Small Business Administration: Few Reviews of Guaranteed Lenders Have Been Conducted
GGD-98-85
Published: Jun 11, 1998. Publicly Released: Jun 25, 1998.
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Highlights
Pursuant to a congressional request, GAO reviewed: (1) how the Small Business Administration (SBA) conducts on-site reviews to monitor participating lenders' compliance with its 7(a) loan program policies and procedures; and (2) what actions SBA is taking to comply with the preferred lender oversight provisions of the Small Business Programs Improvement Act of 1996 (SBPIA).
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Small Business Administration | The Administrator, SBA, should ensure that the required 7(a) lender oversight reviews are conducted. In this regard, the Administrator should establish organizational responsibilities and a mechanism for ensuring that information on the lender review process is collected, reported, and analyzed. This information should be useful in assessing the results of the review process and determining whether additional initiatives may be needed. | On August 17, 1999, the Administrator of SBA approved creation of an Office of Lender Oversight. SBA has developed procedures for oversight reviews of all of its lenders, including preferred lenders. According to SBA officials, the Office of Lender Oversight currently has about five staff members, including the senior executive that leads the Office. SBA and its contractor periodically (normally on an annual basis) conduct oversight reviews of each of its preferred lenders. In addition to preferred lender reviews, SBA's Small Business Lending Companies (SBLCs) are examined for safety and soundness. The preferred lender review group, which is centralized in Kansas City, reports to the... Office of Lender Oversight. The Office of Lender Oversight is in charge of the SBLC examinations. SBA district offices still conduct reviews of other lenders, but they follow the guidelines established by SBA. In addition, the Office of Lender Oversight counsels the district offices to ensure that required reviews are conducted.
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| Small Business Administration | The Administrator, SBA, should develop and implement a mechanism to satisfy its supervision and examination function for small business lending companies. |
SBA and the SBA's Inspector General entered into a contract with the Farm Credit Administration (FCA) to examine the Small Business Lending Companies (SBLCA). As of August 1999, all 12 active SBAs have been examined once. SBA is negotiating with FCA to continue this examination function and is exploring possible mechanisms to fund the examination function.
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Government guaranteed loansLending institutionsLoan accounting systemsRegulatory agenciesReporting requirementsSmall business loansSmall businessFinancial institutionsCompliance oversightLoan guarantees