This audit report presents the results of the OIG’s audit of the origination and closing of 504 Recovery Act loans. The OIG found that the SBA generally originated and closed 504 Recovery Act loans in accordance with SBA policies and procedures. However, the OIG did identify origination and closing deficiencies in four of the loans reviewed. These deficiencies included: loans approved that lacked creditworthiness; a loan approved with a collateral shortfall; and a loan approved as an existing business instead of a new business transaction. These four loans had improper loan approvals of $1,561,000. All four loans were current as of July 31, 2012.
The OIG recommended that the SBA (1) Determine how the deficiencies in the four SBA-approved loans occurred and take corrective action to prevent similar deficiencies in other SBA-approved 504 loans, (2) provide feedback to the SBA loan officers who approved the 504 loans in which deficiencies were identified, and (3) notify the improper payment review team of the improper 504 loan guaranties to ensure the proper estimation of improper payments in the 504 Loan Program.