On March 15, 2021, the U.S. Small Business Administration Office of Inspector General (“OIG”) issued Report 21-09 outlining OIG’s review of duplicate loans made to the same borrower under the Paycheck Protection Program (“PPP”) that resulted from potential vulnerabilities in SBA’s loan processing system.
OIG reviewed PPP regulations and PPP loan data to identify instances of lenders disbursing more than one PPP loan to the same borrower.
OIG’s findings centered on SBA controls and failures in the processing of PPP loans. For PPP loans approved from April 3 through August 9, 2020, Lenders made more than one PPP loan disbursement to 4,260 borrower with the same tax ID number and borrowers with the same business name and address and in a total amount of $692,000,000.00.
Many of the duplicate loans resulted from duplicate loan applications not being detected which led to duplicate loan numbers. SBA explained the reasons for this as computer errors in processing, lenders submitting PPP applications using employer ID or social security numbers interchangeably, and borrower applying for PPP loans with more than one lender.
OIG has recommended SBA review identified potential duplicate disbursements for eligibility and take appropriate action to recover any improper payment, review controls related to all PPP loan reviews to ensure duplicate loans are not forgiven and not subject to an SBA guaranty, as appropriate, strengthen E-Tran controls, and strengthen controls and guidance for lenders to ensure lenders meet program requirements for future programs.
How Does This Report Impact Lenders?
PPP loan applicants made a good faith certification indicating they do not have an application pending for the same purpose and duplicative of an amount applied for or previously received when submitting their PPP loan application.
Lenders are able to rely on this certification but should be prepared to work with SBA on any potential resolutions.
SBA has contacted lenders to resolve duplicate loan numbers and instructed them to recover any funds that should not have been disbursed. SBA has sent policy reminders and detailed instructions on how to make corrections or cancel loans and has worked with lenders to help resolve issues relating to duplicate loans to the same borrower.
There may also be circumstances where the same borrower properly receives more than one disbursement including modifications of existing PPP loans to borrowers eligible for increased PPP loan amounts.
Ultimately, OIG has recommended SBA improve internal processing controls and lenders likewise strengthen controls and their submission process for future PPP type programs.