The Small Business Administration, which received $730 million under the American Recovery and Reinvestment Act to increase the availability of credit to small businesses, is making claims about the number of "jobs saved" that are “unclear” and “misleading” and which cannot be verified, according to a report issued by the agency’s inspector general.
“The lack of a definition for ‘jobs retained’ and the discrepancy in the forms used to collect job statistics from 7(a) borrowers and lenders has resulted in a performance metric with questionable clarity and transparency,” the inspector general said.
Under the Recovery Act, the SBA is required to report job creation and retention statistics in its monthly Recovery Act Program Performance Report, which is published on its Web site.
Neither of SBA’s two major loan programs, known as the 7(a) program and the 504 loan program, require loan recipients to tell the government whether those loans helped them to create or save jobs, the IG noted. But the banks and financial institutions that loan out the money do require small businesses to state on their loan applications how many employees they have.
From this data, lenders determine the number of jobs created and retained and send the information to SBA. According to the inspector general, however, only one of the programs asks on its application about how many job are to be saved -- the 504 program.
“In the 504 loan program, where job creation and retention is a program criteria, applicants are required to report the number of current employees, jobs to be created in the next 2 years, and jobs to be retained because of the loan,” the IG report said.
Applicants for the 7(a) program, however, are only required to report on their application the number of employees at the time of application and the number of employees “if [the] loan is approved.”
“In SBA’s Recovery Act Program Performance Report, the same term is effectively used to describe total employment in the 7(a) program and jobs at risk of being lost in the 504 program, which results in unclear and misleading reporting,” the IG report noted.
Because the SBA hasn't defined for lenders what constitutes “jobs saved” for the 7(a) program, “lenders are generally reporting all existing jobs at the applicant’s business as ‘jobs retained,’” the report noted.
The inspector general report was based on audited information provided by banks and financial institutions on 30 loans made under each program in 2009.