Full text
Semiannual Report to Congress
October 1, 2020 – March 31, 2021
U.S. Small Business Administration | Office of Inspector General
Message from the Inspector General
April 30, 2021
I am honored to submit our Semiannual Report to Congress for the first half
of fiscal year 2021. Every 6 months, we report to Congress our independent
oversight of the U.S. Small Business Administration (SBA), as required by law.
More than a year has passed since the Coronavirus Disease 2019 (COVID-19)
pandemic sparked a nationwide economic crisis. Since March 2020, our
focus has been on providing oversight of SBA’s pandemic response efforts
to combat program fraud, ensuring these programs are being efficiently and
effectively managed.
Pandemic Response Oversight
Hannibal “Mike” Ware
Inspector General SBA’s tremendous role in the nation’s pandemic response is without
precedent. SBA has expended more than a trillion dollars in lending
authority and entrepreneurial assistance in the wake of the
pandemic. The speed and reduced controls surrounding this
lending authority brought with it substantially increased risk. More than 200 fraudsters
There is no higher priority for our office than providing
oversight of SBA and the taxpayer’s funds at stake through
have been brought to
the Coronavirus Aid, Relief, and Economic Security (CARES) justice and some $600
Act and ensuing economic stimulus response laws aimed at
mitigating the pandemic. We have identified SBA’s economic million seized or
relief programs being susceptible to significant fraud risks and
vulnerabilities as a top management challenge for SBA. recovered to make
Our office published a robust oversight plan in April 2020 and taxpayers whole
immediately initiated its first reviews focusing on
implementation and eligibility of the Paycheck Protection
Program, Economic Injury Disaster Loans, and the entrepreneurial development programs.
Leveraging supplemental resources provided by Congress, we have announced an aggressive
oversight plan for calendar year 2021. To date, we have published 12 reports on pandemic oversight,
about half of them during this semiannual period.
We have issued dozens of recommendations for corrective action aimed at strengthening internal
controls and promoting efficiency and effectiveness. Our pandemic oversight efforts already have
identified billions of dollars in potential fraud and improper payments.
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U.S. Small Business Administration | Office of Inspector General
Working in concert with our law enforcement partners over the past year, more than 200 fraudsters
have been brought to justice and some $600 million seized or recovered to make taxpayers whole.
We have also received more than 150,000 Hotline complaints about waste, fraud, and abuse in SBA’s
programs and operations—more than
150 years’ worth of complaints prior to
the pandemic. We expect most of
them will result in thousands of more
investigations.
Although we continue to evaluate and
recommend corrections for the most
critical risks facing SBA during normal
circumstances, there is no doubt that
oversight of pandemic relief funds
and combating fraud in these
programs will be a top priority for
many years to come.
Our Work this Period
During the 6-month period from October 2020 to March 2021, OIG issued 12 reports with 81
recommendations to improve SBA operations and reduce fraud and unnecessary losses in agency
programs. In addition, OIG investigations resulted in 119 indictments and 32 convictions. Overall,
OIG’s investigations and audit work achieved monetary recoveries and savings of $85.4 million during
this semiannual period.
We’re also keeping watch over government contractors for business ethics, integrity, honesty, and
competency, ensuring taxpayer dollars are well spent.
OIG Staff Dedication and Success
I am proud of the significant body of work our auditors, investigators, and support professionals have
produced since the pandemic began. It is an honor to work with such high-caliber professionals
dedicated to protecting the interests of all American taxpayers.
Hannibal “Mike” Ware
SBA Inspector General
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Table of Contents
Message from the Inspector General .............................................................................................. i
OIG Hotline........................................................................................................................................1
SBA Top Management Challenges ................................................................................................2
Summary of OIG Oversight Work ...................................................................................................3
Pandemic Response Oversight ............................................................................................................ 3
Small Business Access to Capital ......................................................................................................... 8
Disaster Assistance Program ................................................................................................................ 9
Contracting and Counseling Programs ........................................................................................... 11
Agency Management ........................................................................................................................ 13
Other Significant OIG Activities ................................................................................................... 15
Organizational Overview .............................................................................................................. 16
Appendix A. Reporting Period Statistical Highlights ................................................................. 18
Appendix B. Reports Issued ......................................................................................................... 20
Appendix C. Reports, Recommendations, and Management Decisions ................................ 22
Appendix D. Investigations Reporting Statistics ........................................................................ 39
Appendix E. Legal Action Summary ............................................................................................ 40
Appendix F. Cosponsored and Other Activities ........................................................................ 43
Appendix G. External Peer Reviews ............................................................................................ 44
Appendix H. Reporting Requirements in the Inspector General Act of 1978, As Amended 45
Make a Difference .......................................................................................................................... 46
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U.S. Small Business Administration | Office of Inspector General
OIG Hotline
All federal Offices of Inspector General have a Hotline function that allows anyone to lodge a complaint
when they suspect wrongdoing involving government programs or functions. The SBA OIG Hotline
handles allegations of waste, fraud, abuse, or serious mismanagement within SBA or its programs from
employees, contractors, and the public.
Record-setting Numbers
Hotline work has changed dramatically because of the COVID-19 pandemic, overwhelming the system
and the staff.
During this semiannual period, the OIG Hotline received more than 61,000 complaints of loan fraud and
abuse, identity theft, and problems with SBA’s customer service.
In total, in the year from March 2020 to
April 2021, the Hotline received more
than 150,000 complaints related to
loan fraud.
Contrast that figure against the 742
complaints received in all of 2019 and
the picture that emerges is one of an
overwhelming surge. OIG’s Hotline
team has been diligently working
through an enormous backlog of tens
of thousands of complaints.
Complaints come to us primarily
through our online submission form.
The Hotline staff members review each
allegation and consult with OIG’s
Investigations Division, Audits Division,
and Office of Counsel to determine
the appropriate course of action.
OIG follow-up of Hotline complaints
may result in corrective actions, audits,
or administrative, civil, or criminal
investigations. Our Hotline staff
monitors the progress of matters
referred to SBA program offices for action to ensure the agency has promptly followed up, adequately
resolved allegations, and documented any corrective actions.
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U.S. Small Business Administration | Office of Inspector General
SBA’s Top Management and Performance
Challenges
Each year, OIG is required to report on the most serious management and performance challenges
facing the agency. SBA includes our assessment in the agency financial report, as required by the
Reports Consolidation Act of 2000
and Office of Management and
Budget (OMB) Circular A-136.
The management challenges
SBA Top Management Challenges
represent areas that OIG considers Challenge 1
particularly vulnerable to fraud, SBA’s Economic Relief Programs Are Susceptible to Significant
waste, abuse, or mismanagement, Fraud Risks and Vulnerabilities
or which otherwise pose significant
risk to the agency, its operations, or Challenge 2
its credibility. Each management Inaccurate Procurement Data and Eligibility Concerns in the Small
challenge generally originated Business Contracting Programs Undermine the Reliability of
from one or more reports issued by Contracting Goal Achievements
OIG or the Government
Accountability Office. Challenge 3
SBA Needs to Improve Oversight of IT Investment and Reduce IT
We do not rank the challenges in
Security Risks
order of importance or magnitude,
except for the COVID-19 Challenge 4
challenge. We view all eight
SBA Risk Management and Oversight Practices Need Improvement
challenges as critically important to
to Ensure the Integrity of Loan Programs
SBA operations in the upcoming
year. However, we placed COVID- Challenge 5
19 economic relief programs at the SBA’s Management and Monitoring of Section 8(a) Business
top of the list for the 2021 report in
Development Program Needs Improvement
recognition that it is the agency’s
most acute challenge. Challenge 6
Identification of Improper Payments in SBA’s Loan Programs
Remains a Challenge
Challenge 7
SBA’s Disaster Assistance Program Must Balance Competing
Priorities to Deliver Prompt Assistance but Prevent Potential Fraud
Challenge 8
SBA Needs Robust Grants Management Oversight
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Summary of OIG Oversight Work
Pandemic Response Oversight
To support businesses affected by the COVID-19 pandemic, Congress tasked SBA with lending more
than $373 billion in COVID-19 Economic Injury Disaster Loans (EIDLs) and $20 billion in COVID-19
emergency advance grants. Congress also appropriated additional funds for new disaster assistance
programs. -$35 billion for targeted EIDL advances, $16.25 billion for the Shuttered Venue Operators
Grants program, and $28.6 billion for restaurant revitalization.
In addition, the Coronavirus Aid, Relief and Economic Security (CARES) Act also provided $349 billion
for the creation of the Paycheck Protection Program (PPP) under Section 7(a) of the Small Business Act.
Congress added an additional $310 billion to the PPP on April 24, 2020, through the Paycheck
Protection Program and Health Care Enhancement Act.
On December 27, 2020, through the Consolidated Appropriations Act of 2021, the Economic Aid to
Hard-Hit Small Businesses, Nonprofits, and Venues Act extended the program through March 31,
2021. The Economic Aid Act provided an additional $147.5 billion in program funding, which
increased the total program funding to $806.5 billion.
SBA’s need to quickly provide relief to small businesses led to reduced controls on pandemic-related
loans, substantially increasing the fraud risk. It was immediately clear that pandemic relief efforts had
drawn the attention of unscrupulous business owners and greedy criminals.
Within weeks, complaints from lenders and allegations of widespread fraudulent activity overwhelmed
OIG’s Hotline. We launched hundreds of investigations and audits to root out the fraud and abuse
endangering these critical resources.
The following summarizes our pandemic oversight work this period.
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U.S. Small Business Administration | Office of Inspector General
Evaluation of SBA’s Award Procedures for the CARES Act Entrepreneurial
Development Cooperative Agreements (Report 21-11)
This report found that SBA awarded the CARES Act entrepreneurial development
cooperative agreements and grants in accordance with applicable federal laws,
regulations, and guidance. We found program officials established performance goals and identified
performance indicators.
SBA should clearly define the performance goals and set performance targets to effectively ensure
performance goals are achieved as intended. We recommended that SBA enforce standard operating
procedures requiring defined performance goals and include performance targets in all future Small
Business Development Centers and Women’s Business Center cooperative agreements and grants.
We also recommended that SBA collect and analyze the CARES Act entrepreneurial development
cooperative agreement recipient’s performance results and establish a goal-setting process for
technical assistance programs established for future disasters. SBA management agreed with both
recommendations.
Access this Evaluation Report on the SBA OIG Reports site.
Duplicate Loans Made Under the Paycheck Protection Program (Report
21-09)
OIG reviewed PPP regulations, the Paycheck Protection Program and Health Care
Enhancement Act, and guidance published in SBA’s PPP Interim Final Rules and PPP
Frequently Asked Questions. We determined SBA did not always have sufficient controls in place to
detect and prevent duplicate PPP loans.
As a result, lenders disbursed more than one PPP loan to 4,260 borrowers with the same tax
identification number and borrowers with the same business name and address. These disbursements
totaled about $692 million in PPP loans approved from April 3--August 9, 2020.
We recommended four actions for SBA to strengthen controls and review PPP loan disbursements to
identify duplicates and take action to recover the funds.
