SBA Agency Financial Report, Fiscal Year 2025
Summary
This is the U.S. Small Business Administration's Agency Financial Report for FY 2025, covering October 1, 2024 through September 30, 2025. The message from the Administrator, dated January 21, 2026, closes with the name Kelly Loeffler, 28th Administrator. It says the agency guaranteed 85,000 loans through its 7(a) and 504 programs, totaling $44.8 billion, and delivered over $6 billion in disaster assistance supporting more than 51,000 disaster loans. It also says the FY25 audit by KPMG resulted in a 50% reduction in one year of material weaknesses, significant deficiencies and audit recommendations. A highlights table (dollars in thousands, unaudited) lists a principal program portfolio of $500,214,152 and total assets of $248,410,141.
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Fiscal Year 2025
Agency Financial
Report
Introduction (Unaudited)
About This Report
The U.S. Small Business Administration’s Agency Financial Report (AFR) for FY 2025 provides an over-
view 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 2025 Annual Performance Report (APR) is the other re-
port and is part of the FY 2027 Congressional Budget Justification (CBJ). The CBJ/APR is scheduled
for publication in early 2026. The reports can be found at: www.sba.gov/performance.
FY 2025 Highlights
(Dollars in Thousands)
FY 2025 (unaudited)
Principal Program Portfolio1 $ 500,214,152
Total Assets $ 248,410,141
Total Liabilities $ 255,879,428
Total Net Position $ (7,469,287)
Total Net Cost of Operations $ 12,124,418
Total Budgetary Resources $ 48,815,506
1 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 2
Introduction (Unaudited)
For More Information
Information about the SBA’s programs is available at: www.sba.gov
The SBA’s plans and reports are available at: www.sba.gov/performance
Para información acerca de los programas de la SBA: www.sba.gov - “Translate” - “Select Language”
Questions and comments regarding the content, presentation, and usefulness of this report are wel-
come and may be addressed to: performance.management@sba.gov
OR, YOU MAY WRITE TO:
U.S. Small Business Administration
Office of Performance, Planning, and the Chief Financial Officer
409 Third Street, S.W.
Washington, DC 20416
OR, YOU MAY CALL:
Deborah Chen, Deputy Chief Financial Officer
Office of Performance, Planning, and the Chief Financial Officer
(202) 205-6723
FOLLOW US ON:
www.facebook.com/sbagov
www.x.com/sbagov (formerly Twitter)
www.youtube.com/sba
www.instagram.com/sbagov
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 3
Introduction (Unaudited)
Table of Contents
MESSAGE FROM THE ADMINISTRATOR 7
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) 10
The SBA’s Organization and Mission 11
Executive Summary 12
Financial Results 12
Performance Results 12
The SBA’s Principal Programs 14
Capital 14
Investment and Innovation 14
Exporting 15
Contracting and Business Development 15
Counseling and Training 16
Disaster Assistance 17
Analysis of Performance Results 18
Summary of Performance Results 18
Verification and Validation of Performance Data 20
Operational Portfolio Analysis 20
Significant Opportunities and Risks 28
Financial Integrity and Risk Management 28
Disaster Assistance and Resilience 29
Technology, Automation, and Operational Innovation 29
Changing Workforce Strategy 30
Supporting U.S. Manufacturing and Industrial Competitiveness 30
Analysis of Financial Results 31
Background 31
Loan Guaranties 31
Credit Program Subsidy Reestimates 33
Financial Position 34
Analysis of SBA’s Systems, Controls, and Legal Compliance 36
Internal Control Environment 36
Financial Management Systems Strategy 38
Management Assurances: FMFIA & FFMIA Assurance Statements for FY 2025 40
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 4
Introduction (Unaudited)
FINANCIAL REPORTING (UNAUDITED) 43
Message from the Chief Financial Officer 44
Inspector General’s Audit Report 46
Independent Auditors’ Report on FY 2025 Financial Statements 48
CFO Response to Draft Audit Report on FY 2025 Financial Statements 62
Consolidated Balance Sheet and Related Notes 67
OTHER INFORMATION (UNAUDITED) 91
Other Financial Statements and Related Notes 92
OIG Report on the Top Management and Performance Challenges 128
Agency Response to the OIG Report on the Top Management and Performance Challenges 160
Payment Integrity 168
Summary of Financial Statement Audit and Management Assurances 188
Grant Programs 192
Civil Monetary Penalty Adjustment for Inflation 193
APPENDICES (UNAUDITED) 195
Appendix 1 – Contact SBA: Useful Websites and Numbers 196
Appendix 2 – Glossary 197
Appendix 3 – OIG Audit Follow-Up Activity 205
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 5
Introduction (Unaudited)
The 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 2025 Agency Financial Report (AFR) provides financial
and performance information for the fiscal year beginning October 1, 2024, and ending September
30, 2025. 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 Consolidated
Balance Sheet and related Notes. It includes a message from the Chief Financial Officer,
the audit transmittal memorandum from the Inspector General, and the Independent
Auditors’ report.
OTHER INFORMATION
The Other Information section includes the other financial statements and notes.
This section also includes the Inspector General’s report on the Agency’s most serious
management and performance challenges along with recommended actions and a
summary of the financial statement audit and management assurances. Additionally,
the required supplementary information provides a combined statement of budgetary
resources.
APPENDICES
The Appendices provide supporting information, including a contact list of useful
websites and telephone numbers, a glossary, and a detailed report on audit follow-up
activity.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 6
Introduction (Unaudited)
Message From The Administrator
January 21, 2026
I’m pleased to report record results for the U.S. Small Business Ad-
ministration (SBA) in Fiscal Year (FY) 2025. Under President Donald
J. Trump’s leadership, this Administration is reversing the damage
of the Biden Administration’s failed economic policies. Accordingly,
the SBA has restored the agency to its founding mission, along with
reinstating long-absent financial and operational integrity. The era of
mismanagement, neglect, incompetence, and a lack of oversight has
ended – along with the bureaucratic expansion, partisan bias, and
racial discrimination that characterized the last four years.
The agency-wide reforms that the Trump SBA were able to effect in
the span of just one year are consistent with the urgency and quality
with which the Trump Administration is executing. There’s perhaps no clearer indication of that than
in our independent audit, which showed that reversal of the deteriorating risk posture of the agency is
well under way. The FY25 audit by KPMG resulted in a 50% reduction in just one year of the agency’s
material weaknesses, significant deficiencies, and audit recommendations. It also marked the first
year that these issues were isolated solely to the pandemic-era programs, and that is the result of our
exceptional agency-wide leadership team.
From 2020-2024, the agency doubled in size with a headcount that remained at pandemic-era staff-
ing levels although the pandemic had long-since concluded. The vast majority – 90% – of employ-
ees worked from home, as the agency spent hundreds of millions on wasteful grants, contracts and
purchases. The SBA poured resources into partisan programs like the Green Lender Initiative, DEI
contracting, and voter registration campaigns for their political constituencies ahead of the 2024
presidential election.
Amid the vacuum of focus on small businesses in favor of a political agenda, the agency’s core pro-
grams suffered. The Biden SBA reduced prudent underwriting standards within the core 7(a) loan
program, generating rising defaults, declining bank participation, and ending Fiscal Year 2024 with
negative cash flow for the first time in more than a decade. Basic and common-sense guardrails like
citizenship and birth date verification were nonexistent. The SBA’s Inspector General uncovered an
estimated $200 billion in Paycheck Protection Program (PPP) and Covid Economic Injury Disaster
Loan (EIDL) fraud, which the agency refused to investigate – exposing taxpayers to substantial losses.
In federal contracting, the 8(a) Business Development Program was arbitrarily expanded – advancing
the interests of “socially and economically disadvantaged” small businesses to advance DEI at the
expense of deserving veteran- and women-owned small businesses.
Against this backdrop, the Trump SBA returned to its founding mission of empowering job creators,
delivering disaster relief, and driving economic growth - grounded in financial discipline, program
integrity, fighting fraud and responsible oversight of taxpayer resources. Being able to identify our
progress on these issues, address opportunities to improve, and to report to you are just a few of the
reasons I called for an immediate audit upon being sworn in.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 7
Introduction (Unaudited)
FY25 marked a pivotal year in the fight to restore financial stewardship across the agency. SBA re-
stored strong underwriting standards within the 7(a) and 504 loan programs, and reimplemented
lender fees to preserve the zero-subsidy status that ensures our loan guarantees remain self-funding.
Across the agency, SBA actioned common-sense oversight, risk management, and internal audit and
compliance practices to ensure that every dollar deployed aligned with statutory intent and sound
financial standards. Along with our action to immediately terminate the partisan programs of the past
and launch multiple fraud investigations, these actions were taken deliberately to protect the long-
term solvency of SBA programs, reinforce lender confidence, and reduce taxpayer exposure.
As a result of these reforms, the SBA delivered record levels of capital while improving portfolio qual-
ity and operational discipline. During FY25, the agency guaranteed 85,000 loans through its 7(a) and
504 programs, totaling $44.8 billion, resulting in a record year for capital access in SBA’s 72-year his-
tory. On average, the SBA approved 1,615 small business loans per week, supporting our job creators
and economic growth while renewing underwriting rigor.
Meanwhile, the agency launched numerous investigations and audits to root out fraud – working to
hold criminals accountable in partnership with law enforcement. The agency initiated a nationwide
investigation into PPP and EIDL fraud, as well as a full-scale audit of the 8(a) Program. Amid its ef-
fort to end waste and abuse within the federal contracting marketplace, the agency also continued
clearing legacy backlogs – most notably in the Veteran Small Business Certification Program – ensur-
ing timely, accurate, and compliant determinations for eligible firms. These actions underscore the
agency’s zero-tolerance approach to waste, fraud, and abuse – and its commitment to preserving
taxpayer funds on behalf of legitimate job creators.
Following the Biden SBA’s failure to ensure adequate disaster funding in 2024, the Trump SBA restored
integrity to the disaster assistance program, which is a critical component of the SBA’s lending opera-
tions. In FY25, the agency delivered over $6 billion in disaster assistance, supporting more than 51,000
disaster loans with improved loan approvals in just 17 days, while maintaining strict eligibility and
credit controls to protect taxpayer funds.
The SBA’s Small Business Investment Company (SBIC) program also closed FY25 at a historic high,
reaching $53 billion in combined private capital and SBA leverage, reflecting strong investor con-
fidence and disciplined risk management. This growth was achieved while maintaining oversight
standards designed to protect the government’s position and ensure long-term program viability as
another zero-subsidy program to drive growth and innovation without taxpayer cost burdens.
Collectively, these results powered over $100 billion in a single year to drive the private sector for-
ward, while reflecting a renewed commitment to financial integrity, transparency, and accountability.
The SBA’s FY25 performance demonstrates that strong oversight and record capital delivery are not
competing priorities, but complimentary ones. By restoring discipline, and focusing on measurable
outcomes, in just one year, the SBA is already better positioned to support America’s entrepreneurs,
Main Streets and workers, while upholding the highest standards of fiscal responsibility.
As we look ahead, we are more committed than ever to continuous improvement, modernization,
rigorous oversight, accountability for fraud, and responsible stewardship of taxpayer resources. I am
confident that the reforms implemented in FY25 have strengthened the foundation of SBA programs
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 8
Introduction (Unaudited)
and will continue to deliver durable, transparent, and auditable results for America’s small businesses.
Sincerely,
Kelly Loeffler
28th Administrator
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 9
SECTION 1
Management’s
Discussion and Analysis
(UNAUDITED)
Management’s Discussion and Analysis (Unaudited)
The SBA’s Organization and Mission
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., and 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.
The SBA is currently developing the FY 2026-2030 Strategic Plan which will outline current SBA
priorities and how the work of SBA offices supports those priorities. The plan will be found at the
following site: https://www.sba.gov/document/support-sba-strategic-plan. For more information
on current SBA priorities and plans, please reference the FY 2026 Congressional Budget Justifica-
tion and FY 2026 Annual Performance Plan documents which can be found at the following site:
https://www.sba.gov/document/report-congressional-budget-justification-annual-perfor-
mance-report.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 11
Management’s Discussion and Analysis (Unaudited)
Executive Summary
America’s 36 million small businesses play a critical role in job creation and retention. During the last
two decades, small businesses have been responsible for creating two out of every three net new
jobs. In turn, the U.S. Small Business Administration’s assistance to those firms and entrepreneurs
helps drive a healthy economy.
The SBA employs a variety of methods to support America’s small businesses. These methods
include promoting equitable access to capital, federal contracting, counseling, and disaster
assistance.
The following sections highlight financial and performance results for the Agency. Additional
information can be found in the Analysis of Financial Results and Summary of Performance Results
sections. The complete set of performance results will be reported in the Annual Performance Report
to be published in early 2026.
FINANCIAL RESULTS
The loans receivable portion of the SBA credit program portfolio is $234.3 billion driven by new loans
disbursed of $3.5 billion, loans purchased of $5.2 billion and collections of $9.3 billion.
For FY 2025, the SBA’s total budgetary resources were $17.3 billion, primarily used for staffing,
operations, and $12.5 billion in loan subsidy costs. Approximately $2.3 billion remains available for
future obligations. Total nonbudgetary resources for loan financing used to make direct loans and
purchase guaranteed loans in default were $31.5 billion. These resources supported $26 billion in
obligations, with the remaining balance available for future-year obligations or will be returned to
Treasury.
The SBA’s guarantied portion of the outstanding loan principal increased by $6.1 billion in FY 2025
to $145.6 billion. During FY 2025, new guaranties disbursed by SBA participating banks were $31.8
billion. (Note 5E)
In FY 2025, SBA purchased $5.2 billion in defaulted guaranteed loans to honor SBA’s guaranties which
exceeded the additional resources available to fund these claim payments (Note 14B), reflecting
higher-than-expected defaults within the guarantied loan portfolio.
PERFORMANCE RESULTS
Capital: In FY 2025, the SBA approved over $45 billion, or more than 84,000 7(a) and 504 loans
to small businesses; 7(a) loans, 504 loans, microloans, and surety bonds helped to support more
than 897,000 American jobs. During FY 2025 the SBA invested more than $5.7 billion in over 1,100
small businesses through the Small Business Investment Company program, which supported over
154,000 jobs.
Contracting: The SBA continued to partner with agencies across the Federal Government to expand
small business contracting opportunities. In FY 2024, small businesses were awarded over $183.5
billion in federal contracts. FY 2025 contracting numbers continue to be collected and certified.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 12
Management’s Discussion and Analysis (Unaudited)
The Federal Government continued to exceed its service-disabled veteran-owned small business
contracting goals but will face challenges meeting its small disadvantaged, HUBZone, and women-
owned small business contracting goals.
Counseling: The SBA helped entrepreneurs start more than 26,000 new businesses in FY 2025 and
served over 660,000 unique clients. Additionally, in FY 2025, hundreds of thousands of American
small businesses took advantage of counseling, mentoring, and training assistance through the SBA
network, which includes 150 Women’s Business Centers (WBC), the largest WBC network in the SBA’s
history, and 31 Veterans Business Outreach Centers (VBOC).
Disaster Assistance: In FY 2025, the SBA approved more than 51,000 direct disaster loans for events
such as floods, hurricanes, and tornadoes, totaling nearly $6 billion. The Agency managed 449
disaster assistance declarations during FY 2025.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 13
Management’s Discussion and Analysis (Unaudited)
The SBA’s Principal Programs
CAPITAL
7(a) Loans—The SBA offers government guaranties on loans (up to $5 million) made by lenders
to help expand access to capital for business owners who face challenges obtaining approval for
financing. The SBA guaranties a portion of 7(a) loans made and administered by commercial lending
institutions. Loans can be guaranteed for a variety of general business purposes.
504 Certified Development Company Loans—The SBA works with CDCs, which are private
nonprofit corporations, and private lenders to provide long-term financing (up to $5.5 million) to
support investment in major assets, such as real estate and heavy equipment. The SBA guaranties
the CDC’s portion of these loans.
Microloans—The SBA provides loans to nonprofit intermediary lenders, which are community-
based organizations with experience in lending and providing technical assistance, that in turn
make these loans (up to $50,000) to small businesses needing small-scale financing and technical
assistance for startup or expansion.
Surety Bond Guarantees—A surety bond is a type of contract that guarantees the performance of
a contractor. If one party does not fulfill its end of the bargain, the SBG program provides financial
compensation to the other party. The SBA guarantees bonds issued by a surety company to
encourage the surety company to provide bonds to small businesses, up to $6.5 million for non-
federal contracts and up to $10 million for federal contracts.
INVESTMENT AND INNOVATION
Small Business Investment Companies—SBICs are privately owned and managed investment
funds that use their capital plus funds borrowed, with an SBA guaranty (up to $175 million), to make
equity and debt investments in qualifying small businesses.
Small Business Innovation Research—The SBIR program stimulates high-tech innovation by
reserving a specific percentage of federal research and development funds for small businesses.
Small Business Technology Transfer—The STTR program reserves a specific percentage of federal
research and development funding to award to small business and nonprofit research institution
partners.
Federal and State Technology Partnership Program–The FAST Partnership Program provides
direct assistance to underserved innovation-based entrepreneurs to help increase their success in
obtaining SBIR and STTR funding.
Growth Accelerator Fund Competition Program–GAFC provides $50,000-$200,000 in funding
to accelerators, incubators, co-working communities, makerspaces, and other organizations that
provide entrepreneurial support, mentorship, and assistance to STEM/R&D entrepreneurs.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 14
Management’s Discussion and Analysis (Unaudited)
Regional Innovation Clusters–RICs promote innovation in regional ecosystems through on-
the-ground collaborations between businesses, research, education, financing, and government
institutions that work to develop and grow a particular industry or related set of industries in a
geographic region.
EXPORTING
Export Loans—The SBA provides several types of export loans, including SBA Export Express loans
(up to $500,000), Export Working Capital loans (up to $5 million), and International Trade loans (up
to $5 million) that provide small businesses with enhanced export financing options to develop
foreign markets, fund their export transactions, and/or support business expansion due to exporting
success. In FY 2024, the SBA began the Working Capital Pilot (WCP) program, which is a modified
version of the Export Working Capital program. The WCP provides a new working capital tool geared
toward the new-to-export market.
U.S. Export Assistance Centers—USEACs are staffed by SBA, Department of Commerce, and
Export-Import Bank professionals. Together, their mission is to help small- and medium-sized
businesses compete in today’s global marketplace by providing export marketing and finance
assistance.
State Trade Expansion Program—STEP provides grants to states to assist small businesses with
the information and tools they need to succeed in export related activities. These activities include
participation in foreign trade missions, foreign market sales trips, international marketing campaigns,
export trade shows, and training workshops.
CONTRACTING AND BUSINESS DEVELOPMENT
Contracting Assistance to Small Businesses—Small business contracts represent the largest
form of direct monetary support for small business in the Federal Government. The SBA provides
certifications for four subgroups:
• Small Disadvantaged Businesses—This program provides assistance through the 8(a)
Business Development program and set-aside contracting for businesses owned and
controlled by socially- and economically disadvantaged individuals. For 9 years, a firm is
assisted in gaining resources to compete for federal contracts and for contracts in the private
sector.
• HUBZone Small Businesses—This program provides sole-source and set-aside contracting
for firms located in designated economically disadvantaged geographical areas.
• Veteran-Owned Small Businesses and Service-Disabled Veteran-Owned Small
Businesses—Certified VOSBs have additional opportunities to pursue sole-source and set-
aside contracts at the Department of Veteran’s Affairs. The SDVOSB program allows federal
agencies to set aside contracts for competition only among service-disabled veteran-owned
small businesses.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 15
Management’s Discussion and Analysis (Unaudited)
• Women-Owned Small Businesses—This program allows federal agencies to set aside
certain contracts for competition only among small businesses owned by women.
Empower to Grow (formerly 7(j) Management and Technical Assistance)—This program
provides training to small businesses owned and controlled by economically and socially
disadvantaged individuals; to small businesses located in areas of high unemployment and low
income; to 8(a) and HUBZone small businesses; and to economically disadvantaged WOSBs.
Mentor-Protégé Program—This program helps small businesses gain experience in and access to
federal acquisition marketplace through formal partnerships with experienced firms.
COUNSELING AND TRAINING
Small Business Development Centers—SBDCs deliver an array of services to small businesses and
prospective business owners using a network of 63 lead centers managing nearly 900 service delivery
points throughout the United States and its territories.
Women’s Business Centers—WBCs provide advising and training through more than 150 nonprofit
educational centers across the nation. Many WBCs provide multilingual services, and some offer
flexible hours allowing mothers with children to attend training classes.
Boots to Business (B2B)—B2B is an entrepreneurial education and training program offered by the
SBA as part of the Department of Defense Transition Assistance Program (TAP). The course provides
an overview of entrepreneurship and applicable business ownership fundamentals. Active-Duty
Service members (including National Guard and Reserve), veterans of all eras, and military/veteran
spouses are eligible to participate.
Native American Outreach—The program supports American Indians, Alaska Natives, and
Native Hawaiians seeking to create, develop, and expand small businesses. It engages in outreach,
technical assistance, and education, formulates and administers training programs, and coordinates
entrepreneurial development opportunities through cosponsorship agreements with entities and
other federal agencies.
Veterans Business Outreach Centers—The SBA’s 31 VBOCs provide counseling and training
services to veteran-owned and service-disabled veteran-owned small businesses and entrepreneurs,
along with reserve component members who have an interest in either starting a new small business
or expanding an established small business.
SCORE—SCORE is a nonprofit association comprising nearly 10,000 volunteer business mentors that
serve entrepreneurs with in-person mentoring and local training workshops. As the largest volunteer
business mentor network in the Federal Government, SCORE adapts its structure and services to
meet the needs of small businesses.
Learning Center and Ascent—The SBA Learning Center is an online portal that hosts a variety of
self-paced online training courses, quick videos, web chats, and other helpful tools to assist small
business owners to explore and learn about business ownership. Ascent is an online learning portal
with materials and tools for women entrepreneurs.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 16
Management’s Discussion and Analysis (Unaudited)
Community Navigator Pilot Program—Through the Community Navigator Pilot Program, the
SBA engaged in targeted outreach to underserved communities through states, local governments,
resource partners, and nonprofit organizations. As of May 31, 2024, the program ended its No Cost
Extension Period and all program-related activities have concluded. The program is now in the full
program closeout phase of the grant’s lifecycle.
DISASTER ASSISTANCE
Disaster Assistance—The SBA is the Federal Government’s primary source of financing for the
long-term repair and rebuilding of disaster-damaged private property for homeowners, renters,
businesses of all sizes, and private nonprofit organizations. It is the only form of SBA assistance that is
not limited to small businesses.
Shuttered Venue Operators Grants—The Economic Aid to Hard-Hit Small Businesses, Nonprofits,
and Venues Act established these grants to support shuttered venues because of the COVID-19
pandemic. Recipients 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 for this
program.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 17
Management’s Discussion and Analysis (Unaudited)
Analysis of Performance Results
SUMMARY OF PERFORMANCE RESULTS
The following section presents key FY 2025 performance data. The presentation is organized by key
programmatic functions of the Agency. Detailed information on SBA program performance data,
including explanations of variances, will be presented in the FY 2025 Annual Performance Report to
be published in early 2026.
Access to Capital, Investment & Innovation, and Contracting & Business Development
Performance Measure FY 2025 Goal FY 2025 Actual
Number of Jobs Supported by 7(a) Loans, 504 Loans,
762,500 897,145
Microloans, and Surety Bonds
Number of Jobs Supported by SBIC Financings 140,000 103,732
Number of Jobs Supported by Businesses Receiving Export
26,000 Data lag 1
Grants and Loans
Number of Jobs Supported by Federal Contract Set-Asides 700,000 Data lag 2
Number of New Business Starts through SBA Counseling and
25,700 17,242
Training Programs
Disaster Assistance and Recovery
Performance Measure FY 2025 Goal FY 2025 Actual
Small Business Employment in the United States (Millions) 66.5 Data lag 3
Number of Loans that Include Mitigation Measures 626 861
1 FY 2025 Q4 STEP grant data not yet available. Full year data will be published in the FY 2025 Annual
Performance Report.
2 Federal contracting data continues to be certified by the SBA, and will be available by summer 2026.
3 Full year data for FY 2025 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
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 18
Management’s Discussion and Analysis (Unaudited)
Mission Support and Advocacy
Performance Measure FY 2025 Goal FY 2025 Actual
Customer Satisfaction Rate of Financial Management Services
4.0 4.8
for SBA Employees
Federal Employee Viewpoint Survey Global Satisfaction Rate 73% N/A 4
Inspector General Maturity Rating 3.8 2.72
4 OPM has foregone the FEVs survey in 2025.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 19
Management’s Discussion and Analysis (Unaudited)
VERIFICATION AND VALIDATION OF PERFORMANCE DATA
Managing for results and integrating performance, financial, and budgetary information requires
valid, reliable, and high-quality performance measures and data. Improving data quality continues to
be a priority for the SBA. The SBA’s performance analysts work with program office leads across the
Agency to acquire high-quality data. In addition to using output data internally from its systems, the
SBA relies on data from resource partners, other federal agencies, and other government entities to
assess its accomplishments and effectiveness.
The SBA rigorously pursues the following strategies to ensure data quality: ensuring the validity of
performance measures and data; fostering organizational commitment and capacity for data quality;
assessing the quality of existing data; and responding to data limitations. For additional information
regarding the SBA’s approach to verifying and validating performance data, see the Congressional
Budget Justification and Annual Performance Report, updated annually.
OPERATIONAL PORTFOLIO ANALYSIS
The Operational Portfolio Analysis provides information on the SBA’s credit programs and does
not reference the financial statements. The SBA is the taxpayers’ custodian of small business loan
guaranties and direct loans with a portfolio of $516.8 billion in FY 2025.6 During FY 2025, the portfolio
increased year over year by $57.9 billion, or 12.6 percent. The largest increase in dollar terms was
the Agency’s disaster loan portfolio, which increased by $37.9 billion (13.2 percent). This increase is
primarily attributable to an accounting policy updated in FY 2025 that delays charge off timing to
maintain active balances longer in the collection process. Due to the updated accounting policy,
direct or purchased guaranteed direct loans under the COVID-19 Economic Injury Disaster Loan
(COVID-19 EIDL) program and Paycheck Protection Program (PPP) that were charged-off in prior
years have been returned to an active status. The result of this policy change for the PPP portfolio
led to a year-over-year increase of $6.4 billion (143.1 percent). All the remaining loan portfolios also
increased on a year over year basis: the 504 loan portfolio increased by $2.1 billion (6.4 percent) and
the 7(a) portfolio expanded by $9.3 billion (8.0 percent). The Small Business Investment Company
(SBIC) portfolio increased by $1.8 billion (11.2 percent) and all other portfolios increased by $488
million (15.5 percent) (see Chart I).
6 The total portfolio consists of guarantied business loans outstanding, guarantied debentures, direct
business loans, and direct disaster loans. The data include all performing loans and defaulted
loans that have not been charged off.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 20
Management’s Discussion and Analysis (Unaudited)
Chart I: Makeup of the SBA’s Outstanding Loan Portfolio
800
7(a)
All Other
700 PPP
504
600
Disaster All Other
Outstanding Loans ($ Billions)
All Other SBIC
500 All Other
All Other
SBIC Disaster
504
400 All Other
Disaster
Disaster
Disaster Disaster
300
PPP
200 SBIC
SBIC
504 SBIC SBIC 504
PPP 504 PPP
504 PPP PPP
100
7(a) 7(a) 7(a) 7(a)
7(a)
0
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 21
Management’s Discussion and Analysis (Unaudited)
New Guarantied Loans
The quarterly average loan volume increased in FY 2025 with an average of $11.3 billion. Chart II
demonstrates the trend in loan approvals since FY 2020.
Chart II: Quarterly Gross 7(a) and 504 Loan Approvals
25
20
Loan Approvals ($ Billions)
15
FY 25 Avg:
FY 21 Avg:
FY 24 Avg: 11,272,997
11,188,716 FY 22 Avg: FY 23 Avg: 9,447,236
10 8,725,450 8,484,336
FY 20 Avg:
7,094,264
5
0
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 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
At least three main factors contributed to the loan guaranty portfolio’s recent changes:
Continuous Growth in the Economy — Real Gross Domestic Product in the United States
increased throughout 2024 and has continued to grow during 2025, with a rate of 3.8 percent in the
second quarter of 2025. The increase in real GDP in the second quarter primarily reflected a decrease
in imports, which are a subtraction in the calculation of GDP, and an increase in consumer spending.
These movements were partly offset by decreases in investment and exports.7
Changes in Market Volatility — During 2022, the monthly inflation reached its highest point,
peaking at 6.6 percent in September 2022 to end that year with a 6.2 percent monthly average before
coming down during 2023 to an annual monthly average of 4.8 percent. In 2024 inflation came down
further to an annual monthly average of 3.4. In 2025 inflation continued to ease with a monthly
7 U.S. Department of Commerce, Bureau of Economic Analysis: https://www.bea.gov/data/gdp/
gross-domestic-product
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 22
Management’s Discussion and Analysis (Unaudited)
average of 2.9 through the first six months of the year. Inflationary pressures have significantly
increased interest rates across the commercial and consumer loan market. Conversely, while the
unemployment rate surged to a peak of 14.7 (April, 2020) during the COVID-19 pandemic period, it
has decreased significantly throughout the 2021-2023 period, averaging 3.6 percent monthly for both
2022 and 2023. In 2024 the unemployment rate increased slightly to an average of 4 percent monthly
and has stayed roughly the same throughout the first nine months of 2025, peaking at 4.4 percent in
September 2025 with a monthly average of 4.2 percent in 2025 year to date.8
Market for Small Business Lending — Data from the Federal Deposit Insurance Corporation
(FDIC) showed that the total market for business loans increased between 2019–2024 by 15 percent
($526 billion). However, 97.5 percent ($513.1 billion) of this increase comes from loans to nonsmall
businesses,9 whereas total small business loans increased by only $12.9 billion. Thus, the ratio of
small business loans compared with the total bank market has decreased between 2019–2024,
with a marked decrease during the pandemic years of 2021–2022 (see Chart III). Furthermore, the
banking industry’s trend toward consolidation, reflected in the reduction of commercial banks by
12 percent10 between 2019–2024 makes the SBA’s guaranty products more critical for growing small
businesses that may be denied credit in the private loan market.
Chart III: Outstanding Commercial Loans to Small vs. Nonsmall Businesses
3,471 3,467 3,401 Nonsmall Business Loans
2,999 3,099
2,888
Outstanding Loans ($ Billions)
Small Business Loans
904
721 737 717 731 734
CY 2019 CY 2020 CY 2021 CY 2022 CY 2023 CY 2024
8 U.S. Department of Labor, Bureau of Labor Statistics: https://data.bls.gov/timeseries/lns14000000
9 Nonsmall businesses are firms that have more than 500 employees. https://www.fdic.gov/
quarterly-banking-profile/quarterly-banking-profile-q3-2025
10 https://www.fdic.gov/bank/statistical/stats
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 23
Management’s Discussion and Analysis (Unaudited)
New Direct Loans
In FY 2025, the SBA’s gross approvals for the Disaster Assistance loan program increased by 228
percent to $5.5 billion against an FY 2024 total of $1.7 billion. As of FY 2023, the COVID 19-EIDL
program is no longer approving loans for COVID-19, so disaster loan approvals are returning to a
comparable level with to the pre-pandemic period. Chart IV illustrates the relative sum of disaster
loans in FY 2025 by month, compared with the prior three fiscal years.
Chart IV: Monthly Gross Disaster Assistance Loan Approvals
6000
FY 2022
5000 FY 2023
FY 2024
Loan Approvals ($ Millions)
4000
FY 2025
3000
2000
1000
0
Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept
Aside from the FY 2020 -2022 COVID-19 EIDL loans, the top ten disasters that make up the portfolio’s
outstanding balance includes lending from FY 2006 (hurricane Katrina), FY 2013 (hurricane Sandy), FY
2018 (hurricanes Harvey, Irma, and Maria), FY 2021, (hurricane Ida), FY 2022 (hurricane Ian), FY 2024
(hurricane Helene), and FY 2025 (hurricane Milton and wildfires in California).
The SBA will continue to make disaster loans an important recovery tool for businesses,
homeowners, and renters that survive a disaster.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 24
Management’s Discussion and Analysis (Unaudited)
Portfolio Performance — Delinquencies
Delinquency rates (i.e., borrowers who are late on their payments) are a leading indicator of
the Agency’s charge-off rate (i.e., the rate of dollars spent to cover loans that defaulted). Thus,
delinquency rates are a general indicator of the Agency’s and taxpayers’ future liabilities for these
programs. A declining delinquency rate (see Chart V) is a positive indicator for the financial
performance of any loan portfolio.
Strong economic growth, strong profit performance, and tighter lending standards by financial
institutions during the past several years have reduced delinquency rates generally for all business
loans. Delinquency rates for the Agency’s major loan programs followed this national downward
trend. Delinquency rates for the 7(a) loan program declined from the 3.8 percent peak in January
2009 to 0.84 percent in February 2020, prior to the start of the COVID-19 pandemic. Similarly,
delinquency rates for the 504 loan program likewise declined from the 5 percent peak in February
2010 to 0.9 percent in February 2020.
The CARES Act provided pandemic debt relief to current borrowers of 7(a) and 504 loans, authorizing
the SBA to pay the principal, interest, and associated fees on existing loans for six months. This led to
a delinquency rate of near zero percent in the last six months of FY 2020. With the expiration of CARES
Act funds, both programs saw more variability in their delinquency rates during FY 2021-2022.
As of July 2025, the average FY 2025 YTD 7(a) delinquency rate of 1.15 percent is higher than the
FY 2024 average delinquency rate of 0.88 percent. The 7(a) rate remained low throughout FY 2025
though, hovering around one percent every month despite generally trending slightly upwards.
Monthly 504 delinquency rates decreased during 2023 following 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 variability throughout that fiscal year. Starting in FY 2023, the 504
delinquency rate is less volatile, and the average FY 2025 YTD 504 delinquency rate of 0.87 percent is
only slightly above the FY 2024 average delinquency rate of 0.76 percent.
The SBA will continue to monitor the variability and level of both 7(a) and 504 delinquency rates
closely in the post-CARES Act environment.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 25
Management’s Discussion and Analysis (Unaudited)
Portfolio Performance — Charge-Offs
The 12-month charge-off rate for the 7(a) loan program sharply declined during FY 2016-2017, has
continued to improve and remains very low. By July 2025 it has come down to 0.68 percent (see
Chart V). The 7(a) loans not sold on the secondary market become a charge-off after all efforts to
recover a delinquent balance were exhausted, such as liquidating the underlying collateral. The
latent rise of the 7(a) charge-off rate in 2013 is attributable to recession-era loans that were charged-
off after efforts to recover delinquent balances had been exhausted. Now that this effort to charge-off
the recession-era loans is complete, the charge-off rate again closely trends with the delinquency
rate in FY 2025.
The 12-month charge-off rate for the 504 loan program had its historical high during FY 2013,
peaking at 4.4 percent in January 2013, but dropping to the very low point of 0.08 percent by
July 2025. This trend is not surprising, since the 504 loan program is an economic development
program with a commercial real estate focus. As such, recovery rates of defaulted 504 loans are, with
some noticeable time lag, significantly impacted by the pricing trend in this sector. The continued
downward trend in the 504 delinquency rate during FY 2025 indicates that the volatility during FY
2021-2022 period had little impact on the trajectory of 504 charge-off rates and as of July 2025, does
not appear to have been a significant factor.
Quarterly information on the status of the SBA’s loan portfolio, including outstanding balances and
approvals by loan program and purchase rates, is available on the SBA’s website at www.sba.gov/
performance.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 26
Management’s Discussion and Analysis (Unaudited)
Chart V: Delinquency and Charge-Off Rates for the 7(a) and 504 Loan Programs by Fiscal
Year
7(a) Loans
3.5% 7(a) Delinquency Rate
7(a) Past 12 Months
3.0% 7(a) Past 12 Months
Charge-Off Rate
Charge-Off Rate
2.5%
Rate (Percentage)
2.0%
1.5%
7(a) Delinquency Rate
1.0%
0.5%
0
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
504 Loans
5.0%
504 Delinquency Rate
4.5%
504 Past 12 Months
4.0% 504 Past 12 Months Charge-Off Rate
Charge-Off Rate
3.5%
Rate (Percentage)
3.0%
2.5%
2.0% 504 Delinquency Rate
1.5%
1.0%
0.5%
0.0%
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 27
Management’s Discussion and Analysis (Unaudited)
Significant Opportunities and Risks
The SBA is dedicated to equipping America’s entrepreneurs with the tools to start, grow, and sustain
resilient businesses. In today’s dynamic economic and technological environment, the Agency faces
risks that may affect program delivery and strategic priorities, alongside opportunities that can
strengthen its impact and expand the reach of its services. By anticipating disruptions and identifying
areas for improvement, the SBA can focus resources where they matter most, enhance program
effectiveness, and help small businesses navigate an increasingly complex landscape. This proactive
approach positions the Agency to optimize taxpayer resources, foster innovation, and promote
resilience across the small business ecosystem.
FINANCIAL INTEGRITY AND RISK MANAGEMENT
The SBA remains committed to maintaining financial integrity and robust risk management practices
across all programs. The COVID-19 pandemic revealed gaps in internal controls, loan underwriting,
and risk monitoring, underscoring the need for enterprise-wide oversight mechanisms. To address
these risks, the Agency continues to improve its Enterprise Risk Management (ERM) and Fraud Risk
Management (FRM) programs, integrating lessons learned from prior audits and leveraging insights
from the Government Accountability Office (GAO) and Office of Inspector General (OIG). The SBA is
implementing advanced monitoring and analytical tools to identify emerging vulnerabilities, improve
predictive risk modeling, and facilitate timely intervention in program management. The SBA is also
developing a governance, risk and compliance (GRC) tool that will centralize governance, automate
risk management, and stay compliant.
Audit remediation remains a top priority. Resources are directed toward resolving outstanding
findings from pandemic-era programs, ensuring recovery of ineligible funds, and closing gaps in
program oversight. The Agency continues to refine loan underwriting standards, perform rigorous
performance analyses, and apply detailed financial modeling to identify emerging lending risks.
Looking forward, these efforts position the SBA to anticipate disruptions in program performance,
address material weaknesses proactively, and continuously improve operational resilience. By
embedding risk awareness into day-to-day processes, the SBA strengthens its capacity to safeguard
public funds and guarantees that support reaches eligible small businesses without delay.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 28
Management’s Discussion and Analysis (Unaudited)
DISASTER ASSISTANCE AND RESILIENCE
Natural disasters remain a growing challenge for small businesses and the communities they
serve. In 2023 alone, the United States experienced 28 separate weather and climate events, each
exceeding $1 billion in damages, marking a record-setting year for billion-dollar disasters.11 In 2024,
there were 27 individual weather and climate disasters with at least $1 billion in damages, trailing
only the record-setting 28 events analyzed in 2023.12 This reflects both the increasing frequency and
intensity of disaster events, as well as the heightened economic vulnerability of small businesses
in affected regions. The SBA’s Disaster Assistance program plays a critical role in mitigating these
impacts by providing rapid support to businesses navigating disruption.
The SBA promotes resilience through disaster mitigation loans, allowing businesses to finance
improvements that reduce future vulnerability. Targeted field office outreach and community
engagement programs extend the Agency’s reach in areas that are particularly at risk. Operational
enhancements, including accelerated disaster declarations, streamlined loan processing, and
specialized support for impacted regions, improve the Agency’s responsiveness. Investments in
modernized systems and staff training enable quicker disaster response across all programs. By
combining proactive mitigation with adaptive operational improvements, the SBA positions itself to
reduce future disruption and accelerate recovery to communities nationwide.
TECHNOLOGY, AUTOMATION, AND OPERATIONAL INNOVATION
The rapid evolution of technology presents both opportunities and risks for small businesses.
Through digital modernization, including secure platforms with integrated AI and advanced
analytics, the SBA improves operational efficiency, enhances customer service, and supports
informed decision-making. These technology-driven improvements also address operational risks by
strengthening cybersecurity and reducing processing errors.
Emerging technologies provide opportunities to expand access. Virtual training platforms and online
tools extend the reach of SBA programs to communities with limited broadband infrastructure.
These tools enable small business owners to receive guidance and access financial resources more
efficiently. Simultaneously, operational process improvements, such as automated loan processing
and integrated program management systems, support faster recovery during disasters and
enhance internal coordination. By embracing these innovations, the SBA positions itself to adapt
to technological change while mitigating potential operational risks, ultimately enabling small
businesses to benefit from a more accessible support system.
11 https://www.climate.gov/news-features/blogs/beyond-data/2023-historic-year-us-billion-
dollar-weather-and-climate-disasters
12 https://www.climate.gov/news-features/blogs/beyond-data/2024-active-year-us-billion-
dollar-weather-and-climate-disasters
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 29
Management’s Discussion and Analysis (Unaudited)
CHANGING WORKFORCE STRATEGY
The SBA’s workforce is central to the Agency’s ability to deliver on its mission. Shifts in employee
demographics, including an increasing proportion nearing retirement, combined with evolving
workplace expectations, necessitate proactive workforce planning and training. The Agency is
developing policies and programs to support hybrid work models, optimize field and headquarters
office configurations, and guarantee continuity of institutional knowledge. Surveys of workspace
requirements and employee feedback inform decisions on staffing allocations and technology
support, enhancing the Agency’s overall effectiveness.
Retention and recruitment remain critical considerations. Competition with private industry and
other federal agencies creates pressure to attract and maintain highly skilled personnel. The SBA
is enhancing training programs for field staff, equipping them with tools and guidance to support
small businesses more effectively. Professional development initiatives focus on preparing staff
for emerging challenges, including financial oversight, technology adoption, and customer service
innovation. By integrating workforce resilience into planning, the SBA ensures the Agency can
maintain mission-critical capacity, respond effectively to emerging business challenges, and
continuously adapt to the evolving federal work environment.
SUPPORTING U.S. MANUFACTURING AND INDUSTRIAL COMPETITIVENESS
Small manufacturers are vital to the nation’s economic growth and industrial leadership. The SBA is
leveraging opportunities to expand support for domestic manufacturing through financing, capital
access, and program visibility. Initiatives such as the Made in America program provide tailored
resources, including financing options, reshoring guidance, and increased visibility for federal
support programs, enabling small manufacturers to scale operations, create jobs, and strengthen
domestic supply chains.
