SBA Agency Financial Report, Fiscal Year 2022
Summary
The SBA's Agency Financial Report for FY 2022 covers the fiscal year beginning October 1, 2021, and ending September 30, 2022. Its highlights table (dollars in thousands, unaudited) lists a principal program portfolio of $559,170,974 and total assets of $378,012,365 for FY 2022. In the Message from the Administrator, dated November 15, 2022 and signed Isabella Casillas Guzman, the SBA says it approved nearly 57,000 loans in the 7(a) and 504 loan programs, providing nearly $35 billion to small businesses. The message also says the Agency received a disclaimed opinion from its auditor on its FY 2021 and FY 2022 Consolidated Balance Sheets.
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Agency Financial
Fiscal Year 2022
Report
ABOUT THIS REPORT
The U.S. Small Business Administration’s Agency Financial Report (AFR) for FY 2022 provides an overview of the Agency’s
financial and performance data to help Congress, the President, and the public assess the SBA’s stewardship over the resources
entrusted to it. The AFR is the first of two required annual reports for federal agencies. The FY 2022 Annual Performance Report
(APR) is the other report and is part of the FY 2024 Congressional Justification (CJ). The CJ/APR is scheduled for publication in
February 2023. The reports can be found at: www.sba.gov/performance.
FY 2022 HIGHLIGHTS
(Dollars in Thousands)
FY 2019 (unaudited) FY 2020 (unaudited) FY 2021 (unaudited) FY 2022 (unaudited)
Principal Program Portfolio (1) $ 143,516,446 $ 835,987,031 $ 713,196,138 $ 559,170,974
Total Assets $ 16,718,652 $ 897,533,990 $ 562,417,681 $ 378,012,365
Total Liabilities $ 15,085,044 $ 718,056,018 $ 503,539,063 $ 395,123,603
Total Net Position $ 1,633,608 $ 179,477,972 $ 58,878,618 $ (17,111,238)
Total Net Cost of Operations $ 136,526 $ 554,231,547 $ 346,283,553 $ 47,096,949
Total Budgetary Resources $ 12,342,598 $ 1,518,667,904 $ 1,347,118,849 $ 420,033,718
(1)
The total portfolio consists of guarantied business loans outstanding, guarantied debentures, direct business loans and direct disaster loans. The
data include all performing loans and defaulted loans that have not been charged off.
FOR MORE INFORMATION
Information about the SBA’s programs is available at: Or, you may write to:
www.sba.gov U.S. Small Business Administration
Office of Performance, Planning, and the Chief
The SBA’s plans and reports are available at: Financial Officer
www.sba.gov/performance. 409 Third Street, S.W.
Washington, DC 20416
Para información acerca de los programas de la SBA:
www.sba.gov “Translate” “Select Language” Or, you may call:
Marjorie A. Rudinsky, Director
Questions and comments regarding the content, presentation, Performance Management Division
and usefulness of this report are welcome and may be addressed (202) 205-7545
to: performance.management@sba.gov
Follow us on:
http://www.facebook.com/sbagov
http://www.twitter.com/sbagov
www.youtube.com/sba
https://www.instagram.com/sbagov
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
TABLE OF CONTENTS
MESSAGE FROM THE ADMINISTRATOR ..............................................................................................1
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)........................................................... 3
The SBA’s History, Goals, and Organization .................................................................................................. 4
Executive Summary ........................................................................................................................................ 8
Primer of the SBA’s Principal Programs ........................................................................................................ 9
Summary of COVID-19 Financial Impacts .....................................................................................................12
Analysis of Performance Results ..................................................................................................................13
Summary of Performance Results ...................................................................................................................... 13
Verification and Validation of Performance Data .............................................................................................. 14
Operational Portfolio Analysis.............................................................................................................................. 14
Forward Looking Analysis ............................................................................................................................. 18
Analysis and Highlights of Financial Statements and Results...................................................................20
Highlights of Financial Results ............................................................................................................................ 20
Analysis of Financial Results ................................................................................................................................ 21
Analysis of SBA’s Systems, Controls and Legal Compliance ..................................................................... 25
Internal Control Environment ............................................................................................................................. 25
Financial Management Systems Strategy ........................................................................................................ 26
Management Assurances: FMFIA and FFMIA Assurance Statement for FY 2022 .................................... 28
Summary of Material Weaknesses ..................................................................................................................... 30
FINANCIAL REPORTING (UNAUDITED)..............................................................................................33
Message from the Chief Financial Officer ...................................................................................................34
Inspector General’s Audit Report ................................................................................................................. 35
Independent Auditors’ Report on FY 2022 Financial Statements ............................................................. 37
CFO Response to Draft Audit Report on FY 2022 Financial Statements .................................................... 60
Financial Statements and Notes (Unaudited) ..............................................................................................61
OTHER INFORMATION (UNAUDITED) .............................................................................................. 107
Top Management and Performance Challenges Facing the Small Business Administration
in Fiscal Year 2023 ...................................................................................................................................... 108
Agency’s Response to Top Management and Performance Challenges Facing The Small Business
Administration in Fiscal Year 2023 ............................................................................................................ 148
Payment Integrity........................................................................................................................................ 150
Summary of Financial Statement Audit and Management Assurances .................................................. 162
Grants Programs ......................................................................................................................................... 164
Civil Monetary Penalty Adjustment for Inflation ....................................................................................... 165
APPENDICES (UNAUDITED) ............................................................................................................. 167
APPENDIX 1 – Contact SBA: Useful Websites and Numbers .................................................................... 168
APPENDIX 2 – Glossary............................................................................................................................... 169
APPENDIX 3 – OIG Audit Follow-Up Activity ...............................................................................................175
Introduction (Unaudited) Agency Financial Report I
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
SBA’S MISSION
Maintain and strengthen the nation’s economy by enabling
the establishment and vitality of small businesses and by assisting in the
economic recovery of communities after disasters.
HOW THIS REPORT IS ORGANIZED
The U.S. Small Business Administration’s FY 2022 Agency Financial Report (AFR) provides financial and performance information
for the fiscal year beginning October 1, 2021, and ending September 30, 2022. This report presents the SBA’s operations,
accomplishments, and challenges. Following a message from the SBA Administrator are four principal sections: Management’s
Discussion and Analysis, Financial Reporting, Other Information, and Appendices.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Management’s Discussion and Analysis section provides a report of the Agency’s overall financial position, program
performance, and results of operations. It presents the SBA’s history, organization, and principal programs. This section highlights
financial results and analysis; performance results; and analysis of systems, controls, and legal compliance.
FINANCIAL REPORTING
The Financial Reporting section provides a detailed report of the SBA’s finances. It includes a message from the Chief
Financial Officer, the audit transmittal memorandum from the Inspector General, the Independent Auditors’ report, and
the financial statements and notes. Additionally, the required supplementary information provides a combined statement of
budgetary resources.
OTHER INFORMATION
The Other Information section includes the Inspector General’s report on the Agency’s most serious management and
performance challenges along with recommended actions. This section also includes a summary of the financial statement audit
and management assurances.
APPENDICES
The Appendices provide supporting information—a contact list of useful websites and telephone numbers, a glossary, and a
detailed report on audit follow-up activity.
II Agency Financial Report Introduction (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
MESSAGE FROM THE ADMINISTRATOR
November 15, 2022
On behalf of the team at the U.S. Small Business Administration who works every day
to advance the American dream of entrepreneurship, I am pleased to present our FY
2022 Agency Financial Report. This report highlights the SBA’s substantial impact and
improvement over the previous fiscal year as the federal agency responsible for helping
our nation’s 33 million small businesses and innovative startups access the funding and
resources they need to start and grow, and for ensuring businesses and the communities
they serve can recover and build resilience in the face of disasters.
Fiscal Year 2022 was a period of significant change and growth for America’s small
businesses, as well as economically devastating natural disasters, and this is reflected in
SBA’s historic financial relief, support and program improvements. During this period,
our nation realized high levels of new business starts, strong job creation, historically low
unemployment, and historic investments in infrastructure, American manufacturing, innovation and clean energy to build
an economy that works for all Americans.
The SBA’s dedicated staff and their mission-driven implementation of both core and emergency programs and services—
including COVID-19 relief, small business lending, investment and innovation, federal contracting support, trade
promotion, technical and skills training, and disaster response—are at the heart of this success. The Agency has worked
diligently to ensure opportunities for America’s entrepreneurs, and has helped millions of small businesses reopen,
rebuild, and grow.
The Agency also achieved notable regulatory and programmatic reforms and milestones during FY 2022, including:
improvements to the SBA Community Advantage (CA) loan program; further implementation of Equity in Procurement
contracting reforms working in partnership with the White House and partner agencies; streamlined service delivery with
critical office realignments; and the implementation of the Community Navigators Pilot Program. Based on preliminary
reported impacts, we expect these regulatory and programmatic reforms to provide strong economic returns for America’s
small businesses.
At the SBA, we work with a network of lenders to guarantee loans to small businesses that are unable to obtain credit
through conventional lending. In FY 2022, the SBA approved nearly 57,000 loans in the 7(a) and 504 loan programs,
providing nearly $35 billion to small businesses and supporting over 569,000 American jobs in the process. We also worked
to deliver on the promise of PPP forgiveness with 91 percent of loans and 95 percent of loan volume fully or partially
forgiven. Minority businesses received $10.7 billion, women nearly $4.7 billion and veterans over $1.1 billion in combined
7(a) and 504 lending. SBA’s microloan program approved nearly $82.7 million in new loans at $50,000 and under, to
provide help to the smallest and start-up businesses. The Agency also expanded the Community Advantage (CA) and Lender
Match programs. In FY 2022, 45 percent of CA dollars were awarded to minority borrowers. Additionally, the number of
lenders enrolled in Lender Match increased by 14 percent.
The SBA works to ensure that investment capital is available through its Small Business Investment Company (SBIC)
program. In FY 2022, the SBA unlocked capital for over 1,200 high-growth startups and main street businesses with
approximately $7.9 billion in financing. The SBA added 29 private, professionally managed investment funds for a total
of over 300 SBICs delivering debt and equity financing to small businesses. The SBA also increased SBIC financings
to women-, minority-, and veteran-owned small businesses, as well as those in underserved geographic areas, by four
percent this year.
The SBA also provides support to small businesses to grow through procurement and global trade. With the SBA’s efforts,
federal agencies collectively exceeded the small business contracting goal for FY 2021, the latest year of data available. More
than 27 percent of federal contracts totaling $154 billion went to small businesses—an over $8 billion increase from the
previous fiscal year. This marks the ninth consecutive year in a row that the Federal Government has exceeded this goal. The
SBA continues to promote equity in federal contracting, challenging federal agencies to award at least 15 percent of federal
Introduction (Unaudited) Agency Financial Report 1
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
contracts to small, disadvantaged businesses (SDBs) by FY 2025. As of FY 2021, the federal government achieved the
progressive goal a year in advance by delivering 11 percent of federal contracts awarded to SDBs. In FY 2022, SBA’s State
Trade Expansion Program (STEP) supported small businesses in expanding global trade and generated over 14,300 jobs in
small businesses and $550, 867,525 in export sales.
The SBA ensures that our nation’s small business owners can access the entrepreneurial training, counseling, and resources to
tackle the challenges they face every day. Our combined SBA network offers free or low-cost programs to help entrepreneurs
plan their business, research market trends, expand their customer base, and secure funding. These efforts are powered by
our 68 district offices and strong resource partner network made up of Small Business Development Centers, Women’s
Business Centers, Veterans Business Outreach Centers, SCORE chapters, Community Navigators, Regional Innovation
Clusters, and Growth Accelerators. In FY 2022, the SBA expanded its Women’s Business Centers network to every state and
Puerto Rico. Across our SBA network, hundreds of thousands of American small businesses took advantage of counseling,
mentoring, and training assistance.
When disaster strikes, the SBA joins the federal response to help small businesses and the communities they serve recover
through direct assistance to businesses, nonprofits, homeowners, and renters. Direct low-interest loans through SBA’s
Economic Injury Disaster Loans (EIDL) and Physical Disaster Loans (PDL) programs have enabled borrowers to replace or
repair uninsured losses, and mitigate future damage, whether through physical damage or economic injury. In FY 2022, the
SBA approved more than 36,500 direct disaster loans for declared natural disasters such as floods, hurricanes, and tornadoes,
totaling $1.96 billion. Additionally, the SBA continued to deliver $122.55 billion in COVID EIDL financial relief to
businesses and nonprofits in response to the COVID-19 pandemic.
The financial and performance data published in this report are reliable, complete, and in accordance with the U.S. Office of
Management and Budget Circulars A-136 and A-11. While the Agency has received a disclaimed opinion from its auditor
on its FY 2021 and FY 2022 Consolidated Balance Sheets as a result of its scaled COVID financial relief, the SBA under
my leadership has taken actions to implement internal controls to ensure that all of the SBA’s programs are carried out at
the highest standard and with the utmost integrity. My team and I remain committed to proper management of Agency
resources by addressing the issues our auditor identified and continuing to strengthen management controls.
The SBA has worked to ensure that we are functioning as efficiently, effectively, and equitably as possible for America’s
entrepreneurs while leveraging technology, partnerships, and alliances with trusted stakeholders, and streamlining operations
to eliminate waste and redundancy while improving customer experience. As we look toward FY 2023 and a future of
possibilities, the SBA is committed to delivering even greater and more equitable results as well as the best possible customer
service for all of America’s small businesses.
Sincerely,
Isabella Casillas Guzman
Administrator
2 Agency Financial Report Introduction (Unaudited)
Management’s Section 1
Discussion and Analysis
(Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
THE SBA’S HISTORY, GOALS, AND ORGANIZATION
In 1953, Congress created the SBA to aid, counsel, assist, and protect the interests of small business. As the nation’s only go-to
resource and voice for small businesses, the SBA provides programs and services that help small businesses confidently start, grow,
expand, or recover. The SBA is backed by the Federal Government and is the only cabinet-level federal agency fully dedicated to
small business. The SBA’s headquarters is in Washington, D.C., while its business products and services are delivered through field
personnel and a network of private sector and nonprofit partners in every U.S. state and territory. Major SBA offices contribute to
one or more Agency-wide strategic goals as outlined in the SBA’s FY 2022-2026 Strategic Plan:
MISSION STATEMENT
Maintain and strengthen the nation’s economy by enabling the establishment and vitality of small
businesses and by assisting in the economic recovery of communities after disasters.
GOAL 1
Ensure equitable and customer-centric GOAL 2 GOAL 3
design and delivery of programs Build resilient businesses and a Implement strong stewardship of
to support small businesses and sustainable economy resources for greater impact
innovative startups
1.1 Ensure all entrepreneurs have 2.1 Help small businesses recover 3.1 Strategically manage resources
access to capital to start and grow from the pandemic and become by integrating quality
their business more resilient data, evidence, and risk in
decision-making processes
1.2 Build a thriving national innovation 2.2 Prepare small businesses and
ecosystem that promotes rebuild communities affected by 3.2 Build an inclusive and high
investments in all small business natural disasters performing workforce
communities
3.3 Develop and deploy
1.3 Grow exporting opportunities to help technology-driven solutions to
small businesses across the country enhance mission delivery
expand into new markets
1.4 Build back an inclusive and proficient
small business contracting base
ready to compete for all federal
procurement opportunities
1.5 Build an equitable entrepreneurial
ecosystem through tailored training
and counseling
STRATEGIC GOAL ONE The Office of Investments and Innovation assists small businesses
through initiatives such as the Small Business Investment
Ensure Equitable and Customer-Centric Design and
Company, Small Business Innovation Research, Small Business
Delivery of Programs to Support Small Businesses and Technology Transfer, and other tailored programs that drive
Innovative Startups innovation and competitiveness.
Strategic Goal One aims to improve access to SBA programs
The Office of International Trade enhances the ability of small
and services for all entrepreneurs.
businesses to export and compete in the global marketplace
The Office of Capital Access assists small businesses with by facilitating access to capital, providing technical assistance,
obtaining capital via the 7(a), 504, and Microloan programs, ensuring the consideration of small business interests in trade
and bonds through the Surety Bond Guarantee program. negotiations, and contributing to the U.S. government’s
PRIME Technical Assistance Grants Program provides training international commercial and economic agenda.
and technical assistance to underserved entrepreneurs and
microenterprise development organizations and programs.
4 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
The Office of Government Contracting and Business STRATEGIC GOAL THREE
Development assists small businesses in competing for federal
Implement Strong Stewardship of Resources for
contracting opportunities through the government-wide prime
and subcontracting programs. The office also sets size standards Greater Impact
for small businesses, which determine the size a business must Strategic Goal Three focuses on SBA resources and ways to
be to be considered a small business. Additionally, business optimize them to best support the small business community.
development assistance includes the HUBZone, 8(a) business
development, 7(j) management and technical assistance, and The Office of Performance, Planning, and the Chief Financial
Mentor-Protégé programs. Officer leads the Agency’s performance management,
program evaluation and evidence-building activities, financial
The Office of Entrepreneurial Development provides business management, and acquisition management functions.
advising, mentoring, and training assistance through its
resource partner network composed of Small Business The Office of Executive Management, Installations, and Support
Development Centers, Women’s Business Centers, SCORE, Services supports resource and core administrative functions,
Community Navigator Pilot Program, and through including grant management, facilities, records management,
Entrepreneurship Education programs. and personnel security.
The Office of Veterans Business Development ensures the The Office of Human Resources Solutions provides strategic
applicability and usability of all the Agency’s small business human capital solutions to workforce issues and strives to
programs for active duty, National Guard and Reservists, create a work environment that attracts and retains a talented
veterans, and veteran or military spouses through Veterans’ and high-performing workforce.
Business Outreach Centers, Boots to Business, and other
grant programs. The Office of the Chief Information Officer provides information
technology leadership, product services, and operational
The Office of Field Operations is responsible for connecting support for the SBA to maximize internal efficiency and
and supporting entrepreneurs with the Agency’s products and responsiveness to small businesses.
services through 10 regional offices and 68 district offices.
Each of the SBA’s programmatic areas are directly supported Other offices that support the strategic goals and objectives
by specialist field staff. include the Office of the National Ombudsman; Office of
Continuous Operations and Risk Management; Office of
Diversity, Inclusion, and Civil Rights; Office of Communications
STRATEGIC GOAL TWO and Public Liaison; Office of Congressional and Legislative
Build Resilient Businesses and a Sustainable Economy Affairs; Office of General Counsel; and Office of Hearings
and Appeals.
Strategic Goal Two focuses on how the SBA can rebuild a
sustainable economy fueled by small businesses.
The Office of Capital Access supports the Disaster Assistance
Program, the only SBA program not limited to small
businesses. Additionally, the SBA oversees Paycheck Protection
Program loans, Restaurant Revitalization Fund grants, and
COVID EIDL loans in support of pandemic relief.
The Office of Disaster Assistance provides short- and long-
term assistance after disasters by engaging with district
offices and resource partners to aid their communities even
after the disaster declaration deadlines have closed. The SBA
communicates its preparedness and disaster resources through
outreach that raises awareness and underscores seasonal risks.
The office also oversees Shuttered Venue Operator Grants
Program in support of pandemic relief.
Management’s Discussion and Analysis (Unaudited) 5
6
Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration
SBA ORGANIZATION CHART
Office of the Administrator Office of Inspector General
Administrator
Chief of Staff Deputy Administrator Office of Advocacy
Office of Office of Office of
Office of Office of Office of
Communications and Continuous Operations Human Resources
Capital Access International Trade Hearings and Appeals
Public Liaison and Risk Management Solutions
Office of Executive
Office of Government Office of
Office of Investment Office of Office of the Management,
Contracting and Diversity, Inclusion,
and Innovation General Counsel National Ombudsman Installations, and
Business Development and Civil Rights
Support Services
Office of Office of Office of Performance,
Office of
Entrepreneurial Congressional and Planning, and the Chief
Disaster Assistance
Development Legislative Affairs Financial Officer
Office of Office of the
Office of
Agency Financial Report Fiscal Year 2022
Veterans Business Chief Information
Field Operations
Development Officer
U.S. Small Business Administration
SBA FIELD OFFICE LOCATIONS
Region 10
AK
Region 8 Region 1
ANC
Region 5
ANC
(In Region 10)
WA
ANC
ME
ANC MT ND ANC ANC
ANC
OR NH
MN VT ANC
ANC ANC
ID ANC
MA
SD WI NY ANC
ANC
ANC ANC ANC
Region 2
WY MI ANC CT
RI
ANC
ANC
ANC ANC
ANC ANC PA ANC
ANC
ANC ANC ANC IA IA NJ
NE ANC
ANC
IN OH
ANC
ANC NV ANC
DE
ANC
CA ANC IL MD
ANC UT ANC HQ
CO ANC ANC
ANC
KY WVA
KS MO VA
ANC ANC
Region 3
ANC ANC
ANC
ANC
TN NC
AZ ANC
ANC OK ANC
ANC
NM ANC SC
ANC
AR MS
ANC GA
AL
ANC
Region 4
TX LA ANC
ANC
Management’s Discussion and Analysis (Unaudited)
HON ANC
FL
ANC
GU HI
Region 9 ANC HAT
(In Region 9) ANC Region 6 PR
Agency Financial Report Fiscal Year 2022
USVI
Region 7 (In Region 2)
7
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
EXECUTIVE SUMMARY
America’s 33 million small businesses play a critical role in Performance Results
job creation and retention. During the last two decades,
small businesses have been responsible for creating two out Capital: In FY 2022, the SBA approved nearly $35 billion
of every three net new jobs. In turn, the U.S. Small Business or more than 57,000 7(a) and 504 loans to small businesses.
Administration’s assistance to those firms and entrepreneurs 7(a) loans, 504 loans, microloans and surety bonds helped to
helps drive a healthy economy. support more than 621,000 American jobs. The SBA invested
more than $7.9 billion in 1,200 small businesses through
The SBA employs a variety of methods to support America’s the Small Business Investment Company program, which
small businesses. These methods include promoting equitable supported almost 130,000 jobs.
access to capital, federal contracting, counseling, and disaster
assistance. Contracting: The SBA continued to partner with agencies
across the Federal Government to expand small business
This year, the SBA published the Agency’s FY 2022–2026 contracting opportunities. From FY 2016 through FY 2021,
Strategic Plan, which established the following strategic goals: small businesses were awarded nearly $760 billion in federal
contracts (FY 2022 contracting numbers continue to be
1. Ensure equitable and customer-centric design and collected and certified). The Federal Government continues to
delivery of programs to support small businesses exceed its small disadvantaged and service-disabled, veteran-
and innovative startups owned small business contracting goals but faces challenges
2. Build resilient businesses and a sustainable economy meeting its HUBZone and women-owned small business
contracting goals.
3. Implement strong stewardship of resources for
greater impact
Counseling: The SBA helped entrepreneurs start more than
20,000 new businesses in FY 2022. Additionally, the SBA’s
The following sections highlight financial and performance
Community Navigators Pilot Program served more than
results for the Agency. Additional information can be found in
7,400 clients and helped small businesses access over $100
the Analysis of Financial Results and Summary of Performance
million in grants and loans. Under the community navigator
Results sections. The complete set of performance results will
approach, traditional business assistance organizations enlist
be reported in the Annual Performance Report to be published
trusted, culturally knowledgeable partners to conduct targeted
in February 2023.
outreach to specific, underserved sectors of the entrepreneurial
community.
Financial Results
Disaster Assistance: In FY 2022, the SBA approved more
For FY 2022, the SBA’s total budgetary resources used for than 36,500 direct disaster loans for events such as floods,
staffing, operations, and loan subsidy costs were $35.5 billion. hurricanes, and tornadoes, totaling $1.96 billion. The Agency
Total nonbudgetary resources for loan financing used to managed 338 disaster assistance declarations during FY
make direct loans and purchase guarantied loans in default 2022. In addition to supporting communities before, during,
were $340.2 billion. The SBA’s guarantied portion of the and after natural disasters, the SBA continued to oversee
outstanding loan principal decreased $271.5 billion in FY COVID-19 relief programs in every state and territory.
2022 to $163.8 billion. During FY 2022, new guaranties
disbursed by SBA participating banks were $32.6 billion, a
$271.4 billion decrease from last year. In FY 2022, purchases
of defaulted guarantied loans increased from $874 million
last year to $6.0 billion. The loans receivable portion of the
SBA credit program portfolio increased in FY 2022 to $322.0
billion, from $245.4 billion in FY 2021. The spike in loans
receivable was caused by the increase in disaster loans in
FY 2022.
8 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
PRIMER OF THE SBA’S PRINCIPAL PROGRAMS
State Trade Expansion Program — STEP provides grants
Capital
to states to assist small businesses with the information and
7(a) Loans — The SBA offers government guaranties on tools they need to succeed in export related activities. These
loans (up to $5 million) made by lenders to help expand activities include participation in foreign trade missions,
access to capital for business owners who face challenges foreign market sales trips, international marketing campaigns,
getting approved for financing. The SBA guaranties a portion export trade shows, and training workshops.
of 7(a) loans made and administered by commercial lending
institutions. Loans can be guarantied for a variety of general
business purposes. Contracting
Procurement Assistance to Small Businesses — Small
504 Certified Development Company Loans — The SBA business contracts represent the largest form of direct
works with CDCs, which are private nonprofit corporations, monetary support for small business in the Federal
and private lenders to provide long-term financing (up to $5.5 Government. Within this goal are four subgoals:
million) to support investment in major assets, such as real
estate and heavy equipment. The SBA guaranties the CDC’s • Small Disadvantaged Businesses — This program
portion of these loans. provides assistance through the 8(a) Business
Development program and set-aside contracting for
Microloans — The SBA provides loans to nonprofit businesses owned and controlled by socially- and
intermediary lenders, which are community-based economically-disadvantaged individuals. For nine years, a
organizations with experience in lending and providing firm is assisted in gaining resources to compete for federal
technical assistance, that in turn make these loans (up to contracts and for contracts in the private sector.
$50,000) to small businesses needing small-scale financing and
• HUBZone Small Businesses — This program provides
technical assistance for startup or expansion.
sole-source and set-aside contracting for firms located
Small Business Investment Companies — SBICs are in designated economically-disadvantaged geographical
privately-owned and managed investment funds that use areas.
their capital plus funds borrowed, with an SBA guaranty (up • Service-Disabled Veteran-Owned Small Businesses —
to $150 million), to make equity and debt investments in This program allows federal agencies to set aside contracts
qualifying small businesses. for competition only among service-disabled veteran-
owned small businesses.
• Women-Owned Small Businesses — This program
Exporting allows federal agencies to set aside certain contracts
Export Loans — The SBA provides several types of export for competition only among small businesses owned
loans, including SBA Export Express loans (up to $500,000), by women.
Export Working Capital loans (up to $5 million), and
International Trade loans (up to $5 million) that provide small Surety Bond Guarantees — A surety bond is a type of
businesses with enhanced export financing options to develop contract that guarantees the performance of a contractor.
foreign markets, fund their export transactions, and/or support If one party does not fulfill its end of the bargain, the SBG
business expansion due to exporting success. program provides financial compensation to the other party.
The SBA guarantees bonds issued by a surety company to
U.S. Export Assistance Centers — USEACs are staffed encourage the surety company to provide bonds to small
by SBA, Department of Commerce, and Export-Import businesses, up to $6.5 million for non-federal contracts and up
Bank professionals. Together, their mission is to help to $10 million for federal contracts.
small- and medium-sized businesses compete in today’s
global marketplace by providing export marketing and
finance assistance.
Management’s Discussion and Analysis (Unaudited) 9
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Innovation SCORE — SCORE is a nonprofit association comprising
nearly 10,000 volunteer business mentors that serve
Small Business Innovation Research — The SBIR program entrepreneurs with in-person mentoring and local training
stimulates high-tech innovation by reserving a specific workshops. As the largest volunteer business mentor network
percentage of federal research and development funds in the Federal Government, SCORE adapts its structure and
for small businesses. services to meet the needs of small businesses.
Small Business Technology Transfer — The STTR Learning Center and Ascent — The SBA Learning Center
program reserves a specific percentage of federal research and is an online portal that hosts a variety of self-paced online
development funding to award to small business and nonprofit training courses, quick videos, web chats, and other helpful
research institution partners. tools to assist small business owners to explore and learn about
business ownership. Ascent is an online learning portal with
Counseling and Training materials and tools for women entrepreneurs.
Small Business Development Centers — SBDCs deliver an Community Navigator Pilot Program — Through the
array of services to small businesses and prospective business Community Navigator Pilot Program, the SBA engages
owners using a network of 62 lead centers managing more in targeted outreach to underserved communities through
than 900 service delivery points throughout the United States states, local governments, resource partners, and non-profit
and the insular territories. organizations. Under the community navigator approach,
traditional business assistance organizations (“hubs”) engage
Women’s Business Centers — WBCs provide advising and trusted, culturally knowledgeable partners (“spokes”)
training through more than 140 nonprofit educational centers to conduct targeted outreach to specific sectors of the
across the nation. Many WBCs provide multilingual services, entrepreneurial community.
and some offer flexible hours allowing mothers with children
to attend training classes.
Disaster Assistance
Boots to Business — B2B is an entrepreneurial education Disaster Assistance — The SBA is the Federal Government’s
and training program offered by the SBA as part of the primary source of financing for the long-term repair
Department of Defense Transition Assistance Program (TAP). and rebuilding of disaster-damaged private property for
The course provides an overview of entrepreneurship and homeowners, renters, businesses of all sizes, and private
applicable business ownership fundamentals. Active Duty nonprofit organizations. It is the only form of SBA assistance
Service members (including National Guard and Reserve), that is not limited to small businesses.
veterans of all eras, and spouses are eligible to participate.
Paycheck Protection Program — The CARES Act established
Native American Outreach — The program supports this loan of up to $10 million designed to provide a direct
American Indians, Alaska Natives, and Native Hawaiians incentive for small businesses to keep their workers on the
seeking to create, develop, and expand small businesses. It payroll because of the COVID-19 pandemic. These loans can
engages in outreach, technical assistance, and education, be forgiven if the funds are used for payroll costs, interest on
formulates and administers training programs, and mortgages, rent, and utilities.
coordinates entrepreneurial development opportunities
through co-sponsorship agreements with entities and other COVID EIDL Loans — The CARES Act modified the
federal agencies. existing Economic Injury Disaster Loan within the Disaster
Assistance program. In response to the COVID-19 pandemic,
Veterans Business Outreach Centers — The SBA’s 22 small businesses owners, including agricultural cooperatives
VBOCs provide counseling and training services to veteran- and nonprofit organizations, can apply for these loans, which
owned and service-disabled veteran-owned small businesses go up to $2 million and must be repaid.
and entrepreneurs, along with reserve component members
who have an interest in either starting a new small business or COVID EIDL Advance — These grants, up to $10,000 in
expanding an established small business. value, went to small businesses that also applied for COVID
EIDL Loans and are not repaid.
10 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Restaurant Revitalization Fund – The American Rescue
Plan Act established the RRF to provide funding to help
restaurants and other eligible businesses keep their doors open.
This program provides restaurants with funding equal to their
pandemic-related revenue loss up to $10 million per business
and no more than $5 million per physical location. Recipients
are not required to repay the funding if funds are spent for
eligible uses.
Shuttered Venue Operators Grants – The Economic Aid
to Hard-Hit Small Businesses, Nonprofits, and Venues Act
established these grants to support shuttered venues because
of the COVID-19 pandemic. Recipients are not required
to repay the grants if funds are spent for eligible uses within
established timeframes.
Management’s Discussion and Analysis (Unaudited) 11
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
SUMMARY OF COVID-19 FINANCIAL IMPACTS
In FY 2022, the SBA continued to assist small businesses The Shuttered Venue Operators Grant (SVOG) program,
in both pandemic relief and core programs, supporting established by the Economic Aid Act and amended by ARPA,
significant growth in small business recovery and stability included over $16 billion in grants for shuttered venues. In
while continuing to implement oversight functions for CARES July 2022, the Agency completed all grant processing for
Act, Economic Aid Act, and American Rescue Plan Act the SVOG program, awarding more than $14.6 billion in
programs that saved millions of jobs and kept small businesses grants. The SBA will continue to monitor and deliver required
in operation. The pandemic’s adverse economic impacts compliance activities for these grants. In addition, the Agency
continue to cause issues such as supply chain disruptions, awarded more than $28.6 billion in Restaurant Revitalization
worker shortages, and changes in consumer spending habits. Fund (RRF) grants to more than 100,000 restaurants, bars,
Going forward, the SBA will continue to perform oversight and other businesses. Established in March 2021, the SBA
and monitoring activities on pandemic-related programs, such stopped accepting applications in July 2021. The Agency
as requests for loan forgiveness, required reporting for grants continues to manage the annual reporting requirement for
recipients, and other activities. venues to report on fund use.
The SBA approved more than 11 million applications for The SBA’s total assets in FY 2022 were $378 billion, compared
the Paycheck Protection Program (PPP) and provided over with $562 billion in FY 2021. Total liabilities in FY 2022
$799 billion in lending over the lifetime of the program.1 The were $395 billion, compared with FY 2021 of $504 billion.
program ended in May 2021, and existing borrowers may be The SBA’s net position and net cost of operations decreased
eligible for PPP loan forgiveness. As of September 2022, over compared with FY 2021. Total budgetary resources decreased
10 million applications been submitting requested PPP loan from $1.3 trillion in FY 2021 to $420 billion in FY 2022.
forgiveness, with nearly $753 billion total forgiveness paid.2 More information on the financial impacts can be found in the
Analysis of Financial Results section.
For the COVID EIDL program, by April 2022, the SBA had
approved nearly 4 million EIDL loans totaling nearly $378
billion, more than 601,000 Targeted EIDL Advance payment
(grants) totaling over $5 billion, and more than 453,000
Supplemental Targeted EIDL Advance payment (grants)
totaling over $2 billion.3 In May 2022, the SBA’s COVID
EIDL funds were exhausted and the SBA was no longer
accepting COVID EIDL loan increase requests or requests
for reconsideration, with the application portal closing on
May 16, 2022.
1 SBA, “Paycheck Projection Program (PPP) Report, Summary of All PPP Approved Lending, approvals through 05/31/2021”, at Paycheck Protection Program (PPP) Report:
Approvals through 05/31/2021 (sba.gov).
2 SBA, “Forgiveness Platform Lender Submission Metrics | September 11, 2022” at Forgiveness Platform Lender Submission Metrics, September 11 (sba.gov).
3 SBA, “Disaster Assistance Update Nationwide COVID EIDL, Targeted EIDL Advances, Supplemental Targeted Advances, April 28, 2022 (figures as of April 27, 2022),” at
https://www.sba.gov/document/report-covid-19-eidl-reports-2022.
12 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
ANALYSIS OF PERFORMANCE RESULTS
Summary of Performance Results
The following section presents key FY 2022 performance data. The presentation is organized by strategic objective, which follows
the SBA’s FY 2022-2026 Strategic Plan. Detailed information on all SBA program performance data, including explanations of
variances, will be presented in the FY 2022 Annual Performance Report to be published in February 2023.
Strategic Goal 1: Ensure Equitable and Customer-Centric Design and Delivery of Programs to Support Small
Businesses and Innovative Startups
FY 2019 FY 2020 FY 2021 FY 2022 FY 2022
S.O. Performance Measure
Actual Actual Actual Goal Actual
Number of Jobs Supported by 7(a) Loans, 504 Loans,
1.1 556,019 552,497 729,034 683,000 621,856
Microloans, and Surety Bonds
1.2 Number of Jobs Supported by SBIC Financings 111,201 91,557 126,431 130,000 129,098
Number of Jobs Supported by Businesses Receiving
1.3 N/A N/A 25,159 26,000 3,9904
Export Grants and Loans
Number of Jobs Supported by Federal Contract
1.4 677,000 699,000 691,700 715,000 Data Lag5
Set-Asides
1.5 Number of New Business Starts through SBA 20,377 19,660 28,771 Baseline Data Lag6
Counseling and Training Programs
Strategic Goal 2: Build Resilient Businesses and a Sustainable Economy
FY 2019 FY 2020 FY 2021 FY 2022 FY 2022
S.O. Performance Measure
Actual Actual Actual Goal Actual
Small Business Employment in the United States
2.1 65 64.7 62.1 65 Data Lag7
(Millions)
2.2 Customer Satisfaction Rate for Disaster Loan Approvals 83% 78% 76% 77% 79%
Strategic Goal 3: Implement Strong Stewardship of Resources for Greater Impact
FY 2019 FY 2020 FY 2021 FY 2022 FY 2022
S.O. Performance Measure
Actual Actual Actual Goal Actual
Customer Satisfaction Rate of Financial Management
3.1 4.4 4.6 4.7 4 4.3
Services for SBA Employees
Federal Employee Viewpoint Survey Global
3.2 70% 72% 70% 70% Data Lag8
Satisfaction Rate
3.3 Inspector General Maturity Rating 2.8 2.8 3 3.2 2.589
4 State Trade Expansion Program (STEP) FY 2022 data is not yet available and will be published in the FY 2022 Annual Performance Report.
5 Federal Contracting data continues to be certified by the SBA and will be available by summer 2023.
6 New Business Starts FY 2022 data is not yet available and will be published in the FY 2022 Annual Performance Report.
7 Full year data for FY 2022 has not yet been published. Source: Bureau of Labor Statistics; Business Employment Dynamics Data by Firm Size Class
https://www.bls.gov/web/cewbd/table_f.txt
8 At the time of publication, the FEVS Global Satisfaction Rate is not yet available. FY 2022 data will be published in the FY 2022 Annual Performance Report.
9 The SBA, like many federal agencies, experienced a decrease in its Inspector General Maturity Rating (FISMA rating) in FY 2022. This result is due to updated evaluation
criteria introduced in FY 2022.
Management’s Discussion and Analysis (Unaudited) 13
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Verification and Validation of Chart I: Makeup of the SBA’s Outstanding
Performance Data Loan Portfolio
Managing for results and integrating performance, financial,
and budgetary information requires valid, reliable, and
high-quality performance measures and data. Improving
data quality continues to be a priority for the SBA. The
SBA’s performance analysts work with program office leads
across the Agency to acquire high-quality data. In addition
to using output data internally from its systems, the SBA
relies on data from resource partners, other federal agencies,
and other government entities to assess its accomplishments
and effectiveness.
The SBA rigorously pursues the following strategies to ensure
data quality: ensuring the validity of performance measures
FY = fiscal year. PPP = Payment Protection Program.
and data; fostering organizational commitment and capacity
SBIC = Small Business Investment Company.
for data quality; assessing the quality of existing data; and
responding to data limitations. For additional information
regarding the SBA’s approach to verifying and validating
New Guarantied Loans
performance data, see the Congressional Budget Justification The quarterly average loan volume increased in FY 2022 with
and Annual Performance Report, updated each February. an average of $8.7 billion. Chart II demonstrates the trend in
loan approvals since FY 2017.
Operational Portfolio Analysis
The Operational Portfolio Analysis provides information on Chart II: Quarterly Gross 7(a) and 504 Loan Approvals
the SBA’s credit programs and does not reference the financial
statements. The SBA is the taxpayers’ custodian of small
business loan guaranties and direct loans with a portfolio of
more than $559.2 billion.10 During FY 2022, the portfolio
decreased by $154 billion, or 21.6 percent. The single and
largest decrease was the continued reduction of the Paycheck
Protection Program (PPP), a loan program authorized in 2020
through the Coronavirus Aid, Relief and Economic Security
Act (CARES Act) in response to the COVID-19 pandemic.
The PPP portfolio decreased by $279.6 billion (-87.8 percent),
whereas the SBA’s 7(a) and 504 loan portfolios expanded
by $3.2 billion (3.1 percent) and $1.9 billion (6.7 percent),
respectively. The SBIC portfolio increased by $2 billion
(19.4 percent) and the Agency’s disaster loan portfolio had
FY = fiscal year. Q1 = first quarter, etc.
the largest increase of $117.7 billion (47.2 percent), as the
COVID Economic Injury Disaster Loans (EIDL) program
continued to grow. All other portfolios increased by $593
million (28.2 percent). (see Chart I).
10 The total portfolio consists of guarantied business loans outstanding, guarantied debentures, direct business loans, and direct disaster loans. The data include all performing
loans and defaulted loans that have not been charged-off.
14 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
At least three main factors contributed to the loan guaranty
Chart III: Outstanding Commercial Loan
portfolio’s recent changes: to Small vs Nonsmall Businesses
Continuous Growth in the Economy — Real Gross Domestic
Product in the United States increased throughout each
quarter of 2021, but started to trend downwards in 2022, with
a rate of -0.6 percent in the second quarter of 2022. Despite
continued economic recovery and a return of consumer
spending, the reduction in government support related to the
COVID-19 pandemic and inflationary pressures contributed
to an overall decline in Real GDP in 2022.11
Changes in Market Volatility — Inflation remained low
throughout 2020 (on average, 1.2 percent),12 but picked up
sharply in April 2021 to 4.2 percent, then 5 percent in May
and 5.4 percent in June 2021. This level was maintained
until another jump in October 2021 to 6.2 percent, and in CY = calendar year.
December the year ended with a monthly rate of 7 percent.
These increases throughout 2021 led to an average monthly New Direct Loans
increase of 4.7 percent for the year. In 2022, the monthly In FY 2022, the SBA’s gross approvals for the Disaster
inflation rate continued to climb, peaking at 9.1 percent in Assistance loan program continued to grow by 48 percent
June 2022 in part due to the increased cost of consumer goods to $36.7 billion against an FY 2021 total of 24.7 billion. In
and services. Conversely, while the unemployment rate surged FY 2022, the EIDL program continued to contribute to the
to a peak of 14.8 in April 2020, it has decreased significantly overall increase in disaster lending as compared to the pre-
throughout 2021 and 2022 to 3.5 percent in September pandemic period. Chart IV illustrates the relative sum of
2022.13 disaster loans in FY 2022 by month, compared with the prior
three fiscal years.
Market for Small Business Lending — Data from the Federal
Deposit Insurance Corporation (FDIC) showed that the total
market for business loans increased between 2016–2021 by Chart IV: Monthly Gross Disaster Assistance
21 percent ($670 billion). However, 93 percent ($623 billion) Loan Approvals
of this increase comes from loans to nonsmall businesses,14
whereas total small business loans increased by $47 billion.
Thus, the ratio of small business loans compared with the
total bank market has decreased between 2016–2021, with a
marked decrease in 2020–2021 (see Chart III). Furthermore,
the banking industry’s trend toward consolidation, reflected in
the reduction of commercial banks by 17 percent15 between
2016–2021, makes the SBA’s guaranty products more critical
for growing small businesses that may be denied credit in the
private loan market.
FY = fiscal year.
11 U.S. Department of Commerce, Bureau of Economic Analysis: www.bea.gov/newsreleases/glance.htm.
12 U.S. Department of Labor, Bureau of Labor Statistics: www.bls.gov/cpi/home.htm.
13 U.S. Department of Labor, Bureau of Labor Statistics: data.bls.gov/timeseries/LNS14000000.
14 Nonsmall businesses are firms that have more than 500 employees. https://www.fdic.gov/analysis/quarterly-banking-profile/index.html.
15 https://www.fdic.gov/bank/statistical/stats/.
Management’s Discussion and Analysis (Unaudited) 15
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Aside from the FY 2020–2021 COVID EIDL loans, most of Monthly 504 delinquency rates increased and experienced
the Disaster Assistance loan portfolio’s outstanding balance greater variability in FY 2021, peaking at 3.4 percent in
includes lending from FY 2006 (hurricanes Katrina, Rita, and September. In FY 2022, the delinquency rate trended
Wilma), FY 2013 (Hurricane Sandy) and FY 2018 (hurricanes downward throughout the fiscal year. The average FY 2022
Harvey, Irma, and Maria). The SBA will continue to make YTD 504 delinquency rate of 1.6 percent is significantly below
disaster loans an important recovery tool for businesses, the FY 2021 average delinquency rate of 2.1 percent. The
homeowners, and renters that survive a disaster. SBA will continue to monitor the variability and level of 504
delinquency rates closely post-CARES Act.
Portfolio Performance — Delinquencies
Delinquency rates (i.e., borrowers who are late on their Portfolio Performance — Charge-Offs
payments) are a leading indicator of the Agency’s charge- The 12-month charge-off rate for the 7(a) loan program
off rate (i.e., the rate of dollars spent to cover loans that sharply declined between FY 2010–2013, falling from 4.3
defaulted). Thus, delinquency rates are a general indicator percent in the fourth quarter of 2010 to 1.2 percent in the
of the Agency’s and taxpayers’ future liabilities for these third quarter of 2013. The rate increased but ultimately
programs. A declining delinquency rate (see Chart V) is a decreased in July 2022 to 0.6 percent (see Chart V). The 7(a)
positive indicator for the financial performance of any loan loans not sold on the secondary market become a charge-off
portfolio. after all efforts to recover a delinquent balance were exhausted,
such as liquidating the underlying collateral. The latent rise of
Strong economic growth, strong profit performance, and the 7(a) charge-off rate in 2013 is attributable to recession-era
tighter lending standards by financial institutions during loans that were charged-off after efforts to recover delinquent
the past several years have reduced delinquency rates for balances had been exhausted. Now that this effort to charge-off
all business loans, which have been steadily declining since the recession-era loans is complete, the charge-off rate again
reaching cyclical peaks in 2009. Delinquency rates for closely trends with the delinquency rate in FY 2022.
the Agency’s major loan programs followed this national
downward trend. Delinquency rates for the 7(a) loan program The 12-month charge-off rate for the 504 loan program
declined from the 3.8 percent peak in January 2009 to 0.84 continuously increased from FY 2008 to FY 2013, peaking
percent in February 2020, prior to the start of the COVID-19 at 4.4 percent in January 2013, but dropping to 0.2 percent
pandemic. Similarly, delinquency rates for the 504 loan in July 2022. This trend is not surprising, since the 504
program likewise declined from the 5 percent peak in February loan program is an economic development program with
2010 to 0.9 percent in February 2020. a commercial real estate focus. As such, recovery rates of
defaulted 504 loans are, with some noticeable time lag,
The CARES Act provided pandemic debt relief to current significantly impacted by the pricing trend in this sector. The
borrowers of 7(a) and 504 loans, authorizing the SBA to pay upward trend in the 504 delinquency rate during FY 2021
the principal, interest, and associated fees on existing loans for could impact the future trajectory of 504 charge-off rates in
six months. This led to a delinquency rate of near zero percent coming fiscal years, but as of July 2022, it does not yet appear
in the last six months of FY 2020. With the expiration of to be a factor.
CARES Act funds, both programs have seen more variability
in the delinquency rate during FY 2021–2022.
As of July 2022, the average FY 2022 year-to-date (YTD)
7(a) delinquency rate of 0.56 percent is slightly below the
FY 2021 average delinquency rate of 0.64 percent. The 7(a)
rate remained low throughout FY 2022, staying below one
percent every month and generally trending down each month
of the fiscal year.
16 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Quarterly information on the status of the SBA’s loan
portfolio, including outstanding balances and approvals by
loan program and purchase rates, is available on the SBA’s
website at www.sba.gov/performance.
Chart V: Delinquency and Charge-Off Rates for the 7(a)
and 504 Loan Programs by Fiscal Year
FY = fiscal year.
Management’s Discussion and Analysis (Unaudited) 17
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
FORWARD LOOKING ANALYSIS
The SBA works to equip America’s nearly 33 million Climate Crisis
small businesses and innovative startups with the tools,
resources, and support they need to start, expand, recover, A natural disaster can destroy lives, businesses, and
and navigate the aftereffects of the COVID-19 pandemic. communities. Moreover, natural disasters have become more
The SBA continues to administer and provide oversight for intense and more costly. In 2021, the U.S. experienced 20
programs implemented to reduce the pandemic’s impacts separate billion-dollar weather and climate disaster events,
on small businesses and reimagine the Agency’s service second only to the record 22 separate billion-dollar events
delivery in virtual and hybrid spaces while improving in 2020.16 Although the SBA has programs that can respond
access for underserved populations. The following areas to hurricanes, tornados, forest fires, and floods, the growing
serve as both challenges and opportunities that factor into threat and number of these occurrences remains a serious
the SBA’s strategies for delivering on outcomes and using concern. Disaster preparedness is a key component of the
taxpayer resources efficiently. The Agency will continue to SBA’s Disaster Assistance program and has helped many
review these factors as it implements its programs to ensure small businesses prepare for the unexpected. Research shows
optimal performance. that for every $1 spent on hazard mitigation, up to $6 in
future disaster recovery costs are saved.17 In 2022, the SBA
spotlighted the promotion of its disaster mitigation loan
Pandemic Recovery, Business option through an Agency Priority Goal to drive increased
Adaptation, and Economic Recovery awareness of this mitigation option and encourage businesses
and homeowners to invest in their own preparedness. By
While SBA support was crucial to saving small businesses and
financing property improvements that help prevent future
fueling their recovery, many businesses continue to feel the
damage caused by flooding, fires, severe winds, or other
effects of ongoing economic change. As the Nation’s economy
natural disasters, businesses and homeowners can proactively
moves through post-pandemic recovery, small businesses
reduce the impact of future disasters and shorten recovery time
and entrepreneurs continue to negotiate fluctuations in
when disasters do occur. The SBA continues to modernize
consumer habits, workforce shortages, real estate costs, supply
its response in communities that have experienced a natural
chain disruptions, natural disasters and other disruptors that
disaster event by updating technology and streamlining its
inhibit small business stability and growth. The SBA can help
ability to onboard staff.
businesses and entrepreneurs adapt to new market forces
through increased access to capital, government contracting In addition to the Disaster Assistance program, the SBA
opportunities, technical assistance, and disaster recovery. Small is responding to Executive Order 14057 Catalyzing Clean
business growth and stability is a key factor in job creation and Energy Industries and Jobs through Federal Sustainability by
heathy communities. prioritizing resources for the operation and procurement of
electric vehicles and associated charging infrastructure. The
Millions of small businesses received government support
Agency will only replace vehicles from the existing fleet when
during the pandemic, and the SBA will continue helping
necessary, to accomplish the transition to a motor vehicle fleet
businesses build resilience, create jobs, and increase revenues
of clean and zero-emission vehicles.
as challenges and volatile conditions in the market remain.
Rising inflation has challenged businesses to increase prices
or decrease staff, and reduced profits stand in the way of Technology and Automation
continued growth. Access to capital is a critical element
As small businesses experienced a rapid evolution of
for small businesses to mitigate disruptions and become
technology and automation during the COVID-19 pandemic,
more robust. The SBA continues to assist small businesses
the SBA undertook significant programmatic improvements
in recovering and growing in the new normal, and it will
across the Agency. These initiatives have scaled the use of
continue to invest in business innovation and in supporting
technology and prioritized customer experience and increased
innovative start-ups as part of its comprehensive programming
access for minority and disadvantaged small business
to support a healthy business ecosystem and entrepreneurs.
16 https://www.climate.gov/news-features/blogs/beyond-data/2021-us-billion-dollar-weather-and-climate-disasters-historical
17 Source: National Institutes for Building Sciences, 2018.
18 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
populations. Virtual training platforms and online tools allow
the SBA to reach further into communities and reduce barriers
to services for previously underserved populations. Not all
entrepreneurs have access to broadband internet services, and
some face challenges connecting to resources. The SBA will
continue adapting and developing new platforms to reach
entrepreneurs in emerging markets. The Agency will continue
to streamline processes, increase accessibility, and deliver broad
equitable support across programs to more communities
and entrepreneurs who have faced historic barriers to small
business ownership.
A Changing Federal Workforce
The federal workforce landscape continues to evolve as
persistent challenges, such as a growing percentage of Agency
employees eligible for retirement, meet with new planning
efforts for the future of work and workplace modernization.
Over the past two and half years, the SBA has increased
workplace flexibilities for employees, including remote work
and telework when appropriate. The SBA will determine
how to reconfigure its physical workplaces in alignment with
position distribution (i.e., remote work, telework, and onsite)
models to help eliminate unused space and identify annual
cost savings.
The SBA continues to search for ways to recruit and retain
the best talent. Competition with private industry and other
agencies is strong, and retention is challenging. The SBA
needs a workforce that is representative of the public it serves
and that can effectively communicate with, and meet the
needs of, entrepreneurs and small business owners. The SBA
has developed and aligned training for its field staff to ensure
that they have the tools to help small businesses succeed.
By providing SBA employees with the necessary tools and
resources, the Agency will be able to better support America’s
small businesses.
