OIG Final Report 22-15 SBA's Award and Payment Practices in the SVOG Program

Source document: OIG Final Report 22-15 SBA's Award and Payment Practices in the SVOG Program SVOG Program; document type: inspector-general-sigpr-reports.

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SBA’S AWARD AND PAYMENT PRACTICES IN THE
SHUTTERED VENUE OPERATORS GRANT PROGRAM
REPORT NUMBER 22-15 | JULY 5, 2022
S B A   I N S P E C T O R   G E N E R A L      I N S P E C T I O N   R E P O R T

          E
S

 XECUTIVE  UMMARY

SBA’S AWARD AND PAYMENT PRACTICES IN THE SHUTTERED
VENUE OPERATORS GRANT PROGRAM
Report 22-15
July 5, 2022
What OIG Reviewed
We
inspected
the
U.S.
Small
Business
Administration’s (SBA) award and payment
practices used to administer the Shuttered Venue
Operators Grant (SVOG) program.
On December 27, 2020, the Economic Aid to Hard-
Hit Small Business, Nonprofits, and Venues Act
authorized SBA to administer the SVOG program.
SBA had $16.25 billion available to award to
eligible
venues
that
experienced
economic
hardship from the COVID-19 pandemic. As of
September 20, 2021, SBA awarded 11,974 grants
totaling $9.7 billion.
Our objectives were to determine if SBA 1)
disbursed awards in accordance with SVOG
program policy, and 2) ensured a recipient’s
approved budget accurately summarized the
financial plan for the award amount in accordance
with federal guidelines.
We reviewed applicable public laws, federal grant
regulations, policies and procedures. We reviewed
SBA’s Oversight and Audit Plan for the program
and interviewed program officials. We selected 10
awards totaling $33.2 million to use as a sample to
test SBA’s disbursement and budget approval
practices.
What OIG Found
Even after determining multiple disbursements
would better protect grant funds from fraud or
misuse, SBA switched to a riskier single advance
payment for all grantees. This payment method
may have hastened award disbursement, but the
agency removed internal controls that would have
better
protected
taxpayer
funds.
Multiple
disbursements enable program officials to verify
that grant recipients used award funds for
allowable activities before disbursing additional
funds. As a result, SBA is unable to monitor the
grantee’s use of the proceeds until the end of the
award when closing out the grant.
None of the 10 awards reviewed had the proper
documentation
signed
by
an
authorized
government official. Only authorized officials can
commit the government to awarding federal funds.
The authorizing agency signature on the notice of
award demonstrates that the proper procedure has
been followed and the obligation has been officially
recorded. This is a critical control that serves as a
safeguard to protect funds from unauthorized use.
Without the proper official documentation, all 10
awards we reviewed, totaling $33.2 million, are
unauthorized commitments.
Program officials did not ensure it had adequate
support for the grant amounts in 3 of the 10 awards
we reviewed. SBA awarded these three recipients
$2.6 million above amounts that were requested.
The higher grant award amounts did not
correspond to their budgets, nor was there
supporting documentation to show why SBA
awarded the higher amounts.
In addition, SBA did not consistently ensure the
recipient’s budget accurately summarized the
financial plan for the award amount. Awards made
to 1,849 recipients, totaling $1.49 billion, did not
have a budget that reconciled to the award amount.
It is essential that SBA approve budgets that match
the award amount to hold grant recipients
accountable for meeting program requirements.
OIG Recommendations
We
made
six
recommendations
for
SBA
management to ensure SBA properly safeguards
program funds and improves disbursement and
award procedures while administering the SVOG
program.
Agency Response
SBA management agreed or partially agreed with
four recommendations and disagreed with two.
Management’s planned actions resolve all six
recommendations.
SBA
plans
to
use
risk
assessments for future disaster grant program
award disbursements. SBA also implemented
procedures to make award amounts match
budgets. SBA managers stated they maintained
digital evidence to document that government
officials approved the SVOG awards and had
reviewed the three awards that received an
overpayment. Finally, SBA plans to assess whether
management should continue to waive prior
approval for budget line item changes.

Office of Inspector General
U.S. Small Business Administration

DATE:
July 5, 2022

TO:

Isabella Casillas Guzman

Administrator

FROM:
Hannibal “Mike” Ware
Inspector General

SUBJECT:
SBA’s Award and Payment Practices in the Shuttered Venue Operators Grant
Program

This report presents the results of our inspection of SBA’s Award and Payment Practices in
the Shuttered Venue Operators Grant Program. We considered management’s comments on
the draft of this report when preparing the final report. We also reviewed additional
documentation that SBA management provided to respond to the draft report.
We made six recommendations to ensure disbursement and award procedures are
improved to safeguard SVOG and future disaster funds. SBA management agreed or
partially agreed with four recommendations and disagreed with two recommendations.
Management’s planned or implemented actions resolve all six recommendations.
We appreciate the cooperation and courtesies provided by your staff. If you have any
questions or need additional information, please contact Christina Sweet, Director of
Business Development Program Group, or Andrea Deadwyler, Assistant Inspector General
for Audits, at (202) 205-6586.

cc:
Arthur Plews, Chief of Staff

Therese Meers, Acting General Counsel

Peggy Delinois Hamilton, Special Counsel for Enterprise Risk

Francisco Sanchez Jr, Associate Administrator, Office of Disaster Assistance
Joshua Barnes, Acting Deputy Associate Administrator, Office of Disaster Assistance
Katherine Aaby, Associate Administrator, Office of Performance Planning, and the
Chief Financial Officer
Erica Gaddy, Deputy Chief Financial Officer
Michael Simmons, Attorney Advisor, Office of General Counsel

Tonia Butler, Director, Office of Internal Controls

Table of Contents
Introduction ............................................................................................................................................................ 1
Objective ............................................................................................................................................................. 1
Finding: SBA Award and Payment Practices Increased Risk and Vulnerabilities in SVOG
Program .................................................................................................................................................................... 2
Single Disbursement ...................................................................................................................................... 3
Award Notices .................................................................................................................................................. 3
Award Amounts ............................................................................................................................................... 4
Budget Revisions ............................................................................................................................................. 5
Budget Approvals ............................................................................................................................................ 6
Table 1. Grant Awards that Did Not Match Approved Budgets, as of September 20,
2021 ............................................................................................................................................................. 7
Grant Awards Greater Than Approved Budgets ......................................................................... 7
Grant Awards Less Than Approved Budgets ............................................................................... 8
Recommendations .......................................................................................................................................... 8
Analysis of Agency Response ........................................................................................................................... 9
Summary of Actions Necessary to Close the Report .......................................................................... 9
Recommendation 1 ............................................................................................................................. 10
Recommendation 2 ............................................................................................................................. 10
Recommendation 3 ............................................................................................................................. 10
Recommendation 4 ............................................................................................................................. 11
Recommendation 5 ............................................................................................................................. 11
Recommendation 6 ............................................................................................................................. 12
Appendix I: Objective, Scope, and Methodology .................................................................................... 13
Objectives .........................................................................................................................................................13
Scope and Methodology ..............................................................................................................................13
Use of Computer-Processed Data ............................................................................................................13
Prior Audit Coverage ....................................................................................................................................14
Appendix II: Monetary Impact ...................................................................................................................... 15
Table 2. OIG Schedule of Questioned Costs for SVOG Awards Reviewed ................................15
Appendix III: Management Comments ...................................................................................................... 16

1
Introduction
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act was signed
into law on December 27, 2020. It included $15 billion in grants to operators of shuttered
venues to be administered by the U.S. Small Business Administration (SBA) Office of
Disaster Assistance. Eligible shuttered venues are live venue operators or promoters,
theatrical producers, live performing arts organization operators, relevant museum
operators, including zoos and aquariums (who meet specific criteria), motion picture
theater operators, and talent representatives. To be eligible, these entities had to have been
fully operational on February 29, 2020.1
The Economic Aid Act states that an eligible person or entity may use amounts received
from the SVOG for payroll, rent and utility payments, scheduled mortgage and other
covered debt payments, worker protection expenditures, and payments to independent
contractors, as well as other ordinary business expenses. These other expenses could
include maintenance, administrative, taxes, operating leases, insurance, and advertisement
costs. However, grant expenditures should not primarily consist of advertisement and
production costs, with exceptions as noted in the law.
For an eligible entity that was in operation on January 1, 2019, the grant amount cannot
exceed $10 million or 45 percent of the 2019 gross earned revenue, whichever is less. For
an eligible entity that began operation after January 1, 2019, the grant amount cannot
exceed $10 million or six times the average monthly gross earned revenue for every full
month during 2019, whichever is less. The Economic Aid Act set aside $2 billion of SVOG
funds for small businesses with less than 50 employees.
On March 11, 2021, the American Rescue Plan Act of 2021 was enacted and provided an
additional $1.25 billion in grants,2 increasing the available SVOG funding to $16.25 billion.
As of March 7, 2022, SBA awarded 12,881 grants totaling $10.9 billion and 9,219 in
supplemental grants totaling $3.23 billion, leaving a remaining balance of $2.12 billion.
Objective
Our objectives were to determine whether SBA disbursed awards in accordance with SVOG
program policy and ensured recipients’ approved budgets accurately summarized the
financial plan for the award amount in accordance with 2 CFR § 200.308.