By connecting manufacturers with technical guidance and federal capital, the SBA helps reduce
reliance on foreign supply chains, improve operational resilience, and support broader economic
objectives. These efforts focus on long-term industrial competitiveness and domestic job creation.
Through a combination of strategic investment, enhanced visibility of programs, and direct
engagement with businesses, the SBA positions small manufacturers to contribute meaningfully to
economic recovery and national industrial resilience.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 30
Management’s Discussion and Analysis (Unaudited)
Analysis of Financial Results
BACKGROUND
The SBA is a major Federal credit agency of the U.S. Government, and most the Agency’s $48.8
billion budgetary resources support the SBA’s credit programs. The SBA provides direct loans to
those impacted by disaster and partners with lenders and investors to provide small businesses with
access to capital.
Major factors that impact the SBA financial results include timing of borrowing and repayment of
Debt to Treasury, annual reestimates, program changes, and disaster activity.
The SBA borrows funds to fund the difference between the loan’s estimated cost and the amount of
the loan disbursed for disaster and business direct loan programs. Funds are also borrowed to fund
cash shortfalls related to the timing of disbursements and collection of resources. (Note 8)
The cost of loan programs is reestimated annually. Based upon the reestimates, additional
funds are made available to the SBA with an upward reestimate funded by permanent indefinite
appropriations, or they are returned to Treasury with a downward reestimate. (Note 14)
Program changes have had a driving impact on SBA costs and balances. In particular, COVID
programs resulted in a marked increase in loans disbursed in prior fiscal years, whereas in the current
fiscal year the SBA has transitioned to recovering these program costs and returning to the traditional
business loan guarantees and disaster lending programs.
The SBA provides direct loans to support individuals and businesses impacted by disasters. These
payments assist communities return to normalcy in the wake of a disaster.
The SBA supports small businesses’ access to capital by guaranteeing loans from lenders. Loan
guarantees allow lenders to share the risk of default with the SBA. The SBA’s 2025 guarantee
programs charged lenders sufficient fees to allow the programs to operate with zero subsidy from the
government. Lenders work with borrowers to determine their needs and credit worthiness.
LOAN GUARANTIES
During FY 2025 SBA guarantied $31.8 billion of new loans disbursed by SBA’s lending partners. Loan
guarantees and the related disbursements are disclosed in SBA’s financial disclosures. (Note 5E)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 31
Management’s Discussion and Analysis (Unaudited)
Guarantied Loans Disbursed
$350
304.0
$300
$250
($ Billions)
$200
$150
$100
31.8
$50 32.6 27.0 27.3
$0
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
If a borrower defaults on an SBA guarantied loan SBA reimburses the lender for the guarantied
portion of the loan. The SBA added $5.01 billion defaulted loan guarantees to its credit receivables in
FY 2025.
Purchases of Guarantied Loans
11.99
12
10
8
($ Billions)
5.90
6 5.01
4.39
4
2 1.19
0.72
0
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 32
Management’s Discussion and Analysis (Unaudited)
CREDIT PROGRAM SUBSIDY REESTIMATES
Credit Program Subsidy Reestimates reflects the net subsidy reestimates for the guaranteed
business and direct disaster loan programs from FY 2020 through FY 2025. The Disaster Assistance
loan program had a net upward reestimate of $9.7 billion in FY 2025 compared to a $1.8 billion
downward reestimate in FY 2024. Further detail on subsidy reestimates can be found in Note 14 of
the financial statements in the Other Information section of this report.
Credit Program Subsidy Reestimates
34.000
34
32
30 28.000
28
26
24
22
20
18
16
14
($ Billions)
12 9.700
10
8
6
4 2.700
2
0
-2 (1.203) (1.800) (0.600) (0.839)
-4
(3.800)
-6 (5.198)
-8
(5.700)
-10
-12
-14
-16
-18
-20 (19.000)
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Direct Disaster Loans
Direct Business Loans
Guaranteed Business Loans
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 33
Management’s Discussion and Analysis (Unaudited)
FINANCIAL POSITION
ASSETS
The SBA had total assets of $248.4 billion at the end of FY 2025. Assets consist primarily of Fund
Balance with Treasury and Credit Program Receivables and Related Foreclosed Property.
The following major activity impacted Fund Balance with Treasury
• Spending Authority collections of $10.5 billion
• New Borrowings $14.8 billion less repayments of $30.1 billion (Note 8)
• Loans Disbursed $3.5 billion (Note 5E)
• Default Claims paid $5.2 billion (Note 14B)
• Reestimate Collections net of disbursements $-1.4 billion
LIABILITIES
The SBA had total liabilities of $255.9 billion at the end of FY 2025. Liabilities consist primarily of
the Principal Payable to the Bureau of Fiscal Service, Liability for Loan Guaranties, and Downward
Reestimate Payable to Treasury.
The Principal Payable to the Bureau of the Fiscal Service is $249.3 billion a decrease of $15.3 billion
from FY 2024 because of repayment of debt of $30.1 billion exceed new borrowings of $14.8 billion.
Repayment of debt is driven by spending authority collections in the current year and prior year that
have not been used to liquidate debt. (Note 8)
Loan Guarantee Liabilities is the estimate of the net present value of the future amount the SBA will
pay, net of fee collections, to liquidate expected purchases of guarantied loans under its guarantied
loan programs. Loan Guarantee Liability is $3.0 billion at the end of FY 2025 -- a decrease of $1.8
billion due to a decrease in estimated recoveries. (Note 14B)
Downward Reestimate Payable to Treasury was $2.8 billion at the end of FY 2025, representing
a decrease of $7 billion from FY 2024. The decrease was primarily due to a smaller downward
reestimate for Disaster loans. (Note 14)
NET POSITION
Cumulative Results of Operations is the cumulative difference between unfunded expenditures
and financing sources since the inception of the Agency. The cumulative results of operations were $
(11.6) billion at the end of FY 2025 a $4.3 billion decrease from FY 2024 primarily because of unfunded
subsidy reestimates. Subsidy reestimates determined at year-end are funded in the following year.
Unexpended Appropriations increased $1 billion to $4.2 billion at the end of FY 2025 from FY 2024
primarily because the appropriations received were greater than the amount of funded spending
from the current year. The increase affected Budgetary Financing Sources and Ending Net Position.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 34
Management’s Discussion and Analysis (Unaudited)
NET COST OF OPERATIONS
Net Cost of Operations was $12.1 billion in FY 2025. Net Costs of Operations primarily reflect the costs
of SBA credit programs subsidy expenses during the year for new loans and subsidy reestimates
at year-end. The primary component of the net cost was a Disaster Assistance program upward
reestimate of $9.7 billion due to lower than projected collections on COVID EIDL loans. (Note 14E)
BUDGETARY RESOURCES
Total Budgetary Resources for FY 2025 of $48.8 billion include Budgetary balances of $17.3 billion
and Non-budgetary credit reform financing balances of $31.5 billion. Non-budgetary credit reform
financing accounts record cash flows from post-1991 direct loans and loan guarantees.
Budgetary resources include a carryover from the prior year of $4.2 billion, appropriations of $11.9
billion, and spending authority of $1.2 billion which funded $12.5 billion of obligations. Of the
remaining $4.7 billion unobligated balance $2.3 billion can fund future obligations, Non-budgetary
resources include a carryover from the prior year of $7.8 billion, $14.5 billion of borrowing authority
and $9.2 billion of spending authority which funded $26 billion of obligations. The remaining
unobligated balance of $5.5 billion will be used to fund default claims and repay debt to Treasury.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 35
Management’s Discussion and Analysis (Unaudited)
Analysis of the SBA’s Systems, Controls, and
Legal Compliance
INTERNAL CONTROL ENVIRONMENT
The SBA believes that maintaining integrity and accountability in all programs and operations is
critical for demonstrating consistently responsible stewardship over assets and resources and is a
sign of responsible leadership. The SBA’s commitment to integrity, ethical values, and an effective
system of internal controls helps to ensure that every employee remains dedicated to the efficient
delivery of services to customers and maximizes desired program outcomes. Accordingly, the SBA
has developed and implemented management, administrative, and financial system controls to
reasonably ensure that:
• Programs and operations achieve intended results efficiently and effectively;
• Resources are used in accordance with the mission of the Agency;
• Programs and resources are protected from waste, fraud, and mismanagement;
• Program and operation activities are in compliance with laws and regulations; and
• Reliable, complete, and timely data are maintained and used for decision-making at all levels.
Each office within the SBA is required to implement or maintain effective internal controls over
operations, reporting, and compliance to achieve programmatic goals. Each year, the SBA conducts
an assessment of internal control as required by the Federal Managers’ Financial Integrity Act
(FMFIA) of 1982 in accordance with the Office of Management and Budget (OMB)’s Circular No. A-123,
Management’s Responsibility for Enterprise Risk Management and Internal Control. The FMFIA
requires that the assessment results be reported to the President and Congress in a statement of
assurance. The SBA Administrator provides the statement of assurance based on the self-assessment
of program managers, internal control reviews, and audits and reviews done by the Government
Accountability Office (GAO) and SBA’s Office of the Inspector General (OIG). Although some
foundational elements are currently in place, SBA continues to operate under modified assurance
levels due to unresolved material weaknesses.
For FY 2025, SBA’s non-compliance with OMB Circular A-123 requirements reflects the impact of
organizational changes and inconsistencies in execution of internal control across multiple program
offices. The SBA has faced challenges in sustaining a consistent control environment and effective
oversight body, which has diminished the overall effectiveness of internal control processes. SBA
prioritized the following actions to stabilize the control environment and mitigate audit risk:
• Engage with external auditors to align expectations and mitigate audit risks;
• Prioritize immediate compliance needs, especially those tied to OMB Circular A-136 and financial
reporting deadlines; and
• Continue performing corrective action plans and remediation activities for known deficiencies,
even if full resolution is not feasible within the fiscal year.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 36
Management’s Discussion and Analysis (Unaudited)
As part of fiscal year 2026 planning, the Office of Performance, Planning, and the Chief Financial
Officer (OPPCFO) has begun implementing initiatives to strengthen the agency’s control
environment, beginning with defining roles and responsibilities for internal controls, and
standardizing documentation. OPPCFO will also improve the trainings and tools designed for
program support offices and district offices, to support management in assessing and documenting
the effectiveness of internal controls within their respective areas of responsibility. These
improvements will align with the internal control framework outlined in GAO’s Standards for
Internal Control in the Federal Government, known as the Green Book.
In 2025, the SBA continued its oversight and monitoring efforts related to the pandemic programs
created by legislation. The methodology applied to all programs established by the Coronavirus Aid,
Relief, and Economic Security (CARES) Act, Economic Aid Act, and American Rescue Plan Act (ARPA).
Although most of the pandemic programs have ceased making disbursements they are still included
in our oversight and monitoring efforts through ongoing audit remediation activities.
In FY 2025, the SBA implemented a new audit remediation strategy through collaboration between
OPPCFO and responsible program offices targeting five key target areas identified as having the
greatest impact on strengthening control activities and advancing progress toward an unmodified
financial statement audit opinion. This approach produced meaningful improvements in internal
controls related to SVOG, RRF, Financial Reporting, Service Organizations, and Access Controls.
Additional audit remediation efforts were performed in areas such as COVID EIDL, PPP, ELC, Debt
Relief Program, and Information Technology.
In FY 2026, the SBA will develop a refreshed financial statement audit remediation strategy to
continue its efforts toward achieving a clean audit opinion and strengthening financial accountability
across the agency.
Related to the SBA’s effort to report accurate and complete financial statements, the Agency delivers
enterprise level cybersecurity and privacy services that empower the SBA to better support the small
business community through robust yet flexible processes and mechanisms.
The Information Security Division is in the process of procuring a new Governance Risk Platform
tool and Security Training Platform which will allow SBA to mature its Security Program, thereby
enhancing its security posture. Additionally, OCIO successfully closed several audit findings
pertaining to user separations and network MFA. This should be reflected with an increased FISMA
maturity rating for FY25.
The SBA will continue to incorporate the changes derived from the evaluation criterion and continue
developing its cybersecurity program in the areas of configuration management, cybersecurity
training, asset management, vulnerability management, supply chain risk evaluation and
management, red team penetration testing, network segmentation, Dev/Sec/Ops, risk quantification,
and automation of controls assessments.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 37
Management’s Discussion and Analysis (Unaudited)
FINANCIAL MANAGEMENT SYSTEMS STRATEGY
The goal of the SBA’s Financial Management Systems Strategy is to provide accurate financial
information to support transparency on the financial performance of the agency to all stakeholders;
provide management with timely and accurate data to support management analysis and decision-
making; and enable the Agency to keep pace with its lending partners and effectively use automation
to achieve operational efficiency.
Over the past year, SBA’s strategy to achieve these goals has been focused on:
• Compliance with Laws & Regulations. As demonstrated throughout the FY 2025 Agency
Financial Report, the SBA seeks to comply with all Federal financial management system
requirements, including the Federal Financial Management Improvement Act of 1996, which
requires that the Agency’s financial management systems comply with Federal financial
management systems requirements, applicable Federal accounting standards, and the U.S.
Standard General Ledger at the transaction level.13 For compliance with DCIA, the Agency
undertook the reversal from charge-off of over 1.1 million loans for subsequent referral to
Treasury Debt Management Service (DMS), as well as pursuing authority with DOJ to refer
potentially fraudulent loans to Treasury for collection. For compliance with executive orders, the
Agency acquired new Treasury Services (AVS/EVS) for future implementation.
• Producing reliable and timely financial information. Provide timely and accurate data to
support management analysis and decision-making, enable the Agency to keep pace with its
lending partners, and effectively use automation to achieve operational efficiency.
• Cost-effective Service delivery. Through the Presidents efforts to reduce wasteful
spending, the SBA is assessing our IT infrastructure to improve security posture and gain cost
efficiencies. The Agency held detailed system spending reviews to coordinate IT spending,
determine strategic contract consolidations, and assess improvements in mission delivery.
Other improvements include further integration and consolidation of grant making with the
Department of Health and Human Services (HHS) Grant Solutions, a QSMO designated provider.
As SBA reflects on the accomplishments and lessons learned from this past year, we believe that
adjusting our focus slightly will better enable us to support our goal of timely and accurate financial
information to support transparency and Agency analysis and decision making. In the coming year,
we plan to focus on the following key areas:
• Compliance with Laws, Regulations, and Executive Orders. While we made significant
progress in the past year, we need to continue work towards greater compliance in a number of
areas, including DCIA referral; continuing to work towards legal methods of referral to Treasury
13 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 38
Management’s Discussion and Analysis (Unaudited)
for the Agency fraud population; implementation of requirements related to executive orders,
especially EO 14247 Modernizing Payments To and From America’s Bank Account and EO
14249 Protecting Americas Bank Account Against Fraud, Waste, and Abuse. Significantly, OMB
has pending guidance (required under EO 14249) regarding the consolidation of core financial
management systems. This guidance, when issued, may have significant future impact on the
Agency’s Financial Systems Strategy & Environment.
• Financial Systems Reconciliations. To provide more timely and accurate Financial Data,
the Agency needs to implement additional reconciliations to ensure that transactions from
the point of entry all the way through to the Agency General Ledger and Financial Statements
are reconciled on a regular, recurring basis. Discrepancies identified should be inventoried,
root-causes identified, and processes established to manage and correct differences between
systems. These reconciliations should be a centralized resource that gives visibility and control to
program offices, as well as serving as an early warning system to identify emerging problems and
ensure that differences, when present, are known, controlled, and mitigated.
• Internal Controls. Internal controls are critical to the accuracy, quality, and timeliness of
financial data. The Agency has an opportunity to re-evaluate the control environment to ensure
that controls are operating as intended; that the control environment adapts to changing risks
with the implementation of new controls; and the implementation of a systematic approach
to risk identification, evaluation, control implementation, and monitoring. The feedback loop
of financial systems reconciliations and control evaluation & implementation is a significant
opportunity for the Agency to exploit.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 39
Management’s Discussion and Analysis (Unaudited)
Management Assurances: FMFIA and FFMIA
Assurance Statement for Fiscal Year 2025
SBA management is responsible for maintaining effective internal controls, managing risks, and
ensuring that financial management systems operate in accordance with applicable laws and regula-
tions. This responsibility includes compliance with the Federal Managers’ Financial Integrity Act (FM-
FIA) of 1982, the Federal Financial Management Improvement Act (FFMIA) of 1996, and the standards
set forth in OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management
and Internal Control. In fulfillment of these requirements, the Agency has conducted comprehensive
assessments of its internal controls and financial management systems for Fiscal Year (FY) 2025. This
letter provides management’s assurance regarding the effectiveness of these controls and the sub-
stantial compliance of financial systems. The Agency remains committed to transparency, account-
ability, and continuous improvement in all operations.
AMENDING PRIOR AGENCY DEFICIENCIES
Our SBA management team recognized the Agency’s deteriorating control environment upon enter-
ing office a few months into FY 2025. In an effort to move away from a toxic control environment un-
der the Biden Administration, SBA senior management immediately hired leaders with the necessary
skillsets to set a new course at the Agency and remedy the ineffective internal control environment.
In just nine months, the SBA has established a strong governance framework to address operational
and financial risks, as well as inform an appropriate allocation of resources. The Agency successfully
restored prudent lending standards and returned the 7(a) portfolio to a zero-subsidy model, thereby
protecting taxpayer dollars. Under the Trump Administration, SBA’s senior management has already
generated real progress in substantially remediating non-pandemic related material weaknesses and
significant deficiencies.
MATERIAL WEAKNESSES AND REMEDIATION
Based on the results of FY 2025 assessments, SBA management provides reasonable assurance that
internal controls were generally effective, except for the following material weaknesses:
• Controls over COVID-19 Economic Injury Disaster Loans (EIDLs)
• Controls over Paycheck Protection Program (PPP) Loan Guarantees
• Entity Level Controls
In addition, the auditor reported a material weakness related to controls over the subsidy reestimate.
SBA management acknowledges the conditions but has concluded that one of the cited conditions
is encompassed within the SBA’s existing material weaknesses related to controls over COVID-19 EIDL
loans and controls over PPP loan guarantees. Because the root causes and corrective actions over-
lap, SBA management does not classify this as a separate material weakness. Management conclud-
ed that the remaining condition does not rise to the level of a material weakness.
The FFMIA requires federal agencies to implement and maintain financial management systems that
substantially comply with federal financial management systems requirements, federal account-
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 40
Management’s Discussion and Analysis (Unaudited)
ing standards, and the United States Standard General Ledger. While the auditor reported that the
Agency does not comply with certain federal financial systems requirements and federal accounting
standards, SBA management’s assessment did not identify substantial FFMIA noncompliance. SBA
management believes the identified deficiencies were caused by factors external to the core financial
management systems, rather than a limitation in the system’s design or ability to prepare financial
statements, disclosures, and related information. Based on the FFMIA criteria, the SBA is providing
reasonable assurance that its financial management systems substantially comply with FFMIA stan-
dards for FY 2025.
CONCLUSION
Based on FY 2025 assessments, SBA management provides reasonable assurance that internal con-
trols over operations, reporting, and compliance, as well as the financial management systems, are
effective and substantially compliant with federal requirements. Management acknowledges remain-
ing material weaknesses and continues to implement structured remediation actions with measur-
able results. The SBA remains committed to transparency, accountability, and continuous improve-
ment to safeguard public resources and maintain durable internal controls across all programs and
functions.
Kelly Loeffler
Administrator
January 21, 2026
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 41
Management’s Discussion and Analysis (Unaudited)
SUMMARY OF MATERIAL WEAKNESSES
1. Controls over COVID-19 EIDLs Need Improvement
SBA management identified deficiencies in the implementation of an accounting policy change that
occurred in the last quarter of the fiscal year. Specifically, management identified that there were
loans that were eligible for reinstatement that were not reinstated as of September 30, 2025. This oc-
curred because SBA did not have sufficient time prior to fiscal year end to complete the process of re-
versing previously recorded charge off transactions for the impacted loans. The SBA will continue to
develop corrective actions to analyze the completeness and accuracy of the population and design
and implement controls related to the charge-off and reinstatement process.
2. Controls over PPP Loan Guarantees Need Improvement
SBA management identified deficiencies in the controls related to the review of PPP loan forgiveness.
Specifically, a funds recovery process for the PPP program has not been approved or implemented.
In addition, SBA identified that certain post payment reviews that have not been completed due to
staffing constraints and volume. The population of forgiven PPP loans requires a risk-based, compre-
hensive analysis to determine if additional post payment reviews may be needed and to ensure there
is an accurate and complete population of PPP Loan Guarantees. The SBA continues to implement a
corrective action plan to analyze the population of forgiven PPP loans and prioritize decision making
related to a possible funds recovery plan.
3. Entity Level Controls Need Improvement
SBA management identified deficiencies in the entity level controls system to produce reliable and
accurate financial reporting. Specifically, operational challenges impeded the SBA’s ability to support
effective entity level controls. Deficiencies were identified in: (a) the SBA’s establishment of an effec-
tive control environment, (b) performance of effective risk assessment procedures, (c) design and
implementation of effective control activities, (d) information and communication control processes,
and (e) monitoring processes. The agency is prioritizing strengthening its internal control frame-
work in accordance with the Government Accountability Office’s (GAO) Standards and the Office
of Management and Budget (OMB) Circular A-123, Managements Responsibility for Enterprise Risk
Management and Internal Control. The SBA continues to implement corrective actions by engaging
and communicating 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 42
SECTION 2
Financial
Reporting
(UNAUDITED)
Financial Reporting (Unaudited)
Message From the Chief Financial Officer
January 21, 2026
I am pleased to issue the Small Business Administration’s (SBA) FY
2025 Agency Financial Report as of September 30, 2025. This report
presents the Agency’s financial results in accordance with U.S. Of-
fice of Management and Budget (OMB) guidance, and the financial
statements have been developed within Generally Accepted Ac-
counting Principles.
The SBA remains fully committed to advancing its mission of sup-
porting America’s small businesses while strengthening operational
integrity, program oversight, and strategic management. Throughout
FY 2025, the Agency continued to reinforce internal controls and
apply rigorous oversight mechanisms to safeguard taxpayer funds.
Under the current administration, SBA has prioritized enterprise-wide initiatives designed to improve
oversight, reduce fraud risk, and improve program outcomes across its operating portfolio.
The FY 2025 Agency Financial Report reflects meaningful, evidence-based progress resulting from
sustained leadership focus, cross-functional collaboration, and disciplined execution of corrective
action plans. During the fiscal year, three previously identified material weaknesses and two previ-
ously identified significant deficiencies were fully remediated, and one material weakness was down-
graded to a significant deficiency. Importantly, material weaknesses and significant deficiencies
unrelated to COVID-19 pandemic-era programs have now been substantially resolved, demonstrating
measurable improvement in SBA’s core financial management and control environment.
These results reflect deliberate, methodical efforts to address longstanding issues while simultane-
ously stabilizing operations that were significantly stressed during the unprecedented scale and
speed of pandemic response programs. Management has taken care to distinguish between legacy
risks arising from emergency-era programs and the control framework governing SBA’s current and
future operations.
Key Accomplishments in FY 2025 include:
• Strengthened controls over general information technology systems, guaranteeing that financial
and operational data is securely processed, reconciled, and reported
• Rigorous evaluation and monitoring of service organizations, which enhances oversight of out-
sourced functions and reduces risk of errors or misstatements
• Implementation of accounting and funds recovery policies and procedures for COVID-19
pandemic-era programs, improving documentation, reconciliation, and recoverability of funds
distributed under these programs
• Improved documentation, reconciliation and reporting processes across business lines, support-
ing greater transparency and facilitating audit readiness
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 44
Financial Reporting (Unaudited)
Collectively, these actions reinforce SBA’s stewardship of taxpayer funds and demonstrate man-
agement’s evidence-driven approach to financial integrity. They also reflect the Agency’s ability to
balance operational complexity with the need for robust controls, even in high-volume, high-risk
program environments.
We remain focused on sustaining these improvements and building upon them in the year ahead.
The remaining material weaknesses are related to entity-level controls and complex challenges
related to the COVID-19 pandemic era programs. In FY 2026, the agency will refine the corrective ac-
tion plans for each remaining material weakness. The Agency recognizes strong entity-level controls
are foundational to effective financial management and reliable financial reporting. Accordingly, the
Agency is prioritizing strengthening its internal control framework in accordance with the Govern-
ment Accountability Office’s (GAO) Standards and OMB Circular A-123, Managements Responsibility
for Enterprise Risk Management and Internal Control.
During the audit, management and the auditors held differing professional judgements related to
assertions over the completeness of the COVID-19 EIDL loan program and the severity classification
of identified control deficiencies. While these disagreements did not prevent the completion of the
audit, they do contribute additional complexities around resolving certain audit findings. Manage-
ment respects the independent role of the auditors and values their perspectives, and we remain
committed to constructive engagement to resolve these matters. We will continue to evaluate audi-
tor recommendations, and where appropriate, refine our processes and controls to address areas of
concern.
I would like to thank our financial management staff, program offices, auditors, and the SBA leader-
ship team for their dedication and professionalism throughout this process. Their work is the foun-
dation of SBA’s continued financial integrity and ensures that taxpayer funds are managed responsi-
bly while supporting the nation’s small business community.
Sincerely,
Nathan Davis
Chief Financial Officer and Chief Risk Officer
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 45
Financial Reporting (Unaudited)
OFFICE OF INSPECTOR GENERAL
U.S. SMALL BUSINESS ADMINISTRATION
DATE: January 21, 2026
TO: Kelly Loeffler
Administrator
FROM: William W. Kirk
Inspector General
SUBJECT: Independent Auditors’ Report on SBA’s Fiscal Year 2025 Financial Statements
(Report 26-03)
I am pleased to present the attached independent auditors’ report on the U.S. Small Business
Administration’s (SBA) financial statement for fiscal year (FY) 2025. The Chief Financial Officers
Act of 1990, as amended, requires the Inspector General or an independent auditor, as
determined by the Inspector General, to audit SBA’s financial statements.
We contracted with the independent certified public accounting firm KPMG LLP to conduct an
audit of SBA’s consolidated balance sheet as of September 30, 2025 and the related notes.
KPMG was not engaged to audit the consolidated statement of net cost, consolidated statement
of changes in net position, and combined statement of budgetary resources. Our contract
required KPMG to conduct the audit in accordance with Government Auditing Standards (GAS)
and Office of Management and Budget Bulletin No. 24-02, Audit Requirements for Federal
Financial Statements.
KPMG issued a disclaimer of opinion on the consolidated balance sheet as of September 30,
2025. The basis for the disclaimer was that because of control deficiencies identified, SBA was
unable to provide adequate evidential matter in support of a significant number of transactions
and account balances related to the Paycheck Protection Program and Economic Injury Disaster
Loan programs. Additionally, management was unable to provide sufficient appropriate audit
evidence to support the data used to develop assumptions used in the subsidy allowance
estimate for SBA’s direct loan and loan guaranty programs.
During the audit, KPMG identified four material weaknesses and one significant deficiency in
internal control over financial reporting. We note that SBA made considerable progress
addressing prior year audit findings, resulting in the successful remediation of two material
weaknesses (controls over general information technology and controls over the evaluation of
service organizations) and the downgrading of one material weakness (controls over monitoring
409 Third St. SW, Washington, DC 20416 • (202) 205-6586 • Fax (202) 205-7382
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 46
Financial Reporting (Unaudited)
Restaurant Revitalization Fund and Shuttered Venue Operators Grant programs) to a significant
deficiency. Appendices I and II of this report describe details of KPMG’s conclusions about the
material weaknesses and significant deficiency. KPMG also identified three instances of
noncompliance with applicable laws or other matters, which are discussed in Appendix III of this
report.
We reviewed KPMG’s report and related documentation and inquired of its personnel. Our
review, as differentiated from an audit of the financial statements in accordance with GAS, was
not intended to enable us to express, and we do not express, opinions on 1) SBA’s financial
statements or internal control over financial reporting; 2) whether SBA’s financial systems
complied substantially with the Federal Financial Management Improvement Act of 1996
requirements; 3) or conclusions on compliance and other matters. KPMG is responsible for the
attached auditors’ report dated January 21, 2026 and the conclusions expressed. Our review
disclosed no instances where KPMG did not comply in all material respects with GAS.
We appreciate the cooperation and assistance extended to KPMG and our office during the
audit. Should you or your staff have any questions, please contact me or Andrea Deadwyler,
Assistant Inspector General for Audits, at (202) 205-6586.
cc: Bill Briggs, Deputy Administrator, Office of the Administrator
Wesley Coopersmith, Chief of Staff, Office of the Administrator
Ben Grayson, Deputy Chief of Staff, Office of the Administrator
Robin Wright, Chief Operating Officer, Office of the Administrator
Nathan Davis, Chief Financial Officer and Chief Risk Officer, Office of Performance,
Planning, and the Chief Financial Officer
Deborah Chen, Deputy Chief Financial Officer, Office of Performance, Planning, and the
Chief Financial Officer
Thomas Kimsey, Associate Administrator, Office of Capital Access
Chris Stallings, Associate Administrator, Office of Disaster Recovery and Resilience
Wendell Davis, General Counsel, Office of General Counsel
Michael Simmons, Attorney Advisor, Office of General Counsel
Attachment
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 47
Financial Reporting (Unaudited)
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 Statement
Disclaimer of Opinion
We were engaged to audit the consolidated balance sheet of the United States (U.S.) Small Business
Administration (SBA) as of September 30, 2025, and the related notes to the consolidated balance sheet (the
consolidated financial statement).
We do not express an opinion on the accompanying consolidated financial statement 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 statement.
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 Venue 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 statement. 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. Additionally, management was unable to provide sufficient appropriate audit evidence to
support the data used to develop assumptions used in the subsidy allowance estimate for SBA’s direct loan and
loan guaranty programs. As a result of these matters, we were unable to determine whether any adjustments might
have been necessary related to the Credit Program Receivables and Related Foreclosed Property, Net; Downward
Reestimate Payable to Treasury; Loan Guarantee Liabilities; and the related notes.
Other Matters
Report on Certain Fiscal Year 2025 Information
We were not engaged to audit the consolidated statements of net cost and changes in net position, and combined
statement of budgetary resources for the year ended September 30, 2025, 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 statement. Such
information is not a required part of the consolidated financial statement or supplementary information required by
the Federal Accounting Standards Advisory Board. The information on these websites or the other interactive data
KPMG LLP, a Delaware limited liability partnership, and its subsidiaries are part of
the KPMG global organization of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 48
Financial Reporting (Unaudited)
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 Statement
Management is responsible for the preparation and fair presentation of the consolidated financial statement 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 the consolidated financial
statement that is free from material misstatement, whether due to fraud or error.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statement
Our responsibility is to conduct an audit of the SBA’s consolidated financial statement 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 the consolidated financial statement.
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 statement. Such information is the responsibility of management and, although not a part of the basic
consolidated financial statement, 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 statement 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 statement as of September 30, 2025,
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 statement, but not for the purpose of expressing an opinion on the effectiveness of the SBA’s internal
control. Accordingly, we do not express an opinion on the effectiveness of the SBA’s internal control. We did not
test all internal controls relevant to operating objectives as broadly defined by the Federal Managers’ Financial
Integrity Act of 1982.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not
designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies
and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as
described in the accompanying Appendices I and II, we identified certain deficiencies in internal control that we
consider to be material weaknesses and significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statement
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 49
Financial Reporting (Unaudited)
will not be prevented, or detected and corrected, on a timely basis. We consider the deficiencies described in the
accompanying Appendix I to be areas of material weaknesses.
SBA management did not report the material weakness, Controls over Subsidy Reestimate Need Improvement, in
its Statement of Assurance, included in Management's Discussion and Analysis section of the accompanying
Agency Financial Report.
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, 2025,
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 the accompanying Appendix III.
We also performed tests of the SBA’s compliance with certain provisions referred to in Section 803(a) of the
Federal Financial Management Improvement Act of 1996 (FFMIA). Providing an opinion on compliance with FFMIA
was not an objective of our engagement, and accordingly, we do not express such an opinion. The results of our
tests disclosed instances, 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 statement, 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
statement 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. This communication is an integral part of an engagement to audit in accordance with
Government Auditing Standards in considering the SBA’s internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.
Washington, DC
January 21, 2026
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 50
Financial Reporting (Unaudited)
Appendix I
U.S. Small Business Administration
Material Weaknesses
The following deficiencies are considered to be areas of 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 Program Need Improvement
3. Controls over Subsidy Reestimate Need Improvement
4. Entity Level Controls Need Improvement
Background
The COVID-19 EIDL direct loan and PPP guaranty loan programs were authorized and funded by the
Coronavirus Aid, Relief, and Economic Security Act of 2020, and the Paycheck Protection Program and
Health Care Enhancement 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 EIDL and PPP programs affect a substantial proportion of the
consolidated financial statement.
The 7(a) Loan Guaranty Program, SBA’s primary business loan program, provides loan guarantees to lenders
that allow them to provide financial help for small businesses.
1. Controls over COVID-19 EIDLs Need Improvement
The COVID-19 EIDL 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. As COVID-19 EIDLs began repayment in fiscal years 2023
and 2024, a substantial number became delinquent, and many were identified by management as potentially
fraudulent. Consequently, management charged off many of these delinquent and potentially fraudulent
COVID-19 EIDLs. In fiscal year 2025, management implemented a funds recovery accounting policy for
COVID-19 EIDLs and concluded that all COVID-19 EIDLs previously charged off on the basis of a prior charge-
off policy should be reinstated and recorded as Credit Program Receivables in accordance with SFFAS 2. As a
result of the updated funds recovery accounting policy, SBA reinstated a large volume of COVID-19 EIDLs as
Credit Program Receivables. Management reinstated these loans based on the anticipation of further
collectability.
Management did not design and implement adequate monitoring controls over the COVID-19 EIDL portfolio to
ensure reliable financial reporting as of the end of the fiscal year. Management’s analysis did not support the
completeness and accuracy of the COVID-19 EIDL population of loans and related data elements as of the
balance sheet date. Management did not sufficiently design and implement a review control to identify a
complete population of loans with eligibility concerns that are critical in assessing the completeness and
accuracy of the COVID-19 EIDL Credit Program Receivable balances. In addition, the monitoring controls for
reviewing the loan status of COVID-19 EIDLs were not adequately designed to detect instances where the
recorded loan status was not supported by the underlying accounting records or loan life cycle events.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 51
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Management did not apply consistent accounting treatment of COVID-19 EIDLs with fraud-related hold codes
where there is no anticipated further collectability. As a result, a sub-population of loans with these fraud-
related hold codes were not excluded from the Credit Program Receivable balance based on management’s
fiscal year 2025 funds recovery accounting policy.
Further, management’s review controls over their reinstatement process did not provide sufficient evidence to
support the completeness and accuracy of the COVID-19 EIDL population as of the balance sheet date. For
example, a sub-population of charged-off loans that management intended to reinstate had not been reinstated
as of fiscal year-end and therefore were not reflected in the Credit Program Receivable balance. In addition,
management reinstated certain loans which were not eligible for reinstatement.
These deficiencies were caused by challenges, such as complexity and considerable effort, in retroactively
generating the necessary point-in-time historical population data from the current system used for the portfolio
analysis as of the end of the fiscal year. Additionally, management’s review controls were not adequately
designed and implemented to identify a complete and accurate population of COVID-19 EIDLs with potential
eligibility concerns. Further, the reinstatement controls implemented by management were not implemented
effectively to complete all eligible loan reinstatements before fiscal year-end. Finally, management’s information
systems were not designed to properly update the loan status of COVID-19 EIDLs to ensure the loan status
was correct and supported by the underlying transactions.
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;
Principle 11, Design Activities for the Information System; 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 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 statement.
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. Establish and document a process to generate, save, and securely retain complete data
extracts of loan populations and relevant data elements (e.g., loan status, balances) as of the
date that management’s analyses are performed (such as the fiscal year-end). This process
will ensure relevant data is maintained by management to support their analyses for financial
reporting purposes.
2. Implement a comprehensive, risk-based, and proactive process that regularly assesses the
loan population for potential fraud or ID theft concerns (e.g. periodic systematic reviews, data
analytics, or other proactive monitoring controls). (2024, recommendation 1)
3. Apply consistent accounting treatment of non-performing loans with open agency hold codes.
4. Consistently implement financial reporting controls to ensure the Credit Program Receivable
balance is completely and accurately stated throughout the fiscal year. If new policies are
implemented, conduct an analysis to assess the financial reporting implications. (2024,
recommendation 2)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 52
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5. Review controls over information technology program changes within the applicable systems
of record for loan accounting so that they are designed, implemented and operating
effectively, to ensure changes are appropriate and function as intended, and the information
systems reflect the underlying accounting transactions. (2024, recommendations 3 & 4)
2. Controls over PPP Loan Program Need Improvement
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.
Management’s post-payment review control was not sufficiently designed and implemented to determine
the appropriate status and financial reporting impact of PPP loans forgiven as of September 30, 2025.
Specifically, management indicated that post-payment reviews were conducted on only two percent of the
total population of forgiven PPP loans. Additionally, management’s process and related control activities
for recovering funds of PPP loans with eligibility concerns that were identified and confirmed after
forgiveness were not fully documented or implemented. While management established a funds recovery
accounting policy, the implementation of related control activities was ongoing as of fiscal year-end.
These deficiencies were caused by the volume of forgiveness payments and management’s ability to remediate
other deficiencies, which prevented SBA from completing all corrective actions. Consequently, the risk
assessment process did not adequately evaluate or address the risks associated with post-payment review and
funds recovery for PPP 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 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 Credit Program
Receivables and Related Foreclosed Property, Net, and Downward Reestimate Payable to Treasury line
items, and other related elements in the consolidated financial statement.
Recommendations – Controls over PPP Loan Program Need Improvement
We recommend the Administrator coordinate with the Associate Administrator for the Office of Capital
Access to:
6. Establish regular monitoring and reporting control activities to track progress of post payment
reviews, to ensure timely and effective decision making related to implementation of funds
recovery policies and procedures. (2024, recommendation 7)
7. Strengthen the risk assessment process and conduct a risk-based, comprehensive analysis of
the entire population of forgiven PPP loans to identify whether additional reviews may be
needed in determining the complete and accurate population for funds recovery. (2024,
recommendation 8)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 53
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3. Controls over Subsidy Reestimate Need Improvement
Statement of Federal Financial Accounting Standards Number 2, Accounting for Direct Loans and Loan
Guarantees, requires that direct loans and loan guarantees obligated 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 annually the future net cash inflows and
outflows for the COVID-19 EIDLs and PPP loan portfolios as of the end of the fiscal year.
Management’s review controls were not adequately designed and implemented over the data inputs used
in the PPP and 7(a) Loan Guaranty subsidy reestimate models. Specifically, management did not provide
sufficient documentation to evidence adequate review controls to validate the reliability of loan data used
in key assumptions for the cash flow PPP model to develop the subsidy cost estimates. Further,
management did not provide sufficient appropriate audit evidence to support the reliability for all key data
elements used in the 7(a) reestimate model.
In addition, 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.
These deficiencies were caused by management’s inability to coordinate and obtain the supporting
documentation necessary to provide sufficient appropriate audit evidence to support the relevant data
elements. Additionally, the control environment was insufficient with respect to the design and implementation
of controls over the review of the PPP and COVID-19 EIDL portfolios. This review control was not sufficiently
precise to ensure that the data inputs used for the reestimate models were complete and accurate.
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 deficiencies described above may result in a material misstatement to the subsidy reestimate
impacting the Liability for Loan Guarantees, the Allowance for Direct Loan Receivables, and the
Downward Reestimate Payable to Treasury and the related elements in the consolidated financial
statement.
Recommendations – Controls over Subsidy Reestimate Need Improvement
We recommend the Administrator coordinate with the Chief Financial Officer to:
8. Identify and implement a method to improve SBA’s ability to demonstrate evidence of
adequate support and controls over relevant data elements in a timely manner.
9. Continue implementing review controls in collaboration with relevant program offices for the
PPP and COVID-19 EIDL portfolios to accumulate relevant, complete and accurate data on
which to base the reestimate. (2024, recommendation 23)
4. Entity Level Controls Need Improvement
Management faced challenges in maintaining an adequate entity level controls system and enterprise risk
management infrastructure and did not design or implement effective controls necessary to achieve its intended
objective of 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 54
Financial Reporting (Unaudited)
A. Control Environment
Management did not establish an effective control environment. The following deficiencies were identified:
• Management did not establish an agency-wide oversight body to govern the internal control system
during the fiscal year.
• Management did not establish a formal internal control plan to support the entity’s financial
reporting objectives. In addition, there was no formal planning and accountability for the design and
testing of controls.
• Management did not effectively identify and remediate gaps in personnel roles and responsibilities
within the agency’s organizational structure, particularly regarding the delegation of authority and
assignment of roles within certain program offices.
B. Risk Assessment
Management did not perform effective risk assessment processes. The following deficiencies were identified:
• Management did not establish a coordinated agency-wide risk assessment framework and a
comprehensive evaluation of financial reporting. In addition, management did not perform an
analysis of program and agency changes to address evolving risks specific to the fiscal year.
• Management did not implement adequate risk assessment processes to effectively identify,
analyze, and respond to relevant financial and reporting compliance risks for fiscal year 2025. For
example, management did not sufficiently evaluate the risks related to the large-scale
reinstatement of certain pandemic program transactions or consider the potential impact on the
completeness of related portfolio balances in the consolidated financial statement. Additionally,
management did not adequately respond to the increased risk of noncompliance with applicable
laws arising from the significant volume of loans in delinquency status during fiscal year 2025.
C. Control Activities
Management did not adequately design and implement effective control activities. The following deficiencies
were identified:
• Management did not develop or implement agency-wide internal control testing plans during the
fiscal year to support the entity’s financial reporting and compliance objectives, respond to relevant
risks, or to achieve an effective internal control system.
• Management did not adequately design or implement controls within the relevant program offices
to operate at a sufficient level of precision to achieve the reporting objective of preparing financial
statements free from material misstatement. For instance, the COVID-19 EIDLs and PPP loan
review processes were not designed to ensure that the reviews conducted were precise enough to
confirm that the related balances were free of material misstatement.
