SBA’s Internal Controls to Prevent Shuttered Venue Operators Grants to Ineligible Applicants

Summary

U.S. Small Business Administration Office of Inspector General Inspection Report 24-02, SBA's Internal Controls to Prevent Shuttered Venue Operators Grants to Ineligible Applicants, dated October 25, 2023, with a memorandum to Administrator Isabella Casillas Guzman from Inspector General Hannibal “Mike” Ware. The report states that OIG sampled grants from the Shuttered Venue Operators Grant (SVOG) program and that, from the two samples, it questioned 47 awards totaling about $22.9 million as the result of weakened controls. It states that SBA stopped obtaining tax transcripts for SVOG awards under $500,000 and placed a strict 4-hour review time limit per application. OIG recommended that SBA reevaluate eligibility for the 47 applicants and implement additional controls, and states that SBA management disagreed with the audit finding.

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U.S. SMALL BUSINESS ADMINISTRATION
OFFICE OF INSPECTOR GENERAL
 SBA’s Internal Controls to Prevent
Shuttered Venue Operators Grants to
Ineligible Applicants
Inspection Report
Report 24-02
October 25, 2023

Make a Difference
To report fraud, waste, or mismanagement, contact the U.S. Small Business Administration’s
Office of Inspector General Hotline at 800-767-0385 or visit https://www.sba.gov/oig/hotline.
You can also write to the U.S. Small Business Administration, Office of Inspector General,
409 Third Street, SW (5th Floor), Washington, DC 20416. In accordance with Sections 7 and
8L(b)(2)(B) of the Inspector General’s Act, confidentiality of a complainant’s personally
identifying information is mandatory, absent express consent by the complainant authorizing
the release of such information.
NOTICE:
Pursuant to the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023,
Public Law 117-263, Section 5274, any nongovernmental organizations and business entities
identified in this report have the opportunity to submit a written response for the purpose of
clarifying or providing additional context as it relates to any specific reference contained herein.
Comments must be submitted to AIGA@sba.gov within 21 days of the final report issuance date.
We request that any comments be no longer than two pages, Section 508 compliant, and free
from any proprietary or otherwise sensitive information. The comments will be appended to this
report and posted on our public website.

U.S. Small Business Administration
Office of Inspector General
EXECUTIVE SUMMARY
SBA’s Internal Controls to Prevent Shuttered Venue Operators
Grants to Ineligible Applicants (Report 24-02)
What OIG Reviewed
The Economic Aid to Hard-Hit Small Businesses,
Nonprofits, and Venues Act provided $15 billion in
funding for the Shuttered Venue Operators Grant
(SVOG) program and set eligibility criteria for
entities. The American Rescue Plan Act of 2021
provided another $1.25 billion in funding for the
SVOG program.
This report presents the results of our inspection to
assess the U.S. Small Business Administration’s
(SBA) SVOG controls to prevent disbursements to
ineligible entities. Specifically, our review focused
on general eligibility requirements applicable to all
SVOG applicants and venue-specific requirements
applicable to live venue operators.
To meet our objective, we reviewed applicable
laws, regulations, policies, and procedures. We
also interviewed program officials and reviewed
SVOG application data and documentation. We
used a web crawler that identified 1,423 high-risk
awards. We sampled 167 grants for general
eligibility criteria review, totaling $163.3 million.
Separate from the web crawler, we identified
124 grants to live venue operators with business
names suggesting multiple lines of business
activity, rather than solely operating as live venues,
and sampled 40 for venue-specific eligibility
criteria review, totaling $24.8 million.
What OIG Found
SBA delayed launching the SVOG application portal
for over 2 weeks in April 2021 because of technical
issues. In June 2021, SBA officials made program
changes, which SBA called a “program refresh,” to
accelerate application processing and to expedite
the release of program funds.
SBA stopped using the application portal to track
applicant compliance with each eligibility
requirement, switching instead to a manual
checklist. SBA staff were instructed to presume
applicant assertions to be true unless a clear
indication of fraud was present. SBA also placed
a strict 4-hour review time limit per application.
Additionally, SBA limited or eliminated certain
verification procedures. For example, SBA stopped
obtaining tax transcripts – official Internal Revenue
Service records of filed tax returns – for SVOG
awards under $500,000. It stopped validating
certain matches to the U.S Department of the
Treasury’s Do Not Pay list, a centralized database
of entities barred from receiving additional federal
funding due to previous issues, such as delinquent
federal debt. These changes weakened internal
controls by making it more difficult for reviewers
to identify ineligible applicants.
From our two samples, we questioned 47 awards,
totaling about $22.9 million in grants awarded
as the result of these weakened controls. We
determined they were ineligible because their
applications and supporting documentation did
not comply with SVOG eligibility criteria.
What OIG Recommended
We recommended SBA management 1) reevaluate
eligibility for the 47 SVOG applicants we reviewed
and recover funds from applicants determined to
be ineligible and 2) implement additional controls
for the monitoring, auditing, and compliance
phases to prevent ineligible entities from receiving
grants.
Agency Response
SBA management disagreed with the audit finding
because the agency did not believe our samples
sufficiently tested for eligibility and internal controls
documented herein. Management agreed in
principle with recommendations 1 and 2; we will
pursue resolution in accordance with our audit
follow-up policy for the recommendations..

OFFICE OF INSPECTOR GENERAL
U.S. SMALL BUSINESS ADMINISTRATION
MEMORANDUM
409 Third St. SW, Washington, DC 20416  •  (202) 205-6586  •  Fax (202) 205-7382
Date:
October 25, 2023
To:
Isabella Casillas Guzman
Administrator
From:
Hannibal “Mike” Ware
Inspector General
Subject:
SBA’s Internal Controls to Prevent Shuttered Venue Operators Grants to Ineligible
Applicants (Report 24-02)
The Office of Inspector General (OIG) is issuing this inspection report to bring to your attention
concerns regarding the U.S. Small Business Administration’s (SBA) Internal Controls to Prevent
Shuttered Venue Operators Grants to Ineligible Applicants. These issues require immediate
attention and action to address protentional awards to ineligible entities.
We appreciate the cooperation and courtesies provided by your staff. If you have any questions
or need additional information, please contact me or Andrea Deadwyler, Assistant Inspector
General for Audits, at (202) 205-6586.
cc: Arthur Plews, Chief of Staff, Office of the Administrator

Peggy Delinois Hamilton, Esq., Special Counsel for Enterprise Risk

Therese Meers, General Counsel, Office of General Counsel

Kate Aaby, Associate Administrator, Office of Performance, Planning, and the Chief Financial
Officer

Deborah Chen, Deputy Chief Financial Officer (Acting), Office of Performance, Planning, and
the Chief Financial Officer

Francisco Sanchez, Jr., Associate Administrator, Office of Disaster Recovery & Resilience

Rafaela Monchek, Deputy Associate Administrator, Office of Disaster Recovery & Resilience

Michael Simmons, Attorney Advisor, Office of General Counsel

Tonia Butler, Director, Office of Internal Controls

Cynthia Pitts, Acting Director, Office of Continuous Operations & Risk Management

Anna M Calcagno, Acting Director, Office of Performance, Planning, and Chief Financial
Officer – Analysis and Evaluations

i
Contents
Introduction .................................................................................................................................... 1
SVOG General Eligibility Requirements ..................................................................................... 2
Live Venue Operator Eligibility Requirements ........................................................................... 2
SBA Preparations for Opening the Application Portal and Processing SVOG Applications........ 2
OIG Management Alert ............................................................................................................. 3
SVOG Delayed Program Launch and Slow Rollout ..................................................................... 4
Congressional Concerns Regarding Timeliness of Awards ........................................................ 4
SVOG “Program Refresh” .......................................................................................................... 5
Objective ................................................................................................................................... 5
Results ............................................................................................................................................. 6
Finding 1: SBA Weakened Internal Controls and Increased the Risk of Ineligible Entities
Receiving SVOG Awards ......................................................................................................... 6
Reviewer Checklist .................................................................................................................... 7
Data Analytics ............................................................................................................................ 9
Live Venue Operators .............................................................................................................. 11
Internal Revenue Service Tax Transcripts ................................................................................ 14
Do Not Pay List ........................................................................................................................ 15
Conclusion ............................................................................................................................... 15
Recommendations .................................................................................................................. 16
Evaluation of Agency Response ..................................................................................................... 16
OIG’s Analysis of Management’s Disagreements with Our Testing Methodology .................. 17
OIG Analysis of Management Disagreement with Statutory Requirements ........................... 19
OIG’s Analysis of Additional Material Provided in the Undisclosed Response to the
Report .................................................................................................................................. 20
Summary of Actions Necessary to Close the Recommendations ............................................ 22

ii
Tables

1
SVOG Award Data as of July 5, 2022 ............................................................................. 5

2
Sample of Reviewer Checklists ...................................................................................... 8

3
Tax Transcript Data as of July 5, 2022 ......................................................................... 14
Figures

1
Sample of 167 web crawlers reviewed. ....................................................................... 11

2
Sample of 40 live venue operators reviewed. ............................................................. 13
Appendices

1
Objective, Scope, and Methodology .......................................................................... 1-1

2
Questioned Costs ....................................................................................................... 2-1

3
Prior Work .................................................................................................................. 3-1

4
Agency Response ........................................................................................................ 4-1

1
Introduction
The U.S. Small Business Administration (SBA) received $1.2 trillion in appropriations as a result
of the Coronavirus Disease 2019 (COVID-19) pandemic’s widespread economic effects on the
U.S. economy. Most of SBA’s funding was provided through supplemental appropriations for
new and expanded programs, including $813.7 billion for the Paycheck Protection Program,
$525 billion for the Economic Injury Disaster Loan program, $28.6 billion for the Restaurant
Revitalization Fund, and $16.25 billion for the Shuttered Venue Operators Grant (SVOG)
program.
This report focuses on the SVOG program, authorized by the Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act1, also known as the Consolidated Appropriations Act2,
2021. The Act initially funded the SVOG program with $15 billion, and the program received an
additional $1.25 billion through the American Rescue Plan Act of 20213, increasing the total
SVOG funding to $16.25 billion.
The SVOG program, administered by SBA’s Office of Disaster Assistance, provided grants of up
to $10 million to shuttered venues affected by the COVID-19 pandemic. The program targeted
six entity types in the arts and entertainment businesses: live venue operators or promoters,
theatrical producers, live performing arts organization operators, relevant museum operators,
motion picture theater operators, and talent representatives. We used data analytics to assess
grant recipients for general eligibility compliance and selected a sample of 167 high-risk awards
across the six entity types. We determined that live venue operators were considered high risk
because they had the potential of principal business activity being other than a live venue
operator. As a result, we selected another sample of 40 live venue operator grant recipients to
assess their eligibility, for a total sample of 207 SVOG awards. This report focuses on the test
results of the 207 awards we examined, totaling $188 million.

