EDA Needs to Improve Oversight of CARES Act Revolving Loan Funds to Ensure Loans Are Made to Eligible Borrowers and Used as Intended

Excerpt:  “The U.S. Economic Development Administration’s (EDA’s) role in disaster recovery is to facilitate the timely and effective delivery of federal economic development assistance. EDA provides investments through its Economic Adjustment Assistance program to support a wide range of activities, including revolving loan funds (RLFs). Through the RLF program, EDA provides grants to eligible recipients (also referred to as ‘RLF operators’) to operate a lending program that offers low-interest loans primarily to small businesses in the geographic areas that these organizations support that cannot get traditional financing (for example, from banks). … Overall, we found that loan costs claimed by the RLF operators were not allowable, allocable, and reasonable. Specifically, we found that the four operators awarded 11 of the 19 loans (58 percent), totaling $4,020,050, to ineligible borrowers that did not meet the eligibility criteria in the operators’ respective RLF operational plan, and borrowers did not use the RLF funds for the purpose intended by the CARES Act. As a result, we are questioning $4,020,050 in loan funds. In addition, we found RLF operators with 20 percent or more loans that were delinquent, in default, or written off, and EDA did not identify this as an area of concern.”