On January 30, 2003, the OIG issued the Independent Public Accountant or IPA’s report, Audit Report 3-06, Audit of SBA’s 2002 Financial Statements. This report followed the IPA’s Disclaimer of Opinion dated January 6, 2003. The IPA identified six matters considered reportable, five of which were considered material weaknesses. The remaining reportable condition related to the SBA’s information-system control environment, where areas for improvement remain. The IPA also reported that they were,
Unable to satisfy ourselves with respect to certain of SBA’s financial statement line items…because SBA could not provide sufficient evidence to support the amounts reported and disclosures made in the consolidated and combined financial statements as of and for the years ended September 30, 2002 and 2001, thereby limiting the scope of the audit.
For example, the SBA’s disaster loan modeling contains deficiencies. Thus, it became inadequate for determining the costs of disaster loans sold or re-estimating the costs of loans not sold. The SBA’s existing model became inadequate when over $5 billion of loans were sold in fiscal years 2000-2002. Therefore, the counts could not be fairly stated by the SBA. Pre-1992 loan guarantees did not present future expected default costs or determine the correct valuation of related line items in accordance with federal accounting standards.