1 Public Law 116-260.
2 Public Law 116-260.
3 Public Law 117-2.

2
SVOG General Eligibility Requirements
To qualify for a grant, an applicant’s business must have been in operation as of February 29,
20204, and at the time of applying, the business must have been open or intending to reopen.5
Applicants must have incurred at least a 25-percent reduction in gross earned revenue in one
quarter of 2020 compared to the same quarter in 2019.6 Applicants could not present live
performances of a prurient sexual nature or sell products of a prurient sexual nature.7
Additionally, with the exception of museums, all venue types must have had some requirement
for tickets or cover charges.8
Live Venue Operator Eligibility Requirements
In addition to the general SVOG requirements, live venue operators were required to
demonstrate they owned or operated a venue on behalf of an owner and derived
either 70 percent or more of their business income from event and event-related sales, or
on average, offered tickets for sale at least 60 days in advance of the performance date.9
Live venue operators were also required to organize live events of performing artists by
1) contracting with performers in a mutually beneficial agreement10, 2) collecting an admission
fee for most performances11, and 3) marketing the events.12
SBA Preparations for Opening the Application Portal and
Processing SVOG Applications
SBA announced on March 19, 2021, that it would begin accepting applications for the SVOG
program on April 8, 2021, via an online portal. SBA published guidance for grant applicants to its
website prior to the anticipated program launch date. Collectively, the documents summarized

4 Public Law 116-260, Section 324(a)(1)(A)(i)(I).
5 Public Law 116-260, Section 324(a)(1)(A)(ii).
6 Public Law 116-260, Section 324(a)(1)(A)(i)(II).
7 Public Law 116-260, Section 324(a)(1)(B).
8 Public Law 116-260, Section 324(a)(1)(A)(iii)(IV) and Section 324(a)(1)(A)(iv)(III).
9 Public Law 116-260, Section 324(a)(3)(A).
10 Public Law 116-260, Section 324(a)(3)(A)(i)(I)(bb) and section 324(a)(3)(A)(ii)(III).
11 Public Law 116-260, Section 324(a)(3)(A)(iii)(IV).
12 Public Law 116-260, Section 324(a)(1)(A)(iii)(VI).

3
the statutory requirements of the SVOG program and provided additional explanation and
clarification on program issues that applicants might find confusing. The agency also issued
internal guidance and trained SBA staff tasked with processing SVOG applications.
SBA hosted public webinars on January 14 and March 30, 2021, to provide introductory
information about the SVOG program, including who could apply and how organizations could
prepare to apply. The webinars also covered the entire SVOG program lifecycle, including SVOG
program background; program basics and definitions; eligibility; the application process; notice
of award; grant disbursement; expenditure of grant funds; grant close out; recordkeeping
requirements; and monitoring, audit, and enforcement actions.
From April 6 to April 8, 2021, SBA trained staff tasked with processing SVOG applications. The
training covered the entire grant lifecycle, including information about government grants in
general and information specific to SVOG awards.
OIG Management Alert
SBA Office of Inspector General (OIG) issued a management alert on April 7, 2021, which
identified serious concerns about the SVOG control environment and tracking of performance
results in the SVOG program,13 before SBA opened its portal to receive SVOG applications. We
suggested SBA take immediate action to reduce or eliminate risks by strengthening existing
controls and implementing internal controls to address potential misuse of federal funds. Our
suggestions for the SBA Administrator included:
1. Reassess the audit risk plan to identify vulnerabilities, commensurate with the expected
volume of applications and average award amount, to strengthen internal controls and
reduce the risk of misuse of federal funds.
2. Clearly establish 2 CFR 200 criteria for the program to ensure compliance during the
implementation and oversight phases.
3. Implement required performance measures to determine the impact of program funds.
4. Ensure sufficient resources are available to implement and oversee the SVOG program.
In response to this memorandum, SBA drafted an addendum to its SVOG Risk Analysis to
acknowledge risks related to staffing, training, technology, program delays, and policy changes.

13 SBA OIG Management Alert, Serious Concerns About SBA’s Control Environment and the Tracking of Performance
Results in the Shuttered Venue Operators Grant Program, Report 21-13 (April 7, 2021).

4
SBA also drafted an SVOG Audit and Oversight Plan stating the SBA would perform periodic
audits of the population of awards using a random sampling methodology and audit a
statistically significant sample of awards for low-, medium-, and high-risk awardees. In addition,
SBA updated its System for Award Management (SAM.gov) listing for the SVOG program to state
that “SBA will apply Uniform Guidance at 2 CFR 200 to all applicants to the maximum extent
practicable.” SAM.gov is an official U.S. government website where entities must register to
receive federal funds. Finally, SBA trained hundreds of employees to process SVOG applications.
SVOG Delayed Program Launch and Slow Rollout
SBA encountered technical issues upon opening the SVOG application portal on April 8, 2021,
and announced that it had suspended access to the portal. SBA announced plans to reopen the
portal by April 24, but the reopening was delayed until April 26. Within the first 24 hours the
portal opened, SBA received 7,884 applications and awarded the first SVOG 1 month later, on
May 26, 2021. By June 14, 2021, SBA had received 14,214 applications seeking $11.5 billion in
SVOG funding but had awarded only 411 grants totaling $304.2 million.
Congressional Concerns Regarding Timeliness of Awards
On June 15, 2021, the SBA Administrator received a letter signed by 55 U.S. Senators that
urged the Administrator to take immediate action to ensure that SVOG relief reached eligible
applicants without further delay. The letter stated that SBA’s insistence on strict compliance
with competitive grant rules created unnecessary funding delays. The letter also stated that
restrictions on SBA communication with grant applicants was unnecessary and prevented the
agency from providing administrative support to applicants that could have streamlined the
application review process. The letter requested information on the status of SVOG application
processing and what actions SBA was taking to keep small business owners apprised of the status
of their applications.
On June 16, 2021, the SBA Administrator received a letter signed by 211 members of
the U.S. House of Representatives also urging SBA to expedite the release of funds to
beneficiaries of the SVOG program. The letter expressed great concern about the rollout of
the program and release of funds, noting the delayed opening of the application portal and that
SBA’s June 14 program report showed that only 411 grants were made by that time from the
14,214 submitted applications. The members of Congress requested that disbursement of funds
be immediately expedited.

SVOG “Program Refresh”
After the congressional inquiry, SBA made significant changes to its application review process.
SBA called this the SVOG “program refresh,” which was designed to speed up processing of
applications. The refresh set a target of 600 SVOG application decisions per day by benchmarking
no more than 4 hours for review of each application before recommending for award, declining,
or inviting the applicant to reapply. The refresh increased the SVOG review and approval rate.
From the opening of the portal on April 26, 2021, through June 9, 2021, SVOG staff completed
90 reviews. After the changes went into effect on June 11, 2021, SVOG staff reviewed
14,592 applications by July 26.
Table 1: SVOG Award Data as of July 5, 2022
Venue type
Total Number
of Awards
Percent of
Total Award
Total Award Value*
(dollars)
Percent of
Total Award
Value
Live performing arts
organization operator
3,396
26.1%
$2,490,199,841
17.1%
Live venue operator or
promoter
4,824
37.1
6,055,884,984
41.5
Motion picture theater
operator
1,621
12.5
2,572,467,758
17.6
Museum operator
815
6.2
1,363,876,379
9.4
Talent representative
1,404
10.8
985,554,074
6.8
Theatrical producer
951
7.3
1,106,290,134
7.6
Total
13,011
100.0%
$14,574,273,170
100.0%
* The total includes initial, reconsideration, supplemental, and reconsideration for supplemental awards.
Source: OIG analysis of SVOG data as of July 5, 2022, the end of our review period
Objective
Our objective was to perform an assessment of SBA’s internal controls to prevent ineligible
applicants from obtaining a SVOG.
5

6
Results
Finding 1: SBA Weakened Internal Controls and Increased the
Risk of Ineligible Entities Receiving SVOG Awards
The “program refresh” may have been SBA’s response to public outcry and congressional
inquiries that followed delays in opening the application portal and subsequently awarding
grants within the timeframe promised, but SBA significantly weakened internal controls to do so.
As a result, it was more difficult for reviewers to identify ineligible applicants. As of July 5, 2022,
the agency had awarded 12,921 grants, totaling $14.4 billion, after the “program refresh.” Of
the 207 grants we reviewed totaling $188 million, SBA made 47 awards (23 percent of the
awards reviewed) to ineligible entities for a total of $22.9 million (12 percent of the dollars
reviewed).
SBA determined the cause of the delays in awarding grants was too many eligibility controls.
For example, the agency used the fact that 8,300 out of the 13,000 applicants at the time had
Do Not Pay (DNP) matches and stated that it would require a complex cure process prior to
being able to award grants. A cure process, sometimes called a fix period, is intended to provide
one final opportunity for a debtor who is in default to make things right with the lender. SBA’s
“program refresh” reduced internal controls to ensure that each application was processed to a
decision within 7 days of receipt in part by reducing initial application review time to 4 hours and
decision process times to 30 minutes. In doing so, the “program refresh” weakened internal
controls over the review process by changing to manual application review with the use of
reviewer checklists, eliminating verification of tax transcripts for grants less than $500,000, and
limiting validation for conclusive matches to the U.S. Department of the Treasury’s (Treasury)
DNP list. The SVOG “program refresh” weakened controls, instead of ensuring they were
designed to reasonably prevent, detect, and correct unauthorized acquisition,14 and resulted in
awarding SVOGs to ineligible applicants.15
14 OMB Circular A-123, “Management’s Responsibility for Enterprise Risk Management and Internal Control”
(July 15, 2016).
15 U.S. Government Accountability Office, GAO-14-304G, Standards for Internal Control in the Federal Government,
p. 5 (2014) requires managers to design controls that appropriately protect an agency’s assets from waste, fraud,
and abuse.

7
Reviewer Checklist
The SVOG portal was set up to receive applicant eligibility responses and supporting documents
in separate pages for reviewers. The SVOG portal used a simple “verified,” “pending,” or “failed”
determination for reviewers to mark their decision on the applicant’s eligibility and a comment
section to document their rationale. An additional dialogue section, called “Chatter,” was
provided in each section of the portal that allowed SVOG staff to discuss applicant information.
The “program refresh” discontinued the monitoring and tracking of eligibility requirement
determinations in the SVOG portal and switched to documenting eligibility manually in a
Microsoft Word document called a reviewer checklist. SBA developed six different checklists
for each unique entity eligible to apply for a SVOG, including the nine general eligibility
requirements applicable to all entities and the venue-specific requirements applicable to the
venue type applying. SVOG reviewers marked “Yes” or “No” to note if the applicant was still
eligible after the review of each eligibility requirement. The document was then converted to a
PDF document and uploaded to the “Chatter” in the applicant “Details” section of the SVOG
portal. Once the SVOG reviewer uploaded the reviewer checklist, if determinations on eligibility
were changed, the checklist was not updated to reflect these changes. As a result, changes
made to eligibility determinations after the applicant review checklist was completed were not
clearly documented. Unlike the clear failed marking of the SVOG portal, indications of potential
ineligibility in reviewer checklists could easily be overlooked by approvers. SBA’s decision not to
update the checklist’s eligibility determinations increased their risk of missing ineligibilities noted
by the initial reviewer.
SVOG reviewers were given a benchmark of 4 hours per application before passing it to SVOG
approvers. SVOG approvers had a benchmark of 30 minutes per application to determine
whether they concurred with the SVOG reviewer’s assessment. SBA instructed reviewers and
approvers to rely on the applicant attestation with limited online search for verification. The
SVOG reviewers were instructed to presume an applicant’s statements to be true unless a clear
indication of fraud existed. Instructions provided to reviewers did not include what constitutes a
clear indication of fraud. Most SVOG recipients are likely first-time federal awardees, with only
3 percent of the 11,974 recipients awarded a SVOG as of September 20, 2021, having prior
federal awards experience based on recent USAspending.gov activity.16 With little prior
experience with government grants, applicants likely did not know if they were in full
compliance with government requirements. Also, considering the prevalence of fraud in SBA’s

