SIGPR Quarterly Report to Congress — October–December 2022
Summary
The Office of the Special Inspector General for Pandemic Recovery (SIGPR) presents its eleventh Quarterly Report to Congress, covering October through December 2022. Special Inspector General Brian Miller writes that the office issued three audit attestation reviews of airlines that received direct loans under the CARES Act and asks for a five-year extension beyond its sunset date of 2025, since most loans within its jurisdiction mature in 2025. Treasury made direct loans to 35 businesses under section 4003 of the CARES Act; this quarter's reviews covered Validation Memoranda for Caribbean Sun Airlines, Ovation Travel Group, and Timco Engine Center, for a total of 15 independent reviews to date. SIGPR has 55 Full-Time Equivalent employees.
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OFFICE OF THE SPECIAL INSPECTOR GENERAL
FOR PANDEMIC RECOVERY
Quarterly Report to the United States Congress
October through December 2022
MESSAGE FROM THE SPECIAL INSPECTOR GENERAL
FOR PANDEMIC RECOVERY
I am pleased to present our eleventh Quarterly Report to Congress. During this reporting period we issued
three audit attestation reviews of airlines that received direct loans under the Coronavirus Aid, Relief, and
Economic Security (CARES) Act. These attestations predominantly showed that the airlines properly
completed certifications to the Department of the Treasury (Treasury) for their loans to move on to the
underwriting phase. This work is important because the taxpayer relies on air transport and expects
their hard-earned dollars to be used as the CARES Act intended.
In addition, we are currently conducting a significant number of investigations within the Special
Inspector General for Pandemic Recovery’s (SIGPR’s) jurisdiction, as well as continuing to enhance other
pandemic oversight efforts through our active participation in the Pandemic Response Accountability
Committee’s (PRAC) Fraud Task Force.
I want to thank the auditors, special agents, attorneys and administrative staff of SIGPR, all of whom are
professional public servants who share one goal—to protect the American people from fraud, waste and
abuse.
As I have noted in previous correspondence and other communications with Congress, in order for this
work to continue, we are asking for a five-year extension beyond our sunset date of 2025. We need this
time to see our investigations through to completion. Most loans within our jurisdiction mature in 2025,
and should defaults then occur, without an extension, we will have sunsetted just when we are most
needed. We at SIGPR will continue our mission and look forward to working with you in the future.
Very respectfully,
Brian Miller
Special Inspector General for Pandemic Recovery
i SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
PROFILE
ABOUT
SIGPR is an independent organization within Treasury whose mission is to promote the economy,
efficiency, effectiveness, and integrity of CARES Act funds and programs. SIGPR was established by section
4018 of the CARES Act with duties, responsibilities, and authority under the Inspector General Act of
1978.
STAFFING AND BUDGET
SIGPR continues to engage in staffing and recruitment efforts with an emphasis on mission critical
occupations, i.e., special agents and auditors, in support of SIGPR’s Congressionally mandated mission.
To date, SIGPR has 55 Full-Time Equivalent employees. We continue to be judicious in the execution of
our budget in support of the SIGPR mission.
CONTENTS
SIGPR OVERSIGHT
Audits 1
Investigations 5
FINDINGS AND DEVELOPMENTS
Direct Loans and Other Investments 9
REPORT TO CONGRESS | OCTOBER – DECEMBER 2022 ii
SECTION 1
SIGPR OVERSIGHT
SIGPR employs proactive efforts to detect and investigate fraud, waste, and abuse involving CARES Act
funds and programs within SIGPR’s jurisdiction.
Below is a summary of SIGPR’s activities during the reporting period:
Audits
The Office of Audits conducts audits and evaluations of loans and other investments made by Treasury
under programs within SIGPR’s jurisdiction. 1
Engagements
During this quarter, the Office of Audits worked on several engagements related to the Direct Loan
Program. This program was established under section 4003 of the CARES Act and authorized Treasury to
provide loans, loan guarantees, and other investments to passenger air carriers and related businesses,
cargo air carriers, and businesses critical to maintaining national security. Treasury made direct loans to
35 such businesses, providing them with liquidity to withstand losses incurred as a result of the
coronavirus pandemic.
