans Made Under the Paycheck 4 —
3/15/2021
Protection Program
21-11 Evaluation of SBA’s Award Procedures for the 2 —
Coronavirus Aid, Relief, and Economic Security
3/30/2021
Act Entrepreneurial Development Cooperative
Agreements
Total — 87 $209,140,313
22 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Significant Recommendations from Prior Reporting Periods without Final Action as
of September 30, 2021
Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
17-19 9/28/2017 Continue efforts to improve the information 1/4/2018 10/31/2021
system to include outcome-based
performance measurements and ensure the
data captured can be used to effectively
monitor the microloan program compliance,
performance, and integrity.
17-19 9/28/2017 Update the microloan reporting system 1/4/2018 10/31/2021
manual to reflect current technology
capabilities.
18-03 11/14/2017 Monitor and perform procedures over the 1/10/2018 9/30/2021
service organization’s attestation report
regarding user control considerations. This
assessment should be performed annually.
18-13 3/6/2018 Review the arrangements between 3/1/2018 3/31/2022
integrators and growers under the revised
regulations, and establish and implement
controls, such as supplemental guidance, to
ensure SBA loan specialists and lenders
make appropriate affiliation determinations.
19-08 3/28/2019 Implement a plan to reduce IT issues 3/29/2019 9/15/2020
affecting the HUBZone certification process.
19-14 6/19/2019 Develop and implement prescriptive and 6/26/2020 1/31/2020
rigorous controls to oversee and monitor
excess cash held by the fiscal agent for
recurring activities such as NSBW on behalf
of SBA and in accordance with the
requirements of OMB Circular No. A-123.
These controls should be incorporated into
SOP 90 75 4 and include the receipt and
recurring review of bank statements for cash
held on account.
19-15 7/10/2019 Require the lender to bring the loan into 7/11/2019 12/1/2021
compliance or, if not possible, seek recovery
of $3,000,297 plus interest on the guaranty
paid by SBA.
19-16 8/14/2019 Require the lender to bring the loan into 8/15/2019 12/1/2021
compliance or, if not possible, seek recovery
of $1,367,417 plus interest on the guaranty
paid by SBA.
19-16 8/14/2019 Require the lender to bring the loan into 8/15/2019 12/1/2021
compliance or, if not possible, seek recovery
of $691,715 plus interest on the guaranty
paid by SBA.
19-17 9/17/2019 Prioritize staff resources to ensure 2/4/2020 9/30/2022
application reviews and annual evaluations
are conducted in accordance with regulatory
and program requirements.
19-17 9/17/2019 Ensure that certify.SBA.gov has the 9/17/2019 9/30/2022
functionality needed for program officials to
conduct application reviews and annual
evaluations.
Semiannual Report to Congress, Fall 2021 | 23
U.S. Small Business Administration | Office of Inspector General
Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
20-03 11/12/2019 Develop and implement policies and 11/15/2019 12/31/2021
procedures to document OCRM's
justification for not conducting planned
reviews and identifying and prioritizing
additional lenders for review.
20-03 11/12/2019 Develop and implement a comprehensive 11/15/2019 9/30/2022
database to manage its oversight of high-risk
lenders to ensure performance of all
planned reviews, implementation of risk
mitigation actions, and identification of
noncompliant lender and systemic material
loan deficiencies.
20-03 11/12/2019 Develop and implement policies and 11/15/2019 11/30/2021
procedures to provide clear and specific
guidance to analysts regarding the
appropriate corrective and enforcement
actions for identified lenders and loan
deficiencies to ensure analysts recommend
appropriate and consistent corrective and
enforcement actions.
20-03 11/12/2019 Conduct periodic overall assessments of the 11/15/2019 12/31/2021
high-risk lender review results and
recommended risk mitigation actions to
ensure analysts recommend appropriate and
consistent corrective and enforcement
actions.
20-03 11/12/2019 Develop and implement policies and 11/15/2019 12/31/2021
procedures that require OCRM to
communicate systemic lender issues and
material loan deficiencies to the appropriate
SBA loan approval and purchase centers to
facilitate proactive portfolio management
and to mitigate the risk of improper
guaranty purchases in the event of default.
20-03 11/12/2019 Determine whether the lenders corrected 11/15/2019 12/31/2021
the deficiencies on the 21 loans purchased
for a total of $13.3 million. If not, require the
lenders to bring the loans into compliance
or, if not possible, seek recovery of the
guaranty paid by SBA from lenders.
20-05 12/10/2019 KPMG recommends Associate Administrator 1/9/2020 11/8/2021
for Capital Access update appropriate Center
Desk Manuals to specify relevant staff
involved in the charge-off and referral
processes to ensure the Next Due Date field
in the loan repository system is timely
updated when a loan's liable parties change.
Any change to policy should be
communicated to relevant staff.
20-05 12/10/2019 KPMG recommends the Associate 1/9/2020 11/8/2021
Administrator for Capital Access perform a
regular review of liable parties with
outstanding receivable balances to ensure
they are referred in a timely manner.
24 | Semiannual Report to Congress, Fall 2021
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Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
20-08 3/18/2020 Evaluate options that facilitate the 6/30/2020 12/31/2021
Community Advantage (CA) pilot program’s
ability to effectively expand access to capital
in underserved markets.
20-08 3/18/2020 Evaluate whether it is feasible to align the 6/30/2020 12/31/2021
maximum interest rates charged under the
CA pilot program with comparable 7(a)
program rates, excluding SBA Express.
20-08 3/18/2020 Provide criteria to lenders to assist them 8/5/2020 10/31/2021
with assessing the borrowers’ M&TA needs.
20-08 3/18/2020 Establish methods to assess whether lenders 6/30/2020 12/31/2021
have the expertise needed to provide M&TA
to underserved borrowers and to address
any lender deficiencies regarding M&TA.
20-08 3/18/2020 Require lenders to complete the data fields 6/30/2020 12/31/2021
related to the M&TA provided and enhance
the annual CA performance analysis by
including the evaluation of the performance
associated with the various types of M&TA.