Access this Flash Report on the SBA OIG Reports site.
Inspection of SBA's Implementation of the Paycheck Protection Program
(Report 21-07)
SBA’s initial response to implement the PPP quickly made billions of dollars of capital
available to millions of borrowers affected by the COVID-19 pandemic. SBA quickly released loan
origination program guidance for most program aspects and approved approximately 3,800 financial
institutions for participation in the program.
However, SBA’s efforts to hurry capital to businesses were at the expense of controls that could have
reduced the likelihood of ineligible or fraudulent business obtaining a PPP loan. We analyzed PPP loan
data and identified three unique scenarios that indicate PPP loans were approved for potentially
ineligible and, in some cases, fraudulent recipients. We found nearly 55,000 loans totaling approximately
$7 billion to potentially ineligible businesses.
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We found SBA’s PPP publicly reported and loan-level data was inaccurate and incomplete, and SBA
guidance was not sufficient to ensure PPP lenders prioritized underserved markets during the initial
round of funding. We made six recommendations to improve SBA’s program and reduce the risk of
financial loss from PPP loans being made to ineligible or fraudulent borrowers and improve SBA’s ability
to obtain information necessary for critical program decisions.
Access this Inspection Report on the SBA OIG Reports site.
Management Alert Paycheck Protection Program Loan Recipients on the
Department of Treasury’s Do Not Pay List (Report 21-06)
Because of complaints of fraud received by the OIG, we collaborated with the U.S.
Department of the Treasury Do Not Pay Business Center. We identified high-risk
transactions related to financial assistance to small businesses for the COVID-19 pandemic. Our review
of Treasury’s analysis showed approximately $3.6 billion in PPP loans to potentially ineligible recipients.
This Management Alert called for fast management action to reduce or prevent losses from improper
payments to lenders for amounts ineligible for forgiveness as well as any fees. After OIG communicated
summary results to SBA management (before we published the report), SBA officials requested
Treasury’s results and immediately put a “hold” flag on loans identified by the Do Not Pay team.
To establish more effective oversight controls related to the PPP, we recommended the agency
promptly identify PPP loans that had not been fully disbursed, follow-up with the lenders to stop $280
million in potential improper loan disbursements and strengthen SBA controls to ensure that loans to
ineligible recipients are not forgiven.
We also recommended the agency review prepayment and pre-award procedures and work with
Treasury to formulate a technical approach to use Treasury’s DNP portal to determine loan applicant
eligibility and prevent improper payments.
Access this Management Alert on the SBA OIG Reports site.
Evaluation of CARES Act Debt Relief to 7(a) Borrowers (Report 21-03)
This report presented the results of our evaluation of SBA’s implementation of debt
relief for borrowers in the 7(a) program. Section 1112 of the Coronavirus Aid, Relief
and Economic Security provided $17 billion in debt relief to borrowers in the 7(a), 504,
and Microloan programs.
We found SBA effectively ensured that more than 224,000 borrowers of 7(a) loans received $2.6 billion in
debt relief within the first 3 months of the CARES Act. By June 2020, SBA had verified that nearly all
reported eligible 7(a) borrowers had received subsidy payments.
We also found SBA could improve payment controls to ensure only eligible borrowers receive subsidy
payments. We identified issues with lender reported information that increased the risk of either making
payments to ineligible borrowers or making excessive payments. We found $43 million in subsidy
payments went to borrowers that may have been ineligible.
We recommended SBA incorporate additional verification procedures before approving subsidy
payments. We also recommended SBA establish post-payment audit procedures using a risk-based
approach and recover any overpayments identified during the post-payment audit. SBA management’s
planned actions resolved the recommendations.
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Access this Evaluation Report on the SBA OIG Reports site.
Inspection of Small Business Administration's Initial Disaster Assistance
Response to the Coronavirus Pandemic (Report 21-02)
The unprecedented demand for COVID-19 EIDLs and the equally unprecedented
challenges SBA had in responding to this pandemic combined with lowered controls
resulted in billions of dollars in potentially fraudulent loans and grants to potentially ineligible
businesses. We found that SBA, in its effort to provide billions of dollars of capital to small businesses
quickly, relaxed internal controls, which significantly increased the risk of program fraud
Our analysis of SBA’s COVID-19 EIDL data revealed that, as of July 31, 2020, SBA had approved more
than $14 billion ($13.4 billion disbursed) in COVID-19 EIDLs to accounts that differed from the original
bank accounts listed on the loan applications. We also found that some $62.7 billion ($58 billion
disbursed) in multiple (between 2 and 245) COVID-19 EIDLs to applicants using the same Internet
provider addresses, email addresses, bank accounts, or businesses listed at the same addresses.
In addition, potentially ineligible applicants received approximately $1.1 billion in COVID-19 EIDLs and
emergency advance grants. We made 10 recommendations for SBA to strengthen its controls to lower
fraud risk and recover funds from ineligible applicants.
Access this Inspection Report on the SBA OIG Reports site.
Investigations
Texas Man Guilty of Filing $10 Million in Fraudulent Bank Loan Applications
A 30-year-old Beaumont, Texas, engineer pleaded guilty for filing fraudulent bank loan
applications seeking more than $10 million dollars in forgivable loans. He had been
charged with violations of wire fraud, bank fraud, false statements to a financial institution,
and false statements to the SBA.
As part of his guilty plea, the man admitted that he sought millions of dollars in forgivable loans
guaranteed by the SBA from two different banks. He claimed to have 250 employees earning wages
but, in fact, he had no business and no employees.
The Texas Workforce Commission provided information to investigators of having no records of
employee wages having been paid in 2020 by the man or his purported business.
This case was investigated by SBA OIG, the Federal Housing Finance Agency Office of Inspector
General, Federal Deposit Insurance Corporation (FDIC) OIG, and the U.S. Postal Inspection Service
Criminal Investigations Group.
Couple Behind “My Buddy Loans” Indicted for Wire Fraud and Aggravated
Identity Theft
A Liberty County, Texas, man and woman were indicted for filing hundreds of fraudulent
economic injury loans. The couple allegedly operated a COVID-19 relief fraud scheme
known as “My Buddy Loans.” This scheme garnered them more than $700,000 in
fraudulent proceeds and resulted in at least $1.3 million in loss to U.S. taxpayers.
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In exchange for a fee, My Buddy Loans took personal identifying information from victims and promised
to file an application for an agricultural grant, which the owners said was available to those who owned a
few acres of land. Instead, the criminals actually filed fraudulent EIDL applications using victims’ personal
identification information.
We investigated this case jointly with the U.S. Secret Service.
Man Purchased Lamborghini After Receiving $3.9 Million in PPP Loans
A Miami, Florida, man pleaded guilty for fraudulently obtaining about $3.9 million in PPP
loans and using those funds to purchase a $318,000 Lamborghini sports car for himself. He
also pleaded guilty to one count of wire fraud.
The man admitted he fraudulently sought millions of dollars in PPP loans on behalf of
different companies and used the funds to purchase a 2020 Lamborghini Huracan sports car within days
of receiving the PPP funds. The man did not make payroll payments but instead used the PPP proceeds
for personal expenses.
We investigated this case jointly with the FDIC OIG, U.S. Postal Inspection Service Criminal
Investigations Group, the Internal Revenue Service, and the Board of Governors of the Federal Reserve
System and the Bureau of Consumer Financial Protection OIG.
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U.S. Small Business Administration | Office of Inspector General
Small Business Access to Capital
SBA provides small businesses with capital and financial assistance through several key programs. SBA
has a financial assistance portfolio of guaranteed and direct loans that totaled about $836 billion as of
September 30, 2020. Over the years, OIG has worked closely with the agency to identify potential points
of risk and improve SBA’s oversight and controls to ensure eligible participants most in need of
assistance benefit from these programs.
The Section 7(a) Loan Program is SBA’s principal vehicle for providing small businesses with access to
credit that cannot be obtained elsewhere. Proceeds from a 7(a) loan may be used to establish a new
business or to assist in acquiring, operating, or expanding an existing business. This program relies on
numerous outside parties (such as borrowers, loan agents, and lenders) to complete loan transactions.
SBA has centralized many loan approval and servicing functions and reduced the number of staff
performing these functions, placing more responsibility on and giving greater independence to lenders.
Past OIG reviews have reported on these trends, and OIG continues to identify weaknesses in SBA’s
lender and loan agent oversight processes.
Criminals use a wide array of techniques to fraudulently get—or induce others to obtain—SBA-
guaranteed loans. The techniques include submitting fraudulent documents, making fictitious asset
claims, manipulating listed property values, using loan proceeds contrary to the terms of the loans, and
failing to disclose debts or previous criminal records. Consequently, there is a greater chance of financial
loss to the agency and its lenders. OIG dedicates a significant portion of its resources to identifying
wrongdoers and, whenever possible, recovering taxpayer funds.
During this semiannual period, our work in this program area was focused on the pandemic response
programs. Consequently, we have included those reports and investigations in the Pandemic Response
Oversight section.
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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 declared disaster. Each year, SBA
approves hundreds of millions of dollars in disaster assistance loans.
The Disaster Assistance Loan Program is the only form of SBA assistance not limited to small businesses.
The program’s disaster assistance loans are the primary form of federal assistance for repairing and
rebuilding nonfarm, private sector losses following a declared disaster.
The program includes four categories of loans for disaster-related losses:
• Home disaster loans
• Business disaster loans (includes PPP loans)
• Economic injury disaster loans (includes pandemic relief loans)
• Military reservist economic injury loans
Audits, Inspections, and Evaluations
General Management Advisory SBA’s Use of Vendors Without a Contract
(Report 21-08)
OIG issued this Management Advisory to notify management of a significant matter
we identified during our audit of SBA’s management of foreclosed properties. We
discovered that SBA had been using three vendors without a contract since fiscal year (FY) 2012. As of
February 18, 2020, SBA had paid these vendors an estimated combined total of more than $10.8 million
in unauthorized commitments.
We recommended SBA require responsible personnel to execute a contract for foreclosure and real
estate services to ensure the procurement of services are obtained and authorized in accordance with
the Federal Acquisition Regulation requirements.
We also recommended SBA ensure vendors used to provide foreclosure and real estate services are
registered and that the agency ratify the more than $10.8 million in payments in accordance with the
Federal Acquisition Regulations and 48 C.F.R. § 1.602-3.
Access this Management Advisory on the SBA OIG Reports site.
Consolidated Results of SBA’s Initial Disaster Assistance Response to
Hurricanes Harvey, Irma, and Maria (Report 21-05)
In 2017, after hurricanes Harvey, Irma, and Maria resulted in catastrophic damage, OIG
conducted three inspections to assess SBA’s initial disaster assistance response. This
review summarized the results of those inspection reports.
The unprecedented damage, application volume, and magnitude of hurricanes Harvey, Irma, and Maria
presented challenges for SBA. However, within nine days of Hurricane Harvey, the agency established
both disaster and recovery centers.