D. Information & Communication
Management did not adequately design and implement effective information and communication control
processes. Specifically, management did not establish an agency-wide oversight body during the fiscal year to
govern the internal control system. As a result, quality information on internal controls, policies, and procedures
was incomplete, insufficient, unavailable, and impeded effective communication across all levels of authority
and lines of responsibility to achieve internal control objectives.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 55
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E. Monitoring
Management did not design and implement effective monitoring processes. The following deficiencies were
identified:
• Management did not establish formal internal control testing plans at the agency-wide level,
resulting in a lack of effective monitoring activities to evaluate the effectiveness of internal controls
across the agency.
• While certain deficiencies identified in the prior year were remediated, management did not fully
design and implement corrective action plans to effectively remediate prior year findings in the
current fiscal year.
These deficiencies were caused by operational challenges that impeded the agency’s ability to support
effective entity level controls throughout the fiscal year. A transition plan was under development at the end of
the fiscal year to respond to resource constraints in order to properly prioritize and execute the agency’s
enterprise risk management process, including the establishment of an agency-wide oversight body,
development of internal control testing plans, and risk assessment frameworks.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Principle 2, Exercise Oversight Responsibility; Principle 4, Demonstrate
Commitment to Competence; 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 13, Use
Quality Information; Principle 14, Communicate Internally; Principle 16, Perform Monitoring
Activities; and 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 statement, and noncompliance with the relevant laws and regulations would neither be prevented
nor detected and corrected in a timely manner.
Recommendations – Entity Level Controls Need Improvement
We recommend that the Administrator coordinate with the Chief Financial Officer to:
10. Finalize and implement the transition plan to respond to resource constraints, which includes
establishing the proper delegation of authority for personnel roles and responsibilities,
ensuring the agency can properly design and effectively operate entity level controls
throughout the fiscal year.
11. Establish an agency-wide oversight body to provide governance, guidance, information and
communication over internal control systems and risk management activities.
12. Design, implement, and document comprehensive internal control testing plans and regularly
monitor and evaluate the effectiveness of internal controls. (2024, recommendation 32)
13. Coordinate with key stakeholders to develop robust risk assessment frameworks to identify,
analyze, and respond to emerging or evolving risks across the agency. (2024,
recommendation 31)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 56
Financial Reporting (Unaudited)
Appendix II
U.S. Small Business Administration
Significant Deficiencies
Monitoring of Restaurant Revitalization Fund and Shuttered Venue Operators Grant 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. In fiscal year 2025, SBA implemented a process for funds recovery for RRF awards
with eligibility concerns.
Management did not sufficiently design and implement monitoring controls to evaluate the accuracy and
completeness of accounts receivable balances impacted by their recovery of funds efforts. Management
reviewed a sample of RRF awards and completed testing at the end of the fiscal year. However,
management did not perform a detailed analysis and extrapolation of results. Further, management did
not assess whether additional testing was needed to support the balances recorded at fiscal year-end.
These deficiencies were caused by management’s risk assessment process not incorporating a final evaluation
of sample results to determine whether the sampling risk was appropriate and supported their adjustments to
accounts receivable related to the recovery of funds for RRF awards.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• GAO’s Green Book, Principle 10, Design Control Activities; and Principle 16, Perform Monitoring
Activities
• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and
Internal Control
The deficiencies described above may result in a misstatement to the Other than Intragovernmental
Accounts Receivable, Net, line item and the related elements in the consolidated financial statement.
Recommendations – Monitoring of RRF Awards
We recommend the Administrator coordinate with the Associate Administrator for the Office of Capital
Access to:
14. Design and implement key monitoring control procedures earlier in the fiscal year to allow
adequate time for thorough execution, review, and analysis before year-end. (2024,
recommendation 15)
15. Conduct a risk-based, comprehensive analysis of the RRF sample review results to identify
whether additional reviews may be needed in determining the complete and accurate
population for funds recovery. (2024, recommendation 16)
B. Monitoring of SVOG Awards
The period to use SVOG funds for eligible purposes expired in fiscal year 2023. 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. In fiscal year 2025, SBA
implemented a process for funds recovery for SVOG awards with eligibility concerns.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 57
Financial Reporting (Unaudited)
Management’s monitoring controls over SVOG awards to ensure compliance with the CARES Act and
related legislation, as well as accurate financial reporting at fiscal year-end were not fully implemented.
Specifically, as of September 30, 2025, certain awards lacked a submitted Expense Report or SF-425.
Management also selected samples of SVOG awards to assess the accuracy of report submissions and
recipient eligibility. However, sample reviews were not completed by the end of the fiscal year.
Furthermore, management’s funds recovery process was not fully implemented for SVOG awards with
identified eligibility concerns to support the balances recorded at year-end.
These deficiencies were caused by the design and implementation of the funds recovery procedures occurring
close to fiscal year-end, resulting in insufficient time to thoroughly execute sample reviews.
The following criteria were considered with respect to the matters described in the preceding paragraphs:
• Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting
Standards 1 (SFFAS 1): Accounting for Selected Assets and Liabilities
• GAO’s Green Book, Principle 10, Design Control Activities; and Principle 13, Use Quality
Information
The deficiencies described above may result in a misstatement to the Other than Intragovernmental
Accounts Receivable, Net, line item and the related elements in the consolidated financial statement.
Recommendations – Monitoring of SVOG Awards
We recommend the Administrator coordinate with the Associate Administrator for the Office of Disaster,
Recovery, and Resilience to:
16. Complete the outstanding sample reviews to identify the complete population of 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. This will ensure the data provided to the Office of
Performance, Planning, and the Chief Financial Officer (OPPCFO) is complete, accurate and
reported in a timely manner for year-end financial reporting. (2024, recommendations 18 & 19)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 58
Financial Reporting (Unaudited)
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 481,258 COVID-EIDLs and 81,782 PPP loans
were noncompliant with DCIA requirements for the fiscal year ended September 30, 2025.
In addition, management did not design and implement effective controls to identify and refer 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 configuration in place to refer delinquent
loans to Treasury within the appropriate timeframe.
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; Principle 10, Design
Control Activities; and Principle 16, Performing Monitoring 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:
17. Reevaluate delinquency policies and procedures, such as system controls and configurations, to
ensure borrowers are notified timely of delinquency, and if applicable, subsequently referred within
the required timeframe. (2024, recommendation 52)
18. Update risk assessment and monitoring controls to address and mitigate noncompliance risks
related to DCIA. (2024, recommendation 51)
19. Document the review and assessment of current and prospective processes and policies to ensure
they address compliance risks. (2024, recommendation 50)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 59
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B. Federal Managers’ Financial Integrity Act of 1982 (FMFIA)
Management did not perform an internal control assessment as required under FMFIA and did not comply with
FMFIA and the related OMB Circular No. A-123 requirements. Specifically, management did not:
• Document a comprehensive evaluation of internal control over financial reporting regarding current
programs while giving consideration to relevant risks during the fiscal year.
• Design or establish a formal internal control program, including the design and implementation of
risk assessment processes and testing across SBA programs and functions.
• Ensure their own assurance process was sufficient to identify material weaknesses and significant
deficiencies that existed during the fiscal year in addition to those identified by external auditors.
This noncompliance was caused by operational challenges that impeded the agency’s ability to support
effective entity level controls and FMFIA compliance throughout the fiscal year. A transition plan was under
development at the end of the fiscal year to properly prioritize and execute the agency’s enterprise risk
management process, which led to insufficient oversight and validation in management’s assurance process.
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 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 statement.
Recommendations – FMFIA
We recommend the Administrator coordinate with the Chief Financial Officer to:
20. Strengthen controls, such as entity level controls, manual controls, general information technology
controls, and system application controls by developing standardized procedures for assessing and
reporting on internal controls across all offices within SBA. (2024, recommendation 53)
21. Collaborate with appropriate program office management to assess internal control testing results
and revise corrective action plans to remediate identified control deficiencies. (2024,
recommendation 54)
22. Update existing policies and implement effective monitoring controls that incorporate independent
validations of program offices’ Statement of Assurance (SOA) process. Ensure that SOAs from all
program offices are thoroughly documented and independently reviewed for completeness and
accuracy, providing a reliable basis for the Administrator’s SOA. (2024, recommendation 55)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 60
Financial Reporting (Unaudited)
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 direct and guaranty loan transactions do not enable reliable
and accurate financial reporting, do not ensure compliance objectives are met.
• Federal Accounting Standards. The deficiencies identified and reported in Appendix I – Material
Weaknesses, provide an indication that SBA’s financial systems were substantially noncompliant
with applicable federal accounting standards. For example, management did not apply consistent
accounting treatment over the COVID-19 EIDL and PPP loan programs.
Management did not substantially meet FFMIA requirements because of the reasons discussed in Appendix I –
Material Weaknesses and due to an inadequate agency-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 statement.
Recommendations – FFMIA
We recommend the Administrator coordinate with the Chief Financial Officer to:
23. 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. (2024, recommendation 56)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 61
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CFO Response to Audit Report on FY 2025 Financial Statements
DATE: January 21, 2026
TO: William Kirk, Inspector General
FROM: Nathan Davis, Chief Financial Officer and Chief Risk Officer
SUBJECT: FY 2025 Financial Statement Audit
The Small Business Administration (SBA) has reviewed the Independent Auditors’ Report issued
by KPMG, which includes a disclaimer of opinion on the Agency’s FY 2025 Consolidated Balance
Sheet. The independent audit of the Agency’s financial statements and related processes is a core
component of SBA’s financial management program, and management takes the results of this
audit seriously.
The FY 2025 Agency Financial Report (AFR) reflects meaningful improvements resulting from
sustained leadership focus, cross-functional collaboration and disciplined execution of corrective
action plans. During the fiscal year, material weaknesses related to Controls over Service
Organizations and Controls over General Information Technology were fully remediated. In
addition, significant deficiencies related to Controls over Payments for Debt Relief and Controls
over Reporting of Contingencies were also fully remediated. Further, the material weakness
related to Controls over Monitoring of Restaurant Revitalization Fund and Shuttered Venues
Operators Grant Programs was downgraded to a significant deficiency. These outcomes
demonstrate tangible progress in strengthening SBA’s financial management and internal control
environment.
The auditors identified material weaknesses related to the internal controls over four areas:
COVID-19 Economic Injury Disaster Loans (EIDL), Paycheck Protection Program (PPP) Loan
Program, Subsidy Reestimate, and Entity Level Controls. Management agrees that certain
conditions identified in the audit report and associated with these material weaknesses were the
result of the auditors’ inability to obtain sufficient and appropriate audit evidence. However,
management does not fully concur with several underlying characterizations and contributing
factors that are presented within the audit report for the reported material weaknesses related to
internal controls over COVID-19 EIDL and Subsidy Re-estimate. In particular,
• Management disagrees with the characterization that the COVID-19 EIDL population
analysis was inadequate as of the balance sheet date (September 30, 2025). Management
assessed the population and concluded that it was complete and appropriate for financial
reporting purposes. Management acknowledges, however, that certain data attributes
supporting this analysis were not available in the form requested by KPMG at the time of
their audit procedures (December 2025), due to the inability to reproduce the population at
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 62
Financial Reporting (Unaudited)
a prior point in time. This limitation reflects challenges associated with retrospective audit
evidence requirements rather than deficiencies in management’s assessment as of the
reporting date. (Material Weakness 1)
Additionally, management disagrees with the auditors’ conclusions regarding certain
review controls. SBA does not believe that additional reviews of the population for potential
fraud or identity theft would alter management’s assessment of the completeness of the
population for financial reporting purposes. (Material Weakness 1, Recommendation 1)
Management agrees that a material weakness exists related to controls over COVID-19
EIDLs because of inconsistent accounting treatment of the COVID EIDL population and
the need for improvements in the controls over the reinstatement process implemented in
the fourth quarter of FY 2025. (Material Weakness 1)
• Management does not believe that there is a clear or likely indicator that SBA does not have
adequate controls over the data inputs used in the 7(a) Loan Guaranty subsidy reestimate
model. The conditions noted by the auditor in the reported subsidy reestimate material
weakness were primarily due to the timing of when the audit procedure was initiated and
performed; the complexity involved with obtaining documentation from third parties,
which increases the amount of time necessary to obtain supporting documents; and the
fact that this was the first time this audit procedure was performed, which led to a
“learning curve” for both the auditor and SBA as to the best approach for testing and
obtaining documentation for audit evidence. Although SBA does not agree that the
conditions reported are likely to result in a material misstatement, SBA is committed to
identifying and implementing a method that improves SBA’s ability to demonstrate
evidence of adequate support and controls over the over the data elements in a timely
manner. (Material Weakness 3)
Additionally, management disagrees with the inclusion of PPP and COVID-19 EIDL within
the reported material weakness related to controls over the subsidy reestimate. The
underlying conditions and impacts associated with PPP and COVID-19 EIDL are already
reflected within Material Weaknesses 1 and 2. Because the root causes and corrective
actions overlap, inclusion within the subsidy reestimate material weakness is duplicative
and may be misleading. Additionally, as indicated above, management disagrees with the
auditor regarding COVID-19 EIDL review controls. SBA does not believe additional
reviews of the population would alter its assessment of completeness of the population.
(Material Weakness 3, Recommendation 9)
• Management does not agree that SBA is not in substantial compliance with the FFMIA.
SBA’s core financial management systems are substantially compliant with Federal
financial management systems requirements, applicable Federal accounting standards and
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 63
Financial Reporting (Unaudited)
USSGL at the transaction level. The deficiencies the auditor cited as causing FFMIA non-
compliance were due to factors external to the core financial management systems, rather
than a limitation in the system’s design or ability to prepare financial statements,
disclosures and related information. For example, SBA’s assessment is that the material
weaknesses cited by the auditor are related to the COVID-19 EIDL and PPP programs are
the result of material uncertainty regarding completeness of populations and potential
funds recovery policy decisions. As such, management does not believe this constitutes
substantial FFMIA noncompliance. (Compliance C, Recommendation 23)
Management respects the independent role of the auditors and values their perspectives, and
we remain committed to constructive engagement to resolve these matters. At the same time,
management believes it is important to distinguish between limitations associated with large-
scale COVID-19 pandemic-era programs, which were executed under emergency conditions,
and the effectiveness of SBA’s current control environment governing ongoing operations.
Notwithstanding these differences, management recognizes the seriousness of the conditions
contributing to the disclaimer of opinion. SBA remains focused on sustaining the improvements
achieved in FY 2025 and building upon them in the year ahead. Management will continue to
evaluate auditor recommendations and, where appropriate, refine our processes and controls to
address identified areas of concern.
We appreciate the efforts of the Office of the Inspector General and KPMG, and we remain
committed to continued progress in strengthening SBA’s financial management and oversight
capabilities.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 64
Financial Reporting (Unaudited)
Appendix V
Auditors’ Response to Management’s Response
We acknowledge SBA management’s response to our Independent Auditors’ Report, presented in Attachment
IV, and commend their commitment to financial management and the accountability for and transparency of
their programs. SBA management agreed with two of the areas of material weakness included in our report,
Controls over Paycheck Protection Program (PPP) Loan Program Need Improvement and Entity Level Controls
Need Improvement. However, management did not agree in part with the other two areas of material
weaknesses included in our report, Controls over Coronavirus Disease 2019 (COVID-19) Economic Injury
Disaster Loans (EIDLs) Need Improvement and Controls over Subsidy Reestimate Need Improvement.
Additionally, management did not agree with our finding over the agency’s substantial noncompliance with
Federal Financial Management Improvement Act of 1996 (FFMIA).
We have reviewed management’s responses and have determined that all aspects of the material weaknesses
in internal control over financial reporting and substantial noncompliance with FFMIA remain appropriate. We
provide the following additional information related to the Controls over Coronavirus Disease 2019 (COVID-19)
Economic Injury Disaster Loans (EIDLs) Need Improvement, Controls over Subsidy Reestimate Need
Improvement, and our findings related to substantial noncompliance with the Federal Financial Management
Improvement Act of 1996 (FFMIA).
In the area of COVID-19 EIDL:
• Management indicated that they assessed the COVID-19 EIDL portfolio and determined it was complete
and accurate. However, the data supporting management’s analysis and conclusion did not substantiate
management’s analysis performed. We identified examples where loans were included in the COVID-19
EIDL population and the Credit Program Receivable balance at September 30, 2025, however these loans
were recorded with a zero balance in management’s analysis. As a result, the data utilized in
management’s analysis did not support management’s conclusion regarding the completeness and
accuracy of the COVID-19 EIDL population. Further, management indicated that their inability to provide
supporting evidence over the COVID-19 EIDL population was due to an audit evidence requirement.
However, OMB Circular A-123, Management's Responsibility for Internal Control, requires management to
establish and maintain effective internal controls to ensure reliable financial reporting. As part of this
responsibility, management must maintain sufficient documentation to support its financial transactions and
account balances.
• Management indicated that they believe additional review would not alter their assessment of the
completeness of the COVID-19 EIDL population. However, management’s review control is not designed to
remove COVID-19 EIDLs with similar eligibility concerns from the portfolio in a consistent manner. We
identified COVID-19 EIDLs with similar eligibility characteristics that were both included in the Credit
Program Receivable balance as of September 30, 2025, and written off to be excluded from this balance,
which resulted in inconsistent accounting treatment. As a result, management did not design and
implement adequate monitoring controls and review processes to support the completeness and accuracy
of the COVID-19 EIDL portfolio and related financial data as of year-end.
In the area of the Subsidy Reestimate:
• Management disagrees with our finding that SBA did not have adequate controls over the data inputs.
However, management did not provide the necessary supporting documentation for the integral data
related to borrower characteristics and the underlying loans used in the 7(a) Loan Guaranty subsidy
reestimate model. Management attributed the material weakness in the 7(a) Loan Guaranty reestimate to
the nature and timing of the audit procedures and complexity involved in obtaining supporting
documentation from third parties. However, it is management’s responsibility to maintain, support, and
report the information for the loan guaranty reestimate. The material weakness resulted from
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 65
Financial Reporting (Unaudited)
management’s ineffective coordination with third parties to obtain the necessary supporting documentation
for the relevant data elements. As a result, the loan guaranty reestimate material weakness existed as of
September 30, 2025.
• Management indicated that elements of material weakness entitled Controls over Subsidy Reestimate
Need Improvement are already covered by material weaknesses entitled Controls Over COVID-19 EIDLs
Need Improvement and Controls Over PPP Loan Program Need Improvement. This is not accurate, as the
material weakness entitled Controls Over Subsidy Reestimate Need Improvement specifically pertains to
the controls over the data inputs used in the subsidy reestimate models, while the material weaknesses
entitled Controls Over COVID-19 EIDLs Need Improvement and Controls Over PPP Loan Program Need
Improvement address separate findings relating to the controls over the COVID-19 EIDL portfolio and
controls over the post-payment review of forgiven PPP loans, respectively.
In the area of FFMIA:
• Management indicated that they believe SBA’s financial management systems are in substantial
compliance with Federal financial management systems requirements and Federal accounting standards.
FFMIA defines Federal financial management systems as software, hardware, processes, procedures, and
controls necessary to support financial management. In our evaluation of management’s compliance with
FFMIA and based on the Basis for Disclaimer of Opinion and the material weaknesses identified, we
determined that management was unable to demonstrate substantial compliance with Federal financial
management systems requirements. Additionally, management was unable to consistently, completely, and
accurately record and account for balances and transactions in accordance with generally accepted
accounting principles, resulting in substantial noncompliance with Federal accounting standards.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 66
Financial Reporting (Unaudited)
Financial Statement and Notes
The U.S. Small Business Administration prepares its financial statement as a critical aspect of ensur-
ing accountability and stewardship for the public resources entrusted to the SBA. Preparation of this
statement is also an important part of the SBA’s financial management goal of providing accurate and
reliable information that may be used to assess performance and allocate resources.
SBA’s management is responsible for the accuracy and propriety of the information contained in the
principal financial statement and the quality of internal controls.
The Consolidated Balance Sheet and related Notes are found in this section. All other financial state-
ments and related Notes are found in the Other Information section of this report.
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 transac-
tions with the public.
The Notes to the Consolidated Balance Sheet provide information to explain the basis of the ac-
counting and presentation used to prepare the Consolidated Balance Sheet and to explain specific
items in the statement. These also provide information to support how particular accounts have been
valued and computed.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 67
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(Dollars in Thousands)
U. S. Small Business Administration
CO N S O L I D AT E D B A L A N C E S H E E T
As of September 30, 2025 (Unaudited)
2025
ASSETS (Note 3)
Intragovernmental Assets
Fund Balance with Treasury (Note 2) $ 13,712,860
Accounts Receivable, Net (Note 4) 377
Advances and Prepayments 5,874
Total Intragovernmental Assets 13,719,111
Other than Intragovernmental Assets
Cash and Other Monetary Assets 9,893
Accounts Receivable, Net (Note 4) 276,726
Loans Receivables, Net:
Credit Program Receivables and Related Foreclosed Property, Net (Note 5) 234,337,317
Property, Plant and Equipment, Net (Note 6) 56,051
Advances and Prepayments 11,043
Total Other than Intragovernmental Assets 234,691,030
Total Assets $ 248,410,141
LIABILITIES
Intragovernmental Liabilities
Accounts Payable:
Accounts Payable, Capital Transfers:
Net Assets of Liquidating Funds Due to Treasury (Note 9) $ 75
Accounts Payable 9,684
Debt:
Loans Payable:
Principal Payable to the Bureau of the Fiscal Service (Note 8) 249,335,902
Advances from Others 8,293
Other Liabilities:
Benefit Program Contributions Payable 15,628
Liability to the General Fund of the U.S. Government for Other Non-Entity Assets:
Downward Reestimate Payable to Treasury (Note 5) 2,869,138
Other (Note 10) 102,303
Total Intragovernmental Liabilities 252,341,023
Other than Intragovernmental Liabilities
Accounts Payable 166,610
Federal Employee Salary, Leave, and Benefits Payable (Note 11) 87,733
Post-Employment Benefits Payable (Note 11) 27,747
Loan Guarantee Liabilities (Note 5) 3,019,305
Other Liabilities:
Accrued Grant Liability 55,775
Surety Bond Guarantee Program Future Claims (Note 7) 89,590
Other (Note 10) 91,641
Total Other than Intragovernmental Liabilities 3,538,401
Total Liabilities 255,879,424
Commitments and Contingencies (Note 12)
NET POSITION
Unexpended Appropriations - Funds from Other Than Dedicated Collections 4,151,458
Cumulative Results of Operations - Funds from Other Than Dedicated Collections (11,620,741)
Total Net Position (7,469,283)
Total Liabilities and Net Position $ 248,410,141
The accompanying notes are an integral part of this statement.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 68
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. The SBA’s mission is to maintain and strengthen the nation’s economy by enabling the estab-
lishment 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 Consolidated Balance Sheet was prepared to report the financial position of the Agency, as
required by the Chief Financial Officers Act of 1990 and the Government Management Reform Act
of 1994. The Consolidated Balance Sheet was prepared from the Agency’s financial records in ac-
cordance with Generally Accepted Accounting Principles (GAAP), issued by the Federal Accounting
Standards Advisory Board (FASAB), and the Office of Management and Budget (OMB) Circular A-136,
Financial Reporting Requirements, as revised.
The accounting structure of federal agencies is designed to reflect both the accrual and budgetary
accounting transactions. Under the accrual method of accounting, revenues are recognized when
earned and expenses are recognized when a liability is incurred, without regard to receipt or pay-
ment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over
federal funds.
The Federal Credit Reform Act (FCRA) of 1990 governs the SBA’s accounting transactions for direct
loans and loan guaranties made in FY 1992 and thereafter. Under the FCRA, the liability for loan guar-
anties 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 ad-
justed to net present value with an allowance for subsidy. A cohort of loans receivable or guarantied
loans is all the direct loans obligated, or loan guaranties committed, in a given fiscal year. Increases
to individual loans in a cohort that are made in a subsequent fiscal year are accounted for in the
subsequent year’s loan cohort. Cohort cash flows include loan repayments, recoveries on defaulted
guaranties and loan fees received by the SBA that are due from the lenders and borrowers when the
loan is made and during the life of the loan cohort, as well as expenditures by the SBA for defaulted
guaranties, loan servicing expenses, and other required SBA expenditures. An initial allowance or li-
ability for loan guaranties is established in the original year of the loan cohort. The initial amount
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 69
Financial Reporting (Unaudited)
the allowance and liability for each cohort is reestimated annually at fiscal year-end, and the adjust-
ed amount is included in the SBA’s annual financial statements.
USE OF ESTIMATES
The SBA’s management makes assumptions and uses estimates to prepare the financial statements
based upon the facts that exist when the statements are prepared. The SBA also uses economic
assumptions provided by the Office of Management and Budget in preparing the estimates. Actual
results may differ from those assumptions and estimates. The most significant differences between
actual results and these estimates may occur in the valuation of credit program receivables and
liabilities for loan guaranties under guidelines in FCRA. The SBA recognizes the sensitivity of credit
reform modeling to slight changes in some model assumptions and therefore continually reviews its
model factors and statistical modeling techniques to reflect the most accurate credit program costs
possible in its annual financial statements.
ACCOUNTS RECEIVABLE
Accounts receivable are amounts due to the Agency from other federal agencies (intragovernmental)
and the public (other than intragovernmental). Other than intragovernmental receivables result from
overpayments to recipients of grants and other financial assistance programs. Intragovernmental
receivables result from reimbursable agreements entered into by the Agency with other agencies to
provide various goods and services. Accounts receivable are reduced to net realizable value by an al-
lowance for uncollectible amounts.
ADVANCES AND PREPAYMENTS
Advances are cash outlays made by a Federal entity to its employees, contractors, grantees, or oth-
ers to cover part or all 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.
CASH AND OTHER MONETARY ASSETS
The SBA field offices deposit collections from borrowers in the SBA’s account at the Treasury using an
electronic deposit system. At the end of the fiscal year, collections temporarily held by the SBA field
offices pending deposit are recorded as Undeposited Collections - Cash in Transit.
PROPERTY, PLANT AND EQUIPMENT
The SBA records PP&E at cost less accumulated depreciation. Capitalization and depreciation poli-
cies are as follows:
Equipment
The SBA capitalizes equipment with a cost of $100,000 or more per unit, and a useful life of 2 years or
more. Equipment meeting these criteria is capitalized at full cost and depreciated using the straight-
line method over the useful life. The SBA expenses equipment not meeting the capitalization criteria.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 70
Financial Reporting (Unaudited)
Leasehold Improvements
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. The SBA expenses leasehold improvements not meeting the
capitalization criteria.
Internal Use Software
Software intended for internal use, whether internally developed, contractor developed, or pur-
chased, 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.
LEASES
Effective October 1, 2023, SFFAS No. 54. Leases, revised the financial reporting standards for Fed-
eral lease accounting, which provides a comprehensive set of standards to recognize Federal lease
activities in a reporting entity’s financial reports and note disclosures. The statement requires Fed-
eral lessees to recognize a lease liability and asset at the commencement of the lease term for all
material non-intragovernmental, non-short-term contracts when the reporting entity has the right to
control access to or obtain benefits from the use of real property, equipment, or other assets. Imple-
mentation of this standard had an immaterial impact on the SBA’s financial reporting as its leases for
real property are intragovernmental leases, which do not require the recognition of a lease liability
or asset, and the SBA does not explicitly lease equipment or other assets in the normal course of
business. The SBA will continue to evaluate its contract activity to identify any potential embedded
leases. However, the SBA will not report any embedded leases in accordance with the three-year
transitional accommodation period provided to entities implementing SFFAS No. 54 Leases in SFFAS
No. 62, Transitional Amendment to SFFAS No. 54.
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.
ADVANCES FROM OTHERS
Advances received from other federal entities are recorded when received and liquidated when the
SBA records a expense funded by the advance.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 71
Financial Reporting (Unaudited)
BENEFIT PROGRAM CONTRIBUTION PAYABLE
A liability is recorded for accrued benefits payable that will be liquidated when the related payments
are recorded.
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 pro-
grams are subject to this treatment.
COMMITMENTS AND CONTINGENCIES
The SBA is a party in various administrative proceedings, legal actions, environmental lawsuits, and
claims brought against the Agency. In the opinion of the SBA’s management and legal counsel, there
are certain matters regarding legal claims for which a clear evaluation of the likelihood of an unfavor-
able outcome cannot be determined as of the date of this financial report. See, Commitments and
Contingencies note for further details. The resolution of all other legal proceedings, actions, suits,
and claims will not materially affect the financial position or results of the SBA’s operations.
CUMULATIVE RESULTS OF OPERATIONS
The Cumulative Results of Operations, presented on the Consolidated Balance Sheet, is the accu-
mulated difference between expenses and financing sources since the inception of the Agency. The
amounts reported reflect timing differences between the recording of expenses and the recognition
of resources. Most of this timing difference results from subsidy reestimates which are funded in the
following year. The SBA does not have funds from dedicated collections.
UNEXPENDED APPROPRIATIONS
Unexpended Appropriations is the portion of the SBA’s appropriations received 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 cer-
tain presentations and disclosures to be modified, if needed, to prevent the disclosure of classified
information.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 72
Financial Reporting (Unaudited)
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 fu-
ture financing sources. Sick leave and other types of non-vested leave are expensed as taken.
Federal Employees’ Compensation Act
The Federal Employees’ Compensation Act (FECA) provides income and medical cost protection to cover
federal civilian employees injured on the job and to beneficiaries of employees whose deaths are attrib-
utable 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 Trea-
sury 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 73
Financial Reporting (Unaudited)
Note 2. Fund Balance with Treasury
The U.S. Department of the Treasury processes cash receipts and disbursements on the SBA’s behalf
to pay liabilities and finance loan program costs. Cash receipts are deposited into the SBA’s account
at the Treasury. The SBA’s fund balances with the Treasury are available to make expenditures to liq-
uidate allowable obligations, except for the Budget Clearing Accounts which are not available to the
SBA to obligate or expend until applied.
Records are maintained for the SBA’s program, financing, liquidating, suspense/budget clearing ac-
counts (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.
Fund Balance with Treasury (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 a combination of receipts, other inflows, and borrowing from the public (if there is a budget
deficit).
(Dollars in Thousands)
As of September 30, 2025
Appropriated Funds $ 5,856,283
Financing Funds 7,648,624
Liquidating Funds 519
Revolving Funds 115,308
Trust Fund 485
Budget Clearing Accounts Balance 91,641
Total Fund Balance with Treasury $ 13,712,860
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 74
Financial Reporting (Unaudited)
Note 3. Non-Entity Assets
Non-Entity Assets consist of assets that belong to other entities but are included in the SBA con-
solidated financial statements and are offset by various liabilities to accurately reflect the SBA’s net
position. The SBA’s non-entity accounts receivable principally consist of disaster loan downward
re-estimates from FY 2025 of $2.3 billion and business guaranteed loans of $0.6 billion. The SBA
performs eliminations between the credit agency payable and the non-entity receivable for compil-
ing the balance sheet. The downward reestimate amounts are reflected in the consolidated balance
sheet in the liabilities section as downward reestimate payable to treasury.
(Dollars in Thousands)
As of September 30, 2025
Intragovernmental Assets:
Accounts Receivable, Net $ 2,869,138
Total Intragovernmental Assets 2,869,138
Other Than Intragovernmental Assets:
Accounts Receivable, Net 101,167
Total Other Than Intragovernmental Assets 101,167
Total Non-Entity Assets 2,970,305
Eliminations (2,869,138)
Total Entity Assets 248,308,974
Total Assets $ 248,410,141
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 75
Financial Reporting (Unaudited)
Note 4. Accounts Receivable, Net
Accounts receivable are amounts due to the SBA from other federal agencies (intragovernmental)
and the public (other than intragovernmental).
Other than Intragovernmental includes amounts owed by the public to the SBA for grants and direct
payments whose recipients have not provided sufficient documentation for the SBA to determine
that the payments have been earned as well as guaranty fees in the SBA’s loan and surety bond pro-
grams and miscellaneous receivables (Other).
An Allowance for Loss on uncollectible Restaurant Revitalization Fund Receivables and Shuttered
Venue Operators Grant Receivables is based upon historical recovery rates in the Paycheck Protec-
tion Program which is similar in nature, originating during the COVID era with no personal guarantee
or collateral.
The Allowance for Loss for Other receivables is the allowance for uncollectible Surety Bond Guaranty
fees based on an aging of delinquent balances. Amounts over 180 days past due on guarantied loans
purchased by the SBA are written off for financial reporting purposes.
(Dollars in Thousands)
Shuttered
Restaurant Guaranty
Venue
As of September 30, 2025 Revitalization Fees Total
Operators
Fund Receivable
Grant
Intragovernmental
Administrative Receivables $ - $ - $ 377 $ 377
Total Intragovernmental $ - $ - $ 377 $ 377
Other than Intragovernmental
Accounts Receivable Gross $ 2,363,589 $ 706,689 $ 146,735 $ 3,217,013
Allowance For Loss (2,262,428) (675,107) (2,752) (2,940,287)
Total Other than
$ 101,161 $ 31,582 $ 143,983 $ 276,726
Intragovernmental, Net
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 76
Financial Reporting (Unaudited)
Note 5. Credit Program Receivables and
Liability for Loan Guaranties
A. LOAN PROGRAM DESCRIPTIONS AND ACCOUNTING
Loan Program Descriptions
The SBA provides guaranties that help eligible small businesses obtain loans from participating
lenders and licensed small business investment companies to make investments in qualifying small
businesses. The SBA also makes loans to microloan intermediaries and provides direct loans that
assist homeowners, renters, businesses of all sizes, and private nonprofit organizations recover from
disasters.
Major Direct Loan and Loan Guaranty Programs
Program Group Program Type Program
Disaster Direct Disaster Assistance Loans
Business Guarantied 7(a) Loan Guaranty
Business Guarantied 504 Certified Development Company
Business Guarantied Small Business Investment Company Debentures
Business Direct 7(m) Microloan
SBA’s Disaster Assistance Loan program makes direct loans to disaster survivors under four cat-
egories: (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 eco-
nomic injury as a result of the COVID-19 pandemic. Although the 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 77
Financial Reporting (Unaudited)
The 504 Certified Development Company program guarantees 100 percent of the principal and inter-
est payments on debentures issued by development companies for loans to eligible small business-
es 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 guarantied loans using economic and financial
credit subsidy models. These estimated cash flows are used to develop the subsidy funding required
under the Federal Credit Reform Act of 1990. The SBA has developed a customized credit subsidy
model for each of its major loan programs.
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 esti-
mates 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 under-
goes quality review and analysis prior to its use in developing model assumptions.
Key input to the subsidy models varies by program. Input includes items such as:
• Contractual terms of the loan or guaranty such as loan amount, interest rate, maturity, and grace
periods
• Borrower characteristics
• Loan origination methods
• Economic indicators such as gross domestic product growth and unemployment rate
• Loan performance assumptions, for example: conditional purchase and prepayment rates and
recovery rates
• Loan fee rates
Subsidy Funding under the Federal Credit Reform Act
The 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 val-
ue of expected cash inflows and outflows over the life of a guarantied loan, or the difference between
the net present value of expected cash flows and the face value of a direct loan. The cost expressed
as a percentage of loans disbursed is termed the subsidy rate. The SBA receives appropriations to
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 78
Financial Reporting (Unaudited)
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 receiv-
able balance.
Guarantied loans purchased by the SBA upon borrower default are established as loans receivable
and are valued in a similar manner as direct loans under FCRA.
Direct loans and defaulted guaranties made prior to FCRA are valued at the current receivable bal-
ance net of an allowance for uncollectible amounts calculated using historical loss experience.
The SBA advances payments semiannually to honor the SBA’s timely payment requirement of prin-
cipal and interest due for debentures in the 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 re-
lated to defaulted guarantied loans. Interest income is accrued at the contractual rate on the out-
standing principal amount and is reduced by the amount of interest income accrued on nonperform-
ing 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 di-
rect loans and defaulted loan guaranties. Properties acquired as a result of defaulted loans commit-
ted 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 fore-
closed property is shown at the appraised value. At September 30, 2025 the SBA’s foreclosed prop-
erty was $20.8 million related to 74 loans. The properties had been held for an average of 1,806 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 includ-
ed on the SBA’s Balance Sheet. The liability for guarantied loans committed after FY 1991 is based on
the net present value of their expected future cash flows, including guaranty fee inflows and the net
cash outflows of defaulted guarantied loans purchased by the SBA.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 79
Financial Reporting (Unaudited)
Valuation Methodology for Pre-FCRA Liability for Loan Guaranties
The SBA values pre-credit reform direct and defaulted guarantied loans by estimating an allowance
for loan losses. This allowance is offset against gross loan receivables to obtain the SBA’s expected
net collections from these assets. The SBA establishes a 100 percent allowance for pre-credit reform
direct and guarantied loans that are past due more than 180 days.
Reestimates
Reestimates mean revisions of the subsidy cost estimate of a cohort (or risk category) based on infor-
mation about the actual performance and/or estimated changes in future cash flows of the cohort.
Reestimates must be made immediately after the end of each fiscal year, as long as any loans in the
cohort are outstanding, unless a different plan is approved by OMB (see section 185.6). An upward
reestimate indicates that insufficient funds had been paid to the financing account, so the increase
(plus interest on reestimates) is paid from the program account to the financing account to make it
whole. Permanent indefinite budget authority is available for this purpose pursuant to section 504(f)
of the FCRA. A downward reestimate indicates that too much subsidy had been paid to the financing
account. The excess (plus interest) is disbursed to a downward reestimate receipt account.
Significant Transactions During FY 2025
As a result of an updated accounting policy to more accurately value the gross receivable, the SBA
returned 697,793 COVID EIDLs totaling $48.9 billion and 448,816 purchased defaulted PPP loans total-
ing $10.2 billion from charge off to a new loan status “SBA Uncollectible”. These loans are either at
Treasury for collection efforts or are eligible for Treasury referral. Due to the subsidy allowance, there
is no impact to the net credit program receivables line. In FY 2026, the SBA will review its other loan
programs to ensure consistency with this new accounting treatment.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 80
Financial Reporting (Unaudited)
B. CREDIT PROGRAM RECEIVABLES AND RELATED FORECLOSED PROPERTY, NET
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2025 Total
Loans Loans
Direct Business Loans
Business Loans Receivable $ 6,021 $ 226,053 $ 232,074
Interest Receivable - 2,142 2,142
Foreclosed Property 2,631 - 2,631
Allowance (8,652) (18,170) (26,822)
Total Direct Business Loans - 210,025 210,025
Direct Disaster Loans
Disaster Loans Receivable 32 324,938,778 324,938,810
Interest Receivable 1 11,024,930 11,024,931
Foreclosed Property - 4,939 4,939
Allowance - (103,975,451) (103,975,451)
Total Direct Disaster Loans 33 231,993,196 231,993,229
Defaulted Guarantied Business Loans & Other Loans Receivable
Defaulted Guarantied Business Loans 2,579 15,117,991 15,120,570
Other Loans Receivable (see note below) - 36,551 36,551
Interest Receivable - 291,477 291,477
Foreclosed Property 1,263 11,979 13,242
Allowance (3,842) (13,323,935) (13,327,777)
Total Defaulted Guarantied Business Loans &
- 2,134,063 2,134,063
Other Loans Receivable
Total Credit Program Receivables & Related
$234,337,317
Foreclosed Property, Net
Note: Other Loans Receivable includes payments advanced by the SBA against future reimburse-
ments in the SBIC and 504 loan programs.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 81
Financial Reporting (Unaudited)
C. 2025 SUBSIDY RATES BY PROGRAM AND COMPONENT
The subsidy rates in Table D 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.
Loan Total
Financing Default Other Fee
Program Subsidy
Guaranty
7(a) 0.00% 0.00% 3.23% 0.00% -3.23%
504 CDC 0.00% 0.00% 3.77% 0.36% -4.13%
504 Refi 0.00% 0.00% 3.92% 0.36% -4.28%
SBIC
0.00% 0.00% 5.05% 0.02% -5.07%
Debentures
Direct
Disaster 22.22% 15.67% 9.70% -3.15% 0.00%
Microloan 10.53% 8.85% 1.93% -0.25% 0.00%
D. LOAN GUARANTEE LIABILITIES
For guaranteed loans outstanding, the present value of estimated net cash outflows of the loan guar-
antees is recognized as a liability. Credit programs re-estimate the liability for outstanding loan guar-
antees as required in Statement of Federal Financial Accounting Standards (SFFAS) 2. An increase or
decrease in loan guarantee liability resulting from the re-estimates is recognized as an increase or
decrease in subsidy expense for the current reporting period. The SBA currently has outstanding loan
guarantee liabilities of $3.0 billion.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 82
Financial Reporting (Unaudited)
E. LOANS PRINCIPAL OUTSTANDING
(Dollars in Thousands)
Loans Outstanding as of September 30, 2025
Total Principal Outstanding at Face Value $ 175,043,268
Total Principal Outstanding Guarantied by the SBA 145,606,225
Note: SBA’s guarantied loan servicing agent provides data to the SBA on the unpaid principal balance
of guarantied loans with a one-month lag.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 83
Financial Reporting (Unaudited)
Note 6. Property, Plant, and Equipment, Net
(Dollars in Thousands)
Accumulated
Useful Life Net Book
As of September 30, 2025 Cost Depreciation and
(Years) Value
Amortization
Equipment 2-25 $ 2,675 $ (2,675) $ -
Leasehold Improvements 2-5 1,811 (1,811) -
Software in Development 5,643 - 5,643
Software in Use 5 181,984 (131,576) 50,408
Total General Property
$ 192,113 $ (136,062) $ 56,051
and Equipment, Net
RECONCILIATION PROPERTY, PLANT AND EQUIPMENT, NET
As of September 30, 2025
Balance Beginning of Year $ 79,875
Capitalized Acquisitions 5,758
Depreciation Expense (29,582)
Balance at End of Year $ 56,051
See Note 1 for a description of accounting policy.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 84
Financial Reporting (Unaudited)
Note 7. 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 congres-
sional 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.
The liability for Surety Bond Guaranties is an estimate of future claims in the SBG Program for guar-
anties outstanding at year-end.
