Making SBA’s Model Validation Process Auditable

The automated Credit Subsidy Model Validation Process saves 50 labor hours per review cycle, reduces the risk of error, and provides an automated audit trail.

Client: Small Business Administration (SBA)

Challenge: SBA lacked a formal and comprehensive checklist for use in the credit subsidy model validation process, which precedes credit model delivery to its auditors and to the Office of Management and Budget (OMB). To ensure high quality and regulatory compliance of the credit subsidy models that feed its financial statements and budget requests, SBA asked FI to develop an auditable model validation process.

FI Solution: FI reviewed SBA’s credit subsidy models, OMB Circular A-11, and the Federal Accounting Standards Advisory Board’s (FASB’s) Technical Release 6 to determine the necessary model validation checklist items that would assure high quality and regulatory compliance of the credit subsidy models. After establishing the appropriate checklist items, FI identified seven tedious validation tasks, including the comparison of model outputs that could be automated to reduce user error and the time required to complete the model validation process. In addition, FI ensured that the results of the model validation process were auditable by storing the locations and timestamps of the validated files and writing documentation on the controls governing the model validation process. FI selected Visual Basic for Applications (VBA) as the tool to create the application.

FI Impact: FI created an application that improved SBA’s credit subsidy model validation process by formalizing the validation checklist and controls process, automating validation tasks, and making the model validation process auditable. The application saves SBA’s modeling team approximately 50 labor hours per review cycle with four reviews per year. It also provides formatted outputs for auditor review.

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