This is the final report in a series of memorandums related to our audit of twenty-five purchased 7(a) Recovery Act loans. Overall, material deficiencies were identified in 14 of the 25 early-defaulted loans selected for audit. These deficiencies resulted in questioned costs or recoverable guaranty payments totaling approximately $10.7 million. The audit found that the National Guaranty Purchase Center (NGPC) either made a purchase error or did not identify the deficiencies during its guaranty purchase reviews on six of the nine loans it reviewed. This resulted in improper payments totaling approximately $3.3 million. Due to the high number of deficiencies identified and the resulting improper payments, we recommended that the SBA establish a specialized early-default purchase review unit at the NGPC.
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Report 12-11R: High-Dollar Early-Defaulted Loans Require an Increased Degree of Scrutiny and Improved Quality Control at the National Guaranty Purchase Center
Date Issued: Friday, March 23, 2012
Report Number: 12-11R