(Dollars in Thousands)
As of September 30, 2025
Intragovernmental Liabilities - Benefit Program Contributions Payable
Unfunded Employment Taxes Payable $ 4,879
Unfunded Federal Employees' Compensation Act Payable 6,560
Total Intragovernmental Liabilities - Benefit Program Contributions Payable 11,439
Other than Intragovernmental Liabilities - Federal Employee Benefits Payable
Accrued Unfunded Annual Leave $ 50,167
Federal Employees' Compensation Act Payable 27,747
Total Other than Intragovernmental Liabilities - Federal Employee Benefits
77,914
Payable
Surety Bond Guarantee Program Future Claims $ 89,590
Total Liabilities Not Covered by Budgetary Resources $ 178,943
Total Liabilities Covered by Budgetary Resources 255,608,840
Total Liabilities Not Requiring Budgetary Resources 91,641
Total Liabilities $ 255,879,424
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 85
Financial Reporting (Unaudited)
Note 8. Debt
The FCRA permits agencies to borrow from Treasury to support credit programs. Borrowings payable
to the Treasury funded disbursements of new loans, payment of downward subsidy reestimates, and
the payment of other credit program outlays and related costs. The SBA makes periodic principal re-
payments to the Treasury based on the analysis of its cash balances and future disbursement needs.
All debt is intragovernmental and covered by budgetary resources. Approximately 99% of SBA debt is
attributable to direct loan programs.
INTRAGOVERNMENTAL DEBT
(Dollars in Thousands)
As of September 30, 2025
Principal Payable to the Bureau of the Fiscal Service
Beginning Balance $ 264,662,710
New Borrowings 14,778,023
Repayments (30,104,831)
Total Principal Payable to the Bureau of the Fiscal Service $ 249,335,902
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 86
Financial Reporting (Unaudited)
Note 9. 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, 2025
Disaster Loan Fund $ 33
Business Loan and Investment Fund 42
Total Due to Treasury $ 75
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 87
Financial Reporting (Unaudited)
Note 10. Other Liabilities
Intragovernmental Other Liabilities - Payable to Treasury represent the amount of non-entity as-
sets held in a General Fund Receipt Account due to Treasury for the estimated recovery of payments
made by the Restaurant Revitalization Fund.
Other than Intragovernmental Other Liabilities primarily represent fund balance with treasury not yet
reclassified as of the balance sheet date.
Other liabilities are shown in the following table.
All liabilities reflected are current liabilities.
(Dollars in Thousands)
As of September 30, 2025
Intragovernmental Other Liabilities
Employment Taxes Payable $ 1,136
Payable to Treasury 101,167
Total Intragovernmental Other Liabilities 102,303
Other than Intragovernmental Other Liabilities
Budget Clearing Accounts 91,641
Total Other than Intragovernmental Other Liabilities 91,641
Total Other Liabilities $ 193,944
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 88
Financial Reporting (Unaudited)
Note 11. Federal Employment Benefits Payable
Federal Employment Benefits Payable are shown in the following table.
(Dollars in Thousands)
As of September 30, 2025
Federal Employee Salary, Leave, and Benefits Payable
Accrued Funded Payroll and Leave $ 36,911
Employer Contributions and Taxes Payable 655
Unfunded Leave 50,167
Total Federal Employee Salary, Leave, and Benefits Payable $ 87,733
Post-Employment Benefits Payable
Actuarial FECA Liability $ 27,747
Total Post-Employment Benefits Payable $ 27,747
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 89
Financial Reporting (Unaudited)
Note 12. 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 transac-
tion has occurred, a future outflow or other sacrifice of resources is probable, and the future outflow
or sacrifice of resources is measurable.
PROBABLE LIKELIHOOD OF AN ADVERSE OUTCOME
The SBA does not have any material probable contingencies. Any probable losses would be classified
as immaterial and would have inconsequential effects on the financial performance or position of
the SBA.
REASONABLY POSSIBLE LIKELIHOOD OF AN ADVERSE OUTCOME
The SBA is subject to other potential losses where it is reasonably possible that an adverse outcome
will result. Since some of the potential liabilities represent claims with no stated amount, the exact
amount of total potential loss is unknown, but it is believed these claims could result in potential
estimable losses as of September 30, 2025, of up to $253 million if the outcomes were adverse to the
SBA. For most claims, any amounts ultimately due will be paid out of Treasury’s Judgment Fund.
For certain claims to be paid by Treasury’s Judgment Fund, once the claims are settled or court
judgments are assessed relative to the SBA, the liability will be removed, and an Imputed Financing
Source will be recognized.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 90
SECTION 3
Other
Information
(UNAUDITED)
Other Information (Unaudited)
Other Information
The information contained in the section is unaudited.
This section consists of financial statements, notes, and other information other than that related to
the Consolidated Balance Sheet.
The Consolidated Statement of Net Cost shows, by major program category, the net cost of opera-
tions for the reporting period. Net cost of operations consists of full program costs incurred by the
SBA less the exchange revenues earned by those programs.
The Consolidated Statement of Changes in Net Position presents the SBA’s beginning and end-
ing net position by two components - Cumulative Results of Operations and Unexpended Appropria-
tions. 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 avail-
ability 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 offset-
ting 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 account-
ing 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 Re-
sources report by principal functional area.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 92
Other Information (Unaudited)
(Dollars in Thousands)
U. S. Small Business Administration
CO N S O L I D AT E D S TAT E M E N T O F N E T CO S T
For The Year Ended September 30, 2025 (Unaudited)
2025
Access to Capital, Investment & Innovation, Contracting & Business
Development
Gross Cost $ 1,077,610
Less: Earned Revenue 545,092
Net Program Costs 532,518
Disaster Assistance and Recovery
Gross Cost 15,920,959
Less: Earned Revenue 4,550,934
Net Program Costs 11,370,025
Mission Support and Advocacy
Gross Cost 165,062
Net Program Costs 165,062
Inspector General and Congressional Initiatives
Gross Cost 56,809
Net Program Costs 56,809
Net Cost of Operations $ 12,124,414
Note 16: The accompanying notes are an integral part of these statements.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 93
Other Information (Unaudited)
(Dollars in Thousands)
U. S. Small Business Administration
CO N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N N E T P O S I T I O N
For The Year Ended September 30, 2025 (Unaudited)
2025
Funds from other than Dedicated Collections
Unexpended Appropriations:
Beginning Balance $ 3,092,566
Appropriations Received 12,043,886
Other Adjustments:
Rescissions (149,212)
Adjustment - Cancelled Authority (16,430)
Return of Unrequired Liquidating Fund Appropriation (412)
Other Adjustments (138)
Appropriations Used (10,818,802)
Total Unexpended Appropriations $ 4,151,458
Cumulative Results of Operations:
Beginning Balance $ (7,346,654)
Appropriations Used 10,818,802
Donations of Cash and Cash Equivalents 2
Imputed Financing 55,953
Other:
Current Year Liquidating Equity Activity 7,947
Non-entity Activity (3,032,377)
Net Cost of Operations 12,124,414
Net Change in Cumulative Results of Operations (4,274,087)
Total Cumulative Results of Operations $ (11,620,741)
Ending Net Position $ (7,469,283)
The accompanying notes are an integral part of these statements.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 94
Other Information (Unaudited)
(Dollars in Thousands)
U. S. Small Business Administration
CO M B I N E D S TAT E M E N T O F B U D G E TA R Y R E S O U R C E S
For The Year Ended September 30, 2025 (Unaudited)
Nonbudgetary
Budgetary Total
Financing
BUDGETARY RESOURCES
Unobligated Balance from Prior Year Budget
$ 4,156,418 $ 7,777,561 $ 11,933,979
Authority, Net (discretionary and mandatory)
Appropriations (discretionary and mandatory) 11,894,262 - 11,894,262
Borrowing Authority (discretionary and
- 14,522,564 14,522,564
mandatory)
Spending Authority from Offsetting
1,237,937 9,226,764 10,464,701
Collections
Total Budgetary Resources $ 17,288,617 $ 31,526,889 $ 48,815,506
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments
$ 12,534,817 $ 25,997,479 $ 38,532,296
(total)
Unobligated Balance, end of year:
Apportioned, unexpired accounts 1,748,202 2,637,794 4,385,996
Unapportioned, unexpired accounts 596,034 2,891,616 3,487,650
Unexpired Unobligated Balance, end of year 2,344,236 5,529,410 7,873,646
Expired Unobligated Balance, end of year 2,409,564 - 2,409,564
Unobligated Balance, end of year (total) 4,753,800 5,529,410 10,283,210
Total Status of Budgetary Resources $ 17,288,617 $ 31,526,889 $ 48,815,506
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 10,866,439 $ 10,866,439
Distributed Offsetting Receipts (10,030,589) (10,030,589)
Agency Outlays, Net (discretionary and
$ 835,850 $ 835,850
mandatory)
Disbursements, Net (total) (mandatory) $ (10,219,149)
Note 17: The accompanying notes are an integral part of these statements.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 95
Other Information (Unaudited)
Note 13. Reporting Entity and Summary
of Significant Accounting Policies (Other
Information)
BASIS OF ACCOUNTING AND PRESENTATION
The SBA prepares financial statements to report its financial position, and the results of its opera-
tions, 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 (GAAP), issued by the Federal Accounting Standards
Advisory Board (FASAB), and the Office of Management and Budget (OMB) Circular A-136, Financial
Reporting Requirements, as revised.
The accounting structure of federal agencies is designed to reflect both the accrual and budgetary ac-
counting transactions. Under the accrual method of accounting, revenues are recognized when earned
and expenses are recognized when a liability is incurred, without regard to receipt or payment of cash.
Budgetary accounting facilitates compliance with legal constraints and controls over federal funds.
BUDGETS AND BUDGETARY ACCOUNTING FOR LOAN PROGRAMS
The SBA’s loan disbursements are financed by appropriations for long-term loan subsidy cost and
borrowings from the Treasury’s Bureau of the Fiscal Service for the remaining nonsubsidized portion
of the loans. 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 disburse-
ment, 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 re-
turned to the Treasury and are unavailable to the SBA. As required by the FCRA, the SBA uses bud-
getary “program accounts” to account for appropriations in its credit programs and nonbudgetary
“financing accounts” to account for credit program cash flow. Estimates and reestimates of credit
program subsidy expenses are recorded in the SBA’s program accounts. Financing accounts are used
to account for Treasury borrowings, the collection of loan fees, repayments and default recoveries,
and the disbursement of loans and loan expenses.
As a component of the Government-wide reporting entity, the SBA is subject to the Federal budget
process, which involves appropriations that are provided annually and appropriations that are pro-
vided 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 96
Other Information (Unaudited)
The SBA’s budgetary resources reflect past congressional action and enable the entity to incur budget-
ary 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 budget-
ary 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.
FIDUCIARY ACTIVITIES
Fiduciary activities are the receipt, management, protection, accounting, investment, and disposi-
tion by the Federal Government of cash or other assets in which non-federal entities have an own-
ership interest that the Federal Government must uphold. Fiduciary cash and other assets are not
assets of the government, and are not recognized on the SBA’s proprietary statements, but they are
required to be disclosed in the notes to the SBA’s financial statements. SBA’s fiduciary balances are
on deposit in commercial banks.
EMPLOYEE BENEFITS
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 em-
ployee contributions to each program. Such matching contributions are recognized as current oper-
ating expenses.
Employee Pension Benefits
SBA employees participate in either the Civil Service Retirement System or the Federal Employees
Retirement System and Social Security. These systems provide benefits upon retirement and in the
event of death, disability, or other termination of employment and may also provide pre-retirement
benefits. They may also include benefits to survivors and their dependents, and they may contain early
retirement or other special features. The SBA’s contributions to both retirement plans, as well as to the
government-wide Federal Insurance Contribution Act administered by the Social Security Administra-
tion, 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 match-
es employee contributions to the plan, subject to limitations. The matching contributions are recog-
nized 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 employ-
ee 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 97
Other Information (Unaudited)
The OPM calculates imputed costs as the actuarial present value of future benefits attributed to
services rendered by covered employees and eligible retired SBA employees during the accounting
period, net of the amounts contributed by employees, retirees, and the Agency. The SBA recognizes
these imputed costs in the Statement of Net Cost and imputed financing in determining the SBA’s net
position.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 98
Other Information (Unaudited)
Note 14. Credit Program Disbursements, Expenses
and Reconciliations of Receivables, Subsidy
Allowance, and Liability for Loan Guaranties
A. SUBSIDY COST ALLOWANCE BALANCES
(Dollars in Thousands)
For The Year Ended September 30, 2025
Post-1991 Business Direct and Purchased Guarantied Loans
Beginning Balance of Allowance Account $ 2,493,967
Current Year's Subsidy (see 14.C for breakdown by component) 4,329
Loans Written Off (3,347,899)
Loans Written Off Reversals 10,235,792
Subsidy Amortization (1,263)
Allowance Related to Guarantied Loans Purchased This Year 3,642,796
Miscellaneous Recoveries and Costs 316,941
Balance of Subsidy Allowance Account before Reestimates 13,344,663
Reestimates (2,558)
Ending Balance of Allowance Account $ 13,342,105
Post-1991 Disaster Direct Loans
Beginning Balance of Allowance Account $ 40,913,937
Current Year's Subsidy (see 14.C for breakdown by component) 761,214
Loans Written Off (14,850,405)
Loans Written Off Reversals 59,684,829
Subsidy Amortization 7,996,516
Miscellaneous Recoveries and Costs (251,781)
Balance of Subsidy Allowance Account before Reestimates 94,254,310
Reestimates 9,721,141
Ending Balance of Allowance Account $ 103,975,451
Note: The Loans Written Off Reversals line includes loans that were returned to regular servicing in
FY 2025 and reestablished as gross loan receivables, as a result of the Hardship Accommodation
Program (HAP), which ended in March 2025. The FY 2025 increase in loans to regular servicing was
primarily due to an update the SBA made to its accounting policy to more accurately value the gross
receivable for loans that were referred to Treasury for collection efforts or are eligible for Treasury
referral. See Note 5A for additional information.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 99
Other Information (Unaudited)
B. LIABILITY FOR LOAN GUARANTIES
(Dollars in Thousands)
For The Year Ended September 30, 2025
Post-1991 Business Loan Guaranties
Beginning Balance of Liability for Loan Guaranties $ 4,827,018
Claim Payments to Lenders/Guarantee Payments (5,156,075)
Fees 1,489,895
Interest Supplements Paid 184,842
Interest Revenue on Uninvested Funds 136,549
Interest Expense on Entity Borrowings (74,772)
Current Year's Subsidy (see Note 14C for breakdown by component) 7,061
Upward Reestimates 1,177,567
Downward Reestimates (538,625)
Loan Modifications (178,334)
Adjustment Due to Reestimate & Guarantied Loan Purchases 1,513,279
Miscellaneous Recoveries and Costs (369,100)
Total Ending Balance of Liability for Loan Guaranties $ 3,019,305
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 100
Other Information (Unaudited)
C. SUBSIDY EXPENSE BY COMPONENT
(Dollars in Thousands)
For The Year Ended September 30, 2025
Business Loan Guaranties
Defaults $ 12,807
Fees (6,029)
Other 283
Subsidy Expense Before Reestimates and Loan Modifications 7,061
Loan Modifications (178,334)
Components of Subsidy Reestimates
Technical Assumptions/Default Reestimates 645,782
Interest Rate Reestimates (6,840)
Total of the above Components of Subsidy Reestimates 638,942
Total Guarantied Business Loan Subsidy Expense $ 467,669
Business Direct Loans
Interest $ 3,556
Defaults 898
Other (125)
Subsidy Expense Before Reestimates and Loan Modifications 4,329
Components of Subsidy Reestimates
Technical Assumptions/Default Reestimates (2,545)
Interest Rate Reestimates (13)
Total of the above Components of Subsidy Reestimates (2,558)
Total Business Direct Loan Subsidy Expense $ 1,771
Disaster Direct Loans
Interest $ 524,694
Defaults 341,729
Other (105,209)
Subsidy Expense Before Reestimates and Loan Modifications 761,214
Components of Subsidy Reestimates
Technical Assumptions/Default Reestimates 9,625,085
Interest Rate Reestimates 96,056
Total of the above Components of Subsidy Reestimates 9,721,141
Total Disaster Direct Loan Subsidy Expense $ 10,482,355
Note: In FY 2025, loan modifications were required to increase fees for 7(a) loans effective March 27,
2025, and to include the effects of temporary expansion of Community Advantage lending and the
expected rollout of Manufacturers’ Access to Revolving Credit (MARC) program.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 101
Other Information (Unaudited)
D. ADMINISTRATIVE EXPENSE
The SBA received appropriations to administer its credit programs, including the making, servic-
ing 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 Year Ended September 30, 2025
Disaster Direct Loan Programs $ 1,009,000
Business Loan Programs 162,420
Total Administrative Expense $ 1,171,420
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 102
Other Information (Unaudited)
E. 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 infor-
mation about historical program performance, revised expectations of future economic conditions,
and enhancements to cash flow projection methods. Financial statement reestimates were per-
formed using a full year of performance data for FY 2025 for the SBA’s large loan programs, with nine
months of actual and three months of projected performance data for the Secondary Market Guaran-
tee, Microloan, and the small loan programs.
Business Guarantied Loan Programs
Net subsidy reestimates for the business guarantied loan programs are shown in the following table.
(Dollars in Thousands)
For The Year Ended September 30, 2025
7(a) $ 563,694
7(a) - Recovery Act (3,499)
7(a) - Jobs Act (1,995)
7(a) - COVID Support 46,299
504 CDC (271,376)
504 CDC - Recovery Act (2,713)
504 CDC - Jobs Act (265)
504 CDC - COVID Support (15,534)
504 CDC - Debt Refinancing (29,012)
504 CDC - Debt Refinancing - COVID Support (3,568)
504 First Mortgage Loan Pooling - Recovery Act (1,121)
SBIC Debentures (78,472)
SBIC Participating Securities 1,369
Secondary Market Guaranty Program (659)
Paycheck Protection Program 435,965
ARC - Recovery Act (171)
All Other Guaranty Loan Programs (1)
Total Guarantied Loan Program Subsidy Reestimates $ 638,942
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 103
Other Information (Unaudited)
The 7(a) Loan Guaranty program, SBA’s flagship program, had a net upward reestimate of $563.7 mil-
lion in FY 2025. The upward reestimate is concentrated in the 2018 to 2025 cohorts. These cohorts had
higher-than-expected losses in FY 2025. The 2025 cohort has higher future loss projections than previ-
ously estimated. These higher projected losses are in part due to loan compositional differences from
the initial estimate, implying higher than anticipated credit risk for these loans.
The 7(a) Recovery Act program had a net downward reestimate of $3.5 million. The reestimate is
mostly due to lower-than-expected losses in FY 2025.
The 7(a) Jobs Act cohort had a net downward reestimate of $2.0 million. The reestimate is mostly due
to lower-than-expected losses in FY 2025.
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 upward reestimate of $46.3 million. The reestimate is primarily driven by higher-than-ex-
pected losses in FY 2025.
The 504 Certified Development Company program had a net downward reestimate of $271.4 million.
The reestimate is mostly due to better-than-expected loan performance in FY 2025 contributing to a
downward reestimate in most cohorts. Aggregate purchases were lower than projected and recover-
ies were higher than projected by the prior year model.
The 504 Recovery Act program had a net downward reestimate of $2.7 million. The reestimate is
mostly due to better-than-expected loan performance in FY 2025. Aggregate purchases were lower
than projected and recoveries were higher than projected by the prior year model.
The 504 Jobs Act program had a net downward reestimate of $0.3 million. The reestimate is mostly
due to better-than-expected loan performance in FY 2025.
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 $15.5 million.
The reestimate is mostly due to better-than-expected loan performance in FY 2025. Aggregate pur-
chases were lower than projected and recoveries were higher than projected by the prior year model.
The 504 Debt Refinancing program had a net downward reestimate of $29.0 million. The reestimate is
mostly due to better-than-expected loan performance in FY 2025 contributing to a downward reesti-
mate for most cohorts. Aggregate purchases were lower than projected by the prior year model.
Authorized by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Eco-
nomic 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 $3.6 million. The reestimate is in part due to better than projected loan per-
formance in FY 2025. Aggregate purchases were lower than projected by the prior year model.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 104
Other Information (Unaudited)
The Section 504 First Mortgage Loan Pooling program had a net downward reestimate of $1.1 million
in FY 2025. The reestimate is mostly due to higher than projected recoveries and lower than project-
ed purchases which were partially offset by higher than projected advances in FY 2025.
The SBIC Debentures program had a net downward reestimate of $78.5 million. The reestimate is
primarily driven by better-than-anticipated program performance in FY 2025. Actual purchases in FY
2025 were lower than projected leading to lower lifetime expected purchase rates for cohorts 2019-
2024. Recoveries on previously purchased debentures were lower in FY 2025 than projected, partially
offsetting the reduction in lifetime expected purchases in the program.
The SBIC Participating Securities program had a net upward reestimate of $1.4 million. The reesti-
mate is primarily due to lower than projected recoveries and lower cash inflows in FY 2025. A reduc-
tion in expected inflows in future years also contributed to the upward reestimate.
The Secondary Market Guaranty program had a net downward reestimate of $0.7 million in FY 2025.
The reestimate is a result of offsetting reestimates across cohorts, driven mainly by changes to pro-
jected earnings on security investments.
The Paycheck Protection Program (PPP) had a net upward reestimate of $436 million in FY 2025. The
reestimate is primarily due to higher FY 2025 actual purchases relative to the prior year model projec-
tions. The increased purchase volume is primarily driven by the processing of guarantee purchase
transactions in Q4 of FY 2025.
The America’s Recovery Capital program had a net downward reestimate of $0.17 million. The reesti-
mate is primarily due to higher than projected recoveries in FY 2025.
All Other Guaranty Loan programs had a net reestimate of less than $0.001 million.
Business Direct Loan Programs
Net subsidy reestimates for the business direct loan programs are shown in the following table.
(Dollars in Thousands)
For The Year Ended September 30, 2025
7(m) Microloan $ (2,492)
7(m) Microloan - Recovery Act (14)
Intermediary Lending Pilot Program (52)
Total Direct Loan Program Subsidy Reestimates $ (2,558)
The 7(m) Direct Microloan program had a net downward reestimate of $2.5 million. The reestimate is
primarily due to aggregate actual defaults being lower and prepayments being higher than projected
in FY 2025.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 105
Other Information (Unaudited)
The 7(m) Direct Microloan Recovery Act program had a downward reestimate of $0.01 million. The re-
estimate is due to higher than projected aggregate actual recovery in FY 2025 and minor differences
in actual FY 2025 inflows relative to prior year projections.
The Intermediary Lending Pilot had a net downward reestimate of $0.05 million. The reestimate is
mostly due to higher aggregate recoveries and prepayments relative to what was forecasted in the
prior year model.
Disaster Direct Loan Program
Net subsidy reestimates for the disaster direct loan programs are shown in the following table.
(Dollars in Thousands)
For The Year Ended September 30, 2025
Disaster $ 9,721,141
Total Disaster Direct Loan Program Subsidy Reestimates $ 9,721,141
The Disaster Assistance program had a net upward reestimate of $9,721.14 million. The upward rees-
timate is primarily due to lower than projected cash collections on COVID EIDL loans in FY 2025, at-
tributed to lower than projected prepayments on loans in regular service and recoveries on defaulted
loans, particularly for larger COVID EIDL loans. Lower than projected collections also contributed to
decrease in expected prepayments and recoveries in future years. and recoveries in future years. These
factors contribute to an upward reestimate, particularly the FY 2021 and FY 2022 COVID EIDL cohorts
which have a higher concentration of larger loans. Partially offsetting the upward reestimate, SBA re-
turned many COVID EIDL loans to regular servicing in FY2025, separate from those placed into the newly
introduced SBA-Uncollectible status, resulting in improved expectations for future loan collections. This
activity was concentrated in the FY 2020 COVID EIDL cohort.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 106
Other Information (Unaudited)
F. LOANS RECEIVABLE
Business Direct
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2025 Total
Loans Loans
Loans Receivable Direct, Net, beginning of year $ - $ 213,992 $ 213,992
Loans Disbursed - 43,518 43,518
Principal & Interest Payments Received - (36,092) (36,092)
Foreclosed Property 6 - 6
Loans Written Off - (45) (45)
Interest Revenue on Uninvested Funds - (2,458) (2,458)
Interest Expense on Entity Borrowings - 6,399 6,399
Subsidy Expense - (4,329) (4,329)
Upward Reestimates - (203) (203)
Downward Reestimates - 2,761 2,761
Subsidy Allowance - (2,679) (2,679)
Other non-cash reconciling items (6) (10,839) (10,845)
Loans Receivable Direct, Net, end of year $ - $ 210,025 $ 210,025
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 107
Other Information (Unaudited)
Disaster Direct
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2025 Total
Loans Loans
Loans Receivable Disaster, Net, beginning of year $ - $ 256,247,176 $ 256,247,176
Loans Disbursed - 3,484,233 3,484,233
Principal & Interest Payments Received (168) (7,745,471) (7,745,639)
Foreclosed Property - (840) (840)
Loans Written Off - (14,850,405) (14,850,405)
Interest Revenue on Uninvested Funds - (550,662) (550,662)
Interest Expense on Entity Borrowings - 4,729,312 4,729,312
Subsidy Expense - (761,214) (761,214)
Upward Reestimates - (12,029,628) (12,029,628)
Downward Reestimates - 2,308,487 2,308,487
Subsidy Allowance - (12,187,284) (12,187,284)
Other non-cash reconciling items 201 13,349,492 13,349,693
Loans Receivable Disaster, Net, end of year $ 33 $231,993,196 $ 231,993,229
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 108
Other Information (Unaudited)
Business Guarantied
(Dollars in Thousands)
Pre-1992 Post-1991
As of September 30, 2025 Total
Loans Loans
Defaulted Guaranteed Loans Receivable, Net,
$ - $ 1,646,649 $ 1,646,649
beginning of year
Claim Payment to Lenders/Guarantee Payments - 5,156,075 5,156,075
Principal & Interest Payments Received (394) (665,840) (666,234)
Fees - (1,489,895) (1,489,895)
Foreclosed Property (1) (9,009) (9,010)
Loans Written Off - (3,347,855) (3,347,855)
Subsidy Allowance - 1,057,355 1,057,355
Other non-cash reconciling items 395 (213,417) (213,022)
Defaulted Guaranteed Loans Receivable, Net,
$ - $ 2,134,063 $ 2,134,063
end of year
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 109
Other Information (Unaudited)
G. LOANS DISBURSED
(Dollars in Thousands)
New Loans Disbursed During the Year Ended September 30, 2025
Direct Loans
Business Direct Loan Program $ 43,518
Disaster Loan Program
3,484,233
Total Direct Loans Disbursed $ 3,527,751
Guarantied Loans
Total Principal Disbursed at Face Value $ 39,930,460
Total Principal Disbursed Guarantied by the SBA 31,812,913
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 110
Other Information (Unaudited)
Note 15. Leases
The SBA leases its facilities from the General Services Administration (GSA). The SBA enters into an
Occupancy Agreement with the GSA for each facility. The GSA bills 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 Statement of
Net Cost when incurred. Lease expenses for FY 2025 are $44.0 million.
(Dollars in Thousands)
For The Year Ended September 30, 2025
Major Underlying Asset Category
Buildings $ 42,930
Vehicles 1,111
Total Intragovernmental Lease Expenses as Lessee $ 44,041
The SBA’s non-federal leases include office equipment and parking. The SBA has determined that
there is no material impact to the SBA financial statements as the total value does not round up to
$1.0 million.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 111
Other Information (Unaudited)
Note 16. Consolidated Statement of Net Cost
Federal cost accounting standards require the SBA to report operating costs by major program. Full
costs include all direct and indirect costs for a program. Full costs are reduced by exchange (earned)
revenues to arrive at net operating cost.
Gross Cost
The full and net operating costs of SBA’s major programs are presented in the Consolidated State-
ment of Net Cost. Full costs are comprised of all direct costs for the program and those indirect costs
which can be reasonably assigned or allocated to the program, 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
programs to arrive at net cost of operations. The SBA recognizes earned revenue when reimburse-
ments are payable from other federal agencies and the public as a result of costs incurred or services
performed. Two major sources of earned revenue include 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 Major Program Category
The SBA reports net costs by major program category. Access to Capital, Investment and Innovation,
Contracting and Business Development programs strengthen the domestic economy by promoting
the “Made in America” initiative to grow U.S. manufacturing, expanding access to capital, and fostering
American innovation. Disaster Assistance and Recovery programs prepare communities to address risks
and help disaster survivors recover and rebuild their communities. Mission Support and Advocacy sup-
ports the agency addressing fraud risks, program evaluation, and advocacy for small business. Agency
administrative overhead costs are fully allocated to the programs. Inspector General and Congressional
Initiatives are program costs associated with the Office of the Inspector General and Congressional
Initiatives. The OIG’s mission and funding are a separate and independent part of the SBA.
Intragovernmental Gross Cost is incurred by the SBA in exchange transactions with other federal
agencies. Other than Intragovernmental Gross Cost is incurred in exchange transactions with the
public. Intragovernmental Earned Revenue is earned by the SBA in exchange transactions with other
federal agencies. Other than Intragovernmental Earned Revenue is earned in exchange transactions
with the public. The General Services Administration and the Treasury are SBA’s primary intragovern-
mental trading partners.
The classification as Intragovernmental Cost or Other than Intragovernmental Gross Cost relate to
the source of goods and services received by the SBA and not to the classification of related revenue.
Revenue or cost being defined as “Intragovernmental” or “Other than Intragovernmental ” is defined
on a transaction-by-transaction basis. The purpose of this classification is to enable the federal gov-
ernment to provide consolidated financial statements, and not to match the public and intragovern-
mental revenue with costs that are incurred to produce public and intragovernmental revenue.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 112
Other Information (Unaudited)
GROSS COST AND EXCHANGE REVENUE
(Dollars in Thousands)
For The Year Ended September 30, 2025
Access to Capital, Investment & Innovation, Contracting & Business Development
Intragovernmental Gross Cost $ 197,976
Other than Intragovernmental Gross Cost 879,634
Gross Program Costs 1,077,610
Intragovernmental Earned Revenue 140,855
Other than Intragovernmental Earned Revenue 404,237
Program Earned Revenue 545,092
Disaster Assistance and Recovery
Intragovernmental Gross Cost $ 4,942,723
Other than Intragovernmental Gross Cost 10,978,236
Gross Program Costs 15,920,959
Intragovernmental Earned Revenue 550,662
Other than Intragovernmental Earned Revenue 4,000,272
Program Earned Revenue 4,550,934
Mission Support and Advocacy
Intragovernmental Gross Cost $ 37,464
Other than Intragovernmental Gross Cost 127,598
Gross Program Costs 165,062
Inspector General and Congressional Initiatives
Intragovernmental Gross Cost $ 12,894
Other than Intragovernmental Gross Cost 43,915
Gross Program Costs 56,809
Net Cost of Operations $ 12,124,414
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 113
Other Information (Unaudited)
Note 17. Statement of Budgetary Resources
The Statement of Budgetary Resources presents information about total budgetary resources avail-
able to the SBA and the status of those resources as of September 30, 2025. SBA’s budgetary re-
sources were $17.3 billion for the fiscal year ended September 30, 2025. Additionally, $31.5 billion of
nonbudgetary resources (including borrowing authority and collections of loan principal, interest,
and fees in financing funds) were reported for the fiscal year ended September 30, 2025.
NET ADJUSTMENTS TO UNOBLIGATED BALANCE, BROUGHT FORWARD, OCTOBER 1
The beginning balance brought forward for FY 2025 decreased by $3.8 billion in total. This amount
reflects an increase of $1.1 billion in recoveries and a decrease of $4.9 billion in Other Changes in
Unobligated Balance. This other change represents the prior year repayment of debt.
PERMANENT INDEFINITE APPROPRIATIONS
The SBA receives permanent indefinite appropriations annually to fund increases in the projected
subsidy costs of loan programs, as determined by the reestimation process required by the FCRA. The
appropriations are received initially in the SBA Program Funds, and then transferred to the Financ-
ing 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 after 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 Fiscal Service when funds needed
to disburse direct loans and purchase guarantied loans exceed subsidy costs and collections in the
nonbudgetary loan financing funds. In FY 2025, the SBA received $14.5 billion of borrowing authority
from the OMB. 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 un-
invested 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 sub-
sidy calculation. The maturities range from 16 years for direct business loans, 25 years for guarantied
business loans, and 30 years for disaster loans.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 114
Other Information (Unaudited)
UNOBLIGATED BALANCES
Unobligated balances at September 30, 2025 is $10.3 billion which include $5.9 billion of unavailable
unobligated balances. These balances are unavailable primarily because the balances are expired
or unapportioned by the OMB. The SBA accumulates the majority of the unobligated balances in its
nonbudgetary financing accounts during the fiscal year ($5.5 billion in FY 2025) from fees and subsidy
to fund default claims in future years. In addition, unobligated balances are accumulated in budget-
ary accounts from appropriations ($4.8 billion in FY 2025) 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 re-
ceived. This includes any orders that have been paid in advance, but for which delivery or perfor-
mance has not yet occurred.
(Dollars in Millions)
For The Year Ended September 30, 2025
Intragovernmental
Unpaid $ 758.2
Paid 9.1
Total Intragovernmental 767.3
Other than Intragovernmental
Unpaid $ 2,865.4
Paid 10.8
Total Other than Intragovernmental 2,876.2
Total Undelivered Orders $ 3,643.5
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 115
Other Information (Unaudited)
DIFFERENCES BETWEEN THE STATEMENT OF BUDGETARY RESOURCES AND THE BUD-
GET OF THE U.S. GOVERNMENT
There was no material difference between the FY 2024 Statement of Budgetary Resources and the
President’s FY 2026 budget submission. The President’s FY 2027 Budget with actual numbers for FY
2025 has not yet been published and will be available at a later date on the OMB website. The SBA
expects no material differences between the President’s Budget “actual” column and the FY 2025
reported results when the budget becomes available in early 2026.
DISTRIBUTED OFFSETTING RECEIPTS
Distributed offsetting receipts are amounts that an agency collects from the public or from other Gov-
ernment 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).
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 116
Other Information (Unaudited)
Note 18. Fiduciary Activities: Master Reserve
Fund and Master Reserve Account
Fiduciary activities are the receipt, management, protection, accounting, investment, and
disposition by the federal government of cash or other assets in which non-federal entities have an
ownership interest that the federal government must uphold. Fiduciary cash and other assets are not
assets of the government and are not recognized on the SBA’s proprietary statements, but they are
required to be disclosed in the notes to the SBA’s financial statements. The SBA’s fiduciary balances
are on deposit in commercial banks.
The Master Reserve Fund (MRF) is a fiduciary activity administered by the SBA’s 7(a) Fiscal Transfer
Agent. The balance in the MRF is invested, according to the SBA policy, entirely in Treasury securities.
The MRF is an integral part of the SBA’s 7(a) secondary market program. The MRF was authorized
by the Small Business Secondary Market Improvement Act of 1984 to facilitate the pooling of 7(a)
guarantied loans that are purchased by secondary market investors. The MRF receives monthly
payments from SBA guarantied borrowers and disburses monthly to 7(a) secondary market pool
investors based on a schedule of amounts due. The 7(a) secondary market program includes the
SBA’s guaranty of timely payment, as well as a default guaranty, to 7(a) secondary market investors.
The MRF supports $39.2 billion and $38.1billion of outstanding SBA guarantied 7(a) secondary
market pool principal as of September 30, 2025 and 2024.
The Master Reserve Account (MRA) is a fiduciary activity administered by the SBA’s 504 Central
Servicing Agent. The balance in the MRA is invested entirely in Treasury securities. The MRA facilitates
the operation of the 504 Certified Development Company secondary market program. The MRA was
authorized by Section 505 of the Small Business Investment Act of 1958 as amended, as a vehicle
to receive, temporarily hold, and distribute 504 program cash flows. The MRA receives monthly
payments from 504 borrowers and retains the payments until a semi-annual debenture payment
is due to secondary market investors. The 504 secondary market program includes the SBA’s
guaranty of timely payment, as well as a default guaranty, to 504 secondary market investors. The
MRA supports $37.3 billion and $34.8 billion of SBA guarantied 504 debentures outstanding in the
secondary market as of September 30, 2025 and 2024.
The composition of the MRF and MRA and a reconciliation of the changes in the assets are included
in the following tables.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 117
Other Information (Unaudited)
(Dollars in Thousands)
Fiduciary Assets
For The Year Ended September 30, 2025 2024
MRF MRA Total MRF MRA Total
Cash $ - $ - $ - $ - $ 17 $ 17
Short Term Securities
Money Market Funds 551,928 637,502 1,189,430 404,727 632,313 1,037,040
Treasury Bills 43,910 - 43,910 128,114 - 128,114
Total Cash and Short Term Securities 595,838 637,502 1,233,340 532,841 632,330 1,165,171
Long Term Securities
Treasury Notes/Bonds Including
1,089,303 - 1,089,303 1,082,771 - 1,082,771
Interest
Total Long Term Securities 1,089,303 - 1,089,303 1,082,771 - 1,082,771
Net Assets $ 1,685,141 $ 637,502 $ 2,322,643 $ 1,615,612 $ 632,330 $ 2,247,942
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 118
Other Information (Unaudited)
(Dollars in Thousands)
Fiduciary Assets
For The Year Ended September 30, 2025 2024
MRF MRA Total MRF MRA Total
Beginning Net Assets $ 1,615,612 $ 632,330 $ 2,247,942 $ 1,893,951 $ 584,118 $ 2,478,069
Receipts
Earned
87,493 39,656 127,149 99,129 43,165 142,294
Income
Contributions 12,213,013 14,577,822 26,790,835 12,086,813 12,937,091 25,023,904
Net Realized Gain (Loss) 28 - 28 127 - 127
Total Receipts 12,300,535 14,617,478 26,918,012 12,186,069 12,980,256 25,166,325
Less Disbursements
Payments to Investors 12,231,005 14,612,306 26,843,311 12,464,408 12,932,044 25,396,452
Expenses - - - - - -
Total Disbursements 12,231,005 14,612,306 26,843,311 12,464,408 12,932,044 25,396,452
Ending Net Assets $ 1,685,141 $ 637,502 $ 2,322,643 $ 1,615,612 $ 632,330 $ 2,247,942
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 $82.5 million and $100.2 million at September 30, 2025 and September 30,
2024. The other two non-MRF accounts are non-fiduciary in nature and are maintained for administrative actions and fees.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 119
Other Information (Unaudited)
Note 19. Reconciliation of Net Operating Cost
and Net Budgetary Outlays
SFFAS 53 amends requirements for a reconciliation between budgetary and financial accounting in-
formation established by SFFAS 7. SFFAS 53 provides for the budget and accrual reconciliation (BAR)
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 infor-
mation about costs arising from the consumption of assets and the incurrence of liabilities. The recon-
ciliation 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 Presi-
dent’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.
Changes in assets recognize the timing differences between the recognition of income and the re-
ceipt 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 an expense.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 120
Other Information (Unaudited)
BUDGET AND ACCRUAL RECONCILIATION
(Dollars in Thousands)
Federal Non-federal Total 2025
Net Operating Cost (SNC) $ 4,499,540 $ 7,624,874 $ 12,124,414
Components of Net Operating Cost not Part of the Budgetary Outlays
Property, plant and equipment depreciation
- (29,583) (29,583)
expense
Year-end credit reform subsidy reestimates (10,386,964) - (10,386,964)
President's Budget adjustment to downward
(19,265) - (19,265)
reestimates
Downward Modification 182,504 - 182,504
President's Budget adjustment to upward
48,703 - 48,703
reestimates
Increase/(decrease) in assets not affecting Budget Outlays:
Accounts Receivable, Net 53 132,636 132,689
Advances (1,386) (1,322) (2,708)
Loans Receivable, Net - 38 38
Other assets - (8,618) (8,618)
(Increase)/decrease in liabilities not affecting Budget Outlays:
Accounts Payable (7,193) 427,418 420,225
Accrued Grant Liability - 85,698 85,698
Federal Employee Salary, Leave, and Benefits
- (5,753) (5,753)
Payable
Post-Employment Benefits Payable - 1,526 1,526
Surety Bond Guarantee Program Future Claims - (12,322) (12,322)
Other Liabilities (108,826) (45) (108,871)
Other Financing Sources:
Imputed Cost (55,953) - (55,953)
Total Components of Net Operating Cost Not
$( 10,348,327) $ 589,673 $ (9,758,654)
Part of the Budget Outlays
Continued...