20-08 3/18/2020 Establish a process to periodically assess the 6/30/2020 10/31/2021
performance of CA loans approved with
SBSS scores under 140, to determine
whether the recently implemented SBA
approval requirement is adequately
mitigating the risk of loss.
20-17 7/30/2020 Establish traceable functional requirements 9/21/2020 1/15/2022
for the Certify investment in accordance
with the Capital Programming Guide,
supplement to OMB Circular A-11,
specifically, in terms of the Office of
Government Contracting and Business
Development’s mission, purpose, capability,
schedule and cost objectives.
20-17 7/30/2020 Develop a documented requirements 9/21/2020 1/15/2022
traceability matrix and ensure that the
Office of Government Contracting and
Business Development has adequate
resources to trace requirements throughout
all stages of design, development, and user-
acceptance.
20-17 7/30/2020 Develop and maintain a performance- 9/21/2020 1/15/2022
measurement baseline with budgets and
schedules assigned to product-oriented
work breakdown structure elements and
established cost and schedule variance
thresholds in accordance with the Capital
Programming Guide, supplement to OMB
Circular A-11.
Semiannual Report to Congress, Fall 2021 | 25
U.S. Small Business Administration | Office of Inspector General
Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
20-17 7/30/2020 Incorporate earned value management and 9/21/2020 1/15/2020
integrated baseline reviews into the Certify
investment as required by FAR 34. 2 and
conduct documented integrated baseline
reviews in accordance with the 32 criteria
identified in National Defense Industrial
Association’s Earned Value Management
Systems EIA-748 Intent Guide, as required
by SOP 90 52.
20-17 7/30/2020 Update system development methodology 9/21/2020 10/29/2021
to link agile summary components with
establishing traceable requirements,
monitoring progress through a requirements
traceability matrix and reporting progress
using a performance management system,
including an earned value management
system for the development of major IT
investments.
20-18 8/25/2020 Require the lender to bring the loan into 8/25/2020 12/1/2021
compliance or, if not possible, seek recovery
of $2,094,574 on the guaranty paid by SBA.
20-20 9/30/2020 Review all loans assigned to the resolution 9/16/2020 6/30/2021
center that are 180 days or more delinquent
and classified with code 66 (Lien or
Mortgage/Refer to Treasury Offset Program
Only) and 00 (Clear Existing Status Code) and
transfer the loans to Treasury Cross-
Servicing, unless verified as exempt when
the temporary suspension of debt collection
activities because of the pandemic is lifted.
20-20 9/30/2020 Perform a cost benefit analysis to determine 9/16/2020 5/15/2021
if SBA should begin assessing fees to offset
the cost of processing and handling
delinquent disaster loans.
20-20 9/30/2020 Revise SOP 50 52 to clearly communicate 9/16/2020 6/4/2021
that all loans with collateral must be
evaluated for foreclosure and placed in
foreclosure status before they are 180 days
delinquent.
20-20 9/30/2020 Revise SOP 50 52 2 to clearly communicate 9/16/2020 6/4/2021
that all debts 180 days delinquent must be
transferred to Treasury Cross-Servicing
unless the debt meets a valid transfer
exemption.
20-20 9/30/2020 Establish requirements to provide annual 9/16/2020 5/15/2021
training on Debt Collection Improvement Act
requirements to all staff of the resolution
center.
20-20 9/30/2020 Ensure that information used to monitor 9/16/2020 5/15/2021
compliance with the Debt Collection
Improvement Act includes all loans assigned
to the resolution center as identified in the
Capital Access Financial System.
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Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
20-20 9/30/2020 Review all loans currently assigned to the 9/16/2020 6/30/2021
Center and designated exempt from
Treasury Offset Program and verify that each
of the obligors is exempt from referral to
Treasury Offset Program, and if not, refer
the obligors to Treasury Offset Program, as
required.
20-20 9/30/2020 Review all loans currently assigned to the 9/16/2020 6/30/2021
Center and designated as exempt from
Treasury Cross-Servicing that are 180 days or
more delinquent and verify that each of the
obligors is exempt from transfer to Treasury
Cross-Servicing, and if not, transfer the debt
to Treasury Cross-Servicing, as required
when the temporary suspension of debt
collection activities due to COVID-19 is lifted.
20-20 9/30/2020 Establish policies and procedures to require 9/16/2020 6/4/2021
routine follow-up on delinquent loans to
ensure full compliance with the Debt
Collection Improvement Act.
20-20 9/30/2020 Reiterate the requirements for workout 9/16/2020 6/4/2021
agreements to responsible personnel to
ensure compliance with the Debt Collection
Improvement Act.
21-02 10/28/2020 Review all loans that had a bank account 12/8/2020 12/31/2021
number changed from that shown on the
original application to determine if the
changes were legitimate or fraudulent. If not
legitimate, work to recover the funds,
deobligate any undisbursed funds, and refer
to the OIG.
21-02 10/28/2020 Review duplicate loans to IP addresses, 12/8/2020 12/31/2021
email addresses, business addresses, and
bank accounts to determine if there are
undisbursed funds that should be suspended
until the duplicate loans are assessed for
eligibility.
21-02 10/28/2020 Strengthen or establish controls to ensure 8/10/2021 12/31/2021
multiple loans are provided only to eligible
applicants and prevent the erroneous
duplication of loans.
21-02 10/28/2020 Strengthen data integrity to make it possible 8/10/2021 12/31/2021
to determine if the inaccurate information
allowed loans to be made to ineligible
entities and to strengthen SBA’s ability to
service loans appropriately.
21-03 12/1/2020 Establish post-payment audit procedures, 12/1/2020 11/30/2021
using a risk-based approach, to verify the
accuracy and completeness of all subsidy
payments to lenders and include reviews of
payments made to loans that changed from
liquidation status to regular servicing status,
and remedy improper payments in
accordance with the Payment Integrity Act
of 2019.
