GAO urges SBA to tighten improper-payment estimates and recovery audits

The Government Accountability Office issued a report finding that the Small Business Administration's (SBA) methods for estimating improper payments for the Paycheck Protection Program, COVID-19 Economic Injury Disaster Loan, 7(a) loan guaranty and standard EIDL programs meet the Office of Management and Budget's basic statistical requirements, but lack documented justification for key assumptions. The agency, for example, did not record why it treats small and large loans as equally vulnerable to error, nor did it assess whether its estimates for PPP and COVID-19 EIDL reflect known fraud risks.

GAO also noted that SBA does not conduct recovery audits for its 7(a) and standard EIDL programs and has not reevaluated the cost-effectiveness of such audits for 10 years and 15 years, respectively. Although SBA recovers a portion of overpayments through regular loan payments, it recovered less than 1 percent of the $616.2 million in overpayments identified in fiscal year 2025, compared with a 62 percent recovery rate government-wide.

The report, prepared under the Payment Integrity Information Act of 2019, cites SBA's 2025 estimate of about $2 billion in improper payments across the reviewed programs. GAO recommends four actions: (1) document the basis for sampling and estimation decisions; (2) ensure estimates reflect known fraud risk; (3) establish a periodic process to reevaluate the cost-effectiveness of recovery audits for standard EIDL and 7(a) loans; and (4) apply relevant federal guidance when identifying recovery options. SBA disagreed with the first two recommendations and agreed or partially agreed with the latter two.

GAO will monitor SBA's response and update the status of the open recommendations, which remain pending.