Finding Text
Federal Agency: U.S. Small Business Administration
Federal Program: Microloan Program (59.046)
Federal Award Numbers:
Federal Award Years:
Reference: 2024-01
Criteria
Microloan Program Standard Operating Procedures Manual (SOP 52 00 B), effective July 1, 2018, section 3.D.4 Microloan Revolving Fund (MRF) states all SBA Microloan payments must be transferred from the operating account to the MRF within two weeks (10 working days) of receipt or by the end of the quarter, whichever occurs first.
Condition
During the fiscal year ended September 30, 2024, we selected a sample of 40 SBA Microloan payments. We traced the flow of funds from receipt of the payments from the borrower to the date of transfer into the MRF account. All 40 loans in the sample had transfers beyond the 10 working day threshold ranging from 17 to 29 working days after receipt of the SBA Microloan Payment.
Cause
Monitoring procedures implemented by the Company to ensure compliance with the Microloan Program did not include a review of the MRF account to ensure funds are transferred in accordance with the 10 working day requirement.
Possible Asserted Effect
Without established monitoring procedures over the 10 working day requirement for transfers, non-compliance may continue.
Questioned Costs
Cannot be determined.
Statistical Sampling
The sample was not intended to be, and was not, a statistically valid sample.
Repeat Finding
No
Recommendation
We recommend that the Company review its monitoring procedures to ensure that funds are transferred to the MRF account within 10 working days from payment receipt from the borrower to the transfer into the MRF account.
Views of Responsible Individuals
We acknowledge the auditor’s comments and can confirm that the following corrective action has been implemented as of
December 2024:
Management has revised the process for identifying, segregating, and transferring Microloan repayments from a monthly process to a weekly process. This change will ensure Microloan repayments received by our operating account are transferred to the appropriate MRF accounts within 10 working days.
By changing the frequency of this task, we will enhance our compliance with Microloan requirements and more effectively
manage Microloan program funds.