Semiannual Report to Congress, Fall 2021 | 27
U.S. Small Business Administration | Office of Inspector General
Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
21-04 12/18/2020 Assess the accounting considerations, 4/30/2021 10/15/2021
including the impact on the consolidated
financial statements, from the results of the
loan review process for PPP loans and record
any necessary adjustments for loans
determined to not be in conformance with
the CARES Act and related legislation.
21-04 12/18/2020 Document the development of significant 2/8/2021 10/15/2021
assumptions used in the PPP reestimate,
including the consideration of the most
recent, best available data to address the
potential existence of disconfirming
evidence.
21-04 12/18/2020 Accumulate relevant, complete, and 2/8/2021 10/15/2021
accurate data to develop and support the
PPP reestimate.
21-04 12/18/2020 Design and implement review and approval 2/8/2021 10/15/2021
controls of the PPP reestimate by
appropriate levels of management, including
review of sources of relevant data inputs,
development of assumptions, and
reasonableness of assumptions and resulting
estimates.
21-04 12/18/2020 Perform a thorough review of the COVID-19 3/17/2021 6/30/2021
EIDLs and grants portfolio and determine
which transactions were made to ineligible
recipients and not in conformance with the
CARES Act and related legislation.
21-04 12/18/2020 Implement controls that prevent or detect 4/7/2021 6/30/2021
loans from being approved that are not in
conformance with the related legislation and
program’s eligibility terms.
21-04 12/18/2020 Update the Reference Guide to require a 3/17/2021 6/30/2021
more thorough review to clear certain alerts
and enforce the actions recommended by
the Reference Guide to adequately address
and mitigate the alerts prior to loan
approval.
21-04 12/18/2020 Provide training of loan officers and 3/17/2021 6/30/2021
supervisory loan officers to execute their
responsibilities in accordance with
established guidance and standard operating
procedures.
21-04 12/18/2020 Assess the accounting considerations, 4/30/2021 10/15/2021
including the impact on the consolidated
financial statements, from the results of the
loan review process for PPP and record any
necessary adjustments for loans determined
not to be in conformance with the CARES
Act and related legislation.
28 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
21-04 12/18/2020 Develop and implement a policy requiring 3/17/2021 6/30/2021
new service organizations to provide a SOC 1
report over the control environment that is
relevant and significant to the processing
and recording of SBA’s transactions. If a SOC
1 report cannot be obtained, identify and
evaluate relevant controls at the service
organizations that have an impact on SBA’s
internal controls over financial reporting.
21-04 12/18/2020 Determine the impact on the outstanding 2/1/2021 9/21/2021
guarantee and eligibility for forgiveness of
loans determined to be not in conformance
with the CARES Act and related legislation.
21-04 12/18/2020 Assess the risk posed by the service 3/172021 6/30/2021
organization’s control environment and
obtain sufficient assurance over the
operating effectiveness of relevant and
significant controls to determine the
integrity of transactions processed on behalf
of and recorded by SBA. If a SOC 1 report is
obtained for the relevant control
environment at the service organization,
determine and document the requirements.
21-04 12/18/2020 Assign and hold accountable individuals 2/25/2021 10/15/2021
responsible for overseeing management’s
design, implementation, and operation of
SBA’s internal control system.
21-04 12/18/2020 Document the internal control system and 2/25/2021 10/15/2021
processes related to the implementation of
the CARES Act and related legislation.
21-04 12/18/2020 Perform and document a thorough risk 2/25/2021 10/15/2021
assessment at the financial statement
assertion level to identify process level risks
and assess the effectiveness of key process
level controls to respond to the risks.
21-04 12/18/2020 Develop and implement monitoring controls 2/25/2021 10/15/2021
to ensure implementation of an effective
internal control environment.
21-04 12/18/2020 Recruit additional qualified personnel, 2/25/2021 10/15/2021
implement a formal training program, and
train appropriate SBA personnel and
contractors on internal control matters that
affect financial reporting and compliance
with relevant laws and regulations.
21-04 12/18/2020 Update and enforce the existing Procedural 3/26/2021 9/17/2021
Notice 5000-20049 to require the adequate
review and approval of Section 1112
payments made to lenders and to determine
that the necessary documentation is
maintained to substantiate the payment
amount.
Semiannual Report to Congress, Fall 2021 | 29
U.S. Small Business Administration | Office of Inspector General
Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
21-04 12/18/2020 Update the enterprise risk management 2/25/2021 10/15/2021
approach over the evaluation of internal
controls to ensure it includes all significant
programs, key processes, and other material
line items on the consolidated financial
statements.
21-04 12/18/2020 Perform and document the internal control 2/25/2021 10/15/2021
evaluation performed over all programs.
This should include entity level controls,
manual controls, general information
technology controls, and system application
controls covering key financial statement
line items and risks.
21-04 12/18/2020 Work with service providers to assess 8/26/2021 10/15/2021
service organization risks and controls and
monitor the service providers to determine
that they properly design, implement, and
effectively operate controls impacting SBA’s
control environment.
21-04 12/18/2020 Address the control deficiencies over 8/26/2021 10/15/2021
transactions arising from the
implementation of the CARES Act and
related legislation by working with the Office
of Capital Access and the Office of Disaster
Assistance to implement the
recommendations in Attachment I –
Material Weaknesses.
21-04 12/18/2020 Address the deficiencies in general 1/19/2021 9/1/2021
information technology controls for SBA
systems critical to financial reporting by
working with the relevant system owners to
implement the recommendations in
Attachment II – Significant Deficiencies.
21-04 12/18/2020 Assess the accounting considerations, 6/2/2021 10/15/2021
including the impact on the consolidated
financial statements, from the results of the
loan review process for PPP loans and record
any necessary adjustments for loans
determined to not be in conformance with
the CARES Act and related legislation.
21-04 12/18/2020 Identify and review PPP loans with 2/1/2021 7/22/2021
incomplete or inaccurate 1502 reports.
21-04 12/18/2020 Determine and update the loan repository 2/1/2021 9/21/2021
system with correct PPP loan related
balances.
