On July 20, 2000, the OIG issued Audit Report 0-24, Audit of the Y2K Loan Program. The Y2K Loan Program, authorized by the Small Business Year 2000 Readiness Act (Act), was established to help small businesses become Y2K compliant and to provide relief for business economic injury due to Y2K problems occurring after January 1, 2000. Use of program funds included the repair and acquisition of information technology systems (hardware and software) and the purchase of consulting and other third party services and related expenses. The audit objective was to determine whether Y2K loans were processed, disbursed, and proceeds used in accordance with the Act. For the five loans selected, we reviewed: (1) repayment ability; (2) character & creditworthiness; (3) eligibility; (4) compliance with the loan authorization and law; and (5) use of proceeds.
Loans approved under the Y2K loan program were eligible for an SBA guarantee of 90 percent on amounts of $100,000 or less and 85 percent on amounts over $100,000. As of March 31, 2000, there were 104 loans totaling $8.2 million approved under the program. As of the same date, no applications were received for business economic injury relief. The program ended on December 31, 2000, . The Act required the OIG to conduct this audit to periodically review a representative sample of Y2K loans to mitigate the risk of fraud and ensure safety and soundness of the program.
Five loans, valued at $992,000, were judgmentally selected for review. The sample selection criterion was based on the loan amount, geographical location, type of loan processing, and credit report information. The OIG determined that, with one exception, the loans were generally processed and disbursed, and proceeds used in accordance with the Small Business Year 2000 Readiness Act. The exception was a single loan for which part of the proceeds became ineligible for the Y2K program after loan closing. Additionally, the audit disclosed minor non-compliances with SBA’s policies and procedures for three loans in the areas of equity injections and monitoring of disbursements.