Full text
U.S. Small Business Administration
Office of Inspector General
Semiannual Report to Congress
October
e 1, 2019–March 31, 2020
April 29, 2020
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U.S. SMALL BUSINESS ADMINISTRATION
OFFICE OF INSPECTOR GENERAL
WASHINGTON, D.C. 20416
I am pleased to present this Semiannual Report to Congress which provides a summary of the Office
of Inspector General’s (OIG) activities from October 1, 2019 through March 31, 2020. Once again, this
report details our independent oversight of the U.S. Small Business Administration (SBA) in which we
continue to focus on the most critical risks facing SBA, directing resources at the most serious
management and performance challenges facing the Agency.
During this reporting period, we issued 10 reports with 67 recommendations to improve SBA
operations and reduce fraud and unnecessary losses in Agency programs. In addition, we completed
investigations that led to 16 indictments and 24 convictions. Overall, our audits and investigations
achieved savings and monetary recoveries of $18,035,009. We also sent 43 present responsibility
referrals to SBA and had 15 suspension or debarment actions taken at other agencies based on joint
casework. These referrals typically result in a suspension, debarment, or administrative agreement.
In achieving these results, we dedicated our oversight resources toward the principal program areas
of SBA. A few noteworthy reviews and investigative outcomes detailed in this report include:
• OIG issued Report 20-01, Report on the Most Serious Management and Performance Challenges
Facing the Small Business Administration in Fiscal Year 2020. This report represents our current
assessment of Agency programs and/or activities that pose significant risks, including those
that are particularly vulnerable to fraud, waste, error, mismanagement, or inefficiencies.
• OIG issued Report 20-03, Audit of SBA’s Oversight of High-Risk Lenders. We determined SBA
did not always perform effective oversight of high-risk lenders to identify and mitigate risks.
We made six recommendations to improve SBA’s internal controls, enhance communication,
and mitigate losses incurred on loans with material deficiencies.
• OIG issued Report 20-08, on SBA’s Community Advantage Pilot Program, which is intended to
provide access to capital in underserved markets by providing 7(a) loan guaranties as high as
85 percent. We found the program increased lender participation in the 7(a) program but
improvements are needed to ensure the program effectively expands access to capital to
benefit small businesses in underserved markets.
• Two former Jacksonville (FL) City Council members were found guilty in Federal court of
fraud, money laundering, and conspiracy in connection with a $2.65 million SBA guaranteed
loan and other funding. The joint investigation found that the two council members used
their businesses to funnel nearly $252,000 for unauthorized expenses.
• A Georgia man who owned a defense contractor company pled guilty in Federal court to
conspiracy and will forfeit over $1.1 million. A joint investigation found that he conspired with
U.S. Army colonels in a kickback and bribery scheme for government contracts to build and
modernize a communications network.
• Four Oklahoma companies agreed to pay the Federal government over $2.8 million in a
settlement agreement. The government alleged that one company orchestrated a scheme
to obtain Federal set-aside contracts. The company also created and caused two of the other
firms to obtain and receive payments on the contracts causing materially false claims and
statements.
I would like to thank OIG’s employees for their outstanding efforts to promote economy, efficiency,
effectiveness, and integrity in SBA programs and operations. I look forward to working with all of our
stakeholders as we continue to play a key role in addressing the issues and challenges ahead.
Hannibal “Mike” Ware
U.S. Small Business Administration | Office of Inspector General
Contents
Organization Overviews .............................................................................................................................. 1
The U.S. Small Business Administration ..................................................................................................1
The Office of Inspector General ...............................................................................................................1
Management Challenges ............................................................................................................................ 3
Small Business Access to Capital ................................................................................................................ 4
Audit of SBA’s Oversight of High-Risk Lenders ...................................................................................... 4
Audit of SBA’s Community Advantage Pilot Program ........................................................................... 5
Two Former Florida Officials Found Guilty in $2.65 Million SBA Loan Scheme .................................... 6
California Man Sentenced and Ordered to Pay $250,000 ...................................................................... 6
Washington State Men Admit Fraud Involving a Nearly $1.6 Million Loan ........................................... 7
Pennsylvania Man to Pay Over $3.2 Million in Restitution ..................................................................... 7
Bank Official Pleads Guilty to Making False Statements ....................................................................... 8
Massachusetts Man Sentenced to 30 Months in Prison........................................................................ 8
Nevada Man Sentenced and Ordered to Pay Over $127,000 in Restitution ......................................... 9
Disaster Assistance Program .....................................................................................................................10
Audit of the Office of Disaster Assistance Improper Payment Appeal Process ................................. 10
Florida Man to Pay Over $171,000 in Restitution ................................................................................... 11
Investigation Results in Administrative Recovery ................................................................................ 11
New Jersey Woman Pays Remaining $121,881 in Restitution ............................................................... 12
Texas Man Pleads Guilty to Disaster Fraud ........................................................................................... 12
Procurement Assistance ............................................................................................................................ 13
Audit of SBA’s Cooperative Agreement with Arsenal Business and Technology Partnership’s
Veterans Business Outreach Center ...................................................................................................... 13
Oklahoma Man Pleads Guilty to $1.2 Million Theft Involving 8(a) Firm............................................... 14
Georgia Man Pleads Guilty in 8(a) Firm Bribery Scheme ...................................................................... 15
Georgia Man to Forfeit Over $1.1 Million................................................................................................ 15
Alaska Man Signs Plea Agreement After $725,000 Contract Fraud ..................................................... 15
Colorado Women Sentenced for HUBZone Fraud ................................................................................ 15
Colorado Men Sentenced in Contract Steering Scheme ..................................................................... 16
Oklahoma Firms Enter into $2.8 Million Civil Settlement Agreement.................................................. 17
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Agency Management .................................................................................................................................18
Independent Auditors’ Report on SBA’s Compliance with DATA Act Reporting............................... 18
Independent Auditors’ Report on SBA’s FY 2019 Financial Statements ............................................. 18
KPMG's Management Letter Communicating Matters Relative to SBA's FY 2019 Financial
Statement Audit ..................................................................................................................................... 19
SBA’s FY 2019 Cash Contributions and Gifts ......................................................................................... 19
Weaknesses Identified During the FY 2019 Federal Information Security Modernization Act Review
................................................................................................................................................................ 20
Other Significant OIG Activities ................................................................................................................ 21
OIG Background Investigations Ensure Integrity .................................................................................. 21
OIG Promotes Debarment and Other Administrative Enforcement Actions ...................................... 21
OIG Provides Training to Multiple Agencies on Small Business Procurement Integrity and Other
Oversight Concerns ............................................................................................................................... 22
OIG Reviews of Proposed Agency Regulations, Operating Procedures, and Other Initiatives Lead to
Improved Program Controls to Reduce Fraud, Waste, Abuse, and Inefficiencies ............................. 22
2004 Legislation Requires SBA Regulations and OIG Approval of SBDC Surveys .............................. 22
OIG Hotline ............................................................................................................................................. 23
Reporting Period Statistical Highlights ................................................................................................... 24
Summary of OIG Dollar Accomplishments ........................................................................................... 24
Efficiency and Effectiveness Activities Related to Audit, Other Reports, and Followup Activities .. 24
Indictments, Convictions, and Case Actions......................................................................................... 24
SBA Personnel Actions Taken as a Result of Investigation ................................................................. 24
Program Actions Taken During the Reporting Period as Result of OIG Action .................................. 24
Agency Legislative and Regulatory Proposals Reviewed .................................................................... 25
Reports Issued ........................................................................................................................................... 26
Top Management Challenges ............................................................................................................... 26
Agency Management............................................................................................................................. 26
Credit/Capital Programs......................................................................................................................... 26
Disaster Assistance ................................................................................................................................ 26
Contracting/Counseling Programs ........................................................................................................ 26
Reports With Questioned Costs ............................................................................................................... 27
Reports With Recommendations That Funds Be Put to Better Use ...................................................... 27
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Reports From Prior Periods with Overdue Management Decisions ..................................................... 28
Reports From Prior Periods With Open Recommendations as of March 31, 2020 ............................... 29
Significant Recommendations From Prior Reporting Periods Without Final Action as of March 31,
2020 ............................................................................................................................................... 30
Significant Recommendations From This Reporting Period ................................................................. 33
Significant Management Decisions With Which OIG Disagrees ............................................................ 39
Significant Revised Management Decisions ........................................................................................... 39
Federal Financial Management Improvement Act ................................................................................. 39
Instances of Interference.......................................................................................................................... 39
Investigations Reporting Statistics .......................................................................................................... 39
Investigative Reports Issued ................................................................................................................. 39
Persons Referred for Prosecution ........................................................................................................ 39
Whistleblower Retaliation Cases ............................................................................................................. 39
Investigations Involving a Senior Government Employee Where Misconduct Was Substantiated ... 39
Investigations Involving a Senior Government Employee That Is Closed and Not Disclosed to the
Public ............................................................................................................................................. 40
Legal Actions Summary .............................................................................................................................41
Legal Actions Summary Program Codes .............................................................................................. 45
Joint Investigation Agency Acronyms .................................................................................................. 45
Cosponsored and Other Activities ........................................................................................................... 46
Appendix: External Peer Reviews ............................................................................................................ 47
Audits Division ........................................................................................................................................ 47
Investigations Division ........................................................................................................................... 47
Reporting Requirements in the Inspector General Act of 1978, As Amended ...................................... 48
Make a Difference ..................................................................................................................................... 49
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Organization Overviews
The U.S. Small Business Administration
The mission of the U.S. Small Business Administration (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 fiscal years (FYs) 2018–2022 has four overarching goals:
• support small business revenue and job growth,
• build healthy entrepreneurial ecosystems and create business friendly environments,
• restore small businesses and communities after disasters, and
• strengthen SBA’s ability to serve small businesses.
SBA is organized around four key functional assistance areas: financial, contracting, entrepreneurial
development, and disaster assistance. The Agency also represents small businesses through an
independent advocate and an ombudsman.
To deliver business products and services, SBA has its headquarters in Washington, DC, and has staff
in 10 regional offices, 68 district offices and corresponding branch offices, and 4 disaster field offices.
There also are six government contracting area offices. SBA also maintains a vast network of
resource partners in all 50 states, the District of Columbia, Puerto Rico, American Samoa, the U.S.
Virgin Islands, and Guam.
The Office of Inspector General
Pursuant to the Inspector General Act of 1978 (the IG Act), as amended, the Office of Inspector
General (OIG) provides independent, objective oversight to improve the integrity, accountability, and
performance of SBA and its programs for the benefit of the American people. While SBA’s programs
are essential to strengthening America’s economy, the Agency faces several challenges in carrying
out its mission. Challenges include fraudulent schemes affecting all SBA programs, significant losses
from defaulted loans, procurement flaws that allow large firms to obtain small business awards,
excessive improper payments, and outdated legacy information systems.
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 that
SBA resources are used by those who need them the most. Copies of OIG reports and other products
are available at https://www.sba.gov/office-of-inspector-general.
OIG has three divisions and several supporting program offices to carry out its functional
responsibilities.
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The Audits Division performs and oversees audits and reviews to evaluate and assist SBA in
administering its programs and operations economically, efficiently, and effectively. Key areas of
emphasis are SBA’s loan programs, disaster assistance, business development and government
contracting programs, as well as mandatory and other statutory audit requirements involving
computer security and financial reporting. The balance of the engagements is discretionary and
focuses on high-risk activities and management issues facing SBA.
The Investigations Division conducts investigations to deter and detect illegal and improper
activities involving SBA’s programs, operations, and personnel. OIG criminal investigators carry out a
full range of traditional law enforcement functions. The security operations staff conducts required
OIG employee background investigations to achieve a high level of integrity in the workforce and
adjudicates OIG employees and contractors for issuance of personal identity verification cards
pursuant to Homeland Security Presidential Directive-12 background investigations requirements.
The OIG Hotline, under the purview of the Investigations Division, reviews allegations of waste,
fraud, abuse, or serious mismanagement within SBA or its programs from employees, contractors,
and the public. Hotline staff members conduct a preliminary review of all complaints to determine
the appropriate course of action and may coordinate reviews of allegations within OIG, SBA program
offices, or other government agencies.
The Management and Operations Division provides business support (e.g., budget and financial
management, human resources, information technology, administrative, and communication) for
OIG functions and activities.
The Office of Counsel provides legal and ethics advice to all OIG components; represents OIG in
litigation arising out of or affecting OIG operations; presents training; assists with prosecuting
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.
OIG’s headquarters is in Washington, DC. Its field staff are located in Atlanta, GA; Chicago, IL; Dallas-
Fort Worth, TX; Detroit, MI; Denver, CO; Herndon, VA; Houston, TX; Los Angeles, CA; Miami, FL; New
York, NY; Philadelphia, PA; Federal Way, WA; and Washington, DC.
