KPMG LLP 

2001 M Street, NW 

Washington, DC 20036-3389

AMERICAN RECOVERY AND REINVESTMENT ACT 

MANAGEMENT LETTER

November 14, 2011

CONFIDENTIAL

Inspector General, 

Administrator of the U.S. Small Business Administration

We have audited the consolidated financial statements of the U.S. Small Business Adnistration 

(SBA), as of September 30, 2011 and 2010, and for the years then ended, and have issued our report 

thereon dated November 14, 2011. Our audit included tests of certain transactions and system 

enhancements related to SBA’s implementation of the American Recovery and Reinvestment Act of 

2009 (Recovery Act). We conducted our audit in accordance with auditing standards generally 

accepted in the United States of America; the standards applicable to financial audits contained in 

Government Auditing Standards, issued by the Comptroller General of the United States; and Office of 

Management and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal Financial 

Statements, as amended. In plalming and performing our Fiscal Year 2011 audit, we considered the 

SBA’s intemal control over financial reporting (intemal control) as a basis for designing our auditing 

procedures for the purpose of expressing our opinion on the financial statements, but not for the 

purpose of expressing an opinion on the effectiveness of the SBA’s intemal control. Accordingly, we 

do not express an opinion on the effectiveness of the SBA’s intemal control. 

During our audit, we noted a certain matter involving internal control that is presented for your 

consideration related to the implementation of the Recovery Act. This comment and recommendation, 

which has been discussed with the appropriate members of management, is intended to improve 

intemal control or result in other operating efficiencies and is summarized in Exhibit I. The status of 

prior year comments is presented in Exhibit II. 

In addition, we identified certain deficiencies in internal control that we consider to be significant 

deficiencies, and communicated them in our Independent Auditors’ Report dated November 14, 2011. 

Our audit procedures were designed primarily to enable us to form an opinion on the financial 

statements, and therefore may not bring to light all weaknesses in policies or procedures that may exist. 

We aim, however, to use our knowledge of the SBA’s organization gained during our work to make 

comments and suggestions that we hope will be useful to you. 

We would be pleased to discuss this COl1Unent and recommendation with you at any time. 

This communication is intended solely for the information and use of the Office of Inspector General; 

OMB, the Gove11Ul1ent Accountability Office, the U.S. Congress, and SBA management, and is not 

intended to be and should not be used by anyone other than these specified parties. 

Very truly yours, KPMG- LL’"P

KPMG LLP Is a Delaware limited lIabHity partnership, 

the U,S. member firm of KPMG International Coopl’fat1ve 

("KPMGlnternational"),aSwi$$entity.
Exhibit I

U.S. SMALL BUSINESS ADMINISTRATION 

American Recovery and Reinvestment Act 

Management Letter Comment 

FY 2011

INADEQUATE CONTROLS OVER THE 504 LOAN POOL TRANSACTION ENTRY PROCESS

During our walkthrough of the American Recovery and Reinvestment Act of 2009 (Recovery Act) 

Section 503 - 504 First Mortgage Lien Pool Program, we detennined the Office of Financial Assistance 

(OF A) does not have documented controls to ensure that the Fiscal Transfer Agent’s (Colson) monthly 

upload of transaction details for each 504 loan pool into the OFA’s Electronic Transaction (E-TRAN) 

System is correct and reliable.

According to a Financial Analyst in the OF A, while there is a review process over the entry and upload of 

the monthly transaction details into the E-TRAN System, the OF A has not formally documented the 

review process.

A lack of properly documented internal control regarding the electronic transfer of financial data !fom 

one automated system to another increases the risk of invalid and/or incorrect loan transaction details 

being recorded in the system and included in the SBA’s financial statements.

We recommend the OF A Director:

1. Develop, document, and implement policies and procedures regarding the review and approval over 

the entry and upload of 504 first mortgage lien pool transactions.

Management’s Response:

The SBA’s management concurs with the finding and recommendation.

I
Exhibit II

U.S. Small Business Administration

Status of Prior Year Comments

FY2011

Fiscal Year 2010 Comments Fiscal Ycar 2011 Status

-,.-.. Recovery Act Management Letters

Improper Allotment of American Recovery and Resolved

Reinvestment Act of 2009 Apportionments

Lack of Documentation and Incorrect Accounting Resolved

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