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					                                                                                OIG Recovery Act Plan Overview
                                       OIG Name: U.S. Small Business Administration, Office of Inspector General

                                                The OIG has developed oversight plans for deploying additional resources to monitor, evaluate, and report on the performance and oversight of SBA's programs
                                                under the Act. These new programs and program changes are inherently high risk, requiring the Agency to establish effective controls and adequate oversight.
                  OIG Broad Recovery Act Goals:
                                                Therefore, the OIG’s oversight efforts will focus heavily on assessing these controls and detecting and deterring fraud, waste and abuse in Recovery Act
                                                programs.
                                                The OIG has conducted outreach efforts to raise fraud awareness and engage industry trade groups. Outreach efforts have focused on providing SBA lenders
   OIG Broad Training and Outreach Recovery Act and employees with information on detecting fraud patterns that have been identified in OIG loan fraud investigations through written guidance, website
                                         Goals: information, and presentations at trade group events, as well as notifying the public of scams. Additionally, the OIG posts the results of audits and other reviews
                                                on its Recovery Act website.

                                                The OIG has taken a number of actions to alert Agency managers of risks and recommend cost effective controls to help prevent fraud, waste, and abuse, and
                                                ensure program goals are achieved and stimulus funds are accurately tracked and reported. In FY 2010 we will review Agency regulations and procedures for
      OIG Recovery Act Risk Assessment Process: the new secondary market programs under the Recovery Act. Additionally, we have initiated periodic reviews of loan quality and will determine whether the
                                                Agency has taken the required steps, beyond standard practice, to initiate additional oversight mechanisms for programs funded by the Recovery Act. As we
                                                identify risks, we have and will continue to provide Agency managers with comments and recommendations for ways to mitigate these risks.

   OIG Staff Dedicated to Recovery Act Oversight: 6


                         OIG Recovery Act Funds: $10,000,000
      Expiration Date of OIG Recovery Act Funds: September 30, 2013


  OIG Recovery Act Funds Allocated to Contracts: Yes
              Purpose of Recovery Act Contracts: Contractors will be used to assist with loan reviews and financial statement audits.
     Types of Recovery Act Contracts Awarded to
                                                 Fixed price modification of the existing financial statement audit contract; fixed-price contract for reviws of Recovery Act loans..
                                          Date:

             Link to OIG Recovery Act Work Plan: www.sba.gov/ig/recovery




Page 1 of Overview                                                                                                                                                                      ae71938b-ea63-461c-8a15-081515a86edd.xls
                                                                                                      OIG FY 2010 Recovery Act Work Plan

                                                                                                                                                                                                                                     Review
                                                                                                                                                                                                                                  Included on   Expected    Expected
                                 Recovery Act Funds                                                                                                                                                                                                                          Expected
                                                                       Entity Performing                                                                                                                                              Prior      Quarter    Quarter(s)
    Agency       Program Area        Associated       Type of Review                             Project Title                         Background                                               Objective                                                                   Number of
                                                                            Review                                                                                                                                                  Recovery      Work       Reports
                                  w/Program Area                                                                                                                                                                                                                              Reports
                                                                                                                                                                                                                                    Act Plan     Begins       Issued
                                                                                                                                                                                                                                      (Y/N)