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Management Challenges
Each year, OIG identifies the most serious management and performance challenges facing SBA. In
accordance with the Reports Consolidation Act of 2000 and Office of Management and Budget
(OMB) Circular A-136, SBA reports this information in its agency financial report. The management
challenges represent areas that OIG considers particularly vulnerable to fraud, waste, abuse, or
mismanagement, or which otherwise pose significant risk to the Agency, its operations, or its
credibility. Each management challenge generally has originated from one or more reports issued by
OIG or the Government Accountability Office (GAO).
For each management challenge, OIG provides SBA with recommended remedial actions together
with an assessment of Agency progress on each recommended action during the preceding fiscal
year. If enough progress occurs during the previous fiscal year, OIG assigns a higher color score and
the arrow indicator shows upward movement. The following table provides a summary of this year’s
management challenges. (Access Report 20-01 at https://www.sba.gov/sites/default/files/2019-
10/SBA-OIG-Report-20-01_0.pdf.)
Status at End of FY 2019 Change from Prior Year
# Challenge Green Yellow Orange Red Up Down
1 Small Business Contracting 0 2 0 0 0 0
2 IT Leadership 1 5 0 0 1 0
3 Human Capital 1 o 0 0 1 0
SBA Loan Program Risk
4 2† 0 0 0 1 0
Management and Oversight
8(a) Business Development
5 0 3 2 0 0 2
Program
Ensuring Quality Deliverables
and Reducing Improper
6 1 0 0 0 0 0
Payments at SBA Loan
Operation Centers
7 Disaster Assistance Program 1 3 0 0 1 0
8 Grant Management Oversight 3 1 0 0 0 0
Total 9 14 2 0 4 2
† For challenge 4 recommendation 1, 7(a) was rated green, while 504 was rated yellow. For challenge 4 recommendation 2,
7(a) was rated yellow while 504 was rated green. For simplicity, they are reflected as green in this table.
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Small Business Access to Capital
SBA provides small businesses with capital and financial assistance through several key programs
and has a financial assistance portfolio of guaranteed and direct loans totaling about $122.7 billion.
Over the years, OIG has worked closely with the Agency to identify potential points of risk and to
improve SBA’s oversight and controls to ensure that eligible participants most in need of assistance
benefit from these programs.
For example, the Agency’s largest lending program, 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 (e.g.,
borrowers, loan agents, and lenders) to complete loan transactions, with most loans being made by
lenders to whom SBA has delegated loan-making authority. Additionally, 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—its 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 obtain—or induce others to obtain—SBA-
guaranteed loans. These include submitting fraudulent documents, making fictitious asset claims,
manipulating property values, using loan proceeds contrary to the terms of the loans, and failing to
disclose debts or prior 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, to recovering funds.
Audit of SBA’s Oversight of High-Risk Lenders
SBA is authorized by statute to provide financial assistance to small businesses through government-
guaranteed loans and debentures. SBA’s Office of Credit Risk Management (OCRM) is responsible
for the oversight of SBA lenders and its $120 billion 7(a) and 504 loan portfolio. OCRM’s mission is to
maximize the efficiency of SBA’s lending programs by effectively managing program credit risk,
monitoring lender performance, and enforcing lending program requirements.
We found that OCRM did not always perform effective oversight of high-risk lenders to identify and
mitigate risks. Specifically, OCRM did not always conduct planned high-risk lender reviews,
recommend adequate and consistent risk mitigation actions, or communicate loan deficiencies they
noted during their reviews to SBA approval and purchase loan centers. Several factors contributed to
these conditions. OCRM did not have policies and procedures requiring them to document their
justification for not conducting planned reviews and identifying and prioritizing additional lenders for
review, a comprehensive database to manage its oversight of high-risk lenders, or clear and specific
guidance to outline adequate corrective and enforcement actions. Further, OCRM did not conduct an
overall assessment of the high-risk lender review results to ensure analysts recommended adequate
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and consistent actions or have a requirement to communicate significant lender review findings and
loan deficiencies to SBA’s loan centers.
As a result, there is an increased risk that lenders with repeated identified systemic deficiencies will
continue to participate in SBA’s 7(a) and 504 loan programs, which could jeopardize the integrity of
the programs and increase the risk of financial loss to the $120 billion loan portfolio. For example,
OCRM identified material deficiencies in 21 defaulted loans, for which SBA honored its guaranty by
purchasing the defaulted loans. However, we did not find evidence that SBA validated whether the
lenders had corrected the deficiencies. Therefore, we questioned SBA’s guaranty purchases of these
21 defaulted loans totaling $13.3 million. Additionally, five lenders that did not receive planned
reviews had an average default rate of 19 percent for loans approved and disbursed in FYs 2015–2017.
These lenders originated and disbursed $1 billion in loans in which $112.5 million was transferred to
liquidation because the loans defaulted.
We made six recommendations to improve SBA’s internal controls, enhance communication, and
mitigate losses incurred on loans with material deficiencies. (Access report 20-03 at
https://www.sba.gov/sites/default/files/2019-11/SBA-OIG-Report-20-03.pdf.)
Audit of SBA’s Community Advantage Pilot Program
The Community Advantage (CA) pilot program is intended to provide access to capital in
underserved markets by providing 7(a) loan guaranties as high as 85 percent. We determined
whether SBA’s CA pilot program expanded capital to benefit small businesses in underserved
markets and whether SBA established internal controls to mitigate the risk of loss. Our audit found
the CA pilot program increased lender participation in the 7(a) program, but improvements are
needed to ensure the program effectively expands access to capital to benefit small businesses in
underserved markets. The CA program was duplicative of other 7(a) programs, charged higher
interest rates, provided limited management and technical assistance (M&TA) and did not mitigate
risk of loss to the agency. As a result, CA borrowers are projected to pay about $49.4 million more
than they would have for non-CA 7(a) loans, and loans with M&TA performed worse than loans
without M&TA.
All the CA loans in our scope were also likely eligible for 7(a) loans; lenders provided M&TA to only 34
percent of CA loans and did not report complete M&TA information. Also, loans in our audit scope
with M&TA defaulted at higher rates than loans without M&TA (15 versus 13.5 percent). We also
determined that the default rate for all CA loans approved between FYs 2011 and 2016 exceeded 14
percent compared to an 8.7 percent default rate for similarly sized non-CA 7(a) loans during the same
period.
In addition, SBA did not always follow established internal controls to mitigate the risk of loss and
did not always monitor and mitigate identified risks timely. SBA’s 2015 CA performance analysis
found that loans with Small Business Scoring Service (SBSS) scores below 140 represented increased
risk but did not conduct additional SBSS analyses on CA loan performance until 2018. During this
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period, 35 loans with SBSS scores below 140 were approved which later defaulted and were
purchased by SBA for approximately $2.1 million.
We made six recommendations to evaluate options to facilitate the program’s ability to effectively
expand access to capital in underserved markets, strengthen controls, reduce the burden on CA
borrowers, and improve the quality of loans. (Access report 20-08 at
https://www.sba.gov/sites/default/files/2020-03/SBA-OIG-Report-20-08.pdf.)
Two Former Florida Officials Found Guilty in $2.65 Million SBA Loan Scheme
Two former Jacksonville (FL) City Council members were found guilty in Federal court on multiple
counts of fraud, money laundering, and conspiracy. The woman served as principal for two
businesses while the man served as the primary principal for two other businesses. In addition, SBA
suspended both individuals and their companies from future procurement and non-procurement
transactions with any Federal executive branch agency.
The investigation disclosed that from late 2013 through early 2015, the two individuals conspired to
defraud SBA. The woman conspired with the man to start his two companies so that she could
submit fraudulent invoices for business expenses for a barbeque sauce bottling plant affiliated with
her. The plant received a $2.65 million SBA Section 7(a) guaranteed loan and $590,000 in city grants
and loans. One of the man’s companies served as a conduit to receive $251,919 in SBA loan proceeds
from a lender. He then funneled at least $166,500 back to a business bank account that the woman
controlled.
The man kept the difference in one of his business accounts and used most of the money for
personal expenses. The SBA authorization agreement with the lender required that the sauce
bottling plant submit detailed invoices of its expenses for the lender to release money in
installments. The investigation was conducted jointly with the Federal Bureau of Investigation (FBI)
and the Internal Revenue Service, Criminal Investigation (IRS CI).
California Man Sentenced and Ordered to Pay $250,000
The owner of a California insurance agency was sentenced in Federal court to time served on a
recommended 18-month sentence, one year in a residential re-entry center, and three years of
supervised release. He was also ordered to pay a $250,000 fine.
As part of his guilty plea, the man stated that beginning around November 2015, he submitted an
SBA form for a $2,325,000 SBA guaranteed loan to purchase two businesses. The form falsely stated
that he would only use the SBA loan proceeds for business-related purposes specified in the SBA
loan application documents.
To support the SBA loan application, the man caused his loan broker to submit a false asset purchase
agreement to a bank. The purchase agreement falsely inflated the business’ purchase price. Based
on the false documents, the SBA loan closed. Approximately $648,000 to which the man was not
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entitled was deposited into two bank accounts he controlled. The remainder of the loan was used to
purchase the two businesses. Instead of using the $648,000 for business-related purposes, he used
the funds for his own benefit for tuition, credit card, and mortgage payments. This was a joint
investigation with the FBI and U.S. Immigration and Customs Enforcement, Homeland Security
Investigations (ICE HSI).
Washington State Men Admit Fraud Involving a Nearly $1.6 Million Loan
Three Washington State men entered into felony diversion agreements with a State court. The first
man admitted to committing theft by deception and identity theft. The terms and conditions of the
agreement include the man (1) waiving his Fifth Amendment privilege to remain silent and agreeing
to testify truthfully at trial(s) against co-defendants; (2) paying a $300 evaluation fee, a $150 contract
signing fee, and $50 per month in felony diversion program fees; (3) performing 100 hours of
community service; and (4) reporting to the county jail for booking and fingerprinting for the above
crimes. Upon successful completion of the felony diversion program, the State of Washington will
cease further prosecution.
In addition to entering into state felony diversion agreements, the second and third co-defendants
admitted to committing theft by deception. The terms and conditions of their agreements include
the same elements described above. Again, upon successful completion of the felony diversion
program, the State of Washington will cease further prosecution.
The investigation revealed that the three co-defendants intentionally submitted false statements to
a bank and SBA when obtaining a $1,573,800 SBA guaranteed loan. They led the bank and SBA to
believe the loan proceeds would be used to start a restaurant; however, the money was used to start
a retail marijuana business. The three men would not have been eligible for the loan if the true
nature of the loan proceeds were disclosed to the bank.
Pennsylvania Man Ordered to Pay Additional $809,000 in Restitution and Forfeit $60,000
A Pennsylvania man was ordered by a Federal court in Delaware to pay an additional $809,000 in
restitution and $60,000 in forfeiture. He was previously sentenced to 18 months of incarceration,
three years of supervised release, and ordered to pay $2,459,150 in restitution. His total amended
restitution is $3,268,150. He also previously pled guilty to bank fraud, conspiracy, and attempted
bank fraud.
The man admitted that he conspired with a client to obtain loans from two banks under false
pretenses. Specifically, he stated that he and his client agreed to submit loan requests in the names
of third parties when they knew that the client would control the proceeds. The loans consisted of a
$1.76 million SBA guaranteed loan funded by the first bank in July 2012, and a $2.183 million loan
funded by the second bank in August 2013. Moreover, he failed to disclose to both banks his
extensive business relationship with his client, as well as the $60,000 loan and BMW he received
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from the client during the time he acted as the client’s loan officer. As part of his guilty plea, the man
agreed to forfeit the BMW and $60,000 in cash.
In addition, he admitted that he submitted a false “Request for Verification of Deposit” form on his
client’s behalf. The client had requested a $5 million loan from a third bank for a separate business
venture. Although the form showed that the client had maintained a checking account for the
business with an average balance of $1.6 million, the man admitted that the account had been
opened the day before he submitted the form and was funded via a single check from a different
entity controlled by the client. The form was important because the third bank had determined that
the business needed to show proof of equity or cash on hand of at least $1.38 million to qualify for an
SBA guarantee. Although the third bank approved the $5 million loan, the loan was never funded
because SBA determined that the loan did not qualify for the guarantee. This investigation was
worked jointly with the Federal Housing Finance Agency OIG and Federal Deposit Insurance
Corporation OIG.
Bank Official Pleads Guilty to Making False Statements
The former chief lending officer (CLO) of a New Jersey bank pled guilty to a Federal criminal
information charging him with making false statements. The man knowingly made false statements
in the bank’s application package related to $5 million in SBA guaranteed loans disbursed to a
business. FDIC has issued an order removing the CLO from office and prohibited him from further
participation in financial institutions. FDIC also ordered him to pay $15,000. The CLO is suspected of
unsafe and unsound banking practices and breaches of fiduciary duties while employed at the bank.
This investigation is ongoing.