Independent Reviews of Direct Loan Validation Memoranda
The Office of Audits issued three independent reviews of Validation Memoranda completed by
Treasury. 2 The Office of Audits has issued a total of 15 independent reviews to date.
A Validation Memorandum is a document that Treasury created to confirm that a direct loan applicant
had submitted all required documentation and met other eligibility criteria. Once a Validation
Memorandum was completed, the relevant applicant could proceed to the loan underwriting process.
The independent reviews determine whether the memoranda were properly completed according to
Treasury’s Underwriting Guide. This effort helps the Office of Audits determine whether Treasury
1 See CARES Act § 4018(c)(1)
2 The independent reviews issued this quarter were for Validation Memoranda that Treasury completed for Caribbean Sun
Airlines, Ovation Travel Group, and Timco Engine Center.
1 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
acquired all required documents from each applicant prior to approving funding from the Direct Loan
Program.
The Office of Audits identified several material deficiencies in the Validation Memorandum for Ovation
Travel Group. The Office of Audits identified minor discrepancies in the Validation Memoranda for
Caribbean Sun Airlines and Timco Engine Center. The results of these attestation reviews will be
summarized in a separate document covering all of the attestation reviews and will also be included
with the overall audit of the Direct Loan Program.
Audit of Treasury’s Process for Approving Its Direct Loan to YRC Worldwide, Inc.
In April 2022, the Office of Audits initiated an audit of Treasury’s process to gather and administer YRC
Worldwide, Inc.’s application package prior to underwriting and approving its $700 million direct loan.
The audit will determine if Treasury’s approval process followed the guidance set forth in the CARES Act,
other regulations, and Treasury guidance. The audit will cover Treasury’s process from the date of the
loan application, April 29, 2020, to the date that the final loan disbursement was made.
Audit of Treasury’s Monitoring of the Direct Loan Program
The Audit of Treasury’s Monitoring of the Direct Loan Program has two objectives. First, the Office of
Audits will determine whether Treasury had a sufficient policy in place to guide its monitoring of the
direct loans. Second, the Office of Audits will determine whether Treasury monitored borrowers’
compliance with the requirements of the CARES Act and the terms and conditions of the borrowers’
loan agreements, as well as whether Treasury followed up to resolve any issues that it detected. For this
objective, the Office of Audits will test a sample of 17 of the 35 borrowers. To conduct its testing, the
Office of Audits has met with Treasury program officials, reviewed Treasury’s monitoring portal
(Salesforce), and obtained monthly reports from Treasury’s administrative agent.
Audit of Direct Loan Program Borrower – Mesa Airlines, Inc.
Mesa Airlines, Inc. received a $195 million direct loan from Treasury pursuant to section 4003(b)(1) of
the CARES Act. The loan agreement includes covenants by Mesa Airlines, Inc. to comply with certain
restrictions on employee compensation, stock repurchases, dividends, and other areas as required by
the CARES Act. We are doing an audit to ensure the terms of the loan agreements between Mesa
Airlines and Treasury are being met.
The Office of Audits held entrance conferences with Treasury officials and individuals at Mesa Airlines to
discuss audit objectives. The audit team has reviewed Mesa Airlines’ responses to Salesforce review card
questions that are designed to monitor compliance with the loan agreement, and is planning a site visit
to Mesa Airlines headquarters to review supporting documentation and interview Mesa Airlines
officials. This is the first in a series of planned audits to ensure compliance with the terms of the loan
agreements between Treasury and the loan recipients.
Audit of Treasury’s Use of Outside Entities
On December 15, 2022, SIGPR issued an engagement letter notifying Treasury of the audit of Treasury’s
use of outside entities contracted to assist in the making, purchase and management of loans, loan
guarantees and other investments made under any program established under Division A of the CARES
Act.
