Serious Concerns Regarding the Return of Paycheck Protection Program Funds

The Office of Inspector General (OIG) is issuing this management advisory to bring to your attention concerns regarding the return of Paycheck Protection Program (PPP) funds. This issue requires immediate attention and action by the U.S. Small Business Administration (SBA) to ensure it has processes and procedures in place to adequately accept, process, and account for PPP funds returned by borrowers, lenders, and financial institutions. Expedited management action should mitigate the risk of financial loss to taxpayers.

Establishing clear and detailed guidance for borrowers, lenders, and financial institutions on how to return PPP funds and implementing a process for SBA to accurately handle and track the returned funds should mitigate the risk of financial loss. SBA should take immediate action to ensure it has processes and procedures in place to adequately accept, process, and account for returned PPP funds.

To ensure PPP funds are returned as appropriate, we suggest the Administrator direct the Associate Administrator for the Office of Capital Access to:

1. Provide detailed guidance to borrowers on returning PPP funds to lenders if the loan was forgiven or guaranty purchased.
2. Provide detailed guidance to lenders on their responsibilities for accepting PPP funds if the loan was forgiven, to include documenting reasons for the return of funds, returning the funds to SBA, conducting a fraud review, reversing forgiveness when appropriate, and handling loans with only a partial return of funds.
3. Seek periodic assurance from lenders that all PPP funds returned to lenders have been reported and returned to SBA. The report to SBA should include details on the source of the returned funds.
4. Provide detailed guidance to financial institutions that receive PPP fund deposits for borrowers regarding how to return PPP funds if there is suspected fraud or other issues that would warrant returning funds.