Management’s Discussion and Analysis (Unaudited) 19
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
ANALYSIS AND HIGHLIGHTS OF FINANCIAL STATEMENTS
AND RESULTS
Highlights of Financial Results (as of September 30)
(Dollars in Thousands)
At End of Fiscal Year 2022 2021 $ Change
CONDENSED BALANCE SHEET DATA
Fund Balance with Treasury $ 56,225,809 $ 316,852,301 $ (260,626,492)
Credit Program Receivables and Related Foreclosed Property, Net 321,528,158 245,445,095 76,083,063
All Other Assets 258,398 120,285 138,113
Total Assets $ 378,012,365 $ 562,417,681 $ (184,405,316)
Debt 362,801,468 262,654,877 100,146,591
Downward Reestimate Payable to Treasury 5,591,451 11,742,037 (6,150,586)
Loan Guaranty Liability 25,708,234 227,831,513 (202,123,279)
All Other Liabilities 1,022,450 1,310,636 (288,186)
Total Liabilities 395,123,603 503,539,063 (108,415,460)
Unexpended Appropriations 10,558,338 69,132,143 (58,573,805)
Cumulative Results of Operations (27,669,576) (10,253,525) (17,416,051)
Total Net Position (17,111,238) 58,878,618 (75,989,856)
Total Liabilities and Net Position $ 378,012,365 $ 562,417,681 $ (184,405,316)
For the Fiscal Year
STATEMENT OF NET COST BY STRATEGIC GOAL
Goal 1: Ensure Equitable and Customer-Centric Design and Delivery of $ (1,052,501) $ 22,325,528 $ (23,378,029)
Programs to Support Small Businesses and Innovative Startups
Goal 2: Build Resilient Businesses and a Sustainable Economy 47,877,837 322,741,620 (274,863,783)
Goal 3: Implement Strong Stewardship of Resources for Greater Impact 150,014 1,184,918 (1,034,904)
Costs Not Assigned 121,599 31,487 90,112
Net Cost of Operations $ 47,096,949 $ 346,283,553 $ (299,186,604)
CONDENSED STATEMENT OF NET POSITION
Beginning Unexpended Appropriations $ 69,132,143 $ 183,460,572 $ (114,328,429)
Total Budgetary Financing Sources (58,573,805) (114,328,429) 55,754,624
Ending Unexpended Appropriations $ 10,558,338 $ 69,132,143 $ (58,573,805)
Beginning Cumulative Results of Operations $ (10,253,525) $ (3,982,600) $ (6,270,925)
Total Financing Sources 29,680,898 340,012,628 (310,331,730)
Less: Net Cost of Operations 47,096,949 346,283,553 (299,186,604)
Ending Cumulative Results of Operations $ (27,669,576) $ (10,253,525) $ (17,416,051)
Ending Net Position $ (17,111,238) $ 58,878,618 $ (75,989,856)
CONDENSED STATEMENT OF BUDGETARY RESOURCES
Unobligated Balance Brought Forward $ 295,788,920 $ 699,661,256 $ (403,872,336)
Other Budgetary Resources, Net - 3,120,760 (3,120,760)
Appropriations (discretionary and mandatory) (22,774,310) 236,667,028 (259,441,338)
Borrowing Authority (discretionary and mandatory) 113,703,268 93,935,801 19,767,467
Spending Authority from Offsetting Collections 33,315,840 313,734,004 (280,418,164)
Total Budgetary Resources $ 420,033,718 $ 1,347,118,849 $ (927,085,131)
Obligations Incurred, Budgetary $ 35,455,067 $ 348,440,145 $ (312,985,078)
Obligations Incurred, Nonbudgetary 340,161,321 699,531,213 (359,369,892)
Unobligated Balances, Available and Unavailable 44,417,330 299,147,491 (254,730,161)
Total Status of Budgetary Resources $ 420,033,718 $ 1,347,118,849 $ (927,085,131)
20 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Analysis of Financial Results Background
The principal financial statements have been prepared to The SBA is a major federal credit reform agency of the U.S.
report the financial position and results of operations of the Government, and the vast majority of the Agency’s $420.0
entity, pursuant to the requirements of 31 U.S.C. 3515(b). billion budgetary resources support the SBA’s credit programs.
Although the statements have been prepared from the When apportioned by the OMB, budgetary resources are
records of the entity in accordance with Generally Accepted available to enter into new obligations and to liquidate them.
Accounting Principles (GAAP) for federal entities and the Budgetary resources are made up of new budget authority and
formats prescribed by the OMB, the statements are in addition unobligated balances of budget authority provided in previous
to the financial reports used to monitor and control budgetary years. The loan financing funds record all the cash flow activity
resources, which are prepared from the same records. The resulting from post-1991 direct loans and loan guaranties and
statements should be read with the realization that they are for are not budgetary costs. The financing accounts are reported
a component of the U.S. Government, a sovereign entity. separately in the Budget of the United States Government and
are excluded from the budget surplus/deficit totals.
This Analysis of Financial Results references numbers in the
Highlights of Financial Results that were derived from the The Federal Credit Reform Act (FCRA) governs the SBA’s
Financial Statements and Notes in this report. As a result, accounting for direct loans and loan guaranties made
the definitions of the loan and guaranty balances used in in FY 1992 and thereafter. Under FCRA, direct loans
this Analysis of Financial Results may differ somewhat from outstanding are reported net of an allowance using the present
the balances in the Operational Portfolio Analysis section. value of forecasted cash flows in subsidy models that are
For example, for the 7(a) loan program, the total amount of OMB-approved.
guarantied loans is used in the Portfolio Analysis, but only the
A Liability for Loan Guaranties is also reported using subsidy
SBA’s guarantied portion is used in the Analysis of Financial
models with forecasted cash flows from user fees and defaulted
Results because it ties to balances in the financial statements.
guarantied loans. The direct loan allowance and liability for
During FY 2022, the SBA continued to support the recovery loan guaranties for each loan program cohort is adjusted
of the American economy from the COVID-19 pandemic. annually under FCRA through the subsidy model reestimate
The American Rescue Plan (ARP) Act established the process. The SBA’s FCRA accounting is discussed further in
Restaurant Revitalization Fund (RRF) to provide funding to this section and in Notes 1 and 6.A of the financial statements.
help restaurants and other eligible businesses keep their doors
The credit subsidy cost is the net present value of expected cash
open. This program provides restaurants with funding equal
inflows and outflows over the life of a guarantied loan or the
to their pandemic-related revenue loss up to $10 million per
difference between the net present value of expected cash flows
business and no more than $5 million per physical location.
and the face value of a direct loan. The SBA receives budget
Recipients are not required to repay the funding if funds
authority annually to fund its credit programs. When loans
are used for eligible uses no later than March 11, 2023.
are disbursed, the SBA records subsidy expense for non-zero
Additionally, the Community Navigator pilot program was
subsidy loan programs.
established under Public Law 117-2 to make grants to, or
enter into contracts or cooperative agreements with, private In accordance with the FCRA, the subsidy costs are
nonprofit organizations, resource partners, States, Tribes, reestimated annually. Reestimates update original loan
and units of local government to ensure the delivery of free program cost estimates to reflect actual experience and changes
community navigator services to current or prospective in forecasts of future cash flows for each annual cohort of
owners of eligible businesses in order to improve access to loans. An upward reestimate occurs when the present value of
assistance programs and resources made available because expected cash outflows exceeds the present value of expected
of the COVID-19 pandemic by Federal, State, Tribal, and cash inflows. A downward reestimate occurs when the present
local entities. This public law appropriated $100 million value of expected cash inflows exceeds the present value of
for the program and $75 million for outreach and training. expected cash outflows.
These programs are discussed further in Note 17 of the
financial statements. Increased reestimated costs are funded in the following year
by permanent indefinite budget authority, while decreased
costs are returned by the SBA to a Treasury general fund.
Management’s Discussion and Analysis (Unaudited) 21
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
The portion of the outstanding principal guaranteed by
the SBA was $163.8 billion as of September 30, 2022, a Chart VII: Purchases of Guarantied Loans
decrease of $271.5 billion from the $435.3 billion guaranteed
as of September 30, 2021, (see Note 6.C in the financial
statements). As shown in Chart VI, new guaranties disbursed
by the SBA participating banks during FY 2022 were $32.6
billion, a $271.4 billion decrease compared to the FY 2021
figure of $304.0 billion.
Chart VI: Guarantied Loans Disbursed
FY = fiscal year.
Financial Position
Assets
The SBA had total assets of $378.0 billion at the end of
FY 2022, down $184.4 billion from FY 2021. Total assets
decreased due to a $260.6 billion decrease in Fund Balance
with Treasury combined with a $76.1 billion increase in Credit
Program Receivables and Related Foreclosed Property.
FY = fiscal year.
Credit program receivables for the SBA comprise business and Liabilities
disaster direct loans and defaulted business loans purchased The SBA had total liabilities of $395.1 billion at the end of
per the terms of the SBA’s loan guaranty programs, which are FY 2022, down $108.4 billion from FY 2021. Liabilities
offset by an allowance for the subsidy. The allowance for the consist primarily of the Principal Payable to the Bureau of the
subsidy cost of the gross loans receivable is recorded as a contra Fiscal Service, Loan Guarantee Liabilities, and Downward
asset, and the net asset is reported on the Balance Sheet. The Reestimate Payable to Treasury.
subsidy allowance is determined by modeling the projected
future cash inflows and outflows of SBA credit programs using The Principal Payable to the Bureau of the Fiscal Service
discounted cash flow methodology. The subsidy allowance for increased $100.1 billion in FY 2022 due to net borrowing
each loan program cohort is reestimated annually. Increases activity needed to cover disaster loan programs as a direct
are funded by the Treasury, whereas decreases are returned result of the CARES Act. Note 9 in the financial statements
to the Treasury by the Agency. Loan losses, the costs of loan provides additional detail on SBA’s Principal Payable to
servicing, and loan interest rates are factors that affect the the Treasury.
subsidy allowance.
The Loan Guarantee Liabilities is the estimate of the net
SBA credit program receivables were valued at $321.5 billion present value of the future amount the SBA will pay,
in FY 2022, an increase of $76.1 billion from FY 2021. The net of fee collections, to liquidate expected purchases of
change in the credit program receivables resulted from an guarantied loans under its guarantied loan programs. The
increase of $117.8 billion in direct disaster loans as a direct Loan Guarantee Liabilities for each loan program cohort is
result CARES Act funded loans. As reflected in Chart VII, reestimated annually. Increases are funded by the Treasury
guarantied loan purchases increased $5.1 billion in FY 2022 while the Agency returns the decreases to the Treasury. The
to $5.9 billion. Loan Guarantee Liabilities decreased $202.1 billion primarily
due to a decrease in current year subsidy, loan modifications,
and subsidy reestimates offset by an increase in miscellaneous
recoveries. Note 6.E in the financial statements provides
additional detail.
22 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
The Downward Reestimate Payable to Treasury decreased
$6.2 billion in FY 2022. The decrease was a direct result of Chart VIII: Credit Program Subsidy Reestimates
overall changes within guarantied Loan program reestimates,
compared with the Payroll Protection Program which had
a downward reestimate of $2.7 billion in FY 2022. The
reestimate is mostly due to fewer forgiveness payments
processed in FY 2022 than anticipated for both the 2020 and
2021 cohorts. This led to a decline in the forecasted lifetime
forgiveness amount as a percentage of disbursements for both
cohorts. The lower lifetime forgiveness rate estimate is partially
offset by an increase in forecasted defaults for the 2020 and
2021 cohorts. Note 6.I in the financial statements provides
additional detail.
Net Position
Cumulative Results of Operations is the accumulative
difference between expenditures and financing sources since FY = fiscal year.
the inception of the Agency. This negative balance increased
The Disaster Assistance program had a net upward reestimate
$17.4 billion primarily because unfunded upward subsidy
of $28.0 billion in FY 2022 compared to $3.8 billion
reestimates at year-end for the Paycheck Protection Program
downward reestimate in FY 2021. The upward reestimate
was lower for FY 2022 compared with FY 2021, while 7(a)
is primarily due to higher projected loss rates for COVID
loan and disaster loan programs were higher. Upward subsidy
EIDL loans. The higher projected loss rates are primarily due
reestimates determined at year-end are funded in the following
to lower expected recovery rates on defaulted small dollar
year when they are received.
loans as well as higher assumed defaults. Further detail on
Unexpended Appropriations decreased $58.6 billion this subsidy reestimates can be found in Note 6.I of the financial
year primarily because the amount of appropriations received statements in the Financial Reporting section of this report.
and expended was less than the appropriations received and
expended in FY 2022 for business, disaster, and administrative Budgetary Resources
activities combined with a rescission of $35.5 billion. This
affected Budgetary Financing Sources and the Ending For FY 2022, Total Budgetary Resources decreased from
Net Position. $1.3 trillion in FY 2021 to $420.0 billion in FY 2022. This
decrease was primarily due to a decrease in appropriations and
Net Costs of Operations spending authority from offsetting collections as well as other
factors shown in the Highlights table and following discussion.
The Net Costs of Operations primarily reflects the costs of
SBA credit programs subsidy expenses during the year for new Appropriations (discretionary and mandatory) decreased
loans and subsidy reestimates at year-end. Net reestimates $259.4 billion in FY 2022 because of the year over year
for the business loan programs were downward in FY 2022 decrease in appropriations to fund CARES Act programs.
compared to the net upward reestimate in FY 2021, which Borrowing Authority increased $19.8 billion in FY 2022 due
affected Strategic Goal 1 costs. Chart VIII reflects the change to an increase in borrowing needed to cover disaster loan
in the net subsidy reestimates for the guarantied business and making. Spending Authority from Offsetting Collections
direct disaster loan programs in FY 2022. The PPP program decreased $280.4 billion in FY 2022. This decrease is primarily
had a net downward reestimate of $2.73 billion for FY 2022 attributable to a decrease in the amount of subsidy collected
and is attributable fewer forgiveness payments processed in FY in business.
2022 than anticipated for both the 2020 and 2021 cohorts.
The net downward reestimate in the 7(a) program of $1.7
billion is mostly due to better than projected actual loan
performance in FY 2022. Further detail on subsidy reestimates
can be found in Note 6.I of the financial statements in the
Financial Reporting section of this report.
Management’s Discussion and Analysis (Unaudited) 23
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Status of Budgetary Resources
The Total Status of Budgetary Resources decreased
$927.0 billion in FY 2021 to $420.0 billion in FY 2022.
Nonbudgetary obligations decreased by $359.4 billion, mainly
resulting from the PPP forgiveness payments, PPP fees, and
increased downward reestimates for both disaster and business
programs. Budgetary obligations decreased $313.0 billion
largely due to decreased subsidy obligations for the business
subsidy associated with the PPP program.
Unobligated balances as of September 30, 2022 and 2021,
were $44.4 billion and $299.1 billion, which included $28.2
billion and $6.4 billion of unavailable unobligated balances,
respectively. These balances were unavailable because they
were unapportioned by the OMB. The SBA accumulates the
majority of unobligated balances in its nonbudgetary financing
accounts ($35.6 billion in FY 2022 and $234.2 billion in
FY 2021) from subsidy estimates and reestimates that are
used primarily to pay default claims in future years. The
unobligated balances in the nonbudgetary accounts are directly
attributable to the PPP program and will be used to make
future forgiveness and default payments.
24 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
ANALYSIS OF SBA’S SYSTEMS, CONTROLS AND
LEGAL COMPLIANCE
performed based on the five components and 17 principles of
Internal Control Environment
the internal control framework prescribed in GAO’s Standards
The SBA believes that maintaining integrity and accountability for Internal Control in the Federal Government, known as the
in all programs and operations is critical for demonstrating Green Book.
responsible stewardship over assets and resources and is a sign
of responsible leadership. The SBA’s commitment to integrity, The SBA Senior Management Council (SMC) was established
ethical values, and an effective system of internal controls to oversee the Agency’s internal control system. The SMC is
helps to ensure that every employee remains dedicated to chaired by the Deputy Chief Financial Officer and composed
the efficient delivery of services to customers and maximizes of SBA managers from the major program and support offices.
desired program outcomes. Accordingly, the SBA has The SMC plans and executes the Agency’s internal control
developed and implemented management, administrative, and activities that includes assessing and improving compliance
financial system controls to reasonably ensure that: with applicable guidance (e.g., Office of Management and
Budget Circular A-123, Management’s Responsibilities for
• programs and operations achieve intended results Enterprise Risk Management and Internal Control), monitoring
efficiently and effectively; and remediation of identified deficiencies, and communicating
• resources are used in accordance with the mission of the results of reviews to senior management.
the Agency;
• programs and resources are protected from waste, fraud, SMC activities in FY 2022 included planning the annual
and mismanagement; internal controls assessments; identifying key processes and
related control activities; documenting the scope, design, and
• program and operation activities are in compliance with
methodology of risk and internal control assessments; testing
laws and regulations; and
of internal controls and monitoring corrective action plans
• reliable, complete, and timely data are maintained and
for remediation. In addition, the SMC discussed any material
used for decision-making at all levels.
information that should be considered for the Administrator’s
Each office at the SBA is required to implement or maintain annual statement of assurance with the Enterprise Risk
effective internal controls over operations, reporting, and Management Board.
compliance to achieve programmatic goals. Each year, the SBA
In 2022, the SBA continued to execute the methodology
conducts an assessment of internal control as required by the
prescribed to address the pandemic programs created by
Federal Managers’ Financial Integrity Act (FMFIA) of 1982
new legislation. The methodology applied to all programs
in accordance with the Office of Management and Budget
established by the Coronavirus Aid, Relief, and Economic
(OMB)’s Circular No. A-123, Management’s Responsibility
Security Act (CARES), Economic Aid Act, and American
for Enterprise Risk Management and Internal Control. The
Rescue Plan Act (ARPA). The Agency worked with applicable
FMFIA requires that the assessment results be reported to
program offices to conduct risk assessments for the programs
the President and Congress in a statement of assurance. The
that reached a level of maturity in their program processes.
SBA Administrator provides the statement of assurance based
Risk assessments were conducted to assess the impact and
on the self-assessment of program managers, internal control
likelihood of different risk factors and to identify deficiencies
reviews, and audits and reviews done by the Government
for remediation. Risk assessments will continue in FY 2023 for
Accountability Office (GAO) and SBA’s Office of the
programs that exceed the materiality threshold.
Inspector General (OIG).
Furthermore, the SBA continued with the development and
The Office of Performance, Planning, and the Chief Financial
execution of the FY 2022 Annual Assessment Plan. Internal
Officer’s (OPPCFO) Internal Controls Division provides
control assessments were conducted for the Shuttered
training and tools designed specifically for program support
Venue Operator Grant (SVOG) program, the Restaurant
offices and district offices, to aid management in assessing
Revitalization Fund (RRF), the Community Navigator Pilot
and documenting the effectiveness of internal controls within
Program (CNPP), Fresno Commercial Loan Servicing Center,
their respective area of responsibility. These assessments are
Management’s Discussion and Analysis (Unaudited) 25
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Disaster Loans-Santa Anna, and Entity Level Controls. To evaluation commencement. This caused a notional decrease in
continue supporting the implementing new programs, end- FISMA Maturity scores across the Federal Government.
to-end process documentation was developed to highlight key
processes and controls. The SBA will incorporate the changes derived from the new
evaluation criterion and continue developing its cybersecurity
The FY 2021 Financial Statement Audit identified weaknesses program in the areas of configuration management,
and deficiencies that required corrective actions. The SBA cybersecurity training, asset management, vulnerability
worked with responsible officials to develop corrective actions management, supply chain risk evaluation and management,
and process documentation to support the remediation of red team penetration testing, network segmentation,
existing deficiencies. The remediation efforts resulted in Dev/Sec/Ops, risk quantification, and automation of
improvements, and internal controls continue to evolve since controls assessments.
the inception of new COVID-19 and ARPA-related programs.
The Agency has collaborated with program offices to support
the remediation of corrective actions and implement new
Financial Management Systems Strategy
controls related to Section 1112 payments, the PPP loan The SBA’s financial management systems are designed to
review process, PPP Loan Forgiveness, SVOG, and RRF. support effective internal controls, produce reliable and timely
Efforts will continue beyond FY 2022 until remediation financial information, and ensure cost-effective loan guaranty
is complete. processing. Management remains focused on robust financial
management systems that support the SBA’s ability to comply
The SBA’s Enterprise Risk Management (ERM) Board, with laws and regulations. SBA systems must also provide
which is chaired by the Deputy Administrator and/or Chief timely and accurate data to support management analysis
of Staff, brings together senior leadership on a monthly and decision-making, enable the Agency to keep pace with
basis from the SBA’s major program and support offices to its lending partners, and effectively use automation to achieve
discuss the management of the agency’s top risks and share operational efficiency. As demonstrated throughout the FY
risk management best practices. The Office of Continuous 2022 Agency Financial Report, the SBA seeks to comply with all
Operations and Risk Management (OCORM) facilitates the federal financial management system requirements, including
ERM Board meetings and is responsible for implementing the Federal Financial Management Improvement Act of
ERM agency wide. The SBA took several steps to strengthen 1996, which requires that the Agency’s financial management
risk and fraud efforts: established an anti-fraud entity systems comply with federal financial management systems
responsible for oversight and coordination of SBA’s fraud requirements, applicable federal accounting standards, and the
risk prevention, detection and response activities, integrated U.S. Standard General Ledger at the transaction level.18
the ERM process for identifying and managing risks with
the strategic planning process, conducted an ERM maturity SBA financial systems continued to process a high volume of
assessment, developed an agency-wide fraud risk assessment transactions this fiscal year, processing 4.8 million payments
tool to assess Agency programs and operations, and, as and 32 million General Ledger transactions primarily to
directed by OMB, approved the agency-wide risk profile that support the various programs providing pandemic emergency
identified cross-cutting risks related to fraud, technology, and relief resources for America’s small businesses. Earlier in the
operations. The SBA delivers enterprise level cybersecurity and year, the Agency focused on improvements and enhancements
privacy services that empower the Agency to better support for disbursements of the various pandemic programs. In the
the small business community through robust yet flexible latter part of FY 2022, the SBA focused on improving the
processes and mechanisms. This strategy produces measurable collections processes for the anticipated repayments.
results, such as a 67 percent increase in the SBA’s FISMA
maturity rating over a multiyear period (1.8/5 in FY 2018 to The SBA continued to build on incremental improvement
3.0/5 in FY 2021). In FY 2022, the Agency saw a decrease projects designed to modernize the financial management
in its overall FISMA maturity rating to 2.58. There were system environment, improve financial system controls, reduce
multiple factors for this decline, the most significant being the sustainment costs, provide additional functionality for external
change in evaluation criterion levied on agencies across the lending partners, and improve system reliability. In addition,
Federal Government, with little or no time to prepare before the Agency has worked closely with the Quality Service
18 The Federal Financial Management Improvement Act of 1996 promotes more effective federal financial management by ensuring that financial management systems provide
accurate, reliable, and timely financial management information to the government’s managers. Compliance with the FFMIA provides the basis for the continuing use of
reliable financial management information by program managers, the President, Congress, and the public.
26 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Management Office (QSMO) for Financial Management
at the U.S. Treasury as they establish a marketplace for
financial systems to be utilized by agencies for modernization
efforts. The SBA also worked with the QSMO for Grants
Management at the U.S. Department of Health and Human
Services (HHS) to integrate the SBA’s financial system with
the HHS Grant Solutions system. These efforts align with the
goal stated in OMB Memorandum M-19-16 to effectively
and efficiently deliver centralized mission support functions
for agencies.
The SBA continued to take steps to enhance its financial
system controls over lending programs and improve
accessibility to common information, financial and budget
management, and financial reporting. The SBA’s tightly
integrated financial systems allow the Agency to respond
quickly to both internal and external financial information
inquiries and requirements. The SBA’s Chief Data Officer
supported the program offices with leveraging financial data
and utilizing data analytics to meet the goals of the agency’s
Fraud Risk Management action plan.
The Office of Performance, Planning, and the Chief Financial
Officer and the Office of Capital Access oversee the following
three core financial management systems:
• Oracle Federal Financials —This system, the most current
release in its implementation of the Joint Administrative
Accounting Management System (JAAMS), supports the
SBA’s funding and expenditure of administrative funds.
• Loan System — This SBA-built system supports the
lifecycle of loan guarantee processing, loan program funds
control, management and accounting for loan servicing,
and loan-related expenses.
• Financial Management System — This SBA-built system
consolidates administrative and loan activity, manages
cash and control funds, and supports financial reporting.
Management’s Discussion and Analysis (Unaudited) 27
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Management Assurances: FMFIA and FFMIA Assurance Statement for FY 2022
The Small Business Administration continued to strengthen its internal controls over core and COVID-related programs
and operations during FY 2022. Creating and sustaining a culture of responsibility and accountability while eliminating and
preventing waste, fraud, and abuse is critical to meeting our mission at the SBA. While the SBA has advanced a strong framework
to achieve this end, its independent auditor issued a disclaimed opinion on the Agency’s FY 2022 Consolidated Balance Sheet
and reported material weaknesses in internal controls. Although the SBA believes its efforts to develop and implement controls in
FY 2022 for its COVID-related programs have remediated material weaknesses identified from the FY 2021 audit, the SBA will
continue to work closely with the Office of the Inspector General and its auditor to further resolve findings next year. Further, the
SBA has provided responses outlining proposed corrective actions for remediation of identified deficiencies to the auditor.
The SBA’s management team manages risks and maintains effective internal controls and financial management systems to meet
the objectives of Sections 2 and 4 of the Federal Managers Financial Integrity Act (FMFIA). The SBA conducted its assessment
of risk and internal controls in accordance with OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk
Management and Internal Control. SBA managers issued assertions to me as to the status of the FY 2022 internal controls in their
areas of responsibility. These assertions were supported by internal testing, checklists, and other management reviews.
FMFIA section 2 requires Agency heads to annually submit to the President and Congress (i) a statement on whether there is
reasonable assurance that the Agency’s controls are achieving their intended objectives and (ii) a report on material weaknesses in
the Agency’s controls. Based on the results of the Agency managers’ assessments, I can provide modified assurance over the internal
controls over operations, reporting, and compliance with applicable laws and regulations, as of September 30, 2022, as the internal
controls over operations, reporting, and compliance with applicable laws and regulations operated effectively except for certain
controls noted below. The SBA developed and implemented controls to remedy the material weaknesses identified in the FY 2021
audit, but the material weaknesses remain because of the timing of SBA’s corrective action plan implementation which did not
cover the entire FY for 2022. The FY 2022 audit identified material weaknesses in the following areas:
• Controls over Paycheck Protection Program (PPP) Loan Guarantees Need Improvement
• Controls over COVID-19 Economic Injury Disaster Loans (EIDLs) and Grants Need Improvement
• Controls over the Subsidy Reestimate Need Improvement
• Controls over the Evaluation of Service Organizations Need Improvement
• Controls over Monitoring and Accounting of Restaurant Revitalization and Shuttered Venues Operators Grant Programs
Need Improvement
• Entity Level Controls Need Improvement
In addition, FMFIA section 4 requires agencies to report on whether the Agency’s financial management systems comply with
government-wide requirements. The SBA evaluated its financial management system; however, the auditor noted noncompliance
with Federal Financial Systems Requirements and Federal Accounting Standards. As a result of this audit assessment, the Agency’s
financial management systems do not conform to the principles, standards, and related requirements prescribed by Section 4 of
FMFIA; therefore, the SBA provides a modified assurance.
The Federal Financial Management Improvement Act (FFMIA) requires federal agencies to implement and maintain financial
management systems that substantially comply with federal financial management systems requirements, federal accounting
standards, and the United States Standard General Ledger. The SBA evaluated its financial management systems to determine
conformance; however, the auditor identified that it does not comply with Federal Financial Systems Requirements and Federal
Accounting Standards. Based on the FFMIA criteria and audit report, the SBA is providing a modified assurance that its financial
management systems substantially comply with FFMIA for FY 2022.
28 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
The SBA remains committed to ensuring it achieves its mission by supporting critical programs with strong controls and
accountability. The agency is working diligently to evaluate identified material weaknesses and non-conformances to make further
adjustments necessary to bring its programs into compliance.
Isabella Casillas Guzman
Administrator
November 15, 2022
Management’s Discussion and Analysis (Unaudited) 29
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Summary of Material Weaknesses
1. Controls over Paycheck Protection Program (PPP) 4. Controls over the Evaluation of Service Organizations
Loan Guarantees Need Improvement – The auditor Need Improvement – The auditor identified deficiencies
identified deficiencies in the PPP loan forgiveness review, in the SBA obtaining reasonable assurance on the operating
loan reporting, and purchases process. Specifically, the effectiveness of internal controls in the service organization’s
auditor identified deficiencies in: (a) the design and control environment relevant to the processing of the
implementation of controls to ensure PPP loan guarantees SBA’s COVID EIDL transactions related to (a) Service
were completely and accurately reviewed (b) controls organizations used for COVID-19 EIDLs and Grants
were designed and implemented to ensure the status of and (b) Service Organizations Used for Loan Guarantee
PPP loan guarantees were complete and accurate, and Programs. Specifically, SBA did not provide evidence of
(c) a comprehensive loan process for PPP purchases. The adequate monitoring activities performed over the relevant
SBA continues to implement a Corrective Action Plan internal control environment at Rapid Finance, such as
(CAP) that includes the implementation of the Paycheck obtaining and reviewing an assurance report. In addition,
Protection Program Loan Review Plan with a detailed management did not provide evidence as to whether there
review process to ensure the PPP Loans are accurately are adequate user entity controls designed, implemented,
designed, implemented, and reported. and operating effectively that complement Rapid Finance’s
controls. Additionally, SBA was unable to provide evidence
2. Controls over COVID-19 Economic Injury Disaster of adequate monitoring activities performed over the
Loans (EIDLs) and Grants Need Improvement – relevant internal control of Summit platform’s control
The auditor identified deficiencies in the design and environment, such as obtaining and reviewing an assurance
implementation of controls related to COVID-19 EIDL. report. In addition, management did not provide evidence
Specifically, the auditor determined the SBA did not as to whether there are adequate user entity controls
design and implement adequate controls to ensure the designed, implemented, and operating effectively that
SBA provided loans to eligible borrowers and accurately complement Summit Platform controls. SBA will develop
recorded. The SBA will ensure procedures for the COVID a System and Organization Controls (SOC) policy to
EIDL servicing incorporate a comprehensive review process address SOC complementary design controls, exception
that includes how it identified, tracked, resolved, loans reporting, and impact analysis. The policy will include the
and funds that are returned to the SBA are managed. organizations required to provide SOC reports.
In addition, the SBA will conduct an internal control
assessment to determine the controls in place are properly 5. Controls over Accounting and Monitoring of Restaurant
designed and operating effectively. Revitalization (RRF) and Shuttered Venues Operators
Grant (SVOG) Programs Need Improvement – The
3. Controls over the Subsidy Reestimate Need auditor determined that SBA did not ensure it designed
Improvement – The auditor identified deficiencies in the and implemented adequate controls to ensure that it
design and implementation of controls over the review approved and dispersed RRF and SVOG awards to eligible
of the data inputs used in the (a) PPP Reestimate and borrowers in conformance with the related legislation
(b) Disaster Reestimate models. The SBA will continue and program terms. The SBA is reviewing RRF awards
to implement a Corrective Action Plan (CAP) that will to confirm eligibility and use of funds compliance. This
include a repeatable 1502 impact analysis that considers the will include all RRF Awards with a flagged PPP loan.
expected impacts of 1502 reports. For Disaster Reestimate, The SBA will continue to send email reminders to RRF
the SBA will further consider any adjustments needed as Award recipients to ensure they are aware of the mandatory
a result of additional information available for the year- reporting requirements. The SBA will determine the
end reestimate calculation. The SBA will document any appropriate plan for recovering the funds from recipients
adjustments to the methodology in updated Disaster who did not report their use of RRF funds or from those
reestimate Model Overview and Disaster and COVID deemed ineligible.
EIDL Assumption Development memos.
30 Management’s Discussion and Analysis (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
6. Entity Level Controls Need Improvement – The auditor
determined the SBA did not adequately maintain its entity
level controls to ensure reliable and accurate financial
reporting is produced. The auditor identified deficiencies
related to (a) risk assessments and (b) monitoring.
Specifically, the SBA did not design and implement an
effective risk assessment and monitoring process. In
FY2023, the SBA will develop and implement a plan
to assess high risk programs. Additionally, the SBA will
continue to perform a significant programs identification
analysis quarterly for the purpose of identifying, early in
the fiscal year, programs that might prove significant to
the financial statements at year-end. The SBA will engage
and communicate with the program offices early to assess,
monitor, and address identified risks and associated controls
and the effects on financial reporting and compliance with
relevant laws and regulations.
Management’s Discussion and Analysis (Unaudited) 31
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
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32 Management’s Discussion and Analysis (Unaudited)
Financial Reporting Section 2
(Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
MESSAGE FROM THE CHIEF FINANCIAL OFFICER
November 15, 2022
I am pleased to issue the SBA’s FY 2022 Agency Financial Report as of
September 30, 2022. This report presents the Agency’s financial results in
accordance with U.S. Office of Management and Budget guidance, and the
financial statements have been developed within Generally Accepted Accounting
Principles.
In FY 2022, the SBA continued to respond to the COVID-19 pandemic and
implement stimulus legislation to mitigate its impact. The pandemic led to a
significant federal response that continued this year. The ongoing execution of
CARES Act programs, in addition to programs implemented under the auspices
of the Economic Aid Act and the American Rescue Plan Act, were essential in
saving millions of jobs and helping small businesses stay open. In alignment with the SBA’s mission statement
and goals to facilitate the vitality of small businesses and strengthen the economic recovery of communities after
disasters, the Agency has issued its FY 2022–2026 Strategic Plan to further the Administration’s vision to help
all entrepreneurs achieve their dreams.
The SBA continued to focus on protecting the economy while strengthening controls to prevent fraud,
waste, and abuse. During FY 2022, the Agency implemented the Fraud Risk Management Board (FRMB), a
governing body that serves as the SBA’s anti-fraud entity. The FRMB has made significant progress through
the performance of fraud risk assessments of key programs and the development of a fraud risk management
strategy that will guide the maturity of the Agency’s fraud risk management program. In addition, the Agency
has documented process for new programs and implemented new controls to prevent fraud and strengthen the
reliability of the values presented in the Agency’s financial statements. The Agency understands implementation
and oversight of these significant efforts are crucial to ensuring taxpayer dollars are appropriately awarded.
The SBA continues to work towards improving its audit outcomes through collaborative partnerships across
the Agency along with a forward leaning strategy that prioritizes the most critical corrective action needs and
optimizes resources.
I look forward to supporting the mission of the SBA and sharing those achievements next year. I also thank the
dedicated SBA team that achieved these great successes and developed the FY 2022 Agency Financial Report.
Sincerely,
Kate Aaby
Associate Administrator for Performance, Planning, and the Chief Financial Officer
34 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
INSPECTOR GENERAL’S AUDIT REPORT
Office of Inspector General
U.S. Small Business Administration
MEMORANDUM
DATE: November 15, 2022
TO: Isabella Casillas Guzman
Administrator
FROM: Hannibal “Mike” Ware
Inspector General
SUBJECT: Independent Auditors’ Report on SBA’s Fiscal Year 2022 Financial
Statements (Report 23-02)
I am pleased to present the attached independent auditors’ report on the U.S. Small
Business Administration’s (SBA) financial statements for fiscal year (FY) 2022, as required
annually by the Chief Financial Officers Act of 1990, as amended.
We contracted with the independent certified public accounting firm KPMG LLP to conduct
an audit of SBA’s consolidated balance sheets as of September 30, 2022 and 2021, and the
related notes to these statements. Our contract with KPMG required that the audit be
performed in accordance with auditing standards generally accepted in the United States of
America, Government Auditing Standards issued by the Comptroller General of the United
States, and Office of Management and Budget (OMB) Bulletin No. 22-01, Audit
Requirements for Federal Financial Statements.
KPMG’s responsibility was to express an opinion on the consolidated balance sheets based
on their audit. KPMG was not engaged to audit the consolidated statements of net cost and
changes in net position, and combined statements of budgetary resources for the years
ended September 30, 2022 and 2021, and the related notes to these statements.
In the audit, KPMG reported significant matters for which they were unable to obtain
sufficient and appropriate audit evidence to provide a basis for an audit opinion on SBA’s
balance sheet as of September 30, 2022. Accordingly, KPMG issued a disclaimer of opinion
on the consolidated balance sheets as of September 30, 2022 and 2021.
The basis for the disclaimer was that due to inadequate processes and controls, SBA was
unable to provide adequate evidential matter in support of a significant number of
transactions and account balances related to the Paycheck Protection Program, Economic
Injury Disaster Loan program, the Restaurant Revitalization Fund, and Shuttered Venue
Operators Grant program.
As a result, KPMG was unable to determine whether any adjustments might have been
necessary with respect to the following:
409 3rd Street SW, Washington, DC 20416 • phone (202)205-6586 • fax 202-205-7382
Financial Reporting (Unaudited) 35
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
• Credit Program Receivables and Related Foreclosed Property, Net
• Other than Intragovernmental Advances and Prepayments
• Downward Reestimate Payable to Treasury
• Loan Guarantee Liabilities
For the period ended September 30, 2022, KPMG identified six material weaknesses and
two significant deficiencies in internal control over financial reporting. Appendixes I and II
of this report describe details of KPMG’s conclusions about the material weaknesses and
significant deficiencies. Appendix III describes instances of noncompliance with applicable
laws or other matters required to be reported under Government Auditing Standards or
OMB Bulletin No. 22-01.
In connection with the contract, we reviewed KPMG’s report and related documentation
and inquired of its representatives. Our oversight protocols included evaluation of major
work products, attendance at critical meetings, review of significant findings and
examination of related evidential matter. Our review, as differentiated from an audit of the
financial statements in accordance with U.S. generally accepted government auditing
standards, was not intended to enable us to express—and we do not express—opinions on
SBA’s financial statements or internal control over financial reporting or conclusions on
SBA’s compliance with applicable laws and other matters. Our review disclosed no
instances where KPMG did not comply in all material respects with U.S. generally accepted
government auditing standards. KPMG is responsible for the attached auditors’ report
dated November 15, 2022, and the conclusions expressed. However, OIG provides negative
assurance of this audit.
We provided a draft of KPMG’s report to SBA’s Chief Financial Officer, who concurred with
its findings and recommendations and agreed to implement the recommendations. SBA
remains committed to excellence in financial management and looks forward to furthering
progress in the coming year. The Chief Financial Officer’s response is included in Appendix
IV.
We appreciate the cooperation and assistance of SBA and KPMG during the audit. Should
you or your staff have any questions, please contact me or Andrea Deadwyler, Assistant
Inspector General for Audits, at (202) 205-6586.
cc: Arthur Plews, Chief of Staff
Peggy Delinois Hamilton, Special Counsel for Enterprise Risk
Katherine Aaby, Associate Administrator, Office of Performance, Planning,
and the Chief Financial Officer
Patrick Kelly, Associate Administrator, Office of Capital Access
John Miller, Deputy Associate Administrator, Office of Capital Access
Erica Gaddy, Deputy Chief Financial Officer, Office of Performance, Planning, and the
Chief Financial Officer
Joshua Barnes, Recovery Director, Office of Disaster Assistance
Therese Meers, General Counsel
Michael Simmons, Attorney Advisor, Office of General Counsel
Tonia Butler, Director, Office of Internal Controls
Attachment
36 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
INDEPENDENT AUDITORS’ REPORT ON FY 2022
FINANCIAL STATEMENTS
KPMG LLP
Suite 12000
1801 K Street, NW
Washington, DC 20006
Independent Auditors’ Report
Inspector General
U.S. Small Business Administration
Administrator
U.S. Small Business Administration
Report on the Audit of the Consolidated Financial Statements
Disclaimer of Opinion
We were engaged to audit the consolidated balance sheets of the United States (U.S.) Small Business
Administration (SBA) as of September 30, 2022 and 2021, and the related notes to the consolidated balance
sheets (the consolidated financial statements).
We do not express an opinion on the accompanying consolidated financial statements of the SBA. Because of
the significance of the matter described in the Basis for Disclaimer of Opinion section of our report, we have not
been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the
consolidated financial statements.
Basis for Disclaimer of Opinion
During fiscal year 2022, SBA continued to execute provisions of the Paycheck Protection Program and
Economic Injury Disaster Loan programs, and the Restaurant Revitalization Fund and Shuttered Venues
Operators Grant programs that were authorized by the Coronavirus Aid, Relief, and Economic Security Act of
2020 and related legislations. SBA was unable to provide adequate evidential matter in support of a significant
number of transactions and account balances related to these programs due to inadequate processes and
controls. As a result of this matter, we were unable to determine whether any adjustments might have been
necessary related to Credit Program Receivables and Related Foreclosed Property, Net; Other than
Intragovernmental Advances and Prepayments; Downward Reestimate Payable to Treasury; and Loan
Guarantee Liabilities.
Other Matter – Report on Certain Fiscal Year 2022 and 2021 Information
We were not engaged to audit the consolidated statements of net cost and changes in net position, and
combined statements of budgetary resources for the years ended September 30, 2022 and 2021, and the
related notes to these statements. Accordingly, we express no opinion on them.
Other Matter - Interactive Data
Management has elected to reference to information on websites or other forms of interactive data outside the
Agency Financial Report to provide additional information for the users of its consolidated financial statements.
Such information is not a required part of the consolidated financial statements or supplementary information
required by the Federal Accounting Standards Advisory Board. The information on these websites or the other
interactive data has not been subjected to any of our auditing procedures, and accordingly we do not express
an opinion or provide any assurance on it.
KPMG LLP, a Delaware limited liability partnership and a member firm of
the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee.
Financial Reporting (Unaudited) 37
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with U.S. generally accepted accounting principles, and for the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our responsibility is to conduct an audit of the SBA’s consolidated financial statements in accordance with
auditing standards generally accepted in the United States of America (GAAS), Government Auditing
Standards, and Office of Management and Budget (OMB) Bulletin No. 22-01, Audit Requirements for Federal
Financial Statements, and to issue an auditors’ report. However, because of the matter described in the Basis
for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence
to provide a basis for an audit opinion on these consolidated financial statements.
We are required to be independent of the SBA and to meet our other ethical responsibilities, in accordance with
the relevant ethical requirements relating to our audit.
Required Supplementary Information
U.S. generally accepted accounting principles require that the information in the Management’s Discussion and
Analysis and Required Supplementary Information sections be presented to supplement the basic consolidated
financial statements. Such information is the responsibility of management and, although not a part of the basic
consolidated financial statements, is required by the Federal Accounting Standards Advisory Board who
considers it to be an essential part of financial reporting for placing the basic consolidated financial statements
in an appropriate operational, economic, or historical context. We were unable to apply certain limited
procedures to the required supplementary information in accordance with GAAS because of the significance of
the matter described in the Basis for Disclaimer of Opinion paragraph. We do not express an opinion or provide
any assurance on the information.
Report on Internal Control Over Financial Reporting
In connection with our engagement to audit the SBA’s consolidated balance sheet as of September 30, 2022,
we considered the SBA’s internal control over financial reporting (internal control) as a basis for designing audit
procedures that are appropriate in the circumstances for the purpose of expressing an opinion on the
consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
SBA’s internal control. Accordingly, we do not express an opinion on the effectiveness of the SBA’s internal
control. We did not test all internal controls relevant to operating objectives as broadly defined by the Federal
Managers’ Financial Integrity Act of 1982.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was
not designed to identify all deficiencies in internal control that might be material weaknesses or significant
deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified.
However, as described in the accompanying Appendices I and II, we identified certain deficiencies in internal
control that we consider to be material weaknesses and significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial
statements will not be prevented, or detected and corrected, on a timely basis. We consider the deficiencies
described in Appendix I to be material weaknesses.
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe
than a material weakness, yet important enough to merit attention by those charged with governance. We
consider the deficiencies described in Appendix II to be significant deficiencies.
Report on Compliance and Other Matters
In connection with our engagement to audit the SBA’s consolidated balance sheet as of September 30, 2022,
we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements, noncompliance with which could have a direct and material effect on the consolidated balance
sheet. However, providing an opinion on compliance with those provisions was not an objective of our
engagement, and accordingly, we do not express such an opinion. The results of our tests disclosed instances
of noncompliance or other matters that are required to be reported under Government Auditing Standards or
OMB Bulletin No. 22-01, and which are described in Appendix III.
We also performed tests of the SBA’s compliance with certain provisions referred to in Section 803(a) of the
Federal Financial Management Improvement Act of 1996 (FFMIA). Providing an opinion on compliance with
FFMIA was not an objective of our engagement, and accordingly, we do not express such an opinion. The
results of our tests disclosed instances in which the SBA’s financial management systems did not substantially
comply with the (1) Federal financial management systems requirements, and (2) applicable Federal
accounting standards. The results of our tests disclosed no instances in which the SBA’s financial management
systems did not substantially comply with the United States Government Standard General Ledger at the
transaction level.
Additionally, if the scope of our work had been sufficient to enable us to express an opinion on the consolidated
financial statements, other instances of noncompliance or other matters may have been identified and reported
herein.
SBA’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the SBA's response to
the findings identified in our engagement and described in Appendix IV. The SBA’s response was not subjected
to the other auditing procedures applied in the engagement to audit the consolidated financial statements and,
accordingly, we express no opinion on the response.
Purpose of the Reporting Required by Government Auditing Standards
The purpose of the communication described in the Report on Internal Control Over Financial Reporting and
the Report on Compliance and Other Matters sections is solely to describe the scope of our testing of internal
control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
SBA’s internal control or compliance. Accordingly, this communication is not suitable for any other purpose.
Washington, DC
November 15, 2022
Financial Reporting (Unaudited) 39
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Appendix I
U.S. Small Business Administration
Material Weaknesses
The following deficiencies are considered to be material weaknesses in internal controls over financial
reporting.
1. Controls over Paycheck Protection Program (PPP) Loan Guarantees Need Improvement
2. Controls over COVID-19 Economic Injury Disaster Loans (EIDLs) Need Improvement
3. Controls over the Subsidy Reestimate Need Improvement
4. Controls over the Evaluation of Service Organizations Need Improvement
5. Controls over Accounting and Monitoring of Restaurant Revitalization Fund (RRF) and
Shuttered Venues Operators Grant (SVOG) Programs Need Improvement
6. Entity Level Controls Need Improvement
For purposes of presentation and as described below, material weaknesses (1) and (4) have multiple
components. Material weakness (1) Controls over PPP Loan Guarantees Need Improvement, is
comprised of: (A) Reporting of PPP Loan Guarantees, (B) Forgiveness Review of PPP Loan Guarantees,
and (C) Purchases of PPP Loan Guarantees. Material weakness (4) Controls over the Evaluation of
Service Organizations Need Improvement, is comprised of: (A) Service Organization Used for COVID-
19 EIDLs; (B) Service Organizations Used for Loan Guarantee Programs; and (C) Service
Organization Used for the SVOG Program.
During fiscal year 2022, SBA continued to implement provisions of the PPP, COVID-19 EIDLs, RRF, and
SVOG programs. These programs were authorized and funded by the Coronavirus Aid, Relief, and
Economic Security Act of 2020, the Paycheck Protection Program and Health Care Enhancement Act,
the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, and the American
Rescue Plan Act. The referenced laws from this point forward are collectively referred to as the
CARES Act and related legislation. The CARES Act and related legislation were passed by Congress to
provide emergency assistance in response to the extensive effects of the public health and economic
crisis arising from the Coronavirus Disease 2019 (COVID-19) pandemic. In fiscal year 2022, SBA
processed forgiveness and purchase payments for the 2020 and 2021 cohort of PPP loan guarantees,
and continued to issue additional COVID-19 EIDLs, and RRF and SVOG program awards.
1. Controls over PPP Loan Guarantees Need Improvement
A. Reporting of PPP Loan Guarantees
Management did not adequately design and implement controls to determine that the status of PPP
loan guarantees was complete and accurate to enable the fair presentation of the Loan Guarantee
Liabilities and related elements in the consolidated financial statements. Specifically, management
did not have adequate processes and controls in place to review the status of PPP loan guarantees
where lender loan status reports had not been submitted, had been submitted incorrectly, or were
not processed.
For fiscal year 2022, the average number of monthly, lender loan status reports for the 7(a) and PPP
loan guarantee programs that had not been submitted or not processed was 16 percent and 9
percent, respectively, of the average active loans. Additionally, we tested a sample of 135 PPP loan
40 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
guarantees and noted variances for 39 sampled items with the accuracy of the outstanding principal
balance recorded by SBA and the confirmation response received from the respective lenders.
The deficiencies were caused by insufficient monitoring controls over the follow-up process performed for
lender loan status reports that were not submitted, submitted incorrectly, or not processed and a lack of
accountability over the lenders who do not submit loan status reports timely or correctly.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• Government Accountability Office’s (GAO’s) Standards for Internal Control in the Federal
Government (Green Book), Principle 10, Design Control Activities; and Principle 16, Perform
Monitoring Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
The deficiencies noted above may result in material misstatements to the Loan Guarantee Liabilities,
Downward Reestimate Payable to Treasury line items and related elements in the consolidated
financial statements.
Recommendations – Reporting of PPP Loan Guarantees
We recommend the Administrator coordinate with the Associate Administrator for the Office of
Capital Access to:
1. Design and implement controls to ensure the population of nonreporting loan status reports or
loan status reports with errors is complete and accurate.
2. Determine and enforce policies and controls to hold lenders accountable for submitting loan
status reports timely and correctly.
3. Design and implement controls to monitor incomplete or inaccurate PPP lender loan status
reports on an ongoing basis, including the review and resolution of loan status reports with
errors.
We also recommend the Administrator coordinate with the Chief Financial Officer to:
4. Design and implement controls to assess the accounting considerations, based on the results of
the lender loan status reports review process for PPP loan guarantees, including the impact on
the reestimate and balances presented in the consolidated financial statements, and record any
necessary adjustments.
B. Forgiveness Review of PPP Loan Guarantees
Management did not adequately design and implement controls to ensure PPP loan guarantees
were completely and accurately reviewed to address their respective eligibility flags and ultimately
determine their eligibility for forgiveness. Specifically, management did not demonstrate controls
over the review and validation of identified flags from the case management system. Additionally,
management did not demonstrate effective monitoring controls over the results from the key
contractor involved in the review process. The loan guarantees determined by the contractor as ‘No
Further Action’ were not subsequently reviewed by SBA. During fiscal year 2022, $167 billion of loan
forgiveness payments were processed for loans determined by the contractor as ‘No Further Action’.
In addition, SBA’s process for the 2021 cohort of PPP loan guarantees did not identify and resolve a
complete population of potential noncompliance flags. More specifically, SBA did not ensure the
2021 cohort of PPP loan guarantees met select program eligibility requirements by verifying with all
Financial Reporting (Unaudited) 41
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
validation checks available within its case management system. Instead, only a limited number of
checks were performed. Furthermore, for the limited flags that were identified, SBA did not have a
sufficient monitoring process implemented to ensure that lenders followed established procedures
and adequately addressed the eligibility concerns raised for the limited number of flags identified by
the case management system’s automated screening.
The deficiencies were caused by the lack of a policy in place to adequately review outputs of the case
management system, insufficient design and implementation of monitoring controls over the contractor’s
loan review process, and insufficient design of the loan forgiveness review process prior to the processing
of forgiveness payments.
The following criteria were considered with respect to the matter described in the preceding paragraphs:
• GAO’s Green Book, Principle 3, Establish Structure, Responsibility, and Authority; Principle 6, Define
Objectives and Risk Tolerances; Principle 7, Identify, Analyze, and Respond to Risks; Principle 10,
Design Control Activities; and Principle 16, Perform Monitoring Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
The deficiencies noted above may result in a material misstatement to the Loan Guarantee Liabilities
and Downward Reestimate Payable to Treasury line items, and the related elements in the
consolidated financial statements.
Recommendations – Forgiveness Review of PPP Loan Guarantees
We recommend the Administrator coordinate with the Associate Administrator for the Office of
Capital Access to:
5. Develop and enforce a policy and controls that require the adequate review, validation, and
monitoring of the outputs of the case management system and maintenance of documentation
evidencing the review.
6. Develop and enforce a policy and controls to monitor the results of the contractor’s loan review
process including a review of loans with a ‘No Further Action’ determination and maintenance of
documentation evidencing the review.
7. Perform a thorough review of the 2021 cohort of PPP loan guarantees. Based on the review,
determine the impact on the outstanding loan guarantee and the eligibility for forgiveness of
loans that are determined to not be in conformance with the CARES Act and related legislation
and program requirements.
8. Develop and document an effective funds recovery plan and controls to ensure funds disbursed
to ineligible recipients as part of the forgiveness review process are recovered and reported
accurately in a timely manner.
C. Purchases of PPP Loan Guarantees
Management did not adequately design and implement controls to ensure purchase requests of PPP
loan guarantees were reviewed to verify that requesting lenders met the origination requirements
prior to approving and disbursing the loan. There was not an approved, documented, comprehensive
process implemented prior to purchase transactions being processed.
In addition, SBA performs a manual review of purchase requests of PPP loan guarantees with a
subset of flags while all other requests are automatically approved and processed. There was not an
adequate review of the determination of the subset of flags requiring manual review as 16 additional
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
flags were added at the end of the fiscal year after purchase requests for PPP loan guarantees with
those flags had already been processed.
Also, when determining which subset of flags would require a manual review for purchase requests,
SBA determined the flags that may indicate lenders did not meet the origination requirements prior
to approving and disbursing the PPP loan. However, SBA did not consider all guidance issued to
lenders when determining the subset of flags that would require a manual purchase review and
indicate that lenders did not meet origination requirements. Specifically, SBA did not consider the
procedural notices issued to lenders to address the flags identified prior to approving the 2021
cohort of PPP loan guarantees.
The PPP loan guarantee purchases review process also relies on the identified flags from the case
management system. However, management did not have adequate controls to ensure the
completeness and accuracy of flags identified and resolved.
The deficiencies were caused by an inadequate risk assessment performed to ensure sufficient controls
were designed and implemented for the review of PPP loan guarantee purchase transactions and a lack
of policy and controls that require the adequate training, onboarding, and monitoring of lenders executing
their responsibilities in the PPP loan origination process.
The following criteria were considered with respect to the matter described in the preceding paragraphs:
• GAO’s Green Book, Principle 3, Establish Structure, Responsibility, and Authority; Principle 6, Define
Objectives and Risk Tolerances; Principle 7, Identify, Analyze, and Respond to Risks; Principle 10,
Design Control Activities; and Principle 16, Perform Monitoring Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
The deficiencies noted above may result in a material misstatement to the Loan Guarantee Liabilities
and Downward Reestimate Payable to Treasury line items, and the related elements in the
consolidated financial statements.
Recommendations – Purchases of PPP Loan Guarantees
We recommend the Administrator coordinate with the Associate Administrator for the Office of
Capital Access to:
9. Perform a thorough and complete analysis of all requirements communicated to lenders for the
PPP program and determine how to evaluate whether lenders met the requirements prior to
disbursing a PPP loan. The analysis should include evidence to support the adequacy of SBA’s
review process when determining which purchase requests will require additional review.
10. Develop and document an effective funds recovery plan and controls to ensure funds disbursed
to ineligible recipients as part of the purchases review process are recovered and reported
accurately in a timely manner.
