Federal Reports

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.

Our office is currently conducting three audits of crime prevention and eligibility determinations at Public Housing Authorities (PHA) in Washington, DC; Chicago; and Los Angeles.  The objective of our audits is to (1) determine whether the Authority complied with HUD’s and its own requirements for verifying eligibility of individuals for HUD-assisted housing based on criminal activity, citizenship, and immigration status, and (2) evaluate the Authority’s practices for preventing and addressing criminal activity.

While the audits remain ongoing, this memorandum provides some of the initial results we believe could result in ineligible tenants participating in HUD’s public housing and voucher programs. We have also made some recommendations for HUD to implement regulatory and procedural changes to improve the program effectiveness in ensuring safe communities and assistance provided to only eligible participants.

The U.S. Postal Service maintains an unrivaled presence in American life, utilizing more than 33,000 retail locations and a workforce of over 640,000 employees to reach every home and business six days a week. While USPS’s primary mission is mail and package delivery, it also manages a portfolio of nonpostal government services that generated $387 million in revenue during fiscal year (FY) 2025. However, this revenue stream is heavily dependent on passport services — with passport processing accounting for approximately 80 percent of total earnings — and all active partnerships remain exclusively at the federal level.

The landscape for providing government services shifted significantly with the Postal Service Reform Act of 2022, which gave USPS the authority to partner with state, local, and tribal governments for non-commercial public services. Despite this legal green light and the Postal Service’s Delivering for America plan’s goal of becoming a national “government storefront,” the organization has not yet established a formal strategy or initiated outreach to explore these new non-federal opportunities.

USPS OIG discussions with state and federal officials highlight the untapped potential of new government partnerships, particularly in rural and underserved areas where the post office often serves as a primary civic hub. Potential growth is evident in providing in-person identity verification for social benefit programs like SNAP or Medicaid, and in streamlining high-assurance biometric services, such as fingerprinting for state professional licensing. Facilities could also transform into digital access points by hosting DMV or IRS kiosks in “service deserts” where residents currently travel long distances for simple renewals or tax assistance. Additionally, USPS could lease rooftop space for 5G and broadband infrastructure to help bridge the digital divide in the thousands of underserved counties it already serves.

Future possibilities also include equipping the delivery fleet with sensors for passive data collection on air quality and road conditions, and leveraging the last-mile network to report infrastructure failures during national disasters. To turn these concepts into reality, the Postal Service could look toward international peers in Australia, France, and Italy, which have built successful government service portfolios through proactive sales teams and centralized management units. These operators thrive by standardizing their offerings to lower technical costs and using market intelligence to target areas where private competition is absent.

Currently, the Postal Service’s approach to government partnerships remains largely reactive and fragmented across multiple departments. To capitalize on its vast infrastructure and the interest expressed by state agencies, the OIG recommends postal leadership develop a unified strategic roadmap. This plan would outline the steps necessary to identify, evaluate, and prioritize expansion opportunities across all levels of government, finally moving the organization beyond case-by-case federal agreements toward its vision of a modern, multi-level government storefront.