SBA COVID-19 PPP and EIDL Loans: SBA Ramps Up Audits and Investigations
SBA COVID-19 PPP and EIDL Loans: SBA Ramps Up Audits and Investigations
Learn why the SBA failed five consecutive financial audits, what it means for small businesses, and how the agency plans to fix internal control weaknesses.
Book a Consultation CallThe U.S. Small Business Administration (SBA) has faced serious scrutiny in recent years due to its inability to obtain a clean financial audit. From FY 2020 to FY 2024, the SBA received repeated disclaimers of opinion on its financial statements, signaling systemic internal control failures. These issues raise concerns not only for government accountability but also for the small business community that relies on the SBA for vital support.
This blog breaks down the findings from OIG Report 25-25, detailing the core issues, the SBA’s remediation strategy, and what small business owners and stakeholders should be aware of moving forward.
The SBA’s financial audit troubles stem from its rapid scaling during the COVID-19 pandemic. Between FY 2020 and 2021, the agency distributed over $1.2 trillion in pandemic-related aid through programs like the Paycheck Protection Program (PPP), COVID-19 Economic Injury Disaster Loans (EIDL), and others. While this support was critical for struggling businesses, it overwhelmed the agency’s financial reporting systems.
Key findings from the Office of Inspector General (OIG) include:
When the SBA faces internal control and audit failures, it affects the broader small business ecosystem:
Moreover, businesses that rely on the SBA for financing or disaster assistance must recognize the agency’s current limitations in oversight and governance.
In January 2025, the SBA launched its Financial Statement Audit Remediation Strategy, focusing on five key areas:
While the strategy is a step in the right direction, the OIG notes that not all material weaknesses have been fully prioritized, and execution gaps remain. Notably, the SBA has not yet designated a single empowered executive with the authority to enforce remediation across all program offices—an essential step for success.
The OIG made four strategic recommendations:
SBA management has accepted most recommendations, though the key leadership appointment remains unresolved as of September 2025.
The SBA plays a critical role in supporting small businesses, especially in times of economic crisis. However, effective support requires sound financial management and internal accountability. While the agency is taking steps to recover from its audit challenges, stakeholders should remain informed and vigilant.
Small businesses should also consider working with experienced legal professionals who understand the SBA’s evolving landscape—particularly when navigating SBA loan disputes, appeals, or compliance issues.
If your business has been impacted by SBA loan programs or you’re facing challenges with SBA-related financial or legal matters, contact Protect Law Group today. Our experienced attorneys are here to help you understand your rights and options. Contact us today to ensure your business is protected and positioned for success.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Clients personally guaranteed an SBA 7(a) loan that was referred to the Department of Treasury for collection. Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest. We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.
Our firm successfully negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.
The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.
Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.
Our firm successfully resolved an SBA 7(a) loan default in the amount of $212,000 on behalf of an individual guarantor. The borrower’s business experienced a significant downturn in revenue and was unable to sustain operations, ultimately leading to closure and a remaining personal guaranty obligation.
After conducting a thorough financial review and preparing a comprehensive SBA Offer in Compromise (SBA OIC) submission, we negotiated directly with the SBA and lender to achieve a settlement of $50,000—approximately 24% of the outstanding balance. This favorable resolution released the guarantor from further personal liability and provided the opportunity to move forward free from the burden of enforced collection.
.jpg)