16 USAspending.gov is the official open data source of federal spending information.

other pandemic programs and the many lessons learned, SBA still relied on self‐certification,
limiting the ability of reviewer to detect ineligible entities through document reviews and web
searches.
Additionally, SBA directed SVOG reviewers and approvers to view sales data “in the light most
favorable” to the applicant and use a holistic approach to their reviews. As such, if the applicants
could demonstrate they had live events at any given frequency, they were viewed as eligible. For
applicants with multiple lines of business activity, SBA did not perform a full assessment of their
principal business activity.
We reviewed checklists (table 2) as part of our sample of 40 live venue operators (see the “Live
Venue Operators” section below). Based on award date, we determined that 39 of the 40 grants
were awarded after the “program refresh.” SBA reviewers should have used a review checklist
to evaluate eligibility for these 39 awards. Based on our examination, we found that SVOG
reviewers did not consistently fill out the reviewer checklist. In most cases, if the primary six
questions on the first page of the checklist were marked as “Yes,” the SVOG approver approved
the grant. Fifteen out of the 21 reviewer checklists that noted eligibility issues had responses of
“Yes” to all six primary questions. In some instances, when the approver acknowledged the
discrepancies, they used vague language to dismiss the reviewer’s concerns rather than directly
addressing the unmet eligibility requirement. For example, the approver would recommend
approval based on “holistic review” of the application or because approval was warranted when
the application was viewed “in the light most favorable” to the applicant. As such, there was no
assurance the entities receiving these awards were eligible, resulting in a waste of government
funds that could have been used to assist others.
Table 2: Sample of Reviewer Checklists
Number of
Reviewer
Checklists
Number of
Ineligibilities*
Number of
Blanks
Primary question and eligibility questions
marked as eligible
14
0
0
Eligibility questions marked as ineligible
15
97
50
Primary questions and eligibility questions
marked as ineligible
6
47
9
No checklist
3
N/A
N/A
Primary questions marked as ineligible
1
0
0
Total
39
144
59
* Number of ineligibilities does not include the primary six questions.
Source: OIG analysis of SVOG data as of July 5, 2022
8

9
Data Analytics
We used a data analytics tool called a web crawler – a software application that downloads and
indexes online content to mimic the online searches reviewers performed – to verify information
submitted by applicants. Of the 13,011 businesses that received an award, 10,285 provided a
business website in their SVOG applications. Of the 10,285 websites, 224 were not fully
functional, and 219 blocked our web crawler.
We used the web crawler to evaluate the 9,842 accessible websites for functionality and
content (see appendix 1 for more details). We found several websites with indicators that
suggested a business was not in operation or was otherwise potentially ineligible for a SVOG,
including:
•
110 websites that had not been modified since December 31, 2020;
•
1,010 websites that did not have any key terms indicating ticket sales, which are
required for all venue types except museums;
•
79 websites that contained words suggesting content of a prurient sexual nature;
and
•
236 websites containing 50 or fewer characters.
We selected a sample of awards (summarized on figure 1 below) from each of the populations
identified through the web crawler. In total we reviewed and examined 167 awards and found
23 grants were ineligible because the applicant did not meet one or more general eligibility
requirements:
•
Seven applicants’ websites reviewed with the lowest number of characters did not
have a principal business activity in the arts and entertainment industry to qualify for
a SVOG. Documentation provided by these applicants in the SVOG portal did not
sufficiently identify their principal business activity or demonstrate that the applicant
qualified.17

17 Public Law 116-260 Section 324(a)(3)(A).

10
•
Four applicants’ websites reviewed with a last modified date of December 31, 2020,
or earlier, were closed and did not demonstrate intent to reopen, as required.
Documentation provided by applicants in their loan applications was contradicted by
information publicly available on the applicants’ business website or social media
accounts.18
•
Four applicants’ websites reviewed with no key terms indicating ticket sales did not
require tickets or cover charges as required for all entities except for museums. Three
of these businesses did not demonstrate ticket sales, and one applicant’s business had
not reopened, nor did the applicant have sufficient documentation to show that the
business required paid tickets or cover charges.19
•
Five applicants’ websites reviewed containing words suggesting content of a prurient
sexual nature were ineligible for a SVOG, or further investigation was needed to confirm
eligibility.20 One applicant’s website showed it operated a pornography theater, one
applicant’s website contained hidden pornography links, and three applicants’ websites
showed they performed or hosted burlesque shows or similar performances.21
•
Three applicants’ websites reviewed for being deemed not fully functional had
questionable eligibility requiring further investigation. One applicant did not
demonstrate an intent to reopen22 and did not own the venue or operate the venue
on behalf of an owner.23 One applicant applied as a theatrical producer but did not
demonstrate that it held a for-profit interest in a theatrical production (other than as a
vendor or service provider) or had sole or joint rights to control a theatrical production,
which is an eligibility requirement for the theatrical producer entity type.24 One of the
25 applicant’s websites displayed pornographic content.25
18 Public Law 116-260 Section 324(a)(1)(A)(ii).
19 Public Law 116-260, Section 324(a)(1)(A)(iii)(IV).
20 We used an SBA internal legal memorandum dated September 15, 2021, as a basis for our review.
21 Public Law 116-260, Section 324(a)(1)(B)(i).
22 Public Law 116-260, Section 324(a)(1)(A)(ii).
23 Public Law 116-260, Section 324(a)(3)(A).
24 Public Law 116-260, Section 324(a)(3)(A).
25 Public Law 116-260, Section 324(a)(1)(B)(i).

11
Figure 1: Sample of 167 web crawlers reviewed
Live Venue Operators
We identified 124 entities as high risk due to venue type. The business names of these
SVOG awardees included terms such as “bar,” “brewery,” “winery,” “restaurant,”
or a similar name that would indicate a business other than a live venue. We judgmentally
selected 40 of the 124 entities for testing. While the sample of awards we reviewed was
limited to live venue operators, the internal control deficiencies we identified were applicable
to all entity types for applications that SBA reviewed and awarded after the “program
refresh.”
The Consolidated Appropriations Act, 2021, contained 7 general SVOG eligibility requirements
and 11 specific requirements for live venue operators. Applicants were also required to meet
two requirements for general grant eligibility. We assessed each eligibility requirement to
identify those that were easily verifiable through document review and web search. Based on
our assessment, we limited our review to 4 of the 9 general eligibility requirements and 5 of
the 11 venue-specific requirements.

12
We concluded that seven of the applicants did not meet one or more of the general eligibility
requirements. Specifically, we found:
•
Four applicants did not provide documentation to demonstrate a 25-percent or greater
decrease in gross earned revenue in at least one quarter of 2020 compared to the same
quarter in 2019;26
•
Two applicants did not demonstrate intent to reopen. Documentation provided by both
applicants were contradicted by web search information identified for the applicant’s
business;27
•
One applicant did not demonstrate being in full operation on February 29, 2020.
Documentation provided by the applicant showed no revenue in February 2020;28 and
•
One applicant presented documentation showing burlesque shows as one of their live
performances. A web search of the business showed that the performances were of a
prurient sexual nature as defined by an SBA internal legal memorandum. Applicants
are ineligible to receive a SVOG if they have live performances of a prurient sexual
nature.29
In reviewing venue-specific eligibility requirements, we concluded that 24 of the applicants did
not meet one or more of the venue-specific eligibility requirements (see figure 2 below).
Specifically:
•
Eighteen applicants either did not submit documentation to support their principal
business activity as a live venue operator, documentation provided did not
sufficiently identify their principal business activity as a live venue operator, or
the documentation provided demonstrated the applicant did not qualify as a live venue
operator.30
•
Eleven applicants did not demonstrate that most performances required a paid ticket
or cover charge to attend. Seven of the eleven applicants provided documentation
showing that the majority of events or all events were free, and four did not provide
sufficient supporting documentation.31
26 Public Law 116-260, Section 324(a)(1)(A)(i)(II).
27 Public Law 116-260, Section 324(a)(1)(A)(ii).
28 Public Law 116-260, Section 324(a)(1)(A)(i)(I).
29 Public Law 116-260, Section 324(a)(1)(B)(i).
30 Public Law 116-260, Section 324(a)(3)(A).
31 Public Law 116-260, Section 324(a)(1)(A)(iii)(IV).

13
•
Six applicants did not demonstrate filling at least two of the required roles under the
Consolidated Appropriations Act, 2021. Five of the applicants did not provide sufficient
documentation, and one applicant indicated only filling one role.32
•
Four applicants did not provide sufficient documentation to demonstrate that most
performers were paid through a mutually beneficial arrangement.33
•
Four applicants did not own the venue or operate the venue on behalf of an owner.34
Figure 2: Sample of 40 live venue operators reviewed
Source: OIG analysis of SVOG data as of July 5, 2022
32 Public Law 116-260, Section 324 (a)(1)(A)(iii)(III).
33 Public Law 116-260, Section 324(a)(3)(A)(i)(I)(bb) and (a)(3)(A)(ii)(II).
34 Public Law 116-260, Section 324(a)(3)(A).

14
Internal Revenue Service Tax Transcripts
Another change of the “program refresh” was the removal of Internal Revenue Service (IRS)
transcripts – official IRS records of filed tax returns – for grants less than $500,000. SBA made
this decision because grants of this amount or less made up 70 percent of the applications
and only 12 percent of the requested funds. SBA believed the benefits of this check, such as
verifying identity and validating 2019 income, could be achieved using applicant provided
data. SBA’s decision for the review of tax transcripts did not consider supplemental awards
and only made the decision to perform or not perform the tax transcript reviews based on
the initial grant amount. Supplemental awards could push an entity’s total grant amount over
the $500,000 threshold, yet it would not trigger a requirement to obtain the tax transcript. As
of July 5, 2022, the end of our review period, the percentages still held, with approximately
70 percent of the applicants having requested an initial grant amount less than $500,000,
making up less than 15 percent of the grant dollars awarded. Over eight percent of these
applicants received supplemental awards that pushed the total award amount for the applicant
above the threshold of $500,000, increasing the risk of the decision to forego the tax transcript
validations. In total, 1,136 applicants received total awards more than $500,000, but they were
not required to provide transcripts. These 1,136 applicants received over $860 million in total
(table 3).
Table 3: Tax Transcript Data as of July 5, 2022
Tax Transcripts Obtained
Total Number of
Awards
Percent of
Total
Awards
Total Award
Value*
(dollars)
Percent of
Total Award
Value
Obtained at time of initial
award (grants more than
$500,000)
3,935
30.2%
$12,390,621,561
85.0%
Not obtained but supplemental
increased past $500,000
1,136
8.8
861,484,052
5.9
Not obtained (grants less than
$500,000)
7,940
61.0
1,322,167,557
9.1
Total
13,011
100.0%
$14,574,273,170
100.0%
* Comprised of initial, reconsideration, supplemental and reconsideration for supplemental awards.
Source: OIG analysis of SVOG data as of July 5, 2022