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 121
Other Information (Unaudited)
...Continued
Federal Non-federal Total 2025
Components of the Budget Outlays That Are Not Part of Net Operating Cost
Acquisition of Capital Assets - 5,759 5,759
Other Financing Sources:
Donation of Cash and Cash Equivalents - (2) (2)
Effect of prior year credit reform subsidy
8,494,922 - 8,494,922
reestimates
Total Components of the Budget Outlays That $ 8,494,922 $ 5,757 $ 8,500,679
Are Not Part of Net Operating Cost
Other Reconciling Items
Distributed Offsetting Receipts - (10,030,589) (10,030,589)
$ - $(10,030,589) $(10,030,589)
Total Other Reconciling Items
Total Net Outlays $ 835,850
Budgetary Agency Outlays, Net (SBR)
Budgetary Agency Outlays, Net $ 835,850
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 122
Other Information (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 Bal-
ance 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 the SBA’s financial statements and the
SBA’s reclassified statements prior to elimination of intragovernmental balances and prior to aggre-
gation of repeated Financial Report line items. A copy of the 2024 Financial Report can be found here:
Bureau of the Fiscal Service - Reports, Statements & Publications (treasury.gov) and a copy of the
2025 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 compo-
nents 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 123
Other Information (Unaudited)
(Dollars in Thousands)
Line Items Used to Prepare FY 2025 Government-Wide
FY 2025 SBA Statement of Net Cost
Statement of Net Cost
Non-Federal Cost
STRATEGIC GOAL 1:
Access to Capital, Investment & Innovation, Contracting & Business Development $ 12,029,384 Non-Federal Gross Cost
Gross Cost $ 1,077,610 12,029,384 Total Non-Federal Cost
Less: Earned Revenue 545,092 Intragovernmental Costs
Net Cost of Strategic Goal 1 532,518 169,300 Benefit Program Costs
55,953 Imputed Costs
STRATEGIC GOAL 2:
Disaster Assistance and Recovery 105,486 Buy /Sell Costs
Gross Cost 15,920,959 4,810,715 Borrowing and Other Interest Expense
Less: Earned Revenue 4,550,934 49,602 Other Expenses (w/o Reciprocals)
Net Cost of Strategic Goal 2 11,370,025 5,191,056 Total Intragovernmental Costs
STRATEGIC GOAL 3: 17,220,440 Total Reclassified Gross Cost
Mission Support and Advocacy
Gross Cost 165,062 4,404,509 Non-federal Earned Revenue
Net Cost of Strategic Goal 3 165,062 Intragovernmental Earned Revenue
1,848 Buy/Sell Revenue
COST NOT ASSIGNED TO STRATEGIC GOALS
689,669 Borrowing and Other Interest Revenue
Gross Cost 56,809
691,517 Total Intragovernmental Earned Revenue
Net Cost Not Assigned to Strategic Goals 56,809
5,096,026 Total Reclassified Earned Revenue
Net Cost of Operations $ 12,124,414 $ 12,124,414 Net Cost
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 124
Other Information (Unaudited)
(Dollars in Thousands)
FY 2025 SBA Statement of Changes in Net Position Line Items Used to Prepare FY 2025 Government-Wide
Statement of Changes in Net Position
Funds from other than Dedicated Collections $ 3,092,566 Unexpended Appropriations, Beginning Balance
Unexpended Appropriations: 11,877,694 Appropriations Received
Beginning balance $ 3,092,566
Appropriations Received 12,043,886
Other Adjustments:
Rescissions (149,212)
Adjustment - Cancelled Authority (16,430)
Return of Unrequired Liquidating Fund Appropriation (412)
Other Adjustments (138)
Appropriations Used (10,818,802) (10,818,802) Appropriations Used
Total Unexpended Appropriations $ 4,151,458 $ 4,151,458 Total Unexpended Appropriations
Cumulative Results of Operations:
Beginning Balance $ (7,346,654) $ (7,346,654) Cumulative Results, Beginning Balance
Other Adjustments:
Current Year Liquidating Equity Activity 7,947 10,818,802 Appropriations Expended
Appropriations Used 10,818,802 7,947 Non-expenditure Transfers-Out of Unexpended Appropriations and Financing Sources
Donations of Cash and Cash Equivalents 2 10,826,749 Total Appropriations Used
(47,483) Other Taxes and Receipts
(47,483) Total Non-Federal Non-Exchange Revenue
149,642 Collections Transferred into a TAS Other than the General Fund of the US Government
149,642 Total Federal Non-Exchange Revenue
Imputed Financing 55,953 55,953 Imputed Financing
Other: (10,066,433) Non-Entity Collections Transferred to the General Fund of the U.S. Government
Accrual for Non-Entity Amounts to be Collected and Transferred to the General
Non-entity Activity (3,032,377) 6,931,899
Fund of the U.S. Government
(3,078,581) Total Transfers and Imputed Financing
Net Cost of Operations 12,124,414 12,124,414 Net Cost of Operations
Total Cumulative Results of Operations $ (11,620,741) $ (11,620,741) Total Cumulative Results of Operations
Ending Net Position $ (7,469,283) $ (7,469,283) Net Position
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 125
Other Information (Unaudited)
(Dollars in Thousands)
Required Supplementary Information
CO M B I N I N G S TAT E M E N T O F B U D G E TA R Y R E S O U R C E S
For The Year Ended September 30, 2025 (Unaudited)
BLIF DLF SBGRF SE OIG
Nonbudgetary Nonbudgetary
BUDGETARY RESOURCES Budgetary Budgetary Budgetary Budgetary Budgetary
Financing Financing
Unobligated Balance from Prior Year Budget $ 2,002,204 $ 6,064,802 $ 163,936 $ 1,712,759 $ 114,312 $ 1,193,460 $ 25,217
Authority, Net (discretionary and mandatory)
Appropriations (discretionary and mandatory) 904,395 - 10,326,947 - - 358,798 88,620
Borrowing Authority (discretionary and
- 978,887 - 13,543,677 - - -
mandatory)
Spending Authority from Offsetting Collections - 3,543,861 - 5,682,903 29,798 1,208,122 15
Total Budgetary Resources $ 2,906,599 $ 10,587,550 $ 10,490,883 $ 20,939,339 $ 144,110 $ 2,760,380 $ 113,852
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments (total) $ 935,786 $ 7,254,443 $ 9,920,056 $ 18,743,036 $ 28,912 $ 1,323,981 $ 48,750
Unobligated Balance, end of year:
Apportioned, unexpired accounts 3,836 1,492,735 456,418 1,145,059 11,098 973,351 62,848
Unapportioned, unexpired accounts 64,652 1,840,372 114,409 1,051,244 104,100 24,223 216
Unexpired Unobligated Balance,
68,488 3,333,107 570,827 2,196,303 115,198 997,574 63,064
end of year
Expired Unobligated Balance, end of year 1,902,325 - - - - 438,825 2,038
Unobligated Balance, end of year (total) 1,970,813 3,333,107 570,827 2,196,303 115,198 1,436,399 65,102
Total Status of Budgetary Resources $ 2,906,599 $ 10,587,550 $ 10,490,883 $ 20,939,339 $ 144,110 $ 2,760,380 $ 113,852
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 940,911 $ 9,501,527 $ (3,850) $ 111,094 $ 47,193
Distributed Offsetting Receipts - - - (10,030,589) -
Agency Outlays, Net (discretionary and
$ 940,911 $ 9,501,527 $ (3,850) $ (9,919,495) $ 47,193
mandatory)
Disbursements, Net (total) (mandatory) $ 3,389,318 $ (13,608,467)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 126
Other Information (Unaudited)
(Dollars in Thousands)
Required Supplementary Information
CO M B I N I N G S TAT E M E N T O F B U D G E TA R Y R E S O U R C E S
For The Year Ended September 30, 2025 (Unaudited)
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
Authority, Net (discretionary and mandatory) $ 7,892 $ 101,703 $ 467,579 $ 45,164 $ 15,079 $ 19,355 $ 517 $ 4,156,418 $ 7,777,561 $ 11,933,979
Appropriations (discretionary and
mandatory) 10,109 316,800 (107,165) - (15,079) 10,837 - 11,894,262 - 11,894,262
Borrowing Authority (discretionary and
- - - - - - - - 14,522,564 14,522,564
mandatory)
Spending Authority from Offsetting
- - - - - - 2 1,237,937 9,226,764 10,464,701
Collections
Total Budgetary Resources $ 18,001 $ 418,503 $ 360,414 $ 45,164 $ - $ 30,192 $ 519 $ 17,288,617 $ 31,526,889 $ 48,815,506
STATUS OF BUDGETARY RESOURCES
New Obligations and Upward Adjustments
(total) $ 9,634 $ 252,188 $ 91 $ 20 $ - $ 15,363 $ 36 $ 12,534,817 $ 25,997,479 $ 38,532,296
Unobligated Balance, end of year:
Apportioned, unexpired accounts 8,367 126,490 45,419 45,144 - 14,750 481 1,748,202 2,637,794 4,385,996
Unapportioned, unexpired accounts - - 288,432 - - - 2 596,034 2,891,616 3,487,650
Unexpired Unobligated Balance,
8,367 126,490 333,851 45,144 - 14,750 483 2,344,236 5,529,410 7,873,646
end of year
Expired Unobligated Balance, end of year - 39,825 26,472 - - 79 - 2,409,564 - 2,409,564
Unobligated Balance, end of year (total) 8,367 166,315 360,323 45,144 - 14,829 483 4,753,800 5,529,410 10,283,210
Total Status of Budgetary Resources $ 18,001 $ 418,503 $ 360,414 $ 45,164 $ - $ 30,192 $ 519 $ 17,288,617 $ 31,526,889 $ 48,815,506
OUTLAYS, NET and DISBURSEMENTS, NET
Net Outlays (discretionary and mandatory) $ 9,386 $ 270,840 $ (21,254) $ (4,090) $ (2,084) $ 16,731 $ 35 $ 10,866,439 $ 10,866,439
Distributed Offsetting Receipts - - - - - - - (10,030,589) (10,030,589)
Agency Outlays, net (discretionary and
$ 9,386 $ 270,840 $ (21,254) $ (4,090) $ (2,084) $ 16,731 $ 35 $ 835,850 $ 835,850
mandatory)
Disbursements, Net (total) (mandatory) $ (10,219,149)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 127
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 2026
Report 26-01 | December 18, 2025
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 128
Other Information (Unaudited)
Contents
MESSAGE FROM THE DEPUTY INSPECTOR GENERAL 131
INTRODUCTION 132
Table 1: Top Management and Performance Challenges Facing SBA in Fiscal Year 2026 132
CHALLENGE 1: PROTECTING THE INTEGRITY OF SBA PROGRAMS 133
Managing Fraud Risk 133
Improving Verification of Eligibility 135
Mitigating Improper Payments 137
Seizure and Return of Funds 138
CHALLENGE 2: MANAGING SBA’S LOAN PORTFOLIO AND PARTICIPATING LENDERS 141
Servicing Disaster Loans 141
Figure 1: The Increased Burden of COVID-19 EIDL Servicing on SBA 142
Planning and Modeling for Future Disaster Responses 142
Figure 2: Total Dollar Amount of Approved Disaster Loans 143
Overseeing Lenders 143
Ensuring Retention of Loan and Award Records 145
CHALLENGE 3: MEASURING PERFORMANCE AND MONITORING SBA PROGRAMS 147
Measuring Program Performance 147
Monitoring Program Performance Results 147
Ensuring Funds Are Used as Intended 148
CHALLENGE 4: FINANCIAL REPORTING AND MANAGING DATA 150
Improving Internal Controls Through Financial Statements Audit Remediation 150
Figure 3: SBA Audit Deficiencies From Pre-Pandemic Through Pandemic Recovery 151
Authorized Data Sharing 152
CHALLENGE 5: MANAGING RISKS IN INFORMATION TECHNOLOGY SYSTEMS 154
Figure 4: Risk Management Best Practices Strategy 154
Improving Information Technology Systems Management 154
Preparing for Artificial Intelligence Challenges 155
Deploying and Monitoring New Third-Party Systems 156
Cybersecurity and Modernization 157
MAKE A DIFFERENCE 159
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 129
Other Information (Unaudited)
NOTICE:
Pursuant to the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, Public Law
117-263, Section 5274, any nongovernmental organizations and business entities identified in this
report have the opportunity to submit a written response for the purpose of clarifying or providing
additional context as it relates to any specific reference contained herein. Comments must be sub-
mitted to AIGA@sba.gov within 30 days of the final report issuance date. We request that any com-
ments be no longer than two pages, Section 508 compliant, and free from any proprietary or other-
wise sensitive information. The comments may be appended to this report and posted on our public
website.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 130
Other Information (Unaudited)
Message From the
Deputy Inspector General
Each year, in accordance with the Reports Consolidation Act of 2000, the
U.S. Small Business Administration (SBA) Office of Inspector General (OIG)
provides a vital assessment of the agency’s top management and perfor-
mance challenges. It is our statutory responsibility to detect and deter fraud,
waste, abuse, and mismanagement in agency programs and services.
While the immediate economic crisis of the Coronavirus 2019 pandemic
is behind us, the vulnerabilities it exposed are not. These persistent chal-
lenges — including improper payments, ensuring program eligibility, and
strengthening internal controls — are not relics of the past. They are sys-
temic issues that continue to challenge SBA’s flagship capital, contracting,
counseling, and disaster assistance programs. Our work remains focused
on how these risks persist and how we can best support the agency in
mitigating them for the future.
OIG has conducted a significant body of work to inform this assessment. Our audits have explored
critical areas, such as the effective use of technology and the alignment of technology with the com-
prehensive review of eligibility criteria, which are essential safeguards against fraud and abuse. We
are actively engaged with our strategic partners to further use the U.S. Department of the Treasury’s
Do Not Pay system and other measures to identify and eliminate improper payments. As SBA pursues
new priorities, such as an increased focus on manufacturing loans, we are committed to providing
independent and objective oversight of these and other critical SBA programs to promote effective
and efficient implementation.
We recognize that SBA has undergone significant changes in its operations, including organizational
restructuring and workforce reductions. Our continuing oversight will consider the effects of these
changes on program operations within our prioritized work. Our partnership with SBA is vital to our
shared goal of protecting the integrity of the agency’s programs. We acknowledge SBA’s continued
commitment to being responsive to our recommended corrective actions.
The nation can depend on OIG to continue to leverage our strategic partnerships and risk-based
approaches to identify and address the most serious challenges facing SBA. Our ultimate goal is to
improve the integrity, accountability, and performance of the agency’s programs, ensuring they oper-
ate as effectively as possible for the American people and are free from fraud, waste, and abuse.
Sheldon Shoemaker
Deputy Inspector General
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 131
Other Information (Unaudited)
Introduction
The Top Management and Performance Challenges Facing the Small Business Administration (SBA)
in Fiscal Year (FY) 2026 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 Ameri-
can 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 consis-
tent 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 mitigat-
ing the top challenges and associated issues facing the agency.
TABLE 1: TOP MANAGEMENT AND PERFORMANCE CHALLENGES FACING SBA IN
FISCAL YEAR 2026
Challenge Issues
Managing Fraud Risk
Challenge 1
Improving Verification of Eligibility
Protecting the Integrity of SBA
Mitigating Improper Payments
Programs
Seizure and Return of Funds
Challenge 2 Servicing Disaster Loans
Managing SBA’s Loan Portfolio Planning and Modeling for Future Disaster Responses
and Participating Lenders Overseeing Lenders
Challenge 3 Measuring Program Performance
Measuring Performance and Monitoring Program Performance Results
Monitoring SBA Programs Ensuring Funds Are Used as Intended
Challenge 4 Improving Internal Controls Through Financial Statements
Financial Reporting and Audit Remediation
Managing Data Authorized Data Sharing
Improving Information Technology Systems Management
Challenge 5
Preparing for Artificial Intelligence Challenges
Managing Risks in Information
Deploying and Monitoring New Third-Party Systems
Technology Systems
Cybersecurity and Modernization
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 132
Other Information (Unaudited)
Challenge 1: Protecting the
Integrity of SBA Programs
The SBA provides loan guaranties, direct disaster assistance loans, government contracting certifica-
tions, and business development programs to qualifying small business owners, entrepreneurs, and
those recovering from a declared disaster. SBA’s challenge is to fulfill its mission of quickly deliver-
ing services and capital while also protecting the integrity of its programs. A strong internal control
environment will help mitigate this challenge. Agency leaders have implemented new verification
measures to ensure only eligible Americans benefit from SBA programs.A We will continue to provide
oversight as the agency moves forward with fraud protection efforts.
MANAGING FRAUD RISK
SBA’s four pandemic relief programs delivered 22.1 million loans and grants to help eligible small
business owners and entrepreneurs. SBA used limited front-end fraud detection internal controls
when it initially distributed the $1.2 trillion.1 The agency was following legislative requirements in-
tended to expedite aid to small business owners adversely affected by the pandemic.
The challenge of managing fraud risk continues as SBA conducts post-payment automated and
manual reviews of Paycheck Protection Program (PPP) loans. Post-payment reviews are when loans
are examined for eligibility after the funds have already been paid to the borrower and forgiven.
PPP borrowers can continue to apply for forgiveness for up to 5 years from the issuance of the loan,
so through 2026. The statutes of limitations for fraud in the PPP and Coronavirus 2019 (COVID-19)
Economic Injury Disaster Loan (EIDL) program were extended from 5 years to 10. In most cases, the
U.S. government will have until 2032 to prosecute wrongdoers and return misused and fraudulently
obtained funds to taxpayers.
In a recent management advisory, we reported how SBA presumed that post-payment reviews of
PPP loans would offset the risks of eliminating key up-front internal controls.2 SBA started flagging
these loans for review in July 2021; however, as of May 2024, SBA had not completed reviewing
37,938 loans totaling about $4.6 billion. According to the agency, these reviews are ongoing and will
continue as resources allow. SBA is drafting a recovery plan for any loans deemed ineligible. For
loans suspected of fraud, SBA did provide information to lenders on how to refer PPP loans, but the
agency did not always keep record and review the referrals.
The federal government does have a front-end fraud detection system in place. The U.S. Department
of the Treasury’s Do Not Pay system is available to help verify applicant eligibility for loans or grants
before they are issued. The Do Not Pay system is a series of databases designed to prevent and
detect improper payments to those not eligible for government funds because of past fraudulent ac-
tivity or other high-risk factors. SBA eventually started using the Do Not Pay system for its pandemic
assistance programs. The agency is in the process of adding additional front-end verification checks
A SBA, News Release 25-42, “SBA Highlights Range of New Measures to Stop Fraud” (April 10, 2025).
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 133
Other Information (Unaudited)
that include Do Not Pay for disaster assistance, 7(a),
and 504 program loans.
We also found SBA performed limited oversight of
non-bank lenders and lender service providers even
though the agency had processes in place. After the
non-bank lenders and service providers were ap-
proved to become PPP lenders, SBA could have bet-
ter assessed the risk of allowing them to continue
to operate in the program. We found that non-bank
lenders made $14.2 billion in suspected fraudulent
loans at a rate more than five times higher than
Example of a Massive Scheme to
loans made by traditional bank lenders. We also
Defraud SBA Preferred Lenders
found the rate of suspected fraudulent loans made
Fourteen defendants were arrested by lenders using service providers was more than
in a global criminal network charged three times the rate of loans processed by lenders
with conspiracy to defraud the that did not use a service provider. For more on this
government in obtaining over $25 topic see our Overseeing Lenders section.
million in taxpayer-funded federally
In 2023, SBA adopted several new changes to its
guaranteed small business loans and
flagship 7(a) loan program that dramatically re-
pandemic relief funds over a period of
duced underwriting standards. Ultimately, these
7 years.
changes increased potential risk. Many of these
One ringleader allegedly defrauded changes were reversed in 2025; In 2023, SBA ad-
numerous banks and the SBA opted several new changes to its flagship 7(a) loan
Preferred Lender Program, a program program that dramatically reduced underwriting
designed to help small businesses that standards. Ultimately, these changes increased
otherwise might not obtain financing. potential risk. Many of these changes were reversed
in 2025; however, the loans made during that time
He allegedly directed sham remain susceptible to increased risk and financial
corporations to open bank loss.B
accounts, make false statements,
and concoct documents to support Our investigative work has revealed a pattern of
loan applications. He also allegedly fraud by loan packagers and other fee-based agents
purchased phony tax returns that in the 7(a) loan guaranty program. We found SBA’s
falsely reported millions in revenue. loan programs are susceptible to borrower fraud
from false statements and documentation, mis-
U.S. Attorney’s Office representation of equity injections, and misuse of
Central District of California proceeds. These patterns of fraud continue to pose
a risk to taxpayer resources due, in part, to SBA
allowing applicants to attest to their own eligibility
(see Improving Verification of Eligibility).
B SBA, News Release 25-41,“SBA Initiates Actions to Reverse Biden-Era Mismanagement of Core 7(a)
Lending Program” (March 27, 2025).
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 134
Other Information (Unaudited)
This past year, the agency has expanded the chief financial officer’s role to include ensuring agency-
wide risk factors are monitored and mitigated. An effective risk management program is sustained by
implementing corrective actions and strengthening internal controls, ultimately reducing fraud and
enhancing program integrity for current and future programs.
IMPROVING VERIFICATION OF ELIGIBILITY
SBA should obtain evidence to verify an applicant’s compliance with program requirements before
issuing loans, grants, or conferring certifications. The agency should be able to ensure only eligible
applicants receive program benefits. One of the biggest challenges in this area is self-certification.
Self-certification is when a person is allowed to make an official declaration that their business com-
plies with standards set for that program without independent evidence. Requiring participants to
provide supporting documentation could mitigate the risks associated with self-certification.
We found that SBA allowed self-certification in the Small Business Innovation Research and Small
Business Technology Transfer programs. Business owners were asked to submit and verify reports,
sales, and investments documentation, but SBA then did not always review the material.3
SBA also allowed applicants to the Restaurant Revitalization Fund (RRF) and Shuttered Venue Opera-
tors Grant (SVOG) pandemic relief grant programs to self-certify their eligibility.4 Applicants attested
that they qualified by both industry and operational status during the eligibility period. We found this
self-certification made the programs vulnerable to fraud or misuse. SBA has not made progress in
resolving multiple audit recommendations for SBA to review billions in grant awards. Progress had
been delayed as the agency contemplated recovery strategies. SBA plans to recover funds for any im-
proper payments made to RRF recipients starting in FY 2026. However, it remains that agency manag-
ers will only review 10,050 awards, despite OIG identifying over 61,000 awards that lacked sufficient
support to determine whether the payment was made to an eligible entity. This means the agency
could miss the opportunity to recoup over $9.5 billion in potentially improper RRF payments.
Another area of concern is the verification of eligibility for SBA contracting certifications. The U.S.
government is the largest single purchaser of goods and services in the world, awarding over $760
billion in prime contracts annually. Congress established SBA contracting certification programs to
ensure that a fair proportion of federal awards and subcontracts are awarded to small businesses.
Congress intended for these programs to assist small businesses with overcoming the complexities
of the federal contracting system. The programs were intended to help build stronger businesses,
expanding competition in the marketplace and strengthening the overall U.S. economy.
SBA works to maximize opportunities for small businesses in government contracting, but because
it relies on self-certification for a key eligibility requirement, fraudsters can take advantage of the
programs.
SBA has seen unscrupulous business owners misrepresent themselves to compete for a contract set
aside for a disadvantaged small business, capitalizing on the smaller pool of applicants and taking
away the opportunity from an eligible and deserving small business. Fraud in these contracting certi-
fication programs contradicts the intent of the congressional mandate to support small business.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 135
Other Information (Unaudited)
OIG investigators currently have 27 cases involv-
ing allegations of firms not meeting contracting
program requirements, including in the 8(a)
Business Development, Women-Owned Small
Business, Service-Disabled Veteran-Owned
Small Business, and Historically Underutilized
Business Zone (HUBZone) programs.
In our reviews of the HUBZone and Women-
Owned Small Business programs, we recom-
mended SBA check each business seeking these
certifications to ensure they can be categorized Example of Contracting
as “small.”5 SBA decided instead to continue Certification Fraud
to rely on small business owners attesting that
A Wisconsin woman who was the owner
they meet these requirements. The agency has
of a Milwaukee HUBZone-certified
maintained its position that self-certification is
construction company pled guilty to one
the most efficient method, but agreed to imple-
count of false statements. She falsely
ment procedures to monitor contract volume
certified her construction company met
and provide additional training to mitigate the
HUBZone eligibility requirements and
risk of HUBZone firms outgrowing their size.
complied with rules and procedures. She
Relying on self-certification without any verifica- also falsely certified that she had no affiliate
tion perpetuates a system in which ineligible business. She solicited 15 HUBZone set-
business owners can obtain benefits meant aside contracts on behalf of her company
for disadvantaged businesses, depriving these and was awarded 7 HUBZone set-aside
business owners of the opportunities that contracts worth
should rightfully be theirs under the statute. Un-
$4.7 million. She did not comply with
scrupulous business owners can make unsup-
the subcontracting rules requiring her
ported claims to attest they are eligible for these
construction company to perform at least
certification programs in SAM.gov or SBA’s Small
15 percent of the cost of HUBZone contract
Business Search Database. Federal contracting
performance. She did not disclose to SBA
officers check these databases when awarding a
that employees of another construction
set-aside contract; however, the veracity of the
company exercised control over the
information is not verified by any federal entity.
management and decision-making process
Given these vulnerabilities across SBA’s loan, of her business.
grant, and certification programs, it is vital the
We investigated this case with the
agency implement robust review procedures
assistance of the U.S. Department of
when conducting eligibility reviews. For certifi-
Transportation OIG, FBI, General Services
cation programs, these reviews could include
Administration OIG, Army Criminal
checking for indicators that a business still
Investigation Division, and Department of
qualifies according to size standards. Such miti-
Defense OIG.
gating steps can protect program integrity and
support SBA’s recent focus to comprehensively DOT OIG Investigations
review 8(a) Business Development program
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 136
Other Information (Unaudited)
participants and federal contracting officers who awarded contracts to these businesses over the last
15 years.C
MITIGATING IMPROPER PAYMENTS
An improper payment is one that should not have been made or was made in an incorrect amount,
including overpayment or underpayment, under a statutory, contractual, administrative, or other
legally applicable requirement.D
Agencies are required to review and assess programs to identify those susceptible to significant
improper payments and report estimates, corrective action plans, and reduction targets to Congress.
However, SBA did not always have acceptable practices and processes to calculate accurate esti-
mates of improper payment rates for some of its programs during the last fiscal year, raising concerns
about whether there were problems and the extent of them.6
Prior and ongoing OIG audit work
has identified 7(a) and PPP loans
given to borrowers who were ineligi-
ble, resulting in improper payments.
OIG’s independent public account-
ing firm found SBA did not publish
improper and unknown payment
estimates for the SVOG program or
for multiple programs under the
debt relief program, according to
our report on SBA’s FY 2024 com-
pliance with the Payment Integrity
Information Act.
In FY 2024, SBA largely employed
adequate and appropriate sampling
and estimation methodology plans
for each of its seven programs that
reported an improper payment
rate, a notable improvement from
FY 2023. However, the independent
public accountant noted SBA placed
undue reliance on its statisticians ex-
ecuting the plans without the appro-
priate level of oversight and quality
control. Further, SBA had data
C SBA, News Release 25-56, “Administrator Loeffler Orders Full-Scale Audit of 8(a) Contracting
Program” (June 27, 2025).
D Office of Management and Budget, M-21-19, “Transmittal of Appendix C to OMB Circular A-123,
Requirements for Payment Integrity Improvement” (March 5, 2021).
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 137
Other Information (Unaudited)
quality issues that affected the improper payment rates for multiple programs due to an inadequate
review process.
The independent public accountant also noted SBA published ineffective corrective action plans for
the PPP loan forgiveness and the PPP loan guaranty purchase programs. In addition, they found SBA
did not accurately disclose the improper payment reduction targets in the annual financial report for
six programs.
Payment integrity actions, such as accurately measuring and reporting an agency’s improper pay-
ment rate, will help to reduce fraud, waste, and abuse in government programs. These actions en-
hance program missions, efforts to advance equity, efficiency, and customer experience.
Over the past several years, SBA has initiated several corrective actions to enhance and develop addi-
tional controls to address loan reviews, loan forgiveness, and fraud, including establishing guidelines
for loan and forgiveness reviews. Although many of SBA’s efforts to mitigate improper payments are
for pandemic assistance programs, learning from past mistakes will help the agency mitigate improp-
er payments in its traditional programs moving forward.
SBA’s implementation of a robust framework and ensuring its effectiveness will help mitigate this
challenge. SBA has also adopted several new verification measures within its loan application pro-
cess that will strengthen protections against fraud to ensure its programs only benefit eligible Ameri-
cans, including citizenship verification, date of birth verification, and automatic fraud alerts.E
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 work-
ing to claw back funds the agency has determined to be improper payments including loans flagged
as potentially fraudulent. Recovery can be time consuming because it can involve coordination with
other government entities and law enforcement agencies. This is a challenge given the volume of
loans in SBA’s portfolio and the applicable statutory timeframes. SBA is working collaboratively with
the Department of Justice, Treasury, and OIG officials to mitigate this challenge.
In the FY 2024 financial statements audit, OIG’s independent public accountant identified significant
issues in the agency’s accounting for the PPP, COVID-19 EIDL, RRF, and SVOG programs.7 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. Further, the independent
accountant found SBA managers did not adequately design and implement controls or develop ac-
counting policies to account for the recovery of funds related to these programs (see Challenge 4 for
more discussion on this issue).
Our audits of SBA’s oversight of RRF and SVOG recipients also found management did not establish
a process to recover funds from these programs.8 Subsequently, SVOG program officials sent letters
requesting a return of funds to recipients who were found to be ineligible for the award or who im-
properly used award funds.9 During FY 2025, SBA drafted a policy for recovering RRF funds and plans
to implement a process in FY 2026.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 138
Other Information (Unaudited)
SBA’s challenge is to enforce its current guidance for returning loan funds and standardize proce-
dures on clawing back funds. Recently, SBA established a process to recover SVOG awards that were
either sent to an ineligible recipient or used for improper expenses. SBA has also recently drafted a
plan to account for the recovery of improperly paid PPP and COVID-19 EIDLs. For RRF awards, SBA
needs to finalize a process to recover funds. The agency is still working through finalizing policies
for clawing back PPP loans that were found to be ineligible after forgiveness. We will monitor SBA’s
progress and actions to close this recommendation. Regarding seized and frozen pandemic-related
program funds, SBA developed a procedural notice to provide guidance to borrowers, lenders, and
other financial intermediaries on how to return the PPP loan funds to SBA. OIG will continue to evalu-
ate the effectiveness of the processes.
E SBA, News Release 25-42, “SBA Highlights Range of New Measures to Stop Fraud” (April 10, 2025).
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 139
Other Information (Unaudited)
OIG HIGHLIGHTED WORK
1 COVID-19 Pandemic EIDL and PPP Loan Fraud Landscape (Report 23-09)
2 SBA’s Actions to Address Forgiven PPP Loans Subsequently Flagged as Potentially Ineligible
(Report 25-12)
3 SBA’s Implementation of the SBIR and STTR Extension Act of 2022 (Report 24-14)
4 SBA’s Restaurant Revitalization Fund Program Award Practices (Report 24-09); SBA’s Oversight of
Shuttered Venue Operators Grant Recipients (Report 25-21)
5 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)
6 Independent Auditors’ Report on SBA’s FY 2024 Compliance with the Payment Integrity Information
Act of 2019 (Report 25-15)
7 Independent Auditors’ Report on SBA’s FY 2024 Financial Statements (Report 25-05)
8 SBA’s Restaurant Revitalization Fund Program Award Practices (Report 24-09); SBA’s Oversight of
Shuttered Venue Operators Grant Recipients (Report 25-21)
9 Improvements Needed in SBA’s Shuttered Venue Operators Grant Post-Award Review Process
(Report 24-21)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 140
Other Information (Unaudited)
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 business owners
and entrepreneurs with access to credit they cannot obtain
elsewhere. This program relies on numerous outside parties
(such as loan agents and lenders) to originate loans. By
statute, the 7(a) loan guaranty offered through private lending
institutions is required to operate at “zero-subsidy,” or zero
cost to taxpayers, and is funded through the collection
of lender fees. SBA has recently restored lender fees and
increased underwriting standards for loan guaranties, which were eliminated or lowered in 2023.A
To protect taxpayer dollars, SBA must maintain adequate oversight of financial institutions
participating in its guaranteed loan programs.
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. The agency is tasked
with handling the long-term loan servicing of the COVID-19 EIDL program, which is a loan portfolio of
about 3.8 million loans — over 14 times what the agency was managing before the pandemic. SBA’s
challenge is to effectively service this large volume of disaster loans and recover delinquent funds.
SERVICING DISASTER LOANS
Prior to the pandemic, SBA typically serviced about 263,000 disaster loans totaling approximately
$9.4 billion. Five years after the pandemic, SBA has the challenge of servicing approximately 3.8
million outstanding disaster loans totaling approximately $336.4 billion — a fourteenfold increase in
the amount of loans the agency was managing previously (see Figure 1). Note that the stated size of
the portfolio includes about 1.1 million charged-off loans that normally would have been transferred
to Treasury for cross servicing. SBA has been temporarily exempted from that requirement until
March 31, 2026. Upon transfer, the servicing portfolio will significantly decrease.
SBA typically services a disaster loan until it is paid in full or, upon default, to 120 days delinquent.
Treasury and the agency have agreed that SBA will service even defaulted loans and attempt
recovery on these loans for up to 2 years, or until the agency’s recovery efforts are exhausted.
COVID-19 EIDL servicing is significantly different than traditional loan servicing because it includes a
variety of complex action requests that are not common to private sector business loans. This further
stresses SBA’s ability to fully and completely service current loans and perform full-spectrum
A SBA, News Release 25-41, “SBA Initiates Actions to Reverse Biden-Era Mismanagement of Core 7(a)
Lending Program” (March 27, 2025).
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 141
Other Information (Unaudited)
Figure 1: The Increased Burden of COVID-19 EIDL Servicing on SBA
Source: OIG generated based on SBA data
collection efforts on past-due and defaulted loans.1 SBA’s challenge is to be responsive to recipients
of these loans and perform its due diligence to mitigate loss to the taxpayer.
In our May 2025 inspection report, we concluded that SBA would be able to service its COVID-19
loan portfolio with a staff of 1,492 at its Fort Worth, Texas, processing center.2 As of June 2025, SBA
reduced its staff at the center to about 819 employees. Since these staff reductions occurred after
our review, OIG has not assessed any potential impact on the agency’s servicing of the $336.4 billion
COVID-19 EIDL disaster loan portfolio.
PLANNING AND MODELING FOR FUTURE DISASTER RESPONSES
To avoid funding lapses, SBA must improve its processes to forecast and request annual
appropriations for future disaster responses. On October 15, 2024, the agency announced
funds in its disaster assistance loans program account had been exhausted. This caused a delay
in disbursements of loans between October 15 and December 21, 2024, when SBA received
supplemental funding. This lapse in funding occurred, in part, because the agency had not adjusted
its forecasted lending level or annual budget request for disaster assistance since 2009, even though
the number and cost of billion-dollar disasters has generally increased over time (see red trendline
on Figure 2).3 Our report 25-24 shows the correlation between a large number of costly disasters and
a larger number of disbursed loans and SBA loan amounts. SBA’s challenge is to ensure historical
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 142
Other Information (Unaudited)
factors, such as changes in the subsidy rate, frequency of major disasters, and total dollar amount of
loan approvals from prior years, are taken into account when developing the annual budget request
for the disaster loan program.
Figure 2: Total Dollar Amount of Approved Disaster Loans
Source: National Centers for Environmental Information billion-dollar disaster database
When requesting future funding, we found that SBA’s monthly reports to Congress did not include
all the required components of 15 U.S. Code § 636k(a) and that the informal messages the agency
initiated with Congress were insufficient to communicate the pending funding lapse.3 SBA’s
challenge is to 1) ensure its monthly reports comply with the statute and can be clearly interpreted
and 2) provide formal notification to Congress and the Office of Management and Budget (OMB) that
clearly states whether sufficient funds are available or if there is a need for supplemental funds as
soon as the agency anticipates a funding shortfall.
OVERSEEING LENDERS
SBA’s Office of Credit Risk Management manages program credit risk on financial assistance
portfolios of guaranteed loans that totaled about $163 billion as of June 2025. The office monitors
lender performance and enforces lending program requirements.
In 2023 and 2024, SBA made significant policy changes to its flagship 7(a) loan program to help
expand access to capital for disadvantaged entrepreneurs. The agency lowered underwriting
standards and granted mission-driven financial institutions access to the 7(a) loan program as
Community Advantage Small Business Lending Companies. In 2025, SBA reversed many of these
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 143
Other Information (Unaudited)
changes.B The agency has recently issued
a moratorium on the expansion of the
program and will require existing lenders to
meet prudent financial stability standards
as a condition of further participation. SBA’s
challenge is to serve entrepreneurs while
also 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 Example of Lender Service
examined by SBA. The agency considered these Provider Fraud
lenders to be higher risk than those with federal
We helped prosecute a national criminal
regulators, so they required more oversight by
ring involving 1,300 PPP applications
SBA’s Office of Credit Risk Management.4
associated with $600 million in fraud,
OIG has conducted prior audit work related leading to the convictions of the founders
to third-party service providers in the 7(a) of a lender service provider, which
loan program. In FY 2025, we assessed the risk facilitated over $6 billion in PPP loans, itself
associated with non-bank lenders in the PPP, benefitting from over $300 million in lender
including financial technology companies and fees. To date, this is our largest prosecuted
service providers.5 We found opportunities pandemic assistance fraud scheme.
for SBA to enhance its oversight of non-bank
The investigation revealed two of the
lenders to promote program integrity and
ringleaders co-founded a fintech in April
reduce financial loss. Specifically, non-bank
2020 purportedly to assist applicants in
PPP lenders made $14.2 billion in suspected
obtaining PPP loans. To obtain larger
fraudulent loans at a rate more than five times
loans for certain applicants, they and other
higher than loans made by traditional bank
co-conspirators fabricated documents,
lenders. Over $6.1 billion of the $14.2 billion
including tax documentation. They
in suspected fraudulent non-bank PPP loans,
charged borrowers kickbacks based on
or nearly 43 percent, were made by lenders
a percentage of the funds received. To
categorized as fintechs and other state-
obtain a greater volume of kickbacks from
regulated finance companies. Additionally,
borrowers and a percentage of lender
loans involving service providers had a
fees from SBA, they submitted PPP loan
suspected fraud rate more than three times
applications they knew contained false
higher than loans made without a service
information.
provider. In addition, we have investigative
cases that reflect some of the effects non-bank U.S. Attorney’s Office
lenders have had on the PPP. Northern District of Texas,
June 23, 2025
SBA has taken steps to mitigate this challenge
and significantly improved its tracking and August 11, 2025
monitoring of third-party providers in the
traditional loan programs. We will continue
B SBA, News Release 25-51, “SBA Overhauls Reckless Biden-Era Lending Program” (May 19, 2025).
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 144
Other Information (Unaudited)
to monitor compliance with SBA policies and procedures as well as corrective actions to address
noncompliance. It is vital that the agency continues to:
• Enhance its 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.
Ensuring Retention of Loan and Award Records
SBA guarantees 50 percent or more 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.6 This means that most
loan documents and data reside only with the participating lender, which could be problematic if
that lender dissolves or ceases to service the loan.
If future programs were designed to capture and maintain applicant data, and if the data was shared
with SBA, it would not be as difficult for the agency to conduct oversight of loans from lenders who
ceased operating. In addition, if SBA were to acquire and maintain lender data, investigators would
have access to the documentation needed to validate evidence of fraud. 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.7
This was most evident in the PPP because of the massive number of loans, the extent of the fraud,
and the forgiveness process on the back end. In the PPP, SBA only required that lenders enter general
applicant information, such as name, address, email, and telephone number, into the agency’s PPP
systems. Applicants were not asked to provide their date of birth on the PPP application, which
we found to be a critical element for Social Security number verification. In addition, SBA did not
require lenders to submit borrower bank account details associated with the disbursement, Internet
Protocol addresses, or web log data associated with the electronic signature on the applications.
If a lender were to go out of business, SBA could not capitalize on the information it obtained in its
PPP systems by using data analytics technology, such as artificial intelligence and machine learning,
which help identify noncompliance with program requirements and likely fraud.
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, 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.C SBA’s challenge is to continuously monitor and
communicate with participating lenders to safeguard loan information and to share documents
C 89 F.R. 68090 Business Loan Program Temporary Changes; PPP-Extension of Lender Records
Retention Requirements (August 2024).
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 145
Other Information (Unaudited)
related to lending decisions, which is imperative in cases in which the lender dissolves or ceases to
service the loan.
The statute of limitations for the Restaurant Revitalization Fund and Shuttered Venue Operators Grant
program is 5 years from application or the reporting date. SBA only requires Restaurant Revitalization
Fund recipients to retain their award 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 wrongdoers and recover funds that were incorrectly or fraudulently obtained.
OIG HIGHLIGHTED WORK
1 Ending Active Collections on Delinquent COVID-19 Economic Injury Disaster Loans (Report 23-16)
2 COVID-19 Economic Injury Disaster Loan Servicing Capability (Report 25-16)
3 SBA’s Processes to Forecast and Request Appropriation Dollars for its Disaster Loans Program
Account (Report 25-24)
4 Audit of SBA’s Oversight of High-Risk Lenders (Report 20-03)
5 SBA’s Oversight of Non-Bank Lenders and Third-Party Service Providers Associated With PPP Loans
(Report 25-04)
6 SBA’s Guaranty Purchases for Paycheck Protection Program Loans (Report 22-25)
7 SBA’s Eligibility and Forgiveness Review of PPP Loans Made to Borrowers with Treasury’s Do Not
Pay Data Matches (Report 24-06)
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 146
Other Information (Unaudited)
Challenge 3: Measuring
Performance and Monitoring SBA
Programs
SBA manages programs to help support American entrepreneurs access grant funds and business
counseling. It aids existing and prospective small businesses through a variety of counseling
and training services offered by partner organizations. Among these partners are Small Business
Development Centers (SBDC), the SCORE mentoring network, Women’s Business Centers, and
Veterans Business Outreach Centers. SBA’s challenge is to improve the measures it uses to assess
the effects of its programs and improve grantee oversight, better serving entrepreneurs and ensuring
that every dollar spent delivers results.
MEASURING PROGRAM PERFORMANCE
Federal guidance requires SBA managers 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.
Our reviews of SBA’s counseling and contracting certification programs have consistently found
opportunities for SBA to improve its measures used to assess program goal accomplishments. In a
recent review of an SBDC, we found SBA established performance goals and measures to monitor
progress toward the goals.1 However, improvements were needed to better align performance goals
with the related funding and to track progress toward achieving those goals.
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 in a timely manner 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.
The agency can improve tracking and monitoring performance goals by coordinating with resource
partners. We found this lack of coordination in our recent inspection of one SBDC. We highlighted the
need to demonstrate performance goals were met by associating the center’s financial data with the
program activities conducted. If not properly associated, the SBDC spends additional money toward
meeting goals already funded, thereby increasing the operational cost of fulfilling program goals and
activities. We plan to take a broader look at these issues in an upcoming audit of SBA’s oversight of
the SBDC program.
We also found in SBA’s oversight of the Small Business Innovation Research (SBIR) and Small
Business Technology Transfer (STTR) programs that there was limited assurance that small
businesses met minimum performance standards.2 These programs help entrepreneurs explore their
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 147
Other Information (Unaudited)
technological potential and provide an incentive to profit from commercialization. Small businesses
must meet minimum performance standards to compete for SBIR and STTR awards. Changes to the
Small Business Act are needed to improve SBA’s ability to monitor small businesses’ compliance
with performance standards, reducing risks because they may not have the ability to achieve
program goals for commercialization as intended by the Act. SBA’s challenge is to monitor grantee
performance in the estimated number of new businesses started, tax revenue generated, and entity
operational status.