1 Public Law 116-260, Section 324 (December 27, 2020).
2 Public Law 117–2, Title V, Section 5005 (2021).

2
Finding: SBA Award and Payment Practices Increased
Risk and Vulnerabilities in SVOG Program
SBA launched the SVOG program, unprecedented in its scope and purpose, to provide
economic relief and stimulus in response to a national economic crisis. The Economic Aid
Act specifically required SBA to increase oversight of eligible entities receiving SVOG, which
included requesting from grantees additional documentation and reviewing spending
activities. The Economic Aid Act also required SBA to submit an Oversight and Audit Plan
that included SBA’s policies and procedures that it would use to govern the program.
However, SBA made changes to its Oversight and Audit Plan while awarding the initial
grants to disburse all grant awards as single advanced payments regardless of the risk
assessed for the recipient. This change eliminated the requirement for moderate and high-
risk grant recipients to report on how they used the award funds before SBA disbursed
additional funds. This change weakened SBA’s ability to oversee the program and ensure
the grant recipients used funds appropriately during the grant performance period.
In addition to the Economic Aid Act requiring SBA establish an Oversight and Audit Plan, an
Office of Management and Budget (OMB) memorandum required SVOG program officials to
follow federal grant regulations in 2 CFR 200.3 They were also expected to implement
applicable federal guidance and establish SBA policies to effectively manage and oversee
the grant program. When applied, these federal guidelines ensure that grants funds are
properly safeguarded, accounted for, and used for their intended purpose. However, we
found SBA did not follow fundamental grant management controls intended to protect
taxpayer funds.
We found these internal control weaknesses need to be addressed to safeguard taxpayers’
funds in the SVOG program:
• Single disbursement. SBA officials changed all disbursements to single payments
regardless of their risk classification.
• Award notices. SVOG notices of award were issued without government authorized
approval signatures.
• Award amounts. SBA made some awards without sufficient documentation
supporting the award amounts.
• Budget revisions. SBA allowed grantees to make budget changes without the
agency’s prior approval.
• Budget approval. SBA inconsistently approved grantee budgets that did not
reconcile to grant awards.
Although federal regulations offer certain flexibilities in adjusting award conditions,
agencies must consider the applicant’s history of compliance with the terms and conditions
of a federal award alongside other factors when determining appropriate award.4 SVOG is a
new program with a large number of first-time federal grant recipients, which could

3 OMB M-21-20, Promoting Public Trust in the Federal Government through Effective Implementation of the American
Rescue Plan Act and Stewardship of the Taxpayer Resources, p. 2 (2021).
4 2 CFR § 200.208(b) - Special conditions.

3
involve higher risk. For these reasons, the program requires a reliable risk framework,
consistent application of federal regulations, and robust monitoring controls for effective
oversight.
Single Disbursement
On February 10, 2021, SBA submitted its Shuttered Venue Oversight and Audit Plan, as
required by the Economic Aid Act, to the House Committee on Small Business and Senate
Committee on Small Business and Entrepreneurship. SBA defined the risk level of grantees
as low, moderate, or high depending on venue type and grant award amount. The plan
specified that recipients having a moderate or high risk would have award funds
distributed in two or more disbursements.
The plan also included monitoring activities to mitigate risks associated with the
disbursement of funds. For instance, after the first disbursement the recipient was required
to provide relevant documentation to further verify revenue loss and the use of funds from
the first disbursement. SBA planned to review the submitted documents before disbursing
additional funds.
Four months later, on June 10, 2021, SBA changed its original plan of risk-based fund
disbursement to a single disbursement for all grantees, whether they were deemed low,
moderate, or high risk. SBA’s decision to advance the full award for all grant recipients in a
single payment limits its ability to detect misuse of SVOG funds. Multiple disbursements
would have allowed SBA to detect potential misuse before disbursing additional funds to
recipients considered to present a high or moderate risk to the program. The use of
multiple disbursements allows for interim financial reporting on the use of funds before
disbursement of the next installment. SBA had planned to base the next payment on the
reliability of documents supporting the interim financial reports. This process, if SBA had
adhered to it, would have given SVOG officials the opportunity to advise moderate and
high-risk grant recipients on allowable costs and acceptable federal financial reporting
before disbursing the full amount of the award.
SBA communicated this change to OMB and White House officials, but did not communicate
it to the public until a month after implementation. SBA did not formally notify members of
Congress of these changes until December 2021, when it submitted the revised Oversight
and Audit Plan. Also, in SBA’s revised Oversight and Audit Plan, management did not
address how funds would be disbursed, which is a critical component in properly
administering this new program and safeguarding taxpayer funds.
Award Notices
Federal standards for internal controls requires managers to institute controls that
appropriately safeguarded assets.5 OMB guidance to federal managers further specifies
that they design a system of controls to reasonably prevent, detect, and correct
unauthorized acquisition, use, or disposition of an asset.6 According to SBA’s federal

5 U.S. Government Accountability Office, GAO-14-304G, Standards for Internal Control in the Federal Government, p. 5
(2014).
6 OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control, p. 22
(2016).

4
assistance directive, only warranted grant officers can commit the agency to enter into a
federal assistance agreement, such as a grant, obligating federal funds. All 10 of the notices
of award we reviewed were signed by the grant recipient, but none were signed by a
warranted grant officer or any agency official. Therefore, there is insufficient evidence that
an authorized government official reviewed and certified a crucial grant document.
In addition, OMB Circular A-11, section 20.5(f) states that discretionary grants will be
obligated after the amounts are determined administratively and recorded at the time the
grant award is signed. The obligation must conform to applicable provisions of the law, and
the agency must be able to support the amounts reported by the required documentary
evidence.7 The absence of a signature accompanying the award date8 results in the
supporting documentation being insufficient to determine whether SBA made payment on
grants in advance of a legally binding award for such purpose. Without a signature from an
authorized government official, these awards do not meet SBA’s policies for incurring an
obligation. This means the $33.2 million awarded to the 10 recipients we reviewed are
unauthorized commitments and improper payments. Program officials told us they had
initially planned to have two officials signing the awards. However, upon implementation,
officials determined they did not have enough resources and issued awards without the
signatures. Because program officials did not ensure authorized officials signed the notices
of award before disbursing funds, there is no assurance that all 11,974 awards, totaling
$9.7 billion, awarded as of September 20, 2021 were authorized commitments.
In April 2021, we alerted SBA management that approving and awarding federal funds is
an inherently governmental function. We also informed management that SBA’s policy
required that warranted grant officers commit the agency to enter the federal assistance
agreement that obligates federal funds. Despite this, SBA did not ensure it adequately
documented that an authorized government officials made the final determination to
award the grant.9
Award Amounts
The Economic Aid Act established a formula for SBA to use to calculate the award amount
for the SVOG recipients. The Act prescribed that the grant amount for an eligible entity in
operation on January 1, 2019 cannot exceed $10 million or 45 percent of the 2019 gross
earned revenue, whichever is less. The Act prescribed that the grant amount for an eligible
entity in operation on January 1, 2019 shall be $10 million or 45 percent of the 2019 gross
earned revenue, whichever is less.
SBA did not ensure the award amounts were appropriately calculated for 3 out of 10
awards we reviewed. For one of the awards, program officials miscalculated the award
amount because they included unallowable revenue. The notice of award provided $6.4
million, of which the recipient agreed to accept only $4.9 million. Program officials
disbursed the full $4.9 million but never updated the notice of award, which incorrectly
reflected $6.4 million. After disbursing the $4.9 million, program officials determined the

7 31 USC 1501.
8 2 CFR 200.1 Definition for award date.
9 SBA OIG Report 21-13, Serious Concerns About SBA’s Control Environment and the Tracking of Performance Results in the
Shuttered Venue Operators Grant Program (April 7, 2021).