15
Do Not Pay List
Prior to the “program refresh,” the SVOG program sent applicant data to the Treasury to be
verified against the DNP list of entities barred from receiving additional federal funding due to
previous issues, such as delinquent federal debt. SBA determined that the original approach of
checking all three matches [possible (name only match), probable (number only match), or
conclusive (name and number match)] was over-controlled, and applicants would need to go
through a complex process to cure the DNP matches prior to receiving a SVOG.35 SBA revised the
Treasury DNP list validation checks to only conclusive matches and removed all matches to the
Death Master File, a subdatabase of the DNP list. This decision was made because the SVOG
application did not specifically collect Social Security Numbers (SSN). The field for business tax
identification could be either a SSN or an Employer Identification (EIN). When EINs were
provided by applicants and ran against the Treasury DNP list, it resulted in false positives (valid
EIN matching to deceased SSNs). SBA could have corrected this issue by requesting that all
applicants provide a SSN for the principal applicant.
Conclusion
SBA’s “program refresh” changes were to expedite the review process by cutting the review
process time to 4 hours, decision process time to 30 minutes, and ensuring that decisions
were processed within 7 days or less for each application. SBA reduced the pre-award internal
controls for the SVOG program, relying instead on post-award monitoring, despite the challenges
identified with similar approaches in SBA’s other pandemic relief programs. SBA determined that
if the application reviewers and approvers, along with the disbursement and monitoring teams,
all performed their assigned duties, the cumulative effect would provide necessary protections
against fraud and ineligible entities. SBA moved these pre-award reviews to post-award
monitoring, which may require SVOG awardees to submit rigorous documentation, including
audited financial statements, during this phase of the SVOG program. Post-award monitoring
does not provide sufficient fraud prevention and comes at a point when funds are potentially
unrecoverable. Had SBA not lowered the internal controls to verification through applicant
assertion, the document review and web searches could have identified the 47 ineligible awards
totaling over $22.8 million out of the $188 million in awards we reviewed.
35 OIG did not perform detailed testing on the Treasury’s DNP list as part of this inspection. OIG intends to do a
review of the DNP list under a separate cover to determine impact.

16
While OIG did not review a statistical sample of SVOG awards, the 47 ineligible awards we
identified represent 23 percent of the awards we did review, which can also be characterized as
12 percent of the dollars we reviewed. Though this small sample cannot be extrapolated to the
entire SVOG portfolio, our findings do evidence concern as it relates to the effectiveness of SBA’s
pre-award controls. These results also underscore the importance of upfront controls to reduce
the risk of fraud and prevent a pay and chase scenario.
Recommendations
To address the issues identified, we recommend that the Administrator direct the Associate
Administrator for the Office of Disaster Assistance to:
Recommendation 1: Reevaluate eligibility for the 47 applicants we questioned and recover grant
funds from the ineligible applicants.
Recommendation 2: Implement additional controls to ensure that, during the monitoring,
auditing, and compliance phases, awards are carefully screened to verify eligibility and to recover
grant funds from ineligible entities.
Evaluation of Agency Response
SBA management provided formal comments to the draft report. We have included those
comments in Appendix 4. SBA also provided a more detailed response that SBA management
requested, and we agreed not to include the final appendix of their response because it includes
personally identifiable information about each of the SVOG recipients discussed in this report.
SBA management's response focused on the controls and sample OIG tested rather than the
eligibility concerns of SVOGs identified in this report. SBA management agrees in principle with
our recommended actions to ensure grant recipients are eligible. We considered management’s
comments from both written responses – the attached response in Appendix 4 and the response
SBA requested not be attached – when preparing this final report.
SBA management provided an extensive list of documentation to OIG to ensure we had
reviewed the same information as the reviewers for awarding grants. It is noted that some of
the information provided was obtained by SBA after awarding the grant, and some of it SBA
obtained in response to our finding. OIG appreciates SBA’s actions on our findings and their
feedback. We reviewed the provided information and met with program officials on three

17
separate occasions to discuss the audit finding and any new material provided by SBA. The
documents provided by SBA were already reviewed as part of the inspection process and in
accordance with established inspection standards.36
OIG’s Analysis of Management’s Disagreements with Our
Testing Methodology
SBA management contends the controls and sample OIG tested were not connected and did not
support our finding. SBA also stated this report would cause unwarranted public confusion. OIG
disagrees, as our sampling and testing procedures were planned and performed in accordance
with established inspection standards and focused specifically on SBA’s review process and
controls SBA revised to speed up the distribution of SVOG grants.
Additionally, the agency questioned our risk-based approach and sample size. Risk-based
sampling methodologies were used in this review and were performed in accordance with
inspection standards, allowing for testing that focuses on the highest-risk transactions that could
be affected by weak controls.37 Our sample methodology is included within OIG reports to
explain how a sample is selected. For this review, the sample included 167 from the 1,423 high-
risk awards identified by the web crawler and a sample of 40 from the 124 high-risk awards
identified based on business names that indicated a business other than a live venue, such as
a bar, brewery, winery, restaurant, or similar business, that could potentially be ineligible for
the grant based on principal business activity being other than a live venue. OIG sampled over
10 percent of each of these two high-risk categories identified in this report.
SBA management’s comments assert the SVOG program contained multiple risk controls,
of which OIG focused on only three internal controls. In its response, the agency speaks of
numerous preventative and detection controls they have in place, yet SBA never provided an
explanation of how or why these controls did not prevent awards being made to the potentially
ineligible entities identified in this report. Specifically, SBA’s SVOG Process Narrative identified
15 key controls; 5 of those controls are directly tied to the reviewer checklist, and 2 of those
controls are tied to limited use (see limitations discussed in the next two paragraphs) of
Treasury’s DNP List and IRS transcripts. Thus, the OIG’s risk-based testing reviewed 15 key
controls identified by the agency. OIG then reviewed each applicant’s provided documentation

36 Council on Inspectors General on Integrity and Efficiency. (2020). Quality Standards for Inspections and
Evaluations (Standard No 4.1 and 4.2).
37 Council on Inspectors General on Integrity and Efficiency. (2020). Quality Standards for Inspections and
Evaluations (Standard No. 4.3).

18
and obtained additional documentation from the agency to determine if the applicants were in
fact eligible SVOG recipients. After reviewing all of the information, OIG maintains the entities
mentioned in this report were ineligible to receive SVOGs and should be re-reviewed by SBA.
We recognize SBA faced challenges in tailoring the internal control environment of the SVOG
Program to meet the monetary needs of intended recipients in a timely manner. Nonetheless,
the agency should have taken measures to verify applicant eligibility. For example, even though
SBA made public statements that they would use the DNP system, the agency removed portions
of the Treasury DNP list control. The focus of the agency response is that a business would not
have appeared on the DNP list, whereas we are noting that a principal applicant may have been
barred, and the agency could have appropriately used the DNP control by simply obtaining the
SSN of the principal applicant. Applicants with a controlling interest in the business who are on
the DNP list should have been ineligible for awards.
Prior to the Program Refresh, SBA was going to use tax transcripts as a front-end control to
ensure eligibility. After the Program Refresh, OIG found SBA had eliminated verification of tax
transcripts for grant recipients receiving less than $500,000 and did not consistently apply this
requirement for grant recipients past the initial award. Prior to the program refresh, SBA
management indicated in their SVOG Risk Analysis addendum that tax transcripts would be a
front-end control for mitigating risk. This is further evident by the fact that “Form 4506-T:
Request for Transcript of Tax Return” is listed as a required document to be submitted by all
applicants in the publicly published Application Checklist and Frequently Asked Questions.
SBA’s response dismisses our finding of the need for tax transcripts for all grant applications and
places over reliance on self-certifications by contending tax transcripts provided limited use for
verifying applicant financial assertions. The agency noted that earned revenue is not a stand-
alone tax field on any tax return forms used by the IRS; therefore, the tax transcript, if available,
could not be used to determine the eligible earned revenues for SVOG applicants in a consistent
or timely manner. We disagree. SBA regularly uses tax transcripts to verify financial assertions
made by applicants when applying not only for disaster loans but also for assistance under other
SBA programs. The agency should have used this resource to the same degree when determining
SVOG eligibility. Instead, the agency continued to rely upon self-certification despite the
challenges identified in similar approaches within SBA’s other pandemic relief programs.
SBA notes the several different reviewer checklists allowed for accelerated program
development and provided a consistent, repeatable structure for every review. We agree
that it is a consistent and repeatable structure; however, we found that reviewers inconsistently
used the correct checklist, and the approvers ignored the ineligibilities documented.

19
SBA also expressed concerns that OIG may not have properly considered instances in which an
applicant could fail one part of a requirement but still be eligible for a SVOG. When meeting with
the agency, we noted our review did take into consideration requirements for which only one
part had to be met for SVOG eligibility (such as the principal business activity of live venue
operators being established either through revenue or advance ticket sales). Our inspection
included an assessment of the entities, and all information was considered in the development
of our findings as presented in this report.
OIG Analysis of Management Disagreement with Statutory
Requirements
In reviewing and responding to our findings, SBA disregarded or did not fully consider the
statutory language and provisions. One example of statutory misinterpretation is principal
business activity for live venue operators, which could be met either by 1) 70 percent of the
revenue coming from ticket sales/cover charges and event-based sales of beverages, food, or
merchandise or 2) selling tickets to live events, on average, no less than 60 days in advance.38 In
a clear case of ineligibility, we identified a brewery as having received $1.4 million from a SVOG
award, but the business had 36 percent of their revenue coming from products sold to other
businesses for resale, making it impossible for 70 percent of the revenue to come from ticket
sales/cover charges and event-based sales of beverages, food, or merchandise. In addition, out
of the 189 live events at the establishment, only 50 were paid events, with no indication of
advance tickets. The agency disagreed. SBA asserted that if it hadn’t been for the entity’s live
events, none of the other sales would have occurred. SBA pointed to the existence of ticket sales
as being sufficient for demonstrating advanced ticket sales, thereby ignoring the clear statutory
requirements for SVOG eligibility. The statutory language is specific and intended to ensure that
the recipients of the grant are in fact a live venue operator or promoter, theatrical producer or
live performing arts organization operator, a relevant museum operator, a motion picture
theatre operator, or a talent representative and not just a business that occasionally has
performances.
In responding to the requirement that most performances require a paid ticket or cover charge
to attend, SBA disagreed and pointed to any amount of ticket sales as support39 even though
there were clear examples of the business not requiring a ticket or cover charge for most
performances. For example, one business provided their 2018, 2019, and 2020 performance list

38 Public Law 116-260, Section 324(a)(3)(A).
39 Public Law 116-260, Section 324(a)(1)(A)(iii)(IV).

20
with detailed pricing for the event and compensation to performers. The event list provided
showed that, on average, only 12 performances annually required a ticket or cover charge even
though the venue had over 200 events on their calendar each year.
When it comes to sexually prurient activities, SBA points to two files: 1) a talent representative
who was awarded $1.5 million and 2) a live venue operator who was awarded $2.5 million. The
first applicant had hidden pornographic links on their website, and the second applicant, who
runs a restaurant that is open daily with an upstairs night club that is open only 3 nights a week,
had a very suggestive Sunday brunch burlesque performance, which meets the definition of
sexually prurient as defined by the agency. The statute clearly indicates that businesses cannot
have live performances of a sexual nature.40 The agency argues potential first amendment rights
concerns, yet the federal government has historically not provided any bailout, rescue, or
assistance funds to businesses who present live performances of a prurient sexual nature. The
agency must apply the statutory language, which bars businesses with sexually prurient
performances from receiving grants, by ensuring grant recipients are in compliance.
Lastly, the agency provided their statutory interpretation for three applicants who OIG found did
not own or operate a live venue. SBA asserted the applicants could operate a venue in which
the primary use is the presentation of live performing arts events and provided the following
examples, including but not limited to, nightclubs, regional performing arts centers,
amphitheaters, concert halls, and Broadway theatres. OIG used a similar approach and found
the three entities in question used public streets, public parks, hotels, and private boats, all
venues in which the primary use was not to present live performances.
OIG’s Analysis of Additional Material Provided in the
Undisclosed Response to the Report
For our sampled transactions, and specifically the exceptions we found, SBA provided additional
information about each SVOG applicant. After reviewing this new information, we stand by our
findings.
40 Public Law 116-260, Section 324(a)(1)(B)(i).

