Christ Yoder
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The Government Accountability Office (GAO) has added emergency small business loans to its list of government programs vulnerable to fraud, waste, abuse and mismanagement. On March 2, 2021, the GAO released its latest High risk list identify struggling federal government programs requiring significant improvement. The GAO concluded that the Small Business Administration (SBA) needs to demonstrate more robust integrity checks and better management practices on PPP and EIDL programs. The GAO findings put pressure on the SBA to ensure faster adoption of GAO’s recommendations for improvements and to keep the public’s attention to the need for SBA audits and investigations of protection program participants. paychecks (PPP) and economic disaster loan (EIDL).
The GAO report notes that the SBA provided about $ 744 billion in emergency funding to help small businesses through PPP and EIDL programs last year. The urgent nature of the funding, the speed at which SBA has implemented and scaled up these programs, and the limited controls built into the approval process for PPP and EIDL applicants have left SBA at risk of making payments in incorrect amounts or out of pocket. ineligible recipients. GAO’s high risk list highlights the continued lack of guarantees and finalized plans from the SBA to oversee the two programs. The report draws attention to the historic struggles of the SBA. Specifically, the GAO explained that since June 2020, it has recommended that the SBA develop and implement plans to identify and respond to risks in PPPs in order to combat potential fraud and ensure the effectiveness of the program. including smaller loans of $ 2 million or less. The report reinforced previous GAO findings that the use of self-certifications can leave a program vulnerable to exploitation by those who wish to bypass eligibility requirements or pursue criminal activity. The Ministry of Justice has resolutely demonstrated his commitment take criminal and civil enforcement action against businesses and individuals for fraudulent conduct under loan programs, including actions under the False Claims Act (FCA).
But, as the GAO explained, the SBA has provided few details on its exam plans or additional checks, and the little detail it has provided is insufficient. The GAO noted that the December 2020 SBA draft master review plan for the loan review process did not contain detailed policies and procedures for certain loan eligibility or surrender reviews. In the same month, the independent auditor of the SBA’s financial statements identified several significant weaknesses in the controls related to the SBA’s CARES programs. The auditor recommended that the SBA perform and document a thorough risk assessment, develop and implement supervisory controls, and document internal controls associated with the implementation of the CARES Act programs. . Nevertheless, the GAO report finds that these controls have still not been implemented by the SBA.
Likewise, in January 2021, GAO recommended that to improve the SBA’s oversight of the EIDL approval process, it should leverage and implement portfolio-level data analytics on EIDL loans to detect potentially ineligible and fraudulent applications. Although the SBA neither accepted nor disapproved of GAO’s recommendation, it did not confirm any plans to conduct such an analysis. Therefore, GAO’s high-risk report reiterates the recommendation that analysis of portfolio-level data could improve the SBA’s management of fraud risk across the EIDL program. The GAO report also recommends that the SBA implement plans to identify and respond to risks in PPPs to ensure the integrity and effectiveness of the program and to combat potential fraud, regardless of the size of the loan. ; and that SBA quickly assess inappropriate payments, identify root causes and develop corrective actions. GAO has continued to push for the SBA to demonstrate tighter program integrity controls and better PPP program management practices and EIDL will only serve to further push the SBA to more carefully consider eligibility. borrowers, determining the loan amount and requesting forgiveness. This scrutiny further increases the risks of civil and criminal audit, investigation and enforcement for participants in PPP and EIDL programs.