While still helping victims of Hurricane Harvey, SBA established its presence for Hurricane Irma within 20
days. Then, while still assisting Harvey and Irma disaster survivors, SBA staffed disaster recovery and
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U.S. Small Business Administration | Office of Inspector General
business recovery centers within 13 days in Puerto Rico and 33 days in the U.S. Virgin Islands to help
victims of Hurricane Maria.
SBA quickly increased its staffing levels from 758 on August 4, 2017, to 2,579 by September 30, 2017.
The agency effectively staffed and opened loan processing centers in each of the affected communities
and exceeded its loan application processing goals for accepted applications for all three hurricanes.
However, SBA’s response was not without difficulty. We found there was a 24 percent backlog of loan
applications. SBA also did not meet its goals for answering calls and responding to email messages and
some survivors were on hold 45 minutes or more waiting to discuss their applications.
To reduce the backlog and increase staffing, the agency began using USA Staffing to automate
recruitment, hiring, and on-boarding processes. The agency also set new program-specific training
requirements for temporary disaster employees and volunteers and awarded a new blanket-purchase
agreement to three different vendors for translation services. SBA’s corrective actions, when
implemented, should enhance its initial response to future large-scale disasters.
Access this Inspection Report on the SBA OIG Reports site.
Investigations
Laplace Man Sentenced to Four Years of Probation for Falsifying
Documentation Related to SBA Disaster Loan
A 59-year-old Louisiana man was sentenced on January 19, 2021, to 4 years of probation
for falsifying documents related to a federal SBA disaster loan and ordered to pay
$161,203.19 in restitution and a $100 special assessment fee.
The man owned a residence in LaPlace, Louisiana, and applied for and received SBA loan money to
repair damages to his residence allegedly caused by Hurricane Isaac in 2012. The man submitted
fraudulent documentation and statements about his annual income and the repairs performed on the
LaPlace residence.
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Contracting and Counseling Programs
Each year, the federal government spends hundreds of billions of dollars in federal contracts to
purchase goods and services. SBA has worked to maximize opportunities for small businesses to receive
these contract awards. In FY 2020 , the federal government aimed for 23 percent of these award dollars
to go to small businesses, as mandated in the Small Business Act.
SBA has specific programs that focus on strengthening particular types of small businesses, like those
owned by service-disabled veterans and women, as well as small businesses that are disadvantaged or
located in historically underused business zones (HUBZones).
The HUBZone program helps small businesses stimulate their economically challenged local
economies. Similarly, to help small, disadvantaged businesses gain access to federal and private
procurement markets, SBA’s Section 8(a) Business Development Program offers a broad range of
business development support, such as mentoring, procurement assistance, business counseling,
training, financial assistance, and other management and technical assistance.
SBA also aids existing and prospective small businesses through a variety of counseling and training
services offered by partner organizations. Among these partners are Small Business Development
Centers, the SCORE mentoring network, and Women’s Business Centers.
SBA also designed the Boots to Business program, providing transitioning service members interested
in exploring business ownership or other self-employment opportunities with technical assistance and
access to resources. These programs require effective and efficient management, outreach, and service
delivery.
Audits, Inspections, and Evaluations
Evaluation of SBA’s Eligibility Verification of 8(a) Firms Owned by
Members of Federally or State-Recognized Indian Tribes (Report 21-12)
The 8(a) program has several eligibility requirements for individually owned firms,
including that the business be at least 51 percent owned, controlled, and managed by
U.S. citizens who are socially and economically disadvantaged.
Native Americans are one of the designated groups which includes Alaska Natives, Native Hawaiians, or
enrolled members of a federally or state-recognized Indian tribe.
We found that SBA adequately verified the socially disadvantaged eligibility of 8(a) firms owned by
enrolled members of a federally or state-recognized Indian tribe for the majority of the applications we
reviewed, despite SBA not having documented verification procedures.
However, we also found two firms SBA admitted into the 8(a) program although owners were members
of tribes not federally or state recognized. Program officials used subjective and inconsistent processes
and unofficial information to determine whether Indian tribes were state recognized. These firms
received $10.9 million in 8(a) set-aside obligations from FY 2015-20 at the expense of eligible
disadvantaged firms in the 8(a) program.
We recommended that SBA document the process and procedures for verifying that Indian tribes
named by individually owned firms claiming socially disadvantaged status as enrolled members are
federally or state recognized and train staff on the verification procedures.
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We also recommended SBA review the two firms we identified that were owned by individuals who
were members of Indian tribes not federally or state recognized and take prompt action to remove firms
found to be ineligible. We closed this recommendation and SBA is working towards implementing
corrective actions to address the other recommendation.
Access this Evaluation Report on the SBA OIG Reports site.
Investigations
Construction Company Owner Guilty of Defrauding Disabled Veteran-
Owned Small Business Program
A San Antonio, Texas, the former owner of several companies in the construction industry,
pleaded guilty to defrauding the SBA Service-Disabled Veteran-Owned Small Business
program. His business partner also pleaded guilty in November 2020 to participating in
the conspiracy.
From 2004-2017, the partner, who is a service-disabled veteran, posed as the ostensible owner of the
general construction company. The other man, however, exercised financial and operational control
over the construction company.
The conspirators concealed that control to win more than $250 million in government contracts “set
aside” for small, veteran-owned businesses to benefit their larger, unqualified businesses.
The true business owner pleaded guilty to one count of conspiring to commit wire fraud and defraud
the United States. The false owner pleaded guilty to conspiracy to defraud the United States and is
scheduled to be sentenced in June 2021. Both men face a maximum penalty of five years in prison and
a $250,000 fine.
Kansas Man Pleads Guilty in Government Contract Fraud Scheme
A Kansas man pleaded guilty to lying to a federal investigator who was looking into
allegations of major program fraud.
The Overland Park, Kansas, man pleaded guilty to one count of making a false statement
to a federal investigator. In his plea, the man admitted he lied during an investigation into
allegations that United Medical Design Builders fraudulently received contracts from the Department of
Defense through the Service-Disabled Veteran-Owned Small Business program. The man was a project
manager for the company.
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Agency Management
OIG is responsible for ensuring that agency management appropriately safeguards SBA from fraud,
waste, and abuse, and that SBA activities directly further agency goals. As part of this work, OIG
coordinates with the offices of the Chief Financial Officer, the Chief Information Officer, and the Chief
Operating Officer to review financial reporting and performance management, human resources,
procurements and grants, space and facilities, and maintenance of SBA’s information systems and
related security controls.
We note that we did not have investigative work in this program area during the period because of the
demands of pandemic oversight.
Audits, Inspections, and Evaluations
SBA’s Controls Over Cash Contributions and Gifts, Fiscal Years 2019-20
(Report 21-10)
Before SBA can accept a gift, the Office of General Counsel must determine that no
conflict of interest exists. In addition, SBA must put any cash gifts into a separate
account, and OIG is responsible for semiannual audits to ensure the agency is appropriately using and
accounting for such gifts.
This compliance report presents the results of our semiannual evaluation of SBA’s handling of cash
contributions and gifts. We determined SBA adequately complied with the Act and SBA policies for the
deposits and holdings of $12,499 in the Business Assistance Trust Fund.
The agency used $21,943 in existing cash funds in accordance with the Acts, regulations, and SBA
policies. SBA did not report any cash contributions during the period we evaluated.
We noted a control deficiency related to the extremely overdue closeout of an SBA cosponsored
activity. However, because the activity in question occurred more than 10 years ago and in light of the
fact that SBA took actions in response to our evaluation, we agreed to close the recommendations.
Access this Compliance Report on the SBA OIG Reports site.
Independent Auditors’ Report on SBA’s FY 2020 Financial Statements
(Report 21-04)
We contracted with the independent certified public accounting firm KPMG LLP to
conduct an audit of the SBA’s consolidated financial statements for the fiscal years
ended September 30, 2020, and September 30, 2019.
KPMG auditors found significant matters for which they were unable to obtain sufficient, appropriate
audit evidence to provide a basis for an audit opinion on SBA’s consolidated financial statements for the
year ended September 30, 2020.
Accordingly, KPMG issued a disclaimer of opinion on the consolidated financial statements as of and for
the year ended September 30, 2020. The basis for this disclaimer was that during fiscal year 2020, the
CARES Act and related legislation authorized funding for SBA to implement the Paycheck Protection
Program and the expanded Economic Injury Disaster Loan program.
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U.S. Small Business Administration | Office of Inspector General
SBA was unable to provide adequate evidential matter in support of a significant number of transactions
and account balances related to those programs because of inadequate processes and controls. As a
result, KPMG was unable to determine whether any adjustments might have been necessary to the
following:
• Credit Program Receivables and Related Foreclosed Property,
• Downward Reestimate Payable to Treasury,
• Liability for Loan Guarantees,
• the related elements in the consolidated statements of net cost and changes in net
position,
• the combined statement of budgetary resources, and
• related notes to the consolidated financial statements.
SBA’s 2019 consolidated financial statements present fairly, in all material respects, the financial position
of the SBA as of September 30, 2019.
However, for the year ended September 30, 2020, KPMG identified seven material weaknesses, two
significant deficiencies in internal controls over financial reporting, and two instances of reportable
noncompliance with provisions of applicable laws, regulations, contracts, and grant agreements.
Access this Auditors’ Report on the SBA OIG Reports site.
14 | Spring 2021 Semiannual Report to Congress
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Other Significant OIG Activities
Background Investigations Ensure Integrity
During this reporting period, OIG initiated 57 background investigations and issued 5 security
clearances for OIG employees and contractors. OIG adjudicated 24 background investigative reports.
Debarment and Other Administrative Enforcement Actions
OIG promotes program integrity by making present responsibility referrals to SBA and other agencies
Present responsibility means the business ethics, integrity, honesty, and competence of government
contractors . During this reporting period, OIG did not send any present responsibility referrals to SBA.
Present responsibility referrals can result in suspensions, debarments, and similar administrative
enforcement actions. These actions protect taxpayer funds from contract vendors who are not a good
risk for the government.
A typical OIG referral contains a summary of allegations, evidence supporting the case, and a draft
notice of suspension or proposed debarment in certain instances. Most OIG administrative referrals
involve SBA’s loan and contract programs. OIG ensures that a suspension and debarment official
reviews all appropriate allegations arising in other contexts, such as the investigation of False Claims Act
cases.
Reviews of Proposed Agency Regulations, Operating Procedures, and
Other Initiatives Lead to Improved Program Controls
OIG reviews changes SBA proposes to make to its program directives, such as regulations, internal
operating procedures, agency policy notices, and SBA forms completed by the public. OIG often
identifies material weaknesses in the proposals and works with the agency to promote more effective
controls to deter waste, fraud, and abuse. During the reporting period, OIG reviewed 57 proposed
revisions of these program directives and submitted comments designed to improve 3 of these
initiatives.
OIG Approval of Small Business Development Center Surveys
Section 21(a)(7) of the Small Business Act states that until Small Business Development Center
information disclosure regulations are issued, the Inspector General must approve any related client
survey, as well as the use of any survey information. OIG must also include this approval in each
semiannual report. SBA did not submit any surveys for OIG review during this reporting period.