5
recipient was only eligible for $3 million. Despite this, program officials did not take action
to recover the $1.9 million in overpayment as of the conclusion of our inspection. Federal
regulations require agency officials to recover overpayments to recipients10 (See Appendix
II for monetary impact).
For two awards we reviewed, program officials determined the applicants should have
received larger amounts than requested on their approved budgets, so they awarded the
larger amounts to these applicants. Program officials did not include any supporting
documentation to justify increasing the amounts. Specifically:
• A talent representative was awarded $551,000 with a budget that supported only
$55,000, resulting in a $496,000 overpayment.
• A theatrical producer was awarded $3.1 million with a budget that supported
needing only $2.9 million, resulting in a $200,000 overpayment.
We question this overpayment of $683,000 not included in the applicants’ original
approved budgets (see Appendix II for monetary impact).
Budget Revisions
Federal regulations established that budgets represent the financial plan for the award
approved by the awarding agency during the federal award process or in subsequent
changes to the federal award.11 Generally, recipients must report changes from budget or
project scope or objective and request prior approval from federal awarding agencies for
any such changes. SBA officials used the option of waiving the pre-approval requirement
for changes between line items within the budget. While it was within their discretion to
waive this requirement, this decision is concerning because of the removal of interim
financial reporting in this high-risk environment.
SBA planned to restrict the grant recipient’s use of funds even further by announcing that
grant recipients had to request prior approval for transfers between line items within the
budget. This is a common restriction SBA uses for grant recipients in its other grant
programs, such as for Women’s Business Centers, Veterans Business Outreach Centers, and
the State Trade Expansion Program. However, on July 22, 2021, SBA announced it would
not restrict the transfers between line items within a budget for SVOG recipients.12
While it was within their authority to waive this requirement,13 SBA did not have other
procedures in place to monitor how grant recipients used the funds during the period of
performance. Additionally, SBA told us they decided to allow all grant recipients to submit
a new budget immediately before submitting their final financial report describing how
they used the award funds. Therefore, grant recipients could simply submit a budget to
match how they already spent the SVOG award. This raises concerns because of the high-
risk environment and lack of internal controls we observed in the program. Most notably,

10 2 CFR § 200.345 and 2 CFR § 200.53.
11 2 CFR § 200.1 Definitions.
12 SBA Shuttered Venue Operators Grants Frequently Asked Questions #167 (2021).
13 2 CFR § 200.308 (f).

6
we identified instances in which the approved budget was inaccurate and did not reconcile
with the grant award amount.
Most SVOG recipients are likely first-time federal awardees14. As such, these grant
recipients may lack the experience to know if they are in full compliance with government
requirements. If SBA required awardees to adhere to their approved budgets, that could
lower the risk of recipients misusing funds. But this would only be effective if the grantee’s
approved budget equals its award amount, which did not happen in about 15 percent of the
11,974 grants SBA awarded as of September 20, 2021.
There is also a potential for grant recipients to unknowingly run into issues during grant
close out. Requiring pre-approval for budget changes could prevent recipients from using
funds for unallowable expenses and having to return the grant funds during the grant
close-out process. If unallowable expenses were detected during the performance through
a budget change request, the grant recipients would have the opportunity to use the funds
for other allowable expenses.
Further complicating this issue is that the terms and conditions in the notice of awards for
these mostly first-time grant recipients did not clearly promote how grant funds should be
spent and what was expected from grantees as beneficiaries of taxpayer funds. In the notice
of award and accompanying terms and conditions, SBA cited the Economic Aid Act, federal
grant regulations, suspension and debarment regulations, and a handful of checklist items
that the grant recipient must follow.
This is potentially problematic because the Economic Aid Act states that an eligible
recipient “may” use grant funds for a list of certain categories of expenses and expressly
excludes a few others. In SBA’s notice of funding opportunity, it stated that the recipient
“must only” use the award funds for the cost categories prescribed in the Economic Aid
Act.15 SBA expounded on the types of allowable costs that were ambiguous in the law in its
Frequently Asked Questions guidance. However, without a reference to SBA’s guidance in
the notice of award, either expressly or by reference, SBA may not be able to enforce policy
implementing the Economic Aid Act as described in the Frequently Asked Questions and
notice of funding opportunity.
Budget Approvals
Approved budgets represent the financial plan for grant awards in the federal award
process. As such, it is fundamental that the applicant’s approved budget reconciles with the
grant award. However, in our review of SVOG grant awards, we found that SBA disbursed
$1.49 billion to 1,849 SVOG recipients, 15 percent of the total, without ensuring the
budgets matched the grant awards (see Table 1). SBA’s federal assistance policy directive
states that a detailed budget and program description improves the likelihood of successful
post-award monitoring and project completion. Federal regulations further state the
approved budget for the award should summarize the financial aspects of the project as

14 Only about 3 percent of the 11,974 recipients awarded an SVOG as of September 20, 2021 had any recent activity on
USAspending.gov. USAspending.gov is the official open data source of federal spending information.
15 Applications for New Awards; Shuttered Venue Operators Grants, 86 FR 16270, 16270-16272 (March 26, 2021).

7
approved during the federal award process.16 The approved budgets are included on the
notices of award. This is vital to SBA’s ability to properly monitor the use of funds.
Table 1. Grant Awards that Did Not Match Approved Budgets, as of
September 20, 2021
SVOG Grant Awards
Number of
Awards
Approximate
Amount
(dollars)
Grant Awards Greater Than Approved Budgets
744
$575,999,705
Grant Awards Less Than Approved Budgets
1,105
911,339,963
Grant Awards equal to approved Budgets
10,125
8,233,891,105
Total Grant Awards
11,974
$9,721,230,773
Source: OIG generated based on Office of Disaster Assistance’s database containing SVOG applications.

SBA needs to consistently ensure that recipients declare that they are going to use award
funds for allowable expenditures. Grants awarded beyond what is requested or needed
could lead to misuse or abuse of taxpayer funds. Awarding grantees more than they have
budgeted could also prevent other eligible and deserving venues from receiving needed
assistance.
Grant Awards Greater Than Approved Budgets
SBA issued at least 744 grant awards, totaling $576 million, that were greater than the
corresponding approved budgets. In some cases, the full grant award amount was
disbursed without an updated budget being provided. SBA did not plan to remedy this
issue before awarding the grant and in some instances before disbursing payment. For
example:
• A motion picture theater operator grant recipient received $6.4 million but provided
an updated budget that supported $5 million.
• A theatrical producer grant recipient received $3.1 million but requested and
provided a budget with support for $2.9 million.
• A live performing arts organization operator grant recipient received $10 million
but provided a budget with support for $8.5 million.
For all of these examples, the grant file did not include a revised budget that supported how
the recipients planned to spend the additional amount. If the award amount exceeds the
budget amount proposed by grantee, then there is no justification for how the grantee will
spend the excess funds or whether the funds are even needed. Funds that were awarded
exceeding the recipient’s need could have been put to better use had SBA awarded the
funds to other recipients to use for allowable operating expenses.

16 2 CFR § 200.308(a).

8
Grant Awards Less Than Approved Budgets
SBA issued at least 1,105 grant awards, totaling $911 million, in which the award amount
was less than the corresponding approved budgets.
For example, a live performing arts organization operator grant recipient received $3.6
million but provided a budget for $9.3 million. SBA determined the submitted grant
application amount in their budget included unallowable income and the award amount
should be $3.6 million. The agency did not then request a revised budget from the grant
recipient which would allow the agency to monitor the usage of grant funds.
It is important that SBA receives and approves revised budgets and updates notices of
award to incorporate changes into the agreements. This will allow SBA to hold grantees
accountable for allowable expenses. SBA’s Post Application Guidance, dated July 28, 2021,
required applicants with award amounts higher than the proposed budget to submit a
revised budget reconciling to the higher grant award within 14 days of notification.
However, the guidance did not address reconciliation where grant awards were less than
proposed budget submissions.
SBA did not reach out to the grant recipient to receive an updated budget prior to grant
award. In speaking with SBA officials, they were not initially aware of this issue, but they
did not consider this a departure from their policy. The need for sufficient documentation,
including an appropriate budget, is a basic grant administration requirement that ensures
grant fund accountability.
Recommendations
To establish more effective financial oversight controls for the SVOG program, we
recommend that the Administrator direct the Associate Administrator for the Office of
Disaster Assistance to:
1. Establish procedures to use a risk-based approach for disbursing award funds for
future disaster grant programs.
2. Ensure all SVOG program notices of award are signed by an authorized government
official and remedy awards that were not entered into by an authorized government
official.
3. Recover the $1.9 million of overpayments to a grant recipient in accordance with 2
CFR § 200.345-346.
4. Remedy or recover the $683,000 of awards that were made without adequate
support for the award amount.
5. Require the reconciliation of the grant recipient’s budget to the final award amount
prior to awarding a grant, including ensuring receipt of revised budgets, when
changes are needed, prior to disbursing grant awards. Furthermore, discontinue the
disbursement of grant awards prior to the receipt of a revised budget.
6. Reassess SBA’s flexibility in allowing waivers for budget changes between line items
or implement monitoring procedures to mitigate risks of recipients using funds for
unallowable expenses during the grant performance period.