2. Controls over COVID-19 EIDLs Need Improvement
Management did not adequately design and implement controls to ensure that approved COVID-19
EIDLs were provided to eligible borrowers and accurately recorded. Specifically, SBA approved and
disbursed COVID-19 EIDLs in the following instances:
• More than one COVID-19 EIDL was approved and disbursed to the same borrower;
• COVID-19 EIDLs were issued to borrowers with fraudulent tax identification numbers;
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
• COVID-19 EIDLs were issued that management flagged to be potentially fraudulent, a victim of
identity theft, or where the borrower or the bank was involved in an Office of Inspector General
investigation; and
• COVID-19 EIDLs with eligibility concerns were issued to borrowers.
As of September 30, 2022, there were a total of 182,298 approved and disbursed COVID-19 EIDLs (with
a total value of $15,618,781,808) flagged within the loan repository system that were potentially issued to
ineligible borrowers. The loans were flagged for one or more of 14 different codes. The codes
corresponding to COVID-19 EIDLs are: Research Duplicate 9 Digit Tax Identification Issue; Potential
Fraud; EIDL Criminal Record; EIDL Bankruptcy; Treasury – Do Not Pay - Death Sources; Treasury - Do
Not Pay – SAM; Treasury – Do Not Pay - TOP Education; Confirmed Fraud; Fraud; Potential Identity
Theft; Confirmed Identity Theft; Manual Review Potential Fraud; Original Loan was Correct but Identity
Theft on the Loan Modification; and DCI Awaiting Legal Review.
Also, management did not implement adequate procedures and controls to address certain alerts within
the system. Specifically, the system’s Reference Guide that is used by loan officers during the approval
process did not have adequate procedures to address the following alerts: Public records search did not
find business; Bank account or routing number could not be verified; Bank account could not be
confirmed to be associated with the business; Deferred student loans; Foreclosure; and Outstanding
lawsuit.
According to management, a review plan was implemented and ongoing to address the COVID-19 EIDLs
identified with eligibility concerns and indicated in the loan repository system by hold codes. However,
management was not able to provide sufficient evidence of a consistent process documenting how the
COVID-19 EIDLs with eligibility concerns were identified and resolved. This would include the specific
rules that were developed and applied for the COVID-19 EIDLs portfolio to identify and designate COVID-
19 EIDLs with hold codes that may indicate eligibility concerns, the approved rationale for why only those
rules were applied, and any testing or review performed on the implementation and application of the
rules.
The deficiencies were caused by an inadequate design and implementation of controls within the COVID-
19 EIDLs processing portal, a lack of effective procedures implemented to adequately train, onboard, and
monitor the performance of loan officers involved in the COVID-19 EIDLs origination process, and the
inadequate design and implementation of controls in the COVID-19 EIDLs loan review process to ensure
hold codes were appropriate, reviewed, and resolved consistently.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Principle 3, Establish Structure, Responsibility, and Authority; Principle 6, Define
Objectives and Risk Tolerances; Principle 7, Identify, Analyze, and Respond to Risks; and Principle
10, Design Control Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
The deficiencies noted above may result in a material misstatement of the Credit Program
Receivables and Related Foreclosed Property, Net and Downward Reestimate Payable to Treasury
line items, and related elements in the consolidated financial statements.
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Recommendations – Controls over COVID-19 EIDLs Need Improvement
We recommend the Administrator coordinate with the Associate Administrator for the Office of
Capital Access to:
11. Perform a thorough review of the COVID-19 EIDLs and determine which transactions were not in
conformance with the CARES Act and related legislation and provided to ineligible recipients.
12. Implement adequate controls over the loan review process to ensure that COVID -19 EIDLs
identified with eligibility concerns are complete and the specific eligibility concerns identified are
accurate.
13. Document a comprehensive process for the COVID-19 EIDLs review process, including how
loans with eligibility concerns are identified, tracked, and resolved.
14. Develop and document an effective funds recovery plan and controls to ensure funds disbursed
to ineligible recipients as part of the COVID-19 EIDLs review process are recovered and
reported accurately in a timely manner.
We also recommend the Administrator coordinate with the Chief Financial Officer to:
15. Assess the accounting considerations, based on the results of the review process for COVID-19
EIDLs, including the impact on the consolidated financial statements, and record any necessary
adjustments for transactions determined not to be in conformance with the CARES Act and
related legislation.
3. Controls over the Subsidy Reestimate Need Improvement
Management did not adequately design and implement controls over the review of the data inputs
used in the PPP subsidy reestimate. Specifically, management did not consider and document the
effects on the subsidy reestimate methodology regarding:
• PPP loan guarantees with lender loan status report errors that were not reviewed or processed to
update the outstanding loan principal balance. This includes lender loan status reports submitted
incorrectly, or did not process due to an error. As such, management did not have sufficient controls
to ensure the unpaid principal balance of loan guarantees within the portfolio, on which the reestimate
is performed, is complete and accurate.
• The results from the PPP loan forgiveness review process were used to develop a significant
assumption in the PPP reestimate model. However, there were not effective monitoring controls over
the performance of the PPP loan forgiveness review process. As such, management did not have
sufficient controls in place to ensure the completeness and accuracy of the data used to develop the
significant assumption.
• The forgiveness transactions processed by SBA during the year that were also used to develop
another significant assumption. The PPP loan forgiveness review process was not adequately
designed to ensure that forgiveness transactions processed were appropriate and in accordance with
the program terms. As such, management did not have sufficient controls in place to ensure the
completeness and accuracy of the data used to develop forgiveness related significant assumption.
• The impact that the PPP purchases review process may have on another assumption in the PPP
reestimate model. In particular, management did not adequately design and implement controls to
ensure the purchase requests for PPP loan guarantees were reviewed to verify that requesting
lenders met the origination requirements prior to approving and disbursing the loan. There was not an
approved, documented, comprehensive process implemented prior to purchase transactions being
Financial Reporting (Unaudited) 45
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
processed and changes made to the process at the end of the fiscal year were not communicated
and evaluated for impact on the reestimate model.
In addition, management did not adequately design and implement controls to ensure the
assumptions used in the subsidy reestimate for the COVID-19 EIDLs were commensurate with their
risks. Management is in process of reviewing the COVID-19 EIDLs portfolio to address eligibility concerns
on disbursed loans. This review was not completed at the time of the year-end reestimate. As such,
management does not have a reasonable basis to determine whether the assumptions applied are
appropriate to COVID-19 EIDLs in the portfolio based on their specific risk characteristics.
The deficiencies were caused by an inadequate entity wide control environment related to the design,
implementation, and operating effectiveness of controls related to the review of the loan portfolio at a
precision level necessary to ensure the data inputs used for the reestimate models are complete and
accurate. In addition, the deficiencies were caused by the inherent challenges with the implementation
and development of subsidy reestimate models for new programs that do not have a significant volume of
historical data or precedence.
The following criteria were considered with respect to the matter described in the preceding paragraphs:
• GAO’s Green Book, Principle 10, Design Control Activities; and Principle 13, Use Quality Information
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
The deficiencies noted above may result in a material misstatement to the Loan Gua rantee
Liabilities, Credit Program Receivables and Related Foreclosed Property (Net), and Downward
Reestimate Payable to Treasury line items, and the related elements in the consolidated financial
statements.
Recommendations – Controls over the Subsidy Reestimate Need Improvement
We recommend the Administrator coordinate with the Chief Financial Officer to:
16. Continue implementing controls to accumulate relevant, complete, and accurate data on which to
base the subsidy reestimate models for the PPP and COVID-19 EIDLs portfolios.
17. Design and implement adequate review and approval controls over the reestimate models for the
PPP and COVID-19 EIDLs portfolios by appropriate levels of management, and to coordinate
with relevant program offices to assess the integrity of relevant data inputs used in the
development of assumptions, and reasonableness for the selected assumptions used and the
resulting estimates.
4. Controls over the Evaluation of Service Organizations Need Improvement
A. Service Organization Used for COVID-19 EIDLs
Management did not obtain reasonable assurance on the operating effectiveness of internal controls
in the service organization’s control environment relevant to the processing of COVID -19 EIDLs
transactions. The service organization control environment includes the operation of the system
used for COVID-19 EIDLs processing and the application controls within the system. In addition, the
relevant control environment includes the data transmissions over the internet between the system
and various third-party organizations.
In addition, management did not provide evidence of adequate monitoring activities performed over
the relevant internal control environment at the service organization, such as obtaining and
reviewing an attestation report on the design, implementation, and operating effectiveness of
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controls at the service organization. Management also did not provide evidence whether adequate
user entity controls were designed, implemented, and operated effectively to complement the
service organization’s controls. Management’s assessment of internal controls over financial reporting is
not complete without the sufficient consideration of existing and non-existing controls at relevant service
organizations and the effectiveness of those controls.
The deficiencies were caused by management not holding the service organization accountable for the
assigned internal control responsibilities by obtaining reasonable assurance on the operating
effectiveness of internal controls in the service organization’s control environment (e.g., requiring a
service organization control (SOC) 1 Type 2 report for the control environment relevant to the
processing of COVID-19 EIDLs transactions).
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Section 4, Additional Considerations: Service Organizations; Principle 5, Enforce
Accountability; Principle 10, Design Control Activities; and Principle 16, Perform Monitoring Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
The deficiencies noted above prevented SBA from obtaining an understanding of relevant service
organization controls and any weaknesses that increase the risk of misstatements in the Credit
Program Receivables and Related Foreclosed Property (Net), and Downward Reestimate Payable
to Treasury line items, and related elements in the consolidated financial statements.
Recommendations – Service Organization Used for COVID-19 EIDLs
We recommend the Administrator coordinate with the Associate Administrator for the Office of
Capital Access to:
18. Continually evaluate the established policy for SOC 1 reports that requires new service
organizations to provide a SOC 1 report over the control environment that is relevant and
significant to the processing and recording of SBA’s transactions as it relates to COVID-19
EIDLs. If a SOC 1 report cannot be obtained, identify, and evaluate relevant controls at the
service organizations that have an impact on SBA’s internal controls over financial reporting.
19. Assess the risk posed by the service organization’s control environment and obtain sufficient
assurance over the operating effectiveness of relevant and significant controls to determine the
integrity of the COVID-19 EIDLs transactions processed on behalf of and recorded by SBA. If a
SOC 1 report is obtained for the relevant control environment at the service organization,
determine and document the following:
• SOC 1 report is sufficiently scoped to cover transaction processing and related control activities
performed by the service organization on behalf of SBA (e.g., that services, business applications
and other information technology, service organization departments and locations, control
objectives and activities, and other aspects of scope that are relevant to SBA’s internal controls
over financial reporting are included in the scope of SOC 1 reports).
• All exceptions noted in the SOC 1 report – not just those described in the independent service
auditor’s report – are evaluated to determine applicability to SBA’s internal controls over financial
reporting, the potential impact to SBA’s financial statements, and mitigating controls other
considerations made during their risk assessment.
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
• All complementary user entity controls described in the SOC 1 reports are evaluated using
current information and with consideration to their applicability to SBA’s internal controls over
financial reporting.
• Evaluation procedures performed to assess whether complementary user entity controls and
other SBA-performed controls were tested and found effective and, if they are not, the impact of
such deficiencies on SBA’s internal controls over financial reporting.
• All complementary subservice organization controls described in SOC 1 reports are evaluated to
determine whether they provided services and performed controls considered relevant to SBA’s
internal controls over financial reporting and, if relevant subservice organizations were identified,
an evaluation is performed to obtain an understanding of the subservice organization(s) and their
controls.
• SOC 1 reports cover the appropriate period or corresponding gap letters provide sufficient
coverage to assess impacts on SBA’s internal controls over financial reporting.
B. Service Organizations Used for Loan Guarantee Programs
Management did not obtain reasonable assurance on the operating effectiveness of internal controls
in multiple service organizations’ control environments relevant to the 7(a) loan guarantee program
fiscal transfer agent, the financial service providers for the 7(a) and 504 loan guarantee programs,
and the PPP forgiveness and purchases platform. With regards to the financial service providers for
the 7(a) and 504 loan guarantee programs, the relevant control environments include the facilitation,
maintenance, and reporting of the account balances for the respective secondary market programs.
With regards to the PPP forgiveness and purchases platform, the relevant control environment
includes the operation of the PPP loan forgiveness and PPP loan purchase modules, the data
transmissions over the internet between the relevant modules and SBA systems used in the
configured checks, the cloud-based infrastructure hosting provider, and the application controls
within the application intake platform.
In addition, management did not provide evidence of adequate monitoring activities performed over
the relevant internal control environments at the respective service organizations and subservice
organizations, such as obtaining and reviewing an attestation report on the design, implementation,
and operating effectiveness of controls at the service organization.
Management’s evaluation of SOC 1 reports obtained for the 7(a) loan guarantee program fiscal transfer
agent and the 504 loan guarantee program financial service provider were not sufficient or properly
documented to aid in management’s assessment of internal controls over financial reporting. Specifically,
management’s review of complementary user entity controls within the SOC 1 reports identified control
gaps or placed reliance on controls for which deficiencies were noted. Management’s assessment of
internal controls over financial reporting is not complete without the sufficient consideration of existing and
non-existing controls at relevant service organizations and the effectiveness of those controls.
Management did not hold the service organizations accountable for the assigned internal control
responsibilities by obtaining reasonable assurance on the operating effectiveness of internal controls in
the service organizations’ control environments (e.g., by requiring a SOC 1 Type 2 report for the control
environment relevant to the processing of SBA’s transactions).
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Section 4, Additional Considerations: Service Organizations; Principle 5, Enforce
Accountability; Principle 10, Design Control Activities; and Principle 16, Perform Monitoring Activities
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• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
The deficiencies noted above prevented SBA from obtaining an understanding of relevant service
organization controls and any weaknesses that increase the risk of misstatements in the Loan
Guarantee Liabilities line item and related elements in the consolidated financial statements.
Recommendations – Service Organizations Used for Loan Guarantee Programs
We recommend the Administrator coordinate with the Associate Administrator for the Office of
Capital Access to:
20. Continually evaluate the established policy for SOC 1 reports that requires new service
organizations to provide a SOC 1 report over the control environment that is relevant and
significant to the processing and recording of SBA’s transactions as it relates to loan guarantee
programs. If a SOC 1 report cannot be obtained, identify, and evaluate relevant controls at the
service organizations that have an impact on SBA’s internal controls over financial reporting.
21. Assess the risk posed by the service organizations’ control environments and obtain sufficient
assurance over the operating effectiveness of relevant and significant controls to determine the
integrity of loan guarantee program transactions processed on behalf of and recorded by SBA. If
a SOC 1 report is obtained for the relevant control environment at the service organization,
determine and document the following:
• SOC 1 report is sufficiently scoped to cover transaction processing and related control activities
performed by the service organization on behalf of SBA (e.g., that services, business applications
and other information technology, service organization departments and locations, control
objectives and activities, and other aspects of scope that are relevant to SBA’s internal controls
over financial reporting are included in the scope of SOC 1 reports).
• All exceptions noted in the SOC 1 report – not just those described in the independent service
auditor’s report – are evaluated to determine applicability to SBA’s internal controls over financial
reporting, the potential impact to SBA’s financial statements, and mitigating controls
considerations made during their risk assessment.
• All complementary user entity controls described in the SOC 1 reports are evaluated using
current information and with consideration to their applicability to SBA’s internal controls over
financial reporting.
• Evaluation procedures performed to assess whether complementary user entity controls and
other SBA-performed controls were tested and found effective and, if they are not, the impact of
such deficiencies on SBA’s internal controls over financial reporting.
• All complementary subservice organization controls described in SOC 1 reports are evaluated to
determine whether they provided services and performed controls considered relevant to SBA’s
internal controls over financial reporting and, if relevant subservice organizations were identified,
an evaluation is performed to obtain an understanding of the subservice organization(s) and their
controls.
• SOC 1 reports cover the appropriate period or corresponding gap letters provide sufficient
coverage to assess impacts on SBA’s internal controls over financial reporting.
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C. Service Organization Used for the SVOG Program
Management did not obtain reasonable assurance on the operating effectiveness of internal controls
in the service organization’s control environments relevant to the external cloud service provider
used for the SVOG platform in the processing of applications and monitoring the status of awards.
While a SOC 1 report was obtained for the service provider, management did not provide evidence
of adequate monitoring activities performed over the relevant internal control environments at the
respective subservice organizations identified in the report. In addition, management also did not
provide evidence whether adequate user entity controls were designed, implemented, and operated
effectively to complement the service organization’s controls. Finally, management did not provide
evidence of adequate evaluation of the control exceptions noted in the report and the impact to
SBA’s internal control over financial reporting. Management’s assessment of internal controls over
financial reporting is not complete without the sufficient consideration of existing and non-existing controls
at relevant service and subservice organizations and the effectiveness of those controls.
The deficiencies were caused by management not implementing effective monitoring of the effectiveness
of internal control over the assigned processes performed by relevant service organizations.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Section 4, Additional Considerations: Service Organizations; Principle 5, Enforce
Accountability; Principle 10, Design Control Activities; and Principle 16, Perform Monitoring Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
The deficiencies noted above prevented SBA from obtaining an understanding of relevant service
organization controls and any weaknesses that increase the risk of misstatements in the Other than
Intragovernmental Advances and Prepayments line item and related elements in the consolidated
financial statements.
Recommendations – Service Organizations Used for the SVOG Program
We recommend the Administrator coordinate with the Acting Chief Information Officer to:
22. Assess the risk posed by the service organizations’ control environments and obtain sufficient
assurance over the operating effectiveness of relevant and significant controls to determine the
integrity of SVOG program transactions processed on behalf of and recorded by SBA and
communicate the results to the relevant program offices. If a SOC 1 report is obtained for the
relevant control environment at the service organization, determine and document the following:
• SOC 1 report is sufficiently scoped to cover transaction processing and related control activities
performed by the service organization on behalf of SBA (e.g., that services, business applications
and other information technology, service organization departments and locations, control
objectives and activities, and other aspects of scope that are relevant to SBA’s internal controls
over financial reporting are included in the scope of SOC 1 reports).
• All exceptions noted in the SOC 1 report – not just those described in the independent service
auditor’s report – are evaluated to determine applicability to SBA’s internal controls over financial
reporting, the potential impact to SBA’s financial statements, and mitigating controls
considerations made during their risk assessment.
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• All complementary user entity controls described in the SOC 1 reports are evaluated using
current information and with consideration to their applicability to SBA’s internal controls over
financial reporting.
• Evaluation procedures performed to assess whether complementary user entity controls and
other SBA-performed controls were tested and found effective and, if they are not, the impact of
such deficiencies on SBA’s internal controls over financial reporting.
• All complementary subservice organization controls described in SOC 1 reports are evaluated to
determine whether they provided services and performed controls considered relevant to SBA’s
internal controls over financial reporting and, if relevant subservice organizations were identified,
an evaluation is performed to obtain an understanding of the subservice organization(s) and their
controls.
• SOC 1 reports cover the appropriate period or corresponding gap letters provide sufficient
coverage to assess impacts on SBA’s internal controls over financial reporting.
5. Controls over Accounting and Monitoring of RRF and SVOG Programs Need Improvement
Management did not adequately design and implement monitoring controls over RRF and SVOG
awards to ensure accurate financial reporting as of the fiscal year-end, and the funds were used in
accordance with the CARES Act and related legislation. According to management, monitoring plans
were implemented and ongoing. However, the monitoring process could not be relied upon for financial
reporting purposes at fiscal year-end. Specifically, we noted that management was unable to provide
evidence that the accounting treatment and financial reporting for the RRF and SVOG awards were in
accordance with U.S. generally accepted accounting principles. The full amount of the awards was
expensed immediately upon disbursement without evidence supporting the existence, accuracy, and
timely recognition of expenses, instead of advances, as they were incurred by the recipients during the
fiscal year.
In addition, management did not adequately design and implement controls to ensure the RRF and
SVOG awards were approved and disbursed to eligible recipients in conformance with the related
legislation. Management approved and disbursed RRF and SVOG awards to recipients that also had
PPP loan guarantees that were flagged in SBA’s loan repository system. SBA placed flags on PPP
loan guarantees if the loans were indicative of potential noncompliance with select eligibility
requirements. We noted that RRF and SVOG award recipients also had a PPP loan guarantee with
an alert or flag that were not resolved prior to the approval of the (RRF) award.
The deficiencies were caused by an inadequate entity wide control environment to design and implement
sufficient review and monitoring controls related to the RRF and SVOG programs. In addition, there was a
lack of a sufficient analysis performed to determine the appropriate accounting treatment for the
programs.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Principle 10, Design Control Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
The deficiencies noted above may result in a material misstatement to the Other than
Intragovernmental Advances and Prepayments line item and the related elements in the consolidated
financial statements.
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Recommendations – Controls over Accounting and Monitoring of RRF and SVOG Programs Need
Improvement
We recommend the Administrator coordinate with the Associate Administrators for the Office of
Capital Access and the Office of Disaster Assistance to:
23. Design and implement a sufficient ongoing review of RRF and SVOG awards disbursed and
identify recipients that may not have been eligible to receive the awards in accordance with the
program’s terms, especially for recipients with flagged PPP loan guarantees.
24. Design and implement effective monitoring controls to ensure that RRF and SVOG award
recipients are complying with the program’s terms and to ensure complete, accurate, and timely
reporting for the use of the award.
25. Develop and document an effective funds recovery plan and controls to ensure funds disbursed
to ineligible recipients as part of the RRF and SVOG review process are recovered and reported
accurately in a timely manner.
We recommend the Administrator coordinate with the Chief Financial Officer to:
26. Design and implement controls to ensure the accounting treatment established to record the
balances related to the RRF and SVOG programs are in accordance with U.S. generally
accepted accounting principles and the basis for the appropriate treatment is sufficiently
documented.
6. Entity Level Controls Need Improvement
Due to the implementation of the new and expanded programs, management faced challenges in
maintaining an adequate entity level controls system that produces reliable and accurate financial
reporting. The significance of the internal control matters indicated weaknesses across several entity level
control categories. We noted the following conditions.
Risk Assessment: Management did not design and implement an effective risk assessment process. For
example, the following matters were noted:
1. The materiality threshold developed and documented was not adequately considered and
applied by program offices when key decisions regarding controls and review processes were
implemented. The controls within the relevant offices were not designed, implemented, and
operating effectively to a sufficient precision level to ensure the reporting objective of preparing
the financial statements free of material misstatement could be achieved. For example, the 2021
cohort of PPP loan guarantees were subject to a limited set of validation checks as compared to
the 2020 cohort of PPP loan guarantees without a documented risk assessment determining the
rationale for why a lower response was appropriate. Additionally, the PPP loan guarantee
forgiveness review process was not designed to ensure the reviews performed were to a
sufficient level of precision to ensure the related balances were free of material misstatement.
2. While risk assessments were planned, they were not completed in fiscal year 2022 for material
programs, including COVID-19 EIDLs, PPP, and Debt Relief Program payments.
Monitoring: Management did not design and implement effective monitoring processes. The following
matters were noted concerning various program areas. Specifically, we noted that SBA did not have
adequate or effective monitoring controls related to:
3. PPP lenders
4. Internal control over processes performed by service organizations.
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5. RRF and SVOG program award recipients.
6. Entity level controls, manual controls, general information technology controls, and sy stem
application controls for key financial statement line items and risks. Specifically, evidence was
not provided to substantiate that the testing of controls was complete for significant new and
expanded programs authorized from the CARES Act and related legislation.
The deficiencies were primarily caused by the prioritization and the urgent need to implement the
provisions of the CARES Act and related legislation as quickly and efficiently as possible over internal
control processes and related remediation of prior year control deficiencies. In addition, these deficiencies
were caused by the inherent challenges with the implementation of new and expanded programs that do
not have any historical precedence. The challenges included implementing programs with inadequate
systems to implement such large-scale programs, and an insufficient number of personnel to assist in the
design, implementation, and execution of internal controls. Finally, these deficiencies were caused by the
lack of an effective risk assessment, communication, and monitoring processes and controls to ensure
financial statement reporting objectives were achieved.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Principle 6, Define Objectives and Risk Tolerances; Principle 7, Identify, Analyze,
and Respond to Risks; Principle 9, Identify, Analyze, and Respond to Change; Principle 10, Design
Control Activities; Principle 12, Implement Control Activities; and Principle 16, Perform Monitoring
Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
As a result of the deficiencies noted above, transactions were approved and in certain cases disbursed
to potentially ineligible entities and not in conformance with the CARES Act and related legislation, and
the Office of Chief Financial Officer placed reliance on controls that were not designed, implemented, and
operating effectively to ensure the financial statements are free from potential material misstatements.
Without the proper level of entity level controls in place and operating effectively, there is an increased
risk that a material misstatement exists in the consolidated financial statements, and noncompliance
with the relevant laws and regulations would not be prevented or detected and timely corrected.
Recommendations – Entity Level Controls Need Improvement
We recommend that the Administrator coordinate with the Associate Administrators for the Office of
Capital Access and Disaster Assistance to:
27. In conjunction with the Office of the Chief Financial Officer, complete the internal control risk
assessments for programs that have a material impact on the financial statements at a process
level in a timely manner. The risk assessments should include the consideration of whether
controls designed and implemented are operating at a sufficient precision level in accordance
with management’s materiality threshold and will be sufficient for financial reporting purposes.
28. Develop and implement monitoring controls as required by the GAO’s Standards for Internal
Control in the Federal Government to ensure implementation of an effective internal control
environment.
We recommend that the Administrator coordinate with the Chief Financial Officer to:
29. Perform and document a thorough risk assessment at the financial statement assertion level to
identify process level risks and communicate the results to relevant program offices.
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30. In conjunction with relevant program offices, assess the effectiveness of key process level
controls to respond to the identified risks.
31. In conjunction with relevant program offices, develop and implement processes to ensure the
timely completion of the testing and monitoring of the design, implementation, and operating
effectiveness of key, relevant controls that affect financial reporting and compliance with relevant
laws and regulations.
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Appendix II
U.S. Small Business Administration
Significant Deficiencies
The following deficiencies are considered to be significant deficiencies in internal controls over financial
reporting.
1. Controls over Payments for Covered Loans under the Debt Relief Program Need
Improvement
2. Controls over General Information Technology Need Improvement
1. Controls over Payments for Covered Loans under the Debt Relief Program Need Improvement
Management did not adequately design and implement controls to determine that payments made to
lenders for covered loans under the Debt Relief Program were accurate, reviewed, and approved prior to
payment to enable the fair presentation of the Loan Guarantee Liabilities. Specifically, management did
not have a documented process and sufficient controls in place to substantiate the accuracy of the
payments made to lenders.
The deficiency was caused by an inadequate entity wide control environment to implement processes,
and procedures to account for new and expanded programs under the CARES Act and related legislation
with sufficiently designed, implemented, and effectively operating controls.
The following criteria were considered with respect to the matter described in the preceding paragraphs:
• GAO’s Green Book, Principle 3, Establish Structure, Responsibility, and Authority; and Principle 10,
Design Control Activities
The deficiency noted above may result in misstatements of the Loan Guarantee Liabilities line item and
related elements in the consolidated financial statements.
Recommendations – Payments for Covered Loans under the Debt Relief Program
We recommend the Administrator coordinate with the Associate Administrator for the Office of Capital
Access to:
32. Perform a review of the payments made by SBA for covered loans under the Debt Relief
Program to identify, review, and remediate any potential over or under payments made on the
related loans.
2. Controls over General Information Technology Need Improvement
Management had control deficiencies that limited SBA’s ability to effectively manage its information
system risks. Collectively, these conditions increase the risk of unauthorized use, modification, or
destruction of financial data, which may impact the integrity of information used to prepare the financial
statements. In the sections below, we have omitted some technical details from the conditions and
recommendations due to the sensitivity of the information. These details were communicated to
management in notices of findings and recommendations.
The following criteria were considered with respect to the matters described in the following paragraphs:
• GAO’s Green Book, Principle 3, Establish Structure, Responsibility, and Authority; and Principle 11,
Design Activities for the Information System
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• National Institute of Standards and Technology Special Publication 800-53, Revision 5, Security and
Privacy Controls for Federal Information Systems and Organizations
We have summarized the information technology control deficiencies by the following general information
technology control objectives: logical access controls and system configuration management.
Logical Access Controls
Management did not consistently follow established policy and procedure requirements for the timely
removal of access to SBA systems for separated employees and contractors.
The deficiency was caused by the lack of a separated personnel report being provided to the relevant
points of contact in program offices.
The deficiency noted above increases the risk that unauthorized users may retain access to the system
resulting in unauthorized modification, destruction, or exposure to SBA systems and data.
Recommendations – Logical Access Controls
We recommend the Administrator coordinate with the Chief Human Capital Officer to:
33. Review and update current processes and procedures for notifying program offices of personnel
separations to ensure inclusion of current primary and secondary points of contacts for each
program office responsible for managing information systems.
We recommend the Administrator coordinate with the Associate Administrator for the Office of Capital
Access to:
34. Review the activities of the terminated employees and contractors to ensure that their accounts
were not used after they separated from SBA.
35. Update the Office of Capital Access procedures to identify the control activities, responsible
parties, and the process for the removal of access for terminated users upon notification from the
Office of the Chief Human Capital Officer.
System Configuration Management
Management did not implement corrective actions to remediate the prior year deficiency related to the
testing of patches prior to implementation. Specifically, management did not follow established policy and
procedures by maintaining supporting evidence to consistently demonstrate that database and operating
system patches were tested and approved prior to migration into the production environment.
The deficiency was caused by a lack of sufficient resources to implement a testing team for the patch
management process and a lack of prioritization to remediate this prior year deficiency.
The deficiencies noted above increase the risk that known vulnerabilities can be exploited and
unauthorized changes can be applied to the system, resulting in possible disclosure, modification, or
destruction of SBA system programs and data.
Recommendations – System Configuration Management
We recommend the Administrator coordinate with the Associate Administrator for the Office of Capital
Access to:
36. Implement controls and a monitoring process to ensure that patches applied to the database and
operating system and application changes are appropriately tested prior to being moved into the
production environment.
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37. Update the system configuration management plan to require internal control documentation for
patch management and application changes as required by GAO’s Standards for Internal Control
in the Federal Government.
38. Periodically train personnel involved with the implementation of database and operating system
patches, and the review and approval of application changes, to follow the respective controls
and requirements of the patch management and application change management processes in
accordance with existing policies.
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Appendix III
U.S. Small Business Administration
Compliance and Other Matters
A. Federal Managers’ Financial Integrity Act of 1982 (FMFIA)
Management performed an internal control assessment as required under FMFIA; however,
management’s assessment did not substantially comply with FMFIA and the related OMB Circular No. A-
123 requirements. Specifically, management did not:
1. Perform, document, and demonstrate that they completed an internal control over financial reporting
evaluation regarding the new or expanded programs, including the evaluation and consideration of
the risks and controls of significant service organizations.
2. For the risks significant to financial reporting, consistently document financial statement risks and
assertions covered, testing procedures performed, extent of sampling performed, testing results,
corrective action plans to respond to deficiencies identified, and provide evidence of management
review. Additionally, management did not complete testing over significant areas and did not plan for
and test information technology controls as part of the internal control evaluation program.
3. Ensure their own assurance process was sufficient to identify material weaknesses that existed
during the fiscal year in addition to those identified by external auditors.
Management did not substantially meet FMFIA requirements due to the urgent need to implement the
provisions of the CARES Act and related legislation as quickly and efficiently as possible, the lack of
historical precedence, and other inherent challenges faced in implementing and expanding programs. In
addition, management did not consider all FMFIA and OMB Circular No. A-123 requirements when
performing their evaluation over internal controls.
The following criteria were considered with respect to the matter described in the preceding paragraphs:
• Section 2 of FMFIA
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal
Control
Management did not substantially comply with FMFIA and the related OMB Circular No. A-123
requirements, which may lead to not identifying the appropriate risks and key controls, and not detecting
internal control or compliance deficiencies. The risk of not detecting and correcting control deficiencies
could result in misstatements to the consolidated financial statements.
Recommendations – FMFIA
We recommend the Administrator coordinate with the Chief Financial Officer to:
39. Update the risk assessment regarding the evaluation of internal controls to ensure it includes all
significant programs, key processes, and other material line items on the consolidated financial
statements.
40. In conjunction with relevant program offices, perform and document the internal control
evaluation over all programs. This should include entity level controls, manual controls, general
information technology controls, and system application controls covering key financial statement
line items and risks.
58 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
41. Update the existing policy and implement adequate controls to ensure that the statement of
assurances provided by the program offices are adequately documented and reviewed for
completeness and accuracy to provide a sufficient basis to support the Administrator’s statement
of assurance.
B. Federal Financial Management Improvement Act of 1996 (FFMIA)
Management did not establish and maintain financial management systems that substantially comply with
the following FFMIA requirements:
1. Federal Financial Management Systems Requirements. As discussed in Appendix I – Material
Weaknesses, control deficiencies over transactions arising from the implementation of the CARES
Act and related legislation do not enable reliable and accurate financial reporting and do not ensure
budgetary resources are safeguarded against waste, loss, and misuse. In addition, the deficiencies
may not support compliance objectives related to ensuring financial transactions are in conformance
with the CARES Act and related legislation are achieved.
2. Federal Accounting Standards. The deficiencies identified and reported in Appendix I – Material
Weaknesses, provide an indication that SBA’s financial management systems were substantially non-
compliant with applicable federal accounting standards. Specifically, management was unable to
provide evidence that the accounting treatment and financial reporting for the RRF and SVOG awards
were in accordance with U.S. generally accepted accounting principles. The full amount of the awards
was expensed immediately upon disbursement without evidence supporting the existence, accuracy,
and timely recognition of expenses, instead of advances, as they were incurred by the recipients
during the fiscal year.
Management did not substantially meet FFMIA requirements because of the reasons discussed in
Appendix I – Material Weaknesses and due to an inadequate entity wide control environment to
implement the provisions of the CARES Act and related legislation with sufficiently designed and
implemented controls.
The following criteria were considered with respect to the matter described in the preceding paragraphs:
• Section 803(a) of FFMIA
• GAO’s Green Book, Section 2, Establishing an Effective Internal Control System
• Appendix D to OMB Circular No. A-123, Compliance with the Federal Financial Management
Improvement Act of 1996
Management did not substantially comply with FFMIA increasing the risk that transactions are incorrectly
recorded to the general ledger, impacting the completeness, existence, and accuracy of the balances in
the consolidated financial statements.
Recommendations – FFMIA
We recommend the Administrator coordinate with the Chief Financial Officer to:
42. Address the control deficiencies over transactions arising from the implementation of the CARES
Act and related legislation by working with the Office of Capital Access and the Office of Disaster
Assistance to implement the recommendations in Appendix I – Material Weaknesses.
Financial Reporting (Unaudited) 59
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
CFO RESPONSE TO DRAFT AUDIT REPORT ON FY 2022
FINANCIAL STATEMENTS
Appendix IV
CFO Response to Audit Report on
FY 2022 Financial Statements
November 15, 2022
TO: Hannibal M. Ware, Inspector General
FROM: Kate Aaby, Associate Administrator for Performance, Planning and the Chief
Financial Officer
SUBJECT: FY 2022 Financial Statement Audit
The Small Business Administration has reviewed the Independent Auditors’ Report from KPMG that
includes the auditors’ disclaimer of opinion on the Agency’s FY 2022 and FY 2021 Consolidated Balance
Sheets. The independent audit of the Agency’s financial statements and related processes is a core
component of SBA’s financial management program, and we are concerned by this result.
The FY 2022 Agency Financial Report includes the programs implemented under the American Rescue
Plan Act, the Economic Aid Act, in addition to those programs funded under the CARES Act and
subsequent legislation. As in FY 2021, the expansion of these programs during prolonged
unprecedented times continued to emphasize the importance of serving small businesses as they
navigate extraordinary circumstances.
The SBA has continued making tremendous progress strengthening internal controls for pandemic-
focused programs and is dedicated to accountability and transparency to the American public. SBA
implemented the Fraud Risk Management Board (FRMB) this year to effectively mitigate, manage and
monitor fraud risks. The FRMB is chaired by the CFO and members include Deputy Associate
Administrators of key Program Offices. In addition, to the governance bodies SBA has in place, the CFO
and key SBA Program Offices have partnered in the development and implementation of corrective
actions that will strengthen internal controls as well as address audit identified deficiencies.
The SBA Senior Management Council (SMC) which is chaired by the Deputy Chief Financial Officer and
comprised SBA managers from program and support offices, actively plans and executes the Agency’s
internal control activities that include assessing and improving compliance, monitoring and remediation
of identified deficiencies and communicating results of reviews to senior management.
As in FY 2021, the auditors identified material weaknesses related to the internal controls over six areas;
PPP Loan Guarantees, COVID-19 EIDLs and Grants, Subsidy Reestimate, Restaurant Revitalization and
Shuttered Venues Operators Grant Program, Entity Level Controls, and Evaluation of Service
Organizations. The SBA has undergone tremendous efforts to strengthen internal controls, policies and
procedures and will continue remediation efforts in the coming audit year.
We appreciate your efforts and those of your colleagues in the Office of the Inspector General, as well as
those of KPMG. The independent audit process continues to provide us with beneficial
recommendations that support our efforts to further enhance the SBA's financial management practices.
We remain committed to excellence in financial management and look forward to furthering progress in
the coming year.
60 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
FINANCIAL STATEMENTS AND NOTES (UNAUDITED)
The U.S. Small Business Administration prepares its financial statements as a critical aspect of ensuring accountability and
stewardship for the public resources entrusted to the SBA. Preparation of these statements is also an important part of the
SBA’s financial management goal of providing accurate and reliable information that may be used to assess performance and
allocate resources.
SBA’s management is responsible for the accuracy and propriety of the information contained in the principal financial statements
and the quality of internal controls. The SBA prepares these financial statements from its records in accordance with generally
accepted accounting principles in the United States as well as formats prescribed by the Office of Management and Budget.
While these statements have been prepared from SBA’s records in accordance with generally accepted accounting principles for
federal entities and the formats prescribed by the OMB, they are in addition to the financial reports used to monitor and control
budgetary resources, which are prepared from the same records. The statements should be read with the realization that they are a
component of the U.S. Government.
The financial statements include the following reports.
The Consolidated Balance Sheet summarizes the assets, liabilities, and net position by major category as of the reporting date.
Intragovernmental assets and liabilities resulting from transactions between federal agencies are presented separately from assets
and liabilities resulting from transactions with the public.
The Consolidated Statement of Net Cost shows, by strategic goal, the net cost of operations for the reporting period. Net cost of
operations consists of full program costs incurred by the SBA less the exchange revenues earned by those programs.
The Consolidated Statement of Changes in Net Position presents the SBA’s beginning and ending net position by two
components - Cumulative Results of Operations and Unexpended Appropriations. It summarizes the change in net position by
major transaction category. The ending balances of both components of net position are also reported on the Balance Sheet.
The Combined Statement of Budgetary Resources provides information about funding and availability of budgetary resources,
and the status of those resources at the end of the reporting period. Data on the Combined Statement of Budgetary Resources
is consistent with information reflected on the Report on Budget Execution and Budgetary Resources (SF 133), with the one
exception of offsetting receipts. Offsetting receipts offset budget authority and outlays at the agency level in the Budget of the
United States Government but are not reflected in the SF 133. The SBA includes offsetting receipts in this statement for the
purpose of reconciling outlay information presented in the Budget of the United States Government.
The Notes to the Financial Statements provide information to explain the basis of the accounting and presentation used to
prepare the statements and to explain specific items in the statements. They also provide information to support how particular
accounts have been valued and computed.
The Required Supplementary Information presents a Combining Statement of Budgetary Resources report by principal
functional area.
Financial Reporting (Unaudited) 61
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
U.S. SMALL BUSINESS ADMINISTRATION
CONSOLIDATED BALANCE SHEET
For the Years Ended September 30, 2022 and 2021
(Dollars in Thousands)
2022 2021
ASSETS
Intragovernmental
Fund Balance with Treasury (Note 2) $ 56,225,809 $ 316,852,301
Advances and Prepayments 1,458 969
Total Intragovernmental 56,227,267 316,853,270
Other than Intragovernmental
Cash and Other Monetary Assets (Note 3) 2,270 3,746
Accounts Receivable, Net (Note 5) 135,629 69,395
Loans Receivables, net:
Credit Program Receivables and Related Foreclosed Property, Net (Note 6) 321,528,158 245,445,095
General Property, Plant and Equipment, Net (Note 7) 100,717 25,276
Advances and Prepayments 18,324 20,899
Total Other than Intragovernmental 321,785,098 245,564,411
Total Assets $ 378,012,365 $ 562,417,681
LIABILITIES
Intragovernmental
Accounts Payable:
Accounts Payable, Capital Transfers:
Net Assets of Liquidating Funds Due to Treasury (Note 10) $ 7,056 $ 8,369
Accounts Payable 5,725 6,612
Debt:
Interest Payable - Loans and Not Otherwise Classified (Note 9) 251 251
Loans Payable:
Principal Payable to the Bureau of the Fiscal Service (Note 9) 362,801,468 262,654,877
Advances from Others and Deferred Revenue 2,271 1,901
Other Liabilities:
Benefit Program Contributions Payable 18,485 13,858
Liability to the General Fund of the U.S. Government for Other Non-Entity Assets:
Downward Reestimate Payable to Treasury (Note 13) 5,591,451 11,742,037
Other (Note 11) 2,123 3,856
Total Intragovernmental 368,428,830 274,431,761
Other than Intragovernmental
Accounts Payable 556,306 932,184
Federal Employee Benefits Payable 69,963 72,440
Loan Guarantee Liabilities (Note 6) 25,708,234 227,831,513
Other Liabilities:
Accrued Grant Liability 197,716 103,138
Surety Bond Guarantee Program Future Claims (Note 8) 62,635 60,054
Other (Note 11) 99,919 107,973
Total Other than Intragovernmental 26,694,773 229,107,302
Total Liabilities 395,123,603 503,539,063
NET POSITION
Unexpended Appropriations - Funds from Other Than Dedicated Collections 10,558,338 69,132,143
Cumulative Results of Operations - Funds from Other Than Dedicated Collections (27,669,576) (10,253,525)
Total Net Position (17,111,238) 58,878,618
Total Liabilities and Net Position $ 378,012,365 $ 562,417,681
The accompanying notes are an integral part of these statements.
62 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
U.S. SMALL BUSINESS ADMINISTRATION
CONSOLIDATED STATEMENT OF NET COST
For the Years Ended September 30, 2022 and 2021
(Dollars in Thousands)
2022 2021
STRATEGIC GOAL 1:
Ensure Equitable and Customer-Centric Design and Delivery of Programs to Support
Small Businesses and Innovative Startups
Gross Cost $ (663,444) $ 26,661,690
Less: Earned Revenue 389,057 4,336,162
Net Cost of Strategic Goal 1 (1,052,501) 22,325,528
STRATEGIC GOAL 2:
Build Resilient Businesses and a Sustainable Economy
Gross Cost 53,026,265 326,705,064
Less: Earned Revenue 5,148,428 3,963,444
Net Cost of Strategic Goal 2 47,877,837 322,741,620
STRATEGIC GOAL 3:
Implement Strong Stewardship of Resources for Greater Impact
Gross Cost 150,014 1,184,918
Net Cost of Strategic Goal 3 150,014 1,184,918
COST NOT ASSIGNED TO STRATEGIC GOALS
Gross Cost 121,599 31,487
Net Cost Not Assigned to Strategic Goals 121,599 31,487
Net Cost of Operations $ 47,096,949 $ 346,283,553
Note 14
The accompanying notes are an integral part of these statements.
Financial Reporting (Unaudited) 63
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
U.S. SMALL BUSINESS ADMINISTRATION
CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION
For the Years Ended September 30, 2022 and 2021
(Dollars in Thousands)
2022 2021
Funds from other than Dedicated Collections
Unexpended Appropriations:
Beginning Balance $ 69,132,143 $ 183,460,572
Appropriations Received 12,693,825 383,192,098
Other Adjustments:
Rescissions (35,467,645) (146,524,623)
Adjustment - Cancelled Authority (17,235) (20,784)
Return of Unrequired Liquidating Fund Appropriation (490) (447)
Other Adjustments (151) (140)
Appropriations Used (35,782,109) (350,974,533)
Total Unexpended Appropriations $ 10,558,338 $ 69,132,143
Cumulative Results of Operations:
Beginning Balance $ (10,253,525) $ (3,982,600)
Other Adjustments:
Current Year Liquidating Equity Activity (460) 5,572
Other - (29)
Appropriations Used 35,782,109 350,974,533
Donations of Cash and Cash Equivalents 506 -
Transfers In/Out Without Reimbursement 10,115 202
Imputed Financing 44,092 35,092
Other:
Non-entity Activity (6,155,464) (11,002,742)
Net Cost of Operations 47,096,949 346,283,553
Net Change in Cumulative Results of Operations (17,416,051) (6,270,925)
Total Cumulative Results of Operations $ (27,669,576) $ (10,253,525)
Ending Net Position $ (17,111,238) $ 58,878,618
The accompanying notes are an integral part of these statements.
64 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
U.S. SMALL BUSINESS ADMINISTRATION
COMBINED STATEMENT OF BUDGETARY RESOURCES
For the Years Ended September 30, 2022 and 2021
(Dollars in Thousands)
September 30, 2022
Nonbudgetary
Budgetary Total
Financing
BUDGETARY RESOURCES
Unobligated Balance from Prior Year Budget Authority, net
$ 66,203,391 $ 229,585,529 $ 295,788,920
(discretionary and mandatory)
Appropriations (discretionary and mandatory) (22,785,272) 10,962 (22,774,310)
Borrowing Authority (discretionary and mandatory) - 113,703,268 113,703,268
Spending Authority from Offsetting Collections 830,053 32,485,787 33,315,840
Total Budgetary Resources $ 44,248,172 $ 375,785,546 $ 420,033,718
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total) $ 35,455,067 $ 340,161,321 $ 375,616,388
Unobligated Balance, end of year:
Apportioned, unexpired accounts 5,194,132 8,725,136 13,919,268
Unapportioned, unexpired accounts 1,289,000 26,899,089 28,188,089
Unexpired Unobligated Balance, end of year 6,483,132 35,624,225 42,107,357
Expired Unobligated Balance, end of year 2,309,973 - 2,309,973
Unobligated Balance, end of year (total) 8,793,105 35,624,225 44,417,330
Total Status of Budgetary Resources $ 44,248,172 $ 375,785,546 $ 420,033,718
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 35,164,861 $ 35,164,861
Distributed Offsetting Receipts (11,965,553) (11,965,553)
Agency Outlays, net (discretionary and mandatory) $ 23,199,308 $ 23,199,308
Disbursements, net (total) (mandatory) $ 302,454,224
Note 15
The accompanying notes are an integral part of these statements.
Financial Reporting (Unaudited) 65
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
U.S. SMALL BUSINESS ADMINISTRATION
COMBINED STATEMENT OF BUDGETARY RESOURCES
For the Years Ended September 30, 2022 and 2021
(Dollars in Thousands)
September 30, 2021
Nonbudgetary
Budgetary Total
Financing
BUDGETARY RESOURCES
Unobligated Balance from Prior Year Budget Authority, net
$ 176,427,273 $ 526,354,743 $ 702,782,016
(discretionary and mandatory)
Appropriations (discretionary and mandatory) 236,630,792 36,236 236,667,028
Borrowing Authority (discretionary and mandatory) - 93,935,801 93,935,801
Spending Authority from Offsetting Collections 372,382 313,361,622 313,734,004
Total Budgetary Resources $ 413,430,447 $ 933,688,402 $ 1,347,118,849
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total) $ 348,440,145 $ 699,531,213 $ 1,047,971,358
Unobligated Balance, end of year:
Apportioned, unexpired accounts 62,881,098 229,828,897 292,709,995
Unapportioned, unexpired accounts 2,064,696 4,328,292 6,392,988
Unexpired Unobligated Balance, end of year 64,945,794 234,157,189 299,102,983
Expired Unobligated Balance, end of year 44,508 - 44,508
Unobligated Balance, end of year (total) 64,990,302 234,157,189 299,147,491
Total Status of Budgetary Resources $ 413,430,447 $ 933,688,402 $ 1,347,118,849
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 350,558,986 $ 350,558,986
Distributed Offsetting Receipts (27,837,806) (27,837,806)
Agency Outlays, net (discretionary and mandatory) $ 322,721,180 $ 322,721,180
Disbursements, net (total) (mandatory) $ 370,149,835
Note 15
The accompanying notes are an integral part of these statements.
66 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 1 Significant Accounting Policies
Reporting Entity
The Small Business Act of 1953 created the Small Business Administration as an independent federal agency. The SBA’s mission
is to maintain and strengthen the nation’s economy by enabling the establishment and vitality of small businesses and by assisting
in the economic recovery of communities after disasters. The SBA operates through the execution of a congressionally approved
budget that funds its programs.
The SBA is a component of the U.S. Government. For this reason, some of the assets and liabilities reported by the entity may be
eliminated for government-wide reporting because they are offset by assets and liabilities of another U.S. Government entity. These
financial statements should be read with the realization that they are for a component of the U.S. Government.
Basis of Accounting and Presentation
The SBA prepares financial statements to report its financial position and results of its operations, as required by the Chief
Financial Officers Act of 1990 and the Government Management Reform Act of 1994. The financial statements are prepared
from the Agency’s records in accordance with generally accepted accounting principles using formats prescribed by the Office of
Management and Budget. As a federal agency, the SBA cannot incur obligations without authority from the Congress and an
apportionment by the OMB.
These financial statements reflect transactions recorded on both a proprietary accrual accounting basis and a budgetary obligation
basis in accordance with concepts and guidance provided by the OMB, the Federal Accounting Standards Advisory Board, and
the Department of the Treasury. Under the accrual method of accounting, revenues are recognized when earned and expenses are
recognized when incurred, without regard to receipt or payment of cash. Budgetary accounting recognizes the legal commitment
or obligation of funds in advance of the proprietary accruals and facilitates compliance with legal constraints and controls over the
use of federal funds.
The Federal Credit Reform Act of 1990 governs SBA’s accounting for direct loans and loan guaranties made in FY 1992 and
thereafter. Under the FCRA, the liability for loan guaranties is determined as the summarized discounted present value of the
estimated future net cash inflows and outflows for each fiscal year’s cohort of guaranties. For direct loans, the allowance is the
current outstanding FCRA loans receivable balance less the discounted present value of the estimated future net cash flows for all
the loan cohorts. A cohort of loans receivable or guarantied loans is all the direct loans obligated, or loan guaranties committed,
in a given fiscal year. Increases to individual loans in a cohort that are made in a subsequent fiscal year are accounted for in
the subsequent year’s loan cohort. Cohort cash flows include loan repayments, recoveries on defaulted guaranties and loan fees
received by the SBA that are due from the lenders and borrowers when the loan is made and during the life of the loan cohort, as
well as expenditures by the SBA for defaulted guaranties, loan servicing expenses, and other required SBA expenditures. An initial
allowance or liability for loan guaranties is established in the original year of the loan cohort. The initial amount of the allowance
and liability for each cohort is reestimated annually at fiscal year-end, and the adjusted amount is included in SBA’s annual
financial statements. Note 6 further describes FCRA accounting.
Use of Estimates
The SBA’s management makes assumptions and uses estimates to prepare the financial statements based upon the facts that exist
when the statements are prepared. The SBA also uses economic assumptions provided by the Office of Management and Budget in
preparing the estimates. Actual results may differ from those assumptions and estimates. The most significant differences between
actual results and these estimates may occur in the valuation of credit program receivables and liabilities for loan guaranties under
guidelines in FCRA. The SBA recognizes the sensitivity of credit reform modeling to slight changes in some model assumptions
and therefore continually reviews its model factors and statistical modeling techniques to reflect the most accurate credit program
costs possible in its annual financial statements.
Financial Reporting (Unaudited) 67
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Budgets and Budgetary Accounting for Loan Programs
The SBA’s loan disbursements are financed by appropriations for long-term loan subsidy cost and borrowings from the Treasury’s
Bureau of the Fiscal Service for the remaining nonsubsidized portion of the loans. Congress may provide one-year, multi-year,
or no year appropriations to cover the estimated long-term costs of the loan programs. The non-subsidized portion of each
loan disbursement, financed initially under permanent indefinite authority to borrow funds from the Treasury, is repaid from
collections of loan fees, repayments, and default recoveries. Congress authorizes the dollar amount of obligations that can be made
for the cost of direct loans and loan guaranties and establishes the maximum amount of loans the SBA can guarantee in its annual
Appropriation Act.
A permanent indefinite authority is available to fund any reestimated increase of subsidy costs that occurs after the year in which a
loan is disbursed. Reestimated reductions of subsidy costs are returned to the Treasury and are unavailable to the SBA. As required
by the FCRA, the SBA uses budgetary “program accounts” to account for appropriations in its credit programs and nonbudgetary
“financing accounts” to account for credit program cash flow. Estimates and reestimates of credit program subsidy expenses are
recorded in the SBA’s program accounts. Financing accounts are used to account for Treasury borrowings, the collection of loan
fees, repayments and default recoveries, and the disbursement of loans and loan expenses.
As a component of the government-wide reporting entity, the SBA is subject to the federal budget process, which involves
appropriations that are provided annually and appropriations that are provided on a permanent basis. The financial transactions
that are supported by budgetary resources, which include appropriations, are generally the same transactions reflected in agency
and the government-wide financial reports.
The SBA’s budgetary resources reflect past congressional action and enable the entity to incur budgetary obligations, but they do
not reflect assets to the Government as a whole. Budgetary obligations are legal obligations for goods, services, or amounts to be
paid based on statutory provisions. After budgetary obligations are incurred, the Treasury will make disbursements certified by the
SBA to liquidate the budgetary obligations and finance those disbursements in the same way it finances all disbursements, which,
is to borrow from the public if there is a budget deficit.