21-04 12/18/2020 Develop and enforce a policy that requires 3/26/2021 7/30/2021
the adequate training and monitoring of
lenders to execute their responsibilities in
the PPP loan servicing process.
21-04 12/18/2020 Develop and enforce a policy to monitor 4/2/2021 7/31/2021
incomplete or inaccurate PPP 1502 reports
on an ongoing basis.
30 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
21-06 1/11/2021 Promptly identify PPP loans that have not 3/4/2021 12/15/2021
been fully disbursed and follow-up with the
lenders to stop $280 million in potential
improper loan disbursements.
21-06 1/11/2021 Strengthen SBA controls to ensure that loans 3/4/2021 12/15/2021
to ineligible recipients are not forgiven.
21-07 1/14/2021 Review the loans identified as potentially 1/14/2021 9/17/2021
ineligible to determine if the businesses met
eligibility requirements. If not, take
appropriate action related to loan guaranty
and forgiveness.
21-07 1/14/2021 For future rounds of PPP lending, assess 1/14/2021 12/1/2021
vulnerabilities in internal controls and
strengthen or implement necessary internal
controls to address ineligible loans and
potential fraud.
21-07 1/14/2021 For future rounds of PPP lending, revise the 1/14/2021 12/1/2021
borrower application to include the critical
“jobs retained” field to ensure SBA reports
accurate and complete job numbers.
21-08 2/3/2021 Require responsible personnel to execute a 2/1/2021 12/31/2021
contract for foreclosure and real estate
services to ensure the procurement of
services are obtained and authorized in
accordance with the Federal Acquisition
Regulation requirements.
21-08 2/3/2021 Ensure that vendors used to provide 2/1/2021 12/31/2021
foreclosure and real estate services are
registered in SAM, as required.
21-09 3/15/2021 Review the OIG identified potential 3/31/2021 12/1/2021
duplicate disbursements for eligibility and
take action to recover any improper
payments as applicable.
21-09 3/15/2021 Review SBA controls related to all PPP loan 3/31/2021 12/1/2021
reviews to ensure that duplicate loans are
not forgiven and not subject to an SBA
guaranty, as appropriate.
21-09 3/15/2021 Strengthen E-Tran controls for future PPP 3/23/2021 12/1/2021
type programs, which includes keeping E-
Tran controls that align with program
requirements on at all times.
21-09 3/15/2021 Review the issues that SBA identified 3/23/2021 12/1/2021
involving the actions of lenders, such as
providing incorrectly formatted data and
submitting the same application through
multiple platforms and determine how to
strengthen controls and guidance as
appropriate to ensure lenders meet program
requirements for future PPP type programs.
21-11 3/30/2021 Enforce standard operating procedures 3/24/2021 9/30/2021
requiring clearly defined performance goals
and include performance targets in all future
SBDC and WBC cooperative agreements and
grants to objectively measure performance
results.
Semiannual Report to Congress, Fall 2021 | 31
U.S. Small Business Administration | Office of Inspector General
Report Date Issued Recommendation Date of Final Action Target
Number Management Date
Decision
21-11 3/30/2021 Collect and analyze the CARES Act 3/24/2021 11/30/2021
entrepreneurial development cooperative
agreement recipient’s performance results
and establish a framework for setting goals
for technical assistance programs in
response to future disasters. Retain the
analysis in program files for future guidance.
Significant Recommendations from this Reporting Period
Report Title Date Issued Recommendation
Number
21-14 Audit of SBA’s 5/4/2021 Implement financial oversight procedures for the WBC program that
Oversight of ensure the program office enforces WBC cooperative agreement
Women’s Business requirements. Program officials should ensure WBCs use federal funds
Centers’ only for allowable, allocable, and reasonable expenses, adhere to
Compliance with contract award procedures, and separate project costs by funding
Cooperative source.
Agreement
Financial
Requirements
21-14 Audit of SBA’s 5/4/2021 Remedy $523,790 in unsupported matching funds, unsupported
Oversight of program income, and the resulting portion of the federal funds
Women’s Business reimbursed for the unmet match, and $186,537 in unsupported
Centers’ expenses.
Compliance with
Cooperative
Agreement
Financial
Requirements
21-14 Audit of SBA’s 5/4/2021 Recover $31,215 for improperly awarded contracts and $31,424 in
Oversight of unallowable or unallocable expenses.
Women’s Business
Centers’
Compliance with
Cooperative
Agreement
Financial
Requirements
21-14 Audit of SBA’s 5/4/2021 Implement policies and procedures for conducting thorough financial
Oversight of compliance reviews and coordinate with the Office of Field Operations
Women’s Business to train field office personnel responsible for semiannual site visits.
Centers’
Compliance with
Cooperative
Agreement
Financial
Requirements
32 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-14 Audit of SBA’s 5/4/2021 Establish policies holding program officials accountable for promptly
Oversight of following up on financial examination results and enforcing cooperative
Women’s Business agreement requirements.
Centers’
Compliance with
Cooperative
Agreement
Financial
Requirements
21-14 Audit of SBA’s 5/4/2021 Require higher-level reviewers to clearly justify and document approving
Oversight of or denying disbursement of funds if the decisions differ from the
Women’s Business recommendations of lower-level reviewers; justification documentation
Centers’ should be kept in the official cooperative agreement file.
Compliance with
Cooperative
Agreement
Financial
Requirements
21-14 Audit of SBA’s 5/4/2021 Review expenses for the $28,089 reallocation of budget expenses we
Oversight of detailed in this report to ensure these costs are allowable and document
Women’s Business the rationale for the reallocation or recover costs that are unallowable.
Centers’
Compliance with
Cooperative
Agreement
Financial
Requirements
21-14 Audit of SBA’s 5/4/2021 Require program officials to enforce the cooperative agreement terms
Oversight of and conditions and deobligate or withhold payments if WBCs do not
Women’s Business submit accurate financial reports on time.
