Paycheck Protection Program (PPP) Loan Forgiveness

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Program level Payment Integrity results

Sponsoring agency: Small Business Administration

View on Federal Program Inventory

PROGRAM METRICS

$46,281 M

in FY 2023 outlays, with a

59.5%

payment accuracy rate

PROGRAM METRICS

$1,507 M

in FY 2024 outlays, with a

74.8%

payment accuracy rate

PROGRAM METRICS

$304 M

in FY 2025 outlays, with a

80.8%

payment accuracy rate

  • Improper payment estimates over time
    View as:

    Chart toggle amounts:
    Proper payments
    Overpayment
    Underpayment
    Technically improper
    Unknown

Payment Integrity results

  • FY 2023 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    04/2022 - 03/2023


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-3.0

  • Actions taken & planned to mitigate improper payments

    Mitigation strategy Description of the corrective action Completion date Status
    Training
    Training was provided to SBA review staff on the following topics and issues related to PPP Forgiveness. Reviewers are trained to review loan and portfolio data including to confirm borrower eligibility and confirm, the loan amount calculation to ensure the borrower did not apply for a loan forgiveness amount in excess of the maximum eligible loan amount. In addition, reviewers are trained on the process of confirming that the forgiveness amount requested is in accordance with PPP rules, that payroll costs are reasonable, ad that non- payroll costs are adequately documented.
    FY2023 Q4
    Completed
    Training
    SBA will continue to provide training to review staff on topics and issues related to PPP Forgiveness.
    FY2024
    Planned

Overpayments

The CARES Act established the Paycheck Protection Program (PPP) loans to provide economic relief to small businesses and incentivize small businesses to keep their workers on the payroll because of the COVID-19 pandemic. The PPP loans can be forgiven if the funds are used for payroll costs, interest on mortgages, rent, utilities, or other eligible expenses. A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. SBA reviewed the forgiveness applications and documentation from lenders for forgiveness already paid to the borrower. If SBA determined that the loan was not eligible for forgiveness (in whole or in part), the payment was considered to be improper; the PPP loan is no longer deferred; and, the borrower must begin paying principal and interest.
Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $873.93 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $873.93 M

Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $0 M

Overpayment type Eligibility element/information needed Eligibility amount
Overpayments Within Agency Control Financial $873.93 M

Overpayment type Mitigation strategies taken Mitigation strategies planned
Overpayments within the agency’s control Training Training

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $22.12 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $22.12 M

Eligibility element/information needed Eligibility amount
Financial $22.12 M

Mitigation strategies taken Mitigation strategies planned
Training Training

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$22.12 M

Unknown Payment Details

In response to the FY 2023 PIIA Compliance Audit conducted by OIG, the SBA separated PPP into three payment integrity reporting categories – PPP Approvals, PPP Forgiveness, and PPP Purchases, and subsequently initiated the improper payments review process shortly after. SBA generated the loan sample and requested supporting documentation from lenders. In many instances, PPP loans forgiveness requests were submitted via SBA’s forgiveness platform and, although the lenders and borrowers were required to retain supporting documentation, they were not required to submit that documentation to SBA. For several of the PPP loans reviewed as part of the forgiveness sample, lenders had to request documents from borrowers. SBA asked lenders to submit their documents as soon as possible. As a result of the compressed time between documentation requests and reporting improper payment rates, many borrowers and lenders were unable to provide complete documentation. Those PPP loans with documentation requests outstanding were categorized as “Unknown” payments since SBA did not have sufficient supporting documentation to make a determination as to whether the forgiveness payment was proper or improper.

The amount of payments that could either be proper or improper but the agency is unable to determine whether they were proper or improper as a result of insufficient or lack of documentation is $17,842.22 M


Cause of insufficient or lack of documentation & why the documentation is needed for determination of payment type
Payment cause Amount Description of the documentation that was not provided and explanation of why the program is unable to conclude whether the payment is proper or improper without that documentation
Applicants $17,842.22 M In the forgiveness sample of 382 loans, lenders did not return sufficient supporting documentation for 193 loans. The following were among the missing information from lenders/borrowers: (1) documentation to support payroll, (2) documentation to support the loan amount/inability to support the maximum loan amount, (3) documentation to support eligibility or PPP 2nd draw eligibility, (4) documentation to support the forgiveness calculation, and, (5) documentation to support revenue reduction.

