Audit Report 14-11: SBA’s Progress in Complying with the Improper Payments Elimination and Recovery Act

On April 10, 2014, the OIG issued Audit Report 14-11, SBA’s Progress in Complying with the Improper Payments Elimination and Recovery Act. The objectives of this evaluation were to (1) assess the progress the SBA has made in remediating improper payment-related recommendations, and (2) determine whether the SBA complied with IPERA using guidelines outlined in OMB’s implementing guidance, Memorandum M-11-16, Issuance of Revised Parts I and II to Appendix C of OMB Circular A‐123.

The OIG found the SBA continues to make progress in its efforts to prevent and reduce improper payments. Further, the SBA was generally compliant in meeting the minimum requirements in accordance with OMB guidance. Specifically, the Disbursements for Goods and Services, as well as 7(a) loan guaranty approvals continued to make progress through the deployment of improved controls and process improvements. The revised procedures were robust and led to the identification of more improper payments during the testing process.  Contrarily, the need to use less experienced staff to process applications for Hurricane Sandy may have attributed to the rate increase for Disaster Assistance loan disbursements. Consequently, the improper payment estimates increased from $12.5 million to $14.1 million for Disbursement of Goods and Services; $233.2 million to $510.9 million for 7(a) guaranty loan approvals; and $91 million to $121.1 million for Disaster Assistance loan disbursements.

Notwithstanding the accomplishments, the SBA needs to improve, further, the effectiveness and development of improper payment controls and processes for all of the programs or activities reviewed.  Specific areas include completeness of test plans, quality of corrective action plans, and sufficiency of improper payment recapturing activities.

The OIG, as specified in Memorandum M-11-16, which requires a limited review of controls over Agency reporting, also assessed whether the SBA complied with IPERA reporting requirements.  The OIG found that the SBA generally met all the IPERA reporting requirements.  However, the Disbursements for Goods and Services and Disaster Assistance Loan programs were not compliant because their improper payment rate exceeded the 10 percent threshold.  In addition, Disbursements for Goods and Services, as well as the 7(a) Guaranty Approvals and Disaster Assistance Loan programs did not achieve their annual reduction targets.