Advances
Advances are cash outlays made by a federal entity to its employees, contractors, grantees, or others to cover part or all of the
recipients’ anticipated expenses or as advance payments for the costs of goods and services the entity receives. Prepayments are
payments made by a federal entity to cover certain periodic expenses before those expenses are incurred. The SBA has both
intragovernmental advances and advances to the public. Intragovernmental advances are primarily to the Interior Business Center
of the Department of the Interior for contracting assistance on work not yet performed. Advances to the public represent prepaid
grants to counseling and training partners.
Accounts Payable
Accounts Payable are amounts that will be liquidated during the next operating cycle. Included in the liability are payables to SBA
lenders for their share of loan collections and to vendors for goods and services.
Accrued Grant Liability
Disbursements of grant funds are recognized as expenses at the time of disbursement. However, some grant recipients incur
expenditures prior to initiating a request for disbursement based on the nature of the expenditures. The SBA accrues a liability
for expenditures incurred by grantees prior to receiving grant funds for the expenditures. The accrual is determined through an
analysis of historic grant expenditures. The Small Business Development Center program and several other grant programs are
subject to this treatment.
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Contingencies
The SBA is a party in various administrative proceedings, legal actions, environmental suits, and claims brought against the
Agency. In the opinion of the SBA’s management and legal counsel, the ultimate resolution of these proceedings, actions, suits,
and claims will not materially affect the financial position or results of the SBA’s operations.
Cumulative Results of Operations
The Cumulative Results of Operations, presented on the Balance Sheet and on the Statement of Changes in Net Position, is the
accumulated difference between expenses and financing sources since the inception of the Agency. The amounts reported reflect
timing differences between the recording of expenses and the recognition of resources. Most of this timing difference results from
subsidy reestimates which are funded in the following year. The SBA does not have funds from dedicated collections.
Unexpended Appropriations
Unexpended Appropriations is the portion of the SBA’s appropriations received that are either undelivered or unobligated.
Delivered orders result in expended appropriations and reduce the total reported as Unexpended Appropriations. Undelivered
orders are the amount of orders of goods or services which have not been actually or constructively received. The SBA does not
have funds from dedicated collections.
Classified Activities
Accounting standards require all reporting entities to disclose that accounting standards allow certain presentations and disclosures
to be modified, if needed, to prevent the disclosure of classified information.
Fiduciary Activities
Fiduciary activities are the receipt, management, protection, accounting, investment, and disposition by the Federal Government
of cash or other assets in which non-federal entities have an ownership interest that the Federal Government must uphold.
Fiduciary cash and other assets are not assets of the Government and are not recognized on SBA’s proprietary statements, but
they are required to be disclosed in the notes to the SBA’s financial statements. The SBA’s fiduciary balances are on deposit in
commercial banks. The SBA’s fiduciary activities are discussed in Note 4.
Employee Benefits
Leave
A liability for employee annual leave is accrued as it is earned and reduced as leave is taken. Each year the balance of accrued
annual leave is adjusted to reflect current pay rates as well as forfeited “use or lose” leave. Annual leave earned but not taken,
within established limits, is funded from future financing sources. Sick leave and other types of non-vested leave are expensed as
taken.
Employee Health and Life Insurance Benefits
SBA employees may choose to participate in the contributory Federal Employees Health Benefits and the Federal Employees
Group Life Insurance programs. The SBA matches a portion of the employee contributions to each program. Such matching
contributions are recognized as current operating expenses.
Employee Pension Benefits
SBA employees participate in either the Civil Service Retirement System or the Federal Employees Retirement System and Social
Security. These systems provide benefits upon retirement and in the event of death, disability or other termination of employment
Financial Reporting (Unaudited) 69
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
and may also provide pre-retirement benefits. They may also include benefits to survivors and their dependents, and they may
contain early retirement or other special features. The SBA’s contributions to both retirement plans, as well as to the government-
wide Federal Insurance Contribution Act administered by the Social Security Administration, are recognized on the Consolidated
Statement of Net Cost as current operating expenses.
Federal employee benefits also include the Thrift Savings Plan. For FERS employees the SBA matches employee contributions to
the plan, subject to limitations. The matching contributions are recognized as current operating expenses.
Imputed Financing Costs
The SBA recognizes the full cost of providing all employee benefits and future retirement benefits, including life and health
insurance, at the time employee services are rendered. Eligible retired SBA employees can continue to participate in health and life
insurance plans. The cost of these benefits is funded through Agency contributions, employee compensation to the extent withheld
from employee and retiree pay, from matching of employee withholding for Thrift Savings Plan and FICA, and by the Office of
Personnel Management, which administers the retirement programs for SBA employees.
The OPM calculates imputed costs as the actuarial present value of future benefits attributed to services rendered by covered
employees and eligible retired SBA employees during the accounting period, net of the amounts contributed by employees,
retirees, and the Agency. The SBA recognizes these imputed costs in the Statement of Net Cost and imputed financing in
determining SBA’s net position.
Federal Employees’ Compensation Act
The Federal Employees’ Compensation Act provides income and medical cost protection to covered federal civilian employees
injured on the job and to beneficiaries of employees whose deaths are attributable to job-related injury or disease. The FECA
program is administered by the Department of Labor.
The DOL pays valid claims as they occur, which are billed to the SBA annually and funded and paid approximately 15 months
later. The DOL also calculates an estimated actuarial liability for future benefits based upon historical experience and other
economic variables. Projected annual benefit payments are then discounted to present value using the forecasted interest rates for
10-year Treasury notes and bonds published by the OMB in its economic assumptions for the federal budget. The SBA recognizes
a current unfunded cost for the actual claims paid and the change in the FECA actuarial liability each year.
NOTE 2 Fund Balance with Treasury
The Department of the Treasury processes cash receipts and disbursements on the SBA’s behalf to pay liabilities and finance loan
program costs. Cash receipts are deposited into the SBA’s account at the Treasury. The SBA’s fund balances with the Treasury are
available to make expenditures to liquidate allowable obligations, except for the Non-entity Fund Balance, which is not available
to the SBA to obligate or expend. Records are maintained for the SBA’s program, financing, liquidating, suspense/budget clearing
accounts (awaiting disposition or reclassification), and other accounts at the fund level. Fund balances with the Treasury include
expired year amounts, which are unavailable for obligation, as well as amounts currently available for new obligations.
FBWT is an asset to the SBA and a liability of the General Fund. The amounts represent commitments by the government to
provide resources for particular programs, but they do not represent net assets to the government as a whole. When disbursements
are made, the Treasury will finance the disbursements in the same way it finances all other disbursements: using some combination
of receipts, other inflows, and borrowing from the public (if there is a budget deficit).
70 Financial Reporting (Unaudited)
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(Dollars in Thousands)
As of September 30, 2022 2021
Appropriated Funds $ 12,101,171 $ 70,066,412
Financing Funds 43,958,137 246,630,128
Liquidating Funds 549 544
Revolving Funds 110,492 105,047
Trust Fund 671 175
Total Entity Fund Balance with Treasury 56,171,020 316,802,306
Budget Clearing Account Balance 54,789 49,995
Total Fund Balance with Treasury $ 56,225,809 $ 316,852,301
Status of Fund Balance with Treasury
Apportioned, unexpired accounts $ 13,919,268 $ 292,709,995
Unapportioned, unexpired accounts 28,188,089 6,392,988
Obligated Balance Not Yet Disbursed 14,906,099 21,267,716
Expired Unobligated Balance 2,309,973 44,508
Borrowing Authority Not Converted to Funds (3,152,409) (3,612,901)
Nonbudgetary 54,789 49,995
Total Fund Balance with Treasury $ 56,225,809 $ 316,852,301
Unobligated balances become available when the OMB approves the SBA’s request to apportion funds for obligation in the current
fiscal year. Obligated balances not yet disbursed include unpaid obligations offset by uncollected customer payments from other
federal government accounts. The unobligated and obligated balances are reflected on the Statement of Budgetary Resources.
NOTE 3 Cash
The SBA field offices deposit collections from borrowers in the SBA’s account at the Treasury using an electronic deposit system.
At the end of the fiscal year, collections temporarily held by the SBA field offices pending deposit are recorded as Undeposited
Collections - Cash in Transit and totaled $2.3 million and $3.7 million as of September 30, 2022 and 2021.
NOTE 4 Fiduciary Activities: Master Reserve Fund and Master
Reserve Account
Fiduciary activities are the receipt, management, protection, accounting, investment, and disposition by the Federal Government
of cash or other assets in which non-federal entities have an ownership interest that the Federal Government must uphold.
Fiduciary cash and other assets are not assets of the government, and are not recognized on the SBA’s proprietary statements,
but are required to be disclosed in the notes to the SBA’s financial statements. The SBA’s fiduciary balances are on deposit in
commercial banks.
Financial Reporting (Unaudited) 71
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
The Master Reserve Fund is a fiduciary activity administered by the SBA’s 7(a) Fiscal Transfer Agent. The balance in the MRF
is invested, according to SBA policy, entirely in Treasury securities. The MRF is an integral part of SBA’s 7(a) secondary market
program. The MRF was authorized by the Small Business Secondary Market Improvement Act of 1984 to facilitate the pooling
of 7(a) guarantied loans that are purchased by secondary market investors. The MRF receives monthly payments from SBA
guarantied borrowers and disburses monthly to 7(a) secondary market pool investors based on a schedule of amounts due. The
7(a) secondary market program includes the SBA’s guaranty of timely payment, as well as a default guaranty, to 7(a) secondary
market investors. The MRF supports $38.0 billion and $36.3 billion of outstanding SBA guarantied 7(a) secondary market pool
principal as of September 30, 2022 and 2021.
The Master Reserve Account is a fiduciary activity administered by the SBA’s 504 Central Servicing Agent. The balance in the
MRA is invested entirely in Treasury securities. The MRA facilitates the operation of the 504 Certified Development Company
secondary market program. The MRA was authorized by Section 505 of the Small Business Investment Act of 1958 as amended,
as a vehicle to receive, temporarily hold, and distribute 504 program cash flows. The MRA receives monthly payments from
504 borrowers and retains the payments until a semi-annual debenture payment is due to secondary market investors. The 504
secondary market program includes the SBA’s guaranty of timely payment, as well as a default guaranty, to 504 secondary market
investors. The MRA supports $32.7 billion and $30.0 billion of SBA guarantied 504 debentures outstanding in the secondary
market as of September 30, 2022 and 2021.
The FY 2022 Disbursements line item on the Reconciliation of Fiduciary Assets as of September 30, 2022, includes the return
of $28.5 million to the outgoing 7(a) Fiscal Transfer Agent to the Master Reserve Fund. In late August 2021, the outgoing and
incoming FTA determined the projected contributions were inadvertently overstated by $28.5 million and a claim was initiated.
The claim was fully adjudicated in FY 2022 and the funds returned.
The composition of the MRF and MRA and a reconciliation of the changes in the assets are included in the following table.
(Dollars in Thousands)
FIDUCIARY ASSETS
As of September 30, 2022 2021
MRF MRA Total MRF MRA Total
Short Term Securities
Money Market Funds $ 501,161 $ 780,155 $ 1,281,316 $ 745,406 $ 878,654 $ 1,624,060
Treasury Bills 661,816 - 661,816 224,985 - 224,985
Total Cash and Short Term Securities 1,162,977 780,155 1,943,132 970,391 878,654 1,849,045
Long Term Securities
Treasury Notes/Bonds Including Interest 875,912 - 875,912 1,123,152 - 1,123,152
Total Long Term Securities 875,912 - 875,912 1,123,152 - 1,123,152
Net Assets $ 2,038,889 $ 780,155 $ 2,819,044 $ 2,093,543 $ 878,654 $ 2,972,197
72 Financial Reporting (Unaudited)
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RECONCILIATION OF FIDUCIARY ASSETS
For the Years Ended September 30, 2022 2021
MRF MRA Total MRF MRA Total
Beginning Net Assets $ 2,093,543 $ 878,654 $ 2,972,197 $ 2,071,468 $ 542,818 $ 2,614,286
Receipts
Earned Income 25,862 5,393 31,255 27,035 97 27,132
Contributions 10,657,949 18,754,704 29,412,653 7,988,522 18,295,369 26,283,891
Net Realized Gain (Loss) - - - 436 - 436
Total Receipts 10,683,811 18,760,097 29,443,908 8,015,993 18,295,466 26,311,459
Less Disbursements
Payments to Investors 10,738,465 18,858,596 29,597,061 7,993,918 17,959,630 25,953,548
Total Disbursements 10,738,465 18,858,596 29,597,061 7,993,918 17,959,630 25,953,548
Ending Net Assets $ 2,038,889 $ 780,155 $ 2,819,044 $ 2,093,543 $ 878,654 $ 2,972,197
In FY 2022, there were six bank accounts rather than the original five accounts acquired when the FTA transitioned in FY 2021.
Upon further review, two accounts belong to the FTA and are unrelated to the SBA. The remaining four accounts belong to the
SBA 7(a) loan program and are non-MRF in nature. Two of the four non-MRF accounts are fiduciary in nature (7a Escrow and
7a Disbursement). The balances of the two fiduciary accounts are $264.9 million and $347.0 million at September 30, 2022, and
September 30, 2021. The other two non-MRF accounts are non-fiduciary in nature and are maintained for administrative actions
and fees.
NOTE 5 Accounts Receivable
Accounts receivable include amounts owed by the public for guaranty fees in the SBA’s loan and surety bond programs, refunds
due from employees and others, as well as other amounts owed by lenders for guarantied loan purchases that lack the required
documents. An Allowance for Loss on uncollectible Surety Bond Guaranty fees is based on an aging of delinquent balances. The
uncollectible amount for refunds and loan guaranty fees is not significant and no allowance is provided. Amounts over 180 days
past due on guarantied loans purchased by the SBA are written off for financial reporting purposes. The amount shown in “Other”
consists primarily of receivables due from lenders and guaranty purchase repairs.
(Dollars in Thousands)
As of September 30, 2022 2021
Other than Intragovernmental
Guaranty Fees Receivable $ 67,913 $ 52,196
Refunds 3,093 1,146
Other 65,795 16,957
Total Other than Intragovernmental 136,801 70,299
Allowance For Loss (1,172) (904)
Net Other than Intragovernmental $ 135,629 $ 69,395
Financial Reporting (Unaudited) 73
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 6 Credit Program Receivables and Liability for Loan Guaranties
A. Loan Program Descriptions and Accounting
Loan Program Descriptions
The SBA provides guaranties that help eligible small businesses obtain loans from participating lenders and licensed small business
investment companies to make investments in qualifying small businesses. The SBA also makes loans to microloan intermediaries
and provides direct loans that assist homeowners, renters, businesses of all sizes, and private nonprofit organizations recover
from disasters.
Major Direct Loan and Loan Guaranty Programs
Program group Program type Program
Disaster Direct Disaster Assistance Loans
Business Guarantied 7(a) Loan Guaranty
Business Guarantied 504 Certified Development Company
Business Guarantied Small Business Investment Company Debentures
Business Direct 7(m) Microloan
In FY 2021, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) provided
temporary modifications to the 7(a) Loan Program including temporary higher guaranty percentages and fee reductions on
eligible 7(a) loans, and an increase in the maximum SBA Express loan amount. The Economic Aid Act also included temporary
modifications to the 504 Certified Development Company program including fee waivers and CDC fee reimbursements, the
authorization of the new ALP Express delivery method, and various changes to the Debt Refinancing programs to include
expanded eligibility. The American Rescue Plan Act of 2021 modified and extended existing programs to support small businesses
and other entities that have been affected during the COVID-19 pandemic.
The SBA’s Disaster Assistance Loan program makes direct loans to disaster survivors under four categories: (1) physical disaster
loans to repair or replace damaged homes and personal property; (2) physical disaster loans to businesses of any size; (3) economic
injury disaster loans to eligible small businesses and nonprofit organizations without credit available elsewhere; and (4) economic
injury loans to eligible small businesses affected by essential employees called up to active duty in the military reserves. The
maximum interest rate is 4 percent for loan applicants without credit available elsewhere and 8 percent for applicants with credit
available elsewhere. The SBA offers low-interest Economic Injury Disaster Loans for working capital to small businesses suffering
substantial economic injury as a result of the COVID-19 pandemic. These COVID EIDL loans may be used to meet financial
obligations and operating expenses that could have been met had the disaster not occurred. The interest rate is 3.75 percent for
small businesses and 2.75 percent for non-profits. The SBA stopped accepting new loan applications on January 1, 2022.
The SBA’s business loan programs include its flagship 7(a) Loan Guaranty program in which the SBA guaranties up to 90 percent
of the amount of loans made by participating banks and other lending institutions to eligible small businesses not able to obtain
credit elsewhere. The CARES Act added the Paycheck Protection Program in the 7(a) loan program, which is designed to provide
a direct incentive for small businesses to keep their workers on the payroll. Loans issued prior to June 5, 2020, have a maturity
of 2 years while those issued after have a maturity of 5 years. All loans have an interest rate of 1 percent. Loan payments will be
deferred for borrowers who apply for loan forgiveness until the SBA remits the borrower’s loan forgiveness amount to the lender.
If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the
borrower’s loan forgiveness (between 8 and 24 weeks). The Paycheck Protection Program ended on May 31, 2021.
The 504 Certified Development Company program guarantees 100 percent of the principal and interest payments on debentures
issued by development companies for loans to eligible small businesses secured by real estate or equipment.
74 Financial Reporting (Unaudited)
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The Small Business Investment Company program guarantees principal and interest payments on debentures issued by small
business investment companies, which in turn make investments in qualifying small businesses.
The 7(m) Microloan program provides direct loans to nonprofit intermediaries, which use these funds to make loans up to
$50,000 to eligible small businesses.
Credit Subsidy Modeling
The SBA estimates future cash flows for direct and guarantied loans using economic and financial credit subsidy models. These
estimated cash flows are used to develop the subsidy funding required under the Federal Credit Reform Act of 1990. The SBA has
developed a customized credit subsidy model for each of its major loan programs.
The SBA’s models vary in the specific methodologies employed to forecast future program cash flows. In general, however, models
for all major credit programs use historical data as the basis for assumptions about future program performance and then translate
these assumptions into nominal cash flow estimates by applying rules about program structure. Nominal cash flow forecasts are
discounted using the OMB’s Credit Subsidy Calculator that has both forecasted and actual Treasury interest rates.
Historical data are used as the basis for program performance assumptions. The historical data undergo quality review and analysis
prior to its use in developing model assumptions.
Key input to the subsidy models varies by program. Input includes items such as:
• Contractual terms of the loan or guaranty such as loan amount, interest rate, maturity, and grace periods
• Borrower characteristics
• Loan origination methods
• Economic indicators such as gross domestic product growth and unemployment rate
• Loan performance assumptions, for example: conditional purchase and prepayment rates and recovery rates
• Loan fee rates
Subsidy Funding under the Federal Credit Reform Act
The FCRA requires that the credit subsidy costs of direct loans and loan guaranties be expensed in the year loans are disbursed.
The credit subsidy cost is the net present value of expected cash inflows and outflows over the life of a guarantied loan, or
the difference between the net present value of expected cash flows and the face value of a direct loan. The cost expressed as a
percentage of loans disbursed is termed the subsidy rate. The SBA receives appropriations to fund its credit programs based on
the subsidy rate that applies to the credit program level approved by Congress. The SBA records subsidy expenses when loans are
disbursed. In accordance with the FCRA, subsidy costs are reestimated annually.
Credit Program Receivables and Related Foreclosed Property, Net
The FCRA governs direct loans made after FY 1991. The FCRA direct loans are valued at the present value of expected future cash
flows discounted at the interest rate of marketable Treasury securities. The subsidy allowance represents the difference between the
outstanding loans receivable balance and the net present value of the estimated cash flows of the loans over their remaining term.
The subsidy allowance is subtracted from the outstanding loans receivable balance to obtain the net loans receivable balance.
Guarantied loans purchased by the SBA upon borrower default are established as loans receivable and are valued in a similar
manner as direct loans under the FCRA.
Direct loans and defaulted guaranties made prior to the FCRA are valued at the current receivable balance net of an allowance for
uncollectible amounts calculated using historical loss experience.
Financial Reporting (Unaudited) 75
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
The SBA advances payments semiannually to honor the timely payment requirement of principal and interest due for debentures
in its 504 Certified Development Company and Small Business Investment Company programs. The advances are liquidated by
receipt of the payments due from borrowers in these programs. Advance balances are reported as Other Loans Receivable.
Interest receivable comprises accrued interest on loans receivable and purchased interest related to defaulted guarantied loans.
Interest income is accrued at the contractual rate on the outstanding principal amount and is reduced by the amount of interest
income accrued on nonperforming loans in excess of 90 days delinquent. The SBA’s purchase of accrued interest is limited to 120
days on the defaulted guaranty unless the loan has been sold in the secondary market. Purchased interest is carried at cost, and an
allowance is established for amounts in excess of 90 days delinquent.
Foreclosed property comprises real and personal property acquired through foreclosure on direct loans and defaulted loan
guaranties. Properties acquired as a result of defaulted loans committed after FY 1991 are shown at recoverable value, which is
adjusted to the present value of expected future cash flows for financial statement presentation through the allowance for subsidy.
Other foreclosed property is shown at the appraised value. At September 30, 2022, the SBA’s foreclosed property was $26.2
million related to 57 loans. The properties had been held for an average of 1,761 days. At September 30, 2021, foreclosed property
was $34.0 million related to 77 loans. The properties had been held for an average of 1,711 days.
Valuation Methodology for the Liability for Loan Guaranties under FCRA
The FCRA also governs loan guaranties made after FY 1991. A liability for outstanding guaranties is included on the SBA’s
Balance Sheet. The liability for guarantied loans committed after FY 1991 is based on the net present value of their expected future
cash flows, including guaranty fee inflows and the net cash outflows of defaulted guarantied loans purchased by the SBA.
Valuation Methodology for Pre-FCRA Liability for Loan Guaranties
The SBA values pre-credit reform direct and defaulted guarantied loans by estimating an allowance for loan losses. This allowance
is offset against gross loan receivables to obtain the SBA’s expected net collections from these assets. The SBA establishes a 100
percent allowance for pre-credit reform direct and guarantied loans that are past due more than 180 days.
76 Financial Reporting (Unaudited)
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B. Credit Program Receivables and Related Foreclosed Property, Net
(Dollars in Thousands)
As of September 30, 2022 Pre-1992 Loans Post-1991 Loans Total
Direct Business Loans
Business Loans Receivable $ 6,507 $ 223,178 $ 229,685
Interest Receivable - 732 732
Foreclosed Property 2,609 - 2,609
Allowance (6,161) (26,954) (33,115)
Total Direct Business Loans 2,955 196,956 199,911
Direct Disaster Loans
Disaster Loans Receivable 262 366,973,740 366,974,002
Interest Receivable 171 14,805,758 14,805,929
Foreclosed Property - 1,936 1,936
Allowance (114) (61,462,708) (61,462,822)
Total Direct Disaster Loans 319 320,318,726 320,319,045
Defaulted Guarantied Business Loans & Other Loans Receivable
Defaulted Guarantied Business Loans 3,227 3,214,141 3,217,368
Other Loans Receivable (see note below) - 85,234 85,234
Interest Receivable - 23,559 23,559
Foreclosed Property 1,264 20,435 21,699
Allowance (3,034) (2,335,624) (2,338,658)
Total Defaulted Guarantied Business Loans & Other Loans Receivable 1,457 1,007,745 1,009,202
Total Credit Program Receivables & Related Foreclosed Property, Net $ 321,528,158
Financial Reporting (Unaudited) 77
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
B. Credit Program Receivables and Related Foreclosed Property, Net Continued
(Dollars in Thousands)
As of September 30, 2021 Pre-1992 Loans Post-1991 Loans Total
Direct Business Loans
Business Loans Receivable $ 6,677 $ 218,490 $ 225,167
Interest Receivable - 798 798
Foreclosed Property 2,609 - 2,609
Allowance (6,664) (31,266) (37,930)
Total Direct Business Loans 2,622 188,022 190,644
Direct Disaster Loans
Disaster Loans Receivable 241 249,216,711 249,216,952
Interest Receivable 286 7,495,582 7,495,868
Foreclosed Property - 2,929 2,929
Allowance (129) (12,633,871) (12,634,000)
Total Direct Disaster Loans 398 244,081,351 244,081,749
Defaulted Guarantied Business Loans & Other Loans Receivable
Defaulted Guarantied Business Loans 1,973 3,265,416 3,267,389
Other Loans Receivable (see note below) - 118,212 118,212
Interest Receivable - 19,507 19,507
Foreclosed Property 1,268 27,230 28,498
Allowance (1,695) (2,259,209) (2,260,904)
Total Defaulted Guarantied Business Loans & Other Loans Receivable 1,546 1,171,156 1,172,702
Total Credit Program Receivables & Related Foreclosed Property, Net $ 245,445,095
Note: Other Loans Receivable includes payments advanced by the SBA against future reimbursements in the SBIC and 504 loan programs.
78 Financial Reporting (Unaudited)
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C. Loans Disbursed and Outstanding Loan Obligations
(Dollars in Thousands)
DIRECT LOANS
New Loans Disbursed During the Year Ended September 30, 2022 2021
Business Direct Loan Program $ 42,950 $ 37,044
Disaster Loan Program 127,261,347 73,739,456
Total Direct Loans Disbursed $ 127,304,297 $ 73,776,500
Outstanding Loan Obligations as of September 30, 2022 2021
Business Direct Loan Program $ 47,145 $ 50,731
Disaster Loan Program 13,128,963 18,974,137
Total Direct Loan Obligations $ 13,176,108 $ 19,024,868
GUARANTIED LOANS
New Loans Disbursed During the Year Ended September 30, 2022 2021
Total Principal Disbursed at Face Value $ 38,855,280 $ 308,925,787
Total Principal Disbursed Guarantied by the SBA 32,578,412 304,023,895
Outstanding Loan Obligations as of September 30, 2022 2021
Business Guarantied Loan Programs $ 22,416,143 $ 27,993,257
Loans Outstanding as of September 30, 2022 2021
Total Principal Outstanding at Face Value $ 187,900,729 $ 459,593,931
Total Principal Outstanding Guarantied by the SBA 163,785,929 435,291,356
Note: Total guarantied balances as of September 30, 2022, include remitted forgiven principal that is pending lender confirmation of reduced borrower
balances. There is lag in reporting between when the SBA has forgiven the principal balance and when lenders confirm they have applied the forgiveness to
the borrower balance via a lender 1502 report.
Financial Reporting (Unaudited) 79
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
D. Subsidy Cost Allowance Balances
(Dollars in Thousands)
For the Years Ended September 30, 2022 2021
Post-1991 Business Direct and Purchased Guarantied Loans
Beginning Balance of Allowance Account $ 2,290,475 $ 2,245,434
Current Year's Subsidy (see 6.G for breakdown by component) 3,607 3,385
Loan Modifications - 28,298
Loans Written Off (5,419,939) (563,931)
Subsidy Amortization (3,040) (2,829)
Allowance Related to Guarantied Loans Purchased This Year 5,342,638 500,852
Miscellaneous Recoveries and Costs 152,182 82,100
Balance of Subsidy Allowance Account before Reestimates 2,365,923 2,293,309
Reestimates (3,345) (2,834)
Ending Balance of Allowance Account $ 2,362,578 $ 2,290,475
Post-1991 Disaster Direct Loans
Beginning Balance of Allowance Account $ 12,633,871 $ 5,641,474
Current Year's Subsidy (see 6.G for breakdown by component) 14,756,882 6,669,771
Loan Modification 172,204 -
Loans Written Off (366,244) (48,711)
Subsidy Amortization 6,126,803 4,120,155
Miscellaneous Recoveries and Costs 66,877 32,195
Balance of Subsidy Allowance Account before Reestimates 33,390,393 16,414,884
Reestimates 28,072,315 (3,781,013)
Ending Balance of Allowance Account $ 61,462,708 $ 12,633,871
For Disaster Loans, a Loan Modification was required for Disaster COVID EIDL payment deferment.
80 Financial Reporting (Unaudited)
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E. Liability for Loan Guaranties
(Dollars in Thousands)
For the Years Ended September 30, 2022 2021
Post-1991 Business Loan Guaranties
Beginning Balance of Liability for Loan Guaranties $ 227,831,513 $ 512,712,498
Claim Payments to Lenders/Guarantee Payments (6,023,484) (874,071)
Fees 1,474,784 1,118,670
Interest Supplements Paid (1,939,216) (4,924,818)
Interest Revenue on Uninvested Funds 275,218 4,271,118
Interest Expense on Entity Borrowings (62,693) (67,191)
Current Year's Subsidy (see 6.G for breakdown by component) 183,871 287,046,480
Upward Reestimates 32,540 8,990,144
Downward Reestimates (5,230,089) (6,264,520)
Loan Modifications - 7,009,738
Adjustment Due to Reestimate & Guarantied Loan Purchases 680,846 373,219
Miscellaneous Recoveries and Costs (191,515,056) (581,559,754)
Total Ending Balance of Liability for Loan Guaranties $ 25,708,234 $ 227,831,513
F. 2022 Subsidy Rates by Program and Component
Loan Program Total Subsidy Financing Default Other Fee
Guaranty
7(a) 0.00% 0.00% 3.95% 0.00% -3.95%
504 CDC 0.00% 0.00% 4.39% 0.41% -4.80%
504 Refi 0.00% 0.00% 4.47% 0.42% -4.89%
SBIC Debentures 0.00% 0.00% 4.14% 0.04% -4.18%
Direct
Disaster 8.96% -3.89% 12.62% 0.23% 0.00%
Disaster - COVID EIDL 11.72% -34.29% 35.00% 11.01% 0.00%
Microloan 6.28% 4.07% 2.54% -0.33% 0.00%
The subsidy rates in Table F pertain only to loans obligated in the current year. These rates cannot be applied to the loans disbursed during the current year to
yield the subsidy expense because loans disbursed during the current year include loans obligated in prior years. Subsidy expenses reported in Note 6.G result
from the disbursement of loans obligated in the current year as well as in prior years and include reestimates and modifications.
Financial Reporting (Unaudited) 81
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
G. Subsidy Expense by Component
(Dollars in Thousands)
For the Years Ended September 30, 2022 2021
Business Loan Guaranties
Defaults $ 822,338 $ 4,816,456
Fees (203,611) 12,940,293
Other (434,856) 269,289,731
Subsidy Expense Before Reestimates and Loan Modifications 183,871 287,046,480
Loan Modifications - 7,009,738
Components of Subsidy Reestimates
Technical Assumptions/Default Reestimates (5,220,762) 183,863
Interest Rate Reestimates 23,213 2,541,761
Total of the above Components of Subsidy Reestimates (5,197,549) 2,725,624
Total Guarantied Business Loan Subsidy Expense $ (5,013,678) $ 296,781,842
Business Direct Loans
Interest $ 2,768 $ 2,666
Defaults 992 839
Other (153) (120)
Subsidy Expense Before Reestimates and Loan Modifications 3,607 3,385
Loan Modifications - 28,298
Components of Subsidy Reestimates
Technical Assumptions/Default Reestimates (3,251) (1,191)
Interest Rate Reestimates (94) (1,643)
Total of the above Components of Subsidy Reestimates (3,345) (2,834)
Total Business Direct Loan Subsidy Expense $ 262 $ 28,849
Disaster Direct Loans
Interest $ (41,045,330) $ 67,780
Defaults 42,808,837 8,631,699
Other 12,993,375 (2,029,708)
Subsidy Expense Before Reestimates and Loan Modifications 14,756,882 6,669,771
Loan Modifications 172,204 -
Components of Subsidy Reestimates
Technical Assumptions/Default Reestimates 18,558,485 8,053,889
Interest Rate Reestimates 9,513,830 (11,834,902)
Total of the above Components of Subsidy Reestimates 28,072,315 (3,781,013)
Total Disaster Direct Loan Subsidy Expense $ 43,001,401 $ 2,888,758
For Disaster Loans, a Loan Modification was required for Disaster COVID EIDL payment deferment.
82 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
H. Administrative Expense
The SBA received appropriations to administer its credit programs, including the making, servicing and liquidation of its loans
and guaranties. Amounts expensed in the Statement of Net Cost are shown in the following table.
(Dollars in Thousands)
For the Years Ended September 30, 2022 2021
Disaster Direct Loan Programs $ 617,843 $ 275,450
Business Loan Programs 163,539 159,993
Total Administrative Expense $ 781,382 $ 435,443
I. Credit Program Subsidy Reestimates
Reestimates are performed annually on a cohort-by-cohort basis. The purpose of reestimates is to update original program cost
estimates to reflect actual cash flow experience as well as changes in forecasts of future cash flows. Forecasts of future cash flows
are updated based on additional information about historical program performance, revised expectations for future economic
conditions, and enhancements to cash flow projection methods. Financial statement reestimates were performed using a full year
of FY 2022 performance data for SBA’s large loan programs, with 9 months of actual and 3 months of projected performance
data for the Microloan and the small loan programs, and 6 months of actual and 6 months of projected performance data for the
Secondary Market Guaranty program.
Business Guarantied Loan Programs
Net subsidy reestimates for the business guarantied loan programs are shown in the following table.
(Dollars in Thousands)
For the Years Ended September 30, 2022 2021
7(a) $ (1,043,011) $ (2,662,078)
7(a) - Recovery Act (5,498) (4,371)
7(a) - Jobs Act (2,716) (7,686)
7(a) - COVID Support (694,093) (509,864)
504 CDC (266,964) (905,781)
504 CDC - Recovery Act (4,885) (2,630)
504 CDC - Jobs Act (1,593) (633)
504 CDC - COVID Support (76,577) (38,056)
504 CDC - Debt Refinancing (11,706) (92,132)
504 CDC - Debt Refinancing - COVID Support (18,802) (9,363)
504 First Mortgage Loan Pooling - Recovery Act (1,129) 3,338
SBIC Debentures (200,001) (323,515)
SBIC Participating Securities (10,505) (47,406)
Secondary Market Guaranty Program (130,803) (8,182)
Paycheck Protection Program (2,728,162) 7,328,120
ARC - Recovery Act (334) (218)
All Other Guaranty Loan Programs (770) 6,081
Total Guarantied Loan Program Subsidy Reestimates $ (5,197,549) $ 2,725,624
Financial Reporting (Unaudited) 83
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
The 7(a) Loan Guaranty program, the SBA’s flagship program, had a net downward reestimate of $1,043.0 million in FY 2022.
The reestimate is in part due to better than projected actual loan performance in FY 2022 and better projected loan performance
for future years. The better actual performance is in part due to lower than projected unemployment rates in FY 2022 and likely
continued lower purchases as an after effect of Section 1112 payments. The better projected loan performance is in part due to
performance assumption and methodological updates resulting in lower projected losses. The reestimate is also in part due to lower
than projected Section 1112 debt relief payments in FY 2022.
The 7(a) Recovery Act program had a net downward reestimate of $5.5 million. The reestimate is mostly due to better than
expected recoveries and lower than projected Section 1112 debt relief payments in FY 2022.
The 7(a) Jobs Act cohort had a net downward reestimate of $2.7 million. The reestimate is mostly due to better than expected
recoveries and lower than projected Section 1112 debt relief payments in FY 2022.
Authorized by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), the 7(a)
COVID Support program offered 90 percent fee relief and upfront and on-going fee waivers for eligible borrowers and additional
debt relief support. The 7(a) COVID Support program had a net downward reestimate of $694.1 million. The reestimate is in
part due to better than projected actual loan performance in FY 2022 and better projected loan performance for future years. The
reestimate is also in part due to higher than projected secondary market premium income in FY 2022.
The 504 Certified Development Company program had a net downward reestimate of $267.0 million. The reestimate is mostly
due to better than expected loan performance in FY 2022 contributing to a downward reestimate in all but one cohort. Aggregate
purchases were lower than predicted and recoveries were higher than projected by the prior year model. The reestimate is also in
part due to improved projections of future loan performance for the 2018–2022 cohorts.
The 504 Recovery Act program had a net downward reestimate of $4.9 million. The reestimate is mostly due to better than
expected loan performance in FY 2022.
The 504 Jobs Act program had a net downward reestimate of $1.6 million. The reestimate is mostly due to better than expected
loan performance in FY 2022.
Authorized by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), the 504
COVID support program offered fee waivers of third-party lender fees and borrower CDC Processing fees, provided for CDC
reimbursements of Processing fees, and extended additional debt relief support. The 504 COVID support program had a net
downward reestimate of $76.6 million. The reestimate is mostly due to better projected loan performance for the program than
originally estimated.
The 504 Debt Refinancing program had a net downward reestimate of $11.7 million. The reestimate is mostly due to better than
expected loan performance in FY 2022 contributing to a downward reestimate in all cohorts. The reestimate is also in part due to
improved projections of future loan performance for the 2018–2022 cohorts.
Authorized by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act), the 504 Debt
Refinancing COVID support program offered fee waivers of third-party lender fees and borrower Processing fees, provided for
CDC reimbursements of Processing fees, and extended additional debt relief support. The Debt Refinancing COVID support
program had a net downward reestimate of $18.8 million. The reestimate is in part due to better projected loan performance for
the program than originally estimated. The reestimate is also in part due to lower than projected disbursements for the cohort,
resulting in lower cash outflows for debt relief payments than originally estimated.
The Section 504 First Mortgage Loan Pooling program had a net downward reestimate of $1.1 million. The reestimate is mostly
due to higher than projected recoveries in FY 2022.
84 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
The SBIC Debentures program had a net downward reestimate of $200.0 million. The reestimate is primarily driven by higher
than projected recoveries and lower than projected defaults in FY 2022. Notably, there were no defaults in the program in FY
2022, which contributes to the downward reestimate.
The SBIC Participating Securities program had a net downward reestimate of $10.5 million. The reestimate is mostly due to
higher than projected recoveries in FY 2022.
The Secondary Market Guaranty program had a net downward reestimate of $130.8 million. The reestimate is primarily driven by
higher than projected prepayments and updated economic assumptions. The latter resulted in an increase in borrower prepayment
speeds and higher expected investment earnings relative to expected pool interest payments, both of which contributed to the
downward reestimate.
The Paycheck Protection Program had a downward reestimate of $2,728.2 million in FY 2022. The reestimate is mostly due to
fewer forgiveness payments processed in FY 2022 than anticipated for both the 2020 and 2021 cohorts. This leads to a decline in
the forecasted lifetime forgiveness amount as a percentage of disbursements for both cohorts. The lower lifetime forgiveness rate
estimate is partially offset by an increase in forecasted defaults for the 2020 and 2021 cohorts.
The America’s Recovery Capital program had a net downward reestimate of $0.3 million. The reestimate is primarily due to higher
than projected recoveries in FY 2022.
All Other Guaranty Loan programs include the SBIC New Market Venture Capital program, which had a net downward
reestimate of $0.8 million. The reestimate is mostly due to higher than projected recoveries in FY 2022.
Business Direct Loan Programs
Net subsidy reestimates for the business direct loan programs are shown in the following table.
(Dollars in Thousands)
For the Years Ended September 30, 2022 2021
7(m) Microloan $ (3,207) $ (2,841)
7(m) Microloan - Recovery Act - 24
Intermediary Lending Pilot Program (134) 1
SBIC Preferred Stock - (14)
All Other Direct Loan Programs (4) (4)
Total Direct Loan Program Subsidy Reestimates $ (3,345) $ (2,834)
The 7(m) Direct Microloan program had a net downward reestimate of $3.2 million. This downward reestimate is primarily
driven by aggregate actual defaults being lower than forecasted and actual debt relief payments being lower than forecasted for the
2021 Microloan cohort.
The Intermediary Lending Pilot program had a net downward reestimate of $0.1 million. The reestimate is mostly due to lower
than expected defaults in FY 2022.
The 7(m) Direct Microloan Recovery Act program and the SBIC Preferred Stock program had neutral reestimates as lifetime
expected loan performance remains consistent with prior year estimates.
Financial Reporting (Unaudited) 85
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Disaster Direct Loan Program
Net subsidy reestimates for the disaster direct loan programs are shown in the following table.
(Dollars in Thousands)
For the Years Ended September 30, 2022 2021
Disaster $ 28,072,315 $ (3,781,013)
Total Disaster Direct Loan Program Subsidy Reestimates $ 28,072,315 $ (3,781,013)
The Disaster Assistance program had a net upward reestimate of $28,072.3 million. The upward reestimate is primarily due to
higher projected loss rates for COVID EIDL loans. The higher projected loss rates are primarily due to lower expected recovery
rates on defaulted small dollar loans as well as higher assumed defaults. The reestimate is also a result of updates to the discount
rate which results in increased borrowing costs for FY 2022 COVID EIDL funded loans. The FY 2022 COVID EIDL funded
cohort’s discount rate increased from a formulated rate of 1.28 percent to 2.34 percent, which increases the financing costs for
the cohort.
J. Loans Receivable
Business Direct
(Dollars in Thousands)
As of September 30, 2022 Pre-1992 Loans Post-1991 Loans Total
Loans Receivable Direct, Net, beginning of year $ 2,622 $ 188,022 $ 190,644
Loans Disbursed - 42,950 42,950
Principal & Interest Payments Received (190) (38,130) (38,320)
Loans Written Off - (29) (29)
Less: Interest Revenue on Uninvested Funds - (1,358) (1,358)
Interest Expense on Entity Borrowings - 5,479 5,479
Subsidy Expense - (3,607) (3,607)
Upward Reestimates - (858) (858)
Downward Reestimates - 4,203 4,203
Subsidy Allowance - 515 515
Other 523 (231) 292
Loans Receivable Direct, Net, end of year $ 2,955 $ 196,956 $ 199,911
86 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Disaster Direct
(Dollars in Thousands)
As of September 30, 2022 Pre-1992 Loans Post-1991 Loans Total
Loans Receivable Disaster, Net, beginning of year $ 398 $ 244,081,351 $ 244,081,749
Loans Disbursed - 127,261,347 127,261,347
Principal & Interest Payments Received (92) (3,372,299) (3,372,391)
Foreclosed Property - (993) (993)
Loans Written Off - (366,244) (366,244)
Less: Interest Revenue on Uninvested Funds - (980,978) (980,978)
Interest Expense on Entity Borrowings - 4,773,168 4,773,168
Loan Modification - (172,204) (172,204)
Subsidy Expense - (14,756,882) (14,756,882)
Upward Reestimates - (28,554,343) (28,554,343)
Downward Reestimates - 482,028 482,028
Subsidy Allowance - (9,919,562) (9,919,562)
Other 13 1,844,337 1,1844,350
Loans Receivable Disaster, Net, end of year $ 319 $ 320,318,726 $ 320,319,045
Business Guarantied
(Dollars in Thousands)
As of September 30, 2022 Pre-1992 Loans Post-1991 Loans Total
Defaulted Guaranteed Loans Receivable, Net, beginning of year $ 1,546 $ 1,171,156 $ 1,172,702
Claim Payment to Lenders/Guarantee Payments - 6,023,484 6,023,484
Principal & Interest Payments Received (321) (797,697) (798,018)
Fees - (1,474,784) (1,474,784)
Foreclosed Property (4) (6,795) (6,799)
Loans Written Off - (5,419,911) (5,419,911)
Subsidy Allowance - 1,628,475 1,628,475
Other 236 (116,183) (115,947)
Defaulted Guaranteed Loans Receivable, Net, end of year $ 1,457 $ 1,007,745 $ 1,009,202
Financial Reporting (Unaudited) 87
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 7 General Property, Plant, and Equipment, Net
The SBA capitalizes equipment with a cost of $100,000 or more per unit and a useful life of two years or more at full cost and
depreciates using the straight-line method over the useful life. The SBA expenses equipment not meeting the capitalization criteria.
Leasehold improvements with modifications of $200,000 or more and a useful life of two years or more are capitalized and
amortized using the straight-line method over the useful life of the improvement or the lease term, whichever is shorter. Leasehold
improvements not meeting the capitalization criteria are expensed.
Software intended for internal use, whether internally developed, contractor developed, or purchased is capitalized at cost if the
unit acquisition cost is $500,000 or more and service life is at least two years. Capitalized software costs include all direct and
indirect costs incurred, including overhead to develop the software. Software for internal use is amortized using the straight-
line method over its useful life, not to exceed five years. Amortization begins when the software is put into production. The
costs of enhancements are capitalized when it is more likely than not that the enhancements will result in significant additional
capabilities. Costs that do not meet the capitalization criteria are expensed when incurred.
Assets meeting the capitalization thresholds are detailed in the following table.
(Dollars in Thousands)
As of September 30, 2022 2021
Leasehold Improvements $ 1,811 $ 1,811
Amortization of Leasehold Improvements (1,811) (1,785)
Net - 26
Software in Development 4,702 7,742
Software in Use 145,188 57,597
Amortization of Software in Use (49,173) (40,089)
Net 100,717 25,250
Total General Property and Equipment, Net $ 100,717 $ 25,276
The increase in Software in Use represents the SBA purchase of a perpetual and unlimited license, including unlimited access
and usage rights, for software and documentation developed by Goldschmitt & Associates LLC and Summit Technology Group.
This includes all software and the software development framework. The system being developed is intended to be the permanent
certification portal for veteran owned businesses.
88 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 8 Liabilities Not Covered by Budgetary Resources
Liabilities not covered by budgetary resources require future congressional action, whereas liabilities covered by budgetary
resources reflect prior congressional action. Regardless of when the congressional action occurs, when the liabilities are liquidated,
Treasury will finance the liquidation in the same way that it finances all other disbursements: using some combination of receipts,
other inflows, and borrowing from the public (if there is a budget deficit).
These liabilities consisted of the following categories, as shown in the table.
(Dollars in Thousands)
As of September 30, 2022 2021
Intragovernmental Liabilities - Benefit Program Contributions Payable
Unfunded Employment Taxes Payable $ 6,171 $ 2,137
Federal Employees' Compensation Act Payable 6,403 6,114
Total Intragovernmental Liabilities - Benefit Program Contributions Payable 12,574 8,251
Other than Intragovernmental Liabilities - Federal Employee Benefits Payable
Federal Employees' Compensation Act Actuarial Liability 27,477 30,128
Accrued Unfunded Annual Leave 41,544 41,504
Total Other than Intragovernmental Liabilities - Federal Employee Benefits Payable 69,021 71,632
Surety Bond Guarantee Program Future Claims 62,635 60,054
Total Other Liabilities
Total Liabilities Not Covered by Budgetary Resources $ 144,230 $ 139,937
Total Liabilities Covered by Budgetary Resources 394,924,807 503,349,228
Total Liabilities Not Requiring Budgetary Resources 54,566 49,898
Total Liabilities $ 395,123,603 $ 503,539,063
The liability for Surety Bond Guarantees is an estimate of future claims in the SBG Program for guaranties outstanding at year-end.
Financial Reporting (Unaudited) 89
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 9 Federal Debt and Interest Payable
Borrowings payable to the Treasury result from loans provided by the Treasury to fund the portion of direct loans not covered by
subsidy appropriations, the payment of downward subsidy reestimates, and other credit program disbursements (see Note 15). The
SBA makes periodic principal repayments to the Treasury based on the analysis of its cash balances and future disbursement needs.
All debt is intragovernmental and covered by budgetary resources. Debt transactions and resulting balances are shown in the
following table.
Intragovernmental Debt
(Dollars in Thousands)
As of September 30, 2022 2021
Principal Payable to the Bureau of the Fiscal Service
Beginning Balance $ 262,654,877 $ 176,173,660
New Borrowings 114,163,763 91,242,787
Repayments (14,017,172) (4,761,570)
Total Principal Payable to the Bureau of the Fiscal Service 362,801,468 262,654,877
Interest Payable
Change in Interest Payable - Liquidating Funds 251 251
Total Interest Payable 251 251
Ending Balance $ 362,801,719 $ 262,655,128
NOTE 10 Net Assets of Liquidating Funds Due to Treasury
Unobligated balances of liquidating funds are transferred to the Treasury general fund at the end of the fiscal year. Net Assets of
Liquidating Funds Due to Treasury is the residual of the book value of assets less liabilities in the Liquidating Funds for loans
made prior to FY 1992 that is not yet available for transfer.
(Dollars in Thousands)
As of September 30, 2022 2021
Disaster Loan Fund $ 318 $ 396
Business Loan and Investment Fund 6,738 7,973
Total Due to Treasury $ 7,056 $ 8,369
90 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 11 Other Liabilities
Other liabilities are shown in the following table.
(Dollars in Thousands)
As of September 30, 2022 2021
Other Liabilities - Intragovernmental
Employment Taxes Payable $ 2,117 $ 3,850
Payable to Treasury 6 6
Total Other Liabilities - Intragovernmental $ 2,123 $ 3,856
Other Liabilities - Other than Intragovernmental
Accrued Funded Payroll and Leave $ 45,353 $ 58,075
Suspense Accounts 54,566 49,898
Total Other Liabilities - Other than Intragovernmental $ 99,919 $ 107,973
All liabilities reflected are current liabilities.
NOTE 12 Leases
The SBA leases its facilities from the General Services Administration (GSA). The SBA enters into an Occupancy Agreement
with the GSA for each facility. The GSA, in turn, leases commercial facilities or provides space in federal buildings. Agreements
for space in federal buildings can be vacated with 120 to 180 days’ notice. However, the SBA anticipates continuing the same
or similar facilities leases in the future. These federal leases with the GSA are operating leases and are expensed in the Statement
of Net Cost when incurred. FY 2022 and FY 2021 historical facilities lease costs were $44.8 million and $47.0 million. Future
lease payments are based on FY 2023 GSA base year estimates. Projections after the base year assume a 3 percent inflation
factor. Payments after 5 years reflect only current leases that will still be in effect, projected to the end of each lease term. Lease
Projections after 2027 increased due to the increase in the total number of Occupancy Agreements still in effect until 2042.
Future Facilities Operating Lease Payments
(Dollars in Thousands)
Fiscal Year Lease Projections
2023 $ 37,294
2024 38,413
2025 39,565
2026 40,752
2027 41,975
After 2027 116,606
Total $ 314,605
Financial Reporting (Unaudited) 91
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 13 Non-entity Reporting
Non-entity Assets are assets held by the SBA but not available to the SBA. The primary non-entity asset is for the SBA’s downward
subsidy reestimates in its loan programs. Because the loan programs are discretionary, the downward reestimates are not available
to the SBA and are returned to the Treasury in the fiscal year following the accrual of the reestimates. During the year, these
general fund accounts contain the SBA’s prior year reestimates. At year-end, the funds are swept by the Treasury. Also at year-end,
the SBA accrues the current year’s reestimates, including downward reestimates as applicable. For the downward reestimates in
the loan financing funds, the SBA records an accrual adjustment that records a transfer out to the non-entity fund, a reduction
of subsidy allowance or loan guaranty liability, and an account payable to the non-entity fund. In the loan program funds, the
SBA records a reduction of loan subsidy expense and the associated impact on the net cost. The non-entity Treasury general funds
contain a corresponding account receivable in anticipation of the receipt of the downward reestimates in the following year and a
Downward Reestimate Payable to the Treasury.
For consolidated financial statement presentation, the SBA eliminates the payable to the non-entity fund and the non-entity
Treasury general fund receivable from the financing funds because both are included in the SBA’s reporting entity. The Downward
Reestimate Payable to the Treasury in the non-entity Treasury general fund is not eliminated and is reflected on the Balance Sheet
as a liability line item.
(Dollars in Thousands)
As of September 30, 2022 2021
Entity
Financing Fund Payable $ (5,591,451) $ (11,742,037)
Non-entity
Miscellaneous Receipts Fund Receivable 5,591,451 11,742,037
Downward Reestimate Payable to Treasury (5,591,451) (11,742,037)
Balance Sheet Reported Payable $ (5,591,451) $ (11,742,037)
See Note 6.I for information on the Downward Reestimate Payable.
92 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 14 Consolidated Statement of Net Cost
Federal cost accounting standards require the SBA to report operating costs by strategic goal activity. Full costs include all direct
and indirect costs for a strategic goal. Full costs are reduced by exchange (earned) revenues to arrive at net operating cost.
Operating Cost
The full and net operating costs of the SBA’s major strategic goals are presented in the Consolidated Statement of Net Cost. Full
costs comprise all direct costs for the strategic goals and indirect costs that can be reasonably assigned or allocated to the strategic
goals, including employee pension and other retirement benefit costs paid by the OPM and charged to the SBA.
Earned Revenue
Earned revenue arises from exchange transactions and is deducted from the full cost of the SBA’s major strategic goals to arrive at
net strategic goals costs. The SBA recognizes earned revenue when reimbursements are payable from other federal agencies and the
public as a result of costs incurred or services performed. A major source of earned revenue includes interest earned on the SBA’s
outstanding business and disaster loan portfolios, and interest earned on uninvested funds in the credit reform financing accounts.
Reporting by Strategic Goal
The SBA reports net costs consistent with its three strategic goals on a full cost allocation basis. The SBA issued its FY 2022–2026
Strategic Plan this year, and FY 2021 costs have been realigned to be comparable to the new strategic plan architecture. Strategic
Goal 1 (Ensure Equitable and Customer-Centric Design and Delivery of Programs to Support Small Businesses and Innovative
Startups) aims to improve access to SBA programs and services for all entrepreneurs. Strategic Goal 2 (Build Resilient Businesses
and a Sustainable Economy) focuses on how the SBA can rebuild a sustainable economy fueled by small businesses. Strategic Goal
3 (Implement Strong Stewardship of Resources for Greater Impact) focuses on the SBA resources and ways to optimize them to
best support the small business community. Agency administrative overhead costs are fully allocated to the programs in Strategic
Goals 1, 2, and 3. The Management’s Discussion and Analysis section of the SBA’s annual Agency Financial Report includes
additional detail on the SBA’s strategic goals. Costs Not Assigned to Strategic Goals are costs associated with the Office of the
Inspector General. The OIG’s mission and funding are separate and independent parts of the SBA and are therefore not assigned.
