SBA Agency Financial Report, Fiscal Year 2024
Summary
This is the U.S. Small Business Administration's Agency Financial Report for fiscal year 2024, covering October 1, 2023 through September 30, 2024. The message from the Administrator, dated November 15, 2024, reports a record 100,000 financings to small businesses and disaster survivors, and says the SBA approved more than 76,000 loans in the 7(a) and 504 loan programs, providing $37.7 billion. It also reports more than 27,000 direct disaster loans totaling $1.7 billion. A highlights table (dollars in thousands, unaudited) lists a principal program portfolio of $453,838,614 and total assets of $276,181,925 for FY 2024.
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Agency
Financial
Report
| FISCAL YEAR 2024
Introduction (Unaudited)
U.S. Small Business Administration
ABOUT THIS REPORT
The U.S. Small Business Administration (SBA’s) Agency Financial Report (AFR) for fiscal year (FY) 2024 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 2024 Annual Performance Report (APR) is the other report and is part of the FY 2026 Congressional Budget Justification
(CBJ). The CBJ/APR is scheduled for publication in early 2025. The reports can be found at: www.sba.gov/performance.
FY 2024 Highlights FY 2021 FY 2022 FY 2023 FY 2024
(Dollars in Thousands)
(unaudited) (unaudited) (unaudited) (unaudited)
Principal Program Portfolio1 $ 713,196,138 $ 559,170,974 $ 412,215,125 $ 453,838,614
Total Assets $ 562,417,681 $ 378,012,365 $ 316,328,584 $ 276,181,925
Total Liabilities $ 503,539,063 $ 395,123,603 $ 346,035,882 $ 280,436,013
Total Net Position $ 58,878,618 $ (17,111,238) $ (29,707,298) $ (4,254,088)
Total Net Cost of Operations $ 346,283,553 $ 47,096,949 $ 35,322,586 $ (308,916)
Total Budgetary Resources $ 1,347,118,849 $ 420,033,718 $ 107,153,718 $ 67,918,113
1 The total portfolio consists of guaranteed business loans outstanding, guarantied debentures, direct business loans and direct non-business 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: Questions and comments regarding the content,
www.sba.gov presentation, and usefulness of this report are
welcome and may be addressed to:
The SBA’s plans and reports are available at: performance.management@sba.gov
www.sba.gov/performance
Para información acerca de los programas de la SBA: Or, you may write to:
www.sba.gov > “Translate” > “Select Language”
U.S. Small Business Administration
Office of Performance, Planning, and the Chief
Financial Officer
409 Third Street, S.W.
Washington, DC 20416
Follow us on:
https://www.facebook.com/sbagov
Or, you may call:
https://www.x.com/sbagov (formerly Twitter)
Anna Maria Calcagno, Director
https://www.youtube.com/sba Office of Strategic Management and Enterprise
Integrity (OSMEI)
http://www.instagram.com/sbagov
(202) 401-2895
Agency Financial Report Fiscal Year 2024 ii U.S. Small Business Administration
Introduction (Unaudited)
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 Systems, Controls, and Legal Compliance ............................................................................................. 25
Internal Control Environment ....................................................................................................................... 25
Financial Management Systems Strategy ...................................................................................................... 26
Management Assurances: FMFIA and FFMIA Assurance Statement for FY 2024................................................ 28
Financial Reporting (Unaudited) .......................................................................................................33
Message from the Chief Financial Officer ................................................................................................................ 34
Inspector General’s Audit Report............................................................................................................................ 35
Independent Auditors’ Report on FY 2024 Financial Statements ............................................................................. 38
CFO Response to Draft Audit Report on FY 2024 Financial Statements ..................................................................... 64
Financial Statements and Notes (Unaudited) .......................................................................................................... 66
Other Information (Unaudited) ........................................................................................................ 111
Summary of Financial Statement Audit and Management Assurances ....................................................................112
OIG Report on the Top Management and Performance Challenges .........................................................................114
Agency Response to the OIG Report on the Top Management and Performance Challenges ................................... 138
Payment Integrity .................................................................................................................................................139
Grants Programs ...................................................................................................................................................152
Civil Monetary Penalty Adjustment for Inflation ....................................................................................................153
Appendices (Unaudited) ................................................................................................................. 155
APPENDIX 1 – Contact SBA: Useful Websites and Phone Numbers .......................................................................... 156
APPENDIX 2 – Glossary ..........................................................................................................................................157
APPENDIX 3 – OIG Audit Follow-Up Activity ............................................................................................................163
Agency Financial Report Fiscal Year 2024 i U.S. Small Business Administration
Introduction (Unaudited)
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 2024 Agency Financial Report provides financial and performance
information for the fiscal year beginning October 1, 2023, and ending September 30, 2024. 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 combining 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 supplementary information— in the form of a contact list of useful websites and
telephone numbers, a glossary, and a detailed report on audit follow-up activity.
Agency Financial Report Fiscal Year 2024 ii U.S. Small Business Administration
Introduction (Unaudited)
MESSAGE FROM THE ADMINISTRATOR
November 15, 2024
On behalf of our dedicated and mission-driven team at the U.S. Small
Business Administration, I am pleased to present our FY 2024 Agency
Financial Report.
This report highlights the SBA’s substantial impact and important gains
over the previous fiscal year as the federal agency responsible for helping
our nation’s more than 34 million small businesses and innovative startups
access the tools, resources, and support they need to start and grow
successful businesses, and as the agency that helps disaster survivors
recover and rebuild their communities.
Throughout FY 2024, America’s small businesses continued to help
propel our nation’s economy, reflecting historic support and program
improvements across the SBA. During this period, the United States has enjoyed strong job creation,
historically high rates of new business application filings, historically low unemployment, generational
investments in American infrastructure, manufacturing, and clean energy, and an economic recovery
unparallelled across the globe.
The SBA’s dedicated staff and their mission-driven implementation of both core and emergency programs
and services – including small business lending, federal contracting support, technical and skills training,
investment and innovation, and disaster response – are at the heart of this success, opening doors of
opportunity for entrepreneurs nationwide and helping countless small businesses, startups, and recovering
communities seize opportunities to start, rebuild, and grow.
The Agency also achieved significant regulatory and programmatic reforms during FY 2024, including
the most significant regulatory reforms in more than 40 years. The simplification of SBA lending and
the expansion of lending partners through the permanence of Community Advantage and expansion of
SBLCs will help support SBA’s ongoing efforts to increase access to affordable capital for business owners
in underserved markets across America, expanding on the Administration’s agenda to advance equity and
build an inclusive economy.
Access to capital is a vital aspect of economic development. The SBA achieved a record 100,000 financings
to America’s small businesses and disaster survivors. In lending products, we work with approved lenders
and community development organizations to guarantee loans to small businesses that are unable to obtain
credit in the conventional lending marketplace. The SBA approved more than 76,000 loans in the 7(a) and
504 loan programs, providing $37.7 billion to small businesses. The SBA has doubled its smallest-sized
loans since FY 2020, increasing these loans by one-third since FY 2023, while addressing capital gaps
in underserved markets including to minorities, women and veterans. The Agency also saw growth in its
Community Advantage and Lender Match programs. Additionally, the SBA’s microloan program, which
offers loans up to $50,000, approved $94 million in new loans, underscoring our commitment to expanding
small dollar loans. Thanks to regulatory reform permanence, overall lending through the Community
Advantage program increased by 41 percent in loans approved and 40 percent in dollars awarded.
Additionally, with technological modernization, Lender Match saw the number of enrolled Community
Financial Institutions increase by 10 percent.
Agency Financial Report Fiscal Year 2024 1 U.S. Small Business Administration
Introduction (Unaudited)
In debt and equity products, the SBA supports the Small Business Investment Company program, in
which we partner with private investors to finance innovative and growth-oriented small businesses
through professionally managed investment funds. As of June 30, 2024, the SBA supported over 890 small
businesses with approximately $5 billion in financing. The SBA also increased SBIC financings to women-,
minority-, and veteran-owned small businesses, as well as those in underserved geographic areas, by 28
percent this year.
The SBA ensures that America’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 funded resource
partner network made up of Small Business Development Centers (SBDC), Women’s Business Centers
(WBC), Veterans Business Outreach Centers (VBOC), SCORE chapters, Regional Innovation Cluster, and
Growth Accelerators. In FY 2024, hundreds of thousands of American small businesses took advantage of
counseling, mentoring, and training assistance through the SBA’s targeted networks. The SBA now has a
total of 152 WBCs in all 50 states, the District of Columbia, and Puerto Rico, as well as 31 VBOCs.
Thanks to the SBA’s efforts, in FY 2023, federal agencies collectively awarded an all-time high of 28.4
percent of federal contract dollars totaling $178.6 billion that went to small businesses. That is an over
$15.7 billion increase from the previous fiscal year and exceeded the federal small business contracting goal
of 23 percent for FY 2023. This marks the tenth consecutive year in a row that the Federal Government has
exceeded this goal. The SBA continues to promote equity in federal contracting, and for the third year in a
row, Small Disadvantaged Business (SDB) spending exceeded its goal.
When disaster strikes, the SBA joins with our federal partners to respond by helping businesses, nonprofits,
homeowners, and renters recover from declared disaster events. Direct low-interest loans from the SBA
have enabled borrowers to replace or repair uninsured losses, whether through physical damage or
economic injury. The SBA also assists borrowers in financing improvements to their homes or businesses
to mitigate future disaster damages. The SBA has worked with federal, state, and local partners to enhance
and improve the disaster response and ensure we are assisting the economic recovery as expediently as
possible. In FY 2024, the SBA approved more than 27,000 direct disaster loans for natural disasters such
as wildfires, floods, hurricanes, and tornadoes, totaling $1.7 billion.
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. Under my leadership, the SBA
has taken action to implement internal controls to ensure that all the SBA’s programs are carried out
at the highest standard and with the utmost integrity. My team and I remain committed to ensuring
proper management of Agency resources by addressing the issues our auditor identified and continuing to
strengthen management controls.
The SBA works across the whole of the agency, and with our private and government partners and
stakeholders to ensure that we are performing at the highest levels, and delivering streamlined, tech-
enabled operations for a strong customer experience for all America’s entrepreneurs in every corner of our
nation. As the agency looks toward the future, I remain confident that the mission-driven teams at the SBA
will continue to deliver even greater and more equitable results to help advance America’s economy.
Sincerely,
Isabel Casillas Guzman
27th Administrator
Agency Financial Report Fiscal Year 2024 2 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Section I
Management’s
Discussion and
Analysis
| Unaudited
Agency Financial Report Fiscal Year 2024 3 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
THE SBA’S HISTORY, GOALS, AND ORGANIZATION
In 1953, Congress created the SBA to aid, counsel, assist, and protect the interests of small businesses. 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., whereas 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 GOAL 2 GOAL 3
Ensure equitable and customer-centric design Build resilient Implement strong
and delivery of programs to support small businesses and a stewardship of resources
businesses and innovative startups sustainable economy for greater impact
1.1 Ensure all entrepreneurs have access to 2.1 Help small businesses 3.1 Strategically manage
capital to start and grow their businesses recover from the resources by
pandemic and become integrating quality
1.2 Build a thriving national innovation
more resilient data, evidence,
ecosystem that promotes investments in all
and risk in decision-
small business communities 2.2 Prepare small
making processes
businesses and rebuild
1.3 Increase exporting opportunities to help
communities affected 3.2 Build an inclusive
small businesses across the country expand
by natural disasters and high-performing
into new markets
workforce
1.4 Build back an inclusive and proficient small
3.3 Develop and deploy
business contracting base ready to compete
technology-driven
for all federal procurement opportunities
solutions to enhance
1.5 Build an equitable entrepreneurial mission delivery
ecosystem through tailored training
and counseling
Strategic Goal One entrepreneurs and microenterprise development
organizations and programs.
Ensure Equitable and Customer-Centric
Design and Delivery of Programs to Support
The Office of Investments and Innovation assists small
Small Businesses and Innovative Startups
businesses through initiatives such as the Small Business
Strategic Goal One aims to improve access to SBA Investment Company, Small Business Innovation Research,
programs and services for all entrepreneurs. Small Business Technology Transfer, and other tailored
programs that drive innovation and competitiveness.
The Office of Capital Access assists small businesses with
obtaining capital via the 7(a), 504, and Microloan programs
The Office of International Trade enhances the ability
and via bonds through the Surety Bond Guarantee
of small businesses to export and compete in the global
Program. The PRIME Technical Assistance Grants Program
marketplace by facilitating access to capital, providing
provides training and technical assistance to underserved
technical assistance, ensuring the consideration of small
Agency Financial Report Fiscal Year 2024 4 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
business interests in trade negotiations, and contributing with District Offices and resource partners to aid their
to the U.S. government’s international commercial and communities even after disaster declaration deadlines
economic agenda. have closed. The SBA communicates its preparedness and
disaster resources through outreach that raises awareness
The Office of Government Contracting and Business and underscores seasonal risks. The office also oversees
Development assists small businesses in competing for Shuttered Venue Operators Grants Program in support of
federal contracting opportunities through the government- pandemic relief.
wide prime and subcontracting programs. The office also
sets size standards for small businesses, which determine
Strategic Goal Three
the size a business must be to be considered a small
business. Additionally, business development assistance Implement Strong Stewardship of Resources
includes the HUBZone, 8(a) business development, for Greater Impact
Empower to Grow management and technical assistance,
Strategic Goal Three focuses on SBA resources and
and Mentor-Protégé programs.
ways of optimizing them to best support the small-
business community.
The Office of Entrepreneurial Development provides
business advising, mentoring, and training assistance The Office of Performance, Planning, and the Chief
through its resource partner network composed of Small Financial Officer leads the Agency’s performance
Business Development Centers, Women’s Business Centers, management, program evaluation, and evidence-building
SCORE, Community Navigator Pilot Program, and through activities; audit management, enterprise and fraud risk
Entrepreneurship Education programs. management; financial management; and acquisition
management functions.
The Office of Veterans Business Development ensures the
applicability and usability of all the Agency’s small business The Office of Executive Management, Installations, and
programs for active-duty military personnel, National Support Services supports resource and core administrative
Guard and Reservists, veterans, and veteran or military functions, including grant management, facilities, records
spouses through Veterans’ Business Outreach Centers, management, and personnel security.
Boots to Business, and other grant programs.
The Office of Human Resources Solutions provides strategic
The Office of Field Operations is responsible for connecting human capital solutions to workforce issues and strives
and supporting entrepreneurs with the Agency’s products to create a work environment that attracts and retains a
and services through 10 regional offices and 68 district talented and high-performing workforce.
offices. Each of the SBA’s programmatic areas are directly
supported by specialist field staff. The Office of the Chief Information Officer provides
information technology leadership, product services, and
operational support so that the SBA can maximize internal
Strategic Goal Two
efficiency and responsiveness to small businesses.
Build Resilient Businesses and a Sustainable
Economy Other offices that support the SBA’s strategic goals and
objectives include the Office of the National Ombudsman;
Strategic Goal Two focuses on how the SBA can rebuild
Office of Diversity, Inclusion, and Civil Rights; Office of
a sustainable economy fueled by small businesses.
Native American Affairs; Office of Communications and
The Office of Capital Access administers disaster loans Public Liaison; Office of Congressional and Legislative
through the Disaster Assistance Program, the only SBA Affairs; Office of General Counsel; and Office of Hearings
program not limited to small businesses. Also, the SBA and Appeals.
continues to administer Paycheck Protection Program
(PPP) loans, Restaurant Revitalization Fund (RRF) grants,
and COVID-19 Economic Injury Disaster Loans (COVID-19
EIDL) in support of pandemic relief. The SBA’s COVID-19
programs have transitioned to long-term servicing and
administration. New loans and grants are not being issued.
The Office of Disaster Recovery and Resilience provides
short- and long-term assistance after disasters by engaging
Agency Financial Report Fiscal Year 2024 5 U.S. Small Business Administration
Agency Financial Report Fiscal Year 2024
Management’s Discussion and Analysis (Unaudited)
SBA ORGANIZATION CHART
Office of the Administrator Office of Inspector General
Administrator
Chief of Staff — Deputy Administrator Office of Advocacy
Office of Office of Performance,
Office of Office of Hearings Office of Human
Office of Capital Access Communications Planning, and
International Trade and Appeals Resources Solutions
and Public Liaison Chief Financial Officer
Office of Executive
Office of Government Office of Diversity,
6 Office of Investment Office of Office of the National Management,
Contracting and Inclusion and
and Innovation General Counsel Ombudsman Installation and
Business Development Civil Rights
Support Services
Office of Disaster
Office of Entrepreneurial Office of Congressional Office of the Chief
Recovery
Development and Legislative Affairs Information Officer
and Resilience
Office of Field Office of Veterans
Operations Business Development
U.S. Small Business Administration
Office of Native
American Affairs
Agency Financial Report Fiscal Year 2024
SBA FIELD OFFICE LOCATIONS
SBA Field Office Locations
Region 10
AK
Region 8 Region 1
ANC
Region 5
ANC
(In Region 10) WA
ANC
ME
ANC ANC
MT ND ANC
ANC
NH
OR MN VT ANC
ANC ANC
ID ANC
MA
WI NY ANC
SD
ANC
ANC ANC ANC
RI
Region 2
WY ANC MI ANC CT
ANC
ANC ANC
7 ANC ANC PA ANC
ANC
ANC ANC ANC IA NJ
NV NE IA ANC
ANC
ANC IN ANC
DE
ANC
ANC IL
ANC OH MD
ANC UT ANC
ANC HQ
CO ANC ANC
WVA
CA VA
ANC
KS MO KY
ANC
Region 3
ANC
ANC ANC NC
ANC
TN
AZ ANC
ANC OK ANC
ANC
NM ANC SC
ANC
AR MS
Management’s Discussion and Analysis (Unaudited)
ANC GA
AL
ANC
Region 4
ANC
TX LA
ANC
HON
ANC
ANC
FL
GU HI
Region 9
U.S. Small Business Administration
ANC HAT
(In Region 9) ANC Region 6 PR
USVI
Region 7 (In Region 2)
Published by OCPL 9/2023
Management’s Discussion and Analysis (Unaudited)
EXECUTIVE SUMMARY
America’s 34 million small businesses play critical roles in Performance Results
job creation and retention. During the past two decades,
Capital — In FY 2024, the SBA approved nearly $38 billion
small businesses have created two of every three net new
in the form of more than 76,000 7(a) and 504 loans to
jobs. In turn, the U.S. Small Business Administration’s
small businesses. Those 7(a) loans and 504 loans, together
assistance to those firms and entrepreneurs helps drive a
with microloans and surety bonds, helped support more
healthy economy.
than 823,000 American jobs. During FY 2024, as of June
30, 2024, the SBA invested more than $5 billion in more
The SBA applies a variety of methods to support America’s
than 890 small businesses through the Small Business
small businesses. These methods include promoting
Investment Company Program, which supported more than
equitable access to capital, Federal contracting, counseling,
80,000 jobs.
and disaster assistance.
Contracting — The SBA continued partnering with
The SBA published the Agency’s FY 2022–2026 Strategic
agencies across the Federal Government to expand small
Plan, which established the following strategic goals:
business contracting opportunities. From FY 2018 through
• Ensure equitable and customer-centric design and FY 2023, small businesses were awarded more than
$890 billion in Federal contracts. FY 2024 contracting
delivery of programs to support small businesses and
numbers continue to be collected and certified. The Federal
innovative startups
Government continued to exceed its small disadvantaged
• Build resilient businesses and a sustainable economy and service-disabled veteran-owned small business
• Implement strong stewardship of resources for contracting goals but will continue to face challenges
greater impact meeting its HUBZone and women-owned small business
contracting goals.
The following sections highlight the Agency’s financial
and performance results. Additional information can be Counseling — The SBA helped entrepreneurs start more
found in the Analysis of Financial Results and Summary than 26,000 new businesses in FY 2024 and served more
of Performance Results sections. The complete set of than 737,000 unique clients. Also, in FY 2024 hundreds of
performance results will be reported in the Annual thousands of American small businesses took advantage
Performance Report to be published in early 2025. of counseling, mentoring, and training assistance through
the SBA network, which includes 152 Women’s Business
Centers, the largest WBC network in the SBA’s history, and
Financial Results 31 Veterans Business Outreach Centers.
For FY 2024, the SBA’s total budgetary resources used for
Disaster Assistance — In FY 2024, the SBA approved
staffing, operations, and loan subsidy costs were $36.6
more than 27,000 direct disaster loans for events such
billion. Total nonbudgetary resources for loan financing
as floods, hurricanes, and tornadoes, totaling nearly $1.7
used to make direct loans and purchase guaranteed loans
billion. The Agency managed 427 disaster assistance
in default were $15.6 billion. The SBA’s guaranteed portion
declarations during FY 2024. In addition to supporting
of the outstanding loan principal decreased $.7 billion in
communities before, during, and after natural disasters, the
FY 2024 to $139.5 billion. During FY 2024, new guaranties
SBA continued its oversight of COVID-19 relief programs in
disbursed by SBA participating banks were $27.3 billion, a
every State and territory.
$.3 billion increase from last year. In FY 2024, purchases
of defaulted guaranteed loans decreased from $12.2 billion
last year to $4.5 billion. The loans receivable portion of
the SBA credit program portfolio decreased in FY 2024
to $258.1 billion from $272.0 billion in FY 2023. SBA’s
response to the COVID pandemic led to unprecedented
increases in loan activity which peaked in FY 2022. As
Disaster lending returned to pre-pandemic levels the
outstanding loan balances have declined.
Agency Financial Report Fiscal Year 2024 8 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
PRIMER OF THE SBA’S PRINCIPAL PROGRAMS
Capital Federal and State Technology (FAST) Partnership
Program — The FAST Partnership Program provides
7(a) Loans — The SBA offers Government guaranties up to
direct assistance to underserved, innovation-based
$5 million on loans made by lenders to help expand access
entrepreneurs to help increase their success in obtaining
to capital for business owners who face challenges getting
SBIR and STTR funding.
approved for financing. The SBA guarantees a portion of
7(a) loans made and administered by commercial lending
Growth Accelerator Fund Competition (GAFC)
institutions. Loans can be guaranteed for a variety of
Program — GAFC provides $50,000 to $200,000
general business purposes.
in funding to accelerators, incubators, co-working
communities, makerspaces, and other organizations that
504 Certified Development Company (CDC) Loans
offer entrepreneurial support, mentorship, and assistance
— The SBA works with CDCs — which are private nonprofit
to science, technology, engineering, and mathematics
corporations — and private lenders to provide long-term
entrepreneurs (STEM) and/R&D entrepreneurs.
financing (up to $5.5 million) to support investment in
major assets, such as real estate and heavy equipment. The
Regional Innovation Clusters (RIC) — RICs promote
SBA guarantees the CDC’s portion of these loans.
innovation in regional ecosystems through on-the-ground
collaborations between businesses and research, education,
Microloans — The SBA provides loans to nonprofit
financing, and Government institutions that work to
intermediary lenders — which are community-based
develop and grow a particular industry or related set of
organizations with experience in lending and providing
industries in a geographic region.
technical assistance — that in turn make loans — up
to $50,000 — to small businesses needing small-scale
financing and technical assistance for startup or expansion. Exporting
Export Loans — The SBA provides several types of
Surety Bond Guarantees (SBG) —A surety bond is
export loans, including SBA Export Express loans up to
a type of contract that guarantees the performance of
$500,000, Export Working Capital loans up to $5 million,
a contractor. If one party does not fulfill its end of the
and International Trade loans up to $5 million that offer
bargain, the Surety Bond Guarantee Program financially
enhanced export financing options for small businesses to
compensates the other party. To encourage surety
develop foreign markets, fund their export transactions,
companies to provide bonds for small businesses, the SBA
or support business expansion due to exporting success.
guarantees a surety company’s bonds up to $6.5 million
In FY 2024, the SBA began the Working Capital Pilot
for non-Federal contracts and up to $10 million for Federal
(WCP) Program, which is a modified version of the Export
contracts.
Working Capital Program. The WCP provides a new
working capital tool geared toward the new-to-export
market.
Investment And Innovation
Small Business Investment Companies — SBICs are U.S. Export Assistance Centers (USEACs)— USEACs
privately owned and managed investment funds that use are staffed by SBA, Department of Commerce, and Export-
their capital plus funds borrowed — with an SBA guaranty Import Bank professionals. Together their mission is to help
up to $175 million — to make equity and debt investments small- and medium-sized businesses compete in today’s
in qualifying small businesses. global marketplace by providing export marketing and
finance assistance.
Small Business Innovation Research (SBIR) — The
SBIR program stimulates high-tech innovation by reserving State Trade Expansion Program (STEP) — STEP
a specific percentage of Federal research and development provides grants for States to assist small businesses
(R&D) funds for small businesses. with the information and tools small businesses need to
succeed in export related activities. These activities include
Small Business Technology Transfer (STTR) — The participation in foreign trade missions, foreign market sales
STTR program reserves a specific percentage of Federal trips, international marketing campaigns, export trade
R&D funding to award to small-business and nonprofit- shows, and training workshops.
research-institution partners.
Agency Financial Report Fiscal Year 2024 9 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Contracting And Business Development centers managing nearly 900 service delivery points
throughout the United States and its territories.
Contracting Assistance to Small Businesses —
Small business contracts represent the largest form of
Women’s Business Centers — WBCs provide advising
direct monetary support for small business in the Federal
and training through more than 150 nonprofit educational
Government. The SBA provides certifications for four
centers across the nation. Many WBCs provide multilingual
subgroups:
services, and some offer flexible hours allowing mothers
• Small Disadvantaged Businesses — This with children to attend training classes.
program provides assistance through the 8(a)
Boots to Business (B2B) — B2B is an entrepreneurial
Business Development Program and set-aside
education and training program that the SBA offers as
contracting for businesses owned and controlled by
part of the Department of Defense Transition Assistance
socially- and economically disadvantaged individuals. Program (TAP). The course provides an overview of
For nine years, a firm can be assisted in gaining entrepreneurship and applicable business ownership
resources to compete for Federal contracts and private fundamentals. Active-Duty Service members (including
sector contracts. National Guard and Reserve), veterans of all eras, and
• HUBZone Small Businesses — This program military/veteran spouses are eligible to participate.
provides sole-source and set-aside contracting
Native American Outreach — The program supports
for firms located in designated economically
American Indians, Alaska Natives, and Native Hawaiians
disadvantaged geographic areas.
seeking to create, develop, and expand small businesses. It
• Veteran-Owned Small Businesses (VOSB) engages in outreach, technical assistance, and education,
and Service-Disabled Veteran-Owned Small formulates and administers training programs, and
Businesses (SDVOSB) — Certified VOSBs have coordinates entrepreneurial development opportunities
additional opportunities to pursue sole-source and through cosponsorship agreements with entities and other
set-aside contracts at the Department of Veteran’s Federal agencies.
Affairs. The SDVOSB program authorizes Federal
agencies to set aside contracts for competition Veterans Business Outreach Centers — The SBA’s
among only service-disabled veteran-owned small 31 VBOCs provide counseling and training services to
veteran-owned and service-disabled veteran-owned
businesses.
small businesses and entrepreneurs, along with reserve
• Women-Owned Small Businesses (WOSB) — component members who have an interest in either starting
This program authorizes Federal agencies to set aside a new small business or expanding an established small
certain contracts for competition only among small business.
businesses owned by women.
SCORE — SCORE is a nonprofit association comprising
Empower to Grow (formerly 7(j) Management and nearly 10,000 volunteer business mentors who serve
Technical Assistance) — This program provides training entrepreneurs via in-person mentoring and local training
to small businesses owned and controlled by economically workshops. As the largest volunteer business mentor
and socially disadvantaged individuals; to small businesses network in the Federal Government, SCORE adapts
located in areas of high unemployment and low income; to its structure and services to meet the needs of small
8(a) and HUBZone small businesses; and to economically businesses.
disadvantaged Women-Owned Small Businesses.
Learning Center and Ascent — The SBA Learning
Mentor-Protégé Program — This program helps Center is an online portal that hosts a variety of self-
small businesses gain experience in and access to Federal paced online training courses, quick videos, web chats,
acquisition marketplace through formal partnerships with and other helpful tools to assist small business owners to
experienced firms. explore and learn about business ownership. Ascent is an
online learning portal with materials and tools for women
entrepreneurs.
Counseling And Training
Small Business Development Centers — SBDCs Community Navigator Pilot Program (CNPP)
deliver an array of services to small businesses and — Through CNPP, the SBA engaged in targeted
prospective business owners using a network of 63 lead outreach to underserved communities through States,
Agency Financial Report Fiscal Year 2024 10 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
local governments, resource partners, and nonprofit Shuttered Venue Operators Grants (SVOG) — The
organizations. As of May 31, 2024, the program ended Economic Aid to Hard-Hit Small Businesses, Nonprofits,
its No Cost Extension Period, and all program-related and Venues Act established these grants to support
activities have concluded. The program is now in the full shuttered venues because of the COVID-19 pandemic.
program closeout phase of the grant’s lifecycle. Recipients were not required to repay the grants if funds
were spent for eligible uses within established timeframes.
The SBA continues to provide servicing and oversight of
Disaster Assistance
this program.
Disaster Assistance — The SBA is the Federal
Government’s primary source of financing of the long-
term repair and rebuilding of the disaster-damaged
private property for homeowners, renters, businesses of
all sizes, and private nonprofit organizations. SBA Disaster
Assistance is the only form of SBA assistance not limited to
small businesses.
Paycheck Protection Program — The Coronavirus Aid,
Relief, and Economic Security (CARES) Act established
this loan of up to $10 million designed to provide a direct
incentive for small businesses to keep their workers on
payroll because of the COVID-19 pandemic. These loans
can be forgiven if the funds are used for payroll costs,
interest on mortgages, rent payments, and utility payments.
The SBA continues to provide loan servicing and oversight
of this program.
COVID-19 EIDL Loans — The CARES Act modified
the existing Economic Injury Disaster Loan within the
Disaster Assistance program. In response to the COVID-19
pandemic, small businesses owners, including agricultural
cooperatives and nonprofit organizations, could apply
for these loans, which went up to $2 million and must be
repaid. The SBA continues to provide loan servicing and
oversight of this program.
COVID-19 EIDL Advance — These grants, up to
$10,000, went to small businesses that also applied for
COVID-19 EIDL loans and are not repaid.
Restaurant Revitalization Fund — The American
Rescue Plan Act (ARPA) established the RRF to provide
funding so that restaurants and other eligible businesses
could keep their doors open. The program funded
restaurants in amounts equal to pandemic-related revenue
losses 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 were spent for eligible uses. The
SBA continues to provide servicing and oversight of this
program.
Agency Financial Report Fiscal Year 2024 11 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
SUMMARY OF COVID-19 FINANCIAL IMPACTS
In FY 2024, the SBA serviced and oversaw functions The Agency continues to manage the annual reporting
for the Coronavirus Aid, Relief, and Economic Security requirement under which venues report fund use.
Act, Economic Aid Act, and American Rescue Plan Act
programs that saved millions of jobs and kept small In addition to the aforementioned programs, the SBA
businesses in operation. The SBA will continue to serve, manages other pandemic relief support it has provided,
oversee and monitor activities on pandemic-related such as oversight of business loan fee waiver and debt relief,
programs, such as requests for loan forgiveness, required close out of the Community Navigator pilot program, and
reporting for grant recipients, recoveries, and other expansion of the microloan program. The SBA continues
activities. to communicate the need for administrative funding in
support of the prudent oversight and management of
The SBA approved more than 11 million applications for all pandemic relief programs. Without certainty of the
the Paycheck Protection Program and provided more than necessary administrative resources, the SBA will not be
$799 billion in lending for the lifetime of the program. able to continue providing effective oversight as designed
The program ended in May 2021, and existing borrowers and will need to continue making risk-based operational
may be eligible for and request PPP loan forgiveness. As of tradeoffs in its management efforts.
September 2024, the SBA has forgiven $756.7 billion in PPP
loans which represents 92% of the value of all PPP loans.
Approximately 97% of the total PPP loan value has been
forgiven, in full or in part.
By April 2022, the SBA approved nearly 4 million COVID-
19 Economic Injury Disaster loans totaling nearly $378
billion. The COVID-19 EIDL Program also issued more
than 601,000 Targeted Economic Injury Disaster Loans
(EIDL) Advance payment (grants) totaling more than $5
billion, and more than 453,000 Supplemental Targeted
EIDL Advance payment (grants) totaling more than $2
billion. In May 2022, the SBA’s COVID-19 EIDL funds were
exhausted; the SBA stopped accepting COVID-19 EIDL
loan increase requests or requests for reconsideration; and
the application portal closed on May 16, 2022. The SBA
continues to service more than 2.3 million COVID-19 EIDL
loans. Approximately 626,000 COVID-19 EIDL loans are 30
or more days delinquent.
The Shuttered Venue Operators Grant Program, established
by the Economic Aid Act and amended by ARPA, included
over $16 billion in grants for shuttered venues. The Agency
completed all grant processing for the SVOG program in FY
2022, after awarding more than $14.6 billion in grants. The
SBA continues to monitor and deliver required compliance
activities for these grants. Approximately 10,500 grants
have been closed for proper expenditure of funds,
representing $9.9 billion in awarded funds. The SBA will
continue to work with grantees to close grants in a timely
manner.
The Restaurant Revitalization Fund Program was
established in March 2021 and the Agency awarded more
than $28.6 billion in direct payments to more than 100,000
restaurants, bars, and other businesses. The SBA stopped
accepting applications for RRF program funds in July 2021.
Agency Financial Report Fiscal Year 2024 12 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
ANALYSIS OF PERFORMANCE RESULTS
Summary of Performance Results
This section presents key FY 2024 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 2024 Annual Performance Report to be published in early 2025.
Strategic Goal 1: Ensure Equitable and Customer-Centric Design and Delivery of Programs to Support Small
Businesses and Innovative Startups
FY 2021 FY 2022 FY 2023 FY 2024 FY 2024
S.O. Performance Measure
Actual Actual Actual Goal Actual
Number of Jobs Supported by 7(a) Loans,
1.1 729,034 621,856 743,501 728,000 776,965
504 Loans, Microloans, and Surety Bonds
1.2 Number of Jobs Supported by SBIC Financings 126,431 129,098 130,281 135,000 Data Lag1
Number of Jobs Supported by Businesses
1.3 25,159 23,869 27,013 26,000 25,776 2
Receiving Export Grants and Loans
Number of Jobs Supported by Federal
1.4 691,700 727,800 790,500 700,000 Data Lag 3
Contract Set-Asides
Number of New Business Starts through SBA
1.5 28,771 27,757 29,749 25,710 26,040 4
Counseling and Training Programs
Strategic Goal 2: Build Resilient Businesses and a Sustainable Economy
FY 2021 FY 2022 FY 2023 FY 2024 FY 2024
S.O. Performance Measure
Actual Actual Actual Goal Actual
Small Business Employment in the United States
2.1 62.1 65.2 66.3 66 Data Lag 5
(Millions)
2.2 Number of Loans that Include Mitigation Measures N/A 522 1,358 626 909
Strategic Goal 3: Implement Strong Stewardship of Resources for Greater Impact
FY 2021 FY 2022 FY 2023 FY 2024 FY 2024
S.O. Performance Measure
Actual Actual Actual Goal Actual
Customer Satisfaction Rate of Financial
3.1 4.7 4.3 4.5 4.0 4.3
Management Services for SBA Employees
Federal Employee Viewpoint Survey Global
3.2 70% 76% 74% 73% 75%
Satisfaction Rate
3.3 Inspector General Maturity Rating 3 2.58 2.8 3.4 2.7
1 SBIC data are not yet available. Full year data will be published in the FY 2024 Annual Performance Report.
2 FY 2024 Q4 STEP grant data not yet available. Full year data will be published in the FY 2024 Annual Performance Report.
3 Federal Contracting data continues to be certified by the SBA and will be available by summer 2025.
4 Preliminary data. Full year data will be published in the FY 2024 Annual Performance Report.
5 Full year data for FY 2024 have 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
Agency Financial Report Fiscal Year 2024 13 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Verification and Validation of Performance Data
Managing for results and integrating performance, Chart I: Makeup of the SBA’s Outstanding Loan Portfolio
financial, and budgetary information require valid, reliable,
and high-quality performance measures and data. The SBA 900
continues to prioritize the improvement of data quality. The 800
SBA’s performance analysts work with program office leads 700
Outstanding Loans ($ Billions)
across the Agency to acquire high-quality data. In addition 600
to using output data internally from its own systems, the 500
SBA relies on data from resource partners, other Federal
400
agencies, and other Government entities to assess its
300
accomplishments and effectiveness.
200
The SBA rigorously pursues strategies that ensure data 100
quality as follows: ensuring the validity of performance 0
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
measures and data; fostering organizational commitment
7(a) PPP 504 SBIC Disaster All Other
and capacity for data quality; assessing existing data
quality; and responding to data limitations. For additional
FY = fiscal year. PPP = Payment Protection Program. SBIC = Small Business
information regarding the SBA’s approach to verifying and
Investment Company.
validating performance data, see the Congressional Budget
Justification and Annual Performance Report, which are
updated annually.
New Guaranteed Loans
Quarterly average loan volume increased in FY 2024 with
Operational Portfolio Analysis
an average of $9.4 billion. Chart II demonstrates the trend
The Operational Portfolio Analysis provides information in loan approvals since FY 2019.
on the SBA’s credit programs and does not reference the
Agency’s financial statements. The SBA is taxpayers’
custodian of small-business-loan guaranties and small-
Chart II: Quarterly Gross 7(a) and 504 Loan Approvals
business direct loans through a portfolio of $458.9 billion
in FY 2024.6 During FY 2024, the portfolio decreased
25
year over year by $22.5 billion, or 5.7 percent. The largest
decrease was in the Agency’s disaster loan portfolio,
20
which decreased by $24.3 billion (a 7.8 percent decrease).
Loan Approvals ($ Billions)
Because the COVID-19 EIDL program stopped accepting FY 21
15
applications during FY 2022, the disaster portfolio is now Average
11,188,716
FY 22 FY 23
FY 24
Average
Average
trending downward. The PPP loan program — authorized FY 19 FY 20 8,725,450
Average
8,484,336
9,447,236
10 Average Average
in 2020 through the CARES Act in response to the COVID 7,033,591 7,094,264
19 pandemic— also experienced a continued reduction.
5
PPP’s portfolio decreased by $4.3 billion, or 49 percent,
and the 504 loan portfolio decreased by $1.5 billion, or 4.4
0
percent. The SBA’s 7(a) portfolio expanded by $5.8 billion, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
or 5.3 percent. The Small Business Investment Company
portfolio increased by $1.4 billion, or 10.1 percent. All other
portfolios increased by $240 million, or 8.2 percent (see
FY = fiscal year. Q1 = first quarter, etc.
Chart I).
6 The total portfolio consists of guaranteed business loans outstanding, guaranteed debentures, direct business loans, and direct disaster loans. The data include all
performing loans and defaulted loans that have not been charged-off.
Agency Financial Report Fiscal Year 2024 14 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
At least three main factors contributed to the loan guaranty
portfolio’s recent changes:
Chart III: Outstanding Commercial Loans
to Small versus Nonsmall Businesses
Continuous growth in the economy: Real gross domestic
product (GDP) in the United States increased throughout 5,000
2023 and continued to grow during the beginning of 2024
and at a rate of 3 percent in the second quarter of 2024. The
Outstanding Loans ($ Billions)
4,000
increase in the second quarter of 2024 primarily reflected
increases in consumer spending, inventory investment, and 3,000
business investment. Imports, which are subtractions in the 2.999 3.471 3.470
3.099
calculation of GDP, increased. 7 2,000 2.796 2.888
Changes in Market Volatility: Inflation remained low 1,000
throughout 2020 — at a monthly average of 1.7 percent8 904 737 717 732
712 721
— but picked up sharply in April 2021 and continued to 0
CY 2018 CY 2019 CY 2020 CY 2021 CY 2022 CY 2023
increase, leading to an average monthly increase of 3.6
Small Business Loans Nonsmall Business Loans
percent for that year. In 2022, the monthly inflation rate
continued to climb, peaking at 6.6 percent in September
2022 to end the year with a 6.2 percent monthly average CY = calendar year.
before coming down during 2023 to an annual monthly
average of 4.8 percent. Finally, in 2024 inflation has
continued to ease with a monthly average of 3.6 percent New Direct Loans
through the first six months of the year. Inflationary
In FY 2024, the SBA’s gross approvals for the Disaster
pressures have significantly increased interest rates across
Assistance loan program decreased by 44 percent to $1.7
the commercial and consumer loan markets. Conversely,
billion against an FY 2023 total of $3 billion. As of FY
even though the unemployment rate surged to a peak
2023, the COVID-19 EIDL program is no longer approving
of 14.8 percent in April 2020, it decreased significantly
COVID-19 loans, so disaster loan approvals are returning
throughout the 2021-2023 period, averaging 3.6 percent
to a level comparable to that of the pre-pandemic period.
annually for both 2022 and 2023. So far in 2024, the
Chart IV illustrates the relative sum of disaster loans in
unemployment rate has increased slightly to an average of 4
FY 2024 by month, compared with the three prior fiscal
percent during all of 2024 and 4.1 percent as of September
years.
2024.9
Market for Small Business Lending: Federal Deposit
Chart IV: Monthly Gross Disaster Assistance Loan Approvals
Insurance Corporation (FDIC) data showed that the total
market for business loans increased from 2018 to 2023 6,000
by 20 percent, or $693 billion. However, 97.3 percent, or
5,000
$674 billion, of that increase came from loans to non-small
Loan Approvals ($ Millions)
businesses,10 whereas total small business loans increased 4,000
by only $19 billion. Thus, the ratio of small business loans
3,000
compared with the total bank market decreased from 2018
to 2023, with a marked decrease during the pandemic 2,000
years of 2021–2022 (Chart III). Furthermore, the
banking industry’s trend toward consolidation, reflected 1,000
in reduction of the number of commercial banks by 15
0
percent11 from 2018 to 2023, makes the SBA’s guaranty Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept
products more critical for growing small businesses that FY 2021 FY 2022 FY 2023 FY 2024
may be denied credit in the private loan market.
FY = fiscal year.
7 U.S. Department of Commerce, Bureau of Economic Analysis: www.bea.gov/newsreleases/glance.htm.
8 U.S. Department of Labor, Bureau of Labor Statistics: www.bls.gov/cpi/home.htm.
9 U.S. Department of Labor, Bureau of Labor Statistics: data.bls.gov/timeseries/LNS14000000.
10 Nonsmall businesses are firms that have more than 500 employees. https://www.fdic.gov/analysis/quarterly-banking-profile/index.html.
11 https://www.fdic.gov/bank/statistical/stats/.
Agency Financial Report Fiscal Year 2024 15 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Aside from the FY 2020 -2022 COVID-19 EIDL loans, most variability throughout that fiscal year. Starting in FY 2023,
of the Disaster Assistance loan portfolio’s outstanding the 504 delinquency rate became less volatile, and the
balance consists of lending from FY 2006 (Hurricane average FY 2024 year-to-date 504 delinquency rate of 0.76
Katrina), FY 2013 (Hurricane Sandy), FY 2018 (Hurricanes percent has been virtually flat with an FY 2023 average
Harvey, Irma, and Maria), FY 2021 (Hurricane Ida), and delinquency rate of 0.73 percent. The SBA will continue to
FY 2022 (Hurricane Ian). The SBA will continue to make monitor the variability and level of 504 delinquency rates
disaster loans an important recovery tool for businesses, closely post-CARES Act.
homeowners, and renters that survive a disaster.
Portfolio Performance: Charge-Offs
Portfolio Performance: Delinquencies
The 12-month charge-off rate for the 7(a) loan program
Delinquency rates (i.e., of borrowers late on their payments) sharply declined from FY 2010 to FY 2013, falling from 4.3
are leading indicators of the Agency’s charge-off rate (i.e., percent in the fourth quarter of 2010 to 1.2 percent in the
the rate of dollars spent to cover loans that defaulted). Thus, third quarter of 2013. The rate increased but ultimately
delinquency rates are general indicator of the Agency’s and decreased by July 2024 to 0.73 percent (Chart V). The
taxpayers’ future liabilities in these programs. A declining 7(a) loans not sold on the secondary market become
delinquency rate (Chart V) is a positive indicator for the charge-offs after all efforts to recover a delinquent balance
financial performance of any loan portfolio. were exhausted, such as the liquidation of the underlying
collateral. The latent rise of the 7(a) charge-off rate in 2013
Strong economic growth, strong profit performance, and was attributable to recession-era loans that were charged-
financial institutions’ tighter lending standards during off after efforts to recover delinquent balances had been
the past several years have reduced the delinquency rates exhausted. Now that this effort to charge-off recession-era
of all business loans, whose delinquency rates have been loans is complete, the charge-off rate again closely trends
steadily declining since reaching cyclical peaks in 2009. with the delinquency rate in FY 2024.
Delinquency rates for the Agency’s major loan programs
followed this national downward trend. Delinquency rates The 12-month charge-off rate for the 504 loan program
for the 7(a) loan program declined from a 3.8-percent peak continuously increased from FY 2008 to FY 2013, peaking
in January 2009 to 0.84 percent in February 2020, before at 4.4 percent in January 2013, but dropping to 0.11 percent
the start of the COVID-19 pandemic. Similarly, delinquency by July 2024. This trend is not surprising, because the 504
rates for the 504 loan program likewise declined from a loan program is an economic development program with
5-percent peak in February 2010 to 0.9 percent in February a commercial real estate focus. As such, recovery rates of
2020. defaulted 504 loans are, with some noticeable time lag,
significantly affected by the pricing trend in this sector.
The CARES Act provided pandemic debt relief to current The continued downward trend in the 504 delinquency rate
borrowers of 7(a) and 504 loans, authorizing the SBA to pay during FY 2024 indicates that the volatility during the FY
the principal, interest, and associated fees on existing loans 2021-2022 period had little impact on the trajectory of 504
for six months. The debt relief led to a delinquency rate of charge-off rates and as of July 2024, does not appear to
near zero percent during the last six months of FY 2020. have been a significant factor.
With the expiration of CARES Act funds, both programs
saw more variability in their delinquency rates during FY Quarterly information on the status of the SBA’s loan
2021-2022. portfolio, including outstanding balances and approvals by
loan program and purchase rates, is available on the SBA
As of July 2024, the FY 2024 average year-to-date 7(a) website at www.sba.gov/performance.
delinquency rate of 0.85 percent was higher than the FY
2023 average delinquency rate of 0.58 percent. The 7(a) rate
remained low throughout FY 2024 though, staying below
one percent every month despite generally trending slightly
upwards.
Monthly 504 delinquency rates decreased during 2023 after
a period of greater variability in FY 2021-2022, peaking
at 3.4 percent in September, 2021. During FY 2022, the
delinquency rate trended downward, but experienced high
Agency Financial Report Fiscal Year 2024 16 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Chart V: Delinquency and Charge-Off
Rates for the 7(a) and 504 Loan Programs by Fiscal Year
504 Loans
5.0%
4.5%
4.0%
Delinquency Rate (Percentage)
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
504 Delinquency Rate 504 Past 12 Months Charge-Off Rate
7(a) Loans
4%
Delinquency Rate (Percentage)
3%
2%
1%
0%
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
7(a) Delinquency Rate 7(a) Past 12 Months Charge-Off Rate
FY = fiscal year.
Agency Financial Report Fiscal Year 2024 17 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
FORWARD LOOKING ANALYSIS
The SBA equips America’s small-business owners with the at all levels of the organization and develop risk response
tools, resources, and support they need to start, manage, strategies to build an agency-wide portfolio of internal
and grow their small businesses and innovative start-ups. and external risks facing the Agency. This comprehensive
The SBA continues to administer and oversee programs view of risks to the organization will position the SBA to
implemented to reduce the COVID-19 pandemic’s impacts better prioritize resources and efforts to manage risk. The
on small businesses and reimagine the Agency’s service SBA will also increase risk management training, with an
delivery in virtual and hybrid spaces while improving emphasis on fraud risks and build on the progress made in
underserved populations’ access. The following sections FY 2024. Additionally, the SBA will continue to mobilize
describe areas that represent both challenges and resources across programs to remediate audit findings and
opportunities that factor into the SBA’s strategies for to maximize the recovery of pandemic funds that were not
delivering on outcomes and using taxpayer resources used in accordance with program requirements and from
efficiently. The Agency will continue to review these recipients that were deemed ineligible.
areas while managing its programs to ensure optimal
performance.
Climate Crisis
A natural disaster can destroy lives, businesses, and
Risk Management And Audit Remediation
communities. Moreover, natural disasters have become
Although the emergency declaration of the COVID- more intense and more costly. In 2023, the United States
19 pandemic is past, the SBA continues to fulfill the experienced 28 separate weather and climate disasters
requirements of long-term oversight, servicing, litigation, costing at least one billion dollars each, becoming the year
audit remediation, and fraud risk management in support with the highest number of billion-dollar disasters in a
of what has been a historic response by the Agency to calendar year.12 Although the SBA has programs that can
the COVID-19 pandemic. The heightened response to the respond to hurricanes, tornados, forest fires, and floods,
pandemic exposed gaps in the SBA’s financial management the growing threats and numbers of those occurrences
internal control protocols. The SBA’s Office of Inspector remain serious concerns. Disaster preparedness is a key
General (OIG) Audits, U.S. Government Accountability component of the SBA’s Disaster Assistance program
Office (GAO) Audits, and Financial Advisors cited the need and has helped many small businesses prepare for the
to have an elevated and well-established Enterprise Risk unexpected. Research shows that for every $1 spent on
Management (ERM) Program, a Fraud Risk Management hazard mitigation, up to $6 in future disaster recovery
(FRM) Program, and a Chief Risk Officer (CRO) function. costs are saved.13 The SBA will continue to support
To fulfill those needs, the SBA established a CRO-led Office disaster-resilient communities and reduce future disaster
of Enterprise Integrity (OEI) to promote agency-wide damage by promoting the disaster mitigation loan option.
risk management through oversight of enterprise risk, By financing property improvements that help prevent
fraud risk, audit management, and internal controls — in future damage caused by flooding, fires, severe winds,
collaboration with SBA offices. OEI is building discipline or other natural disasters, businesses and homeowners
into risk awareness through consultation, education, can proactively reduce the impact of future disasters and
guidance, assessments, and strategic partnerships to shorten recovery time when disasters do occur. The SBA
support compliance and foster good stewardship of SBA continues to modernize its response in communities that
resources. have experienced a natural disaster event by updating
technology and streamlining its ability to onboard staff.
The SBA is working diligently to mature its ERM and FRM As part of the Agency’s efforts to advance equity and
programs in accordance with the U.S. Office of Management environmental justice, the SBA will use Portable Loan
and Budget’s (OMB) Circular No. A-123 Management’s Outreach Centers (PLOCs) to better serve underserved and
Responsibility for Enterprise Risk Management and hard-to-reach communities affected by disasters.
Internal Control and the Government Accountability
Office’s A Framework for Managing Fraud Risks in
Federal Programs (GAO-15-593SP). The SBA will continue
to prioritize audit remediation and identify and assess risks
12 2023: A historic year of U.S. billion-dollar weather and climate disasters | NOAA Climate.gov
13 Source: National Institutes for Building Sciences, 2018.
Agency Financial Report Fiscal Year 2024 18 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
In addition to the Disaster Assistance program, the SBA for headquarters, which will inform how the SBA could
is responding to Executive Order 14057 Catalyzing Clean configure its space in the future.
Energy Industries and Jobs through Federal Sustainability
by prioritizing resources for the procurement and operation The SBA continues to search for ways to recruit and retain
of electric vehicles and associated charging infrastructure. the best talent. Competition with private industry and other
When necessary and feasible, the Agency will replace motor agencies is strong, and retention is challenging. The SBA
vehicles from the existing motor vehicle fleet as part of its needs a workforce that is representative of the public it
transition to a fleet of clean and zero-emission vehicles. 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
Technology And Automation staff to ensure that they have the tools needed to help small
businesses succeed. By providing SBA employees with the
As small businesses experienced rapid evolution of
necessary tools and resources, the Agency will be able to
technology and automation during the COVID-19 pandemic,
better support America’s small businesses.
the SBA undertook significant programmatic improvements
across the Agency. The SBA will continue its multi-year
initiative to unite the customer experience of SBA programs
and harmonize processes while retaining critical functions
unique to each program area. This initiative, referred to as
MySBA, is a whole-of-agency approach that works toward
improvements in SBA programs and services. The Agency
will streamline access to programs by small-business
owners and disaster survivors, empower SBA personnel to
better understand and serve small business owners, and
leverage shared services to improve operational efficiency.
Virtual training platforms and online tools enable 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 existing platforms and developing
new ones to reach entrepreneurs in emerging markets. The
Agency will also continue to streamline processes, increase
accessibility, and deliver broad and equitable support across
programs to more communities and entrepreneurs who
have faced historical barriers to small-business ownership.
A Changing Federal Work Environment
The Federal workforce landscape continues to evolve as
persistent challenges — such as a growing percentage of
Agency employees eligible for retirement — confront new
planning efforts for the future of work and workplace
modernization. As the nation continues to recover from the
COVID-19 pandemic, the SBA will evaluate the Agency’s
work environment plan in alignment with requirements
specified in OMB M-23-15, Measuring, Monitoring, and
Improving Organizational Health and Performance in
the Context of Evolving Agency Work Environments.
The Agency will assess its organizational health and
performance to inform the human capital policies and
workplace space requirements that would enable an
effective mission-based hybrid workforce. The Agency
has also conducted a survey of space considerations
Agency Financial Report Fiscal Year 2024 19 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
ANALYSIS AND HIGHLIGHTS OF FINANCIAL STATEMENTS AND RESULTS
Highlights of Financial Results (as of September 30)
(Dollars in Thousands)
At End of Fiscal Year 2024 2023 $ Change
CONDENSED BALANCE SHEET DATA
Fund Balance with Treasury $ 17,845,756 $ 44,081,291 $ (26,235,535)
Credit Program Receivables and Related Foreclosed Property, Net 258,107,817 271,944,994 (13,837,177)
All Other Assets 228,352 302,299 (73,947)
Total Assets $ 276,181,925 $ 316,328,584 $ (40,146,659)
Debt 264,662,710 334,320,210 (69,657,500)
Downward Reestimate Payable to Treasury 9,902,199 2,724,486 7,177,713
Liability for Loan Guaranties 4,827,018 7,895,498 (3,068,480)
All Other Liabilities 1,044,086 1,095,688 (51,602)
Total Liabilities $ 280,436,013 $ 346,035,882 $ (65,599,869)
Unexpended Appropriations 3,092,566 3,724,113 (631,547)
Cumulative Results of Operations (7,346,654) (33,431,411) 26,084,757
Total Net Position $ (4,254,088) $ (29,707,298) $ 25,453,210
Total Liabilities and Net Position $ 276,181,925 $ 316,328,584 $ (40,146,659)
For the Fiscal Year
STATEMENT OF NET COST BY STRATEGIC GOAL
Goal 1: Ensure Equitable and Customer-Centric Design and Delivery of
Programs to Support Small Businesses and Innovative Startups
Net Cost $ 596,029 $ 799,140 $ (203,111)
Goal 2: Build Resilient Businesses and a Sustainable Economy
Net Cost (1,245,257) 34,120,775 (35,366,032)
Goal 3: Implement Strong Stewardship of Resources for Greater Impact
Net Cost 170,880 169,534 1,346
Costs Not Assigned 169,432 233,137 (63,705)
Net Cost of Operations $ (308,916) $ 35,322,586 $ (35,631,502)
CONDENSED STATEMENT OF NET POSITION
Beginning Unexpended Appropriations $ 3,724,113 $ 10,558,338 $ (6,834,225)
Total Budgetary Financing Sources (631,547) (6,834,225) 6,202,678
Ending Unexpended Appropriations $ 3,092,566 $ 3,724,113 $ (631,547)
Beginning Cumulative Results of Operations $ (33,431,411) $ (27,669,576) $ (5,761,835)
Total Financing Sources 25,775,841 29,560,751 (3,784,910)
Less: Net Cost of Operations (308,916) 35,322,586 (35,631,502)
Ending Cumulative Results of Operations $ (7,346,654) $ (33,431,411) $ 26,084,757
Ending Net Position $ (4,254,088) $ (29,707,298) $ 25,453,210
CONDENSED STATEMENT OF BUDGETARY RESOURCES
Unobligated Balance Brought Forward $ 25,400,613 $ 54,834,396 $ (29,433,783)
Appropriations (discretionary and mandatory) 35,212,958 24,899,206 10,313,752
Borrowing Authority (discretionary and mandatory) 2,655,914 5,903,912 (3,247,998)
Spending Authority from Offsetting Collections 4,648,628 21,516,204 (16,867,576)
Total Budgetary Resources $ 67,918,113 $ 107,153,718 $ (39,235,605)
Obligations Incurred, Budgetary $ 36,577,358 $ 32,264,241 $ 4,313,117
Obligations Incurred, Nonbudgetary 15,607,348 32,336,647 (16,729,299)
Unobligated Balances, Available and Unavailable 15,733,407 42,552,830 (26,819,423)
Total Status of Budgetary Resources $ 67,918,113 $ 107,153,718 $ (39,235,605)
Agency Financial Report Fiscal Year 2024 20 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Analysis of Financial Results Liability for loan guaranties is also reported using subsidy
models with forecasted cash flows from user fees and
The principal financial statements have been prepared to
defaulted guaranteed loans. The direct loan allowance
report SBA’s financial position and results of operations,
and liability for loan guaranties for each loan program
pursuant to the requirements of 31 U.S.C. 3515(b). Although
cohort is adjusted annually under FCRA through a subsidy
the statements have been prepared from the entity’s records
model reestimation process. The SBA’s FCRA accounting is
in accordance with generally accepted accounting principles
discussed further in this section and in Notes 1 and 6.A of
for Federal entities and the OMB-prescribed formats, the
the financial statements.
statements are in addition to the financial reports used
to monitor and control budgetary resources, which are
Credit subsidy cost is the net present value of expected
prepared from the same records. The statements should be
cash inflows and outflows during the life of a guaranteed
read with the realization that they are for a component of
loan or the difference between the net present value of
the U.S. Government, a sovereign entity.
expected cash flows and the face value of a direct loan. The
SBA receives budget authority annually to fund its credit
This Analysis of Financial Results references numbers
programs and when loans get disbursed, the SBA records
in the Highlights of Financial Results that were derived
subsidy expenses for non-zero subsidy loan programs.
from the Financial Statements and Notes in this report.
As a result, the definitions of the loan and guaranty
In accordance with FCRA, subsidy costs are reestimated
balances used in this Analysis of Financial Results may
annually. Reestimates update original loan program
differ somewhat from the balances in the Operational
cost estimates to reflect actual experience and changes
Portfolio Analysis section. For example, for the 7(a) loan
in forecasts of future cash flows for each annual cohort
program, the total amount of guaranteed loans is used
of loans. An upward reestimate occurs when the present
in the Operational Portfolio Analysis, but only the SBA’s
value of future expected cash flows results in liabilities that
guaranteed portion is used in the Analysis of Financial
exceed assets. A downward reestimate occurs when the
Results because it ties to balances in the financial
present value of future expected cash flows results in assets
statements.
that exceed liabilities.
During FY 2024, the SBA continued to support the recovery
Increased reestimated costs are funded in the following
of the American economy from the COVID-19 pandemic.
year by permanent indefinite budget authority, whereas
No new pandemic relief funding was available in FY 2024.
decreased reestimated costs are returned by the SBA to a
The SBA continues to service the COVID-19 programs that
U.S. Treasury general fund. The portion of the outstanding
ended in FY 2022 or before.
principal guaranteed by the SBA was $139.5 billion as
of September 30, 2024, a decrease of $.7 billion from
Background
the $140.3 billion guaranteed as of September 30, 2023
The SBA is a major Federal credit reform agency of the (see Note 6.C in the financial statements). As shown in
U.S. Government, and most of its $67.9 billion budgetary Chart VI, new guaranteed loans disbursed by the SBA
resources support the SBA’s credit programs. When participating banks during FY 2024 were $27.3 billion, a
apportioned by the OMB, budgetary resources are $.3 billion increase compared with the FY 2023 figure of
available to enter new obligations and to liquidate them. $27.0 billion.
Budgetary resources are made up of new budget authority
and unobligated balances of budget authority provided
in previous years. The loan financing funds record all
cash flow activity resulting from post-1991 direct loans
and loan guaranties and are not budgetary costs. The
financing accounts are reported separately in the Budget of
the United States Government and are excluded from the
budget surplus/deficit totals.
The Federal Credit Reform Act (FCRA) governs the SBA’s
accounting for direct loans and loan guaranties made in FY
1992 and thereafter. Under FCRA, direct loans outstanding
are reported net of an allowance by using the present value
of forecasted cash flows in subsidy models that are OMB
approved.
Agency Financial Report Fiscal Year 2024 21 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Chart VI: Guaranteed Loans Disbursed Chart VII: Purchases of Guaranteed Loans
11.99
600 12
538.0
500 10
400 8
304.0
($ Billions) ($ Billions)
5.90
300 6
4.39
200 4
100 2 1.44 1.19
32.6 0.72
21.0 27.0 27.3
0 0
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
FY = fiscal year. FY = fiscal year.
SBA’s credit program receivables comprise business Financial Position
and disaster direct loans and defaulted business loans
Assets
purchased per the terms of the SBA’s loan guaranty
programs, which are offset by an allowance for the subsidy. The SBA had total assets of $276.2 billion at the end of FY
The allowance for the subsidy cost of the gross loan 2024, down $40.1 billion from FY 2023. Fund Balance with
receivable is recorded as a contra asset, and the net asset Treasury decreased $26.2 billion because of the timing of
is reported on the Balance Sheet. The subsidy allowance is repayment of debt to Treasury. Financing Fund collections
determined by modeling the projected future cash inflows increased $6.0 billion while repayment of debt to Treasury
and outflows of SBA credit programs by using discounted increased $36.6 billion. The remaining change to Fund
cash-flow methodology. The subsidy allowance for each Balance with Treasury is due to multiple factors. Credit
loan program cohort is reestimated annually. Increases Program Receivables decreased $13.8 billion due to the
are funded by Treasury, whereas decreases are returned collection of existing balances exceeded new loans.
to Treasury by the Agency. Loan losses, the costs of loan
servicing, and loan interest rates are factors that affect the Liabilities
subsidy allowance.
The SBA had total liabilities of $280.4 billion at the end
of FY 2024, down $65.6 billion from FY 2023. Liabilities
SBA credit program receivables were valued at $258.1
consist primarily of the Principal Payable to the Bureau
billion in FY 2024 — a decrease of $13.8 billion from FY
of the Fiscal Service, Liability for Loan Guaranties, and
2023. The change in credit program receivables resulted
Downward Reestimate Payable to Treasury.
from a decrease in direct disaster loans because of
recoupment of loans previously disbursed, and current
The Principal Payable to the Bureau of the Fiscal Service
year write-offs. As reflected in Chart VII, guaranteed loan
was $264.7 billion a decrease of $69.7 billion from FY 2023
purchases decreased $7.6 billion in FY 2024 to $4.4 billion
because of repayment of debt as the SBA collected disaster
as the SBA honors its guaranties.
loans receivable. Note 9 in the financial statements provides
additional detail on SBA’s Principal Payable to the Treasury.
Loan Guarantee Liabilities is the estimate of the net present
value of the future amount that the SBA will pay, net of fee
collections, to liquidate expected purchases of guaranteed
loans under its guaranteed loan programs. Loan Guarantee
Liabilities for each loan program cohort is reestimated
annually. Increases are funded by Treasury, whereas the
Agency returns decreases to Treasury. Loan Guarantee
Agency Financial Report Fiscal Year 2024 22 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Liability is $4.8 billion at the end of FY 2024 — a decrease to a $34.0 billion upward reestimate in FY 2023. The
of $3.1 billion from FY 2023 primarily because of claim downward reestimate is primarily due to lower expected
payments to lenders and miscellaneous recoveries and costs costs than previously projected for small COVID-19 EIDL
in FY 2024. Note 6.E in the financial statements provides loans net of increased expected costs for large COVID-19
additional detail. EIDL loans. Further detail on subsidy reestimates can
be found in Note 6.I of the financial statements in the
Downward Reestimate Payable to Treasury was $9.9 billion Financial Reporting section of this report.
at the end of FY 2024, representing an increase of $7.2
billion from FY 2023. The increase was a direct result of
Disaster Assistance program reestimates. The reestimate is
Chart VIII: Credit Program Subsidy Reestimates
due mostly to higher expected collections than previously
anticipated for the 2020 COVID-19 EIDL cohort. Note 6.I in
the financial statements provides additional detail. 35 34.000
30 28.000
Net Position
25
Cumulative Results of Operations is the accumulative
20
difference between expenditures and financing sources
since the inception of the Agency. The cumulative results of 15
operations was $ (7.3) billion at the end of FY 2024 a $26.1 10
billion decrease from FY 2023 primarily because unfunded
($ Billions)
5 2.700
upward subsidy reestimates at year-end for the disaster
loan programs were higher for FY 2024 compared with FY 0 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
2023. Upward subsidy reestimates determined at year-end (0.093)
(0.984) (1.203) (1.800) (0.600)
are funded in the following year. -5
(3.800)
(5.700) (5.198)
-10
Unexpended Appropriations decreased $.6 billion to
$3.1 billion at the end of FY 2024 from FY 2023 primarily -15
because the spending fund by appropriations was greater -20 (19.000)
than the amount of current year appropriations. The
Guaranteed Business Loans (Strategic Goal 1) Direct Business Loans (Strategic Goal 1)
decrease affected Budgetary Financing Sources and Ending Direct Disaster Loans (Strategic Goal 2)
Net Position.
FY = fiscal year.
Net Costs of Operations
Net Cost of Operations decreased from $35.3 billion in FY
2023 to $ (.3) billion in FY 2024. Net Costs of Operations
primarily reflects SBA credit programs subsidy expenses
during the year for new loans and subsidy reestimates at
year-end. The primary change was that net reestimates for
disaster loan programs decreased in FY 2024 compared
with FY 2023, which affected Strategic Goal 2 costs.
Chart VIII reflects the change in net subsidy reestimates
for the guaranteed business and direct disaster loan
programs from FY 2019 through FY 2024. The largest
driver of the net downward reestimates in FY 2024 for
the guaranteed business loan programs is attributable to
the PPP program, as other guaranteed loan programs had
offsetting net reestimates. The PPP program had a net
downward reestimate of $0.6 billion for FY 2024 and is
attributable to fewer purchase and forgiveness payments
and higher recoveries processed than anticipated in FY
2024. The Disaster Assistance loan program had a net
downward reestimate of $1.8 billion in FY 2024 compared
Agency Financial Report Fiscal Year 2024 23 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Budgetary Resources
For FY 2024, Total Budgetary Resources for FY 2024 of
$67.9 billion decreased by $39.2 billion from $107.2 billion
in FY 2023. The decrease was due primarily to a decrease
in beginning balance, borrowing authority, and spending
authority from offsetting collections as well as other factors
shown in the Highlights table and the following discussion.
Unobligated Balance from Prior Year Budget Authority
(discretionary and mandatory) decreased $29.4 billion
in FY 2024. Borrowing Authority decreased $3.2 billion
in FY 2024 because of a decrease in borrowing needed
to cover disaster loan making. Spending Authority from
Offsetting Collections decreased $16.9 billion in FY 2024
due to repayment of disaster debt from spending authority
offset by an increase in the amount of subsidy collected in
disaster.
Status Of Budgetary Resources
Total Status of Budgetary Resources decreased $39.2
billion to $67.9 billion in FY 2024 from $107.2 billion in
FY 2023. Nonbudgetary obligations decreased by $16.7
billion, from reductions in PPP forgiveness payments and
purchases of guaranteed loans.
Budgetary obligations increased $4.3 billion to $36.5 billion
in FY 2024 from $32.3 billion in FY 2023 due primarily to
increased Disaster Assistance subsidy reestimates. Non-
budgetary obligations decreased to $15.6 billion from $32.3
billion due to a decline in default payment during FY 2024.
Unobligated balances as of September 30, 2024, and
September 30, 2023, were $15.7 billion and $42.6 billion,
respectively, which included $5.7 billion and $23.8 billion
of unavailable unobligated balances. The balances were
unavailable because they were unapportioned by the OMB.
The SBA accumulates most of the unobligated balances
in its nonbudgetary financing accounts ($5.5 billion in FY
2024 and $23.5 billion in FY 2023) from subsidy estimates
and reestimates used primarily to pay default claims in
future years. However, most of the unobligated balances
in FY 2024 and FY 2023 were for Disaster Assistance and
will be returned to Treasury to repay debt that financed
disaster lending.
Agency Financial Report Fiscal Year 2024 24 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
ANALYSIS OF SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE
Internal Control Environment for Internal Control in the Federal Government, known as
the Green Book.
The SBA believes that maintaining integrity and
accountability in all programs and operations is critical
The SBA’s Senior Management Council (SMC) was
for demonstrating consistently responsible stewardship of
established to oversee the Agency’s internal control
assets and resources and is a sign of responsible leadership.
system. The SMC is chaired by the CRO and composed
The SBA’s commitment to integrity, ethical values, and
of SBA managers from the major program and support
an effective system of internal controls helps ensure that
offices. The SMC plans and executes the Agency’s internal
every employee remains dedicated to the efficient delivery
control activities which include assessing and improving
of services to customers and maximizes desired program
compliance with applicable guidance (e.g., OMB Circular
outcomes. Accordingly, the SBA has developed and put in
A-123, titled Management’s Responsibilities for Enterprise
place certain management, administrative, and financial
Risk Management and Internal Control), monitoring and
system controls to reasonably ensure that:
remediating identified deficiencies, and communicating the
• Programs and operations achieve intended results results of reviews to senior management.
efficiently and effectively;
The SMC’s activities in FY 2024 included planning the
• Resources get used in accordance with the Agency’s annual internal controls assessments; identifying key
mission; processes and related control activities; documenting
• Programs and resources get protected from waste, the scope, design, and methodology of risk and internal
fraud, and mismanagement; control assessments; testing internal controls; and
monitoring corrective action plans for remediation. In
• Program and operation activities are in compliance
addition, the SMC discussed material information that
with laws and regulations; and
should be considered for inclusion in the Administrator’s
• Reliable, complete, and timely data are maintained annual statement of assurance with the Enterprise Risk
and used for decision making at all levels. Management Board.
To achieve programmatic goals, each SBA office is required In 2024, the SBA continued its oversight and monitoring
to establish and maintain effective internal controls of efforts related to the pandemic programs created by
its operations, reporting, and compliance. Every year, legislation. The methodology applied to all programs
the SBA conducts an assessment of internal controls as established by the Coronavirus Aid, Relief, and Economic
required by the Federal Managers Financial Integrity Act Security Act, Economic Aid Act, and the American
of 1982 (FMFIA) in accordance with the OMB Circular No. Rescue Plan Act. Although the pandemic programs have
A-123, titled Management’s Responsibility for Enterprise ceased making disbursements they are still included in
Risk Management and Internal Control. FMFIA requires SBA’s oversight and monitoring efforts. Internal control
that assessment results be reported to the President assessments were conducted to assess the impacts
and Congress in a statement of assurance. The SBA and likelihoods of different risk factors and to identify
Administrator provides the statement of assurance based deficiencies for remediation. Internal control assessments
on self-assessments by program managers, internal control will continue in FY 2025 for programs that exceed the
reviews, and audits and reviews done by the GAO and the materiality threshold.
SBA’s OIG.
Furthermore, the SBA continued the development and
The Office of Performance, Planning, and the Chief execution of the FY 2024 Annual Assessment Plan. Internal
Financial Officer’s (OPPCFO) Internal Controls Division control assessments were conducted for the following
(ICD) provides training and tools designed specifically programs: COVID-19 EIDL, PPP Loan Forgiveness, Debt
for program support offices and District Offices so as Relief Modification (Subsidy Payments), Shuttered Venue
to aid management in assessing and documenting the Operators Grant, Restaurant Revitalization Fund, Targeted
effectiveness of internal controls within their respective EIDL Advance Grants, Entity Level Controls (ELC), IT
areas of responsibility. The assessments are performed General Controls, Financial Reporting, Small Business
based on the five components and 17 principles of the Development Center Grants, Disaster Loans – El Paso, SBA
internal control framework prescribed in GAO’s Standards Payroll, and Congressional Earmarks.
Agency Financial Report Fiscal Year 2024 25 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
The FY 2023 Financial Statement Audit identified mature its Security Program, thereby enhancing its security
weaknesses and deficiencies that required corrective posture. Also, the Office of the Chief Information Officer
actions. The SBA worked with officials to develop (OCIO) successfully closed several audit findings pertaining
corrective actions and process documentation in support of to user separations and network multi-factor authentication
remediation of existing deficiencies. The Agency continues (MFA). The improvements are expected to result in an
to collaborate with program offices to support remediation increased FISMA maturity rating for FY 2025.
via corrective actions and establish new controls related to
PPP, COVID-19 EIDL, SVOG, RRF, Financial Reporting, The SBA will continue incorporating changes derived
Service Organization, ELC, Debt Relief Program, from evaluation criterion and developing its cybersecurity
Information Technology, and Subsequent Events. Efforts program in the areas of configuration management;
will continue beyond FY 2024 until remediation is cybersecurity training; asset management; vulnerability
complete. management; supply chain risk evaluation and
management; red team penetration testing; network
The SBA’s Enterprise Risk Management Board is chaired by segmentation; development, security, and operations; risk
the Deputy Administrator and composed of senior leaders quantification; and automation of controls assessments.
(Senior Executive Service members) from the SBA’s major
program and support offices. The board generally meets
monthly to discuss management of the Agency’s top risks
and to exchange views on risk management best practices.
The Chief Risk Officer and the Senior Risk Officer, the
SBA’s senior advisor for Enterprise Risk Management, in
the Office of Enterprise Integrity advise the ERM Board,
facilitate the ERM Board Meetings, and implement
ERM agency-wide efforts. The SBA took several steps to
strengthen ERM efforts this past fiscal year:
• Hired a CRO to oversee and manage the ERM, FRM,
Internal Controls, and audit management functions
across the Agency;
• Updated the SBA risk appetite statement and ERM
framework guide;
• As directed by OMB, approved an Agency-wide risk
profile that identified cross-cutting risks related to
fraud, technology, and operations;
• Continued to implement the FY 2023-2026 ERM
Strategic Plan to mature the ERM program;
• Continued to integrate the ERM process into existing
management processes.
The SBA delivers enterprise level cybersecurity and privacy
services that empower the Agency to better support the
small business community through robust yet flexible
processes and mechanisms. In FY 2024, the Agency saw
a decrease in its overall Federal Information Security
Management Act of 2014 (FISMA) maturity rating from
2.80 to 2.70 for the core questions. However, the Agency
scored a 2.84 for the FY 2024 supplemental questions
which was an increase from 2.68 in FY 2023.
The Information Security Division is in the process of
procuring a new Governance Risk Platform tool and
Security Training Platform that will allow the SBA to
Agency Financial Report Fiscal Year 2024 26 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
FINANCIAL MANAGEMENT SYSTEMS STRATEGY
The SBA’s financial management systems are designed to The SBA has continued taking steps to enhance its financial
support effective internal controls, produce reliable and system controls of lending programs and to improve
timely financial information, and ensure cost-effective accessibility to common information, financial and budget
loan guaranty processing. Management remains focused management, and financial reporting. The SBA’s tightly
on robust financial management systems that support the integrated financial systems enable the Agency to respond
SBA’s ability to comply with laws and regulations. SBA quickly to both internal and external financial information
systems must also provide timely and accurate data to inquiries and requirements.
support management analysis and decision making, enable
the Agency to keep pace with its lending partners, and The Office of Performance Management, the Chief Financial
effectively use automation to achieve operational efficiency. Officer, and the Office of Capital Access oversee the
As demonstrated throughout the FY 2024 Agency Financial following three core financial management systems:
Report, the SBA seeks to comply with all Federal financial
management system requirements, including the Federal • Oracle Federal Financials—This system, the most
Financial Management Improvement Act of 1996, which current release in its implementation of the Joint
requires that the Agency’s financial management systems Administrative Accounting Management System
comply with Federal financial management systems (JAAMS), supports the SBA’s funding and expenditure
requirements, applicable Federal accounting standards, and of administrative funds.
the U.S. Standard General Ledger at the transaction level. 14
• Loan System—This SBA-built system supports the
lifecycle of loan guaranty processing, loan program
The SBA has continued to build on incremental
improvement projects designed to modernize the financial funds control, management and accounting for loan
management system environment, improve financial servicing, and loan-related expenses.
system controls, reduce sustainment costs, provide • Financial Management System—This SBA-built
additional functionality for external lending partners, and system consolidates administrative and loan activity,
improve system reliability. Projects included migration of manages cash and control funds, and supports
the hosting platform from legacy systems to more modern financial reporting.
technology platforms as well as use and integration with
SBA enterprise IT services. The SBA has also been working
with the Quality Service Management Office (QSMO)
at the U.S. Department of Health and Human Services
(HHS) for improvements in grants management systems
and integration. The SBA continued to implement an
Interagency Agreement (IAA) to integrate SBA’s financial
system with the HHS GrantSolutions systems. In addition,
the SBA has been working closely with the QSMO for
Financial Management at the U.S. Treasury as they
continue their efforts in establishing a marketplace that can
help in modernization efforts for the SBA’s core financial
system.
The SBA’s financial systems continued to process a high
volume of transactions this fiscal year. A large part of
the focus during FY 2024 was on improved collections
processes for repayments and other recoveries. During FY
2024, the systems processed more than 30 million general
ledger transactions in support of collections primarily
related to the various pandemic emergency relief programs.
14 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.
Agency Financial Report Fiscal Year 2024 27 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
MANAGEMENT ASSURANCES: FMFIA AND FFMIA ASSURANCE
STATEMENT FOR FY 2024
The Small Business Administration (SBA or Agency) continued to strengthen its internal controls over core and COVID-
related programs and operations during FY 2024. 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 continued
to strengthen internal controls, the SBA’s independent auditor has issued a disclaimer of opinion on the Agency’s FY 2024
Consolidated Balance Sheet and reported material weaknesses in internal controls. The SBA provided responses outlining
proposed corrective actions for identified deficiencies to the auditor in an effort to remediate.
SBA management is responsible for managing risks and maintaining 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. Agency managers have issued assertions to me as to
the status of the FY 2024 internal controls in their areas of responsibility. These assertions are supported by internal testing,
checklists, and other management reviews.
FMFIA section 2 requires that the head of each executive agency 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 SBA 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, 2024. The internal controls
over operations, reporting, and compliance with applicable laws and regulations were operating effectively except for certain
controls noted below. Internal assessments identified areas for improvement that align with existing deficiencies or are being
addressed internally and are not of a material nature. The SBA developed and implemented controls to remedy the material
weaknesses identified in the FY 2023 audit. The material weaknesses identified through the prior year’s audit remain because
of the timing of the corrective action plan’s implementation. During FY 2024, material weaknesses in the following areas
were identified:
• Controls over COVID-19 Economic Injury Disaster Loans (EIDLs) Need Improvement
• Controls over Paycheck Protection Program (PPP) Loan Guarantees Need Improvement
• Controls over Monitoring of Restaurant Revitalization Fund (RRF) and Shuttered Venues Operators Grant (SVOG)
Programs Need Improvement
• Controls over Financial Reporting for Programs Funded by the CARES Act and Related Legislation Need Improvement
• Controls over the Evaluation of Service Organizations Need Improvement
• Entity Level Controls Need Improvement
• Controls over General Information Technology Need Improvement
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.
Agency Financial Report Fiscal Year 2024 28 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
The Federal Financial Management Improvement Act (FFMIA) requires federal agencies to implement and maintain
financial management systems that are in substantial compliance 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 provides a modified
assurance that its financial management systems substantially comply with FFMIA for FY 2024. The Agency is committed to
continuing to evaluate identified material weaknesses and non-conformances to make any adjustments necessary to bring its
programs into compliance.
Isabel Casillas Guzman
Administrator
November 15, 2024
Agency Financial Report Fiscal Year 2024 29 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
Summary of Material Weaknesses 3. Controls over Accounting and Monitoring, of
Shuttered Venue Operators Grant (SVOG) and
1. Controls over COVID-19 Economic Injury
Restaurant Revitalization Fund (RRF) Need
Disaster Loans (EIDLs) Need Improvement
Improvement
The auditor identified deficiencies in the design and
The auditor identified deficiencies in the design and
implementation of controls related to COVID-19 EIDL.
implementation of monitoring controls to ensure that
Specifically, the auditor identified deficiencies in: (a)
recipients’ uses of funds were in accordance with related
the SBA’s process to identify a complete and accurate
legislation and program terms. Specifically, the auditor
COVID-19 EIDL population of outstanding loans
noted: (a) the SBA did not ensure grantee compliance
disbursed due to portfolio fluctuations resulting from
with reporting requirements, (b) the SBA did not
charge offs, reinstatements, or changes in deferment
ensure grant recipients submitted expense reports as
status, (b) the SBA’s controls around the review of the
required, (c) the SBA did not initiate or complete all Cost
COVID EIDL portfolio resulting in incomplete and
Compliance or Quality Assurance Monitoring reviews,
inaccurate identification of the hold code population,
(d) the SBA process for fund recoveries was not fully
(c) the SBA’s controls around the charge-off and
implemented, and (e) the SBA’s process surrounding the
reinstatement process. The SBA will continue to
grantee’s single audit report is not fully implemented
develop corrective actions to identify the outstanding
(in the case of SVOG). The SBA will continue to develop
loans and evaluate controls related to the charge-off and
corrective actions to ensure that grantees are in
reinstatement process.
compliance with reporting requirements and complete
monitoring reviews.
2. Controls over Paycheck Protection Program
(PPP) Loan Guarantees Need Improvement
4. Controls over Financial Reporting for Programs
Funded by CARES Act and Related Legislation
The auditor identified deficiencies in the design and
Need Improvement
implementation of controls related to the review of PPP
loan guarantees. Specifically, the auditor identified
The auditor identified deficiencies in the design
that the SBA did not retroactively review purchase
and implementation of controls related to financial
requests that required a manual review, and the SBA’s
reporting in the areas of Funds Recovery, Reporting
evaluation of hold code population was not complete and
Contingencies, and Reestimates. Specifically, the
accurate. In addition, the SBA did not have adequate
auditor noted: (a) the SBA did not establish or document
oversight over screening, reviewing, monitoring, and
adequate policies and procedures for fund recovery
fund recovery related to PPP loan forgiveness. The
and accounts receivable recognition in CARES Act
SBA continues to implement a Corrective Action Plan
programs, including RRF, SVOG, EIDL, and PPP, (b)
(CAP) that includes the implementation of a detailed
the SBA did not have timely processes nor adequate
review process to ensure the PPP Loan Guarantees and
documentation for preparing contingency disclosures
PPP Loan forgiveness are accurately, implemented,
and did not consistently apply the materiality policy
monitored and reported.
when assessing financial impacts or ensure accurate
financial reporting of contingent liabilities, and (c) the
SBA did not design adequate controls over the review
and monitoring of reestimates, nor controls to ensure
the data inputs used within the COVID-19 EIDL and
PPP reestimate models were complete and accurate. The
SBA will continue to implement corrective actions to
ensure policies and procedures are designed to address
recoveries, contingent liabilities, and reestimates for the
pandemic related programs.
Agency Financial Report Fiscal Year 2024 30 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
5. Controls over the Evaluation of Service
Organizations Need Improvement
The auditor identified deficiencies in internal controls
for service organizations. Specifically, the auditor
noted: (a) the SBA did not appropriately design
and implement controls to identify, address, and
resolve risks from the service organization’s control
environment in a timely manner, (b) the SBA did not
obtain and review a Service Organization Control (SOC)
report for all required service organizations, and (c)
the SBA did not obtain and review the SOC report for
subservice organizations. The SBA will continue to
implement corrective actions to address timely receipt of
SOC reports, complementary design controls, exception
reporting, and impact analysis. The implementation will
ensure required organizations provide SOC reports for
evaluation and monitoring of identified controls.
6. Entity Level Controls Need Improvement
The auditor identified deficiencies in the entity level
controls system to produce reliable and accurate
financial reporting. Specifically, the auditor identified
deficiencies in: (a) the SBA’s establishment of an
effective control environment and effective risk
assessment, and and (b) the SBA’s design and
implementation of an effective monitoring process. 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.
7. Controls over General Information Technology
Need Improvement
The auditor identified deficiencies in the SBA’s ability
to effectively manage its information system risks.
Specifically, the auditor identified deficiencies in: (a) the
SBA’s design, implementation, and operation of access
controls for applications, databases, operating systems,
and tools, and (b) the SBA’s design and implementation
of a process for recertifying user accounts that require
validation by an independent individual with the
necessary knowledge and authority to recertify access.
The SBA will review the process and controls around
access rights for applications, databases, operating
systems, and tools, as well as the process surrounding
the recertification of user accounts requiring validation
and update as needed.
Agency Financial Report Fiscal Year 2024 31 U.S. Small Business Administration
Management’s Discussion and Analysis (Unaudited)
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Agency Financial Report Fiscal Year 2024 32 U.S. Small Business Administration
Financial Reporting (Unaudited)
Section II
Financial
Reporting
| Unaudited
Agency Financial Report Fiscal Year 2024 33 U.S. Small Business Administration
Financial Reporting (Unaudited)
MESSAGE FROM THE CHIEF FINANCIAL OFFICER
November 15, 2024
I am pleased to issue the SBA’s FY 2024 Agency Financial Report as of
September 30, 2024. 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 2024, the SBA continued the management and oversight of the
$1.2 trillion in COVID-19 pandemic programs that were implemented
to mitigate the pandemic’s impact on small businesses. The execution of
CARES Act programs, the Economic Aid Act, and the American Rescue
Plan Act were essential to saving millions of jobs and helping small
businesses stay open, preserving the vitality of small businesses, and
strengthening the economic recovery of communities after disasters.
The SBA continues to focus on serving small businesses and entrepreneurs while strengthening controls
to prevent fraud, waste, and abuse. The Fraud Risk Management Board (FRMB) serves as the SBA’s anti-
fraud entity. Since its inception in FY 2022, the FRMB has made significant progress in the development of
SBA’s fraud risk management program through the performance of fraud risk assessments of key programs
and the development of a fraud risk management strategy. In addition, the Agency documented processes
for new programs and implemented new controls to prevent fraud and strengthen the reliability of the
values presented in the Agency’s financial statements. In FY 2024, the Agency continued to mature its
fraud risk management by hiring a Chief Risk Officer (CRO) and establishing a new Office of Enterprise
Integrity (OEI) to elevate and consolidate audit management, internal controls, improper payments, fraud
risk management and Enterprise Risk Management. The CFO and CRO will co-Chair the FRMB until
2025 when the leadership will transition to the CRO consistent with other CFO Act agency risk oversight.
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. In FY 2024, the Agency implemented a more centralized financial
statement audit management structure to provide the Agency additional support and oversight to improve
financial statement audit posture, improving partnerships across the Agency and providing more proactive
considerations to strengthen the Agency’s confidence of its financial standing.
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 2024 Agency Financial
Report.
Sincerely,
Kate Aaby
Associate Administrator for Performance, Planning, and the Chief Financial Officer
Agency Financial Report Fiscal Year 2024 34 U.S. Small Business Administration
Financial Reporting (Unaudited)
INSPECTOR GENERAL’S AUDIT REPORT
OFFICE OF INSPECTOR GENERAL
U.S. SMALL BUSINESS ADMINISTRATION
DATE: November 15, 2024
T O: Isabella Casillas Guzman
Administrator
FROM: Hannibal “Mike” Ware
Inspector General
SUBJECT: Independent Auditors’ Report on SBA’s Fiscal Year 2024 Financial Statements
(Report 25-05)
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) 2024, 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, 2024 and 2023 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. 24-02, 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 that ended
September 30, 2024 and 2023 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, 2024. Accordingly, KPMG issued a disclaimer of opinion on the consolidated
balance sheets as of September 30, 2024 and 2023.
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
409 Third St. SW, Washington, DC 20416 • (202) 205-6586 • Fax (202) 205-7382
Agency Financial Report Fiscal Year 2024 35 U.S. Small Business Administration
Financial Reporting (Unaudited)
account balances related to the Paycheck Protection Program, Economic Injury Disaster Loan
program, Restaurant Revitalization Fund, and the 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:
• Credit program receivables and related foreclosed property,
• Other than intragovernmental accounts receivable,
• Downward re-estimate payable to Treasury, and
• Loan Guarantee Liabilities and the related notes.
For the period that ended September 30, 2024, KPMG identified seven 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. 24-02.
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 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 auditing standards. KPMG is responsible for
the attached auditors’ report dated November 15, 2024 and the conclusions expressed.
However, the Office of Inspector General provides negative assurance of this audit.
We provided a draft of the KPMG report to SBA’s Chief Financial Officer, who concurred with its
findings and recommendations and agreed to implement the recommendations. The Chief
Financial Officer stated that SBA has undergone tremendous effort to strengthen internal
controls, policies, and procedures and will continue remediation efforts in the coming audit 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.
Agency Financial Report Fiscal Year 2024 36 U.S. Small Business Administration
Financial Reporting (Unaudited)
cc: Dilawar Syed, Deputy Administrator, Office of the Administrator
Arthur Plews, Chief of Staff, Office of the Administrator
Isabelle James, Deputy Chief of Staff, Office of the Administrator
Katherine Aaby, Associate Administrator and Chief Financial Officer, Office of Performance,
Planning, and the Chief Financial Officer
Kathryn Frost, Associate Administrator, Office of Capital Access
John Miller, Deputy Associate Administrator, Office of Capital Access
Francisco Sanchez Jr., Associate Administrator, Office of Disaster Recovery and Resilience
Therese Meers, General Counsel, Office of General Counsel
Michael Simmons, Attorney Advisor, Office of General Counsel
Cynthia Pitts, Director, Office of Administrative Services
Anna Maria Calcagno, Director, Office of Strategic Management and Enterprise Integrity
Tonia Butler, Director, Office of Internal Controls
Attachment
Agency Financial Report Fiscal Year 2024 37 U.S. Small Business Administration
Financial Reporting (Unaudited)
INDEPENDENT AUDITORS’ REPORT ON FY 2024
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, 2024 and 2023, 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
The SBA’s pandemic relief programs include the Paycheck Protection Program, Economic Injury Disaster Loan
program, Restaurant Revitalization Fund program, and Shuttered Venues Operators Grant program, which
were authorized by the Coronavirus Aid, Relief, and Economic Security Act of 2020 and related legislations.
These programs affect a substantial proportion of SBA’s consolidated financial statements. As of the date of
our audit report, management was still in the process of designing and implementing corrective actions to
remediate control deficiencies identified in the prior and current years. These control deficiencies contributed to
SBA’s inability to provide relevant and reliable information to support a significant number of transactions and
account balances related to these programs. As a result of this matter, we were unable to determine whether
any adjustments might have been necessary related to the Credit Program Receivables and Related
Foreclosed Property, Net; Other than Intragovernmental Accounts Receivable, Net; Downward Reestimate
Payable to Treasury; Loan Guarantee Liabilities; and the related notes.
Other Matters
Report on Certain Fiscal Year 2024 and 2023 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, 2024 and 2023, and the
related notes to these statements. Accordingly, we express no opinion on them.
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
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.
Agency Financial Report Fiscal Year 2024 38 U.S. Small Business Administration
Financial Reporting (Unaudited)
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.
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, issued by the Comptroller General of the United States, and Office of Management and Budget
(OMB) Bulletin No. 24-02, 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.
Other Reporting Required by Government Auditing Standards
Report on Internal Control Over Financial Reporting
In connection with our engagement to audit the SBA’s consolidated financial statements as of September 30,
2024, 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,
Agency Financial Report Fiscal Year 2024 39 U.S. Small Business Administration
Financial Reporting (Unaudited)
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 the accompanying Appendix I to be material weaknesses.
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 the accompanying Appendix II to be significant deficiencies.
Report on Compliance and Other Matters
In connection with our engagement to audit the SBA’s consolidated financial statement as of September 30,
2024, 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 financial
statement. 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. 24-02, and which are described in accompanying Appendix III as items A and B.
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, described in the accompanying Appendix III as item C, 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 the accompanying 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 Other 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, 2024
Agency Financial Report Fiscal Year 2024 40 U.S. Small Business Administration
Financial Reporting (Unaudited)
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 Coronavirus Disease 2019 (COVID-19) Economic Injury Disaster Loans (EIDLs)
Need Improvement
2. Controls over Paycheck Protection Program (PPP) Loan Guarantees Need Improvement
3. Controls over Monitoring of Restaurant Revitalization Fund (RRF) and Shuttered Venues
Operators Grant (SVOG) Programs Need Improvement
4. Controls over Financial Reporting for Programs Funded by CARES Act and Related Legislation
Need Improvement
5. Controls over the Evaluation of Service Organizations Need Improvement
6. Entity Level Controls Need Improvement
7. Controls over General Information Technology Need Improvement
Background
The COVID-19 EIDLs, PPP, RRF, and SVOG 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 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 COVID-19
pandemic. The COVID-19 EIDLs, PPP, RRF, and SVOG programs affect a substantial proportion of the
consolidated financial statements.
1. Controls over COVID-19 EIDLs Need Improvement
The COVID-19 EIDLs transactions were approved in fiscal years 2020 through 2022. These loans have a 30-
year term, and the originating payment start date was deferred by the SBA for up to 30 months after the loan
disbursement. The payment deferral period ended for a significant number of COVID-19 EIDLs beginning in
fiscal year 2023 and continued into fiscal year 2024.
We found that management did not design and implement adequate monitoring controls over the COVID-19
EIDLs portfolio to ensure reliable financial reporting as of the end of the fiscal year. Management’s review was
not appropriately designed to identify a complete and accurate COVID-19 EIDLs population of outstanding
loans disbursed to eligible recipients. The review process relied on hold codes in the SBA’s loan repository
system to identify the COVID-19 EIDLs with eligibility concerns. However, management was not able to provide
evidence of the completeness and accuracy of the population of loans with hold codes as of the end of the
fiscal year.
Management did not properly design the review controls over loans with existing hold codes. Specifically,
management did not document sufficient evidence about the identification, research, and resolution of hold
codes to support management’s reliance for financial reporting purposes as of the end of the fiscal year.
Agency Financial Report Fiscal Year 2024 41 U.S. Small Business Administration
Financial Reporting (Unaudited)
Further, management did not identify and research COVID-19 EIDLs with unresolved hold codes for loans
charged-off, in deferment, repayment, and delinquent stages as of the end of the fiscal year.
During fiscal year 2024, management expanded the Hardship Accommodation Plan (HAP) that is offered to
COVID-19 EIDLs borrowers experiencing short-term financial challenges to help bring them into compliance
and avoid default. The expansion included allowing COVID-19 EIDLs that were previously charged-off to be
reinstated with temporarily modified payment terms. However, management did not design and implement
effective controls over the review of reinstated loans resulting from HAP enrollments. Management did not
provide sufficient evidence on the completeness and accuracy of the reinstated population as of the fiscal year-
end. The COVID-19 EIDLs that were reinstated due to HAP enrollments were not subsequently monitored to
ensure those loans continued to meet HAP eligibility. In addition, management did not consistently reinstate
loans receivable for COVID-19 EIDLs that were enrolled in a HAP, which were previously charged off, and in
certain instances the borrowers were making payments.
The monitoring controls over the servicing and review of the COVID-19 EIDLs portfolio were not adequately
documented or updated timely to reflect process changes throughout the fiscal year. Management implemented
significant policy changes in fiscal year 2024, however, management did not update the COVID-19 EIDLs
servicing manual to reflect the current processes and related controls in operation including the expansion of
the HAP and the changes to the charge off process.
These deficiencies were caused by an inadequate risk assessment process to identify and mitigate relevant
risks and design appropriate controls at a sufficient level of precision to ensure a complete and accurate
population of COVID-19 EIDLs that were disbursed to eligible recipients. In addition, management’s information
systems were not designed to properly update the loan status of COVID-19 EIDLs which were previously
charged-off but that required reinstatement due to HAP enrollments. The monitoring controls over the active
HAP population were not designed to ensure COVID-19 EIDLs enrolled in HAP meet the eligibility
requirements. Finally, management did not update and review the documentation of existing policies and
procedures in a timely manner to ensure the most current operating environment was reflected in its
documentation.
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;
Principle 9, Identify, Analyze, and Respond to Change; Principle 10, Design Control Activities; and
Principle 12, Implement Control Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and
Internal Control
The deficiencies described 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.
Recommendations – Controls over COVID-19 EIDLs Need Improvement
We recommend the Administrator coordinate with the Associate Administrator for the Office of Capital
Access to:
1. Perform and update the program’s internal control risk assessment to identify and respond to
changes to risks that may require updates to the design and implementation of effective
monitoring controls over the review of the COVID-19 EIDLs portfolio.
2. Design and implement sufficient controls to identify COVID-19 EIDLs disbursed to ineligible
recipients and implement an effective funds recovery plan to ensure COVID -19 EIDLs funds
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disbursed to ineligible recipients are recovered and reported accurately and in a timely
manner. The plan should include an effective process to provide the information necessary to
the Office of Planning, Performance, and the Chief Financial Officer to record any required
accounting adjustments for accurate and timely financial reporting.
3. Identify all COVID-19 EIDLs with an incorrect status. Research and update the status of the
identified COVID-19 EIDLs within the applicable systems of record for loan accounting.
4. Review and update the design, implementation, and operating effectiveness of controls over
information technology program changes within the applicable systems of record for loan
accounting to ensure changes are appropriate and function as intended.
5. Update existing process and controls documentation over the servicing and review of COVID-
19 EIDLs to ensure they are relevant, reliable, and based on implemented policies and
procedures. Perform a regular review of implemented processes and controls to ensure th ey
are in line with documented policies and procedures.
2. Controls over PPP Loan Guarantees Need Improvement
A. Forgiveness Review of PPP Loan Guarantees
The PPP program terms, authorized by the CARES Act and related legislation, permitted for the
forgiveness of PPP loan guarantees if the borrower met the forgiveness criteria. To request forgiveness,
borrowers submit the forgiveness application to the lenders for approval. The lenders will subsequently
notify SBA of their forgiveness decision and submit the request to SBA.
We found that management did not design and implement adequate monitoring controls over the work
performed by a contractor and the use of its case management system to ensure that the population of
PPP loan guarantees identified with eligibility flags was complete and accurate to determine eligibility for
forgiveness. Moreover, management did not provide corroborating evidence to demonstrate that an
effective control environment exists when the case management system was used to perform the
automated screening of the PPP loan guarantees. Also, an independent review of a contractor’s work was
not performed effectively to determine whether the results of the contractor’s screening process of certain
loan guarantees was complete and accurate. These loan guarantees included those with no flags
identified for eligibility concerns, or those that had flags identified for eligibility concerns but were not
reviewed further based on management’s policy decision.
Also, management did not design and implement an effective review and monitoring process for the 2021
cohort of PPP loan guarantees, which comprises the majority of the outstanding principal balance of PPP
loan guarantees as of September 30, 2024. The case management system contained a comprehensive
series of validation checks to identify potential ineligible PPP loan guarantees; however management only
used the system to perform a limited number of validation checks against program eligibility requirements
for the 2021 cohort of PPP loan guarantees. Further, management did not implement the appropriate
monitoring process to ensure that lenders followed established procedures to adequately resolve the
eligibility concerns identified by the case management system’s limited automated screening.
The design and implementation of monitoring and review controls to determine the accuracy and
completeness for the sample of PPP loan guarantee forgiveness transactions were not effective. The
review of the sample from the largest subset of PPP loan forgiveness transactions did not address the
eligibility for forgiveness and the accuracy of the approved loan guarantee and forgiveness amounts. In
addition, management’s review process did not include a requirement to follow-up when differences
existed between the sample loan approval amount and the loan forgiveness amount within an acceptable
variance threshold. As a result, management’s sample review process was not properly designed to
evaluate and quantify the magnitude of the actual error amounts for the loan guarantee approval and loan
guarantee forgiveness variances.
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Management did not adequately design and implement the post payment review control to determine the
appropriate status and financial reporting impacts of PPP loan guarantees forgiven as of the end of the
fiscal year. Management’s process and related control activities for funds recovery of PPP loan
guarantees that may have been erroneously forgiven is not documented or effectively implemented.
Management did not fully implement a process to update the outstanding principal balance of PPP loan
guarantees subsequent to the forgiveness payments in its loan accounting system. Also, management did
not document the automated and manual process that was partially implemented. Further, the outstanding
principal balance for certain PPP loan guarantees were not accurate because the balances were not
updated subsequent to forgiveness payments.
These deficiencies were caused by management’s reliance on the contractor’s automated and manual loan
review processes without adequate monitoring controls to evaluate and assess their work. Also, management
placed undue reliance on the lenders’ self-certifications prior to the approval of the 2021 cohort of PPP loan
guarantees without adequate monitoring controls. An adequate risk assessment process to identify and
mitigate relevant risks and design appropriate controls to ensure a complete and accurate portfolio of PPP loan
guarantees that were disbursed to eligible recipients was not effectively performed by management. Finally,
management did not document or implement an effective process for updating the outstanding principal loan
balance for PPP loan guarantees subsequent to forgiveness.
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 described above may result in a material misstatement to the Loan Guarantee Liabilities
and Downward Reestimate Payable to Treasury line items, and other 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:
6. Perform a thorough review of the outstanding PPP loan guarantees to determine the impact
on the outstanding guarantee and eligibility for forgiveness of loans identified to not be in
conformance with the related legislation and program’s terms.
7. Design, implement, and document an effective PPP forgiveness review process for loan
guarantees that were forgiven that addresses both the eligibility and the accuracy of the loan
approval and forgiveness amounts.
8. Design and implement an effective funds recovery plan to ensure PPP funds disbursed on
behalf of ineligible recipients are recovered and reported accurately in a timely manner. The
plan should include an effective process to provide the information necessary to the Office of
Performance, Planning, and the Chief Financial Officer to record any required accounting
adjustments.
9. Identify the root cause of the erroneous adjustment and design and implement a control to
remediate the deficiency.
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10. Document, design, and implement an effective process and controls to update the outstanding
principal balance for PPP loan guarantees subsequent to forgiveness.
B. Purchases of PPP Loan Guarantees
The PPP program terms, authorized by the CARES Act and related legislation, fully guaranteed the PPP
loans disbursed by lenders on behalf of the SBA. Lenders are required to service the PPP loans and
continue to report on their status on a monthly basis until the loan is fully forgiven, repaid, or the borrower
defaults. In the event of default, the lender may request that SBA honor its full guarantee and purchase
the loan.
We found that management did not adequately design and implement controls to ensure that purchase
requests of PPP loan guarantees were appropriately reviewed to verify that requesting lenders met the
program requirements prior to approving and disbursing the original loan.
The PPP loan guarantee purchases review process relies on the identification of flags indicating that the
lender may not have fulfilled the program requirements. The design and implementation of monitoring and
review controls to ensure that the completeness and accuracy of flags identified and resolved for
outstanding PPP loan guarantees was not adequate. In addition, management added additional flags that
require a manual review of PPP purchases at various stages of the program. However, management did
not retroactively review PPP loan guarantee purchase requests that were previously automatically
approved that subsequently required a manual review.
The PPP loan guarantee purchases review process documentation did not consider all relevant guidance
issued to lenders as part of the origination process when determining the subset of flags that would
require a manual purchase review. Specifically, management did not include adequate evaluation of flags
communicated to lenders in the procedural notices related to the cohort 2021 loan approval requirements.
These deficiencies were caused by an inadequate risk assessment performed to ensure the appropriate
controls were designed and implemented for the review of PPP loan guarantee purchase transactions.
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; and
Principle 10, Design Control Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and
Internal Control
The deficiencies described 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:
11. Perform a thorough and complete analysis of all requirements communicated to lenders for
the PPP program and determine whether lenders met the requirements prior to disbursing a
PPP loan. The analysis should include evidence to support the adequacy of management’s review
process when determining which purchase requests will require additional review.
12. Develop and implement an effective process to review purchase requests for outstanding PPP
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loan guarantees and for loans that were previously purchased that address whether the lender
met their requirements in accordance with the program requirements.
13. Develop and implement an effective funds recovery plan to ensure funds related to PPP
purchases disbursed to ineligible recipients are recovered and reported accurately in a timely
manner. The plan should include an effective process to provide the information necessary to
the Office of Performance, Planning, and the Chief Financial Officer to record any required
accounting adjustments.
3. Controls over Monitoring of RRF and SVOG Programs Need Improvement
A. Monitoring of RRF Awards
The period to use RRF awards for eligible purposes expired in fiscal year 2023. SBA relies on award
recipients to submit Post Award Reports to disclose the amount of the award used on eligible purposes prior to
expiration. If any amount of the award was not used for eligible purposes before expiration, the unused funds
must be returned to SBA.
Management did not design and implement the appropriate monitoring controls over RRF awards to
ensure that the funds were used in accordance with the CARES Act and related legislation and accurate
financial reporting as of the end of the fiscal year. Specifically, a Post Award Report was not submitted for
a significant number of awards as of September 30, 2024. While management performed follow-up
procedures to ensure the outstanding Post Award Reports were submitted by the remaining recipients, the
procedures were not substantial enough to support the completeness and accuracy of financial reporting
as of the end of the fiscal year. During the fiscal year, management selected a sample of RRF awards for
review to determine the accuracy of submitted Post Award Reports. However, management did not initiate
or fully complete reviews for a significant number of samples to ensure accurate financial reporting as of
the end of the fiscal year. Further, management’s process for funds recovery was not fully implemented
for RRF awards that had eligibility concerns.
These deficiencies were caused by an inadequate risk assessment process to identify and mitigate relevant
risks and design appropriate monitoring controls to ensure funds were spent on eligible expenses to be relied
upon for financial reporting.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Principle 10, Design Control Activities; Principle 12, Implement 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 described above may result in a material misstatement to the Other than
Intragovernmental Accounts Receivable, Net, line item and the related elements in the consolidated
financial statements.
Recommendations – Monitoring of RRF Awards
We recommend the Administrator coordinate with the Associate Administrator for the Office of Capital
Access to:
14. Continue to perform and update the program’s internal control assessment to identify changes to
risks that may require the design and implementation of effective monitoring controls and review
processes of RRF awards to identify recipients that may not have been eligible to receive awards
or that may have spent awards on ineligible expenses in accordance with the program’s terms.
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15. Design and implement effective follow-up procedures for RRF award recipients that are not
complying with the program’s terms and to ensure complete, accurate, and timely reporting for the
use of the award.
16. Design and implement an effective funds recovery plan and controls to ensure RRF awards
disbursed to ineligible recipients or spent on ineligible expenses are recovered and reported
accurately and in a timely manner. In conjunction with the Office of Planning, Performance,
and the Chief Financial Officer, design and implement an effective process to provide the
information necessary to record any required accounting adjustments.
B. Monitoring of SVOG Awards
The time period to use SVOG funds for eligible purposes expired for all SVOG awards. The SBA relies on
award recipients to submit an Expense Report and Standard Form (SF) 425, Federal Financial Report, to
disclose the amount of the award used for eligible purposes prior to expiration. If any amount of the award was
not used for eligible purposes before expiration, the unused funds must be returned to SBA.
Management did not design and implement appropriate monitoring controls over SVOG awards to ensure
that the funds were used in accordance with the CARES Act and related legislation and accurate financial
reporting as of the end of the fiscal year. Specifically, as of September 30, 2024, an Expense Report or
SF-425 was not submitted for certain awards. In addition, management selected samples of SVOG
awards to review the accuracy of report submissions and eligibility of award recipients. However,
management did not initiate or fully complete the sample reviews for a significant number of samples.
Management’s process for funds recovery was not fully implemented for SVOG awards that had identified
eligibility concerns. Additionally, management’s process to review the recipients’ single audit reports was
not complete by the end of the fiscal year. Therefore, management could not determine the impact of
potential control and compliance deficiencies noted in the single audit reports over the use of SVOG
awards.
These deficiencies were caused by an inadequate risk assessment process to identify and mitigate relevant
risks and design appropriate monitoring controls to ensure funds were spent on eligible expenses to be relied
upon for financial reporting.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Principle 10, Design Control Activities; Principle 12, Implement 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 described above may result in a material misstatement to the Other than
Intragovernmental Accounts Receivable, Net, line item and the related elements in the consolidated
financial statements.
Recommendations – Monitoring of SVOG Awards
We recommend the Administrator coordinate with the Associate Administrator for the Office of Disaster,
Recovery, and Resilience to:
17. Continue to implement effective monitoring controls and review processes of SVOG awards to
identify recipients that may not have been eligible to receive awards or that may have spent awards
on ineligible expenses in accordance with the program’s terms.
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18. Design and implement effective follow-up procedures for SVOG award recipients that are not
complying with the program’s terms and to ensure complete, accurate, and timely reporting for the
use of the award.
19. Design and implement an effective funds recovery plan and controls to ensure SVOG awards
disbursed to ineligible recipients or spent on ineligible expenses are recovered and reported
accurately and in a timely manner. In conjunction with the Office of Planning, Performance,
and the Chief Financial Officer, design and implement an effective process to provide the
information necessary to record any required accounting adjustments.
4. Controls over Financial Reporting for Programs Funded by CARES Act and Related Legislation
Need Improvement
A. Accounting for Funds Recovery
The PPP, COVID-19 EIDLs, RRF, and SVOG programs affect a significant proportion of SBA’s consolidated
financial statements. As these programs are either in the servicing, post payment review or post award
phases, SBA began the process to recover funds or identify funds that need to be recovered.
Management did not adequately design and implement controls to account for the recovery of funds
related to these programs. Management did not provide evidence of implemented and documented
accounting policies and procedures for the recovery of funds related to the RRF and SVOG programs and
the recording of the related accounts receivable and allowance for estimated uncollectible amounts. For
example, management was not able to demonstrate the application of the accounts receivable recognition
criteria for the determination of a claim to cash or other assets due to recovery of funds for each program.
Also, management did not maintain adequate documentation supporting the estimation methodology used
to determine the accounts receivables and the related allowance for estimated uncollectible amounts
based on the status of the awards in the post award review stage or how the post award review sample
results would be utilized. Moreover, management did not fully develop and implement the financial
reporting considerations related to the recovery of funds for the RRF and SVOG programs including the
respective accounting entries.
The accounting policies for the recovery of funds related to the COVID-19 EIDLs and PPP loan programs
were not determined by management and documented as of the end of the fiscal year . Further,
management did not have adequate documentation to support an analysis of the appropriate accounting
treatment with the respective accounting entries in accordance with generally accepted accounting
principles, for each step of the recovery life cycle once loan forgiveness and charge-off transactions have
been determined to be improper and recovery efforts are initiated. Also, management did not fully
complete the evaluation of when the charge-off of a loan should occur.
These deficiencies were caused by an inadequate risk assessment to identify and mitigate relevant
financial reporting risks. Also, management did not develop the appropriate policies and procedures for
considerations related to the recovery of funds through the applicable programs’ lifecycle including the
servicing and post payment review phases.
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; and Principle 10,
Design Control Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and
Internal Control
The deficiencies identified above may result in a material misstatement to the Other than
Intragovernmental Accounts Receivable, Net, Credit Program Receivables and Related Foreclosed
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Property, Net, Loan Guarantee Liabilities, and Downward Reestimate Payable to Treasury line items, and
related elements in the consolidated financial statements.
Recommendations – Accounting for Funds Recovery
We recommend the Administrator coordinate with the Chief Financial Officer to:
20. Develop, document, and implement the accounting policies and procedures for the recovery of
funds, the accounts receivable, and the allowance for estimated uncollectible amounts related to
the programs created or expanded by the CARES Act and related legislation.
21. Inquire and continue to obtain guidance from standard setting bodies to confirm the appropriate
accounting treatment for COVID-19 EIDLs and the PPP loans that have been improperly forgiven
or charged-off and for which recovery has been initiated. Memorialize the response by updating
management’s documented policies and procedures including the respective accounting entries
under generally accepted accounting principles for all applicable scenarios.
22. Design and implement effective controls and communication processes to timely obtain the
information necessary from program offices to record any required accounting adjustments for
programs created or expanded by the CARES Act and related legislation.
B. Subsidy Reestimate
Statement of Federal Financial Accounting Standards Number 2, Accounting for Direct Loans and Loan
Guarantees, requires that direct loans and loan guarantees committed after September 30, 1991, be
recorded on a present value basis consistent with the intent of the Federal Credit Reform Act of 1990. As
such, SBA developed an estimation methodology to reestimate the future net cash inflows and outflows
for the COVID-19 EIDLs and PPP loan portfolios as of the end of the fiscal year.
We found that management did not design and implement adequate review controls over the data inputs
used in the PPP subsidy reestimate. Specifically, management did not adequately design and implement
controls to ensure the data inputs used in the PPP subsidy reestimate methodology that are derived from
the forgiveness and purchases processes are complete and accurate.
Also, management did not design and implement adequate review controls over the data inputs used for
COVID-19 EIDLs subsidy reestimate. The reviews were in process as of the end of the fiscal year and not
appropriately designed to identify a complete and accurate COVID-19 EIDLs population of outstanding
loans disbursed to eligible recipients.
The loan-level projection datasets included projected cash flows for loans that were charged-off without an
outstanding loan receivable balance as of September 30, 2024, for various programs’ subsidy
reestimates. The projected cash flows for these charged-off loans inappropriately affected the allowance
for subsidy balances without the related recognition of the gross loans receivable.
Management did not fully document the considerations made for potential impacts to the estimation
methodology for the COVID-19 EIDLs subsidy reestimates due to significant program changes that
occurred during the fiscal year. Specifically, the Hardship Accommodation Plan was expanded in fiscal
year 2024 resulting in a significant increase in enrollments and loan reinstatements. Discussions were
held with the program office related to this change and included in the model documentation where the
changes impacted implemented model enhancements. However, management did not fully document the
assessment performed to determine if any enhancements should be made to the estimation methodology.
These 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
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accurate. In addition, the deficiencies were caused by the implementation and development of subsidy
reestimate models for programs that do not have a significant volume of historical data or precedence .
The deficiencies were caused by the inadequate design and implementation of review controls to ensure
the impact of significant program changes on the reestimate were adequately documented. Also, there
were inadequate accounting policies and procedures to assess the appropriate timing of loan charge -off to
ensure the reestimate output and resulting financial reporting impact complied with applicable accounting
standards for charged-off loans.
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 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 described above may result in a material misstatement to the Credit Program
Receivables and Related Foreclosed Property (Net), Downward Reestimate Payable to Treasury, and
Loan Guarantee Liabilities line items, and the related elements in the consolidated financial statements.
Recommendations – Subsidy Reestimate
We recommend the Administrator coordinate with the Chief Financial Officer to:
23. Continue implementing review controls in collaboration with relevant program offices for the
PPP and COVID-19 EIDLs portfolios to accumulate relevant, complete, and accurate data on
which to base the subsidy reestimate.
24. Design and implement adequate review and approval controls over the reestimate 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.
25. Refine existing review and approval controls to ensure the documentation of the impact of
significant program changes is adequate.
26. Inquire and continue to obtain guidance from standard setting bodies to confirm the
appropriate accounting and financial reporting treatment for projected cash flows of charged -
off loans in the reestimates. Memorialize the responses as part of a documented policy.
5. Controls over the Evaluation and Monitoring of Service Organizations Need Improvement
A. 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, maintenanc e, 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.
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In addition, management did not provide evidence of adequate monitoring activities performed over the
relevant internal control environment for certain subservice organizations identified in the service
organization control (SOC) 1 Type 2 report.
Management did not provide evidence of adequate monitoring and evaluation activities performed for the
complementary user entity controls identified in the service organization control (SOC) 1 Type 2 reports
obtained for the 504 loan guarantee program central servicing agent and the financial service provider. In
addition, the evaluations of the complementary user entity controls and control objectives were not complete.
These deficiencies identified above were caused by inadequate monitoring controls over the relevant service
organizations for their assigned internal control responsibilities to obtain reasonable assurance on the operating
effectiveness of internal controls in the service organizations’ control environments. Management made an
incorrect determination that the sub-service organization’s controls were included and evaluated by an
independent auditor, however the controls were carved out (i.e. not inclusive).
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 described above prevent SBA from obtaining an understanding of relevant service
organization controls and their operating effectiveness to identify all relevant control gaps and deficiencies that
require a complementary user control to mitigate the risk of error to 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:
27. Assess the risk posed by the service organizations’ control environments and obtain sufficient
assurance over the operating effectiveness of relevant and significant controls to ensure the
integrity of transactions processed on behalf of and recorded by management. To achieve
this, consider obtaining and assessing SOC 1 reports for the relevant control environments at
the service organizations to determine that:
• SOC 1 reports are sufficiently scoped to address transaction processing and related control
activities performed by the service organizations on behalf of management.
• All exceptions noted in the SOC 1 reports – not just those described in the independent service
auditor’s report – are evaluated to determine applicability to management’s internal controls
over financial reporting, the potential impact to management’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 of controls to document the results that include an assessment about whether all
relevant complementary user entity controls and other management-performed controls were
tested on a frequency determined by management and found operating effectively and, if they
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are not, assess the impact of such deficiencies on management’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
management’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 are evaluated to determine whether their reporting periods and corresponding
gap letters provide sufficient coverage to assess impacts on management’s internal controls
over financial reporting and include matters requiring additional follow up by management.
B. Service Organization Used for the SVOG Program
Management did not obtain reasonable assurance on the operating effectiveness of internal controls in
the control environments of the subservice organizations utilized by the service organization for the SVOG
platform in monitoring the status of awards.
Management did not provide evidence of adequate monitoring and evaluation activities performed for the
complementary subservice organization controls listed in the service organization’s SOC 1 report . Also,
management did not provide evidence of adequate monitoring and evaluation activities performed for the
complementary user entity controls and complementary subservice organization controls listed in the SOC 1
reports of the subservice organizations. Specifically, the evaluation of complementary user entity controls and
complementary subservice organization controls was not complete as there was not documentation of the
significance and relevance of each control to SBA’s internal controls over financial reporting. In addition,
management did not evaluate whether the complementary user entity controls and complementary subservice
organization controls were designed, implemented, and operating effectively. For one subservice organization,
management did not obtain and review the SOC 1 report in a timely manner as of fiscal year-end.
These deficiencies were caused by management not implementing effective monitoring of the effectiveness of
internal control over the assigned processes performed by the relevant service organization.
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 described above prevented SBA from obtaining an understanding of relevant service and
subservice organizations’ controls and their operating effectiveness to identify all relevant control gaps and
deficiencies that require a complementary user control to mitigate the risk of error to the Other than
Intragovernmental Accounts Receivable, Net 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 Associate Administrator for the Office of Disaster,
Recovery, and Resilience to:
28. Assess the risk posed by the service organizations’ and subservice organizations’ control
environments to determine which subservice organization controls are relevant to SBA and
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obtain sufficient assurance over the operating effectiveness to determine the integrity of
SVOG program transactions processed on behalf of and recorded by SBA. To achieve this,
obtain a SOC 1 report for the relevant control environments at the service organizations, and
perform and document the following:
• Verify that the SOC 1 report is sufficiently scoped to cover transaction processing and related
control activities performed by the service organizations on behalf of SBA.
• Evaluate all exceptions noted in the SOC 1 report – not just those described in the independent
service auditor’s report – 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.
• Evaluate all complementary user entity controls described in the SOC 1 reports using current
information and with consideration to their applicability to SBA’s internal controls over financial
reporting.
• Evaluate controls and clearly document the results that include an assessment over whether all
complementary user entity controls and other SBA-performed controls were tested on a
frequency determined by SBA and operating effectively. Assess the impact of such deficiencies
on SBA’s internal controls over financial reporting.
• Evaluate all complementary subservice organization controls described in SOC 1 reports 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.
• Verify that the 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.
C. Service Organizations Used for Payroll and Personnel
Management did not implement a process to annually review the SOC 1 reports over its payroll and
personnel systems to determine the reliability of information produced by the system. The SOC 1 reports
are not monitored and reviewed to assess whether complementary user entity controls that users of the
service organization (e.g., management) should have in place are designed, implemented, and operating
effectively to supplement the service organization’s internal controls.
These deficiencies were caused by management not evaluating the standard operating procedures over the
review and assessment of SOCs to determine the required procedures related to systems and reports utilized
by management.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Section 13, Use Quality Information; and Principle 16, Perform Monitoring
Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and
Internal Control
By not monitoring services provided by third-party service providers, this increases the risk that
management may be unaware of control failures that could impact the reliability of those systems and
accuracy of data used to prepare the consolidated financial statements.
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Recommendations – Service Organizations Used for populations of Separated Users
We recommend the Office of Human Resources Solutions to:
29. Assess the risk posed by the service organization’s control environments to identify the
relevant significant controls, including determining the relevant of any subservice
organizations.
30. Implement procedures to review the SOC 1 report for the service organization’s control
environment in accordance with management’s standard operating procedures. Additionally,
evaluate the effectiveness of complementary user entity controls to determine the reliability of
controls and reports provided by the service organization.
6. Entity Level Controls Need Improvement
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. The following conditions were identified.
A. Control Environment and Risk Assessment
Management did not establish an effective control environment and did not perform effective risk assessment
processes. The following deficiencies were identified across the SBA:
• Management did not adequately develop and document the materiality threshold 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 COVID-19 EIDLs and
PPP loan review processes were not designed to ensure the reviews performed were to a sufficient
level of precision to ensure the related balances were free of material misstatement.
• Management did not implement adequate risk assessment processes to identify, analyze, and respond
to relevant risks for FY2024. For example, management did not adequately respond to the increased
risk of noncompliance with applicable laws (e.g., DCIA) due to the large volume of COVID-19 EIDLs
entering delinquency and subsequent charge off in FY2024. Additionally, management did not evaluate
the risks related to the mass reestablishment of COVID-19 EIDLs due to the increased enrollment in
the Hardship Accommodation Plan (HAP).
B. Monitoring
Management did not design and implement effective monitoring processes. Management did not have
adequate or effective monitoring controls related to:
• PPP lenders.
• Internal control over processes performed by service organizations.
• RRF and SVOG program award recipients.
• The COVID-19 EIDLs portfolio to identify a complete and accurate population of loans disbursed to
eligible recipients for financial reporting purposes as of fiscal year-end.
These deficiencies were caused by the prioritization of the continued execution and servicing of the CARES Act
and related legislation programs over internal control processes and related remediation of prior year control
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deficiencies. In addition, these deficiencies were caused by the lack of available resources needed to perform
an adequate risk assessment, appropriately remediate prior year control deficiencies, implement, and monitor
the operating effectiveness of controls, and operationally service large-scale programs effectively.
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; Principle 16, Perform
Monitoring Activities; Principle 17, Evaluate Issues and Remediate Deficiencies
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and
Internal Control
As a result of the deficiencies described above, we noted that without the proper level of entity level controls
in place and operating effectively, there is an increased risk that a material misstatement in the
consolidated financial statements, and noncompliance with the relevant laws and regulations would
neither be prevented or detected and corrected in a timely manner.
Recommendations – Entity Level Controls Need Improvement
We recommend that the Administrator coordinate with the Associate Administrator of the Office of Capital
Access and the Associate Administrator of the Office of Disaster Recovery and Resilience to:
31. In conjunction with the Office of the Chief Financial Officer, review and evaluate the completed
internal control risk assessments for programs that have a material impact on the financial
statements at a process level. Develop a plan to respond in a timely manner, including the
consideration of whether entity level controls, manual controls, general information technology
controls, and system application controls are designed, implemented, and are operating at a
sufficient precision level in accordance with management’s materiality threshold and will be
sufficient for financial reporting purposes.
32. Design, implement, and monitor the operating effectiveness of key controls that respond to
significant risks of material misstatements and compliance with relevant laws and regulations.
7. 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 deficiencies 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 through other written
communications.
The following criteria were considered with respect to the matters described in the following paragraphs:
• GAO’s Green Book, Principle 7, Identify, Analyze, and Respond to Risks; Principle 10, Design
Control Activities; Principle 11, Design Activities for the Information System; and Principle 12,
Implement Control Activities
• National Institute of Standards and Technology Special Publication 800-53, Revision 5, Security and
Privacy Controls for Federal Information Systems and Organizations
Management did not effectively design, implement, and operate access controls for applications, databases,
operating systems, and tools, particularly those related to the authorization, provisioning, monitoring, and
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deactivation of user accounts. Specifically, management did not have adequate controls designed,
implemented, and operating effectively for the timely removal of access to SBA systems for separated
employees and contractors. Management also did not consistently implement and enforce controls across
multiple systems regarding the configuration of application password security, and authentication to the SBA
network and applications.
Management did not properly design and implement a process for recertifying user accounts that required
validation by an independent individual with the necessary knowledge and authority to recertify access. Further,
user recertifications did not always contain sufficient user identifier information, preventing reviewers from
associating accounts with individuals and assessing the appropriateness of their access based on their roles
and responsibilities.
These deficiencies were caused by several factors: a lack of enforcement of account management controls for
the authorization, provisioning, monitoring, and deprovisioning of user accounts; inadequate implementation of
password, and authentication controls; insufficient monitoring and accountability of individuals performing
control responsibilities; inconsistent validation of the continued operating effectiveness of controls ensuring
data is completely and accurately captured and recorded; and an inadequate risk assessment process to
identify and mitigate the risk of inappropriate access.
The deficiencies described 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, including
manipulation of financial transactions and erroneous financial reporting.
Recommendations – Logical Access Controls
We recommend the Administrator coordinate with the Acting Chief Information Officer to:
33. Implement procedures to validate that SBA network access for separated users, per the
authoritative source listings, is removed within the required timeframes.
34. Establish a plan to implement multi-factor authentication for non-privileged users.
35. Implement a process to track compliance with the plan to implement multi-factor authentication
requirements.
We recommend the Administrator coordinate with the Chief Financial Officer to:
36. Document within the system security plan the control implementation for all tools and layers
within the authorization boundary.
37. Develop and provide training to the control operators to reinforce the existing policies and
procedures for requesting, approving, and provisioning new or modified user access.
38. Establish a backup for the individual responsible for operating system account management to
remove single points of failure.
39. Revise the account recertification script so data is retrieved from the correct fields.
40. Update the account review and recertification procedures to include quality control steps to
validate that complete and accurate account listings are used for all user accounts within the
authorization boundary, including the operating system servers.
41. Update the user access review control to include an attribute to ensure that the reviewer has
the knowledge, authority, and independence to conduct the review. Additionally, formalize
these procedures within the existing account management policies and procedures.
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42. Improve controls over personnel actions to ensure timely separation of employees and
removal of system access privileges.
43. Provide training to control operators to reinforce the existing policies and procedures for
requesting and approving user access for employees dependent upon their employment
status (e.g. temporary employee, full-time employee and contractor).
44. Implement separation of duties between roles and functions within the organization to prevent
circumvention of controls.
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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 Reporting of Contingencies Need Improvement
1. Controls over Payments for Covered Loans under the Debt Relief Program Need Improvement
The CARES Act and related legislation authorized the Debt Relief Program that allowed SBA to make
payments on behalf of certain loans in the 7(a) and 504 loan guarantee programs and the Microloan program.
Management did not design and implement effective controls over the Debt Relief Program post payment
review process. A contractor was used to develop and perform a risk-based methodology to identify the
payments for covered loans that may have a higher risk for overpayments and would require further review.
However, management did not provide evidence of an effective review over the accuracy of the inputs,
appropriateness of significant assumptions, and the application of the methodology.
Further, management did not provide evidence of an effective review of the other alternative methodologies
considered and a documented approved basis for the selected risk-based methodology. The documentation
evidencing a risk assessment for the impact of the payments that were not considered, determined to be of
lower risk, and the application of variance thresholds was not provided by management. Despite the high rate
of false positive loan payments that were identified for review by the methodology, management did not provide
documentation considering whether the applied methodology was still appropriate.
These deficiencies were caused by management’s reliance on the contractor’s work without adequate
monitoring controls. Also, management did not perform an adequate risk assessment to identify and mitigate
relevant risks and design appropriate controls to ensure an effective post payment review of payments for
covered loans under the Debt Relief Program caused the deficiency identified above.
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 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
The deficiencies described 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 Acting Associate Administrator for the Office of
Capital Access to:
45. Design and implement controls that require oversight over contractors, including maintenance of
documentation, that provides evidence over the adequate review and validation of the contractor’s
work product.
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46. Perform and document a thorough risk assessment of the payments for covered loans under
the Debt Relief Program.
47. Design and implement the appropriate review controls to identify payments that may have
been improper or inaccurate. Implement an effective funds recovery plan that includes an
effective process to provide the information necessary to record any required accounting
adjustments for accurate and timely financial reporting based on the results of the risk
assessment.
2. Controls over Reporting of Contingencies Need Improvement
Statement of Federal Financial Accounting Standards Number 5, Accounting for Liabilities of the Federal
Government, establishes the accounting and financial reporting requirements for contingencies.
A contingency is an existing condition, situation, or set of circumstances involving uncertainty as to
possible gain or loss that will ultimately be resolved when one or more future events occur or fail to occur.
Contingencies should be recognized as a liability when a past transaction or event has occurred, a future
outflow or other sacrifice of resources is probable, and the related future outflow or sacrifice of resources
is measurable. Contingencies should be disclosed if any of the conditions for liability recognition are not
met and there is a reasonable possibility that a loss or an additional loss may have been incurred.
Management did not design and implement monitoring controls to ensure the timely and complete
recognition and disclosure of contingent liabilities. A detailed listing of pending or threatened litigation and
unasserted claims against the SBA was not obtained or maintained by the office responsible for financial
reporting. The office responsible for financial reporting received a summary of cases by program;
however, the information did not include the name and description of each case, the amount claimed,
likelihood of loss, and estimated amount or range of potential loss. The information and communication
process between the office responsible for communicating the legal matters did not provide the necessary
information to those responsible for the financial reporting to perform a complete assessment of the
financial reporting impact.
Also, management did not report the summary of cases in accordance with a newly implemented materiality
policy. Further, management did not document the quantitative and qualitative evaluation performed to
determine that recognition or disclosure was not warranted in accordance with its policy.
The deficiency was caused by the lack of an effective communication and information process between the
offices responsible for providing all relevant information regarding legal matters to the respective office
responsible for the financial reporting to perform the appropriate assessment of legal matters and the
impact to SBA consolidated financial statements. Also, management did not adequately implement the new
materiality policy.
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 10,
Design Control Activities; Principle 13, Use Quality Information; and Principle 14, Communicate
Internally
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and
Internal Control
The deficiency described above may result in misstatements or omissions to the Other than
Intragovernmental Liabilities line item and the Commitments and Contingencies disclosure and other
related elements in the consolidated financial statements.
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Recommendations – Reporting of Contingencies
We recommend the Administrator coordinate with the Chief Financial Officer to:
48. Design and implement effective communication processes with the Office of General Counsel
to obtain relevant and complete information to ensure complete, accurate, and timely
recognition and disclosure of contingencies.
49. Update the new materiality policy to specify the application criteria and design and implement
controls to ensure that the application of the policy is effective and documented.
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Appendix III
U.S. Small Business Administration
Compliance and Other Matters
A. Debt Collection Improvement Act of 1996, as amended (DCIA)
Certain provisions of the DCIA require agencies to notify and refer debts that are delinquent by 120 days or
more, for purposes of administrative offset and centralized collection, to the U.S. Department of Treasury
(Treasury).
Management did not refer delinquent loans to the Treasury for collection within the required timeframe.
Management identified and communicated that approximately 755,725 COVID-EIDLs and 363,863 PPP loans
were noncompliant with DCIA requirements for the fiscal year ended September 30, 2024.
In addition, management did not design and implement effective controls to identify a complete population of
delinquent loans that meet the criteria for referral to Treasury to ensure compliance with DCIA requirements.
The conditions identified were caused by inadequate design and implementation of risk assessment and
monitoring processes that enable management to identify, analyze, and respond to the relevant risks of
noncompliance and to ensure delinquent loans were identified and referred to Treasury within the required
timeframe. Also, the deficiencies were caused by inadequate system infrastructure in place to understand and
respond to the root causes of noncompliance.
The following criteria were considered with respect to the matter described in the preceding paragraphs:
• DCIA
• GAO’s Green Book, Principle 9, Identify, Analyze, and Respond to Change; and Principle 10,
Design Control Activities
As a result of delays and absence of referrals of delinquent borrowers and guarantors to Treasury, SBA
did not comply with DCIA requirements.
Recommendations – DCIA
We recommend the Administrator coordinate with the Associate Administrator for the Office of Capital
Access to:
50. Perform a regular review and risk assessment of the implemented policies to ensure they are
responding to relevant risks of noncompliance for the current fiscal year.
51. Design, implement, and document appropriate monitoring controls to address compliance with
DCIA.
52. Reevaluate the operational infrastructure and system controls to address relevant risks of
noncompliance and ensure that borrowers are notified timely of delinquency, and if applicable,
subsequently referred to Treasury timely.
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B. 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:
• Thoroughly document a comprehensive evaluation of internal control over financial reporting regarding
current programs while giving consideration to relevant risks during the fiscal year.
• 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.
• 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:
53. In conjunction with relevant program offices, perform and document a comprehensive 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.
54. Work with relevant program office management to communicate and respond to control testing
results and update corrective action plans to remediate control deficiencies identified.
55. 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.
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C. 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:
• 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, do not ensure
compliance objectives are met, and do not ensure budgetary resources are safeguarded against waste,
loss, and misuse.
• Federal Accounting Standards. The deficiencies identified and reported in Appendix I – Material
Weaknesses, provide an indication that SBA’s financial management systems were substantially
noncompliant with applicable federal accounting standards. Specifically, management was unable to
provide evidence that the accounting treatment and financial reporting of the recovery of funds related
to the RRF, SVOG, COVID-19 EIDLs, and PPP programs were in accordance with U.S. generally
accepted accounting principles.
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:
56. 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 Recovery and Resilience to implement the recommendations in Appendix I –
Material Weaknesses.
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CFO RESPONSE TO DRAFT AUDIT REPORT ON FY 2024
FINANCIAL STATEMENTS
Appendix IV
CFO Response to Audit Report
on FY 2024 Financial Statements
DATE: November 15, 2024
TO: Hannibal M. Ware, Inspector General
FROM: Kate Aaby, Associate Administrator for Performance, Planning and the Chief
Financial Officer
SUBJECT: FY 2024 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 2024 and FY 2023
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 2024 Agency Financial Report includes pandemic relief programs: the Paycheck
Protection Program, the COVID-19 Economic Injury Disaster Loan program, the Restaurant
Revitalization Fund program, and the Shuttered Venue Operators Grant program, which were
authorized by the Coronavirus Aid, Relief, and Economic Security Act of 2020, the Economic
Aid Act, the American Rescue Plan Act, and related legislations. As in FY 2023, the
management 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. In FY 2024, SBA hired a Chief Risk Officer (CRO) and established a new
Office of Enterprise Integrity (OEI) to evaluate and consolidate audit management, internal
controls, improper payments, fraud risk management and Enterprise Risk Management (ERM).
SBA’s Fraud Risk Management Board (FRMB) mitigates, manages, and monitors fraud risks
aligned with GAO’s Fraud Risk Management Framework. The FRMB is co-chaired by the CFO
and CRO and members include Deputy Associate Administrators of key program offices, who
are supported by an advisory team of SBA leaders with subject matter expertise across
cybersecurity, data, systems, learning and development, and more.
In FY 2024, SBA implemented a more centralized financial statement audit management
structure to provide the Agency additional support and oversight to improve financial
statement audit posture, improving partnerships across SBA and providing more proactive
considerations to strengthen SBA’s confidence of its financial standing. 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. This was
all accomplished and prioritized within existing resources.
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The SBA Senior Management Council (SMC) which is chaired by the CRO and comprised of
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.
The auditors identified material weaknesses related to the internal controls over seven areas:
COVID-19 Economic Injury Disaster Loans, Paycheck Protection Program Loan Guarantees,
the Restaurant Revitalization Fund and Shuttered Venue Operators Grant Program, Financial
reporting for programs funded by CARES Act and related legislation, Evaluation of Service
Organizations, Entity Level Controls, and General Information Technology Controls. The SBA
has undergone tremendous efforts to strengthen internal controls, policies and procedures and
will continue remediation efforts in the coming audit year.
In FY 2024, SBA re-engaged the Federal Accounting Standards Advisory Board (FASAB) to
obtain clarification on the appropriate accounting treatment for various scenarios within the
COVID-19 Economic Injury Disaster and Paycheck Protection Program loan portfolios. Due to
the unique programs and scope of the standards, FASAB has redirected our inquiry to
Treasury and OMB. These discussions will occur in FY 2025 and will be a critical milestone in
SBA’s remediation.
In addition, SBA implemented Single Sign-On for the Financial Management System in FY
2024. This streamlined multi-factor authentication process enhanced the efficiency, security,
and user experience associated with accessing the Financial Management System.
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.
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Financial Reporting (Unaudited)
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
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 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.
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U.S. SMALL BUSINESS ADMINISTRATION
CONSOLIDATED BALANCE SHEET
As of September 30, 2024 and 2023
(Dollars in Thousands) Line Item 2024 2023
ASSETS
Intragovernmental
Fund Balance with Treasury (Note 2) $ 17,845,756 $ 44,081,291
Accounts Receivable, Net (Note 5) 324 -
Advances and Prepayments 7,260 6,303
Total Intragovernmental Assets 17,853,340 44,087,594
Other than Intragovernmental Assets
Cash and Other Monetary Assets (Note 3) 8,618 10,460
Accounts Receivable, Net (Note 5) 119,910 165,487
Loans Receivables, Net:
Credit Program Receivables and Related Foreclosed Property, Net (Note 6) 258,107,817 271,944,994
Property, Plant and Equipment, Net (Note 7) 79,875 103,995
Advances and Prepayments 12,365 16,054
Total Other than Intragovernmental Assets 258,328,585 272,240,990
Total Assets $ 276,181,925 $ 316,328,584
LIABILITIES (Note 8)
Intragovernmental Liabilities
Accounts Payable:
Accounts Payable, Capital Transfers:
Net Assets of Liquidating Funds Due to Treasury (Note 10) $ 8,673 $ 10,960
Accounts Payable 2,418 3,938
Debt:
Interest Payable – Loans and Other Funds (Note 9) 77 69
Loans Payable:
Principal Payable to the Bureau of the Fiscal Service (Note 9) 264,662,710 334,320,210
Advances from Others 3,316 2,427
Other Liabilities:
Benefit Program Contributions Payable 12,052 15,068
Liability to the General Fund of the U.S. Government for Other Non-Entity Assets:
Downward Reestimate Payable to Treasury (Note 14) 9,902,199 2,724,486
Other (Note 11) 2,032 2,955
Total Intragovernmental Liabilities 274,593,477 337,080,113
Other than Intragovernmental Liabilities
Accounts Payable 558,090 539,791
Federal Employee Salary, Leave, and Benefits Payable (Note 12) 81,980 103,872
Post-Employment Benefits Payable (Note 12) 29,273 27,477
Loan Guarantee Liabilities (Note 6) 4,827,018 7,895,498
Other Liabilities:
Accrued Grant Liability 141,473 248,158
Surety Bond Guarantee Program Future Claims (Note 8) 77,268 68,655
Other (Note 11) 127,434 72,318
Total Other than Intragovernmental Liabilities 5,842,536 8,955,769
Total Liabilities 280,436,013 346,035,882
Commitments and Contingencies (Note 18)
NET POSITION
Unexpended Appropriations – Funds from Other Than Dedicated Collections 3,092,566 3,724,113
Cumulative Results of Operations – Funds from Other Than Dedicated Collections (7,346,654) (33,431,411)
Total Net Position (4,254,088) (29,707,298)
Total Liabilities and Net Position $ 276,181,925 $ 316,328,584
The accompanying notes are an integral part of these statements.
Agency Financial Report Fiscal Year 2024 67 U.S. Small Business Administration
Financial Reporting (Unaudited)
U.S. SMALL BUSINESS ADMINISTRATION
CONSOLIDATED STATEMENT OF NET COST
For the Years Ended September 30, 2024 and 2023
(Dollars in Thousands) Line Item 2024 2023
STRATEGIC GOAL 1:
Ensure Equitable and Customer-Centric Design and Delivery of
Programs to Support Small Businesses and Innovative Startups
Gross Cost $ 806,568 $ 1,033,792
Less: Earned Revenue 210,539 234,652
Net Cost of Strategic Goal 1 596,029 799,140
STRATEGIC GOAL 2:
Build Resilient Businesses and a Sustainable Economy
Gross Cost 3,704,972 40,040,060
Less: Earned Revenue 4,950,229 5,919,285
Net Cost of Strategic Goal 2 (1,245,257) 34,120,775
STRATEGIC GOAL 3:
Implement Strong Stewardship of Resources for Greater Impact
Gross Cost 170,880 169,534
Net Cost of Strategic Goal 3 170,880 169,534
COST NOT ASSIGNED TO STRATEGIC GOALS
Gross Cost 169,432 233,137
Net Cost Not Assigned to Strategic Goals 169,432 233,137
Net Cost of Operations $ (308,916) $ 35,322,586
Note 15
The accompanying notes are an integral part of these statements.
Agency Financial Report Fiscal Year 2024 68 U.S. Small Business Administration
Financial Reporting (Unaudited)
U.S. SMALL BUSINESS ADMINISTRATION
CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION
For the Years Ended September 30, 2024 and 2023
(Dollars in Thousands) Line Item 2024 2023
Funds from other than Dedicated Collections
Unexpended Appropriations:
Beginning Balance $ 3,724,113 $ 10,558,338
Appropriations Received 35,227,207 30,739,480
Other Adjustments:
Rescissions (43,228) (5,867,516)
Adjustment – Cancelled Authority (18,883) (15,088)
Return of Unrequired Liquidating Fund Appropriation (494) (597)
Other Adjustments (227) (104)
Appropriations Used (35,795,922) (31,690,963)
Adjustment to Cancelled Funds - 563
Total Unexpended Appropriations $ 3,092,566 $ 3,724,113
Cumulative Results of Operations:
Beginning Balance $ (33,431,411) $ (27,669,576)
Other Adjustments:
Current Year Liquidating Equity Activity 909 (5,932)
Appropriations Used 35,795,922 31,690,963
Donations of Cash and Cash Equivalents 9 -
Imputed Financing 53,796 38,595
Other:
Non-entity Activity (10,074,795) (2,162,312)
Adjustment to Cancelled Funds - (563)
Net Cost of Operations (308,916) 35,322,586
Net Change in Cumulative Results of Operations 26,084,757 (5,761,835)
Total Cumulative Results of Operations $ (7,346,654) $ (33,431,411)
Ending Net Position $ (4,254,088) $ (29,707,298)
The accompanying notes are an integral part of these statements.
Agency Financial Report Fiscal Year 2024 69 U.S. Small Business Administration
Financial Reporting (Unaudited)
U.S. SMALL BUSINESS ADMINISTRATION
COMBINED STATEMENT OF BUDGETARY RESOURCES
For the Years Ended September 30, 2024 and 2023
(Dollars in Thousands)
September 30, 2024
Nonbudgetary
Line Item Budgetary Total
Financing
BUDGETARY RESOURCES
Unobligated Balance from Prior Year Budget Authority, Net
$ 4,514,210 $ 20,886,403 $ 25,400,613
(discretionary and mandatory)
Appropriations (discretionary and mandatory) 35,212,157 801 35,212,958
Borrowing Authority (discretionary and mandatory) - 2,655,914 2,655,914
Spending Authority from Offsetting Collections 389,617 4,259,011 4,648,628
Total Budgetary Resources $ 40,115,984 $ 27,802,129 $ 67,918,113
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total) $ 36,577,358 $ 15,607,348 $ 52,184,706
Unobligated Balance, end of year:
Apportioned, unexpired accounts 918,126 6,702,752 7,620,878
Unapportioned, unexpired accounts 244,257 5,492,029 5,736,286
Unexpired Unobligated Balance, end of year 1,162,383 12,194,781 13,357,164
Expired Unobligated Balance, end of year 2,376,243 - 2,376,243
Total Unobligated Balance, end of year 3,538,626 12,194,781 15,733,407
Total Status of Budgetary Resources $ 40,115,984 $ 27,802,129 $ 67,918,113
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 36,148,630 $ 36,148,630
Distributed Offsetting Receipts (2,953,774) (2,953,774)
Agency Outlays, Net (discretionary and mandatory) $ 33,194,856 $ 33,194,856
Disbursements, Net (total) (mandatory) $ (44,352,632)
Note 16
The accompanying notes are an integral part of these statements.
Agency Financial Report Fiscal Year 2024 70 U.S. Small Business Administration
Financial Reporting (Unaudited)
U.S. SMALL BUSINESS ADMINISTRATION
COMBINED STATEMENT OF BUDGETARY RESOURCES
For the Years Ended September 30, 2024 and 2023
(Dollars in Thousands)
September 30, 2023
Nonbudgetary
Line Item Budgetary Total
Financing
BUDGETARY RESOURCES
Unobligated Balance from Prior Year Budget Authority, Net
$ 10,514,312 $ 44,320,084 $ 54,834,396
(discretionary and mandatory)
Appropriations (discretionary and mandatory) 24,899,206 - 24,899,206
Borrowing Authority (discretionary and mandatory) - 5,903,912 5,903,912
Spending Authority from Offsetting Collections 1,246,101 20,270,103 21,516,204
Total Budgetary Resources $ 36,659,619 $ 70,494,099 $ 107,153,718
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total) $ 32,264,241 $ 32,336,647 $ 64,600,888
Unobligated Balance, end of year:
Apportioned, unexpired accounts 1,658,289 14,681,439 16,339,728
Unapportioned, unexpired accounts 327,684 23,476,013 23,803,697
Unexpired Unobligated Balance, end of year 1,985,973 38,157,452 40,143,425
Expired Unobligated Balance, end of year 2,409,405 - 2,409,405
Total Unobligated Balance, end of year 4,395,378 38,157,452 42,552,830
Total Status of Budgetary Resources $ 36,659,619 $ 70,494,099 $ 107,153,718
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 31,040,175 $ 31,040,175
Distributed Offsetting Receipts (5,047,035) (5,047,035)
Agency Outlays, Net (discretionary and mandatory) $ 25,993,140 $ 25,993,140
Disbursements, Net (total) (mandatory) $ (22,583,469)
Note 16
The accompanying notes are an integral part of these statements.
Agency Financial Report Fiscal Year 2024 71 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 1 Reporting Entity and Summary of Significant Accounting Policies
Reporting Entity
The Small Business Act of 1953 created the Small Business Administration as an independent federal agency. 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 Credit
Program Receivables and Related Foreclosed Property, Net is the discounted present value of the estimated future net cash
flows for all the loan cohorts composed of outstanding FCRA loans receivable adjusted to net present value with an allowance
for subsidy. A cohort of loans receivable or guaranteed 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
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.
Agency Financial Report Fiscal Year 2024 72 U.S. Small Business Administration
Financial Reporting (Unaudited)
Budgets and Budgetary Accounting for Loan Programs
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. The 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. The 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 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.
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 a 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. 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.
Agency Financial Report Fiscal Year 2024 73 U.S. Small Business Administration
Financial Reporting (Unaudited)
Commitments and Contingencies
The SBA is a party in various administrative proceedings, legal actions, environmental suits, and claims brought against the
Agency. In the opinion of SBA’s management and legal counsel, there are certain matters regarding legal claims for which a
clear evaluation of the likelihood of an unfavorable outcome cannot be determined as of the date of this financial report. See
Note 18, Contingencies and Commitments for further details. The resolution of all other legal proceedings, actions, suits, and
claims will not materially affect the financial position or results of SBA’s operations.
Cumulative Results of Operations
The Cumulative Results of Operations, presented on the Consolidated Balance Sheet and on the Consolidated 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 SBA’s appropriations received which 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 SBA’s financial statements. SBA’s fiduciary balances are on
deposit in commercial banks. 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.
Accrued funded payroll and leave has been moved to Federal Employee Salary, Leave, and Benefits Payable on the
Consolidated Balance Sheet in accordance with OMB and Treasury required changes for FY 2024. FY 2023 amounts have
been realigned to be comparable to the presentation for FY 2024.
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.
Agency Financial Report Fiscal Year 2024 74 U.S. Small Business Administration
Financial Reporting (Unaudited)
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 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. 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 Consolidated 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.
Actuarial FECA liabilities have been moved to Post Employment Benefits Payable on the Consolidated Balance Sheet
in accordance with OMB and Treasury required changes for FY 2024. FY 2023 amounts have been realigned to be
comparable to the presentation for FY 2024.
Agency Financial Report Fiscal Year 2024 75 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 2 Fund Balance with Treasury
The Department of the Treasury processes cash receipts and disbursements on SBA’s behalf to pay liabilities and finance
loan program costs. Cash receipts are deposited into SBA’s account at the Treasury. 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 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).
(Dollars in Thousands)
As of September 30, 2024 2023
Appropriated Funds $ 4,849,654 $ 5,833,607
Financing Funds 12,756,281 38,060,348
Liquidating Funds 358 344
Revolving Funds 111,458 113,918
Trust Fund 520 552
Total Entity Fund Balance with Treasury 17,718,271 44,008,769
Budget Clearing Account Balance 127,485 72,522
Total Fund Balance with Treasury $ 17,845,756 $ 44,081,291
Status of Fund Balance with Treasury
Apportioned, unexpired accounts $ 7,620,878 $ 16,339,728
Unapportioned, unexpired accounts 5,736,286 23,803,697
Obligated Balance Not Yet Disbursed 2,240,324 2,421,001
Expired Unobligated Balance 2,376,243 2,409,405
Borrowing Authority Not Converted to Funds (255,460) (965,062)
Nonbudgetary 127,485 72,522
Total Fund Balance with Treasury $ 17,845,756 $ 44,081,291
Unobligated balances become available when OMB approves 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 Consolidated Statement of
Budgetary Resources.
Borrowing Authority Not Yet Converted to Fund Balance represents unobligated and obligated amounts recorded at year-end
that will be funded by future borrowings.
Agency Financial Report Fiscal Year 2024 76 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 3 Cash and Other Monetary Assets
The SBA field offices deposit collections from borrowers in SBA’s account at the Treasury using an electronic deposit system.
At the end of the fiscal year, collections temporarily held by SBA field offices pending deposit are recorded as Undeposited
Collections - Cash in Transit and totaled $8.6 million and $10.5 million as of September 30, 2024 and 2023.
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 SBA’s proprietary
statements, but are required to be disclosed in the notes to SBA’s financial statements. SBA’s fiduciary balances are on deposit
in commercial banks.
The Master Reserve Fund is a fiduciary activity administered by 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) guaranteed loans that are purchased by secondary market investors. The MRF receives monthly payments
from SBA guaranteed borrowers and disburses monthly to 7(a) secondary market pool investors based on a schedule of
amounts due. In FY 2024, the MRF also received $47.5 million in transfers from the SBA to support select older cohort
available balances, which have sustained higher distributions to pool certificate holders than collections from remaining
pooled loans. The 7(a) secondary market program includes SBA’s guaranty of timely payment, as well as a default guaranty, to
7(a) secondary market investors. The MRF supports $38.1 billion of outstanding SBA guaranteed 7(a) secondary market pool
principal as of September 30, 2024 and September 30, 2023.
The Master Reserve Account is a fiduciary activity administered by 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 SBA’s guaranty of timely payment, as well as a default guaranty,
to 504 secondary market investors. The MRA supports $34.8 billion and $36.1 billion of SBA guaranteed 504 debentures
outstanding in the secondary market as of September 30, 2024 and September 30, 2023.
The composition of the MRF and MRA and a reconciliation of the changes in the assets are included in the following table.
Agency Financial Report Fiscal Year 2024 77 U.S. Small Business Administration
Financial Reporting (Unaudited)
Master Reserve Fund and Master Reserve Account
(Dollars in Thousands)
FIDUCIARY ASSETS
As of September 30, 2024 2023
Line Item MRF MRA Total MRF MRA Total
Cash $ - $ 17 $ 17 $ - $ - $ -
Short Term Securities
Money Market Funds 404,727 632,313 1,037,040 480,960 584,118 1,065,078
Treasury Bills 128,114 - 128,114 221,905 - 221,905
Total Cash and Short 532,841 632,330 1,165,171 702,865 584,118 1,286,983
Term Securities
Long Term Securities
Treasury Notes/Bonds
Including Interest 1,082,771 - 1,082,771 1,191,086 - 1,191,086
Total Long Term Securities 1,082,771 - 1,082,771 1,191,086 - 1,191,086
Net Assets $ 1,615,612 $ 632,330 $ 2,247,942 $ 1,893,951 $ 584,118 $ 2,478,069
(Dollars in Thousands)
RECONCILIATION OF FIDUCIARY ASSETS
For the Years Ended
2024 2023
September 30,
Line Item MRF MRA Total MRF MRA Total
Beginning Net Assets $ 1,893,951 $ 584,118 $ 2,478,069 $ 2,038,889 $ 780,155 $ 2,819,044
Receipts
Earned Income 99,129 43,165 142,294 63,935 36,937 100,872
Contributions 12,086,813 12,937,091 25,023,904 11,312,538 13,238,008 24,550,546
Net Realized Gain (Loss) 127 - 127 - - -
Total Receipts 12,186,069 12,980,256 25,166,325 11,376,473 13,274,945 24,651,418
Less Disbursements
Payments to Investors 12,464,408 12,932,044 25,396,452 11,521,411 13,470,982 24,992,393
Total Disbursements 12,464,408 12,932,044 25,396,452 11,521,411 13,470,982 24,992,393
Ending Net Assets $ 1,615,612 $ 632,330 $ 2,247,942 $ 1,893,951 $ 584,118 $ 2,478,069
The SBA has four accounts that belong to the 7(a) loan program and are non-MRF in nature. Two of the four non-MRF
accounts are fiduciary in nature (7a Escrow & 7a Disbursement). The balances of the two fiduciary accounts are $100.2
million and $151.0 million at September 30, 2024 and September 30, 2023.
Agency Financial Report Fiscal Year 2024 78 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 5 Accounts Receivable
Accounts receivable include amounts owed by the public for guaranty fees in SBA’s loan and surety bond programs, refunds
due from employees and others, as well as other amounts owed by lenders for guaranteed 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 guaranteed 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, 2024 2023
Intragovernmental
Administrative Receivables $ 324 $ -
Total Intragovernmental 324 -
Other than Intragovernmental
Guaranty Fees Receivable $ 42,563 $ 75,764
Refunds 1,393 1,891
Other 78,423 88,990
Total Other than Intragovernmental 122,379 166,645
Allowance For Loss (2,469) (1,158)
Net Other than Intragovernmental $ 119,910 $ 165,487
Note 6 Credit Program Receivables and Loan Guarantee Liabilities
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 Guaranteed 7(a) Loan Guaranty
Business Guaranteed 504 Certified Development Company
Business Guaranteed Small Business Investment Company Debentures
Business Direct 7(m) Microloan
Agency Financial Report Fiscal Year 2024 79 U.S. Small Business Administration
Financial Reporting (Unaudited)
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 offered low-interest Economic Injury Disaster Loans for
working capital to small businesses suffering substantial economic injury as a result of the COVID-19 pandemic. Although
SBA stopped accepting new loan applications on January 1, 2022, the program continues to require servicing support.
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. Although the Paycheck Protection
Program ended on May 31, 2021, there continues to be recovery activity.
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.
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 guaranteed 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.
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 is used as the basis for program performance assumptions. The historical data undergoes 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
Agency Financial Report Fiscal Year 2024 80 U.S. Small Business Administration
Financial Reporting (Unaudited)
Subsidy Funding under the Federal Credit Reform Act
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 guaranteed 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 FCRA, subsidy costs are reestimated annually.
Credit Program Receivables and Related Foreclosed Property, Net
FCRA governs direct loans made after FY 1991. 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.
Guaranteed loans purchased by the SBA upon borrower default are established as loans receivable and are valued in a similar
manner as direct loans under FCRA.
Direct loans and defaulted guaranties made prior to FCRA are valued at the current receivable balance net of an allowance for
uncollectible amounts calculated using historical loss experience.
The SBA advances payments semiannually to honor SBA’s timely payment requirement of principal and interest due for
debentures in SBA’s 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 is comprised of accrued interest on loans receivable and purchased interest related to defaulted
guaranteed 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. 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 is comprised of 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, 2024 SBA’s foreclosed
property was $30.7 million related to 83 loans. The properties had been held for an average of 1,466 days. At September 30,
2023 foreclosed property was $27.8 million related to 71 loans. The properties had been held for an average of 1,594 days.
Valuation Methodology for the Liability for Loan Guaranties under FCRA
FCRA also governs loan guaranties made after FY 1991. A liability for outstanding guaranties is included on SBA’s Balance
Sheet. The liability for guaranteed 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 guaranteed loans purchased by the SBA.
Valuation Methodology for Pre-FCRA Liability for Loan Guaranties
The SBA values pre-credit reform direct and defaulted guaranteed loans by estimating an allowance for loan losses. This
allowance is offset against gross loan receivables to obtain SBA’s expected net collections from these assets. The SBA
establishes a 100 percent allowance for pre-credit reform direct and guaranteed loans that are past due more than 180 days.
Agency Financial Report Fiscal Year 2024 81 U.S. Small Business Administration
Financial Reporting (Unaudited)
B. Credit Program Receivables and Related Foreclosed Property, Net
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2024 Total
Loans Loans
Direct Business Loans
Business Loans Receivable $ 1,886 $ 229,985 $ 231,871
Interest Receivable - 1,652 1,652
Foreclosed Property 2,625 - 2,625
Allowance (4,511) (17,645) (22,156)
Total Direct Business Loans - 213,992 213,992
Direct Disaster Loans
Disaster Loans Receivable - 287,021,249 287,021,249
Interest Receivable - 10,134,085 10,134,085
Foreclosed Property - 5,779 5,779
Allowance - (40,913,937) (40,913,937)
Total Direct Disaster Loans - 256,247,176 256,247,176
Defaulted Guaranteed Business Loans & Other Loans Receivable
Defaulted Guaranteed Business Loans - 4,035,096 4,035,096
Other Loans Receivable (see note below) - 44,309 44,309
Interest Receivable - 22,578 22,578
Foreclosed Property 1,264 20,988 22,252
Allowance (1,264) (2,476,322) (2,477,586)
Total Defaulted Guaranteed Business Loans & Other Loans Receivable - 1,646,649 1,646,649
Total Credit Program Receivables & Related Foreclosed Property, Net $ 258,107,817
Agency Financial Report Fiscal Year 2024 82 U.S. Small Business Administration
Financial Reporting (Unaudited)
B. Credit Program Receivables and Related Foreclosed Property, Net Continued
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2023 Total
Loans Loans
Direct Business Loans
Business Loans Receivable $ 753 $ 232,732 $ 233,485
Interest Receivable - 1,000 1,000
Foreclosed Property 2,620 - 2,620
Allowance (3,373) (20,362) (23,735)
Total Direct Business Loans - 213,370 213,370
Direct Disaster Loans
Disaster Loans Receivable 204 311,320,821 311,321,025
Interest Receivable 308 13,257,040 13,257,348
Foreclosed Property - 4,160 4,160
Allowance (70) (53,947,589) (53,947,659)
Total Direct Disaster Loans 442 270,634,432 270,634,874
Defaulted Guaranteed Business Loans & Other Loans Receivable
Defaulted Guaranteed Business Loans 448 3,492,648 3,493,096
Other Loans Receivable (see note below) - 59,438 59,438
Interest Receivable - 28,191 28,191
Foreclosed Property 1,263 19,742 21,005
Allowance (1,711) (2,503,269) (2,504,980)
Total Defaulted Guaranteed Business Loans & Other Loans Receivable - 1,096,750 1,096,750
Total Credit Program Receivables & Related Foreclosed Property, Net $ 271,944,994
Note: Other Loans Receivable includes payments advanced by the SBA against future reimbursements in the SBIC and 504 loan programs.
Agency Financial Report Fiscal Year 2024 83 U.S. Small Business Administration
Financial Reporting (Unaudited)
C. Loans Disbursed and Outstanding Loan Obligations
(Dollars in Thousands)
DIRECT LOANS
New Loans Disbursed During the Year Ended September 30, 2024 2023
Business Direct Loan Program $ 37,996 $ 48,772
Disaster Loan Program 1,450,201 2,097,897
Total Direct Loans Disbursed $ 1,488,197 $ 2,146,669
Outstanding Loan Obligations as of September 30, 2024 2023
Business Direct Loan Program $ 46,748 $ 48,372
Disaster Loan Program 832,793 896,097
Total Direct Loan Obligations $ 879,541 $ 944,469
GUARANTEED LOANS
New Loans Disbursed During the Year Ended September 30, 2024 2023
Total Principal Disbursed at Face Value $ 34,274,318 $ 33,410,769
Total Principal Disbursed Guaranteed by the SBA 27,281,344 26,958,798
Outstanding Loan Obligations as of September 30, 2024 2023
Business Guaranteed Loan Programs $ 24,606,031 $ 22,600,122
Loans Outstanding as of September 30, 2024 2023
Total Principal Outstanding at Face Value $ 166,585,501 $ 165,520,099
Total Principal Outstanding Guaranteed by the SBA 139,527,550 140,270,131
Note: Total guaranteed balances as of September 30, 2023 include 504 guaranteed debenture balances which have not been reduced by recent semi-annual
scheduled principal payments.
Agency Financial Report Fiscal Year 2024 84 U.S. Small Business Administration
Financial Reporting (Unaudited)
D. Subsidy Cost Allowance Balances
(Dollars in Thousands)
For the Years Ended September 30, 2024 2023
Post-1991 Business Direct and Purchased Guaranteed Loans
Beginning Balance of Allowance Account $ 2,523,631 $ 2,362,578
Current Year's Subsidy (see 6.G for breakdown by component) 3,362 3,650
Loans Written Off (3,373,755) (11,227,347)
Subsidy Amortization (1,517) (2,102)
Allowance Related to Guaranteed Loans Purchased This Year 2,304,136 10,237,161
Miscellaneous Recoveries and Costs 1,042,700 1,157,900
Balance of Subsidy Allowance Account before Reestimates 2,498,557 2,531,840
Reestimates (4,590) (8,209)
Ending Balance of Allowance Account $ 2,493,967 $ 2,523,631
Post-1991 Disaster Direct Loans
Beginning Balance of Allowance Account $ 53,947,589 $ 61,462,708
Current Year's Subsidy (see 6.G for breakdown by component) 265,535 251,139
Loan Modification 2,671 57,961
Loans Written Off (39,906,551) (49,728,611)
Subsidy Amortization 5,601,960 6,544,909
Miscellaneous Recoveries and Costs 22,765,276 1,291,687
Balance of Subsidy Allowance Account before Reestimates 42,676,480 19,879,793
Reestimates (1,762,543) 34,067,796
Ending Balance of Allowance Account $ 40,913,937 $ 53,947,589
Note: The Disaster Direct Loans Miscellaneous Recoveries and Costs line includes $21.7 billion in loans written off in prior years. These loans were
returned to regular servicing in FY 2024 and reestablished as loan receivables. The increase in loans returned to regular servicing is primarily attributed to
enrollments in the Hardship Accommodation Program (HAP).
Agency Financial Report Fiscal Year 2024 85 U.S. Small Business Administration
Financial Reporting (Unaudited)
E. Liability for Loan Guaranties
(Dollars in Thousands)
For the Years Ended September 30, 2024 2023
Post-1991 Business Loan Guaranties
Beginning Balance of Liability for Loan Guaranties $ 7,895,498 $ 25,708,234
Claim Payments to Lenders/Guarantee Payments (4,511,684) (12,223,993)
Fees 1,150,854 1,244,154
Interest Supplements Paid (78,810) (307,695)
Interest Revenue on Uninvested Funds 90,162 113,905
Interest Expense on Entity Borrowings (62,169) (62,886)
Current Year's Subsidy (see 6.G for breakdown by component) 19,399 72,371
Upward Reestimates 823,551 408,676
Downward Reestimates (1,426,005) (1,611,710)
Adjustment Due to Reestimate & Guaranteed Loan Purchases 2,207,548 1,986,832
Miscellaneous Recoveries and Costs (1,281,326) (7,432,390)
Total Ending Balance of Liability for Loan Guaranties $ 4,827,018 $ 7,895,498
F. 2024 Subsidy Rates by Program and Component
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.
Loan Program Total Subsidy Financing Default Other Fee
Guaranty
7(a) 0.00% 0.00% 3.18% 0.00% -3.18%
504 CDC 0.00% 0.00% 4.08% 0.42% -4.50%
504 Refi 0.00% 0.00% 4.24% 0.42% -4.66%
SBIC Debentures 0.00% 0.00% 3.80% 0.03% -3.83%
Direct
Disaster 20.55% 12.67% 10.34% -2.46% 0.00%
Microloan 10.46% 8.67% 2.06% -0.27% 0.00%
Agency Financial Report Fiscal Year 2024 86 U.S. Small Business Administration
Financial Reporting (Unaudited)
G. Subsidy Expense by Component
(Dollars in Thousands)
For the Years Ended September 30, 2024 2023
Business Loan Guaranties
Defaults $ 27,702 $ 108,675
Fees (12,023) (41,895)
Other 3,720 5,591
Subsidy Expense Before Reestimates and Loan Modifications 19,399 72,371
Components of Subsidy Reestimates
Technical Assumptions/Default Reestimates (599,632) (1,177,584)
Interest Rate Reestimates (2,822) (25,450)
Total of the above Components of Subsidy Reestimates (602,454) (1,203,034)
Total Guaranteed Business Loan Subsidy Expense $ (583,055) $ (1,130,663)
Business Direct Loans
Interest $ 2,648 $ 2,661
Defaults 840 1,161
Other (126) (172)
Subsidy Expense Before Reestimates and Loan Modifications 3,362 3,650
Components of Subsidy Reestimates
Technical Assumptions/Default Reestimates (5,427) (7,301)
Interest Rate Reestimates 837 (908)
Total of the above Components of Subsidy Reestimates (4,590) (8,209)
Total Business Direct Loan Subsidy Expense $ (1,228) $ (4,559)
Disaster Direct Loans
Interest $ 137,250 $ (229,722)
Defaults 155,253 411,396
Other (26,968) 69,465
Subsidy Expense Before Reestimates and Loan Modifications 265,535 251,139
Loan Modifications 2,671 57,961
Components of Subsidy Reestimates
Technical Assumptions/Default Reestimates (1,764,672) 30,167,468
Interest Rate Reestimates 2,129 3,900,328
Total of the above Components of Subsidy Reestimates (1,762,543) 34,067,796
Total Disaster Direct Loan Subsidy Expense $ (1,494,337) $ 34,376,896
Note: In FY 2024, loan modifications were required to waive interest for 6-months on outstanding Disaster loans to borrowers impacted by the Maui wildfires and
also to increase the unsecured threshold for new loans approved under Disaster declarations beginning September 9, 2024. For new Disaster loans approved
in FY 2023, loan modifications were required to waive interest during the first year and extend the due date for the first required payment to 12 months. Loan
modifications were also required to increase home Disaster loan limits.
Agency Financial Report Fiscal Year 2024 87 U.S. Small Business Administration
Financial Reporting (Unaudited)
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, 2024 2023
Disaster Direct Loan Programs $ 165,000 $ 1,014,570
Business Loan Programs 162,420 165,718
Total Administrative Expense $ 327,420 $ 1,180,288
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 of future
economic conditions, and enhancements to cash flow projection methods. Financial statement reestimates were performed
using a full year of performance data for FY 2024 for SBA’s large loan programs, with nine months of actual and three
months of projected performance data for the Secondary Market Guarantee, Microloan, and the small loan programs.
Business Guaranteed Loan Programs
Net subsidy reestimates for the business guaranteed loan programs are shown in the following table.
(Dollars in Thousands)
For the Years Ended September 30, 2024 2023
7(a) $ 525,969 $ 197,242
7(a) – Recovery Act (7,795) (5,262)
7(a) – Jobs Act (3,544) 100
7(a) – COVID Support (39,125) (41,981)
504 CDC (264,651) (216,797)
504 CDC – Recovery Act (1,334) (4,573)
504 CDC – Jobs Act (34) (993)
504 CDC – COVID Support (40,060) (30,695)
504 CDC – Debt Refinancing (21,245) (4,018)
504 CDC – Debt Refinancing – COVID Support (5,697) (2,918)
504 First Mortgage Loan Pooling – Recovery Act 134 (4,239)
SBIC Debentures (182,169) 108,228
SBIC Participating Securities 6,168 10,475
Secondary Market Guaranty Program 43,230 (18,237)
Paycheck Protection Program (612,132) (1,186,597)
ARC – Recovery Act (223) (266)
All Other Guaranty Loan Programs 54 (2,503)
Total Guaranteed Loan Program Subsidy Reestimates $ (602,454) $ (1,203,034)
Agency Financial Report Fiscal Year 2024 88 U.S. Small Business Administration
Financial Reporting (Unaudited)
The 7(a) Loan Guaranty program, SBA’s flagship program, had a net upward reestimate of $526.0 million in FY 2024. The
upward reestimate is concentrated in the 2023 and 2024 cohorts. The 2023 and 2024 cohorts have higher actual and future
loss projections than previously estimated, in part due to a loan compositional differences for the cohorts observed though
the current year of data. The upward reestimate for the 2024 cohort is also in part due to lower actual and projected fee
income. The lower fee income is due to more loans being eligible for fee relief provisions than originally estimated, as well as
lower than projected secondary market premium income. The upward reestimate of the 2023 and 2024 cohorts is partially
offset by downward reestimates in the remaining cohorts. These downward reestimates are primarily driven by higher
projected recoveries on purchased loans due to a methodological change to our recovery assumptions.
The 7(a) Recovery Act program had a net downward reestimate of $7.8 million. The reestimate is mostly due to lower-than-
expected losses in FY 2024.
The 7(a) Jobs Act cohort had a net downward reestimate of $3.5 million. The reestimate is mostly due to lower-than-expected
losses in FY 2024.
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 guarantee 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 $39.1 million. The
reestimate is primarily driven by higher projected recoveries on purchased loans due to a methodological change to our
recovery assumptions.
The 504 Certified Development Company program had a net downward reestimate of $264.7 million. The reestimate is
mostly due to better-than-expected loan performance in FY 2024 contributing to a downward reestimate in most cohorts.
Aggregate purchases were lower than projected and recoveries were higher than projected by the prior year model.
The 504 Recovery Act program had a net downward reestimate of $1.3 million. The reestimate is mostly due to better-than-
expected loan performance in FY 2024.
The 504 Jobs Act program had a net downward reestimate of $0.03 million. The reestimate is mostly due to better-than-
expected loan performance in FY 2024.
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 $40.1 million. The reestimate is mostly due to better-than-expected loan performance in FY 2024.
Aggregate purchases were lower than projected by the prior year model.
The 504 Debt Refinancing program had a net downward reestimate of $21.2 million. The reestimate is mostly due to better-
than-expected loan performance in FY 2024 contributing to a downward reestimate for most cohorts. Aggregate purchases
were lower than projected and recoveries were higher than projected by the prior year model.
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 504 Debt Refinance COVID
support program had a net downward reestimate of $5.7 million. The reestimate is in part due to better projected loan
performance in FY 2024. Aggregate purchases were lower than projected by the prior year model.
The Section 504 First Mortgage Loan Pooling program had a net upward reestimate of $0.1 million in FY 2024. The
reestimate is mostly due to higher than projected purchases which was partially offset by higher than projected recoveries in
FY 2024.
The SBIC Debentures program had a net downward reestimate of $182.2 million. The reestimate is primarily driven by
lower than projected defaults in FY 2024. Notably, there were no defaults in the program in FY 2024 which contributes to
the downward reestimate. The lower than projected defaults and updated economic forecast contribute to lower expected
future defaults.
Agency Financial Report Fiscal Year 2024 89 U.S. Small Business Administration
Financial Reporting (Unaudited)
The SBIC Participating Securities program had a net upward reestimate of $6.2 million. The reestimate is mostly due to lower
cash inflows, in the form of profit participation and other inflows, than projected by the prior year model, namely for the
2001-2004 cohorts.
The Secondary Market Guaranty program had a net upward reestimate of $43.2 million. The reestimate is primarily driven
by updated economic assumptions, which resulted in a decrease in expected investment earnings relative to expected pool
interest payments. This is partially offset by a downward reestimate for the 2024 cohort due to a compositional shift in actual
pool formations to pools with lower net pool interest rates than was originally assumed at formulation.
The Paycheck Protection Program (PPP) had a downward reestimate of $612.1 million in FY 2024. The reestimate is due
to a decrease in expected lifetime repurchases for both program cohorts. The reestimate is also in part due to higher net
recoveries in FY 2024 than anticipated, contributing to higher forecasted recoveries in future periods.
The America’s Recovery Capital program had a net downward reestimate of $0.2 million. The reestimate is primarily due to
higher than projected recoveries in FY 2024.
All Other Guaranty Loan programs includes the Dealer Floor Plan program that had a net upward reestimate of $0.05
million. The reestimate is primarily due to lower than projected recoveries in FY 2024.
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, 2024 2023
7(m) Microloan $ (4,425) $ (8,180)
7(m) Microloan – Recovery Act (24) (7)
Intermediary Lending Pilot Program (128) (10)
All Other Direct Loan Programs (13) (12)
Total Direct Loan Program Subsidy Reestimates $ (4,590) $ (8,209)
The 7(m) Direct Microloan program had a net downward reestimate of $4.4 million. The reestimate is primarily due to
aggregate actual defaults being lower than projected in FY 2024.
The 7(m) Direct Microloan Recovery Act program had a downward reestimate of $0.02 million. The reestimate is mostly due
to minor differences in actual FY 2024 inflows relative to prior year projections.
The Intermediary Lending Pilot had a net downward reestimates of $0.1 million. The reestimate is mostly due to higher
aggregate recoveries and prepayments relative to what was forecasted in the prior year model.
All Other Direct Loan programs includes the Economic Opportunity Loan program that had a net downward reestimate of
$0.01 million. The reestimate is mostly due to minor differences in actual FY 2024 inflows relative to prior year projections.
Agency Financial Report Fiscal Year 2024 90 U.S. Small Business Administration
Financial Reporting (Unaudited)
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, 2024 2023
Disaster $ (1,762,543) $ 34,067,796
Total Disaster Direct Loan Program Subsidy Reestimates $ (1,762,543) $ 34,067,796
The Disaster Assistance program had a net downward reestimate of $1,762.5 million. The downward reestimate is primarily
due to revised expectation of the performance of small COVID EIDL loans ($200,000 and below) contributing to a downward
reestimate for the 2020 COVID EIDL cohort. Lower net charge offs and higher recoveries than projected in FY 2024
contribute to increased expected future collections for small COVID EIDL loans. The downward reestimate is partially offset
by an upward reestimate for the 2021 and 2022 COVID EIDL cohorts, which is due to revised expectation of the performance
of large COVID EIDL loans. Higher than projected charge offs and lower than projected prepayments for large COVID EIDL
loans in FY 2024 contribute to lower expected future collections for large COVID EIDL loans
J. Loans Receivable
Business Direct
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2024 Total
Loans Loans
Loans Receivable Direct, Net, beginning of year $ - $ 213,370 $ 213,370
Loans Disbursed - 37,996 37,996
Principal & Interest Payments Received (1,098) (40,235) (41,333)
Foreclosed Property 5 - 5
Loans Written Off - (65) (65)
Interest Revenue on Uninvested Funds - (3,341) (3,341)
Interest Expense on Entity Borrowings - 6,792 6,792
Subsidy Expense - (3,362) (3,362)
Upward Reestimates - (328) (328)
Downward Reestimates - 4,918 4,918
Subsidy Allowance - (1,936) (1,936)
Other non-cash reconciling items 1,093 183 1,276
Loans Receivable Direct, Net, end of year $ - $ 213,992 $ 213,992
Agency Financial Report Fiscal Year 2024 91 U.S. Small Business Administration
Financial Reporting (Unaudited)
Disaster Direct
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2024 Total
Loans Loans
Loans Receivable Disaster, Net, beginning of year $ 442 $ 270,634,432 $ 270,634,874
Loans Disbursed - 1,450,201 1,450,201
Principal & Interest Payments Received (106) (8,876,141) (8,876,247)
Foreclosed Property - 1,619 1,619
Loans Written Off - (39,906,551) (39,906,551)
Interest Revenue on Uninvested Funds - (558,232) (558,232)
Interest Expense on Entity Borrowings - 4,950,210 4,950,210
Loan Modification - (2,671) (2,671)
Subsidy Expense - (265,535) (265,535)
Upward Reestimates - (6,881,330) (6,881,330)
Downward Reestimates - 8,643,873 8,643,873
Subsidy Allowance - (9,994,541) (9,994,541)
Other non-cash reconciling items (336) 37,051,842 37,051,506
Loans Receivable Disaster, Net, end of year $ - $ 256,247,176 $ 256,247,176
Note: The Other Non-Cash Reconciling Items line includes $21.7 billion in loans written off in prior years. These loans were returned to regular servicing
in FY 2024 and reestablished as loan receivables. The increase in loans returned to regular servicing is primarily attributed to enrollments in the Hardship
Accommodation Program (HAP).
Business Guaranteed
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2024 Total
Loans Loans
Defaulted Guaranteed Loans Receivable, Net, beginning of year $ - $ 1,096,750 $ 1,096,750
Claim Payment to Lenders/Guarantee Payments - 4,511,684 4,511,684
Principal & Interest Payments Received (63) (551,811) (551,874)
Fees - (1,150,854) (1,150,854)
Foreclosed Property 1 1,246 1,247
Loans Written Off - (3,373,690) (3,373,690)
Subsidy Allowance - 1,241,925 1,241,925
Other non-cash reconciling items 62 (128,601) (128,539)
Defaulted Guaranteed Loans Receivable, Net, end of year $ - $ 1,646,649 $ 1,646,649
Agency Financial Report Fiscal Year 2024 92 U.S. Small Business Administration
Financial Reporting (Unaudited)
Business Direct
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2023 Total
Loans Loans
Loans Receivable Direct, Net, beginning of year $ 2,955 $ 196,956 $ 199,911
Loans Disbursed - 48,772 48,772
Principal & Interest Payments Received 998 (39,592) (38,594)
Foreclosed Property 11 - 11
Loans Written Off - (19) (19)
Interest Revenue on Uninvested Funds - (1,181) (1,181)
Interest Expense on Entity Borrowings - 4,474 4,474
Subsidy Expense - (3,650) (3,650)
Upward Reestimates - (953) (953)
Downward Reestimates - 9,162 9,162
Subsidy Allowance - (1,193) (1,193)
Other non-cash reconciling items (3,964) 594 (3,370)
Loans Receivable Direct, Net, end of year $ - $ 213,370 $ 213,370
Disaster Direct
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2023 Total
Loans Loans
Loans Receivable Disaster, Net, beginning of year $ 319 $ 320,318,726 $ 320,319,045
Loans Disbursed - 2,097,897 2,097,897
Principal & Interest Payments Received (63) (3,576,632) (3,576,695)
Foreclosed Property - 2,224 2,224
Loans Written Off - (49,728,611) (49,728,611)
Interest Revenue on Uninvested Funds - (879,147) (879,147)
Interest Expense on Entity Borrowings - 5,919,111 5,919,111
Loan Modification - (57,961) (57,961)
Subsidy Expense - (251,139) (251,139)
Upward Reestimates - (34,530,798) (34,530,798)
Downward Reestimates - 463,003 463,003
Subsidy Allowance - (11,585,581) (11,585,581)
Other non-cash reconciling items 186 42,443,340 42,443,526
Loans Receivable Disaster, Net, end of year $ 442 $ 270,634,432 $ 270,634,874
Agency Financial Report Fiscal Year 2024 93 U.S. Small Business Administration
Financial Reporting (Unaudited)
Business Guaranteed
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2023 Total
Loans Loans
Defaulted Guaranteed Loans Receivable, Net, beginning of year $ 1,457 $ 1,007,745 $ 1,009,202
Claim Payment to Lenders/Guarantee Payments - 12,223,993 12,223,993
Principal & Interest Payments Received (125) (502,218) (502,343)
Fees - (1,244,154) (1,244,154)
Foreclosed Property (1) (693) (694)
Loans Written Off - (11,227,328) (11,227,328)
Subsidy Allowance - 1,178,413 1,178,413
Other non-cash reconciling items (1,331) (339,008) (340,339)
Defaulted Guaranteed Loans Receivable, Net, end of year $ - $ 1,096,750 $ 1,096,750
Note 7 Property, Plant, and Equipment, Net
The SBA capitalizes equipment with a cost of $100,000 or more per unit, and a useful life of 2 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 2 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 2 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 5 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, 2024 2023
Software in Development $ 4,279 $ 6,269
Software in Use 177,590 171,405
Amortization of Software in Use (101,994) (73,679)
Net 79,875 103,995
Total General Property and Equipment, Net $ 79,875 $ 103,995
Agency Financial Report Fiscal Year 2024 94 U.S. Small Business Administration
Financial Reporting (Unaudited)
Software in Use represents the SBA’s use of software developed for the disaster loan system modernization to streamline
borrower interface and provide the ability for disaster borrowers to make payments via the SBA’s unified lending platform.
Additional use includes the Veteran-Owned Small Businesses and Service-Disabled Veteran-Owned Small Businesses
certification management system launching the SBA’s ownership from the U.S. Department of Veteran’s Affairs starting
January 2023 as authorized in the National Defense Authorization Act of 2021.
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, 2024 2023
Intragovernmental Liabilities – Benefit Program Contributions Payable
Unfunded Employment Taxes Payable $ 2,377 $ 2,249
Unfunded Federal Employees’ Compensation Act Payable 6,754 5,899
Total Intragovernmental Liabilities – Benefit Program Contributions Payable 9,131 8,148
Other than Intragovernmental Liabilities – Federal Employee Benefits Payable
Accrued Unfunded Annual Leave 48,757 45,736
Federal Employees’ Compensation Act Payable 29,273 27,477
Total Other than Intragovernmental Liabilities – Federal Employee Benefits Payable 78,030 73,213
Surety Bond Guarantee Program Future Claims 77,268 68,655
Total Other Liabilities
Total Liabilities Not Covered by Budgetary Resources $ 164,429 $ 150,016
Total Liabilities Covered by Budgetary Resources 280,144,150 345,813,548
Total Liabilities Not Requiring Budgetary Resources 127,434 72,318
Total Liabilities $ 280,436,013 $ 346,035,882
The liability for Surety Bond Guarantees is an estimate of future claims in the SBG Program for guaranties outstanding at
year-end.
Agency Financial Report Fiscal Year 2024 95 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 9 Debt
Borrowings payable to the Treasury result from loans provided by the Treasury to fund the portion of direct loans not
covered by subsidy appropriations, and to fund the payment of downward subsidy reestimates, and other credit program
disbursements (see Note 16). 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, 2024 2023
Principal Payable to the Bureau of the Fiscal Service
Beginning Balance $ 334,320,210 $ 362,801,468
New Borrowings 3,365,517 9,927,898
Repayments (73,023,017) (38,409,156)
Total Principal Payable to the Bureau of the Fiscal Service 264,662,710 334,320,210
Interest Payable
Change in Interest Payable – Liquidating Funds 77 69
Total Interest Payable 77 69
Ending Balance $ 264,662,787 $ 334,320,279
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, 2024 2023
Disaster Loan Fund $ - $ 442
Business Loan and Investment Fund 8,673 10,518
Total Due to Treasury $ 8,673 $ 10,960
Agency Financial Report Fiscal Year 2024 96 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 11 Other Liabilities
Other liabilities are shown in the following table:
(Dollars in Thousands)
As of September 30, 2024 2023
Other Liabilities – Intragovernmental
Employment Taxes Payable $ 1,128 $ 2,949
Payable to Treasury 904 6
Total Other Liabilities – Intragovernmental $ 2,032 $ 2,955
Other Liabilities – Other than Intragovernmental
Budget Clearing Accounts $ 127,434 $ 72,318
Total Other Liabilities – Other than Intragovernmental $ 127,434 $ 72,318
All liabilities reflected are current liabilities.
Note: FY 2023 amounts have been realigned to be comparable with new OMB and Treasury reporting requirements for FY 2024.
Note 12 Federal Employment Benefits Payable
Federal Employment Benefits Payable are shown in the following table:
(Dollars in Thousands)
As of September 30, 2024 2023
Federal Employee Salary, Leave, and Benefits Payable
Accrued Funded Payroll and Leave $ 32,730 $ 57,073
Employer Contributions and Taxes Payable 493 1,063
Unfunded Leave 48,757 45,736
Total Federal Employee Salary, Leave, and Benefits Payable $ 81,980 $ 103,872
Post-Employment Benefits Payable
Actuarial FECA Liability $ 29,273 $ 27,477
Total Post-Employment Benefits Payable $ 29,273 $ 27,477
Note 13 Leases
The SBA leases its facilities from the General Services Administration. 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. The GSA bills
Agency Financial Report Fiscal Year 2024 97 U.S. Small Business Administration
Financial Reporting (Unaudited)
the SBA monthly for leased space. Agreements specify that space in federal buildings can be vacated with 120 to 180 days’
notice. The SBA anticipates continuing the same or similar facilities leases in the future.
For official government travel, the SBA leases its vehicles from the GSA.
These federal leases with the GSA are intragovernmental leases and are expensed in the Consolidated Statement of Net Cost
when incurred. FY 2024 and FY 2023 lease expenses are $42.8 million and $35.1 million, respectively. The FY 2023 lease
amount now includes $1.0 million in GSA vehicle leases expenses.
SBA’s non-federal leases include office equipment, conference rooms and parking.
Starting in FY 2024, SFFAS 54 requires Federal reporting entities to report material right-to-use lease assets and a lease
liabilities for non-intragovernmental, non-short-term contracts or agreements, when the entity has the right to obtain and
control access to economic benefits or services from an underlying property, plant, or equipment asset for a period of time
in exchange for consideration under the terms of the contract or agreement. SBA has determined that there is no material
impact to the SBA financial statements.
Note 14 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 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 they are returned to the Treasury in the fiscal year following the accrual of the reestimates.
During the year, these general fund accounts contain 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 since both are included in 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, 2024 2023
Entity
Financing Fund Payable $ (9,902,199) $ (2,724,486)
Non-entity
Miscellaneous Receipts Fund Receivable 9,902,199 2,724,486
Downward Reestimate Payable to Treasury (9,902,199) (2,724,486)
Balance Sheet Reported Payable $ (9,902,199) $ (2,724,486)
See Note 6.I for information on the Downward Reestimate Payable.
Agency Financial Report Fiscal Year 2024 98 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 15 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 SBA’s major strategic goals are presented in the Consolidated Statement of Net Cost. Full
costs are comprised of all direct costs for the strategic goals and those indirect costs which 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 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 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. 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 SBA’s annual Agency Financial
Report includes additional detail on 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 a separate and independent part of the SBA and is
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 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.
Agency Financial Report Fiscal Year 2024 99 U.S. Small Business Administration
Financial Reporting (Unaudited)
Gross Cost And Exchange Revenue
(Dollars in Thousands)
For the Years Ended September 30, 2024 2023
STRATEGIC GOAL 1:
Ensure Equitable and Customer-Centric Design and Delivery of Programs to
Support Small Businesses and Innovative Startups
Intragovernmental Gross Cost $ 173,047 $ 176,519
Other than Intragovernmental Gross Cost 633,521 857,273
Total Strategic Goal 1 Gross Cost 806,568 1,033,792
Intragovernmental Earned Revenue 96,829 117,292
Other than Intragovernmental Earned Revenue 113,710 117,360
Total Strategic Goal 1 Earned Revenue 210,539 234,652
STRATEGIC GOAL 2:
Build Resilient Businesses and a Sustainable Economy
Intragovernmental Gross Cost $ 5,107,552 $ 6,044,967
Other than Intragovernmental Gross Cost (1,402,580) 33,995,093
Total Strategic Goal 2 Gross Cost 3,704,972 40,040,060
Intragovernmental Earned Revenue 558,232 879,147
Other than Intragovernmental Earned Revenue 4,391,997 5,040,138
Total Strategic Goal 2 Earned Revenue 4,950,229 5,919,285
STRATEGIC GOAL 3:
Implement Strong Stewardship of Resources for Greater Impact
Intragovernmental Gross Cost $ 29,967 $ 27,313
Other than Intragovernmental Gross Cost 140,913 142,221
Total Strategic Goal 3 Gross Cost 170,880 169,534
COST NOT ASSIGNED TO STRATEGIC GOALS
Intragovernmental Gross Cost $ 29,713 $ 32,313
Other than Intragovernmental Gross Cost 139,719 200,824
Total Gross Cost Not Assigned to Strategic Goals 169,432 233,137
Net Cost of Operations $ (308,916) $ 35,322,586
Agency Financial Report Fiscal Year 2024 100 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 16 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, 2024 and 2023. SBA’s budgetary resources were $40.1 billion and $36.7 billion
for the fiscal years ended September 30, 2024 and 2023. Additionally, $27.8 billion and $70.5 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, 2024 and 2023.
Net Adjustments to Unobligated Balance, Brought Forward, October 1
The beginning balance brought forward for FY 2024 decreased by $17.1 billion in total. The unobligated balance from prior
year budget authority, net included an increase of $1.2 billion related to recoveries and a decrease of $18.3 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. 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 SBA’s annual reestimation
process. The prior year’s ending unobligated balances in 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 guaranteed loans exceed subsidy costs and collections in the nonbudgetary loan financing funds. In FY 2024
and FY 2023, the SBA received $2.7 billion and $5.9 billion of borrowing authority from the OMB. At the end of FY 2024, the
SBA had $0.3 billion in borrowing authority carried over to fund direct loans and default claims to be disbursed in the future.
At the end of FY 2023, the SBA had $1.0 billion in available borrowing authority. The SBA pays interest to the Treasury
based on 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 guaranteed business loans and
30 years for disaster loans.
Agency Financial Report Fiscal Year 2024 101 U.S. Small Business Administration
Financial Reporting (Unaudited)
Unobligated Balances
Unobligated balances at September 30, 2024 and 2023 are $15.7 billion and $42.6 billion, which include $8.1 billion and
$26.2 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 ($12.2 billion in FY 2024 and $38.2 billion in FY 2023) from fees and subsidy to fund default claims in future
years. In addition, unobligated balances are accumulated in budgetary accounts from appropriations ($3.5 billion in FY
2024 and $4.4 billion in FY 2023) that are used to finance SBA’s ongoing program operations. The SBA requests OMB
apportionments as needed, and after OMB approval, apportioned amounts are available for obligation.
Undelivered Orders
Undelivered orders consist of goods or services ordered and obligated which 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, 2024 2023
Intragovernmental
Unpaid $ 225.8 $ 210.3
Paid 9.3 7.0
Total Intragovernmental 235.1 217.3
Other than Intragovernmental
Unpaid $ 1,487.3 $ 1,556.1
Paid 12.2 15.9
Total Other than Intragovernmental 1,499.5 1,572.0
Balance Sheet Reported Payable $ 1,734.6 $ 1,789.3
Differences between the Statement of Budgetary Resources and the Budget of the U. S.
Government
There was no material difference between the FY 2023 Statement of Budgetary Resources and the President’s FY 2025
budget submission. The President’s FY 2026 Budget with actual numbers for FY 2024 has not yet been published and will be
available at a later date on the White House website. The SBA expects no material differences between the President’s Budget
“actual” column and the FY 2024 reported results when the budget becomes available in early 2025.
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).
Agency Financial Report Fiscal Year 2024 102 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 17 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. 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.
Agency Financial Report Fiscal Year 2024 103 U.S. Small Business Administration
Financial Reporting (Unaudited)
Budget and Accrual Reconciliation
(Dollars in Thousands)
Line Item Federal Non-federal Total 2024
Net Operating Cost (SNC) $ 4,685,218 $ 4,994,134 $ (308,916)
Components of Net Operating Cost not Part of the Budgetary Outlays
Property, plant and equipment depreciation expense - (28,315) (28,315)
Year-end credit reform subsidy reestimates 1,358,574 - 1,358,574
President's Budget adjustment to downward reestimates 172,596 - 172,596
President's Budget adjustment to upward reestimates 838,417 - 838,417
Modification Adjustment Transfer (MAT), Net - (801) (801)
Increase/(decrease) in assets not affecting Budget Outlays:
Accounts Receivable, Net 324 2,620 2,944
Advances 957 (3,689) (2,732)
Loans Receivable, Net - (439) (439)
Other assets - (1,843) (1,843)
(Increase)/decrease in liabilities not affecting Budget Outlays:
Accounts Payable 1,513 5,276 6,789
Accrued Grant Liability - 106,685 106,685
Federal Employee Salary, Leave, and Benefits Payable - 21,892 21,892
Post-Employment Benefits Payable - (1,796) (1,796)
Surety Bond Guarantee Program Future Claims - (8,613) (8,613)
Other Liabilities 3,050 (154) 2,896
Other Financing Sources:
Imputed Cost (53,796) - (53,796)
Total Components of Net Operating Cost Not Part of the
$ 2,321,635 $ 90,823 $ 2,412,458
Budget Outlays
Components of the Budget Outlays That Are Not Part of
Net Operating Cost
Acquisition of Capital Assets - 4,195 4,195
Other Financing Sources:
Donation of Cash and Cash Equivalents - (9) (9)
Effect of prior year credit reform subsidy reestimates 34,040,902 - 34,040,902
Total Components of the Budget Outlays That Are Not Part of
$ 34,040,902 $ 4,186 $ 34,045,088
Net Operating Cost
Other Reconciling Items
Distributed Offsetting Receipts - (2,953,774) (2,953,774)
Total Other Reconciling Items $ - $ (2,953,774) $ (2,953,774)
Total Net Outlays $ 33,194,856
Budgetary Agency Outlays, Net (SBR)
Budgetary Agency Outlays, Net $ 33,194,856
Agency Financial Report Fiscal Year 2024 104 U.S. Small Business Administration
Financial Reporting (Unaudited)
Budget and Accrual Reconciliation, Continued
(Dollars in Thousands)
Line Item Federal Non-federal Total 2023
Net Operating Cost (SNC) $ 5,284,673 $ 30,037,913 $ 35,322,586
Components of Net Operating Cost Not Part of the Budgetary Outlays
Property, plant and equipment depreciation expense - (24,506) (24,506)
Year-end credit reform subsidy reestimates (32,154,833) - (32,154,833)
President's Budget adjustment to downward reestimates (640,612) - (640,612)
President's Budget adjustment to upward reestimates (61,108) - (61,108)
Increase/(decrease) in assets not affecting Budget Outlays:
Accounts and Taxes Receivable, net - (946) (946)
Advances 4,845 (2,270) 2,575
Loans Receivable, Net - (4,285) (4,285)
Other assets - 8,190 8,190
(Increase)/decrease in liabilities not affecting Budget Outlays:
Accounts Payable 1,968 9,702 11,670
Accrued Grant Liability - (50,442) (50,442)
Federal Employee Salary, Leave, and Benefits Payable - (16,033) (16,033)
Surety Bond Guarantee Program Future Claims - (6,020) (6,020)
Other Liabilities 2,428 (18) 2,410
Other Financing Sources:
Imputed Cost (38,595) - (38,595)
Total Components of Net Operating Cost Not Part of the
$ (32,885,907) $ (86,628) $ (32,972,535)
Budget Outlays
Components of the Budget Outlays That Are Not Part of
Net Operating Cost
Acquisition of Capital Assets - 27,784 27,784
Effect of prior year credit reform subsidy reestimates 28,662,340 - 28,662,340
Total Components of the Budget Outlays That Are Not Part of
$ 28,662,340 $ 27,784 $ 28,690,124
Net Operating Cost
Other Reconciling Items
Distributed Offsetting Receipts - (5,047,035) (5,047,035)
Total Other Reconciling Items $ - $ (5,047,035) $ (5,047,035)
Total Net Outlays $ 25,993,140
Budgetary Agency Outlays, Net (SBR)
Budgetary Agency Outlays, Net $ 25,993,140
Note: FY 2023 amounts for Federal Employee Salary, Leave, and Benefits Payable and Other lines have been realigned to be comparable with new Treasury
reporting requirements for FY 2024.
Agency Financial Report Fiscal Year 2024 105 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 18 Commitments and Contingencies
A loss contingency is an existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an
entity. The uncertainty will ultimately be resolved when one or more future events occur or fail to occur. A loss contingency is
a liability when a past event or exchange transaction has occurred, a future outflow or other sacrifice of resources is probable,
and the future outflow or sacrifice of resources is measurable.
On October 25, 2023, a class action lawsuit was filed against the SBA (naming the United States the defendant as required) in
the United States Court of Federal Claims by 303 plaintiffs seeking damages for failure to obtain RRF funding. SBA believes
that the possibility of damages is reasonably possible. At this time, the amount of the contingency remains undetermined.
Note 19 Subsequent Events
In late September and early October 2024, hurricanes Helene and Milton struck the continental United States. When
disaster strikes the United States, SBA’s loans are the sole form of federal credit assistance for damage incurred by non-farm,
private-sector homeowners, renters and businesses.
At fiscal year-end, the SBA is uncertain as to the full future effect of the two hurricanes. The SBA could experience future
variations in performance of existing disaster and business loan portfolios as businesses in the affected areas strive to
recover.
The SBA has begun to increase its rate of administrative spending as it conducts its disaster response. This spending is
consistent with the Agency’s experience responding to prior disasters and primarily takes the form of increased expenditures
for travel and temporary personnel.
The provisions of the Federal Credit Reform Act of 1990 govern the valuation of SBA’s portfolio of existing business and
disaster loans as well as the determination of the appropriate subsidy rate for the disaster loans that the SBA will approve in
response to hurricanes Helene and Milton. The FCRA provides permanent indefinite authority for reestimates of subsidy
cost for existing loans to the extent necessary. Any initiatives that would change program terms or conditions for existing or
new loans would require additional appropriations to fund subsidy costs before implementation. Therefore, any additional
significant expenses associated with the hurricanes will be covered by additional appropriations and would not have an
adverse impact on SBA’s financial condition.
Agency Financial Report Fiscal Year 2024 106 U.S. Small Business Administration
Financial Reporting (Unaudited)
Note 20 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. 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. 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 SBA’s financial statements and SBA’s reclassified statements prior to elimination of
intragovernmental balances and prior to aggregation of repeated Financial Report line items. A copy of the 2023 Financial
Report can be found here: Bureau of the Fiscal Service - Reports, Statements & Publications (treasury.gov) and a copy of the
2024 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.
Agency Financial Report Fiscal Year 2024 107 U.S. Small Business Administration
Financial Reporting (Unaudited)
(Dollars in Thousands)
Line Items Used to Prepare FY 2024 Government-Wide
FY 2024 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 $ 806,568 $ (488,427) Non-Federal Gross Cost
Less: Earned Revenue 210,539 (488,427) Total Non-Federal Cost
Net Cost of Strategic Goal 1 596,029
Intragovernmental Costs
139,978 Benefit Program Costs
STRATEGIC GOAL 2: 53,796 Imputed Costs
Build Resilient Businesses and a
79,763 Buy/Sell Costs
Sustainable Economy
Gross Cost 3,704,972 5,019,247 Borrowing and Other Interest Expense
Less: Earned Revenue 4,950,229 47,494 Other Expenses (w/o Reciprocals)
Net Cost of Strategic Goal 2 (1,245,257) 5,340,278 Total Intragovernmental Costs
4,851,851 Total Reclassified Gross Cost
STRATEGIC GOAL 3:
Implement Strong Stewardship of
4,505,707 Non-federal Earned Revenue
Resources for Greater Impact
Gross Cost 170,880
Net Cost of Strategic Goal 3 170,880 Intragovernmental Earned Revenue
3,325 Buy/Sell Revenue
651,735 Borrowing and Other Interest Revenue
COST NOT ASSIGNED TO
655,060 Total Intragovernmental Earned Revenue
STRATEGIC GOALS
Gross Cost 169,432
Net Cost Not Assigned to Strategic Goals 169,432 5,160,767 Total Reclassified Earned Revenue
Net Cost of Operations $ (308,916) $ (308,916) Net Cost
Agency Financial Report Fiscal Year 2024 108 U.S. Small Business Administration
Financial Reporting (Unaudited)
(Dollars in Thousands)
FY 2024 SBA Statement of Changes in Net Position Changes in Net Position
Funds from other than Dedicated Collections
Unexpended Appropriations:
Unexpended Appropriations,
Beginning balance $ 3,724,113 $ 3,724,113
Beginning Balance
Appropriations Received 35,227,207 35,164,375 Appropriations Received
Other Adjustments:
Rescissions (43,228)
Adjustment – Cancelled Authority (18,883)
Return of Unrequired Liquidating
(494)
Fund Appropriation
Other Adjustments (227)
Appropriations Used (35,795,922) (35,795,922) Appropriations Used
Total Unexpended Appropriations $ 3,092,566 $ 3,092,566 Total Unexpended Appropriations
Cumulative Results of Operations:
Beginning Balance $ 33,431,411 $ 33,431,411 Cumulative Results, Beginning Balance
Other Adjustments:
Current Year Liquidating
909 35,795,922 Appropriations Expended
Equity Activity
Non-expenditure Transfers-Out of
Appropriations Used 35,795,922 Unexpended Appropriations and Financing
Sources
Non-expenditure Transfers-In of
909 Unexpended Appropriations and Financing
Sources
Donations of Cash and Cash Equivalents 9
35,796,831 Total Appropriations Used
1,738 Other Taxes and Receipts
1,738 Total Non-Federal Non-Exchange Revenue
Imputed Financing 53,796 53,796 Imputed Financing
Non-Entity Collections Transferred to the
Other: (2,898,812)
General Fund of the U.S. Government
Accrual for Non-Entity Amounts to be
Non-entity Activity (10,074,795) (7,177,712) Collected and Transferred to the General
Fund of the U.S. Government
(10,022,728) Total Transfers and Imputed Financing
Net Cost of Operations (308,916) (308,916) Net Cost of Operations
Total Cumulative Results of Operations $ (7,346,654) $ (7,346,654) Total Cumulative Results of Operations
Ending Net Position $ (4,254,088) $ (4,254,088) Net Position
Agency Financial Report Fiscal Year 2024 109 U.S. Small Business Administration
Financial Reporting (Unaudited)
REQUIRED SUPPLEMENTARY INFORMATION
COMBINING STATEMENT OF BUDGETARY RESOURCES
For the Years Ended September 30, 2024 (Unaudited)
(Dollars in Thousands) Line Item BLIF DLF SBGRF SE OIG
Nonbudgetary Nonbudgetary
BUDGETARY RESOURCES Budgetary Budgetary Budgetary Budgetary Budgetary
Financing Financing
Unobligated Balance from Prior Year Budget
$ 2,029,856 $ 11,335,882 $ 483,074 $ 9,550,521 $ 117,049 $ 1,655,043 $ 37,439
Authority, Net (discretionary and mandatory)
Appropriations (discretionary and mandatory) 515,527 - 33,845,487 801 - 475,476 38,620
Borrowing Authority (discretionary and mandatory) - 617,714 - 2,038,200 - - -
Spending Authority from Offsetting Collections (1) 2,612,384 1 1,646,627 25,872 363,728 5
Total Budgetary Resources $ 2,545,382 $ 14,565,980 $ 34,328,562 $ 13,236,149 $ 142,921 $ 2,494,247 $ 76,064
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total) $ 570,794 $ 8,478,125 $ 34,200,253 $ 7,129,223 $ 31,746 $ 1,384,566 $ 51,528
Unobligated Balance, end of year:
Apportioned, unexpired accounts 16,102 5,770,307 69,476 932,445 3,269 671,024 22,510
Unapportioned, unexpired accounts 56,260 317,548 58,833 5,174,481 107,906 8,382 5
Unexpired Unobligated Balance, end of year 72,362 6,087,855 128,309 6,106,926 111,175 679,406 22,515
Expired Unobligated Balance, end of year 1,902,226 - - - - 430,275 2,021
Unobligated Balance, end of year (total) 1,974,588 6,087,855 128,309 6,106,926 111,175 1,109,681 24,536
Total Status of Budgetary Resources $ 2,545,382 $ 14,565,980 $ 34,328,562 $ 13,236,149 $ 142,921 $ 2,494,247 $ 76,064
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 544,511 $ 34,145,926 $ 2,461 $ 1,035,512 $ 52,187
Distributed Offsetting Receipts - - - (2,953,774) -
Agency Outlays, Net (discretionary and mandatory) $ 544,511 $ 34,145,926 $ 2,461 $ (1,918,262) $ 52,187
Disbursements, Net (total) (mandatory) $ 5,018,882 $ (49,371,514)
(Dollars in Thousands) Line Item ADVOCACY EDP EIDL SVOG RRF WCF BATF TOTAL TOTAL
Nonbudgetary
BUDGETARY RESOURCES Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Total
Financing
Unobligated Balance from Prior Year Budget
$ 6,127 $ 91,590 $ 17,385 $ 41,073 $ 12,871 $ 22,151 $ 552 $ 4,514,210 $ 20,886,403 $ 25,400,613
Authority, Net (discretionary and mandatory)
Appropriations (discretionary and mandatory) 10,109 316,800 (562) - - 10,700 - 35,212,157 801 35,212,958
Borrowing Authority (discretionary
- - - - - - - - 2,655,914 2,655,914
and mandatory)
Spending Authority from Offsetting Collections 2 1 - - - - 9 389,617 4,259,011 4,648,628
Total Budgetary Resources $ 16,238 $ 408,391 $ 16,823 $ 41,073 $ 12,871 $ 32,851 $ 561 $ 40,115,984 $ 27,802,129 $ 67,918,113
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total) $ 8,557 $ 316,366 $ 7 $ - $ - $ 13,497 $ 44 $ 36,577,358 $ 15,607,348 $ 52,184,706
Unobligated Balance, end of year:
Apportioned, unexpired accounts 7,681 61,607 5,591 41,073 - 19,276 517 918,126 6,702,752 7,620,878
Unapportioned, unexpired accounts - - - - 12,871 - - 244,257 5,492,029 5,736,286
Unexpired Unobligated Balance, end of year 7,681 61,607 5,591 41,073 12,871 19,276 517 1,162,383 12,194,781 13,357,164
Expired Unobligated Balance, end of year - 30,418 11,225 - - 78 - 2,376,243 - 2,376,243
Unobligated Balance, end of year (total) 7,681 92,025 16,816 41,073 12,871 19,354 517 3,538,626 12,194,781 15,733,407
Total Status of Budgetary Resources $ 16,238 $ 408,391 $ 16,823 $ 41,073 $ 12,871 $ 32,851 $ 561 $ 40,115,984 $ 27,802,129 $ 67,918,113
OUTLAYS, NET AND DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 8,960 $ 371,455 $ (5,065) $ (12,160) $ (7,431) $ 12,242 $ 32 36,148,630 $ 36,148,630
Distributed Offsetting Receipts - - - - - - - (2,953,774) (2,953,774)
Agency Outlays, Net
$ 8,960 $ 371,455 $ (5,065) $ (12,160) $ (7,431) $ 12,242 $ 32 $ 33,194,856 $ 33,194,856
(discretionary and mandatory)
Disbursements, Net (total) (mandatory) $ (44,352,632)
Agency Financial Report Fiscal Year 2024 110 U.S. Small Business Administration
Other Information (Unaudited)
Section III
Other
Information
| Unaudited
Agency Financial Report Fiscal Year 2024 111 U.S. Small Business Administration
Other Information (Unaudited)
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 New Resolved Consolidated
Balance Balance
Controls over COVID-19 EIDLs 1 0 0 N/A 1
Controls over PPP Loan Guarantees 1 0 0 N/A 1
Controls over Restaurant Revitalization and
1 0 0 N/A 1
Shuttered Venues
Controls over Financial Reporting for
Subsidy Re-estimates, Recoveries, and 1 0 0 N/A 1
Contingencies
Controls over the Evaluation of Service
1 0 0 N/A 1
Organizations
Entity Level Controls 1 0 0 N/A 1
Controls over General Information
0 1 0 N/A 1
Technology Need Improvement
Total Material Weaknesses 6 1 0 N/A 7
Summary of Management Assurances
Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)
Statement of Assurance Modified
Beginning Ending
Material Weaknesses New Resolved Consolidated Reassessed
Balance Balance
Controls over COVID-19 EIDLs 1 0 0 N/A N/A 1
Controls over PPP Loan Guarantees 1 0 0 N/A N/A 1
Controls over Restaurant Revitalization
1 0 0 N/A N/A 1
and Shuttered Venues
Controls over Financial Reporting for
Subsidy Re-estimates, Recoveries, and 1 0 0 N/A N/A 1
Contingencies
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 General Information
0 1 0 N/A N/A 1
Technology Need Improvement
Total Material Weaknesses 6 1 0 N/A N/A 7
Agency Financial Report Fiscal Year 2024 112 U.S. Small Business Administration
Other Information (Unaudited)
Effectiveness of Internal Control over Operations (FMFIA § 2)
Statement of Assurance Modified
Beginning Ending
Material Weaknesses New Resolved Consolidated Reassessed
Balance Balance
None 0 0 N/A N/A N/A 0
Total Material Weaknesses 0 0 N/A N/A N/A 0
Conformance with Financial Management System Requirements (FMFIA § 4)
Statement of Assurance Federal Systems do not conform to financial management system requirements.
Beginning Ending
Material Weaknesses New Resolved Consolidated Reassessed
Balance 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)
Line Item Agency Auditor
1. Federal Financial Management System Requirements Lack of compliance noted Lack of compliance noted
2. Applicable Federal Accounting Standards Lack of compliance noted Lack of compliance noted
3. USSGL at Transaction Level No lack of compliance noted No lack of compliance noted
Agency Financial Report Fiscal Year 2024 113 U.S. Small Business Administration
Other Information (Unaudited)
U.S. Small Business Administration
Office of Inspector General
Top Management and
Performance Challenges
Facing the Small Business Administration
in Fiscal Year 2025
Report 25-01 | October 15, 2024
2025 Top Management and Performance Challenges | 1
Agency Financial Report Fiscal Year 2024 114 U.S. Small Business Administration
Other Information (Unaudited)
CONTENTS
Message From the Inspector General ............................................................................................ 112
Introduction .................................................................................................................................. 113
Table 1: Top Management and Performance Challenges Facing SBA in Fiscal Year 2025 ..................................... 113
Challenge 1: Protecting the Integrity of SBA Programs ..................................................................114
Managing Fraud Risk ........................................................................................................................................114
Figure 1: Disbursed Pandemic Assistance Funds ........................................................................................114
Figure 2: Current and Ongoing Actions Related to the PPP and COVID-19 EIDL .......................................... 115
Figure 3: Potentially Fraudulent Pandemic Assistance Loans and Grants ...................................................116
Improving Verification of Eligibility ..................................................................................................................117
Mitigating Improper Payments ........................................................................................................................ 118
Seizure and Return of Funds ............................................................................................................................ 118
Challenge 2: Managing SBA’s Loan Portfolio and Participating Lenders ....................................... 120
Servicing Disaster Loans ................................................................................................................................. 120
Figure 4: The Increased Burden of COVID-19 EIDL Servicing on SBA .......................................................... 120
Overseeing Lenders ........................................................................................................................................ 121
Ensuring Retention of Pandemic-Related Loan and Award Records .......................................................... 122
Challenge 3: Measuring Performance and Monitoring SBA Programs .......................................... 124
Measuring Program Performance .................................................................................................................... 124
Monitoring Program Performance Results ....................................................................................................... 124
Ensuring Funds Are Used for Intended Purposes .............................................................................................. 125
Figure 5: Total Number of RRF and SVOG Awards that SBA Must Review Manually ..................................... 125
Challenge 4: Managing Data ..........................................................................................................127
Storing, Monitoring, and Analyzing Program Data ........................................................................................... 127
Sharing Authorized Data Between Government Agencies ................................................................................. 128
Evaluating and Improving Data Reliability ....................................................................................................... 128
Challenge 5: Managing Risks in Information Technology Systems and Cybersecurity .................. 130
Figure 6: Risk Management Best Practices Strategy ................................................................................. 130
Improving Information Technology Systems Management ............................................................................... 130
Preparing for Artificial Intelligence Challenges ................................................................................................ 131
Deploying and Monitoring New Third-Party Systems ....................................................................................... 132
Complying with Federal Information Security Modernization Act Management Requirements ......................... 132
Make a Difference ......................................................................................................................... 133
Agency Financial Report Fiscal Year 2024 115 U.S. Small Business Administration
Other Information (Unaudited)
MESSAGE FROM THE INSPECTOR GENERAL
Each year, as required by the Reports Consolidation Act of 2000, the U.S. Small
Business Administration (SBA) Office of Inspector General (OIG) reports on the
top management and performance challenges facing the agency.
This year, we reframed our approach to elevate this discussion in a more
holistic manner, specifying challenges that are systemic and cross-cutting in
nature, as opposed to the highlighting of specific programs. Our new approach
no longer uses color-coded challenge areas; however, we continue to base our
report on audit and investigative oversight work, dialogue with agency program
officials, and assessments of programs and activities that rise to the level of a
top challenge. In so doing, we believe we can better and more systematically
promote programmatic change, resulting in direct benefit to small business
owners who depend on SBA services.
Although the Coronavirus Disease 2019 pandemic economic crisis is behind us, SBA continues to face
challenges related to it and protecting the integrity of SBA programs, while managing large loan portfolios
and a burgeoning number of lenders. The systemic challenges overlap SBA services, affecting the agency’s
flagship capital, contracting, and counseling programs. We identified several underlying issues: mitigating
improper payments, ensuring only eligible entities gain access to programs, reducing or eliminating self-
certification as a practice, and strengthening internal controls.
Additionally, technology must be integrated within programs in a manner that assures eligibility criteria
are met, and that robust verification and validation are inherent in the internal control framework. Further,
SBA must meet its lender oversight responsibilities to avoid missteps that occurred in its pandemic
response. These issues continue to be at the forefront of our recommended corrective actions.
The nation can depend on OIG to provide independent, objective, and timely oversight of SBA. We
will continue to focus our resources on systems and processes that present serious management and
performance challenges within SBA programs with a goal of improving the integrity, accountability, and
performance of those programs for the benefit of the American people.
Hannibal “Mike” Ware
SBA Inspector General
Agency Financial Report Fiscal Year 2024 116 U.S. Small Business Administration
Other Information (Unaudited)
INTRODUCTION
The management challenges report is an important tool to help the agency prioritize its work to improve program
performance and enhance operations. OIG remains committed to protecting the interests of American taxpayers by
promoting positive change within SBA and across government, ensuring taxpayer dollars are spent efficiently according to
intent.
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 challenges are longstanding, inherently difficult, and will likely continue to be challenges in the coming
years. Addressing the challenges will require consistent attention from agency management and ongoing engagement with
Congress, the public, and other stakeholders. We continue to collaborate with SBA program officials in identifying and
mitigating the top challenges and associated issues facing the agency.
Table 1: Top Management and Performance Challenges Facing SBA in Fiscal Year 2025
Challenge Issue
Challenge 1 — Protecting the Integrity of SBA Programs • Managing Fraud Risk
• Improving Verification of Eligibility
• Mitigating Improper Payments
• Seizure and Return of Funds
Challenge 2 — Managing SBA’s Loan Portfolio and • Servicing Disaster Loans
Participating Lenders • Overseeing Lenders
Challenge 3 — Measuring Performance and Monitoring • Measuring Program Performance
SBA Programs • Monitoring Program Performance Results
• Ensuring Funds Are Used for Intended Purposes
Challenge 4 — Managing Data • Storing, Monitoring, and Analyzing Program Data
• Sharing Authorized Data Between Government Agencies
• Evaluating and Improving Data Reliability
Challenge 5 — Managing Risks in Information Technology • Improving Information Technology Systems Management
Systems and Cybersecurity • Preparing for Artificial Intelligence Challenges
• Deploying and Monitoring New Third-Party Systems
• Complying with Federal Information Security Modernization Act
Management Requirements
Agency Financial Report Fiscal Year 2024 117 U.S. Small Business Administration
Other Information (Unaudited)
Challenge 1: Protecting the Integrity of SBA Programs
The U.S. Small Business Administration (SBA) provides loan guaranties, direct disaster assistance loans,
contracting certifications, and business development programs to qualifying small business owners and
entrepreneurs. SBA’s challenge is to fulfill its mission by balancing the priority of delivering prompt assistance
while also protecting the integrity of its programs. We see this in the fundamental tension that exists between
quickly delivering capital to qualifying small businesses while minimizing potential fraud. A strong internal
control environment helps meet the need for prompt service that benefits eligible small businesses, which should
be in place before funds are awarded. We see a need for this strong internal control environment in SBA’s
contracting certification programs to ensure only deserving and eligible small business owners benefit from
contracting opportunities associated with these programs.
MANAGING FRAUD RISK
In the wake of the Coronavirus Disease 2019 (COVID-19) pandemic, action was needed to avert an economic crisis caused by
lockdowns, business closures, and other impediments. More than 30 million small businesses in the nation were adversely
affected by the economic crisis. In March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act authorized
SBA to administer an unprecedented amount of disaster assistance and guaranteed loan funds to help eligible small
business owners and entrepreneurs adversely affected by the crisis. Over the course of 18 months, the agency’s pandemic
relief expanded to four main programs and delivered 22.1 million loans and grants, totaling $1.2 trillion (Figure 1). SBA has
progressed to reviewing, forgiving, and servicing the pandemic assistance loans (Figure 2).
Figure 1: Disbursed Pandemic Assistance Funds
Source: OIG generated
Agency Financial Report Fiscal Year 2024 118 U.S. Small Business Administration
Other Information (Unaudited)
Figure 2: Current and Ongoing Actions Related to the PPP and COVID-19 EIDL
Source: OIG generated from SBA data
At the start of the pandemic in 2020, SBA reduced or eliminated key internal controls as it sought to follow legislative
requirements intended to expedite aid during the crisis. Many existing controls and design features in SBA’s longstanding
flagship disaster lending and loan guaranty programs were replaced with less effective controls.1 These internal controls
could have mitigated fraud and ensured only eligible entities received taxpayer funds.
The pandemic exacerbated risks we have already found in SBA’s flagship loan guaranty programs (see Overseeing Lenders).
Our previous and ongoing audit work has found SBA did not always adequately recognize or manage significant lender
weaknesses. OIG audits and investigations have shown SBA previously could not effectively identify and track loan agent
involvement in its 7(a) and 504 loan portfolios. Our investigative work has found SBA’s guaranteed loan programs susceptible
to borrower fraud in regard to false statements and documentation, misrepresentation of equity injections, as well as misuse
of proceeds. Investigations have also revealed a pattern of fraud by loan packagers and other fee-based agents in the 7(a) loan
program.
The pandemic also magnified the long-standing control weaknesses of self-certification of eligibility (see Improving
Verification of Eligibility) and the limited use of the U.S. Department of the Treasury’s Do Not Pay system to verify eligibility.2
The Do Not Pay system is a series of databases designed to prevent and detect improper payments to those not eligible for
government payments because of past fraudulent activity or other high-risk factors.
SBA eventually started using the Do Not Pay system for pandemic programs, but the challenge remains to better integrate the
use of the system in all its programs and not rely on self-certification. We will continue to keep watch over SBA’s burgeoning
flagship loan guaranty programs, particularly with SBA increasing Small Business Lending Company participation (see
Overseeing Lenders).
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Figure 3: Potentially Fraudulent Pandemic Assistance Loans and Grants
Source: OIG generated
In our fraud landscape report issued in June 2023, we estimated SBA’s missing or weakened internal controls resulted in
the disbursement of over $200 billion in potentially fraudulent Paycheck Protection Program (PPP) loans and COVID-19
Economic Injury Disaster Loans (EIDL) to those who exploited control vulnerabilities (Figure 3).3 We estimated potential
fraud and misuse of proceeds in the EIDL program at approximately $136 billion and $64 billion in the PPP. Using
investigative casework, prior OIG reporting, and advanced data analytics, we identified various schemes used to steal from
American taxpayers. Fraudsters stole identity information, created synthetic identities, and duplicated information to exploit
programs meant to help those in need.
As of September 30, 2024, we have issued 47 reports and made 127 recommendations related to identified weaknesses
in SBA’s pandemic programs control environment (73 recommendations have been closed). Key recommendations for
strengthening internal controls to mitigate fraud in the pandemic relief programs, include:
• Issuing clear requirements and communicating with lending partners in a timely manner;
• Establishing and monitoring performance measures and proper internal controls;
• Establishing a quality assurance plan to prevent and detect improper payments;
• Tracking program data to support accurate measurement and reporting;
• Establishing the organizational structure to manage and handle potentially fraudulent PPP loans and EIDLs.
SBA also faces the challenge of ensuring federal agencies award small business contracts only to eligible entities. OIG
investigators currently have 23 cases involving allegations of firms not meeting contracting program requirements, including
in the 8(a) Business Development, Women-Owned Small Business (WOSB), service-disabled veteran-owned small business,
and the Historically Underutilized Business Zone (HUBZone) programs.
The agency has developed and implemented a fraud risk management policy and framework, developed aggregate review
processes to identify different types of fraud, increased antifraud controls for 2020 loans, established a Fraud Risk
Management Board in 2022, and hired a new Chief Risk Officer to lead its Office of Enterprise Integrity. SBA also developed a
webpage raising awareness of preventing fraud and identity theft that includes a section for lenders.
SBA continues to take actions to address identified fraud risks in its programs. Implementing corrective actions and
strengthening internal controls are imperative in sustaining an effective risk management program that will reduce fraud
and enhance program integrity for current and future programs.
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IMPROVING VERIFICATION OF ELIGIBILITY
Strong internal controls must be in place prior to issuing loans, grants, or conferring certifications. OIG believes SBA should
obtain documented evidence to verify an applicant’s compliance with the program’s eligibility requirements for all of its
programs, ensuring that only eligible applicants receive program benefits.
The CARES Act required SBA to rely on borrower self-certification for eligibility in the PPP and required acceptance of self-
certification from applicants under penalty of perjury for the COVID-19 EIDL program. For the COVID-19 EIDL program,
the Act allowed self-certification for business size and type, such as for a sole proprietorship or a cooperative under 500
employees. Self-certification made the program vulnerable to noncompliance and opened the door wider to fraudsters and
those who misused program funds, thus facilitating a pay and chase environment. Many applicants in the pandemic loan
programs falsified their operating status and provided false information to qualify.
SBA also has relied on self-certifications for its contracting certification programs. These programs were intended by
Congress to help diversify and improve the U.S. economy, fulfilling needed public services while also helping small
businesses gain experience in the federal contracting arena. The goal is for these small businesses to then better compete
in the open marketplace without government assistance. The U.S. government is the largest single purchaser of goods and
services in the world, awarding over $760 billion in prime contracts annually. SBA works to maximize opportunities for
small businesses to receive these contract awards. As mandated by the Small Business Act, the government-wide goal is to
award at least 23 percent of contract dollars to small businesses.
Business owners have been able to attest they qualify as “small” based on the number of employees and revenue, according to
industry classification. Although the Agency’s Audit Follow-up Official adjudicated on the permissibility of self-certification
in these programs, we continue to believe Congress intended for SBA to certify these businesses eligibility for set-aside
contracts. Relying on self-certification without any verification sets up a system that enables ineligible businesses and
unscrupulous business owners to obtain funds for which they are not entitled. OIG has identified instances where SBA did
not consistently detect ineligible firms in its small business contracting certification programs. In our recent reviews of the
WOSB and HUBZone certification programs, we recommended SBA implement procedures and guidance for eligibility and
size determinations and strengthen controls over the annual certification process. 4
We also found SBA’s Dynamic Small Business Search database did not consistently update when SBA made decisions on
applicants’ WOSB certifications. Contracting officers throughout the government rely on the certification status reported
in the database, the system of record for SBA’s small business contracting programs. The Dynamic Small Business Search
database integrates with SAM.gov. Without reliable information, contracting officers may award contracts set aside for
disadvantaged small businesses to ineligible firms.
SBA is developing a standardized fraud risk framework within its administration platform to evaluate available data to
ensure the applicants are eligible for the program. If SBA implements a robust framework and reviews its effects, it will help
mitigate this challenge.
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MITIGATING IMPROPER PAYMENTS
An improper payment is a payment that should not have been made or was made in an incorrect amount, including an
overpayment or underpayment, under a statutory, contractual, administrative, or other legally applicable requirement. SBA
has been unable to provide accurate estimates of improper payment rates for some programs during the last 2 fiscal years,
and OIG has identified multiple issues of noncompliance with the Payment Integrity Information Act (PIIA) of 2019 for fiscal
years 2022 and 2023, raising concerns regarding the accurate measurement of the rate of improper payments.5
Prior and ongoing OIG audit work has identified 7(a) and PPP loans given to borrowers who were ineligible, resulting in
improper payments. In addition, OIG’s external independent accounting firm found SBA did not publish improper and
unknown payment estimates for multiple programs under the debt relief program, according to Report 24-16. Also, sampling
and estimation methodology plans for disaster assistance loans, COVID-19 EIDLs, and EIDL Targeted Advance program
activities were not fully compliant with the Payment Integrity Information Act of 2019.
Specifically, SBA did not design and implement adequate sample review procedures to produce reliable sample results that
could be used to develop accurate improper payment estimates. In addition, SBA did not always publish corrective action
plans as required or publish reduction targets for those over the allowable thresholds. SBA’s assessment methodology for
some programs did not consider certain identified risk factors for determining the likelihood of improper payments.
Payment integrity actions, such as the accurate measurement and reporting of an agency’s improper payment rate and efforts
to reduce those rates, aid in reducing fraud, waste, abuse, and mismanagement in government programs. These actions
enhance program missions, efforts to advance equity, efficiency, and customer experience.
By adhering to its plan to address improper payments, the agency will decrease risk to SBA programs. SBA has initiated
several corrective actions to enhance and develop additional controls to address loan reviews, loan forgiveness, and
fraud, including establishing guidelines for loan and forgiveness reviews and implementing SBA and contractor fraud risk
management policy and framework. SBA has also developed machine learning models to focus on areas of higher risks.
Although many of its efforts related to pandemic assistance programs, learning from past mistakes will help the agency
mitigate improper payments in future programs.
SEIZURE AND RETURN OF FUNDS
SBA, SBA OIG, and our external law enforcement partners are continuing to work together to seize or return pandemic-
related program funds that remain frozen at financial institutions. SBA is also working to claw back funds the agency has
determined to be improper payments.
As of August 2024, SBA and OIG have played a key role in the return of more than $30 billion in funds through working with
law enforcement partners and financial institutions. This includes $1.1 billion in seized or forfeited assets and over $900
million in restitution orders. In addition, OIG’s collaboration with SBA, the U.S. Secret Service, and other federal agencies
and financial institutions has resulted in nearly $9 billion in COVID-19 EIDL funds being seized or returned to SBA and $20
billion paid from borrowers prior to the deferment period ending. Borrowers can make a voluntary payment or return funds
because of concerns they do not meet certain program eligibility requirements, such as the economic need criteria or that the
deposits are suspected to be fraudulent. SBA first issued guidance on how borrowers can return funds in December 2023.
OIG’s audit work recommended and SBA agreed to conduct a cost-benefit analysis that led to SBA reversing its decision to end
collections and referring to Treasury the delinquent unsecured purchased PPP loans with an outstanding principal balance of
$100,000 or less, and delinquent COVID-19 EIDLs with an original loan balance amount of $100,000 or less.
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Our independent auditor found in the 2023 financial statements audit a material weakness in the agency’s accounting for
the PPP, COVID-19 EIDLs, Restaurant Revitalization Fund (RRF), and Shuttered Venue Operators Grant (SVOG) programs.
Because these programs are either in the servicing or post-payment review phases, SBA needs to improve the process to
recover funds or identify funds that need to be recovered. Management did not adequately design and implement controls to
account for the recovery of funds related to these programs.
Also, management did not have adequate documentation about the financial reporting considerations related to the recovery
of funds for the RRF and SVOG programs including the respective accounting entries. Management did not provide sufficient
evidence of documented accounting policies for the recovery of funds related to the COVID-19 EIDLs and PPP loan programs.
Further, management did not have adequate documentation about the appropriate accounting treatment and the respective
accounting entries throughout each step of the recovery life cycle in accordance with generally accepted accounting
principles.
The loss of taxpayer funds could be mitigated if SBA establishes clear, detailed guidance and tracking on returned funds.
SBA’s challenges are enforcing its current guidance for returning loan funds and standardizing procedures on clawing back
funds. Of particular concern is how SBA is going to claw back PPP loans that were found to be ineligible after forgiveness. We
recommended SBA establish clearly defined and detailed roles, responsibilities, and processes for returning PPP funds.6
As a result, SBA developed a procedural notice to provide guidance to borrowers, lenders, and other financial intermediaries
on the return of PPP loan funds to SBA. OIG will continue to evaluate the effectiveness of the established processes.
OIG Highlighted Work
1 Inspection of Small Business Administration’s Initial Disaster Assistance Response to the Coronavirus Pandemic (Report 21-02)
2 SBA’s Eligibility and Forgiveness Review of PPP Loans Made to Borrowers with Treasury’s Do Not Pay Data Matches (Report 24-06)
3 COVID-19 Pandemic EIDL and PPP Loan Fraud Landscape (Report 23-09)
4 SBA’s Implementation of the Women-Owned Small Business Certification Program (Report 22-20); SBA’s Oversight of HUBZone Program Participants’ Continuing
Eligibility (Report 24-23)
5 Independent Auditors’ Report on SBA’s Fiscal Year 2022 Compliance with the Payment Integrity Information Act of 2019 (Report 23-07); Independent Auditors’ Report on
SBA’s Fiscal Year 2023 Compliance with the Payment Integrity Information Act of 2019 (Report 24-16)
6 Serious Concerns Regarding the Return of Paycheck Protection Program Funds (Report 23-08); SBA’s Handling of Potentially Fraudulent Paycheck Protection Program
Loans (Report 22-13)
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Challenge 2: Managing SBA’s Loan Portfolio and Participating Lenders
SBA provides entrepreneurs looking to start, grow, or expand their
small businesses access to financial assistance through several
business loan programs. The 7(a) loan program is SBA’s principal
vehicle for providing small businesses with access to credit that
cannot be obtained elsewhere. Recipients may use proceeds
from a 7(a) loan to establish a new business or assist in acquiring,
operating, or expanding an existing business. This program relies
on numerous outside parties (such as loan agents and lenders) to
originate loans, and the agency has recently expanded non-bank
lender participation. SBA also provides long-term, low-interest
direct disaster assistance loans to businesses of all sizes, private
nonprofits, homeowners, and renters following a declared disaster.
Even though the agency has disbursed and serviced billions in loans since its inception in 1953, the COVID-
19 pandemic presented a significant challenge because of the unprecedented demand in funds and services
from small business owners. SBA systems were never intended to handle such a crisis, and OIG will continue
to monitor how the agency handles long-term loan servicing that is ninefold over what it handled before the
pandemic. To protect taxpayer dollars, the challenge is for SBA to increase its capacity to effectively service
disaster loans, recover delinquent loans, and maintain adequate oversight of financial institutions participating
in its loan programs.
SERVICING DISASTER LOANS
Prior to the pandemic, SBA typically serviced about 263,000 disaster loans totaling approximately $9.4 billion. After the
pandemic, SBA has the challenge of servicing approximately 2.5 million outstanding disaster loans totaling approximately
$283 billion — a ninefold increase in the amount the agency was managing previously (Figure 4).
Figure 4: The Increased Burden of COVID-19 EIDL Servicing on SBA
Source: OIG generated from SBA data
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SBA typically services a disaster loan until it is paid in full or up until default at 180 days. Treasury and SBA have agreed that
the agency will service even defaulted loans and attempt recovery on these loans for up to 2 years, or until SBA’s recovery
efforts are exhausted. This will further stress SBA’s ability to fully and completely service current loans and perform full-
spectrum collection efforts on past-due and defaulted loans. SBA’s challenge is to be responsive to recipients of these loans
and perform its due diligence to mitigate loss to the taxpayer.
In response to the exponential increase in servicing responsibility, SBA has taken actions, such as establishing the standalone
COVID-19 EIDL Servicing Center in Fort Worth, Texas with more than 1,500 employees servicing over 2.2 million loans with
a total value of $284 billion (as of August 2024).
OVERSEEING LENDERS
SBA’s Office of Credit Risk Management manages program credit risk on financial assistance portfolios of guaranteed loans
that totaled about $153 billion as of March 2024. The office monitors lender performance and enforces lending program
requirements.
SBA made significant policy changes to its traditional 7(a) loan program with the goal of helping expand access to capital,
including increasing non-bank lender participation, such as Community Advantage and Small Business Lending Companies.
Lenders that participated in SBA’s mission-lending Community Advantage Pilot Program and over 30 additional lenders were
granted access to the 7(a) loan program as Community Advantage Small Business Lending Companies, bringing the total to
over 140. Additionally, for over 40 years, traditional SBA Small Business Lending Companies licenses were limited to 14, but
SBA granted 3 additional licenses in fiscal year (FY) 2024.
SBA’s challenge is to reach more entrepreneurs while mitigating increased risk to its 7(a) loan program. Many non-bank
lenders are not regulated by other federal entities, which means they are primarily regulated and examined by SBA. These
lenders are considered by SBA to be higher risk than those lenders with federal regulators and require more oversight by
SBA’s Office of Credit Risk Management.
OIG has conducted prior audit work related to third-party service providers in the 7(a) program, and we are currently
assessing the risk associated with non-bank lenders in PPP. In addition, we have investigative cases that reflect some of the
effects non-bank lenders have had on the PPP.
For the PPP, third-party service providers could perform a variety of services in either the loan origination or forgiveness
processes, including assisting lenders with certain lender functions (e.g., determining eligibility), technology services, and
referral services.
Related to prior work OIG has conducted in this area, SBA has significantly improved its tracking and monitoring of
third-party providers in the traditional loan programs and the inherent risks associated with delegated lending require
effective oversight to monitor compliance with SBA policies and procedures as well as timely corrective actions to address
noncompliance. With this in mind, it is vital that SBA continue to
• Enhance the oversight of program lenders;
• Enhance the oversight of third-party service providers, including loan agents who lenders place significant reliance on;
and
• Address emerging issues in a timely manner to reduce risks.
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Our Investigative Actions Involving PPP Lenders
“When the nation was facing a pandemic-induced crisis, Kabbage received tens of millions of dollars through the
PPP to help lend taxpayer funds to businesses in need. Instead of safeguarding those funds, Kabbage doled out
inflated and fraudulent loans, in an effort to maximize its profits.”
U.S. Attorney’s Office District of Massachusetts
CEO of PPP lender MBE Capital “lied to get money that was supposed to help people through the challenges of
COVID-19. He lied so that he could fund a lavish lifestyle of cars, jets, and fancy homes.”
U.S. Attorney’s Office Southern District of New York
Ensuring Retention of Pandemic-Related Loan and Award Records
SBA guarantees a certain percentage of a business loan made by a participating lender to the small business borrower.
Lenders maintain the loan files and service the loan until either the loan is paid in full or
SBA purchases the guaranty and charges off any uncollectible balance. That means most loan documents and data reside
only with the participating lender.
For the PPP, SBA only required the lenders to enter applicant information into data fields in the SBA system. SBA did not
obtain borrower bank account details associated with the disbursement or internet protocol addresses and web log data
associated with the electronic signature on the applications. This means SBA was not able to fully capitalize on data analytics
technology, such as artificial intelligence and machine learning, to identify noncompliance with program requirements and
likely fraud. Future programs could be designed to capture this data.
For example, two PPP lenders are no longer in business and not all data and documentation were maintained; therefore, the
agency has been challenged in conducting oversight of PPP loans issued by those lenders.
Retaining documentation and sufficient evidence to support loan decisions is consistent with federal standards for internal
controls. These controls require managers to support their decisions and determinations with supporting documentation,
which includes the rationale of how loan decisions were made. For this reason, it is important that all loan records are
properly managed, maintained, and available.
The challenge is for SBA to continuously monitor and communicate with participating lenders to safeguard loan information
and documents related to lending decisions, which is imperative in cases where the lender dissolves or ceases to service the
loan. We recommended SBA conduct reviews of PPP lenders to ensure they complied with their communication, servicing,
and debt collection activity requirements. We also recommended SBA require lenders to submit evidence of these activities
with the borrower prior to guaranty purchase.
If the agency does not take these steps, SBA will not have adequate information to make loan decisions, and law enforcement
personnel will not have access to the information needed to prosecute parties that fraudulently obtained the loans
guaranteed by taxpayer dollars.
Congress and the Administration took swift action to extend the statutes of limitations for prosecution of PPP and COVID-19
EIDLs from 5 to 10 years, to end in 2032, but it will be difficult to prosecute bad actors if loan documents and data are not
available. To correspond to the 10-year PPP fraud statute of limitations, SBA extended the records retention requirement for
all PPP lenders to 10 years from the date of final disposition of each PPP loan. 1
1 89 F.R. 68090 Business Loan Program Temporary Changes; PPP-Extension of Lender Records Retention Requirements, (August 2024).
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Other Information (Unaudited)
This increase in the statute of limitations does not apply to the Restaurant Revitalization Fund and Shuttered Venue
Operators Grant programs, which remains at 5 years from application or reporting date. SBA only requires Restaurant
Revitalization Fund recipients to retain their grant records for 3 years. If program officials do not conduct reviews in a timely
manner, or extend the record retention period, SBA could miss the opportunity to prosecute bad actors and recover funds
incorrectly or fraudulently obtained.
OIG Highlighted Work
1 Ending Active Collections on Delinquent COVID-19 Economic Injury Disaster Loans (Report 23-16)
2 Audit of SBA’s Oversight of High-Risk Lenders (Report 20-03)
3 SBA’s Guaranty Purchases for Paycheck Protection Program Loans (Report 22-25)
4 SBA’s Eligibility and Forgiveness Review of PPP Loans Made to Borrowers with Treasury’s Do Not Pay Data Matches (Report 24-06)
Agency Financial Report Fiscal Year 2024 127 U.S. Small Business Administration
Other Information (Unaudited)
Challenge 3: Measuring Performance and Monitoring SBA Programs
SBA manages programs to help support American entrepreneurs access funds, federal contracts, and business
counseling. Integral to this is measuring performance and monitoring these programs to help small businesses,
directly affecting the strength of the American economy. SBA’s challenge is to improve the measures it uses
to assess its’ programs effects and improve grantee oversight, better serving entrepreneurs and ensuring that
every dollar spent delivers results. OIG audits and reviews have consistently identified opportunities for SBA
to enhance and improve its performance data, measures, and goals to assess its programs and better inform
Congress and taxpayers about program effectiveness. We have also raised concerns about SBA’s practices used
to oversee grant recipients’ use of funds to ensure effective support of agency initiatives to help start and grow
small businesses.
MEASURING PROGRAM PERFORMANCE
Federal guidance requires management to establish meaningful performance goals and measure progress,
which provides proof of success and helps improve future programs. With over 33 million small businesses supporting the
economy, having clearly defined program goals and targets are essential to achieving program objectives.
However, our reviews, including of the SCORE mentorship network, an SBA Resource Partner, and of the State Trade
Expansion Program, the Boots to Business program, and the 8(a) Business Development program, consistently found
opportunities for SBA to improve its measures used to assess program goal accomplishments. 1
For example, when SBA initially established the Shuttered Venue Operators Grant (SVOG), we issued a management alert
suggesting the agency establish performance goals and measures before disbursing $14.6 billion in funds to shuttered venues.
In response to this alert, SBA established performance measures to assess whether the program successfully aided small
businesses in the live arts and entertainment industry. We are in the process of assessing SBA’s oversight of program
performance.
MONITORING PROGRAM PERFORMANCE RESULTS
Federal standards for internal controls require managers to use quality information to achieve their objectives. This requires
that program officials ensure information is complete, accurate, accessible, and provided on a timely basis so that leaders
can make informed decisions and evaluate performance. Without accurate and complete performance reporting and
comprehensive reviews of performance reports, SBA grant programs may not achieve their intended results.
In a recent review of SBA’s oversight of Small Business Innovation Research (SBIR) and Small Business Technology Transfer
(STTR) programs, we found there was limited assurance that small businesses met minimum performance standards.
The programs also relied on self-certifications. Small businesses must meet minimum performance standards to compete
for SBIR and STTR awards. These programs help entrepreneurs explore their technological potential and provide an
incentive to profit from commercialization. Changes to the Small Business Act could improve SBA’s ability to monitor
performance standards, reducing risks because the small businesses may not have the ability to achieve program goals for
commercialization as intended by the Act.
1 2 C.F.R. §200.202.
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Other Information (Unaudited)
Our review of the SBA Mentor-Protege Program found program officials established program outcomes and a process to
measure results, but they did not collect sufficient data to accurately assess whether the program had its intended effect.
SBA’s challenge is to monitor grantee performance in such areas as the estimated number of jobs saved or created, tax
revenue generated, and entity operational status.
ENSURING FUNDS ARE USED FOR INTENDED PURPOSES
Figure 5: Total Number of RRF and SVOG Awards that SBA Must Review Manually
Source: OIG generated based on SBA data
We have identified systemic issues with SBA’s oversight of grant recipients’ use of federal funds. These issues included not
enforcing financial reporting requirements, not detecting grant recipient budget reallocations, using weak financial review
procedures, and missing supporting documentation. SBA’s challenge is to improve its grant management processes and
procedures to ensure funds are used for allocable, allowable, and reasonable expenditures.
In our review of Women’s Business Centers and their use of award funds, we found monitoring practices could’ve been
improved in recipients’ accounting for federal expenses, matching funds, and program income. SBA has developed guidance
that, once fully implemented, will more effectively monitor if funds are used for their intended purpose.
Federal funds can greatly assist struggling small businesses during an economic crisis. For example, SVOG and Restaurant
Revitalization Fund (RRF) awards were intended to help businesses in the restaurant industry and venues struggling to stay
in business during the pandemic. SBA has transitioned from quickly disbursing SVOG and RRF awards to monitoring and
closing them out.
In a recent audit of SBA’s oversight of RRF recipients, we found program officials needed to obtain sufficient information to
monitor the recipients to ensure funds were used as intended. RRF recipients were required to submit their final use of funds
report to SBA by April 30, 2023. As of August 2024, 9.7 percent of all recipients, with awards totaling $1.6 billion, had not yet
filed the required report.
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To oversee the RRF and SVOG programs, SBA selected samples of the award recipients to manually confirm eligibility, award
calculation, and use of funds (Figure 5). We found the reviews for both programs were being conducted at a rate that would
extend beyond the required timeframe for grantees to retain award records and the statute of limitations for prosecution
of fraud or misuse. Program officials’ challenge is to prioritize the RRF and SVOG reviews to increase the opportunity to
save taxpayer funds. SBA managers stated they have increased staff allocated to these reviews and are working to manage
resources to complete the reviews within the critical timeframes.
In addition, we found program officials did not review all awards made to potentially fraudulent or ineligible recipients, as
the agency had originally planned to do. We also found SBA needed to implement procedures for recipients to return unused
or improperly awarded funds to Treasury.
SBA’s challenge is to effectively manage its resources to meet the demands of monitoring awardee compliance with award
requirements. Improving awardee oversight will better position the agency to effectively measure and accurately report
performance results and assess whether the federal assistance programs were effective and funds were used appropriately.
OIG Highlighted Work
1 Audit of SBA’s Oversight of the SCORE Association (Report 19-12); Audit of SBA’s State Trade Expansion Program (Report 18-11); The Small Business Administration’s Boots
to Business Program (Report 18-20); SBA’s Business Development Assistance to 8(a) Program Participants (Report 22-08)
2 Serious Concerns about SBA’s Control Environment and the Tracking of Performance Results in the Shuttered Venue Operators Grant Program (Report 21-13)
3 SBA’s Implementation of the SBIR and STTR Extension Act of 2022 (Report 24-14)
4 Evaluation of SBA’s All Small Mentor-Protege Program (Report 19-17)
5 Audit of SBA’s Oversight of Women’s Business Centers’ Compliance with Cooperative Agreement Financial Requirements (Report 21-14)
6 SBA’s Oversight of Restaurant Revitalization Fund Recipients (Report 23-15)
7 Improvements Needed in SBA’s Shuttered Venue Operators Grant Post-Award Review Process (Report 24-21)
8 SBA’s Administrative Process to Address Potentially Fraudulent Restaurant Revitalization Fund Awards (Report 23-10)
Agency Financial Report Fiscal Year 2024 130 U.S. Small Business Administration
Other Information (Unaudited)
Challenge 4: Managing Data
SBA’s data systems are a primary method for customer service and
interaction, helping disburse vital assistance and meet program
goals. But during the pandemic economic crisis, the lack of data
standards and the data environment, which did not include a
centralized data warehouse, limited SBA’s ability to respond to risks.
Data standards and data reliability improves analytical decision
making and fraud identification. By implementing best practices in
data management, the agency will have a stronger foundation for
identifying and preventing fraud schemes.
SBA’s challenge is to mitigate the risk of fraud in future crises by enhancing its management of both internal
data and data from other federal agencies. By enhancing data handling and sharing practices, SBA can
efficiently exchange relevant information with other government entities and leverage data from federal
partners to make more informed decisions, ultimately benefiting the American people.
STORING, MONITORING, AND ANALYZING PROGRAM DATA
During the pandemic economic crisis, SBA’s internal controls and processes were insufficient to address fraud risks because
there was no centralized database of applicant information. For example, PPP loans were made by two institutions that
subsequently failed. Some borrower information was lost, making it more difficult for the government to detect fraud,
investigate, and prosecute wrongdoers (see Ensuring Retention of Pandemic-Related Loan and Award Records).
The agency would be better positioned to fight fraud by consistently collecting key data attributes, such as applicant contact
information, deposit bank accounts, and web log data across all its programs, and then storing it in a centralized database.1
This database would be key in fraud prevention analysis across all programs. 2 1
SBA’s challenge is to minimize fraud risk and manage funding to eligible applicants by implementing consistent data
standards, data storage, and data collection requirements.2 3 This starts with a strong internal effort to require the consistent
collection of relevant data across all loan and grant programs.
For 4 consecutive years, the independent public accounting firm that performed SBA’s annual financial statement audit has
found material weaknesses in the agency’s design and monitoring processes. These areas include data management controls
in the PPP, COVID-19 EIDL, RRF, and SVOG programs.3 This means the agency’s financial reports do not meet federal
criteria for a complete and accurate population of loans disbursed to eligible recipients as of the end of fiscal year (FY) 2024,
according to the FY 2023 Financial Statements audit.
For example, SVOG data is maintained in a separate database. If integrated in a centralized warehouse enforcing data
standards, SBA could analyze fraud indicators across its programs and prevent additional disbursements to fraudulent actors
in current and future programs. 4
SBA programs with different eligibility requirements can still collect and maintain much of the same data, including verified
applicant names, contact information, deposit bank accounts, and web log data. The consolidation can be accomplished
1 GAO, GAO-15-593SP, A Framework for Managing Fraud Risks in Federal Programs, (2015).
2 Office of Management and Budget, M-19-18, “Federal Data Strategy – A Framework for Consistency” (June 4, 2019).
3 GAO, GAO-24-106565, Fraud Risk Management: Agencies Should Continue Efforts to Implement Leading Practices, (2024).
4 GAO, GAO-24-107395, Small Business Administration: Progress and Work Remaining to Implement Key Management Improvements, (2024).
Agency Financial Report Fiscal Year 2024 131 U.S. Small Business Administration
Other Information (Unaudited)
even with credit programs that use third-party lenders. Consistent data standards, collection, and storage are foundational
elements of an analytics strategy. SBA could use data analytic tools to systematically validate all applicants against fraud
indicators detected across data from all its loan and grant programs. Using data analytics across all programs, as permitted
by law, will help SBA better identify cases of fraud before the loan or grant is disbursed.
SHARING AUTHORIZED DATA BETWEEN GOVERNMENT AGENCIES
As recommended by the Pandemic Response Accountability Committee, expanding government data sharing is a critical
component for effective fraud prevention in federal agencies. 5 SBA’s challenge is to secure sufficient and complete data
sharing agreements with other federal agencies and ensuring expired agreements are reestablished. These agreements can
better help federal agencies verify applicant information and detect fraud.
SBA has effectively used data sharing in the past, such as with the Department of Housing and Urban Development, pursuant
to the Stafford Act, to prevent duplication of benefits with community development block grants. 4 Also, we have ongoing audit
work to identify opportunities for data sharing with the U.S. Department of Labor.
A key component of this issue is SBA efficiently sharing relevant data with other government agencies and, in turn, analyzing
the information it receives to better serve the American people. Prior to initiating new programs, the agency should
undertake rigorous risk assessments to protect data and mitigate the inherent risks of fraud, 6 such as matching against Do
Not Pay data before deploying new loan or grant programs.
Another example of effective data sharing between agencies would be if SBA pursues a legal framework to establish Social
Security Number verification data. Given the volume of identity theft associated with SBA pandemic loan fraud, Social
Security Number verification could have helped mitigate the fraud. If statutory limitations prevent SBA from accessing this
or other critical data assets, there are other opportunities for responsible data sharing that could strengthen fraud detection
efforts as outlined by GAO and OMB. As was done with Do Not Pay data sharing agreements with Treasury, the agency could
undertake additional collaborative efforts to uncover fraud, waste, and abuse. The most effective programs would start
with the agreements and systems in place to mitigate fraud, rather than chasing after fraudsters after the funds have been
disbursed.
EVALUATING AND IMPROVING DATA RELIABILITY
Our 2023 financial statements audit found another challenge to SBA’s internal controls that are integral for financial data
reliability and accuracy. OIG’s independent auditors were unable to find reliable financial reporting evidence to provide a
basis for an audit opinion in the agency’s financial reports. As a result, the auditors were unable to provide an opinion on the
reliability and integrity of financial information reported by the agency.
The Standards for Internal Control in the Federal Government and SBA’s 2023 Agency Financial Report highlight proper
procedures for evaluating and improving data reliability. 7 8 OMB also gives priority to data reliability. 9
5 Pandemic Response Accountability Committee, Blueprint for Enhanced Program Integrity, Chapter 2: Opportunities for Policymakers to Improve Program Integrity,
(August 2024).
6 OMB, M-18-16, “Appendix A to OMB Circular No. A-123, Management of Reporting and Data Integrity Risk” (June 6, 2018).
7 SBA, Agency Financial Report Fiscal Year 2023, at 53 (2024).
8 GAO, GAO-14-704G, Standards for Internal Control in the Federal Government, principles 10 and 13, Design Control Activities and Use Quality Information, (2014).
9 OMB, M-18-16, “Appendix A to OMB Circular No. A-123, Management of Reporting and Data Integrity Risk” (June 6, 2018).
Agency Financial Report Fiscal Year 2024 132 U.S. Small Business Administration
Other Information (Unaudited)
The agency should improve the design and implementation of monitoring processes to allow for transparent and accurate
financial reporting.
We believe if SBA conducts a comprehensive data quality evaluation, it can then complete a full evaluation of current
infrastructure, program data quality, and IT processes. SBA’s data quality evaluation should monitor consistent data
standards, data completeness, and data accuracy. A data quality assessment is particularly relevant as the agency starts to
investigate and integrate artificial intelligence into its programs and services.
OIG Highlighted Work
1 SBA’s Handling of Identity Theft in the COVID-19 Economic Injury Disaster Loan Program (Report 21-15); COVID-19 Pandemic EIDL and PPP Loan Fraud Landscape (Report
23-09)
2 SBA’s COVID-19 EIDL Program Data Migration Challenges (Report 22-16)
3 Independent Auditors’ Report on SBA’s Fiscal Year 2022 Compliance with the Payment Integrity Information Act of 2019 (Report 23-07); Independent Auditors’ Report on
SBA’s Fiscal Year 2023 Financial Statements (Report 24-03)
4 SBA’s Controls to Prevent Duplication of Benefits with Community Development Block Grants (Report 15-14)
Agency Financial Report Fiscal Year 2024 133 U.S. Small Business Administration
Other Information (Unaudited)
Challenge 5: Managing Risks in Information Technology Systems
and Cybersecurity
OIG and GAO have reported on significant SBA information technology (IT) systems internal control and
cybersecurity issues, which the agency has also identified. This remains a challenge for SBA because a strong IT
governance framework enables the agency to achieve mission goals and objectives while safeguarding taxpayer
funds. A governance framework in this challenge area is an integrated strategy that identifies, measures, and
controls risk in IT investments, fraud, and artificial intelligence (AI) (Figure 6). These processes will help the
agency better deliver SBA programs and services, particularly in times of crisis.
Figure 6: Risk Management Best Practices Strategy
Source: OIG generated from NIST data
IMPROVING INFORMATION TECHNOLOGY SYSTEMS MANAGEMENT
In March 2024, OIG determined SBA has not had effective IT management
policies and procedures for several years, and the new IT systems
framework is not scheduled to be implemented until FY 2025. The agency
has had issues related to IT software investment governance that include:
• Lack of oversight from the governance board;
• Not identifying the intended purpose of software investments and
their expected benefits;
• Lack of monitoring against performance measurement baselines.
Agency Financial Report Fiscal Year 2024 134 U.S. Small Business Administration
Other Information (Unaudited)
An IT system is essential to mission delivery and enhances organizational performance. IT system management is on GAO’s
high-risk list because these purchases are often a large investment of taxpayer funds for mission critical functions. For
example, SBA plans to spend more than $328 million on IT investments for FY 2025.1
PREPARING FOR ARTIFICIAL INTELLIGENCE CHALLENGES
OIG’s preliminary review of the agency’s charter and minutes of the AI Governance Council indicates the agency has
taken preliminary measures to meet the requirements of OMB M-24-10, “Advancing Governance, Innovation, and Risk
Management for Agency Use of Artificial Intelligence.” The agency established an AI Governance Council in May 2024 to
identify, measure, and control AI risks. In addition, the AI Governance Council has established criteria to assess AI use cases,
and it has reviewed several AI use cases to date.
SBA is using a machine-based system to predict loan guaranty default rate. This machine-based modeling would be
considered AI under 15 U.S.C. § 9401(3), which is why this is a top issue for 2025. SBA is using an updated machine-
based model to predict the probability that a 7(a) loan or a 504 Certified Development Company loan will default within a
year. Projected defaults are predicated based off data variables such as loan payment behavior, loan characteristics (like
loan amount, term, interest type), and borrower data types (like number of delinquent accounts, credit history, payment
experience, and age of oldest account).
We have found no evidence, as of September 2024, that the predictive risk machine-based modeling system was vetted
through SBA’s Business Technology Investment Council, although it was a major investment of more than $500,000. The
council should be reviewing all IT investments to ensure best use of taxpayer dollars and value to the agency.
We also determined that an AI risk assessment was not conducted, as of June 2024. OMB states that while agencies can
capitalize on AI to boost agency performance, they must also manage a range of risks.2 The memorandum requires several
key actions, such as:
• Designating a Chief AI Officer who is responsible for developing best practices that correspond with the National
Institute of Standards and Technology Artificial Intelligence Risk Management Framework 1.0;
• Assessing risks with all AI applications to ensure compliance with the OMB memo;
• Identifying AI purposes and its expected benefits to the agency;
• Testing the AI for performance in a real-world environment before launching it;
• Independently evaluating and monitoring AI, regularly evaluating risks;
• Promoting competition in AI software purchases from contractors or vendors.
SBA’s challenge is to take a proactive stance to risk management in IT system development. So far, we have been unable to
review tools and controls that show SBA is prepared for AI risks. This challenge includes enacting appropriate safeguards
against fraud, privacy infringements, and unintended bias and discrimination. This means the AI could learn from its past
decisions to unintentionally categorize certain borrowers as more likely to default. Effective risk management will also
reduce the likelihood that fraudsters will be able to steal from taxpayers and exploit programs meant to help eligible small
business owners and entrepreneurs.
1 SBA, FY 2025 Congressional Budget Justification FY 2023 Annual Performance Report, (March 11, 2024).
2 OMB, M-24-10, “Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence” (March 28, 2024).
Agency Financial Report Fiscal Year 2024 135 U.S. Small Business Administration
Other Information (Unaudited)
DEPLOYING AND MONITORING NEW THIRD-PARTY SYSTEMS
The agency relies on external vendors or third-party service providers for software and IT services. While these outside
solutions are expedient, SBA’s challenge is to implement robust due diligence and continuous monitoring to ensure data
integrity is maintained throughout the processing cycle. Shortfalls in these processes have contributed to SBA having
material weaknesses and disclaimers of financial reporting reliability going back to FY 2020. 3
We also found SBA’s work to address this challenge is stymied by an outdated system development policy 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.
Proper guidance on monitoring third-party systems can be found though System and Organization Controls 1 reviews. 4 Our
independent financial statement auditors also identified material weaknesses related to insufficient technical support and
inadequate system controls, possibly leading to operational inefficiencies and increased risk of errors. These reviews allow
agencies to evaluate the effectiveness of their internal controls over financial reporting.
SBA’s development guidance requires that systems are designed with adequate controls to prevent unauthorized access
and data breaches. It is also a challenge for the agency to establish clear guidelines for system use, including collaboration
with program end users, ensuring that ongoing technical support is readily available. New platforms must be configured
to provide OIG statutory access to its data and systems access for oversight needs and to detect fraud, waste, and abuse. As
new systems are developed, the importance of robust technical support and continuous system monitoring is integral to data
quality.
COMPLYING WITH FEDERAL INFORMATION SECURITY MODERNIZATION
ACT MANAGEMENT REQUIREMENTS
Our evaluations of SBA’s systems, policies, and procedures regarding the Federal Information Security Modernization
Act (FISMA) show this area continues to be a challenge for the agency. The agency’s overall security program continues to
be rated as “not effective” in accordance with federal guidance. 5 Because of SBA’s mission and the personal identifiable
information it is required to collect to carry out that mission, the agency is susceptible to privacy and data breaches.
Cyberattacks and related threats could imperil critical SBA operations and programs, potentially compromising service.
Improving the agency’s readiness for cybersecurity threats requires an adaptation of mindset and organizational change
across SBA. The agency is working on several significant investments to withstand the potential risk, to align with its policy,
including employing a risk-based approach to identifying and implementing information system security solutions to protect
technology and data, and requiring contractors, loan servicers, and other external entities to implement these comprehensive
cybersecurity solutions.
3 SBA, Agency Financial Report Fiscal Year 2020, (2021).
4 OMB, A-123, “Management’s Responsibility for Enterprise Risk Management and Internal Control” (July 2016).
5 Council of the Inspectors General on Integrity and Efficiency, FY 2023 – 2024 Inspector General Federal Information Security Modernization Act of 2014 Reporting
Metrics, (February 10, 2023).
Agency Financial Report Fiscal Year 2024 136 U.S. Small Business Administration
Other Information (Unaudited)
OIG Highlighted Work
1 SBA’s IT Investment Governance Framework (Report 24-10)
2 COVID-19 and Disaster Assistance Information Systems Security Controls (Report 22-19)
3 Independent Auditors’ Report on SBA’s FY 2020 Financial Statements (Report 21-04)
4 SBA’s Eligibility and Forgiveness Review of PPP Loans Made to Borrowers with Treasury’s Do Not Pay Data Matches (Report 24-06)
5 Fiscal Year 2023 Federal Information Security Modernization Act (Report 24-07)
6 Independent Auditors’ Report on SBA’s Fiscal Year 2023 Financial Statements (Report 24-03)
Make a Difference
To promote integrity, economy, and efficiency, we encourage you to report instances of fraud, waste, or mismanagement to the
OIG Hotline.*
Visit our OIG Hotline website.
Write or visit:
U.S. Small Business Administration
Office of Inspector General
Investigations Division
409 Third Street SW (5th Floor)
Washington, D.C. 20416
* In accordance with Sections 7 and 8L(b)(2)(B) of the Inspector General’s Act, confidentiality of a complainant’s personally
identifying information is mandatory, absent express consent by the complainant authorizing the release of such information.
Agency Financial Report Fiscal Year 2024 137 U.S. Small Business Administration
Other Information (Unaudited)
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 2025
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 or Agency) in Fiscal Year 2025 (2024 Management Challenge (MC) Report). The OIG’s
investigation and analysis provides important insights on the strengths, weaknesses, and opportunities, and threats facing our
enterprise objectives.
The SBA is proud of the progress made to establish a culture of risk mitigation and internal controls. We appreciate the recognition of
these successes and the OIG’s suggestions. Further, we remain dedicated to resolving issues identified within this report, 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 direct resources and oversight efforts.
The Agency is dedicated to effectively addressing outstanding audit recommendations, many of which are closely tied to the issues
identified in the 2024 MC Report. In Fiscal Year 2024, the SBA successfully implemented and closed 116 OIG audit recommendations.
In accordance with OMB Circular No. A-123, the SBA continues to exercise the best practice to review and consider our auditors’
perspective and recommendations from this and other reports when evaluating the enterprise risks. I am proud of the SBA’s skilled
workforce and our ability to improve program and operation integrity and internal controls.
The SBA believes the public will benefit from having more context and direct management insights on one specific issue. Size
standards define the largest size a business can be to compete for contracts reserved or set aside for small businesses. Size standards
vary by industry and are generally based on the two-year average of number of employees or the five-year average of annual receipts
the business has. The Federal government relies on firms’ self-attestation in SAM.gov, a website managed by GSA, to verify that they
are small in at least one NAICS code for certification and program examinations. Contracting officers validate size at the time of award,
and for all set-aside contracts there is a five-day period for interested parties to protest the size of a small apparent successful offeror.
Based on our legal and policy analyses, the SBA concludes that neither the Small Business Act, NDAA nor SBA regulations require
the HUBZone Program to request documentation related to size in connection with a program examination or to perform a size
determination in connection with a program examination.
We will continue to further assess what we can do short of unnecessarily increasing the administrative burdens on firms. However,
this matter was already adjudicated, and then resolved by the SBA and the OIG, consistent with OMB Circular A-50 and SBA’s
standard operating procedures (SOP 20 35 and SOP 90 27). Moreover, both the SBA and the OIG agreed that this matter has been
resolved. The risks raised by the OIG have been addressed and the WOSB and HUBZone certification processes should no longer be
presented as a top management challenge for the SBA in this report.
Again, the SBA has prioritized continuous improvement and ongoing collaboration with the IG to ensure the agency can best
achieve its mission serving America’s small businesses, innovative startups and disaster survivors. I look forward to the continued
strengthening of this collaboration in our endeavor to innovate, institutionalize continuous improvement, and facilitate strategic
collaboration with our stakeholders.
Sincerely,
Isabel Casillas Guzman
Administrator
Agency Financial Report Fiscal Year 2024 138 U.S. Small Business Administration
Other Information (Unaudited)
PAYMENT INTEGRITY
The Payment Integrity Information Act of 2019 (PIIA) • Paycheck Protection Program Loan Forgiveness;
was established to improve efforts to identify and reduce and the
Government-wide improper payments. PIIA requires • Restaurant Revitalization Fund.
agencies to estimate improper payments and report on
actions to reduce improper payments. In accordance with The SBA conducts risk assessments on a three-year rotation
Office of Management and Budget Circular A-123, Appendix cycle for programs not deemed susceptible to significant
C, Requirements for Payment Integrity Improvement improper payments, or earlier if a program was subjected to
(M-21-19) (hereafter referred to as Appendix C), agencies significant change in legislation or funding level. Significant
are required to identify, assess, prioritize, and respond improper payments are defined as gross annual improper
to payment integrity risks to prevent improper payments payments exceeding (1) both 1.5 percent of program outlays
in the most appropriate manner. This report will discuss and $10,000,000, or (2) $100,000,000. The qualitative
the SBA’s efforts and results related to improper payment risk assessment applies an individual risk weight to each
assessment and reviews. More detailed information on risk factor to account for the variability in potential risk
improper payments and information previously reported that each risk factor could impose on a program. This
in the AFR that is not included in the FY 2024 AFR can be year, the SBA performed risk assessments on the Growth
found on PaymentAccuracy.gov. Accelerator Fund program and the payments made under
Section 1112 of the CARES Act using the revised qualitative
The SBA’s improper payment reviews are a multi-layered risk assessment. The SBA concluded that the Growth
process that starts with a risk assessment. If a risk Accelerator Fund Competition Program was not susceptible
assessment indicates that a program is susceptible to to significant improper payments, and that the Section
improper payments, then testing is performed using a 1112 payments were susceptible to significant improper
statistically valid sampling technique. Based upon the payments.
testing results, a corrective action plan is developed to
prevent and remediate the types of errors uncovered. If The next sections discuss the SBA’s efforts and results
testing finds a significant amount of recoverable dollars, related to improper payment assessments and reviews.
the SBA considers the appropriateness of performing a
recapture audit.
The detection and remediation of improper payments are
priorities 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 2024, 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 programs that were created as a
result of the pandemic response. The seven programs are:
• 7(a) Loan Guaranty Approvals;
• 7(a) Loan Guaranty Purchases;
• 504 Certified Development Loan Approvals;
• Disaster Assistance Loans;
• Paycheck Protection Program Loan Guaranty
Purchases;
Agency Financial Report Fiscal Year 2024 139 U.S. Small Business Administration
PAYMENT REPORTING
Agency Financial Report Fiscal Year 2024
Other Information (Unaudited)
Table 1: Improper Payment Reporting and Reduction Outlook ($ in Millions)1
FY 2023 FY 2024 Summary FY 2024 Breakdown
Overpay- Overpay- Overpay- Overpay- FY 2024
Technically Technically Reduction
Program Proper Improper Unknown Proper Improper Unknown ments (Out- ments (With- Underpay- ments (Out- ments (With- Underpay-
Outlays 3
IP IP Outlays 2
Improper Improper Target
Payment Payment Payment Payment Payment Payment side Agency in Agency ments side Agency in Agency ments
$ % $ $ Payments Payment %2
% % % $ $ $ Control) Control) % Control) Control) $
% $
% % $ $
SBA Programs
7(a) Loan Guaranty Approvals 20,110.22 1.31% 262.74 20,294.40 94.56% 5.44% 0.00% 19,191.06 1,103.35 - 0.00% 0.00% 0.00% 100.00% - - - 1,103.35 2.23%
7(a) Loan Guaranty
793.65 6.15% 48.81 1,394.74 94.66% 5.34% 0.00% 1,320.22 74.52 - 0.00% 86.93% 13.07% 0.00% - 64.79 9.74 - 5.34%
Purchases
504 Certified Development
7,150.24 2.75% 196.70 6,329.16 95.46% 3.74% 0.80% 6,042.00 236.73 50.43 0.00% 0.00% 0.00% 100.00% - - - 236.73 3.96%
Loan Approvals
Disaster Assistance Loans 871.64 3.93% 34.29 1,175.70 96.38% 3.62% 0.00% 1,133.16 42.54 - 0.00% 57.81% 42.19% 0.00% - 24.59 17.94 - 3.50%
COVID Programs
COVID-Economic Injury
38,931.71 8.15% 3,171.77 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Disaster Loan (EIDL)
Economic Injury Disaster
140
Loan Emergency Assistance 74.53 6.81% 5.07 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
(Advance)
Paycheck Protection
Program (PPP) Loan 46,280.99 1.94% 896.04 1,507.20 74.85% 21.09% 4.06% 1,128.11 317.83 61.26 0.00% 91.95% 8.05% 0.00% - 292.25 25.57 - 10.00%
Forgiveness
Paycheck Protection
Program (PPP) Loan 8,274.20 1.52% 125.77 6,792.08 75.28% 24.47% 0.25% 5,113.07 1,662.30 16.70 0.00% 100.00% 0.00% 0.00% - 1,662.30 - - 10.00%
Guaranty Purchases
Restaurant Revitalization
N/A N/A N/A 28,599.45 69.98% 0.00% 30.32% 19,928.66 0.07 8,670.72 0.00% 100.00% 0.00% 0.00% - 0.07 - - N/A
Fund Program4 5
Total 122,487.18 4,741.19 66,092.74 53,856.28 3,437.35 8,799.11 - 2,044.01 53.26 1,340.08
Table 1 presents a summary of the SBA’s improper payment review results and reduction outlook.
U.S. Small Business Administration
1 Amounts and percentages reported on this table may not reconcile due to rounding differences.
2 Tolerable rates have been established for 7(a) Loan Guaranty Approvals, 7(a) Laon Guaranty Purchases, 504 Certified Development Loan Approvals, and Disaster Assistance Loans. For these programs, the
established reduction target will be the lesser of the established tolerable rate, or the current reported improper payment rate(i.e., if the FY 2024 improper payment rate is less than the established tolerable rate,
the FY 2024 imporper payment rate will be the reduction target).
3 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.
4 Prior year data for the program is not available as FY 2023 is the first year program is reporting improper payment data.
5 The Restaurant Revitalization Fund program data pertain to outlays in May 2021 to June 2021, which fell into FY 2022; and April 2022 to March 2023, which fell into FY 2023. Data pertain to these 2 years are reported
in FY 2024.
Other Information (Unaudited)
To provide more clarity for the reader, this section is method, the estimated improper payments rate for the
organized by the seven programs and activities subjected annual period ending March 31, 2024 was calculated as
to review for improper payments and provides statistical 5.44 percent. No unknown payments were identified for FY
sampling information and review results coupled with the 2024.
SBA’s planned corrective actions to address the improper
payments. The improper payment rate in FY 2023 was 1.31 percent.
The increase in the improper payment rate can be
attributed to unintentional lender underwriting errors and
7(a) Loan Guaranty Programs
insufficient documentation.
The 7(a) Loan Program is the SBA’s most common loan
program. The 7(a) Loan Program provides small businesses Tolerable Rates and Reduction Targets
with short- and long-term working capital, capital to
Guidance in Appendix C to OMB Circular A-123 states that
refinance current business debt, and capital for specific
“… agency leaders can set Risk Tolerance bands for IPs
business expenditures. Key eligibility factors include what
(Improper Payments) … for each program.”
the business does to receive its income, its credit history,
and where the business operates.
The SBA has established a risk tolerance band for FY 2024
for the 7(a) Loan Guaranty Approval Program improper
For the purpose of payment integrity reporting, the 7(a)
payments. The risk tolerance band for this program is 2.23
Loan Program is split into 7(a) Loan Guaranty Approvals
percent to 10.00 percent. The SBA will assess the adequacy
and 7(a) Loan Guaranty Purchases.
of this risk tolerance band annually. In addition to the
risk tolerance band, the SBA has also established a target
7(a) Loan Guaranty Approvals reduction rate for this program of 2.23 percent.
7(a) Loan Guaranty Approvals describes the loan guaranty
Improper Payment Reviews
approval process. The SBA does not make loans directly to
borrowers; instead, the SBA provides a guaranty to a lender 7(a) Loan Guaranty Approval reviews are conducted to
which makes the loan to a borrower. The SBA delegates determine whether lenders complied materially with the
authority to certain lenders (13 CFR 120.440) to process, 7(a) Loan Program origination requirements, including
close, service, and liquidate certain 7(a) loans without prior statutory provisions, SBA regulations, any agreement
SBA review. Approximately 80 percent of 7(a) loans are the lender executed with the SBA, Standard Operating
approved by lenders under their delegated authority. All Procedures, Loan Authorizations/Terms and Conditions,
loans identified as improper payments in FY 2024 were and official SBA notices and forms applicable to the 7(a)
processed by lenders under their delegated authority. Loan Program. The reviews are conducted in order to
determine if lenders (1) originated the loan in a prudent
During the loan guaranty approval review process, the SBA and commercially reasonably manner, (2) misrepresented
reviews the 7(a) loan for calculation accuracy to ensure or failed to disclose a material fact to the SBA, and/or (3)
that lenders issued the 7(a) loans to eligible borrowers and placed the SBA’s financial interest at risk. Loans in the 7(a)
that loans are made within statutory, regulatory, and SBA- Loan Guaranty Approval Program are reviewed at the time
issued guidelines. At the time of loan approval, no monies of approval; these loans are generally made to the right
are disbursed. Improper payments identified during loan recipient for the right amount, but in the approval process,
review result in no monetary loss to the Government. lenders failed to follow all statutes and regulations. In
these cases, there is no amount that needs to be recovered.
Statistical Sampling However, because the lender failed to adhere to all
applicable statutes, the guaranty is considered technically
For 7(a) approval reviews, the sample cases were chosen
improper.
using probability proportional to size (PPS) sampling with
replacement from all loan guaranties approved during the
Actions to Improve Payment Integrity
12-month period ending March 31, 2024. The approval
population was divided into two strata based on whether The SBA revised its 7(a) Loan Servicing and Liquidation
the loan was SBA Express or not. The SBA determined Standard Operating Procedure in August of 2023, and
the appropriate total sample size to be 263 loans from the issued a second revision in November of 2023. To improve
population. The sample included net guaranteed approvals payment integrity, the SBA provided training on the new
of $359,870,973 and improper payments of $19,557,305 SOP to lenders in 2023 and continues to provide quarterly
within the sample. Using the Hansen-Hurwitz estimation
Agency Financial Report Fiscal Year 2024 141 U.S. Small Business Administration
Other Information (Unaudited)
training. The SBA also provides additional training on Specialists for 7(a) Loan Guaranty Approvals monitors
specific topics throughout the year. errors from identification through completion of the
corrective actions. OFPO management provides oversight
Root Causes and Corrective Actions to ensure that milestones are met. Improper payments
identified as a result of the FY 2024 PIIA reviews have been
Approximately 80 percent of all 7(a) Loan Guaranty
resolved through recommendations to reduce or cancel the
Approvals are performed by lenders with delegated
loan guaranty, efforts to obtain additional documentation,
authority to evaluate, process, close, and disburse 7(a)
and/or referral to other offices. Corrective actions are
loans. Lenders with delegated authority were responsible
initiated within 120 days and are generally taken within the
for all identified improper payments for 7(a) Loan Guaranty
fiscal year.
Approvals in FY 2024.
Improper payments in the 7(a) Loan Guaranty Approval 7(a) Loan Guaranty Purchases
Program were caused by lenders’ failure to verify all
7(a) Loan Guaranty Purchases describes the loan guaranty
components of loan eligibility (program integrity issues,
purchase process. A lender may demand that the SBA honor
lender preference issues, or the subject business is not
its guaranty on a loan if a borrower is in default or files for
eligible), lenders’ failure to provide loan documentation,
Federal bankruptcy protection. During the loan guaranty
and data entry errors. Because the improper payments for
purchase process, the SBA will purchase (also called
these 7(a) approvals are technically improper, the OMB root
“honor”) the guaranty on a defaulted SBA loan.
cause is identified as Statutory Requirements of Program
Were Not Met.
During the loan guaranty purchase review process, the
SBA reviews the 7(a) loan guaranty purchase to determine
To reduce and/or eliminate the occurrence of future
that the honoring of the guaranty was done appropriately:
improper payments, a Corrective Action Plan has been
that the lender complied materially with loan program
developed for the 7(a) Loan Guaranty Approval Program
requirements as defined in 13 CFR 120.110; that the lender
centers. Specific corrective actions are determined based
made, closed, serviced, and liquidated the loan in a prudent
upon the primary reason for the error, with the purpose of
manner; that the lender’s improper action or inaction
both remedying the error and preventing recurrence.
did not place the SBA at risk; and that the lender did not
misrepresent or fail to disclose a material fact regarding the
Plans for improvement include the following:
loan.
• Collaborating with the Office of Credit Risk
Management (OCRM) to recommend that specific
Statistical Sampling
lender deficiencies be monitored and incorporated For 7(a) purchase reviews, the sample cases were chosen
into Risk Based Reviews; using PPS sampling with replacement from all purchases
approved during the 12-month period ended March 31,
• Collaborating with the Office of Financial Assistance
2024. The purchase population was divided into four
(OFA) to inform OFA of deficiencies identified for
strata based on the following factors: 1) which servicing
potential incorporation into policy, regulatory, or
office processed the purchase, and 2) whether the loan was
standard operating procedure rewrite or update; and, considered an early default, regardless of servicing office.
• Conducting external training for lenders on policy The SBA determined the appropriate total sample size to
requirements governing eligibility and appropriate be 284 loans from the population. The sample included
loan structure. aggregate purchase outlays of $314,011,473 and an absolute
value of improper payments of $16,243,017 within the
The Office of Financial Program Operations (OFPO) shares sample. Using the Hansen-Hurwitz estimation method,
the loan level and lender deficiencies identified during the estimated improper payment rate for the 7(a) guaranty
the reviews with OCRM and OFA and will continue its purchase population is 5.34 percent for the annual period
efforts throughout the upcoming fiscal year to ensure that ending March 31, 2024. No unknown payments were
lender deficiencies are monitored and recommended to be identified in FY 2024.
incorporated into OCRM’s Risk Based Reviews and OFA’s
policy revisions and updates. The improper payment rate for 7(a) loan guaranty
purchases in FY 2023 was 6.15 percent, higher than the rate
Corrective actions for specific loans are tracked at the loan in FY 2024. This reduction in the improper payment rate is
level through a centralized database. The Quality Control part of a cycle of higher rates followed by lower rates. The
Agency Financial Report Fiscal Year 2024 142 U.S. Small Business Administration
Other Information (Unaudited)
SBA has been consistent throughout the past few years in deficiencies during the evaluating, processing, closing,
providing training for staff involved in guaranty purchases. disbursing, servicing, liquidating, or litigating of an SBA
guaranteed loan.
Tolerable Rates and Reduction Targets
The primary reasons for 7(a) Loan Guaranty Purchase
Guidance in Appendix C to OMB Circular A-123 states that
improper payments included improper payment of
“… agency leaders can set Risk Tolerance bands for IPs
expenses related to the care and preservation of collateral,
(Improper Payments) … for each program.”
failing to properly identify eligibility for debt refinance, and
failing to identify the source of equity injections.
The SBA has established a risk tolerance band for FY 2024
for the 7(a) Loan Guaranty Purchases Program improper
To reduce and/or eliminate the occurrence of future
payments. The risk tolerance band for this program is 5.78
improper payments, a Corrective Action Plan has been
percent to 10.00 percent. The SBA will assess the adequacy
developed for the 7(a) Loan Guaranty Purchase Centers.
of this risk tolerance band annually. In addition to the
Specific corrective actions are determined based upon
risk tolerance band, the SBA has also established a target
the primary reason for the error to prevent recurrence of
reduction rate for this program of 5.34 percent.
improper payments. The Corrective Action Plan includes:
Improper Payment Reviews • Internal training for purchase processors, reviewers,
7(a) Loan Guaranty Purchase reviews are conducted to and approvers to determine proper recommendation
determine whether lenders complied materially with the of guaranty purchase or denial: ensuring that
7(a) Loan Program origination requirements, including borrower and loan eligibility requirements are met;
statutory provisions, SBA regulations, any agreement ensuring that liquidation expenses are appropriate
the lender executed with the SBA, standard operating and/or approved, verifying the documentation and
procedures, loan authorizations, and official SBA notices accuracy of calculations, ensuring that documentation
and forms applicable to the 7(a) Loan Program. The
for account reconciliation is complete, and verifying
reviewers determined whether the lender (1) originated,
the proper use of proceeds and reviewing expenses for
serviced, and liquidated the loan in a prudent and
eligibility of reimbursement.
commercially reasonable manner, (2) misrepresented or
failed to disclose a material fact to the SBA, and/or (3) put • Internal feedback provided to center staff regarding
the SBA’s financial interest at risk. Loans in the 7(a) Loan the specific loan-level deficiency upon detection.
Guaranty Purchase Program are reviewed at the time of
guaranty purchase, after the SBA has honored its guaranty. Corrective actions are tracked at the loan level through
a centralized database. The Quality Control Specialists
Actions to Improve Payment Integrity for the 7(a) Loan Guaranty Purchase Centers monitor
errors from identification through completion of the
The SBA revised its 7(a) Loan Servicing and Liquidation
corrective action. Headquarters management provides
SOP in August of 2023, and issued a second revision in
oversight to ensure that milestones are met. Improper
November of 2023. To improve payment integrity, the
payments identified as a result of the FY 2024 PIIA reviews
SBA provides quarterly training to lenders. At time of
have been resolved through efforts to obtain additional
publication, the SBA is in the process of issuing additional
documentation, referral for denial review, collection of
revisions to the 7(a) Servicing and Liquidation SOP. The
funds from the lender, or reimbursement to the lender.
SBA plans to provide training to staff and lenders on the
Corrective actions were generally completed at the loan
revised SOP.
level within 60 days, and all actions were taken by the end
of the fiscal year.
Root Causes and Corrective Actions
The root cause categories established by OMB are: (1)
504 Certified Development Loan Approvals
Statutory Requirements of Program Were Not Met; (2)
Unable to Determine Whether Proper or Improper; (3) The 504 Certified Development Company Loan Program
Data/Information Needed Does Not Exist; (4) Inability provides small businesses with long-term, fixed rate
to Access Data/Information; and (5) Failure to Access financing for major fixed assets that promote business
Data/ Information. The root cause for 7(a) Loan Guaranty growth and job creation. 504 loans are available through
Purchases improper payments was identified as Failure to Certified Development Companies. CDCs are the
Access Data/ Information. Improper payments occurred SBA’s community-based partners. They are nonprofit
when purchase processors failed to identify lenders’ corporations certified and regulated by the SBA to package,
Agency Financial Report Fiscal Year 2024 143 U.S. Small Business Administration
Other Information (Unaudited)
process, close, and service 504 loans in order to promote Improper Payment Reviews
economic development within their communities. CDCs are
The 504 Certified Development Loan Approval reviews
certified and regulated by the SBA.
were conducted to determine whether CDCs complied
materially with the program’s origination requirements,
During the loan approval review process, the SBA reviews
including statutory provisions, SBA regulations, any
the 504 loan to ensure that the CDC lender issued the 504
agreement the CDC executed with the SBA, standard
loan to an eligible borrower and that the loan was made
operating procedures, loan authorizations, and official
within statutory, regulatory, and SBA-issued guidelines.
SBA notices and forms applicable to the 504 loan program.
The reviews were conducted to determine whether CDCs
Statistical Sampling
(1) originated the loans in a prudent and commercially
For 504 loan approval reviews, the sample cases were reasonable manner, (2) misrepresented or failed to disclose
chosen using PPS sampling with replacement from all loan a material fact to the SBA, and/or (3) put the SBA’s financial
guaranties approved during the 12-month period ended interest at risk.
March 31, 2024. The approval population was not stratified.
The SBA determined the appropriate total sample size to 504 loan reviews are conducted at the time of loan
be 251 loans from the population. The sample included net approval. At the time of loan approval, no monies are
approval outlays of $534,672,000 and improper payments disbursed. Improper payments identified during loan
of $16,834,314 within the sample. Using the Hansen- review result in no monetary loss to the government.
Hurwitz estimation method, the estimated improper
payments rate for the annual period ending March 31, Actions to Improve Payment Integrity
2024 was calculated as 3.74 percent. Two loans in the
The SBA has revised its origination SOP 50 10, Lender and
sample were determined to be unknown payments, which
Development Company Loan Programs, adding several
extrapolated to an unknown payment rate of 0.80 percent.
504 loan program specific requirements. The SBA provided
These two loans were determined to be unknown due to
training on the new SOP to lenders in 2023 and continues
(1) the timing of a divorce settlement and (2) awaiting an
to provide quarterly training. The SBA also provides
appraisal for real estate collateral.
additional training on specific topics throughout the year.
The improper payment rate for 504 loan approvals in FY
Root Causes and Corrective Actions
2023 was 2.75 percent, and the unknown payment rate
was 0.39 percent. One loan was identified as an unknown 504 loans are reviewed at the time of approval. These
payment in FY 2023. This loan was later determined to be loans are generally made to the right recipient for the
improper. The increase in the improper payment rate can right amount, but CDCs failed, in the approval process,
be attributed to ineligible business models, ineligible use of to follow all statutes, regulation, and SBA Loan Program
proceeds, and lack of borrower injection for special purpose requirements. In these cases, there is no amount that needs
projects. In addition, multiple CDCs did not fully resolve all to be recovered. However, because the CDC lender failed
eligibility concerns, to include incomplete project collateral to adhere to all applicable statutes, the loan is considered
analysis and technical default issues related to existing SBA technically improper.
loans.
The predominant reasons for 504 Loan Approval improper
Tolerable Rates and Reduction Targets payments in FY 2024 were (1) CDCs’ failure to determine
borrower injection for special purpose projects; (2) CDCs’
Guidance in Appendix C to OMB Circular A-123 states that
failure to ensure borrower adhered to all regulations and
“… agency leaders can set Risk Tolerance bands for IPs
loan authorization requirements for existing SBA loans;
(Improper Payments) … for each program.”
and, (3) CDCs’ failure to adequately address all collateral
concerns.
The SBA has established a risk tolerance band for FY 2025
for the 504 Certified Development Loan Approval Program
The root cause categories established by the OMB are: (1)
for improper payments. The risk tolerance band for this
Statutory Requirements of Program Were Not Met; (2)
program is 3.96 percent to 10.00 percent. The SBA will
Unable to Determine Whether Proper or Improper; (3)
assess the adequacy of this risk tolerance band annually.
Data/Information Needed Does Not Exist; (4) Inability to
In addition to the risk tolerance band, the SBA has also
Access Data/Information; and (5) Failure to Access Data/
established a target reduction rate for this program of 3.96
Information. Because the improper payments for these 504
percent.
approvals are technically improper, the OMB root cause is
Agency Financial Report Fiscal Year 2024 144 U.S. Small Business Administration
Other Information (Unaudited)
identified as Statutory Requirements of Program Were Not disasters. Disaster assistance is available to all businesses
Met. located within a declared disaster area, private non-profit
organizations, homeowners, and renters affected by
To reduce or eliminate the occurrence of future improper declared disasters. Disaster assistance loans can be used to
payments, a Corrective Action Plan has been formalized pay for personal or business losses not covered by insurance
for the 504 approval center. Specific corrective actions or funding from other government agencies, as well as
are determined based upon the primary reason for the for business operating expenses that could have been met
improper payment with the purpose of both remedying the had the disaster not occurred. The Disaster Assistance
improper payment and preventing recurrence. Loan Program is a direct loan program, meaning that
the SBA approves and makes the loans and there are no
Plans for improvement include the following: intermediary lenders.
• Collaborating with the Office of Credit Risk The Disaster Assistance Loan Program reviews for
Management to recommend that specific lender improper payments were conducted to determine whether
deficiencies be monitored and incorporated into Risk loans were materially in compliance with SBA guidance,
Based Reviews; including to determine whether borrowers were eligible
for the disaster assistance loan, and whether the amount
• Collaborating with the Office of Financial Assistance
approved was correct, and whether the loan was made in
to inform the office of deficiencies identified for
accordance with existing regulations, SOPS, and other
potential incorporation into policy, regulatory, or
internal guidance.
standard operating procedure rewrite or update; and
• Conducting external training for lenders to ensure Statistical Sampling
that appropriate documentation is obtained
For Disaster Assistance Loan Program disbursement
and analyzed prior to loan approval that policy
reviews, the sample cases were chosen using PPS sampling
requirements are met. with replacement from all loan disbursements processed
during the 12-month period ended March 31, 2024. The
The corrective actions are currently in process. The SBA
disbursement population was divided into three strata
will continue to share the loan level and lender deficiencies
based on the loan type: home loans, business physical
identified during the reviews with the OFA and the OCRM.
loans, and economic injury and disaster loans. A total
The SBA will also continue its efforts to ensure that CDC
of 29,325 loans were approved during the improper
deficiencies are monitored.
payment year, with a total loan outlay of approximately
$1,175,699,623. The SBA determined the appropriate
Because 504 loans are usually reviewed prior to monies
total sample size to be 239 loans from the population. The
being disbursed, resolution of an identified improper
sample included net disbursements of $61,274,359 and
payment is usually through obtaining additional
improper payments of $2,453,500 within the sample. Using
documentation from the CDC to remedy the potential
the Hansen-Hurwitz estimation method, the estimated
improper payment or through cancellation of the loan.
improper payment rate for the annual period ending March
There is no monetary outlay at approval, and thus no loss
31, 2024, was calculated as 3.62 percent with an estimated
to the Federal Government. Specific corrective actions
improper payment amount of $42,536,758. In FY 2024, the
on loans reviewed are tracked at the loan level through a
SBA did not identify any unknown payments.
centralized database. The Quality Control Specialist for
504 approvals monitors errors from identification through
The improper payment rate in FY 2023 was 3.93 percent.
completion of the corrective action. Management provides
The decrease in the improper payment rate from FY 2023
oversight to ensure that milestones are met. All improper
to FY 2024 can be attributed to the reorganization and
payments identified as a result of the FY 2024 PIIA
transitioning the disaster program to the Office of Capital
reviews have been resolved through obtaining additional
Access (OCA). Development and piloting of a new loan
documentation, loan modification, or cancellation of the
processing system, the Unified Lending Platform, has
loan authorization. Corrective actions were generally
vastly automated the loan processing and disbursement
completed at the loan level within 180 days.
functions. Third party verifications and business rules built
into the system aid in the reduction of improper payments
Disaster Assistance Loans by addressing eligibility concerns and verification of loan
amounts.
Disaster assistance loans provide low-interest loans to
help businesses and homeowners recover from declared
Agency Financial Report Fiscal Year 2024 145 U.S. Small Business Administration
Other Information (Unaudited)
Tolerable Rates and Reduction Targets The SBA revised its corrective action processes in FY 2022
for the disaster assistance loans. Corrective actions, which
Guidance in Appendix C to OMB Circular A-123 states that
typically include obtaining supporting documentation
“… agency leaders can set Risk Tolerance bands for IPs
from the borrower, are completed within 15 days of being
(Improper Payments) … for each program.”
informed of the improper payment. In addition, the SBA
provides quarterly training to loan approval staff on the
The SBA has established a risk tolerance band for FY 2024
causes of and prevention of improper payments.
for the Disaster Assistance Loan Program for improper
payments. The risk tolerance band for this program is 3.50
percent to 10.00 percent. The SBA will assess the adequacy Paycheck Protection Program
of this risk tolerance band annually. In addition to the
The CARES Act established the Paycheck Protection
risk tolerance band, the SBA has also established a target
Program loans to provide economic relief to small
reduction rate for this program of 3.50 percent.
businesses and incentivize small businesses to keep their
workers on the payroll because of the COVID-19 pandemic.
Actions to Improve Payment Integrity
The SBA separated PPP into three payment integrity
The SBA is instituting an updated SOP 50 30, disaster reporting categories – PPP Approvals, PPP Forgiveness,
assistance program, that streamlines the disaster lending and PPP Purchases. PPP ended in May 2021. Although no
process. Processing automation through the Unified new PPP funds are being disbursed, borrowers may still
Lending Platform, coupled with the streamlined SOP, request forgiveness for a PPP loan and lenders may request
specifically addresses the most prevalent causes of guaranty purchase of a PPP loan. The SBA is reporting
improper payments. under PIIA on these aspects of the program.
Root Causes and Corrective Actions
Paycheck Protection Program Loan Forgiveness
Disaster assistance loan samples are selected from loan
PPP loans can be forgiven if the funds are used for payroll
disbursements. A disaster assistance loan may have several
costs, interest on mortgages, rent, utilities, or other eligible
disbursements before it is disbursed in full. During the
expenses. A borrower can apply for forgiveness once all loan
loan review process, the SBA reviews the original loan
proceeds for which the borrower is requesting forgiveness
processing and underwriting, any loan modifications, such
have been used. Borrowers can apply for forgiveness at any
as increases in the loan amount or additional borrowers,
time for up to 5 years from the date that SBA issued the loan
to determine eligibility of the borrower and whether the
number. If borrowers do not apply for forgiveness within 10
amount is appropriate. The SBA also verifies that the
months after the last day of the covered period, then PPP
amount of loan is commensurate with the amount of
loan payments are no longer deferred, and borrowers will
damage. Finally, the SBA reviews the actual disbursement
begin making loan payments to their PPP lender.
to determine that the monies are provided to the right
person, in the right amount, and for an eligible use of
PPP loan forgiveness requests were submitted via
proceeds.
SBA’s forgiveness platform and, although the lenders
and borrowers were required to retain supporting
The root cause categories established by the OMB are: (1)
documentation, they were not required to submit that
Statutory Requirements of Program Were Not Met; (2)
documentation to the SBA. In FY 2024, the SBA requested
Unable to Determine Whether Proper or Improper; (3)
supporting documentation from lenders in order to review
Data/Information Needed Does Not Exist; (4) Inability to
to propriety of PPP forgiveness samples. The SBA reviewed
Access Data/Information; and (5) Failure to Access Data/
samples to determine whether the borrower was eligible
Information. The root cause of improper payments in the
for an SBA loan under 13 CFR 120.110, and whether the
Disaster Assistance Loan program was Failure to Access
borrower met all other regulatory criteria for a PPP loan.
Data/Information and Statutory Requirements of Program
Were Not Met. The prevalent causes of improper payments
Statistical Sampling
stemmed from improper accounting of verified losses
on disaster-damaged property, duplication of benefits For PPP Loan Forgiveness reviews, the sample cases were
not adequately addressed, misallocation of loan funds, chosen using PPS sampling with replacement from all
improper calculation or determination of economic injury forgiveness outlays processed during the 12-month period
eligibility, and closing fees deducted from loans contrary to ended March 31, 2024. The forgiveness population was
the Code of Federal Regulations (CFR). divided into three strata based on the lender type: 1) Bank
lender, 2) State Regulated Finance Company lender, and 3)
Agency Financial Report Fiscal Year 2024 146 U.S. Small Business Administration
Other Information (Unaudited)
All Other lender types. The SBA determined the appropriate documentation, and borrower and lender errors in
total sample size to be 387 loans from the population. calculation.
The sample included aggregate purchase outlays of
$634,645,517 and an absolute value of improper payments The root cause categories established by the OMB are: (1)
of $33,026,163 within the sample. Using the Hansen- Statutory Requirements of Program Were Not Met; (2)
Hurwitz estimation method, the estimated improper Unable to Determine Whether Proper or Improper; (3)
payment rate for the PPP Loan Forgiveness population is Data/Information Needed Does Not Exist; (4) Inability to
21.09% for the annual period ending March 31, 2024. The Access Data/Information; and (5) Failure to Access Data/
unknown payment rate for PPP Loan Forgiveness for FY Information. The root cause of these overpayments was
2024 was 4.06 percent. Failure to Access Data.
In FY 2023, the PPP Loan Forgiveness improper payment Corrective actions to address the improper payments
rate was 1.94 percent and the unknown payment rate was identified may include, but are not limited to, the following:
38.57 percent. In FY 2023, as a result of the compressed (1) implementing a quality control review process and/or
time between documentation requests and reporting (2) internally escalating the loan review of a loan for a loan
improper payment rates, many borrowers and lenders review decision.
were unable to provide complete documentation. Those
PPP loans with documentation requests outstanding were
Paycheck Protection Program Loan Guaranty
categorized as unknown payments since the SBA did
not have sufficient supporting documentation to make a Purchases
determination as to whether the forgiveness payment was
If a PPP loan is not forgiven, the SBA may purchase (honor)
proper or improper. Unknown payments in FY 2024 were
all or part of the PPP loan guaranty. Lenders may request
again the result of borrowers or lenders which did not
that the SBA purchase the guaranty of a PPP loan in the
provide requested documentation.
event of a default or other qualifying event. A lender
must have made certain certifications about the loan and
In FY 2023, 193 PPP Loan Forgiveness requests in the
supporting information. The SBA reviews the lender’s
improper payment sample were categorized as “unknown”
request for guaranty purchase and charge-off in accordance
payments due to a lack of supporting documentation.
with PPP Loan Program requirements. The SBA will
The SBA has contacted lenders to obtain missing
honor its guaranty and will purchase 100 percent of the
documentation. As of this writing, 21 of the unknown
outstanding balance of the loan provided that the lender
payments were recategorized as underpayments; 5 of the
has complied with all PPP Loan Program requirements.
unknown payments were categorized as proper payments;
and 167 unknown payments from FY 2023 remain
PPP Loan Guaranty Purchase requests were submitted
unknown.
via the SBA’s PPP platform and, although the lenders were
required to retain supporting documentation, they were
Reduction Targets
not required to submit that documentation to the SBA.
The SBA has set a reduction target for PPP Loan The SBA requested documentation from lenders for those
Forgiveness at 10.0 percent, the statutory compliance limit, guaranty purchases that were a part of the sample. PPP
for FY 2025. Meeting this reduction target will also bring guaranty purchase samples were reviewed to determine
this program into compliance with the PIIA. whether the lender was eligible to receive a loan guaranty
payment; whether the lender received required borrower
Root Causes and Corrective Actions certifications; and, whether the PPP loan met all statutory,
regulatory, and internal requirements for payment.
PPP Loan Forgiveness payments are reviewed after the
forgiveness has been paid to the borrower. Borrower and
Statistical Sampling
lender documentation is reviewed to determine whether the
borrower was eligible, whether the loan was free of “hold” For PPP Loan Guaranty Purchase reviews, the sample cases
codes, and whether required documentation was completed were chosen using PPS sampling with replacement from
and accurate. The SBA also reviewed forgiveness payments all purchases processed during the 12-month period ended
to determine whether the loan amount was documented March 31, 2024. The purchase population was divided
and calculated correctly. into three strata based on the lender type: 1) Bank lender,
2) State Regulated Finance Company lender, and 3) All
The predominate reasons for improper payments in Other lender types. The SBA determined the appropriate
PPP Loan Forgiveness were missing or incomplete total sample size to be 386 loans from the population. The
Agency Financial Report Fiscal Year 2024 147 U.S. Small Business Administration
Other Information (Unaudited)
sample included aggregate purchase outlays of $73,001,319 that the borrower was in business on February 20, 2020; (2)
and an absolute value of improper payments of $9,845,368 lender’s failure to verify average monthly payroll; and (3)
within the sample. Using the Hansen-Hurwitz estimation unacceptable or missing identification of the borrower.
method, the estimated improper payment rate for the
PPP Loan Guaranty Purchase population is 24.47% for The root cause categories established by the OMB are: (1)
the annual period ending March 31, 2024. The unknown Statutory Requirements of Program Were Not Met; (2)
payment rate for PPP Loan Guaranty Purchases in FY 2024 Unable to Determine Whether Proper or Improper; (3)
is 0.25 percent. Data/Information Needed Does Not Exist; (4) Inability to
Access Data/Information; and (5) Failure to Access Data/
In FY 2023, the PPP Loan Guaranty Purchase improper Information. The root cause of these overpayments was
payment rate was 1.57 percent and the unknown payment Failure to Access Data.
rate was 47.63 percent. In FY 2023, as a result of the
compressed time between documentation requests and To recover PPP Loan Guaranty improper payments, the SBA
reporting improper payment rates, many borrowers and will use processes similar to the process used for its 7(a)
lenders were unable to provide complete documentation. guaranty purchase portfolio, which begin with demanding
Those PPP loans with documentation requests outstanding repayment from the lender.
were categorized as “unknown” payments since the SBA
did not have sufficient supporting documentation to make
Restaurant Revitalization Fund
a determination as to whether the forgiveness payment
was proper or improper. Unknown payments in FY 2024 The American Rescue Plan Act of 2021 established the
were again the result of borrowers or lenders which did not Restaurant Revitalization Fund to support the ongoing
provide requested documentation. operations of restaurants, bars and other similar food and
drink establishments which suffered revenue losses caused
In FY 2023, 178 PPP Loan Guaranty Purchase requests by the COVID-19 pandemic. The ARPA became public law
in the improper payment sample were categorized on March 11, 2021. The RRF program provided emergency
as unknown payments due to a lack of supporting financial assistance to eligible entities equal to their
documentation. The SBA has contacted lenders to obtain pandemic-related revenue loss up to $5 million per physical
missing documentation. As of this writing, 117 of the location with a maximum of $10 million per applicant and
unknown payments were recategorized as proper; 57 of any affiliated businesses. If recipients did not use all the
the unknown payments were categorized as improper funds for eligible purposes by March 11, 2023, any unused
payments; and 4 unknown payments from FY 2023 remain funds were required to be returned to the U.S. Treasury.
unknown. On July 2, 2021, the SBA announced that the $28.6 billion
dollar appropriation had been exhausted and the program
Reduction Targets closed.