Centers’
Compliance with
Cooperative
Agreement
Financial
Requirements
21-14 Audit of SBA’s 5/4/2021 Develop and implement procedures to ensure program officials
Oversight of objectively assess applicant risk to minimize the possibility of awarding
Women’s Business cooperative agreements to WBCs not in compliance with program and
Centers’ financial requirements.
Compliance with
Cooperative
Agreement
Financial
Requirements
21-14 Audit of SBA’s 5/4/2021 Require the Office of Women’s Business Ownership to clarify in the
Oversight of public funding opportunity announcement, all review criteria and
Women’s Business weights to be considered in the cooperative agreement award process,
Centers’ to improve transparency in the cooperative agreement review and
Compliance with decision-making process.
Cooperative
Agreement
Financial
Requirements
Semiannual Report to Congress, Fall 2021 | 33
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-15 SBA’s Handling of 5/6/2021 Develop a process to maintain and track all identity theft complaints.
Identity Theft in the
COVID-19 Economic
Injury Disaster Loan
Program
21-15 SBA’s Handling of 5/6/2021 Develop a process to provide status updates to each complainant
Identity Theft in the alleging identity theft.
COVID-19 Economic
Injury Disaster Loan
Program
21-15 SBA’s Handling of 5/6/2021 Complete and formalize a process to restore identity theft victims to
Identity Theft in the their condition prior to the fraud. The process should include steps to
COVID-19 Economic stop the loan billing statements, prevent delinquency collections,
Injury Disaster Loan release them from loan liability and UCC liens.
Program
21-15 SBA’s Handling of 5/6/2021 Develop a process to remove any fraudulent loans and related UCC filing
Identity Theft in the fees from its financial records.
COVID-19 Economic
Injury Disaster Loan
Program
21-15 SBA’s Handling of 5/6/2021 Review over 150,000 returned billing statements and resolve any that
Identity Theft in the involve identity theft, then refer fraudulent loans to OIG.
COVID-19 Economic
Injury Disaster Loan
Program
21-16 Audit of SBA’s 5/12/2021 Continue to update SBA Standard Operating Procedure (SOP) 20 32 1,
Compliance with Estimating and Reporting Improper Payments, using the framework in
the Debt Collection GAO’s Standards for Internal Control in the Federal Government (Green
Improvement Act, Book) to design and implement robust internal and quality control
as Amended processes to ensure complete and accurate reporting of annual
improper payment results, formalized risk assessment process to ensure
all programs are considered, the maintenance of sample
documentation, and to ensure the sampling methodology
documentation is consistent and updated annually with the population,
sample results, and information in the payment integrity section of the
AFR and accompanying materials.
21-16 Audit of SBA’s 5/12/2021 Provide training to responsible staff in the Offices of Internal Control,
Compliance with Capital Access, and Disaster Assistance regarding updates to SBA SOP 20
the Debt Collection 32 1.
Improvement Act,
as Amended
21-16 Audit of SBA’s 5/12/2021 Ensure that staff in the Office of Internal Control oversee and provide
Compliance with adequate quality control reviews over improper payment disclosures
the Debt Collection submitted by SBA program offices.
Improvement Act,
as Amended
21-16 Audit of SBA’s 5/12/2021 Continue to provide training to program office staff, as needed, on the
Compliance with timely and complete reconciliation of the population of transactions
the Debt Collection used for estimating improper payments to the general ledger.
Improvement Act,
as Amended
21-16 Audit of SBA’s 5/12/2021 Implement additional preventative and monitoring controls to
Compliance with determine the eligibility of borrowers prior to approval.
the Debt Collection
Improvement Act,
as Amended
34 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-16 Audit of SBA’s 5/12/2021 Ensure there is adequate training of staff at the National Guaranty
Compliance with Purchase Centers.
the Debt Collection
Improvement Act,
as Amended
21-16 Audit of SBA’s 5/12/2021 Collaborate with the Chief Financial Officer to ensure a timely and
Compliance with complete reconciliation is performed on the population subject to
the Debt Collection sampling for improper payment reviews.
Improvement Act,
as Amended
21-16 Audit of SBA’s 5/12/2021 Formally document and implement additional preventative and
Compliance with monitoring controls to determine the eligibility of borrowers prior to
the Debt Collection approval and disbursement.
Improvement Act,
as Amended
21-16 Audit of SBA’s 5/12/2021 Ensure there is adequate training of staff at the Processing and
Compliance with Disbursement Center.
the Debt Collection
Improvement Act,
as Amended
21-16 Audit of SBA’s 5/12/2021 Collaborate with the Chief Financial Officer to ensure a timely and
Compliance with complete reconciliations performed on the population subject to
the Debt Collection sampling for improper payment reviews.
Improvement Act,
as Amended
21-16 Audit of SBA’s 5/12/2021 Coordinate with the Office of Disaster Assistance’s statistician to ensure
Compliance with the estimated improper payment amounts are calculated consistently
the Debt Collection and the sampling methodology adequately describes the criteria for
Improvement Act, stratification.
as Amended
21-18 Evaluation of SBA's 7/12/2021 Enforce the requirements of the February 2021 COVID-19 Workplace
Coronavirus Safety Plan by consistently applying occupancy and exposure tracking
Reconstitution Plan and accurately recording and maintaining supporting documentation for
all reported COVID-19 cases.
21-19 The Small Business 8/12/2021 Assess affiliation for faith-based organizations to ensure only eligible
Administration's faith-based organizations received the applicable PPP loans.
Implementation of
Recommended
Controls and the
Economic Aid Act
Significant Management Decisions – OIG Disagreement
There were no significant management decisions OIG disagreed with during this reporting period.
Significant Revised Management Decisions
There were no significant revised management decisions during this reporting period.
Semiannual Report to Congress, Fall 2021 | 35
U.S. Small Business Administration | Office of Inspector General
Federal Financial Management Improvement Act
The OIG’s Independent Public Accountant, KPMG, did not render an opinion on the compliance with the
Federal Financial Management Improvement Act, but their test work in the FY 2020 financial statement
disclosed instances in which SBA’s financial management systems did not substantially comply with
federal financial management systems requirements and applicable federal accounting standards. The
results disclosed no instances in which SBA’s financial management systems did not substantially comply
with the United States Standard General Ledger at the transaction level.