Mitigation strategies taken Mitigation strategies planned
Training Training

Evaluation of corrective actions

Managers are held accountable, through annual performance appraisal criteria for payment integrity and meeting the program's Improper Payment and Unknown Payment reduction targets. Performance goals are established annually and include the overall management of the Improper Payment program.

Future payment integrity outlook

Paycheck Protection Program (PPP) Loan Forgiveness has established a baseline.

SBA anticipates that corrective actions--training --will serve to lower the improper
payment rate in the coming year.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $2,344.88 M
Current year +1 estimated future improper payments $43.15 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 1.84 %
Current year +1 estimated future improper payment and unknown payment reduction target 1.84 %

The program's current year improper payment and unknown payment rate of 40.49 % may or may not be the tolerable rate. The agency has not yet determined the tolerable rate for this program.

The CARES Act established the Paycheck Protection Program (PPP) loans to provide economic relief to small businesses and incentivize small businesses to keep their workers on the payroll because of the COVID-19 pandemic. Funding for this program ended in 2021, with no new funds advanced. As PPP loans are forgiven, outstanding PPP loans will eventually be reduced to a nominal amount. Because of this, no tolerable rate has been established.

The agency has what is needed with respect to internal controls, human capital and information system and other infrastructure to reduce Improper Payments and Unknown Payments.

No additional resources for this program were requested.

Additional programmatic information

  • FY 2024 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    04/2023 - 03/2024


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-4.05

  • Actions taken & planned to mitigate improper payments

    Mitigation strategy Description of the corrective action Completion date Status
    Change Process
    None of the choices provided apply to SBA's corrective actions related to this program. Nevertheless, a choice of action is required. Change process is selected as it most closely matches the actions SBA is taking. Processes are ongoing. Corrective actions to address the improper payments identified may include, but are not limited to, the following: (1) implementing a quality control review process and/or (2) internally escalating the loan review of a loan for a loan review decision.
    The corrective action was not fully completed this reporting period
    Not Completed
    Change Process
    None of the choices provided apply to SBA's corrective actions related to this program. Nevertheless, a choice of action is required. Change process is selected as it most closely matches the actions SBA is taking. Corrective actions to address the improper payments identified may include, but are not limited to, the following: (1) implementing a quality control review process and/or (2) internally escalating the loan review of a loan for a loan review decision.
    FY2025
    Planned

Overpayments

PPP Loan Forgiveness payments are reviewed after the SBA has paid forgiveness to the borrower. SBA reviewed borrower and lender documentation to determine whether the borrower was eligible, whether the loan was free of “hold” codes, and whether required documentation was completed and accurate. SBA also reviewed forgiveness payments to determine whether the loan amount was documented and calculated correctly. The predominate reasons for improper payments in PPP Loan Forgiveness were missing or incomplete documentation, and borrower and lender errors in calculation.
Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $292.25 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $292.25 M

Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $0.0 M

Overpayment type Eligibility element/information needed Eligibility amount
Overpayments Within Agency Control Financial $292.25 M

Overpayment type Mitigation strategies taken Mitigation strategies planned
Overpayments within the agency’s control Change Process Change Process

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $25.57 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $25.57 M

Eligibility element/information needed Eligibility amount
Financial $25.57 M

Mitigation strategies taken Mitigation strategies planned
Change Process Change Process

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$25.57 M

Unknown Payment Details

Unknown payments in FY2024 were the result of borrowers or lenders which did not provide requested documentation. Those PPP loans with documentation requests outstanding were categorized as “Unknown” payments since the SBA did not have sufficient supporting documentation to make a determination as to whether the forgiveness payment was proper or improper.

The amount of payments that could either be proper or improper but the agency is unable to determine whether they were proper or improper as a result of insufficient or lack of documentation is $61.26 M


Cause of insufficient or lack of documentation & why the documentation is needed for determination of payment type
Payment cause Amount Description of the documentation that was not provided and explanation of why the program is unable to conclude whether the payment is proper or improper without that documentation
Applicants $61.26 M Borrowers failed to provide documentation supporting eligible payroll, or documentation supporting the amount of the loan forgiveness requested.

Mitigation strategies taken Mitigation strategies planned
Change Process Change Process

Evaluation of corrective actions

The predominate reasons for improper payments in PPP Loan Forgiveness were missing or incomplete documentation, and borrower and lender errors in calculation. A quality control review or internal escalation may help to catch these improper payments.