Intragovernmental Gross Cost is incurred by the SBA in exchange transactions with other federal agencies. Gross Cost with the
Public is incurred in exchange transactions with the public. Intragovernmental Earned Revenue is earned by the SBA in exchange
transactions with other federal agencies. Earned Revenue from the Public is earned in exchange transactions with the public. The
General Services Administration and the Treasury are the SBA’s primary intragovernmental trading partners.
The classification as Intragovernmental Cost or Gross Cost with the Public relate to the source of goods and services received by
the SBA and not to the classification of related revenue. The classification of revenue or cost being defined as “intragovernmental”
or “public” is defined on a transaction-by-transaction basis. The purpose of this classification is to enable the Federal Government
to provide consolidated financial statements and not to match the public and intragovernmental revenue with costs that are
incurred to produce public and intragovernmental revenue.
Financial Reporting (Unaudited) 93
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
(Dollars in Thousands)
Gross Cost and Exchange Revenue
For the Years Ended September 30, 2022 2021
STRATEGIC GOAL 1:
Ensure Equitable and Customer-Centric Design and Delivery of Programs to
Support Small Businesses and Innovative Startups
Intragovernmental Gross Cost $ 170,900 $ 168,841
Other than Intragovernmental Gross Cost (834,344) 26,492,849
Total Strategic Goal 1 Gross Cost (663,444) 26,661,690
Intragovernmental Earned Revenue 277,457 4,208,498
Other than Intragovernmental Earned Revenue 111,600 127,664
Total Strategic Goal 1 Earned Revenue 389,057 4,336,162
STRATEGIC GOAL 2:
Build Resilient Businesses and a Sustainable Economy
Intragovernmental Gross Cost $ 4,952,660 $ 4,131,299
Other than Intragovernmental Gross Cost 48,073,605 322,573,765
Total Strategic Goal 2 Gross Cost 53,026,265 326,705,064
Intragovernmental Earned Revenue 980,978 1,021,155
Other than Intragovernmental Earned Revenue 4,167,450 2,942,289
Total Strategic Goal 2 Earned Revenue 5,148,428 3,963,444
STRATEGIC GOAL 3:
Implement Strong Stewardship of Resources for Greater Impact
Intragovernmental Gross Cost $ 19,587 $ 42,317
Other than Intragovernmental Gross Cost 130,427 1,142,601
Total Strategic Goal 3 Gross Cost 150,014 1,184,918
COST NOT ASSIGNED TO STRATEGIC GOALS
Intragovernmental Gross Cost $ 15,767 $ 3,647
Other than Intragovernmental Gross Cost 105,832 27,840
Total Gross Cost Not Assigned to Strategic Goals 121,599 31,487
Net Cost of Operations $ 47,096,949 $ 346,283,553
94 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 15 Statement of Budgetary Resources
The Statement of Budgetary Resources presents information about total budgetary resources available to the SBA and the status
of those resources as of September 30, 2022 and 2021. The SBA’s budgetary resources were $44.2 billion and $413.4 billion for
the fiscal years ended September 30, 2022 and 2021. Additionally, $375.8 billion and $933.7 billion of nonbudgetary resources
(including borrowing authority and collections of loan principal, interest, and fees in financing funds) were reported for the fiscal
years ended September 30, 2022 and 2021.
Net Adjustments to Unobligated Balance, Brought Forward, October 1
The beginning balance brought forward for FY 2022 decreased by $3.3 billion in total. This amount reflects an increase of $3.6
billion in recoveries and a decrease of $6.9 billion in Other Changes in Unobligated Balance. This other change represents the
prior year repayment of debt.
Permanent Indefinite Appropriations
The SBA receives permanent indefinite appropriations annually to fund increases in the projected subsidy costs of loan programs,
as determined by the reestimation process required by the FCRA. The appropriations are received initially in the SBA Program
Funds, and then transferred to the Financing Funds, where they are used to fund obligations. The SBA’s Liquidating Funds also
receive permanent indefinite appropriations to fund obligations. The Financing Funds are used to account for credit program
obligations made subsequent to FY 1991. Liquidating Funds are used to account for credit program obligations made prior to FY
1992.
Decreases in projected subsidy costs in the Financing Funds are returned to the Treasury through the SBA’s annual reestimation
process. The prior year’s ending unobligated balances in the SBA’s Liquidating Funds are also transferred to the Treasury annually.
Borrowing Authority and Terms of Borrowing
The SBA is authorized to borrow from the Treasury’s Bureau of the Fiscal Service when funds needed to disburse direct loans
and purchase guarantied loans exceed subsidy costs and collections in the nonbudgetary loan financing funds. In FY 2022 and
FY 2021, the SBA received $113.7 billion and $93.9 billion of borrowing authority from the OMB. At the end of FY 2022, the
SBA had $3.2 billion in borrowing authority carried over to fund direct loans and default claims to be disbursed in the future.
At the end of FY 2021, the SBA had $3.6 billion in available borrowing authority. The SBA pays interest to the Treasury based
on the Treasury’s cost of funds. The rate at which interest is paid to the Treasury on the amounts borrowed (or received from the
Treasury on uninvested cash balances) in a loan financing fund for a particular cohort is a disbursement-weighted average discount
rate for cohorts prior to FY 2001 and a single effective rate for cohorts beginning with FY 2001. The SBA calculates and repays
borrowings not needed for working capital at mid-year and at year-end for prior year cohorts. The SBA uses the loan principal,
interest, and fees collected from the borrowers in its loan financing funds to repay its Treasury borrowings. The repayment
maturity dates for borrowings from the Treasury are based on the loan maturities used in the subsidy calculation. The maturities
range from 16 years for direct business loans, 25 years for guarantied business loans, and 30 years for disaster loans.
Unobligated Balances
Unobligated balances at September 30, 2022 and 2021 are $44.4 billion and $299.1 billion, which include $30.5 billion and
$6.4 billion of unavailable unobligated balances. These balances are unavailable primarily because they are unapportioned by the
OMB. The SBA accumulates the majority of the unobligated balances in its nonbudgetary financing accounts during the fiscal
year ($35.6 billion in FY 2022 and $234.2 billion in FY 2021) from fees and subsidy to fund default claims in future years. In
addition, unobligated balances are accumulated in budgetary accounts from appropriations ($8.8 billion in FY 2022 and $65.0
billion in FY 2021) that are used to finance the SBA’s ongoing program operations. The SBA requests OMB apportionments as
needed, and after OMB approval, apportioned amounts are available for obligation.
Financial Reporting (Unaudited) 95
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Undelivered Orders
Undelivered orders consist of goods or services ordered and obligated that the SBA has not received. This includes any orders that
have been paid in advance, but for which delivery or performance has not yet occurred.
(Dollars in Millions)
As of September 30, 2022 2021
Intragovernmental
Unpaid $ 1,902.8 $ 3,449.1
Paid 2.5 2.9
Total Intragovernmental 1,905.3 3,452.0
Other than Intragovernmental
Unpaid $ 14,019.7 $ 20,110.1
Paid 16.2 17.8
Total Other than Intragovernmental 14,035.9 20,127.9
Total Undelivered Orders $ 15,941.2 $ 23,579.9
Differences between the Statement of Budgetary Resources and the Budget of the
U.S. Government
There was no material difference between the FY 2021 Statement of Budgetary Resources and the President’s FY 2023 budget
submission. The President’s FY 2024 Budget with actual numbers for FY 2022 has not yet been published and will be available
at a later date at President’s Budget | The White House. The SBA expects no material differences between the President’s Budget
“actual” column and the FY 2022 reported results when the budget becomes available in February 2023.
Distributed Offsetting Receipts
Distributed offsetting receipts are amounts that an agency collects from the public or from other Government agencies that are
used to offset or reduce an agency’s budget outlays. Agency outlays are measured on both a gross and net basis, with net outlays
being reduced by offsetting receipts (and other amounts).
96 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 16 Reconciliation of Net Operating Cost and Net Budgetary Outlays
Statement of Federal Financial Accounting Standards 53 amends requirements for a reconciliation between budgetary and
financial accounting information established by SFFAS 7. SFFAS 53 provides for the budget and accrual reconciliation to replace
the statement of financing. The BAR explains the relationship between the entity’s net outlays on a budgetary basis and the net
cost of operations during the reporting period.
Budgetary accounting is used for planning and control purposes and relates to both the receipt and use of cash. Financial
accounting is intended to provide a picture of the government’s financial operations and financial position and presents
information on an accrual basis. The accrual basis includes information about costs arising from the consumption of assets and
the incurrence of liabilities. The reconciliation of net outlays presented on a budgetary basis, and the net cost, presented on an
accrual basis, provides an explanation of the relations between budgetary and financial accounting information. The reconciliation
serves not only to identify costs paid for in the past and those that will be paid in the future, but also to assure integrity between
budgetary and financial accounting. The analysis illustrates this reconciliation by listing the key differences between net cost and
net outlays.
Reestimate expense is recorded at the end of the fiscal year and funded in the following fiscal year. The SBA’s annual reestimate
process updates program costs based upon actual cash flow experience and forecasts of future cash flow. As a part of the reestimate
process there is an adjustment for the President’s Budget where expenses for downward adjustments are recorded in the budgetary
program funds and the outlays are from financing funds creating a difference between budgetary outlays and net cost. Additional
discussion of reestimates is in Note 6.I and referenced throughout Note 6.
Changes in assets recognize the timing differences between the recognition of income and the receipt of funds. These are primarily
non-federal advances.
Changes in liabilities recognize the timing difference between the recording and payment of expenses.
Other financing sources include SBA’s imputed cost for retirement benefits. This is an expense for the Agency that is funded by
the OPM.
Components of budget outlays that are not part of net operating cost include disbursements and receipts that are not a revenue
or expense.
Financial Reporting (Unaudited) 97
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Budget and Accrual Reconciliation
(Dollars in Thousands)
Federal Non-federal Total 2022
Net Operating Cost (SNC) $ 3,900,479 $ 43,196,470 $ 47,096,949
Components of Net Operating Cost not Part of the Budgetary Outlays
General Property, plant and equipment depreciation expense - (9,110) (9,110)
Year-end credit reform subsidy reestimates (23,073,605) - (23,073,605)
President's Budget adjustment to downward reestimates 188,692 - 188,692
Downward Modification 63,824 - 63,824
President's Budget adjustment to upward reestimates 13,491 - 13,491
Modification Adjustment Transfer (MAT), net - 364,358 364,358
Increase/(decrease) in assets not affecting Budget Outlays:
Accounts Receivable, net - 2,898 2,898
Advances 489 (2,575) (2,086)
Loans Receivable, net - 162 162
Other assets - (1,476) (1,476)
(Increase)/decrease in liabilities not affecting Budget Outlays:
Accounts Payable 887 102,959 103,846
Accrued Grant Liability - (94,578) (94,578)
Federal Employee Benefits Payable - 2,477 2,477
Surety Bond Guarantee Program Future Claims - (2,581) (2,581)
Other Liabilities (3,262) 12,848 9,586
Other Financing Sources:
Imputed Cost (44,092) - (44,092)
Total Components of Net Operating Cost Not Part of the Budget Outlays $ (22,853,576) $ 375,382 $ (22,478,194)
Components of the Budget Outlays That Are Not Part of Net Operating Cost
Acquisition of Capital Assets 84,551 84,551
Other Financing Sources:
Donation of Cash and Cash Equivalents - (506) (506)
Transfer out (in) without reimbursement (115) - (115)
Effect of prior year credit reform subsidy re-estimates 10,462,176 - 10,462,176
Total Components of the Budget Outlays That Are Not Part of Net Operating $ 10,462,061 $ 84,045 $ 10,546,106
Cost
Other Reconciling Items
Distributed Offsetting Receipts - (11,965,553) (11,965,553)
Total Other Reconciling Items $ - $ (11,965,553) $ (11,965,553)
Total Net Outlays $ 23,199,308
Budgetary Agency Outlays, net (SBR)
Budgetary Agency Outlays, net $ 23,199,308
98 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Budget and Accrual Reconciliation, Continued
(Dollars in Thousands)
Federal Non-federal Total 2021
Net Operating Cost (SNC) $ (883,549) $ 347,167,102 $ 346,283,553
Components of Net Operating Cost not Part of the Budgetary Outlays
General Property, plant and equipment depreciation expense - (2,227) (2,227)
Year-end credit reform subsidy re-estimates 1,266,370 - 1,266,370
President's Budget adjustment to downward re-estimates (778,039) - (778,039)
Downward Modification 24,134 - 24,134
President's Budget adjustment to upward re-estimates 569,892 - 569,892
Modification Adjustment Transfer (MAT), net - (21,626) (21,626)
Increase/(decrease) in assets not affecting Budget Outlays:
Accounts and Taxes Receivable, net - (1,584) (1,584)
Advances (1,332) (23,557) (24,889)
Loans Receivable, net - (721) (721)
Other assets - (6,826) (6,826)
(Increase)/decrease in liabilities not affecting Budget Outlays:
Accounts Payable 8,042 (302,592) (294,550)
Accrued Grant Liability - (36,642) (36,642)
FECA Actuarial Liability - (2,054) (2,054)
Surety Bond Guarantee Program Future Claims - 6 6
Other Liabilities (3,246) (10,876) (14,122)
Other Financing Sources:
Imputed Cost (35,092) - (35,092)
Transfer out (in) without reimbursement (202) - (202)
Total Components of Net Operating Cost Not Part of the Budget Outlays $ 1,050,527 $ (408,699) $ 641,828
Components of the Budget Outlays That Are Not Part of Net Operating Cost
Other Financing Sources:
Effect of prior year credit reform subsidy re-estimates 3,633,605 - 3,633,605
Total Components of the Budget Outlays That Are Not Part of Net Operating $ 3,633,605 $ - $ 3,633,605
Cost
Other Reconciling Items
Distributed Offsetting Receipts - (27,837,806) (27,837,806)
Total Other Reconciling Items $ - $ (27,837,806) $ (27,837,806)
Total Net Outlays $ 322,721,180
Budgetary Agency Outlays, net (SBR)
Budgetary Agency Outlays, net $ 322,721,180
Financial Reporting (Unaudited) 99
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 17 COVID-19 Activity
History
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act PL 116-136) was enacted to provide
emergency and immediate national economic relief and assistance across the American economy, including to small businesses,
workers, families, and the healthcare system, to alleviate the severe economic hardships and public health threat created by
the COVID-19 pandemic. The CARES Act was subsequently modified in legislation in April, June, and July of 2020 to add
funding and adjust programs for continued pandemic response. Agency disaster declarations were announced for all states
and six territories of the United States, enabling existing disaster response programs to respond to the pandemic. CARES Act
programs included:
• Subsidy for Paycheck Protection Program (PPP)
• CARES Act Debt Relief
• Economic Injury Disaster Loan Emergency Advance (EIDL) Grants
• Subsidy for Coronavirus Disaster Assistance Loans
More funding and programs were specified in the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
(Economic Aid Act), PL 116-260. Additionally, the American Rescue Plan Act of 2021, PL 117-2, modified and extended existing
programs and created new programs to support small businesses and other entities that have been affected during the COVID-19
pandemic. Additional programs include:
• Modifications to the Paycheck Protection Program
• Business Loan Fee Waiver and Debt Relief
• Targeted EIDL and Supplemental EIDL Advance
• Restaurant Revitalization Program
• Shuttered Venue Operators Grants
• Community Navigator Pilot Program
Some COVID-19 program applications closed due to funding availability in FY 2021. Authority for the PPP and Debt Relief
programs expired at the end of FY 2021, and new Coronavirus Disaster Assistance Loans and Targeted EIDL Grant program no
longer accepted applications after December 31, 2021.
Subsidy for Paycheck Protection Program
The Paycheck Protection Program (PPP) was established by the CARES Act. Under the Economic Aid Act additional funds
were appropriated to make new First Draw PPP loans. This act also allowed certain eligible borrowers that previously received a
PPP loan to apply for a Second Draw PPP loan with the same general loan terms as their First Draw PPP loan. It also permitted
borrowers that had not received a First Draw PPP loan in 2020 to be eligible to apply for both a First and Second draw loan under
certain circumstances.
The Paycheck Protection Program ended on May 31, 2021. Existing borrowers may be eligible for loan forgiveness based on
specified criteria.
Pursuant to P.L.117-58, 135 STAT 1347 Sec 90007(d)(1), $4.7 billion was permanently rescinded. This was recorded in
fund X1154.
100 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Business Loan Fee Waiver and Debt Relief
As a part of the CARES Act, the SBA is authorized to pay six months of principal, interest, and any associated fees that borrowers
owe for all 7(a), 504, and Microloans reported in regular servicing status (excluding Paycheck Protection Program loans).
These original provisions were amended on December 27, 2020, through the Economic Aid to Hard-Hit Small Businesses,
Non-Profits and Venues Act (Economic Aid Act). The Economic Aid Act revised the eligibility criteria for assistance to include
all 7(a), 504, and Microloans approved up to September 27, 2020, even if not fully disbursed. Additionally, the Economic Aid
Act provided additional relief for covered loans and for loans in hard hit industries approved prior to March 27, 2020, as well as
payments for covered loans made between February 1, 2021 through September 30, 2021.
The Economic Aid Act also included temporary modifications to the 7(a) Loan Program, including temporary higher guaranty
percentages and fee reductions on eligible business loans, and an increase in the maximum SBA Express loan amount.
Pursuant to P.L. 117-58, 135 STAT 1347 Sec 90007(d)(2) of the unobligated balances from amounts made available under
P.L. 116-260, $255.2 million was permanently rescinded. This was recorded in fund X1154.
Targeted Economic Injury Disaster Loan Emergency (EIDL) Advance and
Supplemental Advance
The COVID-19 Targeted EIDL Advance and Supplemental EIDL Advance programs provide funding to help small businesses
recover from the economic impacts of the COVID-19 pandemic. No appropriations were received this fiscal year; funding is
limited to carryover funding.
As of January 1, 2022, the SBA stopped accepting applications for new COVID EIDL advances.
Pursuant to P.L. 117-58, 135 STAT 1347 Sec 90007(b)(1) of the unobligated balances from amounts made available under
P.L. 116-260, $15.8 billion was permanently rescinded. This was recorded in fund X0500.
Subsidy for Coronavirus Disaster Assistance Loans
Based on Agency disaster declarations, the SBA offered disaster designated states and territories low-interest federal disaster loans
for working capital to small businesses suffering substantial economic injury due to the COVID-19 pandemic under P.L. 116-139,
Division B Title II.
Due to the continued adverse effects of the COVID-19 emergency, the SBA is extending the previous deferments granted to
COVID EIDL Borrowers to provide an additional 6-month deferment of principal and interest payments on their COVID
EIDLs. This 6-month deferment extension is effective for all COVID EIDLs approved in calendar years 2020, 2021, and 2022.
COVID EIDLs have a total deferment of 30 months from the date of the Note.
Existing SBA disaster loans approved prior to 2020 in regular servicing status as of March 1, 2020, received an automatic
deferment of principal and interest payments through December 31, 2020. This initial deferment period was subsequently
extended through March 31, 2021. An additional 12-month deferment of principal and interest payments will be automatically
granted to these borrowers. Borrowers will resume their regular payment schedule with the payment immediately preceding March
31, 2022, unless the borrower voluntarily continues to make payments while on deferment. Interest will continue to accrue on
the outstanding balance of the loan throughout the duration of the deferment.
As of May 6, 2022, the SBA is no longer processing COVID-19 EIDL loan increase requests or requests for reconsideration of
previously declined loan applications due to a lack of available funding.
Pursuant to P.L. 117-58, 135 STAT 1346 Sec 90007(a)(1) of the unobligated balances from amounts made available under
P.L. 116-139, $13.5 billion was permanently rescinded. This was recorded in fund X1152.
Financial Reporting (Unaudited) 101
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Restaurant Revitalization Fund
This program provides emergency assistance for eligible restaurants, bars, and other qualifying businesses impacted by COVID-19.
The American Rescue Plan Act established the Restaurant Revitalization Fund (RRF) to provide funding to help restaurants and
other eligible businesses keep their doors open. Recipients are not required to repay the funding as long as funds are used for
eligible uses no later than March 11, 2023.
On July 2, 2021, the SBA announced that the $28.6 billion dollar fund had been exhausted and the program closed.
Shuttered Venue Operators Grant
This funding provides emergency assistance for eligible venues affected by COVID-19. The Shuttered Venue Operators Grant
(SVOG) program was established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, and amended
by the American Rescue Plan Act.
As of August 20, 2021, SVOG was no longer accepting new applications.
Pursuant to P.L.117-158, Section 4(a)(3), of the unobligated balance from amounts made available under P.L. 117-2, $1.2 billion
was permanently rescinded. This was recorded in fund X0700.
Community Navigator Pilot Program
P.L. 117-2, Sec. 5004 establishes a Community Navigator pilot program to make grants to, or enter into contracts or cooperative
agreements with, private nonprofit organizations, resource partners, States, Tribes, and units of local government to ensure the
delivery of free community navigator services to current or prospective owners of eligible businesses in order to improve access to
assistance programs and resources made available because of the COVID-19 pandemic by federal, state, tribal, and local entities.
This public law appropriated $100 million for the program and $75 million for outreach and education. The funding was available
until September 30, 2022, for carrying out this program. The authority of the Administrator to make grants under this section
shall terminate on December 31, 2025.
Salaries and Expenses Administrative Funding
Pursuant to P.L. 117-58, 135 STAT 1348 Sec 90007(g)(1) of the unobligated balances from amounts made available under
P.L. 116-136, P.L. 116-139, and P.L. 116-260, $45.8 million was permanently rescinded. This was recorded in fund X0100.
The impact of COVID-19 programs on various financial statement and footnote lines are decreases and are the result of these
specific programs being closed, with no additional funding provided.
(Dollars in Thousands)
COVID-19 Activity Funded by DEF Code L, M, N, O, P, U, or V FY 2022 FY 2021
Budgetary Resources: Unobligated (and Unexpired) Balance Carried Forward from PY $ 64,520,626 $ 173,804,108
New Budget Authority (+) - 378,599,623
Rescissions(-)/Other Changes (+/-) to Budgetary Resources (28,763,165) (144,487,635)
Budgetary Resources Obligated (-) 23,035,026 343,395,470
Budgetary Resources: Ending Unobligated (and Unexpired) Balance to be Carried Forward 10,457,142 64,520,626
Outlays, Net (Total) 23,712,329 345,858,819
102 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
NOTE 18 Reclassification of Financial Statement Line Items for Financial
Report Compilation Process
To prepare the Financial Report of the U.S. Government (Financial Report), the Department of the Treasury requires agencies
to submit an adjusted trial balance, which is a listing of amounts by U.S. Standard General Ledger account that appear in the
financial statements. The Treasury uses the trial balance information reported in the Government-wide Treasury Account Symbol
Adjusted Trial Balance System (GTAS) to develop a Reclassified Statement of Net Cost and a Reclassified Statement of Changes
in Net Position for each agency, which are accessed using GTAS. The Treasury eliminates all intragovernmental balances from the
reclassified statements and aggregates lines with the same title to develop the Financial Report statements. This note shows the
SBA’s financial statements and the SBA’s reclassified statements prior to elimination of intragovernmental balances and prior to
aggregation of repeated Financial Report line items. A copy of the 2021 Financial Report can be found here: Bureau of the Fiscal
Service - Reports, Statements & Publications (treasury.gov) and a copy of the 2022 Financial Report will be posted to this site as
soon as it is released.
The term “intragovernmental” is used in this note to refer to amounts that result from other components of the
Federal Government.
The term “non-federal” is used in this note to refer to Federal Government amounts that result from transactions with non-federal
entities. These include transactions with individuals, businesses, non-profit entities, and state, local, and foreign governments.
The SBA does not have funds from dedicated collections.
Financial Reporting (Unaudited) 103
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
(Dollars in Thousands)
Line Items Used to Prepare FY 2022 Government-Wide
FY 2022 SBA Statement of Net Cost
Statement of Net Cost
STRATEGIC GOAL 1:
Ensure Equitable and Customer-Centric Design
and Delivery of Programs to Support Small
Businesses and Innovative Startups
Non-Federal Cost
Gross Cost $ (663,444) $ 47,475,519 Non-Federal Gross Cost
Less: Earned Revenue 389,057 47,475,519 Total Non-Federal Cost
Net Cost of Strategic Goal 1 (1,052,501)
Intragovernmental Costs
127,275 Benefit Program Costs
STRATEGIC GOAL 2: 44,092 Imputed Costs
Build Resilient Businesses and a 88,520 Buy /Sell Costs
Sustainable Economy
Gross Cost 53,026,265 4,841,591 Borrowing and Other Interest Expense
Less: Earned Revenue 5,148,428 57,437 Other Expenses (w/o Reciprocals)
Net Cost of Strategic Goal 2 47,877,837 5,158,915 Total Intragovernmental Costs
52,634,434 Total Reclassified Gross Cost
STRATEGIC GOAL 3:
Implement Strong Stewardship of Resources 4,279,050 Non-federal Earned Revenue
for Greater Impact
Gross Cost 150,014
Net Cost of Strategic Goal 3 150,014 Intragovernmental Earned Revenue
881 Buy/Sell Revenue
1,257,554 Borrowing and Other Interest Revenue
COST NOT ASSIGNED TO STRATEGIC GOALS 1,258,435 Total Intragovernmental Earned Revenue
Gross Cost 121,599
Net Cost Not Assigned to Strategic Goals 121,599 5,537,485 Total Reclassified Earned Revenue
Net Cost of Operations $ 47,096,949 $ 47,096,949 Net Cost
104 Financial Reporting (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
(Dollars in Thousands)
Line Items Used to Prepare FY 2022 Government-Wide
FY 2022 SBA Statement of Changes in Net Position
Statement of Changes in Net Position
Funds from other than Dedicated Collections
Unexpended Appropriations:
Beginning balance $ 69,132,143 $ 69,132,143 Unexpended Appropriations, Beginning
Balance
Appropriations Received 12,693,825 (22,791,696) Appropriations Received
Other Adjustments:
Rescissions (35,467,645)
Adjustment - Cancelled Authority (17,235)
Return of Unrequired Liquidating Fund (490)
Appropriation
Other Adjustments (151)
Appropriations Used (35,782,109) (35,782,109) Appropriations Used
Total Unexpended Appropriations $ 10,558,338 $ 10,558,338 Total Unexpended Appropriations
Cumulative Results of Operations:
Beginning Balance $ (10,253,525) $ (10,253,525) Cumulative Results, Beginning Balance
Other Adjustments:
Current Year Liquidating Equity Activity (460) 35,782,109 Appropriations Expended
Appropriations Used 35,782,109 10,000 Non-expenditure Transfers-In of Unexpended
Appropriations and Financing Sources
(460) Non-expenditure Transfers-Out of Unexpended
Appropriations and Financing Sources
Donations of Cash and Cash Equivalents 506
Transfers In/Out Without Reimbursement 10,115 115 Expenditure Transfers-out of Financing Sources
35,791,764 Total Appropriations Used
30,537 Other Taxes and Receipts
30,537 Total Non-Federal Non-Exchange Revenue
Imputed Financing 44,092 44,092 Imputed Financing
Non-Entity Collections Transferred to the General
Other: (12,336,080)
Fund of the U.S. Government
Accrual for Non-Entity Amounts to be Collected
Non-entity Activity (6,155,464) 6,150,585 and Transferred to the General Fund of the U.S.
Government
(6,141,403) Total Transfers and Imputed Financing
Net Cost of Operations 47,096,949 47,096,949 Net Cost of Operations
Net Change in Cumulative Results of Operations (17,416,051)
Total Cumulative Results of Operations $ (27,669,576) $ (27,669,576) Total Cumulative Results of Operations
Ending Net Position $ (17,111,238) $ (17,111,238) Net Position
Financial Reporting (Unaudited) 105
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
REQUIRED SUPPLEMENTARY INFORMATION
COMBINING STATEMENT OF BUDGETARY RESOURCES
For the Year Ended September 30, 2022
(Dollars in Thousands)
BLIF DLF SBGRF SE OIG
Nonbudgetary Nonbudgetary
Budgetary Budgetary Budgetary Budgetary Budgetary
BUDGETARY RESOURCES Financing Financing
Unobligated Balance from Prior Year Budget Authority, net
$ 9,891,558 $ 227,226,403 $ 18,592,257 $ 2,359,126 $ 107,561 $ 1,279,978 $ 55,614
(discretionary and mandatory)
Appropriations (discretionary and mandatory) 4,780,958 - (1,031,430) 10,962 - 820,320 24,271
Borrowing Authority (discretionary and mandatory) - 81,055 - 113,622,213 - - -
Spending Authority from Offsetting Collections - 11,385,028 - 21,100,759 18,907 810,409 230
Total Budgetary Resources $ 14,672,516 $ 238,692,486 $ 17,560,827 $ 137,093,060 $ 126,468 $ 2,910,707 $ 80,115
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total) $ 9,717,743 $ 206,824,983 $ 16,807,323 $ 133,336,338 $ 17,697 $ 1,565,634 $ 37,227
Unobligated Balance, end of year:
Apportioned, unexpired accounts 2,356,017 8,242,645 464,106 482,491 3,423 848,343 40,228
Unapportioned, unexpired accounts 701,110 23,624,858 289,398 3,274,231 105,348 121,314 11
Unexpired Unobligated Balance, end of year 3,057,127 31,867,503 753,504 3,756,722 108,771 969,657 40,239
Expired Unobligated Balance, end of year 1,897,646 - - - - 375,416 2,649
Unobligated Balance, end of year (total) 4,954,773 31,867,503 753,504 3,756,722 108,771 1,345,073 42,888
Total Status of Budgetary Resources $ 14,672,516 $ 238,692,486 $ 17,560,827 $ 137,093,060 $ 126,468 $ 2,910,707 $ 80,115
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 9,900,820 $ 17,134,131 $ (5,445) $ 822,032 $ 35,688
Distributed Offsetting Receipts - - - (11,965,553) -
Agency Outlays, net (discretionary and mandatory) $ 9,900,820 $ 17,134,131 $ (5,445) $ (11,143,521) $ 35,688
Disbursements, net (total) (mandatory) $ 194,437,735 $ 108,016,489
(Dollars in Thousands)
ADVOCACY EDP EIDL SVOG RRF WCF BATF TOTAL TOTAL
Nonbudgetary
BUDGETARY RESOURCES Budgetary - Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary
Financing
Total
Unobligated Balance from Prior Year Budget
$ 2,804 $ 266,738 $ 29,311,549 $ 6,539,178 $ 147,506 $ 8,473 $ 175 $ 66,203,391 $ 229,585,529 $ 295,788,920
Authority, net (discretionary and mandatory)
Appropriations (discretionary and mandatory) 9,466 290,150 (26,487,175) (1,200,000) 8,168 - (22,785,272) 10,962 (22,774,310)
Borrowing Authority (discretionary and mandatory) - - - - - - - - 113,703,268 113,703,268
Spending Authority from Offsetting Collections - - - - - 1 506 830,053 32,485,787 33,315,840
Total Budgetary Resources $ 12,270 $ 556,888 $ 2,824,374 $ 5,339,178 $ 147,506 $ 16,642 $ 681 $ 44,248,172 $ 375,785,546 $ 420,033,718
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total) $ 7,494 $ 478,642 $ 1,927,428 $ 4,879,290 $ 15,178 $ 1,401 $ 10 $ 35,455,067 $ 340,161,321 $ 375,616,388
Unobligated Balance, end of year:
Apportioned, unexpired accounts 4,776 55,034 885,896 459,888 60,915 15,241 265 5,194,132 8,725,136 13,919,268
Unapportioned, unexpired accounts - - - - 71,413 - 406 1,289,000 26,899,089 28,188,089
Unexpired Unobligated Balance, end of year 4,776 55,034 885,896 459,888 132,328 15,241 671 6,483,132 35,624,225 42,107,357
Expired Unobligated Balance, end of year - 23,212 11,050 - - - - 2,309,973 - 2,309,973
Unobligated Balance, end of year (total) 4,776 78,246 896,946 459,888 132,328 15,241 671 8,793,105 35,624,225 44,417,330
Total Status of Budgetary Resources $ 12,270 $ 556,888 $ 2,824,374 $ 5,339,178 $ 147,506 $ 16,642 $ 681 $44,248,172 $ 375,785,546 $ 420,033,718
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 7,167 $ 398,096 $ 1,992,651 $ 4,887,684 $ (13,115) $ 5,648 $ (496) $ 35,164,861 $ 35,164,861
Distributed Offsetting Receipts - - - - - - - (11,965,553) (11,965,553)
Agency Outlays, net (discretionary and mandatory) $ 7,167 $ 398,096 $ 1,992,651 $ 4,887,684 $ (13,115) $ 5,648 $ (496) $ 23,199,308 $ 23,199,308
Disbursements, net (total) (mandatory) $ 302,454,224
106 Financial Reporting (Unaudited)
Other Information Section 3
(Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
TOP MANAGEMENT AND PERFORMANCE CHALLENGES FACING
THE SMALL BUSINESS ADMINISTRATION IN FISCAL YEAR 2023
U.S. Small Business Administration
Office of Inspector General
TOP MANAGEMENT AND PERFORMANCE CHALLENGES FACING
THE SMALL BUSINESS ADMINISTRATION IN
FISCAL YEAR 2023
October 14, 2022
Report 23-01
108 Other Information (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
TABLE OF CONTENTS
MESSAGE FROM THE INSPECTOR GENERAL..................................................................................................................................... 112
Color Coding to Indicate Progress in Challenges ..................................................................................................................................... 113
Table 1. Color Code Definitions .............................................................................................................................................................. 113
FY 2023 Challenges and Issues ................................................................................................................................................................ 113
Table 2. Top Management and Performance Challenges Facing SBA in FY 2023 ..................................................................................... 114
CHALLENGE 1: SBA’S ECONOMIC RELIEF PROGRAMS ARE SUSCEPTIBLE TO SIGNIFICANT FRAUD RISKS
AND VULNERABILITIES ............................................................................................................................................ 115
Why This Is a Challenge .......................................................................................................................................................................... 115
Paycheck Protection Program ................................................................................................................................................................... 115
COVID-19 Economic Injury Disaster Loan ............................................................................................................................................ 116
Issue: Paycheck Protection Program Susceptible to Abuse and Fraud........................................................................................................ 116
Borrowers in the Do Not Pay Database .................................................................................................................................................... 117
Taxpayer Identification Number Registered after February 15, 2020........................................................................................................ 117
Duplicate Loans Made Under the Paycheck Protection Program .............................................................................................................. 117
Paycheck Protection Program Loan Forgiveness ....................................................................................................................................... 117
Program Changes Expanded the Opportunity for Sole Proprietor and Independent Contractor Fraud .................................................... 118
SBA’s Handling of Potentially Fraudulent Paycheck Protection Program Loans ........................................................................................ 118
Agency Progress ....................................................................................................................................................................................... 119
Remaining Challenges ............................................................................................................................................................................. 119
Issue: Paycheck Protection Program Eligibility ......................................................................................................................................... 120
Businesses Exceeding Maximum Loan Amounts ...................................................................................................................................... 120
Businesses that Exceeded Maximum Size Standards ................................................................................................................................. 120
Agency Progress ....................................................................................................................................................................................... 120
Issue: Paycheck Protection Program Data Reliability ................................................................................................................................ 121
Underserved Market Data Was Incomplete .............................................................................................................................................. 121
North American Industry Classification System (NAICS) Data Was Incomplete ..................................................................................... 121
Job Statistics Were Inaccurate and Incomplete ......................................................................................................................................... 121
Agency Progress ....................................................................................................................................................................................... 121
Issue: SBA Must Review COVID-19 EIDLs and Grants for Potential Fraud Identified in Previous OIG Reports .................................... 122
Agency Progress ....................................................................................................................................................................................... 123
CHALLENGE 2: INACCURATE PROCUREMENT DATA AND ELIGIBILITY CONCERNS IN SMALL BUSINESS
CONTRACTING PROGRAMS UNDERMINE THE RELIABILITY OF CONTRACTING
GOAL ACHIEVEMENTS.............................................................................................................................................. 124
Why This Is a Challenge .......................................................................................................................................................................... 124
Issue: Agencies Receive Credit for Ineligible Firms or Those No Longer in the HUBZone or Women-Owned Small Business Programs . 124
Agency Progress ....................................................................................................................................................................................... 125
Issue: Women-Owned Small Business Federal Certification Program Susceptible to Abuse ...................................................................... 126
Agency Progress ....................................................................................................................................................................................... 127
Other Information (Unaudited) 109
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
CHALLENGE 3: SBA FACES SIGNIFICANT CHALLENGES IN IT INVESTMENT, SYSTEM DEVELOPMENT, AND
SECURITY CONTROLS ............................................................................................................................................. 128
Why This Is a Challenge .......................................................................................................................................................................... 128
Issue: SBA’s IT Investment Controls Need Improvement ......................................................................................................................... 128
Agency Progress ....................................................................................................................................................................................... 129
Issue: Existing System Development and Monitoring Controls Need to Reflect Changing IT Design Risks............................................. 129
Enterprise-wide communication of privacy and identity risks .................................................................................................................. 129
Improved coordination for system contracts and data management ......................................................................................................... 129
Oversight of third-party systems used to process transactions integral to SBA’s mission............................................................................ 129
System and Organization Controls (SOC) 1 Type 2 reports for all new and existing external financial systems ........................................ 130
System acceptance controls and continuous monitoring to limit security and processing risks ................................................................. 130
Agency Progress ....................................................................................................................................................................................... 130
Issue: Additional Progress Needed in IT Security Controls....................................................................................................................... 130
Agency Progress ....................................................................................................................................................................................... 131
CHALLENGE 4: SBA RISK MANAGEMENT AND OVERSIGHT PRACTICES NEED IMPROVEMENT TO ENSURE THE
INTEGRITY OF LOAN PROGRAMS .......................................................................................................................... 132
Why This Is a Challenge .......................................................................................................................................................................... 132
Issue: SBA’s Oversight of High-Risk Lending Participants ........................................................................................................................ 132
Agency Progress ....................................................................................................................................................................................... 132
Issue: Increased Risk Introduced by Loan Agents ..................................................................................................................................... 133
Agency Progress ....................................................................................................................................................................................... 133
Issue: Increased Risk Introduced by Lender Service Providers .................................................................................................................. 134
Agency Progress ....................................................................................................................................................................................... 134
CHALLENGE 5: SBA’S MANAGEMENT AND MONITORING OF THE 8(A) BUSINESS DEVELOPMENT PROGRAM
NEEDS IMPROVEMENT............................................................................................................................................. 135
Why This Is a Challenge .......................................................................................................................................................................... 135
Issue: SBA Continues to Address Its Ability to Develop Firms in the 8(a) Program and Measure Results ................................................. 135
Agency Progress ....................................................................................................................................................................................... 136
CHALLENGE 6: IDENTIFICATION OF IMPROPER PAYMENTS IN SBA’S 7(A) LOAN PROGRAM REMAINS A CHALLENGE . 137
Why This Is a Challenge .......................................................................................................................................................................... 137
Issue: Improvements Needed to Ensure High-Risk 7(a) Loan Reviews Reduce the Risk of Losses ............................................................ 137
Agency Progress ....................................................................................................................................................................................... 137
CHALLENGE 7: SBA’S DISASTER ASSISTANCE PROGRAM MUST BALANCE COMPETING PRIORITIES TO DELIVER
PROMPT ASSISTANCE BUT PREVENT FRAUD ...................................................................................................... 139
Why This Is a Challenge .......................................................................................................................................................................... 139
Issue: Reserve Staff Need Training to Sustain Productivity During Mobilization ...................................................................................... 139
Agency Progress ....................................................................................................................................................................................... 139
Issue: Improper Payment Quality Assurance Process Needs Strengthening ............................................................................................... 140
Agency Progress ....................................................................................................................................................................................... 140
Issue: Unprecedented Increase in Servicing COVID-19 EIDLs ................................................................................................................ 141
Agency Progress ....................................................................................................................................................................................... 141
110 Other Information (Unaudited)
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CHALLENGE 8: SBA NEEDS ROBUST GRANTS MANAGEMENT OVERSIGHT .............................................................................. 143
Why This Is a Challenge .......................................................................................................................................................................... 143
Issue: SBA’s Grants Management System Needs Improvement ................................................................................................................. 143
Agency Progress ....................................................................................................................................................................................... 143
Issue: Better Performance Measurements Needed to Monitor Grant Program Achievements.................................................................... 144
Agency Progress ....................................................................................................................................................................................... 145
Issue: Comprehensive Oversight Plan with Strong Controls Will Help SBA Better Assess Risk, Distribute Payments, and Audit the
Shuttered Venue Operators Grant and Restaurant Revitalization Fund Programs..................................................................................... 145
Agency Progress ....................................................................................................................................................................................... 146
Issue: Leveraging SBA’s Workforce to Ensure Effective Administration of New and Significantly Expanded Grant Programs to
Aid Small Businesses ................................................................................................................................................................................ 147
Agency Progress ....................................................................................................................................................................................... 147
Other Information (Unaudited) 111
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
MESSAGE FROM THE INSPECTOR GENERAL
I am pleased to present the Office of Inspector General (OIG) Report on
the Top Management and Performance Challenges Facing the Small Business
Administration in Fiscal Year 2023.
Over 2 years have passed since the start of the Coronavirus Disease 2019
(COVID-19) pandemic economic crisis, and OIG continues to provide
independent and objective oversight of the U.S. Small Business Administration
(SBA). SBA has faced a steady stream of unprecedented new challenges as
the primary agency responsible for providing nationwide assistance to small
businesses during the crisis.
However, even before the pandemic, SBA faced major challenges in managing
enormous financial lending programs, information technology, and other areas.
This report discusses eight major performance challenge areas and the issues that contribute to the challenges,
many of which we have discussed in previous OIG reports (see Table 2).
I believe managing COVID-19 stimulus lending is the greatest overall challenge facing SBA, and it may likely
continue to be for many years as the agency grapples with fraud in the programs, particularly in the Economic
Injury Disaster Loan Program and the processing of Paycheck Protection Program loan forgiveness. Pandemic
response has, in many instances, magnified the challenging systemic issues in SBA’s mission-related work.
OIG remains committed to protecting the interests of all American taxpayers by promoting positive change
within SBA and across government. Our audits and investigations continue to keep watch over government
contractors for business ethics, integrity, honesty, and competency along with SBA programs, ensuring taxpayer
dollars are spent efficiently according to intent.
Sincerely,
Hannibal Ware
Inspector General
112 Other Information (Unaudited)
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Color Coding to Indicate Progress in Challenges
In this report, we use a color gauge as a visual indicator of the agency’s progress in confronting the issues that make a particular
function a top management challenge. Each issue that contributes to the main challenge includes a small color gauge image that
indicates whether the agency has made little, no, or significant progress on the issue to date. (See Table 1).
Table 1. Color Code Definitions
COLOR DEFINITION COLOR INDICATOR COLOR DEFINITION COLOR INDICATOR
Issue Resolved or
Green Red No Progress
Appropriately Reduced
Yellow Substantial Progress N/A New, Not Rated
New, Not Rated
Orange Moderate or Limited Progress Not Rated
N/A
(extenuating circumstances)
Not Rated
FY 2023 Challenges and Issues
Identification of an issue as a top challenge does not necessarily denote significant deficiencies or lack of attention on SBA’s
part. Many of the top management challenges are longstanding, inherently difficult, and may likely continue to be challenges
in the coming years. Addressing the challenges will require consistent, focused attention from agency management and ongoing
engagement with Congress, the public, and other stakeholders. It is also important to note that the top challenges are not listed
in order of importance or magnitude, except for the COVID-19 challenge, which we address first in this report. We view all eight
challenges as critically important to SBA operations.
Overall, the agency has made progress addressing this year’s list of management challenges. We removed three issues this year
related to the 8(a) Business Development Program, which had been included in Challenge 5. One issue was how SBA’s streamlined
application process may expose the 8(a) program to higher fraud risk. The second issue we removed dealt with the processes and
reducing risks of ineligible firms participating in the 8(a) program. We believe that progress mitigating these issues is in large
part attributable to the agency’s continued effort to address outstanding internal control recommendations from our audits
and evaluations.
The third issue had related to economically disadvantaged determination criteria. SBA plans to conduct an assessment of the FY
2020 changes to the economic disadvantage thresholds for the 8(a) program next year, using FY 2021 and FY 2022 data. We
believe the agency’s commitment to montoring the effects of the networth threshold changes mitigate this risk and the issue is no
longer a top management challenge for the agency.
The management challenges report is an important tool to help the agency prioritize its work to improve program performance
and enhance operations. These challenges will guide OIG work in the coming year; we look forward to continuing to work with
SBA’s leadership team to address the agency’s top management and performance challenges.
Other Information (Unaudited) 113
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Table 2. Top Management and Performance Challenges Facing SBA in FY 2023
CHALLENGE ISSUE
Paycheck Protection Program Susceptible to Abuse and Fraud
CHALLENGE 1 Paycheck Protection Program Eligibility
SBA’s Economic Relief Programs Are Susceptible to Paycheck Protection Program Data Reliability
Significant Fraud Risks and Vulnerabilities SBA Must Review COVID-19 EIDLs and Grants for Potential Fraud Identified in
Previous OIG Reports
CHALLENGE 2 Agencies Receive Credit for Ineligible Firms or Those No Longer in the HUBZone
Inaccurate Procurement Data and Eligibility Concerns or Women-Owned Small Business Programs
in Small Business Contracting Programs Undermine the Women-Owned Small Business Federal Certification Program Susceptible to
Reliability of Contracting Goal Achievements Abuse
SBA’s IT Investment Controls Need Improvement
CHALLENGE 3
Existing System Development and Monitoring Controls Need to Reflect
SBA Faces Significant Challenges in IT Investment,
Changing IT Design Risks
System Development, and Security Controls
Additional Progress Needed in IT Security Controls
CHALLENGE 4 SBA’s Oversight of High-Risk Lending Participants
SBA Risk Management and Oversight Practices Need Increased Risk Introduced by Loan Agents
Improvement to Ensure the Integrity of Loan Programs Increased Risk Introduced by Lender Service Providers
CHALLENGE 5 SBA Continues to Address Its Ability to Develop Firms in the 8(a) Program and
SBA’s Management and Monitoring of the 8(a) Business Measure Results
Development Program Needs Improvement
CHALLENGE 6 Improvements Needed to Ensure High-Risk 7(a) Loan Reviews Reduce the Risk
Identification of Improper Payments in SBA’s 7(a) Loan of Losses
Program Remains a Challenge
CHALLENGE 7 Reserve Staff Need Training to Sustain Productivity During Mobilization
SBA’s Disaster Assistance Program Must Balance Improper Payment Quality Assurance Process Needs Strengthening
Competing Priorities to Deliver Prompt Assistance but Unprecedented Increase in Servicing COVID-19 EIDLs
Prevent Fraud
SBA’s Grants Management System Needs Improvement
Better Performance Measurements Needed to Monitor Grant Program
Achievements
CHALLENGE 8 Comprehensive Oversight Plan with Strong Controls Will Help SBA Better
SBA Needs Robust Grants Management Oversight Assess Risk, Distribute Payments, and Audit the Shuttered Venue Operators
Grant and the Restaurant Revitalization Fund Programs
Leveraging SBA’s Workforce to Ensure Effective Administration of New and
Significantly Expanded Grant Programs to Aid Small Businesses
114 Other Information (Unaudited)
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Challenge 1: SBA’s Economic Relief Programs Are Susceptible to Significant
Fraud Risks and Vulnerabilities
Why This Is a Challenge
More than 30 million small businesses in the United States have been adversely affected by the Coronavirus Disease 2019
(COVID-19) pandemic economic crisis. The President signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act
into law on March 27, 2020 to provide economic relief to our nation.
In response to the economic crisis, SBA disbursed CARES Act funds through the Paycheck Protection Program (PPP) and the
Economic Injury Disaster Loan (EIDL) program in amounts unprecedented in SBA’s history. The programs needed proper
controls to ensure they operated as intended in this high-risk environment. The absence of a proper control environment led to
significant fraud risk and vulnerabilities, which is why this continues to be a top challenge in Fiscal Year (FY) 2023.
OIG’s PPP and EIDL oversight and investigative work has resulted in 449 indictments, 354 arrests, and 303 convictions as of
July 31, 2022. As of July 31, 2022, OIG has received more than 208,000 Hotline complaints since the start of SBA’s pandemic
relief programs. Additionally, OIG collaboration with SBA and the U.S. Secret Service has resulted in the seizure of more than
$1 billion stolen by fraudsters from the EIDL program. We also played a key role in assisting financial institutions in the return
of another $8 billion to SBA’s EIDL program. In addition, SBA has also received over $20 billion in EIDL funds returned
by borrowers.
To date, we have issued 10 reports related to the PPP program and 10 reports related to the COVID-19 EIDL program.
Paycheck Protection Program
In early April 2020, SBA launched the $349 billion PPP in collaboration with the U.S. Department of the Treasury. On April 24,
2020, Congress appropriated an additional $310 billion for the PPP through the Paycheck Protection Program and Health Care
Enhancement Act, bringing the total for the program to $659 billion.
Under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act , the PPP was extended on December 27,
2020 to provide more than $284 billion in SBA-guaranteed loans. On March 11, 2021, the American Rescue Plan Act of 2021
provided an additional $7.2 billion to the PPP, which increased the total program funding to $813.7 billion. On March 30,
2021, the President signed the PPP Extension Act of 2021, which allowed SBA to continue accepting new applications until May
31, 2021.
By the end of the program, SBA had processed 11.8 million PPP loans, totaling $799.8 billion, through more than 5,400 private
lenders, far more than all of SBA’s combined lending under the 7(a) program from 1990 to 2019. In contrast, from FY 2000 to
2019, SBA made about 1.2 million 7(a) loans totaling $333 billion. During that 20-year period, SBA made about 62,000 loans a
year totaling about $16.7 billion on average.
Under the CARES Act, SBA-guaranteed PPP loans for eligible small businesses, individuals, and nonprofits can be forgiven if
proceeds were used in accordance with law. Eligible expenses include payroll, rent, utility payments, and other limited uses.
To quickly distribute funds during an economic crisis, SBA eased internal controls that could have helped to mitigate fraud and
misuse of taxpayer funds. We believe this is the tip of a much larger iceberg, and we are working to identify the full extent of PPP
fraud. The true magnitude of fraud in SBA pandemic assistance programs will be coming to light for many more years as these
programs move through remaining stages, including loan forgiveness, repayment, and guaranty purchase.
Other Information (Unaudited) 115
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COVID-19 Economic Injury Disaster Loan
In FY 2020, the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act provided $470 billion for
disaster assistance and $20 billion for emergency grants for eligible entities.
In FY 2021, the Economic Aid Act and the American Rescue Plan Act of 2021 together provided an additional $30 billion in
Targeted EIDL Advances and $5 billion in Targeted Supplemental EIDL Advances to eligible entities that met additional criteria.
From March 2020 to the end of December 2021, SBA received more than 27.7 million COVID-19 EIDL applications and
approved 3.7 million loans totaling $303.6 billion. The COVID-19 EIDL program closed in May 2022. The severity of the
economic crisis, and the demand for aid, is apparent when you compare these numbers to all other disaster loan spending outside
the pandemic. Since the agency’s inception in 1953, SBA has approved 2.2 million non-COVID-19 disaster loans for a total of
$66.7 billion.
SBA’s existing application portal and processing system were initially overwhelmed by the 4.5 million EIDL applications
submitted by April 10, 2020. To ease the strain and meet high demand for COVID-19 EIDLs, SBA contracted with a vendor
that had previously assisted SBA in streamlining disaster loan processing. However, setting up a new application processing system
quickly presented significant risks. Because of the unprecedented demand, SBA relaxed internal controls. This expeded funds to
affected businesses, but also significantly increased the risk of program misuse and fraud.
The extent of the suspected fraud will become apparent as EIDL payments start coming due in October 2022. SBA anticipates
that 30 to 50 percent of the 2.9 million COVID-19 EIDLs with an original loan amount of $100,000 or less will default.
Issue: Paycheck Protection Program Susceptible to Abuse and Fraud
Because the PPP program has closed, the issue has evolved from preventing fraud in the PPP to
identifying and remedying potential and suspected fraud that has already occurred. Since the program
began, reports of suspected fraud have come in from OIG Hotline complaints, financial institutions,
and other law enforcement agencies.
Yellow
Examples of fraud schemes include:
• False statements on applications
• Fraudulent supporting documentation (such as payroll and tax forms)
• Accounts established using stolen identities
• Corporate and personal identity theft
• Inflation of payroll
• Misuse of proceeds
• Lender fraud
We have received an unprecedented number of OIG Hotline PPP complaints, including these potential fraud or scams:
• Loan applicants asserting a business that did not exist
• Business owners who received a loan but did not use the funds for allowable operational expenses
• Business owners who laid off employees to reduce employment numbers to qualify for a PPP loan
• Business owners who have refused to allow employees to return to work, telling them to continue unemployment assistance
• Online fraudsters who offered to prepare applications for a fee
• Business owners and individuals reporting identity theft
116 Other Information (Unaudited)
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Internal control weaknesses limited SBA’s ability to actively reduce and combat fraud and increased the risk of fraudulent and
ineligible applicants receiving PPP loans and loan forgiveness. Strong internal controls will help reduce fraud risk and enhance
program integrity for the PPP and similar programs enacted in the future.
It is important to note that these loans are considered potentially fraudulent because OIG has not completed a document-by-
document review of loan files to confirm or resolve the suspicious activity; however, our investigations have substantiated these
concerns which underscores the need for SBA to review loans identified as suspicious. Below is a description of issues OIG has
identified related to potential fraud in the PPP.
Borrowers in the Do Not Pay Database
We coordinated with the U.S. Department of the Treasury to compare Taxpayer Identification Numbers and name data provided
in PPP data files against Treasury’s Do Not Pay debt, exclusions, and death data sources. We found tens of thousands of loans that
matched a Treasury Do Not Pay data source record indicating potential loan ineligibility (Report 21-06).
