Watchdog Calls for Crackdown on Fraud in Small Business Loan Program

The administration resisted revealing the loan recipients until Friday, when the SBA and the Treasury Department announced plans to reveal the identity of borrowers with loans between $ 150,000 and $ 10 million, about 14 percent of participants in the Program. Administration officials had expressed concern about disclosing confidential and proprietary information about borrowers, despite an SBA precedent of disclosing recipients in its other major loan program.

The GAO said the SBA did not provide critical information for its review, including a detailed description of the loan data, and that it took several weeks to discuss the researchers’ questions.

The watchdog made a point to point the SBA out for lack of cooperation.

“Most agencies across the board were able to provide GAO with timely access to information for this report while executing their responsibilities during this unprecedented national crisis,” he said.

In a response letter included in the report, the SBA said it produced more than 420 pages of documents to GAO in May and made it available to senior officials for three and a half hours of interviews.

The SBA said that it “never refused to provide data to GAO,” but that there was initial confusion about what GAO was looking for. The SBA said the GAO did not indicate until June 1 that it wanted individual loan data similar to what the SBA publishes in its flagship 7 (a) loan program.

“The SBA cannot simply take a spreadsheet used in an audience [Freedom of Information Act] website for traditional loan programs and fill it with PPP loan information, ”said the SBA. “PPP loans raise concerns about the personal privacy of borrowers and confidential, proprietary, or commercially sensitive business information.”

Based on available information, GAO recommended that the SBA “develop and implement plans to identify and respond to risks in PPP to ensure program integrity, achieve program effectiveness, and address potential fraud.”

The SBA has announced that it will apply additional scrutiny to loans over $ 2 million, but that was not enough for the researchers.

“As of June 15, 2020, the SBA had not provided us with additional details, including specific deadlines and review procedures, on how it would conduct its review of all loans over $ 2 million,” GAO said. “Additionally, the SBA had not informed us of any specific oversight plans for the more than 4 million loans under $ 2 million, including how it would identify which loans to review and the number of planned reviews.”

In addition, GAO recommended that the Department of Labor help state unemployment agencies address concerns about workers who receive unemployment benefits while also receiving wages paid through Paycheck Protection Program loans.

“The challenges stemming from such program integrity problems could result in the loss of millions of dollars that can be difficult to recover,” the watchdog said.