Instances of Interference
There were no attempts by SBA officials to interfere with OIG independence during the reporting period.
36 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Appendix D. Investigations Reporting Statistics
Investigative Reports Issued
Report Type Number of Reports
Report of Investigation 67
Preliminary Case Closing Reports of Investigation —
Total 67
Persons Referred for Prosecution
Referred To Number of Persons
Department of Justice 103
State Attorney 0
Local Attorney 0
Total 103*
*Number includes persons and entities referred for prosecution.
Pandemic-Related Investigative Statistics
SBA OIG Investigations Indict/Complaint Arrests Convictions
PPP/EIDL* 126 97 68 63
Investment Fraud 1 1 1 1
Total 127 98 69 64
*PPP stands for Paycheck Protection Program. EIDL stands for economic injury disaster loan.
Whistleblower Retaliation Cases
There were no OIG investigations involving whistleblower retaliation during the reporting period.
Investigations Involving a Senior Government Employee Where Misconduct Was
Substantiated
There were no OIG investigations involving a senior government employee where misconduct was
substantiated during the reporting period.
Investigations Involving a Senior Government Employee That Is Closed and Not
Disclosed to the Public
There were no OIG investigations that are closed and not disclosed to the public involving a senior
government employee during this reporting period.
Semiannual Report to Congress, Fall 2021 | 37
U.S. Small Business Administration | Office of Inspector General
Appendix E. Legal Actions Summary
April 1, 2021 – September 30, 2021
State Program Jointly Alleged Violation(s) Prosecuted Legal Action
with
CA DL SBA, FBI, IRS-CI Subjects as part of an organized crime ring used Trial resulted in eight
fake identification documents to apply for EIDLs subjects convicted, two who
resulting in losses totaling approximately fled and remain fugitives.
$18 million.
FL DL USSS, FBI Individuals were found to have received Individual pled guilty to bank
$433,000 in cumulative EIDL funding for what fraud.
appear to be three ineligible business entities.
FL DL FBI, USSS Three police officers applied for EIDL loans Subjects pled guilty to wire
using their police department as their business. fraud.
GA DL ATF, Local Police A felon applied for $66,400 in PPP funds which Subject received 33 months
he received and was not entitled. confinement, was ordered to
pay $66,400 in restitution,
and to forfeit a 2019 Dodge
Charger R/T and $16,250.
GA DL TIGTA, USSS Business that was not operating before the $1,214,090 seized from
COVID-19 pandemic applied for and received subject.
PPP funds.
GA BL FBI Individuals conspired to defraud investors in a Individual pled guilty to
trucking company when co-conspirators took conspiracy to commit wire
money from investors. They fraudulently led fraud.
investors to believe that the trucking company
could generate enormous profits.
ID BL SBA/FDIC Subject submitted false statements to SBA and Civil judgment ordered to
the Eastern Idaho Development Corporation, pay $600,000.
inducing SBA to approve for disbursement and
debenture sale of an SBA 504 loan for
$3,020,000.
IN CC FDIC Co-conspirators fraudulently obtained more Four individuals were found
than $2 million in small business loans, which guilty of wire and bank fraud.
they defaulted on.
IL DL — Individual received approximately $487,000 in Individual pled guilty and is
PPP funds despite being involved in bankruptcy pending sentencing. Repaid
proceedings. over $176,000.
ID Grants SBA/NASA-OIG Subject directed Small Business Innovation Civil Settlement Agreement
Research (SBIR) funds to be diverted to other totaling $490,000.
work projects or for personal purchases and
payments to include home mortgage, home and
car rentals, vacations, and plastic surgery
between 2014-2016. Sentient Corporation
obtained 56 awards since 2002, totaling
approximately $20 million. The principle
location for SBIR/STTR work was a research and
development facility in Idaho Falls, Idaho.
38 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
State Program Jointly Alleged Violation(s) Prosecuted Legal Action
with
MD DL FDIC Several individuals planned a fraudulent capital Subject was sentenced to 63
campaign to raise funds by issuing loans to months of incarceration
straw borrowers who then used the proceeds to followed by 4 years of
purchase stock in their bank. It is further alleged supervised release,
that bank executives engaged in various loan restitution of $3,593,801,
frauds and self-dealing. forfeiture of $3,593,801, and
a fine of $50,000.
MD DL FBI, FDIC, IRS- Individual fraudulently applied for three PPP Subject was arrested and
CID loans. The PPP loans were funded for a total of indicted. Over $2 million was
$3,560,855. Also fraudulently obtained a seized along with a 2018
$25,500 EIDL and an EIDL Advance of $7,000. Tesla 3.
NY DL FBI Individuals conspired to submit online Three co-conspirators were
applications to at least two financial institutions indicted for bank fraud, wire
for a total of over $13 million in government- fraud, and false statements.
guaranteed loans for which they were not
entitled.
OK DL — Individuals conspired to obtain PPP loans for A co-conspirator was
which they did not qualify. sentenced to a year in
federal prison and was
ordered to pay $97,800 in
restitution.
OR DL SBA/USSS Subject engaged in romance scam applied for Subject pled guilty to theft of
EIDL under false business and true ID, with government funds,
resulting losses totaling $145,200, purchased a sentenced to 22 months,
Dodge Challenger and transmitted funds to the reduced to 10 months based
romance scam perpetrator. upon time served. Seized
$50,000 and Dodge
Challenger.
OR DL SBA/FBI/TIGTA Subject submitted PPP falsifying employee and Subject indicted and arrested
revenue information with resulting losses on wire fraud and bank
totaling $904,330, misused proceeds for fraud, $830,000 seized.
gambling, travel, and narcotics. SBA Express
Loan of $20,000 was also misused.