The Treasury Department Do Not Pay system helps agencies fulfill the obligation to deny federal loans, loan insurance, and loan
guarantees to businesses delinquent on federal debts and obligations. To be eligible to receive PPP funds, a business must not have
any current federal debarments or suspensions, and the applicant must not have delinquent federal loans or have defaulted on any
federal loans in the last 7 years. In March 2021, SBA published an interim final rule that removed the eligibility restriction that
prevents business owners who are delinquent or default on their federal student loans from obtaining PPP loans.
Taxpayer Identification Number Registered after February 15, 2020
The CARES Act required that businesses must have been in operation before February 15, 2020 to be eligible for a PPP loan. We
found thousands of businesses obtained PPP loans with identification numbers that were not registered until after that date, which
may indicate the businesses were created to fraudulently gain access to program funds (Report 21-07). We note that multiple
borrowers in this group of identified loans have already been arrested and others are under active investigation.
Duplicate Loans Made Under the Paycheck Protection Program
SBA did not always have sufficient controls in place to detect and prevent duplicate PPP loans (Report 21-09). OIG has pursued
multiple PPP criminal fraud cases related to duplicate loans made to the same business. Additionally, other federal agencies have
pursued cases involving businesses with duplicate PPP loans. Based on our earlier review of PPP loan data as of August 31, 2020,
we found that lenders made more than one PPP disbursement to 4,260 borrowers, which totaled about $692 million and involved
8,731 loans.
Paycheck Protection Program Loan Forgiveness
Our evaluation of PPP loan review processes (Report 22-09) shows that the large number of borrowers who have not applied for
forgiveness could be a strong indicator of fraud. Borrowers who fraudulently obtained a PPP loan are unlikely to apply for loan
forgiveness because they have already obtained the funds with no intention to use them appropriately or to repay the loan.
Borrowers may submit a loan forgiveness application any time before the maturity date of the loan up to 5 years from loan
origination. However, after the 10-month deferral period, if a borrower has not applied for loan forgiveness, they must begin
making principal and interest payments. Most 2020 borrowers were likely to apply for forgiveness by October 31, 2021 to avoid
making loan payments. Lenders then had 60 days to review a forgiveness application. Therefore, these forgiveness applications
should have been submitted by lenders to SBA by December 30, 2021.
However, based upon further analysis by OIG as of May 30, 2022, we found about 150,000 PPP recipients, with loans totaling
over $6.3 billion, have not applied for forgiveness with SBA or made any principal payments. Over 52,000 of these loans have
defaulted and had their guaranty honored by SBA for over $2.8 billion. OIG is working on a project regarding these potentially
fraudulent loans. PPP funds were intended to assist struggling business owners during a national economic crisis. We believe these
150,000 loan recipients either did not spend the money according to Congressional intent and therefore knew the loans would
not be forgiven, or they had always intended to default and let the taxpayer pick up the bill.
Other Information (Unaudited) 117
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Program Changes Expanded the Opportunity for Sole Proprietor and Independent Contractor Fraud
Changes made by SBA to expand access to the program for certain borrowers appear to have been exploited by unscrupulous
applicants. In March 2021, SBA issued an interim final rule that allowed individuals who filed an IRS Form 1040, Schedule C, to
calculate their maximum loan amount using gross income rather than net income (Report 22-09). This change led to a significant
increase in the number of loans of $20,833 or less, the maximum allowable loan amount for a Schedule C business with no
employees.
In addition to OIG Hotline complaints, multiple financial institutions have contacted us about a significant number of PPP
deposits in personal accounts, or made to those whom the financial institutions believe do not own businesses.
Based on our analysis of the PPP loan data, many of the Schedule C loans were made by lenders that relied exclusively on third-
party loan processing or software platform vendors they hired to complete loan processes. These vendors do not often have
a relationship with SBA. Data shows that 7 of the top 15 lenders made more than 2.4 million loans in 2021, or more than
18,000 loans per day, after having made fewer than 22,000 PPP loans combined in 2020. These seven lenders included financial
technology (fintech) lenders, Community Development Financial Institutions, and small business lending companies.
We believe that these lenders and their reliance on third-party vendors could present SBA with several challenges moving forward,
including access to loan documents. Within the context of the PPP eligibility and forgiveness process, we believe it is important
for SBA to focus targeted efforts on these types of loans and review appropriate documentation to ensure these smaller loans were
made to eligible businesses and minimize the losses associated with forgiveness of fraudulent loans.
SBA’s Handling of Potentially Fraudulent Paycheck Protection Program Loans
In our inspection of potentially fraudulent PPP loans (Report 22-13), we found SBA did not have an organizational structure
with clearly defined roles, responsibilities, and processes to manage and handle potentially fraudulent PPP loans. The agency did
not establish a centralized entity to design, lead, and manage fraud risk because the agency did not establish a sufficient fraud risk
framework. This was partly due to the speed in which SBA was required to launch the PPP, which was 15 days after enactment of
the CARES Act, and the continuous and rapid discovery of different kinds of fraud schemes.
In addition, lenders were not always clear on how to handle PPP fraud or recover funds obtained fraudulently from the PPP that
remained in the borrower’s account. SBA did not provide lenders sufficient specific guidance to effectively handle potentially
fraudulent PPP loans. Our report noted that SBA should provide information on the type of fraud lenders are finding and best
practices for detecting and reporting that fraud to SBA and OIG. Specifically, SBA should instruct lenders on how to document
and report the return of funds from the financial institution. This should include the reason for the return and any findings of
fraud found by the financial institution and lender. Furthermore, SBA should provide instructions for lenders to report notice of
seizures, forfeitures, and restitution to SBA. OIG has seen an increase in inquiries from financial institutions seeking guidance on
how to address potentially fraudulent loans. The loan forgiveness process could potentially trigger more fraud. The instructions
would help SBA properly flag loans for potential fraud and account for the loan balance. This would help determine if there are
any funds due to SBA if the loan had been forgiven or guaranty purchased.
118 Other Information (Unaudited)
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Agency Progress
SBA has made substantial progress to reduce fraud risks and prevent further losses. When the PPP launched in 2020, SBA’s
fraud risk management approach for PPP loans was intentionally developed with more fraud and eligibility controls at the loan
forgiveness phase rather than the application stage.
SBA was mandated by Congress to swiftly pay out, or disburse, funds to millions of struggling small businesses. Speed became the
highest priority in complying with the mandate. SBA has since implemented fraud and eligibility controls and taken corrective
actions to combat PPP fraud, including:
• Establishing a Fraud Risk Management Board in 2022
• Developing a webpage dedicating to preventing fraud and identity theft, which includes a section entitled “Lenders and
Fraud Response”
• Developing aggregate review processes to identify different fraud scenarios
• Developing and implementing a Master Review Plan that established guidelines for loan and forgiveness reviews
• Increasing antifraud controls for loans originating in 2021, including checking application data against Treasury’s Do Not
Pay database
• Developing and implementing SBA and contractor fraud risk management policy and framework
• Increasing post-disbursement antifraud controls for loans that originated in 2020
• Commencing manual loan and forgiveness reviews
• Engaging a contractor with expertise in detection and identification of potential fraud
• Using a contractor’s automated review tool and the SBA Paycheck Protection Platform to analyze loans for fraud and
eligibility
• Implementing machine learning functionality to focus on areas of higher risk
• Providing outreach and training
• Implementing processes to refer potential fraud to SBA OIG
Remaining Challenges
Although SBA has made substantial progress in reducing fraud risks and preventing further loss, difficulties and challenges remain.
The need to establish and utilize effective fraud, eligibility, and compliance controls while reviewing for loan eligibility, forgiveness,
and guaranty purchase remains an ongoing challenge.
SBA’s approach to fraud risk management allowed funds to disburse quickly, but presented risks of fraud when loans were
originated. The method essentially relies on the post-origination controls to identify and report instances of fraud and abuse
that has already occurred, with funds also already disbursed. For funds disbursed on a fraudulent loan, the back-end controls
established for the forgiveness stage may never be used.
SBA’s plans and actions to reduce fraud risks and prevent further losses will determine how this challenge will continue to be
rated in the future. Our investigations into suspected fraud and suspicious activities continue. We have ongoing or planned audit
work on PPP loan eligibility, loan forgiveness, guaranty purchase, and lender activities to determine the effectiveness of agency
implemented controls, and we will continue to monitor agency actions to assess and reduce fraud risk and address vulnerabilities
in the PPP.
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Issue: Paycheck Protection Program Eligibility
OIG reviews have found deficiencies with internal controls related to eligibility of borrowers. Our
review of SBA’s implementation of PPP identified thousands of loans erroneously provided to
potentially ineligible borrowers. Review our sections above on the Do Not Pay database and Taxpayer
Identification Numbers, which also reveal program eligibilty issues. SBA lenders also inappropriately
approved loans for businesses that exceeded maximum loan amounts for the number of employees,
Yellow
and exceeded the maximum size allowed.
Businesses Exceeding Maximum Loan Amounts
We found tens of thousands of approved and disbursed loans were made to borrowers for amounts that exceeded the loan
maximum based on the number of employees and compensation rates, as defined in the CARES Act (Report 21-07). The Cares
Act states that the maximum loan amount is obtained by multiplying the average total monthly payments by the applicant for
payroll costs incurred during the 1-year period before the date on which the loan is made times 2.5, plus any outstanding amounts
of Economic Injury Disaster Loans made beginning January 31, 2020.
Businesses that Exceeded Maximum Size Standards
We found hundreds of businesses obtained PPP loans that may have been erroneously approved (Report 21-07). These businesses
exceeded both 500 employees and the applicable employee-based size standard for the business industry. Under the CARES Act,
an eligible business cannot exceed the greater of 500 employees or the SBA size standard for number of employees in the industry,
if applicable.
Agency Progress
SBA has made substantial progress in strengthening controls to validate eligibility. Most notably, SBA initiated several corrective
actions to enhance and develop additional controls to address loan reviews, loan forgiveness, and fraud, including:
• Developing the Master Review Plan, establishing guidelines for loan and forgiveness reviews (October 2020,
revised June 2021)
• Developing and implementing SBA and contractor fraud risk management policy and framework
• Developing machine learning models to focus on areas of higher risk
• Implementing automated screening to detect potentially ineligible loans
The fraud control framework also includes a variety of antifraud controls in place designed to detect and mitigate possible
instances of eligibility fraud. These controls include approved lender lists, verification with the Treasury Do Not Pay database, and
compliance checks.
SBA also integrated affiliation data, which shows business affiliation through ownership and maximum number of employees, as
well as maximum loan amount. SBA instituted an affiliation worksheet for PPP loan and forgiveness reviews. Swift management
action to identify and review potentially ineligible loans could prevent improper payments to lenders because the associated loan
forgiveness may still be in process.
As we complete current reviews and conduct future audit work, SBA’s plans and actions to reduce and prevent improper payments
in addition to SBA’s corrective actions to address OIG recommendations will determine how we will rate this challenge in
the future.
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Issue: Paycheck Protection Program Data Reliability
OIG’s inspection of SBA’s implementation of the PPP found the data SBA reported and the
loan-level PPP data was inaccurate and incomplete. Without accurate and complete data, SBA
cannot reliably and accurately inform SBA management and Congress about program effectiveness
and measures needed to inform program decisions.
Green
Underserved Market Data Was Incomplete
At the beginning of the PPP program, our May 2020 flash report found that SBA’s demographic information for underserved
markets for PPP borrowers was incomplete (Report 20-14). SBA’s borrower application for PPP did not include standard SBA
fields to request demographic information. One week after we issued our flash report, SBA issued the initial PPP loan forgiveness
application, which included an optional page for borrower demographic information. Notwithstanding, sufficient data may still
not be collected.
Some borrowers may not apply for loan forgiveness while others may choose not to complete the optional page. Although ethnic
demographic information is optional for SBA’s traditional loan programs and the PPP, SBA generally requests the demographic
information as a section on a mandatory form. Borrowers have the option to decline to provide the information.
North American Industry Classification System (NAICS) Data Was Incomplete
We found SBA’s loan-level data on PPP NAICS codes was incomplete (Report 21-07). SBA did not require the borrower to
provide the industry classification code on the application, so lenders did not have the information to put in the loan processing
platform. As of June 30, 2020, there were 222,096 loans totaling approximately $9.9 billion that were identified as “Unclassified
Establishments” because there was no industry classification data on the application.
Job Statistics Were Inaccurate and Incomplete
We found SBA’s loan-level data for job statistics was inaccurate and incomplete (Report 21-07). We found that 191,003 loans
totaling about $11 billion did not include employment information in the required job field for the number of current employees.
SBA officials said because of a backlog of loan applications before the beginning of the second round of PPP funding, lenders were
allowed to submit loan applications in bulk. The officials said they turned off system controls to allow faster approval times. Of the
191,003 applications that did not have data for the number of current employees, 83,374 were approved during the first week of
the second round of funding. Because SBA removed the internal control to check data in the “number of current employees” field,
these loans, totaling about $4 billion, were not validated before approving and issuing loan numbers to PPP lenders.
Agency Progress
SBA implemented a number of additional controls to ensure the integrity of the key data fields noted above, including:
• Adding mandatory fields in borrower and lender application processes, including NAICS code, demographic data, and
number of employees
• Updating controls to ensure data accuracy and completeness of lender-reported data
• Instituting a procedure for lenders and borrowers to correct publicly available PPP loan data provided to SBA by delegated
PPP lenders
• Adding controls for Taxpayer Identification Number data submission, Do Not Pay, and LexisNexis at origination
We have an ongoing audit reviewing PPP loan eligibility, loan forgiveness, and guaranty purchase. We will continue to assess the
reliability of PPP loan data and monitor the agency’s efforts to ensure data reliability.
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Issue: SBA Must Review COVID-19 EIDLs and Grants for Potential Fraud Identified
in Previous OIG Reports
Because the COVID-19 EIDL program has closed, the issue has evolved from preventing fraud in the
program to identifying and remedying potential fraud that has already occurred.
Several reports issued by OIG since the start of the pandemic have identified potential fraud resulting
Orange from serious control weaknesses in the system SBA used to process COVID-19 EIDL and grants. Our
October 2020 inspection report of SBA’s initial disaster assistance response to COVID-19 identified $78.1 billion in potentially
fraudulent loans and Targeted EIDL Advances to ineligible entities (Report 21-02).
Our May 2021 inspection report of SBA’s handling of identity theft allegations in the COVID-19 EIDL program (Report 21-15)
found $6.7 billion in loans and advances related to identity theft allegations. Our October 2021 inspection report of SBA
emergency EIDL grants to sole proprietors and independent contractors (Report 22-01) found SBA provided $4.5 billion more
in advances and grants than the applicants were entitled to receive. The report identified 542,897 sole proprietors and 161,197
independent contractors who received a grant of more than $1,000.
Lastly, our November 2021 inspection of the COVID-19 EIDL program recipients on the Department of Treasury’s Do Not
Pay List (Report 22-06) identified over $3.1 billion in EIDLs and over $550 million in emergency EIDL grants to potentially
ineligible applicants in the Department of Treasury’s Do Not Pay database. OIG has launched numerous investigations into the
fraudulent activities found in these reports.
The agency is tasked with identifying and confirming potentially fraudulent loans and grants reported by OIG. The loans and
grants in the reports listed above may overlap with each other so that the total of potentially fraudulent loans and grants may not
equate to the total of all the numbers above. The loans and grants were potentially fraudulent because of these issues:
• Duplicate Internet Protocol (IP) addresses
• Duplicate email addresses
• Duplicate physical addresses
• Duplicate bank accounts
• Applicants found in Treasury’s Do Not Pay database
• Applicants who registered Employee Identification Numbers (EIN) after the cut-off date
• Applicants with no EIN claiming numerous employees
• Applicants who changed their bank account numbers prior to disbursement
Although there is some overlap, there are a significant number of loans and grants that require further investigation. If fraud is
confirmed or suspected, there are administrative actions the agency should take to hold the fraudsters accountable. SBA should
refer the potentially fraudulent loans and grants to OIG for investigation. It will be a significant challenge for SBA to review the
potentially fraudulent loans and grants and subsequently remedy those determined to be fraudulent.
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Agency Progress
The fraud review team in the Processing and Disbursement Center, the Chief Data Officer within the SBA Office of Performance,
Planning, and the Chief Financial Officer collaborated on a data analytics project to help identify COVID-19 EIDLs that may
be associated with identity theft or fraud. The results of this project are being used by the fraud review team in the Processing and
Disbursement Center with their ongoing effort to research suspected cases of identity theft and fraud.
If it is determined that a file should be flagged for suspected fraud or identity theft, an agency hold (or hold funding) is added to
the processing system. Holds are added to an application at any stage. They alert staff that special attention is required and that it
should be reviewed. SBA is still reviewing loans that have been in hold for review to make a fraud determination.
The agency hold review system allowed staff to review an average of up to 1,500 files a day and recategorize or refer agency holds
to the SBA Office of Disaster Assistance fraud review team. The SBA completed 157,705 reviews of electronic loan files on hold as
of June 17, 2022.
While SBA has made progress in identifying and reviewing fraud and agency holds, we believe the sheer volume of potential
fraudulent loans and grants discovered in OIG reports will be a continuing challenge to the agency as the deferment period ends
for some EIDLs in October 2022 and borrowers are expected to begin making payments on these loans.
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Challenge 2: Inaccurate Procurement Data and Eligibility Concerns in Small
Business Contracting Programs Undermine the Reliability of
Contracting Goal Achievements
Why This Is a Challenge
The government-wide goal of the Small Business Act is to ensure that 23 percent of all prime contracts are awarded to small
businesses each fiscal year. Since FY 2013, the SBA has reported in its annual Small Business Procurement Scorecard that the
federal government has met or exceeded that goal. This year SBA announced the federal government exceeded the FY 2021 goal,
awarding 27 percent of prime countracts to small businesses. These contracts awarded to small businesses totaled $154.2 billion,
an $8 billion increase from the previous fiscal year. SBA reported the federal government earned an “A” on this year’s government-
wide scorecard.
Over the years, Congress has expressed concerns about the accuracy of the report. OIG and Government Accountability Office
(GAO) audits have revealed a widespread problem of misreporting by agencies that award contracts to small firms with provisions
or other contract language that allows larger companies to do most of the work. We recently found this to be the case in our
evaluation of SBA’s set-aside contract awarded for COVID-19 EIDL recommendation services at the beginning of the pandemic
(Report 22-10). SBA awarded the contract to a small business that subcontracted with a large business without assessing whether
the relationship made the two businesses affiliated. Also, we found the subcontractor exceeded the subcontracting limits for this
contract, which totaled $773.8 million, at the time of our review.
As the federal government’s primary advocate for small business, SBA must continue to strive to ensure federal agencies award
small business contracts only to eligible entities and that those qualifying businesses are counted in the assessment. SBA’s
achievement reports do not portray federal contracting dollars obligated only to small businesses, and this reduces the ability
of Congress and other federal policymakers to determine whether the government is maximizing contracting opportunities for
small businesses.
Issue: Agencies Receive Credit for Ineligible Firms or Those No Longer in the
HUBZone or Women-Owned Small Business Programs
SBA has changed HUBZone program requirements, widening eligibility and deviating from
Congressional intent. These small, disadvantaged businesses are located in historically underutilized
business zones. OIG continues to find that SBA does not consistently detect ineligible firms in its
small business contracting certification programs.
Yellow
A disadvantaged small business enters a 9-year program and is designated as an SBA 8(a) business. Agency contracting officers
have reported ineligible firms as certified either in the HUBZone or 8(a) Business Development programs in the System for
Award Management (SAM.gov). In 2020, the General Services Administration Office of Inspector General found $89 million
in contracting dollars erroneously recorded as awarded to small businesses in the Federal Procurement Data System–Next
Generation, the contract reporting system of record at the time of the audit.
In 2018 and 2019, we found SBA did not ensure only eligible firms entered the HUBZone program. In 2020, SBA changed a
HUBZone requirement, allowing certified businesses to have employees who are not current HUBZone residents. Under the new
requirements, the business continues to meet the requirement as long as it has employees who lived in a HUBZone for at least 180
days after the business was first certified.
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HUBZone businesses could have no employees residing in the HUBZone at all and still qualify because employees initially
hired as HUBZone residents moved out of the HUBZone after the 180-day period. The requirements of the rule are clearly
inconsistent with legislative intent.
SBA program success and integrity could be adversely affected if the agency admits ineligible firms into programs intended
for disadvantaged small businesses. Before 2008, SBA certified small, disadvantaged businesses. SBA terminated its small,
disadvantaged business certification program in 2008 as a result of court decisions, and since then, firms have self certified. The
awards made to these firms count toward the agency’s contracting goals.
The Small Business Act requires that 5 percent of all prime and all subcontracts for the federal government be awarded to
contractors with small, disadvantaged business status. In December 2021, the Office of Management and Budget raised the
prime contracting goal for such businesses to 11 percent for FY 2022. Participants in the 8(a) program are considered small,
disadvantaged businesses and awards made to them are also counted toward agency goals.
As of October 2022, SBA’s Dynamic Small Business Search database included 149,326 firms that self certified as small,
disadvantaged businesses. Firms that falsely certify they are socially and economically disadvantaged may receive federal contracts
counting toward the agency’s goal achievements.
Even though self-certification is inherently risky, SBA removed regulations allowing for protests of a firm’s disadvantaged business
status in FY 2020. While firms are still subject to protests related to their small business size, business owners’ status as socially
or economically disadvantaged cannot be challenged. On September 9, 2022, SBA proposed to authorize reviews and protests of
the small, disadvantaged business status in connection with prime contracts and subcontracts to a federal prime contract. SBA
requested comments on that proposal and others by November 8, 2022.
Based on FY 2021 contract data retrieved from SAM.gov, as much as $12.4 billion in prime contracts was awarded to small,
disadvantaged businesses that were not certified as 8(a), a Woman-owned Small Business, an economically disadvantaged women-
owned small business, HUBZone, service-disabled veteran-owned small business, or a joint venture that included a firm with
one of these designated certifications. Given the large amount of federal contracting dollars awarded to these self-certified small,
disadvantaged businesses, it is crucial for SBA to ensure that only eligible firms are counted. Federal agencies will need to expand
procurement activities to deliver on the President’s goal of increasing the share of federal contracts awarded to small, disadvantaged
businesses from 5 to 15 percent by 2025. Program officials should consider the impact this regulatory void could have on the
accuracy of the goaling achievements agencies report annually.
Agency Progress
SBA has made substantial progress in adding controls to detect ineligible firms in the 8(a) and HUBZone programs. In FY 2020,
SBA updated and trained staff on its HUBZone policy directives to standardize analysis and oversight. SBA started requiring that
HUBZone firms annually recertify that they meet program eligibility requirements. SBA also requires each firm to complete a
program examination every 3 years. As a result of implementing these program changes, SBA has taken action to decertify firms
that are no longer eligible for the program. Since initiating the annual recertifications and triannual program examinations in FY
2021, SBA decertified 2,548 firms as of May 31, 2022.
SBA instituted procedures to ensure program officials justified their recommendations to admit firms into the 8(a) program. The
agency is also tracking complaints about firms’ eligibility to participate in the program.
While recent regulatory and procedural changes improved SBA’s oversight of firms continuing in the HUBZone program, the
changes also removed certain controls that are essential for proper oversight. The new HUBZone employee residency requirement
may reduce the program’s ability to meet legislative intent. Allowing certified businesses to count employees who are not current
HUBZone residents does not ensure continual employment of individuals who live in distressed areas. We question if the full
economic benefits of the HUBZone program will be realized in these areas.
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Similarly, SBA’s removal of regulations allowing for protest of a firm’s small, disadvantaged business status jeopardizes the integrity
of the federal government’s small, disadvantaged business contracting and subcontracting achievements. SBA should continue to
strengthen its oversight of these certification programs to ensure only eligible firms are participating.
Issue: Women-Owned Small Business Federal Certification Program Susceptible
to Abuse
SBA’s Women-Owned Small Business (WOSB) program is intended to give eligible companies
greater access to federal contracting opportunities, ensuring a level playing field for women business
owners. Both OIG and GAO have reported weaknesses in SBA’s controls intended to ensure only
eligible firms receive federal contracts set aside for these businesses.
Orange
The federal government’s annual contracting goal for WOSBs is 5 percent of all federal contracting dollars. The WOSB
program is a subset of this larger goal, but not the sole driver. The government limits competition for set-aside WOSB and
economically disadvantaged women-owned small business federal contracts to participants in the WOSB Federal Contracting
Program. Some contracts are awarded directly with no competitive bidding. Such contracts are known as sole-source awards.
This means significant contracting dollars and taxpayer funds are at stake, beginning with program eligibility and certification of
the designation.
The 2015 National Defense Authorization Act required qualifying small businesses to be certified by a federal agency, a state
government, SBA’s Administrator, or a national certifying entity approved by the Administrator.
Women business owners seeking to participate in the WOSB program may submit an application and supporting documents
to SBA at no cost using the website beta.Certify.sba.gov or pay a fee to be certified by an official third-party organization. As
mandated in FY 2015, SBA has four approved third-party certifiers that are allowed to charge a fee to certify the WOSB or an
economically disadvantaged women-owned small business.
Government contracting officers have a history of improperly awarding WOSB contracts because of certification complexities. In
a 2018 audit (Report 18-18), OIG found contracting officers at various federal agencies made sole-source awards without having
the necessary documentation to determine WOSB eligibility.
In September 2022, we reported that SBA established its WOSB certification process to collect documents to verify applicants
met most program eligibility requirements, but did not require any documentation to ensure businesses met SBA size standards
(Report 22-20). SBA analysts also did not always ensure women were the majority owners and controlled the business. In our
analysis, we found 3 of the 25 firms we reviewed did not have documentation that supported a woman controlled the business. To
ensure that only small businesses owned and controlled by women benefit from the WOSB certification program, SBA must create
a control environment requiring all eligibility requirements to be verified.
Further, despite relying on third-party certifier’s decisions on a firm’s eligibility to participate in the program, SBA did not conduct
consistent reviews of these organizations. This has been a challenge for the agency since 2014, when GAO first recommended SBA
establish procedures to assess the performance of the third-party certifiers.
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Agency Progress
SBA has made limited progress toward addressing this challenge. In July 2020, SBA launched beta.Certify.sba.gov, the operational
platform used to manage the certification process for the Women-Owned Small Business and economically disadvantaged
women-owned small business programs. In October 2020, SBA began conducting WOSB certification determinations. SBA hired
additional WOSB analysts, a program director, and increased the number of staff supporting the program.
However, the agency did not develop a reliable system that accurately reports data and interfaces with other essential databases that
contracting officers across the federal government rely on for awarding WOSB set-aside contracts.
Also, SBA did not ensure the staffing levels were appropriate to handle the initial surge of applications, resulting in processing
times that exceeded the established timeframes. As of May 31, 2022, the WOSB program has approved 5,780 firms into the
program and denied 214. Additionally, as part of SBA’s review process, 12,000 applications were screened and returned to the
applicant for more information. The slow progress in issuing prompt certifications affects SBA’s ability to adequately serve the
needs of women-owned businesses.
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Challenge 3: SBA Faces Significant Challenges in IT Investment, System
Development, and Security Controls
Why This Is a Challenge
Over the past decade, the agency has struggled with big, high-dollar information technology (IT) projects. Development
challenges and risks have increased as SBA used outward facing third-party systems to provide emergency COVID-19 and disaster
economic assistance. The inherent risks and related controls outlined in this challenge are comparable to three areas on GAO’s
federal high-risk list: IT investments, SBA’s emergency loan process, and cybersecurity. According to GAO, this list comprises
federal programs and operations that need reform because they are vulnerable to waste, fraud, abuse, and mismanagement.
SBA contracted with third-party providers to provide application processing services for multiple disaster assistance programs,
including PPP loan forgiveness, EIDL processing, and the Shuttered Venue Operators Grant (SVOG) program. Federal guidance,
such as OMB Circular A-123 and the Federal Information Security Modernization Act (FISMA), requires agency management
to validate the adequacy of controls by third-party service providers. Presidential Executive Order 14028 further emphasizes the
importance of strengthening supply chain controls. The security of software used by the federal government is vital to its ability to
perform critical functions. Commercial software development requires transparency, ability to resist attack, and controls to prevent
tampering by malicious actors. Consequently, SBA needs to implement rigorous and predictable programs to improve security.
The SBA Business Technology Investment Council (BTIC) oversees significant IT investments and monitors system development,
design, and security controls. The BTIC is responsible for implementing key provisions of the Clinger-Cohen Act (Information
Technology Management Reform Act), which charges chief information officers with the duty to monitor, evaluate, and report
agency performance of IT programs. The BTIC monitors development performance against requirements and baseline controls,
facilitates corrective actions, and provides transparency to the investment control process.
IT investments, system development, and security controls are managed primarily through entity-level control activities. These
activities allow the agency to meet its objectives, address related risks, and ensure information technology continues to properly
operate. SBA must maintain and establish IT design and security control baselines essential to protect information and preserve
data integrity.
Issue: SBA’s IT Investment Controls Need Improvement
SBA must establish effective IT investment controls and ensure they meet functional requirements,
projected schedules, and estimated costs. Our review of the Certify project in July 2020
(Report 20-17) showed that the project’s investment cost, schedule, and performance baseline data
needed to be submitted for BTIC review. This data shows the amount of work accomplished and
Orange incurred costs against the original investment baseline to provide critical management visibility on the
achievement of, or deviation from, goals. Although the SBA BTIC is the principal governance body in
managing SBA IT investments, it appears the most recent board meeting was on September 15, 2021. Past BTIC minutes showed
limited vetting and oversight of third-party system contracts and related system development activities. BTIC minutes show
limited evidence of project performance oversight on IT investments in the last 2 years. SBA used systems developed by third-
party service providers to deliver the majority of its pandemic assistance.
SBA’s Standard Operating Procedure IT Investment Performance Baseline Management Policy requires that the BTIC be involved
for the whole life of the IT project/investment. The policy further states the BTIC should provide direction on reviewing and
approving the SBA IT portfolio. The council should be helping the agency create the optimum return on its IT investment. The
BTIC should be supporting the agency’s mission and ensuring the accountability of SBA business and IT investments.
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Agency Progress
A major focus of last year’s challenge was related to agency investment controls. This year’s work showed that the recommendations
we made for the Certify.gov (its current version is beta.Certify.sba.gov) investment controls were not fully implemented across the
agency. Our recommendations addressed agency-wide development activities. The BTIC has not published meeting minutes since
September 2021. Consequently the BTIC is not providing effective oversight of IT investments.
Issue: Existing System Development and Monitoring Controls Need to Reflect
Changing IT Design Risks
During the past 2 years, SBA procured new systems from third-party service providers to deliver
emergency COVID-19 disaster assistance. For example, two newly procured systems delivered $808.5
billion of disaster assistance from 2020-2021. These outward facing systems allowed accelerated
delivery of critical disaster assistance funds, performing mission critical functions. These systems
Orange processed large volumes of sensitive data and were subject to cyber threats, incidents, and risks.
Our audit work found the agency allowed the third-party systems to be put into service without
conducting baseline control assessments. With no baseline, the agency could not perform effective continuous monitoring. Also,
we found that control processes did not identify, communicate, capture privacy or identity risks. These risks include identity theft,
misappropriated social security numbers, and modified applicant addresses.
The following control areas require improvement:
Enterprise-wide communication of privacy and identity risks
From 2020 to 2022, OIG identified and communicated to the agency potential privacy and identity internal control weaknesses
in the disaster assistance systems. Subsequently, OIG was unable to obtain evidence that the previously identified privacy and
identity risks were communicated across the agency to be considered for mitigation in other systems. The agency responds
to security incidents through the Enterprise Cybersecurity Service to address cybersecurity intelligence, risk management,
and incident response. However, improvement is needed to ensure identity and privacy risks are fully integrated into the risk
management process.
Improved coordination for system contracts and data management
System acquisition controls play a significant role in the effective management of an information system. OCIO and program
officials need to ensure third-party system security and data migration contract provisions are followed in accordance with
federal guidance. Effective coordination of activities is needed throughout the project life cycle from project inception to
decommissioning of a system. In our report on COVID-19 IT security controls (Report 22-19), we found SBA did not provide
documentation to validate that system functionality and security was included and reviewed in the acquisition contracts. In July
2022, we found (Report 22-16) management did not follow its policies when migrating COVID-19 EIDL program data from the
service provider’s cloud platform to SBA’s data warehouse. Without advanced planning for data migration and defined acceptance
criteria, SBA took reactive measures when the contract ended.
Oversight of third-party systems used to process transactions integral to SBA’s mission
SBA has an outdated system development policy which is a roadmap for the purchase, launching, and management of software
and related application development activities. Updated system guidance is crucial for monitoring third-party systems used to
process transactions integral to the mission of SBA. The agency must update its guidance for purchasing and related system
development to validate essential controls exist before a system is put into production.
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System and Organization Controls (SOC) 1 Type 2 reports for all new and existing external
financial systems
OIG’s Independent Public Accountant was unable to obtain reasonable assurance regarding the reliability and integrity of reported
financial data for critical third-party systems, which contributed to two disclaimer audit opinions for FYs 2020 and 2021. A
disclaimer of opinion results when an auditor cannot obtain sufficient information to render an opinion on an organization’s
financial statements. The SOC 1 Type 2 report provides assurance that reported financial data is complete and reliable.
System acceptance controls and continuous monitoring to limit security and processing risks
SBA expedited pandemic aid to eligible taxpayers, but the agency must still ensure design of system controls meets federal
guidance in delivering program funds. For that reason, testing protocols must be fully addressed, even within limited timeframes,
and then independently tested to ensure they operate as intended. Acceptance criteria specify the minimum desired functionality
acceptable for a system to be put into operation.
The agency did not fully implement a robust internal control baseline that addressed the need for essential security controls and
continuous monitoring over the third-party systems. A baseline is a set of minimum-security controls for an information system.
Parts of the assessment and authorization process were incomplete or completed more than 9-14 months after the systems were
put into operation.
Agency Progress
Since this challenge area was introduced last year, the agency has made limited progress by introducing a supply chain risk
management policy and updating its IT Investment Performance Baseline Management Policy. The agency should continue to
establish policies that address essential entity-wide controls. Some examples of these controls include independent assurance
reviews of third-party financial systems, processes to identify and communicate privacy and identity risks, and an enterprise-wide
system development process that ensures consistency in system design.
The agency should also continue its oversight of IT investments and related system development controls through the Business
Technology Investment Council. The BTIC performs an essential governance role in implementing key provisions of the Clinger-
Cohen Act, which includes monitoring, evaluating, and reporting agency performance of IT programs.
Issue: Additional Progress Needed in IT Security Controls
Inspectors general are required by FISMA to assess the effectiveness of information security programs
on a maturity model spectrum and assess security capability in eight domains.
The current benchmark for an effective program within the context of the maturity model is level 4,
Yellow managed and measurable. In the maturity model, domain performance that scores below the level of
managed and measurable, such as ad hoc, defined, or consistently implemented, means IT security is ineffective.
For FY 2022, the scope of the FISMA evaluation required an accelerated evaluation timeframe. It focused on a reduced core set
of 20 metrics with supplemental metrics being introduced in future fiscal years. This evaluation of core metrics across the nine
domains indicated that SBA continued to achieve level 4 in the area of incident response but is at level 2, defined, or level 3,
consistently implemented, in the remaining eight areas. The maturity model criteria places SBA at an overall level of not effective.
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Agency Progress
SBA quickly responded to identified vulnerabilities but continues to experience security control challenges in areas of user access,
configuration management, security training, and risk management.
SBA made progress in supply chain risk management. The agency continues to be rated at the effective maturity level in the area of
incident response. However, continued improvement is needed in the areas of risk management, including hardware and software
inventories, configuration management controls around patch management, security training and access controls particularly for
administrator privileges.
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Challenge 4: SBA Risk Management and Oversight Practices Need
Improvement to Ensure the Integrity of Loan Programs
Why This Is a Challenge
SBA’s Office of Credit Risk Management manages credit risk for the agency’s loan portfolio of approximately $240 billion (as
of March 2022), and this includes the remaining outstanding loans made through the Paycheck Protection Program (PPP). As
discussed in Management Challenge 1, SBA’s lack of internal controls led to significant fraud risk and vulnerabilities. Additionally,
we found that SBA did not have an organizational structure with clearly defined roles, responsibilities, and processes to manage
and handle potentially fraudulent PPP loans. As of March 2022, SBA has made forgiveness payments exceeding $700 billion to
over 4,700 PPP lenders, which the Office of Credit Risk Management has the responsibility to oversee. PPP loans are originated
by lenders and other companies that often have a low degree of expertise in SBA loan program requirements, which is why this
continues to be a challenge for FY 2023.
Lenders often rely on the services of fee-based and other third-party agents to help originate, close, service, and liquidate SBA
loans. Most traditional SBA-guaranteed 7(a) and 504 Certified Development Company loans are originated by lenders with
delegated approval authority. Generally, these lenders are subject to only limited SBA oversight and quality control unless a
borrower defaults on a loan.
Our previous audits have found SBA has not adequately recognized or managed significant lender weaknesses. In an audit of SBA’s
oversight of high-risk lenders (Report 20-03), we identified additional internal control weaknesses in lender oversight.
Previous OIG audits have also shown that SBA did not effectively identify and track third-party agent involvement in its 7(a) and
504 loan portfolios. Tracking such agents is crucial in managing the portfolios because many lenders rely on the services of fee-
based and other third-party agents to help originate, close, service, and liquidate SBA loans.
Issue: SBA’s Oversight of High-Risk Lending Participants
The risks inherent in delegated lending require effective oversight to monitor compliance with SBA
policies and procedures and corrective actions to address noncompliance. However, OIG’s 2019 audit
of SBA’s oversight of high-risk lenders (Report 20-03) found that the SBA Office of Credit Risk
Management did not always effectively oversee high-risk lenders to identify and mitigate risks. SBA
Yellow did not always conduct planned high-risk lender reviews, recommend appropriate and consistent
risk mitigation actions for the deficiencies identified during the oversight reviews of high-risk lenders, or communicate loan
deficiencies noted during high-risk lender reviews to SBA approval and purchase loan centers.
Agency Progress
SBA has worked to address issues with its oversight of lenders in response to our audit recommendations. In FY 2021, SBA took
three actions to improve its ability to oversee high-risk lenders:
• Issuance of the Final 7(a) Lending Oversight Rule and publication of Standard Operating Procedure (SOP) 50 53 (2) on
supervision and enforcement
• Realignment of the organizational structure of the Office of Credit Risk Management to strengthen lender oversight and
add resources to the review teams for effective oversight
• Implementation of quarterly meetings to ensure adequate oversight of lenders with elevated risk profiles
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In FY 2022, SBA continues to revise SOP 51 00 and document the process for on-site lender reviews and examinations. SBA is
testing the viability of improvements to oversight activities, such as a new approach to monitor lenders with higher risk profiles by
performing quarterly loan file reviews and providing timely feedback.
The Office of Credit Risk Management has implemented the communications protocol that was developed in FY 2020 to
document deficiencies identified during loan file reviews and to then share this information with SBA loan centers and other
internal stakeholders. The communications protocol will be included in the revised SOP 51 00 2.
Although SBA has made substantive progress, agency management has indicated it needs time to finalize and implement oversight
policies and procedures, including SOP 51 00 2. Agency management needs to obtain additional information to confirm that
identified deficiencies have been corrected.
We will continue to monitor SBA’s ongoing efforts to address open recommendations in Report 20-03, including developing
effective oversight policies and procedures and a comprehensive database or workflow management tool to manage oversight of
high-risk lenders.
Issue: Increased Risk Introduced by Loan Agents
Previous OIG audits and investigations have shown SBA could not effectively identify and track loan
agent involvement in its 7(a) and 504 loan portfolios. OIG investigations have also revealed a pattern
of fraud by loan packagers and other fee-based agents in the 7(a) loan program involving hundreds of
millions of dollars. Despite the prevalence of fraud in its loan portfolios, SBA’s oversight of loan agents
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was limited.
SBA requires lenders to provide a loan agent disclosure form (Form 159) to SBA’s fiscal and transfer agent for 7(a) loans that
involve a loan agent. The fiscal and transfer agent is a contractor who supports SBA by serving as paying agent for all investor
payments, processes lender loan reporting, and payment remittance reconciliations. The fiscal and transfer agent also serves as
the central registry for all guaranteed secondary-market interests. The fiscal and transfer agent must enter the data into a database
accessible to SBA. Prior OIG audits identified significant issues in the data quality of Form 159 being tracked by the fiscal agent.
We also found that SBA had not begun tracking Form 159 in the 504-loan program.
Agency Progress
SBA’s oversight of loan agents has been a long-standing challenge that the agency has made great progress in resolving. SBA
determined the best way to gather information on loan agents was by improving Form 159. The improved Form 159 allows SBA
to aggregate and report on loan agent activity to analyze the lender’s portfolio. SBA initiated targeted Form 159 reviews of lenders
to determine compliance with SBA requirements. SBA also undertook a new, more effective method of disclosing and tracking
loan agent involvement in the 504 loan program. SBA requires 504 lenders to electronically submit Form 159 directly into SBA’s
electronic lending system.
SBA contracted with a new fiscal and transfer agent who developed application and follow-up controls, including requiring lenders
to electronically submit Form 159s through the Capital Access Financial System. These controls ensure critical fields on each form
are completed. Lenders put information into the system, such as broker name, service provided, and the amount of compensation
paid, which then populates Form 159. The lender signs the form and may upload the form into the system.
Because loan agent involvement in the 7(a) program is significant, it is important for SBA to have oversight tools that monitor
loan agent involvement in this sizeable program. SBA also needs to effectively manage the risk introduced by high-risk loan agents.
OIG plans to conduct work related to agents involved in the PPP and monitor risks related to SBA’s oversight of loan agents.
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Issue: Increased Risk Introduced by Lender Service Providers
In August 2021, five former officers and employees at one of the largest lender service providers
were convicted on all charges in a 13-year conspiracy to defraud SBA in connection with programs to
guarantee loans made to small businesses.
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The officers fraudulently obtained guarantees for loans SBA deemed ineligible. The officers hid signs of ineligibility from SBA by
misrepresenting the use of SBA loan proceeds and unlawfully diverting previously denied loan applications into expedited approval
channels. The officers originated dozens of loans, totaling more than $10 million in disbursements, that were not eligible for SBA
guarantees. SBA has had to contend with risks introduced by the outsourcing of traditional lender functions to lender service
providers, a type of loan agent, for some time.
The number of SBA-approved lender service provider agreements has grown significantly, in part because of SBA’s effort to better
control access to its systems by lender service providers. SBA assigns an identifying number to all lender service providers that
access SBA systems and records all SBA-approved agreements.
Use of the identification number has made it possible for the SBA Office of Credit Risk Management to develop initial statistics
on provider participation in SBA’s 7(a) program, but the agency’s oversight is still limited. SBA’s analysis of the performance of
loan agents does not include loan-level information from lenders to make it possible to identify high-risk lender service providers.
Agency Progress
Since we first reported on these issues in 2015, SBA has implemented internal controls related to the tracking and monitoring
of lender service provider involvement in SBA’s loan programs. SBA established a method to track lender service provider
involvement at the loan level.
In FY 2020, SBA worked with a contractor to develop a performance analysis for lender service provider portfolios to identify any
high-risk providers. In FY 2021 and FY 2022, SBA worked with the contractor to analyze whether lender service providers add
risk to the lenders’ loan portfolios. The analyses indicated that loans with a service provider generally performed worse than those
without provider involvement in both guaranty purchase and early default rates.
As lender service provider involvement in the 7(a) program increases, it will be important for SBA to continue to evaluate
performance and act when necessary to effectively reduce the incurred risks. OIG will continue to monitor SBA’s oversight of
lender service providers, assess risks, and conduct audits and reviews as necessary.
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Challenge 5: SBA’s Management and Monitoring of the 8(a) Business
Development Program Needs Improvement
Why This Is a Challenge
SBA’s 8(a) Business Development Program was created to provide business development assistance to eligible small, disadvantaged
businesses seeking to compete in the federal marketplace. A major benefit of the 8(a) program is that these certified firms can
receive sole source and set-aside contracts. Sole-source awards are contracts proposed for award without competition. A set-aside
award is a proposed contract with competition limited to small businesses. This means small businesses do not have to compete
against large businesses that may have an industry advantage. The goals of these contracts and certification programs are that the
federal government receives the needed services for the benefit of taxpayers and also helps diversify the economy by supporting
small business.
SBA has adequately addressed issues we raised about ensuring that only eligible firms are admitted into and remain in the
8(a) program, but the agency continues to address challenges in providing effective business development assistance, as well as
measuring and reporting the outcomes of the program. In February 2022, OIG issued Report 22-08, which found SBA’s processes
did not consistently allow for SBA or stakeholders to determine whether firms met their individual goals to successfully complete
the 9-year program.
Issue: SBA Continues to Address Its Ability to Develop Firms in the 8(a) Program
and Measure Results
SBA has historically emphasized business development to enhance the ability of 8(a) firms to
better compete for federal contracts. SBA offers individualized development assistance to program
participants and also makes referrals to its resource partners, Small Business Development Centers,
SCORE, a volunteer mentor network composed of retired executives and entrepreneurs, Women’s
Business Centers, Veterans Business Outreach Centers, and affiliate Procurement Technical
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Assistance Centers.
Despite this, SBA has not fully established an IT system to perform regular performance monitoring and reporting for 8(a)
participants to ensure progress within their business plans. Without an effective IT system to monitor 8(a) participant progress
in meeting individualized business development goals, SBA may not be able to consistently determine if 8(a) participants
have demonstrated the ability to compete in the open marketplace without program assistance (see Challenge 3 for details on
Certify.sba.gov).
SBA is considering next steps for IT development that would provide those features and capabilities that can facilitate tracking,
measuring, and monitoring progress. To bridge the gap in the interim, SBA in FY 2020 created the Business Opportunity
Specialist Annual Review Workbook. When used, the specialist uses this Excel workbook to determine continuing eligibility and
summarizes current financial conditions for each business during annual reviews.
SBA’s IT challenge is not the sole reason the 8(a) program has not improved in measuring the development of firms over the years.
In our February 2022 Report 22-08, we found SBA’s processes did not consistently allow for SBA or stakeholders to determine
whether firms met their individual goals to successfully complete the 9-year program.
SBA did not ensure specialists regularly monitored a participant’s business goals, assessed business development needs, and
followed up with actions for training and accountability. We found that 15 of the 40 firms tested did not have approved business
plans with identified goals, making them ineligible to receive 8(a) contracts. We questioned $93 million in 8(a) set-aside or sole-
source contracts that four of the firms were awarded.
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SBA also did not establish performance measures at the program level to know whether the 8(a) program was successful as an SBA
program. There are no relevant performance metrics to gauge the outcomes from the program or to know the effects the program
is having on small businesses.
Without consistent procedures, there is no assurance that participants received the business development assistance needed for
them to become viable competitors in the contracting arena. As a result, the agency continues to face challenges on how it can best
manage a program that will effectively increase the participation of small businesses in the American economy.
Agency Progress
SBA made some progress to address OIG recommendations issued this year.
To address OIG’s most recent report findings, SBA implemented a standard process to ensure initial business plans are monitored
and annual reviews capture the 8(a) participant’s business plan updates. An SBA Procedural Notice, effective August 10, 2022,
requires all district offices to ensure that 8(a) firms obtain their business plan approval prior to the first contract being awarded.
Program officials are working on improving the FY 2023 Business Opportunity Specialist Annual Review Workbook to better
measure business development. SBA added questions to the business opportunity specialist workbook to place emphasis on
monitoring a firm’s strengths, financial targets, and business goals. The enhancements will help emphasize business development
rather than solely focusing on eligibility and annual compliance.
SBA plans to mandate the use of the workbook for all 8(a) firms that will be admitted to the program in the near future. Until
the new procedures are fully in place, the effectiveness of the workbook has yet to be determined. The agency is also working on
updating standard operating procedures by August 1, 2022. SBA continues to respond to emerging issues related to the pandemic
economic crisis, providing timely guidance and resources to 8(a) program participants.
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Challenge 6: Identification of Improper Payments in SBA’s 7(a) Loan
Program Remains a Challenge
Why This Is a Challenge
OIG audits and reviews have identified 7(a) loans that were ineligible, given to borrowers who did not have the ability to repay, or
were not properly closed, resulting in improper payments. Improper payments occurred in part because SBA did not adequately
review related loans, which is why this remains a management challenge this year.
In FY 2021, the dollar amount of SBA’s 7(a) loan approvals totaled $36.8 billion. Most of these loans were made by lenders with
delegated approval authority. When a loan goes into default, SBA reviews the lender’s actions on the loan to determine if it is
appropriate to pay the lender the guaranty, which SBA refers to as a “guaranty purchase.” “Guaranty” is a variant of “guarantee”
used in financial terminology.
About 8 years ago, OIG established a High-Risk 7(a) Loan Review Program to evaluate lender compliance with SBA requirements
for high-dollar, early defaulted 7(a) loans. High-dollar, early defaulted loans are $500,000 or more and default within the first 18
months of initial disbursement. The 7(a) loan has been the agency’s largest financing program for general business needs, so it is
vital that SBA identify and reduce the risk of improper payments in order to meet its objectives for the program.
Issue: Improvements Needed to Ensure High-Risk 7(a) Loan Reviews Reduce the
Risk of Losses
Between 2014 and 2019, OIG conducted risk based reviews of 7(a) loans and recommended
recoveries on 17 loans totaling more than $19.3 million. In addition, we identified suspicious activity
on five loans totaling nearly $4 million, which were ultimately referred to our Investigations Division.
Although SBA completed purchase and quality control reviews on all the loans, the agency did not
identify or fully address the material deficiencies noted in the OIG review.
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The OIG High-Risk 7(a) Loan Review Program uses an internal scoring system to prioritize loans for review by level of risk. This
evaluation includes a review of high-risk loans purchased by SBA to determine whether lenders complied with SBA requirements
and identified suspicious activity.
Our reviews of high-risk loans have consistently identified issues regarding eligibility, repayment ability, size standards, franchise
agreements, business valuations, appraisals, equity injection, and debt refinance. Our review program also has helped us identify
concerns with change of ownership transactions and SBA’s identification of improper payments.
Agency Progress
SBA has made significant progress in addressing the identification of improper payments in the 7(a). In FY 2020, SBA began to
allow loan specialists more time to review complex early defaulted loans. In addition, the agency improved its review of loans,
training loan specialists, and updating the loan review checklist.
In FY 2020, SBA internally evaluated its purchase process and quality control reviews for 7(a) guaranteed loans to determine
why the loan center reviews did not identify or correct lenders’ noncompliance with SBA requirements, as has also been noted in
OIG reports.
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In FY 2021, SBA held a training session at the loan center that focused on the requirements and SBA review of documentation
related to the source of funds used for equity injection, which has been a continuing issue in our reviews and in the agency’s own
internal evaluations.
In FY 2022, SBA continued to provide monthly feedback to management and staff at the National Guaranty Purchase Center.
Additionally, SBA is drafting revisions to the 7(a) loan servicing and liquidation requirements. SBA has stated they are finalizing
and plan to issue revised requirements designed to reduce improper payments, which should result in continued progress. We
continue to communicate with the agency about previous recommendations for recoveries as part of the audit follow-up process.
We will monitor risks in this area and conduct audits and reviews as necessary.
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Challenge 7: SBA’s Disaster Assistance Program Must Balance Competing
Priorities to Deliver Prompt Assistance but Prevent Fraud
Why This Is a Challenge
This SBA loan program plays a vital role in the aftermath of disasters by providing long-term, low-interest loans to affected
homeowners, renters, businesses of all sizes, and nonprofits. SBA must continually balance the priority of quickly assisting disaster
survivors in the immediate aftermath of a devastating event with the need to mitigate fraud risk and ensure program integrity. To
do so, the agency faces challenges in staffing, quality assurance, and increased loan servicing requirements.
As a result of the pandemic’s widespread economic effects on the U.S. economy, Congress approved legislation that increased
funding to SBA’s disaster loan program, providing over $520 billion in funding to the Economic Injury Disaster Loan (EIDL)
program. Since the start of the pandemic, SBA has approved $390 billion in COVID-19 EIDL assistance, which is a significant
increase over all disaster loan funding disbursed in the agency’s 70-year history. SBA’s existing disaster assistance infrastructure
could not keep up with the unprecedented demand caused by the pandemic, so the agency contracted out for new systems to
deliver vital aid to struggling small businesses. SBA’s infrastructure must be properly equipped to ensure that staffing, processing
systems, and servicing capabilities can efficiently adjust to meet future needs.
Issue: Reserve Staff Need Training to Sustain Productivity During Mobilization
The magnitude of the pandemic relief demand (27.7 million applications received as of December
31, 2021) required SBA to rapidly increase and train staff; staffing numbers rose to historic levels. The
number of personnel needed to serve during the pandemic was almost twice the previous record high
staff total. In addition, the agency had to develop the needed training to address the new criteria for
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COVID-19 EIDLs.
SBA’s Office of Disaster Assistance increased its trained staff from 800 to more than 5,000 employees in December 2017 to
respond to hurricanes Harvey, Irma, and Maria. In response to the COVID-19 pandemic, the Office of Disaster Assistance
increased its permanent and temporary staff size from about 1,200 at the onset of the pandemic to more than 11,500 by
December 2020. In those 9 months, the staff increased nearly 10 times.
SBA outsourced the COVID-19 EIDL processing to a subcontractor to make recommendations for approval or denial of loan
applications. SBA staff made the final decision to approve or deny COVID-19 EIDLs. SBA had to train the existing staff and the
newly hired employees on the new contractor’s system, a tremendous undertaking.
Agency Progress
SBA management made good progress on this long-term issue during the pandemic. SBA had previously made progress in this
area by implementing a cross-functional training plan, as well as online and automated tutorials, a change that resulted from an
after-action report’s findings on SBA’s response to prior major disasters. The COVID-19 pandemic required SBA to train and
mobilize the largest number of new employees ever in its history.
