If you lead a small or midsize government contracting firm, you’ve likely heard a familiar refrain over the years: “We need an audit.” For many 8(a) businesses, that was true — because the Small Business Administration’s (SBA) previous reporting thresholds made audits the default requirement.
But as of January 2025, that landscape has changed. The SBA updated its 8(a) financial reporting thresholds under 13 CFR §124.602, raising the levels at which audited financial statements are required. The result: many contractors can now meet program requirements with a review, gaining significant savings in both cost and turnaround time while still providing credible, reliable financial information to stakeholders.
What Changed?
Under the revised rule:
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8(a) participants with gross receipts above $20 million must provide audited financial statements
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Participants with gross receipts between $7.5 million and $20 million may now submit reviewed financial statements instead
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Participants below $7.5 million may provide compiled statements
This update represents a meaningful shift for growing 8(a) firms. Reviews performed in accordance with AICPA standards offer a solid level of assurance without the time, disruption and cost inherent in a full audit. For many contractors in the scaling stage, this strikes a more practical balance between compliance and agility.
Why Reviews Are Often the Better Fit
With the new thresholds, more contractors can take advantage of the benefits reviews offer:
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Lower cost. Reviews are less expensive than audits, freeing cash for hiring, business development and proposals.
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Faster turnaround. Reviews require less testing and documentation, meaning your financials are ready sooner — especially valuable during busy bid or renewal cycles.
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Meaningful assurance. While not as extensive as an audit, a review still provides analytical procedures and limited assurance — enough to satisfy many lenders, internal governance requirements and potential teaming partners.
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Scalability. For contractors anticipating rapid growth, opting for a review now can reduce friction and position the company for smoother transitions into larger opportunities.
Even contractors below the $7.5 million threshold are often choosing reviews voluntarily to strengthen banking relationships, enhance internal discipline and prepare for the higher scrutiny that comes with 8(a) success.
A More Practical, Growth Aligned Reporting Framework
By raising the audit requirement to $20 million, the SBA has realigned financial reporting obligations with operational reality. Smaller and emerging contractors can focus resources where they matter most — delivering on contracts, investing in talent and pursuing new opportunities — without being overburdened by compliance costs that add limited value at their stage of growth.
For many 8(a) firms, this means:
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A more efficient reporting process
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More proportionate compliance requirements
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More flexibility in choosing the right level of assurance
- More capital and time to fuel strategic growth
Bottom Line
The SBA’s updated thresholds provide welcome relief and new flexibility for 8(a) government contractors. In many cases, a review offers the ideal combination of rigor, speed and cost effectiveness, giving owners and CFOs a practical tool to meet requirements without overspending on an audit that may not be necessary.
If you’re evaluating which level of financial statement preparation is right for your business this year, the updated rules are a strong reason to revisit long standing assumptions.
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