OR BL/DL SBA/FBI Subject submitted numerous PPP and EIDL Subject pled guilty to bank
applications using stolen identities with fraud, money laundering,
resulting losses totaling $4,054,872. Purchased and aggravated identity
23 properties, securities, and transferred theft. Seizures exceeding $11
money to various brokerage accounts. Subject million in securities and cash,
engaged with co-conspirator in furtherance of and additional seizures of 23
the crime. properties purchased with
proceeds.
OR BL/DL SBA/IRS-CI Subject submitted PPP and EIDL applications Subject pled guilty to wire
under the stolen identities of real small fraud, aggravated identity
business owners, purchased a Tesla Model X theft, and money laundering.
and Ford F-350 Super Duty, as well as gold coins Seized Tesla, Ford F-350,
and cryptocurrency with resulting losses gold coins, and
totaling $979,376. Subject fled prosecution cryptocurrency.
following indictment and arrest.
Semiannual Report to Congress, Fall 2021 | 39
U.S. Small Business Administration | Office of Inspector General
State Program Jointly Alleged Violation(s) Prosecuted Legal Action
with
OR BL SBA/TIGTA/ Subject submitted PPP applications for his Subject indicted and arrested
FBI businesses inflating employee numbers, gross on two counts of loan fraud.
revenues, and monthly payroll costs, resulting
in losses totaling $643,782. Misused the
proceeds on his personal residential
construction costs, personal expenditures, and
the purchase of a converted military van.
OR BL SBA/FBI Subject submitted PPP application using false Subject pled guilty to bank
information on IRS documents, payroll, and fraud.
number of employees, resulting in losses
totaling $619,598. Misused money in
purchasing securities and transferring funds to a
co-conspirator.
OR BL/DL SBA/TIGTA/ Subject submitted PPP and EIDL applications Subject indicted and arrested
FBI using fake business information and supporting for wire and bank fraud.
documentation resulting in losses totaling
$367,554, additional cost avoidance of
$302,600.
TX BL USSS Individuals conspired to submit multiple An Individual was Indicted.
fraudulent loan applications, received loan
proceeds in their personal and business bank
accounts, used loan proceeds on items
unrelated to legitimate business activities.
UT BL SBA/FBI Subject submitted PPP application making false Subject pled guilty to wire
statements concerning criminal history with fraud, money laundering,
resulting losses totaling $220,000. conspiracy to defraud the
U.S. and sentenced to 36
months. Co-Conspirator pled
guilty to loan fraud and was
sentenced to a year.
Table Notes:
Legal Actions Summary Program Codes
BL………..Business Loans
DL……….Disaster Loans
GC………Government Contracting and Section 8(a) Business Development
IA………..Internal Affairs
OT………Other
Joint-investigation Agency Acronyms
Defense Criminal Investigative Service (DCIS)
Department of Commerce Office of Inspector General (DOC/OIG)
Department of Energy Office of Inspector General (DOE/OIG)
Department of Health and Human Services Office of Inspector General (HHS/OIG)
Department of Homeland Security Homeland Security Investigations (DHS/HSI)
Department of Homeland Security Immigration and Customs Enforcement (DHS/ICE)
Department of Homeland Security Office of Inspector General (DHS/OIG)
Department of Justice Office of Inspector General (DOJ/OIG)
Department of Justice Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)
Department of State Office of Inspector General (DOS/OIG)
Department of Transportation Office of Inspector General (DOT/OIG)
Department of Treasury Inspector General for Tax Administration (TIGTA)
Department of Treasury Special Inspector General for the Troubled Asset Relief Program (SIGTARP)
Department of Veterans Affairs Office of Inspector General (VA/OIG)
Federal Bureau of Investigation (FBI)
40 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Federal Deposit Insurance Corporation Office of Inspector General (FDIC/OIG)
Federal Housing Finance Agency Office of Inspector General (FHFA/OIG)
Federal Reserve Board Office of Inspector General (FRB/OIG)
General Services Administration Office of Inspector General (GSA/OIG)
Internal Revenue Service – Criminal Investigation (IRS/CI)
National Aeronautics and Space Administration Office of Inspector General (NASA/OIG)
State of California Employment Development Department (State of CA/EDD)
United States Airforce Office of Special Investigations (AFOSI)
United States Army/Criminal Investigation Division (Army/CID)
United States Department of Agriculture Office of Inspector General (USDA/OIG)
United States Naval Criminal Investigative Service (NCIS)
United States Postal Inspection Service (USPIS)
United States Secret Service (USSS)
Semiannual Report to Congress, Fall 2021 | 41
U.S. Small Business Administration | Office of Inspector General
Appendix F. Cosponsored and Other Activities
SBA’s authorization to cosponsor events requires OIG to report to Congress on the Administrator’s use of
that authority semiannually. The following list of activities was provided by the Office of Strategic
Alliances.
Name/Subject of Event Name of Cosponsor(s) Event Date Fully Executed
Location
Pittsburgh District Office (DO) - Johnstown Area
Selling to the Government
Regional Industries, dba JARI; Northwest PA Virtual 9/29/2021
Training Series
Regional Planning & Development Commission
Selling to the Government Wyoming DO-Wyoming Procurement Technical
Virtual 9/15/2021
Training Series Assistance Center
Vermont DO - The Office of U.S. Senator Patrick
Leahy, Vermont Small Business Development
Center, Vermont Manufacturing Center, Center for
24th Annual Women’s Economic
Women & Enterprise, Vermont Agency of Virtual 9/10/2021
Opportunity Conference
Transportation, Vermont Center for Emerging
Technologies, Vermont Procurement Technical
Assistance Center
HQ/Office of Communications and Public Liaison -
ADP, Inc., Amazon.com Services, LLC, Constant
Contact, Inc., Facebook, Inc., Google, LLC,
National Small Business Week
Lockheed Martin Corporation, MetLife, Service Virtual 6/28/2021
2021
Corps of Retired Executives Association, Square,
Inc., The UPS Store, Inc., T-Mobile USA, Inc., Visa
U.S.A. Inc., Zebra Technologies
Underserved Communities
Engagement through HQ/Office of the Administrator-National
Virtual 6/15/2021
Newspaper Publishers Newspaper Publishers Association, Inc.