Effective July 5, 2022, the agency moved the entire disaster lending program from the Office of Disaster Assistance to the Office of
Capital Access. The Office of Disaster Assistance will continue to manage the agency’s non-lending aspects of the disaster program
(such as the immediate response group).
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Bringing on a large temporary staff in response to a major natural disaster will always be a challenge for any organization,
including SBA. However, during the past couple of years, SBA was able to increase its staff by almost tenfold to provide
COVID-19 pandemic financial assistance. The new disaster assistance employees expanded the pool of reserve staff that can
be activated for future disasters. The lessons learned from this surge inform the agency’s current hiring and training practices;
therefore, this issue has achieved a rating of yellow.
Although the agency has now achieved a rating of yellow for this issue, the Office of Capital Access is urged to keep monitoring
the need to revise and update its plan for rapid staff surge and the associated need up to update its training. This is needed to
ensure a high level of customer service with reduced applicant processing times, and to ensure eligible applicants receive the federal
assistance they need in a timely manner.
Issue: Improper Payment Quality Assurance Process Needs Strengthening
SBA received a historic number of loan applications in FY 2020 and FY 2021 when COVID relief
programs were established. SBA tests a statistical sample of these loans for improper payments.
Because the total of the number of loans that have been approved and disbursed is so large, the
statistical sample is also large, which has highlighted issues in SBA’s improper payment process.
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An improper payment is any federal government payment made to an ineligible recipient or for an ineligible good or service,
duplicate payment, or payment for goods or services not received (except for such payment authorized by law).
In February 2020, we reported on weaknesses we found in the improper payment quality assurance process (Report 20-07). We
found the improper payments appeal process effectively assessed improper payments, but the initial review process was inefficient.
The Payment Integrity Information Act of 2019 requires agencies to evaluate fraud risks and use a risk-based approach for financial
and administrative controls to counter identified fraud risks. The law reinforces the requirement for agencies to review prepayment
and pre-award procedures. Further, the law specifies use of the Treasury Do Not Pay database to determine award eligibility.
Agencies are required to thoroughly review the databases to determine award eligibility and prevent improper payments.
SBA removed typical controls in the EIDL program and relied on self-certification by the applicants to get funding out quickly to
struggling businesses at the beginning of the pandemic. This led to significant fraudulent activity in the program.
OIG Report 22-06 identified a lack of pre-award controls during the period March 2020 to November 2020, resulting in over
$3.1 billion in COVID-19 EIDL and $550 million emergency EIDL grants distributed to potentially ineligible recipients found
in Treasury’s Do Not Pay databases.
SBA did not report an estimate improper payments rate for the COVID-19 EIDL program in FY 2021 because they received an
exemption from OMB for this new program.
Agency Progress
SBA has made significant improvements to the process since our February 2020 report was issued. The agency has
• conducted monthly audits for issues of non-compliance;
• conducted focused/targeted audits, reviewing a specific area to focus future training efforts;
• targeted training to quality control specialists, leads, and supervisors to continually improve knowledge necessary to
accurately identify improper payments;
• established quality assurance team with an agile database to review agency holds in the agency review hold system; and
• employed an independent fraud review team to look at potential fraud activities that can be referred at any time in the
loan or grant process.
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Additionally, SBA issued ODA Memo 21-13 on April 28, 2021, which included a requirement to check against the Treasury Do
Not Pay system prior to approval of COVID-19 EIDLs.
Overall, SBA has made substantial progress in improving the improper payment quality assurance process.OIG will conduct
an inspection of the effectiveness of the new controls established to use Treasury’s databases to determine SBA’s effectiveness in
reducing improper payments. Additionally, SBA will be reporting the estimated COVID-19 EIDL improper payments rate for the
first time in FY 2022. OIG will perform its annual evaluation of the estimation process which will include determining whether
the process addresses the significant fraud risk present in the COVID-19 EIDLs as identified in prior OIG reports.
Issue: Unprecedented Increase in Servicing COVID-19 EIDLs
SBA has two Disaster Loan Servicing Centers, one in Birmingham, Alabama and the other in El Paso,
Texas, servicing disaster loans that have been approved and fully disbursed. The two centers manage
the portfolio and provide customer service, including accepting and processing loan payments,
making routine collection efforts by phone, email, and postal letters, and handling any loan-related
issues, such as insurance, title, or lien matters.
Orange
After a disaster loan becomes 90 days delinquent, it is transferred to a third center known as the National Disaster Loan
Resolution Center in Santa Ana, California. The loan resolution center manages the portfolio of defaulted disaster loans with
increased collection efforts, including foreclosure when necessary.
The center also handles other loan servicing activities, such as processing loan payments. When disaster loans are deemed
ultimately uncollectable and charged-off, or removed from the agency’s loan portfolio, the borrowers and guarantors are referred to
the Treasury Department.
Treasury has the authority to take stronger efforts to collect, including offset of other federal payments. In this context, offset
means diverting federal payments to satisfy the delinquent loan.
Before the COVID-19 pandemic, SBA was servicing about 263,000 outstanding disaster loans, totaling approximately $9 billion,
across the three servicing centers. As of May 31, 2022, because of the unprecedented number of pandemic relief loans, SBA was
servicing about 4 million outstanding disaster loans. This is over 15 times what the agency was doing before the pandemic. The
current total dollar amount is about $390 billion, over 43 times the pre-pandemic disaster loan portfolio. A total of 30 months of
payment deferment was instituted for all COVID EIDLs. The end of this deferment period will start to in October 2022. Because
the COVID-19 EIDLs were approved with repayment terms of 30 years, the expected servicing duration of this portfolio is long
term. Simply put, the number of payment transactions estimated for this portfolio is 1.4 billion (based on 4 million loans x 12
months x 30 years).
Because SBA loaned billions in pandemic relief loans, the agency has millions of additional loans in its portfolio that must
be serviced. SBA does not currently have the staff or infrastructure to manage this volume. We anticipate the agency will face
significant challenges in managing this volume going forward.
Agency Progress
SBA officials informed us the agency is adding additional staff and resources across the disaster servicing and liquidation centers
to meet the increasing demand. As of May 31, 2022, the loan servicing staff totaled 344 across the three centers. SBA plans to
achieve a COVID-19 EIDL service staff of up to 2,000 full-time employees by the end of Q2 FY23. This increase is mostly
coming from the 1,500 full-time loan processing agents who will be transitioned to servicing during 2022.
To meet the increased call demand, SBA officials said they overhauled customer service by changing management and contractors,
streamlined the process for adding customer service agents, added performance and quality metrics, improved call scripts and
customer service guidelines.
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To increase servicing efficiencies, SBA officials stated they will enhance their servicing platform. They have been developing a series
of new initiatives allowing SBA to directly service the entire portfolio over the long term. These include a new e-billing capability
that replaces traditional paper billing processes, a borrower self-service portal, and automated transactions for routine requests,
such as loan charge off. This enhanced servicing platform is expected to be operational by the second quarter of FY 2023.
Because this issue is a significant challenge for SBA, staffing and process changes are planned but not yet in place. SBA’s servicing
portfolio has increased so significantly, this issue is being rated moderate or limited progress because more attention and
monitoring is warranted.
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Challenge 8: SBA Needs Robust Grants Management Oversight
Why This Is a Challenge
In FY 2021, pandemic relief legislation authorized new, multibillion-dollar grant programs in addition to SBA’s existing
entrepreneurial development grant program portfolio. Congress had authorized $45.3 billion for SBA to administer as grants to
provide economic relief and technical assistance, nearly doubling SBA’s existing technical assistance programs.
Because of the government-wide emphasis on grants management reform, it is SBA’s responsibility to maximize the value of its
grant funding to ensure its programs accomplish program objectives. In recent OIG audits, we have found ineffective oversight of
grant recipients and systemic issues with the accuracy of SBA grant data in both financial and performance reporting.
Issue: SBA’s Grants Management System Needs Improvement
Previous OIG reports have found SBA used an inefficient and error-prone system to manage its grant
awards. The federal Procurement Request Information System Management (PRISM) that SBA used
to award, monitor, and report on technical assistance programs required substantial manual data
entry, which can lead to input errors.
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Data inaccuracies inhibit the ability to effectively track federal spending. Errors also affect the agency’s
ability to report complete and accurate information on time, as required by the Digital Accountability and Transparency Act of
2014. In March 2018, we issued an advisory memorandum (Report 18-15) on material weaknesses identified by an independent
accounting firm in SBA’s controls over the accuracy of grant award data reported in USASpending.gov.
Immediately after the alert was issued, program officials requested an internal A-123 review of the grant management process
to assess and verify OIG’s findings. SBA’s internal auditors found that all 45 of the sampled awards included inaccuracies and
reported a number of deficiencies per award.
PRISM was not completely integrated with SBA’s financial system and required additional manual entry to obligate funds and
authorize payments to grant recipients. The lack of an integrated system increased the need for grants management personnel to
manually input entries. Reliable data in a grants management system ensures the federal funds are awarded to eligible recipients,
disbursements are accurate, and that management can make informed decisions to effectively administer programs.
Agency Progress
SBA has made substantial progress in modernizing its grants management system. In 2019, SBA entered into an interagency
agreement with the U.S. Department of Health and Human Services for transition analysis, infrastructure setup, and training
services to launch GrantSolutions.gov. SBA will spend $2.5 million over 5 years to help the agency
• improve funding management, awarding of grants, processing payments, and closeouts;
• enhance ability to develop accurate performance metrics reporting;
• reduce compliance violations; and
• increase auditability, accountability, and transparency.
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During FYs 2020 and 2021, the SBA Office of Grants Management implemented the GrantSolutions system for program office
use. In 2021 and 2022, SBA and the Health and Human Services GrantSolutions team trained program officials on how to use
the system. The SBA Office of Grants Management also works with each program office to identify program-specific system
customizations that ensure the agency complies with federal and SBA policies.
Although most of the program offices adopted the system in 2021, the Shuttered Venue Operators Grant (SVOG) program
opted to use Salesforce, a contracted customer relationship management system, to manage its grants. Also, instead of using the
GrantSolutions system, the Restaurant Revitalization Fund (RRF) program developed its own application portal that interfaced
with the SBA Office of Capital Access’s systems to manage the application intake, processing, and award approvals for pandemic
assistance. Both the SVOG and RRF programs were integrated into SBA’s Joint Administrative Accounting Management System.
Since 2020, SBA has been working to integrate the SBA’s Joint Administrative Accounting Management System with
GrantSolutions.gov. Until the agency integrates the financial interface, program offices are still required to use the PRISM
system, which is not completely integrated with SBA’s financial system and requires manual entry to obligate funds and authorize
payments to grant recipients. While SBA continues to have to work around the limitations, grants management officials perform
monthly data quality assessments of the manually input data and reports deficiencies to program offices to correct the errors.
Without an effective grants management system, the agency must continue manual and burdensome processes to manage
compliance requirements, which may continue to hinder its ability to effectively oversee and manage SBA grant programs.
Issue: Better Performance Measurements Needed to Monitor Grant
Program Achievements
An OIG review of SBA’s administration of the SVOG program (Report 21-13) found SBA did not
establish performance goals and measurements for the grant recipients.
We also found in our review of CARES Act entrepreneurial development cooperative agreements
and grants (Report 21-11) that the agency did not establish clearly defined goals with targets for the
Yellow
grant recipients.
Because of this, SBA cannot effectively measure and accurately report performance results to assess whether the grant recipient’s
performance met objectives, ensuring the pandemic relief programs were effective.
Federal regulations require awards to include performance goals. The agency must provide a standard to effectively measure grantee
performance, such as the estimated number of jobs saved or created, tax revenue generated, or entity operational status.
Without specific grantee performance reporting measures and requirements, SBA may have disbursed $14.6 billion in SVOG
funds without knowing whether the program successfully aided small businesses in the live arts and entertainment industry. GAO
recently reported similar concerns about how SBA took limited steps in enforcing RRF reporting. Thirty-two percent of RRF
recipients have not yet reported how they used their funds for 2021 (GAO-22-105442).
Program officials did establish performance goals and indicators for the supplemental CARES Act funds provided to Small
Business Development Centers, Women’s Business Centers, and the Resource Partner Training Portal, but SBA should have clearly
defined the goals and set targets to more effectively ensure they were achieved as intended.
We first identified oversight of grant program performance as a top management challenge in FY 2019. To address these
weaknesses, SBA updated its grant management policies and procedures. The agency required grant officers to enforce performance
requirements and verify reported information as well as to ensure applicants’ proposals include plans to measure performance in a
way that will help SBA achieve program goals.
The SBA Office of Entrepreneurial Development had until September 2020 to fully adopt the updated policies, which are not
reflected in the CARES Act Entrepreneurial Development grants. Without clearly defined performance goals and targets, SBA
144 Other Information (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
cannot effectively measure and accurately report performance results. In 2022, we reported that SBA and its grant recipient
that implemented the Resource Partner Training Portal, an initiative authorized under the CARES Act, did not set targets for
performance goals to assess whether the portal met the intended purpose (Report 22-07). We found the portal did not serve as
a major source for COVID-19 information; SBA’s Resource Partner counselors and mentors generally did not use the training
portal. SBA awarded the grant recipient $18.6 million and less than 1 percent of 30 million eligible small businesses used the
portal within the first year of the pandemic. Only about 62 resource partner counselors and mentors out of approximately
13,000 completed any of the training modules.
Without performance targets, program officials could not hold the Resource Partner training portal grant recipient accountable for
ensuring the hub served as a major source of COVID-19 related resources for small businesses and a training portal for resource
partner counselors and mentors.
The authorizing language for the SVOG program included no specific performance measurements, so SBA created a logic model
in March 2021. The model helped identify outputs and outcomes for the program.
Agency Progress
SBA has made substantial progress establishing performance measures for its grant programs. In FY 2022, the SBA Office of
Grants Management collaborated with all of SBA’s grants-making program offices to oversee an overall approach for implementing
effective performance monitoring.
The SBA Office of Entrepreneurial Development applied lessons learned from OIG’s review of entrepreneurial development
CARES Act awards (Report 21-11) and established a variety of output and outcome-focused measures for the Community
Navigator pilot program, authorized by the American Rescue Plan Act of 2021. In the announcement for the program, SBA
required grant applicants to establish realistic targets for the goals to measure achievements during grant performance.
In FY 2022, the SVOG program established performance measures, developed a customer experience and award outcomes survey,
and finalized program evaluation framework to examine the effects the program had on venues’ survival and other program
outcomes across industry, geography, and business owner demographics. SVOG program plans to survey all award recipients on
their customer experience and award outcomes as part of the grant closeout process.
Issue: Comprehensive Oversight Plan with Strong Controls Will Help SBA Better
Assess Risk, Distribute Payments, and Audit the Shuttered Venue Operators Grant
and Restaurant Revitalization Fund Programs
We alerted management to concerns about SBA’s initial plans for assessing applicant risk and setting
payment disbursements in the SVOG program.
Since the majority of SVOG grant awards were under a certain dollar threshold, they were categorized
Orange as low risk. These awards were disbursed in lump sum payments with minimal financial reporting
requirements and expectations for post-award accountability.
SBA reported that as of July 5, 2022, the agency completed processing applications for the SVOG program. In total, SBA awarded
$14.6 billion to 13,011 grant recipients, of which 9,800 received supplemental awards.
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act of 2020 required SBA to submit the policies and
procedures used to conduct oversight and audits of the grants to Congress. It also required measurement standards to determine
which grants should undergo an audit. The SBA Office of Disaster Assistance based its audit plan for this program on the risk level
established for the payment distributions and financial reporting requirements for the grant recipients.
Other Information (Unaudited) 145
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
All grant recipients who received $10 million, which is the maximum amount for any single award, were going to be audited. It
is likely a minimal number of recipients will be subject to an audit. The office’s initial audit plan exposed the $16.25 billion grant
program to potential misuse of funds because the bulk of grant funds will not be subject to a reasonable degree of scrutiny. SBA
has finalized its oversight plan to include monitoring, audit, and closeout strategies that address the agency’s obligation to uphold
federal grant regulations and other applicable requirements.
Some of the issues we identified on SVOG were identified by GAO for the Restaurant Revitalization Fund program. GAO’s FY
2022 report (GAO-22-105442) on SBA’s RFF found that while SBA emphasized putting pre-award controls in place to manage
risk, there were weaknesses in the design and operation of the internal controls. As a result, the agency did not effectively prevent
systemic control weaknesses throughout the award process.
Program officials did not design a fraud risk framework that assigned appropriate levels of risk to categories of applications, which
left the program vulnerable to making payments to potentially fraudulent applicants. GAO found that SBA had relied heavily on
third-party controls without fully leveraging data the agency already had from administering its other COVID-19 relief programs,
such as the PPP. GAO found SBA underestimated the number of manual reviews that would be needed and did not thoroughly
review all awards that met the criteria for a manual review. In response, SBA officials stated that they did not plan to assess the
effectiveness of the controls and whether they operated as expected. OIG is working on an audit of SBA’s post-award monitoring
efforts.
Agency Progress
In FY 2022, we reported that even after determining multiple disbursements would better protect grant funds from fraud or
misuse, SBA switched to a riskier single advance payment for all grantees (Report 22-15). This lump sum payment method may
have hastened award disbursement, but multiple disbursements are a better way to protect taxpayer funds. Multiple disbursements
enable program officials to verify that grant recipients used initial award funds for allowable activities, before then disbursing the
remaining award. Because SBA made this change, program officials will not be able to monitor grantees’ use of the proceeds until
the end of the award, when closing out the grant, after all the funds have been disbursed.
In a sample of 10 awards we reviewed, program officials did not ensure they had adequate support for 3 of the grant amounts.
SBA awarded these three recipients $2.6 million above the total amount that they had requested. The higher grant award amounts
did not correspond to the recipients’ budgets. Nor was there supporting documentation to show why SBA awarded each recipient
higher amounts than they had requested.
In addition, SBA did not consistently ensure the recipient’s budget accurately summarized the financial plan for the award
amount. Awards made to 1,849 recipients, totaling $1.49 billion, did not have a budget that reconciled to the award amount. It
is essential that SBA approve budgets that match the award amount to hold grant recipients accountable for meeting program
requirements.
SBA finalized its revised oversight plan for the SVOG program and established procedures to monitor, audit, and closeout awards.
The agency contracted with a firm that provided support to develop the strategy and oversight plan. SBA will audit a statistically
significant sample of low, moderate, and high-risk level SVOG recipients. The contractor also developed training materials on
audit and grant management policies and procedures for both SBA staff and SVOG grant recipients.
146 Other Information (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Issue: Leveraging SBA’s Workforce to Ensure Effective Administration of New and
Significantly Expanded Grant Programs to Aid Small Businesses
Although the SVOG program started with only one official and temporary staff, SBA has since trained
a substantial workforce to review and approve applications.
As of July 5, 2022, SBA has awarded 13,011 grants, totaling $14.6 billion. With more than 13,000
Yellow grants to service through monitoring, audit, and closeout, SBA will need to leverage and maintain a
skilled workforce to meet the demands of ongoing grant management and administration of new awards.
According to SBA’s federal assistance directive, only warranted grant officers can commit the agency to enter into a federal
assistance agreement, such as a grant, obligating federal funds. Despite the federal assistance directive, the SBA acting Chief
Operating Officer waived several of the criteria necessary for new grants management staff, including training and certification
requirements.
This waiver negated the previous progress SBA had made on addressing the skills gap of the grants management workforce. We
have recommended that SBA train all grants officers and program personnel on the policies, procedures, and best practices for
awarding and monitoring grants (Report 19-02). To address this challenge, SBA established a training plan for all grants officers
and program officials responsible for monitoring grant recipients to address the systemic weaknesses OIG found in previous audits
of SBA’s grants management.
Since SBA decided to make single advanced payments with minimal financial reporting requirements and agency oversight to all
SVOG award recipients, the application reviewing officials must carefully review the applicants’ proposed budgets to ensure funds
will be used for allowable, allocable, and reasonable expenses.
GAO’s FY 2022 report (GAO-22-105442) on SBA’s Restaurant Revitalization Fund found that there was a greater than expected
need for manual reviews because of the number of applications flagged by automated controls. In contrast to the program officials’
early planning estimate of 10 percent, SBA data indicates 71 percent of applications should have been manually reviewed,
of which 25 percent were considered higher risk for characteristics such as high dollar request or missing documentation.
Furthermore, GAO found that there is no evidence that manual reviews were done on about 17 percent of all awards that met the
criteria for requiring one.
Agency Progress
SBA made progress on ensuring the SVOG had staff, both permanent employees and contract support staff, to support the
application processing. During the peak, the office had 500 staff to support the manual reviews. Similarly, for RRF, GAO found
that program officials had a staff level of 400 employees to perform manual reviews, sufficient to meet anticipated needs, and
therefore not a factor as to why SBA did not complete the needed manual reviews.
The program has trained staff on oversight procedures now that it has transitioned to monitoring the 13,011 shuttered venue
grants. The agency detailed a grants management specialist to provide strategic guidance on all monitoring, auditing, and closeout
activities.
Other Information (Unaudited) 147
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
AGENCY’S RESPONSE TO TOP MANAGEMENT AND
PERFORMANCE CHALLENGES FACING THE SMALL BUSINESS
ADMINISTRATION IN FISCAL YEAR 2023
OFFICE OF THE ADMINISTRATOR
U.S. Small Business Administration
Washington, D.C. 20416
Agency’s Response to Top Management and Performance Challenges Facing
The Small Business Administration in Fiscal Year 2023
I thank the Office of Inspector General (OIG) for its efforts to identify the top management and performance
challenges facing the U.S. Small Business Administration (SBA) in its FY 2023 Management Challenge Report
(MC Report). The OIG’s investigation and analysis provides important insights on the threats, strengths,
weaknesses, and opportunities facing our enterprise objectives.
The SBA’s substantial progress, resolution, and/or appropriate reduction on 14 of the 21 issues identified in
the MC Report is attributable to our continued communication, collaboration, and coordination with the
OIG leadership and staff. We appreciate the recognition of these successes and the OIG’s suggestions. Further,
we remain dedicated to resolving the remaining seven issues, and I have directed the SBA’s program, strategic,
and support offices to continue to prioritize them. The insights of this report have been shared throughout
the Agency so that leadership at every level can evaluate the risks and effectively prioritize resources and
oversight efforts.
Below are a few examples of the SBA’s commitment to addressing these challenges and adjusting to a
continuously evolving operating environment amidst the increased workload of new programs and program
updates, legislative changes, and changing operational priorities resulting from the COVID-19 pandemic.
Improved Fraud Controls and Cooperation with the OIG: Our Agency implemented upfront controls to
mitigate fraud risks, reduce and strengthen controls, and mitigate potential fraud for PPP and COVID EIDL
loans as the demand for expeditious loan program implementation increased. As a result, the SBA has been
able to address and close several recommendations related to pandemic oversight. In addition, when the SBA
identifies cases of suspected fraud or identity theft, the SBA’s fraud review team refers the case to the OIG for
possible criminal investigation. The SBA has referred over 500,000 cases of suspected fraud to the OIG since
the beginning of the COVID EIDL program. The fraud review team also provides support to the OIG, the
Department of Justice, the Secret Service, and other law enforcement agencies investigating and prosecuting
cases of fraud.
Improved Women-Owned Small Business Federal Certification Program: The Women-Owned Small Business
(WOSB) Program changed from a self-certification program to a certification program in 2020. Since
October 2020, the SBA has been conducting WOSB certification determinations. The SBA has also hired a
WOSB program director, additional WOSB analysts, and has increased the number of staff supporting the
programs. The SBA has also updated its regulations on the certification process and the SBA’s oversight of
third-party certifiers.
148 Other Information (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Improved Governance of Information Technology Investments: The SBA has made great strides in its plan
to improve Information Technology (IT) investment controls governance by developing an IT governance
framework, reconfiguring of the Business Technology Investment Council (BTIC) into the Investment Review
Board (IRB), and developing a new process for IT investment management. The Agency has also implemented
IT risk assessment plans and has established regular reporting to the Agency’s Enterprise Risk Management
(ERM) Board.
Improved Monitoring of 8(a) Program Participants: The Agency has instituted guidance for use by Business
Opportunity Specialists (BOS) nationwide that requires all district offices to ensure 8(a) firms obtain their
business plan approval prior to award of the 8(a) firm’s first contract. In addition, the Agency has evolved the
use of the BOS 8(a) firm Annual Review to focus and measure the 8(a) firm’s business development.
Lastly, the Agency is dedicated to addressing outstanding audit recommendations, many of which are closely
tied to the issues identified in the MC Report. This effort, similar to the reported substantial progress noted
above, has already produced benefits that will allow the SBA to better serve the Agency’s stakeholders. In FY
2022, the SBA successfully implemented and closed 114 OIG audit recommendations and significantly reduced
the number of recommendations open more than one year. I am proud of the SBA’s skilled workforce and our
ability to improve program and operation integrity and internal controls.
I look forward to continued collaboration with the OIG in our endeavor to innovate, institutionalize
continuous improvement, and facilitate strategic collaboration with our stakeholders.
Sincerely,
Isabella Casillas Guzman
Administrator
Other Information (Unaudited) 149
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
PAYMENT INTEGRITY
The Payment Integrity Information Act of 2019 (PIIA) • Paycheck Protection Loan Program (PPP).
was established to improve efforts to identify and reduce
Government-wide improper payments and requires agencies The SBA conducts risk assessments on a three-year rotation
to estimate improper payments and report on actions to cycle for programs not deemed susceptible to significant
reduce improper payments. In accordance with Office of improper payments, or earlier if a program was subjected to
Management and Budget (OMB) Circular A-123, Appendix significant change in legislation or funding level. Significant
C, Requirements for Payment Integrity Improvement (M- improper payments are defined as gross annual improper
21-19), agencies are required to identify, assess, prioritize, payments exceeding (1) both 1.5 percent of program outlays
and respond to payment integrity risks to prevent improper and $10,000,000, or (2) $100,000,000. In FY 2022, the SBA
payments in the most appropriate manner. This report will updated the report used to identify SBA programs subject to
discuss the SBA’s efforts and results related to improper PIIA reporting. As a result, all programs with outlays greater
payment assessment and reviews. More detailed information than $10 million that are not currently reporting improper
on improper payments and information previously reported payment estimates were subject to a risk assessment. A total
in the AFR that is not included in the FY 2022 AFR can be of 17 risk assessments were performed, with all 17 programs
found on PaymentAccuracy.gov. identified as being not susceptible to significant improper
payments. A risk assessment was not performed on one
The SBA improper payment reviews are a multi-layered program related to Other Administrative Spending, as the
process that starts with a risk assessment. If a risk assessment disbursement types under this program overlap with the
indicates that a program is susceptible to improper payments, disbursement types of the completed risk assessments. As such,
then testing is performed using a statistically valid sampling the SBA will be leveraging the results from the completed risk
technique. Based upon the testing results, a corrective action assessments to assess susceptibility of significant improper
plan is developed to prevent and remediate the types of errors payments for the Other Administrative Spending program.
uncovered. If testing finds a significant amount of recoverable
dollars, the SBA considers the appropriateness of performing a The next sections discuss the SBA’s efforts and results related to
recapture audit. improper payment assessments and reviews.
The detection and remediation of improper payments is a
priority for the Agency. SBA staff monitor and review for
improper payments and implement improvements that will
reduce improper payment rates. The SBA also continually
seeks opportunities to enhance and implement internal
controls to reduce the risk for improper payments.
In FY 2022, the SBA reviewed seven programs and activities
that were deemed susceptible to significant improper
payments. Of the seven programs reviewed, four programs
are major credit programs mandated by OMB, and three
programs are new programs that were created in response to
the COVID-19 pandemic. The seven programs are:
• 7(a) Loan Guaranty Approvals;
• 7(a) Loan Guaranty Purchases;
• 504 Certified Development Loan Approvals;
• Disaster Assistance Loans;
• COVID Economic Injury Disaster Loan (EIDL);
• Economic Injury Disaster Loan Emergency Assistance
(Advance); and
150 Other Information (Unaudited)
Payment Reporting
U.S. Small Business Administration
Table 1 IMPROPER PAYMENT REPORTING AND REDUCTION OUTLOOK ($ IN MILLIONS) 1
FY 2021 FY 2022 Summary FY 2022 Breakdown
FY 2023
Program Overpayments Overpayments Technically Overpayments Overpayments Technically Reduction
Proper Improper Unknown Proper Improper Unknown Underpay- Underpay-
Outlays $
2
IP % IP $ Outlays $
2
(Outside Agency (Within Agency Improper (Outside Agency (Within Agency Improper Target %
Payment % Payment % Payment % Payment $ Payment $ Payment $ ments % ments $
Control) % Control) % Payments % Control) $ Control) $ Payment $
7(a) Loan Guaranty Approvals 17,342.49 2.03 352.61 29,717.21 99.00 1.00 - 29,419.14 298.07 - 1.00 - - - 298.07 - - - 1.00
7(a) Loan Guaranty Purchases 568.24 3.35 19.01 706.87 95.79 4.15 0.07 677.08 29.32 0.46 - 27.83 0.38 - - 26.66 2.67 - 4.05
504 Certified Development Loan
6,356.99 3.07 195.09 10,020.79 97.99 1.99 0.02 9,819.55 198.96 2.28 1.99 - - - 198.96 - - - 1.89
Approvals
Disaster Assistance Loans 544.98 13.37 72.84 1,133.59 96.94 3.06 - 1,098.91 34.68 - - 16.14 0.58 1.10 - 15.65 6.60 12.44 2.96
COVID-Economic Injury Disaster
N/A3 N/A 3 N/A 3 153,811.64 95.50 4.50 - 146,894.93 6,916.71 - - 2,722.45 0.30 2.51 - 2,600.03 461.26 3,855.42 4.40
Loan (EIDL)
Economic Injury Disaster Loan
N/A 3 N/A 3 N/A 3 7,849.84 90.24 9.76 - 7,083.50 766.34 - - 849.25 - - - 766.34 - - 9.66
Emergency Assistance (Advance)
Paycheck Protection Loan
N/A 3 N/A 3 N/A 3 685,179.36 95.76 1.83 2.41 656,152.31 12,529.33 16,497.71 1.83 - - - 12,529.33 - - - N/A4
Program (PPP)
Total 24,812.70 639.55 888,419.30 851,145.42 20,773.41 16,500.45 13,026.36 3,408.68 470.53 3,867.86
Table 1 presents a summary of the SBA’s improper payment review results and reduction outlook.
Agency Financial Report Fiscal Year 2022
Other Information (Unaudited)
1 Amounts and percentages reported on this table may not reconcile due to rounding differences.
2 Outlays in this report represent the base amount of the program activity related to SBA improper payments; and this amount will differ from the amount reported as outlays in SBA’s President’s Budget submissions because they
include reestimates of subsidy cost, reimbursements to SBA administrative funds and other costs. Outlays for 7(a) loan guaranty purchases are the amount of disbursements for the purchase of defaulted guarantied loans. Outlays for
7(a) loan guaranty approvals are the amount of new guaranty approvals by banks and other SBA lending partners. Outlays for 504 CDC loans guarantied are approvals irrespective of disbursement, net of approval increases, decreases,
reinstatements and cancellations for the current year. Outlays for disaster loans are loan disbursements on current year approvals.
3 Prior year data for the program is not available as FY 2022 is the first year program is reporting improper payment data.
4 An FY 2023 reduction target was not established for the Paycheck Protection Loan Program. The program ended on May 31, 2021, and no loans were awarded after the program end date.
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
To provide more clarity for the reader, this section is organized rate of 1.93 percent, in accordance with OMB Appendix
by the seven programs and activities subjected to review C to Circular A-123 (March 2021), the 7(a) loan guaranty
for improper payments and provides statistical sampling approval program is considered to have met its reduction
information and review results coupled with the SBA’s planned target. Additionally, for FY 2022, the SBA did not identify
corrective actions to address the improper payments. any unknown payments for the 7(a) loan guaranty approvals
program.
7(a) Loan Guaranty Approvals For FY 2023, the SBA established a reduction target of 1.00
percent for the 7(a) loan guaranty approvals program. This FY
The 7(a) Loan program is the SBA’s most common loan 2023 reduction target is the same as the FY 2022 improper
program. The 7(a) Loan program provides small businesses payment rate estimate. The root cause of improper payments
with short- and long-term working capital, capital to refinance in the 7(a) loan guaranty approvals program stems from
current business debt, and capital for specific business shortfalls in the lenders’ loan authentication process, which
expenditures. For payment integrity reporting, the 7(a) Loan are outside of the SBA control. As such, keeping the reduction
program is bifurcated into 7(a) Loan Guaranty Approvals and target rate in-line with the current improper payment rate
7(a) Loan Guaranty Purchases. estimate offers a conservative and realistic target for the SBA.
7(a) Loan Guaranty Approvals describes the loan guaranty The 7(a) loan guaranty approval reviews were conducted to
approval process. Approximately 80 percent of 7(a) loans are determine whether lenders complied materially with the 7(a)
approved by Lenders under their delegated authority. During loan program origination requirements, including statutory
the loan guaranty approval review process, the SBA reviews the provisions, SBA regulations, any agreement the lender
7(a) loan for calculation accuracy to ensure Lenders issued the executed with SBA, Standard Operating Procedures, Loan
7(a) loans to eligible borrowers and to ensure loans are made Authorizations, and official SBA notices and forms applicable
within statutory, regulatory, and SBA issued guidelines. to the 7(a) loan program. The reviews were conducted to
determine if lenders (1) originated the loan in a prudent and
Statistical Sampling commercially reasonably manner, (2) mispresented or failed
to disclose a material fact to the SBA, and/or (3) put the SBA’s
For 7(a) approval reviews, loans in the sample were chosen
financial interest at risk.
using Probability Proportional to Size (PPS) Sampling with
replacement from all loan guaranties approved during the
12-month period ended March 31, 2022. The approval Corrective Action
population was divided into two strata based on whether Approximately 80 percent of all 7(a) loan guarantee approvals
the loan was SBA Express or not. There was a total of are performed by lenders with delegated authority to evaluate,
54,962 7(a) loan approvals, with a total approval outlays process, close, and disburse 7(a) loans. Lenders with delegated
of $36,176,000,822, and an SBA Guaranteed portion of authority were responsible for all identified improper payments
$29,717,206,426. The SBA determined the appropriate total for 7(a) loan program approvals in FY 2022.
sample size to be 233 loans from the population. The sample
included net guaranteed loan approvals of $398,795,586 The root cause categories established by the Office of
and improper payments of $3,251,215 within the sample. Management and Budget (OMB) are: (1) Statutory
Using the Hansen-Hurwitz estimation method, the improper Requirements of Program Were Not Met; (2) Unable
payments rate for the annual period ending March 31, 2022, to Determine Whether Proper or Improper; (3) Data/
was estimated as 1.00 percent, and the improper payment Information Needed Does Not Exist; (4) Inability to Access
amount was estimated as $298,069,226. Data/Information; and (5) Failure to Access Data/Information.
The root cause for 7(a) loan guaranty approvals was Statutory
The FY 2022 improper payment rate estimate of 1.00 percent Requirements of Program Were Not Met. The most prevalent
for the 7(a) loan guaranty approval program is less than the cause for improper payments stemmed from the delegated
target reduction rate of 1.93 percent from FY 2021. The SBA’s lenders’ failure to authenticate borrowers’ eligibility in
sampling methodology is a statistically valid and rigorous compliance with loan program requirements. The primary
plan, with a 95 percent confidence interval, plus or minus a reasons for 7(a) approval errors in FY 2022 included:
3 percent margin of error, the upper and lower bounds of the
confidence interval. Because the lower bound of its confidence
interval, 0.00 percent, is lower than the reduction target
152 Other Information (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
• Lender’s failure to identify eligibility based on affiliates; the FY 2022 PIIA reviews have been resolved through
• Lenders’ failures to obtain appropriate liens; recommendations to reduce or cancel the loan guaranty and/
or referral to other offices. Corrective actions were generally
• Lender’s failure to structure the loan in accordance with
completed without having to refer the loan for further review.
business valuation; and,
Corrective actions are initiated within 120 days and all
• Lender’s failure to identify and obtain appropriate
corrective actions are generally taken within the fiscal year.
guarantors;
Although the SBA identified the primary root cause to be 7(a) Loan Guaranty Purchases
Statutory Requirements of Program Were Not Met, in order to
comply with the root causes identified in the OMB data-call, 7(a) Loan Guaranty Purchases describes the loan guaranty
the SBA further identified a secondary root cause of Inability purchase process. A Lender may demand that the SBA honor
to Access Data/Information. However, it is the SBA’s position its guaranty on a loan if a borrower is in default or files for
that the root causes are derived from statutory requirements federal bankruptcy protection. During the loan guaranty
of the program not being met based on the aforementioned purchase process, the SBA will purchase or honor the guaranty
reasons. on a defaulted SBA loans.
To reduce and/or eliminate the occurrence of future improper
payments, a Corrective Action Plan has been developed for the Statistical Sampling
7(a) loan guaranty approval centers. Specific corrective actions For 7(a) loan guaranty purchase reviews, the loans in the
are determined based upon the primary reason for the error sample were chosen using PPS Sampling with replacement
with the purpose of both remedying the error and to prevent from all purchases approved during the 12-month period
recurrence. Plans for improvement include the following: ended March 31, 2022. The purchase population was divided
into four strata based on which servicing office processed the
• Collaborating with the Office of Credit Risk
purchase and whether the loan was considered an early default,
Management (OCRM) to inform the office of specific
regardless of servicing office. There were 4,533 7(a) loan
lender deficiencies for further monitoring and potential
purchases, with total purchase outlays of $706,870,444. The
incorporation into Risk Based Reviews;
SBA determined the appropriate sample size to be 246 loans
• Collaborating with the Office of Financial Assistance from the population. The sample included aggregate purchase
(OFA) to inform the office of deficiencies identified for outlays of $199,178,963 and an absolute value of improper
potential incorporation into policy, regulatory, or standard payments of $15,494,685 within the sample. Using the
operating procedure rewrite or update; and Hansen-Hurwitz estimation method, the improper payment
• External training for lenders on policy requirements rate for the annual period ending March 31, 2022, was
governing eligibility, and appropriate loan structure. estimated as 4.15 percent, and the improper payment amount
was estimated as $29,324,689. For instances in which the SBA
The Office of Financial Program Operations (OFPO) will
was unable to determine whether a payment was proper or
share the loan level and lender deficiencies identified during
improper, the SBA categorized these payments as “Unknown”5.
the reviews with the OCRM and the OFA and will continue
In FY 2022, one loan purchase in the amount of $846 was
its efforts throughout the upcoming fiscal year to ensure lender
categorized as an unknown payment, which translated to an
deficiencies are monitored and potentially incorporated into
estimated unknown payment rate of 0.07 percent and an
OCRM’s Risk Based Reviews and the OFA’s policy rewrites
estimated unknown payment amount of $462,490.
and updates.
The estimated rate of 4.15 percent improper payments and
Corrective actions for specific loans are tracked at the loan
0.07 percent in unknown payments totals 4.22 percent and
level through a centralized database. The Quality Control
represents total estimated improper payments plus unknown
Specialist for 7(a) loan guaranty approvals monitors errors
payments of $29,787,179.
from identification through completion of the corrective
actions. OFPO management provides oversight to ensure The SBA’s sampling methodology is a statistically valid and
milestones are met. All improper payments identified through rigorous plan, with a 95 percent confidence interval, plus
5 The Payment Integrity Information Act of 2019 §3552(c)(2)(A) states that when an agency cannot determine, due to lacking or insufficient documentation, whether a
payment is proper or not, the payment shall be treated as improper.
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or minus a 3 percent margin of error, the upper and lower Specific corrective actions are determined based upon the
bounds of the confidence interval. Because the lower bound primary reason for the error to prevent recurrence of improper
of its confidence interval, 1.76 percent, is lower than the payments. The Corrective Action Plan includes:
reduction target rate of 3.25 percent, in accordance with
OMB Appendix C to Circular A-123 (March 2021), the • Internal training for purchase processors, reviewers,
7(a) loan guaranty purchase program is considered to have and approvers to determine proper recommendation of
met its reduction target. For FY 2023, the SBA established guarantee purchase or denial, ensuring that liquidation
a reduction target of 4.05 percent for the 7(a) loan guaranty expenses are appropriate and/or approved, verifying the
purchases program. documentation and accuracy of calculations, ensuring
documentation for account reconciliation is complete,
The 7(a) loan guaranty purchase reviews were conducted to and verifying proper use of proceeds and reviewing
determine whether lenders complied materially with the 7(a) expenses for eligibility of reimbursement.
loan program origination requirements, including statutory • Recovery of lender expenses that were withheld from
provisions, SBA regulations, any agreement the lender recovery proceeds or paid, but not fully justified and
executed with the SBA, standard operating procedures, loan deemed ineligible.
authorizations, and official SBA notices and forms applicable
to the 7(a) loan program. The reviewers determined whether Internal feedback was provided to center staff regarding the
the lender (1) originated, serviced, and liquidated the loan specific loan-level deficiency upon detection.
in a prudent and commercially reasonable manner, (2)
misrepresented or failed to disclose a material fact to the SBA, Corrective actions are tracked at the loan level through a
and/or (3) put the SBA’s financial interest at risk. centralized database. The Quality Control Specialists for
the 7(a) guaranty purchase centers monitor errors from
identification through completion of the corrective action.
Corrective Action Headquarters management provides oversight to ensure
The root cause categories established by OMB are: (1) milestones are met. Improper payments identified as a result
Statutory Requirements of Program Were Not Met; (2) of the FY 2022 PIIA reviews have been resolved through
Unable to Determine Whether Proper or Improper; (3) obtaining additional documentation, referral for denial review,
Data/Information Needed Does Not Exist; (4) Inability to collection of funds from the lender, or reimbursement to the
Access Data/Information; and, (5) Failure to Access Data/ lender. Corrective actions were generally completed at the loan
Information. The root cause for 7(a) loan guaranty purchases level within 60 days, and all actions were taken by the end of
improper payments was identified as Failure to Access Data/ the fiscal year.
Information. Improper payments generally arose when
purchase processors failed to identify lenders’ deficiencies
in the evaluating, processing, closing, disbursing, servicing,
504 Certified Development
liquidating, or litigating an SBA guaranteed loan. The primary Loans Approvals
reasons for purchase improper payments included:
The 504 Certified Development Loans program, made
• Reimbursement of lender liquidation expenses were available through Certified Development Companies (CDCs),
ineligible, not fully justified, or not approved by SBA; provides small businesses with long-term, fixed rate financing
• Inability to determine borrower eligibility; for major assets that promote business growth and job
• Data entry errors resulting in overpayments and creation. CDCs are the SBA’s community-based partners:
underpayments; non-profit corporations certified and regulated by the Small
Business Administration to package, process, close, and service
• Inaccurate interest rate calculation resulting in
504 loans in order to promote economic development within
overpayments and underpayments;
their communities.
• Inaccurate/missing data resulting in an inability to
reconcile transcripts of account; and, 504 Certified Development Loans Approvals describes the
• Ineligible use of proceeds. loan approval process. During the loan approval process, the
SBA reviews the 504 loan amount for accuracy to ensure
In order to reduce and/or eliminate the occurrence of CDC Lenders issued the 504 loans to eligible borrowers and
future improper payments, a Corrective Action Plan has to ensure loans are made within statutory, regulatory, and SBA
been developed for the 7(a) loan guaranty purchase centers. issued guidelines.
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Statistical Sampling originated the loans in a prudent and commercially reasonable
manner, (2) misrepresented or failed to disclose a material fact
For 504 Certified Development Loan Approval reviews,
to the SBA, and/or (3) put the SBA’s financial interest at risk.
the loans in the sample were chosen using PPS Sampling
with replacement from all loan guaranties approved during
the 12-month period ended March 31, 2022. The approval Corrective Action
population was not stratified. There was a total of 10,969 504 The root cause categories established by the OMB are: (1)
Certified Development Loan Approvals, with a total outlay of Statutory Requirements of Program Were Not Met; (2)
$10,020,790,600. The SBA determined the appropriate total Unable to Determine Whether Proper or Improper; (3) Data/
sample size to be 221 loans from the population. The sample Information Needed Does Not Exist; (4) Inability to Access
included net approval outlays of $434,102,000 and improper Data/Information; and (5) Failure to Access Data/Information.
payments of $10,876,144 within the sample. Using the The root cause for 504 Certified Development Loan Approvals
Hansen-Hurwitz estimation method, the improper payments was Statutory Requirements of Program Were Not Met. The
rate for the annual period ending March 31, 2022, was most prevalent root cause stemmed from the CDC’s failure to
estimated as 1.99 percent, and the improper payment amount authenticate compliance with loan program requirements at
was estimated as $198,962,331. For instances in which origination. The primary reasons for 504 approval improper
the SBA was unable to determine whether a payment was payments in FY 2022 included:
proper or improper, the SBA categorized these payments as
“Unknown”. In FY 2022, one 504 loan was identified with an • Lender’s failure to determine proper amount of equity
unknown improper payment in the amount of $116,781 and injection;
was categorized as an unknown payment, which translated to
• Lender’s failure to determine appropriate occupancy
an Unknown Payment rate of 0.02 percent and an estimated
percentage; and
unknown payment amount of $2,278,483. The unknown
• Lender’s failure to provide proper documentation for
payment identified in FY 2021, in the amount of $3,553,000,
technical defaults on borrowers’ other SBA loans.
was resolved in FY 2022 and determined to be proper.
Although the SBA identified the primary root cause to be
The estimated rate of 1.99 percent improper payments and
Statutory Requirements of Program Were Not Met, in order to
0.02 percent in unknown payments totals 2.01 percent and
comply with the root causes identified in the OMB data-call,
represents total estimated improper payments plus unknown
the SBA further identified a secondary root cause of Inability
payments of $201,240,814.
to Access Data/Information. However, it is the SBA’s position
The FY 2022 improper payment rate estimate of 1.99 percent that the root causes are derived from statutory requirements
for this program is less than the target reduction rate of of the program not being met based on the aforementioned
2.97 percent from FY 2021. The SBA’s sampling method reasons.
is a statistically valid and rigorous plan, with a 95 percent
As a means to reduce and/or eliminate the occurrence of
confidence interval, plus a 3 percent margin of error, the upper
future improper payments, a Corrective Action Plan has been
and lower bounds of the confidence interval. Because the
formalized for the 504 approval center. Specific corrective
lower bound of its confidence interval, 0.21 percent, is lower
actions are determined based upon the primary reason for the
than the reduction target of 2.97 percent, in accordance with
improper payment with the purpose of both remedying the
OMB Appendix C to Circular A-123 (March 2021), the 504
improper payment and preventing recurrence.
loan guaranty approval program is considered to have met the
reduction target. For FY 2023, the SBA established a reduction Plans for improvement include the following:
target of 1.89 percent for the 504 Certified Development
Loans Approvals program. • Collaborating with the Office of Credit Risk Management
(OCRM) to recommend specific lender deficiencies be
The 504 CDC approval reviews were conducted to determine monitored and incorporated into Risk Based Reviews;
whether CDCs complied materially with the program’s
• Collaborating with the Office of Financial Assistance
origination requirements, including statutory provisions, SBA
(OFA) to inform the office of deficiencies identified for
regulations, any agreement the CDC executed with the SBA,
potential incorporation into policy, regulatory, or standard
standard operating procedures, loan authorizations, and official
operating procedure rewrite or update; and
SBA notices and forms applicable to the 504 loan program.
The reviews were conducted to determine whether CDCs (1)
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• External training for lenders to ensure appropriate relative sampling error. The sample size and probabilities of
documentation is obtained and analyzed prior to loan selections were calculated using classical stratification formulas,
approval and to ensure that policy requirements are met. specifically the Neyman optimization formula. Samples
were selected from loans approvals during the 12-month
The corrective actions are currently in process. The OFPO period ended March 31, 2022. A total of 38,704 loans were
will continue to share the loan level and lender deficiencies approved, with a total loan outlays of $1,133,593,985. The
identified during the reviews with the OFA and the OCRM. SBA determined the appropriate total sample size to be 510
The OFPO will also continue its efforts to ensure CDC loans from the population. The sample included net loan
deficiencies are monitored and incorporated into lenders’ Risk outlays of $35,589,544. The improper payments rate for the
Based Reviews. External training will be provided in FY 2023. annual period ending March 31, 2022, was estimated as 3.06
percent, and the improper payment amount was estimated
Because 504 loans are reviewed prior to monies being
as $34,679,790.
disbursed, resolution of an identified improper payment is
usually through obtaining additional documentation from The FY 2022 improper payment rate estimate of 3.06 percent
the CDC to remedy the potential improper payment or for this program is less than the target reduction rate of 3.71
through cancellation of the loan. There is no monetary outlay percent from FY 2021. The SBA’s sampling method is a
at approval, and thus no loss to the Federal Government. statistically valid plan, with a 97 percent confidence interval,
Specific corrective actions on loans reviewed are tracked at plus a 3 percent margin of error, the upper and lower bounds
the loan level through a centralized database. The Quality of the confidence interval. Because of the reduction in the
Control Specialist for 504 approvals monitors errors from improper payment rate, the Disaster Assistance Loan program
identification through completion of the corrective action. is considered to have met its reduction target. For FY 2023,
Management provides oversight to ensure milestones are met. the SBA established a reduction target of 2.96 percent for the
All improper payments identified as a result of the FY 2022 Disaster Assistance Loan program.
PIIA reviews have been resolved through obtaining additional
documentation, loan modification, or cancellation of the The Disaster Assistance Loan reviews for improper payments
loan. Corrective actions were generally completed at the loan were conducted to determine whether loans were materially
level within 180 days with all actions taken by the end of the in compliance with SBA guidance, including to determine
fiscal year. whether borrowers were eligible for the disaster assistance loan,
whether the amount approved was correct, whether the loan
was made in accordance with existing regulations, Standard
Disaster Assistance Loans
Operating Procedures (SOPs) and other internal guidance.
The Disaster Assistance Loans provides low-interest loans
to help businesses and homeowners recover from declared Corrective Action
disasters. The Disaster Assistance Loans are available to all The root cause categories established by OMB are: (1)
businesses located within a declared disaster area, private Statutory Requirements of Program Were Not Met, (2)
non-profit organizations, homeowners, and renters affected Unable to Determine Whether Proper or Improper, (3) Data/
by declared disasters. Disaster Assistance Loans can be used to Information Needed Does Not Exist, (4) Inability to Access
pay for personal or business losses not covered by insurance Data/Information, and (5) Failure to Access Data/Information.
or funding from other government agencies, as well as for The root cause for Disaster Assistance Loan improper
business operating expenses that could have been met had the payments was Statutory Requirements of Program Were Not
disaster not occurred. Met. The most prevalent cause stemmed from documentation
missing from the file. The primary reasons for Disaster
Statistical Sampling Assistance Loan improper payments in FY 2022 included:
For Disaster Assistance Loan reviews, the SBA applied a • Missing hardship documentation,
stratified variable sampling design that allowed statistical
• Missing documentation related to the Disaster affected
projection of number errors and dollar amount by reporting
Property,
program. This sampling plan provides a 97 percent confidence
interval and a design precision of 3 percent. The sample design • Missing documentation of voting membership, and
measures the actual variability of the dollar data and, through • Improper calculation of Earned Income.
a weighted set of formulas provides a natural measure of the
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Although the SBA identified the primary root cause to The FY 2022 improper payment rate estimate for the COVID
be Statutory Requirements of Program Were Not Met, in EIDL program is 4.50 percent and is in compliance with
order to comply with the root causes identified in the OMB the PIIA. This is the first year the SBA is reporting improper
data-call, the SBA further identified a secondary root cause payment estimates for this program; therefore, no reduction
of Inability to Access Data/Information. However, it is the rates from FY 2021 are available. As of January 1, 2022, the
SBA’s position that the root causes are derived from statutory SBA stopped accepting applications for new COVID EIDL
requirements of the program not being met based on the loans or advances. As of May 6, 2022, the SBA stopped
aforementioned reasons. processing COVID EIDL loan increase requests or requests
for reconsideration of previously declined loan applications.
The SBA revised its corrective action processes in FY 2022. Because the COVID EIDL program ended as of December
Corrective actions, which typically include obtaining 31, 2021, the improper payment estimates for FY 2023 will
supporting documentation from the borrower, are completed only consist of any loan increases and reconsiderations that
within 15 days of being informed of the improper payment. In were disbursed after March 31, 2022. For FY 2023, the SBA
addition, SBA provides quarterly training to loan approval staff established a reduction target of 4.40 percent for the COVID
on the causes of and prevention of improper payments. EIDL program.
COVID Economic Injury Disaster Loan Corrective Action
(COVID EIDL) The root cause categories established by the OMB are: (1)
Statutory Requirements of Program Were Not Met; (2)
The Small Business Act authorizes the SBA to make EIDL Unable to Determine Whether Proper or Improper; (3) Data/
loans to eligible small businesses and nonprofit organizations Information Needed Does Not Exist; (4) Inability to Access
located in a disaster area. On March 6, 2020, Congress Data/Information; and (5) Failure to Access Data/Information.
deemed the COVID-19 pandemic to be a disaster, thus The root cause for COVID EIDL improper payments was
allowing the SBA to declare disasters and make EIDL loans Statutory Requirements of Program Were Not Met. The
available to small businesses and nonprofit organizations most prevalent cause stemmed from missing verification of
suffering substantial economic injury caused by the business ownership.
COVID-19 pandemic.
