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The SBA's Office of Inspector General outlined its concerns in a memo that said agency actiomn is overdue on 10 recommendations it made in the past to addresz weaknesses in lender oversight andagency contracting. The Office of Managemenf and Budget has directed agencies to address problems disclosed by prior audits in programs that will receive funding through the Americab Recovery andReinvestment Act. Lender oversight is particularluy important because the bill temporarily increasee the government guaranty onthe SBA's 7(a) busines s loans to 90 percent.
"Because the highef guaranties reducelender risk, which may lead to poor a greater potential will exist for losses and fraud," wrotse Debra Ritt, the SBA's assistant inspectorf general. That's why it's important for the SBA to do onsiter reviews for all SBA lenderswith high-risk ratinge that have more than $4 million in guaranteed loan the memo stated. The agenc has agreed that's needed but hasn't done it yet.
The SBA also hasn'y implemented comprehensive policies and procedures that define acceptable lenderf performance and risktolerancre levels, or what enforcement actions will be takem when risk tolerance limits are The SBA also needs to do a betterd job of collecting impropetr payments of loan guaranties to lenderw who didn't follow prudentg lending practices or failed to complu with SBA regulations, according to the inspector general's office. More than $4 milliob in improper payments identifie d by previous audits have not been theoffice found.
"Increases in loan volumes and reducedc lender risk under the Recovery Act are expected to lead to higheer levels ofimproper payments," the memo The bill also provided $30 millioj in additional funding for the Microloa program, which makes small loans to aspiring entrepreneurs throughu nonprofit organizations that also provides technical assistance. The SBA needs to develop standardd operating procedures forthis program, and collecrt information on whether the businesseas that received these loans became successful, according to the SBA spokesman Jonathan Swain said the agency "is workinf on a number of fronts" to implement the recommendationz cited in the memo.
"We do take them very seriously, " he said. The agency particularly is focused on lender oversight and risk management as it rolls outnew stimulus-relatef programs. Its new $35,000 America's Recovery Capital loans, for are designed to be "a riskier loan progra m than the SBA hasever offered," he said, because they're an effort to help businesses that temporarilt are having problems making loan payments. The SBA is lookinhg at ways to mitigate that risk as much as he said.