Federal Reports

We prepared this white paper to report on the U.S. Small Business Administration’s (SBA) 7(a) loan program performance during SBA’s response to the Coronavirus Disease 2019 (COVID-19) pandemic and address potential risks SBA should consider in managing the program.We identified factors that could impact the 7(a) loan program and should be considered in SBA’s program risk strategy. Specifically, in FY 2021, the total amount of loans increased to $31.4 billion from $19.4 billion in FY 2020 (62 percent increase) and $20.6 billion in FY 2019 (53 percent increase), as did the average loan amount. Loan approvals decreased in FY 2020 and returned to pre-pandemic levels in FY 2021. Default and charge-off rates also significantly declined after implementation of the CARES Act.The relief payments likely attributed to declining default and charge-off rates. Small businesses also had access to additional support during the COVID-19 pandemic, which included the Paycheck Protection Program, the Restaurant Revitalization Fund, Economic Injury Disaster Loans, and deferred 7(a) loan payments. However, variable interest rates for 7(a) loans increased because the base prime rate increased from 3.25 percent to 6.25 percent in 2022. The effects of the pandemic combined with the rising interest rates could increase the risk for subsequent defaults and charge-offs. These program trends could increase SBA’s liability and have a negative impact on its ability to achieve its zero-subsidy rate goal.To ensure 7(a) loan program integrity, reduce the risk of financial loss and facilitate meeting its zero-subsidy rate goal, SBA should consider potential risks related to higher loan amounts, rising interest rates, staffing shortages, delayed defaults, and charge-offs in its 7(a) risk strategy.SBA management generally agreed with our findings and key considerations, stating that they believed the relief payments helped to prevent loan defaults. They acknowledged that the lasting impact of the relief payments, the effects of the higher loan amounts, and rising interest rates were unknown. Management stated they will continue to consider our key considerations in their risk strategy.

The U.S. Postal Service’s surface network uses highway contract routes, which are routes of travel served by contracted suppliers to transport mail between plants and other designated stops. The suppliers are expected to operate according to scheduled arrival and departure times defined in the contract. From fiscal years (FY) 2020 to 2022, the Postal Service reported that 679,407 scheduled highway contract route trips were omitted, meaning the supplier failed to run a scheduled trip. Omitted trips increased by about 129 percent from 132,158 in FY 2020 to 302,096 in FY 2022.

This report presents a summary of the results of our self-initiated audits assessing the efficiency of selected processes at three selected retail units in the Arizona–New Mexico (AZ-NM) District. These retail units include Yuma Main Office, Lake Havasu City Post Office, and Phoenix-Sierra Adobe Station in the AZ-NM District of the WestPac Area. We previously issued interim reports to district management for each of these retail units regarding the conditions we identified.

The Management and Use of Official Time final audit report, originally issued on September 16, 2022, was reissued on March 20, 2023. The report was revised to remove statements pertaining to questioned costs for official time used for representational activities. We originally developed average hourly costs for official time hours in the background section of the report for presentational purposes only, not for questioned costs as defined in the IG Act. However, these changes did not alter the finding and six recommendations made in the final report.

The U.S. Postal Service’s Central Area has about 6,224 delivery units to assist in the Postal Service’s universal service obligation to bind the nation together and provide prompt, reliable, and efficient postal services to all communities. As of September 2022, about 78,000 city and rural carriers delivered to about 32 million possible delivery points in the Central Area. During fiscal year (FY) 2022, we evaluated mail delivery, customer service, and property conditions at 14 delivery units in the Central Area.

The U. S. Postal Service’s WestPac Area has about 2,996 delivery units to assist in the Postal Service’s universal service obligation to bind the nation together and provide prompt, reliable, and efficient postal services to all communities. As of September 2022, about 64,000 city and rural carriers delivered to about 30 million possible delivery points in the WestPac Area. During fiscal year (FY) 2022, we evaluated mail delivery, customer service, and property conditions at 15 delivery units in the WestPac Area.