9
Analysis of Agency Response
SBA management provided formal comments that are included in their entirety in
Appendix IV. Management fully agreed with two recommendations, partially agreed with
two recommendations, and disagreed with two recommendations. We found that the
agency’s planned, and in some cases implemented, actions are sufficient to resolve all six
recommendations.
Management also included three concerns regarding the inspection methodology and
report content. First, management was concerned that we used our sample as a basis of our
conclusions about the SVOG program as a whole despite being a small sample and not
representative of the SVOG program. We did not attempt to project our findings to the
entire population of SVOG grants. We assessed SBA’s processes for disbursing awards of
SVOG grants. In our assessment of SBA’s processes, the size of our sample does not change
our finding that the designed processes did not ensure program officials used a risk-based
approach for disbursing awards or ensured approved budgets accurately summarized the
financial plan for the award amounts.
While the sample size was small, it was sufficient for our auditors to assess the process.
Also, even with a small sample, it is concerning that we identified issues with every award
tested (See Appendix I).
Second, management disagreed with our finding that SBA changed the initial risk-based
multiple disbursement approach to single disbursements regardless of applicants’ risk
without informing Congress. Despite noting these concerns, management did not provide
evidence of written communication to Congress prior to December 2021 when SBA
submitted the revised Oversight and Audit Plan. We maintain our position that
management made this change without formally communicating it to Congress.
Finally, management disagreed with our finding that SBA did not require recipients to
provide an updated budget prior to the grant award amount. Management stated they
implemented policy to require recipients to submit revised budgets on July 1, 2021 and
started to enforce the policy on November 17, 2021. We acknowledge that enforcing the
policy should help position program officials to make sure applicants planned to use the
award funds for appropriate expenses. However, we maintain our position that there were
instances in which SBA did not require an updated budget be submitted for any
discrepancies prior to grant award and disbursement of funds. We assessed awards issued
as of October 5, 2021, after the agency implemented the policy, but prior to the agency
enforcing the policy. Because our review only captured awards from this specific period,
and the agency enforced the policy more than four months after implementing it, we
identified 1,849 instances in which the grant award amounts and approved budget
amounts did not reconcile. These findings highlight the need for a consistent approach to
ensure approved budgets match award amounts.
Summary of Actions Necessary to Close the Report
The following sections detail the status of the recommendations and the actions necessary
to close them.

10
Recommendation 1
Establish procedures to use a risk-based approach for disbursing award funds for future
disaster grant programs.
Status: Resolved.
SBA managers partially agreed with this recommendation, noting that program officials
were following the Administrator’s guidance to align the SVOG program with other SBA
pandemic relief emergency programs when they changed disbursements to single
payments. Management noted that single payments expedite funding to small businesses
affected by a disaster. Management plans to document requirements to incorporate risk as
a component of disbursement decisions and oversight of future disaster grant programs.
SBA plans to complete final action by September 30, 2022.
This recommendation can be closed when management provides evidence that they
established risk-based award disbursement and oversight practices for future disaster
grant programs.
Recommendation 2
Ensure all SVOG program notices of award are signed by an authorized government official
and remedy awards that were not entered into by an authorized government official.
Status: Resolved.
SBA managers partially agree with this recommendation. They stated that SBA agrees that
all grant awards should be issued by an authorized government official and asserts this was
the case with SVOG awards. Management acknowledged that it is part of SBA’s normal
practice to manually sign, issue, and approve disbursements when processing grants.
However, management explained this practice was not feasible in this circumstance due to
the time constraints and large volume of grant applications.
Management does not agree that a physical countersignature is required and explained
that SBA maintains digital evidence of approvals. They stated that the digital records
comply with 31 USC 1501 and 31 USC 1108, as interpreted by OMB Circular A-11, § 20.5(a)
through (f).
We maintain our position that SBA did not design adequate controls to ensure an
authorized official approved the SVOG awards. For all awards we reviewed, the system
logged user activity captured the names and notes of the various reviewing officials but did
not identify specific actions that showed an authorized officials approved the award.
The recommendation can be closed when management provides the procedures used to
ensure an authorized government official approved the SVOG awards and digital evidence
that authorized government officials awarded SVOG grants, including the ones we
reviewed.
Recommendation 3
Recover the $1.9 million of overpayments to a grant recipient in accordance with 2 CFR §
200.345-346.

11
Status: Resolved.
SBA managers disagreed with this recommendation, stating that SBA evaluated the
documentation on file and concluded there is no overpayment. They noted that an SBA
employee, outside the scope of their assigned duties, alleged an over calculation of the
award recipient’s 2019 earned revenue. However, based on a quality assurance team
review in April 2022, management concluded that the grant award was made in
accordance with SVOG program policy and within federal guidelines.
This recommendation can be closed when management provides the results of the quality
assurance team review and the evidence that supports the full amount of the award.
Recommendation 4
Remedy or recover the $683,000 of awards that were made without adequate support for
the award amount.
Status: Resolved.
SBA managers disagreed with this recommendation, stating that SBA analyzed the three
grants identified and concluded they were awarded with adequate supporting documents
in accordance with SVOG program policy. Based on management’s comments and
documentation regarding one of the awards we reviewed, we agree with management that
SBA did not overpay a recipient $500,000 and removed this award and the amount from
our report.
For the remaining two awards that we questioned as having received an overpayment,
management determined that the recipient’s revised budgets matched the award amounts
as of March 10, 2022 and concluded there was not an overpayment. Management’s
determinations appear to include supplemental award funds because the analyzed award
amounts were larger than the award amounts that we reviewed, but SBA did not provide
the supporting documentation necessary to verify that an overpayment was not made.
Since we reviewed these awards before SBA made supplemental funding decisions, the
additional award funds may have resolved the budget discrepancies. This recommendation
can be closed when management provides the budget revisions that support the award
amounts.
Recommendation 5
Require the reconciliation of the grant recipient’s budget to the final award amount prior to
awarding a grant, including ensuring receipt of revised budgets, when changes are needed,
prior to disbursing grant awards. Furthermore, discontinue the disbursement of grant
awards prior to the receipt of a revised budget.
Status: Resolved.
SBA managers fully agreed with this recommendation. Management stated that they
implemented policy on July 1, 2021 that required budgets to match the award amounts
prior to SBA issuing the notice of award. Management explained this policy was fully
enforced through technology updates as of November 17, 2021.

12
The system controls SBA provided showed that the system would generate an error
message if the budget amount did not match the award amount. We found a similar error
message in 8 of the 10 files we reviewed. However, in these instances, SBA had finalized the
notices of award and disbursed funds without resolving the error. While our sampled
transactions were awarded prior to SBA implementing the system controls, we are unable
to determine whether the November 17, 2021 updates would prevent the overrides we
observed in our sample files.
This recommendation can be closed when management provides evidence that the system
controls include restrictions that would fully enforce the current policy prior to awarding a
grant.
Recommendation 6
Reassess SBA’s flexibility in allowing waivers for budget changes between line items or
implement monitoring procedures to mitigate risks of recipients using funds for
unallowable expenses during the grant performance period.
Status: Resolved.
SBA management fully agreed with this recommendation, stating that they will reassess the
flexibilities in allowing waivers for budget changes by SVOG awardees. Management stated
they planned to make a determination whether to maintain this process by June 15, 2022.
OIG was not provided with any updates concerning any changes in policies and procedures
prior to issuing this report in final.
This recommendation can be closed when management provides evidence that they
reassessed the budget change waivers or implemented monitoring procedures to mitigate
risks of recipients using funds for unallowable expenses during the grant performance
period.

13
Appendix I: Objective, Scope, and Methodology
Objectives
Our objectives were to determine whether SBA disbursed awards in accordance with SVOG
program policy and ensured recipients’ approved budgets accurately summarized the
financial plan for the award amount in accordance with 2 CFR § 200.308.
Scope and Methodology
To meet our inspection objectives, we reviewed applicable public laws, federal grant
regulations in 2 CFR 200, and applicable policies and procedures. We also reviewed SBA’s
SVOG program webpage and all publicly available documents and met with program
officials for additional clarity and documentation, as required.
We relied on the data SBA provided showing the award recipients, the approved budgets,
and disbursements that had been made since the program began making awards on April 8,
2021 through September 20, 2021. SBA used Salesforce to administer and maintain SVOG
program grants awards. We selected ten SVOG grant recipients that had unreconciled grant
award and applicant budget amounts to verify the data SBA provided. The scope of the
inspection has been limited to documented comments made by grant awarding officials,
budget forms, disbursement forms, and notices of award issued. We believe that the
evidence we obtained provides a reasonable basis for our findings and conclusions based
on our inspection objective.
We conducted this inspection in accordance with the Council of the Inspectors General on
Integrity and Efficiency Quality Standards for Inspection and Evaluation. Those standards
require that we adequately plan and perform the inspection to obtain sufficient and
appropriate evidence to provide a reasonable basis for our findings and conclusions based
on our objective.
Use of Computer-Processed Data
We relied on computer-processed data in the program office files. We retrieved SVOG
program notices of award, budget information, disbursement information, and awarding
official comments from the program office files maintained within Salesforce. We tested the
reliability of the data by comparing data reported in the database spreadsheets provided
by SBA to the source documentation. We also reviewed and compared the performance
data of SBA’s COVID-19 SVOG webpage.
In addition, we compared the data reported in the database spreadsheets provided by SBA
to the source documentation generated from the grant recipient’s data analytics program.
We noted some inconsistencies, however, we believe the computer-processed information
is reliable for the limited purposes of this inspection.