Massachusetts Man Sentenced to 30 Months in Prison
A Massachusetts man was sentenced in Federal court to 30 months imprisonment and five years of
supervised release. The man previously pled guilty to conspiracy, bank fraud, aggravated identity
theft, and a forfeiture allegation.
The investigation revealed that he and his company obtained two SBA guaranteed loans, in the
amounts of $35,000 and $10,000, by providing false information on bank loan applications. The man
did not disclose that he and his partner were both previously indicted and convicted of felony
charges. The SBA loans were charged off with losses totaling approximately $46,000. The man also
obtained 32 credit cards for his business from numerous financial institutions by using his
information, the identity and information of others he recruited under the guise of a business
relationship, and the personal information of family and friends. He also made charges on the credit
cards at businesses he controlled, locations of associates, or merchants that supported his
businesses. The man would then issue payments to the credit cards from bank accounts which were
closed or did not have enough funds to cover the payment in a credit card scheme commonly known
as a “bust out” scheme. He used checks from SBA guaranteed loans in this scheme. Credit cards
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losses totaled approximately $531,000. This was a joint investigation with the U.S. Postal Inspection
Service.
Nevada Man Sentenced and Ordered to Pay Over $127,000 in Restitution
A Nevada man was sentenced in State court to five years of probation with a suspended prison
sentence of 12 to 48 months. He was ordered to pay $127,441 in restitution and permitted to enter
Veterans Treatment Court. The man previously pled guilty to assault with a deadly weapon. Per his
plea agreement, the man would plead guilty to assault charges and pay restitution for the theft and
identity theft charges. The cases were merged so his assault charges would be adjudicated, and his
theft charges would be dismissed.
The investigation revealed that the man used the personal identifying information of his prospective
business partner to obtain a $150,000 SBA loan. The loan’s outstanding principal balance was
$145,809. He also used his partner’s information to obtain multiple fraudulent credit cards without
the partner’s knowledge or consent. This was a joint investigation with the Las Vegas (NV)
Metropolitan Police Department and the U.S. Secret Service.
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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 disaster. Each year, SBA
approves hundreds of millions of dollars in disaster assistance loans.
The Disaster Loan Program is the only form of SBA assistance not limited to small businesses; the
program’s disaster loans are the primary form of federal assistance for repairing and rebuilding
nonfarm, private sector disaster losses. The program includes four categories of loans for disaster-
related losses: home disaster loans, business disaster loans, economic injury disaster loans, and
military reservist economic injury loans.
Unfortunately, the need to disburse such loans quickly poses many complications and may create
opportunities for dishonest applicants to commit fraud. OIG and GAO audits have identified that
SBA’s disaster loans have been vulnerable to fraud and losses in the past because loan transactions
are often expedited to provide quick relief to disaster survivors, and disaster lending personnel, who
are brought into the workforce quickly, may lack enough training or experience. Additionally, the
volume of loan applications may overwhelm SBA’s resources and its ability to exercise careful
oversight of lending transactions. OIG audits and investigations have identified specific instances of
fraud as well as necessary systemic improvements to reduce fraud and provide effective and
efficient loan delivery and protect taxpayer dollars.
Audit of the Office of Disaster Assistance Improper Payment Appeal Process
Improper payments are payments that should not have been made or that were made in an incorrect
amount. If an agency’s review is unable to discern whether a payment was proper because of
insufficient or lack of documentation, the payment must be considered an improper payment.
For disaster loans, Quality Control (QC) Specialists conduct improper payment reviews and identify
any payments that appear to be improper. Department managers review the exception and if they
agree, the payment is reported as improper. If the manager disagrees, the exception is appealed to
the QC Supervisor. If the supervisor disagrees with the appeal, the manager can further appeal to the
Policy and Evaluation (PP&E) Director, who makes the final decision regarding whether the payment
is improper.
We assessed the disaster assistance improper payment appeal process and found that although
there was an effective process to assess improper payments, the initial review process was
inefficient. We found that the PP&E Director appropriately removed 31 of 35 (89 percent)
exceptions. However, 310 of 563 (55 percent) of exceptions identified by QC Specialists in FY 2018
were appealed and removed by either the QC Supervisor or the PP&E Director. This occurred
because QC Specialists were inexperienced in improper payment reviews; the related standard
operating procedures (SOPs), training guides, and checklist did not provide clear and comprehensive
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guidance to assist QC Specialists to accurately identify exceptions; and the QC Supervisor did not
always provide adequate oversight of the QC Specialists or conduct quality reviews of the exceptions
identified by the QC Specialists.
Although alleged in a hotline complaint, we did not identify any misconduct or misuse of authority by
the PP&E Director. However, we believe SBA should assess the current structure of the appeal
process to determine if changes are needed to minimize the risk of a perceived appearance of
impropriety and the risk of misconduct or misuse of authority.
We made three recommendations to improve the QC process by providing additional training to QC
Specialists; updating SOPs, training guides, and checklists; and establishing internal controls to
ensure the QC Supervisor provides adequate oversight of QC Specialists and conducts quality
reviews of identified exceptions. (Access report 20-07 at
https://www.sba.gov/sites/default/files/2020-02/SBA-OIG-Report-20-07.pdf.)
Florida Man to Pay Over $171,000 in Restitution for Disaster Fraud
A Florida man was sentenced in a State of New Jersey court to one year of probation and was
ordered to pay $171,099 in restitution. At the time of sentencing, he already paid $35,000 toward the
restitution. The man previously pled guilty to theft by deception. He submitted fraudulent
applications to secure disaster funding offered for Hurricane Sandy victims. The man claimed his
damaged property address in New Jersey was his primary residence, when in fact he was living in
Florida at the time of the storm. Consequently, he received $171,099 in disaster assistance, including
$2,270 in Federal Emergency Management Agency (FEMA) grants, a $10,000 Homeowner
Resettlement Program (RSP) grant, and a $150,000 Reconstruction, Rehabilitation, Elevation and
Mitigation (RREM) Program grant. The latter two grants are funded by the U.S. Department of
Housing and Urban Development (HUD) and are administered by the New Jersey State Department
of Community Affairs (DCA). In addition, he received approximately $8,829 in Sandy Homeowner and
Renter Assistance Program (SHRAP) funds through the New Jersey Department of Human Services.
The man also was approved for a $71,200 SBA Disaster Home Loan. However, at his request, the loan
was cancelled and never disbursed. This investigation is being worked jointly with the Superstorm
Sandy Task Force comprised of SBA OIG, HUD OIG, U.S. Department of Homeland Security (DHS)
OIG, U.S. Department of Health and Human Services (HHS) OIG, New Jersey Division of Criminal
Justice, and DCA. The last two are under the direction of the New Jersey Office of the Attorney
General.
Investigation Results in Administrative Recovery
A $47,647 administrative recovery to SBA was realized when the SBA National Disaster Loan
Resolution Center received full payment on an SBA Disaster Loan from a Georgia woman. The
recovery resulted from an SBA OIG investigation related to Superstorm Sandy. The woman
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previously obtained a $50,000 disaster loan by allegedly falsifying disaster loan documents for her
New York State property.
New Jersey Woman Pays Remaining $121,881 in Restitution
A New Jersey woman entered into pretrial intervention (PTI), and a waiver of indictment was filed in
State court related to the charge of theft by deception. As ordered, she paid restitution for the
remaining balance of $121,881 in relief funds by the time of the PTI order. The woman filed false
applications following Superstorm Sandy which resulted in $155,751 in relief funds for which she was
not entitled. The woman falsely claimed in her application that a New Jersey home damaged by
Superstorm Sandy was her primary residence at the time of the storm when in fact her primary
residence was in New York, NY.
As a result of the fraudulent applications, she received $2,270 in FEMA rental assistance, a $10,000
RSP grant, and $111,881 in RREM Program grant funds. The woman also received a $31,600 SBA
Disaster Home Loan, which she later paid in full. This investigation was conducted jointly with the
Superstorm Sandy Task Force comprised of New Jersey Division of Criminal Justice, New Jersey DCA,
DHS OIG, HUD OIG, and HHS OIG.
Texas Man Pleads Guilty to Disaster Fraud
A Texas man pled guilty in Federal court to engaging in monetary transactions in property derived
from specified unlawful activity. He received $53,000 for alleged damage caused by Hurricane Harvey
to a residential rental property in Houston, TX. The man failed to provide receipts and refused an
onsite inspection of the damaged property. The investigation revealed that the property did not
sustain any hurricane damage and the man used the funds to pay off credit cards and to send an
international wire. This ongoing investigation is being worked jointly with DHS OIG.
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Procurement Assistance
Each year, the federal government spends hundreds of billions of dollars in federal contracts to
procure goods and services. SBA has worked to maximize opportunities for small business firms to
receive these contract awards. For the current fiscal year, the federal government aims for 23
percent of these award dollars to go to small businesses.
To accomplish this goal, SBA has specific programs that focus on strengthening particular types of
small businesses, including firms owned and controlled by service-disabled veteran-owned small
businesses (SDVOSBs) and women-owned small businesses (WOSBs), and small businesses that are
disadvantaged or located in historically underutilized business zones (HUBZones). For example, 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, surety bonding, 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 (SBDCs), the SCORE Association, and women’s business centers. SBA also designed the
Boots to Business Program to provide transitioning service members interested in exploring business
ownership or other self-employment opportunities with technical assistance and access to
information on available resources and on start-up capital. These programs require effective and
efficient management, outreach, and service delivery.
Even with effective controls, some businesses misrepresent their eligibility for the HUBZone, WOSB,
SDVOSB, and 8(a) programs in order to wrongfully receive preference for government contracts.
OIG and other federal investigations have identified schemes in which companies owned or
controlled by non-disadvantaged persons falsely claim to be disadvantaged firms or use actual
disadvantaged firms as fronts. In other schemes, perpetrators use bribery or fraudulent procurement
documents to achieve their ends.
Audit of SBA’s Cooperative Agreement with Arsenal Business and Technology
Partnership’s Veterans Business Outreach Center
SBA’s Veterans Business Outreach Center (VBOC) program provides entrepreneurial development
services to transitioning service members, veterans, guardsmen, reservists, and military spouses
interested in starting or growing a small business. SBA administers the program through cooperative
agreements awarded to a nationwide network of VBOCs.
In 2016, SBA awarded Arsenal Business and Technology Partnership (Arsenal) a cooperative
agreement for $180,000 to perform veterans outreach initiatives in New York and New Jersey. The
following year, SBA extended Arsenal’s cooperative agreement and awarded $250,000 to continue
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U.S. Small Business Administration | Office of Inspector General
its support of the VBOC program. Subsequently, in 2018, SBA awarded Arsenal another cooperative
agreement for $300,000 for the initial year, with options to extend performance for four additional
years. The 2018 cooperative agreement also expanded the coverage area to include Puerto Rico.
We found that SBA undermined the transparency of the award to Arsenal by not maintaining
required pre-award documentation to justify their decision in awarding the 2016 and 2018
cooperative agreements to Arsenal. In addition, SBA did not adhere to its policy for selecting a
Technical Evaluation Panel (TEP) member who participated in evaluating proposals for the 2016
funding opportunity announcement. Further, program officials did not ensure that Arsenal fully
complied with the cooperative agreement performance requirements and did not enforce the
performance reporting requirements. Further, SBA reimbursed Arsenal $300,000 in federal funds for
the 2018 cooperative agreement and exercised the first option year of the agreement, despite the
VBOC not having achieved its intended impact. Lastly, we questioned $10,168 of unallowable costs as
a result of Arsenal reporting expenditures that exceeded budgeted cost categories.
We made nine recommendations to improve SBA’s oversight and management of Arsenal’s
cooperative agreement. (Access report 20-09 at https://www.sba.gov/sites/default/files/2020-03/SBA-
OIG-Report-20-09_508.pdf.)
Oklahoma Man Pleads Guilty to $1.2 Million Theft Involving 8(a) Firm
An Oklahoma man pled guilty in Federal court to (1) theft by an agent of an Indian tribal government
receiving Federal funds, (2) bribery concerning programs receiving Federal funds, and (3) conspiracy
to commit bribery. He also pled guilty to tax fraud.
This investigation was based on allegations received from the FBI relating to an Oklahoma tribally
owned Section 8(a) company. The company was formed by a former tribal town chief. Even though
the tribal town was a 51 percent owner of the 8(a) company, the town had no oversight and was not
aware of what services the 8(a) company performed. Although the tribal town requested financial
documents from the 8(a) company for several years, the 8(a) company declined to provide
requested documents, claiming they were classified due to the nature of the contracts. In addition,
other tribal town elected officials alleged that the former chief had formed the 8(a) company for his
personal gain.
The investigation determined that the Oklahoma man helped establish the 8(a) company and other
business entities established under the tribal town. He and a woman serving as the controller/chief
financial officer for these tribal town-owned businesses diverted funds to the man for personal
expenses unrelated to tribal town business. From 2012 through 2019, these unauthorized
withdrawals from the business entities exceeded $1.2 million.
