More than 26,000 PPP loans, totaling $454 million, were for less than $25,000 and collection might not be pursued, the IG said. Image: Postmodern Studio/Shutterstock.com
By: FEDweek StaffThe SBA has identified some 38,000 loans worth $4.6 billion under a pandemic-era loan program that may have been improper and may be subject to collection but has no specific plans for acting on them for reasons including lack of capacity and competing priorities, an inspector general report has said.
The report examined the status of Payroll Protection Program loans to certain eligible businesses, individuals, and nonprofit organizations that could be forgiven if loan proceeds were used as required. The SBA has forgiven more than 10.5 million loans totaling above $750 billion, while 37,938 loans, totaling approximately $4.6 billion, have been flagged as possibly being subject to collection—in the agency’s terminology, designated with “hold code 70.”
More than 26,000 of those, totaling $454 million, were for less than $25,000 and collection might not be pursued, it said. For the others, it said, the SBA has completed the first two of a four-step process but has not advanced farther “because it lacked the necessary infrastructure to perform steps three and four . . . The agency indicated it is working on competing priorities and could not state when the updates would be completed.”
“In addition, SBA’s review plan guidance does not establish timelines for completing reviews of loans flagged with a hold code 70. Further, SBA has not established comprehensive policies and procedures to formalize how it will recover improper payments for loans deemed ineligible,” it said.
“The ability of an agency to collect on delinquent debts generally decreases as debts get older,” it said, noting that some of the loans had been flagged in mid-2021.
In response, the SBA said that it “has not closed any reviews that require steps three and four and, upon finalization of the remaining policy issues related to recovery, the agency will complete these steps to finalize denials and partial approvals”—which the IG considered responsive to its recommendation.
The agency also contested how the report characterized its treatment of loans below $25,000, with the IG in turn restating its interpretation.
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