21
In response to our finding regarding ineligible SVOG applicants, SBA management responded as
follows:
•
Where we identified websites that did not align with the applicant’s assertions, SBA
management stated there was no requirement to provide a website on the application.
OIG concurs, but if an applicant provided their website, SBA could have reviewed it to
ensure the applicant’s assertions matched how they portrayed themselves as a business
to the public. In reviewing the web crawler results, we identified three businesses that
have, since our last review, updated their website to show activity in support of their
assertions. For example, one entity’s website showed it had not hosted a live event
since November 2019. The website has been updated to show the entity is hosting live
events, but all of these events were outside of the United States. This applicant requires
a legal review by SBA to ensure they are not a foreign entity and were eligible to receive
funds. The other two applicants’ websites did not support eligibility at the time of the
award. Additionally, those two applicants were ineligible for other reasons beyond an
inactive website.
•
SBA provided additional documentation for four live venue applicants to verify a
25-percent loss of gross revenue. While the documentation did verify the loss, the
documentation was obtained post-OIG review; therefore, at the time of approval, SBA
did not have sufficient information to support approval. Even with this new information
that verifies the loss, all four applicants still failed on at least one or more additional
eligibility requirements. Therefore, this new information did not change the final
determination for eligibility.
•
SBA asserted four of the applicants in the live venue operator review were promoters
and, therefore, were not required to own or operate a venue. OIG reviewed the
applicant files and noted the applicants were reviewed by SBA with a live venue
operator checklist and not that of a promoter. Thus, they were held to the eligibility
requirements for a live venue operator instead of a promoter. When it comes to owning
or operating a venue, the agency asserts that if the applicants did not own or operate a
venue, then OIG has merely identified the entity is a promoter due to the similarity
between the two entity types. This stance fails to recognize that a promoter needs to
demonstrate both a profit interest in the live event and sole or joint rights to control the
financial terms of the live event’s presentation.41 If assessed as a live venue operator,
the aforementioned eligibility requirement would not have been considered for the

41 Public Law 116-260, Section 324(a)(3)(A).

22
applicants the agency asserts to be promoters and, therefore, needs to be met by the
applicant before the agency can assert eligibility. We re-reviewed the applicants as
promoters rather than live venue operators and still found them to be ineligible based
on revenue requirements.
Summary of Actions Necessary to Close the Recommendations
The following section summarizes the status of our recommendations and the actions necessary
to close them.
Recommendation 1
To address the issues identified, we recommend the Administrator direct the Associate
Administrator for the Office of Disaster Recovery and Resilience to reevaluate eligibility for the
47 applicants we questioned and recover grant funds from the ineligible applicants.
Status: Unresolved
Management agreed with the recommendation in principle and provided documentation they
believed reaffirmed eligibility; however, the documentation does not assess eligibility based on
statutory requirements. This recommendation can be closed when SBA provides evidence the
agency has re-reviewed the 47 grants and ensured the applicants were in fact eligible or that
recovery of grant funds is being pursued.
In accordance with our audit follow-up policy, we will attempt to reach agreement with
management on the unresolved recommendation. If an agreement is not reached, we will
elevate the disputed issue to the designated audit follow-up official.
Recommendation 2
To address the issues identified, we recommend the Administrator direct the Associate
Administrator for the Office of Disaster Recovery and Resilience to implement additional controls
to ensure that, during the monitoring, auditing, and compliance phases, awards are carefully
screened to verify eligibility and to recover grant funds from ineligible entities.
Status: Unresolved
Management agreed with this recommendation in principle but did not provide evidence of
controls currently in place, or controls they plan to implement, that would ensure high-risk
applicants are reassessed to confirm eligibility to receive SVOG funds. This recommendation

23
can be closed when SBA provides evidence that steps have been incorporated into the
monitoring, auditing, and compliance phases that would screen grant recipients for
eligibility.
In accordance with our audit follow-up policy, we will attempt to reach agreement with
management on the unresolved recommendation. If an agreement is not reached, we will
elevate the disputed issue to the designated audit follow-up official.

1-1
Appendix 1: Objective, Scope, and Methodology
Objective
Our objective was to perform an assessment of the U.S. Small Business Administration’s (SBA)
internal controls to prevent ineligible applicants from obtaining a Shuttered Venue Operators
Grant (SVOG).
Scope and Methodology
To meet our objective, we reviewed SBA SVOG grant data, policies, and procedures. We also
interviewed the Director of the Office of Disaster Assistance Program Policy & Evaluation
regarding controls in place and guidance provided to staff and applicants.
We reviewed computer-generated SVOG program reports from Salesforce. We used a web
crawler on 10,285 who had provided websites out of 13,011 SVOG total recipients to assess
business website functionality and typicality. The web crawler attempted to access each business
website homepage and recorded an error if any issues arose when the site was loaded. The web
crawler adjusted for minor issues in the provided URLs, including invalid or omitted prefixes
(e.g., “https://,” “http://,” and “www.”). We ran the web crawler on 10,285 business websites,
and 224 were deemed not fully functional (i.e., page could not be found, security issue, broken
website code), and 219 appeared valid but disallowed web crawlers. We selected a sample of
25 SVOGs with websites deemed not fully functional.
The web crawler assessed whether the website had been updated recently using the last
modified tag in the website header and whether the homepage had a typical amount of content
by recording the numbers of characters, links, and images. We selected a sample of 25 SVOGs
with websites containing the lowest content by recorded number of characters and 25 SVOGs
with websites with a last modified tag of 2020 or earlier.
The web crawler determined the percentage of sexual words on a webpage based on a
dictionary of about 50 prurient sexual words (e.g., “porn,” “naked”) we developed. Based on the
results, we identified 43 applicants with homepages that contained 1 percent or more of sexual
words. We also identified 47 applicants with 1 percent or more of sexual words with at least five
links from the homepage. This brought our total to 79 SVOGs, after accounting for the overlap
between the two sets. We selected all 47 SVOGs with sexual words at least five webpages linked

from the homepage because we deemed them high risk for potentially containing performance
information. We selected a sample of 25 SVOGs from those with prurient sexual language on
their homepages. Accounting for the overlap between the two samples, we reviewed a total of
67 SVOGs with 1 percent or more of sexual words.
Similarly, a dictionary of ticket‐related words was used to determine whether there was at least
one mention of selling tickets by checking the homepage and up to two levels deep of links to
other webpages within the same domain. We selected 25 SVOGs with websites making zero
mention of ticket‐related words.
In total, we tested 167 grants. To test the grants, we reviewed information found under various
sections of the SVOG portal.
Table 1‐1: Awards With Risk Identifiers as Identified by Web Crawler Tests
Web Crawler Test
Total Number of
Awards
Total Award Value *
(dollars)
Last modified December 31, 2020, or earlier
110
$83,492,633
Zero tickets
1,010
766,426,911
Sexually prurient content
79
76,633,603
Not fully functional websites
224
170,299,674
Total
1,423
$1,096,852,821
* Comprised of initial, reconsideration, supplemental and reconsideration for supplemental awards.
Source: OIG analysis of SVOG data as of July 5, 2022
We also reviewed computer‐generated SVOG program reports from SVOG portal to quantify
grant award amounts that SBA made to each entity type and selected a sample of 40 SVOGs to
live venue operators for this inspection. We identified these grants as high risk because the
entity name included bar, brewery, winery, restaurant, or similar information. We limited our
review to eligibility requirements that were easily verifiable through document review and web
search. To test the 40 grants, we reviewed information found under the “Funding Request
Detail,” “Requirements,” “Revenues,” and “Disbursements” sections of the SVOG portal. For
each section, we reviewed the “Chatter” – a dialogue section provided on each section of the
portal, which allows SVOG staff to discuss application information and upload files – and
obtained a copy of the reviewer checklist.
1‐2

Using a risk‐based approach, we identified live venue operators as the most likely entity type to
have ineligible applicants, as it appeared to be a catch‐all category. Live venue operators are
grouped with live venue promotors and make up 4,824 of the awarded applications totaling
more than $6 billion. Using a nomenclature review of the applicant’s name to segregate
potentially legitimate entities, we broke out the entities into three categories: 1) low risk‐entities
with names including words such as theater, center of arts, and similar terms; 2) moderate‐risk
entities with names that did not indicate the purpose of the business; and 3) high‐risk entities
with names that indicated a business other than a live venue, such as bar, brewery, winery,
restaurant, or similar business.
Table 1‐2: Live Venue Operators and Promoters SVOG Award Data
Risk Category
Number of Grants
Total Value of Grants*
(dollars)
Low risk
2,309
$3,227,396,326
Moderate risk
2,391
2,647,589,448
High risk
124
180,899,210
Total
4,824
$6,055,884,984
* Comprised of initial, reconsideration, supplemental and reconsideration for supplemental awards.
Source: OIG analysis of SVOG data as of July 5, 2022
Use of Computer‐processed Data
We relied on computer‐generated data from Salesforce published on the SVOG webpage. SBA
uses this data to manage the program and derive program statistics. We assessed the reliability
of the data through limited testing. We believe the data is sufficiently reliable to support the
report conclusions.
We performed this review in accordance with the Council on Inspectors General on Integrity and
Efficiency’s Quality Standards for Inspections and Evaluations. Those standards require that
we plan and perform the review to obtain sufficient and appropriate evidence to provide a
reasonable basis for our conclusions and observations based on our objective. We believe the
evidence obtained provides a reasonable basis for our conclusions and observations based on
our objectives.
1‐3

2-1
Appendix 2: Questioned Costs
Under the Inspector General Act of 1978, 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.42 Questioned costs
may be remedied by offset, waiver, recovery of funds, the provision of supporting
documentation, or contract ratification, where appropriate.
Table 2-1: Office of Inspector General Schedule of Monetary Impact
Description
Amount
(dollars)
Explanation
Questioned costs – ineligible live
venue operators
$22,878,968
Applicant did not meet all eligibility
requirements under Public Law 116-260,
Section 324(a) to receive grant
42 Inspector General Act of 1978, as amended, section 5(f)(1).

