Audit 386159

Agency: U.S. Small Business Administration (SBA) Assistance Listing Number: 59.046 Federal Program Title: 2025 Microloan Program Statement of condition: The internal controls over compliance were not operating effectively as a loan was disbursed to a business which operates outside of the approved county listing set by the SBA. Criteria: The Foundation failed to maintain effective internal controls over compliance to approve eligible businesses in compliance with counties set by the SBA. Questioned costs: The known questioned costs are $15,965. Context: During our testing, we sampled seven loans funded by the SBA. Out of the sample tested, one (1) had business operations during the application process within an approved county listing, however, at closing the business was outside of the approved county listing resulting in funds provided to an ineligible recipient. The sample size was not a statistical sample. Effect: The Foundation provided funds to a business which was not eligible to receive funding from the program. Cause: The Foundation did not have effective controls in place to confirm businesses operating in eligible counties at closing in which funding could be provided. Recommendation: We recommend management review their processes and controls over approval of loans to ensure the business operates in a county on the approved county listing provided by the SBA Management's Response: The Foundation has created a procedure for loans assigned to SBA as the loan capital funding source to verify before closing that the county for the business is in a SBA approved county The Foundation has since taken corrective actions by updating internal controls and training of staff involved in SBA loan disbursements. The Foundation has also received approval from the SBA to fund the business in the previously unapproved county subsequent to year end.