                                                                                                                    The American Recovery and Reinvestment Act of
                                                                                                                    2009 (Recovery Act) provides for many
                                                                                                                    enhancements to current SBA programs to begin
                                                                                                                    economic recovery for our country’s small
                                                                                                                    business sector. The Recovery Act provides
                                                                                                                    reduced loan fees, higher SBA guaranties on loans,
                                                                                                                    and the creation of new SBA credit programs. In
                                                                                                                    times of economic instability, SBA’s programs
                                                                                           Reviews of Loans Made
                                                                                                                    suffer increased vulnerability to fraud and            To determine if loans disbursed pursuant to the
                                                                                           Under the American
                Loans and Loan                                                                                      unnecessary losses as demonstrated by SBA’s            Recovery Act were originated and closed in                                        Q1 FY 10
      SBA                          $630,000,000        Performance         OIG Staff       Recovery and                                                                                                                              Yes        Q4 FY 09                          4
                  Guaranties                                                                                        response after the 9-11 attacks and the Gulf Coast     accordance with SBA’s policies and procedures                                     Q2 FY 10
                                                                                           Reinvestment Act of
                                                                                                                    Hurricanes. With increased guaranties, lenders         and to identify any evidence of suspicious activity.
                                                                                           2009
                                                                                                                    will have reduced risk and may not exercise due
                                                                                                                    diligence in originating loans thereby potentially
                                                                                                                    increasing SBA losses. Additionally, SBA’s
                                                                                                                    oversight may not be as effective in identifying red
                                                                                                                    flags in loan applications due to public pressure to
                                                                                                                    increase lending. An audit of the origination of
                                                                                                                    loans disbursed pursuant to the Recovery Act is
                                                                                                                    warranted.




                                                                                                                   The Recovery Act authorizes $6 million for direct
                                                                                                                   lending under SBA’s Microloan program. A
                                                                                                                   previous OIG report identified significant internal
                                                                                                                   control weaknesses in the administration of the
                                                                                                                   Microloan program. In May 2003, the OIG issued
                                                                                                                   a report on the Microloan Program that found (1)
                                                                                                                   monitoring was not sufficient to catch duplicate
                                                                                                                   and ineligible microloans; (2) there was no
                                                                                                                   Standard Operating Procedure, requiring staff and
                                                                                           SBA's Microloan Program participants to rely on other documents with
                                                                                                                                                                           To determine the adequacy of SBA’s (1) oversight
                                                                                           Expansion Under the     various shortcomings; and (3) performance
                                                                                                                                                                           of intermediaries, (2) performance data, and (3)
      SBA         Microloans         $6,000,000        Performance         OIG Staff       American Recovery and standards for intermediaries were inadequate. As                                                                    Yes        Q4 FY 09     Q1 FY 10             1
                                                                                                                                                                           program metrics for managing the Recovery Act
                                                                                           Reinvestment Act of     a result of the significant Recovery Act funding and
                                                                                                                                                                           funds authorized for the Microloan program.
                                                                                           2009                    known program weaknesses, SBA began a “best
                                                                                                                   practices” review of the program and expects to
                                                                                                                   make major changes to the Microloan Program
                                                                                                                   before Recovery Act funds are disbursed. The OIG
                                                                                                                   will evaluate whether SBA has sufficient resources,
                                                                                                                   procedures, data and performance measures in
                                                                                                                   place to assess program performance and whether
                                                                                                                   the Agency's new program policy, which is
                                                                                                                   currently in development, to determine their
                                                                                                                   effectiveness.




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                                                                                           OIG FY 2010 Recovery Act Work Plan



                                                                                                        The Recovery Act calls for unprecedented levels of
                                                                                                        transparency and accountability in carrying out
                                                                                                        Agency programs. On April 3, 2009 the Office of
                                                                                                        Management and Budget (OMB) issued
                                                                                                        Memorandum M-09-15, Updated Implementing
                                                                                Review of Controls Over
                                                                                                        Guidance for the American Recovery and
                                                                                Job Creation and                                                                To: (1) determine whether SBA’s performance
                                                                                                        Reinvestment Act of 2009 . Sections 2.7 and 2.8 of
                                                                                Retention Statistics                                                            metrics adequately measure Recovery Act
                  Program                       Administrative /                                        this Memorandum require Agencies receiving
      SBA                        $630,000,000                      OIG Staff    Reported by SBA under                                                           program performance; and (2) assess data quality       Yes   Q3 FY 09     Q1 FY 10             1
                Administration                    Financial                                             Recovery Act funding to develop Agency-wide and
                                                                                the American Recovery                                                           controls to ensure that reported performance data
                                                                                                        program-specific recovery plans that include
                                                                                and Reinvestment Act of                                                         is accurate.
                                                                                                        performance measures to assess the quantifiable
                                                                                2009
                                                                                                        outcome of the programs. The Memorandum also
                                                                                                        requires Agencies to consult with the OIG to
                                                                                                        establish procedures to validate the accuracy of
                                                                                                        information submitted on a statistical basis and/or
                                                                                                        risk-based approach as approved by OMB.




