Management Alert Paycheck Protection Program Loan Recipients on the Department of Treasury’s Do Not Pay List

The Office of Inspector General issued this Management Alert to alert SBA about improper payments to lenders for potentially ineligible recipients of loans under SBA’s Paycheck Protection Program in response to the Coronavirus Disease 2019 (COVID-19) pandemic.

Because of complaints of fraud received by the OIG, we collaborated with the U.S. Department of the Treasury Do Not Pay (DNP) Business Center, which 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.

Expedited management action could reduce or prevent the potential for loss in terms of the risk of improper payments to lenders for amounts ineligible for forgiveness as well as any fees. OIG communicated summary results to SBA management, who requested Treasury’s results and have systemically put a “hold” flag on loans identified by the DNP team to ensure the loan applications are properly reviewed before processing for forgiveness or any further disbursements.

To establish more effective oversight controls related to the PPP, we recommended the agency promptly identify PPP loans that have not been fully disbursed and 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 preaward 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.