A second man who was the chairman of the Economic Development Authority (EDA) for the tribal
town, engaged in wrongdoing. The EDA identified, planned, initiated, and developed economic
strategies and activities on behalf of the town. The chairman pled guilty to accepting $61,900 in
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payments from the Oklahoma man. These payments were intended to influence or reward the
chairman in deciding ongoing or future business transactions for the town.
Georgia Man Pleads Guilty in 8(a) Firm Bribery Scheme
A Georgia man pled guilty in Federal court to making false statements in connection with a bribery
and kickback scheme that directed 8(a) set-aside contracts in the Fort Gordon/Augusta, GA, area to
an 8(a) communications and engineering firm. The investigation revealed that, in 2017, the man
willfully made materially false statements by stating that he had no knowledge of how the 8(a) firm
was awarded a contract, and by stating that he did not read the firm’s technical proposal. These
assertions were false because while serving as a U.S. Army Signal Network Enterprise Center official
at Fort Gordon, he emailed a contracting officer about the matter. He informed the contracting
officer that the vendor he would recommend for the contract was the 8(a) firm. He signed the firm’s
technical proposal for the contract and found the proposal technically acceptable. This is an ongoing
joint investigation with the Defense Criminal Investigative Service (DCIS) and U.S. Army Criminal
Investigation Command.
Georgia Man to Forfeit Over $1.1 Million
A Georgia man who owned a defense contractor company pled guilty in Federal court to conspiracy.
Between 2008 and 2014, he conspired with two then U.S. Army colonels and a retired colonel in a
kickback and bribery scheme for government contracts at Fort Gordon, GA, to build and modernize
the communications network. As part of his plea, the man will forfeit $1,131,861. This is a joint
investigation with the U.S. Army Criminal Investigation Command and DCIS.
Alaska Man Signs Plea Agreement After $725,000 Contract Fraud
An Alaska man signed a plea agreement in Federal court after having been charged by a criminal
information with conspiracy. His company, a service-disabled veteran-owned small business
(SDVOSB), fraudulently obtained a $725,226 SDVOSB set-aside contract with the VA in 2014 for snow
removal at VA locations in Anchorage, Alaska. A second man, who owned a non-SDVOSB, previously
agreed to manage and control 100 percent of the SDVOSB’s daily operations and long-term decision-
making related to its performance of the contract. He knew that his firm was not certified or eligible
to bid on or perform 100 percent of the contract. The two men and their co-conspirators then
knowingly submitted numerous invoices to the VA for work that was not performed. The contracting
officer representative approved the false invoices in exchange for bribery payments from the second
man. During the conspiracy, the second man paid the first man approximately $54,302 as an unlawful
“kickback” in exchange for the use of his firm’s SDVOSB certification. This was a joint investigation
with the FBI, VA OIG, and General Services Administration (GSA) OIG.
Colorado Women Sentenced for HUBZone Fraud
A Colorado woman who served as the majority owner of a business was sentenced in Federal court
to three years of supervised probation and 250 hours of community service. She was also ordered to
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U.S. Small Business Administration | Office of Inspector General
pay a $100 special assessment. The sentence was based on her previous guilty plea to falsification of
documents.
In addition, a second Colorado woman was sentenced in Federal court to one year of supervised
probation and 100 hours of community service. She was also ordered to pay a $100 special
assessment. The sentence was based on her previous guilty plea to misprision of a felony.
The business’ majority owner was responsible for preparing documents submitted to SBA in
connection with contracts set aside for HUBZone Program certified companies. However, company
employees allegedly made false statements to the HUBZone Program in connection with Federal
contracts they obtained from GSA, U.S. Air Force, and U.S. Army.
The investigation revealed that the majority owner and the second woman, who worked for the
owner, created false documents for maintaining certification as a HUBZone small business. As a
result of their illicitly obtained HUBZone certification, the company was awarded set-aside
government contracts it would not have otherwise been eligible to receive. In one instance,
HUBZone status enabled the company to receive a cost preference on a government construction
contract that was $4 million higher than the lowest eligible bid. This investigation was conducted
jointly with the DCIS, U.S. Army Criminal Investigation Command, U.S. Air Force Office of Special
Investigations (OSI), and GSA OIG.
Colorado Men Sentenced in Contract Steering Scheme
A Colorado man was sentenced in Federal court to 30 months incarceration and three years of
supervised probation. He had previously pled guilty to conspiracy to commit bribery. He was
remanded to the custody of the U.S. Marshals Service while he awaits sentencing related to a
separate Federal investigation.
A second Colorado man was sentenced in Federal court to 18 months of incarceration and three
years of supervised probation. He was also ordered to pay a $600 assessment and forfeit $9,000. He
previously pled guilty to conspiracy to commit bribery, receipt of a bribe, attempted extortion under
color of official right, and criminal conflict of interest.
A third Colorado man was sentenced in Federal court to 12 months of supervised probation and was
fined $4,500. He previously pled guilty to illegal supplementation of government salary.
This investigation was based on a complaint received through the SBA Colorado District Office. The
owner of an 8(a) small disadvantaged business relayed information about its relationship with a
consulting firm. The consulting firm was operated by two of the above men for the purpose of
gaining access to government contracts through another previously mentioned man, a former SBA
business opportunity specialist and VA small business utilization specialist.
The investigation revealed the close relationship between the three men, which existed to steer
contract opportunities with the VA to small businesses who had a contract with the consulting firm.
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One of the men acknowledged in his plea agreements that another man was paid to maintain an
appearance that a relationship with the consulting firm would help their clients secure government
contracts. This other man acknowledged in his plea agreement, that while using his official
government position, he sought payment in order to secure government contracts. Moreover, he
attempted to sell SBA training materials for personal profit to small businesses that had a
relationship with the consulting firm. This was a joint investigation with the FBI and VA OIG.
Oklahoma Firms Enter into $2.8 Million Civil Settlement Agreement
Four Oklahoma companies entered into a civil settlement agreement with the U.S. Department of
Justice in which they agreed to pay the Federal government $2,812,486 to resolve a qui tam action
brought by a competing construction firm. A qui tam action is brought by a third party (i.e., the
Relator) on behalf of the government against a party. A portion of any monetary penalty is awarded
to the party bringing the action. In this matter, the Relator’s share of the settlement was $520,309. In
addition, the Relator’s attorney’s fees, $234,571, were paid by the defendants separately from the
settlement.
According to the agreement, the government alleged one of the four companies was not eligible to
receive set-aside contracts issued under the 8(a), HUBZone, Women-Owned Small Business, and/or
Economically Disadvantaged Women-Owned Small Business programs. The government further
alleged the company orchestrated a fraudulent scheme to obtain such contracts awarded by the U.S.
Department of Defense and others, including the U.S. Army Corps of Engineers, U.S. Navy, U.S. Air
Force, Indian Health Service, Bureau of Indian Affairs, VA, and GSA. To further the scheme, the
government also alleged the company created, controlled, and caused two of the other firms to
obtain, perform, and receive payments on set-aside contracts, thus causing the submission of
materially false claims and statements. The companies denied the government’s allegations and did
not admit liability in the settlement agreement.
In addition to the civil settlement agreement, two of the companies and their owner signed an
administrative agreement with SBA. In this agreement, the company that orchestrated the fraud
scheme agreed that neither it nor any affiliate will apply, represent, certify, or hold itself out as a
HUBZone small business concern, or participate in the 8(a) Mentor Protégé or All-Small Mentor
Protégé Programs with immediate family members or current or former employees for three years.
They also agreed to notify SBA before any change of control or ownership during this period. The
company represented that it has implemented a business ethics programs, which it agreed to
maintain and expand. Consequently, SBA or any other U.S. agency will not suspend or debar the
company based on the facts or allegations in the previously discussed settlement agreement. The
settlements are the result of a joint investigation with the U.S. Army Criminal Investigation
Command, GSA OIG, VA OIG, IRS CI, Naval Criminal Investigative Service, and U.S. Air Force OSI.
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U.S. Small Business Administration | Office of Inspector General
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 these efforts, OIG
works 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.
Independent Auditors’ Report on SBA’s Compliance with DATA Act Reporting
We contracted with the independent certified public accounting firm KPMG LLP (KPMG) to perform
a performance audit as required by the Digital Accountability and Transparency Act of 2014 (DATA
Act). The objectives of this engagement were to assess (1) the completeness, accuracy, timeliness,
and quality of SBA’s fiscal year (FY) 2019, first quarter financial and award data submitted for
publication on USASpending.gov, and (2) SBA’s implementation and use of the governmentwide
financial data standards established by the Office of Management and Budget (OMB) and the U.S.
Department of the Treasury (Treasury).
KPMG reported the following:
• The data submission was of higher quality; however, SBA did not submit certain data completely,
accurately, or timely. Overall, for the 385 sampled transactions, KPMG tested 14,262 individual data
elements and identified 628 errors. Those errors resulted in the following error rates: completeness
0.01 percent, accuracy 2.35 percent, and timeliness 2.03 percent.
• SBA implemented and used the governmentwide financial data standards established by
OMB and Treasury under the DATA Act.
KPMG did not report any instances or matters regarding noncompliance. The report included nine
recommendations that SBA officials agreed to implement. (Access report 20-02 at
https://www.sba.gov/sites/default/files/2019-11/SBA-OIG-Report-20-02.pdf.)
Independent Auditors’ Report on SBA’s FY 2019 Financial Statements
We contracted with KPMG to audit SBA’s consolidated financial statements as of and for the fiscal
year ended September 30, 2019. This audit is an annual requirement of the Chief Financial Officers
Act of 1990, as amended, and was conducted in accordance with generally accepted government
auditing standards; the Office of Management and Budget Bulletin No. 19-03, Audit Requirements for
Federal Financial Statements; and the U.S. Government Accountability Office’s Financial Audit
Manual and Federal Information System Controls Audit Manual.
The independent auditors’ report presented an unmodified opinion on SBA’s consolidated financial
statements for fiscal year 2019. Specifically, KPMG reported that:
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• the financial statements were fairly presented, in all material respects, in accordance with
U.S. generally accepted accounting principles.
• there were no instances in which SBA’s financial management systems did not substantially
comply with the Federal Financial Management Improvement Act of 1996 (FFMIA).
• there is one material weakness related to internal control over financial reporting where
improvement is needed in SBA’s risk assessment processes.
• there is a significant deficiency related to disaster loan processing controls; and
• there is also a significant deficiency related to SBA’s information technology security
controls, which has been identified in the past.
The report included 17 recommendations to address control deficiencies in the above areas. (Access
report 20-04 at https://www.sba.gov/sites/default/files/2019-11/SBA-OIG-Report-20-04.pdf.)
KPMG's Management Letter Communicating Matters Relative to SBA's FY 2019 Financial Statement
Audit
We contracted with KPMG to audit SBA’s consolidated financial statements as of and for the fiscal
year ended September 30, 2019. This audit is an annual requirement of the Chief Financial Officers
Act of 1990, as amended, and was conducted in accordance with generally accepted government
auditing standards; the Office of Management and Budget Bulletin No. 19-03, Audit Requirements for
Federal Financial Statements; and the U.S. Government Accountability Office’s Financial Audit
Manual and Federal Information System Controls Audit Manual.
The management letter represents matters that were identified during the audit. Specifically, KPMG
reported that SBA:
• did not fully comply with the Debt Collection Improvement Act of 1996, as amended.
• needs to improve its process to analyze and document the applicability of recently issued
and existing standards.
KPMG addressed four recommendations to the Acting Chief Financial Officer and the Associate
Administrator for Capital Access. (Access report 20-05 at
https://www.sba.gov/sites/default/files/2020-02/SBA-OIG-Report-20-05_0_0.pdf.)
SBA’s FY 2019 Cash Contributions and Gifts
We reviewed SBA's FY 2019 cash contributions and gifts to determine the adequacy of SBA controls
over the solicitation, acceptance, holding, and utilization of cash contributions and gifts in fiscal year
2019.
The Consolidated Appropriations Act of 2019 granted SBA the authority to accept gifts and to
cosponsor activities. The Administrator may solicit and accept gifts on behalf of SBA after proper
approvals, including a conflict of interest determination by SBA’s Office of General Counsel. SBA is
authorized to solicit gifts in support of cosponsored activities, SBA-sponsored activities, general SBA
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U.S. Small Business Administration | Office of Inspector General
marketing and outreach activities, and other activities that further the mission of the Agency, as
determined by the Administrator or designee.
We found that SBA had adequate controls over the solicitation, acceptance, and holding of cash
contributions and gifts. However, improvement is needed in the Agency’s controls over the
utilization of gift funds in accordance with SBA policies. Specifically, SBA grant personnel did not
ensure that claimed grant costs had adequate supporting documentation. As a result, we identified
$7,602 in reimbursed grant costs that were not adequately supported in accordance with SBA policy.
We made two recommendations that we consider resolved. (Access report 20-06 at
https://www.sba.gov/document/report-20-06-sbas-fy-2019-cash-contributions-gifts.)
Weaknesses Identified During the FY 2019 Federal Information Security Modernization Act
Review
The Federal Information Security Modernization Act (FISMA) requires that OIG review SBA’s
information security program. To determine SBA’s compliance with FISMA, OIG contracted with an
independent public accountant, KPMG, to perform review procedures relating to FISMA. OIG
monitored KPMG’s work and reported SBA’s compliance with FISMA in the Agency FISMA filings in
October 2019. We also assessed the Agency’s progress in implementing open recommendations and
compared our current year assessment with our fiscal year 2018 FISMA evaluation. OIG made 11
recommendations to address FISMA-related vulnerabilities (Access report 20-10 at
https://www.sba.gov/sites/default/files/2020-03/SBA_OIG_Report_20-10_508.pdf.)
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Other Significant OIG Activities
OIG Background Investigations Ensure Integrity
During this reporting period, OIG initiated 46 background investigations and issued 6 security
clearances for OIG employees and contractors. Moreover, OIG adjudicated 21 background
investigative reports. Finally, OIG processed 1,656 internal name check requests for Agency activities
such as success stories and “Small Business Person of the Year” nominees.
OIG Promotes Debarment and Other Administrative Enforcement Actions
OIG promotes program integrity by making present responsibility referrals to SBA and to other
agencies. These present responsibility referrals often result in suspensions, debarments, and similar
administrative enforcement actions. These actions protect taxpayer funds from parties that are not a
good risk for the government. A typical OIG referral contains a summary of allegations, and a
suggested administrative record (evidence supporting the case). 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 qui tam cases. During this reporting period, OIG sent 43 present responsibility referrals to SBA
and had 15 actions taken based upon referrals to other agencies.
• Attorneys Referred for Actions Related to an Ability to Pay Settlement. SBA OIG referred
defense counsel in a False Claims Act matter to the SDO based upon their apparent
knowledge of additional funds related to an ability to pay settlement. After the submission
of ability to pay settlement documentation, the attorneys were involved with, or knew of, an
insurance settlement intended to cover the False Claims Act liability. The attorneys did not
disclose the existence of the insurance settlement to the Federal Government. In fact, the
insurance company’s agreement to pay the settlement was the actuating event driving the
clients to accept the government’s settlement demand. Both attorneys consistently and
aggressively pursued funds from the insurance company to offset the amount a DOJ analyst
deemed the defendants could pay, while not informing the Government of the ultimate
success of these efforts until after their clients signed the False Claims Act settlement.
• Pot Proprietor Referred for Misrepresenting Intended Use of SBA Guaranteed Loan Funds.
An individual and related companies were referred to the SDO based upon evidence
indicating an intentional misrepresentation regarding the intended use of SBA guaranteed
loan funds. The borrower had represented to the bank that the funds were intended to
support storage and equipment rental lines of business at a specific location. That location
however, appeared intended to be used as, and was actually used for, a marijuana growing
operation.
• Former Local Officials and Associated Entities Referred for Loan Scheme. SBA OIG referred
two former local officials and their associated companies to the SBA SDO after a jury found
they conspired to unlawfully obtain money from an SBA guaranteed loan. The conspiracy
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U.S. Small Business Administration | Office of Inspector General
included the use of falsified documents to circumvent an internal control a bank had in place
to ensure SBA guaranteed loan funds were only used for authorized purposes.
• False Damage Claims Sink Marina Owner. SBA OIG referred the owner of a marina company
and the marina company itself for present responsibility review after a Federal court
convicted that individual of making false statements to obtain an SBA Disaster Loan. The
marina owner claimed Hurricane Sandy caused a tidal surge that damaged structures
including floating docks, a boat ramp, and a bath house. The floating docks, boat ramp, and
bath house subject to the claim did not, however, exist at the time of Hurricane Sandy. The
SBA does not provide loans for damage to imaginary structures. Lying about the existence
of those structures to get a disaster loan is fraud.
OIG Provides Training to Multiple Agencies on Small Business Procurement Integrity and
Other Oversight Concerns
During this reporting period, the SBA OIG taught a small business procurement integrity section
embedded within the Council of the Inspectors General on Integrity and Efficiency (CIGIE) Training
Academy’s Contract and Grant Fraud Training Program. We also began making arrangements to
deliver the Fiscal Year 2020 Small Business Procurement Integrity Seminar (SB-ProIS) virtually. SB-
ProIS is an annual training the SBA OIG has produced each year since Fiscal Year 2015. This training
equips members of the Federal Oversight community with the knowledge to identify, develop, and
pursue small business procurement fraud cases. SBA OIG has also developed shorter versions of this
training for delivery to specific Federal offices upon request. The training equips members of the
Federal oversight community with the knowledge to identify, develop, and pursue small business
procurement fraud cases.
OIG Reviews of Proposed Agency Regulations, Operating Procedures, and Other Initiatives
Lead to Improved Program Controls to Reduce Fraud, Waste, Abuse, and Inefficiencies
As part of OIG’s proactive efforts to promote accountability and integrity and reduce inefficiencies in
SBA programs and operations, OIG reviews changes that 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 68 proposed revisions of these program directives and submitted
comments designed to improve 23 of these initiatives.
2004 Legislation Requires SBA Regulations and OIG Approval of SBDC Surveys
In December 2004, Congress amended Section 21(a)(7) of the Small Business Act (15 U.S.C. 648(a)(7))
to restrict disclosing information regarding individuals or small businesses that have received
assistance from a Small Business Development Center (SBDC) and to limit the Agency’s use of such
information. The provision also required SBA to issue regulations regarding disclosures of such
information for use in conducting financial audits or SBDC client surveys. In 2009, the Agency
22 | Semiannual Report to Congress, Spring 2020
U.S. Small Business Administration | Office of Inspector General
represented to OIG that it would issue regulations as required by the statute. In April 2014, SBA sent
the proposed regulations for publication in the Federal Register for public comment.
In addition, Section 21(a)(7) of the Small Business Act states that until these SBDC information
disclosure regulations are issued, the Inspector General must approve any SBDC client survey, as well
as the use of any survey information, and must also include this approval in OIG’s Semiannual Report
to Congress. SBA did not submit any surveys of SBDC clients for OIG review during the reporting
period.
OIG Hotline
OIG’s Hotline reviews allegations of waste, fraud, abuse, or serious mismanagement within SBA or its
programs from employees, contractors, and the public. During this reporting period, the Hotline
received 585 complaints. The Hotline conducts a preliminary review of each allegation and may
consult with OIG’s Investigations Division, Audits Division, and Office of Counsel to determine the
appropriate course of action. Referrals within OIG may result in corrective actions, audits, or
administrative, civil, or criminal investigations. Matters referred to SBA program offices for further
action are monitored by Hotline staff for timely response, for adequate resolution of the allegations,
and to document any corrective action taken.
In 2019, OIG was recertified under the Office of Special Counsel (OSC) 2302(c) Certification Program.
The program requires federal agencies to inform their workforces about the rights and remedies
available to them under the Whistleblower Protection Act, the Whistleblower Protection and
Enhancement Act, and related civil service laws. In accordance with the certification requirements,
the whistleblower coordinator provided training to all OIG and Agency employees on protections
against whistleblower retaliation and other prohibited personnel practices. OIG was initially certified
in 2015.
Comprehensive information on whistleblower protection may be found on OIG’s website at
https://www.sba.gov/oig/whistleblower-rights-and-protection.
Semiannual Report to Congress, Spring 2020 | 23
U.S. Small Business Administration | Office of Inspector General
Reporting Period Statistical Highlights
Summary of OIG Dollar Accomplishments
Dollar Accomplishments as a Result of Investigations and Related Activities
Potential Investigative Recoveries and Fines $4,642,281
Asset Forfeitures Attributed to OIG Investigations $69,000
Loans/Contracts Not Approved or Canceled as a Result of Investigations $0
Investigations Subtotal $ 4,711,281
Dollar Accomplishments as a Result of Audit Activities
Disallowed Costs Agreed to by Management $13,323,728
Recommendations That Funds Be Put to Better Use Agreed to by Management $0
Audit Subtotal $13,323,728
Total OIG Dollar Accomplishments $18,035,009
Efficiency and Effectiveness Activities Related to Audit, Other Reports, and Followup
Activities
Reports Issued 10
Recommendations Issued 67
Dollar Value of Costs Questioned $64,804,274
Dollar Value of Recommendations That Funds Be Put to Better Use $0
Recommendations for Which Management Decisions Were Made 55
Recommendations Without a Management Decision 23
Collections as a Result of Questioned Costs $29,712
Indictments, Convictions, and Case Actions
Indictments from OIG Cases 16
Convictions from OIG Cases 24
Cases Opened 38
Cases Closed 56
SBA Personnel Actions Taken as a Result of Investigation
Dismissals 0
Resignations/Retirements 1
Suspensions 0
Reprimands 0
Program Actions Taken During the Reporting Period as Result of OIG Action
Present Responsibility Referrals to the Agency 43
Pending at the Agency as of April 1, 2020 68*
Suspensions Issued by the Agency 19
Proposed Debarments Issued by the Agency 20
Final Debarments Issued by the Agency 7
Proposed Debarments Declined by the Agency 0
Administrative Agreements Entered by the Agency in Lieu of Debarment 4
Present Responsibility Actions by Other Agencies 15
*The Agency closed four of these referrals after the reporting period.
24 | Semiannual Report to Congress, Spring 2020
U.S. Small Business Administration | Office of Inspector General
Agency Legislative and Regulatory Proposals Reviewed
Legislation, Regulations, Standard Operating Procedures, and Other Issuances Reviewed 68
Comments Provided by OIG to Improve Legislation, Regulations, Standard Operating Procedures, and Other 23
Issuances
Semiannual Report to Congress, Spring 2020 | 25
U.S. Small Business Administration | Office of Inspector General
Reports Issued
Top Management Challenges
Title Report Issue Date Questioned Funds for
Number Costs Better Use
The Most Serious Management and Performance Challenges 20-01 10/11/2019 $0 $0
Facing SBA in FY 2020
Program Subtotal 1 — $0 $0
Agency Management
Title Report Issue Date Questioned Funds for
Number Costs Better Use
Independent Auditors’ Report on SBA’s Compliance with Data 20-02 11/7/2019 $0 $0
Act Reporting
Independent Auditors’ Report on SBA’s FY 2019 Financial 20-04 11/15/2019 $0 $0
Statements
KPMG Management Letter Communicating Matters Relative 20-05 12/10/2019 $0 $0
to SBA's FY 2019 Financial Statement Audit
SBA’s FY 2019 Cash Contributions and Gifts 20-06 2/11/2020 $7,602 $0
Weakness Identified During the FY 2019 Federal Information 20-10 3/30/2020 $0 $0
Security Modernization Act Review
Program Subtotal 5 — $7,602 $0
Credit/Capital Programs
Title Report Issue Date Questioned Funds for
Number Costs Better Use
Audit of SBA's Oversight of High-Risk Lenders 20-03 11/12//2019 $13,313,560 $0
Audit of the SBA's Community Advantage Pilot Program 20-08 3/18/2020 $51,472,944 $0
Program Subtotal 2 — $64,786,504 $0
Disaster Assistance
Title Report Issue Date Questioned Funds for
Number Costs Better Use
Audit of the Office of Disaster Assistance Improper Payment 20-07 2/20/2020 $0 $0
Appeal Process
Program Subtotal 1 — $0 $0
Contracting/Counseling Programs
Title Report Issue Date Questioned Funds for
Number Costs Better Use
Audit of SBA’s Cooperative Agreement with Arsenal Business 20-09 3/24/2020 $10,168 $0
and Technology Partnership’s Veterans Business
Program Subtotal 1 — $10,168 $0
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U.S. Small Business Administration | Office of Inspector General
Reports with Questioned Costs
Reports Recommendations* Questioned Unsupported
Costs** Costs***
A. No management decision made by 2 4 $672,748,578 $672,748,578
September 30, 2019
B. Issued during this reporting period 4 5 $64,804,274 $64,794,106
Subtotal (Universe from which management 6 9 $737,552,852 $737,542,684
decisions could be made in this reporting
period)
C. Management decisions made during 5 7 $686,079,908 $686,069,740
this reporting period
(i) Disallowed costs 2 2 $13,323,728 $13,313,560
(ii) Costs not disallowed 3 5 $672,756,180 $672,756,180
D. No management decision made by 2 4 $51,472,944 $51,472,944
March 31, 2020
* Reports may have more than one recommendation.
** Questioned costs are those that are found to be improper.
*** Unsupported costs may be proper but lack documentation. Unsupported costs are a subset of questioned costs.
Reports with Recommendations That Funds Be Put to Better Use
Reports Recommendations Recommended
Funds for Better
Use
A. No management decision made by September 30, — — —
2019
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 March 31, 2020 — — —
Semiannual Report to Congress, Spring 2020 | 27
U.S. Small Business Administration | Office of Inspector General
Reports from Prior Periods with Overdue Management Decisions
There were no reports from prior periods with overdue management decisions.