                                                                                                        The Recovery Act created a new, 2-year program
                                                                                                        to establish a Secondary Market Guaranty
                                                                                                        Authority for 504 loans. Under this program, SBA
                                                                                                        will issue guaranties for the sale of first lien
                                                                                                        position loans issued by private lenders under the
                                                                                                        504 program and develop a secondary market for          To determine whether: (1) SBA has established an
                                                                                Periodic Review of the  the purchase of these loans or pools of loans. The      adequate process for evaluating applications for
                                                                                Use of SBA's Secondary program is set to expire February 17, 2011. This         guaranties on pools of 504 first lien loans; and (2)
      SBA        504 Programs                    Performance       OIG Staff                                                                                                                                           Yes   Q4 FY 10      Q3FY 11             1
                                                                                Market Authority on 504 program results in SBA guaranties of first              SBA’s guaranties were properly applied to 504
                                                                                Loans                   mortgages made by private sector lenders to small       loans and the pools of guaranteed loans were sold
                                                                                                        businesses. Since these are not SBA delegated           to third party investors as required.
                                                                                                        lenders, they are not subject to SBA’s guidance
                                                                                                        and SOPs. Unlike participating 7(a) lenders, SBA
                                                                                                        has no recourse against these 504 lenders for
                                                                                                        loans poor underwriting and/or serviced. This
                                                                                                        greatly increases the risk of SBA losses.




                                                                                                         SBA guaranties loans that are made by
                                                                                                         participating lenders under a Guaranty Agreement
                                                                                                         to originate, service, and liquidate loans in
                                                                                                         accordance with SBA’s rules and regulations.
                                                                                                         When a loan defaults, the lender can request
                                                                                                         payment of the guaranty. SBA reviews loan
                                                                                                         documentation to evaluate the lender’s
                                                                                                         compliance with program rules and regulations.         To determine whether purchased loans were
                                                                                                         This review is SBA’s primary control for ensuring      originated, closed, and liquidated in accordance                          Q1 FY 11
                                                                                Audits of Purchased
                Loans and Loan                                                                           lender compliance and preventing improper              with SBA’s rules and regulations and commercially                         Q2 FY 11
      SBA                        $630,000,000    Performance       Contractor   Loans Made Under the                                                                                                                   No    Q4 FY 10                          4
                  Guaranties                                                                             payments. In the event of noncompliance, SBA           prudent lending standards for 7(a), 504 (including                        Q3 FY 11
                                                                                Recovery Act
                                                                                                         may be released from its liability on a loan           refinancing), and American Recovery Capital (ARC)                         Q4 FY 11
                                                                                                         guaranty, in full or in part. Previous OIG audits      loans.
                                                                                                         have identified material lender noncompliance in
                                                                                                         loan origination, closing, and liquidation that were
                                                                                                         not detected in SBA’s purchase review processes,
                                                                                                         resulting in improper payments. Increased lending
                                                                                                         under the Recovery Act, combined with limited
                                                                                                         SBA resources and higher default rates, put the
                                                                                                         Agency at risk for even higher improper payments.



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                                                                           OIG FY 2010 Recovery Act Work Plan

                                                                                          The Recovery Act is intended to stimulate small
                                                                                          business lending, increase access to credit, and
                                                                                                                                                To assess the effectiveness of SBA's programs in
                                                                                          improve secondary market liquidity. Periodic
                                                                                                                                                meeting the goals of the Recovery Act of increased
                                                                Review of the Recovery    reviews of program data will allow OIG to monitor
                Loans and Loan                                                                                                                  lending and job growth and to report to the
      SBA                         Performance      OIG Staff    Act's Impact on SBA       how effectively SBA's programs are meeting the                                                             Yes   Q4 FY 09     Q1 FY 10             1
                  Guaranties                                                                                                                    Agency any weaknesses in program data and how
                                                                Lending                   goals of the Recovery Act. These reviews will also
                                                                                                                                                data is being used to measure the effectiveness of
                                                                                          allow the OIG to identify program trends as they
                                                                                                                                                Recovery Act programs.
                                                                                          occur, as well as indicators of control weaknesses
                                                                                          or fraud.