3-1
Appendix 3: Prior Work
Table 3-1: Office of Inspector General Prior Oversight Work on the U.S. Small
Business Administration’s Shuttered Venue Operators Grant Program
Report number
Report title
Final report date
SBA OIG 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
SBA OIG 22-15
SBA’S Award and Payment Practices in the Shuttered
Venue Operators Grant Program
July 5, 2022

4-1
Appendix 4: Agency Response
U.S. Small Business Administration
Office of Disaster Recovery and Resilience Response to Report

DATE:
August 29, 2023
TO:
Hannibal “Mike” Ware
Inspector General
FROM:
Francisco Sanchez, Jr.
Associate Administrator
Office of Disaster Recovery and Resilience
SUBJECT:
Agency Response and Management Decisions to Office of Inspector
General Inspection Report - SBA's Internal Controls To Prevent Shuttered
Venue Operator Grants To Ineligible Applicants (Project 21804)
We have reviewed the Office of Inspector General (OIG) draft report for Project 21804,
“SBA's Internal Controls to Prevent Shuttered Venue Operator Grants to Ineligible
Applicants,” sent on August 1, 2023. Our response to the report follows. The response
includes SBA’s position on the finding and recommendations.
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 Recovery and Resilience
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Executive Summary of Management Comments
The SVOG Covid-19 Emergency Program
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act signed in
December 2020 provided SBA $15 billion in funding to create the Shuttered Venue
Operators Grant (SVOG) program. In March 2021, the American Rescue Plan Act
provided another $1.25 billion in funding and further modified eligibility criteria.
The guiding purpose of the SVOG program was 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.
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
towards, a streamlined approach to grantmaking in the context of the SVOG program.
In March of 2021, the OIG issued Report 21-13 to express concerns with the preliminary
design of the SVOG program and its ability to achieve success while mitigating risks. In
light of these and other concerns, in June 2021, the Administrator conducted a “refresh”
of the SVOG program. Program officials utilized the OMB Uniform Guidance for Grants
Management, including 2 CFR § 200.201, 2 CFR § 200.202, and 2 CFR § 200.301, to
reevaluate the plan, design, and monitoring of performance for the SVOG program.
SBA’s Eligibility Documentation, Do Not Pay List Findings, and Tax Transcript
Controls Contradict OIG’s Finding
SBA disagrees with OIG’s only finding. Of the multiple risk controls for the SVOG
program, OIG focuses on only three internal controls, and in doing so provides a mistaken
understanding of the changes that were made. For example, the report conflates
improving and fixing internal controls as “weakening” controls, despite SBA and the
Treasury Department determining the Do Not Pay list search tool was not originally
working correctly.
Additionally, because the Report’s methodology does not test the three challenged
controls, there is no basis for the Report’s conclusion that any controls were weakened.
The Report does not connect any of the three challenged controls to a single ineligible
award, and overlooks the effectiveness of SVOG's other pre- and post-award controls.
These concerns, including OIG’s dismissal of clear evidence that almost 90% of their
sample were incorrectly inspected, are likely to cause unwarranted public confusion.
SBA does, however, agree it has a responsibility to reevaluate an eligibility determination
when a concern is raised by OIG or other sources. SBA has re-reviewed the files OIG
identified as potentially ineligible and re-confirmed 41 of them were clearly awarded
properly, with documents on-hand prior to the issuance of this Report which directly

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contradict and disprove OIG’s stated concerns. SBA is still re-reviewing the remaining six
awards at the time of submission of this response. If appropriate, SBA will process
ineligible entities according to its robust collections procedure.
SBA also agrees with the importance of controls to ensure that SVOG awards are
carefully screened during the monitoring, auditing, and compliance phases. Through
continual control evaluation and development, SBA has already implemented the controls
detailed in the SBA Audit and Oversight Plan provided to Congress in December of 2021.
SBA remains committed to executing control improvements throughout the SVOG
program’s lifecycle—as SVOG oversight is ongoing, SBA will continue to resolve eligibility
issues and pursue improper payments.
Agency Response and Management Decisions

Finding 1: SBA Weakened Internal Controls and Increased the Risk of Ineligible
Entities Receiving SVOG Awards
Response: SBA disagrees with this finding.

The Report finds that SBA significantly weakened internal controls by modifying policies
governing the method by which staff 1) noted eligibility findings, 2) used tax transcripts in
the review of some applicants, and 3) validated Do Not Pay list matches.
SBA disagrees with the assessment that the modification to these polices impacted
overall effectiveness of SVOG internal controls. These controls were designed in the short
period between the program’s creation and its launch. During this period, the agency
worked closely with its Office of General Counsel, Congress, public stakeholders and
executive branch partners to design a system to process anticipated applications as
quickly as possible while including appropriate controls to prevent fraud, waste, and
abuse. Prior to SBA’s enhancements, the three modified controls proved to be inadequate
and ineffective at accomplishing their intended purpose:  managing the risks involved in
processing more than 17,600 emergency grant applications within a compressed time
period.
The finding in the Report does not consider the effectiveness of the controls before they
were modified, nor does it adequately reflect the impact of the cited controls in relation to
the full range of policies SBA put in place to reduce the risk of improper payments.
The OIG finding assumes that changes in policies resulted in extra risk, without evidence
that any improper payments were made because of those changes. OIG makes no direct
connection between the 47 files it questioned and any of the changed controls. SBA has
re-reviewed the files OIG identified as potentially ineligible and re-confirmed 41 of them
were clearly awarded properly, with documents on-hand prior to this report which directly
contradict and disprove OIG’s stated concerns. SBA is still re-reviewing the remaining six
awards at the time of submission of this response.

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The Report’s Methodology does not Adequately Test the Three Cited Controls
In the Report, OIG explains it conducted a review of files it first identified using a
rudimentary keyword search of SVOG recipient’s websites (referred to as a “WebCrawler”
in the Report), as well as a keyword search of recipient’s formal business names (referred
to as “high-risk indicators” in the Report). The Report never explains how this sampling
methodology tests the modified controls’ impact; rather, the Report pivots from discussing
a small fraction of SBA’s internal controls to discussing a sample of files where OIG
conducted analysis rife with errors, such as misidentifying a Christmas Orchestra as
“sexually prurient” and flagging a music venue operator as ineligible because of a tongue-
in-cheek LLC name.
The Report Does Not Connect a Cited Control to an Ineligible Award
The Report does not identify a single file award made to an entity accurately on the Do
Not Pay list, fails to link any allegedly improper award due to the change in use of tax
transcripts, and lacks evidence to support the OIG’s assumptions the initial reviewer
portal would have prevented mistakes individual reviewers may have made with the
manual reviewer checklists. Nowhere does OIG document a single instance where SBA’s
internal control changes led to even a suspicious award, much less an award confirmed
as ineligible or fraudulent.
The Report’s Scope and Sampling Do Not Fairly Evaluate Eligibility
For each of the grants where OIG questioned eligibility, SBA provided OIG with file-by file
details of SBA’s review and subsequent re-review under separate cover. On July 30th and
August 1st of 2023, SBA met with OIG to express concerns the provided feedback had
not been taking into consideration in this report. At that time, SBA was told that information
OIG staff had been unable to locate for themselves in the SVOG Award System would be
omitted as “out-of-scope.” However, the Report never states the time-frames of OIG’s
sampling, its analysis, nor when OIG ceased to consider information it may have missed
in the case files.
The finding and recommendations of this Report should be consistent with the facts.
Information, support, and documentation available at the time of OIG’s review, as well as
on-file prior to this Report, have not been taken into consideration by this Report, even if
only to remediate the Report’s questioned costs. This Report continues to promulgate a
finding and recommendations based upon an analysis where 41 of 47 sampled files have
been shown to have been incompletely reviewed.
Even had OIG’s analysis properly considered all the information available for each
investigated grant, the Report’s sampling methodology does not follow statistical
practices which allow for extrapolating results to the program writ-large. While the Council
of Inspectors General Quality Standards for Inspections and Evaluations do not require
“statistically-significant” sampling, the standards do require that inspections findings be

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appropriately supported by evidence and provide a reasonable basis for conclusions.
Evidence obtained through the limited testing of small samples1 may not be sufficient to
the extent that it would persuade a knowledgeable person that the findings are
reasonable. Appropriate evidence is determined by its relevancy, which is the extent
evidence2 supports the inspection objective.3
The Report could easily confuse a reasonable or knowledgeable-person. For example,
the Report is inconsistent in the number of files sampled by OIG: the Executive Summary
refers to a test sample of “167 grants for general eligibility review…124 grants [for]
business names…40 for venue-specific eligibility,” while the Report’s Introduction and
Finding sections refer to a “total sample of 207 SVOG awards.” Regardless of the final
number, the Report makes no connection to the three questioned changes to SBA’s
internal controls.
The Report Misrepresents the Effectiveness of the Cited Controls and their Impact
on the Overall System of Internal Control
SBA identified the three internal controls named in the Report as inadequate and
ineffective at accomplishing their intended purpose. As originally designed, these controls
did little to deliver the intended objective of the program and inhibited the review of eligible
applications.
Federal government standards are clear that controls should be effective in practice - they
must do more than just appear to prevent risk, they must actually work in doing so. A
deficiency in internal control exists when the design, implementation, or operation of a
control does not allow management or personnel to achieve control objectives and
address related risks.4 Further, control modifications are warranted when there is a high
likelihood of the deficiency occurring and a high magnitude of an unwanted impact.5
Under the circumstances presented, keeping these three deficient controls in place would
not have achieved program objectives and it was SBA’s duty to make effective
modifications to the use of the Do Not Pay List, the use of IRS tax transcripts, as well as
the eligibility review process.
Improvements to the use of Treasury’s Do Not Pay List
Treasury’s Do Not Pay (DNP) Program is intended to prevent improper payments, such
as to those previously barred from federal contracts and awards.  Modifications the

1 Council on Inspectors General on Integrity and Efficiency. (2020). Quality Standards for Inspections and Evaluations
(Standard No. 4.3).
2 U.S. Government Accountability Office. (2018). Government Auditing Standards (Standard No. 8.92; 8.107; 8.113b).
3 Council on Inspectors General on Integrity and Efficiency. (2020). Quality Standards for Inspections and Evaluations
(Standard No. 4.3c).
4 U.S. Government Accountability Office. (2014). Standards for Internal Control in the Federal Government. (Standard
No. OV3.07).
5 U.S. Government Accountability Office. (2014). Standards for Internal Control in the Federal Government. (Standard
No. 10.05).

