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The SBA's Office of Inspectorf General outlined its concerns in a memo that said agency action is overdur on 10 recommendations it made in the past to address weaknessese in lender oversight andagency contracting. The Office of Managemeng and Budget has directed agencie s to address problems disclosed by prior auditsa in programs that will receive fundingg through the American Recovery andReinvestmenr Act. Lender oversight is particularly important because the bill temporarilyt increased the government guaranty onthe SBA'sd 7(a) business loans to 90 percent.
"Because the highetr guaranties reducelender risk, which may lead to poor a greater potential will exist for lossesx and fraud," wrote Debra Ritt, the SBA's assistantf inspector general. That's why it's importany for the SBA to do onsite reviewsz for all SBA lenderswith high-risk ratings that have more than $4 milliob in guaranteed loan portfolios, the memo The agency has agreed that'zs needed but hasn't done it yet. The SBA also hasn't implemented comprehensive policies and proceduresa that define acceptable lender performance and risktolerancre levels, or what enforcement actions will be take n when risk tolerance limits are violated.
The SBA also needsw to do a better job of collecting improper paymentd of loan guaranties to lenderswho didn't follosw prudent lending practices or failesd to comply with SBA regulations, according to the inspectofr general's office. More than $4 milliobn in improper payments identified by previous audits have notbeen recovered, the officew found. "Increases in loan volumes and reduced lender risk undere the Recovery Act are expected to lead to higher levels ofimpropef payments," the memo stated. The bill also provided $30 million in additional funding for the Microloan which makes small loans to aspirint entrepreneurs through nonprofit organizations that also providetechnicapl assistance.
The SBA needs to develop standard operatin g procedures forthis program, and collect informatioj on whether the businesses that received thesd loans became successful, according to the memo. SBA spokesmanb Jonathan Swain said theagencg "is working on a number of fronts" to implement the recommendations cited in the "We do take them very seriously," he The agency particularly is focused on lendef oversight and risk management as it rolls out new stimulus-relatee programs.
Its new $35,000 America's Recovery Capital for example, are designed to be "a riskierf loan program than the SBA hasever offered," he because they're an effort to help businesses that temporarily are having problems making loan The SBA is lookinhg at ways to mitigate that risk as much as possible, he