Although the SBA identified the primary root cause to
be Statutory Requirements of Program Were Not Met, in
Statistical Sampling order to comply with the root causes identified in the OMB
For COVID EIDL reviews, the SBA applied a stratified data-call, the SBA further identified a secondary root cause
variable sampling design that allowed statistical projection of of Inability to Access Data/Information. However, it is the
number of errors and dollar amount by reporting program. SBA’s position that the root causes are derived from statutory
This sampling plan provides a 97 percent confidence interval requirements of the program not being met based on the
and a design precision of 3 percent. The sample design aforementioned reasons.
measures the actual variability of the dollar data and, through
a weighted set of formulas, provides a natural measure of the The SBA revised its corrective action process in FY 2022.
relative sampling error. The sample size and probabilities of Corrective actions, which typically include obtaining
selections were calculated using classical stratification formulas, supporting documentation from the borrower, are completed
specifically the Neyman optimization formula. Samples within 15 days of being informed of the improper payment. In
were selected from loans approved during the 12-month addition, the SBA provides quarterly training to loan approval
period ended March 31, 2022. A total of 732,649 loans were staff on the causes of and prevention of improper payments.
approved, with a total outlays of $153,811,639,541. The
SBA determined the appropriate total sample size to be 1,029
Economic Injury Disaster Loan
loans from the population. The sample included net loan
outlays of $555,605,701. The improper payments rate for the Emergency Assistance (EIDL Advance)
annual period ending March 31, 2022, was estimated as 4.50
percent, and the improper payment amount was estimated The Economic Injury Disaster Loan Emergency Assistance
as $6,916,710,835. (EIDL Advance) are funds awarded to existing COVID
EIDL applicants who meet certain eligibility criteria. The
EIDL Advances are similar to grants (without the typical
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
requirements for grants) and are not required to be repaid. prevalent cause stemmed from applicant failing to document
There are two forms of EIDL Advances: Targeted EIDL the required income reduction in order to qualify. Additional
Advance and Supplemental Targeted Advance. Targeted EIDL causes for improper payments included applicant failing to
Advance provides up to $10,000 to eligible low-income document citizenship, existence of the business, or that the
applicants that met specific program eligibility criteria. business was located in a low-income area.
Supplemental Targeted Advance provides $5,000 to eligible
low-income applicants that meet specific program eligibility Although the SBA identified the primary root cause to
criteria and does not need to be repaid. be Statutory Requirements of Program Were Not Met, in
order to comply with the root causes identified in the OMB
data-call, the SBA further identified a secondary root cause
Statistical Sampling of Inability to Access Data/Information. However, it is the
For Economic Injury Disaster Loan Emergency Advance SBA’s position that the root causes are derived from statutory
(EIDL Advance) reviews, the SBA applied a stratified variable requirements of the program not being met based on the
sampling design that allowed statistical projection of number aforementioned reasons.
errors and dollar amount by reporting program. This sampling
plan provides a 97 percent confidence interval and a design The SBA revised its Corrective Action processes in FY
precision of 3 percent. The sample design measures the actual 2022. Corrective actions, which typically include obtaining
variability of the dollar data and, through a weighted set of supporting documentation from the applicant, are completed
formulas, provides a natural measure of the relative sampling within 15 days of being informed of the improper payment. In
error. The sample size and probabilities of selections were addition, SBA provides quarterly training to loan approval staff
calculated using classical stratification formulas, specifically on the causes of and prevention of improper payments.
the Neyman optimization formula. Samples were selected
from advances approved during the 12-month period ended
Paycheck Protection Loan Program
March 31, 2022. A total of 626,042 EIDL Advances were
awarded, with total program outlays of $7,849,839,278. (PPP)
The SBA determined the appropriate total sample size to be
308 advances from the population. The sample included net The CARES Act established the Paycheck Protection Loan
outlays of $2,266,000. The improper payment rate for the Program to provide economic relief to small businesses and
annual period ending March 31, 2022, was estimated as 9.76 incentivize small businesses to keep their workers on the
percent, and the improper payment amount was estimated payroll because of the COVID-19 pandemic. The PPP loans
as $766,338,968. can be forgiven if the funds are used for payroll costs, interest
on mortgages, rent, utilities, or other eligible expenses.
The FY 2022 improper payment rate estimate for the EIDL
Advance program is 9.76 percent and is in compliance with Under the initial PPP, borrowers were eligible to receive loans
the PIIA. This is the first year the SBA is reporting improper through June 30, 2020, that included debt forgiveness to
payment estimates for this program; therefore, no reduction cover payroll and other business expenses. A second round of
rates from FY 2021 are available. Because the EIDL Advance PPP funding was approved by Congress on April 24, 2020,
program ended on December 31, 2021, the improper payment for an additional $310 billion in assistance. The program
estimates for FY 2023 will only consist of any advances that was extended through August 8, 2020. On December 27,
were disbursed after March 31, 2022, if any. For FY 2023, 2020, the President signed a new stimulus bill that added
the SBA established a reduction target of 9.66 percent for the an additional $284 billion in PPP funding with a program
EIDL Advance program. expiration date of March 31, 2021. On March 30, 2021, the
President signed an extension of PPP to May 31, 2021.
Corrective Action
Statistical Sampling
The root cause categories established by OMB are: (1)
Statutory Requirements of Program Were Not Met; (2) For Paycheck Protection Program loan reviews, the sample
Unable to Determine Whether Proper or Improper; (3) Data/ loans were chosen using disproportionate stratified sampling
Information Needed Does Not Exist; (4) Inability to Access without replacement from all loan approvals that have
Data/Information; and (5) Failure to Access Data/Information. submitted for forgiveness as of March 31, 2022. There
The root cause for EIDL Advances improper payments was were a total of 8,694,916 PPP loans, with a total outlays of
Statutory Requirements of Program Were Not Met. The most $685,179,357,116 in the population. The SBA determined
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
the appropriate total sample size to be 120,979 loans from The full amount of the loan disbursed was determined
the population. The sample included net approvals of to be improper.
$43,797,555,729 and improper payments of $932,295,492
within the sample. The improper payment rate for the The SBA also reviewed documentation to determine whether
population was estimated as 1.83 percent, and the improper borrowers had eligible expenses during the covered period,
payment amount was estimated as $12,529,331,784. For and, if so, in what amount. If a borrower had eligible
instances in which the SBA was unable to determine whether expenses that did not equal the amount of the loan disbursed,
a payment was proper or improper, the SBA categorized that portion of the loan used for eligible expenses could
these payments as “Unknown”. In FY 2022, 2,608 PPP loans be forgiven.
approved in the amount of $1,624,260,562 were categorized
as unknown payments, which translated to an Unknown Improper payment rates for the Paycheck Protection Program
Payment rate of 2.41 percent and an estimated unknown loans were reported for the first time in FY 2022. The program
payment amount of $16,497,713,144. ended on May 31, 2021. No loans were awarded after the
program end date; therefore, the SBA did not establish a
The estimated rate of 1.83 percent improper payments and program target reduction rate for FY 2023.
2.41 percent in unknown payments totals 4.24 percent and
represents total estimated improper payments plus unknown Corrective Action
payments of $29,027,044,928.
The root cause categories established by OMB are: (1)
The SBA reviewed the sample of PPP loans to determine Statutory Requirements of Program Were Not Met; (2)
whether the loan approval and disbursement were proper Unable to Determine Whether Proper or Improper; (3) Data/
or improper. PPP loans were approved by SBA Lenders Information Needed Does Not Exist; (4) Inability to Access
based on the borrowers’ certifications of eligibility. Lenders Data/Information; and (5) Failure to Access Data/Information.
provided the borrowers’ certifications to the SBA along with The root cause for all PPP loan improper payments was
the borrowers’ loan applications and, were able to make loans Statutory Requirements of Program Were Not Met. The most
to the borrowers. The CARES Act legislation provided that prevalent causes were as follows:
the full amount of a PPP loan, with proper documentation
and eligible expenditures, could be forgiven, and a borrower • The loan amount to a borrower exceeded the borrower’s
released from liability for the portion of the loan that eligibility;
was forgiven. • A lack of supporting documentation; and
• Ineligible business type.
In accordance with program regulations, when a PPP Lender
received a forgiveness application from a borrower, the Lender Although the SBA identified the primary root cause to
reviewed the application and submitted a forgiveness decision be Statutory Requirements of Program Were Not Met, in
to the SBA. If the lender determined that the borrower was order to comply with the root causes identified in the OMB
entitled to forgiveness of some or all of the amount applied for, data-call, the SBA further identified a secondary root cause
the lender requested payment from the SBA at the time the of Inability to Access Data/Information. However, it is the
lender issued its decision to the SBA. The SBA, subject to any SBA’s position that the root causes are derived from statutory
SBA review of the borrower’s loan(s) or loan application(s), requirements of the program not being met based on the
remitted the appropriate forgiveness amount to the lender, aforementioned reasons.
plus any interest accrued through the date of payment.
When performing a loan review, the SBA reviews borrower
The SBA reviewed borrower eligibility (including whether eligibility, PPP loan amounts and use of proceeds, and
the borrower had been debarred; whether the borrower had loan forgiveness amounts. If the SBA determines that the
defaulted on federal debt within the last seven years; whether borrower was not eligible or the loan amount was incorrect,
the borrower had been convicted of a felony involving the payment is considered to be improper, the PPP loan is no
fraud, bribery, or embezzlement; whether the borrower was longer deferred, and the borrower must begin paying principal
incarcerated; and whether the borrower was a U.S. citizen) and and interest.
reviewed documentation to determine whether the borrower’s
business was in operation. Borrowers that were not eligible
based on these eligibility criteria were denied forgiveness.
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U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Payment Recovery Effort appropriate evidence within the 30-day period, a demand is
made for the over-disbursed funds. Collection efforts continue
The SBA makes every effort to recover improper payments at the Disaster loan servicing centers, but if these efforts fail,
identified during their improper payment review process. This the borrower will still be liable for the over-disbursed amount
recovery effort is independent of the recapture audit process, in the form of monthly payments in accordance with the loan
which can be deemed costly and ineffective. The agency’s agreement. Thus, any actual loss is the cost of funds related to
efforts to recapture improper payments are discussed by the over disbursement.
program or activity below.
COVID Economic Injury Disaster Loan (EIDL)
7(a) Loan Program Purchases (COVID EIDL)
Overpayments identified in the improper payments’ reviews Improper payments are generally the result of loan
are recaptured from the lender. The Quality Control staff documentation errors. Loan documentation legally obligates
tracks and collects any monetary overpayment. In some the recipient of a disaster loan to pay back the entire loan
instances, the loan is referred to the Guaranty Denial Team for amount whether or not the loan contains any improper
further action. Determination of a course of action is made payments. Therefore, improper payments are not recovered
on a case-by-case basis, depending on the specific details of upon discovery but realized as the borrower makes each
the reason for the improper payment. Refer to Part I above for payment on the loan.
corrective action plans to prevent future improper payments.
Economic Injury Disaster Loan Emergency
7(a) Loan Program Approvals and 504 Loan Assistance (Advance) (EIDL Advance)
Guaranty Approvals The SBA is developing a plan to assess the Emergency EIDL
Overpayments recaptured outside payment recapture audits Advances. The SBA will demand repayment for EIDL
are not applicable to 7(a) loan guaranty approval and 504 Advances identified as improper. The SBA will explore
loan approval as no payment is made at the time of approval. available options to remedy cases, including recovery of funds
Improper payments identified through the annual improper by offset, referral to the OIG’s Division of Investigations, or
payment reviews in 7(a) and 504 loan guaranty approvals providing supporting documentation where appropriate.
are resolved through obtaining additional documentation,
loan modification, or cancellation of the loan. Improper Paycheck Protection Program Loans
payments identified through the FY 2021 PIIA reviews have
Overpayments result from borrowers receiving a PPP loan in
been resolved through obtaining additional documentation,
an amount that (1) exceeds the borrower’s eligibility, (2) that
or cancellation or reduction of the loan guaranty and/or
cannot be supported through documentation, or (3) that was
referral to other offices within the Office of Capital Access, as
not used for purposes permitted by statute or guidance. In
appropriate. Determination of a course of action is made on a
its review of the loan, if the SBA determines that the loan is
case-by-case basis, which varies substantially depending on the
not eligible for forgiveness (in whole or in part), the borrower
circumstances of the loan approval and lender’s authority.
must begin paying principal and interest.
Disaster Direct Loan Program
Payment Recapture Audits
Overpayments are the result of a borrower receiving both an
SBA loan and insurance payments or other benefits as a result
On September 15, 2011, the SBA submitted a Payment
of a disaster. If the duplication of benefit is recognized prior
Recapture Audit Cost-Effective Analysis to the Office
to the final disbursement, the loan amount is modified to
of Management and Budget. The analysis discussed the
reflect a lower amount and no repayment is required. If the
7(a) Business Loan Guaranty Program, the 504 Certified
duplication of benefit is identified after the final disbursement
Development Company Loan Guaranty Program, the Disaster
of the loan, then the borrower is given 30 days to provide
Direct Loan Program, Disbursements for Goods and Services,
evidence to prove that the disaster loan was not over-disbursed.
the Small Business Investment Company Financing Guaranty
For example, the borrower can provide documentation
Program, the Surety Bond Guaranty Program, and Grants,
demonstrating that insurance funds received did not duplicate
which included all grant programs. The analysis described
the disaster loan purpose. If the borrower has not provided the
the program, the controls over financial disbursements, and
160 Other Information (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
the size of the program and concluded for each program
that recapture audits would not be cost effective due to low
error rates, complexity of the program, or limited amount of
outlays. A subsequent cost analysis for the 7(a) loan guaranty
purchase program was submitted to the OMB on September
13, 2017, to include the results of a payment recapture audit
performed in 2015, which again concluded that such an audit
is not cost effective.
In FY 2022, the SBA did not conduct any recovery audits. The
SBA performed a cost-benefit analysis for programs with over
$1 million in disbursements and not covered by the analysis
completed in 2011, and concluded that it would not be
cost-effective to perform a recovery audit. Some of the factors
considered include the following: program was not identified
as being susceptible to significant improper payments in the
last risk assessment, there have been no recent audit findings or
reports to suggest that the program is susceptible to improper
payments, prior internal control assessments did not identify
the program as being susceptible to significant improper
payments, and the cost to perform a recovery audit exceeded
the potential recovery amount.
Agency Improvement of Payment
Accuracy with the Do Not Pay Initiative
The SBA has implemented the Do Not Pay Initiative (DNP)
and incorporated the use of the DNP by submitting all
programmatic disbursements through the DNP portal. If
anomalies are identified, the SBA takes corrective actions to
remedy the anomalies. For disbursements that have not been
disbursed to the recipient, the SBA requires the recipient to
resolve the DNP finding prior to becoming eligible for SBA
funding. For disbursements that have already be disbursed to
the recipient, the SBA would place a hold code on the loan or
grant and/or deny future loan or grant requests or loan relief
requests until the recipient was able to successfully resolve the
DNP finding.
Other Information (Unaudited) 161
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SUMMARY OF FINANCIAL STATEMENT AUDIT AND
MANAGEMENT ASSURANCES
As required by OMB Circular A-136, Section II.4.4, the following summarizes the SBA’s Financial Statement Audit and
Management Assurances:
Summary of Financial Statement Audit
AUDIT OPINION Disclaimer
RESTATEMENT No
BEGINNING ENDING
MATERIAL WEAKNESSES BALANCE NEW RESOLVED CONSOLIDATED BALANCE
Controls over PPP Loan Guarantees 1 0 N/A 1
Controls over COVID-19 EIDLs and Grants 1 0 N/A 1
Controls over Subsidy Re-estimates 1 0 N/A 1
Controls over the evaluation of Service Organizations 1 0 N/A 1
Entity Level Controls 1 0 N/A 1
Controls over Restaurant Revitalization and Shuttered Venues 1 0 N/A 1
Total Material Weaknesses 6 0 N/A 6
Summary of Management Assurances
EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING (FMFIA § 2)
STATEMENT OF ASSURANCE Modified
BEGINNING ENDING
MATERIAL WEAKNESSES BALANCE NEW RESOLVED CONSOLIDATED REASSESSED BALANCE
Controls over PPP Loan Guarantees 1 0 0 N/A N/A 1
Controls over COVID-19 EIDLs and Grants 1 0 0 N/A N/A 1
Controls over Subsidy Re-estimates 1 0 0 N/A N/A 1
Controls over the evaluation of Service
1 0 0 N/A N/A 1
Organizations
Entity Level Controls 1 0 0 N/A N/A 1
Controls over Restaurant Revitalization and
1 0 0 N/A N/A 1
Shuttered Venues
Total Material Weaknesses 6 0 0 N/A N/A 6
EFFECTIVENESS OF INTERNAL CONTROL OVER OPERATIONS (FMFIA § 2)
STATEMENT OF ASSURANCE Modified
BEGINNING ENDING
MATERIAL WEAKNESSES BALANCE NEW RESOLVED CONSOLIDATED REASSESSED BALANCE
None 0 0 N/A N/A N/A 0
Total Material Weaknesses 0 0 N/A N/A N/A 0
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CONFORMANCE WITH FINANCIAL MANAGEMENT SYSTEM REQUIREMENTS (FMFIA § 4)
STATEMENT OF ASSURANCE Federal Systems do not conform to financial management system requirements.
BEGINNING ENDING
NON-CONFORMANCES BALANCE NEW RESOLVED CONSOLIDATED REASSESSED BALANCE
Federal Financial Management System
1 0 N/A N/A N/A 1
Requirements
Federal Accounting Standards 1 0 N/A N/A N/A 1
Total Non-conformances 2 0 N/A N/A N/A 2
COMPLIANCE WITH SECTION 803(A) OF THE FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT (FFMIA)
NON-CONFORMANCES AGENCY AUDITOR
1. Federal Financial Management System Requirements No lack of compliance noted Lack of compliance noted
2. Applicable Federal Accounting Standards No lack of compliance noted Lack of compliance noted
3. USSGL at Transaction Level No lack of compliance noted No lack of compliance noted
Other Information (Unaudited) 163
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GRANTS PROGRAMS
CATEGORY 2-3 YEARS 3-5 YEARS MORE THAN 5 YEARS
Number of Grants/Cooperative Agreements with Zero Dollar Balances 109 3 0
Number of Grants/Cooperative Agreements with Undisbursed Balances 0 0 0
Total Amount of Undisbursed Balances $0 $0 $0
The SBA works to continuously improve its grants management process and manage risk. The Agency used the following
procedures to assess risk in the Agency’s grant closeout process and improve closeout rates:
• Evaluating the nature and type of grants issued to recipients;
• Examining Agency policy and procedures related to grant closeout; and
• Reviewing the consistency of procedures with federal regulation, industry standards, other guidance, including but not
limited to evaluating the complexities of procedures in the grant closeout process, assessing the population of expired grant
accounts, reviewing information systems used to process grant data, assessing challenges, and assessing internal controls.
To maintain 100 percent accuracy in the closeout rate, the Agency developed a second-tier approval mechanism to ensure all
grant awards are in compliance and are accurately closed in its grants management information technology systems. The closeout
team reviews the status of grants regularly, including the number of grants by period of expiration, the number with zero-dollar
balances, and the number with undisbursed balances.
164 Other Information (Unaudited)
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CIVIL MONETARY PENALTY ADJUSTMENT FOR INFLATION
The Federal Civil Penalties Inflation Adjustment Act of 1990 (Act), as amended, requires agencies to make regular and consistent
inflationary adjustments of civil monetary penalties to maintain their deterrent effect. A civil monetary penalty is defined as any
penalty, fine, or other sanction that is for a specific monetary amount as provided by federal law or has a maximum amount
provided for by federal law, is assessed or enforced by an agency pursuant to federal law, and is assessed or enforced pursuant to an
administrative proceeding or a civil action in the federal courts. To improve compliance with the Act and in response to multiple
audits and recommendations, agencies must report the most recent inflationary adjustments to civil monetary penalties to ensure
penalty adjustments are both timely and accurate. Pursuant to the Act, the SBA reviewed each of the penalty amounts under its
statutes and adjusted them for inflation when required under the law. The SBA applied a prescribed formula from the Act for
calculating the penalty.
The following table reflects the authorities imposing the penalties, the basis for imposing the penalties, the year the penalties were
authorized, the current penalty levels, the program offices responsible for imposing the penalties, and the citation for the most
recent publication of the penalty updates.
SBA FEDERAL CIVIL PENALTIES
Latest Year Current
Location for
Penalty Year of Adjustment Penalty Level Sub- Agency/
Statutory Authority Penalty Update
(Name or Description) Enacted (via Statute ($ Amount Bureau/ Unit
Details
or Regulation) or Range)
Failing to File Report
Small Business Office of
Timely for a Small 87 F.R. 28756
Investment Act, 15 USC 1966 2022 $291 Investment and
Business Investment (5/11/22)
687g Innovation
Company (SBIC)
Failing to File Report
Small Business Act, 15 Timely for a Small Office of 87 F.R. 28756-
2004 2022 $7,244
USC 650(j)(1) Business Lending Capital Access 28757 (5/11/22)
Company (SBLC)
Office of
Small Business Act, 15 Types of Formal 87 F.R. 28757
2020 2022 $268,694 Credit Risk
USC 657t(e)(2)(B) Enforcement Actions (5/11/22)
Management
Small Business Act,
15 USC 634(b)(6) Administrative Remedies
87 F.R. 28757
and Program Fraud for False Statements and 1986 2022 $12,537 Multiple offices
(5/11/22)
Civil Remedies Act 31 Claims
USC 3802(d)
Small Business Act,
not less than
15 USC 634(b)(6)
Penalty for Violation of $22,021 and 87 F.R. 28757
and Program Fraud 1990 2022 Multiple offices
Lobbying Restrictions not more than (5/11/22)
Civil Remedies Act 31
$220,213
USC 1352
Other Information (Unaudited) 165
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166 Other Information (Unaudited)
Appendices (Unaudited) Section 4
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
APPENDIX 1 – CONTACT SBA: USEFUL WEBSITES AND NUMBERS
The SBA home page is www.sba.gov. Information on SBA programs may be accessed from this website. Several of the more
frequently visited websites are listed here:
SBA AND BUSINESS INFORMATION
About the SBA www.sba.gov/about-sba
SBA Performance, Budget & Finances www.sba.gov/performance
Small Business USA www.usa.gov/business
Local Assistance www.sba.gov/local-assistance
Qualifying as a Small Business www.sba.gov/size
Starting a business? www.sba.gov/business-guide
CAPITAL
Small Business Loans & Grants www.sba.gov/funding-programs
Lender Resources www.sba.gov/lenders
Surety Bonds www.sba.gov/funding-programs/surety-bonds
Export Products www.sba.gov/exporting
Fund Your Business www.sba.gov/business-guide/plan/fund-your-business
CONTRACTING
Government Contracting www.sba.gov/federal-contracting
Register as a Contractor www.sam.gov
Contracting Certifications certify.sba.gov
COUNSELING
SBA Learning Center www.sba.gov/training
Small Business Development Centers www.sba.gov/local-assistance/sbdc
Women’s Business Centers www.sba.gov/local-assistance/wbc
SCORE www.sba.gov/local-assistance/score
Veterans Business Outreach Centers www.sba.gov/local-assistance/vboc
DISASTER ASSISTANCE
Disaster Assistance www.sba.gov/disaster
COVID-19 Relief Options www.sba.gov/coronavirus
Disaster Assistance Customer Service Center (Toll Free) (800) 659-2955
SBA INFORMATION
SBA National Answer Desk (Toll Free) (800) 827-5722
Facebook www.facebook.com/SBAgov
Twitter www.twitter.com/sbagov
YouTube www.youtube.com/sba
Blogs www.sba.gov/blogs
Instagram www.instagram.com/sbagov
168 Appendices (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
APPENDIX 2 – GLOSSARY
504 Loan 504 Certified Development Loan APR Annual Performance Report
Program Provides small businesses with A report that is required by the Government
long-term, fixed-rate financing for the Performance and Results Act and presents a
purchase of land, buildings, and long-life federal agency’s progress in achieving the goals
capital equipment. in its strategic plan and performance budget.
7(a) 7(a) Loan Guaranty Program ARP(A) American Rescue Plan (Act)
The SBA’s primary loan program; it provides A law that provides relief to individuals
general loan financing for a wide variety and businesses affected by the COVID-19
of purposes. pandemic.
7(j) 7(j) Management and Technical B2B Boots to Business
Assistance Program An entrepreneurial education and training
Provides specialized assistance to underserved program offered by the U.S. Small Business
small businesses. Administration as part of the Department of
Defense Transition Assistance Program.
7(m) 7(m) Microloan Program
Provides small, short-term loans to small BATF Business Assistance Trust Fund
businesses and certain types of nonprofit A revolving trust fund in which all donated
childcare centers. funds are to be deposited.
8(a) 8(a) Business Development Program BLIF Business Loan and Investment Fund
Assists firm owned and controlled by socially Assists eligible small businesses through
and economically disadvantaged individuals to various loan programs.
compete for federal contracts.
CAP Goals Cross-Agency Priority Goals
A-123 Designation for OMB Circular on Internal A limited number of Presidential priority
Control Systems areas where implementation requires active
Prescribes policies and procedures to be collaboration among multiple agencies.
followed by federal agencies in establishing,
maintaining, evaluating, improving, and CARES Act Coronavirus, Aid, Relief and Economic
reporting on internal controls in their Security Act
program and administrative activities. A $2.2 trillion economic stimulus bill passed
in response to the economic fallout of the
AFR Agency Financial Report COVID-19 pandemic in the United States.
An annual report that provides to OMB,
Congress, and the public an overview of the CJ Congressional Justification
Agency’s financial and performance data. A federal agency’s annual budget request
to Congress.
AGA Association of Government Accountants
The member organization for government CDC Certified Development Company
financial management professionals. Nonprofit corporations, certified and
regulated by the SBA, that work with
APG Agency Priority Goals participating lenders to provide financing to
A set of 2-year goals required by GPRAMA small businesses.
that reflect the highest priorities of a federal
agency’s leadership.
Appendices (Unaudited) 169
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
CFO Chief Financial Officer EAA Economic Aid to Hard-Hit Small
The financial leader whose duties include Businesses, Non-Profits and Venues Act
overseeing all Agency disbursements, Authorizes the U.S. Small Business
management and coordination of Agency Administration to guarantee additional loans
planning, budgeting, analysis, and under the temporary Paycheck Protection
accountability processes. Program and adds a second temporary
program to SBA’s 7(a) Loan Program titled,
CNPP Community Navigator Pilot Program “Paycheck Protection Program Second
Engages in targeted outreach to underserved Draw Loans”
communities through states, local
governments, resource partners, and non-profit EDAP Expedited Disaster Assistance Loan Program
organizations. Provides loans guarantied by SBA for up to
$150,000.
COVID-19 Coronavirus Disease, 2019
Highly contagious respiratory disease caused EDP Entrepreneurial Development Program
by the SARS-CoV-2 virus. An account that reports entrepreneurial
development expenses.
CTI Cyber Threat Intelligence
Information an organization uses to ECS Enterprise Cybersecurity Services
understand the cyber threats that have, will, or Cybersecurity strategies designed to safeguard
are currently targeting the organization. data as it travels between distant wireless
devices and onto cloud servers.
DATA Act The Digital Accountability and
Transparency Act EIDL Economic Injury Disaster Loan
A law that aims to make information on A grant to provide economic relief to
federal expenditures more easily accessible and businesses experiencing a temporary loss of
transparent. revenue due to the COVID-19 pandemic
DCMS Disaster Credit Management System ERM Enterprise Risk Management
Electronic system used to process loan Provides a framework to manage risks and
applications for all new disaster declarations. seize opportunities related to the achievement
of their objectives.
DLF Disaster Loan Fund
Assists eligible small businesses impacted by FAST Federal and State Technology (FAST) Grants
disasters. One year funding opportunity to help increase
the number of SBIR and STTR proposals.
DNP Do Not Pay Initiative
Established by IPERIA to support federal FBO FedBizOps
agencies with their efforts to prevent and The Federal Government’s website that posts
detect improper payments. all federal procurement opportunities with a
value over $25,000.
DO District Office
SBA offices that are responsible for the delivery FCRA Federal Credit Reform Act
of the SBA’s many programs and services A law enacted to provide a more realistic
throughout the country. picture of the cost of U.S. Government direct
loans and loan guaranties.
DOD Department of Defense
The federal agency charged with coordinating FEMA Federal Emergency Management Agency
national security and the armed services. Coordinates the response to a disaster that has
occurred in the United States.
170 Appendices (Unaudited)
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FEVS Federal Employee Viewpoint Survey FTE Full-Time Equivalent
An OPM survey administered to federal Indicates the workload of an employed person.
employees that measures perceptions of An FTE of 1.0 means that the person is
whether, and to what extent, conditions equivalent to a full-time worker while an FTE
characteristic of successful organizations are of 0.5 means that the worker is half-time.
present in their agencies.
FY Fiscal Year
FFMIA Federal Financial Management The Federal Government fiscal year
Improvement Act begins October 1 and ends the following
A law that requires each federal agency September 30.
to implement and maintain financial
management systems that comply substantially GAAP Generally Accepted Accounting Principles
with federal financial management system The standard framework of guidelines
requirements, applicable federal accounting for financial accounting generally known
standards and the United States Standard as accounting standards or standard
General Ledger. accounting practice.
FISMA Federal Information Security GAO U.S. Government Accountability Office
Management Act An independent, nonpartisan agency that
A law that defines a comprehensive framework investigates how the federal government
to protect government information, spends taxpayer dollars and reports their
operations, and assets against natural or man- findings to Congress.
made threats.
GPRAMA Government Performance and Results Act
FITARA Federal Information Technology (GPRA) Modernization Act
Acquisition Reform Act A law that modernizes the federal government’s
Legislation to improve the acquisition performance management framework,
and management of federal information retaining and amplifying some aspects of
technology assets. the Government Performance and Results
Act (GPRA) of 1993 while addressing some
FMFIA Federal Managers Financial Integrity Act of its weaknesses.
A law that primarily requires ongoing
evaluations and reports on the adequacy of the GSA General Services Administration
internal accounting and administrative control A federal agency of the Executive Branch
systems of executive agencies. It also requires whose mission is to deliver the best value real
evaluations and reports on the conformance of estate, acquisition, and technology services to
financial management systems. government agencies.
FR Financial Report of the U.S. Government GTAS Governmentwide Treasury Account Symbol
Record of the United States government’s Adjusted Trial Balance System
financial activities. Used by government entities to provide
proprietary financial reporting and
FRMB Fraud Risk Management Board information about budget execution to the
Anti-fraud entity responsible for the Department of the Treasury.
oversight and coordination of the SBA’s fraud
risk activities. HHS U.S. Department of Health and
Human Services
FTA Fiscal Transfer Agent The federal agency that aims to protect the
The central registry for all guaranteed health of all Americans and provide essential
individual loan and SBA pool human services.
certificate interests.
Appendices (Unaudited) 171
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
HUBZone Historically Underutilized Business Zone LSP Lender Service Provider
An SBA program that encourages economic Carries out functions in originating,
development by the establishment of federal dispersing, servicing, or liquidating a specific
contract award preferences for small businesses SBA business loan or loan portfolio for
located in historically underutilized business compensation from the lender.
zones.
MAT Modification Adjustment Transfer
ICD Internal Controls Division A transfer made between the financing account
Ensures managers comply with internal as the general fund.
control standards.
MRA Master Reserve Account
ICOR Internal Control Assessment Over Reporting The SBA’s fiscal agent maintains this escrow
A reporting methodology that manages assets fund to facilitate the operation of the Certified
(including data), improves data quality, and Development Company program.
reduces compliance-oriented burdens shifting
activities to support attaining high quality MRF Master Reserve Fund
data. A reserve fund maintained by the SBA’s fiscal
and transfer agent that is used to facilitate
IPERA Improper Payments Elimination and the operation of the 7(a) secondary market
Recovery Act program.
A law that requires that agencies examine the
risk of, and feasibility of, recapturing improper OBD Office of Business Development
payments in all programs and activities. Assists small, disadvantaged businesses to gain
access to federal and private procurement
IPERIA Improper Payments Elimination and markets.
Recovery Improvement Act
An act to intensify efforts to identify, prevent, OCA Office of Capital Access
and recover payment error, waste, fraud, and Manages small business loans, lender oversight,
abuse within federal spending. and the Surety Bond Guaranty program.
IPIA Improper Payment Information Act OPPCFO Office of Performance, Planning, and the
A law enacted in 2002 to identify and reduce Chief Financial Officer
erroneous payments in the government’s Financial leadership of the Agency, including
programs and activities. all disbursements, management, and
coordination of planning, budgeting, analysis,
ISS Industrial Specialists for Size and accountability processes.
Specialists who perform size determinations
for protests OCIO Office of the Chief Information Officer
Manages information technology for the
IT Information Technology Agency, including the design, implementation,
Refers to matters concerned with the design, and continuing successful operation(s) of
development, installation, and implementation information programs and initiatives.
of information systems and applications.
OCRM Office of Credit Risk Management
JAAMS Joint Administrative Accounting Manages program credit risk, monitors lender
Management System performance, and enforces lending program
A financial management system, also known as requirements.
the Oracle Administrative Accounting System,
which is used to keep records of the SBA’s OCORM Office of Continuous Operations and Risk
administrative funding and expenditures. Management
Ensures enterprise-wide disaster planning,
readiness, and implementation of ERM best
practices for the SBA.
172 Appendices (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
ODA Office of Disaster Assistance OSDBU Office of Small Disadvantaged
Promotes economic recovery in disaster- Business Utilization
ravaged areas. Disaster loans are the Agency’s Offices located within each federal agency
primary form of federal assistance for that enable small disadvantaged businesses to
non-farm, private sector disaster losses for gain access to economic opportunity through
individuals and businesses. federal contracts.
OFA Office of Financial Assistance PIIA Payment Integrity Information Act of 2019
Oversees the SBA’s credit programs that Law established to improve efforts to identify
provide capital alternatives for small businesses and reduce government-wide improper
not adequately served by conventional lending. payments; requires agencies to estimate
improper payments and report on actions to
OFPO Office of Financial Program Operations reduce improper payments.
Leads the financial services industry in quality
products and services to SBA partners and PPP Paycheck Protection Program
customers and protects the integrity of SBA A loan designed to provide a direct incentive
programs. for small businesses to keep their workers on
the payroll.
OGC Office of General Counsel
Provides comprehensive legal services to the PPS Probability Proportional to Size
Administrator and all Agency offices. A method of sampling that takes the varying
size of each item within the population into
OGCBD Office of Government Contracting and account when selecting the audit sample.
Business Development
Works to create an environment for maximum QAR Quality Assurance Review
participation by small, disadvantaged, A review to identify any deficiencies, to
and woman-owned businesses in Federal include improper payments.
Government contract awards and large prime
subcontract awards. QSMO Quality Service Management Office
Office designated by OMB to promote the use
OIG Office of Inspector General of shared services in specific functional areas.
Conducts and supervises audits, inspections,
and investigations relating to SBA programs RRF Restaurant Revitalization Fund
and operations. A COVID-19 relief program authorized under
the American Rescue Plan.
OMB U.S. Office of Management and Budget
White House office that oversees preparation SBA U.S. Small Business Administration
of the federal budget and supervises its The federal agency whose mission is to
administration in Executive Branch agencies. maintain and strengthen the nation’s
economy by enabling the establishment and
OPM U.S. Office of Personnel Management vitality of small businesses and by assisting
The Federal Government’s human in the economic recovery of communities
resources agency. after disasters.
OPSM Office of Performance and Systems SBDC Small Business Development Center
Management SBDCs provide management and technical
Manages the Capital Access Financial System, assistance, economic development, and
Lender Loan Management System, Central management training to existing and
Servicing Agent system, and Fiscal Transfer prospective small businesses through
Agent system. cooperative agreements with universities and
colleges and government organizations.
Appendices (Unaudited) 173
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
SBG Surety Bond Guarantee TAP Transition Assistance Program
Provides guaranties and bid, performance, Collaborative program between federal
and payment bonds for contracts up to $2 agencies to assist active duty service members’
million for eligible small businesses that transition to civilian life through access to
cannot obtain surety bonds through regular employment workshops and other services.
commercial channels.
USEAC U.S. Export Assistance Center
SBGRF Surety Bond Guaranty Revolving Fund Centers located nationwide that help firms
A fund at the U.S. Department of the grow internationally by assisting in developing
Treasury that collects the SBA’s contractor and a plan of action with solutions tailored to their
surety fees and is used to pay claims. needs.
SBIC Small Business Investment Company USSGL The United States Standard General Ledger
Provides long-term loans, debt-equity Provides a uniform chart of accounts and
investments, and management assistance to technical guidance for standardizing federal
small businesses, particularly during their agency accounting.
growth stages.
VBOC Veterans Business Outreach Centers
SBIR Small Business Innovation Research Provide entrepreneurial development services
A highly competitive SBA program that such as business training, counseling, and
encourages domestic small businesses to engage mentoring, and referrals for eligible veterans
in federal research/research and development owning or considering starting a small
that has the potential for commercialization. business.
SBLC Small Business Lending Company WBC Women’s Business Centers
Non-depository small business lending Provide long-term training and advising
companies listed by the SBA Office of to women who own or manage a business,
Capital Access. including financial, management, marketing,
and technical assistance and procurement.
SE Salaries and Expenses
Operating expenses of the Agency. WCF Working Capital Fund
A fund for IT modernization efforts.
SMC Senior Management Council
Established by the Administrator to WOSB Women-Owned Small Businesses Program
ensure the SBA has an effective system of Allows federal agencies to set aside certain
internal controls. contracts for competition only among small
businesses owned and controlled by women.
SOC System and Organization Controls
A suite of reports produced during an audit YTD Year-to-Date
that focuses on trust service principles. The period of time beginning the first day of
the fiscal year and going to the current date.
SOP Standard Operating Procedure
The primary source of the Agency’s
internal control.
STEP State Trade Expansion Program
Makes matching fund awards to states to
help small businesses enter and succeed in the
internal marketplace.
SVOG Shuttered Venues Operator Grant
COVID-19 relief program authorized under
the American Rescue Plan.
174 Appendices (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
APPENDIX 3 – OIG AUDIT FOLLOW-UP ACTIVITY
Throughout the year, the Office of Inspector General conducts audits of the SBA’s processes, procedures, and programs, and
makes recommendations for improvement. Many of these recommendations are not material, relative to their dollar impact on
the SBA’s financial and administrative operation, but are beneficial to SBA management. If SBA management disagrees with an
OIG recommendation, the OIG may revise the recommendation or refer the issue to a higher level of SBA management. When
both SBA management and the OIG agree on the recommendation, SBA management develops a corrective action plan including
a target date for completion. This recommendation is identified as having a “Management Decision.” When the corrective
action plan is implemented and the recommendation has been fully addressed, the recommendation is identified as having a
“Final Action.”
The SBA maintains a database to track the recommendations through to the conclusion, or Final Action. During FY 2022 there
were 123 Final Actions, resulting from 4 monetary and 119 non-monetary recommendations.
The following tables depict the SBA’s Final Action activity for FY 2022 and the status of corrective action plans not implemented
within one year:
• Table I: Final Action on Audit Recommendations with Disallowed or Questioned Costs.
• Table II: Final Action on Audit Recommendations with Funds Put to Better Use.
• Table III: Final Action on Audit Recommendations Not Completed within One Year.
TABLE I
Final Action on Audit Recommendations with Disallowed or Questioned Costs
October 1, 2021 – September 30, 2022
NUMBER OF
RECOMMENDATIONS DISALLOWED COSTS
RECOMMENDATIONS
A. Recommendations with management decisions on which final action 12 $220,726,750
had not been taken at the beginning of the period.
B. Recommendations on which management decisions were made 2 $4,500,683,000
during the period.
C. Total recommendations pending final action during period. 14 $4,721,409,750
D. Recommendations on which final action was taken during the period.
1. Recoveries:
(a) Collections and Offsets
(b) Property
(c) Other
2. Write-Offs 4 $151,469,571
3. Total 4
E. Recommendations needing final action at the end of the period. 10 $4,569,940,179
Appendices (Unaudited) 175
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
TABLE II
Final Action on Audit Recommendations with Funds To Be Put To Better Use
October 1, 2021 – September 30, 2022
NUMBER OF FUNDS TO BE PUT TO
RECOMMENDATIONS RECOMMENDATIONS BETTER USE
A. Recommendations with management decisions on which final action had
not been taken at the beginning of the period.
0 $0
B. Recommendations on which management decisions were made during
the period.
0 $0
C. Total recommendations pending final action during period. 0 $0
D. Recommendations on which final action was taken during the period.
1. Value of recommendations implemented (completed). 0 $0
2. Value of recommendations that management concluded should not or
could not be implemented or completed.
0 $0
3. Total 0 $0
E. Recommendations needing final action at the end of the period. 0 $0
176 Appendices (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
TABLE III
Final Action on Audit Recommendations Not Completed within One Year
As of September 30, 2022
Report # 18-03, FY 2017 Financial Statement Audit
Program: OCA
Date Issued: 11/14/2017
Management Decision Date: 1/10/2018
Explanation: The one remaining recommendation requires the Office of Capital Access (OCA) to monitor and perform
procedures over the service organization’s attestation report regarding user control considerations. The fiscal transfer agent will
deliver both a service organization controls and an independent verification and validation report at the beginning of FY 2023.
At that time, the OCA will review the reports and submit their analysis and closure package for OIG review. The estimated
completion date is 11/30/2022.
Report # 18-13, Evaluation of SBA 7(a) Loans Made to Poultry Farmers
Program: OCA
Date Issued: 3/6/2018
Management Decision Date: 3/1/2018
Explanation: Revised regulations were published and subsequently rescinded under the CARES Act that addressed the
arrangements between poultry integrators and growers on appropriate affiliation determinations. Due to the Final Rule rescission,
the current due date was extended to provide additional time to conduct a new rule making. The SBA drafted a proposed rule to
address the affiliation issues, and while the proposed rule has been signed by the Administrator, it has not yet been published and
is awaiting additional inter-agency review and comment coordinated by OMB. The estimated completion date is 03/15/2023.
Report # 19-15, 7(a) High Risk Loan
Program: OCA
Date Issued: 7/10/2019
Management Decision Date: 7/11/2019
Questioned Costs: 3,000,297.00
Explanation: OFPO submitted the final closure request in Integrity, the SBA’s audit tracking system, on 08/12/2022.
Report # 19-16, 7(a) High Risk Loan
Program: OCA
Date Issued: 8/14/2019
Management Decision Date: 8/15/2019
Questioned Costs: 1,367,417.00
Explanation: The lender is in the process of submitting recovery for the balances indicated. Estimated completion
date is 10/31/2022.
Appendices (Unaudited) 177
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Report # 19-17, Evaluation of SBA’s All Small Mentor Protégé Program
Program: GCBD
Date Issued: 7/1/2019
Management Decision Date: 8/16/2019
Explanation: Two recommendations. Recommendation 3 — on 06/17/2021, the OIG granted the GCBD’s request for
extension for this recommendation until 09/30/2022. In order to address the recommendation, the GCBD conducted a detailed
assessment of the staff time needed to complete application reviews and annual evaluations given the temporary process and
the updated process based on the advancement of the technology used for application reviews and annual evaluations. After the
resource assessment was completed, the GCBD completed human resource actions to fill open positions. On 09/29/2022, the
GCBD presented the staffing chart and justification of staff resources based on the updated technology to the OIG. The GCBD
will provide the documentation to close the recommendation to OIG within 30 days. Recommendation 4 — on 06/17/2021,
the OIG granted the GCBD’s request for extension for this recommendation until 09/30/2022. The OCIO is the program
responsible for the development of certify.SBA.gov, and the GCBD did not have direct authority to develop and implement
functionality for certify.SBA.gov. The process to address this recommendation started at the beginning of FY 2022 and will
continue until certify.SBA.gov has the full capacity to accept, manage, and track applications and annual evaluations. On
09/29/2022, the GCBD provided the OIG with a demonstration of the Power BI dashboard temporarily being used to address
the functionality needed to track application reviews and annual evaluations. The GCBD will provide the documentation to
close the recommendation to the OIG within 30 days.
Report # 20-03, Audit of SBA’s Oversight of High-Risk Lenders
Program: OCA
Date Issued: 11/12/2019
Management Decision Date: 11/15/2019
Explanation: Four recommendations. Recommendation 1 — The OCRM will include the recommended changes in the revised
SOP 51 00 2, which is being finalized. Estimated completion date is 12/30/2022. Recommendation 2 — The OCRM is working
with the OPSM to develop a database/workflow management tool to more effectively oversee high-risk lenders. It is currently
in development, awaiting a source of funding, and is expected to be implemented by the end of FY 2023. Recommendation
5 — The communications protocol will be included in the revised SOP 51 00 2, which is being finalized. Estimated completion
date is 12/30/2022. Recommendation 6 — The OCRM has the Loan File Review Team reviewing the loans to determine if
deficiencies exist and were corrected. The OCRM requested an extension until 11/30/2022.
Report # 20-08, Audit of the SBA’s Community Advantage Pilot Program
Program: OCA
Date Issued: 3/18/2020
Management Decision Date: 3/9/2020
Explanation: Five recommendations. Recommendation 1 – The OFA has reviewed options for expanding access to capital
in underserved areas and the Administrator has made significant changes to the CA Pilot. On 04/01/2022, the CA Pilot was
extended to 9/30/2024 and the moratorium on new lenders was lifted (see 87 FRN 19165). Additionally, on 04/29/2022, the
SBA published a Final Rule effective 5/31/2022 , making several significant changes to the CA Pilot (see 87 FRN 25398), and
the OFA has requested closure of this recommendation. Recommendation 2 — The OFA has determined that aligning the rates
is feasible and has published a final rule (see 87 FRN 38900 – Section 120.213) that aligns the variable rates for CA loans with
all 7(a) loans up to $350,000. The interest rates on fixed rate loans under $250,000 are already aligned at PRIME +6 percent
per SOP 50.10.6. The OFA has requested closure of this recommendation. Recommendation 4 — OCRM is evaluating a
management interview to be conducted as part of its Risk-Based Reviews that will be used to assess a CA Lender’s provision of
management and technical assistance (M&TA) and will consider the frequency in which a Lender provides M&TA as a factor
178 Appendices (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
to determination whether the CA Lender’s expertise is adequate. The OFA has requested an extension of this recommendation
to 12/31/2022. Recommendation 5 — The OFA has made the TA fields in ETRAN mandatory and has delivered its review of
loan performance associated with the various type of M&TA to OIG. The OFA has requested closure of this recommendation.
Recommendation 6 – The OFA has established a process of periodically evaluating the performance of CA loans with SBSS
scores below 140>. The OFA has requested closure of this recommendation.
Report # 20-20, Compliance with the Debt Collection Act Program: OCA
Date Issued: 9/30/2020
Management Decision Date: 9/30/2020
Explanation: Ten recommendations. Recommendations 1, 2, 3, 6, 7, 9, and 10 — SOP 50 52: Disaster Loan Servicing and
Liquidation is currently being revised within the OCA and will not be ready for agency clearance until all revisions are received.
Extensions to 12/15/2022 granted. Recommendation 4 — The OFPO submitted final closure package in Integrity. Original
closure documents submitted to the OIG on 8/23/2021. The OIG requested additional information 10/6/2022, and OFPO
will submit the documentation by 10/31/2022. Recommendation 5 — The OFPO submitted to the OIG for final closure
5/11/2021. Received OIG extension to 11/19/2021. The OIG requested additional information 10/6/2022, and the OFPO
will submit the documentation by 10/31/2022. Recommendation 8 — The OFPO submitted 1824 to the OIG for final
closure 5/11/2021. The OIG requested additional information 10/6/2022, and the OFPO will submit the documentation by
10/31/2022.
Report # 21-02, Inspection of Small Business Administration’s Initial Disaster Assistance Response to the Coronavirus
Pandemic
Program: OCA
Date Issued: 10/28/2020
Management Decision Date: 10/14/2020
Explanation: Three recommendations. The SBA developed a plan to assess and remedy the EIDL Advances awarded by
reviewing a sampling of recipient sole proprietors and independent contractors that self-certified having employees but did
not provide an Employer Identification Number (EIN) on their COVID EIDL application after initial assessment of the
population by the approved third-party contractor. The SBA has developed an appropriate plan to remedy cases identified where
the applicant provided false information on their COVID EIDL application with regards to having employees. The SBA has
developed an appropriate plan to remedy cases, including but not limited to, recovery of funds by offset, referral to OIG criminal
investigative division, or the provision of supporting documentation, where appropriate. Extensions have been requested to allow
the remedy of the final action to be completed. Extension requested in Integrity to 12/30/2022.
Report # 21-07, Inspection of SBA’s Paycheck Protection Program
Program: OCA
Date Issued: 1/14/2021
Management Decision Date: 2/14/2022
Explanation: One recommendation. The OFPO is preparing final closure documents for submission in Integrity by 11/18/2022.
Appendices (Unaudited) 179
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Report # 21-08, SBA’s Use of Vendors Without a Contract
Program: OCA
Date Issued: 2/3/2021
Management Decision Date: 9/30/2020
Questioned Costs: 10,800.00
Explanation: Three recommendations. Recommendation 1 —The OFPO submitted a draft contract solicitation package to
Acquisitions for assignment to a Contracting Officer. Received extension to 10/31/2022. Recommendation 2 — The OFPO
submitted closure request in Integrity 9/27/2022. Recommendation 3 — The OFPO disagrees with the recommended
ratification of $10.8 million and continues to work with the OIG and the OGC on a resolution.
Report # 21-09, Duplicate Loans Made Under the Paycheck Protection Program
Program: OCA
Date Issued: 1/27/2021
Management Decision Date: 2/26/2021
Explanation: Four recommendations. Recommendation 1 — The Master Plan document was finalized in FY 2022 by the
Office of Financial Program Operations (OFPO). The level of effort developing and finalizing the Master Plan was quite large.
This contributed to the delay with closing this finding. The final package to close this audit will be submitted to the OIG for
review in early FY 2023. Recommendation 2 — The Master Plan document was finalized in FY 2022 by OFPO. The level of
effort developing and finalizing the Master Plan was quite large. This contributed to the delay with closing this finding. The final
package to close for this audit will be submitted to the OIG for review in early FY 2023. Recommendation 3 — Incorporating
SBA Procedural PPP updates (5000-20092) took more time to develop and implement. Our original assessment on timeline
for completion was understated, and more time was needed to complete these updates (communication to external/internal
stakeholders, systematically, etc.). Lastly, more time was needed to document and create artifacts to portray the updates to the
system. The final package to close this audit will be submitted to the OIG for review in early FY 2023. Recommendation 4 —
Incorporating SBA Procedural PPP updates (5000-20092) took more time to develop and implement. Our original assessment
on timeline for completion was understated, and more time was needed to complete these updates (communication to external/
internal stakeholders, systematically, etc.). Lastly, more time was needed to document and create artifacts to portray the updates
to the system. The final package to close this audit will be submitted to the OIG for review in early FY 2023.
Report # 21-11, SBA’s Award Procedures for the CARES Act Entrepreneurial Development Cooperative Agreements
Program: OED
Date Issued: 3/30/2021
Management Decision Date: 3/5/2021
Explanation: Two recommendations. Recommendation 1 — The OED provided evidence to demonstrate that the OED
enforced requirements for award recipients to set measurable performance goals, including performance targets. The OED
submitted the CARES Act program Notice of Awards (NOAs) to the auditors. The OED is awaiting closure information from
the OIG. Recommendation 2 — The OED provided evidence of an established system to collect and retain performance
data and results and submitted a framework that was created to assist with goal setting for future disaster or pandemic related
programs like the CARES Act. The OED is awaiting closure information from the OIG.
180 Appendices (Unaudited)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2022
Report # 21-14, SBA’s Oversight of Women’s Business Center Cooperative Agreements
Program: OED
Date Issued: 5/12/2021
Management Decision Date: 05/04/2021
Explanation: Eight recommendations. Recommendations 1, 4, 5, 6, and 8 have been addressed through the development of
operating procedures and revised policy. The OIG has requested documentation confirming the changes have been implemented,
which will be provided by 10/31/2022. Extensions have been requested to 10/31/2022. Recommendations 2, 3, and 7 are due on
9/24/2024. The SBA conducted an additional analysis and identified documentation that reduced the recoupment and remedy
amount to $237,392.50. For these recommendations the SBA has collected recoupment in the amount of $64,960.27 and is
finalizing the collection of remaining funds from impacted awardees.
Report # 21-16, SBA’s FY 2020 Compliance with PIIA
Program: OCA
Date Issued: 5/12/2021
Management Decision Date: 6/12/2021
Explanation: Two recommendations. Recommendations 10 and 11 — OFPO received extensions to 11/30/2022 for
Recommendation 10 and 12/1/2022 for Recommendation 11 to allow collection of sampling methodology data.
Appendices (Unaudited) 181
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182 Appendices (Unaudited)
ACKNOWLEDGMENTS
This Agency Financial Report was produced with the energies and talents of the SBA staff. To all these dedicated individuals listed
below, and those not listed, the Office of Performance, Planning, and the Chief Financial Officer would like to offer sincere thanks
and acknowledgment.
Katherine Aaby Qiuyan Gu Mike Peterson
Omar Aboushady Blake Hoing Janette Porter
Melissa Atwood Scott Holland Trevor Postlethwaite
Anne Barnes Angela Inmon Steve Ramey
Rory Berges Daniel Kane Marjorie Rudinsky
Jason Bossie Sharon Kirkley AnnMarie Schaef
Johnathan Brame Natalie Kiser Matthew Sonneborn
Tonia Butler Terri Luebs Scott Stilmar
Jeffrey Davis Emily Knickerbocker Zahid Syed
Krzysztof Fizyta Maureen Moore-Vellucci Leo Tudela
Erica Gaddy Christine O’Neill Danielle Ventura
Leslie Godsey Mathew Pascarella Lucine Willis
Kathleen Graber Tony Paul Hellen Wong
We would also like to acknowledge the Office of Inspector General and KPMG LLP for their professionalism while conducting
the audit of the Fiscal Year 2022 Financial Statements. We offer our special thanks to Schatz Publishing Group and Omnidigital
Studio, Inc. for contributions in producing this report.
OFFICE OF PERFORMANCE, PLANNING,
AND THE CHIEF FINANCIAL OFFICER
409 Third Street, S.W. Washington, DC 20416
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