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program made to data matching with the U.S. Treasury’s Do Not Pay list (DNP) did not
significantly weaken SBA’s internal controls for SVOG.
As the Report acknowledges, under the original data match control, “8,300 out of the
13,000 applicants at the time had DNP matches.” When reevaluating the effectiveness of
this control as initially implemented, it was obvious to SBA that something was wrong with
the original control design. 64% of the nation’s applying arts industry could not plausibly
be on the DNP list, particularly considering that only 3% of applicants received prior
federal awards. Under the circumstances, continuing to use inaccurate data and forcing
innumerable “false positives” through a complex, multi-agency cure process would have
been an unnecessary burden, rather than an effective control.
To obtain more accurate, reliable, and factual results, as well as properly utilize the DNP
database for its intended purpose, SBA updated its data matching agreement with revised
data sources and DNP checks continued as part of the SBA’s process of making SVOG
awards.
SBA took the appropriate action required to correct the DNP database control and the
Report should reflect that, by increasing the veracity of the DNP data match, SBA
developed the proper corrective action when a control was not working as needed.
Changes to the use of IRS Tax Transcripts
SBA’s changes to its use of the IRS tax transcript did not significantly weaken SBA’s
internal controls for SVOG. The Report states that “SBA believed the benefits of this
check, such as verifying identity and validating 2019 income, could be achieved using
applicant provided data” despite “the challenges identified with similar approaches in
SBA’s other pandemic relief programs.”
The analogy between SVOG and other agency relief programs is inaccurate.  Unlike other
COVID relief programs, SVOG applicants were required to provide significantly more than
just tax data to support eligibility and the amount of the award, permitting several other
effective ways for SBA to determine the accuracy of claimed earned revenue.
SBA identified that the SVOG program was less reliant on tax transcripts than its other
lending and relief programs and could prioritize how many requests it sent. SVOG awards
are based on “earned revenues,” which is not a tax field on any tax return forms utilized
by IRS, leading SBA to also require substantial additional revenue and profit & loss
documentation from applicants to verify earned revenue. For all grants, SBA conducted
additional follow-ups and information requests for tax returns, as well as required detailed
financial statements, and earnings records if applicants disputed the size of their award,
were denied a grant, or sought supplemental funds.
The cumulative use of many other revenue source documents in the funding requests,
such as tax returns, profit and loss statements, and pre-pandemic financial audits,
provided similarly effective controls for low-risk applicants without further delay in
processing awards. As with the DNP control, the Report also fails to link any allegedly

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improper award to the change in this specific control. The Report should reflect the limited
utility of tax transcripts in verifying earned revenue and consider the totality of the controls
SBA utilized for calculating SVOG awards.
The use of Manual Reviewer Checklists
There is no evidence in the Report to support the conjecture that utilizing manual reviewer
checklists provided “no assurance the entities receiving these awards were eligible,
resulting in a waste of government funds that could have been used to assist others.” The
Report does not provide appropriate or relevant evidence to support the conclusion that
the refreshed manual reviewer checks were less effective as a control than the initially
planned system driven checks. In practice, utilizing a manual reviewer checklist to
process SVOG funding requests proved to be a more accurate method to screen
applicants for eligibility than the initially planned system driven checks.
Once application reviews started, SBA quickly identified that the portal was not conducive
to efficient application review and processing. Marking one response as “fail” in the SVOG
award system would not accurately identify the applicant as ineligible. For example, a live
venue operator could "fail" on the 70% revenue response but could be eligible if they met
the advanced ticket sales criteria. However, the SVOG award system formatted the
prompts in such a way that it was difficult to track alternative paths to eligibility
determinations. This original portal system also required each reviewer to click through
over 20 separate eligibility criteria to note compliance and required subsequent approvers
to separately review each eligibility requirement and any related comments through this
same cumbersome process.
The cumbrous review and processing of applications using the SVOG award system
alone necessitated the implementation of entity specific manual checklists during the
SVOG program "refresh." The refreshed checklists contained reiterations of the statutory
eligibility requirements, SBA’s policy interpretations, citations to the program’s public
FAQs and guidance, a structured and tiered framework for how SBA intended for
applicants to be evaluated, and multiple opportunities for supervisory and management
re-review and analysis. The refreshed checklists brought together multiple resources
consolidated into a single document. Contrary to only using the award system to process
applications, the addition of “manual” checklists allowed for accelerated program
development, in-line citations and policy instruction, rapid revision, and a consistent,
repeatable structure for every review process.
Accordingly, the conclusion that the use of manual checklists in lieu of strictly processing
applications within the SVOG portal provided no “assurance the entities receiving these
awards were eligible, resulting in a waste of government funds that could have been used
to assist others” is unfounded.

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The Report Disregards the Effectiveness of Other Controls
By only spotlighting three specific controls and overlooking the effectiveness of all other
pre- and post-refresh controls in place, the Report paints a misleading picture of SBA’s
internal control system. Numerous program-level controls were developed to detect and
correct the risks of noncompliance with relevant laws, regulations, and federal standards.
The SVOG program staff conduct regular internal risk management assessments and
respond to external risk management assessments. In doing so, identifying program risks,
evaluating the effectiveness of existing controls to mitigate those risks, and modifying
existing controls when necessary to further reduce a risk is an ongoing practice within the
SVOG program.
SBA uses a multitude of controls, including preventative controls that decrease the
chance of errors and fraud before they occur and detective controls to provide evidence
that the preventive controls are operating as intended. Additional controls detect
irregularities post-award. The following are examples of controls that have remained in
place since the SVOG program’s inception:
Detective Controls
• Fraud Risk Assessments;
• Entity Level Control Assessments;
• Internal Controls Improper Payment Audits; and
• Program level evaluations conducted with SBA’s Office of Performance,
Planning, and the Chief Financial Officer
Preventative Controls
• Technological controls to prevent unauthorized access;
• Technological controls to automate processes;
• Use of end-user software that provides descriptive labels, help texts, built-in
input validations, real-time checks for rules and constraints defined by the
statutes governing the program;
• Separation of duties combined with authorization and approval processes;
• Training for employees and stakeholders;
• Reviews to identify potential indicators of program fraud; and
• Assessments of recipient flags to mitigate concerns with eligibility, award-
size, finances, or unresponsiveness

The SVOG program has detailed the broad nature of its controls to OIG on prior
occasions, beginning with the responses to OIG Report 21-13, and most recently in
response to FY2023 Management Challenge 8. These controls are discussed and
detailed again in the Appendix of that response. SVOG continues to strengthen program
components such as its control environments, risk assessments, control activities,
information communication, and monitoring to ensure all components continue operating
in an integrated manner.

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Given this extensive set of risk controls developed and continually improved since the
program’s inception, it is disappointing that the Report focuses on only three allegedly
weakened controls to reach its conclusions and its recommendation that SBA needs to
develop additional, unspecified, post-award controls. A more complete discussion of the
SVOG control environment would avoid giving the mistaken impression that SVOG efforts
to mitigate risk have been anything less than comprehensive.

Recommendation 1: Reevaluate Eligibility For The 47 Applicants We Questioned
And Recover Grant Funds From Ineligible Applicants
Response: SBA agrees that SBA has a responsibility to reevaluate an eligibility
determination when a concern is raised by OIG and has completed the reevaluations of
the questioned 47 Applicants.

SBA agrees with the principle that it has a responsibility under the Payment Integrity
Information Act of 2019 to “…promptly detect and recover improper payments that are
made” and has reevaluated the eligibility of the 47 applicants purported as ineligible in
the Report. A detailed summary of this review was provided to OIG in May 2023, noting
that the SVOG program determined that 41 of these files clearly met eligibility criteria. For
those awards identified as potentially ineligible, these grantees are being given an
opportunity to address the eligibility concerns through the SVOG’s Quality Assurance and
Monitoring process. If the grantee cannot resolve the eligibility issues identified, they will
be referred to the award recoupment process.
OIG’s sample was limited to two grantee types which OIG considered high-risk,
specifically live venue operators with “bar,” “brewery,” “winery,” “restaurant,” in the
grantee’s legal name as well as grantees flagged by WebCrawler software that searched
for words (or the absence of words) that OIG considered raised suspicions about their
eligibility.
SBA identified several categories of concern with the OIG’s analysis of eligibility criteria
for the questioned files that led to the different eligibility conclusions on these files,
including: (1) Failure to holistically review the files and use documents and evidence
outside a specific response that demonstrates applicants meet the eligibility
requirements, (2) Misunderstanding the requirement of live venue operators/promotors to
own or operate the venue location, (3) Improperly strict interpretations of the principal or
primary business activity requirements, and (4) Misidentification of files with “sexual
prurient interest” concerns, combined with a different application of OGC’s directives.
Failure to use Eligibility Documents and Information Within the Files or Online
In many instances, it appears that the eligibility concerns raised by OIG did not account
for information readily available within the file or easily available online. While the Report
criticizes the SVOG program for adopting a reduced time goal for completing each file

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review, the program believes that OIG’s findings would have benefited from a more
thorough review of the available information within the file which was used to support the
eligibility determinations. The holistic review of each file should have identified many
documents that directly address the eligibility concerns raised by OIG.
The following example demonstrate the type of information that OIG appears to have
overlooked within a specific file it reviewed.  A live venue operator awarded nearly $4.5
million was determined by OIG to have failed the principal business activity eligibility
requirement. However, in the application file made available to OIG were marketing
materials showing nearly daily musical performances from its September 2019 opening
through its March 2020 closure, including performances by prominent major label artists.
The applicant also provided links to ticket sales, including some links reflecting tickets
offered for sale as early as seven months before a show, and the applicant’s provided
revenue information showing over 85% of revenue from tickets or beverages was not
appropriately credited. With nearly daily qualifying live performances during peak
operating hours, it is reasonable to accept the applicant’s representation that 70% of
revenue was derived from qualifying events. Yet OIG appears to have failed to either
locate or appropriately credit this evidence in the file when questioning this entity’s
eligibility.
Ownership or Operation of the Live Venue Location
Four awards were identified as ineligible for not being “live venue operators.” SBA
reviewed these entities and found they operated at qualifying venues. The law, policy,
and procedures which regulate eligibility for the Shuttered Venue Operators Grant do not
require the eligible entity to directly own or “work for” the venue; there is also no
requirement for the venue location to be static or “permanent,” e.g., a concert on a boat
or a temporary festival stage can be eligible.
OIG also fails to recognize the nearly identical eligibility requirements of live venue
operators and promotors. If an applicant organizes and presents qualifying live events but
does so at a venue owned or operated by a separate entity, it meets the statute’s definition
of eligible live venue promotor. Therefore, if OIG correctly determined that an entity was
eligible but for its failure to own or operate the venue, all OIG has done is made the
determination that these entities are eligible as promotors. Concluding they did not own
or operate the venue in this situation does not disqualify them from an SVOG award.
Principal Business Activity
More than half of OIG’s sample was identified as failing to have an eligible principal
business activity. With regard to establishing that 70% of the applicant’s revenue is
derived from live performances, OIG appears to demand that applicants provide
unreasonably precise, granular documentation of their 2019 event revenue. However,
demanding that applicants provide such detailed records for 2019 is unreasonable when

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they would have no reason, in 2019, to believe keeping such records was needed to
receive an emergency government grant in 2021.
OIG fails to recognize that the entities with “restaurant,” “brewery,” “bar” and similar words
in their names that applied for SVOG awards made the election to forgo Restaurant
Revitalization Fund grants. Entities could not receive both awards. In electing to pursue
the SVOG, these entities were demonstrating their good faith belief that they met the
eligibility requirements. Further, they were electing SVOG as their only option for COVID
emergency grant funds.
Under these circumstances, SBA found it appropriate to credit the applicants’ sworn
statements that 70% of their revenue derived from qualifying live performances where
this was supported by a holistic review of the file. This includes a review of not just the
supporting documents for the particular eligibility requirement, but also performance
calendars, profit and loss statements, tax information, marketing materials, websites, and
other readily available information about the applicant.
By failing to review these files with a similar holistic approach, OIG applies different review
criteria then was properly applied by the SVOG program. OIG’s strict and narrow
approach would have left numerous applicants without any avenue to receive funds from
any COVID relief program, undermining Congress’ goal of broadly supporting the various
industries impacted by lengthy business closures.
After a comprehensive review of the files OIG questioned, the program found two where
it agreed with OIG’s assessment that the entity did not sufficiently demonstrate meeting
the principal business activity test. Those applicants are being given a chance to provide
further supporting information. If they are unable to do so, these files will be referred for
recoupment.
The Report should clarify that determining the principal business activity of an entity
required a more holistic approach that considers both the emergency nature and goals of
the SVOG program and the challenge of requiring documents showing the exact amount
of revenue associated specifically with only applicant’s qualifying live events.
Misidentification of Files with “Sexual Prurient Interest” Concerns
The Report makes some significant claims relating to grantees who potentially derive
revenue from activity considered “sexual prurient.” These include the claim that OIG’s
WebCrawler identified 79 files with awards of $76,633,603 with alleged sexually prurient
content on their websites. After further review, OIG concludes that just five had website
content suggesting they were ineligible for SVOG, or that further investigation was
needed to confirm eligibility.
This appears to be a factual error by OIG. Two of the five files identified as “sexual
prurient” by OIG even after its further review do not appear to have any such issues at
all. One talent representative awarded about $1.5 million is the manager of only

