Management Advisory Memorandum 16-19

As part of its High-Risk 7(a) Loan Review Program, on August 16, 2016, the Office of Inspector General (OIG) issued a report, Report 16-19, which provides the Small Business Administration (SBA) with early notification of issues identified as part of our review.  We identified material lender non-compliance with SBA’s loan origination and closing requirements.  Specifically, the lender neither ensured SBA loan proceeds were used for an eligible purpose nor assessed the borrower’s repayment ability and size in accordance with SBA’s requirements.  As a result, a recovery from the lender for SBA’s guarantee payment of $850,791 is appropriate to cure the lender’s material deficiencies on this loan.  The Agency agreed with the recommendation to recover funds from the lender.