Corrective actions are focused on addressing the cause of the improper payment.

The predominate reasons for improper payments in PPP Loan Forgiveness were missing or incomplete documentation, and borrower and lender errors in calculation. A quality control review or internal escalation may help to catch these improper payments.

The predominate reasons for improper payments in PPP Loan Forgiveness were missing or incomplete documentation, and borrower and lender errors in calculation. A quality control review or internal escalation may help to catch these improper payments.

Future payment integrity outlook

Paycheck Protection Program (PPP) Loan Forgiveness has established a baseline.

SBA has set a reduction target for PPP Loan Forgiveness at 10.0 percent, the statutory limit, for FY2025. Meeting this reduction target will also bring this program into compliance with the Payment Integrity Information Act (PIIA).

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $302.64 M
Current year +1 estimated future improper payments $30.26 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 10.0 %

The program's current year improper payment and unknown payment rate of 25.15 % may or may not be the tolerable rate. The agency has not yet determined the tolerable rate for this program.

SBA has not established a tolerable rate for PPP Loan Forgiveness as loans under the PPP are no longer being made. With each loan forgiveness payment the program gets smaller and smaller.

The agency has what is needed with respect to internal controls, human capital and information system and other infrastructure to reduce improper payments and unknown payments to the reduction target.

No additional resources were requested in the most recent budget submission of the agency to establish and maintain payment integrity.

Additional programmatic information

The CARES Act established the Paycheck Protection Program (PPP) loans to provide economic relief to small businesses and incentivize small businesses to keep their workers on the payroll because of the COVID-19 pandemic. The SBA separated PPP into three payment integrity reporting categories – PPP Approvals, PPP Forgiveness, and PPP Purchases. PPP ended in May 2021. Although no new PPP funds are being disbursed, borrowers may still request forgiveness for a PPP loan and lenders may request guaranty purchase of a PPP loan. SBA is reporting under PIIA on these aspects of the program.
The PPP loans can be forgiven if the funds are used for payroll costs, interest on mortgages, rent, utilities, or other eligible expenses. A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to up to 5 years from the date that SBA issued the loan number. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.

PPP loan forgiveness requests were submitted via SBA’s forgiveness platform and, although the lenders and borrowers were required to retain supporting documentation, they were not required to submit that documentation to the SBA. In FY2024, SBA requested supporting documentation from lenders in order to review to propriety of PPP forgiveness samples. SBA reviewed samples to determine whether the borrower was eligible for an SBA loan under 13 CFR 120.110, and whether the borrower met all other regulatory criteria for a PPP loan.

Accountability for detecting, preventing, and recovering improper payments

Review standards are established as part of the agency's annual appraisal process. These standards hold managers accountable for meeting applicable reduction targets, preventing improper payments, and promptly detecting and recovering overpayments.

  • FY 2025 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    04/2024 - 03/2025


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-3.0

Causes

PPP Loan Forgiveness payments are reviewed after the SBA has paid forgiveness to the borrower. SBA reviewed borrower and lender documentation to determine whether the borrower was eligible, whether the loan was free of “hold” codes, and whether required documentation was completed and accurate. SBA also reviewed forgiveness payments to determine whether the loan amount was documented and calculated correctly.

The predominate reasons for improper payments in PPP Loan Forgiveness were missing or incomplete documentation, and borrower and lender errors in calculation at loan origination.

Unknown payments in FY2025 were the result of borrowers or lenders which did not provide requested documentation substantiating the amount forgiven. Those PPP loans with documentation requests outstanding were categorized as “Unknown” payments since the SBA did not have sufficient supporting documentation to make a determination as to whether the forgiveness payment was proper or improper.

Borrowers failed to provide documentation supporting eligible payroll, or documentation supporting the amount of the loan forgiveness requested.

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $57.06 M
Amount of overpayments outside the agency's control $0.0 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
Amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
Amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $57.06 M

Underpayment root cause Underpayment amount
Amount of underpayments $0.8 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $0.0 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $0.8 M

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

The amount that could either be proper or improper but the agency is unable to determine whether it was proper or improper as a result of insufficient or lack of documentation $0.53 M

Prevention

Corrective actions for the PPP Forgiveness Program were implemented to address the primary root cause of improper payments, which was insufficient or incomplete lender documentation to substantiate forgiveness amounts. The agency implemented a quality control review process that included risk-based manual reviews of forgiveness payment files, internal escalation of loans requiring additional review, and enhanced audit procedures to verify eligibility and payment accuracy.