The purpose of this audit is to determine if the process Treasury used to select contractors for CARES
Act support complied with the Federal Acquisition Regulation. The audit team held an entrance
conference with Treasury on January 11, 2023.
REPORT TO CONGRESS | OCTOBER – DECEMBER 2022 2
SIGPR OVERSIGHT
Audit Planning
The Office of Audits issued its Fiscal Year 2023 audit plan on October 17, 2022. To develop the audit
plan, the Office of Audits met with the Department of the Treasury’s Chief Recovery Officer, the Federal
Reserve Board of Governors Office of Inspector General, the Government Accountability Office’s
Assistant Director for CARES Act Oversight, and staff members from the House Select Subcommittee on
the Coronavirus Crisis.
Data Analysis
The Office of Audits data analytics program plays an important role in SIGPR’s mission. The data
analytics platform uses various software and tools that process and analyze large quantities of data to
detect potential red flags and anomalies. These tools are valuable not only for SIGPR’s audit work, but
also for other proactive initiatives throughout SIGPR. The program has developed a data library
containing over 150 million rows of CARES Act funding information, drawn from both public and
sensitive government sources. The program updates the library at least quarterly to maintain accurate
and relevant information.
The data analytics program:
• maintains complex risk assessment metrics by creating analytics that identify audit red flags;
• harmonizes, cleanses, normalizes, and joins relevant data tables;
• maintains a growing library of data tables that provide information and support the detection of
irregularities;
• creates interactive dashboards and visualizations to assist users in better understanding and
prioritizing program areas for audits, investigations, and evaluations;
• shares analytic methodologies and processes with various external government agencies,
including the Department of Homeland Security, Department of Defense, U.S. Agency for
International Development Office of Inspector General, PRAC, Department of Health and Human
Services, Amtrak, National Aeronautics and Space Administration, Department of Education
Office of Inspector General, Small Business Administration Office of Inspector General, General
Services Administration Office of Inspector General, and others;
• collaborates with various inter-governmental agencies, committees, and third-party vendors to
stay informed about emerging analytic technologies, techniques, tools, and methodologies; and
• continues to work closely with CIGIE’s Pandemic Analytics Center of Excellence’s data sharing
program and analytics effort in mining data for the benefit of many federal agencies and Offices
of Inspectors General.
Investigative Support
In prior quarters, the Office of Audits provided forensic auditing services, including financial records
analysis, and auditing and accounting expertise in support of investigations conducted by the Office of
Investigations. In Fiscal Year 2023, the Office of Investigations has increased their staffing to do more of
this work internally.
3 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
Investigations
The Office of Investigations conducts criminal and civil investigations regarding allegations of fraud,
waste, abuse, or misconduct involving CARES Act funds and programs within SIGPR’s jurisdiction. In
addition, the office manages SIGPR’s hotline, which serves as a primary avenue for reporting fraud, waste,
abuse, or misconduct.
Investigative Activities
The Office of Investigations routinely collaborates with the rest of the SIGPR team, including auditors,
analysts, and attorneys, to vet complaints, develop proactive initiatives, and pursue investigations.
In addition, SIGPR’s investigations are conducted in partnership with various U.S. Attorneys’ Offices, the
U.S. Department of Justice (DOJ), the PRAC Fraud Taskforce, and other federal law enforcement partners.
During this reporting period, the office continued its investigative and proactive efforts to uncover and
vigorously pursue fraud and wrongdoing related to CARES Act funding under Title IV, Subtitle A. The
following table highlights SIGPR’s investigative activities for the period.
SIGPR Investigative Activity – October 1, 2022, through December 31, 2022
Hotline Complaints
Hotline Complaints Received 110
Referrals to Other Agencies* 18
Preliminary Inquiries
Opened 1
Closed 1
Converted to Full Investigation 3
Ongoing 2
Investigations**
Opened 5
Closed 0
Ongoing 34
Criminal Actions †
Referrals to the Department of Justice 1
Referrals to State/Local Prosecuting Authorities 0
Indictments/Informations 0
Arrests/Summons 0
Convictions/Pleas 0
Sentencings 0
Civil Actions
Referrals to the Department of Justice 0
Civil Judgments/Settlements 0
REPORT TO CONGRESS | OCTOBER – DECEMBER 2022 4
SIGPR OVERSIGHT
Other Enforcement Actions
IG Subpoenas Issued 17
Investigative Monetary Results
Funds Seized/Forfeitures 0
Restitution 0
Fines and Penalties 0
Civil Judgments/Settlements 0
Cost Recoveries 0
Note: Investigative data maintained via SIGPR’s electronic case management system.
