Federal Reports

What We Looked AtWe queried and downloaded 60 single audit reports prepared by non-Federal auditors and submitted to the Federal Audit Clearinghouse between October 1, 2022, and December 31, 2022, to identify significant findings related to programs directly funded by the Department of Transportation (DOT).What We FoundWe found that reports contained a range of findings that impacted DOT programs. The auditors reported 20 incidents of significant noncompliance with Federal guidelines related to 12 grantees that require prompt action from DOT's Operating Administrations (OA). Of these 20 incidents, 11 were repeat findings related to 6 grantees. The auditors also identified questioned costs totaling $5,538,037 for four grantees. Of this amount, $3,703,195 was related to the Joint Programs of the Shoshone and Arapaho Tribes of the Wind River Reservation, and $1,787,378 was related to the Navajo Nation. Additionally, we identified nonmonetary repeat findings that caused qualified opinions for Joint Programs of the Shoshone and Arapaho Tribes of the Wind River Reservation, the County of San Joaquin, California, and the State of Mississippi.RecommendationsWe recommend that DOT coordinate with the impacted OAs to develop a corrective action plan to resolve and close the findings identified in this report. We also recommend that DOT determine the allowability of the questioned transactions and recover $5,538,037, if applicable.

In November 2021, Congress passed the VA Transparency & Trust Act of 2021 (Transparency Act) to facilitate oversight of VA’s spending of COVID 19 emergency relief funding, including Families First Coronavirus Response Act (FFCRA) funds. To comply, VA must provide a detailed plan to Congress outlining its intent and justification for obligating and expending FFCRA funds. Additionally, the Transparency Act requires VA to submit biweekly reports to Congress detailing its obligations, expenditures, and planned uses, as well as justification for any deviations from the plan. The act also requires the VA Office of Inspector General (OIG) to submit semiannual reports comparing how VA is actually obligating and expending covered funds to those planned. In this third such report, the OIG found VA generally complied with the Transparency Act because VA provided justification for its programs and activities and largely aligned VA provided obligations and expenditures to the detailed plan. The OIG review team relied on VA provided obligations and expenditures of $60 million from April 1, 2020, through August 23, 2022, to identify VA’s general spending of FFCRA covered funds. However, VA did not provide sufficient supporting documentation requested by the team to assess line-level details needed to make a full assessment. When that documentation is received, the OIG will review the affected FFCRA topics and any updates to VA’s plans or the biweekly reporting mechanisms for other Transparency Act covered funds in subsequent semiannual OIG reports. Although the OIG did not make recommendations in this report, there are two unimplemented recommendations from a March 2022 OIG report related to Transparency Act funds that could interfere with VA’s long term compliance with the act if not addressed.

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.