Federal Reports

The Office of Inspector General (OIG) is issuing this evaluation report to assess SBA’s screening of 7(a) loan applications under its Risk Mitigation Framework. Our scope covered 7(a) loans approved and disbursed from August 1, 2023, to December 31, 2024, for which SBA used the framework to determine applicants’ eligibility. 

SBA’s Risk Mitigation Framework was not sufficient to determine borrowers’ eligibility because it did not screen or fully screen for three of six eligibility requirements. Specifically, the framework did not screen to determine whether a small business (1) was organized for profit, (2) met SBA’s size requirements, or (3) was an ineligible business type. We also reviewed 188 of the 9,650 loans that had at least one error code and found SBA did not maintain sufficient documentation to support the reviewer’s decision to clear error codes for 71 (or 38 percent) of the loans we reviewed, totaling about $60.7 million. As a result of SBA’s incomplete screenings, there is limited assurance that borrowers met eligibility requirements for the 73,302 loans, totaling about $32 billion in questioned costs. This includes the subset of 71 loans we identified, totaling about $60.7 million, for which SBA did not maintain sufficient documentation to support its decision to clear the error codes, further limiting this assurance.

We recommended that SBA flag the 73,302 loans for review at guaranty purchase to assess whether borrowers met all eligibility requirements and seek remedy for all loans deemed ineligible.

 SBA agreed with the recommendation, stating they will flag the 73,302 loans for review at guaranty purchase and seek recovery where appropriate and legally justified. 

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements.

We found a former NPS Superintendent accepted gifts from a Government subcontractor and misused Government property while overseeing a project. 

We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of the Moving to Work (MTW) demonstration program.  We also reviewed three of the 39 initial MTW public housing agencies (PHA) for compliance with the MTW program’s statutory requirements.  We selected the three PHAs for review based on our analysis of risk factors for initial MTW PHAs.  Our objective was to (1) assess HUD’s monitoring of initial MTW PHAs’ compliance with the statutory requirements of the MTW demonstration program, which includes HUD’s confirmation of PHAs’ activities and related outcomes and (2) determine whether the selected PHAs complied with three of the statutory requirements (creating a reasonable rent policy that encourages employment and self-sufficiency, continuing to assist substantially the same number of eligible families, and maintaining families of similar sizes as the PHA would have if it had not participated in the demonstration program).  Further, we reviewed the PHAs’ activities to assess their established metrics and reported outcomes related to the statutory objectives.

We found that HUD’s monitoring of PHAs’ MTW demonstration programs had weaknesses.  Specifically, HUD relied on PHA self-reported data and certifications to determine full compliance with the statutory requirements and did not confirm program activities.  We determined that two of the three selected PHAs complied with the statutory requirements that we reviewed.  However, (1) one PHA did not always comply with the statutory requirement of serving substantially the same number of families as it had before joining the program, which HUD had identified through its monitoring; and (2) two PHAs’ reporting of local non-traditional households (LNT), which impacts that same requirement, had errors and were not supported.  Further, all three PHAs did not always use appropriate metrics when assessing program activities and related outcomes.  Lastly, two PHAs did not consistently maintain support for their program activities.  

These issues occurred because HUD did not verify PHAs’ reported information due to limited resources and its systems did not capture PHA data needed to determine full compliance with the statutory requirements.  Further, PHAs relied on third-party contractors to administer programs for LNT households without providing sufficient oversight to ensure that data reported for their MTW programs were accurate.  Additionally, HUD's standard metrics did not always align with the PHAs’ program activities; therefore, the PHAs could not consistently meet benchmarks and accurately report outcomes to HUD.  The PHAs also did not consistently maintain support for activities reported in their MTW reports because they believed that documentation was not needed or had relied on third-party contractors to develop and implement MTW activities on their behalf. As a result, HUD did not have complete and accurate information to determine PHAs’ full compliance with the statutory requirements and evaluate their MTW activities to make program decisions that could impact assisted housing, increase housing choices, and encourage low-income families to gain self-sufficiency.

We make several recommendations in this report to address the improvements needed in HUD’s monitoring of initial MTW PHAs to ensure accuracy and reliability of the information PHAs report to HUD related to program activities and outcomes.  Specifically, we recommend that the General Deputy Assistant Secretary for Public Housing Investments require the MTW Program Office to develop and implement a review and verification process to ensure that data provided by MTW PHAs is accurate, complete, and supported, and ensure corrections or updates to PHA information are reflected in either restated or subsequent MTW annual reports.  Further, establish a requirement for PHAs to retain supporting documentation for all data elements reported in their annual reports and program data not captured within HUD systems.  Based on the changes HUD made related to its reporting requirements and performance metrics during this audit, we recommend that HUD conduct an analysis to determine whether those changes will allow PHAs and HUD to appropriately measure the benefits and impacts of PHAs’ MTW program to include whether additional changes are warranted to appropriately evaluate results of the MTW program.  We also recommend that HUD develop and implement a review process to ensure that appropriate outcomes are assessed for each PHA’s local MTW program.