Verification Inspection of SBA’s Microloan Program

This report presents the results of our verification inspection of the U.S. Small Business Administration’s (SBA) corrective actions for the four recommendations from the Office of Inspector General audit report SBA’s Microloan Program (Report 17-19). The U.S. Small Business Administration’s Microloan Program provides loans to nonprofit intermediary lenders (microlenders) that subsequently lend funds, in amounts of $50,000 or less, to small businesses and startups. In fiscal year 2023, microlenders approved microloans totaling $86.4 million for over 5,500 small businesses. We initiated this verification inspection to follow up on the four recommendations and determine whether SBA’s corrective actions are still operating as intended. Accordingly, our objective was to determine the effectiveness of SBA’s actions for 1) improving the information system to include outcome-based performance measurements and ensuring the data captured could be used to effectively monitor Microloan Program compliance, performance, and integrity 2) implementing a site visit plan to comprehensively monitor microloan portfolio performance and ensuring program results could be evaluated program-wide 3) updating SOP 52 00A to clarify requirements regarding evidence for use of proceeds and credit elsewhere and 4) updating the microloan reporting system manual to reflect current technology capabilities. We determined that all four recommendations were implemented and still operating as intended. Additionally, to ensure microlenders comply with program requirements, we suggested SBA review microloan files during annual site visits for proper use of proceeds and no credit elsewhere documentation.