14
Prior Audit Coverage
Report Title
Objective
Report Number
Final Report
Date
Monetary
Impact
Serious Concerns
About SBA’s
Control
Environment and
the Tracking of
Performance
Results in the
Shuttered Venue
Operators Grant
Program
Notify management of
risks and
vulnerabilities in the
SVOG program
Report 21-13
April 7, 2021
N/A

15
Appendix II: Monetary Impact
Questioned costs are expenditures that do not comply with legal, regulatory, or contractual
requirements; are not supported by adequate documentation at the time of the audit; or are
unnecessary or unreasonable.17 Questioned costs may be remedied by offset, waiver,
recovery of funds, the provision of supporting documentation, or contract ratification, where
appropriate.
Table 2. OIG Schedule of Questioned Costs for SVOG Awards
Reviewed
Recommendation Number
Impact Category
Amount (dollars)
2
Unauthorized commitments
$33,182,490
3
Unallowable cost
1,919,326
4
Unsupported award amount
683,000
Total
--
$33,182,490
Note: The table totals $33,182,490. We reduced the total questioned amount by $2,602,326 because these costs were also
questioned as unauthorized commitments.
Source: OIG analysis of the notices of award we reviewed
As defined in 2 CFR 200.1, the unsigned notices of award are questioned costs because they
violate federal budget reporting and recording requirements and SBA policy.
Under 2 CFR 200.345, any funds paid to a non-federal entity in excess of what is entitled
under the terms of the federal award constitutes a debt to the federal government. This
debt must be recovered by reimbursement, withholding advance payments, or other
remedies permitted by statute. For one entity, SBA miscalculated the award amount
because they included unallowable revenue and overpaid the recipient $1.9 million.
SBA’s Federal Policy Directive for Grants requires program officials maintain all supporting
documentation of the complete lifecycle of the award in the official electronic file. For two
of the awards we reviewed, program officials determined the applicants should have
received larger amounts than requested on their approved budgets. Program officials did
not include documentation in the award file to support increasing the award amounts. As a
result, we question the award amount associated with the two recipients who received
$683,000 in overpayments.

17 Inspector General Act of 1978, as amended, section 5(f)(1).

16
Appendix III: Management Comments
SBA Management Response to Inspection Report

1
U.S. SMALL BUSINESS ADMINISTRATION
WASHINGTON, D.C. 20416
DATE:
May 13, 2021
TO:
Hannibal “Mike” Ware
Inspector General
FROM:
Francisco Sanchez, Jr.
Associate Administrator
Office of Disaster Assistance
SUBJECT: Response/Management Decisions to Office of Inspector General Draft Report - SBA's Award
and Payment Practices in the Shuttered Venue Operators Grant Program (Project 21015)
We have reviewed the Office of Inspector General (OIG) draft inspection report, “SBA's Award and
Payment Practices in the Shuttered Venue Operators Grant (SVOG) Program (Project 21015),” sent on
March 29, 2022. Our response to the report follows. The response includes SBA’s position on the six
recommendations identified by OIG, as well as three comments on the report methodology/content.
We appreciate the opportunity to respond and look forward to further discussing at OIG’s convenience.
Sincerely,
Francisco Sanchez, Jr.
Associate Administrator
Office of Disaster Assistance

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Table of Contents
Responses to Recommendations ............................................................................................................. 4
Recommendation #1: Establish procedures to use a risk-based approach for disbursing award funds
for future disaster grant programs. ...................................................................................................... 4
Response: SBA partially agrees with this recommendation. ............................................................. 4
Corrective Action and Anticipated Completion Date: ....................................................................... 4
Recommendation #2: Ensure all SVOG program notices of award are signed by an authorized
government official and remedy awards that were not entered into by an authorized government
official. ................................................................................................................................................ 4
Recommendation #3: Recover the $1.9 million of overpayments to a grant recipient in accordance
with 2 CFR § 200.345-346. ................................................................................................................... 5
Response: SBA does not agree with this recommendation and recommends removing this item
from the report................................................................................................................................ 5
Table 1. Calculation of Correct Payment .......................................................................................... 6
Recommendation #4: Remedy or recover the $1.2 million of awards that were made without
adequate support for the award amount. ............................................................................................ 7
Response: SBA does not agree with this recommendation and recommends removing it from the
report. ............................................................................................................................................. 7
Table 2. Review of SVOG Budgets .................................................................................................... 8
Recommendation #5: Require the reconciliation of the grant recipient’s budget to the final award
amount prior to awarding a grant, including ensuring receipt of revised budgets, when changes are
needed, prior to disbursing grant awards. Furthermore, discontinue the disbursement of grant awards
prior to the receipt of a revised budget................................................................................................ 8
Response: SBA agrees with this recommendation but recommends that it be closed, as the proper
procedure was implemented July 1, 2021, and fully enforced through technology updates as of
November 17th, 2021. ..................................................................................................................... 8
Recommendation #6: Reassess SBA’s flexibility in allowing waivers for budget changes between line
items to mitigate risks of recipients using funds for unallowable expenses. ......................................... 9
Response: SBA agrees with this recommendation. SBA will reassess the flexibilities in allowing
waivers for budget changes by SVOG awardees and will make a determination whether to maintain
this process...................................................................................................................................... 9
Corrective Action and Anticipated Completion Date: ....................................................................... 9
Management Comments – Report Methodology and Content ................................................................. 9
Comment #1: Sample Size of Evaluation and use of phrase “Random Sample” .................................... 9
Comment #2: Communicating the Change to a Single Disbursement ................................................... 9
Comment #3: Description of the Budget Reconciliation Process ......................................................... 10

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Appendix .............................................................................................................................................. 11
Appendix 1: Memorandum from Matthew Stevens, Director, Shuttered Venue Operators Grant
Program to Francisco Sanchez, Jr., Associate Administrator, Office of Disaster Assistance (May 6, 2022)
re: “Authorization of the Expedited Process for Reviewing, Approving, Issuing, and Disbursing SVOG
Awards” (pdf attachment) ................................................................................................................. 11
Appendix 2: Technological Implementation of Required SVOG Budget and Award Reconciliation - User
Story and Development History ......................................................................................................... 11

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Responses to Recommendations
Recommendation #1: Establish procedures to use a risk-based approach for disbursing
award funds for future disaster grant programs.
Response: SBA partially agrees with this recommendation.
In the context of the SVOG program:
•
The change to a lump-sum payment for SVOG was made on June 10, 2021, following the
Administrator’s guidance to align SVOG with other SBA pandemic-relief emergency programs,
including the Restaurant Revitalization Fund, the COVID-EIDL program, and the Paycheck
Protection Program. This change was communicated to grantees via their Form-1222 and
budgetary paperwork, and to Congress via daily and weekly briefings beginning in mid-June.
•
As of early February 2022, SVOG has completed all initial decisions and 99% of disbursements
for base awards.
•
Using single payments for disaster grants increases the likelihood of success. If SBA were to
intentionally delay the availability of funds, it would increase the risk businesses would not
receive timely relief. Without expedited funding, many small businesses will not survive a
disaster.
Moving forward:
•
SBA will continue to use risk assessments for future disaster grant programs to include the need,
purpose, and audience of the emergency funding in its analysis of fraud risk and improper
payments. The risk of bad actors receiving funds must be weighed against the risk of
insufficiently supporting recipients.  SBA will accept the recommendation to incorporate risk as a
component of disbursement decisions and oversight of future disaster grant programs.
Corrective Action and Anticipated Completion Date:
Action
Target Completion
Date
Document outlining the incorporation of risk when designing
disbursement and oversight practices for future disaster grant programs
September 30, 2022
Recommendation #2: Ensure all SVOG program notices of award are signed by an
authorized government official and remedy awards that were not entered into by an
authorized government official.
Response: SBA agrees that all grant awards should be issued by an authorized government official and
asserts this was the case with SVOG awards. However, SBA does not agree that a physical
countersignature is required to accomplish this.

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•
SBA vigorously supports controls which reasonably prevent, detect, and correct unauthorized
acquisition, use, or disposition of federal funds. SBA ensures all awards are entered into by an
authorized government official, and SBA digitally maintains documentary evidence of such
awards and certifications in compliance with 31 U.S.C. 1501 and 31 U.S.C 1108, as interpreted by
OMB Circular A-11, § 20.5(a) through (f).
•
While SBA’s customary practice when processing grants is to manually sign, issue, and approve
disbursements for each award,1 this “one at a time” approach was not feasible for SVOG awards
due to: (1) the number of awards the Agency needed to make under the program2 being
approximately 100 times greater than conventional Agency grant programs; and (2) the dire
need for the Agency to quickly deliver disaster assistance to eligible businesses affected by the
COVID-19 pandemic. Had SBA followed its manual practice in this instance, the incalculable
delays to the award process likely would have forestalled the delivery of emergency relief to
such an extent that many, if not most, eligible entities would have permanently gone out of
business before they received their awards.
•
Therefore, to effectuate the purpose of the legislation, the Agency followed the precedent set
by another SBA emergency pandemic relief initiative, the Economic Injury Disaster Loan (EIDL)
Advance grant program,3 and adopted a streamlined, expedited, and substantially digital
process for reviewing, approving, issuing, and disbursing SVOG awards. As with SVOG, the EIDL
Advance grant program also involved a high volume of applicants and awardees4 who required
immediate support to remain in business, awards were issued via a non-competitive process,
there were no performance requirements for grantees, and both award amounts5 and allowable
uses of funds were stipulated by the EIDL Advance grants authorizing legislation.6
•
Please see Appendix 1 for the complete memorandum documenting the SVOG award process
and its alignment with Economic Injury Disaster Loan (EIDL) Advance processes
Recommendation #3: Recover the $1.9 million of overpayments to a grant recipient in
accordance with 2 CFR § 200.345-346.
Response: SBA does not agree with this recommendation and recommends removing this item
from the report.
•
SBA agrees that payment integrity is vital to protect the investment the Nation has made in the
performing arts industry via the Shuttered Venue Operators Grant.

