Inspector General Report on Paycheck Protection Program–Forgiveness, Fraud, and SBA Procedures

By: Christine V Williams on 03/04/2022

The Inspector General (IG) of the Small Business Administration (SBA) examined the Paycheck Protection Program (PPP) and how SBA was administering it.  This examination included SBA creating uncertainty in not meeting statutory deadlines, potential fraud, and the procedures used in general regarding PPP loans to small businesses.

The IG found the following:

  • That for loans totaling $66.4 billion SBA did not meet the 90-
    day statutory requirement to remit forgiveness payments to lenders
  • This issue included not meeting the 90-day requirement for 98.2 percent of loans over $2 million.
  • Not completing reviews of loans and remitting payment promptly creates uncertainty for borrowers and PPP lenders who are unsure if SBA will forgive their loans.

The IG also had concerns regarding the following

  • In June 2021, SBA changed its process to review loans prioritized by risk rather than order the forgiveness application was submitted.
  • SBA also made changes to allow certain loans to be retroactively reviewed for
    fraud and eligibility after they have been forgiven.
  • We have concerns about the impact these changes will have on SBA’s ability to recover funds for forgiven loans later determined to be ineligible.
  • Outstanding loan forgiveness applications are a potential indicator of fraud. Borrowers who fraudulently obtained a PPP loan are unlikely to apply for loan forgiveness.
  • The IG identified 1.9 million loans totaling $177.3 billion with no forgiveness application as of May 2021.
  • Changes to program requirements for Schedule C borrowers may increase the risk of fraudulent loans.

IG Recommendations

SBA develop a plan to ensure remaining forgiveness reviews and
remittances are completed within 90 days as required by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  (Follow the Law)

Agency Response
SBA management agreed with the report finding and recommendation, stating it
implemented process improvements and policies to reduce manual review processing

Link to full report here: