This independent auditors’ report on the U.S. Small Business Administration’s (SBA) improper payment reporting is required by the Payment Integrity Information Act of 2019. We contracted with the independent certified public accounting firm KPMG LLP to conduct a performance audit of SBA’s fiscal year (FY) 2025 compliance with the Act. The auditor was engaged to review the payment integrity section of SBA’s Agency Financial Report Fiscal Year 2025 and accompanying materials to determine whether the agency complied with the reporting requirements under the Act.
In the report, KPMG auditors found SBA was not compliant with reporting requirements under the Act and Office of Management and Budget (OMB) guidance. Specifically, SBA is not compliant with the Act because it did not:
- Publish complete and accurate root causes and tolerable rates for all applicable programs, including Section 1112 payments and disaster assistance loans, and ensure they agreed with accompanying materials and supporting documentation for FY 2025.
- Perform or document updated required risk assessments for all applicable programs in FY 2025.
- Design and implement adequate review procedures to produce reliable sample results that supported accurate improper and unknown payment estimates for Paycheck Protection Program (PPP) loan guaranty purchases.
- Provide sufficient documentation to support corrective action plans or ensure those plans aligned with root causes for PPP loan guaranty purchases.
- Ensure published root causes and reduction targets were accurately disclosed, published, and consistent with accompanying materials for all applicable programs, including 7(a) loan guaranty approvals, 7(a) loan guaranty purchases, 504 Certified Development Company loan approvals, disaster assistance loans, PPP loan forgiveness, and PPP loan guaranty purchases, and Section 1112 payments.
- Improve improper and unknown payment rates or meet established reduction targets for 7(a) loan guaranty approvals, 504 Certified Development Company loan approvals, disaster assistance loans, PPP loan forgiveness, and PPP loan guaranty purchases.
- Submit all required quarterly information to OMB for PPP loan forgiveness and PPP loan guaranty purchases.
- Publish improper payment and unknown payment rate estimates less than 10 percent for the PPP loan forgiveness, PPP loan guaranty purchases, and Shuttered Venue Operators Grant programs and include the required program integrity proposals in the congressional budget justification for the PPP loan forgiveness and PPP loan guaranty purchases programs.
SBA concurred with the recommendations and indicated that it is committed to reducing the dollar amount of improper payments, ensuring program integrity, and continuing to implement effective risk management procedures in accordance with improper payment legislation, as well as guidance prescribed in OMB Memorandum M-21-19, Appendix C to OMB Circular A-123, Requirements for Payment Integrity Improvement.
