The U.S. Government Accountability Office on Monday released a report finding that the Small Business Administration must improve how it estimates and recovers improper payments.
The SBA estimated about $2 billion in improper payments in 2025 for the programs the GAO reviewed. Without documenting its decisions or considering known fraud risks, the SBA cannot be sure its estimates reflect actual risks, which limits its ability to decide where to focus corrective actions, according to the report.
The GAO reviewed the SBA’s estimation methods for fiscal years 2020 through 2024 for the Paycheck Protection Program, the COVID-19 Economic Injury Disaster Loan, the 7(a) loan guaranty, and standard EIDL programs. While the agency’s estimates met basic statistical requirements from the Office of Management and Budget, the SBA did not document the basis for key decisions, the GAO said. This included its reasons for deciding that small and large loans had the same chance of containing errors.
In fiscal year 2025, the SBA recouped less than 1% of the $616.2 million in excess payments it found, compared to a government-wide average of 62%, the report said. The SBA does not currently conduct recovery audits for 7(a) and standard EIDL programs and had not reevaluated those decisions for 10 and 15 years, respectively. The SBA told the GAO it recovers overpayments using other methods, such as collecting a portion of the overpayment with each regular loan payment.
The GAO made four recommendations, directing the SBA to document the basis for key sampling decisions, ensure estimates reflect known fraud risks, reevaluate the cost-effectiveness of recovery audits, and apply federal guidance for recovery options.
The agency rejected the first two recommendations, while agreeing or partially agreeing with the remaining two, according to the report. The GAO stated it maintains that all four recommendations are valid.