28 | Semiannual Report to Congress, Spring 2020
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Reports from Prior Periods with Open Recommendations as of
March 31, 2020
Report Title Date Issued Number of Open Aggregate
Number Recommendations Potential Cost
Savings
15-16 SBA Needs to Improve Its Oversight of Loan 9/25/2015 1 —
Agents
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 11/14/2017 1 —
FY 2017 Financial Statements
18-07 Accuracy of the FY 2015 7(a) Loan Guaranty 12/11/2017 1 $1,903,213
Purchase Improper Payments Rate
18-13 Evaluation of SBA 7(a) Loans Made to 3/6/2018 1 —
Poultry Farmers
18-18 Audit of SBA’s Women-Owned Small 6/20/2018 1 —
Business Federal Contracting Program
18-21 OIG High Risk 7(a) Loan Review Program 8/15/2018 2 $1,351,565
2018
18-22 Improvements Needed in SBA’s Oversight of 9/7/2018 8 —
8(a) Continuing Eligibility Processes
18-23 OIG High Risk 7(a) Loan Review Program 9/13/2018 2 $1,303,403
19-02 Consolidated Findings of OIG Reports on 11/8/2018 1 —
SBA’s Grant Programs FYs 2014-2018
19-06 SBA’s District Offices’ Customer Service 12/19/2018 1 —
19-07 Audit of SBA’s Controls Over 7(a) Loans Sold 3/14/2019 1 —
on the Secondary Market
19-08 SBA’s HUBZone Certification Process 3/28/2019 3 —
19-12 Audit of SBA’s Oversight of the SCORE 4/25/2019 2 $696,743
Association
19-14 SBA’s 2018 and 2019 Cash Contributions and 6/19/2019 2 —
Gifts
19-15 OIG High Risk 7(a) Loan Review Program 7/10/2019 1 $3,000,297
19-16 The Office of Inspector General High Risk 8/14/2019 2 $2,059,132
7(a) Loan Review Program
19-17 Evaluation of SBA’s All Small Mentor- 9/17/2019 4 —
Protégé Program
19-18 Audit of SBA’s Suspension and Debarment 9/18/2019 5 —
Process
19-19 Office of Inspector General High Risk 7(a) 9/19/2019 1 $1,267,223
Loan Review Program
19-20 Review of Women’s Business Center, Inc. 9/19/2019 2 —
Compliance with Cooperative Agreement
Requirement
19-23 Audit of SBA’s Desktop Loss Verification 9/26/2019 4 $4,738,300
Process
Total 48 $153,519,682
Semiannual Report to Congress, Spring 2020 | 29
U.S. Small Business Administration | Office of Inspector General
Significant Recommendations from Prior Reporting Periods Without Final
Action as of March 31, 2020
Report Date Issued Recommendation Date of Final Action
Number Management Target Date
Decision
15-16 9/25/2015 Develop benchmarks for contractor 9/20/2018 7/31/2020
performance and require the FTA to implement
appropriate application controls and follow-up
procedures with lenders to ensure the integrity
of the Form 159 database.
17-19 9/28/2017 Continue efforts to improve the information 1/4/2018 6/30/2020
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 manual 1/4/2018 6/30/2020
to reflect current technology capabilities.
18-03 11/14/2017 Monitor and perform procedures over the 1/10/2018 9/30/2020
service organization’s attestation report
regarding user control considerations. This
assessment should be performed annually.
18-13 3/6/2018 Review the arrangements between integrators 3/1/2018 9/30/2020
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.
18-18 6/20/2018 Implement a Women-Owned Small Business 9/28/2018 6/30/2020
Federal Contracting Program certification
process as required by the National Defense
Authorization Act for FY 2015.
18-21 8/15/2018 Require the lender to bring the loan into 8/7/2018 1/31/2020
compliance or, if not possible, seek recovery of
$799,159 on the guaranty paid by SBA.
18-21 8/15/2018 Require the lender to bring the loan into 8/7/2018 12/31/2019
compliance or, if not possible, seek recovery of
$552,406 on the guaranty paid by SBA.
18-22 9/7/2018 Revise its current process to ensure that it 12/3/2019 3/31/2020
accurately identifies all high-risk firms to receive
continuing eligibility reviews from the Office of
Certification and Eligibility.
18-22 9/7/2018 Establish and implement clear policies and 12/19/2019 8/15/2020
procedures for evaluating 8(a) continuing
eligibility, including ensuring that district offices
use standardized analysis tools that conform
with 8(a) continuing eligibility requirements
found in 13 CFR 124, and train employees on
these procedures.
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U.S. Small Business Administration | Office of Inspector General
Report Date Issued Recommendation Date of Final Action
Number Management Target Date
Decision
18-22 9/7/2018 Develop and implement a comprehensive 12/19/2019 3/30/2020
oversight plan to ensure completion of
continuing eligibility reviews of all 8(a) firms,
monitor the quality of continuing eligibility
reviews, and eliminate duplication between the
Office of Certification and Eligibility and the
district offices.
18-22 9/7/2018 Develop and implement a centralized process to 9/7/2018 3/30/2020
track and document all adverse actions and
voluntary withdrawals from the 8(a) program,
from recommendation through resolution.
18-22 9/7/2018 Establish and implement clear policies and 12/19/2019 4/30/2020
procedures that include timelines for sending
Notices of Intent to Terminate and to Graduate
Early firms after eligibility issues are first
identified.
18-22 9/7/2018 Establish and implement clear policies and 12/19/2019 4/30/2020
detailed procedures, consistent with 13 CFR
124.112(c), to timely and effectively review and
address complaints regarding 8(a) continuing
eligibility, including communicating the content
of the complaint to the district office, and train
employees implementing the 8(a) program on
the updated procedures.
18-22 9/7/2018 Develop a robust system for tracking 9/7/2018 4/30/2020
complaints that are received regarding firms’
continuing eligibility for the 8(a) program, and
tracking the actions taken to address the
complaints.
18-23 9/13/2018 Require the lender to bring the loan into 9/20/2018 3/31/2020
compliance or, if not possible, seek recovery of
$448,287 plus interest on the guaranty paid by
SBA.
18-23 9/13/2018 Require the lender to bring the loan into 9/20/2018 3/31/2020
compliance or, if not possible, seek recovery of
$855,116 plus interest on the guaranty paid by
SBA.
19-02 11/8/2018 Implement controls to ensure that grants 11/9/2018 9/30/2020
officers and program personnel responsible for
reviewing grant applications verify that the
applicants’ proposals include plans to measure
performance that will help SBA determine
program outcomes.
19-06 12/19/2018 Revise SOP 90 75 4, Outreach Activities, to 12/19/2018 1/31/2020
clarify the expectation for using SBA Form 20,
Outreach Event Survey, and establish a process
to collect and analyze customer feedback.
19-07 3/14/2019 Update secondary market guidance to ensure 3/21/2019 6/30/2020
that it aligns with current secondary market
requirements.
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U.S. Small Business Administration | Office of Inspector General
Report Date Issued Recommendation Date of Final Action
Number Management Target Date
Decision
19-08 3/28/2019 Implement a plan to mitigate IT issues affecting 3/29/2019 1/1/2020
the HUBZone certification process.
19-08 3/28/2019 Monitor hold times to ensure that the Program 3/29/2019 4/30/2020
Office accurately reports overall timeliness of
eligibility determinations.
32 | Semiannual Report to Congress, Spring 2020
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Significant Recommendations from This Reporting Period
Report Title Date Issued Recommendation
Number
20-02 Independent 11/7/2019 Develop a procedure that requires the consistent and timely
Auditors' Report generation of documentary evidence to support an obligation and
on SBA's ensure it is readily available.
Compliance with
DATA Act
Reporting
20-02 Independent 11/7/2019 Monitor the effective operation of the subsequent corrective action
Auditors' Report implemented to the loan origination system to prevent the ability to
on SBA's change loan terms without approval. In addition, determine the
Compliance with impact of the system deficiency across all loans and make the
DATA Act necessary corrections in the various systems and reports affected.
Reporting
20-02 Independent 11/7/2019 Implement a control to ensure the Business Type element reported
Auditors' Report for each recipient is in accordance with DAIMS and the appropriate
on SBA's business size and type criteria.
Compliance with
DATA Act
Reporting
20-02 Independent 11/7/2019 Implement validation controls to verify the accuracy of the Funding
Auditors' Report Office Code and Awarding Office Code elements.
on SBA's
Compliance with
DATA Act
Reporting
20-02 Independent 11/7/2019 Ensure updated vendor and grantee information is obtained from
Auditors' Report SAM.gov at time of award.
on SBA's
Compliance with
DATA Act
Reporting
20-02 Independent 11/7/2019 Provide notification to Treasury’s DATA Act Broker Program
Auditors' Report Management Office of the Primary Place of Performance Code
on SBA's element that has been derived incorrectly.
Compliance with
DATA Act
Reporting
20-02 Independent 11/7/2019 Prior to the end of the reporting period, perform a review of the
Auditors' Report submission to ensure timing differences are reduced.
on SBA's
Compliance with
DATA Act
Reporting
20-02 Independent 11/7/2019 Implement sufficient review of the reconciliation between File B and
Auditors' Report File C to ensure all variances are researched and necessary
on SBA's corrections are made to the submission prior to the Senior
Compliance with Accountable Official’s certification.
DATA Act
Reporting
20-02 Independent 11/7/2019 Perform a regular review to ensure the Data Quality Plan is current
Auditors' Report and updated as changes to the DATA Act broker system and DAIMS
on SBA's guidance are communicated.
Compliance with
DATA Act
Reporting
Semiannual Report to Congress, Spring 2020 | 33
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
20-03 Audit of SBA's 11/12/2019 Develop and implement policies and procedures to document
Oversight of OCRM's justification for (1) not conducting planned reviews and (2)
High-Risk Lenders identifying and prioritizing additional lenders for review.
20-03 Audit of SBA's 11/12/2019 Develop and implement a comprehensive database to manage its
Oversight of oversight of high-risk lenders to ensure performance of all planned
High-Risk Lenders reviews, implementation of risk mitigation actions, and identification
of noncompliant lender and systemic material loan deficiencies.
20-03 Audit of SBA's 11/12/2019 Develop and implement policies and procedures to provide clear and
Oversight of specific guidance to analysts regarding the appropriate corrective
High-Risk Lenders and enforcement actions for identified lenders and loan deficiencies
to ensure analysts recommend appropriate and consistent
corrective and enforcement actions.
20-03 Audit of SBA's 11/12/2019 Conduct periodic overall assessments of the high-risk lender review
Oversight of results and recommended risk mitigation actions to ensure analysts
High-Risk Lenders recommend appropriate and consistent corrective and enforcement
actions.
20-03 Audit of SBA's 11/12/2019 Develop and implement policies and procedures that require OCRM
Oversight of to communicate systemic lender issues and material loan
High-Risk Lenders 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 Audit of SBA's 11/12/2019 Determine whether the lenders corrected the deficiencies on the 21
Oversight of loans purchased for a total of $13.3 million. If not, require the lenders
High-Risk Lenders to bring the loans into compliance or, if not possible, seek recovery
of the guaranty paid by SBA from lenders.
20-04 Independent 11/15/2019 Integrate the Office of Chief Financial Officer's risk identification and
Auditors’ Report assessment process with its enterprise risk management processes.
on SBA’s FY 2019
Financial
Statements
20-04 Independent 11/15/2019 Ensure management personnel document their interpretation with
Auditors’ Report respect to applicability of requirements (e.g., such as the need to
on SBA’s FY 2019 determine a materiality threshold in the risk assessment process).
Financial
Statements
20-04 Independent 11/15/2019 Formally document a comprehensive risk assessment process every
Auditors’ Report year, including the determination of materiality thresholds, as
on SBA’s FY 2019 applicable under the requirements.
Financial
Statements
20-04 Independent 11/15/2019 Work with the relevant program offices to develop, document, and
Auditors’ Report implement procedures outlining the SOC 1 report evaluation process
on SBA’s FY 2019 for relevant service organizations, to ensure reviews are performed
Financial in accordance with OMB and GAO guidance.
Statements
20-04 Independent 11/15/2019 Formally document a comprehensive risk assessment process,
Auditors’ Report including the consideration of the applicability and implementation
on SBA’s FY 2019 of new accounting standards.
Financial
Statements
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U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
20-04 Independent 11/15/2019 Implement adequate internal controls to prevent or detect and
Auditors’ Report correct material misstatements to the financial statements and
on SBA’s FY 2019 notes.
Financial
Statements
20-04 Independent 11/15/2019 Develop and enforce a policy/procedure that requires the consistent
Auditors’ Report and timely generation of documentary evidence to support the
on SBA’s FY 2019 establishment and modification of loan terms subsequent to loan
Financial obligation and ensure it is readily available.