Associations
New Hampshire DO - New Hampshire Small
Business Development Center, New Hampshire
New Hampshire Small Business
Procurement Technical Assistance Center - Division Virtual 5/5/2021
Matchmaker 2021
of Economic Development - Department of
Business & Economic Affairs
Woostapreneurs Forum – New Massachusetts DO - Worcester Area Chamber of
Virtual 4/20/2021
Americans Business Expo Commerce
Money Management Financial Columbus DO - Focus CFO Group, LLC, Apprisen,
Virtual 4/6/2021
Literacy SCORE Chapter Columbus
42 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Appendix G. External Peer Reviews
Section 5(a) of the IG Act requires OIGs to report peer review results in the Semiannual Reports to
Congress. The following information is provided in accordance with these requirements:
Audits Division
Generally accepted government auditing standards (Yellow Book) issued by GAO require that audit
organizations performing audits and attestation engagements in accordance with the Yellow Book must
have an external peer review performed by reviewers independent of the audit organization being
reviewed at least once every 3 years. OIG’s Audits Division was reviewed by the U.S. Department of State
OIG for the period ending March 31, 2018. SBA OIG received a peer review rating of “pass.”
Similarly, the Council of the Inspectors General on Integrity and Efficiency requires that organizations that
conduct inspections and evaluations under the Quality Standards for Inspection and Evaluation, or Blue
Book, must have an external peer review at least once every 3 years. During FY 2020, our Audits Division
underwent a Blue Book peer review conducted by the Department of Justice OIG. OIG generally met Blue
Book standards.
In addition, in FY 2021, our Audits Division reviewed the U.S. Department of Commerce OIG against the
Yellow Book standards for the period ending September 20, 2020. Commerce OIG received a peer review
rating of pass.
Investigations Division
Section 6(e)(7) of the IG Act, Attorney General Guidelines for Offices of Inspector General with Statutory
Law Enforcement Authority, and the CIGIE Quality Standards for Investigations require external peer
reviews of OIG investigative functions be conducted every 3 years.
In 2017, the U.S. Federal Deposit Insurance Corporation OIG reviewed our Investigations Division. The
reviewers found the system of internal safeguards and management procedures for the investigative
function of OIG was compliant with the quality standards established by the Council of the Inspectors
General on Integrity and Efficiency and the applicable Attorney General Guidelines. (OIGs can be
assessed as either compliant or noncompliant.) No recommendations were offered.
Semiannual Report to Congress, Fall 2021 | 43
U.S. Small Business Administration | Office of Inspector General
Appendix H. Office of Inspector General Reporting
Requirements
Under the Inspector General Act of 1978, as amended, OIG provides independent, objective oversight
to improve the integrity, accountability, and performance of SBA and its programs for the benefit of the
American people.
Although SBA’s programs are essential to strengthening America’s economy, the agency faces several
challenges in carrying out its mission. Access our annual report of the agency’s top management and
performance challenges on our OIG Reports web page.
OIG plays a critical role in addressing these and other challenges by conducting audits to identify
wasteful expenditures and program mismanagement; investigating fraud and other wrongdoing; and
taking other actions to deter and detect waste, fraud, abuse, and inefficiencies in SBA programs and
operations.
OIG’s activities also help to ensure that SBA employees possess a high level of integrity. This is critical to
the proper administration of SBA’s programs because it helps ensure SBA resources are used by those
who need them the most. Copies of OIG reports and other products are available at our OIG Reports
web page.
Reporting Requirements in the Inspector General Act of 1978, As
Amended
Section Reporting Requirement Location
4(a)(2) Review of legislation and regulations Other Significant OIG Activities
5(a)(1) Significant problems, abuses, and deficiencies Throughout
Recommendations with respect to significant Significant Recommendations from This Reporting
5(a)(2) problems, abuses, and deficiencies Period
Significant Recommendations from Prior Reporting
Prior significant recommendations on which Periods Without Final Action as of September 30,
5(a)(3) corrective action has not been completed 2019
5(a)(4) Matters referred to prosecutive authorities Legal Actions Summary
Instances in which requested information was
5(a)(5) refused N/A
5(a)(6) List of audit, inspection, and evaluation reports Reports Issued; Reports with Questioned Costs
5(a)(7) Significant reports Throughout
5(a)(8) Audit, inspection, and evaluation statistical tables Statistical Highlights
Audit, inspection, and evaluation reports with Reports with Recommendations That Funds Be Put to
5(a)(9) recommendations that funds be put to better use Better Use
Reports from Prior Periods with Overdue
Audit, inspection, and evaluation reports without Management Decisions; Reports from Prior Periods
management decision, without comment within 60 with Open Recommendations as of September 30,
5(a)(10) days, or with unimplemented recommendations 2019
5(a)(11) Revised management decisions Significant Revised Management Decisions
Management decisions with which the Inspector Significant Management Decisions with Which OIG
5(a)(12) General disagrees Disagrees
Information described under section 05(b) of the
Federal Financial Management Improvement Act of
5(a)(13) 1996 Federal Financial Management Improvement Act
5(a)(14)–(16) Peer review results External Peer Reviews
44 | Semiannual Report to Congress, Fall 2021
U.S. Small Business Administration | Office of Inspector General
Section Reporting Requirement Location
Investigative statistical tables and supporting
5(a)(17),(18) metrics Investigations Reporting Statistics
Investigations involving a senior government
employee where allegations of misconduct were Investigations Involving a Senior Government
5(a)(19) substantiated Employee Where Misconduct Was Substantiated
5(a)(20) Whistleblower retaliation Whistleblower Retaliation Cases
5(a)(21) Attempts to interfere with the independence of OIG Instances of Interference
Each closed inspection, evaluation, and audit not
disclosed to the public; each closed investigation Investigations Involving a Senior Government
involving a senior government employee not Employee That Is Closed and Not Disclosed to the
5(a)(22) disclosed to the public Public
Semiannual Report to Congress, Fall 2021 | 45
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