* Includes referrals from SIGPR proactive work.
** Includes all SIGPR program-related cases, including PRAC Fraud Task Force investigations and joint investigations with
other agencies.
† Actions reported include those resulting from PRAC Fraud Task Force investigations and joint investigations with other
agencies.
Throughout the first quarter of the fiscal year, the Office of Investigations continued to expand its
investigative oversight work through SIGPR’s collaborative and proactive efforts.
PRAC Fraud Task Force
In January 2021, the PRAC established a Fraud Task Force to serve as a resource for the Inspector
General (IG) community by surging investigative resources into the areas of greatest need. Currently, the
area of greatest need is pandemic loan fraud. Special agents from Offices of Inspectors General across
the government are detailed to work on task force cases. These agents have partnered with prosecutors
at DOJ’s Fraud Section and at United States Attorneys’ Offices across the country.
The PRAC extended its authority to investigate pandemic-related fraud to SIGPR through a Memorandum
of Understanding. Currently, SIGPR has five special agents assigned to the PRAC Fraud Task Force on a
part-time basis. These special agents are mostly assigned Payroll Protection Program cases while
continuing to work their SIGPR investigative caseload. This initiative allows SIGPR to make a broader
contribution to the IG community by assisting with a range of critical investigations that might otherwise
remain unstaffed.
SIGPR Hotline Activity
The SIGPR hotline accepts reports of potential fraud, waste, abuse, and mismanagement related to
CARES Act funding, programs, and personnel. The hotline also accepts whistleblower complaints from
federal employees, former federal employees, employment applicants, employees of contractors,
subcontractors, grantees and subgrantees, and personal service contractors, all of whom wish to report
fraud, waste, abuse, mismanagement, or reprisal actions under the jurisdiction of SIGPR.
During this reporting period, SIGPR received 110 hotline complaints, of which all but one pertained to
matters outside SIGPR’s jurisdiction, as indicated in the table and chart below.
5 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
SIGPR OVERSIGHT
Complaints by Category
Received October through December 2022
Category Total
Title I – Paycheck Protection Program 3
Title IV, Subtitle A - (13(3) Facilities (MSLP) 1
Title V – Coronavirus Relief Fund 6
Multiple CARES Act Programs 6
Other
Economic Impact Payments 7
Emergency Income Disaster Loans 1
Income Tax Related 4
Non-Program Related 57
Rental and Housing Assistance Programs 20
Social Security Benefits 1
Unemployment Insurance Programs 3
Financial Institution Related (Bank Account, Missing Money) 1
Grand Total 110
REPORT TO CONGRESS | OCTOBER – DECEMBER 2022 6
SECTION 2 FINDINGS AND
DEVELOPMENTS
The CARES Act requires SIGPR to regularly report “a detailed statement of all loans, loan guarantees,
other transactions, obligations, expenditures, and revenues associated with any program established by
the Secretary under section 4003, as well as the information collected under subsection (c)(1).” 3
Accordingly, below are the categories of loans and other investments made by Treasury under CARES
Act section 4003, 4 including, where applicable and known, a list of the loans and investments made
under each category and the eligible businesses to which loans were made.
Direct Loans and Other Investments
Introduction
CARES Act section 4003(a) authorized the Secretary of the
Treasury “to make loans, loan guarantees, and other investments
in support of eligible businesses, States, and municipalities that do
not, in the aggregate, exceed $500,000,000,000.” The CARES Act
further divided these loans and investments into four categories.