ENSURING FUNDS ARE USED AS INTENDED
We 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 recent review of an SBDC, we found opportunities for the center to improve its financial
compliance when accounting for federal expenses, matching funds, and program income. SBA
program officials are making changes to how it monitors use of funds to hold SBDCs accountable
and ensure objectives are met.
Federal funds can greatly assist struggling small businesses during an economic crisis. For example,
the Restaurant Revitalization Fund (RRF) and Shuttered Venue Operators Grant (SVOG) were intended
to help businesses in the restaurant and venues industries struggling to stay in business during the
pandemic.
In an 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.3 RRF recipients were
required to submit their final use of funds report to SBA by April 30, 2023. As of July 2025, 9.4 percent of
all recipients, with awards totaling $1.5 billion, had not yet filed the required report.
To oversee the RRF and SVOG programs, SBA selected samples of the award recipients to manually
confirm eligibility, award calculation, and use of funds. We previously 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.4
SBA’s challenge is to prioritize the RRF and SVOG reviews to increase the opportunity to save taxpayer
funds. Program managers stated they have increased the number of staff allocated to these reviews
and are working to manage resources to complete the reviews within the 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.5 We also found SBA needed to
implement procedures for recipients to return unused or improperly awarded funds to Treasury.
SBA management recently implemented a process for the SVOG program and plans to implement a
process to recover improper payments for the RRF program in FY 2026.
SBA’s challenge is to effectively manage its resources to meet the demands of monitoring awardee
compliance with award requirements. Improving awardee oversight will help the agency to
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Other Information (Unaudited)
effectively measure and accurately report performance results and assess whether the federal
assistance programs were effective and funds were used appropriately.
In our recent audit of SBA’s oversight of SVOG recipients, we found SBA could improve its process to
close out SVOG awards. The SVOG award close out process consisted of various activities to include
determining if 1) recipients were eligible; 2) the award amount was correct, used in accordance with
requirements, or recovered if applicable; and 3) the agency completed its review of submitted audit
packages.
As of August 2025, SVOG officials closed out 1,515 of the 2,590 awards, with 1,075 awards totaling
more than $1.5 billion still open. SBA program officials paused the close-out process to focus on
recovery efforts. While finalizing the process to recover funds is important, SBA should consider both
the close out and record retention requirements. By not doing so, they could miss the opportunity to
collect misused or unused taxpayer funds.
OIG HIGHLIGHTED WORK
1 New Jersey Small Business Development Center’s Compliance With Cooperative Agreement
Requirements (Report 25-17)
2 SBA’s Implementation of the SBIR and STTR Extension Act of 2022 (Report 24-14)
3 SBA’s Oversight of Restaurant Revitalization Fund Recipients (Report 23-15)
4 SBA’s Oversight of Shuttered Venue Operators Grant Recipients (Report 25-21); Improvements
Needed in SBA’s Shuttered Venue Operators Grant Post-Award Review Process (Report 24-21)
5 SBA’s Administrative Process to Address Potentially Fraudulent Restaurant Revitalization Fund Awards
(Report 23-10)
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Challenge 4: Financial Reporting
and Managing Data
SBA is tasked with managing the data of small business
owners through multiple interfaces and platforms while
meeting government mandates for privacy and security. The
agency has made it a priority to improve SBA technology,
cybersecurity, and response time to customers, affirming that
efficient data systems are integral to customer service. A
Agency leaders also plan to further integrate AI into agency
data systems, which may generate new cybersecurity
concerns requiring OIG oversight. By implementing best
practices in data management, the agency will have
a stronger foundation for identifying and preventing
fraud schemes. Data reliability is also essential for SBA to manage taxpayer funds and accurately
communicate its financial position to Congress, the President, and the American public. The agency
has made satisfactorily completing a financial audit a priority, according to an SBA February 2025
news release. By improving data sharing practices, SBA can leverage information from federal
partners to make more informed decisions, ultimately benefiting all Americans.
IMPROVING INTERNAL CONTROLS THROUGH FINANCIAL STATEMENTS AUDIT
REMEDIATION
Our 2024 financial statements audit found a continuing challenge related to SBA’s internal controls,
which are integral for financial data reliability and accuracy.1 Over the last 5 years, SBA has struggled
with addressing long-standing internal control deficiencies due to challenges the agency faced with
administering its pandemic relief programs. Starting in FY 2020, the agency received its first of five
disclaimers of opinion, which means the auditors were unable to obtain sufficient audit evidence to
support balances, so SBA has not obtained a clean audit opinion in 5 years.
Since its first disclaimer, SBA’s financial statements audits have been limited to the balance sheet,
one of four principal financial statements. The remaining three statements — net cost, statement of
changes in net position, and budgetary resources — have not been audited due to the unresolved
issues affecting the balance sheet. This is important because the other statements contain
information about agency spending and how much funding was used during the fiscal year.
In each of these 5 years, the auditors have identified as many as seven material weaknesses, three
significant deficiencies, and three issues of non-compliance with laws and regulations (see Figure 3).2
A material weakness is a serious concern that an organization’s financial reporting controls are
A SBA, News Release 25-32, “SBA Administrator Loeffler Issues Memo on Day One Priorities”
(February 24, 2025).
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Other Information (Unaudited)
not effective enough to detect major errors or fraud that could cause material misstatements in the
financial statements. A significant deficiency is less severe but indicates control issues that could
potentially lead to misstatements.
Figure 3: SBA Audit Deficiencies From Pre-Pandemic Through Pandemic Recovery
*Federal Managers’ Financial Integrity Act of 1982, Federal Financial Management Improvement Act of 1996, Debt
Collection Improvement Act of 1996.
Source: OIG analysis from SBA financial statements audit reports
OMB guidance states that correcting internal control deficiencies is a fundamental part of
management accountability and must be prioritized.B In this light, the agency developed a new and
centralized Financial Statements Audit Remediation Strategy in January 2025 that set key targets to
focus time and resources on, including:
• Enhancing governance for the audit process;
• Developing accounting policies for the pandemic programs, such as COVID-19 EIDLs, the PPP,
Restaurant Revitalization Fund, Shuttered Venue Operators Grants; and
• Writing a position paper for the auditors, explaining that SBA has identified loans with potential
eligibility concerns through its verification process.C
B OMB, M-16-17, “OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk
Management and Internal Control,” at 37 (July 15, 2016).
C SBA, Office of Performance, Planning, and the Chief Financial Officer Financial Statement Audit
Remediation Strategy (January 8, 2025).
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Other Information (Unaudited)
Although these are positive steps, SBA has the challenge
of remediating the seven material weaknesses and
producing a clean audit opinion for all four financial
statements. SBA should strive to improve program
oversight provided to the taxpayer, Congress, and the
President and accurately report how taxpayer money
was used during the fiscal year.
Beyond achieving a clean audit opinion, SBA must meet
its statutory responsibility with the Federal Managers
Financial Integrity Act of 1982, which requires annual
assessments and certifications of internal controls to Example of Multi-Agency Data
the Congress and President.D Although the material Sharing
weaknesses identified are largely related to pandemic
Four Detroit residents pled guilty
relief programs that have ended, SBA can learn lessons
to conspiracy to commit wire
from the crisis to better its internal control environment
fraud for their roles in a $6 million
moving forward.
pandemic relief fraud scheme.
From FY 2020 to FY 2024, SBA did not substantially Between February 2020 and May
comply with the Federal Managers Financial Integrity 2021, the co-conspirators stole
Act of 1982. Building a more rigorous internal control identity information and created
environment will not only help SBA move toward fictitious businesses to then file
compliance with the Act but will also help it to identify fraudulent claims in various states
potential errors or fraud. SBA’s challenge will be to for PPP loans, EIDLs, and pandemic
effectively design an internal controls assessment unemployment assistance. The
plan that meets requirements, while building a team unemployment benefits were often
with expertise and capacity to strengthen its internal deposited onto debit cards that
controls. were sent to addresses controlled
by the co-conspirators.
AUTHORIZED DATA SHARING
This joint investigation was
During the pandemic recovery, leaders in the offices of successful thanks to SBA OIG,
inspector general analytics community demonstrated Department of Labor OIG, and FBI
that government data sharing can lead to successful data sharing and collaboration.
criminal and administrative investigations into PPP,
EIDL, and unemployment insurance program fraud. E Office of Inspector General
U.S. Department of Labor
A collaboration between SBA OIG and the U.S.
Department of Labor OIG identified $1.3 billion in Eastern District of Michigan
potentially fraudulent unemployment insurance and
EIDL payments were paid to the same likely fraudsters in
D Federal Managers Financial Integrity Act of 1982. Pub. L. No. 97-255 (August 1982).
E Pandemic Response Accountability Committee, Blueprint for Enhanced Program Integrity, Chapter
4: Whole-of-Government Approach, at 11-12 (April 2025).
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Other Information (Unaudited)
both programs.3 We identified this issue through a data use agreement and a subsequent data sharing
and matching project. Additionally, SBA OIG identified an additional $1.4 billion in EIDL disbursements
from a larger dataset not previously identified by Labor OIG or SBA OIG as potentially fraudulent.
Another example of effective data sharing between agencies would be if SBA pursues a legal
framework to establish Social Security number verification data. The Pandemic Response
Accountability Committee (PRAC) demonstrated how a memorandum of understanding with the
Social Security Administration allowed its data scientists to verify Social Security numbers, names,
and dates of birth from a random sampling of 662,000 identity records across the COVID-19 EIDL, PPP,
and Labor’s pandemic unemployment insurance program.F Using those results, PRAC estimated that
up to 1.4 million stolen or invalid Social Security numbers were used to obtain benefits from these
programs. PRAC estimated that verifying Social Security information could have saved taxpayers up
to $79 billion in potentially fraudulent pandemic relief payments.
Given the volume of identity theft associated with SBA pandemic loan programs, Social Security
number verification could have helped mitigate 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.
The agency could undertake collaborative efforts to uncover fraud, waste, and abuse by
implementing Do Not Pay data in all its programs. The agency could put agreements and systems in
place to mitigate fraud, rather than chasing fraudsters after the funds have been disbursed.
PRAC continues to advocate for expanding agency access to information, such as tax data.G We agree
that expanding access to data using collaborative information sharing agreements will help identify
fraud indicators so that federal agencies can better manage resources and protect taxpayer funds. SBA
management stated they are currently making progress to secure sufficient and complete data sharing
agreements with other federal agencies and ensure expired agreements are reestablished. As with Do
Not Pay data sharing agreements with Treasury, the agency is undertaking additional collaborative
efforts to uncover fraud, waste, and abuse during the application process for disaster assistance. These
agreements can better help federal agencies verify applicant information and detect fraud.
OIG HIGHLIGHTED WORK
1 Independent Auditors’ Report on SBA’s FY 2024 Financial Statements (Report 25-05)
2 SBA’s Controls to Address Financial Statements Audit Disclaimers and Material Weaknesses
(Report 25-25)
3 COVID-19: Data Sharing Project Finds Billions Paid to Same Likely Fraudsters Under Both the
Unemployment Insurance and Economic Injury Disaster Loan Programs (Report 25-06)
F PRAC, Fraud Prevention Alert: Pre-Award Vetting Using Data Analytics Could Have Prevented Over $79
Billion in Potentially Fraudulent Pandemic Relief Payments (June 2025).
G PRAC, Blueprint for Enhanced Program Integrity, Chapter 4: Whole-of-Government Approach,
at 11-12 (April 2025).
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Challenge 5: Managing Risks in
Information Technology Systems
SBA continues to share our concerns Figure 4: Risk Management Best Practices
about its information technology (IT) and Strategy
cybersecurity issues, citing these as top
priorities in 2025.A A strong IT governance
framework enables the agency to achieve
mission goals and objectives while
safeguarding taxpayer funds. A governance
framework is an integrated strategy that
identifies, measures, and controls risk in
IT investments, fraud, and AI (see Figure
4). These processes will help the agency
better deliver SBA programs and services,
particularly in times of crisis.
Source: OIG generated from National Institute
IMPROVING INFORMATION of Standards and Technology data
TECHNOLOGY SYSTEMS MANAGEMENT
In March 2024, OIG determined SBA did not enforce IT management policies and procedures, and a
new IT systems framework was not scheduled to be implemented until the second quarter of 2024.1
The agency has had issues related to IT software investment governance, including:
• 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.
An IT system is essential to mission delivery and enhances organizational performance. IT system
management is on the U.S. Government Accountability Office’s (GAO) high-risk list because IT
purchases are often a large investment of taxpayer funds for mission critical functions.B The agency
has made updates to its management processes, including updating its process for IT investment
management to correspond with the requirements of the Clinger-Cohen Act, the Federal Acquisition
Reform Act of 1995, OMB requirements, and OIG recommendations.
A SBA, News Release 25-32, “SBA Administrator Loeffler Issues Memo on Day One Priorities”
(February 24, 2025).
B GAO, GAO-25-107743, High-Risk Series: Heightened Attention Could Save Billions More and
Improve Government Efficiency and Effectiveness, at 153 (February 2025).
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PREPARING FOR ARTIFICIAL INTELLIGENCE CHALLENGES
A 2025 executive order on AI calls upon agencies to develop
and submit to the President an action plan to achieve policy
goals of sustaining and improving America’s AI use, promoting
human advancement, economic competitiveness, and
national security.C OMB also called upon agencies to develop
and publicly release an AI strategy that includes all its current
and possible future uses of machine-learning technology.
OMB directed agencies to promote the use of AI while also
considering security threats and risk, particularly taking care
when the AI has a significant effect on decisions related to:
• Civil rights, liberties, or privacy;
• Critical government resources or services; and
• Access to education, housing, insurance, credit, employment, and other programs.D
This is relevant for SBA because it could employ AI to decide on loan guaranties, award grants, or
detect potentially fraudulent applications, while accessing private financial information and affecting
applicants’ credit records.
SBA faces several challenges in implementing AI according to the new OMB memo. First, IT leaders
must consistently identify and classify any AI uses, particularly if they plan to leverage existing data
and AI assets across the agency. SBA management stated they have formed a new AI working group
and a board to guide and oversee agency integration of AI to improve business processes. As of
November 2025, SBA had no AI use cases reported.
OMB also mandated SBA to:
• Designate a Chief AI Officer to promote AI innovation and governance. (A new officer was
assigned as of August 2025);
• Update internal policies on IT infrastructure, data, cybersecurity, and privacy. (SBA published a
2-year Open Data Plan in June 2025 addressing open data security and privacy; however, more
internal guidance is needed); and
• Develop a generative AI policy. (Its last posted policy expired early 2025).E
C Executive Office of the President, Executive Order 14179, “Removing Barriers to American
Leadership in Artificial Intelligence” (January 23, 2025).
D OMB, M-25-21, “Accelerating Federal Use of AI Through Innovation, Governance, and Public Trust,”
at 19 (April 3, 2025).
E “Artificial Intelligence.” SBA Office of the Chief Information Officer. Internal SharePoint site.
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Other Information (Unaudited)
The agency must consider the budgetary costs and constraints of keeping AI systems and tools
updated and protected from bad actors. Major tech players report skyrocketing costs to generative AI,
leading to the cancellation or postponement of AI initiatives because of cost concerns.F Cutting-edge
tools can be costly to maintain, particularly with ever-evolving cyber threats. Some tech companies
have recognized the need to address the cost and security concerns of AI use within government.G
SBA’s risk management and need of transparency, in addition to the large amount of taxpayer
resources at stake, is why this is a top management challenge for SBA in 2026.
Both GAO and OIG have drawn attention to a past case of SBA not being fully transparent regarding
its use of AI.H SBA had used a machine learning model, considered AI according to U.S. Code,I that
it did not include in its AI inventory. An SBA loan reviewer contractor developed a random forest
machine learning model, an ensemble algorithm using multiple decision trees, to determine if loans
required further analysis before being approved. The model developed its internal rules for making
loan assessments based on risk indicators created by a legal and business research platform, which
are numerical measurements or scores to indicate risk level for businesses. The model used other
factors deemed relevant by the contractor but not clearly explained to GAO or OIG. The model was
trained on a dataset of 20,000 manually reviewed loans, of which 275 had been marked as requiring
further analysis before approval. This model was then used by SBA to assess 129,000 loans.
OIG plans to conduct audit oversight on the implementation of SBA’s AI plans and strategies in the
future. We look forward to working with the agency to ensure AI objectives are met with minimum
risk and optimum return on investment.
DEPLOYING AND MONITORING NEW THIRD-PARTY SYSTEMS
The agency relies on 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.
Proper guidance on monitoring third-party systems can be found through System and Organization
Controls 1 reviews. Our independent financial statements auditors 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. In FY 2025, SBA revised its standard
operating procedure to enhance oversight procedures of service providers.J
F Brodsky, Sascha. “The Hidden Costs of AI: How Generative Models are Reshaping Corporate
Budgets.” IBM Think. Accessed July 18, 2025. (October 14, 2024).
G Wakeman, Nick. “OpenAI to Give Federal Agencies ChatGPT Access at $1 Per year.” NextGov/FCW.
Accessed August 6, 2025. (August 6, 2025).
H GAO, GAO-25-107267, COVID-19 Relief Improved Controls Needed for Referring Likely Fraud in SBA’s
Pandemic Loan Programs (March 2025).
I 15 U.S. Code §9401(3).
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Other Information (Unaudited)
SBA’s development guidance requires that systems are designed with adequate controls to prevent
unauthorized access and data breaches. As new systems are developed, the importance of robust
technical support and continuous system monitoring is integral to data quality.
CYBERSECURITY AND MODERNIZATION
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.2 The
agency’s overall security program continues to be rated as “not effective” in accordance with federal
guidance. Because of SBA’s mission and the personally identifiable information it is required to
collect to carry out that mission, the agency is susceptible to privacy and data breaches.
It is also critical that SBA plan for cybersecurity risks when modernizing its IT systems. This was an
issue for SBA’s Unified Certification Platform, which was intended to help streamline the process for
small business owners to apply for contracting certification programs. GAO reported that when SBA
transitioned to this new “one-stop” certification system, meant to consolidate multiple systems into
one, the agency did not implement leading practices for risk management, cybersecurity, and IT
governance over the investment.K
In addition to not developing a cybersecurity risk management plan, SBA also did not trace design
elements of the new system to related cybersecurity requirements, which increases the risk of
security vulnerabilities.
This problem continued with personally owned electronic devices allowed to access sensitive SBA
systems. In late 2024, we identified a significant security vulnerability.3 The agency unknowingly
allowed personally owned devices, such as smartphones, laptops, or tablet computers, to access,
store, and transmit agency data with only a username and password. Devices could also access
the network from foreign locations, which is prohibited by SBA IT policy. Personally owned devices
can expose the agency to IT security risks, such as unauthorized access and theft of personally
identifiable information, which can be exploited by cyber criminals and other bad actors. Cyber
threats include, but are not limited to, disclosure of sensitive data, unauthorized changes, or
backdoor access to other network resources.
SBA should have multifactor authentication enabled for users to access the agency’s secure network.
Multifactor authentication is a high security control that requires a username, password, and an identity
card, unique security code, or biometrics to access a system. Relying on usernames and passwords
alone greatly increases the risk of SBA data being accessed and exploited by cyber criminals.
SBA has taken corrective action by rolling out multifactor authentication for more than 6,000 users.
The agency is also designing the Unified Certification Platform to improve processes for
J SBA, SOP 20 33 1, Review and Assessment of System & Organization Controls Report(s) (July 10,
2025).
K GAO, GAO-25-106963, It Modernization: SBA Urgently Needs to Address Risks on Newly Deployed
System (November 2024).
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Other Information (Unaudited)
administering the contract certification programs. The challenge for SBA is to ensure cybersecurity
risks are considered and mitigated as the agency continues to modernize and integrate AI
technology, which will likely be a collaborative process with entities outside the agency.
OIG HIGHLIGHTED WORK
1 SBA’s IT Investment Governance Framework (Report 24-10)
2 Fiscal Year 2024 Federal Information Security Modernization Act (Report 25-13)
3 Undetected Vulnerabilities from Personally Owned Devices (Report 25-11)
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Other Information (Unaudited)
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 the Inspector General Act of 1978, codified as amended at 5 USC 407 and 420(b)
(2)(B), confidentiality of a complainant’s identity is mandatory absent their consent to release such
information, or unless the Inspector General determines disclosure is unavoidable during the course
of the investigation.
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Other Information (Unaudited)
Agency’s Response to Top Management and
Performance Challenges Facing the Small
Business Administration in Fiscal Year 2026
Under the leadership of President Donald J. Trump and Administrator Kelly Loeffler, the U.S. Small
Business Administration (SBA or Agency) remains dedicated to advancing the mission of support-
ing America’s small businesses while strengthening operational integrity, program oversight, and
strategic management. Throughout Fiscal Year (FY) 2025, the Agency’s top priority was reversing
Biden-era programs and policies that inflicted material damage – whether through personnel policy
that doubled the agency and resulted in 90% of staff working from home, dozens of unneeded real
estate leases, hundreds of millions of dollars in wasteful spending, weakened oversight that resulted
in billions in defaults and delinquencies, partisan initiatives that discriminated against politically
disfavored groups, or a pervasive indifference to addressing billions of dollars of known fraud on be-
half of U.S. taxpayers and small businesses. In furtherance of this objective, the Agency immediately
reversed this damaging agenda, called for an audit, implemented an aggressive plan to strengthen
and modernize its technology infrastructure, reinforced its internal controls, and reasserted rigorous
oversight mechanisms to safeguard taxpayer funds.
Although the Office of the Inspector General (OIG) has appeared unwilling to acknowledge the wide-
spread malfeasance and mismanagement of the SBA under the Biden Administration, or the enor-
mous progress that this Administration has made towards restoring the fiscal prudence, program
integrity and non-partisan accountability that resulted in years of needless risk and costs, the Agency
nonetheless recognizes that this annual review by OIG is statutorily mandated. With a Trump-ap-
pointed Inspector General recently confirmed, the Agency is optimistic that it will have a law enforce-
ment team that is recommitted in their mission to eliminate fraud, stop abuse, and leverage the SBA
as a powerful force multiplier for economic growth.
Under the current Administration, SBA prioritized enterprise-wide initiatives that strengthen over-
sight, reduce risk, improve program outcomes, improve agency workforce productivity and quality,
enhance efficiency, and address fraud. The result was a historic year in the SBA’s 72-year history –
delivering a record $45 billion in 7(a) and 504 loans to 85,000 small businesses – with a smaller staff,
fewer contractors, less spending, and stricter underwriting standards. In total, the Agency reduced
its headcount by 54% and cut annual spending by over $300 million. Meanwhile, the Agency made
substantial progress toward prosecuting billions of dollars in pandemic-era fraud that went unad-
dressed by the Biden Administration and ending abuse within the 8(a) Program for “socially and
economically disadvantaged” small businesses. With prudent controls and management practices
in place, the Agency successfully led nationwide efforts to eliminate regulations, promote American
industry, and level the playing field for rural and veteran entrepreneurs by eliminating Biden-era DEI
and Green New Deal programs.
The Trump SBA is committed to transparency with stakeholders, including Congress, federal part-
ners, and program participants, and continues to apply strategic management decisions to deliver
results for taxpayers and small businesses owners with accountability, integrity, and efficiency.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 160
Other Information (Unaudited)
PROTECTING THE INTEGRITY OF SBA PROGRAMS: Since Day One, cracking down on known fraud
and implementing preventative measures to end abuse was a top priority for the Agency. The Agency
bolstered program integrity through a comprehensive fraud risk framework spanning account reg-
istration, application processing, and pre-distribution screening, as well as retroactive reviews of
pandemic-era disbursals.
After years of inaction, the Agency added guardrails back to its core loan programs, including imple-
menting citizenship and birth date verifications for 7(a) and 504 loan applications, and heightened
domestic ownership requirements to ensure only legal, eligible, Americans can access federally backed
resources. Additionally, the Agency established a task force led by the Agency’s Chief Operating Officer
(COO). The task force meets with senior leadership to review emerging trends, coordinate intra- and
inter- agency actions, and provide strategic direction to protect the integrity of SBA programs.
In an effort to identify and prevent ineligible borrowers from accessing SBA-backed financing, the
Agency expanded data sharing efforts across numerous federal databases, including the U.S. Depart-
ment of Homeland Security’s (DHS) Systematic Alien Verification for Entitlements (SAVE) Program,
Social Security Administration’s (SSA) Enterprise Data Exchange Network (EDEN), and Department of
the Treasury (Treasury)’s Do Not Pay (DNP) database to prevent fraud and improper payments.
Moreover, the Agency halted non-bank lending programs that saw dramatic expansion—and unprec-
edented levels of default and delinquency—under the Biden Administration, including the Commu-
nity Advantage Small Business Lending Company (CASBLC) Program designed to grant 7(a) loans to
“underserved communities” through “mission-based lenders.” Through a new standard operating
procedure (SOP), the SBA now requires existing lenders to meet prudent financial stability standards
as a condition of further participation. In a similar effort to protect taxpayers from avoidable losses,
the Agency eliminated self-certified loan forgiveness for Paycheck Protection Program (PPP) and cre-
ated additional internal reviews before forgiveness is adjudicated.
The assertion that no front-end fraud detection system exists for SBA loan programs is
false. The SBA offers lenders two types of 7(a) and 504 loan application submissions for compliance
check screening: a pre-check on in-progress applications undergoing underwriting and checks on
full applications following the underwriting process. A Do Not Pay verification check was implement-
ed and is not “in the process” of being completed as asserted in OIG’s report. The Agency also imple-
mented a fraud framework to screen and oversee the following stages: (1) Account Registration, (2)
Application Post-Submission Routines, and (3) Pre-Distribution Screening, which provide oversight of
non-bank lenders and lender service providers.
The increased rates of suspected fraudulent loans by non-bank lenders referenced in OIG’s
report occurred in 2021 as part of a Biden-era strategy to increase lending through non-
bank lenders by reducing program-wide underwriting standards and eliminating lender
fees. This policy change, and its role in driving increased defaults and delinquencies within the 7(a)
loan program, represented the single-greatest threat to the zero-subsidy status of the program since
inception. By the time the Trump Administration assumed office, program losses were approaching
$600 million. The Agency now projects an estimated $2.2 billion in taxpayer losses associated with
the four underwriting cohort years of the Biden Administration.
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Other Information (Unaudited)
Although the Trump SBA took immediate action to restore strong underwriting standards
and lender fees to preserve the solvency of the 7(a) program, the OIG fails to acknowledge
this swift corrective action. Remarkably, the OIG conveniently declines to acknowledge the last-
ing damage of Biden-era malfeasance at all, despite sounding the alarm about potential losses to
taxpayers in 2024.
Ludicrously, while the OIG attempts to blame the Trump SBA for failed COVID-19 program
oversight, the office conspicuously omits the critical fact that the Agency stopped accepting
and processing pandemic-era loan applications during the Biden Administration in 2021,
well before President Donald J. Trump won in a historic landslide election for the second
time. Likewise, OIG’s complaints about the Restaurant Revitalization Fund (RRF) and Shuttered Ven-
ue Operators Grant (SVOG) pandemic relief programs should be directed toward the Biden Adminis-
tration, since both programs started and stopped accepting and processing applications in 2021.
Concerning RRF, the assertion that the Agency hasn’t established a process to recover funds
from improper payments is simply false. While the Biden Administration swept it under the rug,
the Trump SBA went back to the data and took action to begin the recovery of those funds. In the
second half of FY25, management determined a reasonable legal basis to seek recoupment of im-
proper RRF payments. Management is completing a review of RRF awards, issuing letters to debtors,
reviewing those debtor responses, and plans to refer identified improper RRF awards as a debt to
Treasury for collection efforts and may, in limited circumstances, require intervention by the Depart-
ment of Justice (DOJ).
The Agency also continues to recover pandemic-era funds identified as potentially fraudulent in col-
laboration with OIG, Treasury, and DOJ. In 2025, the SBA announced the suspension of thousands of
Paycheck Protection Program (PPP) and Covid Economic Injury Disaster Loans (EIDL) borrowers and
issued over 600 demand letters to recoup an estimated $625 million in funding approved through the
SVOG Program. So far, the Agency has received about $3.5 million and plans to refer the grantees to
Treasury for collections.
Regarding SBA’s oversight of federal contracting programs, OIG’s report is inaccurate and
incomplete as it fails to identify the root cause of fraud. One key failure is to provide sufficient
context concerning Biden-era changes to self-certification for certain eligibility requirements while
stating it can lead to fraudsters taking advantage of government contracting programs – and that the
Trump SBA is the first in the 8(a)’s 45-year history to audit this Carter-era program. As written in the
report, the reader could assume that SBA contracting certification programs allow self-certification
for multiple eligibility requirements, rather than just the size of a particular business applicant. Addi-
tionally, the Agency complies with the federal statute regarding the least possible regulatory burden
principle (15 USC 632(x)(2)(B)) when it comes to the efficiency of self-certification. Furthermore, the
OIG’s report inaccurately states that “unscrupulous business owners can make unsupported claims
to attest they are eligible for these certification programs in SAM.gov or SBA’s Dynamic Small Busi-
ness Search Database,” but only the Agency can attest to a small businesses’ “disadvantaged” status
on both of those databases.
Additionally, last year, the Agency commenced a thorough review of the 8(a) program, including
revoking the independent contracting authority of the U.S. Agency for International Aid (USAID),
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 162
Other Information (Unaudited)
launching a comprehensive audit, and issuing letters to all 4,300 8(a) contractors requiring submis-
sion of three years’ worth of financial documents for review. The Agency also updated its sprints for
the Unified Certification Platform (UCP) system to include additional functionalities and features to
support reviews of 8(a) firms, planned for deployment in mid-March 2026. The technology update
aims to help mitigate the risks of 8(a) firm owners exceeding income threshold levels.
MANAGING SBA’S LOAN PORTFOLIO AND PARTICIPATING LENDERS: Although the PPP and COV-
ID-19 EIDL programs no longer accept new applications, the experience gained from those programs
informed improvements to risk management, loan servicing, technology systems, investigations,
and collections across active loan portfolios. As described in the preceding narrative, oversight of
SBA’s loan programs was expanded through the application of more rigorous controls for both bank
and non-bank lenders, including fintech participants. Program monitoring was enhanced to assess
underwriting, loan disbursement, and lender compliance with SBA standards, including through the
reapplication of prudent lending standards. The Agency also expanded pre-distribution screening
and incorporated additional cross-agency verification checks within loan origination infrastructure.
Concerning the Agency’s portfolio of pandemic-era loans, the OIG’s report speculates that the Agency’s
workforce reduction in 2025 could negatively impact its ability to service the portfolio. This conjecture
is wildly divorced from the reality of the data and results presented here. Last year, the Agency reduced
its headcount by over 50% while simultaneously not experiencing any break in service across SBA’s
financial products – thanks to improved technology, fewer internal personnel issues due to reductions,
and improved workflow enabling greater productivity and results for taxpayers and small businesses.
Mandating in-office work for federal employees – instead of allowing the work-from-home culture that
pervaded the Biden Administration – also contributed to stronger results for taxpayers. As impossible as
it may seem to bureaucrats, the federal government can do more with less.
Under Administrator Loeffler, the Agency made enhancements to its origination platform
for lenders, and continues to do so, to ensure the integrity of its programs and reduce risk,
which is unrelated to lender oversight as the OIG report suggests. During the COVID-19 pan-
demic, PPP funds were deployed rapidly, which did not allow for oversight activities to occur in the
same manner as it does for SBA’s continuous programs, such as the 7(a) and 504 Loan Programs. For
emergency programs with time critical capital deployment, the oversight (risk mitigation framework)
must be integrated into the origination platform. The Agency, OIG and others have documented their
perceived deficiencies in the PPP origination platform with the Agency responding with enhance-
ments between rounds of PPP funding as well as continuous improvement since then in support
of ensuring the continued viability of the Agency’s business loan programs. These efforts provide
greater confidence in lender performance, borrower eligibility, and program outcomes, while reduc-
ing the occurrence of improper payments.
Although the OIG urges stronger stewardship of disaster resources, the office fails to acknowledge
the restructuring implemented by this Agency to ensure the availability of adequate disaster fund-
ing after the Biden Administration ran out of money at the height of Hurricane Helene in 2024. The
Trump SBA maintained adequate appropriations through prudent forecasting and robust reporting
and consultation with Congressional partners. With this renewed governance, the Agency approved
over $6 billion in disaster relief for more than 27,000 survivors in 2025.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 163
Other Information (Unaudited)
The Agency disagrees with OIG’s revisionist history that a lapse in disaster loan disbursements between
October and December of 2024 was because “the Agency had not adjusted its forecasted lending level
or annual budget request for disaster assistance since 2009 even though the number and cost of billion-
dollar disasters has generally increased over time.” The Executive Branch historically does not use the
annual budget requests process to mitigate major disaster requirements. In fact, the Biden SBA as-
sured Congress that funding levels were sufficient mere days before disaster struck. While the Agency is
adjusting its annual budget request to provide an updated steady state disaster lending estimate based
on historical factors, gaps in disaster funding may occur should major disasters strike.
MEASURING PERFORMANCE AND MONITORING SBA PROGRAMS: SBA continues to reform pro-
gram performance oversight through expanded analytics and modern reporting dashboards. Oversight
of resource partners programs, including Small Business Development Companies (SBDCs), has been
reinstated after years to support accurate, timely performance reporting that aligns with statutory and
congressional requirements. These actions allow leadership to track key indicators, identify emerging
risks, and implement corrective measures that advance program performance and participant success.
In contrast to the OIG’s report calling for measures to assess goal accomplishments, the
Agency identified performance and consistency gaps at the beginning of the Administra-
tion’s term and is already developing new dashboards to measure, track, and monitor
activity and results. The OIG suggested remediation that would establish performance goals and
measuring progress, yet these actions are not supported by statute in the Small Business Act, by the
Agency’s regulations, or by Office of Management and Budget’s (OMB) guidance. Furthermore, the
OIG’s recommendations are not practicable nor are they funded. The Agency repeatedly attempted
to explain that differences in loan programs and grant-making require unique approaches. The
Agency would like to partner with the OIG in adopting an accountability framework that inverses the
effectiveness of for the Agency’s statutory grant programs, but the Agency does not believe applying
lending metrics to a grant program is useful.
The Agency agrees with the OIG’s proposal to coordinate with resource partners to improve
the tracking and monitoring of performance goals. In fact, this is exactly what the Agency
does. As the Agency revised the goals beginning for the 2024 project year, extensive meetings took
place with resource partners, as well as consultations with America’s SBDC as required by statute. On an
annual basis, SBDCs submit goals for the established metrics through their annual proposal, and these
are reviewed by the Agency. If the goals are not in alignment with past performance, the Agency will
work collaboratively with the SBDCs to adjust the goals accordingly. The OIGs presumption of addition-
al funding to meet goals are completely unfounded. Because of delays in the appropriation and ap-
portionment process, SBDCs may often carry over funds from the previous year to fill existing resource
gaps while awaiting additional funding. This in turn leads to carryover for the next fiscal year but does
not amount to additional money used in any given performance period as the OIG falsely claims.
The OIG itself considered its recommendation that “the agency establish formal procedures for
obtaining and reviewing appropriate supporting documentation to ensure sales and investments
are accurately reported” resolved, as indicated in its published SBA’s Implementation of the SBIR
and STTR Extension Act of 2022 (Report 24-14). OIG closed the recommendation in August 2024. The
formal procedures were followed in performing the FY24 and FY25 performance benchmark assess-
ments, including requiring small businesses to submit documentation that the SBA used to verify
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 164
Other Information (Unaudited)
performance claims. The population of documents provided as evidence of covered sales included
purchase orders, contracts, sales agreements, receipts, and invoices. Covered sales were assessed
and verified as Government Designated Phase III contracts via official federal databases. SBA has
tested and continues to actively pursue external independent data sources to enhance its ability to
validate commercialization activity provided by small businesses in the SBIR/STTR programs.
FINANCIAL REPORTING AND MANAGING DATA: The Agency made significant progress in modern-
izing data management and financial reporting systems. SBA established standardized data-sharing
agreements with multiple federal partners, including SSA, Treasury, and DHS, to eliminate barriers
and improve data accuracy for program administration. The Agency also created the SBA’s first Open
Data Plan (ODP) to improve transparency and broaden public access to SBA data. Efforts to resolve
historical accounting issues associated with COVID-19 era programs continue, with accepted ac-
counting principles applied to closed and charged-off loans. Enterprise reporting dashboards and
continued audit remediation activities give leadership greater visibility into operational and financial
performance, while supporting statutory and regulatory compliance.
The OIG report provides an accurate depiction of the material weaknesses and significant
deficiencies identified by the Agency’s external auditors for FY24. That said, the report
conspicuously omits any reference to the substantial remediation progress achieved by
management during FY25. The auditor’s report indicates that, to date, SBA has successfully re-
mediated three of the seven material weaknesses, two previously identified significant deficiencies
were fully remediated, and one material weakness was downgraded to a significant deficiency. This
meaningful advancement reflects our disciplined, prioritized approach to strengthening the overall
control environment. By failing to acknowledge this considerable year-over-year improvement, the
report inadvertently presents readers of the Agency Financial Report (AFR) with an outdated and
incomplete perspective, one that materially understates the current state of our internal controls. In
reality, the control environment today is demonstrably stronger than in the several prior fiscal years,
with further enhancements already in progress that position the SBA for even greater resilience and
reliability moving forward.
MANAGING RISKS IN INFORMATION TECHNOLOGY SYSTEMS: The SBA has reinforced IT gover-
nance and cybersecurity through the appointment of a new Chief Information Officer (CIO) and Chief
AI Officer (CAIO) and the consolidation of data centers – which have already been reduced from 11 to
four – accompanied by updated oversight from the new AI Governance Council, AI Working Group,
and Data Governance Board. These bodies provide structured reviews of emerging technologies to
support operational efficiency and sound decision-making. Strengthened IT governance supports
security, continuity of operations, and the availability of reliable and timely information across all
SBA programs.
The reinstated AI Governance Council, Data Governance Board, and the new AI Working Group will
oversee the responsible use of artificial intelligence. Additionally, the Agency has upgraded its net-
work infrastructure, is in process of a complete cloud migration, launched AI pilot programs, and
strengthened oversight to ensure compliance, operational excellence, data stewardship, and data
security. The Data Governance Board has also drafted a new Data Strategy and Data Sharing Agree-
ment for all systems.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 165
Other Information (Unaudited)
The Trump SBA has begun developing a comprehensive de-risking strategy centered on modernizing
both our physical assets, our technology infrastructure, and our human capital. The construction of
a new physical Security Operations Center (SOC) infrastructure now serves as the centralized com-
mand center for our defense operations. Supporting this physical upgrade, we have reorganized our
security division into specialized units, specifically our SOC Analyst, Cyber Threat Intelligence, and
Forensics teams. This structural shift ensures that we have dedicated expertise focused on every
stage of a threat, from proactive intelligence gathering and real-time monitoring to deep-dive foren-
sic investigations.
At the core of our technological defense is the introduction of an Extended Detection and Response
(XDR) solution. This unified security incident platform is designed to enhance our detection and re-
sponse capabilities by integrating data across various security layers, providing a more holistic view
of the threat landscape. To complement this, the SBA has moved toward automated security inci-
dent response, which adopts a collaborative approach by integrating security practices directly into
IT operations. By streamlining and automating incidents and vulnerability management, we have
fostered much closer collaboration between our security and IT teams to ensure a unified approach
to security. This synergy significantly reduces the risk of cyber threats while simultaneously increas-
ing operational efficiency across the entire Agency.
In contrast to the Biden SBA, which operated out of a dozen disparately managed data centers, and
recognizing the complexity of modern infrastructure, the Trump SBA has also implemented a Cloud
Native Application Protection Platform (CNAPP) to secure every layer of our cloud environment, from
the initial code to the final runtime. The SBA now employs agentless, API-based scanning to maintain
comprehensive visibility across our multi-cloud environments. This capability allows the Agency to
protect everything it builds and runs in the cloud, ensuring consistent and robust security standards
across all various cloud platforms. Through these combined physical, organizational, and technolog-
ical advancements, the Agency has established a resilient framework for long-term risk management.
To further mature the Agency’s risk management posture, the SBA has proactively engaged with the
Cybersecurity and Infrastructure Security Agency (CISA) to enhance our participation in the Continu-
ous Diagnostics and Mitigation (CDM) Program. This program provides a dynamic approach to fortify-
ing government networks by reducing exposure to known vulnerabilities and streamlining Federal
Information Security Modernization Act (FISMA) reporting.
By aligning the CDM Program with Zero Trust principles, the Agency is moving toward a model that
requires continuous verification of user identities and device security. This evolution has led to an
increased focus on improving incident response capabilities and deploying advanced endpoint
detection and response tools across the Agency’s infrastructure. These combined efforts—integrating
advanced cloud protections with federal-level visibility programs—ensure that the Agency maintains
a proactive and resilient defense against an increasingly sophisticated threat landscape. OIG’s report
inaccurately states that the Agency has 21 unassigned and two in-review cases in AI Inventory, which
the SBA believes is erroneous data from an invalid source.
With the revitalization of the AI Working Group and the AI Governance Council, the AI Use Case Inven-
tory will be reevaluated. It also inaccurately states that no updated internal policies have been posed
on the Agency’s website. However, the Agency published the statutorily required ODP on June 18,
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 166
Other Information (Unaudited)
2025. This 2-year action plan was approved by the Data Governance Board and establishes an enter-
prise-wide strategy and framework to expand and improve access to Agency data. The ODP outlines
the Agency’s intent to comply with the requirements set forth in the OPEN Government Data Act and
incorporates guidance from OMB M-25-05. The remainder of the document discusses the SBA data
governance framework.
CONCLUSION: The Agency recognizes the OIG’s oversight and appreciates the opportunity to pro-
vide additional context on the findings presented in the Top Management and Performance Chal-
lenges in FY26 report. Several issues identified in the report relate to closed COVID-19 programs that
concluded years ago and were never reinforced or investigated during the Biden Administration. The
SBA continues to resolve remaining matters associated with these programs, including recovery of
improperly disbursed funds. The Agency’s current initiatives focus on strengthening internal controls,
improving operational efficiency, and advancing effectiveness and oversight across active programs.
