Peggy E. (Peg) Gustafson was sworn in as the Inspector General of the U.S. Small Business Administration on October 2, 2009. Ms. Gustafson previously served as General Counsel to Senator Claire...
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Audit Report 0-04: An Audit of an Early Defaulted Loan
On January 20, 2000, the OIG issued Audit Report 0-04, An Audit of an Early Defaulted Loan. The loan was judgmentally selected for review as part of the OIG’s ongoing program to audit SBA guaranteed loans charged off or transferred to liquidation within 36 months of origination (early default). The objective of this audit was to determine if the early loan default was caused by lender or borrower noncompliance with SBA requirements. The OIG determined that the loan default was caused by a lack of repayment ability not discovered by the lender because of borrower misrepresentations on the SBA loan application. Specifically, the OIG found that the borrower’s SBA loan application did not disclose all debts. Further, to ensure the approval of an SBA guaranteed loan for the purchase of the business, the borrowers' real estate agent allegedly advised them not to report all debts.