SBA official says system overhaul prompted payments pause as lawmakers press over $340 million backlog

Paul Fitzpatrick, associate administrator for the Small Business Administration’s Office of Entrepreneurial Development, told the House Small Business Committee that the agency paused grant disbursements while it replaced a grant-management system it described as "not auditable." Fitzpatrick said the office has implemented an integrated grants-and-finance platform intended to improve transparency, controls and speed of payments.

The hearing opened with Chairman Williams and Ranking Member Velasquez framing the committee’s goals: examine how OED’s network of Small Business Development Centers (SBDCs), Women’s Business Centers (WBCs) and SCORE serve entrepreneurs and whether safeguards prevent waste, fraud and delays. Fitzpatrick said OED had identified roughly $340,000,000 in unpaid or delayed grant obligations that the office is reviewing and distributing as appropriate.

Members repeatedly pressed Fitzpatrick on the practical impacts of the pause. "You paused all payments," Representative Velasquez said, pressing whether the SBA had notified Congress and whether the Office of Management and Budget directed pauses. Fitzpatrick responded that the pause was driven by the need to rebuild an auditable system and that SBA will notify Congress when problems arise, adding that improved internal controls will surface issues sooner.

Several members described local harms from delayed reimbursements. Representative Tran said his office helped recover nearly $3,000,000 owed to an Orange County SBDC, and Representative Schmidt warned that a delayed notice of funding opportunity (NOFO) could disrupt a host transition for a Kansas SBDC. Fitzpatrick said NOFOs await appropriations for fiscal year 2027 and advised potential hosts to prepare in advance.

Fitzpatrick described specific eligibility enforcement actions: while reviewing state-hosted SBDC programs, OED identified the Binational Institute of Human Development (an Illinois service center with an office in Guatemala) that, he said, appeared to serve ineligible noncitizen populations; OED alerted state authorities and removed that organization from the program. He also said OED had resumed payments and reported recent distributions such as $15,000,000 to WBCs and about $125,000,000 in disbursements after restarting processing.

Lawmakers on both sides defended the value of the resource partners. Members cited high satisfaction rates, volunteer mentoring networks and strong local returns on investment for programs such as SCORE and SBDCs. Several representatives asked for public documentation of the alleged fraud or other specific evidence that justified a nationwide pause; Fitzpatrick said reviews entailed multi-year file checks, quarterly reports and website examinations and that massive fraud had not been found in most programs.

On administration policy, Fitzpatrick said the agency supports the president’s budget priorities and will implement appropriations Congress provides. He also described a reorganization that centralizes grant managers under the agency’s chief financial officer as a way to strengthen financial oversight and create cross-trained staff who can surge where demand is highest.

The committee requested additional documentation and gave members five legislative days to submit follow-up items for the record. The hearing ended with members urging faster, clearer communication between SBA and grantees during system transitions and with calls to ensure programs that serve local entrepreneurs are not disrupted.

The committee did not vote on legislation at the hearing; members signaled plans for further oversight and possible legislative fixes to grant processes and program design.