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U.S. Small Business Administration | Office of Inspector General
Organizational Overview
U.S. Small Business Administration
The mission of the SBA under the Small Business Act, as amended, is to maintain and strengthen the
nation’s economy by enabling the establishment and vitality of small businesses and assisting in the
economic recovery of communities after disasters. The agency’s strategic plan for FYs 2018–22 has four
key goals:
1. Support small business revenue and job growth.
2. Build healthy entrepreneurial ecosystems and create business friendly environments.
3. Restore small businesses
and communities after
disasters.
4. Strengthen SBA’s ability to
serve small businesses.
SBA is organized around the areas
of financial, contracting,
entrepreneurial development, and
disaster assistance. The agency also
represents small businesses through
an independent advocate and an
ombudsman.
SBA’s headquarters is in
Washington, DC. The agency has
staff in 10 regional offices, 68 district
offices and corresponding branch offices, and 4 disaster field offices. SBA also has 6 government
contracting area offices and maintains a network of resource partners in all 50 states, the District of
Columbia, Puerto Rico, American Samoa, the U.S. Virgin Islands, and Guam.
Office of Inspector General
OIG has three divisions and several supporting program offices:
1. The Audits Division audits and reviews SBA programs and operations to ensure they are
economical, efficient, and effective. Our key areas of emphasis are SBA’s loan programs,
disaster assistance, business and entrepreneurial development and government contracting
programs, as well as mandatory and other statutory audit requirements involving information
security and financial reporting.
2. The Investigations Division investigates allegations of illegal and improper activities involving
SBA’s programs, operations, and personnel. OIG criminal investigators carry out a full range of
traditional law enforcement functions.
Within the division, the OIG Hotline receives allegations of waste, fraud, abuse, or serious
mismanagement in SBA or its programs. Hotline staff members review complaints and may
coordinate reviews of allegations within OIG, SBA program offices, or other government
16 | Spring 2021 Semiannual Report to Congress
U.S. Small Business Administration | Office of Inspector General
agencies. In addition, the security operations staff conducts required OIG employee
background investigations and screens OIG employees and contractors according to Homeland
Security Presidential Directive-12 background investigations requirements.
3. The Management and Operations Division provides business support (budget and financial
management, human resources, information technology, administrative, and communication)
for OIG functions and activities.
In addition, 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, D.C. Our field staff, primarily investigative agents, are located in12
offices in the four regions across the country.
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U.S. Small Business Administration | Office of Inspector General
Appendixes
Appendix A. Reporting Period Statistical Highlights
Summary of OIG Dollar Accomplishments (dollars)
Dollar Accomplishments as a Result of Investigations and Related Activities
Potential Investigative Recoveries and Fines 53,831,647.27
Asset Forfeitures Attributed to OIG Investigations 11,102,843.00
Loans/Contracts Not Approved or Canceled as a Result of Investigations 20,503,709.10
Investigations Subtotal 85,438,199.37
Dollar Accomplishments as a Result of Audit Activities
Disallowed Costs Agreed to by Management 0
Recommendations that Funds Be Put to Better Use Agreed to by Management 0
Audit Subtotal 0
Total OIG Dollar Accomplishments $85,438,199.37
Efficiency and Effectiveness Activities Related to Audit, Other Reports, and
Follow-up Activities
Reports Issued 12
Recommendations Issued 81
Dollar Value of Costs Questioned $21,716963
Dollar Value of Recommendations that Funds Be Put to Better Use 0
Recommendations with Management Decisions 61
Recommendations without a Management Decision 24
Collections as a Result of Questioned Costs 0
Indictments, Convictions, and Case Actions
Indictments from OIG Cases 119
Convictions from OIG Cases 32
Cases Opened 227
Cases Closed 139
SBA Personnel Actions Taken as a Result of Investigation
Dismissals 0
Resignations and Retirements 0
Suspensions 0
Reprimands 0
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Program Actions Taken During the Reporting Period as a Result of OIG
Action
Present Responsibility Referrals to the Agency 0
Pending at the Agency as of March 31, 2021 32
Suspensions Issued by the Agency 4
Proposed Debarments Issued by the Agency 3
Final Debarments Issued by the Agency 0
Proposed Debarments Declined by the Agency 0
Administrative Agreements Entered by the Agency in Lieu of Debarment 10
Present Responsibility Actions by Other Agencies 0
Agency Legislative and Regulatory Proposals Reviewed
Legislation, Regulations, Standard Operating Procedures, and Other Issuances Reviewed 57
Comments Provided by OIG to Improve Legislation, Regulations, Standard Operating
Procedures, and Other Issuances 3
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U.S. Small Business Administration | Office of Inspector General
Appendix B. Reports Issued
Top Management Challenges
Title Report Issue Date Questioned Funds for
Number Costs (dollars) Better Use
(dollars)
Top Management and Performance 0 0
Challenges Facing the Small Business
Administration in FY 2021 21-01 10/16/20
Program Subtotal 1 — 0 0
Small Business Access to Capital
Title Report Issue Date Questioned Funds for
Number Costs (dollars) Better Use
(dollars)
Evaluation of the CARES Act Debt Relief to 21-03 12/1/2020 0 00
7(a) Borrowers
Management Alert Paycheck Protection 21-06 1/11/2021 0 00
Program Loan Recipients on the
Department of Treasury’s Do Not Pay List
Inspection of the SBA's Implementation of 21-07 1/14/2021 0 00
the Paycheck Protection Program
Duplicate Loans Made Under the 21-09 3/15/2021 0 00
Paycheck Protection Program
Program Subtotal 4 0 00
Disaster Assistance
Title Report Issue Date Questioned Funds for
Number Costs (dollars) Better Use
(dollars)
Inspection of Small Business 21-02 10/28/2020 0 0
Administration’s Initial Disaster Assistance
Response to the Coronavirus Pandemic
Consolidated Results of SBA’s Initial 21-05 12/23/20 0 0
Disaster Assistance Response to Hurricanes
Harvey, Irma, and Maria
SBA’s Use of Vendors Without a Contract 21-08 2/3/2021 10,800,476 0
Program Subtotal 3 — $10,800,476 0
Contracting and Counseling Programs
Title Report Issue Date Questioned Funds for
Number Costs (dollars) Better Use
(dollars)
Evaluation of SBA’s Award Procedures for the 21-11 3/30/2021 0 0
CARES Act Entrepreneurial Development
Cooperative Agreements
Evaluation of SBA’s Eligibility Verification of 21-12 3/31/2021 10,916,487 0
8(a) Firms Owned by Members of Federally or
State-Recognized Indian Tribes
Program Subtotal 2 — $10,916,487 0
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Agency Management
Title Report Issue Date Questioned Funds for
Number Costs Better Use
(dollars) (dollars)
Independent Auditors’ Report on SBA’s FY 2020 21-04 12/18/2020 0 0
Financial Statements
SBA’s Controls Over Cash Contribution and 21-10 3/25/2021 0 0
Gifts, Fiscal Years 2019-20
Program Subtotal 2 0 0
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U.S. Small Business Administration | Office of Inspector General
Appendix C. Reports, Recommendations, and Management
Decisions
Reports with Questioned Costs (dollars)
IG Act Reporting Requirement Reports Recommendation Questioned Unsupported
s* Costs** Costs***
(Dollars) (Dollars)
No management decision made — — — —
by September 30, 2020
Issued during this reporting 2 2 21,716,963 21,716,963
period
Management decisions made 2 2 21,716,963 21,716,963
during this reporting period
(i) Disallowed costs — — — —
(ii) Costs not disallowed 2 2 21,716,963 21,716,963
No management decision made — — — —
by March 31, 2021
*Reports may have more than one recommendation.
**Questioned costs are costs 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
IG Act Reporting Requirement Reports Recommendations Recommended Funds for
Better Use (Dollars)
No management decision made
by September 30, 2020 — — —
Issued during this reporting
period — — —
Subtotal — — —
Management decisions made
during this reporting period — — —
(i) Recommendations agreed to
by SBA management — — —
(ii) Recommendations not
agreed to by SBA management — — —
No management decision made
by March 31, 2021 — — —
Reports from Prior Periods with Overdue Management Decisions
One report from a previous semiannual period had an overdue management decision.
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Reports from Prior Periods with Open Recommendations as of
March 31, 2021 (dollars)
Report Title Date Issued Number of Aggregate
Number Open Potential Cost
Recommendatio Savings (Dollars)
ns
15-16 SBA Needs to Improve Its Oversight of 9/25/2015 1 —
Loan Agents
17-19 Audit of SBA’s Microloan Program 9/28/2017 2 137,199,806
18-03 Independent Auditor’s Report on the 11/14/2017 1 —
SBA’s FY 2017 Financial Statements
18-07 Accuracy of the FY 2015 7(a) Loan 12/11/2017 1 1,903,213
Guaranty Purchase Improper Payments
Rate
18-13 Evaluation of SBA 7(a) Loans Made to 3/6/2018 1 —
Poultry Farmers
18-21 OIG High Risk 7(a) Loan Review Program 8/15/2018 2 1,351,565
2018
18-23 OIG High Risk 7(a) Loan Review Program 9/13/2018 2 1,303,403
19-08 SBA’s HUBZone Certification Process 3/28/2019 1 —
19-15 OIG High Risk 7(a) Loan Review Program 7/10/2019 1 3,000,297
19-16 Office of Inspector General High Risk 7(a) 8/14/2019 2 2,059,132
Loan Review Program
19-17 Evaluation of SBA’s All Small Mentor- 9/17/2019 2 —
Protégé Program
19-18 Audit of SBA’s Suspension and Debarment 9/18/2019 1 —
Process
19-19 Office of Inspector General High Risk 7(a) 9/19/2019 1 1,267,223
Loan Review Program
20-03 Audit of SBA's Oversight of High-Risk 11/12/2019 6 13,313,560
Lenders
20-05 KPMG Management Letter 12/10/2019 2 —
Communicating Matters Relative to SBA's
FY 2019 Financial Statement Audit
20-08 Audit of the SBA's Community Advantage 3/18/2020 6 51,472,944
Pilot Program
20-17 Evaluation of Certify.SBA.Gov 7/30/2020 8 —
20-18 Office of Inspector General High Risk 7(a) 8/25/2020 1 2,094,574
Loan Review Program
20-20 Audit of SBA’s Compliance with the Debt 9/30/2020 10 —
Collection Improvement Act, as Amended
Total -- — 51 $214,965,717
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U.S. Small Business Administration | Office of Inspector General
Significant Recommendations from Prior Reporting Periods Without Final
Action as of March 31, 2021
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 7/31/2021
performance and require 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 1/4/2018 6/30/2021
information system to include outcome-
based performance measurements and
ensure the data captured can be used to
effectively monitor the Microloan
Program compliance, performance, and
integrity.
17-19 9/28/2017 Update the microloan reporting system 1/4/2018 6/30/2021
manual to reflect current technology
capabilities.