Statements
20-04 Independent 11/15/2019 Implement adequate controls to ensure changes to loan terms
Auditors’ Report subsequent to loan obligation are consistently and timely processed
on SBA’s FY 2019 within the loan processing and repository system.
Financial
Statements
20-04 Independent 11/15/2019 Consider creating an Agency wide working group to provide
Auditors’ Report effective oversight and solutions to address the entity-wide
on SBA’s FY 2019 conditions cited and implement streamlined, efficient and effective
Financial user access “best practices” currently used by the private sector and
Statements other Federal agencies.
20-04 Independent 11/15/2019 Develop and document procedures over the separation process that
Auditors’ Report identify the roles and responsibilities for each office.
on SBA’s FY 2019
Financial
Statements
20-04 Independent 11/15/2019 Create a process to identify separated contractors from their
Auditors’ Report respective program office/Contracting Officer, centrally track and
on SBA’s FY 2019 monitor for contractor separations, and communicate contractor
Financial separations to stakeholders that are required for the timely removal
Statements of logical access.
20-04 Independent 11/15/2019 Implement a stricter policy for account suspension after inactivity to
Auditors’ Report account for SBA employees who may not have been removed via the
on SBA’s FY 2019 manual account removal process.
Financial
Statements
20-04 Independent 11/15/2019 Continue to enhance and strengthen the audit logging and review
Auditors’ Report controls to specify which events were reviewed, who performed the
on SBA’s FY 2019 review, and whether issues were identified, escalated, and resolved.
Financial
Statements
20-04 Independent 11/15/2019 Implement segregation of duties and implement mitigating controls
Auditors’ Report to help ensure that personnel with the ability to the develop code,
on SBA’s FY 2019 are restricted from migrating code into the production environment.
Financial
Statements
20-04 Independent 11/15/2019 Train personnel who are responsible for the provisioning of accounts
Auditors’ Report to grant access in compliance with SBA policy and procedures.
on SBA’s FY 2019
Financial
Statements
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U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
20-04 Independent 11/15/2019 Evaluate and redesign user access forms to remove any redundant
Auditors’ Report or unnecessary data fields.
on SBA’s FY 2019
Financial
Statements
20-04 Independent 11/15/2019 Periodically train personnel involved with the implementation of
Auditors’ Report operating system patches to follow the requirements of the patch
on SBA’s FY 2019 management process in accordance with SBA and OCA policy.
Financial
Statements
20-05 KPMG 12/10/2019 Update appropriate Center Desk Manuals to specify relevant staff
Management involved in the charge-off and referral processes to ensure the Next
Letter Due Date field in the loan repository system is timely updated when
Communicating a loan's liable parties change. Any change to policy should be
Matters Relative to communicated to relevant staff.
SBA’s FY 2019
Financial
Statement Audit
20-05 KPMG 12/10/2019 Perform a regular review of liable parties with outstanding
Management receivable balances to ensure they are referred timely.
Letter
Communicating
Matters Relative to
SBA’s FY 2019
Financial
Statement Audit
20-05 KPMG 12/10/2019 Implement a process to perform and formally document a
Management comprehensive analysis of the applicability and implementation of
Letter new and existing accounting standards.
Communicating
Matters Relative to
SBA’s FY 2019
Financial
Statement Audit
20-05 KPMG 12/10/2019 Memorialize the results of the analyses in the form of a complete set
Management of approved policies/procedure documents that are readily available.
Letter
Communicating
Matters Relative to
SBA’s FY 2019
Financial
Statement Audit
20-06 SBA’s FY 2019 Cash 2/11/2020 Continue to train program office grant personnel responsible for
Contributions and monitoring grant recipient performance to enforce compliance with
Gifts SBA’s established policies and procedures for grants management
and best practices for administering grant awards and monitoring
performance.
20-06 SBA’s FY 2019 Cash 2/11/2020 Review $7,602 of incurred costs, in accordance with SOP 00 18, to
Contributions and ensure that expenditures are properly categorized as travel, other,
Gifts or supplies on the A 11, Budget Detail Worksheet.
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Report Title Date Issued Recommendation
Number
20-09 Audit of SBA’s 3/24/2020 Implement procedures to include a quality control checklist to
Cooperative ensure that all documentation related to the award of the
Agreement with cooperative agreement is maintained in the official grant file.
Arsenal Business
and Technology
Partnership’s
Veterans Business
Outreach Center
20-09 Audit of SBA’s 3/24/2020 Implement controls to ensure that grants management officials
Cooperative effectively oversee that agency officials select technical evaluation
Agreement with panel members in accordance with grants management policy.
Arsenal Business
and Technology
Partnership’s
Veterans Business
Outreach Center
20-09 Audit of SBA’s 3/24/2020 Revise the grants management policy to require that agency officials
Cooperative establish safeguards, to include separation of duties, when officials
Agreement with with oversight responsibility of any applicant during the grant
Arsenal Business lifecycle are required to serve on the Technical Evaluation Panel and
and Technology maintain documentation in the official grant file.
Partnership’s
Veterans Business
Outreach Center
20-09 Audit of SBA’s 3/24/2020 Require Arsenal to establish quarterly goals for its performance
Cooperative measures, enforce cooperative agreement terms and conditions
Agreement with requirement to provide justification for not achieving quarterly goals
Arsenal Business and propose corrective actions, and implement the quarterly report
and Technology and feedback template prior to exercising the next cooperative
Partnership’s agreement option year.
Veterans Business
Outreach Center
20-09 Audit of SBA’s 3/24/2020 Reconcile actual performance results with proposed goals on a
Cooperative quarterly basis, document the reconciliation, provide feedback to
Agreement with Arsenal using the quarterly report and feedback template, and
Arsenal Business maintain the documentation as part of the official cooperative
and Technology agreement file.
Partnership’s
Veterans Business
Outreach Center
20-09 Audit of SBA’s 3/24/2020 Require program officials to enforce the cooperative agreement
Cooperative terms and conditions to withhold reimbursements if Arsenal does
Agreement with not provide justifications and corrective action when it does not
Arsenal Business achieve its quarterly goals.
and Technology
Partnership’s
Veterans Business
Outreach Center
Semiannual Report to Congress, Spring 2020 | 37
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
20-09 Audit of SBA’s 3/24/2020 Review the expenditures for the $10,168 transfer of funds to ensure
Cooperative these costs are allowable and document the rationale for approving
Agreement with the transfer.
Arsenal Business
and Technology
Partnership’s
Veterans Business
Outreach Center
20-09 Audit of SBA’s 3/24/2020 Develop a tracking mechanism to monitor Arsenal’s cumulative
Cooperative reallocation of funds to ensure it does not exceed the allowable
Agreement with amount and enforce that Arsenal comply with the terms and
Arsenal Business conditions for reporting expenditures that exceed their budgeted
and Technology cost categories.
Partnership’s
Veterans Business
Outreach Center
20-09 Audit of SBA’s 3/24/2020 Implement procedures to ensure program officials enforce financial
Cooperative examination results.
Agreement with
Arsenal Business
and Technology
Partnership’s
Veterans Business
Outreach Center
38 | Semiannual Report to Congress, Spring 2020
U.S. Small Business Administration | Office of Inspector General
Significant Management Decisions with Which OIG Disagrees
There were no significant management decisions with which OIG disagrees during this reporting
period.
Significant Revised Management Decisions
There were no significant revised management decisions during this reporting period.
Federal Financial Management Improvement Act
OIG’s Independent Public Accountant, KPMG, found in the FY 2019financial statement audit that
there were no instances in which SBA’s financial management systems did not substantially comply
with the Federal Financial Management Improvement Act of 1996.
Instances of Interference
There were no attempts by SBA officials to interfere with OIG independence during the reporting
period.
Investigations Reporting Statistics
Investigative Reports Issued
Report Type Number of Reports
Report of Investigation 60
Preliminary Case Closing Reports of Investigation 11
Total 71
Persons Referred for Prosecution
Referred To Number of Persons
Department of Justice 39
State Attorney 4
Local Attorney 0
Total 43*
*Number includes persons and entities referred for prosecution.
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.
Semiannual Report to Congress, Spring 2020 | 39
U.S. Small Business Administration | Office of Inspector General
Investigations Involving a Senior Government Employee That Is Closed and
Not Disclosed to the Public
An SBA official was alleged to have attempted to use his authority to attempt to transfer a Small
Business Investment Company (SBIC) into liquidation despite SBIC complying with the program’s
financial requirements. The official reportedly had attempted to obtain employment with the SBIC
many years ago, and the complainant believed that the attempted transfer was taken in retribution
for being denied employment.
The OIG investigation did not substantiate the allegations. After interviews with officials of the SBIC,
as well as SBA program and ethics officials, there was no evidence of any conflict of interest or
apparent misuse of official government authority. Moreover, the interviews revealed that the initial
attention to the SBIC was warranted by its high capital impairment percentage. Although the SBA
official seemed to take interest in SBIC, none of the things asked of it fell outside of the program’s
authority. There was also no evidence indicating that the SBA official’s conduct harmed the SBIC or
that its treatment was inconsistent with program regulations. Based on the above facts, OIG closed
this matter with no action. The incident was referred to SBA management for their determination as
to the relevance of the OIG’s findings.
40 | Semiannual Report to Congress, Spring 2020
U.S. Small Business Administration | Office of Inspector General
Legal Actions Summary
October 1, 2019 – March 31, 2020
State Program Jointly With Alleged Violation(s) Prosecuted Legal Action
AK GC GSA/OIG, Individuals conspired to submit Individual pled guilty to criminal information and
VA/OIG fraudulent invoices for work not two individuals indicted.
performed.
CA BL FBI, ICE Individual provided false Individual sentenced to time served for 18
information on SBA Form 1919 months; one year in a residentiary re-entry
and used loan proceeds for center, followed by 3 years of supervised
personal expenses. release; an ordered to pay a $250,000 fine.
Company’s State of California Insurance License
revoked.
CO GC FBI, Individuals conspired to pay and One individual sentenced to 30 months of
Energy/OIG, receive bribes in exchange for incarceration, followed by 3 years of supervised
VA/OIG securing government contracts. probation, and ordered to pay a $100
assessment. Another individual sentenced to 18
months of incarceration, followed by 3 years of
supervised release and ordered to pay a $600
assessment and forfeited $9,000. Another
individual was sentenced to 12 months of
supervised probation, fined $4,500 and ordered
to pay a $100 assessment.
CO GC Army/CID, Air Individuals submitted false One individual sentenced to 3 years of
Force/OSI, documents and statements to supervised probation, 250 hours of community
DCIS, GSA/OIG the Historically Underutilized service, and ordered to pay a $100 assessment.
Business Zones (HUBZone) Another individual sentenced to one year of
Program to obtain set-aside probation, 100 hours of community service, and
contracts the company would ordered to pay a $100 special assessment.
not have otherwise been eligible
to receive.
CT DL Company falsified documents to Individual sentenced to 24 months of probation;
obtain an SBA loan in the assessed a fine of $5,000; and ordered to
aftermath of Superstorm Sandy. complete 150 hours of community service.
DC GC NASA/OIG Individual misrepresented Individual indicted.
company as a Woman-Owned
Small Business in order to
receive contracts to which the
company would not otherwise
be entitled.
FL BL FBI, IRS/CID Individuals submitted fraudulent Two individuals found guilty.
invoices for payment and used
loan proceeds for personal
expenses.
FL DL HHS/OIG, Individual falsified the location Individual pled guilty and sentenced to 12
DHS/OIG, of their primary residence in months of probation and ordered to pay
HUD/OIG order to obtain government $171,000 in restitution and fees and penalties in
assistance in the aftermath of the amount of $305.
Superstorm Sandy.
Semiannual Report to Congress, Spring 2020 | 41
U.S. Small Business Administration | Office of Inspector General
State Program Jointly With Alleged Violation(s) Prosecuted Legal Action
FL IA Individual created an appearance Individual retired during investigation
of a conflict of interest due to
overlapping relationships
between SBA and Small Business
Development Center.
GA DL DHS/OIG, Individual falsified loan SBA realized an administrative recovery of
HUD/OIG documents to receive disaster $47,647.
assistance in the aftermath of
Superstorm Sandy.
GA GC Army/CID, DCIS Individuals conspired to commit Two individuals pled guilty to criminal
conflict of interest violations and information.
engaged in a scheme to defraud
the U.S. Army through
overbilling and illegally steering
8(a) sole-source contracts.
LA DL Individual conspired to commit Individual pled guilty to an information.
disaster fraud by misusing loan
proceeds for personal purchases
and expenses.
LA DL DHS/OIG Individual submitted false Individual pled guilty.
documents to obtain a disaster
loan.
MD BL FDIC/OIG, Individuals conspired to submit Individual ordered to pay an additional $809,000
FHFA/OIG fraudulent information in order in restitution and forfeited $60,000.
to obtain SBA guaranteed loans.