                                                                                          Under the Recovery Act of 2009, the SBA received
                                                                                          $730 million to expand the Agency's lending and
                                                                Review of SBA's Job
                                                                                          investment programs and to create new ones to         To evaluate the reliability of lender-reported job
                                                                Creation Data Under the
                Loans and Loan                                                            aid small business owners and revitalize the          creation and retention statistics, which are being
      SBA                         Performance      OIG Staff    American Recovery and                                                                                                                No    Q4 FY 09     Q3 FY 10             1
                  Guaranties                                                              secondary market for SBA-guaranteed loans. Data       used as a major performance metric under the
                                                                Reinvestment Act of
                                                                                          reported on job creation and retention will be an     Recovery Act.
                                                                2009
                                                                                          important measure of the Recovery Act's success
                                                                                          and impact on the economy.


                                                                                                                                             To determine whether: (1) SBA has adequate
                                                                                                                                             controls in place over Recovery Act funds and the
                                                                                          In conjunction with the annual financial statement Recovery Act budget process is executed in
                                                                                          audit, OIG will modify the scope of its contract   accordance with Federal guidance; (2) SBA's
                                                                KPMG Audit of SBA's FY
                                                                                          with KPMG to include additional testing for        Office of Chief Financial Officer has established
                  Financial      Administrative/                2009 Financial
      SBA                                          Contractor                             Recovery Act activity. KPMG will assess the        general ledger accounts to properly track recovery      Yes   Q3 FY 09     Q1 FY 10             1
                 Management        Financial                    Statements - Statement
                                                                                          adequacy of SBA's internal controls to ensure that fund activity and has properly accounted for fixed
                                                                of Budgetary Resources
                                                                                          Recovery Act funds are properly tracked,           administrative costs; and (3) recorded spending
                                                                                          controlled, and reported.                          authority from offsetting collections are available
                                                                                                                                             for obligation and referenced to the appropriate
                                                                                                                                             authorizing legislation.


                                                                                          In conjunction with the annual financial statement
                                                                KPMG Audit of SBA's FY
                                                                                          audit, OIG will modify the scope of its contract      To determine whether SBA has adequate
                                                                2009 Financial
                  Financial      Administrative/                                          with KPMG to include additional testing for           accounting controls in place over loan guaranty
      SBA                                          Contractor   Statements - Credit                                                                                                                  Yes   Q3 FY 09     Q1 FY 10             2
                 Management        Financial                                              Recovery Act activity. KPMG will assess the           approvals, purchases, modifications and charge-
                                                                Receivables - Loan
                                                                                          adequacy of SBA's internal controls over the loan     offs.
                                                                Guaranties
                                                                                          guaranty process.

                                                                                          The Recovery Act established new reporting            To determine whether SBA has established a
                                                                                          requirements related to the award and use of          process to perform limited data quality reviews
                                                                Adequacy of Controls
                  Financial      Administrative/                                          funds to promote transparency. We will review         intended to identify material omissions and/or
      SBA                                          OIG Staff    over FY 2009 Recovery                                                                                                                No    Q4 FY 09     Q1 FY 10             1
                 Management        Financial                                              SBA’s process for monitoring recipient reporting of   significant reporting errors, and notify the
                                                                Act Recipient Reporting
                                                                                          Recovery Act funds for the quarter ending             recipients of the need to make appropriate and
                                                                                          September 30, 2009.                                   timely changes.