Actions implemented in 2025 reflect this Administration’s structured approach to risk management
and program integrity, informed by lessons learned from prior programs and shaped by modern
oversight needs. The SBA remains committed to maintaining open communication with the OIG
and federal partners, and to supporting small businesses through programs that are well-managed,
transparent, and grounded in sound stewardship of public resources.
Sincerely,
Kelly Loeffler
28th Administrator
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 167
Other Information (Unaudited)
Payment Integrity
The Payment Integrity Information Act of 2019 (PIIA) was established to improve efforts to
identify and reduce Government-wide improper payments. PIIA requires agencies to estimate
improper payments and report on actions to reduce improper payments. In accordance with
Office of Management and Budget (OMB) Circular A-123, Appendix C, Requirements for Payment
Integrity Improvement (M-21-19) (hereafter referred to as “Appendix C”), agencies are required to
identify, assess, prioritize, and respond to payment integrity risks to prevent improper payments
in the most appropriate manner. This report will discuss the SBA’s efforts and results related to
improper payment assessment and reviews. More detailed information on improper payments and
information previously reported in the AFR that is not included in the FY 2025 AFR can be found on
PaymentAccuracy.gov.
The SBA’s improper payment reviews are a multi-layered process that starts with a risk assessment.
If a risk assessment indicates that a program is susceptible to improper payments, then testing is
performed using a statistically valid sampling technique. Based upon the testing results, a corrective
action plan is developed to prevent and remediate the types of errors uncovered. If testing finds a
significant amount of recoverable dollars, the SBA considers the appropriateness of performing a
recapture audit.
The detection and remediation of improper payments is a priority for the Agency. SBA staff monitor
and review for improper payments and implement improvements that will reduce improper payment
rates. The SBA also continually seeks opportunities to enhance and implement internal controls to
reduce the risk for improper payments.
In FY 2025, the SBA reviewed eight programs and activities that were deemed susceptible to
significant improper payments. Of the eight programs reviewed, four programs are major credit
programs mandated by OMB, and four programs are programs that were created as a result of the
pandemic response. The eight programs are:
• 7(a) Loan Guarantees Approvals;
• 7(a) Loan Guarantees Purchases;
• 504 Certified Development Loans Approvals;
• Disaster Assistance Loans;
• Paycheck Protection Program (PPP) Loan Guaranty Purchases;
• Paycheck Protection Program (PPP) Loan Forgiveness;
• Section 1112 Payments; and the
• Shuttered Venue Operators Grant Program (SVOG).
The SBA conducts risk assessments on a three-year rotation cycle for programs not deemed
susceptible to significant improper payments, or earlier if a program was subjected to significant
change in legislation or funding level. Significant improper payments are defined as gross annual
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 168
Other Information (Unaudited)
improper payments exceeding (1) both 1.5 percent of program outlays and $10,000,000, or (2)
$100,000,000. The qualitative risk assessment applies an individual risk weight to each risk factor to
account for the variability in potential risk that each risk factor could impose on a program. This year,
the SBA performed risk assessments on the Growth Accelerator Fund program and the payments
made under Section 1112 of the CARES Act using the revised qualitative risk assessment. The SBA
concluded that the Growth Accelerator Fund Competition Program was not susceptible to significant
improper payments, and that the Section 1112 payments were susceptible to significant improper
payments.
The next sections discuss the SBA’s efforts and results related to improper payment assessments and
reviews.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 169
Other Information (Unaudited)
PAYMENT REPORTING
Table 1: Improper Payment Reporting and Reduction Outlook (Dollars in Millions) 1
FY 2024 FY 2025 Summary FY 2025 Breakdown
Over- FY 2025
Over- Techni- Overpayments Overpayments Techni-
payments Reduction
Program Outlays 2 Outlays 2 Proper Improper Unknown Proper Improper Unknown payments Under- cally (Outside (Within Under cally
IP IP (Outside Target
$ $ Payment Payment Payment Payment Payment Payment (Within Agency paments Improper Agency Agency payments Improper
% $ Agency %7
% % % $ $ $ Control) % Payments Control) Control) $ Payment
Control)
% % $ $ $
%
SBA Programs
7(a) Loan Guaranty
20,294.40 5.44 1,103.35 26,614.89 93.87 6.13 0.00 24,982.37 1,632.51 - 0.00 0.00 0.00 100.00 - - - 1,632.51 5.79
Approvals
7(a) Loan Guaranty
1,394.74 5.34 74.52 2,115.50 98.49 1.07 0.44 2,083.63 22.55 9.31 0.00 75.97 24.03 0.00 - 17.13 5.42 - 1.07
Purchases
504 Certified
Development Loan 6,329.16 3.74 236.73 7,392.04 95.42 4.58 0.00 7,053.63 338.42 - 0.00 0.00 0.00 100.00 - - - 338.42 4.56
Approvals
Disaster Assistance Loans 1,175.70 3.62 42.54 3,223.82 95.13 4.87 0.00 3,066.80 157.02 - 0.00 79.66 20.34 0.00 - 125.08 31.94 - 4.25
COVID Programs
Paycheck Protection
Program (PPP) Loan 1,507.20 21.09 317.83 303.85 80.78 19.04 0.17 245.46 57.86 0.53 0.00 98.62 1.38 0.00 - 57.06 0.80 - 10.00
Forgiveness
Paycheck Protection
Program (PPP) Loan 6,792.08 24.47 1,662.30 1,398.23 86.72 5.17 8.11 1,212.49 72.30 113.44 0.00 100.00 0.00 0.00 - 72.30 - - 5.17
Guaranty Purchases
Section 1112
3, 4 N/A N/A N/A 10,585.15 99.66 0.34 0.00 10,548.67 36.48 - 100.00 0.00 0.00 0.00 36.48 - - - N/A
Payments
Shuttered Venue
Operators Grant N/A N/A N/A 14,604.95 31.06 39.89 29.05 4,535.97 5,826.29 4,242.69 0.00 76.97 0.35 22.67 - 4,484.64 20.62 1,321.03 N/A
3, 5
Program
Restaurant Revitalization
6 28,599.45 0.00 0.07 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
Fund Program
Total 37,493.28 3,437.27 66,238.42 53,729.02 8,143.43 4,365.97 36.48 4,756.21 58.78 3,291.96
1 Amounts and percentages reported on this table may not reconcile due to rounding differences.
2 Outlays in this report represent the base amount of the program activity related to SBA improper payments; and this amount will differ from the amount reported as outlays in SBA’s President’s Budget submissions because they include reesti-
mates of subsidy cost, reimbursements to SBA administrative funds and other costs. Outlays for 7(a) loan guaranty purchases are the amount of disbursements for the purchase of defaulted guarantied loans. Outlays for 7(a) loan guaranty approvals
are the amount of new guaranty approvals by banks and other SBA lending partners. Outlays for 504 CDC loans guarantied are approvals irrespective of disbursement, net of approval increases, decreases, reinstatements and cancellations for the
current year. Outlays for disaster loans are loan disbursements on current year approvals.
3 Prior year data for the program is not available as FY 2025 is the first year program is reporting improper payment data.
4 Section 1112 Payments data pertain to outlays from April 1, 2020 through March 31, 2025. Data pertaining to this timeframe are reported in FY 2025.
5 The Shuttered Venue Operators Grant program data pertain to outlays from April 1, 2021 through March 21, 2024. The last disbursement occurred on May 27, 2021. Data pertaining to this timeframe are reported in FY 2025.
6 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 were reported in FY 2024.
7 Tolerable rates have been established for 7(a) Loan Guaranty Approvals, 7(a) Loan 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 2025 improper payment rate is less than the established tolerable rate, the FY 2025 improper payment rate will be the reduction target).
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 170
Other Information (Unaudited)
The above table presents a summary of the SBA’s improper payment review results and reduction
outlook.
To provide more clarity for the reader, this section is organized by the seven programs and activities
subjected to review for improper payments and provides statistical sampling information and review
results coupled with the SBA’s planned corrective actions to address the improper payments.
7(a) Loan Guaranty Program
The 7(a) Loan Program is the SBA’s most common loan program. The 7(a) Loan Program provides
small businesses with short- and long-term working capital, capital to refinance current business
debt, and capital for specific business expenditures. Key eligibility factors include what the business
does to receive its income, its credit history, and where the business operates.
For the purpose of payment integrity reporting, the 7(a) Loan Program is split into 7(a) Loan Guaranty
Approvals and 7(a) Loan Guaranty Purchases.
7(a) Loan Guaranty Approvals
7(a) Loan Guaranty Approvals describes the loan guaranty approval process. The SBA does not make
loans directly to borrowers; instead, the SBA provides a guaranty to a lender which makes the loan to
a borrower. The SBA delegates authority to certain lenders (13 CFR 120.440) to process, close, service,
and liquidate certain 7(a) loans without prior SBA review. Approximately 80 percent of 7(a) loans are
approved by lenders under their delegated authority. All loans identified as improper payments in FY
2025 were processed by lenders under their delegated authority.
During the loan guaranty approval review process, the SBA reviews the 7(a) loan for calculation
accuracy to ensure that lenders issued the 7(a) loans to eligible borrowers and that loans are made
within statutory, regulatory, and SBA-issued guidelines. At the time of loan approval, no monies
are disbursed. Improper payments identified during loan review result in no monetary loss to the
government.
Statistical Sampling
For 7(a) approval reviews, the sample cases were chosen using PPS Sampling with replacement
from all loan guaranties approved during the 12-month period ended March 31, 2025. The approval
population was divided into two strata based on whether the loan was SBA Express or not. The SBA
determined the appropriate total sample size to be 232 loans from the population. The sample
included net guaranteed approvals of $309,844,445 and improper payments of $23,034,655 within
the sample. Using the Hansen-Hurwitz estimation method, the estimated improper payments rate
for the annual period ending March 31, 2025, was calculated as 6.13%.
The improper payment rate in FY 2024 was 5.44 percent. The increase in the improper payment rate
can be attributed to unintentional lender underwriting errors and insufficient documentation.
Tolerable Rates and Reduction Targets
Guidance in Appendix C to OMB Circular A-123 states that “… agency leaders can set Risk Tolerance
bands for IPs (Improper Payments) … for each program.”
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 171
Other Information (Unaudited)
Prior to the FY 2025 improper payment testing cycle, the SBA established a risk tolerance band for
the 7(a) Loan Guaranty Approval Program improper payments. The risk tolerance band effective for
the FY 2025 review cycle is 2.23 percent to 10.00 percent; while the improper payment rate increased
in FY 2025, it is within SBA’s tolerable improper payment range. In compliance with SBA’s established
processes, the Agency conducted the required annual assessment of the established 7(a) Approvals
tolerable improper payment range. The assessment concluded the previous tolerable improper
payment range was no longer adequate and established a new risk tolerance band of 5.23 percent to
10.00 percent. In addition to the updated risk tolerance band, the SBA has also established a target
reduction rate for this program of 5.79 percent.
Improper Payment Reviews
7(a) Loan Guaranty Approval reviews are conducted to determine whether lenders complied
materially with the 7(a) Loan Program origination requirements, including statutory provisions,
SBA regulations, any agreement the lender executed with the SBA, Standard Operating Procedures,
Loan Authorizations/Terms and Conditions, and official SBA notices and forms applicable to the 7(a)
Loan Program. The reviews are conducted in order to determine if lenders (1) originated the loan in
a prudent and commercially reasonably manner, (2) misrepresented or failed to disclose a material
fact to the SBA, and/or (3) placed the SBA’s financial interest at risk. Loans in the 7(a) Loan Guaranty
Approval Program are reviewed at the time of approval; these loans are generally made to the right
recipient for the right amount, but in the approval process, lenders failed to follow all statutes and
regulations. In these cases, there is no amount that needs to be recovered. However, because the
lender failed to adhere to all applicable statutes, the guaranty is considered technically improper.
Actions to Improve Payment Integrity
The SBA revised its 7(a) Lender and Developing Company Loans Standard Operating Procedure
(SOP) in August of 2023 and issued a second revision in November of 2023. To improve payment
integrity, the SBA provided training on the revised SOP – the SOP in effect during the FY 2025
improper payment testing cycle - to lenders prior to issuance and continued providing quarterly
training while this SOP remained in effect.
The SBA updated its 7(a) Lender and Developing Company Loans SOP in 2025, largely re-implementing
requirements that were in place before January 2021, including restoring 7(a) underwriting criteria,
reinstituting the SBA Franchise Directory with streamlined procedures, re-affirming that SBA Lenders
determine whether the Applicant is eligible for a loan guaranteed by SBA, and eliminating the “do what
you do” philosophy from the SOP. This SOP became effective in June 2025 and will apply to 7(a) Loan
Guaranty Approvals in the FY 2026 improper payment testing cycle. To improve payment integrity,
the SBA provided training on the updated SOP prior to issuance and continues to provide quarterly
training. The SBA also provides additional training on specific topics throughout the year.
Root Causes and Corrective Action
Approximately 80 percent of all 7(a) Loan Guaranty Approvals are performed by lenders with
delegated authority to evaluate, process, close, and disburse 7(a) loans. Lenders with delegated
authority were responsible for all identified improper payments for 7(a) Loan Guaranty Approvals in
FY 2025.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 172
Other Information (Unaudited)
Improper payments in the 7(a) Loan Guaranty Approval Program were caused by lenders’ failure to
verify all components of loan eligibility (program integrity issues or project structure issues), lenders’
failure to provide loan documentation, and data entry errors. Because the improper payments
for these 7(a) approvals are technically improper, the OMB root cause is identified as Statutory
Requirements of Program Were Not Met.
To reduce and/or eliminate the occurrence of future improper payments, a Corrective Action Plan
has been developed for the 7(a) Loan Guaranty Approval Program centers. Specific corrective actions
are determined based upon the primary reason for the error, with the purpose of both remedying the
error and preventing recurrence.
1. Collaboration with the Office of Credit Risk Management (OCRM) through referrals;
2. Collaboration with 7(a) Loan Guaranty Processing Center (LGPC) Management and the Office of
Financial Assistance (OFA), informing management of identified deficiencies for incorporation
into policy and training, along with feedback to lenders and LGPC; and/or
3. Provide external training to lenders on regulatory and policy requirements governing eligibility,
proper loan structure, and documentation.
The Office of Financial Program Operations (OFPO) shares the loan level and lender deficiencies
identified during the reviews with OCRM and OFA and will continue its efforts throughout the
upcoming fiscal year to ensure that lender deficiencies are monitored and referred to OCRM
recommending lender deficiencies raising concern to be incorporated into OCRM’s Risk Based
Reviews and OFA’s policy revisions and updates.
Corrective actions for specific loans are tracked at the loan level through a centralized database.
The Quality Control Specialists for 7(a) Loan Guaranty Approvals monitors errors from identification
through completion of the corrective actions. OFPO management provides oversight to ensure
that milestones are met. Improper payments identified as a result of the FY 2025 PIIA reviews have
been resolved through recommendations to reduce or cancel the loan guaranty, efforts to obtain
additional documentation, and/or referral to other offices. Corrective actions are initiated within 120
days and are generally taken within the fiscal year.
7(a) Loan Guaranty Purchases
7(a) Loan Guaranty Purchases describes the loan guaranty purchase process. A lender may demand
that the SBA honor its guaranty on a loan if a borrower is in default or files for federal bankruptcy
protection. During the loan guaranty purchase process, the SBA will purchase (also called “honor”)
the guaranty on a defaulted SBA loan.
During the loan guaranty purchase review process, the SBA reviews the 7(a) loan guaranty purchase
to determine that the honoring of the guaranty was done appropriately: that the lender complied
materially with Loan Program Requirements as defined in 13 CFR 120.110; that the lender made,
closed, serviced, and liquidated the loan in a prudent manner; that the lender’s improper action or
inaction did not place the SBA at risk; and that the lender did not misrepresent or fail to disclose a
material fact regarding the loan.
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Statistical Sampling
For 7(a) purchase reviews, the sample cases were chosen using PPS Sampling with replacement from
all purchases processed during the 12-month period ended March 31, 2025. The purchase population
was divided into four strata based on the following factors: 1) which servicing office processed the
purchase, and 2) whether the loan was considered an early default, regardless of servicing office. The
SBA determined the appropriate total sample size to be 240 loans from the population. The sample
included aggregate purchase outlays of $312,426,648 and an absolute value of improper payments of
$4,093,797 within the sample. Using the Hansen-Hurwitz estimation method, the estimated improper
payment rate for the 7(a) guaranty purchase population is 1.07 percent for the annual period ending
March 31, 2025.
The improper payment rate for 7(a) loan guaranty purchases in FY 2025 was 1.07 percent, a
significant reduction from the FY 2024 rate of 5.34 percent. This reduction in the improper payment
rate is part of a cycle of higher rates followed by lower rates. The SBA has been consistent throughout
the past few years in providing training for staff involved in guaranty purchases.
Tolerable Rates and Reduction Targets
Guidance in Appendix C to OMB Circular A-123 states that “… agency leaders can set Risk Tolerance
bands for IPs (Improper Payments) … for each program.”
Prior to the FY 2025 improper payment testing cycle, SBA has established a risk tolerance band for
FY 2025 for the 7(a) Loan Guaranty Purchases Program improper payments. The risk tolerance band
for this program is 5.78 percent to 10.00 percent. In compliance with SBA’s established processes,
the Agency conducted the required annual assessment of the established 7(a) Guaranty Purchases
tolerable improper payment range, concluding no revisions were needed to the risk tolerance band
for FY 2026. In addition to the risk tolerance band annual evaluation, the SBA also established a
target reduction rate for this program of 1.07 percent.
Improper Payment Reviews
7(a) Loan Guaranty Purchase reviews are conducted to determine whether lenders complied
materially with the 7(a) Loan Program origination requirements, including statutory provisions, SBA
regulations, any agreement the lender executed with the SBA, standard operating procedures, loan
authorizations, and official SBA notices and forms applicable to the 7(a) Loan Program. The reviewers
determined whether the lender (1) originated, serviced, and liquidated the loan in a prudent and
commercially reasonable manner, (2) misrepresented or failed to disclose a material fact to the SBA,
and/or (3) put the SBA’s financial interest at risk. Loans in the 7(a) Loan Guaranty Purchase Program
are reviewed at the time of guaranty purchase, after SBA has honored its guaranty.
Actions to Improve Payment Integrity
The SBA announced revisions to its 7(a) Loan Servicing and Liquidation SOP in September 2024,
which became effective December 2024. Revisions to the SOP were largely the result of feedback
received from the public, including participating lenders and representatives of various trade
associations, addressing technical corrections to clarify the SOP. To improve payment integrity,
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the SBA provided training on the revised SOP to lenders prior to issuance and continued providing
quarterly training while this SOP remained in effect.
The SBA updated its 7(a) Loan Servicing and Liquidation SOP in September 2025. This SOP became
effective in November 2025 and will apply to 7(a) Guaranty Purchases in the FY 2026 improper payment
testing cycle. At time of publication, the SBA is in the process of providing training on the updated SOP
and will continue to provide quarterly training as part of its continuous efforts to improve payment
integrity. The SBA also provides additional training on specific topics throughout the year.
Root Causes and Corrective Action
The root cause categories established by OMB are: (1) Statutory Requirements of Program Were Not
Met; (2) Unable to Determine Whether Proper or Improper; (3) Data/Information Needed Does Not
Exist; (4) Inability to Access Data/Information; and (5) Failure to Access Data/ Information. The root
cause for 7(a) Loan Guaranty Purchases improper payments was identified as Failure to Access Data/
Information. Improper payments occurred when purchase processors failed to identify lenders’
deficiencies during the evaluating, processing, closing, disbursing, servicing, liquidating, or litigating
of an SBA guaranteed loan. The root cause for 7(a) Loan Guaranty Purchases improper payments was
identified as Statutory Requirements of Program Were Not Met when the source of equity injection
funds was not provided.
The primary reasons for 7(a) Loan Guaranty Purchase improper payments included improper payment
of expenses related to the care and preservation of collateral, failing to properly identify eligibility for
debt refinance, and failing to adequately reconcile the purchase from the Secondary Market.
To reduce and/or eliminate the occurrence of future improper payments, a Corrective Action Plan
has been developed for the 7(a) Loan Guaranty Purchase Centers. Specific corrective actions
are determined based upon the primary reason for the error to prevent recurrence of improper
payments. The Corrective Action Plan includes:
• Internal training for purchase processors, reviewers, and approvers to determine proper
recommendation of guaranty purchase or denial: ensuring that borrower and loan eligibility
requirements are met; ensuring that liquidation expenses are appropriate and/or approved,
verifying the documentation and accuracy of calculations, ensuring that documentation for
account reconciliation is complete, and verifying the proper use of proceeds and reviewing
expenses for eligibility of reimbursement.
• Internal feedback provided to center staff regarding the specific loan-level deficiency upon
detection.
Corrective actions are tracked at the loan level through a centralized database. The Quality Control
Specialists for the 7(a) Loan Guaranty Purchase centers monitor errors from identification through
completion of the corrective action. Headquarters management provides oversight to ensure that
milestones are met. Improper payments identified as a result of the FY 2025 PIIA reviews have been
resolved through efforts to obtain additional documentation, referral for denial review, collection of
funds from the lender, or reimbursement to the lender. Corrective actions were generally completed
at the loan level within 60 days, and all actions were taken by the end of the fiscal year.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 175
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504 Certified Development Loan Approvals
The 504 Certified Development Company Loan Program provides small businesses with long-term,
fixed rate financing for major fixed assets that promote business growth and job creation. 504 loans
are available through Certified Development Companies (CDCs). CDCs are the SBA’s community-
based partners. They are nonprofit corporations certified and regulated by the SBA to package,
process, close, and service 504 loans in order to promote economic development within their
communities. CDCs are certified and regulated by SBA.
During the loan approval review process, the SBA reviews the 504 loan to ensure that the CDC lender
issued the 504 loan to an eligible borrower and that the loan was made within statutory, regulatory,
and SBA-issued guidelines.
Statistical Sampling
For 504 CDC approval reviews, the sample cases were chosen using PPS sampling with replacement
from all loan guaranties approved during the 12-month period ended March 31, 2025. The approval
population was not stratified. The SBA determined the appropriate total sample size to be 219 loans
from the population. The sample included net approval outlays of $501,711,000 and improper payments
of $23,253,500 within the sample. Using the Hansen-Hurwitz estimation method, the estimated
improper payments rate for the annual period ending March 31, 2025, was calculated as 4.58%.
The improper payment rate for 504 loan approvals in FY 2024 was 3.74 percent, and the unknown
payment rate was 0.39 percent. The estimated improper payment rate, including unknown payments
for FY 2024, was 4.54 percent, consistent with the estimated improper payment rate for FY 2025, and
within the established tolerance band for improper payments. While nominal, the increase in the
improper payment rate can be attributed to ineligible project structures, borrower eligibility, and
analysis of borrower’s repayment ability.
Tolerable Rates and Reduction Targets
Guidance in Appendix C to OMB Circular A-123 states that “… agency leaders can set Risk Tolerance
bands for IPs (Improper Payments) … for each program.”
Prior to the FY 2025 improper payment testing cycle, SBA established a risk tolerance band for 504
Certified Development Loan Approval Program FY 2025 improper payments. The risk tolerance band
for this program is 3.96 percent to 10.00 percent. In compliance with SBA’s established processes, the
Agency conducted the required annual assessment of the established tolerable improper payment
range, concluding the existing risk tolerance band to be adequate with no recommended revisions
for FY 2026. In addition to the risk tolerance band re-evaluation, the SBA has also established a target
reduction rate for this program of 4.56 percent.
Improper Payment Reviews
The 504 Certified Development Loan Approval reviews were conducted to determine whether CDCs
complied materially with the program’s origination requirements, including statutory provisions, SBA
regulations, any agreement the CDC executed with the SBA, standard operating procedures, loan
authorizations, and official SBA notices and forms applicable to the 504 loan program. The reviews
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were conducted to determine whether CDCs (1) originated the loans in a prudent and commercially
reasonable manner, (2) misrepresented or failed to disclose a material fact to the SBA, and/or (3) put
the SBA’s financial interest at risk.
504 Loan Approval PIIA reviews are conducted after the time of loan approval but usually prior to
disbursement. At the time of loan approval, no monies are disbursed. Improper payments identified
during loan review result in no monetary loss to the government.
Actions to Improve Payment Integrity
The SBA revised its 7(a) Lender and Developing Company Loans Standard Operating Procedure
(SOP) in August of 2023 and issued a second revision in November of 2023. To improve payment
integrity, the SBA provided training on the revised SOP – the SOP in effect during the FY 2025
improper payment testing cycle - to lenders prior to issuance and continued providing quarterly
training while this SOP remained in effect.
The SBA updated its 7(a) Lender and Developing Company Loans SOP in 2025, largely re-implementing
requirements that were in place before January 2021, including restoring 7(a) underwriting criteria,
reinstituting the SBA Franchise Directory with streamlined procedures, re-affirming that SBA Lenders
determine whether the Applicant is eligible for a loan guaranteed by SBA, and eliminating the “do
what you do” philosophy from the SOP. This SOP became effective in June 2025 and will apply to 504
Loan Approvals in the FY 2026 improper payment testing cycle. To improve payment integrity, the SBA
provided training on the updated SOP prior to issuance and continues to provide quarterly training. The
SBA also provides additional training on specific topics throughout the year.
Root Cause and Corrective Action
504 Guaranty Approval PIIA reviews are conducted after loan approval but usually prior to
disbursement. These loans are generally made to the right recipient for the right amount, but
CDCs failed, in the approval process, to follow all statutes, regulation, and SBA Loan Program
requirements. In these cases, there is no amount that needs to be recovered. However, because the
CDC lender failed to adhere to all applicable statutes, the loan is considered technically improper.
The predominant reasons for 504 Loan Approval improper payments in FY 2025 were (1) CDCs’ failure to
ensure borrowers adhered to all regulations include confirmation of legal residency status (2) CDC failed
to properly exercise its delegated authority; (3) CDCs’ failure to adequately address all collateral concerns.
The root cause categories established by the OMB are: (1) Statutory Requirements of Program
Were Not Met; (2) Unable to Determine Whether Proper or Improper; (3) Data/Information Needed
Does Not Exist; (4) Inability to Access Data/Information; and (5) Failure to Access Data/ Information.
Because the improper payments for these 504 approvals are technically improper, the OMB root
cause is identified as Statutory Requirements of Program Were Not Met.
To reduce or eliminate the occurrence of future improper payments, a Corrective Action Plan has
been formalized for the 504 approval center. Specific corrective actions are determined based upon
the primary reason for the improper payment with the purpose of both remedying the improper
payment and preventing recurrence.
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Other Information (Unaudited)
Plans for improvement include the following:
• Collaborating with the Office of Credit Risk Management (OCRM) to recommend that specific
lender deficiencies be monitored and incorporated into Risk Based Reviews;
• Collaborating with the Office of Financial Assistance (OFA) to inform the office of deficiencies
identified for potential incorporation into policy, regulatory, or standard operating procedure
rewrite or update; and
• Conducting external training for lenders to ensure that appropriate documentation is obtained
and analyzed prior to loan approval that policy requirements are met.
The corrective actions are currently in process. The SBA will continue to share the loan level and
lender deficiencies identified during the reviews with the OFA and the OCRM. The SBA will also
continue its efforts to ensure that CDC deficiencies are monitored.
Because 504 loans are usually reviewed prior to monies being disbursed, resolution of an identified
improper payment is usually through obtaining additional documentation from the CDC to
remedy the potential improper payment or through cancellation of the loan. There is no monetary
outlay at approval, and thus no loss to the Federal Government. Specific corrective actions on
loans reviewed are tracked at the loan level through a centralized database. The Quality Control
Specialist for 504 approvals monitors errors from identification through completion of the corrective
action. Management provides oversight to ensure that milestones are met. All improper payments
identified as a result of the FY 2025 PIIA reviews have been resolved through obtaining additional
documentation, loan modification, or cancellation of the loan authorization. Corrective actions were
generally completed at the loan level within 180 days.
Disaster Assistance Loans
Disaster assistance loans provide low-interest loans to help businesses and homeowners recover from
declared disasters. Disaster assistance is available to all businesses located within a declared disaster
area, private non-profit organizations, homeowners, and renters affected by declared disasters. Disaster
assistance loans can be used to pay for personal or business losses not covered by insurance or funding
from other government agencies, as well as for business operating expenses that could have been met
had the disaster not occurred. The Disaster Assistance Loan Program is a direct loan program, meaning
that the SBA approves and makes the loans and there are no intermediary lenders.
The Disaster Assistance Loan Program reviews for improper payments were conducted to determine
whether loans were materially in compliance with SBA guidance, including determining whether
borrowers were eligible for the disaster assistance loan, whether the amount approved was correct,
whether the loan was made in accordance with existing regulations, SOPs and other internal guidance.
Statistical Sampling
For Disaster Disbursement reviews, the sample cases were chosen using PPS Sampling with
replacement from all loan disbursements processed during the 12-month period ended March 31,
2025. The disbursement population was divided into three strata based on the loan type: home
loans, business physical loans, and economic injury and disaster (EIDL) loans. The SBA determined
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the appropriate total sample size to be 241 loans from the population. The sample included net
disbursements of $34,630,721 and improper payments of $1,998,232 within the sample. Using the
Hansen-Hurwitz estimation method, the estimated improper payments rate for the annual period
ending March 31, 2025, was calculated as 4.87%.
The improper payment rate in FY 2024 was 3.62 percent. The increase in the improper payment rate
from FY 2024 to FY 2025 were largely the result of improperly assessed closing fees on loans.
Tolerable Rates and Reduction Targets
Guidance in Appendix C to OMB Circular A-123 states that “… agency leaders can set Risk Tolerance
bands for IPs (Improper Payments) … for each program.”
Prior to the FY 2025 improper payment testing cycle, SBA established a risk tolerance band for the
Disaster Assistance Loan Program for FY 2025 improper payments. The risk tolerance band for this
program is 3.96 percent to 10.00 percent. In compliance with SBA’s established processes, the Agency
conducted the required annual assessment of the established tolerable improper payment range,
concluding the existing risk tolerance band to be adequate with no recommended revisions for FY
2026. The SBA will assess the adequacy of this risk tolerance band annually. In addition to the risk
tolerance band re-evaluation, the SBA has also established a target reduction rate for this program of
4.25 percent.
Actions to Improve Payment Integrity
The SBA is instituting an updated SOP 50 30, disaster assistance program, that streamlines the
disaster lending process. Processing automation through the Unified Lending Platform, coupled with
the streamlined SOP, specifically addresses the most prevalent causes of improper payments.
Root Cause and Corrective Action
Disaster assistance loan samples are selected from loan disbursements. A disaster assistance loan
may have several disbursements before it is disbursed in full. During the loan review process, the
SBA reviews the original loan processing and underwriting, any loan modifications, such as increases
in the loan amount or additional borrowers, to determine eligibility of the borrower and whether
the amount is appropriate. The SBA also verifies that the amount of loan is commensurate with the
amount of damage. Finally, the SBA reviews the actual disbursement to determine that the monies
are provided to the right person, in the right amount, and for an eligible use of proceeds.
The root cause categories established by the OMB are: (1) Statutory Requirements of Program Were
Not Met; (2) Unable to Determine Whether Proper or Improper; (3) Data/Information Needed Does
Not Exist; (4) Inability to Access Data/Information; and (5) Failure to Access Data/ Information. The
root cause of improper payments in the Disaster Assistance Loan program was Failure to Access
Data/Information and Statutory Requirements of Program Were Not Met. The prevalent causes of
improper payments stemmed from fees charged for secured loans contrary to the Code of Federal
Regulations (CFR), duplication of benefits not adequately addressed, and improper calculation or
determination of economic injury eligibility.
During FY 2025, Disaster Lending Operations Division (DLOD) utilized the new Unified Lending
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Platform (ULP) to facilitate loan closings for disaster survivors, aiming to streamline the process and
reduce burden. It was subsequently identified that the DLOD was not authorized to charge fees under
the Code of Federal Regulations (CFR). In response, a corrective action was implemented in February
2025, providing disaster survivors the option to either close the loan themselves or authorize the
Agency to do so on their behalf, thereby ensuring compliance with 13 CFR 123.8.
Paycheck Protection Program (PPP)
The CARES Act established the Paycheck Protection Program (PPP) loans to provide economic relief
to small businesses and incentivize small businesses to keep their workers on the payroll because of
the COVID-19 pandemic. The SBA separated PPP into three payment integrity reporting categories –
PPP Approvals, PPP Forgiveness, and PPP Purchases. PPP ended in May 2021. Although no new PPP
funds are being disbursed, borrowers may still request forgiveness for a PPP loan, and lenders may
request guaranty purchase of a PPP loan. The SBA is reporting under PIIA on these aspects of the
program.
Paycheck Protection Program (PPP) Loan Forgiveness
PPP loans can be forgiven if the funds are used for payroll costs, interest on mortgages, rent, utilities,
or other eligible expenses. A borrower can apply for forgiveness once all loan proceeds for which
the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness at any
time for up to 5 years from the date that SBA issued the loan number. If borrowers do not apply for
forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no
longer deferred, and borrowers will begin making loan payments to their PPP lender.
PPP loan forgiveness requests were submitted via SBA’s forgiveness platform and, although the
lenders and borrowers were required to retain supporting documentation, they were not required to
submit that documentation to the SBA. In FY 2024, SBA requested supporting documentation from
lenders in order to review the propriety of PPP forgiveness samples. The SBA reviewed samples to
determine whether the borrower was eligible for an SBA loan under 13 CFR 120.110, and whether the
borrower met all other regulatory criteria for a PPP loan.
Statistical Sampling
For Paycheck Protection Program (PPP) Forgiveness reviews, the sample cases were chosen using
PPS Sampling with replacement from all forgiveness outlays processed during the 12-month period
ended March 31, 2025. The forgiveness population was divided into three strata based on the lender
type: 1) Bank lender, 2) State Regulated Finance Company lender, and 3) All Other lender types. The
SBA determined the appropriate total sample size to be 412 loans from the population. The sample
included aggregate forgiveness outlays of $426,436,779 and an absolute value of improper payments
of $14,656,755 within the sample. Using the Hansen-Hurwitz estimation method, the estimated
improper payment rate for the PPP Purchase population is 19.04 percent for the annual period
ending March 31, 2025.
In FY 2024, the PPP Loan Forgiveness improper payment rate was 21.09 percent, and the unknown
payment rate was 4.06 percent.
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Reduction Targets
The SBA has set a reduction target for PPP Loan Forgiveness at 10.0 percent, the statutory
compliance limit, for FY 2025. Meeting this reduction target will also bring this program into
compliance with the PIIA.
Root Cause and Corrective Action
PPP Loan Forgiveness payments are reviewed after the forgiveness has been paid to the borrower.
Borrower and lender documentation is reviewed to determine whether the borrower was eligible,
whether the loan was free of “hold” codes, and whether required documentation was completed and
accurate. The SBA also reviewed forgiveness payments to determine whether the loan amount was
documented and calculated correctly.
The predominate reasons for improper payments in PPP Loan Forgiveness were missing or
incomplete documentation, and borrower and lender errors in calculation.
The root cause categories established by the OMB are: (1) Statutory Requirements of Program Were
Not Met; (2) Unable to Determine Whether Proper or Improper; (3) Data/Information Needed Does
Not Exist; (4) Inability to Access Data/Information; and (5) Failure to Access Data/ Information. The
root cause of these overpayments was Failure to Access Data.
Corrective actions to address the improper payments identified may include, but are not limited to,
the following: (1) implementing a quality control review process and/or (2) internally escalating the
loan review of a loan for a loan review decision.
Paycheck Protection Program (PPP) Loan Guaranty Purchases
If a PPP loan is not forgiven, the SBA may purchase (honor) all or part of the PPP loan guaranty.
Lenders may request that the SBA purchase the guaranty of a PPP loan in the event of a default or
other qualifying event. A lender must have made certain certifications about the loan and supporting
information. The SBA reviews the lender’s request for guaranty purchase and charge-off in
accordance with PPP Loan Program requirements. The SBA will honor its guaranty and will purchase
100 percent of the outstanding balance of the loan provided that the lender has complied with all
PPP Loan Program requirements.
PPP Loan Guaranty Purchase requests were submitted via SBA’s PPP platform and, although the lenders
were required to retain supporting documentation, they were not required to submit that documentation
to the SBA. The SBA requested documentation from lenders for those guaranty purchases that were a
part of the sample. PPP guaranty purchase samples were reviewed to determine whether the lender was
eligible to receive a loan guaranty payment; whether the lender received required borrower certifications;
and whether the PPP loan met all statutory, regulatory, and internal requirements for payment.
Statistical Sampling
For Paycheck Protection Program (PPP) Purchase reviews, the sample cases were chosen using
PPS Sampling with replacement from all purchases processed during the 12-month period ended
March 31, 2025. The purchase population was divided into three strata based on the lender type:
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1) Bank lender, 2) State Regulated Finance Company lender, and 3) All Other lender types. The SBA
determined the appropriate total sample size to be 408 loans from the population. The sample
included aggregate purchase outlays of $236,626,898 and an absolute value of improper payments
of $16,093,240 within the sample. Using the Hansen-Hurwitz estimation method, the estimated
improper payment rate for the PPP Purchase population is 5.17 percent for the annual period ending
March 31, 2025.
In FY 2024, the PPP Loan Guaranty Purchase improper payment rate was 24.47 percent and the
unknown payment rate was 0.25 percent. Improper payments were largely due to lack of supporting
documentation due to time constraints. The FY 2025 estimated improper payment rate for PPP Loan
Guaranty Purchases shows a significant reduction in improper payments and improvement in the
program’s payment integrity. The program both met the previously established reduction target of 10
percent and has brought the program into compliance with PIIA.
Reduction Targets
The SBA has set a reduction target for PPP Loan Guaranty Purchase at 5.17 percent, which anticipates
the program remaining in compliance with PIIA.
Root Cause and Corrective Action
PPP Loan Guaranty Purchase payments are reviewed after the guaranty has been paid to the lender.
Borrower and lender documentation is reviewed to determine whether the lender is eligible, and
whether the amount of guaranty purchase request equaled the amount in SBA systems. The SBA
also verifies that the lender received borrower certifications, including whether the borrower had
been in business on or around February 20, 2020. The SBA also checked that the eligible payroll was
accurately accounted for.
The predominate reasons for improper payments in PPP Loan Guaranty Purchases were (1) lender’s
failure to verify that the borrower was in business on February 20, 2020; (2) lender’s failure to verify
average monthly payroll; and (3) unacceptable or missing identification of the borrower.
The root cause categories established by the OMB are: (1) Statutory Requirements of Program Were
Not Met; (2) Unable to Determine Whether Proper or Improper; (3) Data/Information Needed Does
Not Exist; (4) Inability to Access Data/Information; and (5) Failure to Access Data/ Information. The
root cause of these overpayments was Failure to Access Data.
To recover PPP Loan Guaranty improper payments, the SBA will use processes similar to the process
used for its 7(a) guaranty purchase portfolio, which begins with demanding repayment from the lender.
Section 1112 Payments
Section 1112 of the CARES Act authorized the SBA to provide temporary debt relief to eligible
borrowers in the 7(a), 504, and Microloan programs by making principal, interest, and fee payments
on their behalf. This authority was time-limited, and all appropriated funding for the Section 1112
program has been fully expended. As a result, SBA no longer administers or disburses payments
under this program. Accordingly, this reporting period represents the final year in which SBA is
conducting payment integrity review and reporting for Section 1112 payments.
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Statistical Sampling
For Section 1112 reviews, sample cases were chosen using Probability Proportional to Size (PPS)
with Replacement sampling against the population of all disbursements processed during the period
April 1, 2020, through March 31, 2025. This population was divided into three strata based on their
program type: 7(a), 504, and Microloan. The SBA determined the appropriate total sample size to be
386 loans from this population. The samples selected from the population totaled $4,673,849. The
results of sample review identified improper payments totaling $12,989. Using the Hansen-Hurwitz
estimation method, the estimated improper payments rate for the entire Section 1112 population
was calculated as 0.34%. The SBA did not identify any unknown payments for Section 1112.
Reduction Targets
Authority under the Section 1112 Payment program was authorized under Section 1112 of the CARES
Act and has since expired with all appropriated funds expended. FY 2025 improper payment rate
estimates encompassed all disbursements for the program. There was no funding for this program in
FY 2025, no disbursements will be made in FY 2026, and therefore no improper payment rates will be
extrapolated. Further, the SBA has not set a reduction target, as this program has ended.
Actions to Improve Payment Integrity
All funding for this program has been expended. The SBA has not planned any actions to improve
program integrity that are specific to this program.
Shuttered Venue Operators Grant Program (SVOG)
The Shuttered Venue Operators Grant program was established by the Economic Aid to Hard-Hit
Small Businesses, Nonprofits, and Venues Act (also known as the Economic Aid Act) on December
27, 2020, to offer critical assistance to qualifying venues and performing arts entities impacted by the
COVID-19 pandemic. The SVOG program commenced with an appropriation of $15 billion under the
Economic Aid Act and an additional allocation of $1.2 billion through the American Rescue Plan Act
on March 11, 2021. Collectively, the SVOG program was allocated a total of $16.2 billion.
Administered by the Small Business Administration’s (SBA) Office of Disaster Recovery and Resilience
(ODR&R), the Shuttered Venue Operators Grant provided emergency assistance to ensure the
sustainability of eligible live venues, promoters, theatrical producers, talent agents, live performing
arts organizations, museums, and film theaters during economic conditions caused by COVID 19
pandemic.
Statistical Sampling
The first SVOG disbursement occurred on May 27, 2021. The last SVOG disbursement occurred
on December 19, 2022. For SVOG reviews, sample cases were chosen using PPS sampling with
replacement from all SVOG disbursements within the sampling timeframe of April 1, 2021, through
March 31, 2024, to ensure that all disbursements processed were included. This population was
divided into six strata based on business type: live performing arts organization operators, live venue
operators or promoters, motion picture theater operators, museum operators, talent representatives,
and theatrical producers.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 183
Other Information (Unaudited)
The SBA determined the appropriate total sample size to be 547 loans from this population. The
sample included net approval outlays of $1,779,696,434 and improper payments of $837,260,308
within the sample. Using the Hansen-Hurwitz estimation method, the estimated improper payments
rate for the entire SVOG population was calculated as 39.90 percent. Using the Hansen-Hurwitz
estimation method, the estimated unknown payments rate for the entire SVOG population was
calculated as 29.05 percent.
