Need for Improvement in Small Business Administration's Financial Management

FOD-76-7: Published: Apr 16, 1976. Publicly Released: Apr 16, 1976.

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The Small Business Administration (SBA) needs to provide more accurate and timely information on their loan programs to management, Congress, and the public. Delinquent loans from the agency's portfolio are listed as current, or refinanced, making it difficult to discern the exact financial state of the program. Contrary to the accounting principles prescribed for federal agencies, interest was accrued on delinquent loans without making any provisions for the loss of interest should the loans be uncollectable. Because SBA did not provide for costs to be incurred when its guarantees were to be honored, the true status of the lease and Surety Bond Guarantee Program was not clear.

The following conclusions relate to improvements the SBA can make to their loan program. The agency could save money if ceilings are set with the lending banks on the number of days that interest may accrue on loans. The accounting records for the Surety Bond Guarantee Program do not show whether all fees due from contractors and sureties have been collected. Instituting an automated accounting system will help identify these payments. Funds advanced to contractors have been allowed to lay idle in special funds, resulting in a loss of interest to the agency. Periodic audits of the agency's statements are needed to gain a clearer picture of the state of SBA's finances.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The system for gathering statistical data to evaluate the collectability of deferred loans should be automated. The SBA agreed this would be useful but pointed out that present procedures would need revision and the use of an automated loan system would be necessary. The loss of accrued interest could be eliminated by establishing a loss account allowance. The SBA administrator stated that such an account could be adjusted at the end of each year and would provide a true measure of the value of the accrued interest receivable account.

    Agency Affected:


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