Federal Reports

Observations on the SEC’s Rulemaking Process, Report No. 588

Over the last 5 years, the U.S. Small Business Administration’s (SBA) has been unable to pass a financial audit, receiving disclaimers of opinion year after year. The independent public auditor has been unable to offer an opinion on the financial state of SBA because it has not received sufficient evidence to support a number of balances. We reviewed SBA’s history of disclaimers and material weaknesses from fiscal years 2020 to 2024, open recommendations, and SBA’s new strategy for addressing material weaknesses and obtaining a clean audit opinion.

SBA’s accounting deficiencies were primarily related to administering an unprecedented amount of disaster assistance aid and guaranteed loan funds to help eligible small business owners and entrepreneurs adversely affected by the pandemic. Over the course of 18 months, the agency delivered 22.1 million pandemic assistance loans and grants, totaling $1.2 trillion. To address the systemic financial reporting deficiencies, SBA launched its Financial Statement Audit Remediation Strategy in January 2025 to resolve the seven material weaknesses and 56 open audit recommendations.

We made four recommendations to enhance implementation of SBA’s financial statements remediation strategy. We recommended the Administrator appoint a senior executive to lead the effort and emphasize audit remediation priorities through consistent agencywide communication. We also recommended that the remediation strategy be incorporated into SBA’s next strategic plan and individual performance plans to ensure accountability. SBA management agreed with all four recommendations.

Under a contract monitored by this office, the Office of the Inspector General engaged Castro, an independent public accounting firm, to perform the Fiscal Year 2025 Independent Evaluation of the Smithsonian Institution’s Information Security Program. 
 

Smithsonian Enterprises (SE) oversees the majority of the revenue-generating operations of the Smithsonian Institution
(Smithsonian). It is an essential source of unrestricted funds— monies without donor-imposed or legal restrictions on their use. SE provides unrestricted funds to the Smithsonian through the operation of revenue-generating activities.
In SE's fiscal year (FY) 2023, SE generated $150.8 million in net revenue, including more than $63 million from 32 retail stores, approximately $10.7 million of which were cash transactions.

OIG made four recommendations for Smithsonian Enterprises management to improve compliance with policies and procedures related to document retention, audits over cash management, system access for separated employees, and discounts. Management concurred with all four recommendations.