18-03 11/14/2017 Monitor and perform procedures over 1/10/2018 9/30/2021
the service organization’s attestation
report regarding user control
considerations. This assessment should
be performed annually.
18-07 12/11/2017 Require Sonabank to bring the loan into 1/3/2018 4/29/2021
compliance and, if not possible, seek
recovery of $1,903,213, plus interest on
the guaranty paid by SBA.
18-13 3/6/2018 Review the arrangements between 3/1/2018 9/30/2021
integrators and growers under the
revised regulations, and establish and
implement controls, such as
supplemental guidance, to ensure SBA
loan specialists and lenders make
appropriate affiliation determinations.
18-21 8/15/2018 Require the lender to bring the loan into 8/7/2018 4/29/2021
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 4/29/2021
compliance or, if not possible, seek
recovery of $552,406 on the guaranty
paid by SBA.
18-23 9/13/2018 Require the lender to bring the loan into 9/20/2018 4/29/2021
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 4/29/2021
compliance or, if not possible, seek
recovery of $855,116 plus interest on
the guaranty paid by SBA.
19-08 3/28/2019 Implement a plan to mitigate IT issues 3/29/2019 9/15/2020
affecting the HUBZone certification
process.
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Report Date Issued Recommendation Date of Final Action
Number Management Target Date
Decision
19-15 7/10/2019 Require the lender to bring the loan into 7/11/2019 4/29/2021
compliance or, if not possible, seek
recovery of $3,000,297 plus interest on
the guaranty paid by SBA.
19-16 8/14/2019 Require the lender to bring the loan into 8/15/2019 4/29/2021
compliance or, if not possible, seek
recovery of $1,367,417 plus interest on
the guaranty paid by SBA.
19-16 8/14/2019 Require the lender to bring the loan into 8/15/2019 4/29/2021
compliance or, if not possible, seek
recovery of $691,715 plus interest on
the guaranty paid by SBA.
19-17 9/17/2019 Prioritize staff resources to ensure 2/4/2020 3/31/2021
application reviews and annual
evaluations are conducted in
accordance with regulatory and
program requirements.
19-17 9/17/2019 Ensure that certify.SBA.gov has the 9/17/2019 3/31/2021
functionality needed for program
officials to conduct application reviews
and annual evaluations.
19-18 9/18/2019 Rescind the SBA guaranty for the $2.9 11/13/2019 12/31/2020
million loan and assess the lender’s
eligibility for continued participation in
the SBA lending program.
19-19 9/19/2019 Require the lender to bring the loan into 9/16/2019 4/30/2021
compliance or, if not possible, seek
recovery of $1,267,223 plus interest on
the guaranty paid by SBA.
20-03 11/12/2019 Develop and implement policies and 11/15/2019 7/31/2021
procedures to document justification for
not conducting planned reviews and
identifying and prioritizing additional
lenders for review.
20-03 11/12/2019 Develop and implement a 11/15/2019 9/30/2021
comprehensive database to manage
oversight of high-risk lenders to ensure
performance of all planned reviews,
implementation of risk mitigation
actions, and identification of
noncompliant lender and systemic
material loan deficiencies.
20-03 11/12/2019 Develop and implement policies and 11/15/2019 9/30/2021
procedures to provide clear and specific
guidance to analysts regarding the
appropriate corrective and enforcement
actions for identified lenders and loan
deficiencies to ensure analysts
recommend appropriate and consistent
corrective and enforcement actions.
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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
20-03 11/12/2019 Conduct periodic overall assessments of 11/15/2019 7/30/2021
the high-risk lender review results and
recommended risk mitigation actions to
ensure analysts recommend appropriate
and consistent corrective and
enforcement actions.
20-03 11/12/2019 Develop and implement policies and 11/15/2019 7/31/2021
procedures to communicate systemic
lender issues and material loan
deficiencies to the appropriate SBA loan
approval and purchase centers to
facilitate proactive portfolio
management and to mitigate the risk of
improper guaranty purchases in the
event of default.
20-03 11/12/2019 Determine whether the lenders 11/15/2019 7/30/2021
corrected the deficiencies on the 21
loans purchased for a total of $13.3
million. If not, require the lenders to
bring the loans into compliance or, if not
possible, seek recovery of the guaranty
paid by SBA from lenders.
20-05 12/10/2019 Update appropriate center desk 1/9/2020 6/30/2021
manuals to specify relevant staff
involved in the charge-off and referral
processes to ensure the “Next Due
Date” field in the loan repository system
is updated promptly when a loan's liable
parties change. Any change to policy
should be communicated to relevant
staff.
20-05 12/10/2019 Perform a regular review of liable parties 1/9/2020 6/30/2021
with outstanding receivable balances to
ensure they are referred timely.
20-08 3/18/2020 Evaluate options that facilitate the 6/30/2020 9/20/2021
Community Advantage pilot program’s
ability to effectively expand access to
capital in underserved markets.
20-08 3/18/2020 Evaluate whether it is feasible to align 6/30/2020 6/30/2021
the maximum interest rates charged
under the Community Advantage pilot
program with comparable 7(a) program
rates, excluding SBA Express.
20-08 3/18/2020 Provide criteria to lenders to assist them 8/5/2020 3/31/2021
with assessing the borrowers’
management and technical assistance
needs.
20-08 3/18/2020 Establish methods to assess whether 6/30/2020 6/30/2021
lenders have the expertise needed to
provide management and technical
assistance to underserved borrowers
and to address any lender deficiencies.
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Report Date Issued Recommendation Date of Final Action
Number Management Target Date
Decision
20-08 3/18/2020 Require lenders to complete the data 6/30/2020 6/30/2021
fields related to the management and
technical assistance provided and
enhance the annual Community
Advantage performance analysis by
including the evaluation of the
performance associated with the various
types of management and technical
assistance.
20-08 3/18/2020 Establish a process to periodically assess 6/30/2020 3/31/2021
the performance of Community
Advantage loans approved with Small
Business Scoring Service scores under
140 to determine whether the recently
implemented SBA approval
requirement is adequately mitigating
the risk of loss.
20-17 7/30/2020 Include the Certify investment on the 9/21/2020 6/30/2021
agency’s enterprise risk list as a high-risk
endeavor and require continuous risk
monitoring, as specified in the SBA
Enterprise Risk Management Framework
Guide.
20-17 7/30/2020 Establish traceable functional 9/21/2020 6/30/2021
requirements for the Certify investment
in accordance with the Capital
Programming Guide, supplement to
OMB Circular A-11 in terms of the Office
of Government Contracting and
Business Development’s mission,
purpose, capability, schedule and cost
objectives.
20-17 7/30/2020 Develop a documented requirements 9/21/2020 9/30/2021
traceability matrix and ensure that the
Office of Government Contracting and
Business Development has adequate
resources to trace requirements
throughout all stages of design,
development, and user acceptance.
20-17 7/30/2020 Develop and maintain a performance- 9/21/2020 9/30/2021
measurement baseline with budgets
and schedules assigned to product-
oriented work breakdown structure
elements and established cost and
schedule variance thresholds in
accordance with the Capital
Programming Guide, supplement to
Office of Management and Budget
(OMB) Circular A-11.
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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
20-17 7/30/2020 Evaluate work breakdown structure 9/21/2020 5/17/2021
elements for cost, schedule, and
technical risk. Use the results of such risk
analysis to maintain a risk-adjusted
budget and schedule in accordance
with the Capital Programming Guide,
supplement to OMB Circular A-11.
20-17 7/30/2020 Incorporate earned value management 9/21/2020 9/30/2021
and integrated baseline reviews into the
Certify investment as required by
Federal Acquisition Regulation (FAR) 34.
2 and conduct documented integrated
baseline reviews in accordance with the
32 criteria identified in National Defense
Industrial Association’s Earned Value
Management Systems EIA-748 Intent
Guide, as required by Standard
Operating Procedure (SOP) 90 52.
20-17 7/30/2020 Ensure that all Certify investment cost, 9/21/2020 5/17/2021
schedule, and performance baseline
data submitted for Business Technology
Investment Council review clearly show
the amount of work accomplished and
actual costs against the original
investment baseline to provide critical
management visibility on the
achievement of, or deviation from,
goals.
20-17 7/30/2020 Update system development 9/21/2020 6/8/2021
methodology to link agile summary
components with establishing traceable
requirements, monitoring progress
through a requirements traceability
matrix and reporting progress using a
performance management system,
including an earned value management
system for the development of major
information technology investments.
20-18 8/25/2020 Require the lender to bring the loan into 8/25/2020 7/9/2021
compliance or, if not possible, seek
recovery of $2,094,574 on the guaranty
paid by SBA.
20-20 9/30/2020 Review all loans assigned to the 9/16/2020 6/30/2021
resolution center that are 180 days or
more delinquent and classified with
code 66 (Lien or Mortgage/Refer to
Treasury Offset Program Only) and 00
(Clear Existing Status Code) and transfer
the loans to Treasury Cross-Servicing,
unless verified as exempt when the
temporary suspension of debt collection
activities because of the pandemic is
lifted.
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Report Date Issued Recommendation Date of Final Action
Number Management Target Date
Decision
20-20 9/30/2020 Perform a cost benefit analysis to 9/16/2020 5/15/2021
determine if SBA should begin
assessing fees to offset the cost of
processing and handling delinquent
disaster loans.
20-20 9/30/2020 Revise SOP 50 52 to clearly 9/16/2020 6/4/2021
communicate that all loans with
collateral must be evaluated for
foreclosure and placed in foreclosure
status before they are 180 days
delinquent.
20-20 9/30/2020 Revise SOP 50 52 2 to clearly 9/16/2020 6/4/2021
communicate that all debts 180 days
delinquent must be transferred to
Treasury Cross-Servicing unless the debt
meets a valid transfer exemption.
20-20 9/30/2020 Establish requirements to provide 9/16/2020 5/15/2021
annual training on Debt Collection
Improvement Act requirements to all
staff of the resolution center.
20-20 9/30/2020 Ensure that information used to monitor 9/16/2020 5/15//2021
compliance with the Debt Collection
Improvement Act includes all loans
assigned to the resolution center as
identified in the Capital Access Financial
System.
20-20 9/30/2020 Review all loans currently assigned to 9/16/2020 6/30/2021
the Center and designated exempt from
Treasury Offset Program and verify that
each of the obligors is exempt from
referral to Treasury Offset Program, and
if not, refer the obligors to Treasury
Offset Program as required.
20-20 9/30/2020 Review all loans currently assigned to 9/16/2020 6/30/2021
the Center and designated as exempt
from Treasury Cross-Servicing that are
180 days or more delinquent and verify
that each of the obligors is exempt from
transfer to Treasury Cross-Servicing, and
if not, transfer the debt to Treasury
Cross-Servicing, as required when the
temporary suspension of debt collection
activities due to COVID-19 is lifted.
20-20 9/30/2020 Establish policies and procedures to 9/16/2020 6/4/2021
require routine follow-up on delinquent
loans to ensure full compliance with the
Debt Collection Improvement Act.