The SBA has set a reduction target for PPP Loan Guaranty
The SBA reviewed awards to determine whether the
Purchase at 10.0 percent, the statutory compliance limit, for
recipient was eligible for the award, whether the business
FY 2025. Meeting this reduction target will also bring this
met all eligibility criteria, whether PPP loan amounts were
program into compliance with the PIIA.
deducted from the proceeds awarded, and whether the
recipient met remaining statutory criteria.
Root Causes and Corrective Actions
PPP Loan Guaranty Purchase payments are reviewed after Statistical Sampling
the guaranty has been paid to the lender. Borrower and
The RRF program was designed to provide emergency
lender documentation is reviewed to determine whether
financial assistance to eligible restaurants, bars, and
the lender is eligible, and whether the amount of guaranty
other qualifying businesses as a result of the COVID-19
purchase request equaled the amount in SBA systems.
pandemic. In total, the program provided 100,745 awards
The SBA also verifies that the lender received borrower
to eligible program participants, of which 99.83% of
certifications, including whether the borrower had been in
those awards were approved and processed between the
business on or around February 20, 2020. The SBA also
period May 10, 2021 to June 30, 2021. The remaining
checked that the eligible payroll was accurately accounted
disbursements were processed between the period April
for.
1, 2022 through March 31, 2023. The SBA leverages
separate sampling and estimation methodologies for each
The predominate reasons for improper payments in PPP
of the distinct RRF disbursement periods and combines
Loan Guaranty Purchases were (1) lender’s failure to verify
Agency Financial Report Fiscal Year 2024 148 U.S. Small Business Administration
Other Information (Unaudited)
the results of the two estimates to derive improper and Root Causes and Corrective Actions
unknown payment estimates for the program.
RRF awards are reviewed after monies are disbursed.
The SBA noted five awards with improper overpayments
For RRF award reviews, sample cases were chosen using
totaling $71,708.00. In each of the awards where an
PPS sampling with replacement from all disbursements
improper payment was noted, the recipient was eligible;
during the period May 10, 2021 through June 30, 2021.
however, the amount of the award was calculated
This population was divided into five strata based on
incorrectly.
their review tier. The SBA determined the appropriate
total sample size to be 384 awards from this population.
The root cause categories established by the OMB are: (1)
Additionally, a census sample was drawn for all
Statutory Requirements of Program Were Not Met; (2)
disbursements during the period April 1, 2022, through
Unable to Determine Whether Proper or Improper; (3)
March 31, 2023. The combined samples included aggregate
Data/Information Needed Does Not Exist; (4) Inability to
outlays of $461,969,300 and an absolute value of improper
Access Data/Information; and (5) Failure to Access Data/
payments of $71,708 within the samples.
Information. The root cause of these overpayments was
Failure to Access Data.
Because the improper and unknown payments were
calculated from FY 2022 and FY 2023 rates and estimates,
This program ended in June 2021. No additional RRF
the program’s rates listed here apply to FY 2022 and FY
disbursements were made in FY 2024, and none will be
2023, and do not apply to FY 2024. The RRF awards
made in FY 2025. As such, the SBA has not established a
included in the sample of 384 awards discussed below
corrective action plan specific to this program.
were all originated in FY 2021. The estimated program
improper payment rate for the RRF grant population is
0.0003 percent. The program’s unknown payment rate, Shuttered Venue Operators Grant Program
the rate that cannot be classified as proper or improper
The SVOG program was created as a temporary relief
based on available information, for the period was 30.32
program in response to the COVID-19 pandemic, with most
percent because at the time of this writing, the SBA had not
disbursements occurring within the first year. Following
finalized its review of 122 awards. Based on preliminary
guidance from OMB and the limitations outlined in
findings for these 122 awards, 53 are likely to be an
Appendix C, which is written for programs with multiple
improper payment. For many of these awards, an improper
years of disbursements, the SBA is committed to continuing
payment does not translate to any intent to commit fraud—
to work with the OMB to perform an improper payment
for example, for 31 of the awards, there was a calculation
review for the total disbursements made under the SVOG
error and for an additional 20 awards, there was an
program. The SBA has begun testing a sample population
eligibility issue such as a hotel that serves food obtaining
from the SVOG program total program outlays to estimate
an award (while inns were eligible, hotels were not). In
the rate of improper payments. Budget permitting, the SBA
conducting these post award reviews, SBA has only seen an
expects to have the improper payment estimates for the
indication of potential fraud in 4 awards.
SVOG program available in FY 2025.
Reduction Targets
Payment Recovery Effort
The RRF program ended on June 30, 2021. FY 2024
improper payment rate estimates encompassed all The SBA makes every effort to recover improper payments
disbursements for the program. There was no funding for identified during their improper payment review process.
this program in FY 2024, no disbursements will be made This recovery effort is independent of the recapture audit
in FY 2025, and therefore no improper payment rates will process, which can be deemed costly and ineffective.
be extrapolated. Further, the SBA has not set a reduction The Agency’s efforts to recapture improper payments are
target, as this program has ended. discussed by program or activity below.
Actions to Improve Payment Integrity
This program ended in June 2021. The SBA has not planned
any actions to improve program integrity that are specific to
this program.
Agency Financial Report Fiscal Year 2024 149 U.S. Small Business Administration
Other Information (Unaudited)
7(a) Loan Guaranty Purchases Paycheck Protection Program Loan Forgiveness
Overpayments identified in the improper payments’ reviews If the SBA determines that the borrower was ineligible
are recaptured from the lender. The Quality Control staff for the loan amount or used PPP loan proceeds for
tracks and collects any monetary overpayment. In some unauthorized uses, the SBA may seek repayment of part
instances, the loan is referred to the Guaranty Review Team or all of the outstanding PPP loan balance or pursue other
for further action. Determination of a course of action is available remedies. If the SBA uncovers information that
made on a case-by-case basis, depending on the specific indicates that the borrower made a material misstatement
details of the reason for the improper payment. Refer to of fact or provided a false certification, before or after the
section above for corrective action plans to prevent future SBA remits a forgiveness payment to the lender, the SBA
improper payments. may seek repayment of the outstanding PPP loan balance,
refer the borrower to the SBA Office of Inspector General,
or pursue other available remedies. Further, if the SBA
7(a) Loan Guaranty Approvals and 504 Certified
determines that the loan is not eligible for forgiveness (in
Development Loans Approvals whole or in part), the borrower must begin paying principal
and interest.
Overpayments recaptured outside payment recapture
audits are not applicable to 7(a) loan guaranty approvals
and 504 certified development loans approvals as no Paycheck Protection Program Loan Guaranty
payments are made at the time of approval. Improper
Purchases
payments identified through the annual improper payment
reviews for the 7(a) loan guaranty approvals program and If the SBA determines that the guaranty purchase was
504 certified development loans approvals program are not in accordance with PPP Loan Program requirements,
resolved through obtaining additional documentation, the SBA will request that the lender repay the guaranty
loan modification, or cancellation of the loan. Improper purchase funds. In some instances, the loan may be
payments identified as a result of the FY 2024 PIIA referred to the Guaranty Review Team for further action.
reviews have been resolved through obtaining additional Determination of a course of action is made on a case-by-
documentation, or cancellation or reduction of the loan case basis, depending on the specific details of the reason
guaranty and/or referral to other offices within the Office of for the improper payment.
Capital Access, as appropriate. Determination of a course
of action is made on a case-by-case basis, which varies
Restaurant Revitalization Fund Program
substantially depending on the circumstances of the loan
approval and lender’s authority. This program ended in June 2021. At the time of this
writing, the SBA is investigating legal avenues for collecting
on any awards that may be determined to be improper.
Disaster Direct Loan Program
Overpayments are the result of the borrower receiving
Payment Recapture Audits
both an SBA loan and insurance payments or other benefits
as a result of the disaster. If the duplication of benefit is The SBA conducts costs-benefit analyses, as needed, for
recognized prior to the final disbursement, the loan amount programs with over $1 million in disbursements and
is modified to reflect a lower amount and no repayment is not covered by a similar cost-benefit analysis completed
required. If the duplication of benefit is identified after the in prior years. Some of the factors considered include
final disbursement of the loan, then the borrower is given the following: program was not identified as being
30 days to provide evidence to prove that the disaster loan susceptible to significant improper payments in the last
was not over-disbursed. Collection efforts continue at the risk assessment, there have been no recent audit findings
disaster loan servicing centers, but if these efforts fail, the or reports to suggest that the program is susceptible to
borrower will still be liable for the over-disbursed amount improper payments, prior internal control assessments did
in the form of monthly payments in accordance with the not identify the program as being susceptible to significant
loan agreement. Thus, any actual loss is the cost of funds improper payments, and the cost to perform a recovery
related to the over disbursement. audit exceeded the potential recovery amount.
Currently, there are costs-benefit analyses for the following
programs: 7(a) Business Loan Guaranty Program, the
504 Certified Development Company Loan Guaranty
Program, the administrative payroll disbursements,
Agency Financial Report Fiscal Year 2024 150 U.S. Small Business Administration
Other Information (Unaudited)
the administrative travel disbursements, the Boots to
Business Program, the Community Navigators Pilot
Program, the COVID-19 EIDL program, the Disaster Direct
Loan Program, Disbursements for Goods and Services,
the COVID-19 EIDL Advance program, Grants (which
included all grant programs), the Growth Accelerator Fund
Competition Program, the Microloans program, the Office
of Entrepreneurial Development’s (OED) Resource Partners
Training Portal, the Paycheck Protection Program, the
Prime Technical Assistance Grants Program, the SCORE
Program, the Shuttered Venue Operators Grant Program,
the Small Business Development Center Program, the
Small Business Investment Company Financing Guaranty
Program, the State Trade Expansion Program , the Surety
Bond Guarantee Program, and the Veterans Business
Outreach Program.
In FY 2024, the SBA did not conduct any recovery audits.
As mentioned above, in prior years, the SBA has conducted
cost-benefit analyses on programs subject to payment
recapture audit, and deemed the costs to perform a
payment recapture audit outweighed the benefits of the
audit. Although a payment recapture audit is not conducted,
the SBA makes every effort to recover any improper
payments identified through the improper payment review
process or other internal review process.
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.
Agency Financial Report Fiscal Year 2024 151 U.S. Small Business Administration
Other Information (Unaudited)
GRANTS PROGRAMS
In accordance with Federal reporting requirements, this report includes a high-level summary of expired, but not closed,
Federal grants and cooperative agreements. The summary table below shows the total number of awards and balances
for which closeout has not yet occurred, but for which the period of performance has lapsed by two years or more prior to
September 30, 2024.
More than
Category 2-3 Years 4-5 Years
5 Years
Number of Grants/Cooperative Agreements with Zero Dollar Balances 231 94 0
Number of Grants/Cooperative Agreements with
203 85 0
Undisbursed Balances
Total Amount of Undisbursed Balances $14,623,362.85 $21,811,380.68 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, and 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
that 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.
Agency Financial Report Fiscal Year 2024 152 U.S. Small Business Administration
Other Information (Unaudited)
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 that 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
Current
Latest Year of Location
Penalty
Statutory Penalty (Name Year Adjustment Sub-Agency/ for Penalty
Level
Authority or Description) Enacted (via Statute Bureau/Unit Update
($ Amount
or Regulation) Details
or Range)
Small Business Failing to File Report 1966 2024 $324 Office of 89 F.R. 48133
Investment Act, Timely for a Small Investment and (6/5/24)
15 USC 687g Business Investment Innovation
Company
Small Business Act, Failing to File Report 2004 2024 $8,058 Office of 89 F.R. 48133
15 USC 650(j)(1) Timely for a Small Capital Access (6/5/24)
Business Lending
Company
Small Business Act, Types of Formal 2020 2024 $298,887 Office of 89 F.R. 48133
15 USC 657t(e)(2)(B) Enforcement Actions Credit Risk (6/5/24)
Management
Small Business Act, Administrative 1986 2024 $13,946 Multiple 89 F.R. 48133
15 USC 634(b)(6) Remedies for False offices (6/5/24)
and Program Fraud Statements and
Civil Remedies Act Claims
31 USC 3802(d)
Small Business Act, Penalty for Violation 1990 2024 not less than Multiple 89F.R.
15 USC 634(b)(6) of Lobbying $24,496 and offices 481-33-
and Program Fraud Restrictions not more than 4813450004
Civil Remedies Act $244,958 (6/5/24)
31 USC 1352
Agency Financial Report Fiscal Year 2024 153 U.S. Small Business Administration
Other Information (Unaudited)
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Agency Financial Report Fiscal Year 2024 154 U.S. Small Business Administration
Appendices (Unaudited)
Section IV
Appendices
| Unaudited
Agency Financial Report Fiscal Year 2024 155 U.S. Small Business Administration
Appendices (Unaudited)
APPENDIX 1 – CONTACT SBA: USEFUL WEBSITES AND
PHONE 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
Business Guide 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
CONTRACTING
Government Contracting www.sba.gov/federal-contracting
Register as a Contractor www.sam.gov
Contracting Certifications certify.sba.gov
COUNSELING
SBA Learning Center learn.sba.gov
Small Business Development Centers www.sba.gov/sbdc
Women’s Business Centers www.sba.gov/wbc
SCORE www.sba.gov/score
Veterans Business Outreach Centers www.sba.gov/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
X (formerly Twitter) www.x.com/sbagov
YouTube www.youtube.com/sba
Blogs www.sba.gov/blogs
Instagram www.instagram.com/sbagov
Agency Financial Report Fiscal Year 2024 156 U.S. Small Business Administration
Appendices (Unaudited)
APPENDIX 2 – GLOSSARY
504 Loan 504 Certified Development APR Annual Performance Report
Loan Program A report that is required by the Government
Provides small businesses with long-term, Performance and Results Act and presents
fixed-rate financing for the purchase of land, a Federal agency’s progress in achieving the
buildings, and long-life capital equipment. goals in its strategic plan and performance
budget.
7(a) 7(a) Loan Guaranty Program
The SBA’s primary loan program; it provides ARP(A) American Rescue Plan (Act)
general loan financing for a wide variety of A law that provides relief to individuals
purposes. and businesses affected by the COVID-19
pandemic.
7(j) 7(j) Management and Technical
Assistance Program B2B Boots to Business
Provides specialized assistance to An entrepreneurial education and training
underserved small businesses. program offered by the U.S. Small Business
Administration as part of the Department of
7(m) 7(m) Microloan Program Defense Transition Assistance Program.
Provides small, short-term loans to small
businesses and certain types of nonprofit BATF Business Assistance Trust Fund
childcare centers. A revolving trust fund in which all donated
funds are to be deposited.
8(a) 8(a) Business Development Program
Assists firms owned and controlled by BLIF Business Loan and Investment Fund
socially and economically disadvantaged Assists eligible small businesses through
individuals compete for Federal contracts. various loan programs.
A-123 Designation for OMB Circular on CAP Goals Cross-Agency Priority Goals
Internal Control Systems A limited number of Presidential priority
Prescribes policies and procedures to be areas where implementation requires active
followed by Federal agencies in establishing, collaboration among multiple agencies.
maintaining, evaluating, improving, and
reporting on internal controls in their CARES Act Coronavirus, Aid, Relief and Economic
program and administrative activities. Security Act
A $2.2 trillion economic stimulus bill passed
AFR Agency Financial Report in response to the economic fallout of the
An annual report that provides to OMB, COVID-19 pandemic in the United States.
Congress, and the public an overview of the
Agency’s financial and performance data. CJ Congressional Justification
A Federal agency’s annual budget request to
AGA Association of Government Accountants Congress.
The member organization for Government
financial management professionals. CDC Certified Development Company
Nonprofit corporations, certified and
APG Agency Priority Goal regulated by the SBA, that work with
A set of 2-year goals required by GPRAMA participating lenders to provide financing to
that reflect the highest priorities of a Federal small businesses.
agency’s leadership.
Agency Financial Report Fiscal Year 2024 157 U.S. Small Business Administration
Appendices (Unaudited)
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
planning, budgeting, analysis, and loans under the temporary Paycheck
accountability processes. Protection Program and adds a second
temporary program to SBA’s 7(a) Loan
CNPP Community Navigator Pilot Program Program titled, “Paycheck Protection
Engages in targeted outreach to underserved Program Second Draw Loans”
communities through States, local
governments, resource partners, and non- EDP Entrepreneurial Development Program
profit organizations. An account that reports entrepreneurial
development expenses.
COVID-19 Coronavirus Disease, 2019
Highly contagious respiratory disease EIDL Economic Injury Disaster Loan
caused by the SARS-CoV-2 virus. A grant to provide economic relief to
businesses experiencing a temporary loss of
DATA Act The Digital Accountability and revenue due to the COVID-19 pandemic
Transparency Act
A law that aims to make information on ERM Enterprise Risk Management
Federal expenditures more easily accessible Provides a framework to manage risks
and transparent. and seize opportunities related to the
achievement of their objectives.
DCMS Disaster Credit Management System
Electronic system used to process FAST Federal and State Technology Grants
loan applications for all new disaster One year funding opportunity to help
declarations. increase the number of SBIR and STTR
proposals.
DLF Disaster Loan Fund
Assists eligible small businesses impacted FCRA Federal Credit Reform Act
by disasters. A law enacted to provide a more realistic
picture of the cost of U.S. Government direct
DNP Do Not Pay Initiative loans and loan guaranties.
Established by IPERIA to support Federal
agencies with their efforts to prevent and FEMA Federal Emergency Management
detect improper payments. Agency
Coordinates the response to a disaster that
DO District Office has occurred in the United States.
SBA offices that are responsible for the
delivery of the SBA’s many programs and FEVS Federal Employee Viewpoint Survey
services throughout the country. An OPM survey administered to Federal
employees that measures perceptions of
DOD Department of Defense whether, and to what extent, conditions
The Federal agency charged with characteristic of successful organizations
coordinating national security and the are present in their agencies.
armed services.
Agency Financial Report Fiscal Year 2024 158 U.S. Small Business Administration
Appendices (Unaudited)
FFMIA Federal Financial Management FY Fiscal Year
Improvement Act The Federal Government fiscal year begins
A law that requires each Federal agency October 1 and ends the following September
to implement and maintain financial 30.
management systems that comply
substantially with Federal financial GAAP Generally Accepted Accounting
management system requirements, Principles
applicable Federal accounting standards and The standard framework of guidelines
the United States Standard General Ledger. for financial accounting generally known
as accounting standards or standard
FISMA Federal Information Security accounting practice.
Modernization Act
A law that defines a comprehensive GAO U.S. Government Accountability Office
framework to protect Government An independent, nonpartisan agency that
information, operations, and assets against investigates how the Federal government
natural or man-made threats. spends taxpayer dollars and reports their
findings to Congress.
FITARA Federal Information Technology
Acquisition Reform Act GPRAMA Government Performance and Results
Legislation to improve the acquisition Act (GPRA) Modernization Act
and management of Federal information A law that modernizes the Federal
technology assets. Government’s performance management
framework, retaining and amplifying some
FMFIA Federal Managers Financial Integrity aspects of the Government Performance and
Act Results Act (GPRA) of 1993 while addressing
A law that primarily requires ongoing some of its weaknesses.
evaluations and reports on the adequacy of
the internal accounting and administrative GSA General Services Administration
control systems of executive agencies. It A Federal agency of the Executive Branch
also requires evaluations and reports on whose mission is to deliver the best value
the conformance of financial management real estate, acquisition, and technology
systems. services to Government agencies.
FR Financial Report of the U.S. GTAS Governmentwide Treasury Account
Government Symbol Adjusted Trial Balance System
Record of the United States Government’s Used by Government entities to provide
financial activities. proprietary financial reporting and
information about budget execution to the
FRMB Fraud Risk Management Board Department of the Treasury.
Anti-fraud entity responsible for the
oversight and coordination of the SBA’s HHS U.S. Department of Health and Human
fraud risk activities. Services
The Federal agency that aims to protect
FTA Fiscal Transfer Agent the health of all Americans and provide
The central registry for all guaranteed essential human services.
individual loan and SBA pool certificate
interests. HUBZone Historically Underutilized Business
Zone
FTE Full-Time Equivalent An SBA program that encourages economic
Indicates the workload of an employed development by the establishment of
person. An FTE of 1.0 means that the person Federal contract award preferences for
is equivalent to a full-time worker while an small businesses located in historically
FTE of 0.5 means that the worker is half- underutilized business zones.
time.
Agency Financial Report Fiscal Year 2024 159 U.S. Small Business Administration
Appendices (Unaudited)
ICD Internal Controls Division MAT Modification Adjustment Transfer
Ensures managers comply with internal A transfer made between the financing
control standards. account as the general fund.
ICOR Internal Control Assessment Over MRA Master Reserve Account
Reporting The SBA’s fiscal agent maintains this escrow
A reporting methodology that manages fund to facilitate operation of the Certified
assets (including data), improves data Development Company program.
quality, and reduces compliance-oriented
burdens shifting activities to support MRF Master Reserve Fund
attaining high quality data. A reserve fund maintained by the SBA’s
fiscal and transfer agent that is used to
IPERA Improper Payments Elimination and facilitate the operation of the 7(a) secondary
Recovery Act market program.
A law that requires that agencies examine
the risk of, and feasibility of, recapturing OBD Office of Business Development
improper payments in all programs and Assists small, disadvantaged businesses
activities. to gain access to Federal and private
procurement markets.
IPERIA Improper Payments Elimination and
Recovery Improvement Act OCA Office of Capital Access
An act to intensify efforts to identify, Manages small business loans, lender
prevent, and recover payment error, waste, oversight, and the Surety Bond Guarantee
fraud, and abuse within Federal spending. program.
IPIA Improper Payment Information Act OPPCFO Office of Performance, Planning, and
A law enacted in 2002 to identify and reduce the Chief Financial Officer
erroneous payments in the Government’s Financial leadership of the Agency,
programs and activities. including all disbursements, management,
and coordination of planning, budgeting,
ISS Industrial Specialists for Size analysis, and accountability processes.
Specialists who perform size determinations
for protests OCIO Office of the Chief Information Officer
Manages information technology
IT Information Technology for the Agency, including the design,
Refers to matters concerned with the implementation, and continuing successful
design, development, installation, and operation(s) of information programs and
implementation of information systems and initiatives.
applications.
OCRM Office of Credit Risk Management
JAAMS Joint Administrative Accounting Manages program credit risk, monitors
Management System lender performance, and enforces lending
A financial management system, also known program requirements.
as the Oracle Administrative Accounting
System, which is used to keep records ODR&R Office of Disaster Recovery & Resilience
of the SBA’s administrative funding and Promotes economic recovery in disaster-
expenditures. ravaged areas and assists survivors with
accessing SBA disaster loans. Disaster
LSP Lender Service Provider loans are the Agency’s primary form of
Carries out functions in originating, Federal assistance for non-farm, private
dispersing, servicing, or liquidating a sector disaster losses for individuals and
specific SBA business loan or loan portfolio businesses.
for compensation from the lender.
Agency Financial Report Fiscal Year 2024 160 U.S. Small Business Administration
Appendices (Unaudited)
OFA Office of Financial Assistance PIIA Payment Integrity Information Act of
Oversees the SBA’s credit programs that 2019
provide capital alternatives for small Law established to improvew efforts to
businesses not adequately served by identify and reduce Government-wide
conventional lending. improper payments; requires agencies to
estimate improper payments and report on
OFPO Office of Financial Program Operations actions to reduce improper payments.
Leads the financial services industry
in quality products and services to SBA PPP Paycheck Protection Program
partners and customers and protects the A loan designed to provide a direct incentive
integrity of SBA 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 General Contracting and account when selecting the audit sample.
Business Development
Works to create an environment for QAR Quality Assurance Review
maximum participation by small, A review to identify any deficiencies, to
disadvantaged, and woman-owned include improper payments.
businesses in Federal Government contract
awards and large prime subcontract awards. QSMO Quality Service Management Office
Office designated by OMB to promote the
OIG Office of Inspector General use of shared services in specific functional
Conducts and supervises audits, inspections, areas.
and investigations relating to SBA programs
and operations. RRF Restaurant Revitalization Fund
A COVID-19 relief program authorized
OMB U.S. Office of Management and Budget under the American Rescue Plan.
White House office that oversees preparation
of the Federal budget and supervises SBA U.S. Small Business Administration
its administration in Executive Branch The Federal agency whose mission is to
agencies. maintain and strengthen the nation’s economy
by enabling the establishment and vitality
OPM U.S. Office of Personnel Management of small businesses and by assisting in the
The Federal Government’s human resources economic recovery of communities after
agency. disasters.
OPSM Office of Performance and Systems SBDC Small Business Development Center
Management SBDCs provide management and technical
Manages the Capital Access Financial assistance, economic development, and
System, Lender Loan Management System, management training to existing and
Central Servicing Agent system, and Fiscal prospective small businesses through
Transfer Agent system. cooperative agreements with universities
and colleges and Government organizations.
OSDBU Office of Small Disadvantaged Business
Utilization SBG Surety Bond Guarantee
Offices located within each Federal agency Provides guaranties and bid, performance,
that enable small disadvantaged businesses and payment bonds for contracts up to $2
to gain access to economic opportunity million for eligible small businesses that
through Federal contracts. cannot obtain surety bonds through regular
commercial channels.
Agency Financial Report Fiscal Year 2024 161 U.S. Small Business Administration
Appendices (Unaudited)
SBGRF Surety Bond Guarantee Revolving Fund USEAC U.S. Export Assistance Center
A fund at the U.S. Department of the Centers located nationwide that help
Treasury that collects the SBA’s contractor firms grow internationally by assisting in
and surety fees and is used to pay claims. developing a plan of action with solutions
tailored to their needs.
SBIC Small Business Investment Company
Provides long-term loans, debt-equity USSGL The United States Standard General
investments, and management assistance to Ledger
small businesses, particularly during their Provides a uniform chart of accounts
growth stages. and technical guidance for standardizing
Federal agency accounting.
SBIR Small Business Innovation Research
A highly competitive SBA program that VBOC Veterans Business Outreach Centers
encourages domestic small businesses to Provide entrepreneurial development
engage in Federal research/research and services such as business training,
development that has the potential for counseling, and mentoring, and referrals
commercialization. for eligible veterans owning or considering
starting a small business.
SBLC Small Business Lending Company
Non-depository small business lending WBC Women’s Business Centers
companies listed by the SBA Office of Capital Provide long-term training and advising
Access. to women who own or manage a business,
including financial, management,
SE Salaries and Expenses marketing, and technical assistance and
Operating expenses of the Agency. procurement.
SMC Senior Management Council WCF Working Capital Fund
Established by the Administrator to ensure A fund for IT modernization efforts.
the SBA has an effective system of internal
controls. WOSB Women-Owned Small Businesses
Program
SOP Standard Operating Procedure Allows Federal agencies to set aside certain
The primary source of the Agency’s internal contracts for competition only among small
control. businesses owned and controlled by women
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.
TAP Transition Assistance Program
Collaborative program between Federal
agencies to assist active duty service
members’ transition to civilian life through
access to employment workshops and other
services.
Agency Financial Report Fiscal Year 2024 162 U.S. Small Business Administration
Appendices (Unaudited)
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’s 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 2024
there were 116 Final Actions, resulting from 11 monetary and 106 non-monetary recommendations.
The following tables depict the SBA’s Final Action activity for FY 2024 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, 2023 – September 30, 2024
Number of
Recommendations Disallowed Costs
Recommendations
A. Recommendations with management decisions on which final action had not been
11 $ 4,868,703,005
taken at the beginning of the period.
B. Recommendations on which management decisions were made during the period. 6 $ 9,084,426,877
C. Total recommendations pending final action during period. 17 $ 13,953,129,882
D. Recommendations on which final action was taken during the period.
1. Recoveries: 1 $ 1,969,200
a. Collections and Offsets
b. Property
c. Other
2. Write-Offs
3. Total 1 $ 1,969,200
E. Recommendations needing final action at the end of the period. 10 $ 9,027,184,651
Agency Financial Report Fiscal Year 2024 163 U.S. Small Business Administration
Appendices (Unaudited)
Table II
Final Action on Audit Recommendations with Funds Put to Better Use
October 1, 2023 - September 30, 2024
Number of Funds to Be Put
Recommendations
Recommendations to Better Use
A. Recommendations with management decisions on which final 0 $0
action had not been taken at the beginning of the period.
B. Recommendations on which management decisions were
0 $0
made during the period.
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
0 $0
or could not be implemented or completed.
3. Total 0 $0
E. Recommendations needing final action at the end of the period. 0 $0
Table III
Final Action on Audit Recommendations Not Completed within One Year
As of September 30, 2024
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: 6 Recommendations.
Recommendations 3, 4 and 6 have been closed by OIG.
Recommendation 1: Significant improvements in the lender oversight procedures have been implemented and will be
included in the revised SOP 51 00 2, which The SBA is expecting to finalize and publish in the revised SOP in Q2 FY 2025.
Recommendation 2: The SBA is in communication with OIG seeking resolution as OIG denied the SBA’s request for
closure on 9/27/2024.
Recommendation 5: The SBA’s communication plan has been implemented. The SBA is revising the SOP 21 00 2 to include
the communication protocol. This recommendation is currently anticipated to be remediated in Q1 FY 2025.
Agency Financial Report Fiscal Year 2024 164 U.S. Small Business Administration
Appendices (Unaudited)
Report #20-20 Audit of SBA’s Compliance with the Debt Collection Improvement Act, as Amended
Program: OCA
Date Issued: 9/30/2020
Management Decision Date: 9/30/2020
Explanation: 10 Recommendations.
Recommendations 4 and 9 have been closed by OIG.
Recommendation 1: The SBA is currently revising documentation to resubmit a request for closure which was previously
rejected by OIG.
Recommendations 2, 3, and 8 are currently tied to a memorandum that is being approved by SBA leadership.
Recommendations 5, 6, and 7: The SBA is actively working to remediate these recommendations.
Recommendations 1, 2, 3, 5, 6, 7, 8 and 10 are currently anticipated to be remediated in Q1 FY 2025.
Report #21-07 Inspection of SBA’s Implementation of the Paycheck Protection Program
Program: OCA
Date Issued: 1/14/2021
Management Decision Date: 12/9/2021
Explanation: 1 Recommendation.
Recommendations 2 and 3 have been closed by OIG.
Recommendation 1: The SBA is reviewing loan documentation to support an updated closure request for this
recommendation, after OIG advised that they needed to perform some additional analysis. This recommendation is currently
anticipated to be remediated in Q1 FY 2025.
Report #21-08 General Management Advisory SBA’s Use of Vendors Without a Contract
Program: OCA
Date Issued: 2/3/2021
Management Decision Date: 2/2/2023
Explanation: 3 Recommendations.
Recommendation 2 has been closed by OIG.
Recommendations 1 and 3 were previously submitted for closure by the SBA, however the closure requests were rejected
by OIG. The SBA is currently working with OIG to establish a clear path toward closure for recommendation 1. Currently,
recommendation 1 is anticipated to be completed in Q1 FY 2025.
Recommendation 3 will likely require resolution by the Audit Follow-Up Official, as the SBA and OIG are at an impasse
regarding the recommendation.
Agency Financial Report Fiscal Year 2024 165 U.S. Small Business Administration
Appendices (Unaudited)
Report #21-09 Duplicate Loans Made Under the Paycheck Protection Program
Program: OCA
Date Issued: 3/15/2021
Management Decision Date: 3/31/2021
Explanation: 4 Recommendations.
Recommendations 2, 3, 4 have been closed by OIG.
Recommendation 1: The SBA is actively working to remediate this recommendation. The SBA is currently reviewing the
loan population and may request additional supplemental documentation, as needed. This recommendation is currently
anticipated to be remediated in Q1 FY 2025.
Report #21-14 Audit of SBA’s Oversight of Women’s Business Centers’ Compliance with Cooperative
Agreement Financial Requirements
Program: OED
Date Issued: 5/04/2021
Management Decision Date: 3/31/2021
Explanation: 8 Recommendations.
Recommendations 1,4,5,6 and 8: The SBA will update and implement the Office of Women’s Business Ownership SOP. The
SBA anticipates resubmitting updated closure requests for these recommendations in Q1 FY 2025.
Recommendations 2, 3 and 7: The SBA will develop a summary that crosswalks the costs that were disallowed and recovered,
and the costs that were allowed. These recommendations are currently anticipated to be remediated in Q1 FY 2025.
Report #22-01 SBA’s Emergency Economic Injury Disaster Loan Grants to Sole Proprietors and
Independent Contractors
Program: OCA
Date Issued: 10/07/2021
Management Decision Date: 8/22/2022
Explanation: 1 Recommendation.
Recommendation 1: The SBA’s remediation work is ongoing and taking longer than expected. Implementation of
the process and procedure to close out the work has been scheduled and is an ongoing project for the SBA. This
recommendation is currently anticipated to be remediated in Q1 FY 2025.
Agency Financial Report Fiscal Year 2024 166 U.S. Small Business Administration
Appendices (Unaudited)
Report #22-07 SBA’s Oversight of the Grant Recipient’s Implementation of the CARES Act Resource
Partners Training Portal
Program: OED
Date Issued: 1/18/2022
Management Decision Date: 4/4/2022
Explanation: 5 Recommendation.
Recommendations 1, 3, and 4 were closed by OIG.
Recommendations 3 and 5: The OIG did not approve SBA’s request to close recommendations 3 and 5. The SBA and OIG
have arrived at an impasse; the SBA is awaiting OIG’s memo to the Audit-Follow-Up Official to request assistance in
resolving the impasse.
Report #22-08 SBA’s Business Development Assistance to 8(a) Program Participants
Program: GCBD
Date Issued: 2/14/2022
Management Decision Date: 11/10/2022
Explanation: 8 Recommendations.
Recommendations 3, 4, 7, and 8 have been closed by OIG.
Recommendations 1, 2, 5 and 6: The SBA issued Procedural Notice 6000-836899, mandated the use of the BOS Analysis
Workbook, and updated the SOP to clarify business plan review requirements and detail business development actions.
Actions have been completed and the SBA plans to submit documentation for closure in Q1 FY 2025.
Report #22-11 Fiscal Year 2021 Federal Information Security Modernization Act Review
Program: OEMISS
Date Issued: 4/28/2022
Management Decision Date: 4/29/2022
Explanation: 10 Recommendations.
Recommendations 1, 3 - 10– Closed by OIG.
Recommendation 2: The SBA’s conducted a re-organization of its Continuity of Operations (COOP) team in FY 2024 to
improve efficiency, creating the Office of Executive Management, Installation and Support Services (OEMISS)/Office of
Administrative Services (OAS). Significant coordination is needed across the Agency, including program offices and the Chief
Information Officer, to adequately plan and prepare for the COOP exercise. The SBA intends to also align the timing of this
exercise to enable the SBA to participate in Eagle Horizon 2025, a national-level exercise, which is currently anticipated to be
held in Q3 FY 2025.
Agency Financial Report Fiscal Year 2024 167 U.S. Small Business Administration
Appendices (Unaudited)
Report #22-17 COVID-19 Economic Injury Disaster Loan Applications Submitted from Foreign IP Addresses
Program: OCA
Date Issued: 9/12/2022
Management Decision Date: 10/6/2022
Explanation: 2 Recommendations.
Recommendations 1 and 2 were submitted for closure in Q4 FY 2024 and are awaiting a decision from OIG.
Report #22-19 COVID-19 and Disaster Assistance Information Systems Security Controls
Program: OCIO
Date Issued: 9/27/2022
Management Decision Date: 11/23/2022
Explanation: 10 Recommendations.
Recommendations 3, 4, 6, and 9 have been closed by OIG.
Recommendations 1 and 2: The SBA is currently drafting the System Development Methodology SOP. Recommendations 1
and 2 are currently estimated to close in Q1 FY 2025.
Recommendation 5: Engagement with the Enterprise Risk Management team is underway to provide OIG a well-
documented, implemented, and proof of concept towards strengthening the perimeter and core of privacy and identity
risks. This recommendation is currently estimated to close in Q1 FY 2025.
Recommendations 7 and 10: A new tool is currently going through procurement. Once procured, the SBA will install,
attend training, and validate that the tool is working appropriately. Recommendations 7 and 10 are currently anticipated
to be remediated by Q2 FY 2025.
Recommendation 8: Procurement is underway in support of this recommendation. This recommendation is currently
anticipated to be remediated in Q1 of FY 2025.
Report #22-21 Paycheck Protection Program Eligibility for Nonprofit Organizations
Program: OCA
Date Issued: 9/26/2022
Management Decision Date: 6/3/2024
Explanation: 2 Recommendations.
Recommendation 2 has been closed by OIG.
Recommendation 1: The SBA is reviewing the loans identified in this recommendation. This recommendation is currently
anticipated to be remediated in Q3 FY 2025.
Agency Financial Report Fiscal Year 2024 168 U.S. Small Business Administration
Appendices (Unaudited)
Report #22-25 SBA’s Guaranty Purchases for Paycheck Protection Program Loans
Program: OCA
Date Issued: 9/30/2022
Management Decision Date: 8/26/2024
Explanation: 3 Recommendations.
Recommendation 1 has been closed by OIG.
Recommendations 2 and 3: The SBA is preparing documentation to resubmit to OIG in updated closure packages. Both
recommendations are currently anticipated to be remediated by Q1 FY 2025.
Report #23-03 FY 2022 Federal Information Security Modernization Act Review
Program: OCIO
Date Issued: 12/13/2022
Management Decision Date: 12/16/2022
Explanation: 6 Recommendations.
Recommendations 1, 4, and 6 were closed by OIG.
Recommendations 2 and 3: A new tool is currently going through procurement. Once procured, the SBA will install,
attend training, and validate that the tool is working appropriately. Recommendations 2 and 3 are anticipated to be
completed in Q2 FY 2025.
Recommendation 5: Procurement is underway in support of this recommendation. This recommendation is currently
anticipated to be completed by Q1 2025.
Report #23-10 SBA’s Administrative Process to Address Potentially Fraudulent Restaurant
Revitalization Fund Awards
Program: OCA
Date Issued: 7/5/2023
Management Decision Date: 8/15/2023
Explanation: 1 Recommendation.
Recommendations 1: The SBA is currently reviewing the RRF awards identified in this recommendation. This
recommendation is currently anticipated to be remediated by Q1 FY 2025.
Report #23-11 SBA’s Awards for Staffing Support for COVID-19 Economic Relief Loan Programs
Program: OPPCFO
Date Issued: 7/26/2023
Management Decision Date: 8/20/2024
Explanation: 4 Recommendations.
Recommendations 2 – 4 have been closed by OIG.
Recommendation 1: The SBA Procurement has updated its SOP. Updates are expected to be made effective during Q1 FY
2025 at which time the SBA will submit a request to close this recommendation.
Agency Financial Report Fiscal Year 2024 169 U.S. Small Business Administration
Appendices (Unaudited)
Report #23-12 SBA’s Corrective Actions to Improve Oversight of the SCORE Association
Program: OED
Date Issued: 9/21/2023
Management Decision Date: 10/25/2023
Explanation: 1 Recommendation.
Recommendation 1 was submitted for closure in Q4 FY 2024 and is currently pending a decision from OIG.
Report #23-15 SBA’s Oversight of Restaurant Revitalization Fund Recipients
Program: OCA
Date Issued: 9/29/2023
Management Decision Date: 5/6/2024
Explanation: 6 Recommendations.
Recommendations 1, 5, and 6: The SBA is actively working to remediate these recommendations. This work is dependent
upon formal internal guidance to begin the process of finalizing procedures to recover unused funds.
Recommendation 2: The SBA requested additional time to document reviews of the identified award recipients.
Recommendation 3: The Management Decision was approved by OIG and is currently estimated to be remediated in Q3 FY 2025.
Recommendation 4: The SBA requested an extension to assess the post-award review process and manpower requirements to
ensure post award reviews are conducted in a prompt manner.
Report #23-16 Ending Active Collections on Delinquent COVID-19 Economic Injury Disaster Loans
Program: OCA
Date Issued: 9/29/2023
Management Decision Date: 8/20/2024
Explanation: 5 Recommendations.
Recommendations 1, 2, and 4 have been closed by OIG.
Recommendations 3 and 5: The SBA is actively working to remediate these recommendations by implementing a system
to flag the multiple identified COVID-19 EIDL loans for recommendation 3, and producing the supporting documentation
that OIG cited would be sufficient to close recommendation 5. These recommendations are currently anticipated to be
remediated in Q1 FY 2025.
Agency Financial Report Fiscal Year 2024 170 U.S. Small Business Administration
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 Patrick Gushue
Trevor Postlethwaite
Melissa Atwood Walter Hill, Jr.
Steve Ramey
Lola Bailey Blake Hoing
Albert Santiago
Tonia Butler Scott Holland
Zach Simons
Anna Calcagno Bryce Johnson
John Sloan, Jr.
Deborah Chen Anthony Kimi
Sowmya Srikant
Kelsey Do Sharon Kirkley
Scott Stilmar
Travis Dorsey Terri Luebs
Zahid Syed
David Dyck Laura Mintskovsky
Leo Tudela
Kris Fizyta Christine Illige-Saucier
Lucine Willis
Leslie Godsey Mathew Pascarella
Hellen Wong
Grace Goudiss Mike Peterson
Mandana Yousefi
Qiuyan Gu Janette Porter
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 2024 Financial Statements. We offer our special thanks to Schatz Publishing Group and BrennSys
Technology, LLC for contributions in producing this report.
Agency Financial Report Fiscal Year 2024 171 U.S. Small Business Administration
w
Appendices (Unaudited)
Office of Performance, Planning, and the Chief Financial Officer
409 Third Street, S.W. Washington, DC 20416
Agency Financial Report Fiscal Year 2024 172 U.S. Small Business Administration
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