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Audit Report 13-13: Evaluation of SBA’s Progress in Reducing Improper Payments in FY 2012

Date Issued: 
Thursday, March 14, 2013
Report Number: 
13-13

The objective of this audit was to determine the adequacy of SBA’s compliance with IPERA and OMB’s implementing guidance. To achieve the audit objective, the OIG determined whether the SBA addressed required provisions, and performed limited testing of compliance with these provisions. The OIG also reviewed the completeness of improper payments disclosures in the SBA's Agency Financial Report for fiscal year (FY) 2012, and assessed the Agency’s efforts to prevent and reduce improper payments.

The OIG found that the SBA was generally compliant in meeting the minimum requirements, in accordance with OMB guidance. Further, the OIG found that the SBA’s efforts to prevent and reduce improper payments have resulted in significant progress since the FY 2011 assessment. Specifically, the Disaster Assistance Loan Program made progress through the deployment of improved controls and process improvements, which reduced their improper payments rate from 28.4 percent in FY 2011 to 17.9 percent in FY 2012. In addition, the 7(a) and 504 programs improved their testing procedures for loan guaranty approvals. The revised procedures were more robust and led to the identification of more improper payments during the testing process. As a result, the improper payments estimate increased from $0 in FY 2011 to $233 million and $105 million, respectively, in FY 2012. Notwithstanding these accomplishments, further improvement is still needed in the effectiveness and development of SBA improper payment controls and processes for all of the programs or activities.

The OIG also assessed whether the SBA complied with IPERA reporting requirements, as specified in OMB guidance.  This guidance requires a limited review of controls over Agency reporting. This evaluation found that the SBA generally met all the IPERA reporting requirements. However, the Disaster Assistance Loan program was not compliant because their improper payment rate exceeded the 10 percent threshold. In addition, three of the five programs or activities did not achieve their annual reduction targets. The OIG was unable to evaluate the accuracy and completeness of the improper payments rate reported for the Acquisition Program.