20-20 9/30/2020 Reiterate the requirements for workout 9/16/2020 6/4/2021
agreements to responsible personnel to
ensure compliance with the Debt
Collection Improvement Act.
Spring 2021 Semiannual Report to Congress | 29
U.S. Small Business Administration | Office of Inspector General
Significant Recommendations from this Reporting Period
Report Title Date Issued Recommendation
Number
21-02 Inspection of 10/28/2020 Review all loans that had a bank account number changed from
SBA’s Initial what was shown on the original application to determine if the
Disaster changes were legitimate or fraudulent. If not legitimate, work to
Assistance recover the funds, deobligate any undisbursed funds, and refer
Response to the to OIG.
Coronavirus
Pandemic
21-02 Inspection of 10/28/2020 Establish or strengthen controls to ensure loan deposits are
SBA’s Initial made to legitimate bank accounts for eligible borrowers only.
Disaster
Assistance
Response to the
Coronavirus
Pandemic
21-02 Inspection of 10/28/2020 Review duplicate loans to internet provider addresses, email
SBA’s Initial addresses, business addresses, and bank accounts to
Disaster determine if there are undisbursed funds that should be
Assistance suspended until the duplicate loans are assessed for eligibility.
Response to the
Coronavirus
Pandemic
21-02 Inspection of 10/28/2020 Cancel all ineligible loans that are not disbursed, recover funds
SBA’s Initial from all loans disbursed to ineligible applicants, and flag those
Disaster loans for the improper payments estimation process.
Assistance
Response to the
Coronavirus
Pandemic
21-02 Inspection of 10/28/2020 Strengthen or establish controls to ensure multiple loans are
SBA’s Initial provided only to eligible applicants and prevent the erroneous
Disaster duplication of loans.
Assistance
Response to the
Coronavirus
Pandemic
21-02 Inspection of 10/28/2020 Strengthen data integrity to make it possible to determine if the
SBA’s Initial inaccurate information allowed loans to be made to ineligible
Disaster entities and to strengthen SBA’s ability to service loans
Assistance appropriately.
Response to the
Coronavirus
Pandemic
21-02 Inspection of 10/28/2020 Review the applicants with approved loans to determine if there
SBA’s Initial are undisbursed funds remaining that should be suspended
Disaster until the business start date is verified and the applicant is
Assistance deemed eligible based on the CARES Act eligibility
Response to the requirements. If the applicant is deemed ineligible, recover any
Coronavirus disbursed funds, deobligate any undisbursed funds, and flag
Pandemic the application as ineligible.
30 | Spring 2021 Semiannual Report to Congress
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-02 Inspection of 10/28/2020 Review the advance grants to determine if the application was
SBA’s Initial legitimate and the business met CARES Act eligibility
Disaster requirements. If not, recover the funds and flag the application
Assistance as ineligible.
Response to the
Coronavirus
Pandemic
21-02 Inspection of 10/28/2020 Revise the FY 2021 Improper Payments Act Checklist to include
SBA’s Initial checking EIN dates for COVID-19 EIDLs and advance grants or
Disaster program the system to flag erroneously approved loans and
Assistance advance grants as improper payments; the information should
Response to the be used during the FY 2021 improper payments estimation
Coronavirus process.
Pandemic
21-02 Inspection of 10/28/2020 Strengthen controls for verifying an entity’s start date to ensure
SBA’s Initial applicants meet eligibility requirements.
Disaster
Assistance
Response to the
Coronavirus
Pandemic
21-03 Evaluation of 12/1/2020 Incorporate procedures to verify the accuracy and
CARES Act Debt reasonableness of the loan status, principal, interest, and any
Relief to 7(a) fees of loans before approving subsidy payments.
Borrowers
21-03 Evaluation of 12/1/2020 Establish post-payment audit procedures, using a risk-based
CARES Act Debt approach, to verify the accuracy and completeness of all
Relief to 7(a) subsidy payments to lenders and include reviews of payments
Borrowers made to loans that changed from liquidation status to regular
servicing status, and remedy improper payments in accordance
with the Payment Integrity Act of 2019.
21-04 Independent 12/18/2020 Finalize the review plan and execute the loan review process for
Auditors’ Report all loans in the PPP portfolio to determine whether loans were
on SBA’s FY 2020 or not in conformance with the CARES Act and related
Financial legislation.
Statements
21-04 Independent 12/18/2020 Determine the impact on the outstanding guarantee and
Auditors’ Report eligibility for forgiveness of loans determined to be not in
on SBA’s FY 2020 conformance with the CARES Act and related legislation.
Financial
Statements
21-04 Independent 12/18/2020 Implement adequate controls to prevent loans from being
Auditors’ Report approved that are potentially not in conformance with the
on SBA’s FY 2020 legislation and program terms.
Financial
Statements
21-04 Independent 12/18/2020 Develop and enforce a policy that requires the adequate
Auditors’ Report training and monitoring of PPP lenders to execute their
on SBA’s FY 2020 responsibilities in the loan origination process.
Financial
Statements
Spring 2021 Semiannual Report to Congress | 31
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-04 Independent 12/18/2020 Assess the accounting considerations, including the impact on
Auditors’ Report the consolidated financial statements, from the results of the
on SBA’s FY 2020 loan review process for PPP loans and record any necessary
Financial adjustments for loans determined to not be in conformance
Statements with the CARES Act and related legislation.
21-04 Independent 12/18/2020 Identify and review PPP loans with incomplete or inaccurate
Auditors’ Report 1502 reports.
on SBA’s FY 2020
Financial
Statements
21-04 Independent 12/18/2020 Determine and update the loan repository system with correct
Auditors’ Report PPP loan related balances.
on SBA’s FY 2020
Financial
Statements
21-04 Independent 12/18/2020 Develop and enforce a policy that requires the adequate
Auditors’ Report training and monitoring of lenders to execute their
on SBA’s FY 2020 responsibilities in the PPP loan servicing process.
Financial
Statements
21-04 Independent 12/18/2020 Develop and enforce a policy to monitor incomplete or
Auditors’ Report inaccurate PPP 1502 reports on an ongoing basis.
on SBA’s FY 2020
Financial
Statements
21-04 Independent 12/18/2020 Document the development of significant assumptions used in
Auditors’ Report the PPP reestimate, including the consideration of the most
on SBA’s FY 2020 recent, best available data to address the potential existence of
Financial disconfirming evidence.
Statements
21-04 Independent 12/18/2020 Accumulate relevant, complete, and accurate data to develop
Auditors’ Report and support the PPP reestimate.
on SBA’s FY 2020
Financial
Statements
21-04 Independent 12/18/2020 Design and implement review and approval controls of the
Auditors’ Report PPP reestimate by appropriate levels of management,
on SBA’s FY 2020 including review of sources of relevant data inputs,
Financial development of assumptions, and reasonableness of
Statements assumptions and resulting estimates.
21-04 Independent 12/18/2020 Perform a thorough review of the COVID-19 EIDLs and grants
Auditors’ Report portfolio and determine which transactions were made to
on SBA’s FY 2020 ineligible recipients and not in conformance with the CARES
Financial Act and related legislation.
Statements
21-04 Independent 12/18/2020 Implement controls that prevent or detect loans from being
Auditors’ Report approved that are not in conformance with the related
on SBA’s FY 2020 legislation and program’s eligibility terms.
Financial
Statements
21-04 Independent 12/18/2020 Update the Reference Guide to require a more thorough
Auditors’ Report review to clear certain alerts and enforce the actions
on SBA’s FY 2020 recommended by the Reference Guide to adequately address
Financial and mitigate the alerts prior to loan approval.
Statements
32 | Spring 2021 Semiannual Report to Congress
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-04 Independent 12/18/2020 Provide training of loan officers and supervisory loan officers to
Auditors’ Report execute their responsibilities in accordance with established
on SBA’s FY 2020 guidance and standard operating procedures.
Financial
Statements
21-04 Independent 12/18/2020 Develop and implement a policy requiring new service
Auditors’ Report organizations to provide a report over the control environment
on SBA’s FY 2020 that is relevant and significant to the processing and recording
Financial of SBA’s transactions. If a service organizational control 1 report
Statements cannot be obtained, identify and evaluate relevant controls at
the service organizations that have an impact on SBA’s internal
controls over financial reporting.
21-04 Independent 12/18/2020 Assess the risk posed by the service organization’s control
Auditors’ Report environment and obtain sufficient assurance over the
on SBA’s FY 2020 operating effectiveness of relevant and significant controls to
Financial determine the integrity of transactions processed on behalf of
Statements and recorded by SBA. If a service organizational control 1
report is obtained for the relevant control environment at the
service organization, determine and document the
requirements.
21-04 Independent 12/18/2020 Consideration of all exceptions noted in the service
Auditors’ Report organizational control 1 reports and determination of the
on SBA’s FY 2020 applicability to SBA’s internal controls over financial reporting.
Financial Management should determine the potential impact on
Statements internal controls over financial reporting and if mitigating
controls exist.
21-04 Independent 12/18/2020 Evaluation of each complementary user entity control
Auditors’ Report identified within the service organizational control 1 reports.
on SBA’s FY 2020 Management should determine that complementary user
Financial entity controls have been appropriately designed and
Statements implemented and are operating effectively.
21-04 Independent 12/18/2020 Evaluation of the service organizational control 1 reports for all
Auditors’ Report relevant subservice organizations to include an understanding
on SBA’s FY 2020 of its role, their controls, and its effect on SBA’s processes.
Financial
Statements
21-04 Independent 12/18/2020 Assessment of service organizational control 1 reports to
Auditors’ Report determine whether coverage was provided for the entire fiscal
on SBA’s FY 2020 year. Management should determine the period covered by
Financial the report, assess the significance of the gap, and obtain
Statements bridge letters for reports that do not extend through
September 30 to provide sufficient coverage to assess impacts
on SBA’s internal controls over financial reporting.
21-04 Independent 12/18/2020 Assign and hold accountable individuals responsible for
Auditors’ Report overseeing management’s design, implementation, and
on SBA’s FY 2020 operation of SBA’s internal control system.
Financial
Statements
21-04 Independent 12/18/2020 Perform and document a thorough risk assessment at the
Auditors’ Report financial statement assertion level to identify process level risks
on SBA’s FY 2020 and assess the effectiveness of key process level controls to
Financial respond to the risks.
Statements
Spring 2021 Semiannual Report to Congress | 33
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-04 Independent 12/18/2020 Develop and implement monitoring controls to ensure
Auditors’ Report implementation of an effective internal control environment.
on SBA’s FY 2020
Financial
Statements
21-04 Independent 12/18/2020 Update and enforce the existing Procedural Notice 5000-
Auditors’ Report 20049 to require the adequate review and approval of Section
on SBA’s FY 2020 1112 payments made to lenders and to determine that the
Financial necessary documentation is maintained to substantiate the
Statements payment amount.
21-04 Independent 12/18/2020 Review the automated portion of their account management
Auditors’ Report process to determine what caused the process to create
on SBA’s FY 2020 multiple accounts for individual users.