MI GC GSA/OIG, Company misrepresented itself Individual sentenced to 12 months of
VA/OIG as a Service-Disabled Veteran- incarceration, 24 months of supervised release,
Owned Small Business (SDVOSB) and ordered to pay a $50,000 fine and $100
to obtain a government special assessment.
contracts to which the company
would not otherwise be entitled.
MO BL FBI, IRS/CID Individual provided false Individual pled guilty.
statements on loan application
and laundered loan proceeds.
NM GC Army/CID, Individuals conspired to Individual indicted and pled guilty.
DCAA, DCIS fraudulently misappropriate
federal funds for lobbying
services to obtain 8(a) sole
source contracts.
NJ BL Individual made false statements Individual pled guilty.
to obtain an SBA guaranteed
loan.
42 | Semiannual Report to Congress, Spring 2020
U.S. Small Business Administration | Office of Inspector General
State Program Jointly With Alleged Violation(s) Prosecuted Legal Action
NJ DL HUD/OIG Individual falsified the location Individual charged by complaint summons.
of their primary residence in
order to obtain government
assistance in the aftermath of
Superstorm Sandy.
NJ DL HHS/OIG, Individual falsified the location Individual charged by complaint summons.
DHS/OIG, of their primary residence in
HUD/OIG order to obtain government
assistance in the aftermath of
Superstorm Sandy.
NY DL FEMA/OIG, Individual falsified the location Individual agreed to deferred prosecution for
HUD/OIG of their primary residence in two years and to pay $59,254 in restitution.
order to obtain government
assistance in the aftermath of
Superstorm Sandy.
NJ DL HUD/OIG Individual falsified the location Individual entered pretrial intervention and
of their primary residence in ordered to pay $121,881 in restitution.
order to obtain government
assistance in the aftermath of
Superstorm Sandy.
NJ DL HHS/OIG, Individual falsified the location Individual sentenced to 5 years of probation and
DHS/OIG, of their primary residence in ordered to pay $142,414 in restitution and $155 in
HUD/OIG, NJ order to obtain government fees and penalties.
DCA assistance in the aftermath of
Superstorm Sandy.
NY BL DHS, FBI, Bank employee accepted bribes Individual indicted.
FDIC/OIG, and used position to approve
SIGTARP/OIG loans to entities in which there
was a personal financial interest.
NV BL USSS Individual used another Individual sentenced to 5 years of probation with
another’s personal identifying a suspended sentence of 12 to 48 months and
information to obtain an SBA ordered to pay $127,441 in restitution.
loan.
OH GC Individuals conspired to defraud Four individuals indicted.
government by creating a pass-
through company to obtain 8(a)
contracts to which the company
would not otherwise be entitled.
OK GC FBI, NCIS, Two Individuals used loan One individual pled guilty and two individuals
Army/CID, proceeds for personal expenses indicted.
DCIS, GSA/OIG and one individual accepted
bribes as influence for
conducting business
transactions.
Semiannual Report to Congress, Spring 2020 | 43
U.S. Small Business Administration | Office of Inspector General
State Program Jointly With Alleged Violation(s) Prosecuted Legal Action
OK GC Army/CID, Company falsely represented Company entered into a civil settlement
DCIS, GSA/OIG itself agreement in the amount of $2.8 million.
in order to receive set-aside Company also agreed that neither itself nor any
contracts to which the company affiliate of the company will apply, represent, or
would not otherwise be entitled. certify as a HUBZone Small Business Concern or
participate in the 8(a) Mentor Protégé Programs
for a period of 3 years; and will notify SBA prior
to any change of control or change of
ownership.
PA GC DCIS, DOJ/OIG Company did not operate within Company agreed to include extensive business
the recorded HUBZone. ethics training within the company for two years.
SC GC DCIS, Individuals falsely represented Individual entered a pretrial diversion and
USDA/OIG the eligibility of a company in required to complete 40 hours of community
order to receive set-aside 8(a) service.
contracts to which the company
would not otherwise be entitled.
TX DL Individual misused loan proceeds Individual indicted.
and submitted falsified
documents in support of loan.
TX DL DHS/OIG Individual submitted false Individual pled guilty.
documents to obtain disaster
loan and misused proceeds for
personal expenses.
TX DL Individual submitted fraudulent Individual sentenced to 48 months of probation
invoices to obtain disaster and ordered to pay $19,866 in restitution and a
assistance. $100 special assessment fee.
TX DL DHS/OIG Individuals falsified the location Individual sentenced to 3 years of probation and
of their primary residence in ordered to pay $16,541 in restitution and a $100
order to obtain government special assessment fee.
assistance.
WA GC DOI/OIG Individual received bribes to Individual served with target letter.
steer government contracts and
to release non-public
information to a contractor.
WA BL Individuals conspired to make Three individuals entered a pretrial diversion,
false statements regarding the and each agreed to pay $450 in fees and $50 per
true purpose of a loan that a month in Felony Diversion Program fees; and will
company would not have perform 100 hours of community service.
otherwise been entitled to
receive.
44 | Semiannual Report to Congress, Spring 2020
U.S. Small Business Administration | Office of Inspector General
State Program Jointly With Alleged Violation(s) Prosecuted Legal Action
WI GC DCIS, DOT/OIG, Individuals posed as straw Individual sentenced to 78 months of
GSA/OIG owners of a company to imprisonment, 24 months of supervised release,
fraudulently obtain 8(a) SDVOSB and assessed a $5,000 fine and $200 special
status to obtain government assessment. One individual found guilty.
contracts to which the company
would not otherwise be entitled.
Legal Actions Summary Program Codes
BL—Business Loans
DL—Disaster Loans
GC—Government Contracting and Section 8(a) Business Development
IA—Internal Affairs
Joint Investigation Agency Acronyms
Defense Contract Audit Agency (DCAA)
Defense Criminal Investigative Service (DCIS)
Department of Energy Office of Inspector General (Energy/OIG)
Department of Health and Human Services Office of Inspector General (HHS/OIG)
Department of Homeland Security Office of Inspector General (DHS/OIG)
Department of Housing and Urban Development Office of Inspector General (HUD/OIG)
Department of Interior Office of Inspector General
Department of Justice Office of Inspector General (DOJ/OIG)
Department of Transportation Office of Inspector General (DOT/OIG)
Department of Veterans Affairs Office of Inspector General (VA/OIG)
Federal Bureau of Investigation (FBI)
Federal Deposit Insurance Corporation Office of Inspector General (FDIC/OIG)
Federal Housing and Finance Agency Office of Inspector General (FHFA/OIG)
Federal Emergency Management Agency Office of Inspector General (FEMA/OIG)
General Services Administration Office of Inspector General (GSA/OIG)
Immigration and Customs Enforcement (ICE)
Internal Revenue Service – Criminal Investigation Division (IRS/CID)
National Aeronautics and Space Administration Office of Inspector General (NASA/OIG)
New Jersey Department of Community Affairs (NJ DCA)
Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP/OIG)
United States Air Force Office of Special Investigations (Air Force/OSI)
United States Army/Criminal Investigation Division (Army/CID)
United States Department of Agriculture Office of Inspector General (USDA/OIG)
Semiannual Report to Congress, Spring 2020 | 45
U.S. Small Business Administration | Office of Inspector General
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
Location Executed
International Trade Event New Mexico DO - New Mexico International Albuquerque, February 25, 2020
Trade Alliance NM
Southeast Idaho Opportunity Boise DO - Bannock Development Corporation, Pocatello, ID February 20, 2020
Zone Connection Forum Citizens Community Bank
Financial Empowerment Washington, DC DO - Hispanic Chamber of Washington, DC February 18, 2020
Workshop Series Commerce Montgomery County
Financial Empowerment Washington, DC DO - Greater Washington Bethesda, MD February 18, 2020
Workshop Series Hispanic Chamber of Commerce
Opportunity Zone and Pittsburgh DO - Focus on Renewal, Sto Rox McKees Rocks, February 4, 2020
Entrepreneurship Summit Neighborhood Corporation PA
Export Trade Assistance Orange County/Inland Empire DO - Riverside Riverside, CA December 20, 2019
Partnership Program County Economic Development Agency Office of
Foreign Trade
Pittsburgh Equity in Energy Pittsburgh DO - U.S. Department of Energy, Community December 13, 2019
Community College of Beaver County, General College of
Trade Corporation Beaver County
Small Business Workshops and Rhode Island DO - Rhode Island Hospitality Rhode Island December 6, 2019
Lender Matchmakers Series Association, University of Rhode Island Rhode Statewide
Island Small Business Development Center
Small Business Roundtable Rhode Island DO - Rhode Island Society of Kingston, RI December 6, 2019
Certified Public Accountants
Business Development Series Hawaii DO - Honolulu Minority Business Center Hawaii December 4, 2019
University of Hawaii at Manoa Shidler College of Statewide
Business, State of Hawaii Department of
Transportation Office of Civil Rights
Disadvantaged Business Enterprise
ACBA Business Resource Page Arkansas DO - Arkansas Community Bankers World Wide November 15, 2019
Association Web
International Banking & Orange County/Inland Empire DO - District Export Irvine, CA October 22, 2019
Finance Seminar Council of Southern California
Small Business Saturday 2019 HQ OCPL - American Express, Women Impacting Nationwide October 15, 2019
Public Policy
46 | Semiannual Report to Congress, Spring 2020
U.S. Small Business Administration | Office of Inspector General
Appendix: External Peer Reviews
Section 5(a) of the IG Act requires OIGs to report peer review results in their Semiannual Reports to
Congress. The following information is provided in accordance with these requirements.
Audits Division
Generally accepted government auditing standards (GAGAS) issued by GAO require that audit
organizations performing audits and attestation engagements in accordance with GAGAS 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 year ended March 31,
2018. In September 2018, SBA 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 September 2017, the U.S. Federal Deposit Insurance Corporation (FDIC) OIG reviewed our
Investigations Division. The FDIC OIG issued its final report December 19, 2017. The FDIC found that
the system of internal safeguards and management procedures for the investigative function of OIG
was compliant with the quality standards established by the CIGIE and the applicable Attorney
General Guidelines. (OIGs can be assessed as either compliant or noncompliant.) No
recommendations were offered.
Semiannual Report to Congress, Spring 2020 | 47
U.S. Small Business Administration | Office of Inspector General
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
5(a)(2) Recommendations with respect to significant Significant Recommendations from This Reporting
problems, abuses, and deficiencies Period
5(a)(3) Prior significant recommendations on which Significant Recommendations from Prior Reporting
corrective action has not been completed Periods Without Final Action as of March 31, 2019
5(a)(4) Matters referred to prosecutive authorities Legal Actions Summary
5(a)(5) Instances in which requested information was N/A
refused
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 Statistical Highlights
tables
5(a)(9) Audit, inspection, and evaluation reports with Reports with Recommendations That Funds Be Put
recommendations that funds be put to better to Better Use
use
5(a)(10) Audit, inspection, and evaluation reports Reports from Prior Periods with Overdue
without management decision, without Management Decisions; Reports from Prior Periods
comment within 60 days, or with with Open Recommendations as of March 31, 2019
unimplemented recommendations
5(a)(11) Revised management decisions Significant Revised Management Decisions
5(a)(12) Management decisions with which the Significant Management Decisions with Which OIG
Inspector General disagrees Disagrees
5(a)(13) Information described under section 05(b) of Federal Financial Management Improvement Act
the Federal Financial Management
Improvement Act of 1996
5(a)(14)(16) Peer review results External Peer Reviews
5(a)(17)(18) Investigative statistical tables and supporting Investigations Reporting Statistics
metrics
5(a)(19) Investigations involving a senior government Investigations Involving a Senior Government
employee where allegations of misconduct Employee Where Misconduct Was Substantiated
were substantiated
5(a)(20) Whistleblower retaliation Whistleblower Retaliation Cases
5(a)(21) Attempts to interfere with the independence of Instances of Interference
OIG
5(a)(22) Each closed inspection, evaluation, and audit Investigations Involving a Senior Government
not disclosed to the public; each closed Employee That Is Closed and Not Disclosed to the
investigation involving a senior government Public
employee not disclosed to the public
48 | Semiannual Report to Congress, Spring 2020
U.S. Small Business Administration | Office of Inspector General
Make a Difference
To promote integrity, economy, and efficiency, we encourage you to report instances of fraud,
waste, or mismanagement to the OIG Hotline.*
Online: https://www.sba.gov/oig/hotline
Call: 1-800-767-0385 (Toll Free)
Write or Visit:
U.S. Small Business Administration
Office of Inspector General
Investigations Division
409 Third Street, SW (5th Floor)
Washington, DC 20416
*In accordance with Sections 7 and 8L(b)(2)(B) of the Inspector General’s Act, confidentiality of a
complainant’s personally identifying information is mandatory, absent express consent by the
complainant authorizing the release of such information.
Semiannual Report to Congress, Fall 2019 | 49
U.S. Small Business Administration | Office of Inspector General
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50 | Semiannual Report to Congress, Spring 2020