Small Business Administration: Opportunities to Improve Management of Fraud Risks, Improper Payments, and Contracting Programs

What GAO Found

Since June 2020, GAO has made dozens of recommendations to help the Small Business Administration (SBA) better manage fraud risks, improve its estimates of improper payments, and oversee its contracting programs. This testimony discusses SBA’s efforts to address 42 of these, of which SBA has implemented 17.

• Fraud risks. GAO has found that some SBA programs—particularly its COVID-19 pandemic relief programs—have been susceptible to fraud. SBA established these programs quickly to respond to the adverse economic conditions small businesses faced, but the speed of implementation came at the expense of appropriate safeguards. SBA has implemented most GAO recommendations in this area—for example, by implementing oversight plans, conducting fraud risk assessments, and developing a fraud strategy. GAO has estimated that the additional controls SBA put in place for its pandemic-relief programs collectively had saved the government more than $30 billion as of the end of fiscal year 2025.
  
  However, it is imperative for SBA to advance its fraud prevention and detection efforts, such as by expanding use of data analytics and improving its process for referring potential fraud to SBA’s Office of Inspector General. Furthermore, examining fraudsters and fraud schemes that emerged during the pandemic can help agencies identify fraud mitigation controls that can be implemented both in emergency environments and during normal operations.
• Improper payments. GAO has also previously identified problems related to SBA’s estimates of improper payments, particularly for its pandemic relief programs. An improper payment occurs when a payment should not have been made or was made in the incorrect amount. SBA has implemented one GAO recommendation in this area but has not implemented three others. These include expanding and documenting its overpayment review procedures and expanding its overpayment tracking process. Developing reliable improper payment estimates is essential for understanding and addressing financial vulnerabilities in SBA’s programs in a timely manner.
• Contracting assistance programs. SBA has addressed several GAO recommendations related to oversight of its contracting programs, including the 8(a) Business Development Program. For example, the agency has improved its documentation of compliance reviews of small business subcontracting plans. However, SBA has not addressed 14 recommendations intended to address critical risk management and cybersecurity issues associated with its small business certification platform.

In addition, SBA’s independent financial statement auditor issued a disclaimer of opinion on SBA’s fiscal year 2024 financial statements. The auditor reported material weaknesses in SBA’s controls over pandemic relief programs for the fifth consecutive year. For example, the auditor found that SBA did not sufficiently design the review process for Paycheck Protection Program (PPP) loan forgiveness. GAO supports the auditor’s recommendations to address these weaknesses and urges SBA to work toward obtaining a clean financial statement audit opinion.

Why GAO Did This Study

Since spring 2020, SBA has made or guaranteed more than $1 trillion in loans and grants and assisted more than 10 million small businesses adversely affected by the COVID-19 pandemic, primarily through PPP and the COVID-19 Economic Injury Disaster Loan program. SBA also continued to support small businesses through its contracting assistance and small business research programs.

This testimony discusses the status of selected GAO recommendations to SBA related to fraud risks, improper payments, and contracting assistance programs, as well as issues related to SBA’s financial statements.

This testimony is based on prior GAO reports issued from June 2020 through March 2025 that assessed SBA’s implementation of four pandemic relief programs, SBA improper payments, financial statements, and contracting assistance programs. Details on GAO’s methodology can be found in the individual reports cited.

For more information, contact Courtney LaFountain at lafountainc@gao.gov.