Sneak Preview: GAO Deems SVOG Fraud Risk Monitoring Inadequate

(The following was excerpted from a recent Thompson Grants Compliance Expert article.) Although the Small Business Administration (SBA) states that it has adequate monitoring procedures in place to address potential fraud risks in the Shuttered Venue Operators Grant (SVOG) program, the Government Accountability Office (GAO) contends that the agency’s monitoring procedures do not include activities to respond to all the fraud-related risks that SBA included in previous risk assessments.

The SVOG program was created under the Consolidated Appropriations Act of 2021 (Pub. L. 116-260) to financially assist businesses in the performing arts and entertainment industries, such as museums, live music venues and movie theaters, that were hard hit by the COVID-19 pandemic. From April 2021 and July 2022, SBA’s Office of Disaster Assistance awarded $14.6 billion in grants under the program.

To expedite award processing to needy applicants, SBA removed certain antifraud controls, such as investigating applicants to identify affiliates and conducting checks of applicant tax information and Internal Revenue Service data. However, GAO noted that the agency’s controls for the applications process to verify identity and eligibility reflected some leading practices for fraud risk management (e.g., checking applicant information against other third-party databases).

During the first year of the program (2021), SBA conducted quarterly risk assessments of the program, the first two of which focused on potential program risks related to improper payments and technology challenges when collecting grant applications, while the last two focused on fraud-related risks, through which the agency identified eight specific risks.

To oversee SVOG grants it awarded, SBA in February 2021 developed an audit and oversight plan for the program. These procedures included SBA’s methodology for auditing a sample of awards to assess eligibility determinations and recipients’ use of funds. In April 2021, the SBA Office of Inspector General raised concerns about the sample size in the agency’s initial approach. In December 2021, SBA submitted a new audit and oversight plan in December 2021, which increased the sample size of awardees.

(The full version of this story has now been made available to all for a limited time here.)
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