What GAO Found
GAO analyzed the Small Business Administration’s (SBA) methods for estimating improper payments for fiscal years 2020 through 2024 for the Paycheck Protection Program (PPP) and the COVID-19 Economic Injury Disaster Loan (EIDL), 7(a) loan guaranty, and standard EIDL programs. SBA’s estimates met the Office of Management and Budget’s basic statistical requirements. However, SBA did not document the basis for key decisions it made to develop those estimates. This includes the basis for assuming that small and large loans are equally likely to be improper. SBA also did not consider whether estimates for PPP and COVID-19 EIDL appropriately reflected known fraud risks. As a result, SBA cannot be sure that its estimates accurately reflect improper payment risks, limiting its ability to use those estimates for decision-making on where to focus future corrective actions to help mitigate improper payment risks.
For 7(a) and standard EIDL, SBA does not currently conduct recovery audits—reviews of accounting and financial records to identify and recover overpayments—and had not reevaluated these decisions for 10 years and 15 years, respectively. However, interest rates, collateral requirements, and other factors that may affect the cost-effectiveness of recovery audits have changed over the past 10 to 15 years. SBA said it recovers overpayments using other methods. For example, on loans with an overpayment, SBA recovers a portion of the overpayment with each regular loan payment. However, SBA recovered less than 1 percent of the $616.2 million in overpayments it identified across its programs in fiscal year 2025, compared to 62 percent government-wide. Developing a process that triggers reevaluations of its approach to recovering overpayments in 7(a) and standard EIDL could help ensure that SBA’s approach reflects the current environment, which could potentially improve recoveries.
GAO identified key factors SBA could use when designing overpayment recovery audits and activities (see figure), which could help SBA more fully and systematically assess its recovery options. These factors incorporate and build on existing federal guidance.
Key Factors SBA Could Consider When Identifying Recovery Options
Why GAO Did This Study
The Payment Integrity Information Act of 2019 requires federal agencies to estimate improper payments for risk-susceptible programs and to conduct recovery audits if doing so is cost-effective. In 2025, SBA estimated about $2 billion in improper payments for programs GAO reviewed. However, its Office of Inspector General reported that SBA was not compliant with the act, in part because of issues affecting the reliability of its estimates.
GAO was asked to review SBA’s improper payment estimates and recovery audits. This report examines (1) SBA’s methods for estimating improper payments, (2) SBA’s evaluation of the cost-effectiveness of recovery audits for its programs, and (3) key factors SBA could consider when identifying recovery options.
GAO reviewed SBA’s methods for estimating improper payments and evaluating recovery audit cost-effectiveness. GAO interviewed six federal agencies, all selected for demonstrating comparably high recovery rates, and developed a list of key factors for identifying recovery options.
Source: GAO Reports & Testimonies · 2026-11-09