Special Alert | Paycheck Protection Program

SBA OIG report – Areas for improvement

Amy S. Matsuo

Amy S. Matsuo

Regulatory and ESG Insights Leader, KPMG US

+1 919-664-7100

The Small Business Administration’s (SBA) Office of Inspector General (OIG) published a flash report on the SBA’s implementation of the Paycheck Protection Program (PPP), finding that the SBA’s Interim Final Rules and Frequently Asked Questions (FAQs) “mostly aligned” with Section 1102 of the CARES Act but did not align with the statutory provisions in four areas. In particular, the OIG determined the SBA’s guidance does not:

  • Prioritize small business concerns and entities in underserved and rural markets. The OIG recommends SBA require lenders to do so going forward and to include optional demographic information on forms used to request loan forgiveness.
  • Provide unrestricted, allowable use of loan proceeds eligible for forgiveness (i.e., SBA added a requirement that at least 75 percent of the loan proceeds must be used for payroll). Also, the SBA guidance requires borrowers to repay amounts not eligible for forgiveness within two years, rather than the 10 years provided in the CARES Act. The OIG recommends SBA evaluate the potential negative impacts these changes may have on borrowers and update the requirements as necessary.
  • Include guidance on the loan deferment process. The OIG suggests the lack of such guidance creates uncertainties regarding the program requirements for servicing and loan repayments of PPP loan balances that are not eligible for forgiveness. The OIG recommends SBA provide lenders with guidance on loan deferments.
  • Address the registration of loans, and further that the SBA has not registered loans using the applicant’s taxpayer identification number. The OIG recommends SBA register the loans.

The report was prepared at the request of Senators Schumer, Cardin, and Brown.

Guidance on the loan forgiveness process is forthcoming.

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