The first three, described in sections 4003(b)(1)–(3), cover loans
and loan guarantees to passenger air carriers and related
businesses ($25 billion), cargo air carriers ($4 billion), and
businesses critical to maintaining national security ($17 billion). 5
The fourth category, described in section 4003(b)(4), authorized the Secretary to invest in various
liquidity programs established by the Board of Governors of the Federal Reserve System under section
13(3) of the Federal Reserve Act ($454 billion).
3 CARES Act § 4018(f)(1)(B)
4 Treasury did not establish a program for “loan guarantees” under CARES Act section 4003.
5 Treasury has posted on its website the contracts it has entered in connection with the administration of loans under section
4003(b)(1), (2), and (3). See U.S. Dep’t Treasury, Other Programs, https://home.treasury.gov/data/ other-programs
REPORT TO CONGRESS | OCTOBER – DECEMBER 2022 7
FINDINGS AND DEVELOPMENTS
The Consolidated Appropriations Act, 2021, amended the CARES Act to rescind unobligated balances of
funds ($429 billion) in these programs. 6 It also specified that after December 31, 2020, the Federal
Reserve “shall not make any loan, purchase any obligation, asset, security, or other interest, or make any
extension of credit” through the liquidity programs or facilities in which Treasury had invested CARES
Act funds, except for facilities in the MSLP, that were authorized to purchase loans until January 8, 2021,
for applications submitted by December 14, 2020. 7
Direct Loans
On March 30, 2020, Treasury first announced guidelines for businesses interested in applying for loans
under CARES Act section 4003(b)(1)–(3). 8 Those guidelines incorporated several mandatory loan terms
and conditions, with many designed to protect
American taxpayers. A summary of these terms
and conditions can be accessed in SIGPR’s
previous quarterly reports.
Air Carrier Loan Program
CARES Act section 4003(b)(1)–(2) allocated $25
billion for loans and loan guarantees to passenger
air carriers, aviation-maintenance facilities
certified under 14 C.F.R. Part 145, and air-
transportation ticket agents, as well as $4 billion
for cargo air carriers.
Businesses Critical to Maintaining National Security
CARES Act section 4003(b)(3) allocated $17 billion for loans and loan guarantees to “businesses critical to
maintaining national security.”
The report excerpts on the following pages summarize the section 4003(b)(1) – (3) loans current through
this quarter. 9
6 See Consolidated Appropriations Act, 2021, Pub. L. 116-260, div. N §§ 1003, 1005
7 Id. § 1005.
8
U.S. Department of the Treasury, Procedures and Minimum Requirements for Loans to Air Carriers and Eligible Businesses and
National Security Businesses under Division A, Title IV, Subtitle A of the Coronavirus Aid, Relief, and Economic Security Act (Mar.
30, 2020), https://home.treasury.gov/system/files/136/Procedures and Minimum Requirements for Loans.pdf
9 See U.S. Department of the Treasury, Report Under Section 4026(b)(1)(C) of the CARES Act on Loans to Air Carriers, Eligible
Businesses, and National Security Businesses (January 1, 2023). https://home.treasury.gov/system/files/136/
4026b1CLoanReport01012023.pdf; see also U.S. Department of the Treasury, Loans to Air Carriers, Eligible Businesses, and
National Security Businesses, https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-industry/loans-to-
air-carriers-eligible-businesses-and-national-security-businesses (last updated Jan. 21, 2021).