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mainstream musical acts including a band which conducts a prominent annual holiday
musical tour.  Another was a live venue operator awarded nearly $2.5 million that
describes itself as an “adult arcade” with pinball and video games accompanied by
frequent shows from mainstream musical and comedy acts.
The program believes the identification of these two files further undermines the reliability
of both the initial WebCrawler review as well as OIG’s consideration of the flagged files.
With regard to the other files, SBA agrees that one does appear to clearly raise issues of
eligibility and is undergoing further review and will be referred to recoupment if
appropriate. For the remainder, SVOG believes OIG did not properly apply the Office of
General Counsel’s memo and direction to the SVOG program relating to the definition of
prurient sexual interest. Review of these files must recognize the potential First
Amendment concerns raised by denials on this issue and associated litigation risk, as
well the historic production and acceptance of shows including burlesque themes and
sexual elements in the performing arts community from the earliest days of theater
through the present.
Corrective Actions Taken
The following corrective actions took place prior to the issuance of the Final Report. SBA
first reevaluated the eligibility of applicants identified as ineligible in January 2022 and
provided the OIG a detailed summary of the review that same month. In April 2023, SBA
reevaluated the eligibility of applicants being identified as ineligible a second time. A
detailed summary of the second review was provided to OIG in May 2023.
The SVOG program determined that 41 of the files reevaluated met eligibility criteria. The
6 entities identified as potentially ineligible, were notified of their opportunity to address
the eligibility concerns through the SVOG quality assurance and monitoring process.
Recommendation 1 appears to be moot and unnecessary to promote the economical,
efficient, and effective operation of the SVOG program office as the actions detailed below
have been completed or are already in development.
Corrective Actions:
Corrective Actions Planned
Target Completion
Dates
Conduct quality assurance eligibility reviews of files OIG
identified.
Completed
Request potentially ineligible entities resolve eligibility
issues.
Completed
Allow potentially ineligible entities time to address eligibility
concerns.
September 2023

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Refer entities deemed to be ineligible to recoupment
process.
November 2023
Recommendation 2: Implement Additional Controls to Ensure that During the
Monitoring, Auditing, and Compliance Phases, Awards are Carefully Screened to
Verify Eligibility and Recover Grant Funds from Ineligible Entities
Response: SBA agrees with the importance of implementing necessary controls to
ensure that, during the monitoring, auditing, and compliance phases, SVOG awards are
carefully screened to verify eligibility and recover grant funds from ineligible entities.
SBA has already implemented additional controls through continual control evaluation
and development as well as implementing improvements throughout the SVOG
program’s lifecycle.

SBA agrees with the principle that comprehensive post-award controls are necessary to
ensure SVOG awards are carefully screened and improperly awarded grant funds are
recovered. Categorically, the development, testing and improvements to SVOG program
controls has been ongoing since the passage of the SVOG statute by Congress. In early
2021, the SVOG program began to contemplate and plan controls for its monitoring, audit,
and compliance strategy which incorporates the Office of Management and Budget's
(OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements
for Federal Awards, commonly called "Uniform Guidance." The controls governing these
post-award phases are communicated in the SBA Audit and Oversight Plan. The SBA
Audit and Oversight Plan was developed at the direction of Congress and initially
submitted to Congress in February 2021, and updated and expanded in December of
2021.
To ensure the careful screening of SVOG awards and to verify eligibility during the audit
and oversight stage of the grant lifecycle, the SVOG program regularly reviews and
strengthens the SBA Audit and Oversight Plan. For example, SBA has refined the for
its monitoring, audit, and compliance strategy to further detail risk factors that identify
grantees for monitoring, and developed the specific policies and guidelines to
assist SVOG staff implement these processes. In fiscal year 2023, as most SVOG
grants begin to reach the audit, monitoring and close out stage of the grant lifecycle, SBA
finalized its framework for a comprehensive monitoring, audit, and compliance strategy.
The Report Dismisses SVOG’s Other Pre-Refresh and Post-Refresh Controls
Detective Controls
To mitigate potentially fraudulent activity, SVOG conducts annual Fraud Risk
Assessments (FRA). FRAs address fraud as well as risk tolerance and contain a
mitigation plan for the risk schemes identified, including the identification of additional
controls designed to reduce those risks. SBA’s Fraud Risk Management Board (FRMB)

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effectively mitigates, manages, and monitors fraud risks across the agency. The FRMB
voted to approve SVOG’s latest FRA in March 2023.
For the purpose of refining and mitigating risks, SVOG and its internal partners conduct
annual Entity Level Control (ELC) Assessments. ELC Assessments evaluate the
components designed and implemented within a system of internal control. SVOG
provides each ELC Assessment to the ODR&R Internal Controls (OIC) division.
Additionally, ODR&R OIC and SVOG partner to develop monitoring controls to ensure
implementation of an effective internal control environment.
SBA’s program level evaluation function is housed in the Office of Performance, Planning,
and the Chief Financial Officer (OPP&CFO). OPP&CFO in conjunction with SVOG
perform and document internal control evaluations that include entity level controls,
manual controls, general information technology controls, and system application
controls. Through strategic planning and program evaluations, SVOG and OPP&CFO
partner in the development of results-driven activities and controls that strengthen its
system of internal control as well as address identified deficiencies. OPP&CFO drafts a
Process Narrative outlining the key functions, key systems, and key internal controls
identified in the documentation prepared for each grant management phases/processes.
Preventative Controls
Preventative controls to decrease the chance of errors and fraud before they occur. These
include, but are not limited to the separation of duties, using systems of checks and
balances, authorization and approval processes, access controls, and employee
screening and training.
SVOG’s technical support staff and the Office of the Chief Information Officer monitor and
improve technological solutions to ensure business rules, policies, procedures, and
program requirements are enforced and complied with internally and externally, to
prevent unauthorized access, and to automate processes to ensure consistency,
auditability, and equity in program actions across SBA offices. SVOG’s end-user software
interface provides descriptive labels, help texts, built-in input validations, real-time checks
for rules and constraints defined by the statutes governing the program.
SBA also trains and staffs an SVOG Program Integrity Vertical composed of several
teams dedicated to supporting SVOG’s system of internal controls. There is a team to
identify potential indicators of program fraud and if further investigation or action is
warranted, to make referrals to law enforcement agencies. There is a team that conducts
assessments of grantee flags from any source and take appropriate corrective actions to
mitigate eligibility, award-size, financial, or other concerns surrounding awards. There is
also a team to mitigate the risk of grantees becoming non-compliant through
unresponsiveness.
SBA trains and staffs an SVOG Grants Management Vertical composed of teams
dedicated to supporting grant recipients and teams dedicated to implementing SVOG’s

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post- award Monitoring and Compliance (MAC) strategy. Each awarded funding request
is assigned a Grant Management Specialist (GMS) to assist the grantee, which mitigates
the risk of inadvertent misappropriations while also providing SBA with granular capacity
to observe and report suspicious activity.
To increase grantee understanding of federal assistance norms and regulations, SBA
developed trainings for grantees and opportunities for grantees to seek technical
assistance.
SVOG continues to strengthen program components such as its control environments,
risk assessments, control activities, information, and communication, and monitoring to
ensure all components continue operating in an integrated manner. Given the extensive
risk controls developed and continually improved since the program’s inception, it is
disappointing that the Report focuses on only three proven inadequate controls to reach
its conclusions and its recommendation that SBA needs to develop additional,
unspecified, post-award controls. A more complete discussion of the SVOG control
environment would avoid giving the mistaken impression that SVOG efforts to mitigate
risk have been anything less than comprehensive.
The Report should reflect the wide breadth of controls that remained in place after the
“program refresh” and give credit to SBA’s continuing efforts to measure the effectiveness
of and improve these controls, rather than continue its narrow focus on vital modifications
made to only three controls.
Corrective Actions Taken
Because the development, testing and improvements to SVOG program controls has
been ongoing since Congress passed the SVOG statute, the following corrective actions
occurred prior to the issuance of the Final Report. The SBA Audit and Oversight Plan was
initially submitted to Congress in February 2021. An updated SBA Audit and Oversight
Plan was submitted to Congress in December 2021. In fiscal year 2023, SBA finalized its
framework for a comprehensive monitoring, audit, and compliance strategy; however,
SVOG continues to review and strengthen the SBA Audit and Oversight Plan regularly to
ensure the careful screening of awards to verify eligibility persist throughout the program’s
audit and oversight stages.
SVOG conducted Fraud Risk Assessments in 2022 and 2023. SBA’s Fraud Risk
Management Board approved SVOG's latest FRA in March 2023. SVOG conducted
Entity Level Control Assessments in 2022 and 2023 and provided each assessment to
the ODR&R Internal Controls division. Since the program office's inception, SVOG in
conjunction with OPP&CFO has performed and documented internal control evaluations
that included entity level controls, manual controls, general information technology
controls, and system application controls.  Likewise, SVOG and OPP&CFO partnered in
the development of results-driven activities and controls to strengthen SVOG's system of
internal control as well as address identified deficiencies. To further decrease the chance

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of errors and fraud before they occurred, preventative controls, such as the separation of
duties, checks and balances, authorization and approval processes, access controls, and
training employees and stakeholders, were ingrained into each program phase.
Recommendation 2 appears to be moot and unnecessary to promote the economical,
efficient, and effective operation of the SVOG program office as the actions detailed
above have been completed and the actions detailed below are already in development.
 Corrective Actions:
Corrective Actions Planned
Target Completion
Date
Provide original and updated SVOG Audit and Oversight
Plan to Congress.
Completed

Through the existing Audit, Monitoring and Compliance
processes, request identified potentially ineligible entities
to resolve eligibility issues.
Ongoing
Allow potentially ineligible entities time to address eligibility
concerns.
Ongoing
Review responses from potentially ineligible entities.
Ongoing
Refer entities deemed to be ineligible to recoupment
process.
October 2023

Conclusion
In conclusion, SBA disagrees with the finding that policy changes undertaken as part of
the ‘program refresh’ resulted in significantly weakened internal controls. As detailed in
our full response, the cited controls were not effective as originally designed. By modifying
these controls, SBA was able to more effectively provide much-needed emergency relief
to eligible entities without increasing the risk of improper payments.
SBA stays committed to developing and implementing meaningful process improvements
as control deficits are identified. As such, SBA pre-emptively undertook Recommendation
1 to re-evaluate the 47 applications questioned in the report. Our review of the files only
found eligibility issues for 6 files, which are being addressed through existing post-award
quality assurance controls. The other questioned applications were largely a result of
misunderstandings regarding eligibility determinations, rather than weakened internal
controls. This point is further demonstrated by the fact that the Report neglects to directly
link any questioned costs to changes implemented as part of the program refresh.
It may provide better service to the public and better stewardship of resources to close
the recommendations without the formal audit resolution and closure package process.
The issues identified in the Report have been resolved with corrective actions prior to the

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recommendations even being made: SBA has already reevaluated the eligibility for the
47 applicants questioned, implemented additional controls to ensure awards are carefully
screened during the monitoring, auditing, and compliance phases, and developed a
process to recover grant funds from ineligible entities.

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