SBA’s FY 2018 Compliance With the Improper Payments Elimination and Recovery Act of 2010

The objectives of our evaluation were to (1) determine whether the Small Business Administration (SBA) was compliant with the Improper Payments Elimination and Recovery Act of 2010 (IPERA) using guidelines outlined in the Office of Management and Budget (OMB) Memorandum M-18-20, Appendix C to OMB Circular No. A-123, Requirements for Payment Integrity Improvement, and (2) assess progress SBA made in remediating improper payment–related recommendations. We performed limited procedures and consulted with a statistician to evaluate the accuracy and completeness of the program-specific improper payment rates. To achieve our objectives, we assessed controls SBA has implemented to address prior year OIG recommendations and evaluated whether SBA mitigated those risks. We also assessed SBA’s efforts to prevent and reduce improper payments and reviewed the accuracy and completeness of improper payment disclosures in the 2018 Agency Financial Report (AFR). Our overall qualitative review of Agency efforts to prevent and reduce improper payments showed that SBA continued to maintain controls to prevent and reduce improper payments. Further, SBA was generally compliant in meeting the minimum requirements in accordance with OMB guidance. In accordance with IPERA, SBA published and posted an AFR on its website, conducted program-specific risk assessments, and published improper payment estimates for all programs and activities identified as susceptible to significant improper payments. We noted that for the disbursements for goods and services area, this was the second consecutive year that SBA reduced its rate of improper payments and had improper payment amounts that were less than the statutory threshold of $10 million. As a result, on February 19, 2019, SBA submitted a memo to OMB requesting relief from reporting improper payments for disbursements for goods and services. SBA also published extracts from the applicable programmatic corrective action plans in the AFR for three of five areas tested for fiscal year (FY) 2018 reporting and published and met the annual reduction target for three of the applicable five areas tested, including the disaster loan program. However, we noted that SBA eased controls for the disaster program regarding the requirement for justifications to exceed the maximum acceptable fixed debt, which was the primary cause for improper payments in FY 2018. We concluded that SBA was not compliant with IPERA because the actual improper payment rate for 7(a) and 504 CDC loan guaranty approvals exceeded the annual reduction target for FY 2018.The report contains two recommendations that the Agency agreed to implement. Both recommendations will remain open until OIG receives documentation demonstrating that these recommendations have been addressed. We requested that SBA provide us within 90 days their progress in addressing these recommendations.