1 SBA SOP 00 18 01, Federal Assistance Policy Directive (Grants) (Sep. 24, 2019).
2 As of midday April 25, 2022, the program has reviewed 17,637 applications and has made 12,980 initial and
reconsideration awards and 9,511 supplemental awards. In total, the program has awarded $14.41 billion dollars.
3 15 U.S.C. § 9009(e).
4 Disaster Assistance Update: Nationwide COVID EIDL, Targeted EIDL Advances, Supplemental Targeted Advances
(Apr. 14, 2022) https://www.sba.gov/sites/default/files/2022-04/COVID-
19%20EIDL%20TA%20STA_04142022_Public-508.pdf
5 Id. at § 9009(e)(3).
6 Id. at § 9009(e)(5).

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•
In this instance, after OIG provided identifying information on the SVOG award7 in question, SBA
evaluated the documentation on file and concluded there is no overpayment. On March 28,
2022, SBA confirmed the award was made in accordance with SVOG Program policy and within
federal guidelines. Therefore, no recovery is needed.
•
The SBA verification process, inclusive of 2019 tax returns, found Grantee had larger 2019
earned revenues (approximately $14.9 million) than the Grantee estimated in their application.
The verified financials were then used calculate revenue losses for eligibility, as well as award
size.
•
The SVOG Award System, applying the statutory formula, correctly calculated the maximum
eligible award as $6.7 million, prior to the PPP deduction required by the American Rescue Plan
Act.
•
Upon notification of their maximum possible award size, Grantee submitted a revised budget
indicating they only wanted to receive $4.9 million of the maximum eligible award.
•
One month after the award was issued, a non-authoritative review by an SBA employee, outside
of the scope of their assignment from the SVOG Program Office, alleged an overcalculation of
2019 Earned Revenue. The file was re-reviewed by a quality assurance team in April 2022, and
the original revenue determination was upheld.
Table 1. Calculation of Correct Payment
Award Calculation - Formula
Data Input
Output
1. Standard Award Amount: 45% of 2019 earned revenue
a. Alternatives:
i.
If confirmed Date Business Began
Operation (DBBO) is greater than
1/1/2019 but less than or equal to
12/1/2019: Avg. of full months of 2019,
multiplied by 6.
ii.
If DBBO is greater than 12/1/2019 but
less than or equal to 1/1/2020:  Avg. of
Jan 2020 and Feb 2020, multiplied by 6.
iii.
If DBBO is greater than 1/1/2020 but less
than or equal to 2/29/2020:  Avg. of Feb
2020, multiplied by 6.
b. If (1) or (1.a) are not applicable, the SVOG Award
System will calculate a maximum possible award
of $0. This may indicate an issue with eligibility.
2. Adjusted Grant Award Amount
DBBO:  Prior to
2019 [Per Articles
of Incorporation]
2019 Earned
Revenue: $14.9
Million (approx.)
[per 2019 Form
1120-S]
Applicable PPP:
$350 Thousand
(approx.)
Maximum
Award
Amount: $6.4
Million
(approx.)
Award
selected by
Grantee: $4.9
Million
(approx.)
Award
disbursed to
Grantee: $4.9
Million
(approx.)

7 Via email dated March 18, 2022, from OIG to SBA SVOG, the award identified by OIG has in an internal SVOG
identification number of DA-000018186.

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Award Calculation - Formula
Data Input
Output
a.
Reduce Award amount by any Payment
Protection Program Loan amounts created On or
after 12/21/2020.
3.
Maximum Award Size is $10 Million
Recommendation #4: Remedy or recover the $1.2 million of awards that were made
without adequate support for the award amount.
Response: SBA does not agree with this recommendation and recommends removing it from the
report.
•
After OIG provided SBA with identifying information, SBA analyzed the three grants8 identified
and concluded they were awarded with adequate supporting documents in accordance with
SVOG Program policy. Therefore, no recovery is needed. All three grantees are currently in the
standard process of reconfirming their budgets via the SVOG Final Budget.
•
The preliminary budget submitted in an application cannot exceed the estimated award within
the application. Therefore, as SBA’s financial verification determines a larger maximum award,
an applicant is provided the opportunity to submit a new budget.
•
The SVOG legislation requires SBA use specific calculations which incorporate earned revenues
to determine losses, as well as maximum award size. SBA used verified financial information for
its calculations, and not solely an applicant’s representations, which can result in a different
SVOG award calculation than is estimated by the Grantee’s application.
•
SBA takes evidentiary support seriously. The SVOG Program requests updated, comprehensive
financial documentation whenever there is a possibility an applicant or grantee may be eligible
for funding.
•
OIG correctly identifies that many of SBA’s SVOG recipients are first-time participants in the
federal grant system. Many legitimate businesses in and around the arts industry do not have
professional grants writers or teams of accountants and attorneys on-call. When revenue
documents or statements in an SVOG interaction appear insufficient, but not fabricated or
intentionally exaggerated, SVOG officials review the evidence provided and/or request
additional documentation, such as financial statements, audit reports, and tax returns. This
allows SBA to conduct a line-item level analysis, by month and year.
•
SBA frequently found that small business owners were confused by accounting terminology, did
not have, or could not access accountants during the pandemic, and frequently under-stated
their “earned revenue” compared to their documentation.
8 Via email dated March 18, 2022, from OIG to SBA SVOG, the three awards identified by OIG have in an internal
SVOG identification numbers of DA-000014215, DA-000011058 and DA-000017530.

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•
There are strict internal controls in place which prevent an SBA official from ever obligating and
awarding more per award type than that which is established by the law.
Table 2. Review of SVOG Budgets
Entity Reviewed
Alleged Award & Discrepancy
Current Award and
Budget
Live Performing Arts Organization
Operator
Award: $3.8 Million
Alleged Overpayment: $500,000
Award: $3.3 Million
Budget: $3.3 Million
(as of 7/3/2021)
Talent Representative
Award: $551,000
Alleged Overpayment: $496,000
Award: $849,000
Budget: $849,000 (as
of 3/10/2022)9
Theatrical Producer
Award: $3.1 Million
Alleged Overpayment: $200,000
Award: $4.6 million
Budget: $4.6 Million
(as of 3/11/2022)10
Recommendation #5: Require the reconciliation of the grant recipient’s budget to the
final award amount prior to awarding a grant, including ensuring receipt of revised
budgets, when changes are needed, prior to disbursing grant awards. Furthermore,
discontinue the disbursement of grant awards prior to the receipt of a revised budget.
Response: SBA agrees with this recommendation but recommends that it be closed, as the
proper procedure was implemented July 1, 2021, and fully enforced through technology updates
as of November 17th, 2021.
•
SBA does verify the stated revenues of all applicants. If a potential award is increased or
decreased by SVOG officials, the SVOG Award System technologically requires that a matching
budget be received prior to issuing a Notice of Award.
•
SBA internally identified reconciliation as a concern and implemented this policy as a business
rule July 1, 2021. The technological ability to request a revised budget was released June 29,
2021. The rule and associated procedure were implemented as a technologically enforced
internal control on November 17th, 2021. Please see Appendix 2 for the supporting
documentation of the final technological enforcement of this policy, to include a description of
the user story and the activity history of its implementation.