In addition, the agency conducted targeted outreach and training for lenders to reinforce documentation requirements, calculation standards, and responsiveness expectations. These efforts were designed to reduce recurring documentation deficiencies identified during quality assurance and post-forgiveness reviews and to promote consistent application of program requirements across lenders. Training and audit activities continue throughout the review and recoupment phases to address root causes and prevent recurrence of improper payments.

The agency has not yet finalized the process for PPP Post Forgiveness reviews; however, once the process is approved the SBA will begin recapturing improper payment funds which could not be resolved through the receipt of supporting documentation.
Corrective actions for PPP Forgiveness Process are structured based on the root cause of the improper payment and the severity of the associated harm to the agency. Improper Payments and Unknown Payments in this program primarily occurred as a result of missing or incomplete Lender/borrower documentation prohibiting the SBA's ability to verify borrower eligibility. To address these issues, SBA reviewed lender-submitted documentation to validate applicably eligibility criteria and confirm that key business information was accurate. These corrective actions directly target the underlying causes of the improper payments and are proportional to the risk and impact of each deficiency. When improper guaranty payments are identified, SBA initiates recapture actions and requires lenders to provide any missing or clarifying documentation. Planned corrective actions include continuing these recapture efforts and reinforcing the need for lenders to submit complete and timely documentation to support PPP Forgiveness requests. Collectively, these measures strengthen program oversight and reduce the likelihood of future Improper Payments and Unknown Payments.

Corrective actions for PPP Forgiveness requests are implemented and prioritized based on the predominant reason for the Improper Payment, ensuring that the agency’s efforts directly address the underlying cause. These actions focus on strengthening payment reviews and eligibility checks to prevent the recurrence of errors related to payroll verification and borrower business eligibility. When an improper guaranty payment is identified, SBA initiates recovery by demanding repayment from the lender and requiring any outstanding or clarifying documentation needed to substantiate the original eligibility determination.

The agency provides feedback to the lender and applicable SBA employees regarding process and policy errors resulting in the improper payment to ensure consistent understanding and application of program requirements. These corrective actions are adequate to address the root causes of Improper Payments and Unknown Payments and have contributed to improvements in program compliance and payment accuracy. As implementation continues, the actions are expected to further reduce Improper Payments and Unknown Payments within the PPP Forgiveness program.

Payment type Mitigation strategies taken Mitigation strategies planned
Overpayments Audit, Training Audit, Training
Underpayments Audit, Training Audit, Training
Unknown payments Audit,Training Audit,Training

Eligibility element/information needed Description of the eligbility element/information
Financial The financial position or status of a beneficiary, recipient, or their family

Additional information

Reduction target

10.0 %

The agency has established sufficient internal controls, human capital, and information system infrastructure to reduce improper and unknown payments to a level at which additional investments would not be cost-beneficial. In its most recent budget submission, the agency requested the maintenance of current resource levels to support workforce capacity and operational activities necessary to sustain payment integrity during PPP Forgiveness testing, recoupment, and closeout, including post-forgiveness reviews, improper payment identification, and recovery efforts. Existing controls—such as risk-based reviews, eligibility validations prior to payment, and post-payment quality assurance—resulted in the identification and recapture of improper payments reviewed, and further expansion of review activities beyond statistically valid sampling would exceed the marginal benefit of additional prevented or recovered payments. Accordingly, the agency has determined that current resource levels and controls represent the most cost-effective approach for mitigating improper payments during the recoupment and closeout phase.

In the most recent budget submission, the agency requested to maintain current resources to support workforce capacity and operational activities required to ensure payment integrity of the PPP Forgiveness Process during testing, recoupment, and closeout. These resources are intended to support staff responsible for post-forgiveness reviews, improper payment identification, recovery efforts, and closeout activities. Despite overall resource constraints in fiscal year 2025, the program prioritized available staffing and funding to sustain payment integrity functions and ensure compliance through the recoupment and closeout phase.

As a means to reduce and/or eliminate the occurrence of improper payments, a Corrective Action Plan has been developed for the program. In addition, managers are held accountable for meeting the program's improper payment rate and unknown payment rate reductions targets. Senior management is responsible for implementing a Quality Control review process. In addition, senior management has established and maintained sufficient and appropriate control environment.

$0.8 M