REPORT TO CONGRESS | OCTOBER – DECEMBER 2022 8
FINDINGS AND DEVELOPMENTS
9 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
REPORT TO CONGRESS | OCTOBER – DECEMBER 2022 10
FINDINGS AND DEVELOPMENTS
Other Investments
CARES Act section 4003(b)(4) allocated at least $454 billion for “loans and loan guarantees to, and other
investments in, programs or facilities established by the Board of Governors of the Federal Reserve
System for the purpose of providing liquidity to the financial system that supports lending to eligible
businesses, States, or municipalities” by “purchasing obligations or other interests” directly from the
issuer or through secondary markets, and “making loans, including loans or other advances secured by
collateral.” 10
The Federal Reserve established several liquidity programs (facilities) pursuant to section 13(3) of the
Federal Reserve Act. 11 That provision, used extensively during the 2008 financial crisis and amended by
the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 allows the Federal Reserve to lend
money in “unusual and exigent circumstances” to participants in “any program or facility with broad-
based eligibility” who are “unable to secure adequate credit accommodations from other banking
10 CARES Act § 4003(b)(4)(A)–(C)
11 See 12 U.S.C. § 343(3)
12 Pub. L. 111-203, 124 Stat. 1375
11 SPECIAL INSPECTOR GENERAL | PANDEMIC RECOVERY
FINDINGS AND DEVELOPMENTS
institutions.” 13 The Federal Reserve Board was required to consult with the Secretary of the Treasury
prior to the Federal Reserve Board’s 2015 issuance of its regulations governing emergency lending under
section 13(3) of the Federal Reserve Act. 14 The Federal Reserve may not establish any emergency
lending program under section 13(3) without prior approval of the Secretary of the Treasury. 15
Of note, as of December 31, 2022, MS Facilities, LLC—a special-purpose vehicle (SPV) jointly
formed by Treasury and the Federal Reserve Bank of Boston to operate the MSLP—has
recognized approximately $95 million in actual loan losses, net of subsequent recoveries. 16 This
number has over doubled from $45 million since SIGPR’s last quarterly report. In addition, an
evaluation of loan participations purchased by the MS Facilities, LLC resulted in a reported loan
loss allowance in the amount of $1.4 billion. 17 The allowance for loan losses is estimated based
upon MS Facilities, LLC’s holdings as of September 30, 2022. 18
These facilities have stopped extending loans or purchasing obligations. Additional details for the
facilities are available on the Federal Reserve’s website. 19 The Federal Reserve has indicated that
because the MSLP ceased purchasing participations on January 8, 2021, it will not provide
additional transaction-specific disclosures about the MSLP on a periodic basis going forward.
The following table summarizes the total amount of remaining CARES Act funds that Treasury invested
in MS Facilities, LLC and other SPVs created in conjunction with other lending programs as of December
31, 2022. 20
Recipient Treasury Investment Remaining as of
December 31, 2022
MS Facilities, LLC $11,647,683,604.49
TALF II, LLC $1,042,930,200.31
Corporate Credit Facilities, LLC $0.00
Municipal Liquidity Facility, LLC $2,918,475,815.47
The SPVs have returned the following amounts to Treasury as of December 31, 2022.
Investment Returned to Treasury as of
Recipient December 31, 2022
MS Facilities, LLC $26,047,299,812.42
TALF II, LLC $8,958,103,834
Corporate Credit Facilities, LLC $37,980,215,713.55
Municipal Liquidity Facility, LLC $14,629,455,817.27
13 12 U.S.C. § 343(3)(A); see also 12 C.F.R. § 201.4(d)
14 12 U.S.C. § 343(3)(B)(i)
15 12 U.S.C. § 343(3)(B)(iv)
16 See Bd. of Governors of the Fed. Reserve Sys., Periodic Report: Update on Outstanding Lending Facilities Authorized by the
Board under Section 13(3) of the Federal Reserve Act, https://www.federalreserve.gov/publications/files/13-3-report-
20230111.pdf (last updated January 11, 2023).
17 See id.
18 See id.
19 See id.
20 Letter from Michelle Dickerman, Dep. Ass’t Gen. Counsel, Off. of Gen. Counsel, Treasury, to David B. Dwyer, Counsel for
Audits and Banking, Off. Of Gen. Counsel, SIGPR, Treasury (Jan. 20, 2023) (on file with SIGPR).
REPORT TO CONGRESS | OCTOBER – DECEMBER 2022 12
HELP FIGHT
FRAUD,
WASTE, AND
ABUSE.
hotline@sigpr.gov
BY EMAIL:
BY PHONE: 202-927-7899
www.sigpr.gov
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