9 A supplemental award was approved for this grantee; the award was disbursed on 10/28/21 for $292,956.09
10 A supplemental award was approved for this grantee; the award was disbursed on 10/8/21 for $1,565,709.75

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Recommendation #6: Reassess SBA’s flexibility in allowing waivers for budget changes
between line items to mitigate risks of recipients using funds for unallowable expenses.
Response: SBA agrees with this recommendation. SBA will reassess the flexibilities in allowing
waivers for budget changes by SVOG awardees and will make a determination whether to
maintain this process.
Corrective Action and Anticipated Completion Date:
Action
Target Completion
Date
Document outlining assessment of SVOG waivers for budget changes
between line items and determination of process moving forward
June 15, 2022
Management Comments – Report Methodology and Content
Comment #1: Sample Size of Evaluation and use of phrase “Random Sample”
SBA recommends that the Draft Report explicitly state that the findings are not indicative of overall
performance of the SVOG Program, due to the small sample size and use of non-random sampling.
During the exit conference on March 18th, 2022, OIG staff described the process of sample selection
for 10 awards as a “random” selection of five awards which had an award greater than the budget
submitted alongside the initial application, as well as five awards which had an award less than the
budget submitted. The statistical term for this type of sampling is “purposive sampling” and SBA
recommends using that term, rather than “random” to describe the sampling methodology.
As the term “random sample” has specific statistical definition, the use of that term implies it speaks
to the broader population of SVOG awards, the scope and methodology of the Draft Report should
refrain from using this term. The population evaluated by OIG cannot be used to draw conclusion
about the SVOG Program as a whole. A sample size of 10 is a statistically invalid method of sampling
the SVOG program’s 12,000 grantees. A sample of this size analysis would only be accurate at a 95%
confidence level with a 30% margin of error for any findings—meaning the results can be off by 30
percent in either direction. In general practice, this is far too small a sample to draw any
comprehensive conclusions about the program.
Comment #2: Communicating the Change to a Single Disbursement
SBA recommends striking inaccuracies in the Draft Report narrative which imply changes were made
to SVOG’s risk approach without informing Congress.
Congress and other public figures aggressively stressed to SBA that SVOG had too conservative a risk
posture. A change to a single disbursement approach was recommended to SBA in a letter signed by
over fifty U.S. Senators, and over 200 U.S. Representatives in May 2021.

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SBA agreed that size of award alone was not a sufficient risk characteristic to justify such a
restrictive payment schedule for disaster relief. In June of 2021, SBA adjusted its posture, keeping
key stakeholders informed throughout the process with daily stakeholder meetings, including
industry representatives and Congressional staff, as well as weekly Congressional meetings from
June through September of 2021. Members of the public, including grant recipients, were informed
via industry groups and updated award paperwork communicating a change away from staggered
disbursements.
Comment #3: Description of the Budget Reconciliation Process
SBA recommends striking inaccuracies in the Draft Report narrative which state that grantees were
not directed to provide an updated budget prior to a grant award. SBA internally identified
reconciliation as a concern and implemented this policy as a business rule July 1, 2021. The
technological ability to request a revised budget was released June 29, 2021. The rule and
associated procedure were implemented as a technologically enforced internal control on
November 17th, 2021.

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Appendix
Appendix 1: Memorandum from Matthew Stevens, Director, Shuttered Venue Operators Grant
Program to Francisco Sanchez, Jr., Associate Administrator, Office of Disaster Assistance (May 6,
2022) re: “Authorization of the Expedited Process for Reviewing, Approving, Issuing, and Disbursing
SVOG Awards” (pdf attachment)
Appendix 2: Technological Implementation of Required SVOG Budget and Award Reconciliation -
User Story and Development History

                                        U.S. SMALL BUSINESS ADMINISTRATION
  WASHINGTON, D.C. 20416

Date:
May 6, 2022

To:

Francisco Sanchez, Jr.

Associate Administrator, Office of Disaster Assistance

From:
Matthew T. Stevens

Director, Shuttered Venue Operators Grant Program

Subject:
Authorization of the Expedited Process for Reviewing, Approving,
Issuing, and Disbursing SVOG Awards

This document formally memorializes the process under which SBA authorized the
review, approval, issuance, and disbursement of awards of financial assistance pursuant to the
Agency’s Shuttered Venue Operator Grants (SVOG) program. Following the adoption of 15
U.S.C. § 9009a in December of 2020,1 Congress empowered SBA to make grants to live venue
operators or promoters, theatrical producers, live performing arts organization operators,
museum operators, motion picture theatre operators, or talent representatives for whom the
uncertainty of the economic conditions brought about by the COVID-19 pandemic made such
a grant necessary to support their ongoing business operations.

As articulated in the legislation, the guiding purpose of the SVOG program is to provide
emergency financial assistance to help eligible entities stay open or reopen (when legally
permitted to do so by applicable governmental authorities) in the face of hardships they
experienced due to the public health disaster caused by the COVID-19 pandemic.2 The statute
also laid the groundwork for streamlined program operations through establishing a formula
for determining SVOG award amounts based on an eligible entity’s reduction in earned receipts
compared to pre-pandemic levels3 and by strictly delineating the allowable uses of award
funds.4 Furthermore, the SVOG program legislation did not mandate that awards be issued via
a competitive process, nor did it impose any performance requirements on grantees. Both of
these congressional design decisions further facilitated, and indeed steered the Agency
toward, a streamlined approach to grantmaking in the context of the SVOG program.

While SBA’s customary practice when processing grants is to manually sign, issue, and
approve disbursements for each award,5 this “one at a time” approach was not feasible for

1 Pub. L. No. 116–260, div. N, title III, § 324, 134 Stat. 2022 (2020); as amended by Pub. L. No. 117–2, title V,
§ 5005(b), 135 Stat. 92 (2021).
2 15 U.S.C. § 9009a(a)(1)(A)(ii).
3 Id. at § 9009a(c).
4 Id. at § 9009a(d).
5 SBA SOP 00 18 01, Federal Assistance Policy Directive (Grants) (Sep. 24, 2019).

2

SVOG awards due to: (1) the number of awards the Agency needed to make under the program6
being approximately 100 times greater than conventional Agency grant programs; and (2) the
dire need for the Agency to quickly deliver disaster assistance to eligible businesses affected
by the COVID-19 pandemic. Had SBA followed its manual practice in this instance, the
incalculable delays to the award process likely would have forestalled the delivery of
emergency relief to such an extent that many, if not most, eligible entities would have
permanently gone out of business before they received their awards.

Ther
fore

Under the approach utilized by the EIDL Advance grant program, SBA considered
applications that successfully passed through the Agency’s streamlined and automated
process for verifying applicant identity and eligibility, validating award amounts, and
conducting fraud checks to be fully authorized grant awards ready for immediate
disbursement without any need for individual, manually signed and issued Notices of Award.11
In contrast to the EIDL Advance grant program, which required the use of outside contractors
as reviewers due to the sheer volume of applicants, the approach adopted by the SVOG
program relied instead upon a cadre of “appropriately trained ODA federal employee loan
officers” to review and “execute SVO grant awards rather than warranted grant management
officers.”12
SBA ensures all SVOG awards are entered into by an authorized government official,
and SBA digitally maintains documentary evidence of such awards and certifications in
compliance with 31 U.S.C. 1501 and 31 U.S.C 1108, as interpreted by OMB Circular A-11, §
20.5(a) through (f). To fulfill its duty to make SVOG awards to eligible entities in appropriate
amounts, the Agency implemented controls before and after the generation of an SBA Form-
1222. For example, even if the Form-1222 is returned and appears validly executed by the
intended recipient, SBA will only consider this award conditionally approved so that SBA can

6 As of midday April 25, 2022, the program has reviewed 17,637 applications and has made 12,980 initial and
reconsideration awards and 9,511 supplemental awards. In total, the program has awarded $14.41 billion dollars.
7 15 U.S.C. § 9009(e).
8 Disaster Assistance Update: Nationwide COVID EIDL, Targeted EIDL Advances, Supplemental Targeted Advances
(Apr. 14, 2022) https://www.sba.gov/sites/default/files/2022-04/COVID-
19%20EIDL%20TA%20STA_04142022_Public-508.pdf
9 Id. at § 9009(e)(3).
10 Id. at § 9009(e)(5).
11 Memorandum from Stephen Kong, Acting Chief Operating Officer, to Tami Perriello, Chief Financial Officer (Jan.
14, 2021); APPENDIX 1
12 Memorandum from Barbara J. Carson, Deputy Associate Administrator for the Office of Disaster Assistance to
Kimberly S. Butler, Director, Office of Grants Management (Feb. 11, 2021); APPENDIX 2

3

address any new concerns discovered prior to award obligation. Concerns could result in a
recission of a Form-1222, and possibly a referral to SBA’s investigatory partners.
SBA considers its agreement with an SVOG awardee to be a binding “grant award” only once
all of the following are true:
o Reviews for program eligibility, disqualifiers, and documentary compliance are
complete;
o The Form 1222 has been executed by the intended recipient;
o The Form 1222 has been digitally accepted by an authorized SVOG official as to
form, e.g., the document provided by the intended recipient is a valid Form-
1222, the signatories are authorized;
o The size of the award listed on the Form 1222 has been administratively
determined and confirmed for accuracy by an authorized SVOG official in the
SVO Grant Award System, captured via a digital, time-stamped approval;
o The Federal Awardee Performance and Integrity Information System (FAPIIS)
and GSA System for Award Management (SAM) reflect a disbursement is
possible and permissible; and
o Successful transmittal of the SVOG official’s certification of the award
obligation to the SBA’s Joint Administrative Accounting Managements System
(JAAMS). JAAMS is the financial management system of record for managing
funding and expenditure of SBA’s administrative funds.