Financial
Statements
21-04 Independent 12/18/2020 Update and test the account management process to ensure
Auditors’ Report that multiple accounts will not be created when changes are
on SBA’s FY 2020 applied to the production environment.
Financial
Statements
21-04 Independent 12/18/2020 Validate that new users identified in the notification of findings
Auditors’ Report and recommendations are assigned appropriate access to
on SBA’s FY 2020 SBA’s information system and the supporting environment.
Financial
Statements
21-04 Independent 12/18/2020 Periodically train personnel who are responsible for the
Auditors’ Report approval and provisioning of accounts to emphasize the
on SBA’s FY 2020 importance of documenting and approving user access
Financial requests prior to and provisioning access to SBA’s information
Statements systems and their supporting environments.
21-04 Independent 12/18/2020 Analyze and validate the users identified in the notification of
Auditors’ Report findings and recommendations were granted appropriate
on SBA’s FY 2020 access.
Financial
Statements
21-04 Independent 12/18/2020 Periodically train personnel who are responsible for the
Auditors’ Report approval and provisioning of accounts to emphasize the
on SBA’s FY 2020 importance of documenting and approving user access
Financial requests prior to and provisioning access to SBA’s information
Statements systems and their supporting environments.
21-04 Independent 12/18/2020 Validate the accounts that are to be reviewed and recertified
Auditors’ Report are performed by the appropriate or designated personnel
on SBA’s FY 2020 before performing the existing recertification process.
Financial
Statements
21-04 Independent 12/18/2020 Validate that the patches applied to the database and
Auditors’ Report operating system are appropriately implemented and do not
on SBA’s FY 2020 negatively affect the performance of the application.
Financial
Statements
21-04 Independent 12/18/2020 Periodically train personnel involved with the implementation
Auditors’ Report of database and operating system patches to follow the
on SBA’s FY 2020 requirements of the patch management process in
Financial accordance with existing policies.
Statements
34 | Spring 2021 Semiannual Report to Congress
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-04 Independent 12/18/2020 Design and implement a quality check process to ensure that
Auditors’ Report approvals for application changes are timely and accurate
on SBA’s FY 2020 prior to migrating changes into the production environment.
Financial
Statements
21-04 Independent 12/18/2020 Periodically train personnel involved with the review and
Auditors’ Report approval of application changes to follow the requirements of
on SBA’s FY 2020 the application change management process in accordance
Financial with existing policy.
Statements
21-04 Independent 12/18/2020 Update the enterprise risk management approach over the
Auditors’ Report evaluation of internal controls to ensure it includes all
on SBA’s FY 2020 significant programs, key processes, and other material line
Financial items on the consolidated financial statements.
Statements
21-04 Independent 12/18/2020 Perform and document the internal control evaluation
Auditors’ Report performed over all programs. This should include entity level
on SBA’s FY 2020 controls, manual controls, general information technology
Financial controls, and system application controls covering key
Statements financial statement line items and risks.
21-04 Independent 12/18/2020 Work with service providers to assess service organization risks
Auditors’ Report and controls and monitor the service providers to determine
on SBA’s FY 2020 that they properly design, implement and effectively operate
Financial controls impacting SBA’s control environment.
Statements
21-04 Independent 12/18/2020 Address the control deficiencies over transactions arising from
Auditors’ Report the implementation of the CARES Act and related legislation
on SBA’s FY 2020 by working with the Office of Capital Access and the Office of
Financial Disaster Assistance to implement the recommendations in
Statements Attachment I – Material Weaknesses.
21-04 Independent 12/18/2020 Address the deficiencies in general information technology
Auditors’ Report controls for SBA systems critical to financial reporting by
on SBA’s FY 2020 working with the relevant system owners to implement the
Financial recommendations in Attachment II – Significant Deficiencies.
Statements
21-06 Paycheck 1/11/2021 Promptly identify PPP loans that have not been fully disbursed
Protection and follow-up with the lenders to stop $280 million in potential
Program Loan improper loan disbursements.
Recipients on the
Department of
Treasury’s Do
Not Pay List
21-06 Paycheck 1/11/2021 Strengthen SBA controls to ensure that loans to ineligible
Protection recipients are not forgiven.
Program Loan
Recipients on the
Department of
Treasury’s Do
Not Pay List
21-06 Paycheck 1/11/2021 Review prepayment and pre-award procedures and work with
Protection Treasury to formulate a technical approach to use Treasury’s
Program Loan Do Not Pay portal to determine loan applicant eligibility and
Recipients on the prevent improper payments before the release of any federal
Department of funds.
Treasury’s Do
Not Pay List
Spring 2021 Semiannual Report to Congress | 35
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-07 Inspection of 1/14/2021 Review the loans identified as potentially ineligible to
SBA's determine if the businesses met eligibility requirements. If not,
Implementation take appropriate action related to loan guaranty and
of the Paycheck forgiveness.
Protection
Program
21-07 Inspection of 1/14/2021 For future rounds of PPP lending, assess vulnerabilities in
SBA's internal controls and strengthen or implement necessary
Implementation internal controls to address ineligible loans and potential
of the Paycheck fraud.
Protection
Program
21-07 Inspection of 1/14/2021 For future rounds of PPP lending, revise the borrower
SBA's application to include the critical “jobs retained” field to
Implementation ensure SBA reports accurate and complete job numbers.
of the Paycheck
Protection
Program
21-07 Inspection of 1/14/2021 For future rounds of PPP lending, revise the application to
SBA's include the demographic information of borrowers.
Implementation
of the Paycheck
Protection
Program
21-07 Inspection of 1/14/2021 For future rounds of PPP lending, update the PPP borrower
SBA's application to include a field for the North American Industry
Implementation Classification System code of the business and the business
of the Paycheck description to enable SBA to prevent potentially ineligible loan
Protection approvals.
Program
21-07 Inspection of 1/14/2021 Update the PPP forgiveness application to include North
SBA's American Industry Classification System code to ensure that
Implementation previously recorded information is accurate.
of the Paycheck
Protection
Program
21-08 SBA’s Use of 2/3/2021 Require responsible personnel to execute a contract for
Vendors Without foreclosure and real estate services to ensure the procurement
a Contract of services are obtained and authorized in accordance with the
Federal Acquisition Regulation requirements.
21-08 SBA’s Use of 2/3/2021 Ensure that vendors used to provide foreclosure and real
Vendors Without estate services are registered in the federal System for Award
a Contract Management, as required.
21-08 SBA’s Use of 2/3/2021 Ratify the over $10.8 million in payments in accordance with
Vendors Without the Federal Acquisition Regulation and 48C.F.R. § 1.602-3.
a Contract
21-09 Duplicate Loans 3/15/2021 Review the OIG identified potential duplicate disbursements
Made Under the for eligibility and take action to recover any improper
Paycheck payments as applicable.
Protection
Program
21-09 Duplicate Loans 3/15/2021 Review SBA controls related to all PPP loan reviews to ensure
Made Under the that duplicate loans are not forgiven and not subject to an SBA
Paycheck guaranty, as appropriate.
Protection
Program
36 | Spring 2021 Semiannual Report to Congress
U.S. Small Business Administration | Office of Inspector General
Report Title Date Issued Recommendation
Number
21-09 Duplicate Loans 3/15/2021 Strengthen E-Tran controls for future PPP type programs,
Made Under the which includes keeping E-Tran controls that align with
Paycheck program requirements.
Protection
Program
21-09 Duplicate Loans 3/15/2021 Review the issues that SBA identified involving the actions of
Made Under the lenders, such as providing incorrectly formatted data and
Paycheck submitting the same application through multiple platforms
Protection and determine how to strengthen controls and guidance as
Program appropriate to ensure lenders meet program requirements for
future PPP type programs.
21-11 Evaluation of 3/30/2021 Enforce standard operating procedures requiring clearly
SBA’s Award defined performance goals and include performance targets
Procedures for in all future SBDC and WBC cooperative agreements and
the Coronavirus grants to objectively measure performance results.
Aid, Relief, and
Economic
Security Act
Entrepreneurial
Development
Cooperative
Agreements
21-11 Evaluation of 3/30/2021 Collect and analyze the CARES Act entrepreneurial
SBA’s Award development cooperative agreement recipient’s performance
Procedures for results and establish a framework for setting goals for technical
the Coronavirus assistance programs in response to future disasters. Retain the
Aid, Relief, and analysis in program files for future guidance.
Economic
Security Act
Entrepreneurial
Development
Cooperative
Agreements
Significant Management Decisions with which OIG Disagrees
There were no significant management decisions OIG disagrees with during this reporting period.
Significant Revised Management Decisions
There were no significant revised management decisions during this reporting period.
Federal Financial Management Improvement Act
The OIG’s Independent Public Accountant, KPMG, found in the FY 2020 financial statement audit the
following instances in which SBA’s financial management systems did not substantially comply with the
Federal Financial Management Improvement Act of 1996.
Control deficiencies over transactions arising from the implementation of the CARES Act and related
legislation do not enable reliable and accurate financial reporting and do not ensure budgetary
resources are safeguarded against waste, loss, and misuse. In addition, the deficiencies may not support
compliance objectives related to ensuring financial transactions are in conformance with the CARES Act
and related legislation are achieved
Spring 2021 Semiannual Report to Congress | 37
U.S. Small Business Administration | Office of Inspector General
Management did not implement sufficient general information technology controls for SBA systems
critical to financial reporting. Sufficient and effective general information technology controls were not
implemented to protect the financial accounting and reporting data.
SBA’s financial management systems were substantially noncompliant with federal accounting
standards
Instances of Interference
There were no attempts by SBA officials to interfere with OIG independence during the reporting
period.
38 | Spring 2021 Semiannual Report to Congress
U.S. Small Business Administration | Office of Inspector General
Appendix D. Investigations Reporting Statistics
Investigative Reports Issued
Report Type Number of Reports
Report of Investigation 42
Preliminary Case Closing Reports of Investigation 6
Total 48
Persons Referred for Prosecution
Referred to Number of Persons
Department of Justice 109
State Attorney 0
Local Attorney 0
Total 109
*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.
Nonpublic, Closed Investigations Involving a Senior Government Employee
There were no nonpublic, closed investigations of senior government employees during this semiannual
period.
Spring 2021 Semiannual Report to Congress | 39
U.S. Small Business Administration | Office of Inspector General
Appendix E. Legal Actions Summary
Legal Actions, October 1, 2020–March 31, 2021
State Program Joint With Alleged Violation Legal Action
FL BL FBI, IRS- Individuals conspired to perpetuate a Individual was sentenced to 33
CID scheme to defraud the SBA when they months of incarceration and 5
created a shell business and received years supervised release.
SBA loans and grants and other public Individual was sentenced to 18
monies in the excess of $3,250,000, to months of incarceration and three
which they were not authorized. years’ supervised release. More
than $1,600,000 was forfeited by
the subjects.
VA DL FBI, IRS- An ineligible felon accepted nearly Individual was sentenced to 51
CID, PIS $200,000 in PPP and EIDL loans for months of incarceration and 3
which he was not entitled. The years of supervised release.
individual used the funds for personal Individual ordered to pay $57,303
reasons. in restitution.