                                                                                          In conjunction with the annual financial statement
                                                                                                                                                To determine whether SBA: (1) has a system of
                                                                KPMG Audit of SBA's FY    audit, OIG will modify the scope of its contract
                                                                                                                                                quality controls for Recovery-Act related
                  Financial      Administrative/                2009 Financial            with KPMG to include additional testing for
      SBA                                          Contractor                                                                                   operational expenses; and (2) validates the          Yes   Q2 FY 09     Q1 FY 10             2
                 Management        Financial                    Statements - Operations   Recovery Act activity. KPMG will assess the
                                                                                                                                                accuracy of accrual amounts for a sample of
                                                                Expenses Testwork         adequacy of SBA's internal controls in place over
                                                                                                                                                expense categories.
                                                                                          operational expenses related to the Recovery Act.




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                                                                                           OIG FY 2010 Recovery Act Work Plan

                                                                                                                                                            To determine whether: (1) SBA has adequate
                                                                                                                                                            controls in place over Recovery Act funds and the
                                                                                                         In conjunction with the annual financial statement Recovery Act budget process is executed in
                                                                                                         audit, OIG will modify the scope of its contract   accordance with Federal guidance; (2) SBA's OCFO
                                                                                KPMG Audit of SBA's FY
                                                                                                         with KPMG to include additional testing for        has established general ledger accounts to
                  Financial                     Administrative/                 2010 Financial
      SBA                                                          Contractor                            Recovery Act activity. KPMG will assess the        properly track recovery fund activity and has             No     Q2 FY 10         Q1 FY 11             1
                 Management                       Financial                     Statements - Statement
                                                                                                         adequacy of SBA's internal controls to ensure that properly accounted for fixed administrative costs;
                                                                                of Budgetary Resources
                                                                                                         Recovery Act funds are properly tracked,           and (3) recorded spending authority from
                                                                                                         controlled, and reported.                          offsetting collections is available for obligation and
                                                                                                                                                            referenced to the appropriate authorizing
                                                                                                                                                            legislation.


                                                                                                         In conjunction with the annual financial statement
                                                                                KPMG Audit of SBA's FY
                                                                                                         audit, OIG will modify the scope of its contract     To determine whether SBA has adequate
                                                                                     2010 Financial
                  Financial                     Administrative/                                          with KPMG to include additional testing for          accounting controls in place over loan guaranty
      SBA                                                          Contractor     Statements - Credit                                                                                                                 No     Q2 FY 10         Q1 FY 11             2
                 Management                       Financial                                              Recovery Act activity. KPMG will assess the          approvals, purchases, modifications and charge-
                                                                                  Receivables - Loan
                                                                                                         adequacy of SBA's internal controls over the loan    offs.
                                                                                      Guaranties
                                                                                                         guaranty process.


                                                                                                                                                              To determine whether SBA: (1) performs internal
                                                                                                        In conjunction with the annual financial statement
                                                                                                                                                              control assessments to evaluate the risk of waste,
                                                                                                        audit, OIG will modify the scope of its contract
                                                                                                                                                              fraud, and/or abuse and identifies strategies to
                                                                                KPMG Audit of SBA's FY with KPMG to include additional testing for
                                                                                                                                                              prevent and timely detect waste, fraud, and abuse
                                                                                     2010 Financial     Recovery Act activity. KPMG will assess the
                  Financial                     Administrative/                                                                                               involving grants and operational expenses; (2) has
      SBA                                                          Contractor   Statements - Operations adequacy of SBA's internal controls in place over                                                             No     Q3 FY 10         Q1 FY 11             3
                 Management                       Financial                                                                                                   a system of quality controls for accrued grant
                                                                                  and Grant Expenses    the grant management/accounting processes,
                                                                                                                                                              liabilities and operational expenses in the financial
                                                                                       Testwork         which will include Microloan program grants
                                                                                                                                                              statement footnotes; and (3) validates the
                                                                                                        funded by the Recovery Act. We will also assess
                                                                                                                                                              accuracy of accrual amounts for a statistical
                                                                                                        controls over operational expenses.
                                                                                                                                                              sample of grants and operational expenses.