In accordance with the Waiver of Small Business Administration SOP 00-18 and Agency
Grants Training Plan signed by Stephen Kong on March 10, 2021, the Agency considers all
applications for SVOG funding that have been verified, validated, and approved in accordance
with the procedures outlined above to have been authorized for immediate issuance and
disbursement. Furthermore, all records and awards verified, validated, approved, and
complying with these procedures by SBA are deemed to have been effectively signed by an
authorized government official pursuant to established SBA practice for COVID-19 pandemic
related emergency assistance grant programs.

I authorize the disbursement of all such records and awards to the Office of the Chief Financial
Officer.

Matthew Stevens, Director, Shuttered Venue Operators Grant Program
(Appendices)

4

Appendix

Appendix 1: Memorandum from Stephen Kong, Acting Chief Operating Officer, to Tami
Perriello, Chief Financial Officer (Jan. 14, 2021) re: “Targeted EIDL Disbursement
Processes” (pdf attachment)

Appendix 2: Memorandum from Barbara J. Carson, Deputy Associate Administrator for
the Office of Disaster Assistance to Kimberly S. Butler, Director, Office of Grants
Management (Feb. 11, 2021) re: “Staff Support for Approval of Shuttered Venue
Operators (SVO) Grant Awards” (pdf attachment)

                                        U.S. SMALL BUSINESS ADMINISTRATION
 WASHINGTON, D.C. 20416

Date:
April 7, 2020

To:

Tami Perriello, Chief Financial Officer

From:
Kimberly S. Butler, Director, Office of Grants Management

Subject:
Authorization for Payments from RER Solutions

Ref:

(a) OGC memo of 3 April 2020

In accordance with reference (a), this guidance initiates the authorization for payments from RER
Solutions to the Office of the Chief Financial Officer for disbursement to the Bureau of Fiscal Service,
U.S. Treasury.

On March 27th, 2020, President Trump signed Pub. L. No. 116-136, the Coronavirus Aid, Relief, and
Economic Security (CARES) Act that includes authority under § 1110 for Emergency Economic Injury
Disaster Loan (EIDL) Advances up to $10,000.

VERIFICATION.—Before disbursing amounts under this subsection, the Administrator shall verify that
the applicant is an eligible entity by accepting a self-certification from the applicant under penalty of
perjury pursuant to section 1746 of title 28 United States Code.

AMOUNT.—The amount of an Advance provided under this subsection shall be not more than $10,000.

Verification
The Small Business Administration has contracted with RER Solutions for identity verification, data
validation, and fraud detection.
1.
EIDL applications collected through the Rapid Intake COVID-19 EIDL web form will be
forwarded for processing to Rapid Decision automated processing platform configured and
programmed in accordance with SBA Office of the Chief Financial Officer requirements as
follows:
2.
Remove duplicates
3.
Remove applicants previously funded under COVID-19 EIDL in the Disaster Credit
Management System (DCMS)
4.
Perform fraud checks
5.
Calculate eligible Advance amount based on logic provided by SBA
6.
Applications that are not duplicates and not excluded  based on fraud rules will be
periodically placed in a batch file including fields required for processing through the Office
of the Chief Financial Officer
7.
Each batch file shall include batch number/code in the file name
8.
Each batch file is sent to the Office of the Chief Financial Officer for funds check and
creation of a Payment Automation Manager (PAM)-compliant file.

Fraud Check Indicators
If any 1 of the BOLDED fraud indicators in the verification process are triggered or any 3 BOLDED OR
NON-BOLD indicators are triggered, the application will not be included in a batch file.

1.
Large number of applications with other lenders (large scale)

2

2.
Large number of applications for this program (several in succession)
3.
Owner information failed validation (information does not match, person is listed as
deceased, etc.)
4.
Client location is international
5.
Digital identity fraud suspicion/suspicious online behavior – the  data has been used
fraudulently online
6.
VOIP phone number
7.
Phone number is not associated with business or owner
8.
Email has not passed validation
9.
Invalid bank account number and/or routing number
10.
Bank account ownership does not match business
11.
Unable to confirm business registration

Any approved disbursements where the bank account number and routing number are valid and indicate
that the account can receive a deposit but the EIN/SSN can’t be authenticated are authorized. A report for
awards at the $10,000 value shall be provided to the Office of Grants Management within 60 days after
the EIDL Advance program has completed its last disbursement.

 Payment Amount
The total disbursement amount for each record included in the payment file is calculated based on the
following logic:

If number of employees is 0 then amount is $1,000
Otherwise if number of employees is greater than 10 then amount is $10,000
Otherwise amount is number of employees times $1,000

The total disbursement amount for each Advance file is the sum of the individual disbursements amount
for each record in the file

Based on the procedures outlined above, and in accordance with § 1110 of Pub. L. No. 116-136  – (the
CARES Act) and the streamlined procedures noted under 2 C.F.R. § 200.200(b), I authorize the
disbursement of all records verified, validated, approved and  from RER Solutions to the Office of the
Chief Financial Officer.

Kimberly S. Butler, Director,
Office of Grants Management

1
Date:  February 11, 2021

From:  Barb Carson, ODA/DAA

To:  Kym Butler, Director, OGM

Subject:  Staff support for approval of Shuttered Venue Operators (SVO) grant awards

The Shuttered Venue Operators (SVO) grant program provides for $15 billion in grants to shuttered venues. SBA
anticipates a range of 1,500 to 27,000 awardees, the total number which is yet to be determined.  The sheer
scale of the program, and lack of administrative funds provided to stand up the program, have necessitated
the creation of a highly automated a system for the receiving and processing of SVO applications.

That said, SBA will still require substantial staffing support for the review and approval of the SVO grants.  To
address this personnel demand, ODA intends to fulfill this requirement with federal employees currently
assigned as loan officers in the Office of Disaster Assistance. The work to ultimately approve grants is
inherently governmental, and typically conducted by a warranted grant management officer.  However, the
SVO grant program is unique in nature and is designed more like a direct payment program rather than a
competitive grant program.  SVO grant payments will be calculated based only on eligibility and revenue loss,
unlike a competitive grant program where a higher level of analysis and expertise are needed to evaluate and
approve awards.  Given the design of the SVO program, the inherently governmental nature of the approval
function, and the OPM technical competencies for grant management, it is conceivable that the SBA loan
officers would satisfy the needed skill set to perform this function or that grant administrators from other
agencies could be borrowed to fulfill this function.

To date, OPM’s guidance on the technical competencies for grants management, which incorporates awards,
does not indicate a required certification.  It does however frame knowledge requirements for this function:

•  Laws, regulations, rules, policies, procedures, and methods governing the administration of Federal grants,
cooperative agreements, and awards;
•  Grants/assistance management processes and techniques consistent with sound business and industry
practices; and
•  Financial methods, procedures, and practices to assess the financial stability of recipient of Federal grants
or cooperative agreements.

ODA is developing a training plan, including a knowledge assessment, that SVO grant approvers must
complete before commencing work in the SVO program.   As stated above, employees eligible for this duty are
ODA loan officers who have demonstrated experience evaluating program eligibility criteria and are trusted to
make decisions to approve high dollar loans on behalf of the federal government.  Additionally, ODA has
developed a comprehensive audit and monitoring plan and conducted a robust risk assessment for the
program.

ODA requests a waiver from SBA Standard Operating Procedure (SOP) 00-18 Chapter 6 (1) (b) to allow
appropriately trained ODA federal employee loan officers to execute SVO grant awards rather than warranted
grant management officers.  An SBA Policy Notice, submitted by OGM into SBA’s clearance process, can serve
as the instrument to implement and memorialize this deviation from standard procedure for the SVO grant
program.

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Production Issue Info (if applicable)

Issue Found in
Release 2
Release
W-001235
Request Info
Subject
Require Internal User to complete Budget Review and completion of Form 1222 flow
Description
As an Internal Control user, I should be required to complete the Budget Review and process
Form 1222 before I can send an NOA so that I can ensure these steps are not missed. (See
report for current records impacted by this story:
https://sbaodagrants.lightning.force.com/lightning/r/Report/00Ot0000001Nr1hEAC/view)
User Story Version
Control
v1 - 09.27.21 - MCrooks - Original draft
 User Story Details
Personas: Internal Controls User
Assumptions:
Acceptance Criteria:
1. User cannot send an NOA unless the following conditions are met:
1. Original Verified Budget record is populated AND Review Agent Status field = ‘Verified’
2. User has clicked ‘Adjust Grant Amount to Budget Amount’ button
3. Funding Request record →Form-1222 Reviewed and Approved field does not = Null
2. User receives the following error message if they attempt to create an NOA action item and
the conditions above are not met:
1. “You must complete the following steps prior to issuing the NOA:
1.
Verify the most recent Original Budget Reported by Applicant
2.
Confirm if a new Budget Action Item is needed by checking that the award and
budget amount match. If they do not match, an authorized staff member must
provide Applicant the opportunity to indicate their desired budget and adjust the
award to match.
3.
Generate Form 1222“
Key Decisions:
1. SBA needs to confirm if the error message language above is appropriate. (10/5 Grooming
Session 1: SBA provided warning language in AC #2) - SBA confirmed language 10-12-21.
Alternative/Exception Paths:
Technical Dependencies/Impacts

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