Automated Controls Should Ensure Compliance with Criteria

The Office of Inspector General is issuing this management advisory to present the results of our review of the U.S. Small Business Administration’s (SBA) incomplete reviews of Coronavirus Disease 2019 (COVID-19) Economic Injury Disaster Loans (EIDL) and grants disbursed to borrowers who self-disclosed their business establishment dates after January 31, 2020.

SBA asserted that the Coronavirus Aid, Relief, and Economic Security (CARES) Act requirement for a business to be in operation on or before January 31, 2020, applied only to COVID-19 EIDLs, not Emergency EIDL Advances. The Office of Inspector General disagreed and reiterated the CARES Act requirement that there be no waiver of eligibility for a business that was not in operation on or before January 31, 2020, which included Emergency EIDL Advances.

We made two recommendations for SBA to recover funds disbursed to ineligible applicants and to ensure automated controls are aligned with clearly defined disaster assistance criteria. Management’s planned action to resolve Recommendation 1 does not fully satisfy the intent of the recommendation; therefore, it will remain unresolved. Management’s planned action to resolve Recommendation 2 satisfies the intent of the recommendation; therefore, it will be closed upon issuance of this report.