SBA announces comprehensive audit of the 8(a) Business Development Program

• The SBA has directed all current 8(a) firms to submit extensive financial, ownership, and contract documentation for the past three fiscal years by January 5, 2026.
• The SBA is expected to closely examine social and economic disadvantage showings, ownership and control, and any post-admission changes. Deficiencies in narratives, documentation, or performance-of-work compliance may trigger follow-up inquiries or adverse findings. Potential consequences include delayed or suspended eligibility for new 8(a) awards or removal from the program.
• Contractors who participate in preference-based contracting programs—both small and large businesses—should consider taking proactive steps to mitigate any potential risks, including a comprehensive review of their preference-based contracting portfolio and assessment of compliance.

What was announced

On December 5, 2025, the U.S. Small Business Administration (SBA) announced a sweeping, program-wide audit of the 8(a) Business Development Program. The audit focuses on all current 8(a) participants and, in some cases, firms that have recently graduated from the program.

The 8(a) Program aims to support small businesses owned by socially and economically disadvantaged individuals through access to federal contracting opportunities and business development resources. However, the SBA and U.S. Department of Justice recently identified significant concerns regarding fraud and compliance failures within the program, prompting heightened investigation and enforcement. The SBA stated the audit intends to identify “bad actors” and prevent misuse of government resources.  The audit will proceed on an accelerated basis and involve extensive documentation requests and enhanced scrutiny of eligibility and compliance.

Who is affected and what is required

All 4,300 current 8(a) participants must respond to SBA’s audit request by Monday, January 5, 2026. 8(a) participants must upload certain financial, ownership, and contract documentation for the last three full fiscal years to the MySBACertifications portal, including the following:

• General ledgers and year-end trial balances
• IRS Form 4506
• Year-end bank statements and reconciliations
• Payroll registers, reconciliations, and owner distributions
• Employee listings by contract
• Vendor, subcontractor, and joint venture listings
• Copies of all 8(a) contracts and related subcontracts
• Complete financial statements and reconciliations to the trial balance; and
• Subledger schedules for receivables, payables, and P&L accounts.

The audit also extends to certain graduated or recently exited participants. Those participants may also be required to provide records relating to initial eligibility, continuing eligibility, and compliance during their participation in the program.

Participants should anticipate targeted follow-up requests and compressed response deadlines. Adverse findings may result in demands for corrective or supplemental submissions, delays or suspension of eligibility for new 8(a) awards, removal from the 8(a) Program or loss of future eligibility, and increased risk of protests or challenges to pending awards. 8(a) participants should review all documents closely before producing them to SBA to ensure accuracy. If applicable, submissions should disclose any limitations to responses and include markings with appropriate protections against release under the Freedom of Information Act. 

How to mitigate potential risks 

SBA’s audit is only one of various potential investigations or audits of 8(a) participants and other preference-based contractors. For example, on November 6, 2025, the U.S. Department of the Treasury (Treasury) similarly announced a department-wide audit of contracts and task orders awarded under preference-based contracting. Treasury’s audit will focus, in part, on large companies who inappropriately use pass-through arrangements with eligible 8(a) and other small businesses to perform contracts that are set aside for small businesses. 

To mitigate any potential risk of non-compliance, 8(a) participants and contractors who are currently performing (or have recently performed) set-aside contracts should consider conducting an internal readiness review of their set-aside and sole source contracting files, updating financial documentation and eligibility calculations, reconfirming ownership and control compliance (including governance documents and third-party agreements), reviewing subcontracting, performance-of-work, and mentor-protégé compliance, and establishing a rapid-response plan supported by a centralized, well-organized document repository. Subcontractors on 8(a) and other preference-based prime awards, particularly large contractors, should also take steps to evaluate their subcontracting portfolio and prepare to demonstrate compliance with applicable requirements, such as limitations on subcontracting. 

Conclusion

The SBA’s December 5 announcement follows closely on the heels of the Treasury’s announcement that it is undertaking a department-wide review of preference-based federal contracting programs. Taken together, these actions signal coordinated investigation and enforcement across agencies. This enforcement trajectory will likely shape agency oversight, audit activity, and eligibility determinations throughout the first and second quarters of 2026. Proactive compliance oversight remains critical for contractors participating in preference-based programs. 

Our Government Contracts team continues to monitor these developments and is standing by to assist contractors in responding to, or preparing for, these audits and potential investigations. 

Additional authors: Lee Williams