                                                                                                        Under the Recovery Act, SBA received $20 million      To determine whether SBA has: (1) adopted an
                                                                                                        to improve, streamline, and automate information      acquisition plan for the procurements that
                                                                                  Planning and Award technology systems related to lender processes           promote competition, protect the taxpayer, and
                                                                                Process for Information and lender oversight. SBA intends to issue a series   provide measurable outcomes; (2) ensured
                                                Administrative /
      SBA             Contracts   $20,000,000                      OIG Staff     Technology Contracts of contracts using various contract types and           contractors are qualified and that contracts            Yes   Q3 FY 09        Q3 FY 10          1 or more
                                                  Financial
                                                                                  Awarded Under the     methods. Because SBA plans to use contractors to      contained required Recovery Act provisions; and
                                                                                     Recovery Act       manage the award of these contracts and has few       (3) properly posted solicitations and contract
                                                                                                        staff to oversee them, there is an increased risk     awards to meet the transparency requirements of
                                                                                                        that the contracts may not be properly awarded.       the Recovery Act.


                                                                                                        SBA has designated six Recovery Act-funded
                                                                                                                                                              To determine whether SBA is (1) managing the IT
                                                                                                        projects totaling $20 million as high priority and
                                                                                                                                                              projects within cost, schedule, and performance
                                                                                   Management of IT     set ambitious deadlines for their implementation.
                                                Administrative/                                                                                               goals; and (2) complying with Federal laws and
      SBA        Performance                                       OIG Staff     Projects Funded By the The audit will examine how well SBA is managing                                                               No     Q3 FY 10         Q1 FY 11             1
                                                  Financial                                                                                                   regulations regarding the development and
                                                                                      Recovery Act      the Recovery Act projects, given concerns raised in
                                                                                                                                                              protection of Federal information systems and
                                                                                                        prior OIG reports about the Agency's oversight of
                                                                                                                                                              data.
                                                                                                        other IT projects.


                                                                                                         Because of the high risk associated with the award
                                                                                                         and expenditure of Recovery Act funds, OMB has
                                                                                                         re-emphasized the importance of providing
                                                                                                                                                              To determine whether: (1) SBA is providing
                                                                                Oversight of Information adequate oversight of Recovery Act contracts to
                                                                                                                                                              adequate oversight of IT contracts funded by the
                                                Administrative /                 Technology Contracts mitigate risks. Because SBA is largely using
      SBA             Contracts                                    OIG Staff                                                                                  Recovery Act; and (2) SBA appointed qualified           No    Q4 FY 10        Q1 FY 11               4
                                                  Financial                       Awarded Under the      contractors to oversee the $20 million in IT
                                                                                                                                                              contracting personnel to monitor contractor
                                                                                      Recovery Act       contracts that will be awarded with Recovery Act
                                                                                                                                                              performance.
                                                                                                         funds and may not have sufficient staff to oversee
                                                                                                         them, the audit will evaluate how well the
                                                                                                         contract oversight process is being managed.



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                                                                                     OIG FY 2010 Recovery Act Work Plan


                                                                                                  Early defaulted loans are those loans that default
                                                                                                  or demonstrate payment problems within 18
                                                                                                  months of disbursement. Previous OIG audits of
                                                                                                  early defaulted loans have determined that, in          To determine: (1) whether early-problem or early-
                                                                                                  some cases, lenders’ negligence in originating,         defaulted 7(a) Recovery Act loan were originated
                                                                               Audit of Early-    closing, and administering loans in full compliance     and closed in accordance with SBA's rules and
                Loans and Loan
      SBA                        $375,000,000   Performance   OIG Staff   Problem/Early-Defaulted with SBA requirements and prudent lending               regulations and commercially prudent lending         No   Q2 FY 10     Q3 FY 10             1
                  Guaranties
                                                                             Recovery Act Loans   practices did not protect the government’s              standards; and, (2) If not, whether noncompliance
                                                                                                  interest and resulted in an increased risk of loss to   with SBA's requirements led to the loan problem,
                                                                                                  SBA. As of December 31, 2009, 27 7(a) Recovery          default, or unnecassary losses
                                                                                                  Act loans have already been purchased by SBA and
                                                                                                  39 others have been transferred to liquidation,
                                                                                                  indicating payment problems or early default.