Reduction Targets
The last SVOG disbursement occurred on December 15, 2022. FY 2025 improper payment rate
estimates encompassed all disbursements for the program; therefore, no improper payment rates
will be extrapolated. Further, the SBA has not set a reduction target, as there are no additional
disbursements in this specific program.
Actions to Improve Payment Integrity
The last SVOG disbursement occurred on December 15, 2022. Overpayments identified in the improper
payments’ reviews are subject to recovery efforts. Determination of a course of action is made on a
case-by-case basis, depending on the specific details of the reason for the improper payment.
Root Cause and Corrective Action
The root cause categories established by OMB are: (1) Statutory Requirements of Program Were Not
Met (SR); (2) Unable to Determine Whether Proper or Improper (UD); (3) Data/Information Needed
Does Not Exist (DI); (4) Inability to Access Data/Information (IA); and, (5) Failure to Access Data/
Information (FA).
The predominant root cause identified for the Shuttered Venue Operators Grant (SVOG) program is
Statutory Requirements of Program Were Not Met. The disbursements categorized under this root
cause pertain to instances where the Principal Business Activity did not align with the established
statutory guidelines. Furthermore, the completion of closeout requirements was not executed in
accordance with statutory provisions.
The second root cause identified relates to the Failure to Access Data/Information. Disbursements
within this category resulted from the SBA’s inability to obtain critical documentation when assessing
eligibility, as well as accessing essential documents required for calculating revenue and/or grant
award amounts.
To mitigate the occurrence of improper future payments and identify overpayments, SBA will
implement the following corrective actions:
• Train staff to address procedural inconsistencies.
• Obtain and analyze appropriate eligibility documentation to ensure that policy requirements are met.
• Identify deficiencies for potential incorporation into policy, regulatory, or standard operating
procedure rewrites or updates.
• Review improper payments for recoupment.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 184
Other Information (Unaudited)
The FY 2025 Unknown Payment (UP) estimate rate is 29.052 percent. The root causes of the
“Unknown Payment” were identified as: (1) A lack or insufficiency of eligibility documentation to
determine whether the payment was proper or improper, (2) The Agency did not complete the
required cost compliance monitoring, which would have identified if the payment was utilized
according to statutory requirements, and (3) The closeout requirement for the grant has not been
fulfilled. Unknown payments require further investigation and resolution to ensure the proper
allocation of resources and maintain the integrity, efficiency, and compliance of the program with
established guidelines and regulations.
SBA’s approach to resolving the identified unknown payments is to employ corrective actions that
efficiently prioritize resources and maintain the program’s integrity. SBA will implement corrective
actions to include, but are not limited to:
• Uploading the necessary eligibility documentation such as LexisNexis reports, Audit reports, etc.
• Completing the Cost Compliance Monitoring events.
• Finalizing the closeout process.
Payment Recovery Effort
The SBA makes every effort to recover improper payments identified during their improper payment
review process. This recovery effort is independent of the recapture audit process, which can be
deemed costly and ineffective. The Agency’s efforts to recapture improper payments are discussed
by program or activity below.
7(a) Loan Guaranty Purchases
Overpayments identified in the improper payments’ reviews are recaptured from the lender. The
Quality Control staff tracks and collects any monetary overpayment. In some instances, the loan is
referred to the Guaranty Review Team for further action. Determination of a course of action is made
on a case-by-case basis, depending on the specific details of the reason for the improper payment.
Refer to section above for corrective action plans to prevent future improper payments.
7(a) Loan Guaranty Approvals and 504 Certified Development Loans Approvals
Overpayments recaptured outside payment recapture audits are not applicable to 7(a) loan guaranty
approvals and 504 certified development loans approvals as no payments are made at the time
of approval. Improper payments identified through the annual improper payment reviews for the
7(a) loan guaranty approvals program and 504 certified development loans approvals program are
resolved through obtaining additional documentation, loan modification, or cancellation of the loan.
Improper payments identified as a result of the FY 2025 PIIA reviews have been resolved through
obtaining additional documentation, or cancellation or reduction of the loan guaranty and/or referral
to other offices within the Office of Capital Access, as appropriate. Determination of a course of
action is made on a case-by-case basis, which varies substantially depending on the circumstances
of the loan approval and lender’s authority.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 185
Other Information (Unaudited)
Disaster Direct Loan Program
Overpayments are the result of the borrower receiving both an SBA loan and insurance payments or
other benefits as a result of the disaster. If the duplication of benefit is recognized prior to the final
disbursement, the loan amount is modified to reflect a lower amount and no repayment is required.
If the duplication of benefit is identified after the final disbursement of the loan, then the borrower is
given 30 days to provide evidence to prove that the disaster loan was not over-disbursed. Collection
efforts continue at the disaster loan servicing centers, but if these efforts fail, the borrower will still be
liable for the over-disbursed amount in the form of monthly payments in accordance with the loan
agreement. Thus, any actual loss is the cost of funds related to the over-disbursement.
Paycheck Protection Program Loan Forgiveness
If the SBA determines that the borrower was ineligible for the loan amount or used PPP loan
proceeds for unauthorized uses, the SBA may seek repayment of part or all of the outstanding PPP
loan balance or pursue other available remedies. If the SBA uncovers information that indicates
that the borrower made a material misstatement of fact or provided a false certification, before
or after the SBA remits a forgiveness payment to the lender, the SBA may seek repayment of the
outstanding PPP loan balance, refer the borrower to SBA Office of Inspector General (OIG), or pursue
other available remedies. Further, if the SBA determines that the loan is not eligible for forgiveness (in
whole or in part), the borrower must begin paying principal and interest.
Paycheck Protection Program Loan Guaranty Purchases
If the SBA determines that the guaranty purchase was not in accordance with PPP Loan Program
requirements, SBA will request that the lender repay the guaranty purchase funds. In some instances,
the loan may be referred to the Guaranty Review Team for further action. Determination of a course
of action is made on a case-by-case basis, depending on the specific details of the reason for the
improper payment.
Shuttered Venue Operators Grant Program
The last SVOG disbursement occurred on December 15, 2022. Overpayments identified in the improper
payments’ reviews are subject to recovery efforts. Determination of a course of action is made on a
case-by-case basis, depending on the specific details of the reason for the improper payment.
Payment Recapture Audits
The SBA conducts cost-benefit analyses, as needed, for programs with over $1 million in
disbursements and not covered by a similar cost-benefit analysis completed in prior years. Some
of the factors considered include the following: program was not identified as being susceptible to
significant improper payments in the last risk assessment, there have been no recent audit findings
or reports to suggest that the program is susceptible to improper payments, prior internal control
assessments did not identify the program as being susceptible to significant improper payments,
and the cost to perform a recovery audit exceeded the potential recovery amount.
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
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 186
Other Information (Unaudited)
payroll disbursements, 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 OED’s 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 (STEP), the Surety Bond Guarantee Program,
and the Veterans Business Outreach Program.
In FY 2025, 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
the Agency 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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 187
Other Information (Unaudited)
Summary of Financial Statement Audit and
Management Assurances
As required by OMB Circular A-136, Section II.4.1, the following summarizes the SBA’s Financial State-
ment Audit and Management Assurances:
SUMMARY OF FINANCIAL STATEMENT AUDIT
Audit Opinion Disclaimer
Restatement No
Material Beginning Ending
New Resolved Consolidated
Weaknesses Balance Balance
Controls over PPP
1 0 0 0 1
Loan Program
Controls over
1 0 0 0 1
COVID-19 EIDLs
Controls over Subsidy
1 0 0 0 1
Reestimate
Controls over the
Evaluation of Service 1 0 1 0 0
Organizations
Entity Level Controls 1 0 0 0 1
Controls over
Restaurant
1 0 1 0 0
Revitalization and
Shuttered Venues
Controls over
General Information 1 0 1 0 0
Technology
Total Material
7 0 3 0 4
Weaknesses
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 188
Other Information (Unaudited)
SUMMARY OF MANAGEMENT ASSURANCES
Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)
Statement of
Modified
Assurance
Material Beginning Ending
New Resolved Consolidated Reassessed
Weaknesses Balance Balance
Controls over PPP
1 0 0 0 0 1
Loan Program
Controls over
1 0 0 0 0 1
COVID-19 EIDLs
Controls over
1 0 1 0 0 0
Subsidy Reestimate
Controls over the
Evaluation of Service 1 0 1 0 0 0
Organizations
Entity Level Controls 1 0 0 0 0 1
Controls over
Restaurant
1 0 1 0 0 0
Revitalization and
Shuttered Venues
Controls over
General Information 1 0 1 0 0 0
Technology
Total Material
7 0 4 0 0 3
Weaknesses
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 189
Other Information (Unaudited)
Effectiveness of Internal Control over Operations (FMFIA § 2)
Statement of
Modified
Assurance
Material Beginning Ending
New Resolved Consolidated Reassessed
Weaknesses Balance Balance
None 0 0 0 0 0 0
Total Material
0 0 0 0 0 0
Weaknesses
Conformance with Financial Management System Requirements (FMFIA § 4)
Statement of Federal Systems do not conform to financial management system
Assurance requirements.
Non-Conformanc- Beginning Ending
New Resolved Consolidated Reassessed
es Balance Balance
Federal Financial
Management
1 0 1 0 0 0
System
Requirements
Federal Accounting
1 0 1 0 0 0
Standards
Total Non-
2 0 2 0 0 0
conformances
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 190
Other Information (Unaudited)
Compliance with Section 803(a) of the Federal Financial Management Improvement Act
(FFMIA)
Agency Auditor
1. Federal Financial Management System No lack of compliance Lack of compliance
Requirements noted noted
No lack of compliance Lack of compliance
2. Applicable Federal Accounting Standards
noted noted
No lack of compliance No lack of compliance
3. USSGL at Transaction Level
noted noted
The auditor identified a material weakness related to Controls over the Subsidy Reestimate. Manage-
ment acknowledges the conditions but has concluded that one of the conditions is encompassed
within SBA’s existing material weaknesses related to controls over COVID-19 EIDLs and controls over
the PPP loan program. Because the root causes and corrective actions overlap, SBA management
does not classify this as a separate material weakness. Management concluded that the remaining
condition does not rise to the level of a material weakness.
The auditor identified instances of noncompliance with FFMIA Federal Financial Systems Require-
ments and Federal Accounting Standards. SBA management’s assessment did not identify any FFMIA
noncompliance. SBA management believes the deficiencies identified by the auditor were related to
factors external to the financial management systems.
SBA remains committed to constructive engagement to resolve these matters and will continue to
evaluate auditor identified material weaknesses and implement suggested recommendations where
applicable.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 191
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, 2025.
More than 5
Category 2-3 Years 3-5 Years
Years
Number of Grants/Cooperative Agreements
172 209 1
with Zero Dollar Balances
Number of Grants/Cooperative Agreements
95 131 1
with Undisbursed Balances
Total Amount of Undisbursed Balances $ 2,212,870.00 $ 10,413,866.00 $ 11
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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 192
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.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 193
Other Information (Unaudited)
(Dollars in Thousands)
SBA FEDERAL CIVIL PENALTIES
Latest Year of Current
Location for
Penalty (Name or Adjustment Penalty Level Sub- Agency/
Statutory Authority Year Enacted Penalty Update
Description) (via Statute or ($ Amount or Bureau/ Unit
Details
Regulation) Range)
Failing to File Report
Small Business Office of
Timely for a Small 90 F.R. 23422-
Investment Act, 15 1966 2025 $ 332 Investment and
Business Investment 23423 (6/3/25)
USC 687g Innovation
Company (SBIC)
Failing to File Report
Small Business Act, 15 Timely for a Small Office of Capital 90 F.R. 23423
2004 2025 $ 8,267
USC 650(j)(1) Business Lending Access (6/3/25)
Company (SBLC)
Office of
Small Business Act, 15 Types of Formal 90 F.R. 23423
2020 2025 $ 306,652 Credit Risk
U.S.C. 657t(e)(2)(B) Enforcement Actions (6/3/25)
Management
Small Business Act,
Administrative
15 USC 634(b)(6) and
Remedies for False 90 F.R. 23423
Program Fraud Civil 1986 2025 $ 14,308 Multiple offices
Statements and (6/5/25)
Remedies Act 31 USC
Claims
3802(d)
Small Business Act,
not less than
15 USC 634(b)(6) and Penalty for Violation
$ 25,132 and 90 F.R. 234
Program Fraud Civil of Lobbying 1990 2025 Multiple offices
not more than (6/3/25)
Remedies Act 31 USC Restrictions
$ 251,322
1352
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 194
SECTION 4
Appendices
(UNAUDITED)
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 (800) 659-2955
Center (Toll Free)
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
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 196
Appendices (Unaudited)
Appendix 2 – Glossary
504 Loan 504 Certified Development Loan AGA Association of Government Ac-
Program countants
Provides small businesses with The member organization for
long-term, fixed-rate financing for government financial management
the purchase of land, buildings, and professionals.
long-life capital equipment.
APG Agency Priority Goal
7(a) 7(a) Loan Guaranty Program A set of 2-year goals required by
The SBA’s primary loan program; it GPRAMA that reflect the highest
provides general loan financing for priorities of a federal agency’s lead-
a wide variety of purposes. ership.
7(j) 7(j) Management and Technical APR Annual Performance Report
Assistance Program A report that is required by the Gov-
Provides specialized assistance to ernment Performance and Results
underserved small businesses. Act and presents a federal agency’s
progress in achieving the goals in
7(m) 7(m) Microloan Program its strategic plan and performance
Provides small, short-term loans to budget.
small businesses and certain types
of nonprofit childcare centers. ARP(A) American Rescue Plan (Act)
A law that provides relief to indi-
8(a) 8(a) Business Development Pro- viduals and businesses affected by
gram the COVID-19 pandemic.
Assists firms owned and controlled
by socially and economically disad- B2B Boots to Business
vantaged individuals compete for An entrepreneurial education and
federal contracts. training program offered by the U.S.
Small Business Administration as
A-123 Designation for OMB Circular on part of the Department of Defense
Internal Control Systems Transition Assistance Program.
Prescribes policies and procedures
to be followed by federal agencies BATF Business Assistance Trust Fund
in establishing, maintaining, evalu- A revolving trust fund in which all
ating, improving, and reporting on donated funds are to be deposited.
internal controls in their program
BLIF Business Loan and Investment
and administrative activities.
Fund
AFR Agency Financial Report Assists eligible small businesses
An annual report that provides to through various loan programs.
OMB, Congress, and the public an
overview of the Agency’s financial
and performance data.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 197
Appendices (Unaudited)
CAP Goals Cross-Agency Priority Goals A law that aims to make informa-
A limited number of Presidential tion on federal expenditures more
priority areas where implementa- easily accessible and transparent.
tion requires active collaboration DCMS Disaster Credit Management
among multiple agencies. System
CARES Act Coronavirus, Aid, Relief and Eco- Electronic system used to process
nomic Security Act loan applications for all new disas-
A $2.2 trillion economic stimu- ter declarations.
lus bill passed in response to the DLF Disaster Loan Fund
economic fallout of the COVID-19 Assists eligible small businesses
pandemic in the United States. impacted by disasters.
CBJ Congressional Budget Justifica- DNP Do Not Pay Initiative
tion Established by IPERIA to support
A federal agency’s annual budget federal agencies with their efforts to
request to Congress. prevent and detect improper pay-
CDC Certified Development Company ments.
Nonprofit corporations, certified DO District Office
and regulated by the SBA, that work SBA offices that are responsible
with participating lenders to pro- for the delivery of the SBA’s many
vide financing to small businesses. programs and services throughout
CFO Chief Financial Officer the country.
The financial leader whose du- DOW Department of War
ties include overseeing all Agency The federal agency charged with
disbursements, management and coordinating national security and
coordination of Agency planning, the armed services (formerly the
budgeting, analysis, and account- Department of Defense).
ability processes.
EAA Economic Aid to Hard-Hit Small
CNPP Community Navigator Pilot Pro- Businesses, Non-Profits and Ven-
gram ues Act
Engages in targeted outreach to Authorizes the U.S. Small Business
underserved communities through Administration to Guarantee ad-
states, local governments, resource ditional loans under the temporary
partners, and non-profit organiza- Paycheck Protection Program and
tions. adds a second temporary program
COVID-19 Coronavirus Disease, 2019 to SBA’s 7(a) Loan Program titled,
Highly contagious respiratory “Paycheck Protection Program Sec-
disease caused by the SARS-CoV-2 ond Draw Loans”
virus.
DATA Act The Digital Accountability and
Transparency Act
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 198
Appendices (Unaudited)
EDP Entrepreneurial Development agency to implement and maintain
Program financial management systems that
An account that reports entrepre- comply substantially with federal
neurial development expenses. financial management system re-
quirements, applicable federal ac-
EIDL Economic Injury Disaster Loan counting standards and the United
A grant to provide economic relief States Standard General Ledger.
to businesses experiencing a tem-
porary loss of revenue due to the FISMA Federal Information Security
COVID-19 pandemic Management Act
A law that defines a comprehensive
ERM Enterprise Risk Management framework to protect government
Provides a framework to man- information, operations, and as-
age risks and seize opportunities sets against natural or man-made
related to the achievement of their threats.
objectives.
FITARA Federal Information Technology
FAST Federal and State Technology Acquisition Reform Act
(FAST) Grants Legislation to improve the acquisi-
One year funding opportunity to tion and management of federal
help increase the number of SBIR information technology assets.
and STTR proposals.
FMFIA Federal Managers Financial In-
FCRA Federal Credit Reform Act tegrity Act
A law enacted to provide a more A law that primarily requires ongo-
realistic picture of the cost of U.S. ing evaluations and reports on the
Government direct loans and loan adequacy of the internal account-
guaranties. ing and administrative control sys-
tems of executive agencies. It also
FEMA Federal Emergency Management
requires evaluations and reports
Agency
on the conformance of financial
Coordinates the response to a
management systems.
disaster that has occurred in the
United States. FR Financial Report of the U.S. Gov-
ernment
FEVS Federal Employee Viewpoint
Record of the United States govern-
Survey
ment’s financial activities.
An OPM survey administered to
federal employees that measures FRMB Fraud Risk Management Board
perceptions of whether, and to Anti-fraud entity responsible for the
what extent, conditions character- oversight and coordination of the
istic of successful organizations are SBA’s fraud risk activities.
present in their agencies.
FFMIA Federal Financial Management
Improvement Act
A law that requires each federal
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 199
Appendices (Unaudited)
FTA Fiscal Transfer Agent the best value real estate, acquisi-
The central registry for all guaran- tion, and technology services to
teed individual loan and SBA pool government agencies.
certificate interests. GTAS Governmentwide Treasury Ac-
FTE Full-Time Equivalent count Symbol Adjusted Trial
Indicates the workload of an em- Balance System
ployed person. An FTE of 1.0 means Used by government entities to
that the person is equivalent to a provide proprietary financial report-
full-time worker while an FTE of 0.5 ing and information about budget
means that the worker is half-time. execution to the Department of the
Treasury.
FY Fiscal Year
The Federal Government fiscal year HHS U.S. Department of Health and
begins October 1 and ends the fol- Human Services
lowing September 30. The federal agency that aims to
protect the health of all Americans
GAAP Generally Accepted Accounting and provide essential human ser-
Principles vices.
The standard framework of guide-
lines for financial accounting gener- HUBZone Historically Underutilized Busi-
ally known as accounting standards ness Zone
or standard accounting practice. An SBA program that encourages
economic development by the
GAO U.S. Government Accountability establishment of federal contract
Office award preferences for small busi-
An independent, nonpartisan nesses located in historically under-
agency that investigates how the utilized business zones.
federal government spends taxpay-
er dollars and reports their findings ICD Internal Controls Division
to Congress. Ensures managers comply with
internal control standards.
GPRAMA Government Performance and
Results Act (GPRA) Moderniza- ICOR Internal Control Assessment
tion Act Over Reporting
A law that modernizes the federal A reporting methodology that
government’s performance man- manages assets (including data),
agement framework, retaining improves data quality, and reduces
and amplifying some aspects of compliance-oriented burdens shift-
the Government Performance and ing activities to support attaining
Results Act (GPRA) of 1993 while ad- high quality data.
dressing some of its weaknesses.
GSA General Services Administration
A federal agency of the Executive
Branch whose mission is to deliver
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 200
Appendices (Unaudited)
IPERA Improper Payments Elimination MAT Modification Adjustment Trans-
and Recovery Act fer
A law that requires that agencies A transfer made between the
examine the risk of, and feasibility financing account as the general
of, recapturing improper payments fund.
in all programs and activities.
MRA Master Reserve Account
IPERIA Improper Payments Elimination The SBA’s fiscal agent maintains
and Recovery Improvement Act this escrow fund to facilitate the
An act to intensify efforts to identify, operation of the Certified Develop-
prevent, and recover payment er- ment Company program.
ror, waste, fraud, and abuse within
MRF Master Reserve Fund
federal spending.
A reserve fund maintained by the
IPIA Improper Payment Information SBA’s fiscal and transfer agent that
Act is used to facilitate the operation of
A law enacted in 2002 to identify the 7(a) secondary market program.
and reduce erroneous payments
OBD Office of Business Development
in the government’s programs and
Assists small, disadvantaged busi-
activities.
nesses to gain access to federal and
ISS Industrial Specialists for Size private procurement markets.
Specialists who perform size deter-
OCA Office of Capital Access
minations for protests
Manages small business loans,
IT Information Technology lender oversight, and the Surety
Refers to matters concerned with Bond Guaranty program.
the design, development, installa-
OPPCFO Office of Performance, Planning,
tion, and implementation of infor-
and the Chief Financial Officer
mation systems and applications.
Financial leadership of the Agency,
JAAMS Joint Administrative Accounting including all disbursements, man-
Management System agement, and coordination of
A financial management system, planning, budgeting, analysis, and
also known as the Oracle Adminis- accountability processes.
trative Accounting System, which
OCIO Office of the Chief Information
is used to keep records of the SBA’s
Officer
administrative funding and expen-
Manages information technology
ditures.
for the Agency, including the de-
LSP Lender Service Provider sign, implementation, and continu-
Carries out functions in originating, ing successful operation(s) of infor-
dispersing, servicing, or liquidating mation programs and initiatives.
a specific SBA business loan or loan
portfolio for compensation from
the lender.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 201
Appendices (Unaudited)
OCRM Office of Credit Risk Manage- Works to create an environment for
ment maximum participation by small,
Manages program credit risk, disadvantaged, and woman-owned
monitors lender performance, and businesses in Federal Government
enforces lending program require- contract awards and large prime
ments. subcontract awards.
OCORM Office of Continuous Operations OIG Office of Inspector General
and Risk Management Conducts and supervises audits,
Ensures enterprise-wide disaster inspections, and investigations re-
planning, readiness, and imple- lating to SBA programs and opera-
mentation of ERM best practices for tions.
the SBA. OMB U.S. Office of Management and
ODR&R Office of Disaster Recovery & Budget
Resilience White House office that oversees
Promotes economic recovery in preparation of the federal budget
disaster-ravaged areas and assists and supervises its administration in
survivors with accessing SBA di- Executive Branch agencies.
saster loans. Disaster loans are the OPM U.S. Office of Personnel Manage-
Agency’s primary form of federal as- ment
sistance for non-farm, private sector The Federal Government’s human
disaster losses for individuals and resources agency.
businesses.
OPSM Office of Performance and Sys-
OFA Office of Financial Assistance tems Management
Oversees the SBA’s credit programs Manages the Capital Access Finan-
that provide capital alternatives for cial System, Lender Loan Manage-
small businesses not adequately ment System, Central Servicing
served by conventional lending. Agent system, and Fiscal Transfer
OFPO Office of Financial Program Op- Agent system.
erations OSDBU Office of Small Disadvantaged
Leads the financial services indus- Business Utilization
try in quality products and services Offices located within each federal
to SBA partners and customers and agency that enable small disad-
protects the integrity of SBA pro- vantaged businesses to gain access
grams. to economic opportunity through
OGC Office of General Counsel federal contracts.
Provides comprehensive legal
services to the Administrator and all
Agency offices.
OGCBD Office of General Contracting
and Business Development
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 202
Appendices (Unaudited)
PIIA Payment Integrity Information SBDCs provide management and
Act of 2019 technical assistance, economic
Law established to improve efforts development, and management
to identify and reduce government- training to existing and prospective
wide improper payments; requires small businesses through coopera-
agencies to estimate improper tive agreements with universities
payments and report on actions to and colleges and government
reduce improper payments. organizations.
PPP Paycheck Protection Program SBG Surety Bond Guarantee
A loan designed to provide a direct Provides guaranties and bid,
incentive for small businesses to performance, and payment bonds
keep their workers on the payroll. for contracts up to $2 million for
eligible small businesses that can-
PPS Probability Proportional to Size not obtain surety bonds through
A method of sampling that takes regular commercial channels.
the varying size of each item within
the population into account when SBGRF Surety Bond Guaranty Revolving
selecting the audit sample. Fund
A fund at the U.S. Department of
QAR Quality Assurance Review the Treasury that collects the SBA’s
A review to identify any deficien- contractor and surety fees and is
cies, to include improper payments. used to pay claims.
QSMO Quality Service Management Of- SBIC Small Business Investment Com-
fice pany
Office designated by OMB to pro- Provides long-term loans, debt-eq-
mote the use of shared services in uity investments, and management
specific functional areas. assistance to small businesses, par-
ticularly during their growth stages.
RRF Restaurant Revitalization Fund
A COVID-19 relief program autho- SBIR Small Business Innovation Re-
rized under the American Rescue search
Plan. A highly competitive SBA program
that encourages domestic small
SBA U.S. Small Business Administra-
businesses to engage in federal re-
tion
search/research and development
The federal agency whose mission
that has the potential for commer-
is to maintain and strengthen the
cialization.
nation’s economy by enabling the
establishment and vitality of small SBLC Small Business Lending Com-
businesses and by assisting in the pany
economic recovery of communities Non-depository small business
after disasters. lending companies listed by the
SBA Office of Capital Access.
SBDC Small Business Development
Center
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 203
Appendices (Unaudited)
SE Salaries and Expenses Provide entrepreneurial develop-
Operating expenses of the Agency. ment services such as business
training, counseling, and mentor-
SMC Senior Management Council ing, and referrals for eligible veter-
Established by the Administrator ans owning or considering starting
to ensure the SBA has an effective a small business.
system of internal controls.
WBC Women’s Business Centers
SOP Standard Operating Procedure Provide long-term training and
The primary source of the Agency’s advising to women who own or
internal control. manage a business, including finan-
cial, management, marketing, and
STEP State Trade Expansion Program
technical assistance and procure-
Makes matching fund awards to
ment.
states to help small businesses
enter and succeed in the internal WCF Working Capital Fund
marketplace. A fund for IT modernization efforts.
SVOG Shuttered Venues Operator WOSB Women-Owned Small Business-
Grant es Program
COVID-19 relief program authorized Allows federal agencies to set aside
under the American Rescue Plan. certain contracts for competi-
tion only among small businesses
TAP Transition Assistance Program
owned and controlled by women.
Collaborative program between
federal agencies to assist active
duty service members’ transition
to civilian life through access to
employment workshops and other
services.
USEAC U.S. Export Assistance Center
Centers located nationwide that
help firms grow internationally by
assisting in developing a plan of ac-
tion with solutions tailored to their
needs.
USSGL The United States Standard Gen-
eral Ledger
Provides a uniform chart of ac-
counts and technical guidance for
standardizing federal agency ac-
counting.
VBOC Veterans Business Outreach
Centers
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 204
Appendices (Unaudited)
Appendix 3 – OIG Audit Follow Up Reports
OIG audits SBA’s programs, systems, and operations and recommends improvements to management
based on its findings. 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. SBA
management may agree or disagree with the audit’s findings or recommendations. When management
agrees with recommendations in an audit, it submits a written plan for corrective action and an esti-
mated target completion date to the OIG for concurrence. If OIG and management agree that the pro-
posed corrective action will address the finding, the “management decision” process is concluded for
that recommendation. The memo outlining the terms of the management decision between manage-
ment and OIG is retained for audit follow-up purposes. When the corrective action plan is implemented
and the recommendation has been fully addressed, the recommendation is identified as having a “Fi-
nal Action.” An audit remains open until all corrective actions for each recommendation are completed.
The SBA maintains a database to track the recommendations through to the conclusion, or Final
Action. During FY 2025 there were 40 Final Actions, resulting from 4 monetary and 36 non-monetary
recommendations.
The following tables depict the SBA’s Final Action activity for FY 2025 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, 2024 – SEPTEMBER 30, 2025
Number of Disallowed
Recommendations
Recommendations Costs
Total recommendations pending final action during period. 65 $4,500,000,000
1) Recommendations with management decisions on
which final action had not been taken at the beginning of 61 $4,500,000,000
the period.
2) Recommendations on which management decisions
4 $0
were made during the period.
Total recommendations on which final action was taken
4 $0
during the period.
1. Recoveries 1 $0
2. Write-Offs 3 $0
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 205
Appendices (Unaudited)
TABLE II: FINAL ACTION ON AUDIT RECOMMENDATIONS WITH FUNDS PUT TO BETTER
USE
OCTOBER 1, 2024 – SEPTEMBER 30, 2025
Number of Funds to be Put
Recommendations
Recommendations to Better Use
Total recommendations pending final action during
0 $0
period.
1) Recommendations with management decisions on
which final action had not been taken at the beginning of 0 $0
the period.
2) Recommendations on which management decisions
0 $0
were made during the period.
Total recommendations on which final action was taken
0 $0
during the period.
1. Value of recommendations implemented (completed). 0 $0
2. Value of recommendations that management
concluded should not or could not be implemented or 0 $0
completed.
TABLE III: FINAL ACTION ON AUDIT RECOMMENDATIONS NOT COMPLETED WITHIN
ONE YEAR
AS OF SEPTEMBER 30, 2025
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 1, 3, 4, 5 and 6 have been closed by OIG.
Recommendation 2: The SBA is in communication with OIG seeking resolution as OIG denied the
SBA’s request for closure on 9/8/2025.
Report #21-08 SBA’s Use of Vendors Without Contracts
Program: OCA
Date Issued: 2/3/2021
Management Decision Date: 2/2/2023
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 206
Appendices (Unaudited)
Explanation: 3 Recommendations.
Recommendation 2 has been closed by OIG.
Recommendations 1 and 3: This recommendation is being reviewed by SBA Leadership through the
Audit Resolution Process, and OCA is currently awaiting leadership’s final decision.
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.
The SBA is currently working with new administration leadership to evaluate PPP remediation
activities to ensure they are aligned with the current Administration’s priorities. Once this evaluation
is complete, OCA will address this recommendation.
Report #21-14 Audit of SBA’s Oversight of Women’s Business Centers’ Compliance with
Cooperative Agreement Financial Requirements
Program: OED
Date Issued: 5/4/2021
Management Decision Date: 5/4/2021
Explanation: 9 Recommendations.
Recommendations 1, 6, 8, 9 have been closed by OIG.
Recommendations 2, 3 and 7: OWBO is working to remediate this recommendation by
recovering funds from the WBC for the questioned costs. The SBA will work to remediate these
recommendations in FY 2026.
Recommendations 4 and 5: The Standard Operating Procedure (SOP) was finalized and submitted to
OIG for closure.
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: Recommended documents were submitted to OIG for closure on 10/22/2025.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 207
Appendices (Unaudited)
Report #22-07 Evaluation of 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 Recommendations.
Recommendations 1, 2, and 4 have been closed by OIG.
Recommendations 3 and 5: OIG provided an impasse memo to the SBA on 12/5/2025. The SBA’s
remediation timeline for these recommendations depends upon the Agency Audit Follow-up Official
to resolve the disagreement on these recommendations.
Report #22-11 Evaluation of 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 have been closed by OIG.
Recommendation 2: An extension was approved by OIG to allow the SBA to adequately plan and
prepare for the Continuity of Operations (COOP) exercise.
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 for 1 and 8: The closure packages were submitted to OIG on 12/18/25.
Recommendations 2 and 5: The SBA is recirculating a package that includes a Privacy Program Plan
and Cybersecurity and Privacy Policy. These documents will implement enterprise-wide privacy risk
mitigation practices that can be assimilated into new and existing system program designs. Once
these documents are approved, the SBA will request closure of recommendations 2 and 5 no later
than 1/30/26.
Recommendation 7: The SBA will be requesting an extension to implement a Cyber Risk
Management Platform. This platform will allow users to manage, access, and visualize their
compliance status, and can trigger reauthorization requirements using compliance/pass/fail status, if
necessary.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 208
Appendices (Unaudited)
Recommendation 10: The SBA will be requesting closure for this recommendation no later than
1/30/26. OCA is currently utilizing Microsoft Dynamics for changes and will move to the enterprise
solution and use of ServiceNow.
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 currently working with new administration leadership to evaluate
PPP remediation activities to ensure they are aligned with the current Administration’s priorities.
Once this evaluation is complete, OCA will address this recommendation.
Report #23-03 FY 2022 Federal Information Security Modernization (FISMA) Act Review
Program: OCIO
Date Issued: 12/13/2022
Management Decision Date: 12/16/2022
Explanation: 6 Recommendations.
Recommendations 1, 4, and 6 have been closed by OIG.
Recommendation 2: The closure package submitted for Recommendation 2 on 11/17/2025.
Recommendations 3 and 5: The SBA released a Cybersecurity Supply Chain Risk Management Plan
dated 1/9/2026 and will request closure of this recommendation effective 1/14/26.
Report #23-10 SBA’s Administrative Process to Address Potentially Fraudulent Restaurant
Revitalization Fund (RRF) Awards
Program: OCA
Date Issued: 7/5/2023
Management Decision Date: 8/15/2023
Explanation: 1 Recommendation.
Recommendations 1: The SBA is currently working with new administration leadership to evaluate
RRF remediation activities to ensure they are aligned with the current Administration’s priorities.
Once this evaluation is complete, OCA will address this recommendation.
Report #23-15 SBA’s Oversight of Restaurant Revitalization Fund Recipients
Program: OCA
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 209
Appendices (Unaudited)
Date Issued: 9/29/2023
Management Decision Date: 5/6/2024
Explanation: 6 Recommendations.
Recommendation 4 has been closed by OIG.
Recommendations 1, 2, 3, 5, and 6: SBA has taken recent actions to remediate these findings and will
coordinate with OIG to close these recommendations.
Report #24-02 SBA’s Internal Controls to Prevent Shuttered Venue Operators (SVOG) Grants
to Ineligible Applicants
Program: ODRR
Date Issued: 10/25/2023
Management Decision Date: 8/20/2024
Explanation: 2 Recommendations.
Recommendation 1: The extension was requested on 12/04/2025 for a target due date of FY26 Q2.
Recommendation 2: The closure package was submitted on 12/11/2025.
Report #24-06 Evaluation of Eligibility and Forgiveness of Paycheck Protection
Program Loans Made to Borrowers on the Department of Treasury’s Do Not Pay List
Program: OCA
Date Issued: 2/22/2024
Management Decision Date: 3/27/2024
Explanation: 7 Recommendations.
Recommendation 5 has been closed by OIG.
Recommendation 4: The requested documents were submitted to OIG for closure on 9/30/25.
Recommendations 1, 2, 3, 6 and 7: SBA is currently working with new administration leadership to
evaluate PPP remediation activities to ensure they are aligned with the current Administration’s
priorities. Once this evaluation is complete, OCA will address this recommendation.
Report #24-07 Fiscal Year 2023 Federal Information Security Modernization Act (FISMA)
Program: OCIO
Date Issued: 3/7/2024
Management Decision Date: 3/27/2024
Explanation: 11 Recommendations.
Recommendations 1, 2, 3, 4, and 8 have been closed by OIG.
Recommendation 5: The development of this strategy is currently in progress. A dedicated team
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 210
Appendices (Unaudited)
has been assigned to assess the cybersecurity and supply chain requirements. An initial draft of the
strategy has been created and is undergoing internal review.
Recommendation 6: Baseline and configuration weaknesses have been identified, and a timeframe
for remediation has been outlined.
Recommendation 7: The SBA is preparing to submit a closure package to OIG no later than 4/30/26.
Recommendation 9: The SBA will submit the closure package date no later than 4/30/26.
Recommendation 10: The SBA submitted closure package on 06/15/2025. The SBA is awaiting OIG
final response to the submitted closure package.
Recommendation 11: Training programs for individuals with contingency planning roles and
responsibilities have been created. Subsequent sessions will be held biannually to ensure all relevant
personnel are trained adequately.
Report #24-09 Fiscal Year 2023 Audit of SBA’s Restaurant Revitalization Fund (RRF) Program
Award Practices
Program: OCA & OCFO
Date Issued: 3/26/2024
Management Decision Date: 6/14/2024
Explanation: 5 Recommendations.
Recommendation 1: The Chief Operating Officer (COO), Chief Financial Officer (CFO), and Associate
Administrator of the Office of Capital Access (OCA) have implemented the framework and continue to
execute it. The framework structures processes and tools to combat fraud. The closure package was
submitted on 1/7/2026.
Recommendations 2, 3, 4, and 5: SBA is currently working with new administration leadership to
evaluate RRF remediation activities to ensure they are aligned with the current Administration’s
priorities. Once this evaluation is complete, OCA will address this recommendation.
Report #24-10 Evaluation of SBA’s IT Investment Governance Framework Practices
Program: OCIO
Date Issued: 3/29/2024
Management Decision Date: 06/14/2024
Explanation: 6 Recommendations.
Recommendations 1, 3, 4, 5, 6 have been closed by OIG.
Recommendation 2: The SBA leverages the bi-monthly Business Technology Investment Council
(BTIC), in accordance with SOPs 90 52 and 90 44, to perform EA reviews. A closure package was
submitted for this recommendation on 6/17/2025. The SBA is awaiting OIG final response to the
submitted closure package.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 211
Appendices (Unaudited)
Report #24-16 SBA’s Fiscal Year (FY) 2023 Compliance with Payment Integrity Information
Act of 2019
Program: OCA & OCFO
Date Issued: 5/15/2024
Management Decision Date: 6/14/2024
Explanation: 10 Recommendations.
Recommendations 1, 2, 6, and 8 were closed by OIG.
Recommendations 3, 4, 5, 7, 9, and 10: The SBA has designed and developed a comprehensive PIIA
tracker system, a systematic quality control system open to program offices to conduct extensive
reviews of sampled items and record results, evaluate findings, and support the extrapolation of the
sample results over the population. The closure response was submitted on 12/17/2025.
Report #24-17 7(a) Loan Approval for Borrowers with Unresolved COVID-19 Pandemic Loan
Compliance Issues
Program: OCA
Date Issued: 5/21/2024
Management Decision Date: 8/8/2024
Explanation: 1 Recommendation.
Recommendation 1: The SBA has completed the reviews and added CHRON notes to the appropriate
7(a) loans. The closure package will be submitted to OIG.
Report #24-20 SBA’s Guaranty Purchases for Paycheck Protection Program Loans
Program: OCA
Date Issued: 7/9/2024
Management Decision Date: 9/27/2024
Explanation: 7 Recommendations.
Recommendations 1, 2, 4, and 5: SBA has taken additional remediation steps and will coordinate
with OIG to close out these recommendations.
Recommendation 3: The SBA submitted a closure package to OIG on 6/2/2025.
Recommendation 6: The SBA will collaborate with OIG to determine an appropriate remediation
path that aligns with the current Administration’s priorities.
Recommendation 7: Extension request was approved; final action target date is 12/31/2025.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 212
Appendices (Unaudited)
Report #24-21 Audit of SBA’s Oversight of Shuttered Venue Operators Grant Program
Recipients
Program: ODRR
Date Issued: 7/10/2024
Management Decision Date: 7/11/2024
Explanation: 3 Recommendations.
Recommendations 2 and 3 have been closed by OIG.
Recommendation 1: ODRR is implementing the recovery process based on guidance developments.
The extension was requested 01/06/2026 for a target due date of FY26 Q2.
Report #24-23 Audit of SBA’s Oversight of HUBZone Program Participants’ Continuing
Eligibility
Program: GCBD
Date Issued: 7/10/2024
Management Decision Date: 8/20/2024
Explanation: 4 Recommendations.
Recommendations 2 and 4 have been closed by OIG.
Recommendation 1: Extension request was approved. SBA’s planned actions satisfy the intent of this
recommendation, and it can be closed when management provides evidence that the program office
revised the SOP.
Recommendation 3: Extension request approved. GCBD is currently working to prepare the
submission to OIG to demonstrate the functionality established within the new UCP system and
support a successful closure.
Report #24-25 Oversight of Community Navigator Pilot Program
Program: OED
Date Issued: 9/24/2024
Management Decision Date: 12/20/2024
Explanation: 5 Recommendations.
Recommendations 3 and 5 have been closed by OIG.
Recommendation 1: SBA management partially agreed with the recommendation. An extension
request has been approved by OIG.
Recommendation 2: The SBA submitted a closure package OIG on 11/19/2025.
Recommendation 4: SBA management did not concur with the recommendation. Management
stated they do not believe SBA can legally implement the recommended comparison of performance
results due to existing statutory language that limits the data SBA resource partners share with SBA.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 213
Appendices (Unaudited)
Acknowledgments
This Agency Financial Report was produced with the energies and talents of the SBA staff. To the
dedicated groups listed below, the Office of Performance, Planning, and the Chief Financial Officer
would like to offer sincere thanks and acknowledgment.
ACCOUNTING LIAISON, QUALITY ASSURANCE, AND FINANCIAL REPORTING DIVISION
FINANCIAL ANALYSIS AND REPORTING DIVISION
FINANCIAL SYSTEMS DIVISION
OFFICE OF COMMUNICATIONS AND PUBLIC LIAISON
OFFICE OF STRATEGIC MANAGEMENT AND ENTERPRISE INTEGRITY
PERFORMANCE MANAGEMENT DIVISION
SAVALAN, LLC
SIGNIFICANCE, INC
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 2025 Financial Statements. We offer our
special thanks to BrennSys Technology, LLC for contributions in producing this report.
U.S. Small Business Administration Agency Financial Report Fiscal Year 2025 214
Office of Performance, Planning, and the Chief Financial Officer
409 Third Street, S.W. Washington, DC 20416
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