MO BL FBI, FDIC- Individual committed wire fraud, Individual was sentenced to 96
OIG, IRS- money laundering and making a false months of incarceration, 5 years of
CID statement on a loan application supervised release and was
leading to a total of $25,400,000 in ordered to pay $14,847,451 in
fraudulent government and civil loans. restitution.
MD BL FBI, FHFA- Individuals conspired to commit bank Individual was sentenced to 24
OIG, FDIC- fraud while obtaining $11,560 in months incarceration, 5 years
OIG taxpayer backed loans. Individual used supervised release and restitution
their position as a bank officer to assist of $145,000. Individual was
others commit a myriad of additional sentenced to time served, 2 years
fraudulent activities. supervised release and $72,000 in
restitution. Individuals forfeited
ownership of a real property.
OK DL FDIC-OIG, Individual committed bank fraud and Individual was sentenced to 24
FHFA-OIG made false statements to a financial months of incarceration, 5 years
institution, when they fraudulently supervised release and $106,475
obtained a EIDL loan and attempted to was seized from their accounts.
obtain a PPP loan.
VA DL FBI Married couple committed conspiracy An individual was sentenced to 12
to commit wire fraud when they months of incarceration and 24
attempted to obtain $6,600,000 in PPP months supervised release. An
loans. The couple and their companies individual was sentenced to time
eventually received over $1,400,000 in served and 24 months supervised
fraudulent loans and a fraudulent release.
$10,000 EIDL grant.
OH DL IRS Individual committed wire fraud and Individual was sentenced to 24
false statements when they produced months of incarceration, 3 months
false documents to obtain PPP and supervised release, was ordered to
EIDL funds. pay $6,020 in criminal restitution
and forfeited $1,290,817.
LA DL Married couple conspired to commit Individual was sentenced to 15
fraud and wire fraud in obtaining a months of incarceration, 3 years of
$50,000 disaster assistance loan. supervised release and $50,000 in
restitution. Individual sentenced to
3 years’ probation, $50,000 in
restitution and a $4,000 fine.
AL CC FBI Individuals conspired to commit fraud, Individual sentenced to 84 Months
40 | Spring 2021 Semiannual Report to Congress
U.S. Small Business Administration | Office of Inspector General
money laundering and bribery against incarceration, 3 years of
several government agencies. supervised release, ordered to pay
the IRS $105,068 in back taxes and
$1,390,284 in restitution.
Individual sentenced to 12 months
of incarceration, 2 years’
probation, and a $10,000 fine.
Individual sentenced to 3 months
incarceration, 1-year supervised
release and $40,860 in restitution.
CA DL FBI Individual obtained $1,302,550 of Individual pled guilty, agreed to
Cares Act funding utilizing falsified return the $1,302,550 to the
documents. Further, the individual government and is awaiting
transferred funds to a forging bank that sentencing.
had no connection to the entities for
which he obtained the loans.
WI CC FBI, DCIS, Individuals defrauded the government Individual was sentenced to 24
Army CID, by receiving preferential assignment of months’ probation. Several
GSA-OIG, contracts for their business which was businesses and individuals were
DCAA, VA- falsely listed as 8(a). debarred.
OIG
ID BL FDIC Individuals and businesses made false Individual representing a business
statements leading to the fraudulent agreed to pay $2,500,000 in
issuance of an SBA backed loan for restitution.
$3,020,000.
CO BL FBI In violation of federal law, an individual Individual agreed to pay $15,000
attempted to use his connections as a in a civil settlement.
former SBA employee to expedite the
loan approval for a project he
previously worked with as a
government employee.
CA BL A business which had filed for Individual agreed to pay $100,000
bankruptcy, knowingly falsified in civil penalties.
documents to obtain PPP loans.
WA CC DCIS, Individuals created fraudulent Business was debarred
Army-CID, documents, businesses, and false indefinitely. Multiple entities were
GSA-OIG, identities with the intent to defraud the debarred for 5 years.
HHS-OIG, government and others through U.S.
DOJ-OIG, Small Business set-aside contracting
IRS-CID, programs.
HHS-OIG,
DOC-OIG
GA DL FBI Several individuals conspired to Individual was sentenced to 12
defraud the government by each months of incarceration, 3 years of
obtaining a $300,000 PPP loan for with supervised release and $242,177
they were not intitled. in restitution. 6 Induvial were
indited. One individual was
arrested. $300,000 was seized
from a business.
Note: The following lists define the program codes for legal actions and the abbreviations in the table.
Program Codes:
BL—Business Loans
DL—Disaster Loans
GC—Government Contracting and Section 8(a) Business Development
IA—Internal Affairs
Spring 2021 Semiannual Report to Congress | 41
U.S. Small Business Administration | Office of Inspector General
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)
42 | Spring 2021 Semiannual Report to Congress
U.S. Small Business Administration | Office of Inspector General
Appendix F. Cosponsored and Other Activities
SBA’s authorization to cosponsor events requires OIG to report to Congress on the Administrator’s use
of that authority semiannually.
Name/Subject of Event Name of Cosponsor(s) Event Date Fully
Location Executed
Resource Partner Meetings San Francisco DO - California Association for Virtual March 11, 2021
Microenterprise Opportunity
ChallengeHER Campaign HQ/Government Contracting & Business Virtual March 8, 2021
Development - Women Impacting Public
Policy, American Express Travel Related
Services Company, Inc.
PPP Changes Webinar HQ Office of Communications and Public Virtual February 26,
Series Liaison-Public Private Strategies, Institute 2021
Creating the Vision: South Florida DO-Broward County Office of Online February 20,
Embracing Change Economic Small Business Development 2021
Workshop
Webinar topics: Web South Florida DO-Hialeah Chamber of Online February 17,
Congress; National Small Commerce and Industries 2021
Business Week; Hispanic
Heritage & Disaster
Programming
Business Building Book South Florida DO-Women's Business Online February 3, 2021
Enterprise Council of Florida
Webinar topics: South Florida DO-Latin American Chamber Online February 1, 2021
Government contracting, of Commerce CAMACOL
Exporting, Education,
Finance
SBA Minnesota Lenders Minnesota DO - In dependent Community Virtual January 28, 2021
Conference Bankers of Minnesota; Minnesota Bankers
Association
Business Education and Washington DO - Greater Washington Virtual January 25, 2021
Resiliency Boot Camp Hispanic Chamber of Commerce
Back2Basics - Financing Washington DO - Fairfax County Economic Virtual January 8, 2021
Fundamentals Workshop Development Authority (FCEDA); Cordia
Series Partners
Small Business COVID-19 Hawaii DO - Better Business Bureau Virtual, January 6, 2021
Recovery Northwest-Pacific Hawaii
Webinars/Workshops Statewide
Government Procurement North Dakota DO-North Dakota Small Online November 17,
Training Series FY 2021 Business Development Center, University of 2020
North Dakota
Small Business Saturday HQ Office of Communications and Public Nationwide November 3,
2020 Liaison - American Express, Women 2020
Impacting Public Policy, Inc.
Gifts to the Small Business Administration, October 1, 2020-
March 31, 2021*
Office/Location Donor(s) Gift Description Gift Value Date of Gift Date Fully
(Cash or Other) Activity Executed
_ _ _ _ _ _
*No gifts reported
Spring 2021 Semiannual Report to Congress | 43
U.S. Small Business Administration | Office of Inspector General
Appendix G. External Peer Reviews
Section 5(a) of the IG Act requires OIGs to report peer review results in 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 the Government
Accountability Office require organizations performing audits and attestation engagements under to
have an external peer review performed by reviewers independent of the audit organization being
reviewed at least once every three years.
SBA OIG conducted an external GAGAS peer review of the Department of Commerce OIG for the year
ended September 30, 2020. In March 2021, SBA OIG issued a peer review report giving Department of
Commerce OIG a pass rating.
OIG’s Audits Division underwent a GAGAS review by the U.S. Department of State OIG for the year
ended March 31, 2018. In September 2018, SBA OIG received a peer review pass rating.
The Quality Standards for Inspection and Evaluation (Blue Book), issued by the Council of the Inspectors
General on Integrity and Efficiency, requires inspection and evaluation organizations to undergo
external peer reviews once every three years. The external peer review assesses whether the
organization’s internal policies and procedures are consistent with the seven Blue Book standards and
the organization’s own policies and procedures.
In 2020, the Department of Justice OIG reviewed the SBA OIG Audits Division under the Blue book
standards for the year ended December 31, 2019. In September 2020, Department of Justice OIG
reported that SBA OIG generally met the quality standards required for inspections and evaluations, as
well as SBA OIG policies and procedures.
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 three years.
In September 2017, FDIC OIG reviewed our Investigations Division and issued a final report December
19, 2017. FDIC OIG found that the system of internal safeguards and management procedures for the
investigative function of OIG complied with the quality standards established by CIGIE and the
applicable Attorney General’s Guidelines. No recommendations were offered.
44 | Spring 2021 Semiannual Report to Congress
U.S. Small Business Administration | Office of Inspector General
Appendix H. 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 Throughout
deficiencies
5(a)(2) Recommendations with respect to Significant Recommendations from This
significant problems, abuses, and Reporting Period
deficiencies
5(a)(3) Prior significant recommendations on which Significant Recommendations from Prior
corrective action has not been completed Reporting 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 N/A
was refused
5(a)(6) List of audit, inspection, and evaluation Reports Issued; Reports with Questioned Costs
reports
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 Reports with Recommendations That Funds Be
with recommendations that funds be put to Put to Better Use
better use
5(a)(10) Audit, inspection, and evaluation reports Reports from Prior Periods with Overdue
without management decision, without Management Decisions; Reports from Prior
comment within 60 days, or with Periods with Open Recommendations as of
unimplemented recommendations March 31, 2019
5(a)(11) Revised management decisions Significant Revised Management Decisions
5(a)(12) Management decisions with which the Significant Management Decisions with Which
Inspector General disagrees OIG Disagrees
5(a)(13) Information described under section 05(b) Federal Financial Management Improvement
of the Federal Financial Management Act
Improvement Act of 1996
5(a)(14)(16) Peer review results External Peer Reviews
5(a)(17)(18) Investigative statistical tables and Investigations Reporting Statistics
supporting metrics
5(a)(19) Investigations involving a senior government Investigations Involving a Senior Government
employee where allegations of misconduct Employee Where Misconduct Was
were substantiated Substantiated
5(a)(20) Whistleblower retaliation Whistleblower Retaliation Cases
5(a)(21) Attempts to interfere with the independence Instances of Interference
of OIG
5(a)(22) Each closed inspection, evaluation, and Investigations Involving a Senior Government
audit not disclosed to the public; each Employee that Is Closed and Not Disclosed to
closed investigation involving a senior the Public
government employee not disclosed to the
public
Spring 2021 Semiannual Report to Congress | 45
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
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.
46 | Spring 2021 Semiannual Report to Congress