                                                                                                   In accordance with Office of Management and
                                                                                                   Budget's Recovery Act guidance, agencies are
                                                                                                   required to take steps, beyond standard practice,
                                                                                                   to initiate additional oversight mechanisms for
                                                                                                                                                          To: (1) assess SBAs oversight of high-risk lenders
                                                                                                   programs funded by the Recovery Act. At a
                                                                                                                                                          making loans under the Recovery Act; and
                                                                          SBA’s Oversight of High- minimum, agencies are to evaluate and
                Loans and Loan                                                                                                                            (2) evaluate the extent to which SBA has used
      SBA                        $630,000,000   Performance   OIG Staff     Risk Lenders Making demonstrate the effectiveness of standard                                                                      No   Q3 FY 10     Q1 FY 11             1
                  Guaranties                                                                                                                              Recovery Act funding to enhance its standard
                                                                            Recovery Act Loans     monitoring and oversight practices. Agencies are
                                                                                                                                                          monitoring and oversight practices of SBA’s
                                                                                                   also required to enhance performance
                                                                                                                                                          riskiest lenders.
                                                                                                   management and accountability processes, as well
                                                                                                   as implement appropriate internal controls
                                                                                                   assessments to define strategies to prevent and
                                                                                                   timely detect waste, fraud and abuse.




                                                                                                 In June 2009, SBA launched the America’s
                                                                                                 Recovery Capital (ARC) Loan Program, a
                                                                                                 temporary guaranteed loan program authorized
                                                                                                 by the Recovery Act. This program is intended to
                                                                                                 provide loans, on a deferred basis, to viable small      To determine whether SBA has: (1) implemented
                                                                                                 businesses that are experiencing immediate               adequate program controls and oversight of the
                Loans and Loan
      SBA                         $255,000      Performance   OIG Staff   SBA’s Arc Loan Program financial hardship. Loan proceeds must be used to        ARC Loan Program; and (2) taken steps to             No   Q3 FY 10      Q1 FY11             1
                  Guaranties
                                                                                                 make principal and interest payments on existing,        effectively identify and manage risks in the ARC
                                                                                                 qualifying business loans. This audit will               Loan Program.
                                                                                                 determine whether SBA’s implementation and
                                                                                                 oversight of the ARC Loan Program is adequate
                                                                                                 and if the Agency has taken effective steps to
                                                                                                 monitor and mitigate program risks.




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                                                                                    OIG FY 2010 Recovery Act Work Plan

                                                                                                  For SBA-approved loans, SBA determines the
                                                                                                  borrowers’ eligibility and credit risk and approves
                                                                                                  or declines the loans based on financial
                                                                                                  information and other required documentation
                                                                                                  submitted by lenders. Unlike lender-approved
                                                                                                  loans, if an SBA-approved loan defaults, generally
                                                                                                  the lender is not held responsible for poor
                                                                                                  underwriting decisions. Previous audits have          To determine if SBA is approving 7(a) Recovery Act
                Loans and Loan                                            SBA’s 7(A) Recovery Act identified that loans approved by SBA’s Loan          loans in accordance with its policies, procedures,
      SBA                        $630,000,000   Performance   OIG Staff                                                                                                                                      No   Q3 FY 10     Q1 FY 11             1
                  Guaranties                                               Loan Approval Process Guaranty Processing Center (LGPC) have a higher        and prudent lending standards in order to
                                                                                                  default rate and more material deficiencies than      minimize risk of loss.
                                                                                                  delegated lender-approved loans. Recently
                                                                                                  completed and ongoing reviews of Recovery Act
                                                                                                  loans have identified issues in SBA’s approval of
                                                                                                  change of ownership transactions, calculation of
                                                                                                  repayment ability, eligibility determinations,
                                                                                                  consideration of affiliates, and compliance with
                                                                                                  guaranty limits.




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